Seven Questions for Jeff Dyer, Co-Author of The Innovator’s DNA

A perennial question that companies struggle with is how to generate new and innovative ideas that can lead to growth. We can all list examples of companies that do this well, yet every company is constantly wondering how they could do it better.

A recent IBM poll of 1,500 CEOs identified “creativity” as the top leadership skill needed in the future. But being creative doesn’t just happen. It’s one of those intangible qualities that people simply have or do not. Yet if you could make it tangible — put it in a bottle and sell it — you’d strike it rich. Clearly, there’s something that innovative companies and people have that the less innovative ones lack. Just what the heck is it?

That’s the question that business professors Jeff Dyer and Hal Gregersen set out to answer by teaming up with famous innovation guru Clay Christensen. Nearly 15 years ago, Christensen coined the phrase “disruptive innovation,” and wrote two best-selling books on the subject. The Innovator’s Dilemma and The Innovator’s Solution both examined disruptive technologies, business models and companies.

The Innovator’s DNA, co-authored by all three, makes it a trilogy. In it, they seek to answer the most basic questions about innovation: What makes an innovative company, and what companies can do to become more innovative.

Gregersen is a professor of leadership at INSEAD, the international graduate business school. Dyer, who I spoke with recently, is the Horace Beesley Professor of Strategy in the Marriott School of Management at Brigham Young University. I started by asking him how the idea for the book came about.

AllThingsD: What’s the book about and how did it happen?

Dyer: The book is really the product of a conversation I had with Hal Gregersen and Clayton Christensen. And the question we raised in that conversation was this: Where do disruptive business ideas come from in the first place? What are the origins of disruptive business? And [we wondered] if we could tell people something about where disruptive and innovative ideas come from that might be useful and helpful. One of the things we knew from research in psychology is that if you ask any crowd of people whether creativity is a genetic endowment or if it’s something that’s learned, 90 percent will say it’s genetic. We either have it or we don’t. But the way psychologists research this is they take identical twins — ideally who have been raised apart — and then, between ages 16 and 24, they will give them general intelligence tests. And what they find is that about 80 percent of performance seems to be genetically based. But then they give them creativity tests. There, only 20 to 40 percent of performance is genetically based. What that means is that creativity is much more learned than we think. Therefore the ability to generate innovative business ideas may come from things people learn and do, more than just because the people involved are who they are. For the book, we decided to go back and study business innovators and figure out, as best we could, the antecedents of people coming up with the ideas that they did, and what contributed to their ability to come up with innovative ideas.

And what sorts of things did you study?

One example we looked at was Steve Jobs at Apple. The story that everyone knows is the story of the graphical user interface and drop-down menus and the mouse. He, of course, didn’t originate an idea, but having seen it at Xerox, he returned to Apple laser-focused and determined to apply them to the Macintosh. He assembles a team of engineers and they create the first computer with a graphical user interface. But the idea was really born of an observation. He had seen something that he was able to take back and solve a problem. Another innovation of his was beautiful typography on the Mac and the LaserWriter printer. That came because he dropped out of college, and dropped in on a calligraphy class, and had no idea that it would ever have a practical application in his life. Ten years later, when he was working on the Macintosh, it all came back with the idea for a computer that could create beautiful typography. It was an important differentiation, and it occurred because of a time when he was out exploring. When we looked at the genesis of disruptive ideas, we found that the ideas occured when the innovator was asking a question, engaged in an observation, networked with someone who had a different point of view, or because they were experimenting.

Well, let’s talk about experimenting for a minute. There are lots of ways to experiment with things, and you discuss these in the book. What are they?

We have three ways of experimenting. Most of us think of it as just testing and piloting an idea, and that’s the classic method. But the second is taking apart a product or service or process or idea, and then putting them back together. That’s how Michael Dell came up with the idea for Dell Direct. The other is simply an exploration, where you’re learning a new skill like Jobs did in learning calligraphy — where you’re having a new experience that you can later draw upon. One of the innovators we talked to was a guy named Nate Alder. He came up with the idea for an argon vest. He was scuba diving in South America, and argon gas is used to keep you warm when you scuba dive. He was a snowboarding instructor at the time. He wondered if he could use the same argon to keep warm on cold days. So he came back and developed a line of products called Klymit jackets. And it happened because he was out exploring and trying something new.

So then the problem becomes this: If you’re a CEO or COO reading this book, how do you apply these ideas? I can send my team off for a retreat or something, but they’re not necessarily going to come back any more creative than they were. How do you encourage these behaviors at a company?

What we found is that at innovative companies, there’s a high correlation between the extent to which the leaders of the company engage in and display these discovery skills and the innovation performance of the company. It starts at the top. If you don’t do it, you’re not likely to imprint your behaviors on your organization as processes. What we saw was that when someone like Jeff Bezos is good at experimenting and questioning and coming up with new ideas, he then sets about creating processes within the company for doing experiments. Innovative companies are more likely to have processes that encourage questioning, observing, networking and experimenting. This is how it becomes more embedded in the organization’s culture.

How deep can the questioning go? You can look at Nokia, for example, which made rubber boots and toilet paper. And at some point, someone must have questioned the fundamental business plan that caused it to pivot to building electronics. That’s a pretty fundamental shift. If the questions can go that deep, is it always constructive?

In innovative companies, you find that that kind of question is always okay. And then we try to look at that question from a variety of angles to see if it warrants an answer. In companies that don’t innovate well, those kinds of questions aren’t considered or tolerated. If you don’t try to change the status quo, how are you ever going to innovate? That’s why it’s so important for the leaders to legitimize it, and to say that they want things that are new and different.

This is something you teach, so I wonder what you’ve learned from the process of sharing these ideas with other companies. The reason I ask is that there’s often a lot of entrenched resistance to change.

One of things I’ve done is courses where we teach with the case method — you give the students a case study on Sears or Kmart, and then ask them to come up with a new strategy to compete better with Wal-Mart. I gave one group the task and simply asked them to come up with a new strategy. I gave another group the same case and said that I wanted a new strategy, but that I also wanted it to be creative and innovative. I told them to push the boundaries. In third-party reviews, the groups where I legitimized being creative were all judged as having been more creative and original and likely to make a real difference than in the cases where I didn’t legitimize it.

You also ranked several companies for their ability to innovate. What companies are on your list? Number one and number two are Salesforce.com and Amazon, but I’m also interested in number three. Can you explain them?

We did rank several companies on their innovation prowess, using something we called an innovation premium. We interviewed [Salesforce CEO] Marc Benioff for the book. Salesforce has a founder who is really good at questioning the current model. He asked a fundamental question: In the age of the Internet, why are we installing software on individual computers? He just challenged that whole business model, and continues to try and challenge it now. And we all know about Amazon and Jeff Bezos. He loves to experiment and try new things, even if they’re weird. It’s gone from being the world’s biggest book retailer to the world’s biggest discount retailer to launching the Kindle, and now running Amazon Web Services. They just keep trying new things. Number three was Intuitive Surgical. They make the da Vinci system of surgical robots, and so they’re bringing robot-assisted surgery to the world. They innovated through tons and tons of observations of how surgeons do their work, and then creating robots that could mimic that, and that could be manipulated with tremendous precision.