Wednesday, November 26, 2008

Sustaining Innovation: Perspectives From Andrew Hargadon

An interesting thesis of Andrew Hargadon's book How Breakthroughs Happen is that creative breakthroughs in organizations are more the result of innovation than invention. Organizations that stay ahead of the curve foster collaboration that leads to recombinant innovation: ways of assembling old things in new ways. "For these companies," he explains, "innovation isn't a process of thinking outside the box so much as one of thinking in boxes that others haven't seen before" (p. 13).

What kills creative breakthroughs is insularity and a lack of communication. Teamwork fosters innovation by helping participants think in unnoticed boxes. This is particularly the case when team members can "broker" information across disciplines.

One of the greatest threats to trader success and longevity is isolation and insularity. Without the free flow of ideas from different sources and perspectives, individual traders become trapped in limited ways of viewing and doing. Hargadon argues that creativity requires both bridging and building; it is a fundamentally social process. Perhaps that is why I have consistently found that successful traders and portfolio managers have well-developed networks of contacts.

One of the great challenges of the online medium is to create virtual networks that can sustain one's own creative processes. In the right kinds of networks, participants serve as knowledge brokers, combining and recombining ideas and perspectives. If one's trading is a business, it is helpful to understand how successful businesses innovate. A large part of success is situating oneself in the right social networks.