Creative Construction – Book review

Highlights

• Well-respected Harvard Business School professor and HBR contributor Gary Pisano has weighed in on the topic of large company innovation in his new book ‘Creative Construction’. He makes a compelling case that being ‘large’ doesn’t have to mean being non-innovative, or growing only through the acquisition of innovative start-ups
• The author presents a clear three-part framework consisting of Innovation Strategy, System and Culture that a large company needs to use to be an innovative organization
• This book is a worthwhile, albeit high-level, treatment of the topic with a rich set of descriptions and examples. It is most useful, however, as a foundation on which corporate innovators can build their own innovation strategy, system and culture – a task left for the reader.

Innovative organizations do not just form spontaneously. They are not “natural” in any sense of the word. Innovative organizations are themselves the product of human creativity.

– Gary Pisano, PhD

Every now and then a book on innovation is published that deserves to be put on the innovator’s bookshelf along with other seminal writings about innovation. Creative Construction, by Gary Pisano at Harvard Business School, is such a book, in part due to the preeminence and influence of Harvard in the conversations about innovation that have been taking place since Christenson’s ‘The Innovator’s Dilemma’ was published in 1997. It is also such a book because it offers a full-throated, positive argument for the case that large companies can be innovative – and in big ways. This is a book that should be read by every innovator, at any level, who is working at a large company.

Pisano starts by accurately noting that we often succumb to the all too common narrative that big, transformational innovations are not possible in large companies. As he states,

The thesis that large corporations cannot succeed at transformative innovation has been repeated so often by so many that—like some law of nature—it is no longer questioned. … Even leaders of many larger enterprises seem to have surrendered to the “fact” that they cannot grow organically through innovation but instead must buy innovation through acquisitions.

This book presents a refutation of this belief. But it is a refutation that, while articulated at a high level, lacks the practical specifics necessary for implementation. It is these practical specifics that those who are responsible for innovation at large companies, from the top to the bottom, are hungry for. The real work required to realize the outcomes the book describes is work that large companies often find very difficult to do.

The Big Picture

Contrary to popular belief, large companies can innovate! To do so, the author presents the following framework for creating and sustaining a capacity for innovation.

Creating an Innovation Strategy – A robust innovation strategy specifies the kinds of innovation that are important for the company to pursue. An innovation strategy focuses the organization’s resources and energy on building the right set of capabilities. The key concept presented is to identify four fundamental categories of innovation:

1. Routine Innovation – Leverages a company’s existing technological competencies and fits with its existing business model
2. Disruptive Innovation – Requires a new business model but not a technological breakthrough
3. Radical Innovation – Requires a technological breakthrough but not a new business model
4. Architectural Innovation – Requires significant changes in both business model and technology

An innovation strategy informs how a company approaches each of these categories and the resources and amount of focus devoted to each.

Designing and implementing an Innovation System – A coherent set of interdependent processes and structures that dictates how the company searches for novel problems and solutions, synthesizes ideas into a business concept and product designs, and selects which projects get funded. The key functions of the system the author describes and gives examples of are:

1. Search – uncovering novel and valuable problems and solutions,
2. Synthesis – integrating diverse streams of ideas into coherent business concept, and
3. Selection – focusing on a subset of opportunities.

Building an Innovation Culture – The organizational ‘software’ that shapes how an organization’s formal systems function. It is a powerful driver of organizational behavior and performance. The attributes and objectives of a proper innovation culture are:

• Tolerance for Failure but No Tolerance for Incompetence
• Willingness to Experiment but Highly Disciplined
• Psychologically Safe but Brutally Candid
• Collaborative but Individually Accountable
• Flat but with Strong Leadership

The top-level components of Strategy, System, and Culture are interdependent. For example, the innovation system you design needs to reflect and implement the innovation strategy you create and be managed and used by people who embody the culture and behave in ways that will make it work well.

In the various chapters of the book, the author gives descriptions and examples of what the elements of this framework should look like based on his years as an academic researcher and consultant to C-level executives at large (and small) companies. As he points out,

Innovation is a systems problem … building a capacity for innovation is like bespoke tailoring – you build it from the ground up. What works for Apple isn’t necessarily going to work for your company. You have to find your own path.

This is hard work. The design space is large – but not infinite. The solid framework presented by the author is great for thinking about the overall design requirements of these three components. It does not, however, present a recipe for how to get there.

A Few Minor Issues

The book contains much that is insightful, but there are also a few idiosyncrasies that leave the reader scratching their head. Some examples include the author’s discourses about ‘eating your own lunch’, the company’s ‘home court’, and his definition and discussions on ‘uncertainty’ and ‘ambiguity’. None of these are major (except perhaps the wrong definition of uncertainty which he confuses with risk[1]).

These idiosyncrasies do speak, however, to a more general impression one gets when reading the book that the author has come to his insights and framework through a highly personal journey. It seems to be primarily a journey of interactions with his academic colleagues at Harvard and the various companies he has dealt with, most likely at the senior executive level. But it doesn’t seem to be a journey that is very familiar with the vast and extensive body of innovation research and writings done by others on the same subjects over the past 25 years. Nor is it a journey that includes actual experience as an innovator within a large company. The experience of someone who has actually had to do innovation – taking an initial idea to market successfully.

Despite this, the book presents a compelling case for large company innovation and a very useful framework of strategy, system and culture that large companies can use as a high-level roadmap for becoming innovative.

Conclusion

The key adjective to remember when reading this book is ‘high-level’. The book can be viewed as a ‘requirements specification’ for large company innovation. It sets out the framework and lists the many requirements for each framework element, some in more detail than others. But it doesn’t go into details of design and implementation or even how to design and implement the framework. It is too abstract to be immediately actionable.

But perhaps that is the main purpose of this book, and a good purpose at that. Despite his idiosyncratic perspective, the author has managed to synthesize a comprehensive framework that is very useful. The work that needs to be done is turning the framework and accompanying lists of requirements into an actual, customized design that a company can realize. As the author himself says,

Through systematically creating an innovation strategy, designing an innovation system, and building an innovation culture, organizations develop the capability for transformative innovation regardless of scale.

As such, it is inspirational to those who want a big picture. It is also frustrating for those who need to actually do the work to make their large organizations innovative. And maybe that’s the point. We should expect a book like this to tell us only what the promised land looks like, not how to get there. From that perspective it is successful. It will be up to others to take this framework and put actionable substance behind the concepts. Now the real work begins.

[1] Frank Knight first wrote about the difference between risk and uncertainty in 1921 in a book called Risk, Uncertainty and Profit (which you can read here). For concise descriptions of the difference between uncertainty and risk see Kastelle 2013 or Ritholtz 2012