Taking fear out of innovation

Most executives will agree that fear—of criticism, of uncertainty, of career consequences—can paralyze innovation. In this episode of the Inside the Strategy Room podcast, three innovation experts discuss ways to create an environment of psychological safety that rewards creative initiative and destigmatizes failure. Laura Furstenthal, Alex Morris, and Erik Roth, all leaders in McKinsey’s innovation service line, are the coauthors of the recent article, “Fear factor: Overcoming human barriers to innovation.” This is an edited transcript of their discussion. For more conversations on the strategy issues that matter, follow the series on your preferred podcast platform.

Sean Brown: What do you mean by human barriers to innovation?

Alex Morris: Barriers to innovation can include what I call plumbing issues, such as lack of an innovation strategy or a disciplined capital allocation process. But there is another set of barriers to innovation involving people, and these relate to norms, behaviors, mindsets, habits, even language, and they can pose serious challenges.

Sean Brown: Your article talks about the fear factor in innovation. Where does that fear come from?

Alex Morris: Our research shows that leadership wants innovation, but they often don’t create the conditions for its successful execution. That produces employee frustration and, eventually, apathy. People are not energized to work on innovation projects because they see new ideas smothered regularly. It also leads to fear—fear on managers’ part to take on ideas that diverge from company or industry orthodoxy, and fear on employees’ part of criticism or reprisal. The ultimate result is a lack of ideas, experimentation, and investment in what matters to the company’s long-term success, which in turn creates barriers to growth and staying relevant to stakeholders.

Sean Brown: What type of orthodoxies do you typically encounter at client organizations?

Alex Morris: Rules, such as stick with what the organization has always done, stick with industry convention, stick to your lane, stick with your workflow, stick with existing processes, stay in your silo. Leaders need to know if such implicit rules get in the way of innovation.

Erik Roth: Often, these implicit barriers become explicit as systems and rewards. When an organization experiences success by adhering to certain ways of working, those approaches firm up and become difficult to change. But what once led to success may be exactly what is now getting in the way of innovation. One of our most striking statistics is that 80 or 90 percent of executives tell us that innovation is a top priority, but only 6 percent are satisfied with their performance. That number has not changed for almost a decade, so the frustration and anxiety are there for executives as well.

Sean Brown: Is that frustration mainly related to the people or the plumbing, to use Alex’s terminology?

Erik Roth: It’s both. Ultimately, innovation is a resource allocation problem. When your strategy orients resources toward incremental improvements in the core business, including both people and funds, it’s hard for organizations to go after the best opportunities, which often are not in the core. That strategy, and the processes around it, become a barrier that reinforces fear of stepping out. The innovation process should build confidence—the more steps you take, the more confident you should be that you are onto a value proposition that can win in the marketplace. If the organization is focused on the near term and the ideas are not rooted in valuable problems to solve, meaning customers’ identifiable frustrations or pain points, then those ideas are barriers to confidently taking risks.

We also see companies often hurt themselves in how they take offerings to market. They have something great, but they don’t mobilize around it. They lack a process to accelerate delivery and ensure scale. Many times, we hear, “We piloted it in one market, but it never got to the second market,” or, “It never got to the next customer.” And our question is, “Did you plan to get it there from the start or were you treating the idea like a petri dish experiment?” It’s often the latter. Then, of course, incentives are another element that reinforce today’s ways of working versus what’s required to innovate for tomorrow. Together, all that creates anxiety—“What if I get it wrong?”—and the fear drives the decisions.

Sean Brown: If processes build confidence and pathways to market, what did the new research tell you about the people side of the equation?

Laura Furstenthal: Culture is a very important aspect of innovation. Our research shows that leading innovators—companies that outperform in economic profit generated from new products, services, and business models—are full of positive energy, creativity, excitement, and optimism, whereas employees of average and lower performers have a diametrically opposed set of feelings. While these average and low performers still focus on creativity, they lack joy, inspiration, and courage.

These negative feelings are quantifiable. More than 85 percent of innovation practitioners report that fear often or always holds back innovation, but only a quarter of organizations understand this fear, and fewer than 11 percent are doing anything about it. To understand how leading innovators recognize and counter the fear, we looked at their practices.

Language can be an important tool. One organization always hyphenates the word mistakes as mis-takes, as in “take again,” inculcating the idea that there’s no such thing as a mistake you cannot learn from, that mistakes are part of the process. At another company, a leader starts all big meetings with a slide that says, “It’s easier to edit than to author. Before we iterate, please thank the authors.” That sets the tone that we may critique the idea, but the most important thing is for someone to author that idea. Another organization has replaced the word pilot with pioneer. The subtle point is that when something doesn’t work, we won’t call it a failure but see it as a step, backed by the full intention to keep going forward. They found this small change helped them find ways to iterate beyond initial trials.

Sean Brown: Some of these examples suggest a sense of playfulness. Do you find that helps reduce anxiety around innovation?

Alex Morris: One hundred percent. The broader idea is fun. It’s not uncommon to see fun among the values that successful innovators articulate—that we are here to work because it’s joyful.

Erik Roth: You don’t want fun and humor used to deflect, however. Creating an environment of psychological safety where humility, empathy, and respect for one another dominate is critically important. You don’t want the organization to mask the reality with a veneer of fun and entertainment, as we often see. We call it “innovation kabuki theater,” where contests and similar initiatives generate excitement but don’t fundamentally shift the organization’s gravitational pull. That needs to be balanced with empathy and honest conversations.

Sean Brown: How can companies engender the willingness to take creative risks while keeping employees focused on delivering for existing customers?

Laura Furstenthal: We often hear organizations say, “If I disrupt my current customers, I’ll lose much of the core.” You have to learn to live in a two-speed world. Also, not everybody has to be innovating every day. Some employees can focus on the core business while those focused on innovation can perhaps try new things with abbreviated approval processes with a subset of customers.

Erik Roth: Innovation is everyone’s job at one level, but it isn’t at another. When executives talk about innovation, everyone says, “Yay,” then they all go back to their desks and say, “I guess I should continue doing what I do every day because no one taught me how to do anything differently.” This is where the fear comes in, because if I am to innovate, then I’m not doing my work in the core business. You need specificity on how innovation gets done to prevent the fear factor from creeping in.

Sean Brown: What role do top leaders play in helping what may be a conservative organization become more innovation-oriented and more accepting of “mis-takes”?

Laura Furstenthal: The leadership team plays a critical role. Have you set a clear, quantifiable aspiration for your organization and cascaded targets and objectives to support it? When John F. Kennedy defined NASA’s mission as landing a man on the moon and returning him safely to Earth within a decade, everyone got it. Signals such as Jeff Bezos saying, “We are willing to be misunderstood for long periods of time,” because Amazon believes in where it’s going to make the organization feel safe innovating. Those are the two most important roles of the executive team: make that aspiration clear and ensure people feel comfortable living it.

Erik Roth: I want to add one word: commitment. If executives are not fully committed to choosing to grow and innovate, it will not happen. Alignment—everyone nodding and saying, “Sure”—is different than commitment: “I’m willing to take people and money out of my organization and put it toward the goal.”

Sean Brown: What specific fears form the biggest barriers to innovation?

Alex Morris: Fear is very personal, but three areas are most pervasive, and they appear among average innovators significantly more than they do in leading innovators: fear of negative impact on one’s career, fear of uncertain outcomes, and fear of criticism. For example, fear of impact on careers is reported 3.6 times more often by people who work at average innovation companies than those at leading innovators.

About 30 percent of the companies that we polled have these lower-fear innovation environments. What’s interesting is that almost six in ten of those companies are top innovators. Among the higher-fear companies, only one in ten is an innovation leader.

Sean Brown: How do those low-fear companies embed a culture where people dare to take risks?

Alex Morris: There are five cultural elements that most of these companies exhibit, and they all relate to the CEO and top team. Just like Erik said, it starts with commitment. Does the top team authentically hold innovation as a core value? Leading innovators score three times higher than lagging and average innovators on this. Do they champion innovation and use storytelling to evangelize it? Leading innovators score 4.5 times higher. Number three: do they signal and symbolize that innovation is a priority? Leading innovators are 11 times more likely to use the power of symbols to show employees that innovation is important. Innovation leaders also embrace behaviors and rituals that support innovation, including practicing them themselves, and create a sense of psychological safety.

Erik Roth: People may ask, “What about bottom-up innovation? This is all about top-down.” Bottom-up innovation is important, and many organizations foster entrepreneurship and create robust marketplaces of ideas—but they hit a ceiling. If you can’t get the resources to scale those bottom-up ideas into something meaningful, a success model for value creation through innovation is missing. Over time, the fear of stepping out of line overcomes the rewards of being entrepreneurial.

Sean Brown: How do you ensure that the innovation practitioners are viewed as partners by those in the rest of the business?

Laura Furstenthal: It’s critically important to have an end-to-end model, from idea through to full scale. There is a great cartoon of R&D catapulting an idea at marketing, which is a brick wall. Those kinds of organizations usually fail at scaling. They let flowers bloom, but those flowers never mature. Employees from the entire value chain should be present throughout the innovation process, whether on the working teams or in advisory roles. Having opportunities to rotate into the innovation center or into sales and marketing roles also helps create healthy cultures by creating more interaction.

Erik Roth: Innovation, at its simplest, is identifying a valuable problem to solve, using a technology to solve that problem, and putting it inside a business model that allows it to scale as quickly as possible to create value. If you have that mental model in mind, how easy or difficult is it for those pieces to come together end to end in your organization? We often see innovation teams almost get sequestered to do prototypes or pilots or one-offs. If you disconnect your innovation team from the ability to influence the customer or the user, the likelihood that it can have genuine impact is very low.

Sean Brown: How do the organizations that excel at innovation embed those five cultural dimensions you mentioned?

Alex Morris: First, as Laura pointed out, words truly matter. Among the world’s leading innovators, one in six of their values, on average, is about innovation. At all other companies, it’s about one in 19. By values we don’t mean putting the word innovation up on the wall; we mean authentically committing to it.

Leading innovators then connect those values to their mission, vision, and purpose, and they make those specific. Going to the moon and back within a ten-year period—that’s very specific. Average innovators commonly have a purpose like becoming a great restaurant chain, whereas leading innovators’ purpose tends to be more focused—to become a net-zero automaker, for example. The message is that we need innovation to achieve our purpose.

Sean Brown: On championing innovation, you mentioned storytelling. What role does that play?

Alex Morris: You can frame innovation as risky, or you can frame it as an imperative, something we have to do to stay relevant. Commonly, CEOs at leading innovators have a mantra around innovation. At one major high-technology company, the CEO describes an innovation effort that doesn’t pan out as “learning that something doesn’t work” rather than a failure. A media company’s mantra around innovation is, “We do two things: we make originals, and we make sequels. We make sequels because we don’t want to go commercially bankrupt, and we make originals because we don’t want to become creatively bankrupt.” That mantra reminds employees that the goal is both driving the core business and living up to a bigger purpose.

Signaling and symbolizing, the next dimension, likewise reinforces that innovation imperative. Symbols can be as simple as setting your employees’ default landing page to your main competitor’s home page as a way to signal that you want people to look outside the company first. Where and how leaders spend their time also sends a signal. One research participant who works for an airline talked about a competitor’s CEO showing up at the Consumer Electronics Show, which communicated to that CEO’s organization that innovation and thinking outside the industry silo are important—something the research participant lamented that his company’s CEO would never do.

Sean Brown: You also mentioned rituals—how are these different from symbols?

Alex Morris: Rituals are about the routines that the leadership demonstrates and inculcates in the organization. Steve Jobs, for example, was known to show up at call centers and make calls to customers to understand their needs. Organizations often say they want to be customer-centric, and they set up training in customer centricity for employees, but the leaders don’t participate. It’s important to understand where you are out of step with the behaviors you want your employees to embrace.

The final aspect of a fearless innovation culture, and perhaps the most important, is psychological safety. It’s not about creating a space where there is no criticism, but a space where, as Erik described, there is humility, respect, honesty, and transparency; where failure is destigmatized; and where employees feel free to ask questions, to learn, and to experiment.

Sean Brown: If your organization lacks these fundamentals, where do you start?

Alex Morris: Maybe the easiest one is, where do you show up as a leader? You could start by giving a speech about innovation or sharing a message in an employee newsletter.

Laura Furstenthal: My favorite is bringing positive energy to discussions. Some organizations have a rule that when someone throws out an idea, the first five comments have to be positive. Another one I love is “MIB” culture: make it bigger, make it better. It’s your job, as an executive and an employee, to take ideas and instead of tearing them down, make them bigger and better.

Erik Roth: Fear, as we’ve said, often accompanies going against the presumed way to be successful. One of my favorite interventions, back when I was the chief innovation officer of a large Korean organization, was to challenge the fear of failure, which was strong at the time in Korean corporate culture. We did it in a profound way by holding a full-blown Korean funeral. The CEO came to the R&D center, which had never happened before, and with pomp and circumstance we buried the idea that failure is something to fear. We celebrated its life and the fact that we were now stronger as an organization. That challenge of the orthodoxy resonated throughout the organization for months, and people still tell the story. That’s the power of taking an action as a leader and creating a symbol.

Sean Brown: What aspect of this research struck you as most intriguing?

Laura Furstenthal: For me, culture is often a squishy word. What I love about this research is that we have started to quantify behaviors, actions, and strategies for building the fabric required to deliver innovation.

Erik Roth: I have long believed that behavioral economics is the critical unlock to helping organizations innovate, and it has not been explored enough. This research is a first step.