The top 25% of S&P 500 companies achieve a 4% Return on Net Assets (RONA) after removing the cost of capital (WACC). The bottom half of S&P 500 companies have negative RONAs! What is your organization’s RONA minus WACC?
Doing the same things we have always done isn’t going to change these outcomes. To transform our outcomes, we must transform both what we do and how we do it.
As the saying goes, doing the same thing over again and expecting a different outcome is the definition of insanity. I think we can agree that overcoming these challenges will need more than the historical and conventional means of change. We need Transformative Innovation (TI).
It bears asking, why are leaps like the cell phone and the internet so rare? To answer that, most of us point out barriers to innovation like funding, risk tolerance, technology, culture or even lack of talent. But to unleash transformative innovation, the boards and senior executives of organizations need to understand that there are other and deeper root causes to all these issues. We are either blind to these root causes, or worse, assume they can’t be changed. If we are blind to them, or assume they cannot be changed, we really can’t address these root causes. The goal of this article is to, at least, raise your consciousness about these invisible barriers. You may choose not to tackle these because they are “above your pay grade.” For those of you who have the courage, conviction, and passion to take on these barriers, here are a few primers to get you started.
Human Nature. It’s not that we don’t like change, or don’t like taking risks. The issue is more subtle. Most of us don’t like taking unknown risks, not unless we have absolutely no alternatives. So we avoid unknown risks by taking “practical” incremental steps, until sometimes it is too late. This tendency gets amplified in our organizational behaviors. We resist even daring to dream about a future that doesn’t involve what is already familiar to us.
Those that dare to think big are considered crazy and impractical. The death knell of their careers is rung. We need more people who are willing to say, “What if?” and back it up with practical ways to achieve those big ideas. Being practical by killing ideas isn’t really practical – it is called becoming obsolete. The best way form of being practical is to think big and then ACT upon those ideas. Start by finding those in your organization that have the passion and courage to imagine a transformational future. And encourage them, don’t drive them out of your company, or they’ll do great things without you.
Poorly Defined Core Competencies. Emanating from our basic fear of the unknown is one of our most sacred management principles: “Stick to your core competencies,” or “Avoid mission creep.” If I could have had a penny for every time I have heard leaders say, “lets stick to our core competency” and then without pausing for breath, continue with, “we should innovate!” I’d be spending my days drinking Pina Coladas on my own island right next to Richard Branson’s! The unintended consequence of this “focus on core competency” is that it directly kills any hope of breakthrough innovation. Trillions of dollars worth of opportunities have been squandered by adhering to what seems like a no-brainer management doctrine.
By definition, we can’t be “competent” in something that doesn’t exist yet. Therefore, we can’t stick to core competencies and still create transformative innovation. This paradox explains why small entrepreneurs—not large organizations—conceived and incubated most of the world’s greatest innovations, organizations, and brands: United Way, Susan G. Komen for the Cure, Goodwill, Coca-Cola, Nike, and Apple, for example. These Davids (start-ups) like Nike were not encumbered by an artificial barrier of “core competency,” like the Goliaths (e.g. Converse) that they ultimately beat, and sometimes even acquired.
Instead of defining our core competencies by what we do (example, sell phones or drinks) let’s define them by how we do it, for example, lets focus on our expertise in understanding consumers or how we manage innovation processes.
Apple is a great example of this—a core competency in making computers didn’t prevent them from taking on the music industry or the cell phone industry with the transformative iPod and iPhone. If clarity of unique value and transformative innovation doesn’t become a part of an organization’s practices, it will be difficult to survive, let alone thrive.
P&G is another great example. I’ve personally worked on Pantene, Vicks and Old Spice. Some of my friends who worked on these categories went on to work on Pampers and Whisper/Always (feminine hygiene) – what on earth do these products have in common? Why would a soap company get outside its core competency in soap manufacturing and marketing and get into such diverse categories? It is because P&G’s real core competency lies in understanding consumers, innovation and brand management. Not in making soap. So, ask yourself whether you describe your organization’s core competency by what you do, or the how you do it (the underlying skills)?
Illogical Time Horizons. We measure performance in annual cycles. Why? That is a stupid question, I hear you say. But, really, why? Do you expect a perfectly developed human baby to be born in 6 months or 12 months? An Elephant pregnancy lasts 21-22 months. Why doesn’t nature make all babies be born in 12 months? Why should a new business be tracked by pre-conceived notions of how long it should take to become healthy and viable in this world? Well, the annual business cycle paradigm was born 10,000 years ago as foragers started to farm. An agrarian operating paradigm simply makes no sense more than 200 years into the industrial age. The annual agrarian cycle forces us to create annual plans and incentives. Therefore, our projects face invisible and irrational pressure by trying to show meaningful progress for an annual review within some artificially bounded plan.
Wall Street takes this irrelevant timetable to yet another level of insanity by tracking companies’ quarterly results. Public stocks leap and crash based on both the quarterly results themselves and on announcements in advance of these results. This short-termism becomes the impetus behind innumerable corporate decisions that temporarily boost stock price while eroding long term value. This is a root cause for why even large corporations with huge budgets and resources can rarely transform markets.
Actions of great CEO’s, like P&G’s A.G. Lafley, who courageously told Wall Street that they would no longer provide quarterly guidance, are critical for Transformative Innovation. I know actions like Lafley’s might be above the pay grade of some of our readers. But, at least being conscious of this invisible barrier might help you address the debilitating effects of this insane barrier.
Different ideas need different time scales to evolve. Some faster, some slower. Forcing arbitrary annual and quarterly results squelches innovation in favor of the quick win. Why do corporations kill world changing ideas that might be worth a billion dollars in 6 years because they can’t achieve some arbitrary goal in 1 year? Why can’t we review an idea on its medium to long term merits rather than its ability to produce meaningful results in a few quarters?
I hear you saying, “this is impractical!” The board/investors would fire the CEO. But, Phil Knight, Howard Schultz, Steve Jobs, and even AG Lafley, all did it. It took immense courage and credibility on their part to convince their boards. You can do this more easily if you can overcome the following related barriers. Given below are some practical ideas.
Unreasonable Scale. Coupled with illogical time horizons is the “big organization” mentality of trying to achieve scale quickly. This “go big or go home” mentality forces us to over-invest early in our transformative innovations. This makes our experiments too big and our failures bigger. Not only do we kill great ideas, but this “failure” sucks the wind out of our enthusiasm for innovation in the future.
The trick is to start tiny. If you start tiny, your risks are lower and the need for annual or quarterly monitoring is felt less acutely. This gives the innovators breathing room to fail, learn, and improve—just like all those entrepreneurs who created transcendent brands. So – without changing Wall Street’s expectations, you can start transformative innovations with really small scale, low risk, and ironically, speed up the process to get to a billion dollars.
Processes & gates that shut out transformational innovation. The greatest entrepreneurs failed and learned often from small steps and experiments, gaining rich insights before they achieved their breakthroughs. But large organizations put tight controls on the scope of every step of highly linear processes, and expect black and white answers, leaving no space for accidental discoveries and unexpected outcomes.
Using processes that have major milestones/gates have unintended consequences, the opposite of what is desired. The actual process of transformational change is organic. At Blue Earth, our best results have come when we have reversed aspects of value creation that typically come at the latter stages/gates of traditional processes. For example, testing a business model before the first gate might be considered crazy, when the consumer/customer proposition itself isn’t clear! But, sometimes the proposition can be transformed if we consider an “out-of-the-box” business model. The point is, replace linear thinking with organic thinking – and you will get non-linear results!
We won’t get Transcendent Innovation right by using preconceived metrics or rigid timelines. Instead, we need to promote several quick innovation iterations—which may be “failures”—in an organic process, while allowing serendipity to emerge. The good news is that flexible milestones can actually speed up the innovation process if managed wisely. We don’t need to be governed by arbitrary metrics or rigid processes, we need to be governed by what creates transformational outcomes.
The barriers listed above are imbedded in our assumptions, they are systemic, and are difficult to reconcile with conventional management wisdom. But they can be overcome—even by large organizations driven by Wall Street’s fixation for quick returns.
When conventional management wisdom doesn’t help you uncover and remove these barriers, find new wisdom that does. Removing these barriers unlocks value and allows us to create escalating returns over time and transformational outcomes for our planet and ourselves.
Great companies like Google, Apple and, I’m happy to say, our clients, ranging from Heinz, Panasonic, and Verizon, to start-ups like NewTree and Sofn’free are experimenting and benefiting from relinquishing the invisible chains of the 20th century.
photo by neelaka
This post first appeared in PDMA Visions 2013 Q2 magazine, found here.
Over the holidays last year, I had my piano restored by a local expert, Hamer. We had purchased it eight years earlier from a church that was getting a new one so that our children could begin taking lessons. Turns out that it’s over a hundred years old, built by a New Jersey company, Cornish, in the year 1900 and has generally been considered a pretty good piano. Our first question for Hamer was, “is it worth saving?” After an initial assessment, he explained that it was absolutely worth saving due to the quality of the materials and workmanship he observed and because much of the interior was still very well preserved. After giving us the basic parameters for restoring it, he removed the front panel and gently lifted out the piano’s “action” which is the set of dampers and hammers that, respectively, end a note and start a note, and left for his shop. A month later, accompanied by a clean and restored action, he returned and began the process of re-installing and tuning it, all-the-while allowing me to watch and listen as he described the many inner-workings of our piano.
It struck me as I watched him polish the nearly 200 wire tension screws, align the dampers and hammers, and adjust each string to its perfect pitch, that I was in the presence of a real craftsman. I wondered about craftsmanship and how it might relate beyond the work I was witnessing – to my own work and to that of others.
Can one be a craftsman of marketing, innovation, product design or risk analysis?
In my experience, “craftsmanship” is almost always only associated with hand crafted physical goods or services like furniture, carpentry or, in my case, piano restoration. My definition of craftsmanship is rooted in two fundamental concepts…excellence and focus. Excellence implies not only quality, but quality in the highest degree, satisfying both the base quality expected by the customer as well as a very high internal bar comprised of additional latent elements that won’t necessarily be expected, but greatly appreciated. A craftsman possesses both great knowledge of the work necessary to produce excellence as well as the attention to detail necessary to recognize it from the beginning to the end of his or her work. Finally, to attain focus, a craftsman must have the passion and patience to execute the detailed work to be done and possess the ability to focus on that work.
At first blush, it appears as though any one of us could have the ability to achieve those two basic traits – excellence and focus –but let’s delve deeper into the implications inherent within craftsmanship and how it translates from physical work to “knowledge work.”
Let’s start with “Excellence.” One of my favorite sayings is “success is measured by expectations.” Understanding quality in a physical, durable good is often fairly straightforward – it works, doesn’t break down, etc. Yet there is another component to quality in a physical good and its associated feature function – whether or not it meets the expectations of the customer who purchases it. It could work as designed with no internal defects, but, if it doesn’t “do” what the customer expects, it is not likely to be considered to be high quality. True quality, then, is the combination of reliable function in conjunction with the satisfaction of the customer’s expectations.
Excellence, however, seems to go beyond merely meeting the stated expectations. Hamer performed much work on the action of my piano that seemed to conform to his own “bar” of excellence. He polished the action metal and the 88 steel screws holding the dampers and hammers in place. He polished the bolts affixing the strings to the sound board, taking care of additional aesthetic qualities that actually make me want to leave the piano cover off, making it visible to all.
Unfortunately, he said, leaving it open “would only make the piano dirty again.” These unstated attributes of quality, when added to the product output, have the ability to give customers an added thrill. We like shiny, slick, polished, integrated, easy and free flowing products. It’s that kind of detail that moves quality to excellence and was on clear display in Hamer’s work.
I asked Hamer how he had learned to do the detailed and intricate repair work with such a variety of available pianos, form factors, etc. He had a simple answer… “I was an apprentice.” An old world concept, but one I found intriguing. We tend to use the word “mentor” now and, though it doesn’t mean quite the same thing, it is at least analogous to the concept of master/apprentice. Many of us can point to individuals who have ‘helped’ us throughout our career, but apprenticeship implies more than informal advice, it’s a structured training program teaching the specifics of a craft and how to achieve not only quality, but excellence. I wonder how many of you have had the luxury of receiving real, structured training vs. the reactive knowledge gained in a ‘sink or swim’ environment?
In Charles Duhigg’s recent book The Power of Habit: Why We Do What We do in Life and Business1, he states that, “left to its own devices, the brain will try to make almost any routine into a habit,” which includes our business behaviors as well. If your early business experiences were like mine, in the absence of knowing the exact way to do something well, you were left to learn a way, any way at all, to accomplish your tasks. According to Duhigg, as you were figuring out how to develop a product, your brain was searching for ways to make the initial path you chose into a habit and, “once that habit emerges, the brain stops fully participating in decision making.”  In other words, we stop thinking about how we do something and we just do it.
Yet what happens when the habit that we’ve formed through experience – without conscious knowledge of “excellence” within our company and without a “master” to tweak our approaches and shape them – isn’t really the best way to get something done? Moreover, what happens when we have an innovation or development organization with hundreds of employees, all of whom have been in the same sink or swim environment and have formed their own habits by either learning to “swim” or receiving just enough advice from other “swimmers”? How many approaches to quality does a company like that have? Well…they have hundreds and, if you’re not achieving excellence, you have hundreds of approaches (habits) that need to be identified, analyzed and retrained – a daunting task to be sure.
In order to achieve consistent, excellent outcomes we need to foster the mastery of the processes that create excellence within our resources. We also need a clear picture of both our customer’s base expectations of quality and the latent expectations to which they may never give voice. Our processes/habits need to be clearly identified and repeatable to a point where all involved are consistently performing each task during which we gather expectations. We cannot rely on people to each have their own way of executing. Good people have bad days. The company can then start creating an organizational habit around knowing the right way to create excellence and instilling it into those involved in delivering its products.
Quality execution then becomes a habit, allowing our most creative people to move away from the consequences of poor quality (defects, rework, phone calls to clarify intentions, upset customers, etc.) and focus that extra bandwidth on doing something else – hopefully being creative and improving our chances of delivering “excellence.”
The second major trait of a craftsman is his/her ability to focus – spending uninterrupted time and avoiding distractions in order to complete the work within the smallest possible time window. Hamer’s work was often painstakingly slow, careful and many times repetitive, but, he kept a steady pace— working for nearly 12 hours straight, with only a single break for dinner (“Eating,” he said, “just slows me down.”) In my estimation he achieved almost perfect focus. In an organization, the ability to focus provides many advantages including a dramatic increase in benefit realization, simpler resource models, increased customer satisfaction and, as you’ll see, a happier work environment (for additional information on focus, see my article in the previous issue of Visions.)
The concept of speed is often misinterpreted. The intent of focus isn’t to speed up the work. On the contrary, Hamer did not hurry. He simply dedicated the amount of time necessary to do the right amount of work. I don’t think he actually knew how long it would take him to finish, he simply started. During his time in my house, he worked diligently, with patience, attention to detail and remarkably few breaks. Do we do the same in product development or are we constantly managing “slices” of a person’s allocation? Do we work at a constant pace or do we typically meet only once or twice a week, stopping and restarting each time? To accomplish focus, you need the commitment to continue the work until it is complete, as Hamer did. Do you see such an attitude in your company?
Distractions play a major role in our work environments and, while Hamer was in an environment where distractions abound (kids, dogs, grandparents, etc.), he never stopped working, even as he spoke with me. In knowledge work, distractions take the form of competing priorities, along with instant messaging, cellphones, the internet or even a colleague who just wants to talk. Many organizations actually promote a lack of focus. Have you ever listed, posted for or read a job description that contains the following: “the candidate must be able to focus on multiple, independent initiatives with very little supervision…?” What reaction would you get to a posting that, instead, stated “…must have singular focus on important initiatives and work steadily until completion…?” It’s a different message and, potentially, a different skillset.
Yet what happens when we achieve focus? I was happy with Hamer because he finished the piano restoration quickly. But what about Hamer himself? Does focus have an effect on his attitude as well? In her article “The Power of Small Wins,” Teresa Amabile discusses what motivates employees who do knowledge work. According to Amabile, “of all the things that can boost emotions, motivation, and perceptions during a workday, the single most important is making progress in meaningful work.”  Focus, I believe, in conjunction with a clear understanding of the work to be done, is a very effective way to make progress, creating an environment with a high level of morale.
Upon completion of the restoration of our piano, Hamer appeared to be extremely satisfied with his work. How do I know? I did not need to ask him, I simply listened as he gave us an impromptu 40 minute concert, lost in his music, flowing easily from one piece to the next, testing each note, its tone, balance, each and every key, octave and its associated sound. By the end, my mother-in-law, also an accomplished pianist, was in tears, my wife and I were in awe and my rather rambunctious children were unnaturally still and quiet. Indeed, my kids could appreciate the excellence of Hamer’s work without even knowing the meaning of the word “excellence.” That, I would humbly submit, is true craftsmanship. Can we, as innovators accomplish the same? Perhaps not everyone, but with a clearer, singular knowledge of the necessary work, stronger master/apprentice pairings and a focused environment, I certainly believe more are capable of achieving it. If you need any advice, I can get you the phone number of a certain piano restoration expert I know…
 Duhigg, Charles, “The Power of Habit: Why We Do What We Do in Life and Business,” The Random House Publishing Group, USA, 2012.
 Amabile, Teresa, Kramer, Steve, “The Power of Small Wins,” Harvard Business Review, May, 2011.
At a recent innovation summit in Atlanta, the CoLab Summit, our CEO, Udaiyan Jatar, was invited on stage to encourage businesses leaders to stop relying on conventional management theory for innovation and instead learn from the real situations in which innovation has worked. It turned out that his speech shared themes with some of the summit headliners, such as Sir Ken Robinson and Thomas Friedman. But one headliner had the same message, Tony Wagner, who is the Innovation Education Fellow at the Technology & Entrepreneurship Center at Harvard.
In addition to making everyone else’s job title somehow seem inadequate, Wagner painted a poignant picture of somewhere else besides business where current ideological convention is serving us poorly in innovation. Wagner’s focus was on our current education system and how it woefully prepares us for innovation once we go to work.
Here at Blue Earth, we believe the same thing. Today’s conventional business doctrine is a mirror of that education system. There are 3 main reasons we can do much better.
You can’t innovate in a silo, and you can’t innovate in a vacuum. The greatest human thinkers from DaVinci to Edison to Einstein relied on the opportunities for collaboration and challenge provided by their peers.
In the typical k-12 education, we have lots of peers. But we are not creating ideas in school, we are proving how well we memorize other people’s ideas. We are not applying what we learn to the real world, we are showing we understand things on paper that in many cases will be used by less than 1% of the US adult population.
What percentage of our time was actually involved creating and collaborating? What percentage involved our peers challenging and refining ideas? From k-12, through college, and even through most graduate programs, the environment that fosters innovation is completely absent.
Measurements included. Your grades are yours alone, even with group work. Most forms of collaboration, unless expressly sanctioned, are actually treated as cheating. You are not graded on positive contributions to the classroom or your community.
What about business school? Surely they do better. MBAs seem to have more team projects than most, but ultimately an MBA’s success in school and out of it is presented to her as an individual effort. In teamwork the emphasis is on her individual contribution to the team, more than it is about the team coming up with something more than the sum of its parts, which would be closer to innovation. Innovation as a stand-alone subject is absent in 99% of business school curricula.
Case competitions are the exception. And what are case competitions? Students working on real world problems. Outside of the classroom.
How we work as students is not how innovation works. Innovation comes from mixing ideas and perspectives and collaboration and challenge. The innovations that we have learned from and have helped create are not siloed solutions, they are means of helping whole swaths of people bring something new to their life. Those people, through their reaction to and advocacy of the innovation are an integral part of that innovation’s success.
Even discovering a ripe opportunity for innovation requires deep interaction with those served by the innovation, let alone the execution. The best innovations satisfy deep human needs and aspirations. To understand those opportunities you require perspectives, diversity, and deep learning into what makes other people tick.
The best ideas are born of empathy for those being served.
This is how a new business idea can take hold most firmly and spread most effectively. This can only come from collaboration that holds the best intentions for the success of our collaborators in mind.
That does not sound like education. Nor does it sound like a typical management strategy for innovation which focuses on products and technology and current capabilities before it ever looks at the human level.
At Blue Earth, we start our projects with the best intention to satisfy a deep need. Start innovation with the question – how can I really help people in a new way? How can I change their lives in a way they can’t do effectively themselves?
This is how Gatorade was invented by an industry outsider despite the massive resources and drive for growth of all Gatorade’s initial beverage competitors. The beverage giants were asking, how can we grow our volume and make more flavors? Gatorade was asking, how can I help student athletes have better sports experiences and performance? Gatorade was sold for over $15 billion to one of those very giants who didn’t see it coming.
Innovation requires more than papers, presentations or even great ideas. It requires action and reaction in the “real world.” Of course it does. But then why isn’t real-world solution creation ever taught in schools?
Our entire education system up until graduate school is predicated on students repeating old information. Deviation from this prescribed notion of truth, often in books written years ago, gives you wrong answers. It is a small percentage of teachers that have the energy or the flexibility to supplement stogy textbooks with the real-time discoveries happening every day. Not only do students miss the excitement of what is happening out there right now as a connection to what they are being taught, they spend years practicing only one style of knowledge absorption, passive learning.
You can’t innovate through passive learning, you can’t even truly innovate only by “ideating”. You can only innovate by doing.
How often did a teacher turn to you and say, I actually don’t know the answer to this problem that people have, let’s figure out a new way to solve it, and then we’ll go try it out? That question doesn’t fit anywhere in our current education system.
This has direct implications for the business world.
Most businesses approach innovation like a classic school research report. They state a hypothesis for a new idea, then they set out to research every element of that new idea. Multiple focus groups and surveys of thousands leading to potentially endless analysis are recruited in an attempt to prove or disprove that original hypothesis.
This process can take months. Worse, this process will tell us the preferences of the average person, of the “typical” market for a potential idea. That’s the same market every competitor will see. That’s the fast track to diluting our ideas and making then easy to copy. Sustainable inventions use new unique ways to serve deep yet specific needs.
Most often the motivation for the the long term research approach is to prevent a commitment of resources to a bad idea. What if it fails? This is a method for preventing resource loss. That sounds reasonable to any manager. The irony is that simply creating a small but effective real world test of this idea can require less resources than a typical research plan!
Entrepreneurs know that some of the greatest innovations of our time didn’t require months worth of traditional research, or even weeks. They required the innovator to create something as fast as possible and get it into the market. That is the experiment.
Nike was invented when Bill Bowerman poured rubber into a waffle iron and started selling it, not to the average person in the biggest market, but to people who he was familiar with and who he knew needed it the most, college coaches. He served them so well that they became his biggest sources of feedback and his biggest evangelists.
He had no budget for research. That proved to be an advantage, because the best way to innovate is to actively create to serve a unique need and put your creation out there.
Failure is the worst thing that can happen to you in education. Literally the entire point of traditional education is to not fail and keep moving through the grades. Failure is the worst outcome. Enough failure and your traditional education ends.
This process is mirrored in the business world. Most business people agree that failure is actually one of the fastest ways to learn. Despite all the rhetoric around failure these days, in practice, failure is either overtly punished or culturally demonized in most companies. Very few companies embrace it because very few leaders embrace it.
Failure sounds just as bad to most CEOs as it does to most teachers. Despite rationally agreeing with failure as a learning tool, failure is perceived as a great loss. This can paralyze a leader. The issue is that most leaders don’t know how to fail productively.
The problem is not failure, it is how we do failure.
The faster you put your innovation out there, the faster you see what part of it fails, the faster you will get to the most successful version of your innovation. Believing that you can invent a solution that will be so perfect so as to never experience failure is the false grail of all that corporate research and the height of unproductive hubris.
The key to doing failure productively is to start tiny. Start with the smallest possible experiment, the minimally viable product, the smallest use of resources to give you learning results. Start with a small audience, the audience with the greatest need. Reduce the time, reduce the resources, and you reduce the risk. Then you fail and you learn. Failure becomes productive.
Penn State Professor, Dr. Jack Matson, describes this concept as IFF – Intelligent Fast Failure. Many other organizations have their own names. At Blue Earth we call this Rapid Prototyping.
Venture Capital firms have figured out that successful start-ups require an average of 7 pivots to find their most viable product. Seven pivots technically means 6 productive failures. Despite all the business plans, despite all the research, despite, in many cases, the funding, they had 6 failures and that’s what taught them to succeed.
Failure doesn’t have to mean an end or a loss. Done the right way it can mean success.
Traditional management doctrine was born of the traditional education system. We have seen here how they are connected and how neither serves us well when trying to create something new. It is time to drop those old habits.
That is what we endeavor to do at Blue Earth Network every day. Our process is wholly unconventional and produces much better results.
You can begin applying these ideas right now.
Take a look at your business and find the places where your culture, your processes, or your activities mirror an academic setting. See where you are striving to come up with a pre-defined answer. See where collaboration, action, and failure are being stifled or tied up in the red tape and well-meaning, but misguided, approach of conventional management doctrine.
I can guarantee those activities are impeding your best chance at true innovation.
photo by 20se
Udaiyan Jatar talks at TEDxBGI about how big things start small – and how you can start creating transformational change.
Blue Earth’s Mission
The pace at which organizations are adapting to the changing needs of consumers, the environment and society, is too slow. Incremental innovation just won’t cut it any more.
To help organizations drive true transformational change, like Unilever’s CEO, Paul Polman is doing according to Hunter Lovins, Blue Earth has brought together a multi-disciplinary team with an integrated set of solutions under the “Holistic Transformation” model.
The restaurant industry strongly influences or directly impacts some of the biggest issues in American society including obesity and poverty. The obesity issue is being tackled from a variety of angles, including legislation that seeks greater transparency in labeling of calories and ingredients and re-drawing of the Food Pyramid by folks like Dr. Walter Willett from the Harvard School of Public Health.
The poverty issue, on the other hand, is far more insidious. The minimum wage is less than 60-70%, at best, of a living wage. Add to this the widespread practice in some sections of the restaurant industry of not hiring workers for 40 hours or more to avoid paying benefits, forces the poor to take multiple jobs, stay away longer from home, and still not have any health coverage etc. This leaves no time for self-improvement via education, or indeed, not even a decent family life creating other long term social issues.
On the other end of the spectrum are restaurants like the ones listed on NP Enterprises Forum’s website – a link to social enterprises that provide great food while being socially and/or environmentally responsible.
TRANSFORMATIVE INNOVATION, PART II: DISCOVERY OF ROOT CAUSES
By Udaiyan Jatar
“The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.”—Marcel Proust
Mental Paradigms and the Dangers of Experience
If you had an intractable problem to solve, who would you turn to—an expert or an inexperienced outsider? In The 7 Habits of Highly Effective People, Stephen Covey described an experiment where two groups of people were shown a trick picture. One group was convinced the lady in the picture was a pretty young girl. The other group angrily argued it was an ugly old woman! The conclusions they drew were distorted by two different pictures the two groups had experienced before they were shown the trick picture. Unfortunately, our prior experience (often touted as expertise) constrains us every day, making us unable to see with new eyes. The key to innovation starts with identifying and eliminating barriers created by our expert judgment, so that we can spot transformational opportunities hidden in plain sight.
David vs. Goliath and Transformational Discoveries
Inventors involved in some of the world’s greatest discoveries, such as penicillin, have admitted to their accidental and unexpected nature. Remarkably, most world-changing discoveries were made by outsiders. For example, Einstein was a mathematician, but his discoveries changed physics. Most of the world’s greatest businesses were created not by large companies, but by small entrepreneurs who had new eyes by virtue of being outsiders to the industries they transformed. Nike was created by an accountant, Coca-Cola by a pharmacist, Starbucks by a salesman, and Harley-Davidson by hobbyists. This phenomenon applies to nonprofits as well. Icons like Goodwill Industries, YMCA, United Way, and Susan G. Komen for the Cure had humble beginnings outside the nonprofit sector.
Can an insider systematically harness this outside-in phenomenon and master it to discover opportunities for transformational change? Yes, if you are committed to creating transformational change. However, you have to truly think out of the box. But what is this box? Even if you can get out, where do you start?
Thinking Out of the Box
The Blue Earth Network Discovery framework (BEND) is part of a systematic and repeatable process to discover, invent, and execute transformational solutions. Most of us, whether we know it or not, are stuck in a box in the bottom-left hand corner of the BEND framework (A), the Organization-Product box. Our minds are constrained by our current assets and competencies. “This is the way things are done” or “this is our core competency.” This is the worst place to start an innovation project, because it creates immense invisible barriers to the discovery and resolution of the root causes of seemingly intractable problems. If what you do today will lead to transformational change, great. If not, remember the definition of insanity is repeating the same actions and expecting different outcomes.
Here is an example of how the framework is applied. Mr. Smith (hypothetical), a vitamin deficiency expert, is brought in to help children in Vietnam. His doctoral thesis was on the impact of Vitamin C deficiencies on children. Clearly, if he remains stuck in point A in the BEND framework (below), he won’t be able to help children whose deficiencies don’t include Vitamin C. If he climbs to Step B, he is able to recognize broader malnourishment issues, and benchmark himself against others in his sector. Therefore, he adds other nutrients to his portfolio and helps more children. Unfortunately, his core competency keeps him anchored by what’s being done currently by him and his current sector. His improvements are incremental and don’t create transformational change. Mr. Smith continues to import nutritional supplements at a high cost into Vietnam and distribute them to as many children as his grant money allows.
In contrast, let’s look at someone who wasn’t constrained by a product/service-based competency, and thus, was able see the issue of malnourished children with new eyes. Jerry Sternin (a Positive Deviance pioneer) did not solve the malnourishment problem by studying vitamin deficiencies (A) or children with malnutrition issues (B). Instead, Sternin studied the children’s lives holistically (C), including their environment and the children’s friends to discover the root cause of the problem. We call this the Human-Planet perspective (C). By doing this, he discovered that some of their friends were healthy and well-nourished, despite coming from equally poor families. Turns out, these families were eating nutrients abundantly available in their environment (like shrimp growing in the rice paddies and green potato leaves). Sternin discovered that the root cause of malnourishment was ignorance of the nutritional value of local flora and fauna. This discovery ultimately helped tens of thousands of kids get better nutrition without import or distribution costs. Read more examples here.
Organizations and experts can replicate this process by looking with new eyes or by bringing in “outside-in” thinkers who can help executives to think outside the box.
Obviously, discovering a root cause is not enough. Developing transformational solutions can be costly, time-consuming, and ultimately, quite risky.
Can we learn from the inexperienced outsiders who created the world’s greatest businesses with minimal expertise and resources by virtue of being small entrepreneurs? In the next edition of this series, “Invention,” I will discuss how to leverage a transformational discovery and convert it into a high-impact service or product with minimal cost, risk, and time.
We’ve all heard that we will need more Earths if we cannot curb population growth, reduce per capita consumption, or get more from less. We will need to do all three, but “getting more from less” is what this series of articles is about.
The story is the same at the micro level. Our organizations have fewer resources than are needed to meet the growing needs of our stakeholders (communities, donors, shareholders, employees, and so on). We cannot achieve our expanding goals with declining budgets by doing what we have always done. To transform our outcomes, we must transform what we do and how we do it. As
the saying goes, doing the same thing over again and expecting a different outcome is the definition of insanity!
I think we can agree that transformative innovation (TI) is necessary.
An example of incremental innovation is moving from rotary dial to touch-tone phones. This innovation improved productivity incrementally. However, cellular phones are transformational. You don’t have to walk miles to an emergency phone if you are stranded on a highway. If you are a farmer in a remote village, you can access a world of information from a cell phone. This innovation, along with the Internet, has dramatically improved human productivity, and cut costs and reduced materials used at the same time.
The problem is that TI is rare and unpredictable. Why? Most of us focus on barriers like lack of vision, funding, risk-taking, or even talent. But to unleash innovation, the boards and senior executives of large organizations need to remove the invisible barriers.
Barriers to Transformative Innovation
Human Nature. Let’s start with the obvious: a majority of us don’t like major change, until we have absolutely no choice. So we avoid it by taking “practical” incremental steps, until sometimes it is too late. This gets amplified in our organizational behaviors.
Poorly Defined Core Competencies. Emanating from our basic nature is our most sacred of management principles: “Stick to your core competencies,” or “Avoid mission creep.” The unintended consequence of this otherwise sound idea is that it frequently forces us to abandon ideas that are necessary to achieve an outcome, but are too different from our existing activities.
By definition, we can’t be experts in something that doesn’t exist yet. Therefore, we can’t stick to activity-based core competencies and still create a transformative innovation. This conflict explains why small entrepreneurs—not large organizations—conceived and incubated most of the world’s greatest innovations, organizations, and brands: United Way, Susan G. Komen for the Cure, Goodwill, Coca-Cola, Nike, Apple etc.
We shouldn’t define our core competencies or our missions by what we do, but by our desired outcomes. This might mean developing new competencies. This removes artificial constraints to transformative innovation. Apple is a great example of this—fear of the unknown didn’t prevent them from taking on the music industry or the cell phone industry with the transformative iPod and iPhone. If transformative innovation doesn’t become a part of our core competency, it will be difficult to survive, let alone thrive.
Illogical Time Horizons. We measure performance in annual cycles—an agrarian operating paradigm that simply makes no sense more than 200 years into the industrial age. The annual agrarian cycle forces us to create annual plans and incentives. Therefore, our projects face invisible and irrational pressure by trying to show meaningful progress for an annual review. Wall Street takes this irrelevant timetable to another level of idiocy by tracking companies’ quarterly results. Transformative ideas need time to evolve, especially in the social sector. Forcing annual results squelches innovation. If we invest big money in an innovation, we have to monitor results as frequently as possible. But why do we have to invest big money?
Unreasonable Scale. Coupled with illogical time horizons is the “big organization” mentality of trying to achieve scale quickly. This makes our TI experiments too big and our failures bigger, leaving transformative ideas dead on the vine. These failures, then, discourage future innovation. The trick is to start really small. If you start small, your risks are lower and the need for annual monitoring is felt less acutely. This gives the innovators breathing room to fail, learn, and improve—just like all those entrepreneurs who created iconic brands.
Impossible Success Criterion. The greatest entrepreneurs failed and learned often from small steps and experiments, gaining rich insights before they achieved their breakthroughs. But large organizations put tight controls on the scope of every step of the process, and expect black and white answers, leaving no space for accidental discoveries.
We won’t get transformative innovation right on preconceived metrics or on rigid timelines. Instead, one needs to promote several quick innovations—which may be failures—in an organic process, while allowing serendipity to emerge. The good news is that flexible milestones can actually speed up the TI process if managed wisely.
Overcoming Wall Street’s Negative Influence on Innovation
The barriers listed above are systemic and are difficult to reconcile with conventional management wisdom, but they can be overcome—even by large organizations. Wall Street’s fixation with quarterly reports (ostensibly to create management accountability) is driven by greed for quick returns. This is a root cause for why even large corporations with huge budgets and resources can rarely transform markets. Hence, actions of great CEO’s like P&G’s A.G. Lafley to courageously tell Wall Street that they would no longer provide quarterly guidance are to be imitated.