Today’s market is being disrupted by a tidal wave of digital innovation. Industries are being re-invented and business models challenged. This fast changing demands innovation.
“Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.” – Peter Drucker
Without innovation an enterprise is mired in the past. Without innovation it’s almost impossible to grow revenue. Given this what is the role of leaders in improving levels of innovation in an enterprise?
Innovation requires a forward looking CEO
Research shows that forward looking Chief Executive Officers (COE) make a significant contribution to an enterprise’s level of innovation outcomes. This is the central finding of a longitudinal university study that explored how future oriented CEOs were at 176 US retail banks. The research focused on the future-oriented statements found in annual reports that separated CEOs future focus (1990-1995) and subsequent innovation outcomes (1996-2004).
The study counted the number of future-orientated statements and phrases that occurred in the organisation’s letters to shareholders, based on this the researchers were able to predict the level of innovation from those organisation up to five years later.
Those CEOs who focused their attention on future events and external activities lead their organisations to adopt new technologies and were faster at deploying new innovation. CEOs that focused on internal operations were slower to detect, adopt and implement new technologies.
A surprising finding from the research was that future-focused by CEOs are the rare exception, finding thatonly 9% of words and phrases in shareholder letters relating to the future!
The study highlights the impact that the focus and attention of CEOs has on the actions and outcomes of an organisation. CEOs that are forward looking create and environment that encourages innovation.
Forward looking CEOs are the exception
It may come as a shock for many, but creativity and innovation requires time and executive attention! Too often people seem to assume that innovation is free, something that happens as part of doing your day job. The reality is completely different. Innovation requires an investment of attention, time, people and financial resources.
Unless leaders deliberately make time to think about and plan for the future, day-to-day demands will focus resources and attention on more immediate concerns.
It’s the obligation of leaders to set the future direction for the organisation. What CEOs focus on set’s the tone as to what’s important. The focus of CEOs influences what information is considered important, how information get’s interpreted and acted upon. It’s the role of the CEOs and executive leadership to influence and focus employee attention on these few things that matter for the organisation’s future. The focus of the organisation is the result of the leaders focus and attention.
The best CEOs focus on the future
Enterprises whose CEO’s give attention to the future drive higher levels of innovation than CEOs who don’t. So it’s necessary that CEOs manage the demand for their attention. How leaders choose to manage their focus and attention is of critical importance. The biggest danger is that leaders remain stuck in the past or present with little time to focus on the future.
COEs play a critical role in focusing the attention and as a consequence the resources of the organisations. This research found that the emphasis CEOs places on future events are predictive of the organisations innovation outcomes. The greater the emphasis on events in the future led to the quicker adoption of technologies and broader deployment of innovation. The greater attention given to internal events lead to slower adoption of technologies and less innovation.
Attending to the events of the future increases the likelihood that innovation will occur as opposed to a focus on attending to the needs of the present.
- Where is your focus and attention?
- Are your forward looking?
- Do you have a 20 year vision?
Source: “ Managing the Future: CEO Attention and Innovation Outcomes,” by Manjit S. Yadav, Jaideep C. Prabhu and Rajesh K. Chandy, Marketing Science Institute (MSI) Report No. 07-110