Fear and Innovation

There’s quite a bit of fear in the economy today. But that can be seen either as an advantage or a disadvantage for innovation. In some ways, it’s both.

Fear pushes companies to try new ideas and new approaches. As one leader of a small business recently told me, “We would be out of business three years ago if we hadn’t innovated.” Most innovators I talk with list fear as a source of strength. If you are losing customers, if money is scarce, and there is no other choice; you have to innovate.

At the same time, more than lack of capital, lack of good ideas, or lack of economic imperative; fear of change can be the most stubborn impediment to innovation.

According to David Johnson, CIO of Jones Lang LaSalle, “Middle managers think Innovation is such a big word. Innovation is too scary.” Employees have their fill of change right now, and innovation is just one more demand for change.

And fear can cripple innovation. Different people react differently to an environment that challenges their existence, and many will deny a new reality, resist change, and sometimes become paralyzed. As Tony Reynes, partner in a recruiting firm that is re-writing their entire business model, put it, “Some people just freeze up but I think a successful innovator says, “Okay, I’ve got to do something different.” Everyone is facing the same fear and everyone has the same opportunities. The innovators act on the new environment.”

Tracy Williams, a leader in agricultural ventures and former military officer, pointed out that the responsibility of a leader is to create a feeling of safety, to help those who are paralyzed take action. As he put it, “Look, part of my job is keeping my people safe from the people on top. Go make a mistake. As long as you haven’t done anything illegal, as long as it makes business sense, as long as you tell me when things go wrong, I can get you out of anything you get into. So let’s go do something.”

Another, more Machiavellian approach may be to avoid telling everyone that they are innovating. With some projects, it is possible to position the work in such a way that it does not seem to overtly threaten the status quo. Eventually, innovation always changes things – but to avoid unduly frightening the people whose work lives will change some innovators will use a Trojan Horse approach.

The Trojan Horse approach presents something new as if it were merely a slightly modified version of something old. The iPod, for example, was really just a digital version of a Walkman. A personal computer could be seen as just a typewriter with a screen. A car as a horseless carriage. Televisions, at first, were perceived as radios with pictures. Look at most successful innovations, and likely you will also find an analogue to an older technology or process that was used to get people comfortable with the idea.

At times, the Trojan Horse approach goes well beyond offering comfort. It can also cloak the true implications of an innovation - forcing us to change our lives without realizing it. Few people buying a computer in 1990 were buying into the complete transformation of our work and personal lives that took place in the next 15 years. If companies knew that the Internet would force them to share more information than they had ever shared before, would they have started creating Internet sites?

According to David Johnson, “anytime you are saying that you are innovating, you will get an initial buzz. But, as soon as everyone sees it as changing what they do, they become very opposed to it. So, when there is the slightest problem with developing a new innovation, everyone jumps to, “Aha, I told you this was never going to work! And the project gets killed.” Instead, try “…unveiling bits and pieces of it at a time. Emphasize how a certain function is made simpler, but avoid talking about any larger plans or potential for industry change.”

Jonathan Rutman of CB Richard Ellis uses a three ring binder to make fear of innovation less of an issue, “Every step of the process will go into this binder, every study, every point of data, and every decision we make will be captured on paper and put into your binder. Fear can be managed if you package it.”

But if you don’t use a Trojan Horse, it is important to acknowledge fear upfront, to be honest about what the real dangers, the real risks of any new project might be. Instead of pretending that there is no danger, there is a real need for innovators and leaders to be able to say, “This is difficult. It could fail. Let’s see what we can do to make it succeed.”

Brian Marshall, a consultant on innovative sales strategies, offered a different way to think about fear that could help explain why some are able to innovate now and others cannot. “Fear is nothing more than pain that hasn’t happened yet…the most compelling emotional motivator is pain – more so than fear.” The immediate pain of changing something right now will always trump the fear of something that might happen.

An example Brian used was the US auto industry, “The unions are now suddenly the most innovative group of people you will ever meet – but it may be too late. They are now able to make substantial change because they are in tremendous pain. The fear they felt two years ago was not enough to overcome the immediate pain of change.”

“What is innovation? It is a direct threat to the status quo. So those who are a part of that status quo will kill innovation if they see it threatening how they do things now. When they start to feel real pain, then they become the champions of change and innovation.”

Brian continued, “Great leaders and drivers of change are those that can take the fear of the future and bring it into the pain of the present before it’s too late.”

Fear is a powerful motivator for innovation, but it must be controlled, acknowledged, and worked with to overcome the natural resistance to change.

(This blog post is an excerpt from a Branson Powers, Inc. B2B Executive Innovation Roundtable that was held on June 19th, 2009. If you are interested in reading the full report, you can view the pdf file)

Uncomfortable Innovation

In order to change something, an innovator has to be comfortable with new ideas and at the same time be uncomfortable with the status quo. They have to be uncomfortable enough to want to change it – and willing to use untried approaches, unfamiliar skills, and even the wrong tools to make something better.

Tony Reynes, a principal of Tesar Reynes made this very clear to me recently when he said, “Instability and comfort with being off-balance certainly is a big part of why I’m an innovator.” Being comfortable with discomfort may be a crucial character trait for innovators.

Patrick Lamb of Valorum Law Group helped clarify the importance of discomfort by describing his new exercise regimen. His physical trainer requires Patrick to stand on an unstable platform whenever he performed an exercise. According to the trainer, the instability of the platform helps to build core muscles that are constantly compensating and trying to maintain some kind of internal balance. Translated to business and innovation, that same ideal holds, “if we are able to operate in an unstable way, we become stronger and better able to emphasize the positive sides of change.”

If people are unable to accept discomfort, they may not be able to innovate. Kevin Conlon of Conlon Public Strategies pointed out that traditional printers in the seventies and eighties, when negotiating new contracts with newspapers passed up the opportunity to take control of emerging electronic printing and remote printing technologies. Those printers, however, were very comfortable in their skills as traditional trainers. “They were given the opportunity to embrace new and unfamiliar technology – and instead opted for contracts that allowed them to be traditional printers forever with no burden to evolve professionally. There are now virtually no traditional printers at any of the major newspapers.”

It should come as no surprise then, that innovators often seem to straddle multiple worlds, multiple cultures, and quite often don’t completely fit in. They often don’t have the standard credentials or formulas for a problem – and therefore by default look at things in a fresh or unique way. And even when they know the formulas well, they are willing to put them aside.

People who are comfortable with how things are done right now, have little reason to change. The rational course of action for someone in that position is to avoid changing what they are doing, even if there's a chance that things could become very uncomfortable in the future.

Jonathon Rutman of CB Richard Ellis has pointed out, “Those people who are the most successful in an old system are the last to see the reason to change – or to make any kind of change. Why give up what you have?”

Innovators are better able to find new solutions to old problems, not because they choose to – but because they have to. They are too uncomfortable to continue as they are.

Innovation needs to be uncomfortable.

(This blog post is an excerpt from a Branson Powers, Inc. B2B Executive Innovation Roundtable that was held on June 19th, 2009. If you are interested in reading the full report, you can view the pdf file)

Commercial Real Estate Innovation

Many of my friends, colleagues and clients work in the commercial real estate industry. Even after the credit markets come back, commercial real estate will be engaged in some exciting and fundamental transformation. A comment left on my real estate blog at The Real Corner elicited two interesting questions from Mark Waligora of Pinetree Commercial. He asked,

"What are the trends that we can anticipate and take advantage of as stakeholders (principals, brokers, lenders, tenants) during this transformative cycle? Where are the hackers in our industry?"

As I attempted to answer the questions, I decided to focus on two key trends that help me to understand what is happening and what may happen in the future. There are, of course, many macro trends affecting this sector; demographic trends, changes in technology, economic growth, debt and equity, legal structures and a new regulatory environment are all very important. But I believe that these two sometimes overlooked trends have a tremendous amount of potential to transform commercial real estate. They are:

1. Office and Retail need less space per person.
2. Sustainability and Energy Use issues will not go away.

To start with, it is time to acknowledge that that square feet use per person is on a downward trend - both in office space and in retail - and is unlikely to jump back up once the recession is over. The second baby boom will help offset the loss of square footage demand as new workers enter the workforce, but as the use of the Internet, mobile networking, flexible office space and on-line retailing only increases, population growth cannot keep up with the fundamental shift in how our society uses real estate.

When it comes to office space, why do businesses need to have large private offices when the average desk chair is only occupied 30% of the time from 9 to 5 Monday through Friday? They don't - and more and more businesses large and small are reducing their square footage per person. It's no longer a flaky idea to have flex office space and telecommuting. With everyone using a laptop computer and a cell phone, offices no longer house all the tools for people to work. The remaining purpose of office space may ultimately be to conduct meetings and brainstorming, not sitting at a computer and taking calls, that can be done in any number of places. Commercial real estate service companies have been advising corporate clients for quite some time on how to better use - and ultimately decrease the total amount of space they use for offices. Owners of office buildings that understand that will have far more luck keeping their buildings occupied.

In retail real estate, some of the most imaginative, innovative and frankly brilliant real estate pros work in retail. However more and more people now use the Internet for entire categories of purchases - such as books, electronics, groceries, and clothing. Even though there will always be a need for some form of in-person retailing - it will require a lot less space. Retail real estate must come up with another use for all those empty shopping centers - otherwise yesterday's community big box center will become tomorrow's community problem. For more on retail vacancy read this interesting overview in a blog regarding "ghost boxes" here.)

Secondly, energy and sustainability issues will not go away - they will only become more important. A third of the energy used in this world and almost half of the release of carbon in the atmosphere is related to buildings. That means that real estate is equally as important as manufacturing and transportation when it comes to solving the issues of global warming and energy use. This is about more than getting a LEED certification on the corporate headquarters building. Every real estate investment and every lease needs to be looked at with energy use and carbon in mind - not because it's the right thing to do - but because it will have more and more of a financial impact on the profitability of that asset every year. Do not be fooled by temporary lower energy prices and a slow government's reluctance to initiate a carbon tax. This stuff is coming, and those real estate players - whether they are investors, developers, owners, brokers, managers or corporate users will get burned if they don't pay close attention.

At some point very soon, the environmental impact of a building may have as much importance as its location. The players that figure that out first will have the advantage.

Who are the hackers?

You can find them everywhere - they are the people who are trying to redefine their jobs and their companies - the tenant reps that are positioning themselves as portfolio consultants, the investment sales reps that are figuring out where the new sources of capital are coming from, and the owners, brokers, tenants and managers who are figuring out how to make the energy and environmental crisis work for them.

Why are they hacking?

Recently an industrial real estate guru and friend, Sam Foster, sent me his insight on innovation that is particularly relevant to that question,

"No one innovates until survival requires it. Yes, there are the neurotic few that can't help themselves, but for most of us, not so. Getting laid off and not being able to find another job requires one to innovate."

Real estate professionals, even if they still have a job, are seeing their old sources of income shrink or even dry up. When buildings aren't flipping every couple of years or companies doubling in size every couple of years, real estate, by necessity, has to figure out how to make a living again. Commercial real estate is a transaction business at its heart, and when the transactions slow down, the best people in the industry will work towards finding the next great opportunity.

It is not an easy time to work in commercial real estate, but it may be one of the most important times. If real estate professionals can solve for the two trends of diminished per person space and sustainability, they will go a long way towards building a brighter future.

What's Your Trojan Horse?

According to the Kauffman Foundation, 78% of Americans believe innovation is important to our economic health. Western governments are trying to figure out how to stimulate innovation. CEO's speak eloquently about innovation as they strategic advantage.

And yet...

Most companies seem to be doing anything but change. Instead, they go the standard and sometimes necessary playbook that calls for laying off workers, closing lines of business, selling assets, and praying that the economy will change before they run out of money. Changing a business model or process, creating a new product or new market is often overlooked as too expensive or risky ventures.

And yet...

According to Dane Strangler of the Kauffman Foundation, (“The Economic Future Just Happened” 6/9/09), over half of the current Fortune 500 companies began during a recession, bear market or both. If historical patterns continue, this isn’t a time to wait. New companies, new technologies, new processes and new markets are always found in times of challenge.

And yet...

According to an executive I interviewed recently, “Middle managers think Innovation is such a big word. Innovation is too scary.” Employees have their fill of change, Innovation now seems like yet another demand for change.

More than lack of capital, lack of good ideas, or lack of economic imperative; fear of change can often be the most stubborn impediment to innovation. This suggests that it would be a strategic mistake for an innovator to tell everyone that they are innovating.

A key strategic tool for innovation is to position the work in such a way that it does not seem to overtly threaten the status quo. Eventually, innovation always changes things – but it’s important that those affected by that change are not unduly concerned or frightened.

Consider using a Trojan Horse.

In Virgil's The Aeneid, the Greek armies, after 10 years of trying to defeat the city of Troy, built a huge statue of a horse out of wood. The Trojans took the seemingly harmless but massive statue into their city. At night, soldiers from the Greek army snuck out of their hiding places inside the statue in order to take over the city.

The Trojan Horse approach, then, is to present something new as if it were merely a slightly modified version of something old. The iPod is really just a digital version of a Walkman. A personal computer is really just a typewriter with a screen. A car is really just a horseless carriage. A television is really just a radio with pictures. Look at most successful innovations, and likely you will also find an analogue to an older technology that was used to get people comfortable with the idea.

At times, the Trojan Horse approach goes well beyond offering comfort. It can also cloak the true implications of an innovation - forcing us to change our lives without realizing it. No one buying a computer in 1990 was buying into the complete transformation of our work and personal lives that took place in the next 15 years. If companies knew that the Internet would force them to share more information than they had ever shared before, would they have started creating Internet sites?

According to one executive I spoke with recently, “anytime you are saying that you are innovating, you will get an initial buzz. But – as soon as everyone sees it as changing what they do, they become very opposed to it. So, when there is the slightest problem with developing a new innovation, everyone jumps to, “Aha, I told you this was never going to work! And the project gets killed.” Instead, try “…unveiling bits and pieces of it at a time. Emphasize how a certain function is made simpler, but avoid talking about any larger plans or potential for industry change.”

If you are going to innovate – and therefore subvert the existing state of things – be ready to ride inside the belly of a wooden horse.