GUEST POST from Matthew E May

The question of where to play, strategically speaking, is deceptively simple. Most companies don’t give it enough deep thought and consideration. My friend Roger Martin would say, in fact, that most companies adopt a mindset of “our ‘where to play’ is where God ordained us to play.”

In other words, they act as if the space they occupy in the competitive playing field is somehow carved in stone, and can’t be changed, ala: “this is where we play, it’s where we’ve always played.”

That kind of thinking can be a death knell. Think newspapers. “We are a newspaper. Always have been, always will be.” The Washington Post or Boston Globe are at this moment kicking themselves for thinking that way.

“Your where-to-play is not fixed,” argues Roger. “It should always be adjusted to accommodate different situations, places, and spaces.”

In other words, strategy is as dynamic as your competitive playing field. You might be focusing on a ground game today, but tomorrow may demand an air approach. “Some may say that’s tactics,” says Roger. “But with the speed of change today it’s a meaningless distinction.”

Take the case of Intuit. Scott Cook founded the company with a singular purpose in mind: provide people with personal financial planning software. He called it Quicken. Quicken was product that put Scott Cook and Intuit on the map. (Note: I do not use the product.)

Intuit for years played exclusively in the personal financial planning software consumer market space.

After Quicken had been in the market for a bit, complaints began to come into the customer service and support call center about the software. Over time a distinct pattern emerged, to the tune of “we like Quicken, except it has no accounts receivable or payable capability.”

Customer service reps would typically advise the caller that they were using Quicken for the wrong thing. Quicken was for personal finance, and you don’t need AR or AP functionality for personal finance.

At some point the pattern became prevalent enough to prompt the Jerry Seinfeld question: “Who. Are. These. People?!“

Answer: Very small business owners. Businesses that could not afford huge, elaborate, and expensive accounting software systems. They wanted something a simple as Quicken, but focused on running a small company.

And so Quickbooks was born to occupy a vacant space in the financial software market…the business, not consumer, space.

Quickbooks is the winner in the space, and five times the revenue of Quicken. As Roger tells it, “Intuit would have been a tiny player had it kept its where-to-play as ‘software only for individuals.'”

Lesson: Play with the “where to play?” question so that you can win in new and different (i.e. innovative) ways.

“It’s a discipline not many companies have,” concludes Roger.

But where to play is only half the heart of strategy. You have to make a choice on the question of “how to win?” in a given where-to-play.

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GUEST POST from Matthew E May

A winning strategy absolutely must begin with a winning aspiration. Too doctrinaire? Allow me to explain the premise the way I learned it from Roger Martin, one of the best strategists on the planet.

The operative word is “winning,” for the simple reason that if you’re not winning, you live in fear of the competitor in your space that is. If they’re winning and you’re just participating, they can use the greater resources that derive from winning to beat you up. The only place in competitive endeavors with any degree of safety is that of the winner. If you’re not winning or attempting to unseat the winner, you’re simply playing a game that will leave you bruised and battered with only marginal gain to show for it.

Take the story of the 2008 Chevy Malibu. (Former GM CEO Rick Waggoner hired Roger Martin on January 1, 2006, to help the then-senior management team–Bob Lutz, Fritz Henderson, Larry Burns, Troy Clark–with a turnaround strategy.)

The 2007 launch of the 2008 Chevy Malibu was to be a key strategic move for GM. Chevy is GM’s biggest brand, and the Malibu plays in the biggest dollar volume product segment in the US car market. The previous version, the 2007 Malibu, was by no means a winner, selling just 60,000 units at retail that year.

Roger asked the team in the Fall of 2006 a key question: “What is our aspiration for this launch? What do we really want the 2008 Malibu to do for GM?”

Answer: “120,000 units.”

Seems like a winning aspiration, right? It’s a big aspiration to double your retail volume in one year. In no way insignificant.

But this is where the art of strategy really plays out.

“The Malibu competes against the Toyota Camry and Honda Accord, right?” asked Roger. “How many Camries and Accords were sold at retail this year?”

Answer: “560,000 Camries. 440,000 Accords.”

“So let me get this straight,” Roger began. “Our aspiration is to go from selling 1/10 as many as the category winner to selling 1/5 as many? Do I have that right?”

Silence. Then, grumbles…“not how we think about it” responses from the management team.

“Well, that’s how I think about it,” replied Roger. “The Camry is bang-on direct competitor and your highest aspiration is get to a fifth of their volume with as big or bigger dealer network.”

That is not winning. That is lowering the bar to declare victory.

“But, ok,” Roger continued. “You’re going to have to get 60,000 new customers. How does the planned Malibu stack up against the Camry?” (Camry had just launched its upgrade, so the specs were available.)

Answer: “We actually don’t really know.”

Now, to have a sense of strategy, you cannot craft a winning one in the context of just yourself. “This vehicle is going to be much better than the previous vehicle” rather than “better than the competitor’s” is all well and good, but strategically tricky, unless of course you’re the current winner. Which the Malibu wasn’t. (In other words, a “do better” strategy would work for Camry, but no one else.)

“I don’t think you can count on an incremental 60,000 units without some valid third parties saying nice things about the Malibu,” Roger explained. “You won’t even meet your current aspiration if bad reviews come in.”

Roger convinced the team to hire an independent third party to evaluate the Malibu prototype against the Camry, using all the objective measures typically reviewed by the Edmunds, Car & Driver, and Consumer Reports of the world.

The test report came back with an answer to Roger’s “how we stack up?” question: a few criteria were on par with the Camry, but on nine key criteria, it was a loser against the Camry.

Roger made the point that selling 120,000 units against the headwinds of mediocre reviews essentially saying “not bad, but no Camry” was a losing strategy.

The team agreed. In response, they spent $300 million to retool the Malibu so that it beat Camry against those criteria. GM ran three consecutive engineering shifts a day (24/7 engineering!) for the seven months they had remaining before production had to start.

They sacked the engine program. They put thicker glass in. They tuned the new engine to be as fuel efficient as the Camry (vs the one mile per gallon less that they had planned to go to market with!).

Media response: surprise and delight.

Retail response: Malibu sold at a 250,000 a year pace…until the market crash in the summer of 2009. And even after the crash and comeback, the Malibu matched the Camry on monthly sales. The payback on the $300 million investment was, in Roger’s words, “ridiculously high.”

Lesson: if you don’t have winning aspiration, you won’t do the things you need to do in order to win.

Sounds simple, but if a ginormous company run by very smart people can spend a gazillion dollars going to market with what sounds good but is in reality a losing strategy, anyone can.

The sine qua non of strategy is to have a winning aspiration.

What’s yours?

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GUEST POST from Matthew E May

Nearly every small-business owner wants to scale his or her business—to have it continue to grow and succeed. Eventually, though, even the most successful small business must master the natural tension between excellence and growth.

Is it possible to scale up without losing quality?

It’s a pressing challenge for businesses of all shapes and sizes, and it’s the very question Stanford professor and bestselling author Robert Sutton and his Stanford colleague Huggy Rao set out to study and answer in their excellent new book, Scaling Up Excellence: Getting to More Without Settling for Less.

Bob and Huggy recently took some time to answer a few questions I had about scaling.

How do you define scaling?

Bob: If your organization has a bit of excellence, a “pocket of goodness,” how do you spread it to others there? Early on in the project, I saw an interview with the famous folk singer Pete Seeger. He said something like, “Sometimes the only thing wrong with it is there isn’t enough of it.”

Can you give me an example of an innovative scaling pioneer, and what we might learn from them?

Bob: A hallmark of every successful scaling company is that they behave as if they were spreading a mindset, not just creating a big footprint.

Facebook is exhibit one. Even as it’s grown like crazy, hiring thousands of engineers, it continues to devote six weeks to instilling key elements of the Facebook mindset in every new engineer—most famously a “move fast and break things” mindset. Before management decides what job a new engineer ought to hold, let alone putting them to work in a particular group, each engineer spends those six weeks in boot camp working on a dozen or so short projects for a dozen or so different groups.

How exactly can a company scale well?

Huggy: A pocket of excellence is developed or uncovered, the people who know how to do it are connected to people who need to learn it, and new and presumably better ways “cascade” throughout the system. And in all the cases we studied, the change wasn’t spread like a thin coat of goodness over the whole system. There were one, or a few, pockets of excellence that were used, in turn, to create new pockets. That’s why we say scaling well requires treating the process as a ground war, not just an air war—hearing a few speeches and giving people a few days of training or a bit of coaching now and then isn’t enough to instill and spread excellence.

The pressure is higher than ever today to do everything in business fast, especially scaling. How can scaling be done fast but effectively?

Huggy: What we learned is that, especially in cases of fast and effective scaling, the teams that guided these efforts often slowed down at key junctures—to think about what they’re doing and to develop true excellence—so they could move faster later. Scaling takes a lot of patience and persistence, in concert with an obsessive focus on making progress toward long-term goals every hour of every day.

Does the same approach to scaling work for all kinds or organizations, including large and small, for profit and nonprofit?

Huggy: While the scaling principles we recommend work for both small and large organizations, when organizations get larger, there are structural changes that are necessary and impossible to avoid. Even though founders often don’t like it, as companies get bigger, they need more process and more hierarchy and more specialized roles. Many of the things that “got you here” won’t get you to the next stage.

At the global design and innovation firm IDEO, for example, it worked great to have an all-hands meeting every Monday morning when the firm had 60 people. But after the company grew to 100 and beyond, it became too impersonal, with most people being unable to add to the conversation. Things worked much better after the office was split into smaller, 30-person studios.

Chapter 2 of your book is titled “Buddhism Versus Catholicism,” referring to different scaling decisions and approaches. What’s the short course?

Bob: It’s about choices, the most important being deciding how much to insist on standardization and replication—which we call Catholicism—versus encouraging local customization, [which we refer to as] Buddhism.

Here’s the thing: The further you want to spread your footprint, the more likely it is that you’ll need to move toward the Buddhist end of the spectrum. So, for example, although we may think of McDonald’s as standardized, it actually has extensive local customization in different countries. It serves beer and wine in Europe, and burgers are made out of lamb, not beef, in India.

Much of what you write about concerns a central tension between capability and capacity. What should young companies struggling with that keep in mind, especially when facing key transition points in their growth?

Bob: Ask yourself whether you’re in a “You can’t get there from here” situation. Your goal might be to have hundreds of skilled employees who fit your organization perfectly, but right now, you might only have a dozen or so. If you try to hire too fast, you’ll have a big but bad organization.

Shona Brown, Google’s former senior vice president of business operations, told us that the reason the company was able to scale from 2,000 to 30,000 people relatively quickly was that they hired so slowly and carefully. Too many startups bring warm bodies on board too fast, which helps in the short term but can destroy what made them great in the first place.

Then you must ask if what got you to where you are will get you to where you want to be. Many of the things that organizations do that work well when they’re small no longer work when they get bigger. We encountered dozens of examples in our research: all-hands meetings that have too many hands, CEOs who grew their companies by approving every small expense but continued to do so after it had grown, which causes things to grind to a halt, and on and on.

Who are your scaling heroes and why?

Bob: There are many, but three that stand out for me are Bonny Simi, vice president for talent at JetBlue Airlines, IDEO’s founder and chair David Kelley, and Dr. Louise Liang, who led Kaiser Permanente‘s computerized health records project. What’s compelling is that while they’re all wildly different, they all have something important in common.

All three created, and often discovered, pockets of excellence and then helped spread them to new places—that’s the meat and potatoes of scaling. All three started where they were with what they had. All three made wise early choices to get the ball rolling—to create one or a few early pockets of excellence. And all three never thought of scaling as an abstract or mechanical process.

Rather, they each viewed scaling as a fundamentally human undertaking, one that required constant attention to quirks, histories and motivations of the people they hoped would build and identify a bit of excellence and spread it to others.

If a business owner wants to start scaling excellence in their company tomorrow, what’s their first step?

Bob: Start where you are with what you have. It’s what is present in every successful case of scaling that we examined, from a single manager to a big scaling effort. We met one manager who wanted to spread design thinking in her company, so she started by changing how her cubicle looked. Kaiser Permanente spent billions and devoted years to rolling out its computerized health records system, but it started in the company’s smallest region.

What’s the one thing you want readers to take away from this book?

Bob: To scale faster and better, you need to slow down to take the time and effort to instill the right mindset in people as your project is rolled out. Just running up the numbers as fast as you can is a recipe for disaster. You also need to slow down because scaling requires so much mindfulness—it requires so many changes in organizational structure, tactics and strategies, and so much thinking about how what you’re doing now will set the stage for success later.

You can follow Robert Sutton on Twitter @work_matters and Huggy Rao@huggyrao. previously published on OPEN

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GUEST POST from Matthew E May

Every year, millions of people “resolve” to lose weight. It’s the number one goal set each January 1. And by about this time each year, it’s the most abandoned one. There are dozens of theories about why that might be, but the explanation I like most (because we can do something about it) is that our optimism tends to overpower any thought of contingency planning.

It’s true of any goal, really, and makes some sense. Thinking about why something might go wrong, and how to deal with it, is a bit of a downer. But the plain fact is that in any situation requiring a change, such as chasing a goal, there are strong forces at play and obstacles in the way.

Nearly 70 years ago, social psychology pioneer Kurt Lewin called the forces working in your favor “driving forces,” and those working against you “restraining forces.” I’m a cyclist, so I like to think of these winds of change as tailwinds and headwinds.

According to Lewin, driving forces help you achieve the desired change and are generally positive, reasonable, logical, conscious, or economic. (For example, looking better, fitting in clothes, feeling better, higher self-confidence, and better health.) Restraining forces are generally negative, emotional, illogical, unconscious, social or psychological. (For example, willpower, discipline, motivation, rationalizing, etc.)

Here’s the thing: restraining forces rule. If you don’t acknowledge, evaluate, and plan for them, the chances of you succeeding are significantly decreased. In other words, if you love a good midnight nosh, you better have a rock-solid plan in place for when the refrigerator calls your name, or dropping that ten pounds so you can look good in your letterman sweater for the class reunion is a distant pipedream.

Lewin came up with a simple tool he called Force Field Analysis to describe a current situation as a state of equilibrium between driving and restraining forces. You can use the analysis to map the forces and do some planning.

There are six steps involved:

1. Start with a well-defined goal or change to be implemented.

2. In the middle of a sheet of paper, write the goal or change to be implemented.

3. Title the bottom half “Driving Forces.” Title the top half “Restraining Forces.”

4. Brainstorm a list of driving and restraining forces and place them in the appropriate space.

5. Once the driving and restraining forces have been identified, ask and answer the following questions.

• How significant is each force?

• Which forces, if altered, would produce rapid change?

• What skills and/or information is needed to manage the forces?

6. Create a responsive course of action that follows one of three strategies:

• Strengthens driving forces

• Weakens restraining forces

• Creates new driving forces

When I work with creative teams and new ideas, we always perform a Force Field Analysis before we pitch the idea. The reason is pretty simple: pushback, yeah-buts, and objections always come from the restraining forces side of the page.

We’re always ready for the resistance this way. We never have to do a dance for an answer, because we can easily point to the counterbalancing driving force.

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GUEST POST from Matthew E May

The constant rapid changes in today’s business climate demands on-the-fly gear shifting for teams and business units. Few can afford to wait until next year’s 3-day strategic offsite meeting, a model fast becoming a relic of more halcyon days.

So how do you quickly and nimbly get everyone on board to create collective mindshare and emotional investment in charting a path for the foreseeable future?

I like short and simple things, so here’s a technique I use regularly to get folks off the 3-day vision meeting and onto a 3-hour vision meeting.

I did this with the executive team of a Pacific Northwest homebuilder, at the height of their success, at the beginning of 2008. We all know what transpired later in the year. To this day, the CEO maintains that this “pre-mortem” exercise enabled them to weather the multi-year downturn, and emerge in a position to not only survive, but thrive.

The reason is simple: I had them paint a perfect disaster, then simply reverse it. When disaster did indeed strike, they had already internalized a backup.

The first part of the activity is “heads up,” and meant to draw out the dream of the team. The second part of the meeting is “sleeves up,” and intended to focus energy on a real world strategy that achieves the dream. The exercise is designed to be fast-paced, highly interactive, and visually oriented.

Here’s the flow:

Warmup: “I See” (15 minutes)

If you’re the leader or facilitator, state something like this: “Vision is essential. We can’t advance in any direction without it.” To illustrate the point, have folks stand up and lift one leg off the floor, and hold it there for ten seconds. State: “That’s easy, right? But now try it with your eyes closed.” Watch everyone struggle. It’s pretty tough to do!

Next have people try this exercise:

Step 1. Answer the question: “What do I really want?” Describe what you see as the ideal in your mind’s eye, using a statement that begins with “I see…” (For example: I see our department as setting the benchmark of effectiveness and efficiency in all of our operations in an effort to promote the stability needed to realize the highest levels of productivity, performance and profitability.)

Step 2. Create a statement of the endstate using the future perfect tense. (For example: Standardized work processes, policies, procedures and tools are supported by the diligent administration of quality control and management, enabling internal operations to function at peak efficiency levels.)

Step 3. Sketch what you have just described verbally. Don’t worry about artistry, just draw it out as best you can. Avoid using words, but an occasional one-word exclamatory (e.g. Victory!) is okay. Fill up the whole page. Use different colors of pen and pencil to make it vivid. Use symbols and icons whenever possible. Stick figures are OK!

Now that the right brain is nice and warm, launch into the meeting proper.

Visioneering: Our Company R.I.P. (30 minutes)

The goal of this activity is to get to the big picture, bringing the future to the present so that it can be addressed. The traditional approach is to write a success story for the media some number of years or months in the future. But a better way, albeit unconventional, is to draft a detailed corporate obituary. (This is essentially what Kerry Morrison did in her interview, because Hollywood was dead at the time.) The outcome is a much more realistically and vividly portrayed picture of perfection, but in exact reverse. What would the article say about your team’s demise? What would the headline read?

Removing Obstacles: (45 minutes)

Understanding what the goal or vision isn’t is often more important than what it is, because it outlines the restraining forces and obstacles. And the reality is that restraining forces always rule. For most people, painting the disaster scene provides more readily accessible mental images, because they’ve seen them before at some point in their experience. When the roadblocks appear in the future, they are more easily recognized and effectively addressed.

Make a master list of all the items identified in the obituary, the company “killers.” Over to the right, list the countermeasure. What is the opposite of the ailment? How will each obstacle be overcome or avoided? These now become the critical success factors that form the framework of the future vision.

Goal-Setting: (30 minutes)

For each success factor, list a key objective, a measurable goal. Use the list you just developed to spark a discussion of the major goals. Combine ideas, wordsmith, refine, remove — whatever is needed to arrive at what the group agrees is a comprehensive list of goals incorporating all the critical ideas from the visioning exercise.

Prioritizing: (30 minutes)

Nothing sophisticated here: have each individual write down what they believe the three most important goals are. Then go down the list, simply asking for a show of hands indicating how many chose the item as number one. Tally the hash marks to identify the top five.

Project Forming: (30 minutes)

Now turn the top five priorities into key projects, assigning a champion and putting thought into who does what by when. Don’t make it exhaustive and detailed logistics planning.

Not only you can hone the visualization skills of your team with this practical exercise, but you just avoided what can all too often be an enormous waste of time and money.

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GUEST POST from Matthew E May

Each year, thousands of people visit the “factory” of Menlo Innovations, a custom software design firm in Ann Arbor, Michigan. They’re visiting for the same reason people flock to Zappos: People who work there simply love their work. Visitors are after a dose of the kind of unique company culture capable of producing such an emotional connection to work.

In the case of Menlo Innovations, they’re after something very specific: joy.

Menlo Innovations CEO and chief storyteller Richard Sheridan recently codified “The Menlo Way” in a brand new book, Joy, Inc: How We Built a Workplace People Love.

I caught up with Sheridan recently to ask him a few questions about the business of joy and how he created a company culture that seems to make everyone happy.

You start the book with the very question I’d ask: Why joy? Sounds squishy.

Let’s be completely honest here. “Joy in business” sounds worse than squishy—it sounds ridiculous. The word “joy” sat buried at the end of the Menlo Innovations’ mission statement for a decade until [business innovator] Simon Sinek came along and told the world to “Start with why.”

We have a minimum of one group per day touring our office, so I tried it on an unsuspecting tour group. “Welcome to Menlo. You have come to a place that has intentionally focused its culture on the business value of joy.” They asked me why I was talking about joy. I pointed back to my team and asked our visitors what they thought would happen if half my team had joy and the other half didn’t. Which half would they want me to assign to their project? They all wanted the joyful half. I then asked them why they would care and what difference joy would make. Their answers gave me all the data I needed:

“They’d be more productive.”  “They’d be easier to work with.”  “They’d produce higher quality.”  “They’d care more about the results.”  “They’d be more engaged.”

It became quite clear to me that everyone understands that there is, in fact, tangible business value to joy.

How do you know whether you’ve been successful in creating a culture of joy? In other words, what’s the real-world measure of joy?

Anecdotally, one measure of joy is through the stories we collect. People tell us how much better their lives are now because of the software we have designed and developed.

Business-wise, we build one measure of joy right into our contracts. We always offer our clients the option to trade a significant amount of our cash receipts for upside potential in their company or the product they’re asking us to help them produce. With the percentage of cash we’re willing to trade away, we would be very hungry if our approach didn’t work. Thus, we only win in the business financial sense if we help our clients win market share and user adoption.

You have an interesting collaborative practice: “pairing.” What is it, and why is it powerful?

Pairing is a time-honored tradition in many industries: police, fire, airlines, surgery, to name a few. Everyone who does project work for Menlo works in pairs. These pairs are assigned, and we switch at least every five working days. There are many benefits; some are obvious, others more subtle.

At Menlo, we design and develop software. Software controls our cars, our airplanes, our air traffic control systems, our bank accounts, our medical records, point of sales systems, etc. Errors can be costly and potentially even deadly. Pairing greatly increases the opportunity to catch programming errors at the time they’re created. That’s an obvious and powerful benefit.

Creatively, we just innovate better when there’s someone to bounce ideas off of. When we’re trying to create something new and interesting, we often get stuck and stay stuck much longer than we need to. At Menlo, if I’m pairing with someone and I’m stuck, my pair partner might say, “Hey, what about this?” and voila! we’re moving forward again.

This approach also helps with sustainability and scalability. If we have four people working on a project in two pairs, and suddenly the client wants us to go twice as fast, we add in four more people, adjust the pairs and assign twice as much work. No overtime, no burnout.

You had a eureka moment in your career that brought joy in business front and center.

For much of my career, I was searching for a better way to do things. I didn’t know exactly what I was looking for. I was simply convinced I would know it when I saw it. In 1999, I read about Kent Beck’s “extreme programming,” and I saw an ABC News Nightline episode on [global design firm] IDEO called “The Deep Dive.” I saw the future, and I never looked back. In that moment, I decided that the risk of staying the same was far greater than the risk of change, and I ran toward change and away from risk.

Can you explain the what and why of “Hey, Menlo!”?

We work in one big open room with no walls, offices or cubes. I sit out in the room with everyone else. If someone needs to call an all-company meeting, they call out, “Hey, Menlo!” When I do this, the entire teams calls back in unison, “Hey, Rich!” and then they fall dead silent.

At that moment, you are in a Menlo all-company meeting! No one moves. You make whatever announcement or ask whatever question you want, thank the team, and everyone gets back to work. These meetings can occur in 60 seconds or less even if there are 50 people in the room.

We hate the traditional kind of meetings that require cc-all emails, calendar checking, room booking and ambiguous agendas, so we’ve pretty much eliminated them. That adds to the joy by subtracting useless unproductive misery.

What’s a “High-Tech Anthropologist”?

Most people hate the software they use every day. It requires them to think like a computer rather than having the computer think like the user. How can I make such a broad assertion? Consider the origin of the term “stupid user” and the industry that gave rise to the Dummies books. We need a special kind of person to end this form of technological human suffering. Enter the Menlo High-Tech Anthropologist®.

They’re highly compassionate, empathetic observers who study the people who are ultimately going to use the software we design and build. They learn about them, their goals as human beings, their goals at work, their vocabulary and their workflow, and then, through simple prototyping and an iterative approach to design, create a user experience that will delight the users and not require user manuals, help text or training classes.

It’s fair to say that no one person comes in our doors with all these talents in one neat package. That’s another benefit of pairing. Each pair combination may cover almost all of these. During the pairing, in addition to doing the work, each partner can learn a little bit more about the areas they’re still weak in.

What’s the one thing you want readers to take away from this book?

That you can achieve joy in business. We all want joy in our work lives, in our downtime, in our kids’ schools, in our faith communities, in our families and in our nation. Humans are wired to work on things bigger than themselves, to be in community with one another. It’s why we join teams and companies, and work very hard and long to achieve a difficult and elusive shared goal. I hope to inspire others to pursue joy in their work lives.

originally published on open. image credit: menlo innovations

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GUEST POST from Matthew E May

Co-creation–companies and customers creating experiences, new products and services together–is a way of life with among the most innovative companies, and few would argue that co-creation is beneficial.

And there’s plenty of research showing that under the right circumstances and conditions customers and users can develop innovations which are both novel and have greater value for the users that what the company’s own developers come up with. Still, there hasn’t been overwhelming agreement on the how and why of it all.

A recent study by Anders Gustafsson at BI Norwegian Business School and Karlstad University in Sweden demonstrates that profitable co-creation with customers centers on the nature of the communication and interaction between the company and its customers.

The researchers were after answers to two questions: How should companies communicate with their customers? When is it profitable to listen to what they say?

They tested four hypotheses. First, that customer co-creation characterized by high frequency communication will lead to increased product and market success.

Second, that because companies often take an overly dominating role, a more evenly distributed dialogue will lead to more beneficial outcomes of an innovation process.

Third, that collaborative process of face-to-face communication and openness in critical aspects of a project, will facilitate successful development of future services and products:

Finally, that new offerings will be more successful if they account for needs that have been identified from use experiences.

The researchers conducted a survey among 334 managers who all had experience with innovation to create new products and services. They selected 284 real development projects that they divided into two main groups:

207 of the projects dealt with minor improvements of products or services, while the remaining 77 projects dealt with development of radically new products or services not previously known to the market.

The study confirms that companies can achieve better results in new product development if customers are given the right pre-requisites for participating actively in the company’s development processes. Better results were defined as enhanced creativity, improved user value, and a more successful launch.

Listening…No Big Surprise

For minor improvements to products and services it is advantageous to talk frequently with the customers and have two-way communication between the company and customers. The researchers also saw that it’s wise to listen carefully to what the customers actually said. Users will often know better what is needed to make them even more satisfied with products and services. Customers will also be able to tell you what types of improvements they are willing to pay for.

Listening…Don’t Bother

When a company aims to develop a product or service entirely new to the market, on the other hand, you should not listen too much to the customers’ specific proposals. The researchers saw that companies that listened too much to what customers said were less successful with radical innovations than those which placed less emphasis on the contents of conversations.

“The customers base themselves to a great extent on previous experiences. The really radical solutions are difficult to imagine in advance based on experiences with current products,” Gustafsson points out.

Sounds a bit like Henry Ford’s famous century-old quote: “If I had asked people what they wanted, they would have said a faster horse.” And he didn’t even have to conduct a survey of over 300 managers.

And as Toyota chief designer Kevin Hunter once told me: “People can’t tell you what they want in the future, but they know what they want now. You have to balance creativity with market acceptability. You have to push the envelope and be progressive, but you can’t get too far out there, because customers won’t understand. Your design has to evoke something familiar or emotional while at the same time offering something new and unfamiliar. You have to avoid a strict design bias and remember who you’re designing for. You can’t be selfish, you must focus outward, and on the problem you’re trying to solve for customers.”

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GUEST POST from Matthew E May

I get the question all the time, especially from organizations who have significant investment in some process improvement program — like a “lean six sigma” or “lean kaizen” (I hear the ghosts of Toyota engineers booing) initiative – and have picked all the low-hanging fruit clean, squeezed as much inefficiency from their work as is humanly feasible, and are now realizing that their beloved program wasn’t all that market-focused.

All that internal scrutiny left the customer without any new and useful value. They’re realizing they need to focus on what they should have been focusing on all along: companywide innovation.

The question comes in different forms. Often it sounds something like this:

“What’s the difference between lean and innovation?” “Will an innovation effort clash with our lean program?”

It’s the wrong kind of question. It’s indicative of the wrong mindset. You hear it in the language: “We’re doing lean,” and “we’ve been doing lean for three years.” You don’t “do lean”! Do you “do innovation”? When’s the last time you heard someone say, “we’ve been doing innovation for three years”? Geez, what did you do before?

Why do we view anything branded “lean” as a bolt-on, but innovation as a necessary embedded competency every business must have?

Here’s the thing: lean thinking and innovation — ANY conscious, cognitive, creative problem-solving process for that matter — employs the human learning steps we come into the world with: curiosity makes us notice something, we ask a question, hypothesize an answer, test it out, and then reflect on whether the cause and effect we were anticipating came true.

It’s a learning loop. It’s at the heart of everything. The only difference between what many think of as “lean” and what they think of as “innovation” is where you point your energy.

Incremental, sustaining innovation and improvement efforts (kaizen) are focused on an existing process, product, service, or system. Think of it as a pie, in which about 25% is true value–stuff a customer cares about and pays for. The rest is stupid stuff: non value-adding things like overload, inconsistency, and all flavors of waste. Your “lean” or kaizen efforts are aimed at increasing true value by decreasing those burdens and value-detractors.

Radical or disruptive innovation (kaikaku) is focused on creating an altogether new pie.

“Lean” and innovation are not at odds. Allow me to make my case. Let’s look at the seven basic “mudas” or forms of waste…typical lean targets. Except, let’s look at them through the lens of what the entire commercial word defines as innovation.

Overproduction. Anything done without regard to demand counts as overproduction. That includes something as simple as processing an order before it’s actually needed. Uber, a radically innovative, just-in-time limousine service that doesn’t take advance reservations, has successfully excised this waste.

Overprocessing. When there are too many non-value-added steps to achieve a given outcome, you’ve got overprocessing. Amazon banished overprocessing with the “1-Click” innovation.

Conveyance. The very best you can hope for when transporting goods, material, and information from one place to another is that nothing goes wrong. Conveyance is a necessary evil to be reduced wherever possible. The decline of the U.S. Postal Service began with one of the most radically innovative applications ever, now 20 years old: Email.

Inventory. Any time inventory builds up, it creates unhelpful pressure to reduce or eliminate it. It’s a point of pain as close as your back pocket…your wallet, the traditional version of which promotes the “George Costanza” hulking mass of cards, cash, receipts, and sugar packets. Google Wallet aims to eliminate the wallet entirely as a physical storage device.

Motion. Needless repetition of any process (even a lean one) sucks time, productivity and cost. Even the best companies struggle with this. Until Apple’s iOS 7, you couldn’t select all the emails in your iPhone/iPad inbox and mark them “read.” If you had 500 emails, you had to go through each one to remove the little red number on the app, a constant eyesore. It only took Apple 6 years to ease that burden.

Defects/Rework. Everyone has experienced a defect of some kind: errors, inaccurate or incomplete information, flawed products. Ever try cutting a simple error-free straight line with a pair scissors? Nearly impossible. Requires trimming or rework every time. Until, that is, Tamas Fekete invented the Vector Scissors.

Waiting. We’ve all experienced waiting and the accompanying sense of helplessness and lost productivity. Both MinuteClinic and WellnessMartMD have eliminated the dreaded healthcare waiting room by minimizing procedures to those that are quick and easy to handle.

But…

…think about it: all of these innovations are in a sense simply leaner versions of what was there before. It’s just that the scope, scale and magnitude of the improvement are so great that a new value pie has been baked, and while the general shape looks comfortably familiar, it tastes completely different.

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GUEST POST from Matthew E May

If it’s true, as we often hear, that the artist is not a special kind of person, but rather that every person is a special kind of artist, then the journey to creative excellence must begin with finding the key to unlocking that special artistry. We may never understand it fully – and I don’t think we really need to – but we can certainly find it and follow it to see where it leads us.

Now, this approach breaks with the traditional wisdom that would have us first decide on some dramatic destination. But a destination has little relevance if we don’t have the means to reach it in the first place. Our natural gifts are the means to any significant end, so we must start there. Only then can a dramatic destination be reached.

The artist’s true colors are not found in paints and brushes, but in one’s palette of talent. The first order of business, then, is recognizing our talent, because it represents the greatest source of power and personal energy in performing any kind of work. That energy must then be released, developed and directed, because that’s how we achieve something significant. I can’t think of any original masterpiece that didn’t involve a well-developed talent.

Clues to your creative calling in life, the general nature of the work you are best suited for – your real potential – reside in knowing and understanding your natural gifts and talents. Work that engages your gifts will be intrinsically meaningful for you.

But the concept of talent is a difficult and often misunderstood one.

WHAT IS TALENT?

Talent provides an endless source of fascination with human behavior, dating back at least twenty-five hundred years to the time of Hippocrates (5th century B.C.), the “Father of Medicine,” who was the first to propose that people are highly formed at birth, with fundamentally different gifts in life. Modern research on brain activity has added new scientific insight into the origins and sources of different intelligences, but the concept of talent itself remains one that is open to at least some interpretation.

For purposes of speaking about artistry in performing our work, it makes sense to say that talent is best thought of asendowed potential, a mystic constellation of qualities given to us by nature – raw at birth, noticeable at a young age, and developed over time through continued exposure to exercise and environment.

The key here is the notion of a natural gift: A talent is not something we can acquire, and we cannot learn to be talented.

I believe everyone has talent. Still, most people don’t really know what their talents are, or at least have difficulty describing them. Why? Perhaps because talents are innate and reflexive, and we don’t need to think hard about them – they’re like the air we breathe – we tend to take them for granted.

Perhaps we falsely presume talent is supposed to involve a rare skill, or some activity deemed to be tremendously difficult to execute, like performing arts and professional athletics. And perhaps we just don’t appreciate our own abilities enough – mistaken in our thinking that talent is reserved for others who can do things we can’t, especially those notable individuals who have accomplished extraordinary things.

Ask someone what they think their real talent in life is and my bet is that they will adopt a look of utter bewilderment and shrug, “nothing really.”

What’s interesting is if you ask someone they work with to describe the talent of that person, they can easily rattle off a handful of abilities they admire and even envy in the other, and consider gifts. Explanation? No two people share the same gifts, so others often have a good view of our talents because they’re in a better position to observe something they don’t possess.

The challenge remains for us to find our talents.

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GUEST POST from Matthew E May

What causes us to be creative one day and completely blocked the next? Where do our sudden creative insights—our Eureka! moments—come from, and how can we generate more of them, more consistently? What brand of creativity is best suited to business? Much has been written about creativity in business in an effort to answer these kinds of questions, and much of it is just plain fiction, according to David Burkus, founder of the popular LDRLB blog and author of the new book, The Myths of Creativity: The Truth About How Innovative Companies and People Generate Great Ideas. Based on the latest research into how creative individuals and firms succeed, Burkus sets the record straight in his new book on 10 very popular but mistaken beliefs, such as:

• The Eureka Myth: The truth is, creative insight is typically a slow hunch, not a sudden spark.
• The Breed Myth: The truth is, creativity is not a trait that only certain individuals hold.
• The Originality Myth: The truth is, creative ideas are actually combinations of older ideas.
• The Brainstorming Myth: The truth is, creativity requires more than the rapid generation of ideas.

I recently caught up with David to ask him a few questions about these and other creativity myths.

There seems to be no shortage of ideas in the business world. Why talk about creativity in the first place?

Many people associate creativity with the ability to just generate lots of ideas, rather than focusing on ideas that are novel or useful. There are certainly a lot of ideas floating around, but finding the ones that will actually have a useful impact on the world takes a process of idea generation, refinement, testing and modifying until we come upon a worthwhile idea. I think we need a broader discussion about what creativity is and is not. It’s not thinking up lots of ideas; it’s creating ideas that are new and useful.

Linus Pauling is attributed with saying, “The best way to get a good idea is to have lots of ideas.” Would you care to weigh in on that?

Pauling is totally right, but sometimes we oversimplify his intent. The best way to get good ideas is to start with lots of them, but that doesn’t mean we’ll be able to look at our list of ideas and pluck out one perfectly formed innovation like a diamond in the rough. Diamonds are actually a good metaphor for ideas since it takes intense pressure and a long process to make a diamond. So it is with ideas. We start with a lot of good ideas, but we have to take those ideas through a process to arrive at a truly good one.

Is the old cliche “there are no new ideas under the sun” true or false?

Generally true. I don’t look at this phrase as saying, “There’s nothing new, so stop trying.” Rather, I think it’s a statement on the nature of ideas. All new ideas are built from combinations of older ideas. The printing press was a combination of moveable type and the wine press. Henry Ford didn’t invent the automobile or the assembly line, but when he combined the two, something innovative happened. My favorite example is Star Wars. George Lucas combined a famous plot line from mythology with low-budget sci-fi films and Akira Kurosawa samurai films, and the result was a trilogy that continues to resonate with us. Creative genius doesn’t come from thinking up totally new things; it comes from merging the ideas we already have and creating a combination we haven’t seen before.

Why do we love our own ideas but naturally reject those of others?

We think we would recognize a genius idea the moment it was presented, but the truth is, we have a natural, psychological bias against new creative ideas. For an idea to be creative, it has to be novel and useful, and we use past precedent and the status quo to judge whether something is useful, meaning if that something is new, then we’ve already stacked the deck against it. When we think of the idea ourselves, I think we have an easier time working around this bias. When someone else presents the idea, we go right into judgment mode, and the bias takes over.

Which of the 10 creativity myths do you think cripples small businesses the most?

The above bias [against new ideas] turns into a complete myth. I call it the Mousetrap Myth, from the phrase, “If you build a better mousetrap, the world will beat a path to your door.” History is filled with great ideas that were rejected by the public or by businesses. For instance, Kodak had the opportunity to develop the digital camera but didn’t. In small business, this can be even more crippling since the stakes for implementing great ideas are even bigger. Small businesses might think they need more great ideas, and they try to teach their people to generate more ideas, or they hire consultants to help bring in new ideas. The truth is that innovation and competitive advantage aren’t an idea generation problem; they’re an idea recognition problem. We need to get better at implementing the ideas we already have.

If you could point to one historical figure who embodies most of the truths about creativity, who would that be?

I would say Thomas Edison as he really was, not as the vague resemblance of him we currently have. We think Thomas Edison invented the light bulb, and we envision him alone in his studio slaving away at it. The truth is, Edison didn’t invent the light bulb so much as he refined it and made it commercially viable. He found other ideas to combine with the existing technology of the light bulb and created a version that would succeed on the market. In addition, he rarely worked alone. During the peak of his inventing career, Edison built a large studio in Menlo Park where roughly 15 other inventors worked alongside him, trading ideas and collaborating on projects. I like to think that his greatest invention wasn’t the light bulb; it was Menlo Park.

What’s the one thing you want readers to take away from The Myths of Creativity?

We’ve built up a system of beliefs around creativity that portray it as something vague, mysterious and inaccessible. The truth is, creativity is something that’s hard wired into our brains. Sure, some people are better at it than others, but that doesn’t mean you can’t grow your creative genius. We all have the potential to create great ideas or breakthrough innovations—it’s just a matter of learning and being comfortable with the process. That’s the truth about innovation.

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