The business of innovation: Art or science?

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Creating and successfully commercializing innovations is tough. But does success lie in following a systematic process – or does it spring from experience-based intuition?

How do you spot a viable business innovation? Some take an analytical approach, studying strategic plans, business models and growth projections. Judgment enters into the equation, but the facts define the parameters of the choices you face. Others lead with an intuition shaped by their experiences. Sure, the numbers matter, but only at the margin: a lousy plan is likely to fail, but only the ineffable insights of a seasoned entrepreneur or business leader can identify what is most likely to succeed. Where do you put yourself on the “science vs. art” continuum?

Here’s the debate:

Innovation is a science first and an art second.
Innovation is a systematic process that can be learned. We can get better at it and the difference between good and great is dedication and commitment.Innovation is, at its core, an art form.
Great innovators are born, not made. We might all be able to improve, but greatness is innate: you can spend years as an apprentice to a master sculptor, but if you weren’t an artist when you arrived, you won’t be one when you leave.Careful research is revealing the underlying laws of successful innovation.
The academic and consulting communities have built a vast library of case studies of successful and failed innovations and provided insightful frameworks for extracting general principles. Learning from the past and improving over time is a defining element of a science.The research isn’t making progress; it’s running laps.
Our insights into innovation, like our perspectives on art, don’t get better. They just change over time in predictable cycles. Just like art, two people can examine the same data and come up with completely different views on the merits. In the end, it’s always more about what you feel than what you think.Ultimately, which innovations succeed is not determined randomly or by the gods.
What works is governed by rules that we can discover and apply. With the right information and frameworks, you can pick innovations that are more likely to result in a sustainable business than you can by following your gut.There are rules – but they change faster than we can discover them.
Innovations must succeed in a dynamic marketplace where competitors are constantly trying to outwit you. If there are rules, your competitors can figure them out, too – and then behave in ways that violate them in order to undermine your plans. Success demands acting on the basis of insights that can’t be anticipated by others. If there are rules, your best odds may lie in breaking them.

Michael E. Raynor, Director, Deloitte Consulting LLP

Innovation remains an art form…but there’s a chance it will become a science.

Whether innovation is more artistic than scientific tends to turn on the processes people advocate as most effective in its pursuit. Each admits the importance of the other, but proponents of “innovation as art” argue that the critical input is the intuitive and idiosyncratic judgment of experienced people. The “innovation as science” side says the input that matters most are the data and the structured approach used to come up with the idea.

It’s worth noting, however, that in focusing on processes – on inputs – to innovation, much of the conversation ignores an examination of which approach actually works. It is only through an examination of results, of the outputs of different approaches, that one can make true progress. It’s not so much about whether innovation is a science or an art, but about taking a scientific approach to answering that question.

Unfortunately, there is very little research on innovation that accepts this challenge. Most frameworks and theories are supported solely by an analysis of the past, with very little (if any) attempt to demonstrate any meaningful predictive power. And until there is some indication that a given approach to innovation can improve predictions, innovation is destined to remain an art.

I tackled this head-on in 2009 and 2010 by conducting controlled experiments to test the predictive power of different approaches to evaluate the survival odds of early-stage businesses. Test subjects were asked to predict outcomes based on whatever approaches they felt might be appropriate. The results were no different from random chance. When test subjects were instructed on a specific framework – Disruption theory – and were directed to use that framework on a new set of business plans, they improved their predictive accuracy by as much as 50 percent. 

These results show that it is possible for a systematic approach to deliver demonstrably improved outcomes. And so, just as medicine has been transformed from an “art” to a “science” over the centuries, progressing from bloodletting to CAT scans, we can have hope that innovation, too, can be transformed from art to science.

By focusing on the output – predictive accuracy – we learned that entrepreneurs and investors can improve – but unfortunately, not perfect – their ability to predict which innovations will be viable in the marketplace. This predictive quality is the distinction that places innovation in the realm of science.

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As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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The CIO’s role in business innovation: Sustain or disrupt?

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Would leaders improve the odds of creating value by focusing on risks associated with a mergers and acquisitions (“M&A”) transaction? Or by generating strategic opportunities to seize the moment? 

You’ve probably heard that many, if not most, M&A deals sap shareholder value. It’s no wonder leaders approach a transaction with a wary eye—even when it holds the potential to open the door to new markets, fill gaps and improve operational capability. Would leaders shift the odds in their favor by focusing on mitigating the risks? Or by rallying others around new opportunities?

Here’s the debate:

Leadership’s job is to mitigate risk.
M&A is a risky proposition that’s fraught with potential failure. It’s leadership’s job to make sure the value proposition is clearly defined and flawlessly executed.Leadership’s job is to seize the opportunity.
M&A is a high impact, high value tool that brings a wave of opportunity. Leadership’s challenge is to deliver results through an organization that enthusiastically serves the mission.This is serious and risky business.
Leaders must relentlessly protect the value proposition by making sure the deal is grounded in sound strategic and economic rational. This requires heads-down execution from all leaders.Opportunity is the name of the game.
Agreed, business is serious and risky, but who can lead from a position of fear? Leadership in times of great opportunity is very different from excellent management.Livelihoods could be threatened. Better to keep our leaders off the grid until plans are pinned down.
People hear “synergy savings” and think “layoffs.” Better to keep the lid on until it’s time to act.We are about to delight our shareholders, thrill our customers and markets and supercharge our organization.
Staying off the grid creates a destructive mindset. Instead, effective leaders frame the conversation to reflect the opportunity. They do not abandon the market, the people, or the message.Our strategy and operating model work. Why increase risk by considering something new?
It’s faster and obviously more efficient to adopt the acquirer’s operating model as the go-forward strategy.A merger provides a rare opportunity to create a new business-as-usual.
By drawing the best from each organization, leaders have an opportunity to deliver value through greater scale, differentiated offerings and increased efficiencies.My take

Kevin Knowles, Principal, Deloitte Consulting LLP

In the community of executive leaders, only a small percentage ever get the opportunity to truly reshape a business and an organization. Leading through transformative events is a unique mission and in many cases, one of the most significant professional experiences for leaders. Not only is it hard work that exercises every ounce of a leader’s credibility, authority and vision – it’s also a new environment for most leaders.

There’s no denying that successful integration requires rigorous analysis, disciplined planning and precisely executed integration plans. Relentless attention must also be paid to retaining customers and key talent, addressing supplier and vendor concerns and setting shareholder and analyst expectations. Risk-mitigating activities are necessary management efforts and leaders should hold themselves accountable for these results.

During integration, there is also distinct value provided by leaders who have the ability to methodically inspire, engage and empower. Transformative leaders create momentum through their words and actions. They set the rhythm of testing and revising the opportunities. They leverage their credibility and vision with every interaction across every stakeholder. And they thrive in the test of leading purposeful change.

M&A presents many leadership opportunities. My challenge to executive leaders heading into a transformative phase of their organization’s lifecycle is to get precise about defining effective leadership performance and identify who you will lean on to demonstrate transformational leadership. It’s an opportunity too often squandered in the frenzy of M&A.

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As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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