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Why radical innovation requires a hot strategy approach

change management

Fear or excitement? Anticipation of change does “something” with humans. It evokes emotion. The implementation of Industry 4.0 technologies is expected to deliver and require change en masse. The type of change that does not only affect one part of the production process but uproots organizations’ rules of organizing and challenges the fundamental beliefs of what a company stands for. Big change. Radical change. Such transformations have been proven to bring about extreme emotions, in employees and decision makers alike.

(**Disclaimer: Strategy and emotion are rarely mentioned in the same breath. The author of this article apologizes for any discomfort felt while reading this piece and hopes you see it as an immediate illustration of the mentioned Ostrich effect.)

“Well yes, of course they do”, I hear you say. “But I would never let my emotions get between me and an amazing business opportunity. We practice rationality at our firm.
We analyze, debate, look at the details, then we decide.”

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Hard facts. Cold analytics. Nothing more. Sounds familiar?

The idea that adopters of innovation make independent, rational choices guided by goals of technical efficiency has been dominant in literature and in the public’s mindset. Many organizations go about formulating their strategies and implementing them as if emotions do not exist or, at best, can be easily suppressed or side-lined.

But emotions are at play. Always. They shape what information decision makers attend to and how they use that information, or also: they pre-filter what opportunities you investigate and which ones you dismiss. They even influence your view on a situation and label it as opportunity or threat. How does that work?

Emotions (unconsciously) influence your decision making.

  1. Ostrich effect

As humans we tend to shy away from what makes us feel uncomfortable. Research shows that whether you take on board new information or bury your head in the sand depends on how the information makes you feel. Radically new business ideas might therefore not get proper attention. A proven or familiar sounding concept on the other hand, might get more easily accepted, even when the prospects are only mildly promising.

  1. Over-optimism

Sometimes we simply fall in love with an idea or a concept. Being overly optimistic however, can lead to overemphasizing potential benefits while underestimating risks. Combine this with our tendency to look for information that confirms our ideas, and you see the danger. Positive emotions are great for idea generation but make sure to always include into the discussion some gloomy team members who question everything and keep pressing for data to back up glorious predictions.

  1. Threat bias and hypercriticism

A climate of fear, anxiety over changes to come or simply being stressed out from the day might lead to dismissal of possible interesting opportunities. Since we tend to interpret situations in agreement with our present state of mind, making judgements in a bad mood-moment might lead to opportunities being misclassified as threats. It’s perfectly ok to tell your colleagues: “I’m in a bad place right now. Let’s revisit this idea later when I’m more receptive to it.”

  1. We get emotionally invested in projects, people…

Letting go of something you’ve built and invested in for years or admitting a seemingly profitable project is turning out to be nothing more than a money pit, is not an easy thing. Studies show that decision makers often continue to invest in a failing cause for reasons of self-satisfaction. “If we try a little harder, you will see, our initial investment made total sense.” Occasionally it is more about pride than anything else. But sometimes it nearly comes down to an identity conflict. On divesting the failing handsets division to Microsoft, former Nokia Chairman Risto Siilasmaa said that “even though the deal made sense rationally, it was very difficult emotionally as the deal challenged everyone’s sense of what Nokia stood for and what that meant for their own sense of self.” Talk about being invested.

So, what does this mean for strategy design related to Industry 4.0 technologies?
Easy: turn on the heat! Step 1: Recognize that emotions are at play both at an individual and collective level. Step 2: Learn how to use them to improve your strategy development. How exactly? Find out in the next blog post!

Thanks to Hodgkinson & Healey (2017), Akgün (2009), Huy (1999; 2005), Abrahamson (1991) and Rogers (1983) for the insights and inspiration.

Read more on the research project Paradigms 4.0

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