CHAPTER 1 THE PSYCHOLOGY OF INNOVATION

The classic experiment on the concept of creative insight is the candle problem (figure 2a and 2b). Proposed by Gestalt psychologist Karl Duncker in his master’s thesis in 1926 and published posthumously twenty years later, the experiment involves a box of tacks, a candle, and a book of matches. The test subjects are told to attach the candle to a corkboard by using only the items presented to them. Typically, some subjects try to use the tacks to attach the candle to the corkboard, while others creatively melt some candle wax and attempt to attach the candle to the corkboard with it. Unfortunately, none of these methods work. What does work is to realize that the box that holds the tacks can also be used to hold the candle. In this way, a tack can be used to attach the box to the corkboard and the candle can rest in the box.

The candle problem is a great test of creative insight because to solve it, people have to overcome their preconceived notions of what the box is there for. This is why for ninety years it has been the benchmark for testing this type of psychological capacity and is still actively discussed.

The interesting thing is what it tells us about how the mind works under different stimuli. Classic reasoning from a typical modern-management or Taylorist-management approach is that to get the task done more quickly, one should incentivize the task. So what happens if you add a small financial incentive to come up with a solution to the candle problem faster?

This was tried by psychologist Sam Glucksberg in 1962. To create baseline times, a small financial reward was offered to one group for solving the candle problem more quickly, while another group was asked to just move as quickly as they could. Surprisingly, the group that was incentivized did the task more slowly than the group that wasn’t.

There is plenty of evidence to suggest that for straightforward tasks, incentives do work—at least in the short term. Incentives are widely deployed in management, initially for the types of tasks that matter in a mass-production factory or any other Taylorist workplace. Having said that, when creativity or lateral thinking is required, it’s not just that incentives don’t work; they actually reduce productivity, and this conclusion is supported by a body of scientific literature, starting with Glucksberg’s 1962 paper, and continues to be researched to this day. What incentives do is induce stress and create focus or even fear. These things are great when the task is known, but when the task isn’t, they are counterproductive. We very much support financial and equity rewards in our innovation process, but we want to emphasize that while stress may make you work faster, it can shut down higher-order thinking. Focus is great for excluding the nonessential, but it also kills lateral thinking. As we will describe in the next section—when we place these effects in an actual, observed corporate environment—stress and fear are often used by people high up in the hierarchy to create action; however, this may not be the type of action that is needed if creative lateral thinking is required to solve the problems that the corporation may face.

This teaches us that what seems intuitively correct, about setting up hierarchical, incentivized systems with vigorous rewards and punishment, is something that worked well for the industrial economy. But transplant those same notions to the fluid economy, where creativity is paramount, and you are setting yourself up for failure. If we want our organizations to be creative and to meet the challenges of the fluid economy, then a typical hierarchical organizing structure with short-term, carrot-and-stick incentives will not work.