Innovation is driven by open-mindedness, inputs from diverse groups of sources, fostering collaboration across functions, processes, ecosystems, etc. In most cases, the final decision to bet on an idea is taken by one or few executives.
Recent research from USC’s Marshall School of Business in collaboration with the London Business School, University of Illinois, and Northwestern University reveals alarming findings compromising these decision-process-fundamentals: When we feel a sense of personal power, we overestimate our ability to make good decisions, which can lead to higher risk-taking coupled with poor decision-making.
Researchers conducted a series of experiments and found, across the board, that those who felt most powerful following their questionnaire results overestimated their abilities and actually lost the most money. As a leader gains more formal authority and power in his organization, he typically rejects the need for input, critique, and feedback from others. Paradoxically, these are the ingredients of the most successful innovation projects.
Within venture capital, this is could very well be one of the reasons why larger funds perform worse than smaller funds (also, see this post concerning funds performance). Under all circumstances, should this knowledge inspire us to incorporate further measures to open-innvation, syndication, etc. to fix the broken venture capital model.