You have heard the mandate: ‘we need to step up our innovation if we’re going to remain competitive.’ Though developing new products and services is obviously important, it will not take you far if you do not also boost your organisational creativity. And the concepts of innovation and creativity are completely different, maintains Luc de Brabandere, a partner in the Boston Consulting Group. Innovation is your capacity to change reality – to redesign processes, develop new products and devise fresh business models. By contrast, creativity is your ability to change your perceptions of reality – your assumptions about the marketplace, the ways in which your company might respond to changes in the marketplace and what may be possible. In order to innovate, you must first be creative.

Take Thomas Edison, says de Brabandere. “If he had held to the common perception that light could be generated only from fire, he would have merely developed better oil lamps or better wicks.” By allowing himself to imagine that there might be other ways of creating light, Edison engaged in creativity. Eventually – after experimenting with numerous prototypes – he designed the radical innovation of the light bulb.

There are two major reasons why creativity is now more crucial than ever, says de Brabandere. First, change is accelerating: popular tastes mutate continually, and technologies advance at a blistering pace. Business leaders who cannot detect and respond to rumblings of change – who cannot be creative – stand little chance of generating the innovations that will allow their firms to compete.

"If he [Thomas Edison] had held to the common perception that light could be generated only from fire, he would have developed merely better oil lamps or better wicks"

Luc de Brabandere, partner, Boston Consulting Group

Second, innovation without creativity leads to only surface-level change, the kind of change that will not deliver long-lasting value in volatile markets. Suppose, says de Brabandere, you habitually arrive late to meetings. To improve your behaviour, you could change your actions: get an appointment book, schedule more time between meetings and so forth.

But unless you also change your attitude about punctuality – such as deciding that regularly showing up on time will improve your career prospects – you will probably fall back into your old habits within weeks. Despite creativity’s importance, many managers have difficulty altering their perceptions of reality.

Double-edged sword

De Brabandere says that these managers’ stereotypes – their assumptions about how the business world works or should work – get in the way. “Stereotypes are double-edged swords,” de Brabandere says. “On the one hand, they help us organise and process huge volumes of information. On the other hand they’re like frozen pieces of thinking: they don’t accommodate changes in reality.”

Stereotypes are cognitive structures that provide the very basis of our thinking, so we cannot eradicate them. However, we can articulate and change the ones that limit us. And when we do, we hone our creative powers.

De Brabandere contrasts HP and Dell. “HP has long held the stereotype that, to stay competitive in an uncertain world, you need to maintain a lot of inventory. Dell broke that stereotype when it decided that having no inventory was a better way of dealing with uncertainty.”

The result was Dell’s revolutionary – and highly successful – business model, which cuts out distributors and warehouses and lets computer users buy ‘off an assembly line’ rather than off store shelves.

Ryanair provides another example. “It challenged several stereotypes – such as you have to have many types of aircraft and you have to land in major cities,” says de Brabandere. “Ryanair operates with one type of aircraft, lands in secondary cities and has customers make reservations over the internet,” he says.

Changing widely held stereotypes about the airline business has netted Ryanair numerous benefits. For instance, using just one type of aircraft has helped the company slash training and maintenance costs and pass those savings along to its customers. To articulate and change the stereotypes limiting your creativity, De Brabandere offers four rules.

Become a stereotype manager

Embrace the notion that you need to break stereotypes in your business. But distinguish between stereotypes that have merit and those that warrant re-examination.

For example, the assumption that the forces of globalisation will continue apace is likely well founded, given the long-standing economic and political trends unfolding around the world. Thus, breaking this stereotype probably would not be a wise business decision.

"Dell broke that stereotype when it decided that having no inventory was a better way of dealing with uncertainty"

Luc de Brabandere, partner, Boston Consulting Group

On the other hand, the assumptions that a heavily stocked warehouse protects your company against uncertainty and that all air travellers want to fly out of major cities have proven highly ‘breakable’ – as Dell and Ryanair discovered.

Look for weak signals

Weak signals are small shifts in reality that can be detected only by those who are listening and watching for them – and who are willing to acknowledge their significance.

Such signals show up everywhere, such as in consumers’ comments, in employee or customer surveys, and in a company’s performance. According to de Brabandere, these signals are akin to “announcements that you must soon break at least one stereotype”.

De Brabandere tells about the time his friend’s son asked, ‘why are people still watching movies in cinemas if they can watch movies at home?’ Executives in the entertainment business, he says, can respond to consumer comments like this in two ways: ‘he’s just a kid; ignore him’ or ‘the boy could have something there – maybe watching movies doesn’t necessarily have to mean going to a cinema.’

Opening oneself to the possibility that the existing stereotype about watching movies may be outdated is the first step to envisioning new ways of competing in the entertainment business. Managers at consumer products giant Philips detected weak signals in their surveys about coffee consumption.

A mere two per cent drop in consumption triggered an extensive investigation into the cause of the decline. Researchers discovered that people were drinking slightly less coffee for several reasons. First, family and work pressures were making them feel crunched for time – and the coffee machines on the market took too long.

Second, more people were living alone, and they wanted far smaller volumes of coffee than the existing appliances produced.

Third, people were drinking coffee frequently throughout the day, rather than only in the morning. Thus, a large, fresh batch of coffee made in the morning would only get thrown out later in the day.

Informed by this new knowledge, Philips challenged existing stereotypes about how people consume coffee – and envisioned an innovative product that met consumers’ changing needs more effectively.

The new offering? The Senseo coffee machine, which brews one fresh cup in just 10 seconds – and which has scored a major success in the European marketplace.

Watch for paradoxes

Look around for paradoxes – situations in which two conditions that you believe cannot occur simultaneously are, in fact, occurring. Failing to notice paradoxes can severely hamstring your ability to envision new realities – and to combat competitors. For example, Nucor, a steel start-up in Alabama, managed to develop minimills that paradoxically achieved greater efficiencies despite their small size.

“Big Steel dismissed Nucor as a preposterous pip-squeak,” explains de Brabandere. The result was Big Steel virtually collapsed as Nucor and similar rivals captured market share.

Ask new questions

When trying to solve pressing business problems, ask, ‘what are we really concerned about here?’ Consider NASA engineers’ thinking about how to get a spacecraft on Mars. As long as they asked, ‘how do we keep the spacecraft from crashing?’ their ideas were limited to strategies for protecting the vehicle from disintegration upon impact – such as decelerating the craft and making it strong enough to withstand the impact. In other words, the engineers were limited by a stereotype holding that a vehicle landing on Mars must be expected to crash.

"Stereotypes are like double-edged swords. On the one hand they help us organise and process huge volumes of information. On the other hand they’re like frozen pieces of thinking: they don’t accommodate changes in reality"

Luc de Brabandere, partner, Boston Consulting Group

But as soon as the engineers asked a new question – ‘How do we land the spacecraft?’ – they generated a wider range of creative and counter-intuitive ideas. These included girding the vehicle with air bags that enabled it to bounce safely on landing. The air bags proved a far simpler and less expensive solution than deceleration technologies would have been.

New eyes

Challenging your most closely held stereotypes will never be easy. But by noticing weak signals in the business environment, investigating paradoxes, and asking new questions, you greatly increase the likelihood of seeing reality through fresh eyes. The payoff: innovative solutions that leave rivals scrambling.