Why You Need Innovation Capital — And How to Get It

Nathan Furr, assistant professor of strategy at INSEAD, researches what makes great innovative leaders, and he reveals how they develop and spend “innovation capital.” Like social or political capital, it’s a power to motivate employees, win the buy-in of stakeholders, and sell breakthrough products. Furr argues that innovation capital is something everyone can develop and grow by using something he calls “impression amplifiers.” Furr is the coauthor of the book Innovation Capital: How to Compete—and Win—Like the World’s Most Innovative Leaders.

CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.

Nikola Tesla and Thomas Edison were great both great inventors of their time. Tesla was brilliant. He even felt sorry for how long it took Edison to come up with his inventions. But Tesla was eventually forced out of his company and he died penniless.

Edison on the other hand racked up commercial success. He managed to motivate employees, woo investors, and win consumers. His inventions broke through to the mass market.

Today’s guest says the main reason that Edison succeeded where Tesla failed was because of Edison’s innovation capital.

That’s the idea that – similar to social capital or political capital — great innovative leaders develop the power to convince people to join their cause and bring unproven products and ideas to reality.

Our guest is Nathan Furr. He’s a strategy professor at INSEAD. Along with his fellow researchers, he studied innovative firms and interviewed their leaders.

He’s the coauthor of the book Innovation Capital: How to Compete—and Win—Like the World’s Most Innovative Leaders. Nathan, thanks for being here.

NATHAN FURR: Thank you for having me.

CURT NICKISCH: Now, I have to say that with all that’s been written in the business press about innovative leaders like – and the cult of the startup – it seems like one thing that has to be really well understood is how people like Steve Jobs and Elon Musk made their ideas happen. Why did you feel like a book needed to be written about the right stuff that people have to have to be innovative?

NATHAN FURR: Yeah, it’s a good question. I mean, most of the innovation work is how do you get an idea and do something about it. What we don’t talk about is how do you actually win the backing for your ideas in the first place?

And you know, the “aha” for this came to us really pointedly in an interview we were doing with Marc Benioff who is the founder and CEO of Salesforce.com. And you know, we’re sitting in this interview and Marc Benioff is describing his ability to do new things and change the organization. He said, “you know, I’ve spent the last many years – 17 years – building up my ability to change this organization, to do new things.” He said, “it’s like political capital but it’s not. It’s more like you could almost call it ‘innovation capital,’ and it’s something I can use to get things done.”

And you know, it was so, you know, in our faces right then because of anybody in the world who has the credibility and the power to change Salesforce.com, it should be Marc Benioff, founder and CEO, and yet here he still is very consciously thinking about how do I – how do I build up my capital to change this organization, to do new things?

And that, for us, was the big “aha.” We realized, oh my gosh, this thing, innovation capital, we take it for granted but very, very few people, if any, are born with it. Instead it’s something that people – they build up over time; they use it to pursue new ideas, win support, change something; and they can also lose it.

CURT NICKISCH: If somebody like Marc Benioff is spending a good deal of his time and energy figuring out how to cultivate and most wisely spend his innovation capital, is this a bigger problem for people, a CEO or, you know, somebody who is leading a big venture or is it just as hard at the outset of your career when you’re getting started or working your way up in a company?

NATHAN FURR: So I think innovation capital matters for both individuals and organizations. I think it matters a lot for individuals at all levels of organizations. Listen, absolutely as a CEO, you have to – I have to say, you have to be thinking about your innovation capital because I guarantee that your environment will change at some point and you’re going to need the ability to win the resources and support to change that organization. I mean, you know, this was staring me in the face for years.

I mean, the CEO has to think about this, the leaders in an organization have to think about this. I’ve worked with a lot of leaders who don’t, but you’ve got to think about it as an individual too because innovation capital takes time. And so even when we looked inside organizations or we looked at entrepreneurs, it was very critical that they were thinking early about their innovation capital and how they could build it over time so that when they had like a really powerful idea, they could be the ones to advance it. Otherwise, they have to kind of hand it off to somebody who has say more innovation capital than they do to actually get something done.

CURT NICKISCH: Now that you have kind of opened up your thinking to this idea of innovation capital, does it make you look at every story about digital transformation or every company that’s trying to do something new?

NATHAN FURR: Yeah, it does and in a couple different ways. I work with many top executives in well-known companies – some less well known but really pillars of the economy – and one thing I do observe is that they will go announce a digital transformation and we’re going to move into, you know say, exciting space X, Y, and Z and they’ll get punished.

And they get punished because, you know, their investors are saying, stick to your knitting and they’ll be like, well wait a minute, the competitor over there – they’re getting rewarded for doing something new.

And one of my favorite interviews was with Ralph Hamers who is the CEO of ING. ING is a massive global bank. Obviously they have a lot of strength in Europe but they’re global and they’re in many, many countries. And I mean Ralph Hamers has led that bank through multiple transformations – I mean from a kind of mixed insurance company/traditional bank over to being a pure traditional bank and then from that to being a digital bank and then from that to now in the middle of moving to be a platforms company.

That’s a lot of change. Those are big transformations and a big part of how he was able to do that is how he has built up his innovation capital over time and the innovation capital of the organization so that now when he says, we’re going to make this move, we’re going to change this thing, his shareholders are like, all right, let’s try it.

CURT NICKISCH: So you’ve convinced some listeners that innovation capital is this critical component to make things happen in your company and for yourself. How do you start building it? Like how do you develop it? Like how do you just become known as the person who should be leading innovation efforts?

NATHAN FURR: Yeah, it’s a great question and what we really tried to do here was to break down what are the components that go into innovation capital? And what we really came down to is really four elements. It’s said in simple words; who you are, who you know, what you’ve done, and the things you do, the actions you take to get attention for your ideas – what we call impression amplifiers.

CURT NICKISCH: If who you are is a big part of your innovation capital, don’t we already know how to develop that nowadays? This is a time when anybody can look up your LinkedIn profile and see where you worked and who you’re connected with. This is probably a time where who you are and who you know is better known than ever before so why is that so important?

NATHAN FURR: Yeah, it’s interesting, you know, one of my – the things I wanted to avoid in this book was giving advice like go to Stanford or Harvard for your undergraduate degree or, you know, these things that like most of us can’t really change.

We take that for granted, social capital matters, but what are your weak and strong ties to other innovators and entrepreneurs, other leaders, other investors and benefactors, other influencers? One of my favorite stories in the book is a guy, you know, David Bradford who, you know, when he starts out his career, I mean, he doesn’t know anybody, you know, he doesn’t know anybody but he thought, you know, really intelligently about how do I build my connections to the kinds of people who will help me get things done.

And, you know, eventually he, you know, among many people, you know, he gets into like Eric Schmidt who is, you know, the former CEO of Google and Scott McNealy who is the founder and CEO of Sun Microsystems and Steve Wozniak of Apple, and when he goes to create this company called Fusion-io that goes, you know, eventually does go public but before it goes public, through these connections he brings Wozniak onboard as the Chief Science Officer.

And you can bet that when they actually go to take it public that it actually contributes a great deal to the IPO success of Fusion-io. So again, it’s, you know, who you are, who you know, what you’ve done, and then these impression amplifiers.

CURT NICKISCH: So what are some more things that people can do to improve their reputation capital for instance?

NATHAN FURR: The things we identified that were most critical were becoming a founder. Now, we can’t all found startups but you can be a founder in more ways than creating a startup. You can lead a project or initiative inside your company, you can lead visible hard projects.

So a great example of this would be, you know, Nadella, CEO of Microsoft. You know, when he started Microsoft there wasn’t really a lot to set him apart. I mean he was, you know, a University of Wisconsin graduate, so not MIT or Stanford, and one of thousands of new engineers joining Microsoft. How does the guy set himself apart?

And, you know, he talks about how he used to engage in mental time travel to try to imagine what the future is going to be like and what’s going to be important in that future. And at the time, he was thinking, you know, I really think that like what we now call the could – cloud business – but you know, essentially moving computing into the cloud is going to be important in the future.

Now at the time, that was a really uncool part of Microsoft. It was called the server business, it was unpopular, it wasn’t seen as like the place to go, but he got in there. Ballmer – Steve Ballmer was CEO and he put Nadella in charge of this server business and he kind of says to him, you should think twice about taking this job because this might be your last job at Microsoft because if you fail, there’s no parachute and you’re going to crash with it.

But he still believes that, you know, this server business which becomes the cloud business is at the core of Microsoft and it does. It – you know, you could see from where he was standing how he could envision the future of computing going that direction. But those are all more related to who you are and your kind of human social and reputation capital, we also found that people used what we called impression amplifiers. These are different.

CURT NICKISCH: I don’t want to be too jargon-y with this impression amplifier term. Impression amplifiers are essentially ways of taking the things that are really important and making them more visible and a clear to people. You’re just trying to raise signal over noise.

NATHAN FURR: Yeah. These are more like activities or actions you take to win support for your ideas. I think a good example of this is actually Robin Chase. Robin Chase was a graduate of MIT around the year 2000 has this really forward thinking idea. She basically says, listen, this new thing called the internet, I think we could use it to create a platform to allow people to do car sharing.

Every time Robin would try to, you know, get funding for her idea or get customers onboard or employees onboard, she was struggling. Now when she talked to us, she said, listen, you know, what I had going for me, yeah, I did have a degree from MIT but on the other hand, I had a lot of things going against me including one of the things – let’s be honest – she was honest like, I was also a woman and that was hard.

And so here I was trying to introduce a radically new idea as a woman and win support and I just wasn’t getting anywhere. And so what she did is she said, well, let me look at – she leveraged one of the impression amplifiers we talk about, which is how do you make comparisons?

In Robin Chase’s case, the comparison that made the most sense was, oh, this is car sharing, and she would go around describing it as car sharing and people would be kind of unenthusiastic. And the reason why is that, if you dig down, even though that was the technically accurate term, people had this association with car sharing as kind of being dirty and unreliable and kind of gross.

And it was that moment she realized, gosh, the comparison I’m using for this business is super critical. She even – by the way, she joked with us – she said, imagine if you described a hotel as bed sharing – who is going to want to stay in a hotel? Nobody. Right? So – it’s just gross, you know.

So what she did is she literally wrote down on index cards names for the businesses, comparisons, and tag lines. And what she came up with is, it’s like an ATM – like an ATM lets you get money whenever you want it – well Zipcar, which is her business – Zipcar is wheels when you want them.

CURT NICKISCH: Storytelling is one, and that of course will not be a surprise to listeners of this podcast. Why did storytelling really just out at you as something you wanted to highlight as much as you did?

NATHAN FURR: Storytelling is a term we use so much in business but most of what our stories are chronologies, kind of problem solution summaries and really great stories – we forget – have characters, conflict, and resolution. It’s not a chronology. It’s not a problem solution statement.

They also often integrate listeners into their story if possible. So for example, you know, I love the example of Jack Ma. I mean the guy – before he finds Alibaba – is like a case study in failure. I mean the guy like – he failed his elementary exams three times, his middle school exams twice, his high school exams three times and he only gets into the university because the worst university in his town had some open slots reserved for men.

He goes afterwards to apply for a job. He applies for a job at KFC, Kentucky Fried Chicken. There’s 25 applicants, they hire 24, and he’s number 25 who doesn’t get hired. His first two ventures are not commercial successes. I mean this is not a guy who has a reputation for success.

But he was so able to pull people into Alibaba – not just investors but employees – because he was so good at telling the story of how they were going to transform China and he made the people who were around him part of that story. He gave them names of popular Kung Fu heroes. He even had a name of a popular Kung Fu hero.

And he told this story and he drew even on this, you know, there’s this old kind of historical text called Bandits of the Marsh and like, he drew on that story as well – like we’re part of this group of bandits that are going to revolutionizing the way commerce is done to help all the small vendors around us. And people just were drawn into that.

So if you can, make people part of the story. And then number three, the thing we saw was avoid the expectations curse. You know, someone like an Elon Musk is kind of a master at this, right? He’ll talk about going to Mars but he’s not going to tell you, you know, we’re going to then, you know, create this rocket at this time over, you know, in excessive detail over 10 years.

He just kind of dribbles that out as they go along. So storytelling is a master craft and, you know, it’s about creating a narrative arc with characters, conflict, and resolution if you can, involving the people around you in the story and, three, very carefully setting those expectations.

CURT NICKISCH: Yeah. What do you do if you are a creative person, but these steps feel like they’re too much to do, they’re not your personality to really craft yourself as a master storyteller to – yeah, to really focus on these impression amplifiers? Can you be a great innovative leader?

NATHAN FURR: You have to be true to who you are. And I am worried, by the way, as a side note, about how people can use these for evil. You know? I mean, I think in a lot of ways you could look at some of the techniques that Elizabeth Holmes used to win support for Theranos as being very deceptive.

And I think that if a creative person tries to apply a technique that isn’t authentic in some way to themselves, then they’ll really struggle. But I would argue that, you know, we provide a large menu of choices and there’s ways to use these choices that can be authentic to yourself.

I mean, for example, I remember this entrepreneur who we spoke to of a startup that basically is like an alternative to Orbitz or Expedia or something like that and, you know, he wasn’t like a really flashy character. He wasn’t, you know this kind of, you know, what you would picture to be a master storyteller and creating all this drama. He was really kind of dry and factual but he would describe the story of what they did with incredible honesty and transparency and it was – it was kind of like he took the magic of storytelling and merged it with his own – his own essence and that was actually more realistic.

You know, I really like that question because I think with every amplifier we’ve talked about, it’s about finding the match with who you are. What we want to avoid is ignoring it, thinking that the best idea wins because, you know – I really hate this because I’m an idealist and I want the best idea to win – but it’s rare that it does. It’s often the idea and the innovator with the innovation capital.

So if you really, by the way, are a creative who just cannot – I’m just, you know – I’m sorry I’m like, you know – lock me in my room, I don’t want to interact with anybody – then you’re probably going to have to find somebody who is a compliment to you to help you do that. But you can’t ignore the need for innovation capital.

CURT NICKISCH: Nathan, thank you so much for coming on the show and talking about your book Innovation Capital.

NATHAN FURR: Thanks for having me, it’s been fun.

CURT NICKISCH: That’s Nathan Furr. He’s an assistant professor of strategy at INSEAD. He’s also the co-author of the book Innovation Capital: How to Compete—and Win—Like the World’s Most Innovative Leaders.

This episode was produced by Mary Dooe. We get technical help from Rob Eckhardt. Adam Buchholz is our audio product manager.

Thanks for listening to the HBR IdeaCast. I’m Curt Nickisch.