Developing Innovative Capital Through the Subconscious

Creativity leads to innovation that improves organizational functioning by solving problems. As more problems are resolved, the organization continues growing to become competitive on the market. Even though the subconscious influences creativity and problem solving, it is has been ignored as pseudo-science despite impacting almost everything in our lives; including solving business problems.

Creativity relies on our ability to resolve problems that lead to the survival of both ourselves and society. Creative people like Einstein are honored because they have the capacity to develop new solutions to long unsolved problems. Without the use of the subconscious, creativity would have never been turned into a useful form.

Problem-solving requires preparation, incubation, illumination, and verification (Grupas, 1990). A creative person studies a problem and develops a knowledge base, allows possible solutions to incubate in the subconscious, percolates a solution into a conscious form that is verified through research.

The reason the subconscious is so powerful is that it is a self-organizing system that continually makes associations/connections between information (Andreasen, 2011). As the brain builds framework for handling environmental knowledge, it also connects, categories and comes to conclusions of perplexing problems.

The speed and ability of the mind to do this is based on the intelligence level of the individual. Intelligent people are better able to process greater amounts of information and find associations faster. When put to substantial use that innovative creativity has tangible value for business that want to invent new ways of doing things.

People with creative minds don’t often think like everyone else. They use a divergent system of reasoning that creates many different solutions that are eventually pruned back to the most useful ones. This is in contrast to the general population that has been socialized through schooling to use convergent thinking that relies on step-by-step processing models already planned out by someone else.

Divergent thinking can cause difficulties interacting with people. Many intelligent people lose jobs and opportunities only because of the restrictive social circles inherent in most businesses. They may say things that are true but also run against conventional wisdom that doesn’t sit well with ego driven individuals.

Open environments that respect the diversities of people, and the way in which people process information, are more likely to develop innovative environments. Restrictive, position-oriented, highly controlled conditions will restrict innovation. By developing the right open-minded environment, a company can foster the bringing forward of subconscious ideas to develop higher forms of intellectual capital.

The Importance of Hiring Managers with Divergent Thinking

Divergent thinking allows managers to find new solutions to existing organizational problems. Those that can see a problem from multiple perspectives are more likely to come to comprehensive solutions with greater impact. Tunnel Vision among managers leads to lower results and less innovative problem solving. Companies that do not consider adding divergent thinking skills to their intellectual and labor capital may find themselves with sluggish future performance. 

Divergent thinking is a process of developing multiple vantage points and ways of seeing a problem. Those with higher cognitive abilities often use multiple and simultaneous pathways to understand, analyse, solve, and implement solutions from different vantage points. Switching perspectives is important for well-rounded solutions that meet multiple stakeholder solutions. 

Divergent thinking is associated with genius and artistic ability. Neuroscientific studies have found that divergent thinking uses both hemispheres and causes higher levels of neural activation (Yoruk & Runco, 2014). Divergent thinking activates the central, temporal, and parietal regions of the brain to develop semantic processing. Semantic processing is a deeper processing than most people are capable and allows for the encoding of meaning. 

A high percentage of managers have tunnel vision and know all the answers without exploring any of the premises. Their level of mental processing is low and relies on snap judgments, hueristics and bias. This tunnel vision becomes obvious when a person cannot find multiple explanations of a problem or accept the possibilities of other alternative solutions. It is often manifested in “know it all”, close-minded, and rigid explanations. 

Most of us have probably met at one time a manager who knew all the answers, used their power to force their opinion, and ultimately was gravely mistaken in their conclusions. When executives are stuck in tunnel vision they can cost companies a lot of money as their erroneous assumptions make their way throughout their department. Strong executives explore all the possibilities to find that which is most likely to work. 

Tunnel vision is dangerous for organizations because managers who cannot see alternative possibilities run the same poor processes until they collapse. They are also likely to use the same mental tool to solve every problem. Each major problem needs its own tool from the tool shed. Tunnel vision won't even allow them to see where the tool shed is let alone what other tools it contains.

Based upon an in-depth study of 221 managers within the workplace it was found that  divergent thinking and openness come together (Scratchley & Hakstian, 2001). Managers who are open to new experiences and abilities are better at finding new ways of thinking about things. Hence, narrow minded individuals who are convinced of their “rightness” should be avoided at all costs. 

A few tips for improving divergent thinking in your company may be beneficial.

Switch Up the Executive Team: If your organization is suffering from stuffy thoughts and rehashed ideas then consider switching up your executive team. Hire some new talent, throw out a few of the old talent, and get a different way of evaluating problems. 

Rearrange Team Membership: In some organizations the same people are asked to join problem solving teams. Ensuring you are using different types of people with various backgrounds and collaborative departments will help create new ways of thinking about issues. 

Hire Creative and Open Minded People: Without having people with the cognitive ability to solve problems and create organizational innovation, the company will eventually move into the decline stage. Develop stronger selection tools that look for creativeness and open mindedness. 

Adjust Performance Metrics: What and how we reward people impacts what type of behavior they are going to exhibit. If you want them to be creative and solve problems then ensure it is reflective as a performance evaluation.

Develop an Inclusive Culture: Creative people don't come forward with ideas in hostile environments. To propose solutions requires a level of risk and a receptive environment that doesn't chastise new ideas.

Train Managers to be Critical Thinkers: Even though much is determined by personality it is still possible to train managers on to use critical thinking and make decisions is beneficial; whether or not they use them is another story.

Scratchley, L. & Hakstiane, R. (2001). The measurement and prediction of managerial creativity. Creativity Research Journal, 13 (3/4). 

 Yoruk, S. & Runco, M. (2014). The neuroscience of divergent thinking. Actitas Nervosa Superior, 56 (1/2).

Free Trade Agreements can Foster Economic Hubs

Free trade agreements are a common economic method of increasing trade. Free trade agreements work best where lower value imports are used to create higher value exports. Global hubs  often work with regional hubs in an international supply chain that continues to develop products for exportation to world markets. Effective economic hubs use intellectual capital to create value that cannot be easily copied by other countries.

According to Chong and Hur (2008) each hub has access through trade agreements to the spokes but the spokes only have access to the hub. This means that the hub can sell more products and services than the spokes can themselves. This advantage gives them preferred trading and profitability standards. It also creates a value chain with the highest hub realizing the most benefits.

Because hubs are central locations, they also can have an advantage in investments (Wonnacott, 1996). Those who seek to maximize their investment opportunities will invest their money through the purchasing of stocks or starting businesses within the hub (i.e. supply chain). They are aware that this is the fastest place for them to grow their capital. This in turn spurs additional economic growth in the area and develops opportunities for product development.

A problem occurs when two mega hubs are not competing on the same assumptions. For example, Chinese tariffs on U.S. made automotive products are designed to protect Chinese budding suppliers (Jian, 2008). When this occurs, one country has an advantage as they are willing to sell their products without tariffs to the U.S. but will not accept American products. The free trade cycle is broken.

In order for the mega hubs to operate correctly individual components of production should be purchased at a lower price and then assembled with intellectual labor into higher value products that are sold on the market. If these products are built else ware and sold primarily within the U.S. there is no export advantage, revenue, or growth. A decline occurs because the consumer culture is soaking up the value locally instead of properly exporting.

Hubs should be creators of wealth. They should use both imported and locally generated resources to develop them into higher value products for export. When this does not occur, it is likely that the export gain will turn into an import loss. Those hubs that export products will grow while those that only distribute imported products are likely to decline. It is the total value of the flow that determines growth or decline in regional development.

Chong, S. & Hur, J. (2008). Small hubs, large spokes and overlapping free trade agreements. World Economy, 31 (2).

Jain, Y. (2008). Wto rips china’s tariffs on imported auto parts. Automotive News, 82 (6295).

Wonnacott, R. J. (1996a), ‘Free-Trade Agreements: For Better or Worse?’, American Economic

Review, 86, 2, 62–66.

Retaining Competitive Advantages through Specialized Human Capital

Organizations seek to develop uniqueness that will allow them to create competitive advantages that allow them to better compete on international markets. The combination of human capital and organizational factors helps develop those firm specific qualities. The development of human capital through firm-specific skills will further retain the talent of organizational members and encourage lower levels of knowledge loss or competitive posturing.

Competitive advantage is a unique organizational strength a company develops over competitors through the offering of higher products, value, or benefits that justifies higher prices on the market. It is a condition whereby an organization is more efficient and productive than those it competes with. Such firms are seen as competitive, “if it is able to create more economic value than the marginal competitor (Peteraf & Barney, 2003: 314). Through this competitiveness, additional benefits are earned by the organization that other companies have a hard time emulating. 

Competitive advantage can be found in the development of human capital within an organization. Such competitive advantage comes from employee skills and abilities that cannot be easily passed from one firm to another (Kor & Leblebici, 2005). Thus skills and abilities help employees work in patterns and methods that other organizations will have difficulty time copying without copying all of the unique aspects of the firm.

Skills and abilities can be developed within other organizations which reduces the overall competitiveness of the subject firm. However, even though such skills apply to other firms their true value lies in their combination of technology, product markets and assets (Teece, 1986). Such firms are able to combine the various components that create uniqueness in order to develop new market strengths. It is this combination of strengths that is difficult for organizations to develop without significant research, cost and energy.

To develop competitive advantage through human capital it is important to see employee skills as a total portfolio that fosters firm strength. Some skills are general while others are more firm specific (Lazear, 2009). It is the firm specific skills that have the highest value and exchange rate with the organization. It is through the development of employee skill specificity that organizations can not only create competitive advantages in human capital but also the ability to retain such capital due to its value being tied to the firm. 

Let us take an example. Two employees are seeking higher paychecks. Each has their own particular portfolio of skills and abilities. The organization that understands the unique skills and abilities of their employees can combine other assets to drive higher levels of unique competitive advantages. In this example, employee 1 has skills that are unique to the firm while employee 2 has skills that are more general. Employee 1 is likely to be retained by the firm because their skills are non-transferrable. Employee 2 can apply their skills wherever they decide to work and are more likely to move to another company. 

Firm specific capital is difficult to transfer to other companies (Hashimoto, 1981). The more specialized the employee and their abilities the less opportunity they have to move to a competitor and obtain comparative wages and income. This specialization makes their value worth more to the home firm where they are likely to be paid the highest rate of income. 

Developing competitive advantages means combining the organizations unique qualities with available human capital to develop strengths that other firms cannot copy. Organizations that develop specific firm related skills are less likely to lose this intellectual capital to other companies that do not have the same needs. General skills provide appropriate foundations for human capital development but can be easily transferred from one firm to the next. Employees will also desire to retain employment as their firm specific skills have the highest exchange rates of value. To develop stronger competitive advantages requires the ability to take general skills and foster firm specific skills that have the highest competitive advantage for both the employee and the company by retaining employment.

Hashimoto, M. (1981). Firm-specific human capital as a shared investment. American Economic Review, 71: 475–482.

Kor, Y. & Leblebici, H. (2005). How do interdependencies among human-capital deployment, development, and diversification strategies affect firms’ financial performance? Strategic Management Journal, 26: 967–985.

Lazear, E. (2009). Firm-specific human capital: A skill weights approach. Journal of Political Economy, 117: 914-990.

Peteraf, M. & Barney, J. (2003). Unraveling the resource based tangle. Managerial and Decision Economics, 24: 309–323.

Teece, D. (1986). Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy, 15: 285–305.

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