The Genuis of Innovation Systems | Larry Keeley

My guest today Larry Keeley has been an innovation scientist for four decades. Larry is the co founder of Doblin, the leading global firm focused on innovation effectiveness. He's a professor at IIT Institute of Design, and runs Keeley innovations, LLC, his own consultancy advising individuals and firms that he believes can change the world. In this episode, Larry is provocative, and he shares revolutionary ideas about how to be a courageous leader in times of great change, and how to foster true innovation that's useful, adopted and profitable. I'm glad you're here to learn from Larry.

Welcome to the Courage of a Leader podcast. This is where you hear real life stories of top leaders achieving extraordinary results. And you get practical advice and techniques, you can immediately apply for your own success. This is where you will get inspired, and take bold, courageous action. I am so glad you can join us. I'm your host, Amy Riley. Now, are you ready to step into the full power of your leadership and achieve the results you care about most? Let's ignite the Courage of a Leader.

Larry, I'm excited for our conversation today. Thanks for being here. We are going to talk about what it takes to be a courageous leader in a time of great change. This is a time of great change of great disruption. And some of you might be in companies or maybe even in industries that won't exist in the not too distance future. Unless you're disrupting yourselves and innovating. I'm glad to have Larry here as an expert in innovation. Why don't we start Larry, with how you define and think about innovation?

It's an age old question me that people have wrestled with for a long time, usually without much precision. To me, an innovation is a useful advance neither to an industry a category, a region or the world that people find assimilate comfortably into their lives and becomes a standard new practice. Inside of that, for an enterprise, it needs to throw off enough free cash flow to earn you the privilege of doing it over again. So there's why you mean, yeah, it's kind of have multiple sides to it. But the starting place is it has to fit into people's busy lives.

And why is innovation so important right now?

Well, it's always been important, because we've always had to deal with moments that matter and whatever eras and times we're in. There are plenty of times in history when it's been super exciting. Damia like to talk about the feeling that must have been everywhere back when, you know, numbers zero was invented. And people are thinking, Oh, my goodness, we've got an entirely new world of mathematics, the advent of steam engines were pretty exciting. But now I think everyone agrees that we live in one of the greatest times of change in the history of our species. And many of those changes. Amy, I think you and I can agree I think most reasonable people agree, are existential. If we don't figure out better strategies for sustainability, if we don't figure out better ways to feed eight, maybe 9 billion people with fewer resources. If we can't figure out how to stop the radical addiction that we seem to have to exporting American standard of living and American gaps and income. We're gonna run into difficulties of diverse kinds that may well this time not be sustainable. So learning to change our rate of change to be bolder, more exciting, more effective in thinking about how to do more with less maybe how to get more meaningful and less materialistic lives are all really interesting and important. Innovation and Design questions. Yes,

agreed. So I want to underscore how Larry is thinking and defining innovation for us. It's useful, it's new, and it creates a new standard. Alright, and it's getting an hour ROI for your company in the marketplace. And it's designed to do. And we're being called right now for so many reasons in our businesses in our world to be bolder. Now, I know Larry, you are great at busting some of the myths that are out there that many leaders and organizations have around innovation that don't help us. They're erroneous in some way. We take us through the top myths about innovation.

Sure, here, let me start with the requisite admission of humility and stupidity. Like most people, when I started being intrigued by innovation four decades ago, Amy, I have the same widespread beliefs that are commonplace and that plague almost everybody, most people begin by assuming that the scarce resource and innovation is creativity and that they're supposed to be exquisitely creative. Most people believe that they're supposed to invent a new product that even bought into silly old phrases like if you build a better mousetrap, the world will beat a path to your door. These things and many other commonplace beliefs are rooted in lore, not logic. And the idea, which took me at least the first decade of my research as an innovation scientist to get sort of properly framed, turned out to be about eradicating those myths about trying to start from blank pieces of paper, and being able to prove hypotheses and propositions with enough evidence and enough replicability so that I wasn't promulgating the same widespread misbeliefs that everyone tends to have. That was, you know, three decades ago that I started doing that work. What's also important to me is how different innovation has become in our era, right? So the in the current life that we're all leading, we're interconnected. The internet has all happened in most of our lifetimes, advances in amazing platforms, whether the way you think about Google or Amazon or Wikipedia, or Airbnb, or Uber, all of these things are reasonably new and reasonably revolutionary. But they quickly became assimilated into our lives. And we started to assume that they've been there forever. That new standard. Exactly. And so you not only have to challenge the thing you were told about innovation when you were very short, right, and you were reading about Chitty Chitty, bang, bang and corrected his teapots, the crazy uncle in the outhouse who invented a flying car. That's the way Hollywood teaches us about innovation. That and Willy Wonka, when you learn that it's harder than that. And that requires much more discipline than creativity and much deeper ways to think about the patterns, practices, methods, and tools and teams that actually work. Then, innovation kind of like an onion reveals itself to you, if you peel back enough layers, you have a fighting chance of getting it to occur routinely, reliably, robustly.

Yeah. So so good news for everyone listening is that our scarce resource is not creativity. It's not new ideas. There are ideas, we don't need the creative, eccentric personality that's going to come up with something that none of us have ever thought of. There's good, there's good ideas in you and the people in your organization. The scarce resource is discipline. Well said Amen. About that, Larry.

Happy to indeed, I'm going to be even slightly more emphatic. And the way you said it. Almost all organizations are plagued by too many ideas, not too few. Okay. So, again, most of innovation is counterintuitive. And if you believe that conventional wisdom, you believe that you're supposed to get everybody in a room and have the senior executives come in and give what I like to call the steering speech, and it's always the same, it doesn't matter what company or what industry, and it goes like this. Ladies and gentlemen, thank you for volunteering to be on the all important innovation team. You know, I want you to remember that, from the beginning of our enterprise universal galactic unlimited innovation has always been our North Star and every We time we've gotten into trouble we have innovated our way out of it. And, and ladies and gentlemen, this is one of those times, just remember as you generate your creative ideas to have to produce at least $87 million incremental revenues by this time next month with 37%, gross profits and, and 14% We're on and then everything's gonna be fine. And then the senior executives leave in a haze of blue smoke, right me and they think that really what they're supposed to do is to is to, you know, start a brainstorming session. And inevitably, after that stirring speech occurs, let's brainstorm. There's no such thing as a bad idea. This is manifestly untrue. I think we've seen a steady stream of really lousy ideas coming out of United States Congress for a long time now. And beyond that, of course, there's the problem of the rules of brainstorming, that have been formalized and are often you know, stuck in a corner of the of the conference room that you're in. And things like more ideas, it's better than fewer ideas, and other AI, you know, sort of nonsense like this. And here's the facts, Amy. Enterprise enterprises have too many ideas, what they really should be doing is looking for a smaller number of bigger ideas. And before they even begin to do anything as nonsensical as brainstorming, they should be doing weeks of preparation to determine the pinch points that customers have and their busy lives, that anxieties and uncertainty is that they're wrestling with the new technologies that may be converging in their market spaces, and the new partnering or ecosystems evolution that they should be thinking about their routes to market, whether or not they're going to partner with an Amazon or AWS or Google or any of the other now dominant platforms that might make their lives easier in the short run and their profitability more elusive. In the long run. These are the hard pieces of discipline that have to be done well in advance of asking a team to try to do the hard work of innovation at

Great, so do not start with the brainstorming session. And stay

there until the feeling goes away. Exactly.

Oh, love it. And our preparation around those pinch points for customers, distribution opportunities, or challenges, partnership opportunities, so that we know what we need ideas for. And we're coming up with that smaller number of bigger ideas, beautifully

said I mean, look, it's one of the things I like to say is that, shockingly, frequently, the biggest innovations in the history of the world are rooted in things that are simply just irritating. What is wasting people's time? What is stressing them out? What is causing them to be confounded or ineffectual in the way that they're trying to live their busy lives? You know, and that could be really large things. What am I going to do about my crushing student debt? How will I ever afford to own a home, and it can be really small things. Jeez, I spent way too much time trying to figure out whether a new story is useful to me. And whether it's true. I'd really like to have the world filter that for me, and bring it to me in a form that is more useful, right? So that's what a great innovation team instinctively does. They process the world through a variety of different especial methods, including the use of cultural anthropologists and other folks that are now really quite gifted at these kinds of analyses, to be able to find things in the world that, you know, need to be transformed. And that is very different from the way most people start. You know, I live for the last 45 years in Chicago, a man recently relocated to, you know, a short drive from Silicon Valley. And out here where I live, the presumption is always that technology is 95 85% of whatever is going to happen next. It's always the driver of the next big thing. Yeah, this is another myth. It's these days, the technology is so hyper abundant. So in interoperable, so nicely modular, that really the starting place is less and less about, you know what I want to do with AI although that's an important Question. And more and more about well, where do I want to do something remarkable? And a secondary question, much farther down in the list of considerations as well? How will I do that? What cool new stuff or well known stuff? Will I stitched together in some elegant new way to do some magic that people will find noteworthy and useful?

And yeah, and transformative. Terrific, Larry, I have some questions for you about the innovation team. But first, let me tell listeners a little bit more about you. Larry Keeley has 40 years of work as an Innovation Scientist, he works to make innovation much more effective. He's co founder of Doblin, the leading global firm focused on innovation effectiveness, over 700 alumni in that network. He's a professor at IIT Institute of Design for 39 years first university in the world to grant PhDs in design and innovation. He's a board member and a leading employer of the graduates professor at Kellogg Graduate School of Management mmm program for 12 years named distinguished professor there in 2015. Author of number two all time best selling book on innovation '10 types of Innovation' translated into 15 languages, we'll get a link in the show notes selected by Businessweek is one of the top seven global guru's of the innovation field, then separately selected by them as one of the top 27 designers in the world. Currently, Larry runs Keeley Innovations LLC, his own private consultancy, advising individuals and firms that he believes can change the world. This gives him complete independence with no teams, firms methods, or follow on activities that he's obligated to represent. You've already heard that Larry has some revolutionary ideas. And I know that you have researched and created many of the innovation methods or methods that are are out there in the field. So our vacation team, Larry, Oh, do we need on our innovation team?

So believe it or not, Amy, that's been a mysterious question for two decades, lots and lots of theories about it. I read all of those theories, I tried all of those theories in laboratory settings with different firms in different industries and in different countries in the world. And I found that, as is so often the case with innovation, they are just not robust. So let me give you some of the common theories. Some people say, Well, you really must make sure that all of the hierarchical levels of the enterprise are represented from you know, the senior executives down to the junior people that have to do the work, otherwise, the innovation will fail because you didn't have enough cooks in the kitchen or the right cooks in the kitchen. Other people say, Oh, no, no, no, you need to have everybody at the same level so that they really are peers and developing it. There are theories, popular ones at places like Amazon that say, oh, geez, the most important thing is the size of the team. And it can never be larger than a team that you can feed for a meal with two large pizzas when the team gets hungry. Okay, here's what I've learned. And again, I emphasize that it came to me the hard way from mistakes and errors. And only after extremely careful experimentation and extremely deep data analytics after the fact. Okay, yeah. So here's what I think actually works, Sandy. Amazingly enough, it's simpler than people think what leaders should do is they should go into the enterprise. First off, it's the leaders job to determine when the current pace of change isn't great enough, okay. There's specifically the leaders job to have the integrity to admit that he or she doing the very best that they know how to do or not delivering a bold enough future agenda to be able to meet the rapidly changing needs of the marketplace they're part of okay. So that takes such courage and such humility. It's extremely important for the leader to bring that humility to the problem. Then the next question is they ideally should get some sense of the specific bounded area where they'd like to concentrate their innovation do they want to change a particular Killer brand a particular category, the firm has a whole ecosystem that they're part of, it would be better to ask a team to solve a bounded problem than to simply say, give me innovation ideas that that lacks robustness and tends to make teams galvanized right into an activity. Now, that comes to the question that you asked very thoughtful and important question, what do we do to compose that innovation team? Again, surprising the heck out of me, when I finally came to this discovery, the simple and best way to do it is to go out into the enterprise and to say, Who wants to be on the innovation team? Yeah, okay. Turns out people are extremely good at self nominating. And the ones that will tend to say, me, me, I want to are the ones that are pretty disaffected with the status quo that have a sense that there's something wrong, you know, that, that there's something rotten in Denmark, and I'm very fond of Denmark, so don't any games take that? Personally, I'm borrowing a Shakespearean phrase there. And what we're trying to do is to get a sense that the people that that say, we need to change stuff are probably right. And you're not having to overcome an awful lot of cultural resistance with the people that are very sort of emotionally attached to the status quo. There's a second step, though, any, and this turns out to be surprising to once those individuals get in a room and you want it to be a small team, you know, fewer than 20, probably fewer than it does. And the first question to ask is, and again, kind of amusing? Who should have volunteered but didn't have it? Because it turns out, Amy, I bet this won't be a surprise for somebody who's thought as much about leadership as you do. There's all kinds of folks that love being pretty bold, but a hate ban, on teams, or in committees. And yeah, almost everybody in any enterprise knows who the go to guy or gal is that we really need when we want to do something new and different. So you want to just ask politely, is there another person or two that should have volunteered that you'll end up having to drag goon into the into the conversation? So that's team composition,

I am hearing loud and clear that we want to get our bold thinkers and actors on this team. First, we need the leader with courage and humility to say rate of change is not enough. We need something significant here. And define where that sub specifically where that something significant needs to be that bounded area, then I love this, like, who's bold and says, Yeah, I'm ready. I think bold change here. Yeah. And further asking that second question. Like who else should have been on here? Because there are other bold individuals. Bingo,

well said now, can I go just a little bit further and describing the metrics that matter and the incentives and rewards that make a huge difference. So this also took a long time to develop. But it is a set of practices that I've now applied to I think, at latest count 44, different multibillion dollar companies. And it literally always lifts the innovation return on investment by at least 20x. Amy, that's enormous. Okay. So here's what, let me describe the old practice that was normal. Okay, senior executives would say we need to do innovation, let's get some innovation teams going. Let's get those innovation teams to do brainstorming and prototyping. And then they like to review those innovation ideas in something that I sort of liken to good day at the Colosseum. Right? They're acting as the Roman senators, the innovation teams are all oiled up and they bring their innovation ideas and they tell amazing stories and, and the senior executives hand back, stand back and they basically say that gladiator gets to live and that one has to die, right? And this is the normal way innovation happens. Junior people are the authors of innovation. senior people are the reviewers of innovation and they decide who lives and who dies. Yeah. Unbelievable number of errors promulgated in This methodology AMI, the tendency is to greenlight things that are obvious, routine normal and very statistically likely to be emerging from your competitors at exactly the same moment. Okay. The things that people tend to discourage are the ones that are boldest most game changing, most likely to be valuable. There are all kinds of other errors that people do, such as they ask teams inappropriately, to tell them, what the costs are for the development of these ideas and what the cashflow is going to be in year five, or something the world has never seen before. That tends to lead to months and months of detailed spreadsheet engineering, plagued with dozens of errors of very interesting, diverse kinds, all to pretend that innovation is rational. And if there's anything sort of really stunning, I can reveal unto you now, Amy, it goes like this. and Western society, we pretend that innovation is rational, when indeed, it's almost always emotional. So we go through months and months of preparatory work to try to reduce all possible innovations to a so called shared set of objective metrics, in order to make decisions about which ones to pursue. When you look at those metrics, as I say, usually 27 to 250 factors inside of a complicated Excel spreadsheet that is comparing 40 or 45 different alternative investments the enterprise could make, it literally always takes months for people to do all that work. But the real way it happens, of course, and a Stage Gate process, which normally costs a million or $2 million to install inside of an enterprise is that the people doing the work in that spreadsheet have a sense of what their favorites are. So they constantly change the assumptions up or down in order to try to get the right, three best things that they think the company should green light to magically come out on top and these complicated metric systems, right? Okay. So so that's the way it normally happens. It's just dumb. It at a minimum slows innovation down to a crawl, when everything we should be doing should be about changing that clock speed and getting it to happen much, with much less friction, not more friction, right? But what do you do instead? Here's what actually works. Senior executives in close collaboration with their HR professionals should try to systematically identify next generation leaders. These are young people, Amy almost always in, you know, younger than then 35, in most cases younger than 30. But they've been identified early on as really impressive future leaders from a variety of metrics that enterprises are familiar with, and that vary from industry to industry. So I won't a pine about what those are. But let's just say a well run company knows who their next generation leaders are. And that's usually two or three or four levels down from whoever has p&l responsibility today, right. So we identify a cadre, or a cohort of those wonderful future leaders. And the next thing that you do is you go to your current business leaders, the ones with p&l responsibility, so they're running a profitable business for you. Or they're running a particularly crucial function, which might be in some industries, the legal department and other industries, the IT department, or the HR department, or whatever it is. And you go to those individuals, your senior leadership team often direct reports to the CEO. And you say, okay, in the past, we made your bonus, a function of your top line, your target revenues, and your bottom line, your total profitability, and that will continue. We need you to run the railroad. Well, we can't survive if you don't, but that's only going to be responsible for and this number is not random. It's directionally correct, but might vary a little bit from firm to firm or industry to industry that covers 60% Have your bonus potential. The other 40% is, in this enormous time of change, you really need to have a narrative about the future, you need to tell a story that is extraordinary and compelling and credible and true. Maybe not quite yet true. But it could be true or if our organization lived up to it. And your ability to have that sense of that future narrative as your job as a leader in a time of great change, we're counting on each of you to be able to say, in a short, compelling way, what it is you're trying to do next. And when you can do that, what we will do, our head of HR over here, will identify a team of four young future leaders. And those four young future leaders will use an extraordinarily important innovation toolkit that we have built for the firm. And their job will be to prototype and to test specific business models shifts and, and capability shifts, and product offerings are partnering around your new narrative. And to be able to demonstrate the evidence that those prototypes are, in fact, electrifying the markets that we want to serve in the future. And that is what earns you the other 40% of your bonus. Now notice what I've just done, Amy, I've taken the dysfunctional old world where bottoms up brave volunteers, we've just volunteered to sort of say, We'll give you some innovation ideas. But senior executives can, you know, just say I like it, for whatever arbitrary reason. And we flipped it to the point where yes, there's still bottoms up teams that are supposed to bravely foster powerful innovations. But now for the first time, there's also pull through, there's a reason why those senior executives are incentivized to champion bold new ideas. And that turns out to make innovation spectacularly easier to achieve. It takes some doing to stitch together all those bits and pieces. I'm sure that makes sense to you. But see how different it is. And, and the reason it's matters so much is because as my good friend, sadly, no longer alive. Clayton Christensen made us the enormous discovery codified in his book and subsequent work on the innovators dilemma. He pointed out that the enemy of innovation is not people opposed to innovation, almost everybody's vaguely in favor of it. But it's actually really great skills, and the degree to which we cling on to those, and we just assume that we have to hang on to them for dear life. Again, core competencies and other kinds of practices. Well, we can't give that up. That's what we're great at. Yeah. Well, one of my mentors was CK Prahalad the man that invented the idea of core competencies. And you know, I would be with him teaching all over the world. And I would watch with some bemusement, as some young person, you know, would bravely go up to visit the,

you know, the guru that was on site, and with incredible timidness, but often, you know, equal pride in the work that they've done here, professor here, we have analyzed our core competencies, and here they are. And the famous professor would glance at this list and put it down and not say a word about it. And I would watch from the sidelines, I would know that some team had spent months building that for the visiting great leader CK Prahalad and so eventually that individual or one of those team members would think the professor just simply hadn't heard them and they'd go find that piece of paper and hand it to him again and shouted a little bit louder. But these are our core competencies, at which point C CK Prahalad would laugh is infectious laugh and he'd say, yeah, yeah, yeah, yeah, no, sure. If you've got some core competencies, go ahead, leverage those, but you know, it's a pretty big time of change. And if you need to innovate, you're gonna have to invent some new ones. And that's the thing that everybody misses Amy is that you have to not be so addicted to the things you've done well up till now. Let you don't feel quite intensely the obligation and the sense of urgency to build some new ones.

Yeah. Yeah, we get invested in, we get attached to what we've spent time and energy and money creating. So I love this idea of incentivizing those leaders in groups, senior leaders in critical functions, to have a significant portion of their bonus attached to creating that really starts. Yeah, for the future.

And Amy, because you think about leadership all the time, it's important that you see how many different ways in places this attachment, this emotional investment in our competencies in our skills, manifests, right? So I'm inside teams all the time, that will bravely come up with an incredibly powerful idea. And they will present it and they will, you know, be courageous as they present it. And they'll be frightened as they present it as almost everybody will be because they really only had a few weeks to develop the idea. And of course, there's always somebody in the room like the chief legal counsel would say, this is great, because it's terrific. I really love the energy in this team. It's fantastic. You know, do you care that your idea is actually illegal? And, and so those are the kinds of attacks you immediately get I've been in, I won't identify this client, when a team that I was working with actually cured one of the most important diseases mankind suffers from it was the chief financial officer that just went into a screaming rage. He said, you are. Don't join us and you're destroying our golden cage. And I'd say what's our golden cage the way in which the people having to take our drug each and every day for the rest of their lives? Right? Because our profitability, and I thought, yep, okay, got that. And so, what you'd have to see, Amy, is that the enemies of innovation, are, are really complicated, and multi factorial, which is a phrase I hate, because it's always an egg heady phrase. But the ability to listen with empathy to everybody who's fearful, and the enterprise saying, Well, this might not work because of X, or Y, or Z, needs to be matched with good storytelling skills, and really good research and really good anthropological empathy for users, to be able to say, I totally get what you're saying. But the thing we're telling you about will replace that thing we care about, where something we can care about just as enthusiastically in the following way. Excellent.

Larry, you have shared so many thought provoking concepts, and steps to produce innovation. I'm going to highlight just a few from the second part of our conversation, this skill of storytelling, right? And how do we pull people into this future vision, smaller number of bigger, bolder ideas? And it's it's not about creativity, it's about discipline? And how do we employ tools, and really looking at those assumptions that we have about what's core to us and looking at what we are attached to, will willing to blow up or tear tear apart in some way.

And let me just elaborate on a couple of things. And whatever a team is trying to achieve with innovation, what they should know is that there's a scrape set of modern innovation tools that will get them there. They don't have to learn all those things. You just have to hire somebody that already has. And that's pretty easy to do. The other thing that I wanted to double click on with you is this storytelling thing. Because it sounds goofy, and, and it sounds lightweight. But really, let's see if we can snap it into focus. And modern life. We've all watched a Elon Musk become larger than life and in some cases, extreme in his behaviors. And I really don't want to a pine about that. There will be of course a full bell curve of opinions. What I can say is that anybody just squinting at the guy can see that one of the things he did well, was he managed to convince the world that this is the moment test slows the firm and he's the guy to electrify transportation worldwide, right? That's a really marvelous example of concise storytelling. And he was a fraction of the size of the smallest car company in the world, when he became more valuable than all the other car companies in the world put together. That's the power of storytelling. If you do it right, the whole world shows up shower Sheila's sweaty wads of cash, and gives you the resources that you need, if you're clever, to actually make your story come true, somewhat ahead of its regularly scheduled arrival. And that's why it's such an important part of modern innovation. Now, the other thing you and I talked about, that I think deserves to be underscored a little bit is that innovation is always frightening, both for the young people that are supposed to offer it, and for the senior people that are supposed to sponsor it. But if you can set it up in a really well governed, well, lad, well championed senior executive sanctioned way, you can overcome the fears that are nearly universal, that normally prevent people from getting innovation to succeed. And that's kind of beautiful, especially because we need it now more than ever, in this really exceptional time of change, when in many cases, were grappling with existential issues as a species.

Love it. Look, we'll end on that note, Larry, well governed well led, well championed. Yeah, thank you so much for sharing your experience and expertise with us on the courage of a leader podcast.

Well, it's my pleasure, Amy to be with you and hopefully with some of your listeners, and hopefully they'll reach out if they have questions.

We'll put in the show notes how you can find Larry.

My pleasure.

Thank you for listening to the Courage of a Leader podcast. If you'd like to further explore this episode's topic, please reach out to me through the courage of a leader website at www.courageofaleader.com. I'd love to hear from you. Please take the time to leave a review on iTunes. That helps us expand our reach and get more people fully stepping into their leadership potential. Until next time, be bold and be brave because you've got the Courage of a Leader.