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Hitachi

Hitachi Social Innovation Forum 2017 TOKYO

Speech 3

November 2 (Thu) 16:30-17:30

PLAUSIBILITY BEATS ACCURACY IN CREATING INNOVATION IN TODAY'S WORLD OF UNCERTAINTY

Management Theories for Japanese Firms' Innovation

Akie Iriyama
Associate Professor,
Waseda Business School
(Graduate School of Business and Finance)

Venue photo

Venue photo
Professor Iriyama,
Waseda Business School (Graduate School of Business and Finance)

Venue photo
Professor Iriyama explains innovation theory

Professor Iriyama opened his speech by touching on the rapid international standardization of business administration studies happening today. He revealed, "The innovation I will be discussing here today is not the cutting-edge innovation of famous companies, but rather the new initiatives, new issues, and work improvements that are on a more familiar level. That being said, I would like you to think of innovation as any new thing that a company, organization, or businessperson does to move a business forward, even slightly."
He pointed out that innovation is one of the most important research themes to business scholars worldwide, revealing how cognitive science and cognitive psychology underlie innovation theory and then familiarizing the audience with three renowned business scholars.

Next, Dr. Iriyama explained that the first step in innovation is to create new knowledge and cited Joseph Schumpeter, who defined new knowledge as creating new combination of existing knowledge.
As he explained, "Nevertheless, since humans have such a limited perception, we tend to only combine the things right in front of us. It is important to search for knowledge as far-and-wide as possible and continue trying to combine the knowledge you bring back with the knowledge you already have. This is called the 'exploration of knowledge'. Next, it is also important to―from the combinations created―select those with profit potential and delve deeper to find ways to monetize them. This is called the 'exploitation of knowledge.'"
Dr. Iriyama then d that companies that are able to strike a good balance between knowledge 'exploration' and 'exploitation' have the highest probability of creating innovation. Nevertheless, most companies and organizations tend to have a heavy bias towards knowledge exploitation. However, he warns, "If you neglect knowledge exploration, you will run out of the fuel for innovation. This is called the 'competency trap.'"

Next, Dr. Iriyama described the key points of how to explore knowledge, breaking the process down into four levels. First, at the Personal Level, he cited the example of Steve Jobs, who created numerous failed works. He emphasized that failure is an inevitable part of exploration for knowledge, which is why we need to rethink personnel evaluations which are only based on success or failure.

At the Strategy Level, he discussed the importance of open innovation wherein different types of businesses collaborate, as well as the importance of interacting with startups, such as those launched via corporate venture capital in recent years. At the Organizational Level, he pointed out the importance of 'diversity' in staff. He expressed his concern about the fact that many companies implement diversity for the sake of diversity.
As he explained, "When a diversity of people such as women and foreigners come into the fold, there are of course more possibilities which create new combinations of knowledge. However, the important thing is to have diversity in experience, knowledge, and mindsets. If just one person has a diversity of experience, he or she has the ability to create new combinations of knowledge within themselves. We call this 'intra-personal diversity.'"
Dr. Iriyama emphasized that while it is important to include diverse talent in the organization, the most important factor leading to innovation is for each of these employees to possess a diversity of experience and knowledge. As examples of intra-personal diversity, he gave insight on four of the winners of the woman-of-the-year award.

At the Human Interaction Level, he explained the reasoning behind 'weak ties and strong ties'. He explained, "People with weak ties are more efficient at gathering information. Moreover, weak ties can easily be made by anyone and can extend far away. This is called the 'strength of weak ties', and many studies have found that people with many weak ties tend to produce creative outcomes much more easily."

Dr. Iriyama also introduced examples of promoting knowledge exploration through workstyle innovation such as removing the prohibition of secondary jobs and the 3-day workweek approach. Lastly, he included a story of a Hungarian scouting team stranded in the Swiss Alps to introduce 'Sense-Making Theory', which is considered to be most lacking for Japanese despite of being vital for knowledge exploration, despite being vital for knowledge exploration.
"According to Sense-Making Theory, there is one thing you should never do in a world of ever-changing uncertainty: make future predictions based on accurate analysis," he noted.
He also warned that relying solely on analysis hinders innovation, and pointed out that the important thing in this world of uncertainty is not 'accuracy' but rather 'plausibility'.
Dr. Iriyama wrapped up his speech by emphasizing that "the most important thing is to express a clear future vision; win over company staff, investors, and customers; and engage them in moving forward together."