JEFFREY MACMILLAN FOR USN&WR50 U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • JUNE 18, 2007

Quick: Be creative. Go on, thinkof a new product or idea thatwill dramatically improveyour company’s sales, cutcosts, or even just make thedaily commute a little more

bearable. Still haven’t come up with anything? Not to worry. Conventionalwisdom has it that breakthrough ideascome only from the minds of geniuses.Edison, Tolkien, Darwin—history’s big-gest brains are responsible for its biggestinnovations. Inventors, in popular his-tory, are loner-savants, solving theworld’s problems solo in musty labs andlibraries. Many companies are organizedwith this idea in mind.

But here’s the thing: Thomas Edisondidn’t work alone. The invention of thelight bulb was the work of an entire labteam; it was one of his assistants whocame up with the idea of screwing thebulbs into sockets instead of just mount-ing them straight up. Same goes forJ. R. R. Tolkien, who wrote his Lord of theRings novels at the same time C. S. Lewis

was creating The Chronicles of Narnia.Both authors generated ideas for theirstories in a weekly literary group of Ox-ford scholars called the Inklings. CharlesDarwin’s work on evolution wasn’tdreamed up in a vacuum, either: Whiledoing his research, he was correspondingwith dozens of scientists across Europe.

No “I” in team. Creativity, in otherwords, isn’t a solitary affair—and it’s notthe exclusive domain of the brilliant andgifted. In fact, research shows that peo-ple working in groups are far more in-novative than previously thought. Ahandful of academic papers in the pastdecade have found that team-based or-ganizations consistently outperform tra-ditional bureaucracies, largely becausethey allow better ideas to bubble to thetop. Phrases like the “wisdom of crowds”have entered the lexicon, and companieslike YouTube and craigslist have takenadvantage. According to one recentstudy, 14 percent of the “substantial in-novations” that come out of small groupsaccount for 61 percent of all profits.“Most people think the creative econo-my is artists, musicians, and sculptors,”

says Richard Florida, author of The Riseof the Creative Class. Actually it’s not:Whether you’re a lawyer or a factoryworker, he says, companies are relyingmore and more on your ideas.

So what can businesses do to take ad-vantage of their employees’ creativity? Twobooks published this month, one by KeithSawyer, a professor of psychology atWashington University in St. Louis, andanother by Richard Ogle, a business con-sultant and researcher, offer the begin-nings of an answer. Sawyer and Oglemaintain that group effort always has beenthe best source of innovation—and theyoffer a glimpse into companies that arefinding new ways to harness the ingenuityand entrepreneurship of their employees.

Generating new ideas, they point out,isn’t as simple as pouring money intor&d. Indeed, a 2005 Booz Allen Hamil-ton study found no relationship at all be-tween the dollar amount companiesspend on research and development andthe growth of sales or profits. Kind ofmakes sense: Microsoft, with its massive$5 billion research budget, isn’t knownfor its innovations (witness the Zune),

No Ideas? You’re Not Alone

EXECUTIVE

Suite

If you’re in a group, you’ll have a better shot at being creative By Justin Ewers

Checking Gore-Texfabric at W. L.Gore & Associates,an organizationally“flat” workplace

Checking Gore-Texfabric at W. L.Gore & Associates,an organizationally“flat” workplace

DAVID KILPER—WASHINGTON UNIVERSITY IN ST. LOUIS U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • JUNE 18, 2007 51

while Toyota, only the third-biggest r&d spender in the autoindustry (behind Ford andDaimlerChrysler), not onlycame up with the most popularhybrid vehicle on the market butis well on its way to becomingthe world’s largest automaker.

Tapping into employee cre-ativity takes more than money:It requires a new way of think-ing about management—onethat is often hard for those at thetop to accept. “Most managersaren’t willing to give up enoughautonomy,” says Sawyer, authorof Group Genius: The CreativePower of Collaboration. Hepoints to Semco, a Brazilianmanufacturer of devices frommarine pumps to commercialdishwashers, as an example of a man-agerial paradigm shift. Until 1980,Semco was a traditional company, witha top-down management structure anda shelf full of binders with procedures forany situation. The only problem: It wason the verge of bankruptcy.

Then Ricardo Semler, the son of thecompany’s founder, took over as ceo.Semler tossed the binders, fired most ofhis senior managers, and handed thereins to the company’s employees. “It waslike taking an improvisational jazz en-semble and ramping it up to the organi-zational level,” Sawyer says. Small groupsnow run the company with near-total au-tonomy. Large, 300-worker factorieshave been split into smaller, 100-workerunits. The move initially caused ineffi-ciencies and higher costs but eventually

allowed low-level innovation to flourish.Empowered factory-line workers, it turnsout, really do know how to do their jobsbetter. Inventory backlogs have eased,product lines have expanded, and saleshave jumped. “That’s not a lack of struc-ture; that’s just a lack of structure im-posed from above,” Semler has said. After the company’s reorganization, revenuesclimbed from $4 million to $212 million.Semler held a party in 2003 to celebratethe 10th anniversary of the last time hesays he made a decision. Semco is “a radi-cal rethinking of the organization,” Saw-yer writes, “and most companies aren’twilling to go there just yet.”

Glide path. Some are, though. W. L.Gore & Associates, the Delaware-baseddeveloper of Gore-Tex and Glide dentalfloss, has been widely praised for creat-

ing a collaborative atmosphere.Since its founding in 1958, thecompany has been organiza-tionally “flat.” There’s no chainof command. Employees are re-ferred to as “associates” andhired into evolving work areas,not specific jobs. They are guid-ed by “sponsors,” not bosses.Workers, not managers, chooseproduct areas that fit their skills.Small task forces organize as is-sues arise, work to solve them,then disband. To prevent bu-reaucratic creep, Gore tries toerect a new building any time awork group exceeds 200 people.It’s a system designed to breedmeritocracy and self-sufficiency.“Your team is your boss, becauseyou don’t want to let them

down,” as one employee puts it.This environment has allowed ad hoc

teams room to flourish—and to createmost of Gore’s most lucrative innova-tions. Three employees familiar with thecompany’s Ride-On bike cables won-dered if the same technology—a wire en-cased in a thin coat of plastic—could beused on guitar strings. Without theguidance of senior managers, the asso-ciates came up with the Elixir guitarstring. Released in 1997, it quickly be-came a top seller.

When a full organizational makeoverisn’t possible, smaller dabs of collabora-tion are always an option. British Petro-leum, for example, has redesigned itsHouston office around espresso bar“nodes”: To get anywhere in the build-ing, employees have to pass through

Money & Business • Executive Suite

IDEAS. Keith Sawyer studies how companies spur innovation.

B rainstorming is the most popu-lar tool managers use to tapinto their employees’ ideas. It’s

also one of the most misunderstood.“At most companies, the managertells the team to come up with abunch of ideas and then just picksone,” says Keith Sawyer, author ofGroup Genius: The Creative Power ofCollaboration. “That’s exactly thewrong way to do it.” Decades of re-search show that brainstorming ses-sions are often best for selectinggood ideas, not generating them. In-dividual workers tend to come up

with plenty of ideas. The group ex-cels at picking the winners.

A rule of thumb: If it’s verbal ideasyou’re after—like a headline or a newproject name—brainstorming may bea dud. But if you’re trying to come upwith visual or spatial concepts—abetter shopping cart or a new com-pany logo—then a group brainstormmay help. Here are other ways to getthe most out of brainstorming:

Keep the group small. The idealgroup size is around six, smallenough to prevent anyone frombeing intimidated but large enough

to reflect a range of opinions. Stay diverse. “Group genius can

happen only if the brains in the teamdon’t contain all the same stuff,”writes Sawyer.

Reward the team. The most effectivegroups are rewarded en masse. Butsavvy managers should make individ-uals accountable, to prevent loafing.

Don’t plan too much. Studies showthat the more time spent planning—and the less time spent actually brain-storming and implementing an idea—the fewer concepts come to fruition.

Practice. Don’t count on one brain-storming session to turn on the cre-ativity. “Group genius can’t be bot-tled,” Sawyer says. “It has to bespread throughout the organizationand practiced every day.” –J.E.

A User’s Guide to Brainstorming It’s great for picking ideas, less so for generating them

Inside the Business of Washington •

52 U.S.NEWS & WORLD REPORT • WWW.USNEWS.COM • JUNE 18, 2007

these central hubs, forcing disparategroups of workers to interact with one another. At Cisco Systems, the networking giant, senior managershave begun allowing non-salespeopleto talk to customers, something thatwas frowned upon for years. When en-gineers hear complaints directly fromcustomers, the thinking goes, they’relikely to generate new ideas. Open-source software and wikis, the newestform of Web-enabled collaboration,are being used by groups ranging fromwould-be authors generating bookideas to the more than 1,400 develop-ers who created Nicholas Negroponte’s$100 laptop, a rugged, bare-bonescomputer for use in educating childrenin developing countries. “You simplycouldn’t do some of these things anyother way,” says Ogle, author of SmartWorld: Breakthrough Creativity andthe New Science of Ideas. “The knowl-edge economy is morphing into thecreative economy. This is where yourbig competitive edge is going to be.”

Payoffs. Some managers are also try-ing to inspire employee creativity theold-fashioned way. Gary Carini, a pro-fessor of management at Baylor Uni-versity’s Hankamer School of Busi-ness, found that companies that offerfinancial rewards for business ideashave seen worker “idea outputs” in-crease by up to 40 percent. At Inter-minds, a San Francisco consultingfirm, employees who come up withideas that save the company money are awarded half of the first year’s sav-ings. An executive assistant earning$38,000 a year recently devised a wayto automate the system for trackingfield reps and was awarded a $152,000bonus. “Every single employee hasideas,” Carini says. “We say let’s getthese folks eyeball to eyeball in groupsand create an atmosphere that saysideas are good and you’re going to berewarded for them.”

Not everyone is convinced danglingbonuses in front of workers is the bestway to inspire collaboration. “It won’twork in the long run,” Florida says. He believes employees will learn thathoarding ideas for personal gain is thefastest way to a quick buck. (Wait, isn’t that the American way?) For pur-ists who support collaboration for col-laboration’s sake, bottom-up innova-tion isn’t something managers can do piecemeal. Employees in the futurewill either be empowered or theywon’t. Whether managers think theycan compete without creative workers,of course, is up to them. l

When it comes to Chinaand trade policy thesedays, there are few onCapitol Hill who would, to use an old Chinesemaxim, “send coal during

a snowy winter.” Everywhere, biparti-san critics abound. Economic nation-alists want to punish China for runninga $200 billion-plus annual trade sur-plus with the United States, while de-fense hawks, who view the nation as a growing military threat, and socialconservatives, who abhor the MiddleKingdom’s coerced-abortion, one-childpolicy, see trade as an opportunity totake a whack as well.

Turns out that the recent high-level“strategic dialogue” be-tween a Chinese tradedelegation and Ameri-can officials from theWhite House and Con-gress was a tactical failure, doing little toalter or even slow themomentum behind thepush to punish. Thetrade meetings werebarely ended when a Senate commit-tee started considering a measure toallow companies to petition for newduties on Chinese goods.

But there’s more to come. Look formuch of the action to swirl around abill from Sens. Charles Schumer, a NewYork Democrat, and Lindsey Graham,a South Carolina Republican, due to bemade public this month. A previous in-carnation would have slapped a 27.5percent tariff on Chinese goods in re-sponse to the weak yuan. Unlike in thatversion, Schumer and Graham promisethis bill will be legal under WorldTrade Organization rules. And it mightwell garner enough support to survivea Bush veto. Things might move evenfaster in the House. Analysis fromGoldman Sachs, the former corporatenest of Treasury Secretary Henry Paul-son, says that chamber is likely to passlegislation this month to impose dutieson Chinese goods.

Now, there’s little chance that Chinawould permit the sort of rapid currencyappreciation necessary to satisfy Con-gress. China is fixated on the example

of Japan, which, at U.S. urging in the1980s, allowed its currency to strength-en dramatically vs. the dollar. Not onlydid the rising yen fail to eliminate Jap-anese trade surpluses, notes StanfordUniversity economist Ronald McKin-non, but it “forced a deflationary slumpand [Japan’s] ‘lost decade’ of the1990s.” For all the talk of this being “the Chinese century,” a “lost decade”for emerging China’s economy couldthreaten that nation’s political stability.

If harsh protectionist measures dopass, the move will stun corporateAmerica and Wall Street, where mar-kets rallied recently after Congress andthe White House agreed to attach environmental and worker protections

to ensure passage oftwo pending trade bills.Although protection-ism has been perhapsthe biggest macro fearamong institutional in-vestors, they may bestill be underestimat-ing the risk of a tradewar with China, forsurely it would re-

spond—perhaps canceling Boeing air-plane orders or even dumping U.S.treasury bonds—to any U.S. moves. In-vestment firm Morgan Stanley re-cently concluded that “an outbreak ofprotectionism is not [factored] in theprice of world financial markets in any way whatsoever.”

But this isn’t just what the big-moneycrowd calls “headline risk”—a news-driven market hiccup. Harvard Uni-versity economist Kenneth Rogoff saysthe impact of a Chinese bond sell-offwould be “a sharp rise in interest ratesand market volatility and a concomitantdrop in equity and housing prices.” Thatwe don’t need. And, of course, a reces-sion in the United States, to which theChinese exported nearly $300 billionworth of goods last year, would stingChina, too. In the end, the Americanand Chinese economies are already toointerconnected for a trade war to be any-thing but lose-lose. As another Chinesemaxim puts it, “The lotus root is broken,but the string still connects.” l

More at www.usnews.com/capcom

Executive Suite

Big investors maystill under-

estimate the riskof a U.S.-China

trade war.

The Push to Punish China

James Pethokoukis

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