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Connections with Leading Thinkers: Lourenço Bustani

Armen Ovanessoff and Eduardo Plastino of the Accenture Institute for High Performance interview Lourenço Bustani as part of a research project on collaborative innovation.

As part of the Accenture Institute for High Performance's mission to develop cutting-edge new ideas and insights, researchers often seek the views of academic leaders, business executives and industry analysts. The Connections with Leading Thinkers series captures some of those interviews, showcasing interactions and discussions with some of the world's leading experts.

Innovation expert Lourenço Bustani analyzes difficulties hindering innovation in Brazil’s economy and discusses potential solutions.

Lourenço Bustani is co-founding partner of Mandalah, an innovation consultancy that seeks to help clients boost both their profitability and their contribution to people and the planet. Founded in Brazil, Mandalah has offices in five countries on four continents. In 2012, Fast Company named Bustani one of the world’s 100 most creative people in business. Eduardo Plastino of the Accenture Institute for High Performance interviewed him as part of a research project on innovation in the Brazilian economy.

You’ve seen Brazilian companies struggling to innovate. Given the size of Brazil’s economy, why is innovation so challenging here?

A crucial reason is our education deficit. That’s our Achilles’ heel, not only in our public (state) schools but at all levels, including higher education. The result is a significant talent shortage. Consequently, we have relatively few truly disruptive and winning initiatives, be it in large companies or startups—and these are key for boosting innovation in the country.

What other factors come to mind?

Many of them are related to the fact that Brazil still behaves like a relatively closed economy. While it has been opening up over the last two decades, companies still don’t feel the burden of having to differentiate themselves as is evident in more mature markets around the world. In many ways, our economic structure still reflects that legacy. The government adopts policies that, while perhaps well intended, are somewhat ill-informed and perpetuate the mindset of a closed economy.

Can you say more about how Brazil’s economic structure reflects that closed-economy legacy?

On the policy side, there is not much government support for innovation. Initiatives are mostly peripheral—nothing remotely close to what you see in many advanced economies. On the corporate side, state- and family-owned companies still play a huge role in Brazil’s economy. Many have only recently begun migrating from what we could call a family-centered management style to a more professionalized style. So, a lot of corporate leaders are still playing according to the rules of a game that has become obsolete. In addition, many focus excessively on the short term. And in some sectors, you still see some near-monopolies or oligopolies, where there are relatively few players in an industry. This further undermines innovation. In addition, historically, Brazilian citizens never put much pressure on companies to innovate, because they had few options to choose from anyway. But now they have become more sophisticated in their desires and more informed about their greater range of options, even though companies haven’t yet adapted to this. Add the huge complexity of our tax system, which forces companies to divert time, energy and resources away from more valuable efforts, and you get a landscape that is not very conducive to innovation.

Still, there are some extremely innovative companies in Brazil. How have they achieved this?

Even our most innovative companies are not yet fully innovative. Many people in Brazil tend to coin these companies as extremely innovative and see them as global benchmarks. I don’t want to deny their many merits, of course, but I think it is dangerous to look up to a company for innovation inspiration when most of its products and services don’t have the quality they should or could have, its processes are archaic, its structures hierarchic and its overall culture less than inspiring.

Even with all those challenges, we believe that Brazilian companies could boost their innovativeness by adopting a more open and collaborative approach. But there is little collaboration here; for example, between large and small companies. What do you think is behind this?

Big and small companies are so different from each other that many don’t even view cooperation as possible. People working for large companies usually have a very different academic background, career track and even worldview from those hailing from small companies. There is also power asymmetry. It is very difficult to collaborate when one side has much more to win or lose than the other. In Brazil, many entrepreneurs and small-business owners feel powerless next to a large corporation.

But shouldn’t the need to protect and grow market share motivate companies to explore all possible alternatives to innovate?

That happens in markets where companies face a constant need to reinvent themselves because of intense competition and increasing technological disruption. In such markets, innovation becomes a matter of survival. We see that in our operations in the US and Japanese markets, for example. In Brazil, however, most companies don’t seem to feel that kind of pressure. As a result, few leaders seem willing to become true game changers.

For those who do, what capabilities does their workforce need to become more innovative?

I think these companies’ workforces need a diverse repertoire of skills. These include the ability to see their companies’ businesses as part of a larger ecosystem and to understand complex public policies that may affect future business growth. Staff also must understand Brazil’s vulnerabilities, because these often hide the greatest business opportunities. Finally, they need to take a balanced approach to risk. They cannot be too daring, because that would make their company vulnerable. But they cannot be too conservative either, because that would cause the company to stagnate.

How important are traditional hard skills, such as understanding intellectual property systems, to a company’s ability to innovate?

Understanding how IP works is important, but your legal department can address that. The key problem I see in terms of innovation-related capabilities in Brazil is that people leave university unable to think critically, express their ideas clearly in writing or orally, exert leadership and work in teams or across organizational functions. Lack of ability in these “softer” skills makes it much harder for companies to innovate. That being said, you need both hard and soft skills to innovate. If you cannot express yourself clearly, it doesn’t matter how smart you are about IP, technology or some other “hard” area, because people won’t listen to you.

What does a truly innovative company look like?

It has a clear purpose that the entire staff embraces. It is meritocratic, favoring true talent, regardless of age and length of service. It adopts a multidisciplinary approach to work, promoting crossdepartment interaction so people can exchange knowledge with colleagues they wouldn’t normally engage with. It welcomes people’s contributions from their life out of the office, because all their experiences can help inspire innovations. This human-centered attitude permeates the organization.

What role, if any, do standardized processes have in innovativeness?

You can’t get rid of all such processes in a corporate environment, but you should try to have as few as possible— keeping only those essential for the job to be done well. Innovation always comes with risk and error, so companies should give professionals autonomy to make mistakes. Processes exist to minimize errors, so having too many of them stifles innovation.

Of course, companies can’t afford to make too many mistakes. So they must strike the right balance between the efficiency of their existing operations and their ability to innovate. If you embrace innovation, you must be prepared to take some risks, and that must be reflected in your policies. Compensation policies are a case in point. Most companies have compensation policies that reward excessively conservative attitudes. Think about people who have been with a company for 20 years and are now at the director level. Many have a family and big bills to pay. They see an innovation opportunity but worry that it may not work out. Failure could cost them their bonus, promotion or even their job, so they won’t take the chance. Consequently, their company won’t innovate.

What about younger employees in Brazilian companies? Are they equally conservative?

Many want to change the world, starting with the companies they work for. These younger people have a different worldview, and companies have to adapt to that. In fact, we are seeing a clash between two business paradigms. The old paradigm is based on predatory market practices. Companies are closed entities, and competition is the only possible way to navigate the market. In this mentality, business is a zero-sum game. Someone has to lose so someone else can win. Knowledge is proprietary. But today, young people live in an open-source world, which is informed by the idea that collective intelligence benefits all. In this new paradigm, the key assumption is that we can not only coexist, but also boost each other’s potential. When you look at the market through this lens, you see competition replaced with integrated cooperation and the creation of shared value. To innovate, companies have to adapt to this new mindset.

Thank you very much. This has been an extremely interesting session.

It has been a pleasure.

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