Innovation and Strategy Need Opposite Types of Motivation

The proper motivation…

For a long time it was accepted that incentives, and specifically financial incentives, would motivate any type of desired business behavior. In other words–everyone has a price.

There are two main types of motivation: intrinsic and extrinsic. Intrinsic motivation comes from within the task itself, and directly by the value of the benefit from completing it. Extrinsic motivation has nothing to do with the outcome you want to achieve. There are two types of extrinsic motivation: positive (the “carrot”) and negative (the “stick”).

Creativity needs intrinsic motivation

Experiments done by Karl Duncker in 1945, Sam Glucksberg in 1962, and Dan Arielly in 2005 showed an unexpected result. They showed that in tasks that are mostly mechanical and straight forward, extrinsic motivation (specifically financial incentives) works. At the same time, it doesn’t work for activities that require creativity and “out of box” thinking. In fact, those experiments showed that extrinsic motivation had a negative impact on creativity. Teresa Amabile (1996) proved the same thing regarding motivation for creativityin organizations. Intrinsic motivation went a long way, while extrinsic motivation hurts creativity.

Strategic planning needs extrinsic motivation

You might think that the same would apply to strategic planning. You would be wrong. While Strategic planning is certainly a complex task, intrinsic motivation doesn’t work for it. Here is the big difference:

The results of creative thinking are typically immediate. A great idea would immediately get management’s attention, recognition, and more. In an era of immediate gratification–creativity efforts deliver quickly. The results of strategic planning, on the other hand, are not immediate. In fact, they would typically be outside of the average employee (or executive) tenure with the company. There is no doubt that the results of strategic planning can put the company in a much better position in its competitive environment. But if this happens outside of your typical “employment window” with the company–should you even care? The problem is that since the time horizon for strategic planning (or at least the benefit from it) is so far out, that the Net Present Value of it is low. Probably too low to justify the effort required today. The intrinsic motivation is discounted and is simply not enough.

To secure the longevity and competitive positioning of your company, you must perform strategic planning periodically. Since intrinsic motivation (derived by the expected outcome of strategic planning) is discounted and not high enough–you should complement it with incentives that drive the specific actions required for strategic planning, regardless of the long-term results.

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Dr. Yoram Solomon is an inventor, creativity researcher, coach, consultant, and trainer to large companies and employees. His Ph.D. examines why people are more creative in startup companies than in mature ones. Yoram was a professor of Technology and Industry Forecasting at the Institute for Innovation and Entrepreneurship, UT Dallas School of Management; is active in regional innovation and tech transfer; and is a speaker and author on predicting technology future and identifying opportunities for market disruption. Follow @yoram