Getting to Eureka!: How Companies Can Promote Creativity

We tend to think of the moment of insight and creativity in sudden and shocking terms: the bathtub overflowing (Archimedes), the apple beaning off the head (Newton), the bolt of lightning shivering the key at the end of a kite (Franklin). In the common imagination, ideas come full-formed in a flash of brilliance, raining down like manna from some deity of inspiration. Teaching people how to be creative, on the other hand, is like teaching them how to be tall—that is, impossible.

These days, as global competition intensifies, it's more important than ever that companies figure out how to innovate if they are going to maintain their edge, or maintain their existence at all.

"For the University as well as for the economy and our nation, the importance of innovation cannot be overstated," Harvard President Drew Gilpin Faust opined at the recent announcement of the Harvard Innovation Lab. Upon his appointment last year, Harvard Business School Dean Nitin Nohria named innovation, along with globalization and business ethics, as one of the most important focuses of the School for the twenty-first century.

With that imperative, it's not surprising that Harvard Business School faculty across a wide spectrum of disciplines including business history, entrepreneurship, finance, and organizational behavior have made creativity and innovation primary subjects of focus. What is surprising is just how teachable they have found innovation to be. On every level—from the individual to the company to the economy as a whole—creativity is something that can be created and fostered if you have the right guidance and incentives.

Think of the following insights and techniques, gleaned from the research of six HBS professors, as the key sent aloft in the lightning storm, or the apple tree placed in anticipation of a beaning. Or better yet, think of your own brilliant analogy. Inspiration below.

Josh Lerner And Tom Nicholas: Blue-ribbon Innovation

On the morning of October 4, 2004, the star-spangled fuselage of SpaceShipOne blasted off from California's Mojave Air and Space Port at speeds reaching more than 2,000 miles per hour. By the time it glided to a landing two hours later the ship had won the coveted Ansari X PRIZE, a $10 million award for the first privately funded manned spacecraft to break through the earth's atmosphere twice within two weeks. The designers, funded by Microsoft cofounder Paul Allen, had spent more than double that to produce the spaceship, but it was worth it, they said, for the bragging rights.

“The prizes had a real impact"
—Josh Lerner

Prizes are increasingly dangled in front of inventors as a way of spurring innovation. In addition to the aviation reward, the X PRIZE Foundation is offering similar carrots for breakthroughs in sequencing the human genome, designing fuel-efficient cars, and even reaching the moon. And the US government is experimenting with prizes as an alternative to grants for improving everything from spaceflight to lightbulbs. But do these rewards really spur inventors to new ideas they wouldn't have come up with on their own?

That's the question Professor Josh Lerner set out to answer in recent research with Associate Professor Tom Nicholas and Liam Brunt of the Norwegian School of Economics. To answer it, they looked not to high-tech modern prizes but to a comparatively unglamorous series of awards sponsored by the Royal Agricultural Society of England (RASE) back in the nineteenth century. For decades, explains Lerner, the RASE offered dozens of awards for new farming equipment or techniques, often leading to new patents and companies—and at the same time producing a rich dataset for research.

Comparing the list of winners for 100 years with databases of patent data from the British Patent Office, the results were indisputable: "The prizes had a real impact," says Lerner. "They seem to not only have stimulated activity but also to have actually led to more innovation." In those years that recognitions were offered in areas of agricultural science, the number of prize submissions in those areas shot up, as did the number of patents and patent renewals.

Most surprising to the researchers, it didn't seem to matter how much money was made available for the prizes—or even if any money was offered at all. In areas where a gold medal replaced a cash prize, competition was just as fierce and the innovations just as plentiful.

Lerner speculates that prestige alone was enough to spur the innovation, offering inventors a "seal of approval" they could then use to show investors that their idea had merit. "When you think about the cost of launching a new innovation, it is clearly an expensive thing," he says. "Certification would enable you to raise money, and that would be a big deal."

In modern terms, you can observe the same phenomenon in the basement programmer who designs open-source software as a calling card or the blogger who wants to establish herself as an expert in a field. While Lerner says more work must be done to determine the best ways to develop prize competitions to maximize participation, the evidence shows that they can be a valuable approach to spurring new inventions—whether you are designing a new plow or putting another man on the moon.

Teresa Amabile: Small Wins, Big Ideas

The words creativity and innovation tend to be used interchangeably, but when it comes to novel ideas in business, they are not necessarily the same thing.

"Creativity and innovation are different stages in the same process," says Professor Teresa M. Amabile. "Creativity is the initial production and development of novel, useful ideas. Innovation is the successful implementation of creative ideas." In other words, she says, creativity is the "front end" of the process, while innovation is the "back-end" result.

With degrees in chemistry and psychology, Amabile has spent more than three decades exploring how work environments can help or hinder the creative process. What she has found is that while the fruits of innovation are often in plain view, the seeds of creativity are much harder to spot—occurring deep inside what she calls the "inner work life" of employees.

"Creativity requires very high levels of intrinsic motivation," she says—that is, it has much more to do with an employee's inner passion for doing great work than any outside motivators like incentives.

In an effort to better understand exactly where that motivation comes from, Amabile spearheaded a study of more than 200 knowledge workers over a three-year period, asking them to keep journal entries of their successes and frustrations at work. What she found was unexpected: It wasn't recognition or awards that most ignited employees and freed up their creative juices. Rather, employees tended to be most engaged by regular, incremental progress toward the accomplishment of a meaningful goal—a phenomenon Amabile calls The Progress Principle, which is also the title of her new book.

Analyzing some 12,000 journal entries, Amabile consistently found that these so-called small wins were more frequently associated with the positive emotions and intrinsic motivation that in turn generated the creativity needed to develop innovative approaches to problems. That doesn't mean that managers don't have some control over the internal processes of their employees' minds—quite the contrary. "As a manager of people, you should regard this as very good news," Amabile wrote in the Harvard Business Review. "The key to motivation turns out to be largely within your control."

By setting clear, achievable goals, allowing autonomy in achieving those goals, and removing distractions or unnecessary time pressures, managers can help free up employees' creative impulses and guide them down the path of real innovations that can help the company.

"In contrast to the creative process, the innovation process can happen when people are in a more extrinsically motivated state, focusing on the deadline, the profitability goals," she says. "Ideally, they will still be passionate about the work, but it's important at that point to focus in and to make sure the details of implementation are right."

Karim Lakhani: The Right Fit

As a rule, creative workers don't become so by following a routine. Almost by definition, people in creative fields are more free-spirited than their gray-flannel counterparts. This can generate intense self-motivation on the one hand; but on the other, it can create difficulties for managers trying to channel work into round holes.

Employers have commonly sought to solve that motivation problem in one way: money. By using "pay-for-performance" schemes that reward workers for hitting targets in a project, they seek to provide that extra incentive to succeed. But the very nature of creative work can make those strategies problematic, says Assistant Professor Karim R. Lakhani. It's often difficult in creative fields to set specific deliverables to which you can attach incentives. And the very fact that the manager is focusing so much on money can strip away workers' own intrinsic motivations or blind them to other goals that don't come with a bonus attached.

In the search for other solutions, Lakhani and London Business School professor Kevin J. Boudreau started with a simple hypothesis: instead of seeing the individuality of creative workers as an impediment, what if it could be used as a strength. Through a 10-day field experiment involving over 500 high-powered computer programmers, the researchers sought to determine just how employees would respond to working in environments somewhat customized to how they like to work. They divided the participants into virtual "rooms" of 20 people, competing against each other to solve a complex algorithmic engineering problem. In each room, only 5 participants were declared winners.

Rather than sort participants into rooms based on their inherent skills, however, the researchers sorted half of them based on their responses to a questionnaire about how much they liked working in a competitive environment versus working with others as a team. A person who selected "like competition" was teamed with other competitors.

Once the results were tabulated, Lakhani and Boudreau found a dramatic difference in the output from the rooms. Those sorted participants who liked competition performed twice as well on the test, putting in more hours and coming up with better results than the unsorted groups.

At the same time, the researchers inserted another wrinkle into the experiment: varying the amount of the prize participants would win from a high of $1,000 to a low of $0. The extra money did have an effect—but not nearly as much as the preference sorting. Among higher-skilled workers, the number of engineers who worked a minimum number of hours increased along with the prize purse, but those who were already working hard didn't increase their number of hours; and lower-skilled workers didn't work more at all.

The application of formal cash incentives worked in a different way than the sorting effect. The absolute effect of cash incentives was significantly greater for higher-skilled participants than for lower-skilled participants, consistent with high-skilled workers having a greater chance of winning cash prizes. In addition, the cash incentive acted most acutely by increasing the fraction of subjects who worked more than the minimum.

"Workers' ability to fit into the regime of their choice accounts for a lot of the effort they put in and also the performance their performance," concludes Lakhani. "The effect is as strong as paying them for their work."

This is hardly just an academic study for Lakhani and Boudreau, who serve as principal investigator and as chief economist, respectively, for the NASA Tournament Lab, a new online project designed to tackle complex computational problems by setting up competitions among scientists to come up with solutions. But the findings from their study can be broadly applicable to any work environment, says Lakhani.

"It's important for [managers] to ask the question, 'Do you work best autonomously, or do you work best cooperatively in a team?' " Putting workers in the right environment, Lakhani says, may be a crucial way to motivate them to better performance—whether you pay them more or not.

Carliss Baldwin: Diy Innovation

The traditional paradigm for entrepreneurialism goes something like this: someone has an idea, patents that idea so no one else can steal it, and then sets about persuading investors to help put that idea into practice. Over the past few centuries, this "producer model" of innovation has worked to create a vast array of valuable products, from cancer treatments to airplanes. But alongside it, Professor Carliss Y. Baldwin argues, there is a lesser-known model of innovation that is destined to become more important in this century: innovations by users themselves.

“Scholars have documented the existence of user innovation back to the monks"
—Carliss Baldwin

After all, who knows better how to improve a product or fulfill a need than the person who will ultimately benefit? For the better part of a decade, working with Eric von Hippel of MIT and others, Baldwin has been studying "open-source" and user innovations to determine exactly how they work—and when they can be effective. While open-source computer software is the best-known example of the trend, it is far from the only one. In one paper, for example, Baldwin studied the sport of rodeo kayaking, in which enthusiasts used the specialized watercraft to perform zany stunts. Traditional kayakers began modifying their own equipment on the fly, and eventually these user-innovators began producing kayaks for others. Established kayak manufacturers noticed the trend and started selling variations of their own.

In order to be a successful candidate for user innovation, Baldwin found, there needs to be a passionate community that recognizes a need, and the cost of design must be low enough for users to afford it. In cases of open-source innovation, where a number of users come together to create something, another requirement emerges: the cost of communication must be low enough so that various users can collaborate in an effective way. That is where the Internet comes in. With the web cutting down on both the cost of information (and therefore design) and the cost of communication, we are bound to see more user and open-source innovations in the future, says Baldwin.

"Scholars have documented the existence of user innovation back to the monks," she says. "But if not new, it is newly important because technology is reducing both design costs and communication costs."

That doesn't mean that established companies have to worry about becoming obsolete in the face of a new do-it-yourself world. Some fields that require high degrees of mass production or are subject to complex regulation will always support producer innovation. Even with products that lend themselves to open source, however, mainstream companies are learning to incorporate users in a way that benefits everyone.

Apple, for example, tightly controls the software that runs its iPhone, as well as the technology through which consumers buy new applications. It allows users the opportunity to develop their own apps and profit from them, but Apple holds final authority over what gets sold on its platform. Compare Apple's controlled approach with Google, which runs its Android on open-source software, allowing users to customize their own apps with few barriers. On the other hand, Google tightly controls its search engine technology that is the core of its advertising profits. In a similar way, Facebook uses open source code to run its site and has recently opened up the design of its data centers, but closely guards its proprietary user information that allows it to target advertising.

As the Wild West of the new communications frontier shakes out, Baldwin predicts that companies will use many iterations to combine producer- and user-created elements in their business strategies in an effort to find the right balance.

"Thinking about what you control and what you don't is a very tough intellectual problem, because for every story of success, there is one of failure," she says. "In some ways, it's the users who win—the phenomenon makes us all richer in terms of the innovation capacity of our society."

Roy Chua: Bridging The Culture Divide

Throughout history, the confluence of cultures has always led to creative innovations—think of the Crusades and the Italian Renaissance, or Japan's revolution of the auto industry. Now that business is becoming more global than ever, it's increasingly important to harness the power of multiculturalism to maintain a creative edge, says Assistant Professor Roy Y.J. Chua.

"Creativity is not always about coming up with something that is totally new—most often it is about connecting ideas to create something different," says Chua. "If you have a multicultural social network, you are more likely to receive ideas that are different."

“You need to start engaging people from different cultures in a more intense way"
—Roy Chua

Chua confirmed that belief with a pair of studies that linked the cultural diversity of participants' professional circle to their level of creativity. First, he surveyed over 70 media professionals about their social networks, and then asked each to brainstorm about the future of the newspaper industry. When their ideas were ranked on the basis of creativity by independent judges, participants who had more diverse networks were judged to have the most novel ideas. Chua repeated the study with college students, asking them to come up with a new advertising campaign for a fruit drink; again, those with more contacts in different cultures had the most creative ideas.

In both cases, however, there was a catch: creativity of the ideas increased when participants were given a situation involving a global context (strategizing about the future of a foreign wire service and advertising at an international sports competition). When asked to brainstorm in a local context (a US newspaper or a local sports competition), all participants were equally creative. As collaborating with colleagues of different cultures is becoming more the norm in business, Chua speculates that those with a greater multicultural social networks will win out in terms of innovation that matter in the global marketplace.

It's one thing for people to come up with ideas on their own, however, and another to work effectively with another person from a different background. In another series of studies, Chua looked at how culturally dissimilar participants collaborated on a series of tasks, such as inventing a recipe for a unique chicken dish. Those who were most successful also scored high on an attribute called "cultural metacognition," a psychological scale measuring the degree to which people examine their own cultural preconceptions when interacting with someone from a different culture. Chua was able to determine that those participants with higher cultural metacognition scores were more apt to build trust with their different culture collaborators in order to act on their suggestions. The takeaway from both papers, says Chua, is that people can become better at increasing their cultural creativity, but only if they consciously work at it.

"If you want to harness the power of creativity in a global multicultural context, you need to think about how to connect with people from other cultures," he says.

For businesses, that might mean building in extra time for socializing when dealing with colleagues from different cultures; for individuals, that might mean seeking out more multicultural interactions and keeping a journal of their thoughts and insights gleaned from these interactions.

"You need to start engaging people from different cultures in a more intense way so you are connecting with them on a more emotional level," says Chua. "Then you really want to reflect and systematically take stock of those experiences."

Those who do that, he says, will not only be more comfortable interacting with someone from a different culture, but also be more open to new ideas from which creativity flows.