Of all the places for our CEO to visit December 2012, Taipei was an unlikely one. Far from our headquarters in New York, Taipei represents a small portion of our total business and boasts less than 20 employees. But, in recent years, our operation there has become a lightning rod for innovation – a leader for new products in an intensely competitive market with a developed payment industry. It is a defiant example for anyone who assumes that Asians do not ‘think outside of the box’.

Centuries ago, we would never have asked how to increase innovation in Asia, as Asians were far more advanced than the West. For example, China gave us paper, money, the printing press and gunpowder. And, India gave us the number zero. But, in more modern times, Asia lost ground due to the ebb and flow of economies. With strong capital markets in the US, we saw unfathomable ideas like Microsoft, Apple, Google and Facebook seemingly rise out of the ground. In Greater China and throughout Asia, as our capital markets have advanced, innovation has increased again, along with our human capital and talent recruitment.

Once perceived as imitators, a 2012 Booz & Company report found that 45% of global companies now perceive Chinese companies as major innovation powers – either equally or indeed greater than themselves. According to the report, China has more companies that proactively shape new products by uncovering consumer needs (“need seekers”) than any other place in the world after Silicon Valley.

All of this is very positive news for Asian business leaders, and is vindication for those who have invested heavily in R&D over the years. But, there is another side to this coin: competition is significantly increasing in Asia, especially for talent. As Booz & Company concludes, creating a culture that attracts, motivates and sustains innovators will determine which companies are winners and losers in the innovation game over the next decade.

The challenge for Asian business leaders today is to ensure they are developing infrastructures and social environments to support risk-taking, experimentation and collaboration, in order to unlock innovation and keep their talent. As leaders, incentivising systematic processes to promote risk-taking is as important as rewarding success.

“Good companies reward success, punish failure, and ignore inaction,” Stanford University’s Professor Jim Adams famously said. Yet, “Great ones reward success and failure, and punish inaction.”

There are endless ideas to get you to Dr Adams’ destination of a great company. But, having worked in the US and in Asia, I found three that are both essential and universal to all companies from all corners of the world: encouraging ownership and responsibility through small teams; testing every thoughtful idea and learning from the results; and, turning data into insights.  

Encouraging responsibility through small teams

Good ideas come from collaboration, but individuals need to be incentivised to take ownership of their ideas and responsibility for the execution of these. Many Asian companies rely on big groups of people gathered around a table, debating assumptions, to get things done. I feel that this leads to inefficient execution and dissuades individual ownership.

When 20 people are left to make a decision, 90% of the group will not speak. The leader ultimately polls his or her audience for a consensus and uses the outcome to decide next steps. Groupthink is something every manager needs to understand, and stave off. When the end goal is motivating innovation and increasing dialogue, groupthink of this sort is the antithesis of productivity.

When Deng Xiaoping taught to “cross the river by feeling the stones,” he did not envision 20 people grabbing for the next stone together. As a tactic at MasterCard, we rely on small meetings of 3 or 4 to give each person the chance to share ideas and take responsibility for the project. This is how historic announcements of projects like inControl, a simple and convenient security payment tool that was a game-changer in the market, went from ideation to execution in Taiwan.

All of our successful major initiatives have been charted by small teams, in which everyone has a stake, a place at the table, and a shared dedication to the outcome.  

Testing every idea that counts

homas Peters, a US business professor and author, once preached: “Test fast, fail fast, adjust fast.”

A company that fosters innovation is one that is always experimenting and testing every thoughtful idea. Inherently, this means getting very used to failing, too. Today, we test every worthwhile idea and eliminate conjecture.

Recently, we were faced with two independent obstacles: to promote cross-border use of our cards and design our own platform to engage consumers directly. We began to test a MasterCard reward system that offered as-yet unprecedented returns on cross-border usage of our cards. This had never been done in Greater China before. And, because it was unprecedented, we received understandable concerns about the initial investment and returns. We took a risk with a controllable scale in terms of costs and marketing investment, and after a nine-month pilot we received our initial insights verifying the reward platform as a viable model and confirming key success drivers.

Today, the team is planning an expanded version with a bigger investment and larger coverage, and it is tackling two obstacles by testing one solution. Nine out of every ten ideas may not have outcomes as successful as this, but each provides an opportunity to learn from both hypothesis and results, and incentivises employees to find new ways to tackle large and sometimes overlapping challenges. The key obstacles are learning to become comfortable with undesired outcomes, and always looking for guiding principles in the results.

Turning data into insights

Our data today comes from all around us – we have data from company surveys and research, sales data and internal audits, social media platforms, analytics, and website hits. The challenge for innovation is transforming the numbers at our fingertips into insights that guide new offerings and strategic decisions.

One of our most successful initiatives was a project that was born out of data compiled on travel expenditures. The data on its own was useful to us. In our industry, it is widely accepted that international travel shapes global commerce, and spending in destination cities by foreigners contributes to local commerce and business activities. Travel has always been good for our business – this much we have known.

But, when we looked at the data differently, and focused on using the numbers to capture new transactions and drive new campaigns, the data revealed something we could immediately use. More than just a compilation of geographic spending habits, we found that travel is most frequent between nodal hubs and typically transpires between major destinations. Simply put: our customers usually go from one top city to another.

We used this data to make a major investment in a product that offered travelers incredible lifestyle experiences the moment they deplaned in a major city, giving people truly remarkable experiences when they arrive. For instance in Beijing, one of the experiences is an exclusive tour of the gardens of the Summer Palace, a UNESCO World Heritage site, at dusk, away from the crowds, followed by pre-dinner cocktails on an imperial barge and a private dinner by a chef from one of Beijing’s premier hotels. This also helped to transform how our customers and our employees view MasterCard, which is a much different company than they were first introduced to.

The incentive to innovate

Innovation premiums have been discussed by analysts and investors since Apple – traditionally a computer company – launched a device to put “1,000 songs in your pocket.”

Companies today understand that feeding the innovative beasts ultimately feeds the bottom line. Today, we are a different company than just ten years ago, when we focused entirely on transactions and partnered almost exclusively with banks. Now, we partner with technology companies like Google and e-commerce sites, offer lifestyle products, and have mobile developments and social media properties.

In Taiwan, our CEO demonstrated the simplest and most lasting form of motivation there is for the innovators in a company’s ranks. Speaking to our small team in Taipei, he told them,“I came out here to tell you all: thank you.”

This came from the risks our teams have taken in creating the social environment to encourage out-of-the-box thinking and collaboration.

This article was first published in HQ Asia (Print) Issue 05 (2013).