Sustaining Innovation: The Role of Managers, Leaders, and Entrepreneurs
By Philip A. Dover and Udo Dierk
The German automotive supplier had all the symptoms of an ailing executive suite: sluggish growth, decline in market position and struggles to establish strategy and clear direction were a few of the more recognizable features.
But what—if anything—could the company do to accelerate and then sustain innovation in their increasingly competitive marketplace?
To help address this question we worked with the company to deploy our new assessment tool, the MEL (Manager, Entrepreneur, and Leader) Index.* The instrument aims to give organizations practical insight on the integrative impact of three key kinds of personnel—managers, entrepreneurs and leaders—in both the short and longer term fortunes of the organization. For definitions of each role, see Figure 1.
Figure 1. The Three Archetype Model: Manager-Entrepreneur-Leader
As part of the interview process members of the executive team were asked: “Please take a look at the triangle. We would like you to rank yourself and your peers/the company on the manager, entrepreneur and leader dimensions. On each of the dimensions allocate yourself/your company a score between 0 and 10, with 0 equaling no capabilities and 10 indicating truly outstanding skills.” In addition, we collected considerable open-ended information from the participants. This included a description of their current job, perceptions of the generic roles and responsibilities of managers, entrepreneurs and leaders as well as verbatim comments on their own and their company’s capabilities on these key roles. Data was also collected on firm performance and innovation intensity.
The executives found the concept of a triangle and the three 0-10 rating scales easy and logical to operate. The consistency between the peer and self-evaluations in Figure 2 suggests agreement that the company has, at best, modest leadership and entrepreneurial capabilities in the higher ranks of the organization. In particular, Figure 3 reveals the specific evaluations for the CEO. The CEO sees himself as a leader, while his peers view his strengths as more of a manager. This should register a warning light, as the general expectation of a CEO is for him/her to provide both strong inspirational and directional leadership. When asked to explain their ratings, the management team observed that the main feature of the CEO’s operational style was a penchant for day-by-day micromanagement. On the other hand, as the CEO believed himself a sound leader, he saw little need to change.
Figure 2. Senior Executives at German Automotive Supplier: Aggregate Peer and Self-Evaluation
Figure 3. CEO Self and Peer Evaluations by Senior Executives and Middle Managers
The ratings were similar for two other pivotal senior officers—the chief financial officer (CFO) and the head of research and development (CTO). Both were seen as managerially adroit but less adept at leadership and entrepreneurial activities. This balance of skills seems to have greatly influenced the innovation activities of the firm. Subsequent discussions with middle managers revealed that several high potential opportunities for platform innovation had been rejected by the top team, including the CTO. The middle managers saw the heavy focus on management skills by the head of R&D as leading to a rigid and cautious innovation process exemplified by a conservative risk profile.
When the MEL ratings were shared with the senior management team, they voiced surprise at their own individual and peer evaluations. In subsequent discussions, there was general agreement that stronger leadership was needed at the head of the company. Moreover, executives voiced concern at the weak entrepreneurial scores. They felt that the company’s top executives should be much more future oriented, exhibiting leadership (and perhaps entrepreneurial) skills that stimulate and facilitate continuous innovation. Subsequently, two middle managers with leadership orientation were promoted into the top team.
In addition, as the current financial crisis took hold, the CEO and the CFO were asked to leave and were quickly replaced. This move was initiated by the head of the advisory board, a family member, and the previous CEO, out of concern for the company’s health and progress. He had run the company for about 25 years and was evaluated as a strong entrepreneur and leader. Our MEL findings revealing the weaknesses of the CEO and the CFO did not directly precipitate their dismissal, but it did draw the attention of others to the need for more leader—and entrepreneur—capabilities at the head of this company.
Using the MEL Index
We believe that the roles of the manager, entrepreneur, and leader are critical in guiding and sustaining growth and innovation efforts. Moreover, the development of the MEL Index provides a simple but effective measurement tool for assessing the balance of capabilities required to both manage the present and prepare for the future. Although still at a fairly early stage of design and testing, these initial results hold much promise for both the business and applied academic communities.
We believe such results can have important operational implications. They can help in recruitment activities where personnel with desired levels of managerial, entrepreneurial, and leadership skills can be sought to fill gaps in current capabilities. Furthermore, MEL Index findings can drive internal review processes that place personnel with certain MEL skill sets where they will best meet the short- and longer-term needs of the company. These findings also allow for the design of executive training programs that help bridge gaps between current and desired competencies in the search for future sustainability. The Index is now being used regularly in companies in North America and Western Europe and is providing fascinating insights on such issues as the role of culture on innovation, attitudinal differences in publicly and privately owned companies and variants in managing the innovation process.
Phil Dover is Chair of the Marketing Department at Babson College. Udo Dierk is Professor of Leadership, Entrepreneurship and HR Management at Paderborn Business School in Germany.
* For a full discussion of our research findings and methodology, please see: Dover, P.A. and Dierk, U., “The Ambidextrous Organization: Integrating Managers, Entrepreneurs, and Leaders,” Journal of Business Strategy, Vol. 31 No. 5 2010, pp. 49-58.