Tuesday, August 16, 2022

Working in, Working on, Working for the business

In a previous blog post, I wrote about the differences between working "in" the business for strategy and innovation versus working "on" the business for strategy and innovation.  This dichotomy is a somewhat classic way of thinking about how people spend their time - either "in" the business doing the day to day work that propels the company forward, or time spent "on" the business, thinking about how the business is positioned, its strategy, how it operates.  For most executives, the majority of time is spent "in" the business, with far too little time spent "on" the business.  You can read that previous post here to get more detail.

What about a third option

That post got me thinking that the tradeoffs between "in" and "on" are incomplete.  That is, there is at least one other perspective that managers and leaders must assume beyond in and on.  As described above, in the business is doing day to day work - going to meetings, completing emails, assigning projects and so on.  Doing work on the business is stepping back and examining how the business actually operates, and trying to define future opportunities or new strategies.

What's missing - at least from my perspective - is the idea of actually running the business.  That is, ensuring the business does the right things day to day, has the right resources and is focused on the right targets.  In other words, actually managing the business, making decisions, establishing priorities.

In vs On vs Running

When you are "in" the business, you may neglect the aspects you would consider if you were in the "on" perspective.  That's because the urgent overwhelms the important.  What needs to get done today becomes more important.  As managers and executives, we must be careful to do today's work effectively but not allow it to consume all of our time and energy.  Executives and leaders should not do work that belongs to their subordinates, and should not become firefighters or paramedics unless it is absolutely necessary.

In the rare times when you are "on" the business - usually when preparing for a board presentation or in an executive offsite, you are considering big picture questions.  Where is the business going?  What are our best opportunities?  The "in" the business issues will constantly hound you even when you are trying to be on the business.  The vast majority of businesses already spend too little time in the "on" perspective, because it does not feel like work.  

Running the business is a critical third perspective that I think often gets overlooked or ignored.  In some sense, we denigrate this task because it has connotations of "managing" the business, and we've been led to believe that good businesses should manage themselves.  Nothing could be farther from the truth.  A business without good management is like a ship without a rudder - it will go wherever the wind and the tides decide to take it.  This is especially true in companies that are growing quickly.  Without clear strategy (on the business) and clear leadership and management (running the business), a company will follow the easy money, pursue trends and find itself in a business cul-de-sac.

Good management (running the business) takes good strategy (from the on the business perspective) and creates a business that realizes the best outcomes of the strategy.  Good outcomes don't happen by accident, or simply by having a good roadmap.  Decisions have to be made, people put into important positions, priorities set and upheld.

What's so hard about running a business

What's difficult about the third option - running a business - is that it often seems uninteresting and is considered overhead.  Great management of a company, especially a growing company, means implementing operations and tactics that feel like bureaucracy.  It means optimizing the way things work, putting in processes, getting staffing right, getting the right people in the right seats.  It can mean hard decisions that bring in new people with skills to help grow a business beyond its current state.  Good management also brings with it the sense of planning and accountability - holding people to the plans they created and ensuring that what was promised is delivered.

Running the business is often overlooked because to some degree it sits between the "on" the business strategy pronouncements and the "in" the business sense of getting things done.  Running a business seems somewhat operational, not that interesting or sexy for entrepreneurs who want to grow a business and take it public.

Which perspective matters most?

An interesting question arises:  where should executives spend their time, and how much of their time should they devote to each perspective?

I think for many executives this is a difficult decision, and in many cases they revert to form.  Entrepreneurs are often deep experts in coding or software or technology, and may prefer to spend their time "in" the business, especially where they believe their company has a competitive advantage.  In mid-sized and larger firms, many executives come from finance, so they are entranced by the numbers.  In the modern, "data driven" companies (and I put data driven in quotes because there is a lot of talk about being data driven without a lot of outcome), people become entranced by the data they get.  

Running the business requires action and decisions, placing bets and improving operations, motivating people, moving assets around.  This is a vital orchestration function, and without it, businesses reach a point where the organic nature of the business and lack of operational management hamper direction and growth.  Can these decisions be influenced by having a deep knowledge of technology, or having expertise in numbers or finance?  Of course, but each of those perspectives is limited.  Companies need management expertise and leadership beyond one business function or technical expertise.

In my mind, once a company leaves the entrepreneurial phase, executives should spend far more time on running the business and time "on" the business, leaving the "in" the business activities to those closer to product or customers.  It's difficult to say just when this shift needs to occur, but many companies that I work with suffer from too little direction, too little day to day operational management.  Executives spend too much time enthralled with data, or dividing into the business, rather than thinking about the future growth opportunities (on the business) or making the business operate more effectively.

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posted by Jeffrey Phillips at 5:50 AM 0 comments

Friday, August 12, 2022

Creating the conditions for disruptive innovation

 In what is probably one of the most revered books among innovators, Edward De Bono wrote about six "thinking" hats.  The point of his book is to recognize and acknowledge that many people, either intentionally or often unintentionally, play roles or "wear hats" that represent a specific point of view.

De Bono identified six perspectives or "hats" that people wear.  The hats he defined are:

  1. The conductor hat - the role that drives a meeting
  2. The creative hat
  3. The emotions hat
  4. The optimist hat
  5. The judging hat
  6. The factual hat
Whether we mean to or not, it's likely that when we attend meetings, listen to pitches, create ideas, we are listening and participating in one or more of these perspectives.  Often, many people will be wearing either the factual hat - like the famous detective, just give me the facts, or the judging hat - does what is being said meet with my experience?  Conversely, few people are willing in most business settings to wear the emotions hat - it seems too illogical in businesses where we have divorced ourselves from emotion, or the optimist hat - no one wants to be seen as naïve or too optimistic in a business setting.

So, many businesses, for many different reasons, start out with unbalanced perspectives, typically over weighted toward what is reasonable and expected today.  If what you hope to do is approve approaches or ides that fit into the existing standards, this approach is probably OK, although it will only reinforce the status quo.  If you are hoping to "shake things up" or create new products or services, these perspectives will simply block most ideas.

New perspectives needed

In fact, the more your environment is changing, the more competitors you have, the more intense the competition within your industry is, the more you need new perspectives.  Whether you refer to this as the "creative hat" as de Bono did, or refer to it as a naive or uninformed opinion, or think about it with the wonder of a child, your teams need this perspective.

The more change you want to create, the more you need the creative hat, the wonder and discovery inherent in child-like thinking.  And this flies in the face of everything we hold near and dear in a business setting, where hard facts and past experience are supposed to hold sway.  As if personal gains, politics, favoritism and other factors never play a part in what is decided!

Getting naïve to get ahead

There is an old saying, attributed to African tribes, that says if you want to go fast, go alone, but if you want to go far, go together.  I'd suggest a corollary to this idea:  if you want incremental ideas, rely on the existing perspectives.  If you want new, fresh and radical ideas, get new perspectives and don't shout them down.

But let's be honest - no business worth its salt is going to welcome in a bunch of naive idea generators or better yet children into the boardroom to create new products and services, even if the businesses need these perspectives.  Every growing business needs someone, internal or external, who is willing to contribute insights and ideas that are outside the norm.  

Some companies have successfully partnered with third party idea generators who are active provocateurs - who openly question the status quo.  Third parties don't have a stake in the way things work today and can question existing norms in ways that internal personnel can't or won't.  In other settings, I've watched de Bono fans use the hats - actual hats in a meeting - to ensure someone is playing the role.  But playing a part, like an actor who may or may not truly believe in the concepts, is different than expressing ideas from a sense of new discovery or wonder.

Who within the business can take on the role of the naïve perspective?  How long can someone last in that role?  

Why can't we innovate?

I get asked quite frequently - why can't large firms create interesting new ideas?  I have a litany of answers, but ultimately they boil down to this:  lock-in.  Once a company reaches a certain size and has an investment to protect, the thinking shifts from creativity and growth to defend and protect.  Good ideas are often going to call existing products, services and even business models into question.  

It's not that people lack creativity or can't think in child-like exploration and wonder, it's that they will be ridiculed for creating ideas that call the existing product line or business model into question, or that they are so well compensated within the existing model that it is anathema for them to think outside of it.

By the way, I have had the opportunity to work with some large firms on some relatively disruptive ideas.  Those that were able to bring those ideas to market were most successful doing so in a way that did not disrupt their existing operations.  This means that many disruptive ideas need to be launched as a new business or in new channels or markets.

Outside the box?  Hardly

CEOs will often say they want ideas that are "outside the box" meaning that they want new ideas that create new value.  You can get new ideas from old sources - just look at Einstein.  You can get new ideas from a team wedded to the existing operating models.  To do so, you simply need to make the status quo untenable.  As long as the status quo is reasonably safe, and other options are reasonably risky, the only ideas you'll get are incremental ideas, and the folks who do manage to generate and sponsor radical ideas will be considered difficult troublemakers who "don't get the business we are in".

There's a leadership gap here as well.  Executives need to tell their teams that "what got us here won't help us succeed in the future".  If that is the case, then segregate the core business and its operations from innovation, and run them separately.  Insulate the existing core business from your new ideas, to protect the nascent ideas from the resistance the existing business will create, and protect your core business from the disruption you are going to cause.  Otherwise, don't ask for interesting ideas, you'll only waste time and anger some of your best thinkers.

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posted by Jeffrey Phillips at 7:24 AM 0 comments

Tuesday, August 02, 2022

Why expertise is a seductive trap for innovation

 I've been thinking for years that we have innovation all wrong.  We treat innovation as it if requires years of experience, deep knowledge of an industry or a technology, or mastery of a specific subject.  I think far too often we fall into the fallacy of expertise, and look for great ideas from people who are deeply experienced in one technology or field.  This seems like a logical approach.  People who have deep experience must know where opportunities lie, right?

The problem with innovating with experts in a field is that they think they have explored every nuance and pathway, or that someone else in the field has.  These are the people who are most likely to say an idea "won't work" or that "it has been tried before".  And, in many cases, they are probably right.  But not always.  Experts told us that heavier than air flight was impossible.  Lord Kelvin, one of the brightest scientific minds of his day, felt that nothing heavier than air could fly.  Scientists expected that any craft exceeding the speed of sound would break apart.  In 1942 Thomas Watson, the CEO of IBM, was quoted as saying that the world market would need a maximum of 5 computers.  All were experts in their field, and all either accepted the received wisdom, were too confident in their own knowledge, or could not forecast how much and how rapidly technologies would change.

No, it took a couple of bike mechanics to develop the first viable heavier-than-air plane.  A couple of enthusiasts who tinkered and explored, while other, more well-known scientists received thousands of dollars in government grants failed.

We come not to bury experts

I'm not interested in castigating experts, except when it comes to innovation.  We, all of us, become experts in our chosen paths and fields, and most of us, when confronted with a "new" idea, will search our memory banks to consider whether this idea has been presented before (some version probably has) and what happened the last time it was presented.  We call on our store of knowledge to rapidly eliminate ideas, rather than our store of wonder, to consider what could be possible.  Don't worry, like a lot in modern life, it's not your fault.  You've been taught to use your time efficiently, to place bets only where there is a significant return on investment and winnowing out a list of any proposed alternatives is something we've perfected.

What we often don't recognize are the fallacies that lie within the questions we ask.  For example, are "old" ideas always useless?  There are Roman aqueducts that still carry water thousands of years later.  If an idea failed previously, is it possible that technologies have adapted, market needs have changed in such a way that the idea is now valid?  In our haste to reject ideas, we ignore our own narrow viewpoints.

From the mouths of babes and neophytes

You know who won't express concerns about most ideas?  Children.  Children are filled with wonder and are naturally creative.  You will rarely hear a kid exclaim "that won't work" about a new idea and they never say "that's been tried before", Of course, some ideas that children have are probably far-fetched and impossible, but that's what childhood is for.  Our educational system, unfortunately, squeezes all of the creativity and wonder out of us by the time we reach high school, in the hopes that we will all learn the same facts and regurgitate them in the same way.  No wonder so many of our best innovators and entrepreneurs seemed like such outsiders.  Most did not fit into the standard educational mold that we created.

Children don't run businesses

Ah, but you'll say, we cannot trust the future growth of our company to kids with crazy ideas. Again, there is a strange dichotomy at work.  Venture Capitalists are shoveling money into companies run by recent college grads with little professional experience but deep belief in ONE IDEA.  As an established corporation, it makes sense to ask:  are we ready to outsource our idea generation and next generations of products and services to startups, assuming we can afford to license their products or acquire their companies?

Established businesses need solid, business-ready ideas that are practical with a high degree of success to invest in.  This is true, to a point.  As anyone who has been in or adjacent to innovation work in the past 20 years knows, there is a need for consistent, predictable innovation that moves the needle just a bit (incremental innovation) to create the next version of an existing product.  This is vital work but should not consume more than 50% of your innovation budget.  What, don't have an innovation budget?  That's another sign your company isn't serious about innovation.

In-source or Out-Source the other 50%

Which leaves 50% of your company's time, resources and funds to do real exploration.  Who do you want to lead that?  An expert who is likely to tell you what's wrong with your ideas before they leave the drawing board?  The scientists who said that airplanes could not fly?  Is this who you want leading the portion of your work that will dictate future product and service offerings?  Corporations have a choice - start evaluating the startups and neophytes who are attacking your industry and gobble them up as they become viable, or do your own homework.

The department of wonder

Every decision and every department in your organization seeks predictability and efficiency.  You have a strong finance team that can calculate your EBITDA to three decimals.  You have a top notch sales team that hits its sales targets quarter after quarter.  You have product teams and engineering teams that work at exceptional rates of efficiency.  All of these in service to current state.

You need one team that focuses on what's next, what unlikely combinations may occur, what new markets and needs may emerge.  There's no one doing that work - R&D is looking for new technologies, so you may not need to sweat that side of things, but they aren't responsible for seeking out new markets, new needs, new combinations.  

You need a department of wonder.  This department would exist to explore new opportunities, finds new emerging needs and markets, consider unlikely mash-ups of technologies and capabilities, seek out adjacent opportunities.  While this seems entirely unscientific and a likely source of ridicule, done correctly, it will generate far more, and far better ideas, than anything you are doing today.

In case you think this recommendation is unusual, hark back to Edison and his Menlo Park team, a number of people who were experts in emerging technologies, trying to create mash-ups.  Or the original Bell Labs, where scientists from different disciplines were in regular interaction, seeking happy accidents.  

You don't need to entrust your future innovation decisions to children or neophytes, but you do need a sense of child-like wonder and the ability of the people who are focused on that work to suspend disbelief if you are to create any really interesting ideas.  After all, Airbnb was not created by experts in the hotel business, but by a couple of guys who decided to rent out a spare room.  

In the end, the choice is yours, and you won't be alone if you follow the safe and proven path of trusting in experts to delivery near-term product improvements.  Most companies in most industries follow this path. It's not until some upstart, some college kid with venture backing, two guys with a spare bedroom create a solution that becomes more valuable than the established competitors that someone says - how did we miss this opportunity?  Were the Airbnb guys smarter than the combined intelligence in Marriott?  I seriously doubt it.  Moreover, I'm willing to bet you lunch that there were people at Marriott who have presented plans that looked a lot like Airbnb before Airbnb existed.

And, if I am wrong about Marriott having prior exploration about the potential market opportunity that Airbnb explored, what does it say about Marriott's leadership and its sense of possibility and wonder?

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posted by Jeffrey Phillips at 6:53 AM 0 comments