Innovation: Process and Performance

5 January, 2015 / Articles

David Westfall currently is the Senior Director of Decision Support and Innovation, a team working on the next generation of support tools and products at Aon-Hewitt. Prior to his role at Aon-Hewitt, David has held leadership roles in innovation and business in diverse industries such as online and academic education, healthcare, research and technology. David’s passion is to approach innovation from an intrepreneurial perspective, leading large and medium sized companies to develop new opportunities within their corporate structure.

Christopher Skroupa: So many people are talking about innovation today. Many companies have innovation as part of their various mission statements, etc. What are your thoughts on this?

David Westfall: This world is all about changes. Markets change, grow, and shrink. Competition changes and is worldwide. Consumers change and expect more for less. Technologies change and they are changing at an ever increasing rate (Moore’s Law). For a company, what may have been a competitive advantage, may over time become a competitive disadvantage. As a result, companies have come and gone based on their ability to adopt to an ever changing environment. In the corporate world, most call their strategy to adapt to change “innovation.” Innovation is not a new concept and you cannot read a company report that does not talk about their investment in innovation. However, how innovation is leveraged and the pace required for companies to continuously innovate is the difference between growth and decline.

The reality of today is that there is very little, if anything, that does not change as part of a business model. From the invention of new technologies to the introduction of a new business model – a company’s ability to thrive, if not simply survive, is directly related to how quickly it can adapt to and drive value from change. This effort is what innovation is all about. If a company believes this statement reflects their setting, then innovation must be a constant part of its business model. Leaders must realize this requires a different approach to traditional management and strategy models.

Skroupa: Many people believe innovation starts at the top. What are your thoughts about this?

Westfall: Innovation starts everywhere. What leaders must realize is that simply mandating innovation does not mean their company is actually able to or even willing to innovate. The reality is that many company cultures, structures, and overall business models do not support innovation. In order for innovation to thrive, there needs to be a fundamental acceptance to experimentation, iteration of ideas, and willingness to allow an idea forward that may be contrary to corporate thinking. The role of corporate leadership should be to set overall goals, support the culture of innovation, and ultimately delegate as much decision making to the lowest levels of the organization as possible. Leaders should set the overall boundary conditions, or what I like to describe as the “sand-box” of acceptable areas to consider.

The larger a leader allows the sandbox to be, the larger the risks and rewards will be. Leaders need to balance the risk associated with the value obtained, but should not seek to remove all risk. Without risk, nothing will ever change and innovation is nothing more than a talking point. For example, leaders should create a model where barriers and norms can be challenged. They should provide an environment where questions are encouraged and taking reasonable risks are acceptable. And most importantly, failure to achieve something new or to test a new idea should not be punished. If people are afraid to fail, they will never take the risk.

The larger the sand-box leaders are willing to allow, the more their people can learn from their successes and failures. It is during this iterative experimentation of ideas that new information and value can be obtained. This is a unique type of information that many leaders fail to realize.

Skroupa: Information is critical. But what type of information are you referring to? There is so much information, where do you even start?

Westfall: There are all kinds of information, but let me qualify this in simple terms. There is information that has value and then there is information that does not – which we typically call noise. I believe this simple approach is misleading. A different approach to qualifying information is to consider the approach of information theory first introduced by Claude Shannon and later qualified further for economics by George Gilder. I will summarize these concepts here. The principle is as follows: to maximize value, high entropy information must be gathered in or by a low entropy process.

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