Author Archives: Greg Satell

About Greg Satell

Greg Satell is a popular speaker and consultant. His latest book, Cascades: How to Create a Movement That Drives Transformational Change, is available now. Follow his blog at Digital Tonto or on Twitter @Digital Tonto.

Business Pundits Love to Say These 4 Untrue Things

Business Pundits Love to Say These 4 Untrue Things

GUEST POST from Greg Satell

Go to just about any business conference and you will see a pundit on stage. He or she will show some company that failed and explain the silly mistakes that they made, then follow-up with a few basic rules to help you avoid those pitfalls and become super successful. You leave feeling confident, because it all seems so simple and easy.

Yet look a little closer and the illusion falls away. Very few of these pundits have ever run a successful business. At the same time, many of the executives that are shown to be so silly today, were hailed as visionaries of their time, often by the same pundits that ridicule them now. Some went on to great success later on.

The truth is that managing a successful enterprise is a very hard and complex thing to do well. It can’t be boiled down to a few simple rules. For every great enterprise that does things one way, you will find one that’s equally successful that goes about things very differently. So to succeed in the long term, we often need to ignore the myths pundits love to repeat.

1. You Need To Move Fast And Break Things

When the iPhone came out in 2007, Microsoft CEO Steve Ballmer dismissed it, saying, “There’s no chance that the iPhone is going to get any significant market share. No chance.” The tech giant recognized the switch too slowly and largely missed out on the mobile market. Microsoft, it seemed, was a dinosaur, soon to become extinct.

Yet actually the opposite happened. Over the next 10 years, the company grew revenues at the impressive annual rate of better than 10% and maintained margins of nearly 30%. Those are very strong numbers. How can a company miss such an enormous opportunity and still survive, much less thrive?

They key to understanding Microsoft’s business isn’t what it missed, but what it was patiently building. While the world was obsessed with mobile, it was developing its servers and tools division, which eventually became the core of its cloud business that is now growing at stellar rates. That’s why Microsoft is once again vying to be the world’s most valuable company.

While agility can be an important asset for developing applications based on technology that is well understood, it is not a great strategy for developing technology that is truly new and different. To do that, you need to explore, discover and invent from scratch. That takes time and patience.

2. Innovation Is About Ideas

There is nothing that pundits and self-styled gurus like to talk about more than the power of ideas. They put up a picture of someone famous, like Albert Einstein, Mahatma Gandhi, Martin Luther King Jr. or, most enthusiastically, Steve Jobs, and revel the audience with a fascinating story about how their ideas changed the world.

The implication is that you can change the world too if only you could find the right idea. So they suggest all manner of exercises, from brainstorming techniques to meditation and mindfulness, designed to get your creative energy flowing so that you can generate more ideas and rise to greatness, just like those fabulous and famous people.

Yet that’s not how innovation happens. Consider Einstein. He didn’t start with an idea, but with a problem. More specifically, he wanted to know what would happen if you shined a lantern while traveling at light speed. It took him ten years to solve that problem with his theory of special relativity. It took him another ten to solve his next problem and arrive at general relativity.

The truth is that if you want to make a real impact, you don’t start with an idea, but by identifying a meaningful problem to be solved. Revolutions don’t begin with a slogan, they begin with a cause.

3. Lowering Costs Will Make You More Competitive

Not all pundits are pie-in-the-sky dreamers. Some are hard-nosed realists and they will tell you that the key to success is focusing on the bottom line. That means a relentless drive toward efficiency and driving down costs so that you can increase margins and achieve a sustainable competitive advantage.

Yet as MIT Professor Zeynep Ton, explains in The Good Jobs Strategy, that’s often not the case, even in the notoriously stingy retail industry, she points to companies like Costco, Trader Joe’s and Spain’s Mercadona as examples of how you can get better results by investing in training and retaining employees to better serve your customers.

The problem with a relentless drive to cut costs and drive efficiency is you often end up impeding the interoperability and exploration it takes to create value. That’s the efficiency paradox. The more we try to optimize operations, the less we are able to identify improvements, react to changes and discover new possibilities.

This is becoming even more important in the age of automation, where it is all too easy to replace employees with robots and algorithms. The truth is that racing to the bottom of the cost curve will almost guarantee that you will become a commodity business. Value never disappears, it just moves to a new place. To compete for the long term, you need to identify value at a higher level, develop new business models and redesign work.

4. Companies That Fail Weren’t Paying Attention

The one thing that you can almost guarantee at any conference is that at least one of the fancy pants gurus will tell a story about a great big company, usually Blockbuster, Kodak or Xerox, that was run by eminently silly people. Because these dull executives were asleep at the wheel, they failed to notice the change swirling around them and drove their enterprises into the ground.

The problem is that these stories are almost never true. Make no mistake, it takes talent, intelligence and ambition to run a significant enterprise. So whenever anybody tells you that there was a simple fix to a complex problem, you should raise your B.S. antenna. You’re probably being sold a fairy tale.

Reality is never simple or clear cut. Executives need to make tough decisions with incomplete information, often in a complex time frame. So rather than looking for easy answers, you would do yourself a much greater service by trying to uncover why smart, diligent leaders with good intentions so often get it wrong and learning from them.

Most of all, you need to internalize the fact that success or failure never boil down to a single decision or event. Even the best of us have bad moments and sometimes the least deserving get lucky. The best you can do is to keep moving forward, continue to learn and, most of the time, ignoring the pundits.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Dall-E on Bing

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Science Fiction Becomes Innovation Reality This Way

Science Fiction Becomes Innovation Reality This Way

GUEST POST from Greg Satell

When H.G. Wells was born in 1866, there was no electricity or cars or even indoor plumbing. Still, his active imagination conjured up a world of time machines, space travel and genetic engineering. This was all completely fantasy, but his books foresaw many modern inventions, such as email, lasers and nuclear energy.

It’s no accident that people who invent the future are often fans of science fiction. In fact, in Leading Transformation, the former head of Lowe’s innovation lab explains how he hired science fiction writers to help inspire the company to leverage virtual reality and build a new future for the company.

To create anything truly new and different, you often need to discard the constraints of the present. Yet that comes with a problem. How do you transform fantasy into something real and useful? What makes great innovators truly different is how they combine imagination with practical problem solving in order to bring even the wildest pipe dreams into reality.

How A “Memex” Machine Became The Internet

“Consider a future device for individual use,” Vannevar Bush wrote in The Atlantic in 1945, “which is a sort of mechanized private file and library. It needs a name, and, to coin one at random, “memex” will do. A memex is a device in which an individual stores all his books, records, and communications, and which is mechanized so that it may be consulted with exceeding speed and flexibility. It is an enlarged intimate supplement to his memory.”

It was an unlikely vision for the time. The first computers were just being developed then and were themselves somewhat impractical devices, which is why Bush imagined that the memex would be based on microfilm. Yet Bush was no inveterate dreamer, but in many ways the architect of America’s path to scientific dominance and people took him seriously.

One of those was a young radar technician stationed in the Philippines named Douglas Engelbart, who would return to school to study electrical engineering. It was that expertise, along with Bush’s vision that led him to think of computers, still primitive at the time, as machines that could do more than merely calculate, but “augment the human intellect.”

Engelbart would showcase these ideas in what is now known as the Mother of All Demos in 1968 and Xerox began an enormous research project to bring his vision to market. By 1973, a functional prototype, called the Alto, was built and, a decade later, a young entrepreneur named Steve Jobs would use it to create the Macintosh. The world was never the same.

When Feynman Found “Plenty Of Room At The Bottom”

Richard Feynman was an usual scientist, known almost as much for his pranks as he was for his discoveries. So few were probably surprised at the unconventional title for his address the American Physical Society a few days after Christmas in 1959, There’s Plenty of Room at the Bottom. It was something they had come to expect from the young genius.

Feynman’s fantasy was not unlike Bush’s, except that it was more ambitious. While Bush imagined putting all the world’s knowledge on microfilm, Feynman imagined writing the entire 24 volumes of the Encyclopedia Britannica on the head of a pin. It was just the sort of impractical idea that usually gets people thrown out on physics conferences, not given the stage.

Yet Feynman immediately got down to brass tacks. He proposed using an electron microscope as a writing tool, much like a cathode ray oscilloscope projected images on television screens at the time. He then asked if we can write things on a microscopic scale, why not build things too? Again, he identified problems and proposed potential solutions.

That day, almost single handedly, Feynman invented the field of nanotechnology, although that term wasn’t coined until 1974. These days we use it to etch transistors in silicon wafers to make computer chips and create advanced materials for things like solar cells. Yet the truth is that even now, 60 years after that initial talk, we are just beginning to scratch the surface of Feynman’s vision.

Spacemen, Cavemen And Small World Networks

In the late 1990s, a young graduate student named Duncan Watts was struggling to understand an obscure phenomenon that had baffled scientists for centuries. Known as coupled oscillation, it was a mysterious force that allowed a disparate group of entities, like pacemaker cells in the human heart or certain species of crickets in a forest, to synchronize their behavior.

Nobody could figure out how it worked. Was there some kind of leadership structure with “conductor” leading the synchronized orchestra? Or maybe some complicated web of influence? As much as he pored through the research, tracked the chirping of crickets and tested out formulas to describe behavior, he was still baffled.

What helped break the logjam was two books by the science fiction writer Isaac Asimov. In the first, Caves of Steel, people lived in underground caves and, while everybody was connected to everybody else in their cave, they knew no one outside of it. In the second, The Naked Sun, space colonists led a hermit-like existence, linked to others only through long-range connections.

Neither of these, of course, told Watts anything about pacemaker cells or crickets, but it allowed him to reframe the problem as one of relationships. By imagining the two extremes of the cave people and the space colonists, he was able to come up with a model of relationships that led to the mass synchronization of coupled oscillators.

The paper he would write based on his fantasy-inspired formulas would prove to be a landmark. It would establish an exciting new field of small world networks and lead to a new era in the science of how things are connected, helping to transform fields as diverse as neuroscience, epidemiology and computer science.

Venturing Into The Visceral Abstract

Today we are beset with an dizzying array of problems in the world, climate change, income inequality and the rise of authoritarianism being just a few. Successful businesses face extinction by a seemingly endless wave of disruptions ranging from new technologies to new social phenomenons. It can all seem overwhelming.

It’s important to view these problems from a practical perspective. Each needs to be solved within constraints of economics, politics and competitive pressures. Yet it is also important to realize that the solutions to tough problems will rarely be found in the realm of our experiences. If a solution to any of these problems already existed, they wouldn’t be such tough problems.

The only path through that troubling tautology is fantasy. Once we have exhausted the realm of the possible, we often must venture into the realm of the impossible to see a new direction. A memex machine, a world with “plenty of room at the bottom,” cave societies and space colonies were all ideas of little practical import at the time they were conceived, but benefit us today in important ways through the discoveries they inspired.

We need to accept that we live in a world of the visceral abstract, where the technologies we use to solve the practical problems in our lives are all based on what were once considered utterly impractical ideas. That means to make an impact on reality, we often need to indulge ourselves with fantasy, identify a different path to travel and then begin the work anew.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Pexels

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The Event That Made Einstein an Icon

The Event That Made Einstein an Icon

GUEST POST from Greg Satell

On April 3rd, 1921, a handful of journalists went to interview a relatively unknown scientist named Albert Einstein. When they arrived to meet his ship they found a crowd of thousands waiting for him, screaming with adulation. Surprised at his popularity, and charmed by his genial personality, the story of Einstein’s arrival made the front page in major newspapers.

It was all a bit of a mistake. The people in the crowd weren’t there to see Einstein, but Chaim Weizmann, the popular Zionist leader that Einstein was traveling with. Nevertheless, that’s how Einstein gained his iconic status. In a way, Einstein didn’t get famous because of relativity, relativity got famous because of Einstein.

This, of course, in no way lessens Einstein’s accomplishments, which were considerable. Yet as Albert-László Barabási, another highly accomplished scientist, explains in The Formula, there is a big difference between success and accomplishment. The truth is that success isn’t what you think it is but, with talent, persistence and some luck, anyone can achieve it.

There Is Virtually No Limit To Success, But There Is To Accomplishment

Einstein was, without a doubt, one of the great scientific minds in history. Yet the first half of the 20th century was a golden age for physics, with many great minds. Niels Bohr, Einstein’s sparring partner at the famous Bohr–Einstein debates (which Bohr is widely considered to have won) was at least as prominent. Yet Einstein towers over all of them.

It’s not just physicists, either. Why is it that Einstein has become a household name and not, say, Watson and Crick, who discovered the structure of DNA, an accomplishment at least as important as relativity? Even less known is Paul Erdős, the most prolific mathematician since Euler in the 18th century, who had an outrageous personality to boot?

For that matter, consider Richard Feynman, who is probably the second most famous physicist of the 20th century. He was, by all accounts, a man of great accomplishment and charisma. However, his fame is probably more due to his performance on TV following the Space Shuttle Challenger disaster than for his theory of quantum electrodynamics.

There are many great golfers, but only one Tiger Woods, just as there are many great basketball players, but only one Lebron James. The truth is that individual human accomplishment is bounded, but success isn’t. Tiger Woods can’t possibly hit every shot perfectly any more than Lebron James can score every point. But chances are, both will outshine all others in the public consciousness, which will drive their fame and fortune.

What’s probably most interesting about Einstein’s fame is that it grew substantially even as he ceased to be a productive scientist, long after he had become, as Robert Oppenheimer put it, “a landmark, not a beacon.”

Success Relies On Networks

Let’s try and deconstruct what happened after Einstein’s arrival in the United States. The day after thousands came to greet Weizmann and the reporters mistakenly assumed that they were there for Einstein, he appeared on the front pages of major newspapers like The New York Times and the Washington Post. For many readers, it may have been the first time they had heard of any physicist.

As I noted above, this period was something of a heyday for physics, with the basic principles of quantum mechanics first becoming established, so it was a topic that was increasingly discussed. Few could understand the details, but many remembered the genius with the crazy white hair they saw in the newspaper. When the subject of physics came up, people would discuss Einstein, which spread his name further.

Barabási himself established this principle of preferential attachment in networks, also known as the “rich get richer” phenomenon or the Matthew effect. When a particular node gains more connections than its rivals, it tends to gain future connections at a faster rate. Even a slight change in early performance leads to a major advantage going forward.

In his book, Barabási details how this principle applies to things as diverse as petitions on Change.org, projects on Kickstarter and books on Amazon. It also applies to websites on the Internet, computers in a network and proteins in our bodies. Look at any connected system and you’ll see preferential attachment at work.

Small Groups, Loosely Connected

The civil rights movement will always be associated with Martin Luther King Jr., but he was far from a solitary figure. In fact, he was just one of the Big Six of civil rights. Yet few today speak of the others. The only one besides King still relatively famous today is John Lewis and that’s largely because of his present role as a US congressman.

Each of these men were not solitary figures either, but leaders of their own organizations, such as the NAACP, The National Urban League and CORE and these, in turn, had hundreds of local chapters. It was King’s connection to all of these that made him the historic icon we know today, because it was all of those small groups, loosely connected, that made up the movement.

In my book, Cascades, I explain how many movements fail to bring change about by trying to emulate events like the March on Washington without first building small groups, loosely connected, but united by a shared purpose. It is those, far more than any charismatic personality or inspirational speech, that makes a movement powerful.

It also helps explain something about Einstein’s iconic status. He was on the ship with Weizman not as a physicist, but as a Zionist activist and that dual status connected him to two separate networks of loosely connected small groups, which enhanced his prestige. So it is quite possible, if not probable, that we equate Einstein with genius today and not, say, Bohr, because of his political activity as much as for his scientific talent.

Randomness Rewards Persistence

None of this should be taken to mean that Einstein could have become a legendary icon if he hadn’t made truly landmark discoveries. It was the combination of his prominence in the scientific community with the happy accident of Weizmann’s adoring crowds being mistaken for his own, that made him a historic figure.

Still, we can imagine an alternate universe in which Einstein becomes just as famous. He was, for example, enormously quotable and very politically active. (He was, at one time, offered the presidency in Israel). So it is completely possible that some other event, combined with his very real accomplishments, would have catapulted him to fame. There is always an element of luck and randomness in every success.

Yet Einstein’s story tells us some very important things about what makes a great success. It is not, as many tell us, simply a matter of working hard to achieve something because human performance is, as noted above, bounded. You can be better than others, but not that much better. At the same time, it takes more than just luck. It is a combination of both and we can do much to increase our chances of benefiting from them.

Einstein was incredibly persistent, working for ten years on special relativity and another ten for general relativity. He was also a great connector, always working to collaborate with other scientists as well as political figures like Weizmann and even little girls needing help with their math homework. That’s what allowed him to benefit from loosely connected small groups.

Perhaps most importantly, these principles of persistence and connection are ones that any of us can apply. We might not all be Einsteins, but with a little luck, we just might make it someday.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: misterinnovation.com

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Transformation is a Journey Not a Destination

Transformation is a Journey Not a Destination

GUEST POST from Greg Satell

When Mohandas Gandhi was a young lawyer he was so shy that he couldn’t even bring himself to speak in an open courtroom. He was also impulsive and had a nasty temper. Nelson Mandela started out as an angry nationalist, who argued vigorously about joining forces with other racial groups in a coalition to fight against Apartheid.

Yet as I explain in my book Cascades, both men learned to conquer themselves and evolved into inspirational leaders that achieved transformational change. Movements, as the name implies, must be kinetic to be successful. They need to start in one place and end up somewhere else, evolving and changing along the way.

The same is true for an organization. To create a real impact on the world, you first must drive change internally. That’s not easy and it doesn’t happen all at once, which is why most transformations fail. However, successful leaders understand that to bring true change about it is not enough to simply plan and direct action, you have to inspire and empower belief.

Building A Genome of Values

When Lou Gerstner took over as CEO of IBM in 1993, the company was near bankruptcy. Many thought it was a dinosaur and should be broken up. Yet Gerstner saw that its customers needed it to help them run their mission-critical systems and the death of IBM was the last thing they wanted. He knew that to save the company, he would have transform it and he started with its values.

“At IBM we had lost sight of our values,” Irving Wladawsky-Berger, one of Gerstner’s chief lieutenants, told me. “IBM had always valued competitiveness, but we had started to compete with each other internally rather than working together to beat the competition. Lou put a stop to that and even let go some senior executives who were known for infighting.”

Pushing top executives out the door is never easy. Most are hard working, ambitious and smart, which is how they got to be top executives in the first place. Yet sometimes you have to fire nasty people, even if they outwardly seem like good performers. That’s how you change the culture and build a collaborative workplace.

In doing so, Gerstner led one of the greatest turnarounds in corporate history. By the late 1990s, his company was thriving again and continues to be profitable to this day. That would have never been true if he saw the problem as one of merely strategy and tactics. IBM had to change from the inside first.

Forging Shared Purpose And Shared Consciousness

When General Stanley McChrystal first took over Special Forces in Iraq, he knew he had a magnificently engineered military machine. No force in the world could match their efficiency, expertise and effectiveness. Yet, although they were winning every battle, they were losing the war.

The problem, as he explained in his book, Team of Teams, wasn’t one of capability, but interoperability. His forces would kill or capture Al Qaeda operatives and collect valuable intelligence. Yet it often took weeks for the prisoners to be questioned and the data to be analyzed. By that time, the information was often no longer relevant or actionable.

What McChrystal realized was that if his forces were going to defeat a network, they had to become a network and he set out to build connections within his organization to improve trust and interoperability. He upgraded liaison officer positions to only include the best operators and embedded commandos into intelligence teams and vice versa.

While formal structure and traditional lines of authority stayed very much in place, operating principles changed markedly. The transformation wasn’t immediate, but soon personal relationships and shared purpose replaced archaic customs, procedures and internal rivalries. Even those resistant to change found themselves outnumbered and began to alter their views and behavior.

That allowed McChrystal to also change the way he led. While in traditional organizations information is passed up through the chain of command and decisions are made at the top, McChrystal saw that model could be flipped. Now, he helped information get to the right place and decisions could be made lower down. As a result, operating efficiency increased by a factor of seventeen and soon the terrorists were on the run.

Forging Cultural Awareness

As one of the largest credit bureaus in the world, Experian’s customers depend on it to help determine which customers are good risks and which aren’t. If its standards are too lax, lending organizations lose money from making bad loans. However, the opposite is also true. There are also consequences if it fails to identify good credit risks.

“One of the things that made the US so successful throughout its history is the principle that everybody can participate in the American dream,” Alexander Lintner, Group President at Experian told me. “Yet today, if you don’t have access to credit, it is very hard to live that dream. You can’t buy a house or a new car or do many other things most people want to do.”

“If we rely solely on traditional credit scores about 26 million working age adults are left out of the credit system,” he continued. “That means our clients are missing out on as many as 26 million potential customers. So at Experian, we’ve been working on extended scores based on alternative data, such as rent and utility bills, to help establish a credit history.”

As a fairly recent immigrant to the country, Lintner knows the problems that having a lack of a formal credit history can cause. He credits his company’s efforts to promote cultural awareness programs internally through Employee Resource Groups for driving a passion to solve problems for customers and the public at large, especially related to financial inclusion.

Transformation Starts At Home

Clearly, Experian didn’t start its Employee Resource Groups as a product development strategy, but to improve the lives of its employees. “We strive to make a very diverse group of people feel that Experian is their home,” Lintner says. Nevertheless, Its internal commitment helped create empathy for those who are excluded from the financial system and helped lead to a solution.

Chances are, that won’t end with using alternative data to improve credit scores, but will affect many other facets of its business. To drive a true desire to solve problems, it must be genuine. Much like Gandhi and Mandela, you have to first drive change internally if you hope to create a real impact on the world.

Wladawsky-Berger talks about IBM’s earlier transformation in similar terms. “Because the transformation was about values first and technology second, we were able to continue to embrace those values as the technology and marketplace continued to evolve,” he told me and credits that transformation in values with the company’s continued profitability. While IBM has had its challenges over the years, nobody talks about breaking it up anymore.

What most organizations fail to understand and internalize is that transformation is always a journey, never a destination. There is no immediate return on investment from cultural change. Investors won’t cheer you on for firing top employees who are disruptive or creating Employee Resource Groups. Yet great companies understand that transformation always starts at home.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Pexels

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Big Companies Should Not Try to Act Like Startups

Big Companies Should Not Try to Act Like Startups

GUEST POST from Greg Satell

In 2009, Jeffrey Immelt set out on a journey to transform his company, General Electric, into a 124 year old startup. Although it was one of the largest private organizations in the world, with 300,000 employees, he sought to become agile and nimble enough to compete with high-flying Silicon Valley firms.

It didn’t end well. In 2017, problems in the firm’s power division led to massive layoffs. Immelt was forced to step down as CEO and GE was kicked off the Dow after 110 years. The company, which was once famous for its sound management, saw its stock tank. Much like most startups, the effort had failed.

Somewhere along the line we got it into our heads that large firms can’t innovate and should strive to act like startups. The truth is that they are very different types of organizations and need to innovate differently. While large firms can’t move as fast as startups, they have other advantages. Rather than try to act like startups, they need to leverage what they have.

Driving Innovation At Scale

The aviation industry is dominated by big companies. With a typical airliner costing tens of millions of dollars, there’s not much room for rapid prototyping. It takes years to develop a new product and the industry, perhaps not surprisingly, moves slowly. Planes today look pretty much the same as ones made decades ago.

Looks, however, can be deceiving. To understand how the aviation industry innovates, consider the case of Boeing’s 787 Dreamliner. Although it may look like any other airplane, Boeing redesigned the materials within it. So a 787 is 20 percent lighter and 20 percent more efficient than similar models. That’s a significant achievement.

Developing advanced materials is not for the faint of heart. You can’t do it in a garage. You need deep scientific expertise, state-of-the-art facilities and the resources to work for years—and sometimes decades— to discover something useful. Only large enterprises can do that,

None of this means that startups don’t have a role to play. In fact one small company, Citrine Informatics, is applying artificial intelligence to materials discovery and revolutionizing the field. Still, to take on big projects that have the potential to make huge global impacts, you usually need a large enterprise.

Powering Startups

All too often, we see large enterprises and startups as opposite sides of the coin, with big companies representing the old guard and entrepreneurs representing the new wave, but that’s largely a myth. The truth is that innovation often works best when large firms and small firms are able to collaborate.

Scott Lenet, President of Touchdown Ventures, sees this first-hand every day. His company is somewhat unique in that, unlike most venture capital firms, it manages internal funds for large corporations. He’s found that large corporations are often seen as value added investors because of everything they bring to the table.

“For example,” he told me, “one of our corporate partners is Kellogg’s and they have enormous resources in technical expertise, distribution relationships and marketing acumen. The company has been in business for over 100 years and it’s learned quite a bit about the food business in that time. So that’s an enormous asset for a startup to draw on.”

He also points out that, while large firms tend to know how to do things well, they can’t match the entrepreneurial energy of someone striving to build their own business. “Startups thrive on new ideas,” Lenet says “and big firms know how to scale and improve those ideas. We’ve seen some of our investments really blossom based on that kind of partnership.”

Creating New Markets

Another role that large firms play is creating and scaling new markets. While small firms are often more agile, large companies have the clout and resources to scale and drive impact. That often also creates opportunities for entrepreneurs as well.

Consider the case of personal computers. By 1980, startups like Apple and Commodore had already been marketing personal computers for years, but it was mostly a cottage industry. When IBM launched the PC in 1981, however, the market exploded. Businesses could now buy a computer from a supplier that they knew and trusted.

It also created fantastic opportunities for companies like Microsoft, Intel and a whole range of entrepreneurs who flocked to create software and auxiliary devices for PCs. Later startups like Compaq and Dell created PC clones that were compatible with IBM products. The world was never the same after that.

Today, large enterprises like IBM, Google and Amazon dominate the market for artificial intelligence, but once again they are also creating fantastic opportunities for entrepreneurs. By accessing the tools that the tech giants have created through APIs, small firms can create amazing applications for their customers.

Innovation Needs Exploration

Clearly, large firms have significant advantages when it comes to innovation. They have resources, customer relationships and deep expertise to not only invent new things, but to scale businesses and bring products to market. Still, many fail to innovate effectively, which is why the average lifespan of companies on the S&P 500 continues to decline.

There’s no reason why that has to be true. The problem is that most large organizations spend so much time and effort fine-tuning their operations to meet earnings targets that they fail to look beyond their present business model. That’s not due to any inherent lack of capability, it’s due to a lack of imagination.

Make no mistake, if you don’t explore, you won’t discover. If you don’t discover you won’t invent and if you don’t invent you will be disrupted. So while you need to focus on the business at hand, you also need to leave some resources un-optimized so that you can identify and develop the next great opportunity.

A good rule of thumb to follow is 70-20-10. Focus 70% of your resources on developing your present business, 20% of your resources on opportunities adjacent to your current business, such as new markets and technologies and 10% on developing things that are completely new. That’s how you innovate for the long term.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Pixabay

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Driving Change is Not Enough

You Also Have To Survive Victory

Driving Change is Not Enough

GUEST POST from Greg Satell

In early 2004, Viacom announced it would spin off Blockbuster Video, leaving CEO John Antioco master of his own fate. He moved quickly to meet the threat posed by Netflix head on, launching Blockbuster Online in 2004 and, after successfully testing the concept in a few markets, ending late fees in early 2005.

Still, not satisfied with playing catch-up, Antioco searched for model that would return his company to dominance. He found it in 2006 with the Total Access program. Within a few weeks of announcing the promotion, Blockbuster was winning the majority of new subscribers, outstripping Netflix for the first time.

It was a textbook case of sound strategy and execution meeting a disruptive threat, but it would not end well. In 2010 Blockbuster would declare bankruptcy and become a cautionary tale. We tend to think that driving change is merely a matter of coming up with a clever plan and executing well. Yet that isn’t enough. You also need learn how to survive victory.

Defying Critics And Beating The Odds

John Antioco was the quintessential American success story. Starting from humble origins as a management trainee at 7-Eleven, he rose to become a senior vice president at the company. He then moved on to run the struggling Circle K convenience store chain, which he turned around in just three years before moving on to Taco Bell and working the same magic there.

So when he joined Blockbuster as CEO in 1997, he was ideally suited to the job. Early in his tenure, he came up with a program to share rental revenues with the movie studios rather than buying the videos directly.The strategy improved the firm’s cash position and its access of high demand movies, while also allowing it to increase its marketing budget. It was a stroke of genius.

“The experienced video executives were skeptical,” Antioco would later tell me. “In fact, they thought that the revenue-sharing agreement would kill the company. But throughout my career, I had learned that whenever you set out to do anything big, some people aren’t going to like it. I’d been successful by defying the status quo at important junctures and that’s what I thought had to be done in this case.”

So Antioco approached the Netflix problem in the same way. He assembled a team of talented executives, came up with a strategy and worked to execute it flawlessly. Yet although his efforts were initially successful, there was a flaw in his plan that he didn’t see at the time and it would lead to Blockbuster’s downfall.

Failing To Align Stakeholders

Not everybody was thrilled with the moves Antioco made. Franchisees, many of whom had their life savings invested in their business, were suspicious of Blockbuster Online. They only owned 20% of the stores, but could make their displeasure known. The moves were also expensive, costing roughly $400 million to implement, and investors balked.

So while Blockbuster was making progress against the Netflix threat, as earnings turned to losses, its stock took a beating. The low price attracted corporate raider Carl Icahn, whose heavy-handed style made managing the company difficult. Things came to a head in late 2006 when Icahn demanded that Antioco accept only half of the bonus he was owed.

“I was at a point, both personally and financially, that I had little desire to fight it out anymore,” Antioco told me. He negotiated his exit early the next year and left the company in July of 2007. His successor, Jim Keyes, was determined to reverse Antioco’s strategy, cut investment in the subscription model, reinstated late fees and shifted the focus back to the retail stores.

When Blockbuster declared bankruptcy in 2010, the event was portrayed as corporate America’s inability to navigate digital disruption. Yet, as we have seen, nothing could be further from the truth. The management team came up with a viable strategy, executed it well and proved they could compete, yet still were unable to survive that victory.

Building Shared Purpose And Shared Consciousness

When General Stanley McChrystal took over command of special forces in Iraq, the situation he encountered was surprisingly similar to that of Antioco and Blockbuster. A well-led, well-resourced and highly efficient organization was faced with a disruptive challenge by a smaller, less powerful, but incredibly disruptive adversary.

Yet while Antico saw the problem as one of strategy and tactics, McChrystal saw it as one of one of organizational coherence. So he embarked on a program to improve the links both within his command and also to outside stakeholders, such as partner agencies, law enforcement and embassy personnel, to build “shared purpose and shared consciousness.”

“We began to make progress when we started looking at these relationships as just that: relationships — parts of a network, not cogs in a machine or outputs and inputs,” McChrystal would later write in his book, Team of Teams. Within a few years, the terrorists were on the run.

The difference in outcomes is striking. Antioco, who had built his career on defying the critics, largely ignored their concerns and pressed on with his strategy. McChrystal, on the other hand, understood that if he couldn’t get key stakeholders on board, the strategy wouldn’t matter. He worked on building relationships not to overpower, but to attract others to his cause. There were still critics, but they were vastly outnumbered.

You Need A Plan To Survive Victory From The Start

In my book, Cascades, I cover a wide range of transformational efforts, from revolutionary political movements to corporate turnarounds. In every case, the movement for change inspired others to move against it. As Saul Alinsky pointed out decades ago, every revolution provokes a counterrevolution.

I saw this first hand in Ukraine’s Orange Revolution, which I personally took part in. Five years after we protested in the bitter cold to overturn a falsified election, we saw the target of our ire, Viktor Yanukovych, win the presidency in an election that outside observers judged to be legitimate. Later, similar events played out in the aftermath of Egypt’s Arab Spring.

What makes the difference is not a particular strategy or persona, but whether an organization can align based on shared values and purpose. It wasn’t that Blockbuster franchisees were worried that Antioco’s plan wouldn’t succeed, they were terrified that it would and they would be left behind. Investors, for their part, were more focused on earnings than Antioco’s vision.

Yet shared values are what enables a transformation to succeed beyond a few initial victories. As Irving Wladawsky-Berger, a key player in IBM’s historic turnaround in the 90s told me, “Because the transformation was about values first and technology second, we were able to continue to embrace those values as the technology and marketplace continued to evolve.”

And that’s what so often makes the difference between ultimate success and failure. Those that see driving change as merely a series of benchmarks often find their efforts thwarted. Those that build a plan to survive victory based on the forging of shared values, are much more likely to prevail. Transformation is always a journey, never a destination.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Wikimedia Commons

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Build Trust Before Beginning a Transformation

Build Trust Before Beginning a Transformation

GUEST POST from Greg Satell

A few years ago I was invited by Accenture Strategy, along with other thought leaders such as Bruce Weinstein and Andrew Winston, to discuss its research on trust and competitive agility. In a study of 7,000 companies the firm found that trust among a diverse ecosystem of stakeholders is increasingly becoming a competitive advantage.

One of the most interesting aspects of the discussion was how crucial trust is for driving transformation and change. We tend to think of trust as static, but Accenture’s research, as well as that of the participants, made it clear that trust is especially important when you need to drive an organization to do something different.

All too often, transformation is seen as a simple matter of strategy and tactics, but it’s far more than that. Nobody can really drive change alone. You need buy-in from a variety of stakeholders, such as customers, employees, suppliers, analysts and investors to make it work. So before you set out to transform your organization, you first need to build trust.

Purpose, Values And Constraints

Every change effort starts out with a grievance. Sales are down, customers are unhappy, regulation restricts a once profitable activity or something else. That’s what drives the need to change, but it does little to provide the will to change. In researching my book Cascades, I found that every successful change effort starts by transforming an initial grievance into an affirmative “vision of tomorrow.” To drive a true transformation, people need to believe in it.

For example, when Paul O’Neill took over as CEO at Alcoa in 1987, the company was in dire straits. So analysts were more than surprised when he declared that his first priority at the company would be safety. It was an odd vision for a struggling company, but O’Neill understood that improving safety would also improve operational excellence. The company hit record profits a year later.

Or consider Lou Gerstner’s tenure at IBM. When he arrived, the once high-flying firm was near bankruptcy and many thought it should be broken up. Yet Gerstner saw that by shifting its focus from its own “stack of proprietary products” to its customers’ “stack of business processes,” the company could have a bright future. The result was one of the greatest turnarounds in history.

Notice how each of these visions also included important constraints. When safety is the first priority, managers can’t cut corners. When customers’ “stack of business processes” is the company’s focus, salespeople can’t wring every last dollar out of each deal. Yet those constraints are crucial in building credibility with key stakeholders, such as unions and customers.

Small Groups, Loosely Connected

Anybody who has ever been married or had kids knows how hard it can be to convince even one person about a significant decision. So it is somewhat puzzling that business leaders so often think they can convince thousands through mass communication campaigns. The truth is that change happens when people convince each other.

That’s why every change efforts depends on small groups, loosely connected, but united by a shared purpose. Small groups engender trust, loose connections provide reach and a shared purpose gives a change effort a raison d’être. You need all three to successfully drive a transformation.

Consider the case of Wyeth Pharmaceuticals, which in 2007 saw sales for one of its top drugs fall by 70% due to the launch of a generic version. In order to compete more effectively, the company’s leadership embarked on an ambitious effort to instill lean manufacturing practices across 25 sites employing 17,000 people.

Yet rather than try to transform the whole company all at once, it chose one keystone change, involving factory changeovers, at one facility. It had limited impact, but with the success of that one initiative at one facility, it then moved on to others, implementing the transformation in phases, speeding up as the process gained momentum.

The result was a 25% reduction in costs, an improvement in quality and a more motivated workforce. It’s tough to imagine how that could have been achieved if the management had simply decided to cut salaries instead.

Training To Empower Transformation

When Barry Libenson first arrived at Experian as Global CIO in 2015, he spent the first few months talking to customers and everywhere he went they were asking for the same thing: access to real-time data. That was much easier said than done, because it meant that he would have to shift from a traditional data infrastructure to the cloud, which would entail far more than just implementing new technologies.

“The organizational changes were pretty enormous,” Libenson told me. “For example, agile development requires far more collaboration than traditional waterfall development, so we needed to physically reconfigure how people were organized. We also needed different skill sets in different places so that required more changes and so on.”

To spur these changes, the company identified high potential employees that it thought could help drive change. It also brought in outside partners to train them in agile development, so that they could train and coach others. Those employees then became centers of excellence and helped drive change even further throughout the organization.

“Building trust was crucial to making it all work,” Vijay Mehta, Chief Innovation Officer at the credit bureau stressed to me. “When you are trying to build an innovative, fail-fast culture, people need to trust that they won’t be penalized for being ambitious and failing. So that had to come from the top and be constantly pushed all the way down to make it all work.”

Transformation Is Always A Journey, Never A Destination

All too often, we see change through the lens of a specific objective. Paul O’Neill needed to return his company to operational excellence. Wyeth needed to cut costs to compete with generics. To provide its customers with the access to real-time data, Experian needed to shift its decades-old infrastructure to the cloud.

Yet change is never as easy as it first would seem, because the status quo has inertia on its side, which can be a powerful force in any enterprise. In fact, research by McKinsey has found that only 26% of transformational efforts succeed. The reason is that change is often narrowly construed as a series of procedures, a cost cutting target or a technology implementation project.

Yet Alcoa, IBM, Wyeth and Experian succeeded where most fail because they saw driving change as more than just a series of objectives, but as a shift in values, skills and capabilities. That’s why they started not with a detailed plan, but with building trust, because leaders can’t implement change, they can only inspire and empower it.

The truth is that transformation is always a journey, never a destination. O’Neil’s focus on safety unlocked a passion for operational excellence. Gerstner’s focus on IBM’s customers led it to a highly profitable service business based on deep partnerships. Wyeth’s lean manufacturing program empowered its employees to create value for the company and its customers. Experian’s shift to the cloud was just a prelude to an ambitious foray into artificial intelligence.

None of this would be possible without trust, because trust is open ended. It is, in its essence, a social contract that demands that employees, customers and other stakeholders are not treated as merely means to an end, but ends in themselves.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Unsplash

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Four Ways To Empower Change In Your Organization

Four Ways To Empower Change In Your Organization

GUEST POST from Greg Satell

In 1957, Ken Olsen founded Digital Equipment Corporation (DEC) with his MIT classmate, Harlan Anderson, and by the 1960s, the company had pioneered the minicomputer revolution. Much cheaper than IBM mainframes, but still powerful enough to be useful, these machines helped make DEC one of the world’s leading technology companies.

Hailed as a visionary, Olson was named “America’s most successful entrepreneur” by Fortune magazine in 1986. Yet as AnnaLee Saxenian explained in Regional Advantage, by that time the minicomputer industry was already being disrupted by PC’s and DEC would never recover. It was acquired by Compaq in 1998.

The truth is that everybody gets disrupted eventually, even a visionary entrepreneur like Olsen. What makes the difference is whether you are able to chart a new path. That takes more than merely being smart and ambitious, you need to empower change from within. It’s never easy, but there are some basic principles that can help you reinvent your organization.

1.Identify A Keystone Change

Much like DEC in the 80s, by the 1990s IBM had hit hard times. Squeezed between low cost PC’s made by firms like Compaq, Intel based servers and a software industry dominated by Microsoft, IBM was near bankruptcy. Many observers, both inside and outside the company, thought that it should be broken up.

Yet its incoming CEO, Lou Gerstner, saw things differently. As a former customer, he knew how important IBM was to running critical business processes of large organizations. As he talked to other customers, he found they felt the same way. In fact, they were terrified of IBM being broken up. If he could refocus the company on fulfilling that need, he could save it.

That was easier said than done though. IBM had a hardwired culture of “if it was a good idea, we would have already done it” that had been ingrained over decades. So he needed to identify a keystone change — one that would be clear and tangible, involve multiple stakeholders and pave the way for future change — to make a transformation possible.

So Gerstner built a new business model aimed at the customers’ “stack of business processes” rather than its own “stack of proprietary technologies.” That led to a successful new service business, an e-business initiative and a new line of Linux based servers. Within a few years, he had achieved one of the greatest turnarounds in corporate history.

2. Empower Change Agents

Probably the greatest misconception about change is that a leader can force it through. Even as skilled an executive like Lou Gerstner needed others to actually implement the changes at IBM, his role was mostly to inspire belief that it could be done. The truth is that you can’t force change. You need need to attract rather than try to overpower.

As Zeynep Ton explains in The Good Jobs Strategy, when the recession hit in 2008, Mercadona, Spain’s leading discount retailer, needed to cut costs. But rather than cutting wages or reducing staff, they asked their employees to contribute ideas. The result was that the company managed to reduce prices by 10% and increased their market share from 15% to 20% between 2008 and 2012

Or consider England’s National Health Service, a truly mammoth organization of with 1.3 million employees serving 54 million citizens. In 2013 it introduced Change Day, on which employees pledge to do one thing to improve the life of patients. In that first year there were 189,000 pledges for action and that figure rose to 800,000 in the second year.

Many of the initiatives were small, but multiplied by hundreds of thousands, it has created a significant impact. As Helen Bevan, Chief Transformation Officer for the NHS Horizons team put it to me, “Programmatic methods have their place, but if you want to create change on a truly massive scale, a top-down approach on its own doesn’t work so well. You need to get people invested in change. They have to own it.”

3. Network Your Movement

When Rick Warren first arrived in Orange County, California in 1979, he saw the opportunity to build a new kind of church. He had spent three months going door-to-door and found that while many residents identified themselves as christians, they found church services boring and irrelevant. So he began to cater his services and programs to meet their needs.

Today, his Saddleback Church is one of the largest congregations in the world, with 20,000 people attending sermons every week. Yet looks can be deceiving. What makes Warren such a powerful force isn’t those massive weekend services, but the thousands of small prayer groups that that meet during the week.

We tend to think of effective leaders as solitary figures, able to compel action through sheer force of will, but actually they are shrewd managers of complex ecosystems and that’s key to how they are able to empower transformational change. Martin Luther King Jr., for example, didn’t lead the charge for civil rights alone, but as one of the Big Six. In much the same way, Nelson Mandela had to build consensus among many competing interests within the African National Congress.

Today IBM, having had its core business disrupted by the cloud, is taking a network approach to quantum computing. Rather than having its scientists work alone in secret labs, it has set up a Q Network of leading companies, startups, academic institutions, and national research labs to advance the technology.

4. Survive Victory

The most important thing to remember is that the battle against disruption never ends. All too often, an initial victory soon reverses itself. Many turnaround efforts see some initial improvement as excitement about a new direction motivates people to perform better, then dissipates as harsh realities take hold.

The case of Ken Olsen and DEC provides some insight into why this happens. While he was hailed as a visionary leader, the minicomputer revolution he spawned was rooted in a particular technology. When that technology ceased to be compelling, as always happens eventually, his company could no longer compete effectively.

Now consider what Irving Wladawsky-Berger, one of Gerster’s key lieutenants, told me about IBM’s historic turnaround. “The Gerstner revolution wasn’t about technology or strategy, it was about transforming our values and our culture to be in greater harmony with the market… Because the transformation was about values first and technology second, we were able to continue to embrace those values as the technology and marketplace continued to evolve.”

That’s why, as I explain in my book Cascades, it’s critical that you make a plan to survive victory and that plan must be rooted in fundamental values rather than in a particular strategy or set of tactics. To overcome disruption for the long-term, you need to not just transform the organization but, more importantly, the fundamental beliefs that drive it.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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Hire for Diversity and Empathy to Drive Innovation

Hire for Diversity and Empathy to Drive Innovation

GUEST POST from Greg Satell

One of the questions I get asked quite often, both at conferences and when coaching executives, is what type of personality is best suited for innovation so that they can optimize their hiring. Are technical people better than non-technical people? Introverts better than extroverts? Is it better to hire foxes or hedgehogs?

The first thing I tell them is that there has been no definitive research that has found that any specific personality type contributes to innovation. In fact, in my research I have found that there is not even a particular kind of company. If you look at IBM, Google and Amazon, for example, you’ll find that they innovate very differently.

The second thing I point out is that every business needs something different. For example, Steve Jobs once noted that since Apple had always built integrated products, it never learned how to partner as effectively as Microsoft and he wished it would have. So the best approach to hiring for innovation is to seek out those who can best add to the culture you already have.

Foxes vs. Hedgehogs

In Good to Great, author Jim Collins invokes Isaiah Berlin’s famous essay about foxes and hedgehogs to make a point about management. “The fox,” Berlin wrote, “knows many things, but the hedgehog knows one big thing.” Collins then devotes an entire chapter to explaining why hedgehogs perform better than foxes.

Yet as Phil Rosenzweig points out in The Halo Effect, this is a highly questionable conclusion. Even if it were true that the most successful companies focus on one core skill or one core business, that doesn’t mean that focusing on “one big thing” will make you more successful. What it probably means is that by betting on just one thing you increase your chances of both success and failure.

Think about what would have happened it Apple had said, “we’re going to focus just on computers” or if Amazon had focused on just books. There is also evidence, most notably from Philip Tetlock, that foxes outperform hedgehogs on certain tasks, like making judgments about future events.

So the best strategy would probably be to hire a fox if you’re a hedgehog and to hire a hedgehog if you’re a fox. In other words, If you like to drill down and focus on just one thing, make sure you have people around that can help you integrate with other skills and perspectives. If you like to dabble around, make sure you have people who can drill down.

Introverts vs Extroverts

We tend to see leaders as brash and outgoing, but my colleague at Inc, Jessica Stillman points out that introverts can also make great leaders. They tend to be better listeners, are often more focused and are better prepared than social butterflies are. Those are great qualities to look for when adding someone to add to your team.

Still, you wouldn’t want to have an entire company made up of introverts and, in Social Physics, MIT’s Sandy Pentland explains why. Perhaps more than anything else, innovation needs combination. So it’s important to have people who can help you connect to other teams, both internally and externally, bring in new ideas and help take you in new directions.

Consider Amazon, a company that is not only incredibly successful but also highly technically sophisticated. You might expect that it hires a lot of introverted engineers and I’m sure that’s true. Yet the skill it is most focused on is writing, because it understands that to create a successful product, you need to get a lot of diverse people to work together effectively.

So much like with foxes and hedgehogs, if you’re an introvert you should make sure that you have extroverts that can help you connect and if you are an extrovert, make sure you have people who can focus and listen.

Technical vs. Non-Technical People

By all accounts, Steve Jobs was never more than a mediocre engineer, but was clearly a legendary marketer. Nevertheless, he felt strongly that technical people should be in charge. As he once told his biographer, Walter Isaacson, in an interview:

“I have my own theory about why the decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The product starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company.”

Yet the story is not nearly as clear cut as Jobs makes it out to be. When IBM hit hard times it was Lou Gerstner, who spent his formative professional years as a management consultant, that turned it around. Steve Ballmer clearly made missteps as CEO of Microsoft, particularly in mobile, but also made the early investments in cloud technology led to Microsoft’s comeback.

So much like with foxes vs. hedgehogs and introverts vs. extroverts, the choice between technical and non-technical people is a false one. Far more important is how you build a culture in which people of varied skills and perspective can work closely together with a shared sense of purpose.

Today, as we enter a new era of innovation, organizations will need a far more diverse set of skills than ever before and building a collaborative culture will be key to success.

Collaboration Is The New Competitive Advantage

Over the past few decades, the digital revolution has shaped much of our thinking about how we advance a business. Digital technology required a relatively narrow set of skills, so hiring people adept at those skills was a high priority. Yet now, the digital era is ending and we need to rethink old assumptions.

Over the next decade, new computing architectures like quantum and neuromorphic computing will rise to the fore. Other fields, such as genomics and materials science are entering transformative phases. Rather than living in a virtual world, we’ll be using bits to drive atoms in the physical world.

That will change how we need to innovate. As Angel Diaz of IBM told me a few years back, “…we need more than just clever code. We need computer scientists working with cancer scientists, with climate scientists and with experts in many other fields to tackle grand challenges and make large impacts on the world.”

That’s why today collaboration is becoming a real competitive advantage and we need to focus far less on specific skills and “types” and far more on getting people with diverse skills, backgrounds and perspectives to work together effectively.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Unsplash

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We Change the World with Ecosystems Not Inventions

We Change the World with Ecosystems Not Inventions

GUEST POST from Greg Satell

Imagine yourself as the CEO of a Dow component company in 1919. You are fully aware of the technological forces that would shape much of the 20th century, electricity and internal combustion. You may have even be an early adopter of these technologies. Still, everything seems like business as usual.

What you don’t see, however, is that these inventions are merely the start. Secondary technologies, such as home appliances, radio, highways and shopping malls, would reshape the economy in ways that no one could have predicted. Your company has a roughly 50% chance of remaining on the Dow a decade later.

We are at a similar point today. New inventions, such as quantum computing, neuromorphic chips, synthetic biology and advancements in materials science already exist. It is not those inventions, however, but the ecosystems they spawn that will shape the decades to come. We’re all going to have to learn how to compete in a new era of innovation.

A 50-Year Boom In Productivity

By 1919, electricity was already a 40-year old technology. In 1882, just three years after he had almost literally shocked the world with his revolutionary electric light bulb, Thomas Edison opened his Pearl Street Station, the first commercial electrical distribution plant in the United States. By 1884 it was already servicing over 500 homes.

Yet although electricity and electric lighting were already widespread in 1919, they didn’t have a measurable effect on productivity and a paper by the economist Paul David helps explain why. It took time for manufacturers to adapt their factories to electricity and learn to design workflow to leverage the flexibility that the new technology offered. It was the improved workflow, more than the technology itself, that drove productivity forward.

Automobiles saw a similar evolution. It took time for infrastructure, such as roads and gas stations, to be built. Improved logistics reshaped supply chains and factories moved from cities in the north — close to customers — to small towns in the south, where labor and land were cheaper. That improved the economics of manufacturing further.

Yet all of that was just prelude to the massive changes that would come. Electricity spawned secondary innovations, such as household appliances and radios. Improved logistics reshaped the retail industry, shifting it from corner stores to supermarkets and shopping malls. As Robert Gordon explains in The Rise and Fall of American Growth, these changes resulted in a 50-year boom in productivity between 1920 and 1970.

The Digital Revolution

In 1984, Steve Jobs and Apple launched the Macintosh, which heralded a new era of computing. Based on technology developed for the Xerox Alto in the early 1970s, with a bitmapped screen, a graphical user interface and a mouse, it made computing far more accessible to regular consumers.

Before long, personal computers were everywhere. Kids would use them to write term papers and play video games. Lotus 1-2-3 spreadsheet software became a staple for small businesses and entrepreneurs. Desktop publishing helped democratize the flow of information. The computer age had begun in earnest.

Yet much like electricity and internal combustion earlier in the century, the effect on productivity was negligible, causing the Nobel Prize winning economist Robert Solow to quip, “You can see the computer age everywhere but in the productivity statistics.” In fact, it wouldn’t be till the late 90s that we saw a measurable impact from computers.

Once again, it wasn’t any particular invention that made the difference, but an ecosystem that built up over years. The Internet paved the way for open-source software. Hordes of application developers created industry specific tools to automate almost every imaginable business process. Computers converged with phones to create the mobile era.

The 30 Years Rule

Look back at the two major eras of technology in the 20th century and a consistent theme begins to emerge. An initial discovery of a new phenomenon, such as electricity and internal combustion, is eventually used to create a new invention, like the light bulb or the automobile. This creates some excitement, and builds the fortunes of a few entrepreneurs, but has little impact on society as a whole.

Yet slowly, an ecosystem begins to emerge. Roads and gas stations are built. Household appliances and personal computers are invented. Secondary inventions, such as shopping malls, home appliances, the Internet and application software help create new business models. Those business models create new value and drive productivity.

The truth is that innovation is never a single event, but a process of discovery, engineering and transformation. As a general rule of thumb, it takes about 30 years for all of this to take place, because thousands, if not millions of people need to change their behavior, coordinate their activity and start new businesses.

That’s why the future will always surprise us. It is not any one great event that tips the scales, but some hardly noticeable connection that completes the network. Network scientists call this type of thing an ‘instantaneous phase transition’ and there’s really no way to predict exactly when it will happen, but if you learn to look for telltale signs, you can see one coming.

A New Era Of Innovation

Today, we appear to be in a very similar situation to what those executives faced in 1919. We have decoded the human genome. Artificial intelligence has become a reality that everyone, for the most part, accepts. New computing architectures, such as quantum computers and neuromorphic chips, are in late stages of development by a variety of companies.

Yet once again, the impact has been negligible and it’s not hard to see why. While these inventions, in some cases at least, are relatively mature, they have yet to create the ecosystems that can drive a true transformation. Today, however, we can clearly see those ecosystems being created.

In fact, in artificial intelligence we can already see a fairly well developed ecosystem emerging already. In synthetic biology and genomics we can begin to see one as well, although it is still nascent. IBM has created a Q Network of major companies, research labs and startups to support quantum computing.

Here’s what’s important to know: We can’t predict exactly when the system will tip, but it’s a good bet it will happen in the next decade. It is also likely that the impact will be equal to or greater than the 50 year boom that began in the 1920s. Finally, it won’t be driven by any particular invention, but by ecosystems. You need to start figuring out how you will connect.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Pixabay

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