by William Duggan, Associate Professor, Columbia Business School

We all need to innovate. But how? As we’ve seen this past year in the financial sector, innovation without constraint is a recipe for disaster. Yet putting in place creative constraints can be just as bad. A company-wide Sarbanes-Oxley for innovation, with rules and procedures and forms to fill out, will surely kill the golden goose before it takes a breath.

So what can we do?

The usual methods of strategic analysis offer no help. They tell you how to analyze your industry, your competitors, and your own company. But they’re silent about how to come up with a creative idea for what to do next. They tell you how to analyze a strategy, not how to make one. There are many popular methods of analysis: five forces, SWOT, blue ocean, core competence. They are all very useful for understanding your situation. None of them gives you the next step: now what do we actually do?

The usual methods of strategic planning are no help either. They tell you how to get in a room and come to agreement on vision, goals, objectives, and so forth. They’re great for coming to a consensus on strategy. But they offer no way to tell if the strategy is a good one or not. These are really methods of strategic agreement, to get everyone rowing in the same direction. But is it the right direction? Strategic planning has no answer. It does not tell you how to come up with a good strategic idea.

There’s something missing, between strategic analysis and strategic planning. Once you analyze your situation, you need a creative idea for what to do. Then you go into strategic planning to figure out how to do it. That missing step is the key. In the past two decades, an array of innovation methods has grown to fill that gap. You get six thinking hats, brainstorming sessions, blue sky thinking, bean-bag chairs, and lego blocks in the lobby. These all aim to make you creative instead of analytical—to turn off your left brain and turn on your right one.

But ask yourself this: when do you get your best ideas? I’ve asked this question of at least 3,000 people over the past two years, a third of them business executives. The most common answer? The shower. Others answer: driving, or falling asleep, or in the gym. Not a single person has ever answered: in a formal brainstorming meeting or using any of those creative methods like thinking hats. And what came to them in the shower was not a wild and crazy idea, but a clear thought. It made good analytical sense. And it was creative. They did not turn off the analytical side of their brain and turn on their creative side.

Modern science now understands what happens in your brain at that moment. You get a flash of insight. Neuroscientists no longer believe there are two sides of the brain that work in two different ways. Analysis and creativity work together in the whole brain, to give you a creative idea that makes analytical sense. And once we understand how these flashes of insight work, we see how to replace our conventional procedures for strategic analysis, strategic planning, and creative brainstorming with simple, natural methods that harness the flashes of insight of everyone in the company.

The “insight matrix” is an example of one such technique. It comes from General Electric in the late 1990s, when Jack Welch as CEO and Steve Kerr as chief learning officer made new combinations of previous elements the basic problem-solving method of the whole company. The insight matrix takes what your brain does in flashes of insight and turns it into a step-by-step team method. At minimum, it should come between strategic analysis and strategic planning at all levels of your company. At maximum, it can replace many of the steps you already take in analysis and planning. And it should replace completely any other methods of creativity or brainstorming you currently use.

Here’s how it works. At the top of the insight matrix you write down your current understanding of the situation, in draft, because it might change. Then comes analysis: you list as rows what actions you think you might need to do to succeed in the situation, in draft, because these too might change. Then you ask the most important question you can ever ask to solve any problem of any kind: has anyone else in the world ever made progress on any piece of this puzzle? The sources to search go across the top, as columns, in draft again. The team then starts a treasure hunt. They search across the sources for previous elements to find a good combination.

This matches how your brain works when you have a flash of insight. Your mind wanders from piece to piece of the puzzle, searching all the shelves to find pieces that go together, and only when it finds them does it know what the picture looks like&emdash;what problem you’re actually solving. The insight matrix turns it in to a team exercise, and the shelves to look for pieces of the puzzle stretch across the whole world. As you go along, the team might restate the situation, revise the rows of actions, and change the columns of sources. That’s exactly what your brain does before a flash of insight. And when does the team stop? When a combination strikes them as promising. It usually happens in pieces, as people come in with connections that struck them overnight. Or they might spend weeks and come up with nothing at all. You can’t force it. But the insight matrix helps you try.

There are many other complementary techniques that combine analysis and creativity in the same moment of insight. You can make them a regular part of your basic problem-solving and planning methods at all levels of your company, for any kind of problem, large and small. Innovation becomes not a special event or a rare exception, but everyday business for one and all.

An associate professor at Columbia Business School, William Duggan, teaches strategic intuition in MBA and executive MBA courses and in executive education sessions. Professor Duggan is also the author of three recent books on strategic intuition as the key to innovation: Napoleon's Glance: The Secret of Strategy (2002); The Art of What Works: How Success Really Happens (2003); and Strategic Intuition: The Creative Spark in Human Achievement (2007). In 2007, Strategic Intuition was named the “Best Strategy Book of the Year” by Business + Strategy.

Professor Duggan will speak at the Seattle Bank’s 2008 Management Conference on May 13. All Seattle Bank members are invited to attend.

IMPORTANT DISCLAIMER, PLEASE READ: The Federal Home Loan Bank of Seattle ("Seattle Bank") publishes What Counts for educational and promotional purposes only. The data and analysis presented are based upon information obtained from sources that we consider reliable. The opinions expressed represent the current opinions of our staff and are subject to change without notice. We make no warranties, express or implied, regarding the accuracy or completeness of any information, analysis, or opinions presented. No part of this newsletter may be reproduced in any manner without the written permission of the Seattle Bank. The Seattle Bank, its employees, agents, and contractors are not registered investment advisors, financial advisors, or broker dealers, and they are not acting in a fiduciary capacity. The information contained in this newsletter does not constitute a recommendation, offer to sell, or solicitation of an offer to purchase any particular investments or products, including without limitation securities of any companies discussed, and it should not be construed as such. It is the reader’s responsibility to evaluate the suitability, risks, and merits of any investment, funding strategy, or business proposal presented in this newsletter. Newsletter content is for our readers' informational purposes only. Please refer to our Terms of Use for details.