Leadership shortage hurts companies' innovation goals

Few organizations are meeting their innovation goals because they lack the right leadership, according to a recent global survey of 636 business leaders by Harvard Business Review Analytic Services.

Chinese companies show an equal or probably larger demand for innovative leadership than multinational companies, said experts.

MNCs are more conservative with their investments in China and are focused on their core business, while Chinese companies see an opportunity to leap frog and expand into new markets, said Mike Lim, managing partner of executive search firm DHR International in China.

"A younger developing market is more agile to accept new things," said Lim.

Although there is consensus about the most important competencies for innovative corner-suite leaders, most respondents across the globe indicated that their current executive teams fall short, the report said.

As more industries undergo disruptive change driven by technological advances, increasingly dynamic customer expectations and fierce competition, innovation has become an existential imperative - and it's critical to have the right leadership in place to drive change throughout the organizations, the report said.

However, only 44 percent think their leaders have the strategic vision needed to innovate successfully and 14 percent are effective at acquiring, developing, and retaining leaders with the right competencies, it said.

"Everyone needs to innovate," said Jeff Mike, vice-president and human resources research lead for Bersin by Deloitte, a firm that offers HR-related research, analytics, and industry insights to its corporate clients.

"But capable, innovative leadership is actually pretty rare," Mike added.

According to the report, 85 percent of respondents consider the CEO the most important executive to lead innovation efforts, while only 16 percent said their company has been very or extremely effective in its innovation attempts to date.

Lim said companies face a common challenge in promoting innovative leadership.

"For one thing, they have not defined what innovative leadership means to them; for another, they generally don't know how to measure or reward it," he said.

Though some companies set up innovation award to commend several teams by the end of year, their contribution does not always result in better compensation, he said.

Guo Kai, partner of consultancy firm Roland Berger, said the uncertainty of outcomes of innovative trials is keeping executives from making bold attempts.

"New concepts and technologies are updating quickly so that the current innovation can be overturned in an instant," he said. "Few companies can predict what the industries will be like in the next decade and take measures in advance. Even for large listed enterprises, the pressure from survival and making profit also forces them to make a more conscious decision."

According to Lim, as one way to ease the concern for possible high cost brought by innovative trials, the finance department could weigh the benefit and risks of each project and set an initial budget for the project. As milestones are being met and the project shows more promise, additional budget can be given.

This step-by-step investment is tied to the projects' progress and thus the risk is minimized, he said, adding companies should develop better tolerance to trials and failures, as well as optimizing an incentive system to encourage innovation.

For instance, Tata Sons, the holding company of India's conglomerate Tata Group, each year awards innovative employees across its entire group, not for the outcomes of their new ideas but for having learned from their attempts. Thousands of employees compete for the "Dare to Try" prize each year, the report said.

Another solution to promote innovative leadership is to hire executives who show the potential in creating or encouraging innovation.

According to Guo, an innovative leader should have the ability to break through one's field of vision, track down the market trend and integrate resources, as well as prepare well for the future.

"Having a narrative about where you're trying to get to and the organization you're trying to become is the first step toward driving change," said Scott D Anthony, Singapore-based senior partner at consultancy Innosight in the report.

A continuous learning mindset and collaborative nature are also important, said Mike of Bersin.

To identify innovation characteristics in an executive, an executive's past experience and track record in driving or achieving innovation should be looked at, Lim said.

Another important task is to assess how passionate and involved the executive is in the whole innovation process. "Ask detailed questions such as who first put forward the idea, what were the challenges, what they did to resolve the problems and when they knew it was going to work. You can tell from the way they express their ideas when retelling the story how they really felt," Lim added.