Drive Innovation with Better Decision-Making
To stay competitive, today’s business leaders are investing millions in digital tools, agile methodologies, and lean strategies. Too often, however, those efforts produce neither the breakthrough operational processes nor the blockbuster business models companies need—at least not before their competitors introduce their own advances. And a key culprit is the inability to make quick and effective innovation decisions.
The discovery-driven innovation processes companies now rely on involve an unprecedented number of choices, from big go/no-go gates that govern which ideas are pursued to countless decisions about how to conduct experiments, what data to collect, how to interpret findings, and how to act on them. But in companies that are just learning to experiment, too many decisions are made inefficiently or informed by past experience and narrow perspectives. As a result, critical risks aren’t identified, and bad ideas hang around forever, eating up scarce resources and crushing the chances of bigger, more-transformative bets.
Take Pfizer. (One of us, Hill, has been a paid adviser to the company over the years.) In 2015 the pharmaceutical giant kicked off a digital transformation effort in its Global Clinical Supply (GCS) arm, which delivers more than a million doses of investigative medicines to thousands of clinical sites in over 70 countries each year. Doing so while maintaining clinical trial integrity is a complex task. Any issue, such as inadequate refrigeration, unclear instructions for medical professionals, or patients’ failure to comply with regimens, could delay the development of potentially lifesaving treatments. By 2018, GCS had made significant progress with its digital initiatives. But with new medical and digital technologies on the horizon, Pfizer’s strategy changed to focus exclusively on breakthrough drugs and vaccines. GCS needed to become ever more agile, innovative, and patient focused so that it could adapt to myriad clinical-site and patient needs. Findings from a cultural survey, however, underscored that the organization was struggling to make good, timely decisions about systems, processes, and capability innovations.
So GCS altered its approach on a number of fronts, creating cross-functional teams that were responsible for key decisions, changing the frequency of decision-making meetings, and improving team members’ ability to robustly debate ideas. Those efforts paid off when Covid hit: Thanks in no small part to the quick-footed support of GCS, the first emergency authorization of the Pfizer-BioNTech vaccine was granted only 266 days after the declaration of the pandemic. (GCS’s journey in advance of the pandemic will be described throughout this article; for more on the race to make the vaccine, see “The CEO of Pfizer on Developing a Vaccine in Record Time,” HBR, May–June 2021.) GCS’s success at rapidly delivering tens of thousands of doses of the vaccine candidates and collaborating with colleagues across Pfizer to develop solutions to the thorny challenge of preserving them at subzero temperatures is just the most prominent of its many recent innovation achievements, which range from real-time tracking of trial-drug shipments to personalized tests for cutting-edge therapies.
We’ve spent almost two decades studying leaders at highly innovative organizations and, more recently, incumbent firms that are on their way to becoming innovation powerhouses. When we looked closely at 65 of the companies that were on the journey to becoming more nimble, we found that the more successful ones were applying many agile and lean principles to decision-making itself. In this article we’ll show what that means: including diverse perspectives, clarifying decision rights, matching the cadence of decision-making to the pace of learning, and encouraging candid, healthy conflict in service of a better experience for the end customer.
Research has long shown that diverse teams are better at identifying opportunities and risks in any problem-solving situation. But in organizations that are learning to experiment, four perspectives tend to be underrepresented in decision-making:
The customer perspective.
It’s hardly a surprise that the customer needs to be at the heart of all decisions, whether they’re about new products, business models, or internal processes. But we find that customer intimacy is all too rare. Because of that, firms end up chasing problems that don’t really matter to customers and miss opportunities to address their unarticulated pain points and desires.
The solution here is to include in your decision-making processes the people who are most closely connected with end customers: frontline operations staff, customer service employees, salespeople, and the customers themselves. Organizations that are good at this also tend to work closely with user experience or user interface teams, ethnographic researchers, or experts in human-centric design. And if you’re developing a new business process or a digital tool for employees, remember that their voices need to be heard—in this case they are the customers who will use it.
To represent the voices of patients in clinical trials and the health care professionals working directly with them, Pfizer’s GCS unit created a new function, Clinical Research Pharmacy, and recruited pharmacists (who had prior experience administering the treatments) to join it. Over time, the CRP came to play an integral role in decision-making at GCS. Its pharmacists’ insights have led to innovations ranging from user-friendly package designs to virtual-reality training for health care providers.
The local perspective.
Too often decisions in global companies are made at headquarters without adequately taking into account perspectives from different geographies. Yet people at headquarters rarely have the contextual intelligence required to judge which new business models, services, or operations are best suited to a local economy and regulatory environment. Getting local input can make a big difference.
At GCS, strategic decisions, even those that affected regional operations, had been made principally by U.S. teams. But once the unit began deliberately soliciting ideas from local managers, empowering them to innovate, it saw impressive improvements. For instance, when a new Latin America–based team was established, it used its expertise to cut the time it took to get trial medicines to local health care providers and patients from 55 to 20 days.
Even more prevalent is the failure to transfer local insights back to a business’s core processes and products. Often small divisions in small markets can be quicker and more innovative than their larger counterparts in home markets. For example, eBay’s successful Buy It Now button, which revolutionized e-commerce and helped shopping move online, was developed by eBay Germany and was based on its deep relationships with its user communities.
The data-informed perspective.
Especially in years like the past one, when the business environment was in constant flux, relying on past experience to guide innovation efforts may lead a company astray. Lean methods call for testing ideas and using near-real-time quantitative and qualitative data to decide next steps. The challenge lies in making that information accessible to every decision-maker.
Data visualization provides a solution: It can allow timely, complex information to be interpreted by people from a variety of functional backgrounds, leveling the playing field so that those who are less data savvy can fully engage when making decisions.
At GCS, a new digital-business-operations group created visual dashboards that superimposed information about events such as weather, flight, and shipping route disruptions over supply chain data to predict risks to operations in real time. These dashboards, which were accessible to all team members, proved invaluable at the daily “light speed” meetings held to respond to the Covid crisis as it upended supply chains, shut down borders, and overwhelmed the hospitals running Pfizer’s clinical trials. GCS teams were able to make critical decisions about the processes for supplying ongoing trials across the globe, including those for the new Covid vaccine candidates and antivirals. Despite the logistical challenges brought on by the pandemic and natural disasters from wildfires to hurricanes, the organization didn’t miss a single delivery to trial patients.
The outside perspective.
Even the best-intentioned innovators can get mired in their companies’ dominant logic. Leaders of incumbent firms, especially ones that are still growing, albeit slowly, tend to reject bold ideas—ideas that present high risk as well as high reward, require new resources or capabilities, or threaten to cannibalize the core business. An outside view can help organizations contemplate those moves more seriously.
That outside view can come from within the company, however. GCS invited high-potential talent from other parts of Pfizer to join its leadership team permanently, increasing the group from six to 16 members. Many leaders at other firms ask less-experienced, recently hired employees to attend C-suite meetings. Because these people aren’t steeped in the company’s inner workings, they ask questions that challenge core assumptions and help reframe strategic choices.
An outside perspective can also come from beyond the company’s walls or even its industry. GCS, for example, invited people from Delta Air Lines’ innovation lab to participate in a design workshop on the clinical trial experience for patients. Delta’s boarding-pass scanner and bag-tracking capabilities sparked ideas for new ways that GCS could enhance its own shipment-tracking capabilities, ensuring that more patients got the right dose of the right drug at the right time.
Clear Decision Rights
As they recognize the need to bring together many points of view, a lot of organizations are relying more on decentralized networks of cross-functional teams, both permanent and ad hoc, to increase their agility. But this can have a downside: Involving more voices in a decision can mean less clarity about who ultimately owns it, slowing the innovation process and often prompting frustration and disengagement.
For example, when executives at a financial services firm asked their high-potential team leaders to identify and pursue new business models, the results were disappointing. The team leaders didn’t understand that they’d been given the authority to make decisions themselves and often came back to the executives and suggested options to choose from, rather than proposing an intended plan of action. The team leaders also had a mixed experience. At first they were honored and energized by being selected for an innovative project. But later they became discouraged by the disconnect between their recommendations and the decisions of the executives—who’d fallen back into their habit of calling the shots—and ultimately, by the ambiguity about decision-making rights.
To effectively empower decision-makers, leaders must be explicit in every case about who will be responsible for executing the decision, who will be accountable for making it, who will be consulted, and who will be informed.(Creating and sharing a traditional RACI chart can do the trick here.) If leaders are delegating decisions to a group, they should specify the process to be used and the parameters of the group’s authority for everyone involved.
GCS transferred ownership of the investigative drug supply from a single leader to cross-functional teams of four known as “tetrads.” Each tetrad became responsible for one therapeutic area. The members were collectively accountable for decisions, and they had clear guidelines about when they should escalate a decision to the tetrad’s executive sponsors. It took some months for everyone involved to feel confident about the new structure and to refine the guidelines, but ultimately the tetrads helped GCS kill less-promising ideas faster, without having to push those choices up to senior leadership. With their enterprisewide view, the teams were also able to begin proposing more-innovative ideas for optimizing the whole clinical supply chain, such as how to pioneer delivery of highly personalized gene-therapy drugs.
The Right Cadence
Established companies tend to make innovation decisions on a fixed schedule, through quarterly or annual reviews at which senior teams step back, assess past plans, and make new ones. But in agile companies, innovation is based on discovery-driven learning. With each experiment, data and insights emerge that should be taken into consideration in setting up the next one. Leaders must encourage decisions to be made at a pace aligned with the learning cycle.
To gauge the right cadence for your meetings, think about how long it will take to gather enough data to validate (or disprove) your hypotheses. If you’re learning quickly or confronting rapid change, you may need to make decisions more frequently. During the pandemic, for example, most leadership teams at companies we observed naturally increased the cadence of meetings. Given the unfolding nature of the crisis, every decision had to be considered a “working hypothesis,” so they opted for short sessions daily over longer ones every few weeks. Many told us they hope to stick with the new, faster rhythm even after the pandemic is over.
The many decisions that come up daily in experimentation often call for continuous processes. For example, in one Indian organization we studied, the design team created a WhatsApp forum to collect rapid feedback on its proposals from the whole organization, including remote employees working closely with end users in the field. Because the channel was always available, designers could spontaneously solicit feedback from employees and apply it to decisions immediately.
But longer timelines can still be needed to create the space necessary for collaboration and information gathering, especially if you’re contemplating big bets. When Kathy Fish, P&G’s former chief research, development, and innovation officer, introduced the lean start-up model to her organization, the business units supplemented their annual planning processes with a review of innovation portfolios every 90 days in order to issue metered funding to the initiatives in them. That gave teams enough time to conduct experiments and consolidate findings while preserving their momentum.
Inviting diverse sets of participants to well-timed decision-making forums doesn’t automatically lead to the thorough vetting of ideas. This is where so many organizations get stuck: They fail to create a competitive marketplace of ideas, where genuine debate increases the odds that risks are identified and the most-promising projects are pursued.
In some dysfunctional teams, productive discourse is stymied by political infighting, defensive behavior, or hidden agendas. Critiques of ideas often become critiques of personalities, and employees don’t trust that their ideas will be taken seriously. Often any real conversations and decisions happen “outside the room,” so members of the group feel disenfranchised even though they’ve been asked to participate.
Yet an even more common cause of unproductive debate is a culture of politeness. Many people try to minimize differences as opposed to amplifying them, in an effort to avoid conflict. The effect is that those with minority views don’t speak up or compromise too quickly when they’re challenged. As a result bosses or experts tend to dominate the decision-making process no matter how diverse the assembled group is.
In both kinds of situations, leaders must stop worrying about whether people can collaborate and instead worry about whether they know how to argue. Leaders can encourage the psychological safety that promotes good fights in three ways:
Leaders need to avoid shutting down the conversation with solutions from the outset. Instead, they should be transparent about what they don’t know. At P&G (which has also hired Hill as an adviser in the past), leaders are encouraged to ask these four questions in response to every experiment: What did you learn? How do you know? What do you need to learn next? How can I help? By demonstrating that they don’t have all the answers, leaders help set the expectation that all present should share their opinions and that anyone can be wrong. They also create an environment in which people feel more comfortable challenging one another.
At Pfizer, team members were initially reluctant to disagree with vice president Michael Ku when he became the head of GCS. But as he learned to admit what he didn’t know and adopted the habit of being the last person to share his thoughts in meetings, they became more comfortable speaking up.
Focus on the data.
Data can provide a solid foundation for productive debate. Team members who have the same data visualizations in front of them are likelier to develop a shared understanding of problems—common ground on which they can add their unique perspectives. Ku ensured that all decisions made at GCS’s monthly operational review were informed by data. When things had to move quickly during Covid, this kept the team from making choices based on emotion or past experiences that were no longer relevant.
Articulate a shared purpose.
Aligning the whole organization around a common, meaningful purpose (why we exist and whom we serve) gives people permission to fight about new ideas, because they all agree about what they’re fighting for. Ideally the purpose will serve as a framework that ensures that decisions benefit the end user or customer.
A shared ambition can keep debates from getting personal. At one retail company we studied, a team created avatars for key customer segments. “Ali” was the avatar for urban Millennials, for instance. Whenever a discussion started to get more personal than substantive, someone would intervene and ask, “What does Ali need from us all right now?” That encouraged the team to focus on a joint concern for customers instead of descending into a winner-takes-all argument.
A purpose can also encourage criticism rather than silent politeness. A real challenge in companies learning to be agile is killing “walking zombies”—projects without enough value to justify their continuation. To meet it, leaders should remind teams of their purpose. When Ku first took the reins at GCS, most people were reluctant to criticize others’ ideas. Decision-makers interpreted silence as agreement that an idea was worth pursuing, so the number of projects underway became overwhelming. Ku’s first priority was to align the entire team around a shared purpose: “Patients First.” In debates about which initiatives to pursue, people learned to ask, “Is that the best solution for the patient?” rather than staying silent. The team soon found itself rejecting more ideas and able to focus more effort on those that enhanced the patient experience.
A common purpose helps decision-makers focus on solving problems rather than fulfilling personal agendas. In the midst of Covid, while everyone was working 24/7, Ku observed with pride that leaders in GCS were advocating for decisions that were in the best interests of the patient even when doing so meant more work for their own functional areas.
Organizations and teams must adopt new behaviors to make informed decisions more quickly, but managers need to change, too. Too many leaders act unilaterally, swooping in to save the day with the “right” answers—especially during a crisis. But when innovation is called for, leaders need to create environments in which their people can find answers on their own. It takes courage and practice to step back and let others make decisions and especially to avoid taking the bait when teams naturally try to delegate up the chain. But until you adopt this new way of working yourself, your organization will never be as innovative as it could be.
Linda A. Hill is the Wallace Brett Donham Professor of Business Administration at Harvard Business School. She is author of Becoming a Manager and coauthor of Being the Boss and Collective Genius.
Emily Tedards is a research associate at Harvard Business School.
Taran Swan is a managing partner at Paradox Strategies, a provider and creator of advisory services, experiences, and tools that enable organizations to navigate the paradoxes of leadership, innovation, and diversity.