As we continue to digest Ray Dalio’s book “The Changing World Order,” there is an important point that I believe is essential for us to understand collectively as a country, and individually as business, family, and community leaders. Ray states: 

“The degree of inventiveness and innovation in a society is the main driver of its productivity. An innovative and commercial spirit is the lifeblood of a thriving economy. Without innovation, productivity growth would grind to a halt. Innovations that allow a country’s [or company’s] workers to produce more than the rest of the world feed into their cost competitiveness, making them more attractive places to do business. The drive to tinker and invent, to discover, to improve from prior failures – this is how people learn and find new and better ways of creating things of value”

In reading this, I believe we must ask ourselves: how do we create a spirit of inventiveness and innovation?

The both simple and difficult answer is leadership. Let me explain further. In today’s high-tech world where the inventiveness of certain individuals grants them celebrity status, we may incorrectly believe that all innovation is the product of genius alone. While this may be true in a select few cases, it is not generally true.

A few years ago, two leaders took over a failing company. Several years of unprofitability were made worse by the sentiment the customers held and the morale of the employees. Infighting over resources was constant and managers continually feared losing their job. It was better for employees to keep their head down and do what they were told, than it was for them to speak openly. Inventiveness and innovation were dead, and the company would be too if things did not change quickly.

Within twelve months, this same group of managers, who previously had to keep their heads down, returned the organization to profitability and were national champions in an annual Kaizen Innovation Challenge. In fact, this team went on to win this national award two years in a row – the first company ever to do so.

This is a simple story with profound implications. Countless “Lean” consultants had attempted to turn this failing organization around through process mapping, KPI’s, performance management centers, and all sorts of fancy statistical tools. However, the front-line managers within the organization had the answers to fix the problems – all they needed were leaders to make them feel safe to “tinker and invent, to discover, to improve from prior failures.” It was good leadership that allowed innovation to flourish, which gave the company a significant cost advantage, which further allowed the company to improve its service and renew its delicate customer contracts. 

Leadership is the ultimate competitive advantage: it is the catalyst needed for innovation and inventiveness to flourish within an organization. Good leadership creates a culture where failure is an expected outcome of experimentation, and with failure comes the ability to learn, improve, and eventually do things better.

Organizations that rely on outside inventiveness will quickly lose their competitive advantage (think of SaaS implementations), whereas organizations that create an internal culture of innovation will keep and compound upon their competitive advantage. This is why good leadership is so important, and organizations that spend time intentionally developing leaders will perform better than those who do not.

A few questions for leaders:

• Do you create an environment that allows your team to experiment and innovate, even if that means temporary failure?
• Do you develop your subordinate managers to create the same environment of innovation?
• Do front line employees in your organization feel empowered and safe to bring up better ways of doing things?

Let’s rise above and lead.