Book Notes: The Innovator’s DNA

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NOTE: This article was originally posted on the Notes for Growth blog. This is a blog where our team shares notes on the books we’ve read.

In The Innovator’s DNA: Mastering the Five Skills of Disruptive Innovation, authors Jeff Dyer, Hal Gregersen, and Clayton Christensen completed an extensive study of the world’s top innovators. Their goal was to identify and define the common characteristics and behavioral patterns of these leaders as well as how their companies were organized to unlock innovative ideas and opportunities.

The authors studied companies that scored high on a innovation premium score; which is when a firm’s market value was higher than the cash flows from its existing businesses. In other words, companies that the market deemed valuable based on its potential future earnings.

The Four Discovery Skills

Throughout their journey, the authors identified 4 core behaviors that all innovators engage in questioning, observing, networking, and experimenting. These discovery skills were commonly seen in innovative CEOs and founders and they were also embedded into the DNA of innovative companies. The book explores how innovative companies actively looked for these skills while hiring as well as created environments where discovery skills could be leveraged and grown.

A key skill of many innovators is their willingness to challenge the status quo. Most often than not, they challenged conventional wisdom by simply asking lots of questions. For example, Jeff Bezos (CEO and founder of Amazon) routinely employs the “Five Whys”. Essentially, he continues to ask “Why?” until he is able to surface a root cause. Once the root cause is identified, he’s able to unlock potentially innovative solutions. For example, let’s imagine a package arrived late to its destination:

“The package arrived 3 days late.”

“Why?”

“It appears it got lost between Dallas and Jasper.”

“Why?”

“The package fell off a pallet while in the Dallas warehouse.”

“Why?”

“Because the pallet wasn’t wrapped and when the forklift driver moved it, the package fell off the top.”

“Why?”

“It takes too much time for our forklift drivers to wrap the pallets before they move them.”

“Why?”

“They have a lot of pallets to move during the day. Taking the time to leave the forklift to find a roll of plastic is just too time consuming.”

This technique of questioning allows us to correctly frame the problem and identify hidden solutions (e.g. providing a roll of plastic on each forklift, hiring a team to focus on wrapping pallets, etc.). Asking questions like “Why?” and “Why not?” are ways for innovators to understand problems and discover overlooked opportunities.

Innovators are constantly observing the world around them. They like spending time outside the office and look for ways to position themselves in environments that allow them to see things “first hand”. They’re fascinated by human behavior and will actively look for users who are creating workarounds to solve everyday problems. These workarounds can be windows into potential business opportunities. For example, OpenTable.com was created after founder Chuck Templeton observed how much difficulty his wife was having finding and making reservations at a restaurant.

Scott Cook, founder of Intuit, makers of QuickBooks and TurboTax encourages his employees to actively watch customers use their products. As employees watch customers, he asks them to “savor the surprises” — situations where customers behave in a way that was unexpected — as that is where innovation lives.

Innovators are masters at associative thinking. In other words, they have a unique ability to network disparate ideas and people together to create new solutions to complex problems. Many innovators featured in the book were voracious collectors of experiences. They tried new foods, they read diverse books, traveled frequently, met new people, and explored many different industry verticals.

For example, Mark Benioff (founder and CEO of Salesforce.com), visited the Oracle of Tibet — who was responsible for innovation for the Tibetan government. Using questioning and observing, the networks can prove extremely valuable by generating diverse opinions and ideas.

Many innovative CEOs create opportunities for networking within their companies. For example, Pixar shapes the building space to encourage employees to spend time with each other and Google offers its employees free lunch in hopes that they’ll spend time eating together.

Innovators value their connections with others and spend time investing in their internal and external human networks. They often share early ideas and leverage their networks to help them shape, define, and refine them.

Innovators have a high-risk tolerance and a willingness to embrace failure — if it leads to quick learning. They see experimentation and failure as a necessary, if not vital, part of the innovation process.

Thomas Edison, legendary American scientist and inventor, famously said:

I have not failed. I’ve just found 10,000 ways that won’t work.

The book is full of countless stories where innovators continually experimented and iterated on their ideas. They continually challenged their own assumptions and were willing to pivot their understanding in order to find success.

Combining Discovery and Delivery Skills

The most innovative companies had a healthy balance of discovery and delivery skills within a team.

While discovery innovators leverage their associating skills, delivery innovators leverage their ability to analyze, plan, and implement ideas in a consistent and reliable way. Delivery innovators have a high degree of self-discipline and can remain focused to ensure that ideas don’t “die on the vine.”

While delivery innovators might appear quite different than discovery innovators, they still share many similarities. For instance, delivery innovators leverage discovery skills (questioning, observing, and networking) to ensure they create the right associations to delivery on an idea.

The authors discovered the most innovative companies had a healthy synergy between discovery and delivery innovators. As an example, Steve Jobs leveraged Tim Cook’s supply chain mastery for years before Cook eventually became CEO of Apple. Jobs’s ability to envision new hardware and Cook’s ability to find innovative ways to supply the necessary materials allowed Apple to dominate the competition and deliver best-in-class hardware.

People, Processes, and Philosophies

Innovative organizations often reflect the founder’s DNA. You’ll find their associative thinking baked in to people, processes, and overall company philosophies.

The authors researched how innovative companies hired and trained employees within their organization. They found that many examples where hiring practices were influenced by the founder’s ethos for innovative thinking. For example, during hiring interviews, Amazon will often instruct candidates to, “Tell us about the last time you invented something.” This is a question that Bezos prefers because it exemplifies his curious spirit and desire to have a company full of curious inventors.

Companies like P&G create opportunities for employees to engage in discovery skills. They create environments for employees to connect with customers and experiment with new ideas. Innovative companies also encourage employees to ask questions by creating Q+A events and Town Halls — where employees can speak directly to senior level executives, offer suggestions, and ask challenging questions.

Innovative leaders know that they must actively create a culture of innovation within their companies. Innovation isn’t something that you can just wait to happen organically. You must have a philosophy of innovation in all areas of your company. Many innovative companies adhere to the following philosophies:

  1. Innovation is everyone’s job: Anyone in the company can participate in developing an innovative idea.
  2. Disruptive innovation is part of our innovation portfolio: Companies desire a diverse portfolio of innovation. Health companies investigate a mix of incremental and disruptive innovations. They’re not afraid to investigate opportunities that might eventually cannibalize current offerings.
  3. Deploy lots of small, properly organized, innovation project teams: Innovative leaders look to create small, intact, teams. Bezos uses a “two pizza rule”. If you can’t feed a team with two pizzas, it’s too big. The key is that these teams expand beyond organizational boundaries. This prevents the investigation from being biased toward a solution that serves a single division. For example, if Sony were to investigate a new tablet by tapping the PlayStation group to explore the opportunity, they could expect that the team would come back with a tablet designed for video game enthusiasts (regardless if that was a viable opportunity for the company). Sony would be better served by creating a team that drew individuals from their PlayStation, TV, computing, and entertainment divisions. This would ensure a more diverse set of ideas and experiments.
  4. Take smart risks in the pursuit of innovation: Innovation isn’t “reckless experimentation”. While innovation requires risk taking and an willingness to accept failure, the most innovative companies ensure they have processes to learn from failures. They perform postmortems on failed projects and leverage the four discovery skills to identify ways to avoid making the same mistakes.

UX Researcher and Author