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.

Four Questions That Make Better Innovators

1 Reply

Four Questions That Make Better Innovators

GUEST POST from Greg Satell

In 1999, the day before his eighth startup went public, Steve Blank decided to retire at the age of 45. With time to reflect, he sat in a ski lodge and began to write a memoir with a “lessons learned” section at the end of each chapter. “In hindsight, it was a catharsis of moving from one part of my life to another,” he later told me.

“I was 80 pages in when I realized there was a pattern. When I sat inside the building things didn’t go very well, but when I got outside the building things turned around and got much better,” he remembered. What he meant was that it was only when he got out and talked to customers that he could really get a handle on the business.

We like to think that innovation is about ideas, but it’s really about solving problems. In order to surface problems, you need to ask questions, which is why Steve’s businesses started doing better when he got out of the building to talk to customers. The better questions you ask, the better problems you can identify. Here are four questions that will help you do that.

1.Why?

Problems come in all shapes and sizes. Some problems are relatively minor and can be worked around. Others are more fundamental and represent serious impediments to effective operations. Clearly, the more fundamental the problem you can identify, the greater the impact you can create by solving it.

One very effective technique to do that is called the 5 Whys. For example, when NY Times columnist Charles Duhigg noticed that however much he and his wife wanted to get home on time to eat dinner with their kids, they inevitably ended up getting caught up at work and arriving home late, he began to ask “why?”

The first “why” of he and his wife arriving late to dinner was because they had work to finish. Why? Because there were pesky little tasks, like responding to emails, that they needed to get done. Why? Because they couldn’t get to them during the day. Why? Because they arrived at work just before their first meeting. Why? Because they were busy getting the kids ready for school.

By the fifth “why” he realized that the problem wasn’t so much that they got caught up at work, but that it took too long to get the kids ready for school. The conundrum was solved by having the kids lay out their clothes for school the night before. The Duhiggs soon began having family dinners regularly.

It’s an incredibly powerful technique. Each why takes you a bit deeper into the problem and, as you begin to identify root causes, you’ll be able to come up with more effective solutions.

2. Where’s The Monkey?

When I work with executives, they often have a breakthrough idea they are excited about. They begin to tell me what a great opportunity it is and how they are perfectly positioned to capitalize on it. However, when I begin to dig a little deeper it appears that there is some big barrier to making it happen. When I try to ask about that, they just shut down.

One reason that this happens is that there is a fundamental tension between innovation and operations. Operational executives tend to focus on identifying clear benchmarks to track progress. That’s fine for a typical project, but when you are trying to do something truly new and different, you have to directly confront the unknown.

At Google X, the tech giant’s “moonshot factory,” the mantra is #MonkeyFirst. The idea is that if you want to get a monkey to recite Shakespeare on a pedestal, you start by training the monkey, not building the pedestal, because training the monkey is the hard part. Anyone can build a pedestal.

The problem is that most people start with the pedestal, because it’s what they know and by building it, they can show early progress against a timeline. Unfortunately, building a pedestal gets you nowhere. Unless you can actually train the monkey, working on the pedestal is wasted effort.

3. How Will We Fail?

Innovation is not a mere intellectual endeavor. It’s highly emotional. You thrive on your hopes and dreams. That’s what keeps you going and helps you block out doubts, both your own and those of others. Failure is just not something you want to contemplate. It’s just too painful.

Yet thinking seriously about failure can actually help you succeed and there are two techniques that can help you do that productively. The first, called pre-mortems, asks you to imagine that the project has failed and figure out why it happened. The second, called red teaming sets up an independent team to find flaws in the idea.

The idea isn’t to figure out ways to kill the project, but to identify holes to be plugged. For example, when the Obama administration thought it had identified Osama bin Laden’s hideout, it set up a red team to challenge the evidence. Because the red team had no emotional attachment to the initial analysis, they were able to look at it far more objectively.

As we now know, the raid on bin Laden’s compound went ahead, but the red team was able to raise important questions that strengthened the plan. To successfully innovate, you need to do the same. Identify every potential for failure that you can so that you can address those issues before going forward.

4. What Kind Of Problem Are We Trying To Solve?

Go to any innovation conference and you will undoubtedly see a wide variety of innovation experts championing their favored strategy and each will have stories that will amaze you. Design thinking, disruptive innovation, lean startup methods and open innovation have all become buzzwords because they have produced real results.

Yet none of them is a cure-all. Each performs well with some classes of problems, but not so well in others. That’s why in my book, Mapping Innovation, I advocated using the whole innovation toolbox. The trick is to match the right type of problem with the right type of solution.

Innovation Matrix Greg Satell

The truth is that there is no one “true” path to innovation. Many organizations get stuck because they end up locking themselves into a single strategy. They find something that works and say, “this is how we innovate” and end up trying to apply essentially the same solution no matter what the problem is. Eventually, that ends badly.

That’s why it’s so important to ask good questions. Every problem is, to some extent, unique. You can’t simply assume you know the solution beforehand. That’s why Steve Blank’s businesses failed when he stayed “in the building” and prospered when he got out of it. If you want to become a better innovator. Ask better questions.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

How Networks Power Transformation

1 Reply

How Networks Power Transformation

GUEST POST from Greg Satell

In February 2004, Viacom announced that it would spin off Blockbuster Video into its own independent company, which gave its CEO, John Antioco, the opportunity to begin addressing the disruptive threat emanating from Netflix head on. He developed a viable strategy, executed it well, but in the end his efforts were for naught.

Around the same time General Stanley McChrystal was tapped to take command of Special Forces in Iraq. Much like Antioco and Blockbuster, he faced a disruptive threat in the form of Al Qaeda that, using unconventional tactics, threatened to thwart his efforts. Unlike Antioco, however, McChrystal succeeded brilliantly.

We tend to think about transformation in terms of strategy and tactics, but if that was all there was to it, Blockbuster would still be thriving today. As I explain in Cascades, the difference between Antioco and McChrystal wasn’t that one had a good plan and the other didn’t, but that McChrystal saw that he had to rewire the networks in his organization.

Why Blockbuster Really Failed

Today, Blockbuster is a cautionary tale, but for all the wrong reasons. When the spinoff was announced, Antioco moved quickly to build an online rental business and remove the late fees that so many found annoying. Later, in 2006, he created the Total Access program that allowed customers rent DVDs online and return them in stores.

The convenience of the Total Access program was something that Netflix couldn’t match and almost immediately Blockbuster began to surpass Netflix in adding new subscribers. Yet within a few months, a compensation dispute arose between Antioco and the corporate raider Carl Icahn, who had gotten control of the company. Antioco left, the new CEO reversed the strategy and Blockbuster declared bankruptcy in 2010.

The tensions had actually been building for some time. Antioco’s shift to the online business made franchisees, many of whom had their life’s savings tied up in Blockbuster stores, uneasy. The changes were also costly, which depressed earnings and made investors and analysts skeptical. The stock price cratered.

It was the low stock price that led Icahn to buy up stock in Blockbuster, a proxy fight that allowed him to take control of the company’s board, the compensation dispute, Antioco’s departure and the reversal of the strategy. What really killed Blockbuster wasn’t external competition, but internal opposition.

Addressing The Internal Struggle

While Antioco framed the challenge Blockbuster faced largely in terms of strategy and tactics, McChrystal saw his task as an internal struggle. His forces were among the best in the world and were winning every battle. Yet somehow, they were losing the war and losing it badly.

As McChrystal would later write, “the world had outpaced us. In the time it took us to move a plan from creation to approval, the battlefield for which the plan had been devised would have changed. By the time it had been implemented, the plan—however ingenious in its initial design—was often irrelevant.”

So instead of trying to come up with better plans, McChrystal sought to change how his organization functioned. The problem, as he saw it, was one of interoperability. His forces needed not only to work with each other, but also partner agencies and other stakeholders, in order to succeed.

“I needed to shift my focus from moving pieces on the board to shaping the ecosystem,” McChrystal would remember. The moves paid off. The tide of the war soon shifted and the forces under his command would achieve their major objectives.

Rewiring Networks

The main difference between Antioco and McChrystal had less to do with their actions than it did with their mindsets. Where Antioco saw his task in terms of planning and execution, McChrystal saw his in terms of connection. “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,” he would later write.

Antioco would take a very different approach. He set up the Blockbuster Online team in a warehouse down the street its Dallas headquarters. That allowed him to pursue the online strategy with little disruption to operations in the core business, but it also allowed suspicion and fear to fester and grow.

McChrystal, on the other hand, moved to forge links anywhere he could. He started embedding intelligence analysts into commando teams and vice versa. Liaison officer positions, traditionally given to marginal performers or those nearing retirement, were now earmarked for the very best operators.

Moves like these slowed down the individual teams — commandos in business suits placed at embassies don’t kill many terrorists — but that wasn’t the point, building networks of trust and interoperability was. Over the next few years, the effectiveness of his organization improved markedly and overall operating efficiency improved by a factor of seventeen.

Rethinking Leadership For A Networked Age

To a large degree, the most important difference between Antioco and McChrystal was how they saw their role as leaders. Antioco was truly a brilliant strategist and had built an enormously successful career devising effective plans and driving efficient execution. He had encountered opposition before, but had always been able to prevail by showing results.

McChrystal came to see things differently. “I began to reconsider the nature of my role as a leader,” he would later write. “The wait for my approval was not resulting in any better decisions, and our priority should be reaching the best possible decision that could be made in a time frame that allowed it to be relevant.

In other words, where Antioco saw a vertical hierarchy for carrying out tasks efficiently, McChrystal saw a horizontal network of connections which needed to be cultivated. Where Antioco built a strong senior management team to drive his strategy, McChrystal forged shared values throughout his organization so that units could act independently.

The truth is that we need to reimagine leadership for a networked age to focus less on driving strategy and tactics and more on widening and deepening connections in networks. Or, as McChrystal put it, “The role of the senior leader was no longer that of a controlling puppet master, but that of an empathetic crafter of culture.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Are We Abandoning Science?

2 Replies

Are We Abandoning Science?

GUEST POST from Greg Satell

A recent Pew poll found that, while Americans generally view scientific expertise in high regard, there are deep pockets of mistrust. For example, less than half of Republicans believe that scientists should take an active role in policy debates and significant minorities question the transparency and integrity of scientific findings.

An earlier study done by researchers at Ohio State University found that, when confronted with scientific evidence that conflicted with their pre-existing views, such as the reality of climate change or the safety of vaccines, partisans would not only reject the evidence, but become hostile and question the objectivity of science.

This is a major problem, because if we are only willing to accept evidence that agrees with what we already think we know, we are unlikely to advance our understanding. Perhaps even worse, it opens us up to being influenced by pundits —those with strong opinions but questionable expertise. When we turn our backs on science, we turn our backs on truth.

The Rise Of Science

When René Descartes wrote “I think, therefore I am” in the mid 1600s, he was doing more than coining a clever phrase, he was making an argument for a rational world ruled by pure logic. He believed that you could find the answers to problems you needed to solve merely by thinking about them clearly.

Yet Descartes and his rational movement soon ran out of steam. Many of the great minds that followed, such as John Locke and David Hume, took a more empirical view and argued that we can only truly understand the world around us through our experiences, however flawed and limited they may be.

It was this emphasis on experiences that led us to the concept of expertise. As the Renaissance and the Enlightenment gave way to the modern world, knowledge became specialized. It was no longer enough to think about things, the creation of knowledge came to be seen as arising from a scientific process of testing hypotheses through experiment.

This was a major shift, because you could no longer simply argue about things like how many angels could fit on the head of a pin, you actually had to put your thoughts to the test. Others could then examine the same evidence and see if they came to the same conclusions as you did. Thinking about things wasn’t enough, you had to show that they worked in the real world.

The Soccer Ball You Can’t See

Science is a funny thing, full of chance discoveries, strange coincidences and unlikely moments of insight. In his book, The God Particle, the Nobel prizewinning physicist Leon Lederman tells a metaphorical story about an alien race watching a soccer game to illustrate how it is practiced.

These aliens are very much like humans except that they can not see black and white patterns. If they went to a soccer game, they would be utterly confused to see a bunch of guys running around a field for no apparent reason. They could come up with theories, formulas and other conjectures, but would fail to make useful predictions.

Eventually, one might notice a slight bulge in the net of the goal just as the crowd erupted in a cheer and come up with a crazy idea about an invisible ball. Through further observation, they could test the hypothesis and build evidence. Although they could never actually see the ball, they could catalogue its effects and use them to understand events.

His point is that science is not common sense. It deals with things that we do not directly experience, but nevertheless have concrete effects on the world we live in. Today, we live in a world of the visceral abstract, where oddball theories like relativity result in real innovations like microprocessors and the Internet.

Cargo Cult Science

Because so much of science deals with stuff we can’t directly experience, we need metaphors like Lederman’s story about the aliens to make sense of things. Part of the fun of science is letting your imagination run wild and seeing where things go. Then you can test those ideas to see if they actually reflect reality.

The problem is that pundits and flakes can do the same thing — let their imagination run wild — and not bother to test whether they are true. Consider the anti-vax movement, which has no scientific basis, but has gone viral and led to a resurgence of diseases that were nearly extinct. Nevertheless, dressed up in some scientific sounding words, the idea that vaccines cause disease in children can be very convincing.

The physicist Richard Feynman called this cargo cult science, after a strange phenomenon that takes place on some islands in the South Pacific in which some tribes try to mimic the use of technology. For example, they build mock airstrips in the hopes that airplanes would appear with valuable cargo.

What makes science real is not fancy sounding words or white lab coats, but the fact that you work under certain constraints. You follow the scientific method, observe professional standards and subject your work to peer review. Pundits, on the other hand, do none of these things. Simply having an opinion on a subject will suffice.

The New Mysticism

Clearly, science is what created the modern world. Without science, you cannot have technology and without technology, you cannot create prosperity. So, on purely economic terms, science is extremely important to our success as a society. We need science in order to progress.

Yet in broader terms, science is the search for truth. In a nutshell, science is the practice of coming up with testable statements to see what’s possible. That’s what separates Darwin’s theory of natural selection and the big bang from nonscientific theories. The former is a matter of science, which can be tested through experiment and observation, the latter a matter of faith and belief.

Consider what Marco Rubio said in an interview with GQ about the age of the universe a few years ago:

“I think the age of the universe has zero to do with how our economy is going to grow. I’m not a scientist. I don’t think I’m qualified to answer a question like that. At the end of the day, I think there are multiple theories out there on how the universe was created and I think this is a country where people should have the opportunity to teach them all.”

Yet the big bang is not just a theory, but the result of a set of theories, including general relativity and quantum mechanics, combined with many observations over a period of decades. Students in physics class are supposed to learn about the big bang not to shape their religious beliefs, but because of its importance to those underlying theories.

And those concepts are central to our everyday lives. We use relativity to calibrate GPS satellites, so that we can find restaurants and target missiles. Quantum mechanics gave us lasers and microprocessors, from which we make barcode scanners and iPhones. In fact, the theories underlying big bang are essential for our modern economy to function.

When we turn our backs on science, what we are left with is essentially a form a mysticism. We can listen to our inner voices to decide what we believe and, when faced with a competing idea, ascribe its provenance to only someone else’s inner voice. Once we make truth a matter of opinion, we start our way down a slippery slope.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

The Shareholder Value Myth

Leave a reply

The Shareholder Value Myth

GUEST POST from Greg Satell

The Business Roundtable, an influential group of almost 200 CEOs of America’s largest companies, a few years ago issued a statement that discarded the old notion that the sole purpose of a business is to provide value to shareholders. Instead, it advocated serving a diverse group of stakeholders including customers, employees, suppliers and communities.

The idea is not a new one. In fact, Jack Welch once called shareholder value the dumbest idea in the world. Nevertheless, The Wall Street Journal opinion page immediately pounced, suggesting that the move was just an attempt to “appease the socialists” and that it would undermine financial accountability.

It’s hard to see how acknowledging accountability to stakeholders other than investors would undermine accountability to investors. Shareholders, after all, have the power to fire CEOs. Even more importantly though, the notion that performance can be reduced down to a single metric is foolhardy and dangerous. Managing a business is simply tougher than that.

The Principal-Agent Problem

Every business seeks to make a profit. Ones that do not achieve that basic requirement do not stay in business for long. However, that doesn’t mean that the only reason a business exists is to make money. Clearly, in order to earn a profit over the long term, you need to provide value for others. Anybody who has ever run a business knows this.

Yet a large corporation is very different from an ordinary business in that there is what’s known as a principal-agent problem. The shareholders are a dispersed group that have relatively little information, while the managers of the business are a small group with an asymmetric informational advantage.

So you can see how the concept of shareholder value can be attractive. If you can reduce performance down to a single metric, such as stock performance, then the principal-agent problem is solved. Shareholders, as principal owners of the company, can hold managers, as their agents, accountable.

Yet this is a fantasy. There are many things that a manager can do, such as reducing investment or making a lot of sexy acquisitions, that can increase short-term financial performance, but hurt performance in the long run. So the concept of shareholder value has always been a murky one.

From Value Chains To Ecosystems

For decades, the dominant view of strategy was based on Michael Porter’s ideas about competitive advantage. In essence, he argued that the key to long-term success was to dominate the value chain by maximizing bargaining power among suppliers, customers, new market entrants and substitute goods.

Yet there was a fatal flaw in the notion that wasn’t always obvious. In an industrial economy, where technology is relatively static, value chains are stable. However, in a fast moving information economy, firms increasingly depend on ecosystems to compete. That drastically changes the game.

Ecosystems are nonlinear and complex. Power emanates from the center instead of at the top of a value chain. You move to the center by connecting out. So while an industry giant may possess significant bargaining power, exercising that bargaining power can be problematic, because it can weaken links to other nodes in the ecosystem.

So the increased emphasis on stakeholders is not merely some newfound socialistic altruism, but a realistic strategic shift. In a networked-driven world you need to continually widen and deepen links to other stakeholders within the ecosystem. That’s how you gain access to resources like talent, technology and information.
Building Power Through Gaining Trust

In a famous 1937 paper, Nobel Prize winning economist Ronald Coase argued that the function of a firm was to minimize transaction costs, especially information costs. For example, it makes sense to keep employees on staff, even if you might not need them today, so that you don’t need to search for people tomorrow when a job comes in.

Another way to minimize transaction costs is through building trustful relationships. If the stakeholders within ecosystems that you operate trust you, you gain greater access to information and decrease the amount of resources you need to spend on enforcing formal and informal norms. In fact, a study from Accenture Strategy recently found that building trust with stakeholders is increasingly becoming a competitive advantage.

In The Good Jobs Strategy MIT’s Zeynep Ton found that investing more in well-trained employees can actually lower costs and drive sales in the low-cost retail industry. While the sector is often thought of as highly transactional, her research indicates that a dedicated and skilled workforce results in less turnover, better customer service and greater efficiency.

For example, when the recession hit in 2008, Mercadona, Spain’s leading discount retailer, needed to cut costs. But rather than cutting wages or reducing staff, it asked its employees to contribute ideas. The result was that it managed to reduce prices by 10% and increased its market share from 15% in 2008 to 20% in 2012.

In other cases, competitors collaborate to improve their industrial ecosystems for customers. So it is should not be surprising that firms are increasingly investing in structures that are focused on ecosystems, such as Internet of Things Consortium, Partnership on AI and the Manufacturing Institutes. Again, power in an ecosystem resides at the center, not at the top, so to compete you have to connect.

Clearly, it could be argued that by investing in these partnerships, business are increasing shareholder value. However, to do so would be to essentially argue that investing in stakeholder ecosystems and pursuing shareholder value are equivalent, which reduces the debate to one of semantics rather than substance.

Manage For Mission, Not For Metrics

Perhaps one of the most interesting lines in the Business Roundtable statement was the assertion that “each of our individual companies serves its own corporate purpose,” because it acknowledges that the notion of purpose can’t be reduced to a single concept or metric.

Historically, the lines between industries were fairly clear-cut. Ford competed with GM and Chrysler. Later, foreign competition became more important, but the basic logic of the industry remained fairly stable: you produced cars and sold them to the public through a network of dealers.

Today, however, industry lines have blurred considerably. A company like Amazon competes with Walmart in retail, Microsoft, IBM and Google in cloud computing, and Netflix and Warner Media in entertainment. The company itself is much more than simply a bundle of operations competing in different value chains, but a platform for accessing a variety of ecosystems of talent, technology and information.

In much the same way, automobile manufacturers are making investments to transform themselves into mobility companies. To do so, they are building ecosystems made up of technology giants, startups and others. They are not seeking to “maximize bargaining power,” but rather to prepare for a future that hasn’t taken shape yet.

That’s why today, business leaders need to manage for mission, not for metrics. Building trustful relationships among a diverse set of stakeholders may not be as simple or as clear cut as “maximizing shareholder value,” but it’s increasing what profit-seeking businesses need to do to compete.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

What I Learned Solving a Business Crisis

Leave a reply

What I Learned Solving a Business Crisis

GUEST POST from Greg Satell

By 2006 we knew we had a serious problem. Our company’s onetime flagship product, called Afisha, was in a steady decline and it was becoming all too clear that something had to be done. What had once been a market leader that generated huge profits, which fueled the growth of our company had slowly, but surely, lost its market position.

It was clear that the business was in crisis, but nobody was exactly sure what to do about it. Operationally, nothing had really changed. We still believed in our product and our people. Nevertheless, the marketplace had evolved and our business model, which once had seemed bulletproof, was no longer viable.

We didn’t know it at the time, but Afisha’s brightest days were still ahead. We were able to reimagine the business model, strengthen the brand and return to profitability. What we learned is that solving a crisis is not a straightforward linear process, but a journey of discovery. You never know what you’ll find so you need to be willing to experiment.

Acknowledging The Problem

As I explained in Mapping Innovation, when Afisha came out in 2000, it was an immediate hit. At its core, it was simply a guide to restaurants, nightlife and other entertainment, somewhat similar to Timeout. Its restaurant, music and movie columnists quickly became tastemakers in Kyiv, while its sex advice column, achieved a cult-level status. Ad dollars soon came rolling in

In 2006, all of those elements that had made Afisha successful were still in place, but the business environment had changed significantly. The ad market, which had been worth less than $100 million dollars in 2000, was now quickly approaching a billion dollars. Strong multinational publishers like Hearst, Hachette and Rodale had begun investing heavily into Ukrainian versions of top international titles like Cosmopolitan, Elle and Men’s Health.

What we had to accept was that Afisha, although still popular with readers, was no longer a dominant brand. At the same time, the free distribution model which it had once depended on to quickly achieve wide readership was now seen as a liability among advertisers. That diminished our ability to command top ad rates while, at the same time, the booming media market sent our editorial costs through the roof.

None of this happened all at once, so it was easy to believe that Afisha was just going through a temporary downturn. It was only when we were able to acknowledge that our once-successful model had become fundamentally broken that we were able to start moving forward.

Assembling A Broad-Based Team

Once we had acknowledged the problem we assembled a meeting to come up with a strategy to move forward. This included the publisher and editor-in-chief of Afisha, several of the key staff, our company founder, me (as CEO) as well as several company leaders outside of Afisha who had specific knowledge and skills and who were widely respected.

The composition of the meeting was important. Clearly, the Afisha team had to be deeply involved in the process. Having the company founder and me there made it clear that the business had the full backing of the executive leadership. However, in many ways, it was those outside the core Afisha team who had critical impacts.

For the Afisha team and the executive leadership, the business model was so familiar it seemed almost like second-hand. Bringing in other leaders from around the company helped us look at the business in new ways. They asked questions that challenged us, made observations that we hadn’t seen and suggested things that wouldn’t have occurred to us.

Identifying Issues And Developing Options

As the working group met and got down to business, we began to identify problems. First, as noted above, the competitive landscape had shifted dramatically and, although Afisha remained a beloved brand, international titles had taken away significant market share. Second, the free distribution model was no longer financially viable.

As we discussed options, we were able to quickly build consensus on two actions. We would redesign the magazine and the website to beef up the editorial content and better compete with the international titles. We would also look for partners to license Afisha to other cities in Ukraine and create a more national brand.

We also came up with a third option that was considerably more speculative. For years, we had been giving paid subscribers Afisha cards to receive discounts at local merchants. We thought that we could add value to the card by creating an event calendar that was exclusive to Afisha card holders.

Our reasoning was that if we could increase subscribers through upgrading the Afisha card, we could reduce our reliance on free distribution and improve the economics of the business. It seemed like a longshot, but it was also low risk. All we had to do was sign up some partners for events and publish an event calendar in the magazine and on the website.

Finding The Unexpected

The editorial and licensing strategies, which seemed like no brainers, were, at best, mildly successful. Readers seemed to like the new design and expanded editorial content, but then again they liked the old Afisha too. We were able to set up licenses for five major Ukrainian cities, giving up close to national coverage, but the licensees struggled to earn a profit.

The Afisha card strategy, on the other hand, was an unexpected hit. We had hoped to be able to do one event a week, but were soon so deluged with partners that we had to limit events to one per day. From happy hours and shopping nights to club openings and movie festivals, it seemed like everybody wanted to work with us.

Before we knew it, we were able to upgrade events from a promotional activity to a seriously profitable business. We organized a nationwide Frisbee contest for a beer launch, a French movie festival for an upscale coffee brand and organized party trips with sponsors. To our amazement, the business just grew and grew.

What we learned from the experience is that you can’t plan your way out of a crisis. If we were able to plan effectively, we wouldn’t have been in the crisis in the first place. Our success wasn’t the product of our own brilliance, but our willingness to experiment. That’s how we came across the “happy accident” that led to the events business.

The truth is that it takes some bad luck to get into a crisis and it takes some good luck to get out of one. Sound management can help stem the bleeding, but if you are ever going to rebuild a successful business, you have to experiment and allow for the unexpected.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Reasons Change Management Frequently Fails

2 Replies

Reasons Change Management Frequently Fails

GUEST POST from Greg Satell

In 1983, McKinsey consultant Julien Phillips published a paper in the journal Human Resource Management that described an “adoption penalty” for firms that didn’t adapt to changes in the marketplace quickly enough. His ideas became McKinsey’s first change management model that it sold to clients.

So it is notable, to say the least, that in 2015, more than 35 years later, McKinsey found that only 26% of organizational transformations succeed. It’s not hard to see why. While traditional change management models offer sensible frameworks for fairly obvious changes, truly transformational efforts almost always encounter fierce resistance.

That’s an important distinction that leads to a significant difference. As I found when researching my book, Cascades, successful transformations identify resistance from the start and effectively plan to overcome opposition. Clearly, today, when change is so often a matter of survival, traditional change management models are no longer enough.

Preparing For Resistance

The change management industry was developed to solve a particular and discrete problem. While there were clear and coherent models for other critical business functions, such as marketing and finance, there was a relative dearth of models to help drive change. Phillips’ model and those that came after sought to fill that gap.

Yet as the McKinsey data clearly shows, those models have not been widely successful and it’s not hard to see why. Much as any competitive strategy that doesn’t anticipate the response from competitors is doomed to failure, any transformation strategy that doesn’t take into account those who oppose change is unlikely to succeed.

In my research, however, I found that when resistance is anticipated and accounted for, transformational efforts can achieve astounding results. At Wyeth Pharmaceuticals, the team implemented lean manufacturing techniques across 17,000 employees and cut costs by 25%. At Experian, CIO Barry Libenson shifted its entire technological infrastructure to the cloud and improved profitability across the entire company.

What made the difference is that in both cases, those leading the transformation didn’t assume that the changes would be embraced. In fact, just the opposite. They expected resistance and built a plan to overcome it.

Mapping The Terrain

Traditional change management models start with steps that encourage communicating the need for change and building a sense of urgency. Yet that can often backfire. While communication efforts can and often do excite many about the prospect for transformation, they also alert the opposition to step up their efforts to undermine change.

So the first step is to map the terrain upon which the battle for change will be fought (and make no mistake, any significant transformation effort is always a battle). There are two tools, borrowed from nonviolent political movements, that can help you do this: The Spectrum of Allies and the Pillars of Support. Both have been battle tested for decades.

The Spectrum of Allies, helps you identify which people are active or passive supporters of the change you want to bring about, which are neutral and which actively or passively oppose it. Once you are able to identify these groups, you can start mobilizing the most enthusiastic supporters to start influencing the other groups to shift their opinions. You probably won’t ever convince the active opposition, but you can isolate and neutralize them.

The Pillars of Support identifies stakeholder groups that can help bring change about. Some of these may be internal stakeholders, such as business units or functional groups within an organization. However, some of the most important stakeholders are often external, such as customer groups, industry associations, regulators and so on.

At this point, you are still planning, rather than implementing change. Most of all, you are listening and remain respectful of others who don’t hold the same views you do. The information you gather in these early stages will be critical for overcoming resistance later on.

The Myth of A Quick Win

One of the key tenets of change management is the need to achieve some quick, short term wins to help build momentum. The truth is that these types of objectives are often not meaningful to many, if not most, key stakeholders. In fact, they can often signal to those skeptical of change that the initiative is not serious.

In my research, I found that every successful transformation I studied identified a keystone change which had a clear and tangible goal, involved multiple stakeholders and paved the way for greater change down the road. Because these require the involvement of multiple stakeholders, they are never quick or easy.

For example, in the Wyeth transformation noted above, the keystone change was to reengineer factory changeovers, a difficult and complex task. In Experian’s shift to cloud technology, the keystone change was to build internal API’s. During Lou Gerstner’s historic turnaround at IBM in the 90s, he sought to shift the company from a “proprietary stack of technologies” to its “customers’ stack of business processes.”

In each case, key constituencies in the Spectrum of Allies were mobilized to influence key institutional stakeholders in the Pillars of Support. That takes time, patience and no small amount of effort. In some cases, it took a few tries to identify a keystone change that could succeed.

Every Revolution Inspires Its Own Counter-Revolution

Many change management efforts start with a large kickoff, complete with a vigorous communication campaign designed to create a sense of urgency and rally the troops. What’s often overlooked is that these efforts often alert those who are opposed to change that they need to begin undermining change efforts before they gain momentum.

As the change efforts gain momentum, these undermining efforts may quiet somewhat, but they very rarely disappear, even after the goals of the transformation have already been achieved. For example, at Blockbuster Video, initial efforts to address the disruptive threat posed by Netflix were successful, but that strategy was quickly reversed when a new CEO came aboard.

That’s why it’s crucial that you set out from the beginning to survive victory and you do that by rooting your efforts not in specific goals or objectives, but in common values. As Irving Wladawsky-Berger, a key player in IBM’s historic turnaround, 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.”

Perhaps most of all, you need to remember that there’s a reason that the vast majority of transformational efforts fail: Change is hard and it can’t be easily managed. Yet history has shown that it can be achieved, even under the worst conditions and against the greatest odds, if you learn to anticipate and overcome those who would seek to undermine it.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

The End of the Digital Revolution

1 Reply

Here’s What You Need to Know

The End of the Digital Revolution

GUEST POST from Greg Satell

The history of digital technology has largely been one of denial followed by disruption. First came the concept of the productivity paradox, which noted the limited economic impact of digital technology. When e-commerce appeared, many doubted that it could ever compete with physical retail. Similar doubts were voiced about digital media.

Today, it’s hard to find anyone who doesn’t believe in the power of digital technology. Whole industries have been disrupted. New applications driven by cloud computing, artificial intelligence and blockchain promise even greater advancement to come. Every business needs to race to adopt them in order to compete for the future.

Ironically, amid all this transformation the digital revolution itself is ending. Over the next decade, new computing architectures will move to the fore and advancements in areas like synthetic biology and materials science will reshape entire fields, such as healthcare, energy and manufacturing. Simply waiting to adapt won’t be enough. The time to prepare is now.

1. Drive Digital Transformation

As I explained in Mapping Innovation, innovation is never a single event, but a process of discovery, engineering and transformation. Clearly, with respect to digital technology, we are deep into the transformation phase. So the first part of any post-digital strategy is to accelerate digital transformation efforts in order to improve your competitive position.

One company that’s done this very well is Walmart. As an old-line incumbent in the physical retail industry, it appeared to be ripe for disruption as Amazon reshaped how customers purchased basic items. Why drive out to a Walmart store for a package of toothpaste when you can just click a few buttons on your phone?

Yet rather than ceding the market to Amazon, Walmart has invested heavily in digital technology and has achieved considerable success. It wasn’t any one particular tactic or strategy made the difference, but rather the acknowledgment that every single process needed to be reinvented for the digital age. For example, the company is using virtual reality to revolutionize how it does in-store training.

Perhaps most of all, leaders need to understand that digital transformation is human transformation. There is no shortage of capable vendors that can implement technology for you. What’s key, however, is to shift your culture, processes and business model to leverage digital capabilities.

2. Explore Post-Digital Technologies

While digital transformation is accelerating, advancement in the underlying technology is slowing down. Moore’s law, the consistent doubling of computer chip performance over the last 50 years, is nearing its theoretical limits. It has already slowed down considerably and will soon stop altogether. Yet there are non-digital technologies under development that will be far more powerful than anything we’ve ever seen before.

Consider Intel, which sees its future in what it calls heterogeneous computing combining traditional digital chips with non-digital architectures, such as quantum and neuromorphic. It announced a couple of years ago its Pohoiki Beach neuromorphic system that processes information up to 1,000 times faster and 10,000 more efficiently than traditional chips for certain tasks.

IBM has created a network to develop quantum computing technology, which includes research labs, startups and companies that seek to be early adopters of the technology. Like neuromorphic computing, quantum systems have the potential to be thousands, if not millions, of times more powerful than today’s technology.

The problem with these post-digital architectures is that no one really knows how they are going to work. They operate on a very different logic than traditional computers, will require new programming languages and algorithmic strategies. It’s important to start exploring these technologies now or you could find yourself years behind the curve.

3. Focus on Atoms, Not Bits

The digital revolution created a virtual world. My generation was the first to grow up with video games and our parents worried that we were becoming detached from reality. Then computers entered offices and Dan Bricklin created Visicalc, the first spreadsheet program. Eventually smartphones and social media appeared and we began spending almost as much time in the virtual world as we did in the physical one.

Essentially, what we created was a simulation economy. We could experiment with business models in our computers, find flaws and fix them before they became real. Computer-aided design (CAD) software allowed us to design products in bits before we got down to the hard work of shaping atoms. Because it’s much cheaper to fail in the virtual world than the physical one, this made our economy much more efficient.

Yet the next great transformation will be from bits to atoms. Digital technology is creating revolutions in things like genomics and materials science. Artificial intelligence and cloud computing are reshaping fields like manufacturing and agriculture. Quantum and neuromorphic computing will accelerate these trends.

Much like those new computing architectures, the shift from bits to atoms will create challenges. Applying the simulation economy to the world of atoms will require new skills and we will need people with those skills to move from offices in urban areas to factory floors and fields. They will also need to learn to collaborate effectively with people in those industries.

4. Transformation is Always a Journey, Never a Destination

The 20th century was punctuated by two waves of disruption. The first, driven by electricity and internal combustion, transformed almost every facet of daily life and kicked off a 50-year boom in productivity. The second, driven by the microbe, the atom and the bit, transformed fields such as agriculture, healthcare and management.

Each of these technologies followed the pattern of discovery, engineering and transformation. The discovery phase takes place mostly out of sight, with researchers working quietly in anonymous labs. The engineering phase is riddled with errors, as firms struggle to shape abstract concepts into real products. A nascent technology is easy to ignore, because its impact hasn’t been felt yet.

The truth is that disruption doesn’t begin with inventions, but when an ecosystem emerges to support them. That’s when the transformation phase begins and takes us by surprise, because transformation never plays out like we think it will. The future will always, to a certain extent, unpredictable for the simple reason that it hasn’t happened yet.

Today, we’re on the brink of a new era of innovation that will be driven by new computing architectures, genomics, materials science and artificial intelligence. That’s why we need to design our organizations for transformation by shifting from vertical hierarchies to horizontal networks.

Most of all, we need to shift our mindsets from seeing transformation as set of discreet objectives to a continuous journey of discovery. Digital technology has only been one phase of that journey. The most exciting things are still yet to come.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Is China Our New Sputnik Moment?

Leave a reply

Is China Our New Sputnik Moment?

GUEST POST from Greg Satell

When the Soviets launched Sputnik, the first space satellite, into orbit in 1957, it was a wake-up call for America. Over the next year, President Eisenhower would sign the National Defense Education Act to spur science education, increase funding for research and establish NASA and DARPA to spur innovation.

A few years ago, a report by the Council on Foreign Relations (CFR) argued that we are at a similar point today, but with China. While we have been steadily decreasing federal investment in R&D over the past few decades, our Asian rival has been ramping up and now threatens our leadership in key technologies such as AI, genomics and quantum information technology.

Clearly, we need to increase our commitment to science and innovation and that means increasing financial investment. However, what the report makes clear is that money alone won’t solve the problem. We are, in several important ways, actually undermining our ability to innovate, now and in the future. We need to renew our culture of innovation in America.

Educating And Attracting Talent

The foundation of an innovation economy is education, especially in STEM subjects. Historically, America has been the world’s best educated workforce, but more recently we’ve fallen to fifth among OECD countries for post-secondary education. That’s alarming and something we will certainly need to reverse if we are to compete effectively.

Our educational descent can be attributed to three major causes. First, the rest of the world has become more educated, so the competition has become stiffer. Second, is financing. Tuition has nearly tripled in the last decade and student debt has become so onerous that it now takes about 20 years to pay off four years for college. Third, we need to work harder to attract talented people to the United States.

The CFR report recommends developing a “21st century National Defense Education Act” to create scholarships in STEM areas and making it easier for foreign students to get Green Cards when they graduate from our universities. It also points out that we need to work harder to attract foreign talent, especially in high impact areas like AI, genomics and quantum computing.

Unfortunately, we seem to be going the other way. The number of international students to American universities is declining. Policies like the muslim ban and concerns about gun violence are deterring scientific talent coming here. The denial rate for those on H1-B visas has increased from 4% in 2016 to 18% in the first quarter of 2019.

Throughout our history, it has been our openness to new people and new ideas that has made America exceptional. It’s a legitimate question whether that’s still true.

Building Technology Ecosystems

In the 1980s, the US semiconductor industry was on the ropes. Due to increased competition from low-cost Japanese manufacturers, American market share in the DRAM market fell from 70% to 20%. The situation not only had a significant economic impact, there were also important national security implications.

The federal government responded with two initiatives, the Semiconductor Research Corporation and SEMATECH, both of which were nonprofit consortiums that involved government, academia and industry. By the 1990s. American semiconductor manufacturers were thriving again.

Today, we have similar challenges with rare earth elements, battery technology and many manufacturing areas. The Obama administration responded by building similar consortiums to those that were established for semiconductors: The Critical Materials Institute for rare earth elements, JCESR for advanced batteries and the 14 separate Manufacturing Institutes.

Yet here again, we seem to be backsliding. The current administration has sought to slash funding for the Manufacturing Extension Partnership that supports small and medium sized producers. An addendum to the CFR report also points out that the administration has pushed for a 30% cut in funding for the national labs, which support much of the advanced science critical to driving American technology forward.

Supporting International Trade and Alliances

Another historical strength of the US economy has been our open approach to trade. The CFR report points out that our role as a “central node in a global network of research and development,” gave us numerous advantages, such as access to foreign talent at R&D centers overseas, investment into US industry and cooperative responses to global challenges.

However, the report warns that “the Trump administration’s indiscriminate use of tariffs against China, as well as partners and allies, will harm U.S. innovative capabilities.” It also faults the Trump administration for pulling out of the Trans-Pacific Partnership trade agreement, which would have bolstered our relationship with Asian partners and increased our leverage over China.

The tariffs undermine American industry in two ways. First, because many of the tariffs are on intermediate goods which US firms use to make products for export, we’re undermining our own competitive position, especially in manufacturing. Second, because trade partners such as Canada and the EU have retaliated against our tariffs, our position is weakened further.

Clearly, we compete in an ecosystem driven world in which power does not come from the top, but emanates from the center. Traditionally, America has positioned itself at the center of ecosystems by constantly connecting out. Now that process seems to have reversed itself and we are extremely vulnerable to others, such as China, filling the void.

We Need to Stop Killing Innovation in America

The CFR report, whose task force included such luminaries as Admiral William McRaven, former Google CEO Eric Schmidt and economist Laura Tyson, should set alarm bells ringing. Although the report was focused on national security issues, it pertains to general competitiveness just as well and the picture it paints is fairly bleak.

After World War II, America stood almost alone in the world in terms of production capacity. Through smart policy, we were able to transform that initial advantage into long-term technological superiority. Today, however we have stiff competition in areas ranging from AI to synthetic biology to quantum systems.

At the same time, we seem to be doing everything we can to kill innovation in America. Instead of working to educate and attract the world’s best talent, we’re making it harder for Americans to attain higher education and for top foreign talent to come and work here. Instead of ramping up our science and technology programs, presidential budgets regular recommend cutting them. Instead of pulling our allies closer, we are pushing them away.

To be clear, America is still at the forefront of science and technology, vying for leadership in every conceivable area. However, as global competition heats up and we need to be redoubling our efforts, we seem to be doing just the opposite. The truth is that our prosperity is not a birthright to which we are entitled, but a legacy that must be lived up to.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Questions Are More Powerful Than We Think

1 Reply

Questions Are More Powerful Than We Think

GUEST POST from Greg Satell

When I was 27, I moved to Warsaw, Poland to work in the nascent media industry that was developing there. I had experience working in media in New York, so I was excited to share what I’d learned and was confident that my knowledge and expertise would be well received.

It wasn’t. Whenever I began to explain how a media business was supposed to work, people would ask me, “why?” That forced me to think about it and, when I did, I began to realize that many of the principles I had taken for granted were merely conventions. Things didn’t need to work that way and could be done differently.

That’s when I first learned the power of a question. As Warren Berger explains in A More Beautiful Question, while answers tend to close a discussion, questions help us open new doors and can lead to genuine breakthroughs. Yet not all questions are equal. Asking good questions is a skill that takes practice and effort to learn to do well. Here’s where to start.

Why?

When we are young, we ask lots of “why?” questions. Why is the sky blue? Why can’t we fly like birds? Why do I have to go to bed at a certain time? It is through asking why that we learn basic things about the world. Yet as we get older, we tend to think we know things and stop questioning fundamental assumptions.

That’s where I was when I first arrived in Poland. I had gone through extensive training and knew things. I was proud of the knowledge that I had gained and didn’t question whether those things were necessarily true. My new Polish colleagues, on the other hand, were emerging from 50 years of communism and so were unencumbered with that illusion of knowledge.

In researching my book, Mapping Innovation, I spoke to dozens of world class innovators, and I was amazed how often breakthroughs started with a “Why?” question. For example, Jim Allison, a prominent immunologist who had lost family members to cancer, asked himself why our immune system doesn’t attack tumors.

“Why?” questions can be frustrating, because there are rarely easy answers to them, and they almost always lead to more questions. There’s even a technique called the 5 Whys that is designed to uncover root problems. Nevertheless, if you want to get beyond fundamental assumptions, you need to start with asking “why?”

What If?

While asking “why?” can help alert us to new opportunities, asking “What if” can lead us into new directions and open new doors. Einstein was famous for these types of thought experiments. Asking “What if I would ride on a bolt of lightning?” led to his theory of special relativity and asking, “What if I was riding on an elevator in space?” led to general relativity.

Often, we can use “What if?” questions to propose answers to our “Why?” questions. For example, after Jim Allison asked himself why our immune system doesn’t attack tumors, he followed it up by asking, “what if our immune system actually does attack tumors, but shuts off too soon?”

That took him in a completely new direction. He began to experiment with regulating the immune response and achieved amazing results. Eventually, he would win the Nobel Prize for his role in establishing the new field of cancer immunotherapy. It all started because he was able to imagine new possibilities with a “What if?” question.

Another way we can use “What If? questions is to remove or add constraints. For example, we can ask ourselves, “What if we didn’t have to worry about costs?” or “What if we could only charge our customers half of what we’re charging now?” Asking “What if? Questions can often alert us to possibilities what we weren’t aware of.

How?

Asking “Why?” and “What if? questions can open up new opportunities, eventually we need to answer the “How?” question. “How?” questions can be especially difficult because answering them often involves knowledge, resources and capabilities that we do not possess. That’s what makes “How?” questions fundamentally more collaborative.

For example, as a research executive at Eli Lilly, Alph Bingham became interested in why some chemistry problems never got solved. One observation he made was that when he was in graduate school, if there were 20 people in a class, they would often come up with 20 different approaches to a problem, but in industry scientists generally worked alone.

Long an admirer of Linux, he was fascinated with the way thousands of volunteers were able to create and advance complex software that could compete with the best proprietary products. So he began to think “What if we could do something like Linux, but with a bounty?” He thought that if he got more people working on the “How?” question, he might be able to solve more problems.

The fruit of his efforts, called Innocentive went live in June 2001 with 21 problems, many of which the company had been working on for years. Although the bounties were small in the context of the pharmaceutical industry — $20,000 to $25,000 — by the end of the year a third of them were solved. It was an astounding success.

It soon became clear that more challenges on the site would attract more solvers, so they started recruiting other companies to the platform. When results improved, they even began inviting competitors to post challenges as well. Today, Innocentive has over 100,000 solvers that work out hundreds of problems so tough that even the smartest companies can’t crack them.

Building A Culture Of Inquiry

When I first arrived in Poland, I was prepared to give all the answers, because that’s what I was trained for. The media business in New York had been around for a long time and everything was supposedly worked out. Follow the model, I was told, and you’ll be successful. That’s why the questions my new colleagues posed took me by surprise.

Yet once I started asking questions myself, I began to see opportunities everywhere. As I travelled and worked in different countries, I found that everywhere I went, people ran nearly identical businesses in completely different ways and most were convinced that their way was the “right” way. Most saw little utility in questioning how things were done.

That’s why most people can’t innovate. In fact, while researching Mapping Innovation, I found that the best innovators were not the ones who were the smartest or even the ones who worked the hardest, but those who continually looked for new problems to solve. They were always asking new questions, that’s how they found new things.

The truth is that to drive innovation, we need to build a culture of inquiry. We need to ask “why” things are done the way they are done, “what if” we took a different path and “how” things can be done differently. If you don’t explore, you won’t discover and if you don’t discover, you won’t invent. Once you stop inventing, you will be disrupted.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Humans, Not Technology, Drive Business Success

Leave a reply

Humans, Not Technology, Drive Business Success

GUEST POST from Greg Satell

Silicon Valley is often known as a cut-throat, technocratic place where the efficiency of algorithms often define success. Competition is ferocious and the pace of disruption and change can be dizzying. It’s not the type of environment where soft skills are valued particularly highly or even at all.

So, it’s somewhat ironic that Bill Campbell became a Silicon Valley legend by giving hugs and professing love to those he worked with. As coach to executives ranging from Steve Jobs to the entire Google executive team, Campbell preached and practiced a very personal style of business.

Yet while I was reading Trillion Dollar Coach in which former Google executives explain Campbell’s leadership principles, it became clear why he had such an impact. Even in Silicon Valley, technology will only take you so far. The success of a business ultimately depends on the success of the people in it. To compete over the long haul, that’s where you need to focus.

The Efficiency Paradox

In 1911, Frederick Winslow Taylor published The Principles of Scientific Management, based on his experience as a manager in a steel factory. It took aim at traditional management methods and suggested a more disciplined approach. Rather than have workers pursue tasks in their own manner, he sought to find “the one best way” and train accordingly.

Taylor wrote, “It is only through enforced standardization of methods, enforced adoption of the best implements and working conditions, and enforced cooperation that this faster work can be assured. And the duty of enforcing the adoption of standards and enforcing this cooperation rests with management alone.”

Before long, Taylor’s ideas became gospel, spawning offshoots such as scientific marketing, financial engineering and the Six Sigma movement. It was no longer enough to simply work hard, you had to measure, analyze and optimize everything. Over the years these ideas have become so central to business thinking that they are rarely questioned.

Yet management guru Henry Mintzberg has pointed out how a “by-the-numbers” depersonalized approach can often backfire. “Managing without soul has become an epidemic in society. Many managers these days seem to specialize in killing cultures, at the expense of human engagement.”

The evidence would seem to back him up. One study found that of 58 large companies that have announced Six Sigma programs, 91 percent trailed the S&P 500 in stock performance. That, in essence, is the efficiency paradox. When you manage only what you can measure, you end up ignoring key factors to success.

How Generosity Drives Innovation

While researching my book, Mapping Innovation, I interviewed dozens of top innovators. Some were world class scientists and engineers. Others were high level executives at large corporations. Still others were highly successful entrepreneurs. Overall, it was a pretty intimidating group.

So, I was surprised to find that, with few exceptions, they were some of the kindest and most generous people I have ever met. The behavior was so consistent that I felt that it couldn’t be an accident. So I began to research the matter further and found that when it comes to innovation, generosity really is a competitive advantage.

For example, one study of star engineers at Bell Labs found that the best performers were not the ones with the best academic credentials, but those with the best professional networks. A similar study of the design firm IDEO found that great innovators essentially act as brokers able to access a diverse array of useful sources.

A third study helps explain why knowledge brokering is so important. Analyzing 17.9 million papers, the researchers found that the most highly cited work tended to be largely rooted within a traditional field, but with just a smidgen of insight taken from some unconventional place. Breakthrough creativity occurs at the nexus of conventionality and novelty.

The truth is that the more you share with others, the more they’ll be willing to share with you and that makes it much more likely you’ll come across that random piece of information or insight that will allow you to crack a really tough problem.

People As Profit Centers

For many, the idea that innovation is a human centered activity is intuitively obvious. So it makes sense that the high-tech companies that Bill Campbell was involved in would work hard to create environments to attract the best and the brightest people. However, most businesses have much lower margins and have to keep a close eye on the bottom line.

Yet here too there is significant evidence that a human-focused approach to management can yield better results. In The Good Jobs Strategy MIT’s Zeynep Ton found that investing more in well-trained employees can actually lower costs and drive sales. A dedicated and skilled workforce results in less turnover, better customer service and greater efficiency.

Its competitors maintained the traditional mindset. They reduced cut wages and employee hours, which saved them some money, but customers found poorly maintained stores with few people to help them, which damaged their brand long-term. The cost savings Mercadona’s employees identified, on the other hand, in many cases improved service and productivity and these gains persisted long after the crisis was over.

Management Beyond Metrics

The truth is that it’s easy to talk about putting people first, but much harder to do it in practice. Research suggests that once a group goes much beyond 200 people social relationships break down, so once a business gets beyond that point, it becomes natural to depersonalize management and focus on metrics.

Yet the best managers understand that it’s the people that drive the numbers. As legendary IBM CEO Lou Gerstner once put it, “Culture isn’t just one aspect of the game… It is the game. What does the culture reward and punish – individual achievement or team play, risk taking or consensus building?”

In other words, culture is about values. The innovators I interviewed for my book valued solving problems, so were enthusiastic about sharing their knowledge and expertise with others, who happily reciprocated. Mercadona valued its people, so when it asked them to find ways to save money during the financial crisis, they did so enthusiastically.

That’s why today, three years after his death, Bill Campbell remains a revered figure in Silicon Valley, because he valued people so highly and helped them learn to value each other. Management is not an algorithm. It is, in the final analysis, an intensely human activity and to do it well, you need to put people first.

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

Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.