Resistance – Page 3 – OrgChanger.com

“Better before Worse” – are you dropping off the cliff?

Most change initiatives fail. Statistics from MIT research suggest that for leaders managing change the ‘capability trap’ is the single major failure mode. So, what is this trap, how is it set up and, more importantly, how to avoid it?

As a quick disclaimer, the charts and examples are schematic and simple to get my point across. This is a blog, not a textbook.

Under pressure

New leaders get appointed to solve a business problem such as improving poor results of sorts. So from the start the new guy or gal is under pressure to perform and succeed. In politics the common public expectations are to see result or bold actions within the first 100 days – and business is not known for being less demanding.

Tough Choice

So, soon enough the new leader faces a tough decision. Which choice do you favor?

“Worse before better” means doing “the right thing.” However, this approach may not deliver sustainable results fast and is a hard sell to impatient or less reasonable superiors.
“Better before worse” is a less stellar route to reap short-term benefits and lessen the immediate pressure but it comes at a price: knowing that the this choice is not sustainable and will cost more later down the road.

By the way, this is really not rocket-science but straight-forward logic yet many executives still get seduced by the low hanging fruit, namely “better before worse”… so stay with me for a moment to see what happens next.

“Better before Worse”

It starts out easy: you cut cost all over the place and look like a hero immediately. For example, you could reduce machine maintenance or cut the employee training budget. Schematically it looks somewhat like this:

What happens is that not only your balance sheet looks better quickly, you also increase productivity short-term. The machines keep running and people keep on working, so in the short-term you produce the same output with less input.

After short-term gains, productivity plummets

Productivity and the Capability Inertia

The problems arrive with a delay when ‘capability inertia’ starts kicking in. So here is what happens: You didn’t maintain the machines yet the machines keep working – for while. Then, they break really bad and it takes a lot more money to get them fixed than having them maintained. It’s like not putting oil in your car’s engine and driving on – somewhere down the road the engine will die on you. You will have to spend money to fix it and live with the downtime while fixing the machines.

With a delay, the organization's capabilities suffer and are very costly to regain later — With a delay, the organization’s capabilities suffer and regaining them later proves very costly

At that time you find yourself in deep water and all your previous savings go up in smoke together with what else you didn’t budget for.

On the people side with employee training, for example, the effect is quite similar but often less obvious: You save the money for keeping them up-to-date with new technology, skilled, etc. and saved short-term. The real problem is your staff losing its professional capabilities to continue to perform on a high level in the face of competition or adapting to changing markets and environments. External focus comes with a cost of doing business – that you just eliminated, thereby fostering group-think and internal focus. Getting the crew back in shape later on takes effort and is expensive: not only will you have to train them but also they are unproductive during the training period.

Furthermore, shortsighted cost-cutting inhibits seizing business growth opportunities such as ‘small elephant’ projects (see also How to grow innovation elephants in large organizations), which can jeopardize the business foundation for the future.

With it comes the ‘leaky pipeline’ effect where valuable talent leaves. It is the best people who leave first (see How to retain talent under the new workplace paradigm?) if they see sweeping cost savings affecting critical investments in the company’s future capabilities and not surgically cuts. Talent does not wait it out on a sinking ship. If you are unfamiliar with the horrendous costs of turnover, check with your Human Resources person to get a sense for your burn-rate!

Despite all of this, many managers still embrace “better before worse” as the scenario of choice and believe they are “doing it the right way”.

Rewards for all the Wrong Reasons?

Unfortunately, performance and compensation frameworks in mature organizations usually support this easier approach. ‘Success’ is typically measured quarterly or yearly as a basis for bonuses, raises or promotions. The typical incentive systems don’t take long-term sustainability into account enough (other than stock options for publicly traded companies, for example) to change behavior.

Instead, rewards keep getting handed out on a short-term basis of evaluation. Research showed many times over that this approach simply doesn’t work for more challenging jobs of the 21st century. Don’t believe it? – Check out Dan Pink’s famous 18 minute TED talk “The Puzzle of Motivation” relating to the candle problem and motivation research.

As a bottom line, if don’t plan to hang around to ride out the consequences of your choice (or even have a golden parachute ready), “better before worse” appears an attractive shortcut to short-term success. Deep down, however, you know it was not the right thing to do. Your staff, your successor, and sometimes the entire company will suffer and face the consequence when you are gone. – So what could you do instead?

“Worse before Better”

There is an alternative choice: the stony road of “worse before better” by doing what is right. For leaders accepting responsibility this may be the only choice.

Right from the starts is gets tough: you increase cost to invest where things need to change most, be it people or technology. For example, invest in getting the best people to do the job and train them as well as you can for the challenges to come and step out of their way. Establish or overhaul technology, processes and managerial framework needed to deliver results reliably.

This takes time and money, so as you would expect, productivity suffers at first but then, if the change is executed well, recovers and quickly exceeds the additional costs by far while you deliver outstanding results reliably.

It is important here not to address all problems at one time but to prioritize and tackle change in smaller steps. Mind that change is a development process that doesn’t lend itself to shortcuts.

With a delay, productivity recovers sustainably — After dipping down at first, productivity grows sustainably

While this is clearly the more sustainable strategy the tough part is getting your stakeholders and superiors to buy in (especially if they are looking for short-term “better before worse” results) by setting realistic expectations. After all, “worse before better” is a sustainable basis for a business model where “better before worse” is not.

You may also have to accept not receiving the short-term performance incentives for doing the right thing if your incentive system does not reward building capabilities. However, there are other kinds of meaningful rewards to consider. They range from feeling good about withstanding the temptation, doing good for the company and its employees, as well as possibly getting attention from more forward-thinking parties who may want to hire you in the future as a leader with guts and brains.

Xbox’s Hollywood Bust – when culture eats strategy for breakfast

Shut down

It’s not only successful innovations that can get shut down (see “Shut down! Why Successful Innovations Die“) but also those that don’t get a chance to take of in the first place: In the small print of Microsoft’s recent announcement to eliminate 18,000 jobs (mainly in the light of the Nokia acquisition) you could also find 200 jobs cut to end the Xbox Hollywood aspirations.

After a history of failures entering the hardware sector, Microsoft struck gold with its powerful Xbox gaming console series powered by popular games such as the epic HALO. Long forgotten seem the times of the “PocketPC” handheld to rival the PalmPilot or the “Zune” MP3 player to dwarf Apple’s iPod. (Let’s keep the Surface tablets with its awful Windows 8 mosaic tile interface out of the equation for now – even a recent promotion is just a sad parody.)

Without doubt, the Xbox is a success, Microsoft’s media flagship. It faces serious competition, so creative and disruptive solutions are needed to dominate the console market.

Beyond gaming

To expand on this solid Xbox console foundation and fend off competitors, the idea was to produce engaging and original video content. This added value would expand the Xbox platform to broaden Xbox attractiveness and deepen customer loyalty by appealing to its gamer audience in new ways. The gap between gaming and film converged over the past years when new game productions became sophisticated, quality productions with celebrity actors and voice overs, music by top Hollywood composers, high-end visual effects and not only budgets to rival studio movie productions but revenue exceeding blockbuster movies.

Inspired by, for example, Netflix’s success in producing original content such as “Orange” and “House of Cards,” this strategy looked very promising. Well equipped with CBS’ highly accomplished Nancy Tellem and ties to Steven Spielberg, the Microsoft Hollywood team of 200 was up to a great start – or so it seemed.

Two years in, however, the there was very little to show for, so Microsoft finally divested.

– What went wrong?

Culture Clash

A key inhibitor for the Hollywood team, so it turned out, was clashing organizational cultures between Microsoft and the quick-paced and decision-friendly media world Tellem was used to from CBS. Nanny Tellem learned the hard way that effectiveness of decision-making at the lower hierarchical levels and fast execution was not the strong suit of the established culture, red-tape processes and deep hierarchy of the Redmond software giant. Down four levels in hierarchy under the CEO, Microsoft’s convoluted processes diluted Tellem’s authority and effectiveness. It slowed down decisions to a point where the ambitious and energetic start-up became practically shackled and impotent to operate effectively in the media world.

Even the best strategy cannot be executed when unaligned with organizational culture or, as Peter Drucker has put it so famously, “Culture eats strategy for breakfast.”

Culture is what most employees say and do routinely. It translates into a company’s processes, structures, systems, etc. This is why failing to understand or outright ignoring culture can be so disastrous for leaders. From my experience, the magic sauce is in aligning corporate culture and strategy with the passion of competent employees.

Learnings

Microsoft’s Hollywood adventure is just one more example how disruptive innovation struggles when measured and governed by processes of a mature and bureaucratic organization with matrix structure. With reigns held too close and not leaving room to experiment, innovation suffers, as this missed opportunity for Microsoft demonstrates.

“Hindsight is 20/20” people say and in all honesty, other factors may have contributed too, but looking at it from the outside, perhaps this train wreck could have been prevented had Tellem paid closer attention to the culture of her new employer and ‘how we do business around here.’

Cultural fit with conductive structures and processes downstream are serious business factors that often get overlooked and then backfire for the blind-sided executive. – Only perhaps there could have been a proper Hollywood ending.

After all, disruptive innovations is a delicate flower that needs some room to flourish – especially in mature organizations.

Want more?

Related posts on organizational culture include:

Shut down! Why Successful Innovations Die

Why successful innovations get shut down. WhIle we expect unsuccessful initiatives and projects to get shut down, what sense does it make to stop hugely successful ones?

Punished Despite Success

It doesn’t make sense to shut down profitable programs – or does it? It happens all the time when the current yet wilting business model still tastes sweet. Investing in building a disruptive, future business model appears less palatable as it takes uncomfortable transformation that comes with investment cost and lower profits initially. The sobering reality is that short-term gains often win over long-term investments, sustainability and bold moves to explore uncertainty and white space.

Here is a quick example from the fossil oil and gas industry straight out of Bloomberg Businessweek, “Chevron Dims the Lights on Green Power” (June 2-8, 2014): Chevrons renewable power group successfully launched several projects generating solar and geothermal power for over 65,000 homes. Despite margins of 15-20%, the group was surprisingly dissolved earlier this year after they had just about doubled their projected profits from $15 million to $27 million in 2013, the first year of their full operation. – Why would you kill a profitable new business?

Clashing Business Models

As for reasons for the shut-down, a former Chevron employee and Director of Renewable Energy notes that Chevron’s core businesses, oil and gas, still remain more profitable than renewable energy. This development signals that Chevron’s leadership is willing to experiment with renewable energy but does not seem fully committed – it makes Chevron’s slogan “Finding newer, cleaner ways to power the world” sound like lip-service.

Instead, Chevron continues to hold on tightly to their old business model to squeeze out the last drop of oil. Chasing short-term profit margins may prove not only a questionable path for long-term company sustainability but also from a business model perspective. While oil and gas prices have been on the rise for the past decades, it is well-known that these natural resources become scarce, so extraction from more challenging locations becomes increasingly expensive. It cuts into the company’s profits and the consumers’ pockets. To date, Chevron already pays a higher cost for extracting oil compared to competitors.

Chevron focuses on the upper tail of the S-curve of the current technology instead at the expense of preparing for the disruptive jump to the next technology platform. (See section “Technology S-curves” in 10x vs 10% – Are you still ready for breakthrough innovation?)
The risk here is to lose out on developing and acquiring new technologies that will be the make-or-break competitive advantage in the industry’s future.

Bio Fuels

Interestingly, Chevron’s competitor and largest oil company, Exxon-Mobil, takes a different approach. Even after initial setbacks where proof-of-concept did not scale to industrial size, Exxon-Mobile now partnered with Craig Venter’s Synthetic Genomics to produce oil from micro-algae at industrial scale. Hopes are high that this bio-tech and bio-agriculture approach proves more practical, profitable and sustainable to replace fossil fuels in the future.

Sounds risky? It sure is, but with profits from oil and gas still in the tens of billions this is the time to invest heavily in the jump on to the next technological S-curve. You may recall Craig Venter as a most successful entrepreneur and also the first to sequence the human genome, so there is no shortage of top bio-brainpower, which opens the flow also for more investment capital.

Nearsighted Decisions

Truth being told, several other bio-fuel ventures of this nature exist all around the world. Neither made it to produce in industrial scale needed to satisfy the world demand for crude oil – yet. There is no question, however, that the world is running out of affordable oil and gas at accelerating speed. Disruptive technologies will emerge to fill the gap and redefine the energy sector.

Leadership is needed to prepare and transform the industry beyond short-term management of profit targets. Not taking a bold step forward is the absence of leadership. (More on the clashing goals in Leadership vs Management? What is wrong with middle management?)

Learnings

The learning here is that even profitable disruptive ventures get shut down at times when the leadership is comfortable and holds on tightly to the existing business model they are familiar with and doing what they always did rather than taking transformative steps to prepare the organization for the future. Even with the writing clearly on the wall, the way of how profitability of a new venture is measured and the (still higher) margins of the established business (fossil fuels) make short-term focus attractive despite concerns over business model sustainability. So often enough there is little patience to further develop even successful, transformative ventures of tomorrow in favor of enjoying the sweet but wilting fruits of today.

Somehow this short-term mindset painfully reminds me also of the established car industry who, obviously, had little interest to bring electric vehicles to market at scale over the past decades until a Tesla comes around to show them how it can and should be done.

As for our example, time will tell whether Chevron or Exxon-Mobil made the better choice in the long run to win the new business model race leading us into the post-crude oil era – or if they both get disrupted by an even different new technology altogether.

Innovation Killers: The Corporate Immune System Strikes Back!

Parallel Universes

Our immune system protects our health and defends us against threats entering our body. It identifies intruding germs, isolates them from the surroundings and flushes them out of the system to prevent further harm. Our immune system also keeps track of intruders formerly identified to reject them even more effectively should they ever reappear.

Large organization consist of humans who tend to follow behavioral patterns not unlike their inner immune systems when it comes to evaluating new ideas brought forward by an aspiring intrapreneur. Especially, if a new idea comes with a ‘wishlist’ of demands is needed from us to make it happen; typically, time and money.

Joining the Dark Side

It’s our human nature: we approve ideas we like or that further our objectives while we tend to reject ideas that don’t match our liking, beliefs, commitments or that cause disruption to our equilibrium or budget. Disruptive ideas come with uncertainty and may require uncomfortable or additional efforts on our side. The outcome may appear risky, could waste precious resources or have other undesirable repercussions for us. The fear of losing something is stronger than the incentive of gain. And often enough, we just don’t fully understand the idea or its implications, don’t take the time or find the impetus to look into its details, so it seems safe and convenient to reject it.

This way, as managers and coworkers, we act as a part of the organizational immune system. We become part of the reasons why mature organizations can’t innovate – we join the ‘dark side,’ so to speak.

Our body remembers a previous intruder in order to respond even faster the next time – and so do we. Interestingly, though, we tend to remember better who presented the idea that we rejected rather than what the idea was about. So when the ‘quirky guy’ shows up again after a while with the next idea, our suspicion is already kindled, and we more easily reject this next idea too.

Facing Defeat

For intrapreneurs it is crucial to avoid the “No,” because it is hard to turn it into a “Yes” again later on. This is why we teach How Intrapreneurs avoid “No!” at the School for Intrapreneurs: Lessons from a FORTUNE Global 500 company, a highly effective talent and leadership development program.

Too often an intrapreneur lets their enthusiasm take over and confronts us straight on with their ideas bundled with a request for resources of sorts. Most often, this discussion ends quickly with a “No,” when we perceive this ‘frontal attack’ as a threat to the status quo, the establishment, and the well-oiled machine that the manager runs; and so it triggers the ‘corporate immune system’ leading to rejection.

Stepping Stones to Success

So, just short of having “The Force” of a Jedi, how should an intrapreneur seek support for an idea from managers, potential sponsors or coworkers? While not ‘one-size-fits-all’ and there is no silver bullet, here is a selection of tried approaches for consideration:

Seek support: The trick is to ask in a ways that build support for driving the idea forward – and not necessarily for the whole implementation project at once. Even a small step is better than none. For example, supporting evidence can help to raise curiosity and deflate resistance. Find out if a similar approach worked out in another company or industry; it helps to emphasize validation elsewhere. It can help to frame and position your offer to a potential sponsor.
Build trust: Additional ‘selling tips’ I picked up from Gifford Pinchot III., the Grand-Master of intrapreneuring himself, suggest a more social approach that includes building a personal relationship first: It is much easier to connect from a position of mutual trust and openness to find support building the supportive network by asking for advice or references before you ask for resources.
Just a test: Cautious managers may open up when they hear the intrapreneur is not intending to change anything, just ‘trying something out,’ so not to threaten their established processes, investments or power-structures within the organization. Emphasizing the ‘experimental’ and non-threatening nature of the idea helps to prevent triggering the immune system at this early stage.
Gathering Insights: Successful intrapreneurs listen very closely to what the responses to learn from them. Rather than asking a closed question that puts them in a Yes-or-No cul-de-sac, it is much more insightful to carefully phrase questions in a way that the gate-keeper already solves the problem, or provides an answer or approach to the problem the intrapreneur is trying to solve.
Know the Goals: The larger a support network an intrapreneur can built for their idea, the better. Rather than the direct manager, it may be more informative to work with people who have insights into the goals and priorities of the organization, which may be sources of resistance. This way, the intrapreneur can learn about possible conflicting goals (for example, “do more with less” or “stability versus creativity”) that need to be known and understood in order to be addressed and dealt with constructively.
Show Gratitude: And finally, it is important for intrapreneurs to pay respect and express gratitude no matter what the outcome is of their conversation. A ‘thank you’ goes a long way and keeps the door open to talk more and possibly receive support in the future.

SOX for Snowden?

Quick Recap

Edward Snowden, a former member of the U.S. intelligence community, released classified government data to the public in 2013. He faces prosecution under the U.S. Espionage Act, remains on the run from the U.S. government and ended up seeking asylum in Moscow, Russia.

The 1.3 million documents he released are the largest known security breach in U.S. history. They also unveiled highly questionable if not outright illegal action by US intelligence agencies relating to widespread spying domestically and abroad.

Traitor or Patriot?

In the light of an exclusive interview with NBC News on May 28, 2014, the popular NBC “Today” show asked its viewers in a polarizing poll to decide for themselves whether Snowden was a “Traitor” or a “Patriot.” The morning before the interview aired, 53% of viewers saw Snowden as a “traitor”. The morning after, 61% found him a “patriot.” Though the responses do not necessarily reflect a representative sample of the U.S. population, let’s go with it for now, since an interesting majority swing took place in favor of Snowden’s action.

We are not going deeper into whether or not Snowden did the right thing or not. His disclosures spurred and continue to fuel a worldwide discussion on where the boundaries are for covert operations and government surveillance programs. It’s not a new question and comes down to the ancient question the Roman poet Juvenal famously raised: “Quis custodiet ipsos custodes?” or “Who guards the guards?”

Apparently, the continued decisions of U.S. secret courts approving intelligence programs of the disputed nature did not resonate with the viewers. If Snowden was tried under the U.S. Espionage Act, the public may never hear of Snowden again nor details of his prosecution with most certain conviction. The covered surveillance programs may continue without meaningful oversight.

It makes Secretary John Kerry’s strong request sound weak and questionable for Snowden to face U.S. authorities and trust the legal system. Continued messages from high-ranking politicians up to President Barack Obama himself depict Snowden as a “low-ranking analyst” and “high school drop-out.” – Doesn’t this makes you wonder how such an acclaimed ‘bum’ got access to such large amounts of sensitive government information in the first place and who else is granted ‘Top Secret” security clearance, which is shared by 1 million(!) Americans?

SOX for Government Employees and Contractors?

Countering illegal practices by companies let the U.S. Congress to pass the Sarbanes-Oxley Act (SOX) in 2002. While SOX overhauls regulatory standards for record keeping practices, it -perhaps- became more known to the public for protecting employees of publicly traded companies from discrimination who report violations of regulations by the company. Every major business now has a process in place to ensure SOX is enforced effectively.

However, SOX only covers publicly traded companies in order to protect shareholders from fraud. What about the public sector, namely the government? Shouldn’t there be a similar ruling that effectively protects government employees and contractors, such as Edward Snowden, when they witness and wish to report apparent illegal actions by government institutions?

Check and Balances? (source: en.wikipedia.com) — Where are the “Checks and Balances”?
(source: en.wikipedia.com)

Checks and Balances

Snowden claimed that he repeatedly approached his manager raising concerns and was told to shut up. Certainly, national security interests must be protected and safeguarded by the clandestine functions of government. But then, again, who guards the guards, when “national security” becomes an obscure blanket excuse without an effective system of checks and balances that the U.S. Constitution mandates and the United States are founded on?

The Snowden affair made painfully clear that the existing legal parameters for governmental “whistle blowers” are insufficient to non-existent. How else would the public have found out about the abuse of governmental power? Going public and risking prosecution, currently, appears to remain the only viable option to truly allow and push for effective checks and balances until legislation catches up with a SOX for future Snowdens in order to keep our democracy working for the people.

Angel Investing within the Company – Insights from an Internal Corporate Venture Capitalist

Breaking through the crust

One of my favorite and most successful approaches to building a powerful intrapreneuring ecosystem is internal corporate venturing!

It is an exquisite tool to cut through the crust of ‘red tape’ that bureaucracy builds up over time. Internal corporate venturing or “Angel investing” allows for nimble decision-making with a lean process to give disruptive innovation ideas a chance again in a large company.

Related: Why mature organizations can’t innovate and Overcoming the Three Big Hurdles to Innovation in Large Organizations

Seed-funding promising ideas

How does it work? Think of becoming a venture capitalist within the company: You invest in ventures within the organization and help building ‘intraprises’ in contrast to funding start-up enterprises outside the company. The difference is a you don’t venture for your own profit but for the better of your organization.

The idea here is to seed-fund promising disruptive ideas that otherwise would not be implemented or even seriously considered. These opportunities –typically‑ were rejected by the ‘corporate immune system’ previously, when an employee with an idea approached their line manager or a governance committee of sorts requesting approval to ‘try something out.’

Related: How to grow innovation elephants in large organizations and Innovation Killers: The Corporate Immune System Strikes Back!

POC over ROI

Often enough, there is no clear return-of-investment (ROI) predictable for these early ideas. What you may be looking for is rather risky and experimental, a proof-of-concept (POC). The metrics for payoff and ROI of disruptive ideas does not follow the same approach we are used to measure the more predictable returns of common cost reduction and incremental improvement projects. Disruptive POC projects often don’t have an ROI projection when you explore technology of sorts or its application that may become a game-changer for our future business.

In my experience, communicating the POC nature of the project over focusing on ROI can actually help! It prevents the ‘organizational immune system’ from kicking in early on, since there is little threat to established practices. Why? It does not come across as competing with ‘big elephant’ projects over significant amounts of governed resources following the conventional processes of the company’s machinery. Instead, we just try something out! It’s a little experiment that doesn’t change anything, so it poses no threat to established practices, investments or the power-base of individuals defending their fiefdoms.

Related: How Intrapreneurs avoid “No!”

Aspired returns

Having said this, there is of course a commercial end to all projects. After all, we have no resources to waste and will have to demonstrate down the road that our ‘experiments’ pay off somehow. Our working assumption is that the disruption should lead to a ten-fold (10X) payoff – at least.

Personally, I prefer aiming at a bold 100X ROI target; two orders of magnitude, that is. It sets an ambitious target and -if things work out- a great success story. It’s a powerful point to make for disruptive innovation as part of our innovation ecosystem and shifting the mindset within an organization. Sharing these success stories with executive stakeholders is crucial (for future support) as well as with employees (for future ideas).

Related: 10x vs 10% – Are you still ready for breakthrough innovation?

Governance and authorization

Interestingly, what employees are looking for more than funds is authorization to do what is right and worthwhile for the company. Often, the obstacles are perceived and only exist in peoples’ minds. These barriers are formed by many factors over time, such as the management style they experienced and organizational silos that mold a company’s culture as well as the employees’ mindset.

In this particular company, a lean oversight board makes funding decisions. It is composed of a diverse team of more forward-thinking executives and a very lean decision process. The team acts as enabling ‘go-keeper’ for accelerated innovations instead of pushing the breaks as ‘gate-keeper.’

The little monies offered for trying something new only help smoothen the path for innovators in the company. The most important part is them feeling empowered and “authorized” to take action that overcomes complacency, inertia and organizational paralysis. On the spectrum of strategic innovation roles, the board serves as a “sponsor” and sometimes as a “coach,” when an idea aims to overcome internal barriers to increase efficiency, for example.

Related: Innovation Strategy: Do you innovate or renovate?

Dealing with Risk

The purpose of this governance board is to enable the exploration of disruptive ideas by giving internal innovators a chance. The focus is on projects that can be characterized as early stage experiments to explore transformative enabling technologies and value-adding services of higher risk or less predictable outcomes than conventional project portfolios in the mature organization would feel comfortable with.

Naturally, this approach comes with an elevated risk of failure when projects do not produce profitable outcomes or simply prove infeasible or poorly timed. This ‘price’ is accepted as long as it generates learning.

The potential damage is low, since we are talking about swift and low-cost experimentation: try often and fail fast. Thus, these risky projects complement regular and more conservative project portfolios in the various businesses of the organization. In addition, the innovation project portfolio is somewhat risk-balanced, which avoids having too many high risk projects that may jeopardize the likelihood of profitability across the portfolio. Reality is that also the disruptive innovation project portfolio has to demonstrate tangible returns over time, so the mature organization sees the economic benefit of experimenting and not shut down this ‘playground.’

Branding the projects as experiments with a proof-of-concept (POC) endpoint helps to calm the ‘organizational immune system’ and to argue that these risky ‘small elephant’ projects complement the other ‘big elephant’ project portfolios across the organization.

Related: How to grow innovation elephants in large organizations

Getting Funds

Here are my experiences as an internal corporate venturer or ‘angel investor’ from the past years: First of all, I don’t have much money to spend. The budget I have for this kind of ventures is pathetically meager – and I overcommit it all the time! Nonetheless, I came in under budget once again by 46% last year. It sounds like an oxymoron, and since I don’t have a money tree growing in the backyard, how does this work?

The secret is in the psychology of acting as the “first investor.” Think of this way: when someone wants you to invest into their idea first with nobody else having made an investment before you, you are skeptical and most hesitant to put down your money, right?

All I do is to commit paying for an idea in full to overcome this initial threshold and get things started. What typically happens next is that an executive from the business affected by or potentially benefiting from the project hears of my investment, reconsiders and wants to get on board too – as a second investor. Once the ‘innovation guys’ have put money down first, the investment in the idea appears less risky to the business executive, so either we split the bill or the business takes on the cost completely!

I’ve seen it happen many times with managers turning around 180 degrees after they had rejected the idea previously. This is how to deal with them: to save (their) face, don’t point out their earlier resistance but rather thank and recognize them for their support and foresight as valued contributors to change and success for the organization. Celebrate them as enablers, win them over as allies and keep the connection for future collaborations!

Alignment and validation

Don’t be mistaken, funding by the business is not only crucial given the fact that my funds are few. It is even more important because it validates that the idea makes sense to the business. It aligns with strategy and goals of the organization but also helps implementing it once the business has ‘skin’ in the game! Otherwise, even if I funded a project alone, the intrapreneur running it would have a hard time getting it implemented without the support of a business sponsor.

So all it takes is making it easy for business executives to invest in a good ideas by making them feel comfortable not to invest first, which reduces their perceived risk and lowers their threshold to act.

Key Learnings

The lean innovation governance board is an instrument for reasonable oversight that benefits from diverse perspectives.
The “Go keeper” instead of “Gate keeper” process is crucial as is the willingness to accept risk of failure for disruptive projects.
The model proves highly effective to get around a convoluted “red-tape” bureaucracy as well as generating a surprisingly high return-of-investment (ROI) – even without the latter being the primary focus.
The “first investor” psychology validates the alignment of ideas with business needs and strategy while opening the flow of funds from the businesses and facilitating the implementation.
This internal corporate venturing or “angel investing” approach became a beacon of hope for employees and a very profitable innovation engine for the organization that starts to change the organizational culture to the better.

Be the next Steve Jobs!

Can you innovate?

It a strange question. Isn’t it astonishing how many people say “I am not creative” or believe “innovators” are so much different from themselves. As if innovators are an enlightened lot of geniuses that come up with breakthrough innovations that nobody else could have thought of or made happen but them. Icons such as Steve Jobs (Apple), Elon Musk (Tesla) or Jeff Bezos (Amazon) stand out. They apparently think differently and changed the world.

The question for the rest of us is: could I be a Steve Jobs too? Or do have to be born gifted to be able to innovate in ways that “make a ding in the universe” like Steve Jobs?

Are you a Steve Jobs? (photo credit: http://scrapetv.com/News/News%20Pages/Technology/images/steve-jobs-3g-iphone.jpg) — Are you a Steve Jobs?
(photo credit: http://scrapetv.com/News/News%20Pages/Technology/images/steve-jobs-3g-iphone.jpg)

You can learn creativity!

If you ask kids in kindergarten or preschool if they are creative, they enthusiastically respond “Yes!” At that age we are convinced we are creative and express our views, thoughts and ideas in many ways. We design rockets to Mars or create new animals, nothing is out of bounds or out of reach.

What has happened to us that we believe as grown-ups and employees we can no longer create and change the world? I heard “I could never do that” and “nothing will change anyway” too many times.

Good news is that genetic predisposition only attributes one-third to your creativity and innovative-ness (if this is a word), while two-thirds are skills that can be learned, as research confirmed many times over (see Marvin Reznikoff et al, Creative abilities in identical and fraternal twins, Behavior Genetics 3, no. 4, 1973).

Therefore, innovation can be taught, “nurture trumps nature.” So, you can learn it too!

Are you an intrapreneur or entrepreneur?

However, not everyone wants to take the risk and uncertainty to make an entrepreneurial dream come true by starting a new business on their own. Many of us work in large organizations and would like to improve the company from within somehow.

This is where intrapreneuring comes into play. Intrapreneurs are also called corporate entrepreneurs, since they apply entrepreneurial methods within the organization to create intraprises. (See also The Rise of the Intrapreneur)

What innovators have in common

So is there anything that great innovators share and which we ‘mortals’ can replicate or do similarly to succeed? – In fact, there is!

In his iconic book “The Innovator’s DNA,” famous disruptive innovation guru Clayton Christensen (who is also known for coining the term ‘disruptive innovation’) identified four common catalysts that sparked the great ideas:

“a question that challenged the status quo,
an observation of a technology, company, or customer,
an experience or experiment where he was trying out something new,
a conversation with someone who alerted him to an important piece of knowledge or opportunity”

This comes down to the four following behaviors, as Christensen found out: questioning, observing, networking, and experimenting.

Thinking different

While, typically, the underlying information is not unique, the innovator’s associative thinking combines information and connects dots that seem random or unrelated to others. They create a picture or vision of a need or opportunity to pursue.

Now, on your way to become an intrapreneur (or entrepreneur), how can you get to these insights, find a suitable target and make it happen?

There are two basic steps:

Don’t work alone
Seek a fertile environment.

1. Don’t work alone

An African proverb says “If you want to walk fast, walk alone; but if you want to walk far, walk together”. Developing and bringing a disruptive idea to life takes time, work and -more than anything- collaboration. It’s not a fast shot and you will need help. What you can do is tapping into more brains: ask others and bring together a diverse team around an idea. You want to get as many different perspectives to see the fuller picture, risks, needs, opportunities to tackle the problem you are working on.

You may be blindsided or unaware of things critical for your success including much needed political cover, validating your assumptions or technical aspects outside your expertise. If you try to do everything yourself, you are setting yourself up for failure for a simple reason: you are not an expert in everything! Stick with what you are good at and let other experts help you with what they are good at.

2. Seek a fertile environment

If you want to start your own business as an entrepreneur, you may want to move where you find the best condition for a supportive business environment, an ecosystem. For entrepreneurs, for example, Stanford University and Silicon Valley remain a major tech magnets with ample and easy access to top talent and money. Also accelerators can serve this purpose. Comparable conditions for an innovative ecosystem exist at the US-East coast in the Boston area. Depending on your business idea, other locations and ecosystems may be more suitable – do your homework and find the right one for you.

As an intrapreneur, your available ecosystem seems more limited: it typically is the company you work in that defines the perimeter of your freedom to navigate. Your advantage here can be that you already know the environment and who could be supporting or funding your idea. If not your, you could more easily ask colleagues for help than people outside your company could, which significantly lowers the bar for access to resources.

Let’s continue by focusing on intrapreneuring. Compared to the entrepreneurial world out there, within an organization you may have more opportunities to help shape the fertile ecosystem for breakthrough ideas if none exists yet.

Now, if you are stuck with a company that does not provide an environment that supports intrapreneuring, you may consider becoming the innovation leader (see How to become the strategic innovation leader? (part 2 of 3)) to build an ecosystem within a large organization.

– Stay tune to find out how.

Join me at the Customer Experience Summit 2014 in Princeton/NJ on March 6, 2014

Pharma Customer Experience Summit 2014 at The Nassau Inn Hotel, 10 Palmer Square, Princeton, NJ on March 6, 2014

How open offices kill productivity – and how to make it work

Open offices are not a new invention. They have been around for a long time as hallmark of start-up companies that simply cannot afford glitzy corporate skyscrapers with plush corner offices (yet). Open offices emerged less by deliberate design than driven by need.

Start-ups typically run on a vibrant culture of passionate people wanting to spend time together to create something great, everyone works together closely in the tight space available. Information flows fast and freely. Recreational elements and other services offered remove the need or motivation to leave. Employees hang out to work maximum hours as a team in a fun, inspiring and supportive environment. Productivity is up and work gets done.

Start-up open office (source: theepochtimes.com)

Growing pains

Large companies are attracted by this powerful value-proposition for open offices – or so it seems. Mature organizations struggle with their increasing size that, over time, entails increasing specialization and complexity with a stifling system of red tape and inertia.

While jobs are large in small companies and come with broad scope and high accountability, which are diluted when jobs narrow in large companies by increased specialization over time. Functional silos emerge and sub-optimize often to the detriment of other business functions.

This siloed corporate world only contributes to a climate that works against diverse collaboration and inhibits breakthrough innovations; and business results degrade from 10x to 10%. (See also 10x vs 10% – Are you still ready for breakthrough innovation?)

Cutting costs is a questionable driver

The reasons for large organizations moving to an open floor plan are often glorified and communicated as a measure to increase creativity and productivity in an appealing modern working environment: employees connect casually and spontaneously at the ‘water cooler’ to network and innovate together again.

The true and paramount driver for tearing down the office walls, however, is often more sobering: it comes down to simply cutting costs by reducing the expensive office footprint. Fitting more people into less space comes at a price for the workforce.

Cost savings only get you so far. It’s an easy approach but not a sustainable business model for productivity. What do you really save if productivity goes down? How sustainable is your business then? Sacrificing productivity for cost savings is a narrow-minded approach lacking long-term perspective and, therefore, not worth it. That is unless your goal is to achieve short-term gains without consideration for the future of the business, which is a disqualifying business perspective altogether.

The popular phenomenon in large companies is a move for the wrong reasons (the better driver being increased productivity) and entails serious consequences that jeopardize the company’s productivity, workforce satisfaction, and even the bottom line.

Design constraints

It gets even worse when the new environment is retrofitted space with structural limitations, founded in the legacy of existing buildings and investments, and if no flanking measures taken to enable effective collaboration needs.

A design from scratch has the potential support the collaboration needs and flow of the workforce best. This is an advantage start-ups have when they can shape and rearrange loft space to their immediate needs without limitations carried forward.

Size matters

Controlling cost is necessary and reducing office footprint is an effective business measure. Aetna, for example, has nearly half of their 35,000 employees working from home already, which saves ~15% to 25% on real estate costs – that’s about $80 million saving per year.

Do not get me wrong, there are undeniable benefits to open office spaces – when applied for the right reasons in the right context, with right priorities and proper execution. The point I am making is that cost reduction alone is not a worthwhile driver if it sacrifices productivity. There comes a point where a hard decision has to be made and if you prioritize cost savings, you sacrifice productivity and other aspects automatically.

What does it take?

Unfortunately, the start-up company model with open office space and its agile and enthusiastic does not scale for large organizations. The corporate one-size-fits-all approach does not do the trick for several reasons.

Let us look at aspects that make the open office work:

Tear down cost center walls
Make presence easy
Level the (remote) playing field
Embrace work style differences

1. Tear down cost center walls

Proximity favors who needs to work together closely. In a start-up company, staff is few and jobs are big. This ratio flips in large organizations where many employees work in highly specialized functions. With increasing specialization comes complexity that leads to functional silos. The employees become separated by every rising departmental and organizational walls.

In large organizations, work space is typically paid for by department and charged to cost centers. Staff gets corralled this way and kept separated in functional clusters that are easier to administer but counteract productivity, streamlined workflow, and diverse collaboration cross-functionally. After all, it wouldn’t make sense to have any department operating completely independent from the rest of the organization.

These artificial and structural boundaries make no sense (unless you are an accountant, perhaps). Therefore, trade the urge for financial micro-management for what makes the workforce more productive, as this is the most important aspect of collaboration and, ultimately, the bottom line.

2. Make presence easy

Make it easy for your employees to go the extra mile. Now here is where large companies can learn from how start-ups: offer incentives for employees to hang out and remove reasons for them to leave to maximize time to work and collaborate.

The list seems endless: free beverages and food, services such as laundry, hair dresser, spa or receiving deliveries, exercise equipment, healthy snacks, child and pet care, and other useful perks that cost-cutting companies often omit.

Sounds like a waste to many large companies. But is it really? You get more out of your employees’ carefree working along longer than by pinching the free coffee and have them leave during the day or early to run their necessary errands.

3. Level the (remote) playing field

It may sound counter-intuitive but when cost saving rules, the open office space often only works when not all employees are around at the same time. If all employees showed up on the same day there may not be enough room and resources (seating, access to power and networks, etc.) to fit and accommodate everyone, since the physical office footprint is now too small ‑ a Catch-22.

When only a subset of employees can be present in the office at any given workday, the rest has to work remotely forming an –at least- virtual organization. Consequently, the random personal connection “at the water cooler” becomes less likely as does spontaneous cooperation by “pulling together a team” since your pool of physically available staff is limited.

Management needs to take deliberate and determined measures to level the playing field for remote workers by giving them the same opportunities as colleagues present in the office. Why? “Out of sight, out of mind” is a powerful and human nature. If not managed effectively, it only becomes worse when remote staff easily is continuously overlooked when it comes to projects staffing, development opportunities and promotions, for example. The resulting inequities undermine workforce cohesion, effectiveness, and talent development.

4. Embrace work style differences

There are too many individual work styles to list them all – for example, just think of

Generational differences and preferences (see also Generation Y for managers – better than their reputation?) or
Introverts vs extroverts (see also Why virtual teams fail, and how to make them work (part 1) and Boost ‘Group Intelligence’ for better decisions!)

FastCompany recently came up with a list of reasons by workers arguing against open offices, which is a good indicator where the pain-points are. Representative or not, the list tends to resonate with people that experienced first-hand working in a corporate open office environment.

The key complaints are about

Distraction – hard to concentrate with surrounding noises of all sort; loud speaking coworkers; interruptions of coworkers stopping by at any given time
Discomfort – no privacy; by-passers looking at your screen and documents; food, bodily and other odors; white-noise generators blamed for headaches; spreading contagious illnesses; having to talk to people when you don’t feel like it; “hiding” by wearing earphones
Workflow obstacles – competing over quiet spaces, conference rooms or other rare resources; no place to store personal items or personalize the space.

In summary

One size does not fit all and it does not do the trick for large companies, in particular. So if you have to downsize office space or accommodate more employees, take a sound and sustainable approach by making productivity the driving priority and not cost.

After all, we are human beings that work best when we have control over our work environment and schedule. When we perform at our best, it is also for the better of the company as a whole. Flexibility, empowerment and inclusion go a long way – otherwise, mind FastCompany’s warning: “What was supposed to be the ultimate space for collaboration and office culture was having the opposite effect” – also for the bottom line.

How to grow innovation elephants in large organizations

Driving innovation in large organizations is like herding elephants. Big and small elephants. – How so?

Big Elephants in the Back-Office

In large organizations, departments gravitate to sub-optimize their core business. Silos form under local management to run their department more efficient – following the old mantra: do more with less.
(Read more about silos forming at Leadership vs Management? What is wrong with middle management?)

Although all business functions are affected, corporate Information Technology (IT) departments often lend themselves as best examples for a “big elephant” world: they are critical enablers in a pivotal position of every modern organization. Even though the success of practically every business function hinges on IT, also IT is not immune to this silo-forming phenomenon in large organizations.

Over time and with ‘organizational maturity’, the IT department tends to end up focusing on what they do best: large back-office projects that cannot be funded or run by any business function in isolation, since they span across disciplines or impact the entire enterprise. Just one examples for a “big elephant” project is implementing a comprehensive Enterprise Resource Planning (ERP) system across multiple locations internationally.

This is the back-office domain and comfort zone of IT with technology know-how, big budgets, long duration, high visibility, rigid governance and clear processes to follow.

Small Elephants in the Front-Office

In contrast, the front-office typically comprises Marketing, Sales and Product Development. Here, a small tweak or agile change (that requires some IT input) can go a long way and have significant impact on organizational effectiveness and business results. – These micro-innovations are “small elephants” as recent Gartner research coined them.

These little disruptions to the slower-moving big elephant world easily trigger the “corporate immune-system” that favors large elephants and suppressing small emerging ones.

Typically, most projects in large organization aim to reduce cost in some way. Only a minority of projects address new business and growth opportunities that tend to come with uncertainty and greater risk.

While big elephants are typically incremental improvement project to save cost, it’s the small elephants that are more likely to be disruptive drivers of growth and future business opportunities: the much needed life-blood of sustaining business and future prosperity.

Barriers in the Big Elephant World

IT departments tend to struggle the farther they move away from their ‘core competency’ meaning leaving the big-elephant back-office and dealing with the myriad of small needs of the customer-facing units in the small-elephant front-office.

Many reasons contribute to say “No!” to emerging small elephants:

Small elephants are disruptive to the big elephant world, perhaps even threatening to the establishment
It is hard for the back-office to accept that there cannot be much standardization around these small small elephant solutions by the very nature of their scope and scale
It is cumbersome to plan and manage resources scattered across small projects that pop up left and right without significantly impacting big elephant projects. Unfortunately, pressure to save cost only fuels the focus on fewer, bigger elephants.
Gartner brings the dilemma to the point: “[..] the focus on optimization, standardization and commoditization that underlies IT’s success in the back office is contrary and even detrimental to the needs of the front office.”
Insights in front-end processes and customer needs are essential (and not usual IT back-office competencies) to seize small elephant opportunities, which are often disruptive and driven by the agile intrapreneurial spirit that makes full use of the diversity of thought and understanding customers deeply.
– See also The Rise of the Intrapreneur
On top of it all, the challenge for IT is to understand the potential and pay-off for initiatives that rely on IT in a domain outside of IT’s expertise: In the mature world of big elephants, ROI projections are demanded upfront and based on models that apply to mature organizations. These models typically do not apply well to measure project ROI in the emergent worlds of small elephants, which puts the small elephants at a disadvantage; another disconnect that easily leads big elephant organizations to reject proposed small elephants.

As a bottom-line, for large IT departments it is simple and convenient to say ‘No!’ to requests for “micro-innovations” coming in from employees scattered across the front-offices. And, sadly, often enough this is exactly what happens. Despite the lasting impact of “No!” (see also How Intrapreneurs avoid “No!”), turning ideas and proposals down too fast also leaves out opportunity for huge innovation potentials (see also 10x vs 10% – Are you still ready for breakthrough innovation?).

What happens to IT without small elephants?

Ignoring the need for micro-innovations and not supporting them effectively will not serve IT departments well in the long-run. With only big-elephant focus IT departments are at high risk to lose sight of the needs of their internal customers. Consequently, IT undermines and finally loses its broader usefulness, acceptance and footing in the business functions they intend to serve.

When small elephants are neglected or blocked, it practically forces the front-office to look for other resources sooner or later in order IT-services providing resources to get their needs taken care of. Over time, the big IT department drifts to become more and more obsolete, and finally replaced by agile and responsive agencies and contractors that deliver on their front-office customer needs.

After all, IT’s general role is one of an enabler for the core businesses rather than being perceived by its customers as a stop-gap.

How to raise Small Elephants

So, what can a mature yet forward looking IT organization do to support micro-innovations – or ‘balance the herd,’ so to speak, to include a healthy number of small elephants in the mix?

Brad Kenney of Ernest&Young recommends limited but dedicated resources (including time) for micro-innovations in Ernest&Young’s 2011 report “Progressions – Building Pharma 3.0”;
for example, dedicate 10% of the expert’s time to implement micro-innovations
Test changes in emerging markets first, if possible, where agility is high at a lower risk of jeopardizing the bottom line or threatening the established organization and its investments in mature markets
Establish effective collaboration platforms that make it easy for employees to openly and conveniently share content among each other as well as with external parties.

How Intrapreneuring helps

A systematic approach to Intrapreneuring can go a long way to help move these micro-innovations forward. It starts with systematic intrapreneurial skill-building for employees across all levels of hierarchy and includes:

Understanding how innovation happens in large organizations, i.e. large and small elephants and the need for both to exist
Helping employees become aware of and overcome their own mental barriers and silo-thinking
Attracting, inspiring and engaging employees to take their idea forward knowing there are obstacles in their way
Training skills that help to frame, develop and pitch ideas to potential supporters and sponsors
Building and presenting a business case for review and improvement by peers and management
Enabling and empowering employees to bring their small elephants to life and sharing the story of their success to inspire others
Working to gradually change the mindset of the organization, its culture, as needed, to become more balanced on the elephant scale, to unlock the resources within the own workforce and to seize opportunities for growth and the future of the business.

Just as out there in the wild, without raising small elephants the life-span of organizations with only big elephants is limited.

10x vs 10% – Are you still ready for breakthrough innovation?

Google co-founder and CEO, Larry Page, continues to have big expectations for his employees: come up with products and services that are 10 times better than their competitors, hence “10x” – that’s one order of magnitude!

10X vs. 10%

Many entrepreneurs and start-up companies, they seem to ‘shoot for the moon’! Far more than 90% of these ventures fail within just a few years. Few, such as Google, succeeded and grew to dominate internet giants. The question remains though if they can maintain the innovative pace of 10x when the innovation rate tends to sink closer to 10% in matured companies.

How big dreams changed the world

This challenge effects also other visionaries that changed the face of the world and transformed society in ways nobody has imagined, such as:

Apple building a micro-computer at times when mainframes ruled the digital world and only few could envision a demand for personal computing

"There is no reason anyone would want a computer in their home." - Ken Olsen, founder of Digital Equipment Corporation, 1977; just a few years before the first IBM PC was sold. — *“There is no reason anyone would want a computer in their home.”* – Ken Olsen, founder of Digital Equipment Corporation, 1977 – just a few years before the first IBM PC sold.

eBay establishing a new online sales model that millions around the globe use every day

Google taking over the browser market through simplicity, by giving everyone control to use the most complex machine on Earth, the Internet
Microsoft cultivated software licensing to sell one piece of software millions of times over effortlessly at minimal cost.

Innovation downshift

As disruptive and transformative ventures grow and mature, the definition of what is perceived ‘innovate’ changes. Both momentum and focus shifts. With size companies struggle to continue innovating similar to their nimble start-up origins.

What happens? With size comes a downshift from disruptive to incremental change. Simplicity makes space for adding features. Adding features makes products more complex and ultimately less usable and appealing to the majority of customers.

Look at Microsoft’s Offices products, for example: Wouldn’t you wish they came out with a ‘light’ version with reduced feature complexity by let’s say 75%, so the software becomes easy to use again?

It also starts haunting Google, as their established products such as Search or Gmail need to be maintained. Additional “improvements” aka. features creep in over time. Perhaps you noticed yourself that recently Google search results seem to be less specific and all over the place while the experimentation-happy Gmail interface confuses with ever new features?

Even the most iconic and transformative companies experience the reduction of their innovative rate from 10X to an incremental 10% or so.

Technology S-curves

Funny thing is that -at least in technology- incremental improvement quickly becomes obsolete with the next disruptive jump. The current technology matures up along the S-curve (see graphics) and generates revenue, but the next disruptive technology emerges. Companies hold on as long as they can keeping revenue flowing by adding features or improvements of sorts to gain or maintain a marginal competitive advantage. Thus, incremental improvement and process optimization found their place here to minimize cost and maximize profit in a market where the product became a commodity, so the competition is based only on price.

The new technology does not yet make significant money in the beginning at the beginning of the next S-curve. The few early units produced are expensive, need refinement and are bought by enthusiasts and early adopters who are willing to pay a steep premium to get the product first. Nonetheless, development reached the point of “breakthrough,” becomes appealing to many and quickly takes over the market: the big jump onto the next S-curve gains momentum. Suddenly, the former technology is ‘out’ and revenue streams deflate quickly.

S-curve (http://www.carteblancheleeway.wordpress.com)

(source: http://www.carteblancheleeway.wordpress.com)

Large and matured organizations ride on an S-curve as long as possible. They focus top-down on optimizing operations. Little effort is made to address the underlying limitation of the current technology and seeking out risky new successors. Maturing companies tend to transform into a ‘machine’ that is supposed to run smoothly. A mind shift happens to avoid risk in order to produce output predictably and reliably at a specific quality level to keep operations running and margins profitable. Incremental process improvement becomes the new mantra and efficiency is the common interpretation of what now is considered ‘innovative’.

10X has turned into 10%. To keep up with the ambitious 10x goal, companies would have to constantly re-invent themselves to replicate their previous disruptive successes.

How Goliath helps David

Even our recent iconic ‘giants’ find themselves in a tighter spot today:

Google struggles to integrate a fragmented product landscape and maintain the ambitious 10X pace of innovation
Microsoft suffocates loaded with features that make products bulky and increasingly unusable while consistently failing to launch new technologies in the growing mobile segment successfully
Apple waters down their appealing simple user interface by adding features and clinging to defend their proprietary standards from outside innovations.

On top of it, all giants tend to face the stiffening wind of governmental scrutiny and regulation that influences market dynamics to protect the consumers from overpowering monopolies that jeopardize competition and innovation.

This is a fertile ground for the next wave of innovators, small Davids, to conquer markets from the Goliaths with fresh ideas, agility, and appealing simplicity. Where does your organization stand on the S-curve, riding the current curve with 10% or aiming high at the next with 10x?

Observing the down-shift

What can you observe when the down-shift happens? How do you know you are not on the transformative boat anymore? Here are just some examples:

Small Jobs – job descriptions appear that narrow down the field of each employee’s responsibility while limiting the scope by incentivizing employees to succeed within the given frame.
Safe Recruiting – practices shift to playing it safe by hiring specialists from a well-known school with a streamlined career path to fit the narrowly defined mold of the job description. They newbies are expected to replicate what they achieved elsewhere. To risk is taken to getting the ‘odd man out’ for the job, a person who took a more adventurous path in life and thinks completely different, as this may disrupt the process and jeopardize the routine output by shifting the focus away from operations.
Homogenized workforce – as a consequence of hiring ‘safely’, the workforce homogenized thereby lowering the innovative potential that comes with the diversity of thought and experience.
Visionaries leave – with the scope of business shifting, the visionary employees that drove innovation previously lose motivation when innovation and creativity slows. Now they are held to operate in a business space where they do pretty much the same thing as their competition. Naturally, these go-getters move on, as it is easy for them to find a challenging and more exciting new job in a more dynamic place. – This ‘leaky talent pipeline’ gets only worse and costly when the talent management focus shifts to talent acquisition and leaving talent retention behind.
Complexity creeps in – the temptation to constantly add features increases the complexity and starts a spiral that is hard to leave again (see also ‘Complexity’ is the 2015 challenge! – Are leaders prepared for ‘glocal’?)
Procedures for everything – operating procedures regulate every detail of the job. The new ‘red tape’ is not limited to the necessary minimum but rather by the possible maximum.
Short-term focus – work output becomes mediocre and focuses on short-term goals and sales targets; the next quarter’s numbers or annual results take priority over following the big dream.
Sanitized communications – broader communications within the company become ‘managed’, monitored, ‘sanitized.’ A constant stream of (incremental) success stories pushes aside an open discussion to target the bigger problems. Opportunities are missed for open dialogue and creative disruption that fuels the quantum leaps forward to outpace the competition. Peer to peer communication is monitored to remain ‘appropriate’ and can even be actively censored. Trust in management and subsequently also among employees erodes.

Management fear of being the first

The real problem is the shift of mindset in top management that quickly works its way down: not wanting to take the risk of being first, which includes avoiding the risk to fail while chasing to next big opportunity or technology. Instead, they sail the calmer waters among more predictable competition fighting for small advantages and holding on to the status quo opportunistically as long as they can. In some cases, the management even acknowledges the strategy shift from ‘leader’ to ‘fast follower’ despite whatever the company motto proudly promotes – and thereby accepting 10% and avoiding to leap ahead of their competition by bold and game-changing 10x moves.

Interestingly, these same managers still love to look over the fence to awe the iconic leaders but steer away to take charge and work to become the leader again themselves. The nagging question remains if they could actually pull it off getting into first place.

Outside-of-the-box thinking may still be encouraged in their organization but is not acted upon anymore. Internal creativity or ideation contests become more of an exercise to keep employees entertained and feeling engaged, but the ideas are hardly being funded and executed. Instead, company resources are concentrated to run the incremental machine predictably and reliably at 10% as long as its profitable, no matter what. – They simply have no resources to spare and dedicate to 10x!

Business Darwinism

These businesses undergo a cycle of breaking through by successful disruption in a narrow or completely new segment, then continued growth to a size where the organization slows down to an incremental pace and somewhat stagnating innovation. It may then get driven out of business by the next disruptor or pro-actively break up into more competitive fragments that allow for agility and risk-taking once again to become leaders in their more closely defined space of business. This closes the cycle they are to go through next. There is a strong parallel between evolution and Charles Darwin’s survival of the fittest.

Keeping this cycle in mind, it becomes easier to see why management undergoes the mind shift to predictable and incremental improvement during the massive growth phase of the company in the center of the S-curve. It is also the time when the disruptive innovators have jumped ship to join the next generation of cutting-edge innovators and risk-taking disrupters that prepare to take the leap working on the next S-curve.

Which way to turn?

The question is where you want to be: the true risk-taker or the incremental improver? Understanding the trajectory and current location of your company helps to make the right decision for you. It can save you from frustration and be banging your head against corporate walls and be wasting your energy in a dinosaur organization that is just not ready anymore for your ‘big ideas’ and quick moves outside its production-house comfort zone.

This leaves some of us thinking which way to turn. If you are looking for predictability, longer-term employment (an illusion these days one way or another) and good night sleep, this is the place you will feel comfortable in.

Otherwise, dare to follow the risk-taking visionaries like Elon Musk (the brain behind PayPal, SpaceX, and Tesla Motors; see his recent great interview) to move on.

And then there is ‘intrapreneuring’ as a third direction that tries to change the company from within. (See ‘The Rise of the Intrapreneur‘)

To say it with the words of Niccolo Machiavelli, the wise and sober realist: “All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but calculating risk and acting decisively. Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer.”

Shoot for the moon (or Mars, if you are Elon Musk), change the world no matter what and enjoy what you do!

Innovate to Implement!

Innovate to Implement!
Creating value through new products is not enough. Capturing the value requires equal attention on the innovation process. Focusing on creativity and neglecting execution along the value chain is a costly mistake.

It’s all about creating and capturing value

Innovation is about new products (or services) that create value for an organization as much as it is about capturing this value. While there seems to be no shortage of ideas and even products, what differentiates successful companies from others is that they are able to capture the value of what they created.

Capturing value is a process that complements the product by looking at all aspects of the value chain seeking ways to maximize influence and revenue streams. Thus, capturing the value has to be well thought out and built it into the solution – rather than addressing it in an after-thought.

A new product may bring competitive advantage but this is temporary and will last only as long as the competition needs to catch up. To sustain, an organization needs to develop agility and differentiating capabilities to sharpen the competitive edge continuously and reliably in a fast-paced, competitive, and ever-changing environment (see also “‘Complexity’ is the 2015 challenge! – Are leaders prepared for ‘glocal’?”), while reaping the fruit of their work.

Capturing value –or- Who owns the customer?

The aim of capturing value is to ‘own the customer’, i.e. a customer who is willing to pay a premium or accept shortcomings in some areas in order to buy or use the product (or service). Only then does a company own the customer and the competition remains locked out.

Apple, for example, has perfected this customer ownership: Its loyal customer base values the customer experience with Apple products and identifies with the Apple branding. They purchase every new gadget at a premium with little regard to the actual technical specifications or product offerings from other manufacturers. (See section “Fuzzy values? – Here are some how-to examples” in my previous blog “How to become the strategic innovation leader? (part 2 of 3)”)

Apple effectively controls all aspects of the value chain and generates revenues from different streams from hardware, apps, software, and content, for example. Just to give you an idea, here is an overview on some of the revenue streams Apple has created along the value chain (from Bertrand Issard’s Blog):

Apple Value Chain (found on Bertrand Issard's Blog)

As a bottom-line, products create the value that needs to be captured just as much. Hence, it is important to focus also on the process that ensures value is captured throughout the value chain.
– So how does this relate to innovation?

Innovating the value chain

Innovating the value chain to capture value requires thinking far and wide beyond the product considering all aspects relating to the:

Business model – what is the revenue model? What partnerships add value without sacrificing too much control?
Processes – what are the core processes of the organization? What are value-adding enabling processes?
Offering – what do you offer the customer? – For example, a product concept (think: iTunes, App store), quality/cost/performance optimization (Intel or AMD chips), a product system (Google), or a supply chain (Fedex or UPS)
Delivery – how do you deliver your product or service? – For example, are you forming alliances with partners to complement the in value chain in areas outside your own organization’s competency or field of business? If so, make sure you have a well thought-out marketing strategy with win/win profit sharing that creates incentives for stable and lasting partnerships.
Examples here are the coffee distribution approaches of Nespresso or Keurig’s (single cup coffee brewing), the focus on customer experience of Harley-Davidson (motorcycles), or the brand communication of Red Bull (energy drink).

Two parts of one whole

The innovation process consists of two parts, the invention and the implementation part. Typically, the invention revolves around creativity and ideation that tends to get more publicity and attention than the implementation, which requires focus, discipline, and persistence to execute.

The creativity has the ‘Wow!’ factor – no question about it. Brain-storming of sorts and creativity techniques can be quite fun, social, and engaging. Nonetheless, new ideas are cheap and come by the dozen. That is, perhaps, why innovation literature and models seem to focus (and sell better) on the creative front-end; not so much on the back-end (execution). Yet, it is flawless execution where the rubber hits the road and the value is captured.

Even worse when the innovation process starts out with generating ideas around a specific solution for a new product or service without exploring alternative approaches and then trying to find an application and market for the product. The more mature way to start is with a focus on the problem and then develop and narrow down solutions to find the one(s) that best meet(s) the underlying needs of that problem.

Focusing on the problem first and understanding it thoroughly leads to better results, i.e. develop a product (invent) to sell it (implement).

Focus on the problem before building a solution

The point here is that both parts are equally important and require to same amount of attention for an innovation project to succeed. Invention without implementation does not help; neither does implementing something immature that and doesn’t work.

Innovation process

This is what an innovation process looks like if you break it up (left to right) into the two parts, invention and implementation, and the process steps:

Eleven “i” for Innovation (process spectrum)

A new product alone is not enough

New product development (NPD), for example, draws from both parts, typically in a series of steps with cycles between them: Ideation, Initiation, Incubation, and finally preparing the Industrialization ‑ but this is not where the implementation process ends.

It requires a few more process steps to make the solution work in the real-life production environment and deliver results reliable and consistently. A clean hand-over introduces and integrates the change into routine operations, i.e. the production environment and processes of the organization, for example. Failing here means failing the innovation project.

Unfortunately, innovation leaders on the front-end tend to be crushed or steamrolled in a rigid and back-end-heavy organization in a clash of creativity (front-end) and execution (back-end).

It requires discipline, persuasiveness, and persistence to push forward and overcome the obstacles that emerge from a production environment optimized for efficiency when innovative change knocks at their door and disrupts the rhythm of a fine-tuned process flow. It also requires courageous leadership and an intrapreneurial spirit to do what is right for the company overall and necessary for future success.

In a nutshell

What innovation comes down to is the creative part of collaboration to come up with a new product as well as the implementation that captures the value throughout the value chain with the goal to ‘own the customer’ through differentiation. Focusing on the creativity and neglecting the implementation and execution is a costly mistake that lets even the best idea fall short of its market potential.

The Rise of the Intrapreneur

The Rise of the Intrapreneur
How to become an ‘Intrapreneur’? Why are Intrapreneurs needed? What is the difference to Entrepreneurship? – The future of innovation within large organizations lies within, if you know how to tap into it with intrapreneurship!

What is Intrapreneurship?

Did you know that ‘Intrapreneur’ and ‘Intrapreneurship’ are not new terms but were coined nearly 35 years ago by Elizabeth and Gifford Pinchot in 1978?

As a definition for our purposes, an intrapreneur takes responsibility in large organizations for turning an idea into a profitable finished product through assertive risk-taking and innovation. In contrast to an entrepreneur, the Intrapreneur operates within an existing organization with an internal focus. Intrapreneurship requires an organization of considerable size for an intrapreneurial role to become applicable in the first place.

What is the difference to Entrepreneurship?

‘Intrapreneur’ is not as well known as the more established term ‘Entrepreneur’ which it derives from. It even takes a deliberate effort to pronounce the word Intrapreneur so doesn’t sound like and get confused with Entrepreneur.

The word ‘Entrepreneur’ has been around since the 19^th century with its functional roots reaching even farther back into the 16^th century. According to the original definition, an Entrepreneur is “one who undertakes an enterprise […] acting as intermediatory between capital and labour” or in other words, to “shift economic resources out of lower and into higher productivity and greater yield.” (source: Wikipedia)

The role of an Entrepreneur is not so different from the Intrapreneur but many differences exist relating to the environment they operate in and the approach they take. An Entrepreneur founds a new venture, a business, or company, as an independent economic entity. This new entity then typically competes for profit in a market with other companies. Today, Entrepreneurship has fanned out to include specializations such as lifestyle, serial, or social Entrepreneurship that also expanded in markets (in lieu of a better word) previously dominated by non-for-profit, clerical or government institutions.

As a bottom-line, Entrepreneurship roots in competition between companies or organizations by introducing and building a new entity that grows as a company to stand alone in an economic marketplace – while the Intrapreneur connects “capital and labour” using somewhat entrepreneurial methods within an existing organization. You can even see Intrapreneurship as a downstream evolution for a successful and matured entrepreneurial venture.

Why do we need Intrapreneurs?

With increasing size, an organization slows. Inertia and paralysis set in to replace agility and effectiveness. This is often caused by the organization’s own success: The focus shifts towards delivering with increasing efficiency (cost, time) and consistency (quality). You can easily observe the results in many organizations – it looks somewhat like this:

Business functions specialize and sub-optimization to become more efficient and productive; they thereby form ‘silos’ with communication and interactions thinning between them to the detriment of the organization as a whole.
Hierarchical structures become steeper to manage more employees; they effectively disconnect the executives on the top from the workers at the bottom of the hierarchy.
Promising innovation ideas from the grassroots don’t get through to the executive level for backing or funding to be developed and implemented; the ideas starve and innovation suffers overall.
More rules and procedures regulate the growing workforce and detailed aspects of work processes; governance, red tape, and bureaucracy pour over the organization like concrete and become obstacles to change.
Career paths become linear, job profiles and responsibilities narrow, entailing an equally narrow view and mindset of the staff that eats away motivation and creativity over time.
Talented and creative employees are the first to leave or become hard to retain, as they are always in demand and easily find interesting work elsewhere.
Innovation suffers while competitive pressure increases when nimble competitors and start-ups outpace the organization.
Management used to command-and-control eagerly seeks fresh talent and ideas externally, i.e. ‘hiring the best and brightest’, to reanimate the organization – yet the leaky pipeline continues bleeding talent, as also the new ‘super stars’ find themselves trapped and escape to new adventures elsewhere.

It takes a jolt to overcome this inertia, revive it, and get an organization moving nimble again ‑ this is the hour of the Intrapreneur!

Time for Action - Clock — Time for Action – Clock

How to become an Intrapreneur?

It takes a new role in the organization to jump-start it, so we “Innovate to Implement“. Sometimes, a new CEO is hired to turn the corporate ship around from the top; sometimes it works. The Intrapreneur, however, also considers working bottom-up by pulling the loose ends together and connecting people again across all functions and levels of hierarchy. The Intrapreneur bridges the various gaps within the organization vertically and horizontally.

It takes a different approach to include, and engage all employees in ways outside their immediate job description that makes best use of all dimensions each individual brings to the (work) table. The Intrapreneur inspires and spreads a new sense of enablement throughout the workforce.

The Intrapreneur looks differently at how we conduct our business and unlocks innovative value chains, new business models, or propositions. It takes a strategic lead to become a facilitator for the organization, to adapt continuously and make best use of the changing environment. The Intrapreneur builds networks and alliances to help actively moving the organization towards its business goals.

The Intrapreneur is a much-in-need and critical role within the matured organization. It can come in different flavors too! Being the ‘Executive Champion’, for example, is an intrapreneurial role (see “How to become the strategic innovation leader? (part 2 of 3).”

As an Intrapreneur it is important to be aware what hat to wear and when. Sometimes an ‘architect’ is needed and an ‘orchestrator’ at other times, for example. ‑ For more details see: “Innovation Strategy: Do you innovate or renovate?”

Risks becoming an Intrapreneur

Now, as a word of warning, being an Intrapreneur is not always easy: You tent to step on many people’s toes if you want to make a difference. It can be so risky, that Gifford Pinchot even formulated The Intrapreneur’s Ten Commandments starting with: “Come to work each day willing to be fired.”

So brace yourself because there are many obstacles to innovation and change out there that the Intrapreneur will face. Intrapreneurship is most and foremost a leadership role, which has a natural tendency to conflict with managers (see “Leadership vs Management? What is wrong with middle management?”).

Prepare to hit the obstacles to an innovation environment that Irving Wladawsky-Berger in Business Week calls “indifference, hostility, and isolation” – I couldn’t agree more!

The bottom-line

It is not always easy to become an Intrapreneur. It takes skill and persistence as well as courageous leadership and risk taking. Truly making a difference and reviving an organization though is rewarding in itself – at least you will learn a lot and make new friends. ‑ Most of all make sure you have fun!

Starting an ERG as a strategic innovation engine! (part 3 of 3)

An alternative and sustainable way to tap deep into your employees’ creative potential and turning it into solid business value is by forming an employee resource group (ERG). A well-crafted ERG serves as a powerful and strategic innovation engine for your organization!

Losing the innovative edge?
It is the large companies that seem to struggle with innovation most. When companies grow they tend to become less innovative. When this happens we see great talent turning into under-performing employees. – Why is that and is there a way out?

Stuck in mental models of the past?
Remember the heavy dinosaurs that finally got stuck in the pre-history tar pits and starved, too heavy to move themselves out of the calamity? Mental models are the tar pits that companies grow to get stuck in – unless they find a way to shed (mental) weight and think nimble again to survive.

The mental models often originate from days past when the business started and flourished with initial success. The models worked when the company grew back then but models out-date easily over time. At some point the company began to work harder to standardize its processes to ensure the output is delivered reliably and predictably and costs are driven down: the focus shifted from innovation to efficiency. Specialized and refined business functions create increasingly complex and bureaucratic processes, ‘standard operating procedures’ rule the course of action. Things don’t move fast here anymore. Improvement ideas from employee on the floor hardly make it to the top executives and starve somewhere in between, probably in the famous ‘idea box’…

> For more general insight on complexity as a leadership challenge, read this: ‘Complexity’ is the 2015 challenge! – Are leaders prepared for ‘glocal’?

This focus on incremental efficiency also traps R&D departments to a point where true creativity and innovation get stifled, the innovative output drops. In short, the larger a company the less it innovates. Sounds familiar?

Many companies chose the dangerous and seemingly easy way out in buying new ideas from the outside through acquisitions and hiring ‘new talent’. The danger lays in applying this practice too broadly and becoming reliant on this practice, i.e. getting trapped in a vicious and reinforcing cycle. This practice also alienates and frustrates the more seasoned employees who feel underutilized and –quite rightly so see their career opportunities dwindling. Soon enough the sour side of the hire-for-innovation practice for employees becomes transparent also to the newer employees and drives them away in frustration. This organization just found the perfect recipe to turn top talent into poor performers!

Don’t waste your human capital
Bringing in fresh brains to an organization may justify mergers, acquisitions or hiring at times – but not as a strategy for continuous innovation and without also at least trying to tap into the innovative capacity that lays dormant within the organization.

Don’t write your staff off easily by following blindly the common yet wrong assumption that an employee loses the creative spirit after a few years and that new hires would be more innovative than whom we already have working for us. Haven’t we hired the best and brightest consistently in the past? Well, then this logic doesn’t add up, right?

Ask yourself: have you lost your innovative edge? Will you personally be more innovative once you change to another employer? – I don’t think so either. The good news is that even if you don’t believe it, changes are that managers and human resource experts of your new employer do, at least the ones who follow the outdated mental model! – But then, how long can you expect to last there before you get written off? It’s like getting on a train to nowhere.

Derailing the train to nowhere
But seriously, the seasoned employees’ intimate knowledge of the organization and its people can hold enormous potential for innovation not only under financial considerations but also as a morale booster for staff. Getting personally involved more and engaging them in driving change again actively leads the way to measurable and favorable results for the organization. These employees are the people who know your business, your markets, your customers and where to find resources and short-cuts if needed to get things done! Remember the “Radar” character in M*A*S*H who creatively procured whatever his unit needed by knowing how to play ‘the system’ and navigate the cliffs of bureaucracy on unconventional routes?

So, how can you motivate and (re-)activate your employees to come forward with brilliant ideas and getting them implemented to boost the organization’s profitability? How can you spread new hope and direct the enthusiasm to practical and meaningful outcomes for the company and the individual employee alike?

Facing organizational barriers
There is no shortage of good ideas in the heads of employees. Too few of them, however, actually get picked up and implemented since organizational barriers have many dimensions the need to be overcome first. Here are some examples:

A vertical barrier effectively disconnects employees from the executive level which hold the (financial and other) resources to make things happen. Penetrating this barrier means to connect the people within the organization closely and effectively again. > Readers of my previous post What does take to keep innovating? (part 1) will recognize that an executive champion is needed who brings together the technical and business champions. If you feel intrapreneurial and consider becoming an executive champion, check this out: How to become the strategic innovation leader? (part 2)

The horizontal barrier separates business functions and operating units that evolved to become silos or manager’s ‘fiefdoms’ of sub-optimized local productivity often with lesser concern to the overall performance of the organization. What you are up against here is often enough beyond specialized deep expertise but also defensive egos and managerial status thinking that led to a comfortable and change-adverse local equilibrium. As an intrapreneur you bring a much needed yet disruptive element to the organization. Since you are rocking the boat you can get caught up in ‘politics’ easily. Functional managers and their staff may perceive you as throwing a wrench into their well-oiled and fine-tuned machine that could jeopardize not only their unit’s efficiency but also their personal incentives for keeping operations running smoothly. > For more insight on the tension field of management vs. leadership check out Leadership vs Management? What is wrong with middle management?

Another barrier relates to the perceived value that your work creates for the organization, so let’s call it the value barrier: When you start acting intrapreneurial, you may be seen as someone wasting resources, incurring additional cost or generating questionable value (if any value at all) in the eyes of executives and other managers.

Therefore it is of critical importance to clearly demonstrate the business value your work adds to the organization. Based on an unambiguous success metrics the value proposition needs to be communicated clearly and frequently especially to executive management to gain their buy-in and active support.

These and possibly more barriers are a tough challenge. Now, I assume you are not the almighty ‘Vice President of Really Cool Stuff’ (that would be my favorite future job title!) but hold a somewhat lower rank. Perhaps you got stuck in the wrong department (the one without the Really Cool Stuff).

So, where do you start to innovate and ‘rescue’ your organization from a looming train-wreck scenario?

Breaking down barriers by innovating from within using ERGs

A vehicle I tried out quite successfully over the past years was forming an employee resource group (ERG). This grassroots approach has the power to crash right through the vertical, horizontal and value barriers while driving change effectively and sustainably through the organization as a strategic innovation engine.

> A previous post discusses the business model behind the ERG approach in more detail: Build ERGs as an innovative business resource!

Here are the first steps on the way to founding an ERG:

Identify a business need and build a business case, i.e. a clear value proposition aimed at executive management convincing them of the need and benefits of forming an ERG within the limits of company policies. Attracting an influential executive sponsor to gain buy-in is a key requirement for instituting an ERG successfully. The sponsor serves as a political and resourceful ally, an experienced advisor and advocate but also ensures strategic alignment of the ERG’s activities with the broader goals of the company.Since executives value their time more than yours, keep it short and to the point. Think executive summary style and offer details separately for those who chose to dig deeper and to demonstrate that you thought this whole thing through. If your organization already has a distinguished officer or departments with a vested interest in employee engagement for example then connect, collaborate and leverage your joint forces. > More on how to build a case study for an ERG at: Q&A – Case study for founding a business-focused ERG

Get organized! Seek voluntary members and reach out to future constituency of the ERG. Active members are needed as the driving force and source of ideas that the ERG turns into business projects aimed to innovate and energize the organization.
The first ERG I founded was “NxGen”, which stands for the “Next Generation at the Workplace”. The NxGen ERG has a generational orientation but is open to all employees regardless of their age or workplace generation. Nonetheless, from the start mostly the youngest employees (Generation Y) drove NxGen. In many cases they did not know of each other as the GenY-ers were spread thin across the various business functions of the company.The GenY-ers, in particular, found a forum in the NxGen ERG to get to know each other in the first place. We then focused on goals based on shared values or needs to build a strong support network within the company. At all times we kept the ERG open and inclusive to interested employees join from other workplace generations.

The ERG offers its members a safe environment to discuss issues and ideas. It also serves as an informal forum to find coaches and mentors for personal development or specific projects and initiatives. Active ERG membership allows less experienced employees to quickly acquire new skills and test them in real-life by running a project hands-on even in areas outside of their job description or business function to address needs close to their heart with tangible business value. Here, the ERG serves as a very practical leadership development pipeline and safe ground for experimentation within the organization.

> More on the virtues of Generation Y as I experience it in NxGen under: Generation Y for managers – better than their reputation?

Get active by launching business-focused projects. Again, you are targeting management and executives in particular to build credibility and thereby become more effective over time.Start with feasible projects of high visibility and short duration that address a significant business need with a clear and quantifiable success metrics. For each project seek executive sponsorship at the highest level you can attain from the business area that the project affects. Make sure to communicate your successes broadly and frequently to kick-start the ERG. Stick to a clear, specific and unambiguous metrics for your success; if you can tie it to a monetary ROI the better, as this is the language of business. > More on establishing a success metric under: Driving the ROI – where to start your projects metrics?

Showcasing and celebrating your successes as an ERG motivates the already active members, keeps attracting new members and builds credibility among executives to keep the ERG wheels turning as a strategic innovation engine for your organization.

On a personal note
The example of the NxGen ERG is very real. NxGen was nationally recognized as best-practices ERG within 5 months (!) of its founding and became a valued and frequent sounding board for C-level executives within one year. The ERG has no funds of its own yet runs projects and initiatives nationally and internationally that already shifted the company culture and opened it more for change.

References and additional reading

Leadership vs Management? What is wrong with middle management?

Is ‘middle management’ to blame? About the differences between managers and leaders, two conflicting roles that are both needed in an organization.

What is wrong with middle management?
Listen around, ‘middle management’ gets blamed all around for many things and even more so, for the big disconnect between executives and the staff and managers in the trenches.

A colleague just asked me again today – what is wrong with middle management?
Is there a systematically flaw that affects so many organizations?

Management versus Leadership?
The confusion originates from a lack of clarity over the roles: We need to look first at what the difference is between a manager and a leader: Is there one at all and are these roles exclusive or do they overlap?

Don’t be mistaken, significant differences exist between managers and leaders; yet an organization needs both, managers and leaders. It is necessary to distinguish these roles, since their focus and goals are quite different. Not only can they conflict to some degree, they actually have to for the better of the effective organization overall. ‑ Let’s take a close look at both roles:

Management role
A manager typically supervises a unit that produces an output consistently (such as a product or service). The manager’s job is to improve the input (resources) and output (deliverables) and make tactical adjustments. Most changes are moderate and of an evolutionary character focused on optimization by refinement of the here-and-now.

Given their tasks and responsibility, managers do have a professional tendency and even obligation to resist changes that disrupt their well-oiled and optimized “machine” whose output is also their immediate measure of success in most organizations.

For an effective manager it is all about “doing-things-right”. The ways often get documented in procedures to solidify and guard the established processes to guarantee the reliable delivery of results. Focused on preservation and functional optimization, managers can also easily fall in the trap of judging too soon and then making an adaptive decision too late.

Leadership role
In contrast, a leader takes a step back and looks at the bigger picture that aims strategically at the organization’s future. The effective leader shakes up the established structures and “does-what-is-right” by bringing about change that will position and optimize the organization for future success through transformation. (Read more on Innovation Strategy: Do you innovate or renovate?)

Leaders must stay flexible and willing to deviate from the current path to drive the needed change to successfully shift or even turn the course of the organization. Consequently, the leader must take into account major disruptions of otherwise smooth and sub-optimized operations. (Read more on How to become the strategic innovation leader)

The farther a leader is removed (usually way up in the hierarchy) from the level where the output is produced, the more abstract the work appears. It becomes easier for leaders to make game-changing decisions flexibly that may turn out unfeasible on the factory floor or other real-life business settings or that confuse the staff.

A good leader follows guiding principles and keeps the staff in the loop to prepare them for upcoming changes. Removing elements of surprise where possible is an effective early step of successful change management when it comes to implementation.

We need both!
The goals of leaders and managers conflict and create a constant tension field. It requires active balancing and healthy negotiation to prepare the organization for the future while not sacrificing the ability to deliver results reliably as the organization moves ahead on the bumpy road of change and uncertainty. (More on Mastering the connected economy – key findings of IBM’s 2012 CEO study)

This makes clear that an organization needs both, effective managers and visionary leaders. It also makes clear though that both roles may not be best united in one person to avoid a conflict of interest that compromises best results for the organization overall.

Where middle management gets stuck
As you move farther down in a hierarchy from the leadership level and closer to operations, the harder it becomes for managers to balance the high-flying leadership vision with the demanded production or service targets on the ground.

So here is where you find the clash and overlap between leadership and management: The middle management gets caught in the middle, literally!

Middle management needs to bridge the gap even for self-preservation by negotiating and brokering between the workers and the leaders. It’s a tough job! Middle managers deserve some sympathy as they get torn by the conflicting needs of the organization every day and often enough not fully included by leaders while yet having to make sense of the dilemma and translating it for their staff.

Can’t do without…
Thus, there is no ‘systematical flaw’ but only the reality of conflicting needs of an organization that requires both, effective managers and visionary leaders. This comes with accepting the entailing tensions and conflicts to deliver results reliably and consistently while readying the organization for meeting the challenges of the future – which puts the middle management in the hottest spot!

Fear of change?

Do people fear change? I doubt it. See how fear relates to ‘change’ and how to harness it.

Fear of change?

An interesting discussion I got involved in recently is about ‘What gets in the way of embracing change?’
It quickly revolved passionately around whether employees like change or not.

People love change!
From my experience, people love change! – Not convinced? Look around you: People love fashion, wearing different clothes and hair styles, driving a new car, using gadgets with cool new features (look at the success of iPhone, iPad, etc.!) and so on. These are all changes we embrace all the time!
Obviously, ‘change’ as such is not the issue; so what is?

Angst or fear?
‘Angst’ describes “an acute but unspecific feeling of anxiety”. There is no specific source, however, so angst is based on the abstract, the unknown.

In contrast, ‘fear’ is anxiety about a “possible or probable situation or event”. Strangely, fear of change hints at something specific and not at some unspecific angst the general term ‘change’ leads up to. Nobody seems to use the term angst relating to change. – So what is the mix-up about?

When it comes to fashion or hair styles the fear is not about the new color or cut but about how others will respond to it and how this will affect me.
Will the person I fancy secretly finally notice me and be attracted to me? Will I appear more daring, more professional or more ‘me’ branded – or what ever else it is you wish to symbolize or achieve through the change that you initiate.

People fear uncertainty of the consequences!
What people fear are the consequences for them that the ‘change’ entails and even more so if they have no control over the change. Translated into the workplace this comes down to what changes for the individual employee: First of all, their gotten-used-to equilibrium gets disturbed by an outside force – not by free choice of the individual. This type of change typically induces much uncertainty for an individual with little or no control over how it will play out for them. Instead, the well-established and familiar routine stops. It is replaced by something different, possibly something they don’t know or understand fully.

Now, where the fear comes from specifically for the employee is that one day the employee is competent in doing their work and delivering results, while the next day (i.e. when the ‘change’ takes effect) they may need to learn, adapt, give up comfortable routines, figure things out the hard way, may not know how, fail and struggle ‑ and be inhibited during this period to produce results again so this comes with a lack of satisfaction and appreciation or other forms of acknowledgment.

Other colleagues may adapt better, learn faster and surpass them in the ability to the work done in the new way. Then, the employee may find they got left behind and may no longer be needed by the new organization. This potential lack of professional competency is the origin of the fear possibly combined with loss of certain perks or proprietary knowledge acquired over time that helped them staying afloat and ahead of others in the good old days.

Ask yourself if you would like to be surprised today with a major reorganization, for example, that let’s you hanging in the limbo with uncertainty about your fate within the company for months or by a new process thought out in some remote ivory-tower that is unlikely to work in the reality of your workplace…

This is where the major opposing force to effective change comes from: the employee resistance. If resistance is high also the chances are high that the change will not be implemented effectively, not efficiently or not even at all.

Change as an equation
Change can be expressed in an equation called Gleicher’s Formula (after David Gleicher and Richard Beckhard, 1969). Several variations of the equation exist but they all include the same three factors, which multiplied need to exceed the amount of resistance (=cost) on the other side of the equation for the change to be implemented successfully.

According to the streamlined formula (by Kathleen Dannemiller, 1992), change (C) is the product of

The dissatisfaction with the status quo (A),
The desired state (B) and
The practical steps taken towards the desired state (D).

These factors multiplied must outweigh the amount of resistance represented here by the cost of change (X). Here is the formula: C = (ABD) > X

In practice, there must be significant pressure present from dissatisfaction with the current state (status quo), a clear description of what the new state should look like in the future (vision) and effective measures taken to get from the current to the desired state (action plan).

Overcoming resistance in the change equation
Resistance may include different elements but a major contributor is the resistance originating from the people affected by the change. It is crucial for reaching sustainable results to keep this friction low by engaging these vital stakeholders actively and early on where possible.

What it comes down to in practice is having a sound plan and excellent execution of change management together with the people affected by the change. Include them to work issues out as they arise early on when alterations cost little and to buy in to the change and drive it. Don’t underestimate the impact and potential of employee empowerment and the pay-off that it can have for the organization that does it right!

Including and empowering employees effectively in organizational and procedural change projects becomes a powerful differentiator between an effective change implementation and a costly disaster.

The blind side of HR? –or- A case for talent retention!

Discussion of the provocative thesis that HR strategists are blind-sided and focus on talent acquisition rather than on talent retention. This opens opportunities for ERGs to fill the gap by engaging the present employees and running projects targeting talent retention for the organization!

The blind side of HR? –or- A case for talent retention!

Ask whom you want, the corporate “war over talent” is declared and raging out there worldwide. We see companies going above and beyond to spot the precious future brainpower, lure them with all the goodies and reel in the catch – but what happens later?

After the first days of sweet honeymoon with ‘new hire orientations’, fancy status symbols and back-patting, the shiny brochures start wilting, the warm words of welcoming encouragement fade and reality kicks in – and sometimes hard.

Now, did you notice that HR strategies these days tend to focus on talent acquisition but neglect employee engagement to secure talent retention?

It’s not enough to bring in the ‘top talent’ when you can’t get the most out of your staff effectively and consistently long-term. To drive innovation and game-changing business models to their full potential, we cannot relinquish the expertise and insight of people familiar with the company or flourish on ideas from newly hired staff alone.

When true ‘on-boarding’ fails (and what I mean by that is embedding the new employee firmly into the organization’s human fabric) the wedding is short-lived. Good people are easy to move again to find their next job somewhere else and leaving the company behind with an unproductive vacant position. New employees may also soon pick up on limiting or meager career prospects that they soon will share with their not-so-new-anymore co-workers that were not granted the opportunity to develop and ‘grow’ into the open position. Then, the costly investment in the new hire went down the drain while the company still needs to fill the vacant position with another candidate to be snatched from the competition at a cost…

On the other hand, what is the effect on the more seasoned employees that ever hiring new staff has over the transfer and development seasoned staff? They see the influx of fresh blood affecting (and sometimes disrupting) the established company’s culture as well as limiting their own career opportunities. When will the veteran staff feel they are no longer valued and find it is time to make a move and be courted by a new employer that values their talent more?

How about this provocative thesis: HR strategists –by the very nature of their job!- see the organization as it should be in contrast to the functional managers throughout the organization see it as it is in the reality they have to deal with every day. Therefore, HR strategists are naturally blind-sided!

Does the HR strategic perspective make sense to focus on acquisition, i.e. hire talent the company should have, and not so much on retention, i.e. the talent the company already has?
– I leave this question open for discussion. What are your observations or experiences?

If this thesis holds true then ERG leaders face opportunity and, perhaps, have an obligation to show positive “organizational citizenship behavior” by doing what is right for the organization. Focusing on ERG engagement projects that aim at employee engagement and talent retention then has a bright future!

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Design constraints

In summary

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10X vs. 10%

How big dreams changed the world

Innovation downshift

Technology S-curves

Observing the down-shift

Business Darwinism

Which way to turn?

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