What leadership capabilities are necessary to support innovation and entrepreneurship?

Leadership, Innovation and Entrepreneurship: What leadership capabilities are necessary to support innovation and entrepreneurship?

OCTOBER 28, 2010 LEAVE A COMMENT

The following paper is a look at leadership qualities for innovation and entrepreneurship. Quite a difficult topic and the word count was extremely limiting but a lot of fun none the less!

Innovation and Entrepreneurship

The words innovation and entrepreneurship cause confusion when addressing what leadership qualities are required to foster both.  The two concepts have mutually shared features and meanings.  An entrepreneur is someone who creates something new or different, transmuting or changing values, shifting resources from low to high productivity (Drucker 1985).  Correspondingly, innovation is, “driven by the ability to see connections, to spot opportunities and to take advantage of them” (Tidd et al. 2005, L 165).  Innovation can range from incremental through to radical product, process, position or paradigm change and is about reshaping the status quo to create value (Tidd et al. 2005).  One is an innovator if they, through entrepreneurial activities, have found utility for their invention in a market (Lafley & Charan 2008, p 25) with Drucker (1985, p 36) stating that innovation is the knowledge base of entrepreneurship.  An individual can be both, but it’s generally the purview of entrepreneurial start-ups with established organisations relying on people networks.  Govindarajan & Trimble’s (2010, L 439) simple maxim of “innovation = idea + leader + team + plan” is useful, indicating the importance of collaborative social process (Drucker 1985 ; Lafley & Charan 2008, p 26), but isn’t complete and is adapted in figure 1 to include two fundamentals.

From an organisational context, the term intrapreneur means an intra-corporate entrepreneur who take ideas to reality and whose absence decreases innovation possibilities (Pinchot & Pellman 1999, p ix).  The intrapreneurial leaders challenge is, innovation is neither repeatable nor predictable but is non-routine, uncertain (Govindarajan & Trimble 2010, L 380) and carries a degree of risk requiring a change of mind-set with Govindarajan & Trimble (2010, L 63) arguing, “the limits to innovation in large organizations have nothing to do with creativity… or technology… but everything to do with management capability.”

Figure 1: Innovation and Entrepreneurship Equation

Source: Adapted from Govindarajan & Trimble (2010, L 439), Kim & Mauborgne (2005) and Pinchot & Pellman (1999)

Requirement for Innovation and Entrepreneurship

Both Schumpeter (1943), Marx and Engels (1888) share agreement, but with different outcomes, keeping intra/entrepreneurs and innovators in business, that is, to remain competitive an organisation needs to destroy its previous advantage through constant revolution of what made it competitive in the first place (Appendix A).  This has direct ramifications on sustainability because if ones competitors value your innovation and requires it to neutralise your advantage it will be adopted and adapted to the point that it becomes commoditised (Christensen 1997, L 2266).  This predicates that both innovation and entrepreneurship are imperative to create new solutions to distinguish organisations from the mediocre by imagining what could be (Hamel & Prahalad 1994, L 464).  If the organisation fails to anchor innovation with value, the company may lay eggs that others may hatch (Kim & Mauborgne 2005, p 13).  This is where intrapreneurial leaders make a difference.

Creativity and Change

The commonality between innovation and entrepreneurship is in organisational ability to tap into individual and collective creativity in order to innovate and those employees ability to cope with change.  It’s argued that in essence all people are creative, usually manifesting in ones past-times or hobbies, in other words where someone’s in their element (Csikszentmihaly 1996 ; Robinson 2001, L 327).  The intrapreneurial leaders challenge is, one doesn’t manage creativity by instructing people to innovate, one manages for creativity (Amabile & Khaire 2008).  The intrapreneurial leader needs to develop an environment, culture and capabilities that draws on these founts of creative energy (Clawson 2006) and apply them to the work setting.

Most people fear change because it’s often disruptive, risky and costly (Tidd et al. 2005).  With the trend for flatter, flexible organisations requiring entrepreneurial innovation due to increased volatility and competition (Kotter 2001), for some people their “raison d’être of working life—simply evaporates” (Goffee & Jones 2009, p 15).  Quite simply, they lose their identity or hierarchical title and their reality becomes uncertain.  This fear has negative consequences for ideation (Hellström & Hellström 2002, p 108) the very source of creativity.  It’s “not surprising that individuals and organizations develop many different cognitive, behavioural and structural ways of reinforcing the status quo“ (Tidd et al. 2005, L 6136).  Again this is the domain of intrapreneurial leaders through coping with change not just complexity (Kotter 2001).

Leadership and Culture

There are many explanations of what ‘good’ leadership is and in some descriptions, contradictory situations arise contributing to a ‘wedge of disconnection’ (Mintzberg et al. 2002) that places the leader on a pedestal.  This is exemplified through the infinite loop of academics looking for the magic answer in trait, behavioural, power and influence, situational, charismatic and transformational theories (Clawson 2006, p 450-462).  Table 1 and Appendix B.

Table 1: Examples of leadership types

7 Ways of Leading	Level 5 Leadership
Opportunist – Wins any way possible	Level 1 – Highly capable individual
Diplomat – Avoids overt conflict	Level 2 – Contributing team member
Expert – Rules by logic and expertise	Level 3 – Competent manager
Achiever – Meets strategic goals	Level 4 – Effective leader
Individualist – Interweaves personal and company action logics	Level 5 – Executive, builds enduring greatness through paradoxical combination of personal humility plus professional will
Strategist – generates organizational and personal transformations
Alchemist – Generates social transformations

Source:  Rooke & Torbert (2005), Collins (2001)

According to Schein (1990, p 22) leadership and culture are two sides of the same coin and leaders create cultures when they create groups and organisations.  This results in the leaders themselves being influenced by culture.

Table 2: Definition of group culture

“A pattern of shared basic assumptions that was learned by the group as it solved its problems of external adaption and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems”

Source: Schein (1990, p 17)

However this creates a paradox, as all people are influenced by many cultures at many levels, including temporal and regional circumstances (Hofstede et al. 2010)… What comes first?  This contributes to Schein’s (1990) proposition that there aren’t good or bad cultures, there just are cultures.  All a leader can do is positively influence a culture based on their VABE’s (Clawson 2006).  One of the main reasons for this complexity is due to the world becoming more connected through the mixing of people and cultures on a global, regional, national and organisational scale.  Nowhere is this more evident than in the workplace that’s no longer homogenous due to progress society has made both socially and technologically (Dickie & Soldan 2008).

Hofstede et al. (2010) explain the polarity and complexity of some cultures through their explanation of collectivist versus individualist cultures that may have weak or strong uncertainty avoidances.  Figure 2, 3 and Appendix C.  These factors need to be considered by the intrapreneurial leader because as Drucker (1985, p 25) states, “people who need certainty are unlikely to make good entrepreneurs.”  This of course is an absolutist argument that focuses on the individual by placing, for example, someone from Japan in a box of non-entrepreneurial yet highly collective.  It doesn’t take into account that the Japanese have pioneered innovation management practices such as Kaizen since WWII and now dominate the automotive industry (Ireland et al. 2008).

One could argue that maybe the whole is bigger than its parts and therein contains the answer?  Maybe the confidence of a successfully innovative collective can spur entrepreneurial behaviour?  To hark back to Schumpeter (1943), Marx and Engels’s (1888) similar views but diametrically opposed outcomes, one needs to consider the influences of time, circumstances and cultures.  All three are from similar regions in Europe (with their own cultures) but had vastly different experiences.  Is it possible that Marx and Engels were heavily influenced by the paradigm shift of the industrial revolution and sought solace in the collective to avoid uncertainty?  Whilst Schumpeter saw the benefits of mass production due to WWII and embraced the concept of challenging uncertainty through ingenuity, innovation and entrepreneurship?

Figure 2: Differences between collectivist and individualist workplaces

Source: Hofstede et al. (2010, p 124)

Figure 3: Differences between weak and strong uncertainty avoidances in the workplace

Source: Hofstede et al. (2010, p 217)

In summary innovation and entrepreneurship are heavily influenced by the macro-cultural context.  How does one draw out ideas from a person or group that values collectivism, not wanting to speak out of turn?  How does one lead in times of change when the wider cultural context seeks safety in certainty?  Is timing a consideration?  These factors add to the challenge for intrapreneurial leaders.

Followers, are they homogenous?

If one of the major qualities of a leader is coping with change (Kotter 2001) then one could surmise that ‘followers’ who are innovative and/or entrepreneurial are also ‘leaders.’  Then the aim of the intrapreneurial leaders should be to enable and direct their energy in a way that’s beneficial to the organisation.  Goffee and Jones (2009, p 3) label these people ‘clever,’ otherwise known as ‘A’ players (Huselid et al. 2005), due to their highly talented qualities with the “potential to create disproportionate amounts of value from the resources that the organisation makes available to them.”  However these people are not compliant followers like most management theory assumes.  They have specific characteristics and are found in particular places.  Table 3.  If the organisation ignores them they can be destructive, poisoning “a culture very quickly” (Goffee & Jones 2009, p 49).  This theory is corroborated by Robinson’s (2001, L 355) assertion, “if ideas are discouraged or ignored, the creative impulse does one of two things.   It deserts or subverts the organisation.  Creativity can work for you or against you.”  Simply put followers aren’t homogenous; this again raises challenges for intrapreneurial leaders.

Table 3: Nine common characteristics of ‘clever’ people and where they’re found

Characteristic	Type of Clever Teams
Their cleverness is central to their identity	Techie Teams
Their skills are not easily replicable	Creative Teams
They know their worth	Professional Teams
They ask difficult questions	Problem Solving Teams
They are organizationally savvy	Strategy Teams
They are not impressed by corporate hierarchy (and they don’t want to be led)	Top Teams
They expect instant access
They want to be connected to other clever people
They won’t thank you

Source:  Goffee & Jones (2009, p 21-34 & 82–98)

The role of leadership to foster innovation and entrepreneurship

The intrapreneurial leader’s role is to “map out the stages of innovation and recognize the different processes, skill-sets, and technology support each requires” (Amabile & Khaire 2008).  The duty of intrapreneurial leaders is to create safety and draw out the very things that motivate and drive people, that are intrinsically linked to their desires (George et al. 2007).  Clawson (2006) would call this leading at level three by trying to understand peoples VABE’s through promoting innovation where people can make a difference tapping into employee’s “deepest intellectual and professional desires” (Lafley & Charan 2008, p 28).  By doing this intrapreneurial leaders create a community with Pinchot and Pellman (1999, p 99) stating, “at the core of community is voluntary contribution to the whole, above and beyond the call of duty.”  This is where intrinsic motivation and reward resides.  The feeling of a job well done or having made a difference can stimulate more than extrinsic carrot and stick motivation (Clawson 2006 ; Covey 2004).

Required Leadership Capabilities

Innovation and entrepreneurship requires energy (Tidd et al. 2005) and leadership requires the management of energy (Clawson 2006) by building a shared vision of a better future, fostering genuine commitment (Senge 2010) to overcome change resistant obstacles of the status quo.  This seems perfect, although it’s often more difficult than the previous statement suggests.  Not everyone is aggressively focused like Maccoby’s (2004) ‘productive narcissists’ or driven to sate their extrinsic desires (George et al. 2007).  Collins (2001, p 35) outlines individuals who were paradoxical in nature demonstrating humility plus will, of which there was only 11 from a sample of 1,435 companies, not even 1%!  This is why the idea of servant leadership (Banutu-Gomez 2004 ; Hannay 2009 ; Quist 2008) can be applied particularly when latent creativity (Csikszentmihaly 1996) and talent exists throughout the organisation that if channelled provides value (Goffee & Jones 2009).  If there are people who are entrepreneurial or innovative help them by enabling and guiding them.  Extrinsic satisfaction will come but is no substitute for intrinsic desires.

The intrapreneurial leaders particular foundational capability begins with self-knowledge and authenticity (George et al. 2007).  Through having self-awareness, self-regulation, motivation and empathy (Goleman 2004) they clarify their centre (Clawson 2006) through developing an open stance making it possible to be objective, whilst being aware of alternative possibilities (Csikszentmihaly 2008, p 205).  If intrapreneurial leaders develop the requisite ‘self’ skills then it’s possible that their “emotions and actions prompt followers to mirror those feelings and deeds” (Goleman & Boyatzis 2008).  This becomes the Gandhian (1957) self fulfilling philosophy of, ‘be the change you wish to see.’  If this happens and a focus on understanding the individual’s strengths and weaknesses occurs, the reality of distributing leadership throughout the organisation through complimentary skills could be realised (Ancona et al. 2007) releasing creativity to feed innovation and entrepreneurship.  The intrapreneurial leaders objective should be to promote change as an opportunity by walking the talk aiming to mirror their VABE’s throughout the organisation because, “people don’t embrace an opportunity because they see it, they embrace it because they feel it” (Hamel 2002, p 136).  By living this centred reality beginning with the self and establishing trust (Covey & Merril 2006), for those that shy away from uncertainty in the safety of the collective it’s possible that innovation and entrepreneurship can occur as is the example of Japan in section 3.

A word of warning, there is a danger that this analysis falls into the very trap that Mintzberg et al. (2002) warns.  The capabilities and qualities that follow (table 4) are to be taken as a guide and begin with the self rather than the wider context of ‘technical’ expertise due to the acknowledgement that innovation, entrepreneurship and its progeny of change and creativity is an adaptive challenge (Heifetz et al. 2009) requiring the development of higher states of awareness through self-transformation (Kegan & Laskow Lahey 2009).

Table 4: Selection of capabilities and qualities required of intrapreneurial leaders

Capabilities and qualities

Self-knowledge – understand what motivates them intrinsically and extrinsically, understand their capabilities including strengths and weaknesses (Ancona et al. 2007 ; Clawson 2006 ; Drucker 2005 ; George et al. 2007 ; Schecter & March 2003)

Authenticity – demonstrating a passion for the purpose, practicing their values consistently, leading with their hearts and their heads (George et al. 2007).  When people are engaged authentically in discussions that matter deeply, Senge (2010, L 6958) states, there’s no limit to the energy, courage and willingness to step into foreign territory.

Humble (Collins 2005 ; Goffee & Jones 2009)

Personal mastery – continually clarifying and deepening ones personal vision (Senge 2010)

Discipline (Schecter & March 2003), self-regulation (Goleman 2004), Persistence (Hamel 2007)

Ethical (Klebe Treviño, Pincus Hartman & Brown 2000 ; Northouse 2009)

Trustworthy (Clawson 2006 ; Covey & Merril 2006)

Systems thinker (Senge 2010) – recognising patterns instinctively (i.e. gut feeling) (Goleman & Boyatzis 2008)

Sense-making – understanding the context in which a company and its people operate (Ancona et al. 2007) and curiosity (Csikszentmihaly 1996)

Communicator, Relator – build networks of people, boundary crosser (Ancona et al. 2007) / Establish a guiding coalition (Kotter 1996), establishing team learning (Senge 2010), Enabler (Bennis 2010)

Strategic creative thinking through generative reasoning (De Wit & Meyer 2005) and if they feel they cannot think creatively, let creative thinkers get involved.

Self transforming (Kegan & Laskow Lahey 2009) / autonomous moving towards integrated (Loevinger 1976; 1987 cited by Hayward 2003)

Foresight and imagining a better future by building a shared vision (Senge 2010)

Cultural and situational lens switching (Heifetz et al. 2009 ; Skarzynski & Gibson 2008), the ability to challenge mental models (Senge 2010), Culturally aware and sensitive (Dickie & Soldan 2008 ; Quist 2008 ; Santos 2004)

Establish a currency of reciprocity (Clawson 2006)/ investor in the ‘emotional bank account’ (Covey 1989)

Servant leader (Banutu-Gomez 2004 ; Hannay 2009 ; Quist 2008)

Risk and failure tolerant – to create an environment of psychological safety (Amabile & Khaire 2008)

A sense of timing (Csikszentmihaly 1996) and of when certainty is needed (Cherry 2010), evolutionary rather than revolutionary (Hamel 2007)

Developer and mentor – of other leaders for the future (Lafley & Charan 2008, p 28)

Practices to be discouraged
Bureaucratic, efficiency-minded management has no place in innovation (Hamel 2007), so leaders need to develop a model of intrapreneurship that fosters creativity and networks (figure 4).  Birkinshaw (2003) explain BP’s framework of direction, space, boundaries, and support (figure 5) in which balance is integral with tight constraints as destructive as loose ones.

Figure 4: Leaders in collaborative networks

Source: Barsh et al. (2008)

Figure 5: BP’s model for corporate entrepreneurship

Source: Birkinshaw (2003)

Allowing a culture of fear and isolation by stifling risk taking, punishing failure (Amabile & Khaire 2008) and not being considerate of individual’s cultural context is another consideration.  Pigeon-holing someone because of their ethnicity or background stifles innovation as diversity can deliver groundbreaking solutions (Santos 2004).  Goffess and Jones’s (2009) illustration of ‘clevers’ also provides practices to be discouraged, provided in table 5.

Table 5: Dos and don’ts for leading clever people

Dos	Don’ts
Explain and persuade	Tell people what to do
Use expertise	Use hierarchy
Give people space and resources	Allow them to burn out
Tell them what	Tell them how
Provide boundaries (agree on simple rules)	Create bureaucracies
Give people time	Interfere
Give recognition (amplify their achievements)	Give frequent feedback
Encourage failure and maximise learning	Train
Protect them from the rain (organizational politics)	Expose them to politics
Give real-world challenges with constraints	Build an ivory tower
Talk straight	Use bull or deceive
Create a galaxy	Create a star
Conduct and connect	Don’t take all the credit as the leader

Source:  Goffee & Jones (2009, p 43)

Kelley and Littman (2001, p 180–181) describe barriers to creating an innovation culture including; clean, hierarchy-based, bureaucratic, anonymous organisations dominated by experts.  On the flip side they recommend bridges that can foster innovation by allowing people to be themselves.  Appendix D.  Whilst Moss Kanter (1983) elucidates poor practices that typically exemplify a lack of trust in one’s peers and subordinates.  Appendix E

Conclusion

Some leadership theorists tend to promote utopian philosophies based on unrepeatable qualities.  For the would be leader, trying to emulate productive narcissists (Maccoby 2004), paradoxical level 5 leaders (Collins 2001) or any other construct that alludes to imperative leadership qualities is likely to lead to failure.  They are no longer being themselves and can potentially lose sight of who they are and become unauthentic (George et al. 2007), the very opposite of what a leader should be.  Blindly following utopian advice of leadership theorists is fraught with danger particularly when utopia is derived from the Greek ou-topos meaning no place or nowhere and eu-topos meaning good place, a paradoxical mixture, asking can utopia ever be realised (British-Library n.d.)?  We are all imperfect beings meaning we are incomplete leaders (Ancona et al. 2007).  If leadership is what we aspire to maybe we need to work hard at extracting the best from ourselves or as Drucker (2005) states focusing on our strengths whilst minimising our weaknesses and also our followers who also share leadership capability that might just go untapped if we don’t.

In summary the question of leadership qualities to foster innovation and entrepreneurship is slightly rhetoric due to the conflicting nature of some theory and its significant influence of time, circumstance and culture.  As a result, this report should be taken as an imperfect guide to complex territory.

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Appendix A: Agreement on the foundations for Innovation and Entrepreneurship

Appendix A: Schumpeter on Capitalism
“Capitalism, then, is by nature a form of economic change and not only never is but never can be stationary… The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates” (Schumpeter 1943, L 1930).

“But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance)—competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives” (Schumpeter 1943, L 1967)

Appendix A: Marx and Engels on Capitalism

“The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society… Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish bourgeois epoch from earlier ones” (Marx & Engels 1888, p 38).

Appendix B: Bennis’s theory of Leaders versus Managers

• The manager administers; the leader innovates.
• The manager is a copy; the leader is an original.
• The manager maintains; the leader develops.
• The manager accepts reality; the leader investigates it.
• The manager focuses on systems and structure; the leader focuses on people.
• The manager relies on control; the leader inspires trust.
• The manager has a short-range view; the leader has a long-range perspective.
• The manager asks how and when; the leader asks what and why.
• The manager has her eye always on the bottom line; the leader has her eye on the horizon.
• The manager imitates; the leader originates.
• The manager accepts the status quo; the leader challenges it.
• The manager is the classic good soldier; the leader is her own person.
• The manager does things right; the leader does the right thing.”

(Bennis 2010, L 728)

Appendix C: Global Uncertainty versus Masculinity Index

Source: Hofstede et al. (2010, p 214)

Appendix D: Kelley and Littman’s (2001) Barriers and Bridges to Innovation
The following table is Kelley and Littman’s (2001) Barriers and Bridges to Innovation:

Barriers	Bridges
Hierarchy-basedInnovation and structure are like oil and water.  Forcing ideas to start at the top or rigidly follow a vertical path through an organization tends to weigh down new projects.  There are just too many obstacles.	Merit-basedIf your company is truly willing to embrace ideas from any source, not only will innovations flourish more readily, but people will be more open to tossing their thoughts out into the ring.
BureaucracyIf you have to fill out a standardized form or consult a lawyer every time you start a project, pretty soon you’ll just try fewer new things.	AutonomyIf you’re the master of your own destiny, you’ll have the self-confidence to take risks.  Yes, you’ll occasionally stumble, but you’ll keep reaching for new successes too.
AnonymousThere are companies where nobody seems to notice or care.  Places where you can cruise slowly up a predictable career path as long as you don’t rock the boat.  Places where playing it safe is the wisest course.	FamiliarIf you feel like friends and family, then occasionally will understand an occasional misstep.  Good organizations make you feel comfortable enough to poke fun at each other—even at the boss—because you’re among friends.
CleanBeware of clean desk policies or strict rules about customizing your space.  Even a “tidy” organizational structure can stifle creativity.  If you keep laying down restrictions, you shouldn’t be surprised when the project team has trouble thinking outside of the box.	MessyMy office may be messy but it’s unmistakably mine, a personalized home base for the many hours I spend there.  New York City is a good metaphor for this kind of stimulating messiness—a jumble of cultures, ideas and experiences that spawns great energy and creativity among its inhabitants,.
ExpertsExpertise is great until it begins to shut you off from new learning.  Man y self-described experts, for example, talk more than they listen.  Experts can inadvertently block an innovation by saying, “It’s never been done that way.”	TinkerersA tinkerer is always tweaking things and ideas, trying to improve their work and themselves.  Tinkerers ignore the status quo because they know they’ll be trying something a little different tomorrow.  They’re great at launching projects and keeping them in motion.

Source: Kelley & Littman (2001, p 180–181)

Appendix E: Moss Kanter’s (1983, p 101) Rules for Stifling Innovation

The following ‘rules’ are a contradictory way of looking at innovation management practices.  If one were to implement them one would expect an un-innovative and un-entrepreneurial organisation:

• Regard any new idea from below with suspicion—because it’s new, and because it’s from below.
• Insist that people who need your approval to act first go through several other levels of management to get their signatures.
• Ask departments or individuals to challenge and criticize each other’s proposals.  (That saves you the job of deciding; you just pick the survivor.)
• Express your criticisms freely, and withhold your praise.  (That keeps people on their toes.)  Let them know they can be fired at any time.
• Treat identification of problems as failure, to discourage people from letting you know when something in their area isn’t working.
• Control everything carefully.  Make sure people count anything that can be counted, frequently.
• Make decisions to reorganize or change policies in secret, and spring them on people unexpectedly.  (That also keeps people on their toes.)
• Make sure that requests for information are fully justified, and make sure that it is not given out to managers freely.  (You don’t want data falling into the wrong hands.)
• Assign to lower-level managers, in the name of delegation and participation, responsibility for figuring out how to cut back, lay off, move people around, or otherwise implement threatening decisions you have made.  And get them to do it quickly.
• And above all, never forget that you, the higher-ups, already know everything important about this business.

(Moss Kanter 1983, p 101)