THE THINKING FEELING ORGANIZATION Thinking-Feeling Organization: A New Paradigm for Strategic Innovation |2) TheCasefor)ThinkingandFeeling) Half%our%mistakes%in%life%arise%from%feeling%where%we%ought%to

THE THINKING-FEELING ORGANIZATION

A New Paradigm for Strategic Innovation

By Larry Schmitt, Ph.D.

December 2013

Copyright © 2013 by The Inovo Group, LLC All rights reserved.

www.TheInovoGroup.com

The Thinking-Feeling Organization: A New Paradigm for Strategic Innovation | 1

Strategic opportunities present a conundrum. They, and all the

uneasiness, fear and challenges they generate, are critical if an

organization is to not only survive but thrive.

THE THINKING-FEELING ORGANIZATION

A New Paradigm for Strategic Innovation

ather any group of innovators and ask what one of the hardest parts of their job is, and they are likely to tell you it's convincing the rest of the organization the opportunity is a good idea to pursue. Those within organizations who are directly involved in the front-‐

end of the innovation process face two daunting challenges: understanding ambiguous signs of future demand and rationalizing future designs to meet it and, perhaps even more difficult, convincing the rest of the organization why this innovation will be good for the company.

New offerings and business models are unfamiliar – by definition they are different, even radical or disruptive – not just for the ultimate customer but for the organization creating them, too. This prospect of change makes the organization "uncomfortable," and discomfort can manifest in many ways. Most of these, as you might imagine, are detrimental to good decision making.

Discomfort is exacerbated when the opportunities under consideration are strategic, that is, of such complexity and impact as to require the organization to change in meaningful ways. Strategic opportunities present a conundrum: They, and all the uneasiness, fear and challenges they generate, are critical if an organization not only is to survive but thrive. Incremental, sustaining innovations also contribute to an organization's survival – but only for so long.

Especially critical to strategic innovation is the need to acknowledge and productively channel the strong emotional reactions strategic opportunities generate within an organization. Although most companies have systems and processes in place for "thinking" about new opportunities, few if any have a systematic way to "feel" about them. On an individual level, we know this magic combination of thinking and feeling as intuition, and leaders of the Amazons, Apples and Googles of the world demonstrate extraordinary intuition that accelerates strategic innovation. But not all organizations have such a singular presence and so, for these organizations, a structured system that lets both reason and emotion interact in productive and effective ways is a necessity.

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The Case for Thinking and Feeling

Half our mistakes in life arise from feeling where we ought to think, and thinking where we ought to feel.

– John Churton Collins

We as individuals are bound by internal constraints, even as we actively seek the new. Our experience and perspectives limit our mental models, thoughts and decisions in ways we do not necessarily realize or control. If we do realize the constraints, we likely seek ways to unfetter our capacity for learning and creativity in search of the new thing that will transform us and the organizations we work with – we purposefully explore new realms, acquire knowledge and seek new experiences. Done well, these activities challenge our existing world views.i But we are human. We are bound by both rationality and emotionality. We crave change but are wary of the new. We say we love creativity, but we avoid uncertainty. ii We demand statistics and spreadsheets, but we are suspicious of their conclusions. We have numerous cognitive deficiencies,iii we naturally tend to believe that which reinforces our own existing perspectivesiv and we want to express our individualism and be a member of a communityv.

One of the most powerful communities, when it comes to instilling norms of behavior and thought (i.e., a culture), is the corporation. The things corporations love and that create their distinct cultures – missions, visions, strategy, processes, accountability, etc. – also create constraints, those explicit and implicit rules that individuals within organizations live by. These constraints are necessary for immediate performance but are usually antithetical to transformational growth. Enlightened organizations, and the innovators who work in them, continually challenge orthodoxy and aspects of embedded culture that constrain the organization. They understand this is a must in order to find new opportunities to transform and evolve. The alternative, these innovators realize, is to shrink and, eventually, die.

What It Means for an Organization to Think and Feel

Academics, business leaders and other thought leaders have written a lot over the past two decades about the learning organization and knowledge-‐creating companies.vi Now, it is time to go further. In the face of the inherent complexity, ambiguity and uncertainty strategic innovation brings, organizations must not only learn but also "think" about what has been learned and created and, here is the radical new idea: to "feel" about what has been learned and created.

All organizations, but especially companies needing to innovate, must develop the means to think about new opportunities – with all of their requisite spreadsheets and predictive analysis – and also to feel about new opportunities, including the emotions they elicit. We as individuals


During the genesis of a strategic opportunity, there are too many places where the journey can be

derailed by decisions based primarily on emotional factors, and likewise, by decisions based

solely on reason.

know what it means to think and feel, although often we are not consciously aware of the interaction. And what determines how an organization as a whole behaves toward new strategic opportunities is the collective effect of individuals, acting on behalf of the organization and in accordance with its culture and mission.

Several years ago, the innovation team of a Fortune 50 company initiated a project to focus specifically on business model innovations in the domain of heating and cooling, which held a great deal of interest and promise. The ground rules for this opportunity discovery project stipulated that no new technology could be considered; any opportunity had to utilize existing and proven technology. One of the opportunities the team discovered and developed at the conceptual level involved increasing the adoption of ground source heat pump solutions for certain types of buildings. The technology was well developed. A supply and service infrastructure existed. The benefits of the technology had been well established and recognized. Still, the market had yet to take off. The team discovered the systemic reasons for this and developed solutions to overcome the barriers, but the solutions involved significant changes to the existing value network. At this stage of opportunity development, the analysis clearly indicated a next step was warranted. This meant further study and experimentation but not a large financial investment.

When the team presented this opportunity, the executives in the room listened attentively, asked probing questions, acknowledged the value equations and agreed on the potential. They were complimentary in their assessment of the work done. Then one executive added, "But this is just not us." And that was the end of that.

"But this is just not us" was an emotional response, and it trumped all of the reasoning, logic and analysis that went into determining that the opportunity was worth a minor investment to test some assumptions. The opportunity made the executives uncomfortable. It didn’t fit with their model of what they felt the company should be or do. There was too much uncertainty, and they responded in a way that in retrospect was not surprising. In the absence of a paradigm that addresses both the rational and emotional dynamics within an organization, a company doesn’t have the proper means to both think and feel and to integrate these perfectly valid ways of assessing an opportunity. During the genesis of a strategic opportunity, there are too many places where the journey can be derailed by decisions based primarily on emotional factors like this one was, and likewise, by decisions based solely on reason.


Jobs' decision was not based on massive amounts of data about consumer preferences.

In fact, such data surely would have pointed to the opposite conclusion, that there must be a keyboard.

By contrast, it’s instructive to look at three technology giants widely admired for innovativeness – Apple, Google and Amazon – to see how both thinking and feeling play into their ability to innovate.

In truth, Apple under Steve Jobs was a company ruled by intuition. Myriad stories exist about the way Jobs made decisions "instinctively." One of the most telling is about the decision not to have a physical keyboard on the iPhone. From the Walter Isaacson biography of Jobs,vii here’s what Steve said at the time: “A hardware keyboard seems like an easy solution, but it’s constraining. Think of all the innovations we’d be able to adapt if we did the keyboard onscreen with software. Let’s bet on it, and then we’ll find a way to make it work.” What is interesting is that Jobs' decision was not based on massive amounts of data about consumer preferences. In fact, such data surely would have pointed to the opposite conclusion, that there must be a keyboard.

The birth of AdSense, one of the reasons Google is so successful, is another example of the equal role of the "feeling" part of the equation. In an accounting by Steven Levy in In the Plex,viii Sergey Brin’s decision to purchase Applied Semantics, the company that developed the AdSense technology, was based on his belief that "this could be a two-‐billion-‐dollar business," after a single presentation from Applied Semantics executives. When AdSense launched, it was Google that purchased the ad space and gave it away to its existing AdWords advertisers to get them to try it. The decision was based on Brin’s intuition, the subconscious interplay between thinking and feeling, which told him it would work, rather than solely on market data or reasoned analysis of advertiser behavior.

Amazon’s decision to develop the technology behind its Elastic Compute Cloud (EC2) web service grew out of necessity, to support its online retail business. The decision to open this service to the world was, however, anything but a foregone conclusion. Early on (in 2003), Jeff Bezos became interested in this idea and requested a write-‐up describing it. Based on the information he received, he pushed for making the service available, not just to Amazon, but also to anyone in the B2B space, turning it into a business. According to one of the developers,ix well before the service was available "… we produced a ‘press release’ and a FAQ to further detail the how and why of what would become EC2.” Bezos (and others at Amazon) not only thought through the EC2 opportunity; they realized the company needed to communicate with its future internal and external customers in ways that let them feel what EC2 was, how it fit Amazon, and how it could transform the company.


An organization not only creates and shapes new opportunities but also,

particularly in the case of strategic opportunities, is

shaped by the opportunity. It goes both ways. It is not

comfortable. Yet it is exactly what organizations must

do if they are to be successful in the future.

These three examples illustrate how even the most innovative, hi-‐tech, data-‐driven companies respond to new opportunities both rationally and emotionally, how they think and feel. All three have intuitive, charismatic leaders, who have internalized their ability – in an instinctual way – to combine reason and emotion. We as individuals know this as intuition. These three leaders have honed deep intuition about their customers that transcends existing industry or market segments and they have the authority and the will to transform their organizations as necessary.

Intuition, that delicate balance of thinking and feeling, plays a major role in how organizational decisions are made, especially those that involve an uncertain future. In the hands of a Jobs, Bezos or Brin, it can be a powerful force. But not all organizations have a leader with such intuition or who is involved in such a direct way in the details of the offering design and experience. For these organizations, a structured system that lets both reason and emotion interact in productive and effective ways throughout the strategic innovation process is essential. That's because an organization not only creates and shapes new opportunities but also, particularly in the case of strategic opportunities, is shaped by the opportunity. It goes both ways. It is not comfortable. Yet it is exactly what organizations must do if they are to be successful in the future. Strategic Innovations – Pushing Boundaries and Creating Discomfort

Wicked problems resist mere cleverness. – Andrew Zolli

Strategic innovation is the means of creating transformational change and growth of an organization, and strategic opportunities are the means of achieving it. The nature of strategic innovation and strategic opportunities has been discussed extensively elsewhere,x,xi and the following diagram shows the strategic innovation canvas that can be used to assess the opportunities a company chooses to pursue. The Constant Risk Boundary represents the combination of new-‐to-‐the-‐world and new-‐to-‐the-‐company that the organization can tolerate.


Figure 1 – The Strategic Innovation Canvas and the Strategic Boundary

By their nature, strategic opportunities push the organization’s strategic boundary into new territory (figure 1). While sustaining innovations are critically important to a company’s current health (and the functioning of its performance engine), they need to be augmented by innovations that transform both the world and the company in significant ways. To succeed at strategic innovation and the transformational growth it brings, a company needs constantly to push its strategic boundary outwards. But herein lies the conundrum: Precisely because strategic opportunities do push the boundary, they are inherently unfamiliar and create tremendous uncertainty and discomfort.

The essence of a strategic opportunity can be antithetical to the way in which a company’s performance engine runs. Characteristics that can make a strategic opportunity especially uncomfortable for a performance-‐oriented company include the following:

1. Complex opportunities – The opportunities may involve a number of "moving parts" that require detailed interaction among multiple parties, not all of whom are necessarily within the organization that pursues and realizes the opportunity.

2. New experiences – There often is a high degree of ontological uncertainty regarding the opportunity. In other words, the opportunity creates new categories or dimensions of experience, both for the customer and for the organization, that don’t fit neatly into existing mental or operational models.

3. Weak evidence – The evidence for a strategic opportunity may come in the form of weak signals. Often, traditional forms of market research – voice of the customer, focus groups, surveys, even ethnography – do not reveal what does and does not motivate a future


customer. Weak signals are notoriously difficult to distinguish from noise, and so the evidence to support decisions to move forward and invest in strategic opportunities is often, and unavoidably, ambiguous.

4. Qualitative decisions – The decisions that must be made during the genesis of a new strategic opportunity are usually based on qualitative, not quantitative, factors. As a matter of fact, innovators should view detailed quantitative "evidence" with suspicion. Also, these qualitative decisions are usually made with little expertise or experience because, by definition, the opportunities should be pushing the boundaries of existing organizational culture and competencies.

Learning how to deal effectively and systematically with the uncertainty and discomfort inherent in a strategic opportunity is a must. The organization needs to evolve and adapt in ways that allow it to transform itself and push boundaries while not affecting the existing performance engine, the source of its current health.

How Organizations View the World and Make Decisions

All of our reasoning ends in surrender to feeling. – Blaise Pascal

Decisions are made emotionally as much as they are made rationally.xii This is true of customers as well as executives, managers and individual contributors within organizations. Emotion (or feeling) most certainly enters into the decisions an organization makes. In fact, this is the problem. The emotions that are natural in any process of examining something new and uncertain too often go unacknowledged, and they therefore manifest themselves in ad hoc and unstructured ways, to the detriment of sound decision making.

To use the model presented by Kahneman,xiii organizations have both "System 1" and "System 2" parts to their "mind." System 1 acts instinctively – the initial emotions that emerge when presented with an unfamiliar, strategic opportunity are immediate but often wrong. System 2, the thinking function, is difficult and slow. The key is to let the instinctual System 1 feeling part of the organizational mind catch up with the System 2 thinking part, and to have the two parts complement each other. Adopters often initially react negatively or ambivalently to things they ultimately come to accept and even value greatly.xiv This is true for organizations as well. Emotional reactions are usually immediate, but they can slowly evolve in more nuanced ways with sufficient time and exposure to the new concepts. This should be one key objective of any system that aids decision making about new, unfamiliar and uncomfortable future options.

An organization needs ways to explicitly acknowledge and guide thoughts and feelings that don’t leave emotion to chance. Internal adopters must come to understand and "feel" what the


opportunity can be for the company so the opportunity can get a fair hearing within the organization. Executives and managers not only must think a decision is correct based on a reasoned analysis of facts and evidence; they also must feel the decision is correct within the context of their own, and the company’s, experience. Otherwise, they won't support the opportunity going forward.

To accomplish this, we need a new paradigm to acknowledge and integrate the thoughts and feelings of internal and external adopters. The paradigm must include several key thinking and feeling categories and functions that apply internally, externally and, most importantly, at the boundary between them (figure 2). Many tools and techniques exist to address the rationality and irrationality of future customers (e.g., voice of the customer, ethnography, personas). Companies are less versed in how to address the rational and emotional aspects internally, or, to be more accurate, it is the emotional or feeling aspects of an opportunity that tend to be the most problematic within organizations.

Figure 2 – The Thinking-‐Feeling Cycle of an Innovation Paradigm

The four quadrants of figure 2 define distinct and complementary actions and behaviors that the team undertaking an innovation initiative, and by implication the organization the team belongs to, must do. All four are necessary to be successful at strategic innovations:

• External – Thinking: Extraction and synthesis of new knowledge as the foundation for identifying and creating new opportunities. The purposeful, structured and thoughtful searching for, discovery and use of new knowledge is critical to all aspects of opportunity genesis.

• Internal – Thinking: The creation of models, often complex systems models of plausible futures and likely outcomes, requires a reasoned and thoughtful


Executives and managers not only must think a decision is correct based on a reasoned analysis of

facts and evidence; they also must feel the decision is correct within the context of their own, and the

company’s, experience. Other-‐wise, they won't support the opportunity going forward.

construction to capture the relevant dynamics of the opportunity's most important attributes.

• Internal – Feeling: The need to have the organization "feel good" about a new opportunity is accomplished not just with analysis but with stories that let others within the organization understand what the opportunity truly means to both the external adopter and to the organization itself. A good story reveals the knowledge and empathy behind the new opportunity and lets internal stakeholders define their role.

• External – Feeling: Understanding experiences and motivations at a visceral level is key to empathizing with potential and eventual adopters and influencers and to seeing the world through their eyes, including the emotions they might feel and the thoughts they might have.

The actions and behaviors associated with each of the four quadrants occur with any type of innovation (sustaining, strategic or speculative). When undertaken using a system of Learn-‐Create-‐Evaluate-‐Select activities defined below, the four quadrants create a comprehensive framework for the tools that an innovation team should use when tasked with strategic innovation.

With sustaining innovations, the "thinking" quadrants typically get the most attention because the "feeling" quadrants are a given. These innovations likely "feel right" – they fit nicely with the organization, even if they use technology or design that pushes the envelope. For sustaining opportunities implemented by the performance engine of the organization, these four quadrants are well travelled and familiar. The system models and analysis are well known, the stories of the sustaining innovations have been told many times before, with only slight variation. Even the external experiences and knowledge are not too far afield from what the organization already knows and does.

Speculative innovations, on the other hand, are ruled by feeling. These, by definition, are a leap of faith where reason would say to tread carefully but emotion says to jump. This is not to say that an organization should never attempt such opportunities. Indeed, some companies such as Google have an explicit charter to pursue opportunities that significantly stretch or even break the strategic boundary. It is up to the organization (and its culture) to determine if this is something it is willing to do.


The beauty of establishing a system based on the Iterative Deepening paradigm is that

even while an organization is discovering, creating, shaping and designing its new strategic opportunities, these very same opportunities are shaping the organization for the future.

The picture gets complicated with a strategic opportunity. System models and analyses are likely new and different. Stories about the future are unfamiliar and possibly off-‐putting. Adopter experiences are unlike what has been seen before, and the knowledge being acquired doesn’t readily fit into existing mental models. All four quadrants are equally important to determining the success of a new strategic opportunity. It is in these situations that an organization needs to have the right paradigm, the right framework, and the right means to balance the four quadrants so it can manage the uncomfortable. Iterative Deepening as a Paradigm for Collectively Thinking and Feeling

You never know the truth. You can only approach it and hope to get a bit nearer to it each time. You iterate towards the truth. You don't know it.

– James Lovelock

Acknowledging the need for an organization to collectively think and feel about a new innovation or a portfolio of innovations raises the question of means. How does a company do this? How can collective thinking and feeling about a new opportunity take place?

The answer is iterative deepening.

The term "iterative deepening" (ID) is adopted from the world of computer science. A technique to search impossibly large spaces with limited resources, ID was originally introduced by early developers of chess-‐playing computers, where the space of possible moves is so large that a computer cannot practically examine every potential move in any reasonable time period (i.e., the limited resource is computer cycles and memory). Instead, ID enabled the computer to efficiently search the large space of possible moves using both iteration (a search is run repeatedly) and deepening (the search goes deeper with each iteration).

The term ID is used in our context as a metaphor. As such, it illustrates several key attributes of a paradigm that guides a thinking-‐feeling organization through the exploration of a strategic opportunity:

• An iterative process, i.e., repeated looks at a specific concept • A deepening process, i.e., getting more nuanced and informed • A specific charter, i.e., a purpose-‐built project with tangible deliverables and

measurable outcomes • Limited resources, i.e., a purpose-‐built team with a defined schedule and

endpoint

Iterative deepening allows an organization both to think deeply about opportunities in order to understand how they can be created and adopted and to feel deeply about opportunities in


order to understand how they will "fit" the organization. A specific implementation of the ID paradigm is described elsewhere.xv

A system of ID can serve as the paradigm by which an organization can develop effective mechanisms for thinking and feeling about the future when that future makes the organization uncomfortable. And the ID paradigm applies all along the journey, from initial discovery through the stages of development and execution (using hypothesis-‐driven, test-‐and-‐learn approaches), deployment and post-‐launch adaptation by both the customers and the organization itself.

Because the ID paradigm deals with the challenges strategic opportunities present, it needs to work differently than the system an organization uses for its performance engine. This includes business divisions focused on new product development systems. Systems based on stage-‐gate or phase-‐gate paradigms make sense for sustaining innovations but do not work well for strategic innovations.

Four fundamental activities support a system of ID:

1. Learning, which entails

o Gathering information, knowledge and insights, no matter how ambiguous and qualitative, from both obvious and non-‐obvious sources.

o Letting early learning influence later learning – the questions get better (more focused and nuanced), and the answers get better.

o Synthesizing and sharing new information so the collective understanding is greater than the sum of individual perspectives.

The thinking aspect of learning is exemplified by the purposeful searching and extraction of information from a variety of sources. The feeling aspect of learning is exemplified by conversation and observation to develop understanding of and empathy with others' situations and motivations.

2. Creating, which entails

o Using imagination and what has been called "deductive tinkering" to create a wide portfolio of potential options, be they future scenarios, new opportunities, designs of new offerings and business models or paths to market and deployment.

o Being inventive in dealing with constraints and in the exploration and discovery of knowledge.

The thinking aspect of creativity is exemplified by the use of tools such as TRIZxvi or simply purposeful and structured thought experiments.


The feeling aspect of creativity is exemplified by brainstorming and ideation events that use group energy and emotion to unlock the sub-‐conscious.

3. Evaluating, which entails

o Finding qualitative and quantitative means to assess ambiguous, incomplete and sometimes contradictory information (and beliefs, opinions, perspectives).

o Identifying internal and external weak signals, such as the "voice of the dissenter" that needs to be heard or the person with proprietary knowledge the team is missing.

o Constantly identifying and testing assumptions.

o Comparing multiple options at different stages in the genesis of an opportunity.

o Confidence that the space of alternatives has been covered.

o Shaping the options based on new learning, evidence and creative energy.

The thinking aspect of evaluating is exemplified by the purposeful examination of demand and design assumptions and the subsequent shaping of opportunities.

The feeling aspect of evaluating is exemplified by intense, structured debates between pro and con sides to pressure-‐test both facts and feelings about the opportunity.

4. Selecting, which entails

o Making decisions about the new options that push boundaries and make the organization uncomfortable.

o Creating a decision balance between the collected wisdom within the company and the inevitable constraints (blinders) that come with such collected wisdom.

o Determining the next step in the opportunity’s genesis and the appropriate allocation of resources.

The thinking aspect of selecting is exemplified by the use of analytic tools to assess numerous aspects of an opportunity and produce ratings of multiple opportunities along several dimensions. The feeling aspects of an opportunity are exemplified by wisdom-‐of-‐crowd tools that aggregate the perspectives and identify how the organization as a whole feels about the opportunities before them.

Of course these activities don't occur in a vacuum. It is necessary to continuously socialize new opportunities within the organization. This is known as diffusion, and it helps the organization, collectively, understand what the opportunities are all about. Diffusion also serves to align the organization, in the face of differing perspectives and opinions, with the commitment needed to further develop and realize the opportunity. The process of diffusion does two things:


It starts to shape the opportunity, and it also begins to shape the organization itself in ways that are necessary to realize the opportunity's potential.

An Organizational Locus for Thinking and Feeling about Strategic Opportunities

For strategic innovation to happen, there must be a locus within the company to guide the organization, including the performance engine parts, to think and feel.

Figure 3 – The Thinking – Feeling Organization

The locus should be the innovation team, the group of individuals charged with acting as the liaison or channel between internal adopters and external adopters. Internal adopters include sponsors and stakeholders, who allocate resources within the organization; external adopters include customers, partners and influencers, who determine if and how a new innovation gets adopted. The team's work requires both reasoned thinking and emotional feeling in equal measure (figure 3). The ID paradigm ensures this will happen. Lacking such a paradigm, the team is usually left with an ad hoc process based upon serendipity and personal influence.

The team learns in unfamiliar, complex and ambiguous contexts and creates new strategic opportunities. It diffuses productive thinking and feeling throughout the organization and thereby brings the company along on its journey in a way that helps the company "see" and support a new opportunity, despite the inherent discomfort. The team becomes, for a time, the way a company “wraps its head around” a portfolio of possible opportunities.

The team is built to counteract groupthink and the collective constraints built into any performance-‐oriented organization. For this reason, the team must function as a "society of mind." It should have many centers of expertise, each with its own view of the world, behavior, cognitive style and decision processes. As the old cliché says, the best teams become more than the sum of their individual parts; they become the way in which the organization processes and responds to uncomfortable new opportunities. It is the team’s purpose to harness its collective understanding, insight and wisdom on behalf of the organization. It is the team's purpose to


The innovation team – which is like an elite movie production

crew – enables the company to wrap its head around a portfolio

of possible opportunities.

become the buffer, the interface and the impedance match between the organization and potentially disruptive opportunities as well as between internal and external adopters.

As the transformational thinking-‐feeling mind of the organization, the innovation team needs to be purpose-‐built – in other words, laser-‐focused on a specific journey with a defined charter and tangible end-‐product (such as the selection of one particular strategic opportunity to be pursued). It is not enough to say, "Just go investigate and see what you find." This is why many so-‐called tech-‐scouting efforts are, at best, only marginally effective.

But assembling a purpose-‐built team that can focus its attention is, of necessity, time and resource limited. Getting something of signifi-‐cance identified quickly and developed and launched in a timely manner needs to happen with less time and fewer people than are available to the performance-‐engine side of the business. The team must spend a sufficient amount of time on the internal and external thinking and feeling, but not so much as to let the essence and excitement of an opportunity wither from protracted debates, partial decisions, extended analyses or infighting.

To envision how the team should function, picture an elite movie production crew. The right people come together with a defined mission. Within a limited period of time, they focus intently on a specific outcome and, the idea is, craft something compelling. This way of working is a natural response to the demands of strategic innovation and will itself transform the organization.

A Team in Action

In 2012, a diverse team of 10 people undertook an initiative to help a major health insurance and services company discover and develop new strategic opportunities in healthcare. The team was chartered to identify opportunities that addressed the needs and desires of the future healthcare provider. This was broadly defined to include not only doctors and nurses but also other professional and non-‐professional providers – patients’ family members, online communities, dietitians, emergency department managers, etc. – who, on a regular basis, influence Americans’ health and wellness. This expanded definition of "provider" reflects the changing nature of the ecosystem and will be the source of future value. The team's objective was to identify 10 to 12 new, strategic opportunities that would become major pillars of the company’s growth initiatives over the coming decade.

During the five-‐month initiative, the team generated more than 100 opportunity hypotheses. It synthesized a tremendous amount of information and knowledge, gained from many sources


through in-‐depth interviews (65, with individuals in 20-‐plus different roles throughout the healthcare ecosystem) and ethnographic field trips (six, to over 20 sites).

The team simultaneously undertook a number of other activities that spanned the four quadrants listed in figure 2. No one of these techniques, methods or tools is, by itself, radical or transformative, but combined in a structured way, as a framework and a system for thinking and feeling about the new, they comprise a powerful paradigm for strategic innovation. Iterative deepening ensures rigor, volume, depth, specificity and alignment of opportunities. Like the film production crew, the team works together to let the lead actors, in our case the strategic opportunities, be the best they can be.

As part of its work, the team:

• Held weekly opportunity review meetings where new opportunities were presented, questions asked and voting decisions were made.

• Produced a weekly newsletter with information and links to the most interesting and relevant information being discovered as it did its research.

• Included a large and diverse collection of participants throughout the organization in regular updates about the opportunities being considered and provided the chance for participants to voice opinions on the relative merit of all opportunities.

• Conducted a series of structured ideation session with team members and a diverse collection of other participants throughout the organization.

• Took groups on field trips to observe and interact with a variety of people in organizations throughout the healthcare ecosystem.

• Held intensive debates on the opportunities under consideration with sponsors and influencers throughout the organization, during which everyone contributed to shaping the opportunity.

• Conducted a series of participatory futuring events where all participants (from the team and the rest of the company) could build scenarios of plausible futures that could inform the new opportunities.

• Created a should-‐could canvas, xvii among others, that showed how the opportunities compared with each other along the dimensions of "should" the opportunity be done and "could" the organization do it.

• Developed visual storyboards that depicted the future experiences that would be created if the opportunities were to be realized.

• Conducted an interactive "reveal" of the top opportunities with key executives who had the authority (and the expectation) to commit to funding the next stage of opportunity development.


These activities all were designed to exercise both the thinking and feeling muscles of the team and organization. Through repeated exposure and interaction, the organization came to understand the opportunity concepts while they were being formed, which allowed individuals to weigh in on what they felt were important considerations.

In the end, the project team designed a set of 14 strategic opportunities and a set of six future scenarios. Six of the opportunities were presented in-‐depth to the client’s Innovation Council (I-‐Council), a group of senior executives who sponsor innovation initiatives, in an interactive, multimedia session. The team had hoped to win approval for just one or two opportunities; the I-‐Council approved four for immediate funding. One of the senior executives told the team, “I haven't seen the I-‐Council as excited about a group of well-‐formed concepts... ever. We literally couldn't sit down when we were deliberating” about which ones to green light.

Currently, the opportunities and insights from this initiative are working their way through the organization’s innovation pipeline and are expected to help the company grow its business for years to come.

From Opportunity to Organization and Back – A Virtuous Cycle

If you don't like change, you're going to like irrelevance even less. – General Eric Shinseki

Innovation is a complex system of individuals and organizations acting as agents of creation (e.g., companies) and agents of adoption (e.g., customers). When organizations are considering sustaining opportunities, the processes, methods and tools used by the performance engine can be adapted and used to great effect. This is the situation where stage-‐gate systems can be effectively adapted for front-‐end activities.

But when the objective of the organization is to push its strategic boundary, and the opportunities of interest are strategic, the processes and tools of the performance engine break down. In the early stages, these new ideas are alien and uncomfortable; in the later stages, corporate "antibodies" come out to attack because it becomes increasingly clear the organization will need to change. Organizational discomfort becomes prominent unless there is a system in place to acknowledge the emotional reactions and direct them in constructive ways. This is when innovators must employ a new paradigm, iterative deepening.

Any organization can implement ID in order to purposefully address the complexities and ambiguities it faces. Instead of approaching these issues in an ad hoc manner or with a "performance engine" mindset, an organization can explicitly put in place the people, processes, strategies and governance structures to constantly push their strategic boundaries outward.


The ID paradigm lets an organization think and feel in the face of complexity, ambiguity and uncertainty. But the ID paradigm, in order to be used by an organization, needs the means to be implemented. In particular, the following components need to be present:

• A purpose-‐built team

• A focused project

• The process, methods and tools to learn, create, evaluate and select

• A framework for bringing all the pieces together

Together, these four prerequisites help the organization deal with the inherent discomfort strategic opportunities generate.

The complex dynamics of strategic innovation can be summarized in this way:

1. In order to thrive in the future, it is imperative that organizations push their strategic innovation boundary outward.

2. Organizations create strategic opportunities to push the boundary, and this creates discomfort.

3. An organization needs to have mechanisms to both think and feel to deal with this natural discomfort.

4. Iterative deepening serves as the paradigm by which an organization can collectively think and feel.

The beauty of establishing a system based on the ID paradigm is that even while an organization is discovering, creating, shaping and designing its new strategic opportunities, these very same opportunities are shaping the organization for the future. With a structured system of thinking and feeling, the organization cannot help but examine and change its internal constraints, thereby enhancing its culture and capabilities as it moves forward. A virtuous cycle is established: The organization creates and shapes new opportunities, and the new opportunities (re)create and shape the organization.

The final test of any innovation system is whether an organization can expand its strategic boundary in the face of the constant forces at work. If a company does not do this, it will be squeezed into a corner where it will be difficult to thrive. The ability to create new opportunities that expand the strategic boundary is the measure of success, and the capability of an organi-‐zation to both think and feel using a system of iterative deepening is the means to get there.


Notes i Done improperly, it confirms our biases and reinforces untrue knowledge. ii Mueller, Jennifer, et.al.; The Bias Against Creativity: Why People Desire but Reject Creative Ideas; Cornell IRL; 2011 iii Kahneman, Daniel; Thinking Fast and Slow; Farrar, Straus and Giroux; October 25, 2011 iv This is the established fact of confirmation bias, that we filter new information through a lens of what we currently

believe. v Wilson, E. O.; The Social Conquest of Earth; Liveright; April 2, 2012 vi There are many books and articles on the topics of the learning organization and knowledge creating companies. A

couple classics are Peter Senge’s The Fifth Discipline and Ikujiro Nonaka and Hirotaka Takeuchi’s The Knowledge Creating Company. Various overviews and bibliographies of books and articles on these subjects can be found at the Overseas Development Institute, William King at the University of Pittsburgh, and Martin Ryder at University Colorado.

vii Isaacson, Walter; Steve Jobs; Simon & Schuster; 2011 viii Levy, Steven; In The Plex: How Google Thinks, Works, and Shapes Our Lives; Simon & Schuster; 2011 ix Black, Benjamin; EC2 Origins; Blog post; Jan. 2009 x Schmitt, Larry; Strategic Innovation: If it Feels Comfortable, You’re Not Doing it Right; 2012 xi Christian, Brian; The Demand-‐Design Tango: Getting from Concept to Market Launch; 2013 xii Ariely, Dan; Predictably Irrational; HarperCollins; June 23, 2009 xiii Kahneman, Daniel; Thinking Fast and Slow; Farrar, Straus and Giroux; October 25, 2011 xiv This is most striking in the arts where examples like Picasso and his Les Demoiselles d'Avignon, Stravinsky and his

Rite of Spring, even Maya Lin’s Vietnam Veterans Memorial all were met with near universal initial condemnation. In the business world it is a well-‐researched phenomenon of adoption, exemplified by the S-‐curve adoption model, that it can often take a long time to get to 1-‐2% penetration before even the most popular products (e.g., TVs, VCRs, the iPod, etc.) take off.

xv The specific details of a system of Iterative Deepening that lets an organization collectively think and feel about an opportunity are described in detail in a soon-‐to-‐be-‐published)companion paper: Schmitt, Larry; The Iterative Deepening Paradigm: A Path to Strategic Innovation; 2013.

xvi See definition of TRIZ. xvii The Should-‐Could canvas, and the methodology for creating it, are part of the ADOPTS™ innovation framework

developed and implemented by Inovo. The canvas lets an organization evaluate an opportunity along the two dimensions of “Should the opportunity be pursued (by anyone)?” and “Could this organization do it?” Just because an organization could do something doesn't mean it should do it. The Should-‐Could tool, along with other Inovo-‐developed tools, has been has been disseminated by the Corporate Executive Board (CEB) as an illustration of an innovation best practice.

About The Inovo Group

Founded in 2001, Inovo is an innovation consulting firm based in Ann Arbor, MI, that helps the world’s top organizations succeed at strategic innovation.

About the Author

LARRY SCHMITT, PH.D. is Co-‐Founder and CEO of The Inovo Group. He is the lead architect of Inovo’s theory-‐based framework and tools, which Inovo uses with its Global 1000 clients to identify significant unmet needs and develop compelling new-‐to-‐the-‐world products, services, and business models.

Larry has taught innovation at the University of Michigan’s Medical Innovation Center and has served as an invited guest speaker on innovation in the U.S. and India. In addition, he serves as a subject matter expert for the Industrial Research Institute (IRI)’s Research-‐on-‐Research Working Group on Business Model Innovation.

Larry previously served in technical roles at General Electric and Unisys, as well as in executive roles at two successful tech start-‐ups, Applied Intelligent Systems (acquired by Electro-‐Scientific Industries) and Intelligent Reasoning Systems (acquired by Photon Dynamics).

Documents

THE THINKING FEELING ORGANIZATION Thinking-Feeling Organization: A New Paradigm for Strategic Innovation |2) TheCasefor)ThinkingandFeeling) Half%our%mistakes%in%life%arise%from%feeling%where%we%ought%to