After the WSJ reported regulators are considering banning Theranos founder Elizabeth Holmes from owning or running any labs for at least two years, Jeffrey Sonnenfeld, Yale School Management; Bill George, Harvard Business School; and Les Funtleyder, ESquared portfolio manager, discuss Theranos.
Iger places faith in his creative directors and allows them to propose original ideas.
In 2015, Bob Iger, CEO of Disney DIS -1.58% , told his top 400 executives, “The riskiest thing Disney can do is maintain the status quo.” Iger knows that simply 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 Harvard Business School 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 their mojo (such as Hewlett-Packard) have stagnated.
Startups, smaller companies, and academic institutions currently drive most of our nation’s innovation. It doesn’t have to be this way. Companies like Google GOOGL -0.59% , 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 nuanced. 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 to produce 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 original 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 Lasseter. Thanks to their leadership, Pixar has created the 12 most successful animated films of all time, including the 2016 Oscar winner, “Inside Out.” After he was fired from Apple AAPL 1.03% , Steve Jobs bought controlling interest in Pixar, and he learned first-hand from Catmull and Lasseter how to lead innovators. This experience paved the way for Jobs’ string of successes when he returned to Apple in 1997.
During a corporate board trip I took in 2013 to Pixar with Iger, Catmull, and Lasseter 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 said that as part of the merger, Iger asked him and Lasseter 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, though. He later 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, who is himself a great innovation leader, gives them the latitude, resouces, and teams to engage in highly risky projects.
So, what are the key qualities of innovation leaders? What makes them so effective at bringing out the creativity in others? After all, the characteristics of great innovation leaders are dramatically different from traditional business managers. The following seven elements are the key ingredients to innovation leadership.
Passion for innovation. Innovation 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.
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. 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 with the need to give innovation leaders a safe space to incubate new ideas.
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 MDT 1.23% , our failures with implantable defibrillators in the 1980s led to far more sophisticated approaches to treating heart disease in the 1990s.
Deep engagement with the innovators. Innovation leaders must be highly engaged with their 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.” In such settings, participants feel respected even when their ideas are rejected, and they don’t fear airing opposing views. The more failed ideas that come up, they more likely the group will land on a successful one.
Willingness to tolerate mavericks and protect them from middle management. The best innovators are rule-breakers who don’t fit the corporate mold. These people are often threatening to middle managers, many of whom adhere to standard practices. That’s why innovation leaders must protect their mavericks’ projects, budgets, and careers rather than forcing them into traditional management positions.
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- to 60-minute chunks, feeling satisfied with tight schedules of meetings throughout the day. For makers, this is disruptive, because it is impossible to generate the time and freedom to be creative. Innovative thinkers 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 three-hour meetings on marketing – an unusual amount of time in a CEO’s schedule.
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 helps leaders to be 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 helps me reflect on myself and my ability to lead others. Many of my strongest ideas have come from meditation.
Innovation leaders don’t create innovations themselves, but they are effective at leading creative people. While many companies claim they are innovative, few successfully develop leaders who understand how to lead creative teams. 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 truth, 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.
Bill George is Senior Fellow at Harvard Business School, former Chairman & CEO of Medtronic, and author of Discover Your True North.
This article was originally published by Fortune.com on 4/4/16.
MPR News host Kerri Miller talks with Bill George, Senior Fellow at the Harvard Business School, and Washington University law professor Adam Rosenzweig about corporate tax inversions and why the issue seems to have taken a timid foothold in this year's presidential election. With both Democrats and Republicans taking aim at companies who employ tax inversion, Kerri delves into the reasons why, what the concerns are with this sort of corporate maneuvering and what might be done to get at the root causes behind U.S. companies taking their operations overseas.
CNBC Contributors Jeffrey Sonnenfeld of the Yale School of Management, and Bill George, former Medtronic chairman & CEO, talk about the leadership challenges facing Alphabet with the various companies in the corporate structure.
This article was originally posted to CNBC.com on 3/29/16.
Bill George of Harvard Business School, and Jeffrey Sonnenfeld of Yale School of Management, discuss the proxy fight launched at Yahoo by Starboard Value and how the current and proposed boards could do.
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Bill George, Harvard Business School professor, former Medtronic CEO and CNBC Contributor, weighs in on the Valeant Pharmaceuticals leadership change and gives his pick for who should replace Michael Pearson as CEO.
Weak leaders focus on all the things that are going wrong. Great ones bring out the best in us.
Much that is written about leaders these days seems to be negative: they are incompetent, arrogant, unethical, greedy, the list goes on and on.
No doubt, there is a great deal of anger and cynicism from employees, shareholders, and voters. When things go wrong in our lives, we are quick to place the blame for our ills on our leaders, and we often expect our leaders to fix things.
Are we justified in doing so? Or are we externalizing our problems by blaming those in charge? Is it time to accept responsibility for our lives and take action to make things better?
We live in an imperfect world, filled with violence, income inequality, a lack of jobs, corruption, ill health, and defective products. As much as we would like to eradicate these ills, there are no easy solutions that leaders can apply to make such problems disappear.
Meanwhile, political leaders are fanning the flames of anger and distrust in order to gain popular support. Their words are intensified by the 24-hour news cycle, with every outlet looking to gain viewers by highlighting the urgency of these ills.
This atmosphere brings out the worst in us. All we are doing is further dividing the country between rich and poor, conservatives and liberals, free traders and protectionists, hawks and doves. The next American president will be no more able to eliminate these problems than the last two have been. And blaming the media doesn’t solve anything because their incentive structure is built on giving people stories they want to grow the size of their audience.
In business, activist investors assault corporate boards with simplistic, short-term solutions to break up companies, leverage their balance sheets, or buy back stock by cutting investment required for their strategic success. These investors can find something to criticize at every company. And shareholders often give them the benefit of the doubt in order to see near-term bumps in stock prices.
But toxic leadership comes at a great cost. Such leaders create environments that bring out the worst in people and drag everyone down. Like malignant tumors, negative attitudes spread throughout organizations until everyone is playing “the blame game” and avoiding responsibility for the problems they create. Once this happens, organizations are on a path to self-destruction, creating in their wake enormous harm for employees and shareholders alike. At this point, the organization is no longer able to sustain itself and begins to unravel. That’s what happened to Sears, General Motors, Lehman Brothers, Kodak, and other victims of politics, cynicism, and short-term thinking.
Enter Positive Leadership
Authentic leaders, by contrast, try to bring out the best in people. They aim to see others’ potential, to empower people to take responsibility for their actions, and to work together to make things better for all people. That’s what great political leaders like Ronald Reagan, Franklin D. Roosevelt, and Nelson Mandela have done in years past. It is what today’s leaders in business, health care, nonprofits, academia, and yes – in politics – need to do to bring us together to make life better for all people and to ameliorate our ills.
Sustainable, meaningful progress of any kind comes with a multitude of trials and tribulations. Yet the best leaders find ways to celebrate the incremental victories. As I highlight in my latest book, Discover Your True North, recent scientific research shows that positive approaches to empower people is a must-have leadership trait. By and large, the leaders I know are doing just that. They are doing their best to encourage people to grow, contribute, and live happy and meaningful lives. To use the words of author Adam Grant, they are “givers,” not “takers.”
In his book Focus, Daniel Goleman describes multiple experiments that demonstrate the impact of positive interactions with employees. One experiment showed employees perceived negative feedback more favorably when it was delivered in warm, supportive tones. When good news or positive feedback was delivered in negative tones, employees left the discussions feeling poorly, instead of feeling elated by their successes. Seligman’s research shows a 3:1 “positive-to-negative” statements ratio is necessary for healthy professional relationships.
When organizations hit roadblocks, people naturally get upset, and often their anger shows, but that doesn’t resolve anything. As Positive Intelligence author Shirzad Chamine says, there is an inner, often unconscious dialogue going on between your “sage” and your “saboteurs.” As leaders recognize this dialogue, they will be alert to avoiding negative responses that sabotage healthy relationships. By inquiring rather than directing, leaders can find opportunities within the challenges their organizations face. They also can build better relationships with colleagues who count on them to help solve problems.
Alan Mulally’s Positive Transformation at Ford
Navigating severe challenges requires strong, courageous, and authentic leaders. That’s what Alan Mulally offered at Ford Motor F 0.37% .
On his first day as Ford’s CEO in 2006, Mulally asked to tour Ford’s famous Rouge plant where Henry Ford created the Model T. Mulally was informed by one of his top executives, “Our leaders don’t talk directly to factory employees.” Ignoring that advice, he went to the plant immediately to talk to front-line workers.
Mullaly also set up mandatory weekly management meetings he called the business process review (BPR) for his top executives to get to the root cause of Ford’s long-standing problems. He quickly discovered that Ford’s challenges went way beyond financial losses: the culture at Ford was broken and in need of massive transformation. He observed, “Ford had been going out of business for 40 years, and no one would face that reality.”
In response, Mulally developed One Ford, an initiative based on “focus, teamwork and a single global approach, aligning employee efforts toward a common definition of success.” He started by redesigning internal meetings. As described in Bryce Hoffman’s American Icon, meetings had become “arenas for mortal combat” in which employees practiced self-preservation, trying to identify flaws in each other’s plans instead of recommending solutions to their problems.
Mulally reframed these meetings from negative to positive, fostering a safe environment where people had open and honest discussions without fear of blame. Instead of attacking executives for the issues they brought to the table, Mulally encouraged collaborative approaches to problem solving. He noted, “If you have a common purpose and an environment in which people want to help others succeed, the problems will be fixed quickly.”
Mulally introduced a “traffic light” system to weekly BPRs in which executives indicated progress on key initiatives as green, yellow, or red. After four meetings in which all programs were labelled green, Mulally confronted his team, “We are going to lose $18 billion this year, so is there anything that’s not going well?” His question was met with stony silence.
The following week, Ford’s North American President, Mark Fields, showed a red indicator that a new vehicle launch would be delayed. Other executives assumed Fields would be fired over the bad news. Instead, Mulally began clapping and said, “Mark, that is great visibility.” He asked the group, “What can we do to help Mark out?” As he frequently told his leaders, “You have a problem; you are not the problem.”
Mulally describes his leadership style as “positive leadership—conveying the idea that there is always a way forward.” He says a critical part of positive leadership is “reinforcing the idea that everyone is included. When people feel accountable and included, it is more fun. It is just more rewarding to do things in a supportive environment.”
With determination and positive leadership, Mulally created a culture of effective problem solving and teamwork. As a result, his team kept Ford out of bankruptcy, reversed market share losses with improved auto designs and quality, brought jobs back to the U.S. from overseas plants, and restored the company’s profitability by becoming cost competitive with foreign producers.
Weak leaders focus on all the things that are going wrong. Great leaders like Mulally bring out the best in us. The most effective leaders apply the principles of positive psychology, ensuring their interactions with employees contain a healthy balance of positive and constructive feedback. They maintain an optimistic outlook despite the setbacks, reinforcing that there is a hopeful way forward.
Bill George is Senior Fellow at Harvard Business School, former Chairman & CEO of Medtronic, and author of Discover Your True North.
This article was originally posted on 3/21/2015 on Fortune.com.