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We have all been inspired by the relentless curiosity of toddlers repeatedly asking “why” in their quest to learn. Curiosity is no less valuable in business. Yet CEOs frequently bemoan the reluctance of their organizations to embrace new questions, perspectives, and paths.

But what exactly is curiosity? Why is it especially crucial to companies today? And what can leaders do to cultivate it?

What is curiosity in business?
We are more likely to take direct action when the goal is clear and the solution is known. When the precise solution is less clear, but the challenge pattern is familiar enough, we move to action by defining the process to solve, with milestones to benchmark progress.

While this direct approach to problem solving is efficient, it makes no sense for small children because their ability to tackle worldly challenges pivots on how well they can increase their knowledge of the world. The same logic applies to companies facing unprecedented business challenges in rapidly changing environments. Before they rush to execution, they need to deepen their understanding of novel situations.

Why is curiosity especially crucial today?
Shrinking the gap between the known and the knowable makes the most sense when we cannot easily draw on the experience of similar situations. The value of curiosity is therefore high in the following contexts:

• A young company that is unlikely to be competitive by pursuing the same paths as established ones.
• A company that is facing new challenges.
• When rapid change makes yesterday’s solutions less applicable to today.
• When new technologies provide very different possibilities and paths to the future.
• When intense competition quickly arbitrages away any advantage that an incumbent company might possess, necessitating the continuous exploration of new approaches.

One or more of these conditions apply to most businesses today. The rapid progress of generative AI, in particular, is forcing companies large and small to reconsider both the ends and means of strategy by investigating new approaches fueled by curiosity. Equally, the depletion of natural resources and the need to minimize environmental and social externalities—while continuing to create adequate financial returns—requires curiosity to drive new business-model discovery.

Why is curiosity hard for established companies?
Do the following experiment: Spend an hour observing a management meeting at a young, fast-growing company and an hour at a large, slower-growth incumbent. Be sure to note the number of references in each to new phenomena and stakeholders outside the company, the number of questions asked, or the number of new approaches suggested. A comparison will no doubt reveal a distinct lack of curiosity at the larger, more established firm.

Fortunately, incuriousness in big, incumbent companies is not an immutable law of nature. But large organizations must overcome several tendencies that erode curiosity, such as:

• Complacency. Success may encourage a company to believe it doesn’t need to ask new questions or seek new answers.
• Specialization. For efficiency’s sake, companies subdivide their businesses into functions and departments that develop expertise in some process step, product, or geography. That approach encourages further optimization of the parts rather than curiosity to reimagine the whole.
• Introversion. As a sphere grows, the ratio of its surface area to its volume declines precipitously. The same formula applies to externally facing roles in growing companies, diminishing the prominence of external stimuli that fuel curiosity.
• Financialization. Public companies are accountable to shareholders and must carefully manage returns. But in the long run, returns are an oblique goal. They are achieved not by pursuing returns directly, but rather as an indirect consequence of pursuing innovation and growth fueled by curiosity of what could be.
• Instrumentalism. Setting goals, following plans to achieve them, and incentivizing results or actions is a powerful way of solving familiar problems. However, it can be a disastrous way of fostering the learning of new things, because we must first explore and learn before we can know what needs to be optimized.

Curiosity at Genpact
Business-process outsourcing (BPO) leader Genpact started in the late 1990s as an experiment within General Electric. Designed to explore a new business model, it supplied previously internal services to other global companies using plentiful, effective human resources based in India.1

There was no existing template nor any tried-and-tested practices Genpact could use as a guide. Fueled by curiosity, its leadership learned its way toward an unknown future. Today, it is an independent, $4 billion-plus company providing all kinds of business, technology, and analytical services to global companies as part of a $300 billion-plus BPO industry it incubated from scratch.

Genpact continues to thrive in a rapidly changing global and technological business environment by intentionally embracing key practices that foster its foundational curiosity, including:

• Making curiosity an explicit core value, along with courage, incisiveness, and integrity.
• Operationalizing that value by emphasizing questions rather than answers. This includes, for example, not being satisfied with winning a new contract but routinely finding out why it happened.
• Screening and hiring employees for curiosity as opposed to only knowledge and skills. For leadership positions, Genpact screens for hunger to learn and the courage to act upon new learnings.
• Maintaining an external perspective by locating 80% of its senior leaders in key markets including the US, Europe, Australia, and Japan. This has enabled Genpact to avoid creating isolated “delivery factories” or an out-of-touch headquarters. Leaders are also encouraged to allocate 50% of their time to clients, 25% to other external stakeholders, and only 25% to internal matters.
• Shaping a collaborative culture in which new insights are shared and “blameless postmortems” are used to extract and share lessons from failures.

In addition to encouraging curiosity, Genpact leadership also works to prevent the complacency and stagnation that kills curiosity within teams. When something is running “too smoothly,” leaders deliberately disrupt the status quo through personnel substitutions and new goals to facilitate curiosity and learning.

Curiosity at KKR
Genpact is not alone in its emphasis on curiosity. Henry Kravis, the pioneering private equity legend and KKR cofounder and coexecutive chairman, recently told an interviewer that it is not possible to be a successful investor or founder without curiosity. He noted this is especially true today, as rapidly shifting geopolitical and economic dynamics create risks that can become business opportunities if thoroughly explored and understood.

Kravis operationalizes this belief by routinely seeking and having conversations with people who have very different perspectives from his. For example, when visiting an unfamiliar business environment, Kravis fills out his schedule by meeting with as many local stakeholders as possible. Even when on familiar ground, he tries to meet with as many young people as possible to understand their points of view.

How can leaders cultivate organizational curiosity?
Drawing on Genpact, KKR, and other examples of curious companies, a number of common organizational levers emerge for fostering a curious mindset:

• Cultivating organizational extroversion by making all functions and positions externally facing.
• Cultivating learning from anomalies such as new customer behaviors, new competitor moves, or new operational tactics that depart from routine ways of doing business.
• Cultivating multiple mental models of the business. A dominant perspective on how the business works is inevitable as a business model is optimized and a successful approach emerges. But a mental model is a choice rather than a fact. Employees should always be open to reframing how they see the business when new information comes to light.
• Cultivating “tinkering” by encouraging the early trial of ideas, not just for the purpose of validating them but also to generate new ideas and insights by colliding them with reality.
• Sharing information on new phenomena and ideas by building an explicit “social learning system” that connects observation with insight extraction and the sharing and scaling of insights.
• Using technology to facilitate this social learning system.
• Maintaining an equal focus on exploiting known recipes and creating and exploring new ones.
• Fostering cognitive diversity and an appreciation for how entertaining diverse perspectives can lead to new and better ways of doing things.

CEOs can play a special role in cultivating these practices of curiosity. The following actions and behaviors can set the tone for the whole organization, creating a fertile ground for curiosity to flourish:

• Modeling and legitimizing the behaviors of curiosity, such as asking questions and entertaining different mental models.
• Codifying the practices of curiosity within their organizations.
• Promoting collaboration through sharing and collecting learning.
• Rewarding exploration and discovery of new possibilities as much as returns from existing businesses.
• Building systems to encourage cognitive diversity in leadership.

Business has always had two main jobs: exploiting today’s models and exploring future ones. As the pace of technological evolution and new ways of competing accelerates, it is incumbent on CEOs to not only reward current performance but also the curiosity to create new models that will drive tomorrow’s performance.

By Martin Reeves and Tiger Tyagarajan

Source: bcg.com