Innovation Leaders Create Long-Term Value

Office worker meditating on the floor, rear view
Office worker meditating on the floor, rear view

In 2015, Bob Iger, CEO of Disney, told his top 400 executives, "The riskiest thing Disney can do is maintain the status quo." Iger knows that just leveraging the traditional Disney brands like Mickey Mouse and adding theme parks is insufficient to sustain the company's growth.

As organizations grow, their capacity for innovation tends to stagnate -- as my HBS colleague Clay Christensen explained in The Innovator's Dilemma. Iger would not consider himself an innovator in the class of Walt Disney or Steve Jobs, but he is a master at identifying, motivating, and supporting creative leaders.

Why are there so many innovators, but so few innovation leaders?

Today there are tens of thousands of innovators, but few outstanding innovation leaders. Those companies with innovation leaders at their helm, like Google, Apple, Amazon, Gilead, Disney, 3M, Tesla and my former company Medtronic, have sustained their growth and performed exceptionally well. Meanwhile, one-time innovation pioneers that lost the mojo (such as Hewlett-Packard) have stagnated.

Start-ups, smaller companies and academic institutions currently drive most of our nation's innovation. It doesn't have to be this way. Companies like Google, 3M, Disney and Apple show that corporations can stay creative even as they grow large. Many people call these companies "experts on innovation," but the truth is a bit more subtle. These organizations don't just develop innovative ideas, they develop innovation leaders.

Before Iger became CEO of Disney, his predecessor used a disciplined, "factory-like" process for creating films. Business development teams came up with ideas and then handed them to directors. Iger rearranged the process, placing faith in his creative directors and enabling them to propose very creative ideas.

Iger isn't the only leader at Disney inspiring creativity. Disney subsidiary Pixar has two of the world's finest innovation leaders in Ed Catmull and John Lassiter. Thanks to their leadership, Pixar has created the twelve most successful animated films of all time, including the 2016 Oscar winner, Inside Out. After he was fired from Apple, Steve Jobs bought controlling interest in Pixar, and learned first-hand from Catmull and Lassiter how to lead innovators. This experience was one of the key reasons for Jobs's success when he returned to Apple in 1997.

I spent half a day at Pixar with Iger, Catmull and Lassiter, and learned first-hand why they are so successful. We visited their teams -- the first-line innovators that create Pixar films -- and saw how these innovation leaders interacted with them. Catmull also said that as part of the merger, Iger asked him and Lassiter to take over Disney Studios because it had become bureaucratic and slow-moving. In turn, they revived its fortunes - a success which was evident in the popular 2013 film, "Frozen." Iger didn't stop with Pixar as later he bought LucasFilm and Marvel Entertainment, and retained their innovation leaders.

Examining Alphabet (nee Google), we see the same caliber of leaders. The former CEOs of Nest, Genentech, and Bloomberg all work for Alphabet. They operate within a common corporate framework because CEO Larry Page, himself a great innovation leader, gives them the latitude, resources and teams to engage in highly risky projects.

Qualities of innovation leaders

The characteristics of great innovative leaders are dramatically different from traditional business managers. Here are seven essential qualities they must have to lead innovation:

1. Passion for innovation.
Innovative leaders not only have to appreciate the benefits of innovation, they need a deep passion for innovations that benefit customers. Just approving funds for innovation is insufficient. Leaders must make innovation an essential part of the company's culture and growth strategy. They personally read research articles, ask the innovators deep and probing questions, and seek to understand the full potential of new ideas.

2. A long-term perspective.
Most investors think three years is "long-term," but that won't yield genuine innovation. Major innovations can change entire markets as the iPod and iTunes did, but they take time to perfect products and gain adoption by mainstream users. Leaders cannot stop and start innovation projects as if they were marketing expenses. They must support innovation regardless of the company's near-term prospects. Thus innovation leaders are sometimes willing to sacrifice near-term financial results to seize longer-term opportunities.

Companies like Apple and Alphabet find ways to shield their leaders from the day-to-day demands of investors. Google's "X" runs the moonshot projects of Alphabet, which include driverless cars, drone delivery, and robotics. The division doesn't measure its success by dollars created. Instead, it focuses on "speed of failure." By changing the metrics of success, Page and co-founder Sergey Brin are able to balance fiscal discipline and the need to give innovation leaders a safe space to incubate new ideas. Eric Schmidt has shared that they nurture smaller investemtns in many simultanerous projects, which avoids premature scale (and increased financial pressure). In this scenario, teams are motivated to hit milestones which unlock more resources and financiers guard against unjustified spending.

3. The courage to fail and learn from failure.
The risks of innovation are well known, but many leaders aren't willing to be associated with its failures. However, there is a great deal to be learned from why an innovation has failed, as this enhanced understanding can lead to the greatest breakthroughs. At Medtronic our failures with implantable defibrillators in the 1980s led to far more sophisticated approaches to treating heart disease in the 1990s.

4. Deep engagement with the innovators.
Innovative leaders must be highly engaged with their innovation teams, asking questions, probing for potential problems, and looking for ways to accelerate projects and broaden their impact. That's what HP's founders Bill Hewlett and David Packard did by wandering around HP's labs and challenging innovators. My HBS colleague Amy Edmondson says groups where members can air wild ideas are "psychologically safe." Members feel respected even then their ideas are rejected, so they don't fear airing opposing views. The more failed ideas that accrue, they more likely they'll land on a truly creative one.

5. Willingness to tolerate mavericks and protect them from middle management.
The best innovators are rule-breakers and mavericks who don't fit the corporate mold, and are threatening to middle managers following more typical management approaches. That's why innovative leaders must protect their mavericks' projects, budgets, and careers rather than forcing them into traditional management positions.

6. Opening up time for creativity and brainstorming.
Innovation leaders understand how to give their people the time to think - the difference between "maker time" and "manager time." As Paul Graham wrote, managers break up their time into 30-60 minute chunks, feeling satisfied with tight schedules of meetings throughout the day. For makers this is incredibly disruptive, because it is impossible to generate the time and freedom to be creative.They need a few consecutive hours to enter "flow" - a mental state in which people are fully immersed in the creative process. Innovation leaders fit meetings around the needs of their creative teams. For instance, Steve Jobs held 3-hour meetings on marketing - an unusual amount of time in a CEO's schedule. Google, for example, enables its creative people to hold 20% of their time to work on creative ideas not related to approved projects.

7. Being self-aware and mindful.
The best innovation leaders understand the importance of self-awareness. Without knowing their limitations, they'll be unable to bring out the strengths of those around them. Honest feedback is often hard to get because many people tell leaders what they want to hear rather than the unvarnished truth. For this reason, many leaders use 360-feedback from their peers and subordinates.

Mindful practices such, as daily meditation, prayer, journaling or jogging, also enable leaders to become more creative and open to new ideas. For Iger, this means waking up every morning at 4:30 a.m. to be alone. For Jobs, this meant Zen Buddhist meditation. As I have learned from my personal practice of meditation, mindfulness causes me to reflect on myself and my ability to lead others. Many of my most breakthrough ideas have come from meditation.

Innovation leaders don't create innovations themselves, but they are effective in leading creative people. While many companies claim they are innovative, few companies successfully develop leaders who understand how to lead creative teams. While unintentional, many large companies often stifle innovation leaders. Short-term pressures, zero-sum success, and an unhealthy focus on the status quo all prevent innovation leaders from emerging.

Iger calls creativity "the heart and soul of Disney," but in reality, innovation leaders are at the core of every creative company. Without their leadership, companies begin to manage for short-term results and eventually decline. To stay ahead of their competitors, companies must have innovation leaders who inspire the creativity of others.