INSIDER

Thinking about Innovation as the new asset bucket

I had a moment this week where I was utterly absorbed by how indulgent my job can be. I interviewed Tim Hodgson, head of the Thinking Ahead Group at Towers Watson. He gets paid to think, and I was getting paid to talk to him about thinking. Anyway, it’s had a knock-on effect and ever since I’ve been mulling the origination of ideas.It’s admirable that an investment consulting group has a dedicated group of individuals whose job is to challenge the status quo. That in an environment where businesses are pre-occupied with “value add”, it dedicates resources to essentially what is purely research and development (or in other words, a cost centre).

A number of pension funds are looking at how to incorporate new ideas into their investment thinking too, with large institutions such as APG and CalSTRS allocating investments to “innovation” buckets.

In my experience, ideas come randomly. But it is possible to create an environment where ideas are “allowed” to come more easily. Ideas come from never being satisfied with an answer. (In this context ideas are a little misrepresented. Ideas don’t have to be solutions. They can simply be observations, and resisting the urge to solve something can be quite liberating.)

Good ideas challenge and lead, and in speaking about the ideas generation at Towers Watson, Hodgson quotes Henry Ford: “If I had asked people what they wanted, they would have said faster horses.”

Ideas also come with perspective, and perspective comes from time and knowledge. Within this context Hodgson says his group needs to be “networked in to thinkers”, they read widely and have relationships with institutions outside of the industry, such as the Santa Fe Institute, the US science think tank that was the originator of complexity science.

Collectively speaking, ideas come from diversity in thinking. This is convention on well-governed boards, or indeed sports teams, where distinct specialist but complementary skills imply the whole is greater than the sum of its parts. This is true of the Thinking Ahead Group (TAG) where all the individuals approach an idea from a different angle.

They recognise that the world is interconnected – that politics, economics, society, environment, technology and finance all interact on almost all issues in many different ways. “There are very few self-contained problems,” he says.

An example is Hodgson’s approach to thinking about sustainability.

“We do work on this but there are some questions we haven’t worked on, and I would say my thinking is not yet complete. If growth is linked to physical elements then in the long term the sustainability of growth is about 0 per cent per annum because there are finite resources. This may be over the very long term, and then I wonder if homo sapiens are wired for long-term thinking?”

TAG is tasked with trying to improve the investment map to make it more detailed and useful. TAG is brimming with competing forces: its ideas need to be as global and generic as possible, and its members are specialists at generalism.

“We are trying to create more accurate mental models to better describe how the world works, then we can make better decisions, and better decisions are more profitable,” he says.

It was also Henry Ford who said “thinking is the hardest work there is, which is probably the reason so few engage in it.”