To Manage for Innovation is to Manage for Progress not Stability

progress and stability are mutually exclusive

Something extraordinary happened to the human species over the past two centuries: Economic growth transformed everyday life and changed poverty from a near-universal condition to a limited problem. The technologies that enabled this change emerged largely in Western Europe. Why there  and not, say, in China?

The Washington Post explores why the industrial revolution didn’t happen in China in a fascinating interview with economic historian Joel Mokyr.

Mokyr argues that, though Chinese society had a rich culture full of intellectual achievement, it optimized for stability rather than growth. It remained a centralized empire for most of its history, whereas Europe never unified, and evolved a more competitive landscape — one that meant that heretical challengers of received knowledge could find harbor across a border.

So, what’s the takeaway for businesses?

To manage for innovation is to manage for growth

Progress is the continuous disturbance of the status quo. So, you can take the Europe and China example and apply it to cities, regions, states and companies: You kill long-term growth by blocking diversity of thinking.

Many leaders believe they manage for growth, they don’t; they manage for stability. It’s why CEO’s don’t really want new business models: they rarely walk the talk and encourage the type of thinking and action that disrupts their existing business, much less embrace outside ideas.

Leaders that operate by a not-invented here mindset risk their company’s future today and tomorrow if they are not cognizant of this.

For example, if the purpose of a CEO is long-term company survival, then one could argue that Steve Ballmer was a failure as Microsoft’s CEO the moment he optimized short-term gains by squandering long-term opportunities.

Microsoft is one the biggest and most valuable companies in the world. It’s been able to stay that way because of its large cash cows coming from Windows, Office, Server and other businesses, but they missed search,  mobile, mobile OS, media and cloud. They’ve played from behind on those fronts, while the cash cows grew and held steady helping maintain stability.

Unfortunately stability leads to complacency, which results in stagnation. The only reason Microsoft’s stock is soaring today is because it’s bets on non-cash cow businesses is starting to pay off and getting people excited. But the latter only happened until Ballmer left. Satella set a new vision where Windows is everywhere, not just the desktop, and has moved fast to do so; a perfect antidote for stagnation.

Now, Microsoft hires the best and the brightest but it’s all for naught if it optimizes for stability, punishes failure and discourages risk taking. That’s changing with new CEO Satya Nadella.

Growing organizations require leaders to become novices again and again

CEO’s must manage for both stability and growth; not an easy task by any stretch but it has to be done. In stagnant organizations, stability is more valuable than uncertain innovation. Complacency follows. All organizations will battle with it, but everyone has the same option: You kill complacency by opening your gates to diversity, surrounding yourself with zero gravity thinkers and giving oxygen to new ideas that challenge the status quo.

Innovative organizations are learning organizations, and are led by innovative leaders. Leaders that stop learning and growing are not suited to enable their organization to find the next revolution before it finds them.

Simply put, for things to change someone has to start acting differently, creating the conditions for this happen is a leader’s job; your business will be dead if you don’t.

Bottom line: Homogeneous organizations optimize for stability, heterogeneous ones optimize for growth. In the long run, homogeneity breeds failure.