Leadership Insight > Susan and Tom Kuczmarski

The Kuczmarski's Talk About Using Value-Based Leadership to Drive Innovation

By Elizabeth M. Ferrarini

If today's corporate executives really want to innovate, they have to think differently about leadership or become the square apple in the bushel. Dr. Susan Kuczmarski, a cultural anthropologist, and her husband, Thomas Kuczmarski, the founder of an innovation management consulting firm and adjunct professor of innovation at Northwestern University's Kellogg School of Management, have teamed up to write Apples Are Square, a book that talks about the new set of softer values today's leaders need if they want to drive organizational innovation and growth. The book has received kudos from Fast Company magazine, Business Week, and also executives such as Dr. Surinder Kumar, chief innovation officer, Wm Wrigley Jr. Company, author of Riding the Blue Train.

BTM Institute sat down with the Kuczmarski's to explore how they have put this new leadership and innovation paradigm into practice. Here's what they had to say:

Q. Susan, how did you come up with the idea of values-based leadership to drive innovation?

In 1995, we wrote Values-Based Leadership to bring back values to organizations. In doing our research for the book, we saw that the workplace culture in 1995 mirrored the isolation of the workplace 100 years before. In fact, Emile Durkheim wrote about the high rate of suicide because of this isolation. Values-Based Leadership does two things: provokes the query of our individual values, and shows how some of these values can become corporate group values. It's the concept of culture and community.

In 2002, we looked at what had been happening since 1995. Out of 100 leaders we interviewed, we selected 25 who we felt characterized a new breed of leader. Our book, Apples Are Square, profiles these leaders who represent the arts, government, media, sports, education, and business. Based on these interviews, we did a qualitative analysis to see what values all of these people had in common. These six values include humility, compassion, transparency, inclusiveness, collaboration, and values-based decisiveness.

Q. Tom, is corporate American ready for the leader style you advocate as opposed to the leadership legacy of Jack Welch, former CEO of General Electric?

The Jack Welch leadership style might have worked 30 to 50 years ago. It's totally pass. Only a naive person would suggest that it has any merit in the workplace today. Today leaders have no choice but to take on a new set of values and characteristics. They need to do this out of necessity. Young people expect corporations to be sensitive to their need to balance work and home life. Also, during the past 10 years, women have been exiting corporate America to start their own businesses. Women have proven they can obtain C-level positions, but many chosen not to go that route. Some women say that the values they're looking in a corporation aren't there. In fact, women run 57 percent of all entrepreneurial businesses.

If leaders, whether they are in business or in academe, want to survive in the future, they need to adopt some of the six values mentioned in Apples Are Square. These values will change the landscape of corporate America.

Q. Tom, what's the biggest stumbling block today for the women who want to pursue C-level positions?

I'd say it's a mindset that doesn't perpetuate organizations that will continue to thrive on diversity, and truly be able to innovate. I'll never overhearing a conversation with some senior executives from Coca Cola the week Carly Fiorina became CEO of Hewlett Packard. The said, 'How long do you think she will last?' I've heard the same thing about Irene Rosenfeld, CEO of Kraft, and Brenda Barnes, CEO of Sara Lee. The entire old boy control and compete mindset is just all over with.

Q. Tom, what is it going to take for CEOs to change to this values-based leadership paradigm?

They have to change because of innovation. It's a critical cornerstone for a company's whole growth strategy. They can't pretend to say, 'I don't need any new products or services or business models.' They also can't say, 'I'll just pursue inquisitive growth, make some acquisitions, and increase my market share.'

They need to overcome several hurdles residing in most major corporations. The first is risk aversion. You can't have a culture of innovation unless you enable people to feel its okay to fail and to learn from their mistakes. So, you need to encourage and to reward risk not penalized people for it. In fact, you can't even begin to talk about innovation as a core growth strategy unless overcome the risk hurdle.

The next hurdle is resourcing. People dedicated to innovation need to be put on cross-functional teams focused on innovation. Money also needs to be spent upfront on initial market research and on initial prototyping. To often companies, decide to put someone in charge of innovation and then expect everyone will start to innovate. It doesn't work that way.

The last hurdle is rewards. If you look at how companies pay based on innovation, you'll have to go back to the 13th century. Few companies provide unique incentives for people who are providing new platforms for innovation. In fact, some companies provide negative reinforcement for people to be innovative. There's the old, 'If profits are down this year because of launching new products, then I won't get my bonus.' The challenge here is how do you give innovative people the right rewards.

Q. Tom, to what degree should a company formalize into innovative initiatives?

You need to look at what is the innovative strategy of the company. A high-growth company like Google.com has no choice but to formalize innovation. Google can't create more ad space and have more searches to perpetuate that growth. Its strategy needs to define the new areas for growth. Then the company has to align resources around those areas.

Most CEOs need to first look at the strategic role and the financial role they expect innovation to play in moving the company forward. If the role is one of more upgrades, improvements, and enhancements, then innovation can be housed in the functional areas such as IT or marketing. On the other hand, if your business strategy is to have 10 percent of your 20 percent expected annual growth to come from innovation, and then you're looking at a chief innovation officer and a very formal process for driving innovation. You need systematic screening criteria to evaluate ideas and concepts as you move through the process.

Q. Tom, to what degree do constituents drive a company's innovation?

Constituents should always drive a company's innovation. I often hear technology people say that innovation is all about the technology. Innovation, instead, is all about satisfying some latent need of a consumer. When the Sony Walkman first came out, market research in the U.S. said we wouldn't buy a tape recorder that didn't record. The president of Sony USA decided to let joggers in Central Park try out the device. They liked it because it reduced the boredom of jogging and it allowed them to select what they wanted to listen to. The device took off because of these findings.

Look at IBM versus Apple. IBM develops 3,900 patents each year. Meanwhile Apple has about 10. Apple is more interested in satisfying consumer needs.

Q. Tom, how did you folks help a not-for-profit become more innovative?

We worked with Smith Bucklin, the world's largest association management organization, for two years. It manages 90 associations. For years, the associations grew by raising dues. However, many of them were starting to loose members with every dues increase. The CEO of Smith Bucklin wanted to look for a new way to increase revenues but not at the risk of member attribution. The strategy included developing new fee-based products for members, and offering more value-added membership services. The latter would enable the associations to increase dues with less member attrition.

Smith Bucklin put in an innovative center, which has had a profound affect on this organization. Today, association executives see themselves as growth managers rather than relationship managers. The CEO of Smith Bucklin believed in changing the mindset of the organization's culture. He transferred ownership of the corporate values to the employees.

Q. Okay, Tom, so how do you help a major corporation become more innovative?

We worked with Alfe, the third largest company in Mexico. It's $8 billion annual revenues comes from a diverse product portfolio of food products, auto parts, petrochemicals, and telecommunication.. The CEO has developed a very rigid, analytical, and detailed culture based on preciseness. We told the CEO that if he wanted to have innovative work, he needed to allow for failure and creativity. We also said that people had to be told they could work in a disciplined way, but they didn't have to be afraid to make mistakes.

For each of the four product lines or four businesses, we developed a corporate innovation strategy, and a related annual rewards program. Each program has a dedicated innovation officer. Within 12 months, we saw a significant change in Alfe's culture. That's what can happen when a CEO makes a commitment to change the culture to be more innovative.

Q. Tom, what kind of a rewards program was in place for Alfe?

It has a base salary and a variable bonus. People who are dedicated to innovation receive 100 percent of their variable bonus based on innovation results. People on cross-functional teams receive a bonus based on the amount of time they spend on innovation, as well as the results of the innovations. At the corporate level, Alfe has a rewards program for the top project each year from each business unit.

Q. Tom, Do metrics, such as the balanced scorecard, to evaluate employee performance hinder innovation?

I'm a contrarian. Everyone is supposed to love the balanced scorecard. It has done a lot of good things for companies. I'm not a fan of Six Sigma or the balanced scorecard as they relate to innovation. I'm not a big believer in relying on the results of screening criteria to drive innovation. Both of these two quality practices don't really look at the dimensions of how people solve problems, and how they collaborate with team members. That's why values, such as, the entrepreneurial spirit and the attraction to diversity, help people to be more innovative.

Q. Susan, are U.S. companies loosing their global innovative edge?

The U.S. has a lot of innovative companies. Look at Craig Newman founder of Craig's List and Dean Kamen founder of Segway, both are featured in Apples Are Square. In fact, Kamen's looks for finding common ground in the innovation process and learning how you go about doing it. Unfortunately, the media has jumped on John Kao's Innovation Nation and Rosabeth Moss Kanter's American the Principled, both of which advocate that the U.S. is loosing its innovative and competitive edge. That's hogwash.

For more information about the Kuczmarski's visit http://www.kuczmarski.com

Elizabeth M. Ferrarini is a writer from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com.