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What is the difference between Intrapreneuring and Corporate Entrepreneuring?

Intrapreneuring and Corporate Entrepreneurship are very different and directly affect business outcomes. Read about both approaches, their distinct opportunities, and challenges.

For many years I have worked as an Intrapreneur. I advised startups, built intrapreneurial eco-systems across global organizations, and mentored corporate teams applying Lean Startup and other entrepreneurial methodologies in Corporate Entrepreneurship programs.

The question that came up frequently was about the difference between intrapreneuring and corporate entrepreneuring: Are they the same?

The quick answer is ‘No’ as there are significant differences on many levels that directly affect the business outcomes. Both approaches come with distinct opportunities and challenges (see also the comparison table below):

Idea Origin

The Intrapreneur finds a bold idea that can have the potential to transform or even save the business but may not align with the business plans and priorities of the company – more likely, the idea is not anywhere on the management’s radar.
The Corporate Entrepreneur receives the objective together with a project handed down by management. The idea (project scope) is a business goal of sorts that the Corporate Entrepreneur should address.

Ownership

In a large company, jobs are small. The increasing complexity and high specialization of work in a large organization narrow the responsibility and job descriptions for the individual employee. In a small company, in contrast, jobs are big since there are only a few people who need to step up and cover all aspects of the business – the individuals ‘own’ and contribute to the success of the business directly and to large degrees.

In this context, Intrapreneurs make an idea their own which determines the mission and scope of the intrapreneurial quest, the ‘intraprise’. The Intrapreneur assumes ownership and full responsibility for the idea and brings it to life – even against the resistance of the organization. Thus, the Intrapreneur runs his or her own, small ‘intraprise’ with full responsibility, freedom to operate and navigate in any way and direction imaginable, and -therefore- has a big job (just like an entrepreneur).
The Corporate Entrepreneur receives the project objectives handed down by management and is held responsible for delivering on project results as scoped. The idea directly translates down from a business goal of sorts. The Corporate Entrepreneur usually runs or contributes to a ‘small job’ project that is temporary. This project scope and small job perspective together with the time limit can also affect process and outcomes as it can easily narrow the solution space, or adjusting and ‘pivoting’ by re-aiming, for example, at opportunities beyond the original or change the scope of the idea altogether.

Passion

The Idea Origin and Ownership are key to the single most important driving force for an Intrapreneur: Passion.
The importance of being passionate about the idea is essential because passion is needed to persist and to bring about change against the resistance many obstacles an Intrapreneur runs into. The resistance of the organization is a sign of meaningful change entailing the intrapreneurial idea; therefore, facing resistance can be a positive sign.

An Intrapreneur committed and passionate about the idea will try everything and get very creative in bringing the idea to life.
The Corporate Entrepreneur usually is not truly passionate about a project handed down by management and being held responsible for delivering on the project as scoped.

Mandate

‘Intrapreneur’ is a self-assumed role in the organization and, therefore, operates without a formal mandate, organizational support or assigned resources. On the upside, the Intrapreneur does not have an answer to a superior. The challenge is, however, to get creative to find allies and resources in an organization unprepared to formally support the Intrapreneur. This lack of formal authority and institutional support by management also comes with considerable risk for the Intrapreneur and the idea.

The Corporate Entrepreneur has a clear mandate and already receives support from management usually within the given operational framework of the approved project. The project scope is narrow which translates into limited resources and restricted freedom to navigate. Furthermore, the project comes with timelines and expectations by sponsors whose patience can run out fast when the team misses milestones or falls short on expectations. Thus, Corporate Entrepreneuring, more often than not, is a glorified term for ‑usually‑ quite ordinary projects of incremental nature along established processes.

Mindset and Results

The limited scope, resources, and overall operational framework define a ‘box’ for the Corporate Entrepreneurs to operate in within the larger organization and the path on how to get there. Often enough these limits extend also into the mindset and open-mindedness of the team and their approaches. Real or perceived restrictions can originate from various factors present in the established organization such as formal process and procedures, authority and hierarchy, values and norms, group-think and taboos, etc.

Corporate Entrepreneurs operate openly and under the constant scrutiny of the larger organization. The latter can take uninvited influence on the project scope, progress, process, resources, results, and success as well as on the project team itself. Being able to leverage the resources of the larger organization can be very helpful when it comes to implementation and scaling (if it ever comes to his point) but operating in the limelight is not always helpful and may easily lead to compromises, trade-offs, and scope-creep induced by powerful stakeholder.

The Intrapreneur is not as limited by the formal boundaries, practices, and culture of the organization. Being able to operate outside the box lends itself to pursuing a bold and disruptive idea, taking unconventional and stealthy approaches and pathways that help to move the idea forward ‑ the sky is the limit. Operating in the shadows initially avoids drawing broader attention to the idea. Preventing premature exposure to the ‘organizational immune-system.’ Once triggered, it tends to quickly put an end to the unconventional idea and their champion. A stealthy Intrapreneur can more cautiously test the waters, find experts and executive supporters also outside the own business unit, and allow the idea to take shape, evolve, and mature before taking the risk of exposure.

Exposure comes with a range of possible outcomes where the idea can then can slip beyond the control of the Intrapreneur including:

Shutting down the idea and implementation altogether or watering it down by absorbing it into the regular structures and processes of the organization
Bringing the idea to life by creating a new company structure and business altogether
The Intrapreneur leaving the organization to pursue the idea elsewhere

I have seen all of these outcomes many times throughout my career as an Intrapreneur and executive consultant.

Reward

What are rewards can look very different for Intrapreneurs and Corporate Entrepreneurs. The latter delivers a project and may get recognition for it, a bonus or promotion even, before moving on to the next assignment.

The Intrapreneur, however, has a much greater sense of accomplishment and fulfillment for the passionate Intrapreneur having brought a great idea to life against all obstacles and resistance of the organization.

Comparison in Summary

From my perspective, the main difference is that an intrapreneur has a calling, a vision, that he or she wants to bring to life for the better of the organization even against the resistance of an organization. Intrapreneuring is an active expression of organizational citizenship behaviors (OCB), i.e. ‘helping behaviors’, with going beyond the call of an employee’s duty. It requires intrapreneurial spirit with passion and guts to pursue challenges and to overcome obstacles day after day which includes taking risks including to stand all alone against the organization at times. This can make some Intrapreneurs even leave their organization to make their dream come true elsewhere or on their own.

While Corporate Entrepreneuring propagates introducing entrepreneurial methods within an established organization, if you look beyond its fancy label and a vendor’s prospectus, the approach ‑most often in my experience‑ remains shackled by numerous institutional constraints. Therefore, these program falls short to deliver the true potential of entrepreneurship or intrapreneurship. Instead, the solutions tend to remain in the more predictable space of incremental improvement that large organizations are more accustomed to and feel comfortable to operate in.

Thus, the average Corporate Entrepreneur is not an Intrapreneur by any means and not an entrepreneur either. Corporate Entrepreneurship then resembles a non-controversial, risk-free, and feel-good version of the intrapreneurial experience out of the safe position as an appointed corporate cogwheel in a glorified project with a marketing blast and a defined career path waiting at the end of the project.

The Golden Opportunity

Now having said all this, there is no reason why true Intrapreneurs and Corporate Entrepreneurship programs should not be compatible in ways where they can benefit from each other mutually.

A savvy Intrapreneur could use company’s Corporate Entrepreneurship program as a vehicle to forward the Intrapreneur’s agenda somewhat in alignment with company goals and avoiding a frontal collision with the organizational immune system. In return, the company benefits from a driven Intrapreneur in the driver seat who can bring intrapreneurial passion to the project – with a lot of ‘If’:

If they are willing to embrace the disruptive challenge of bringing about meaningful change,
If they are able to identify true Intrapreneurs in their organization and
If they are bold enough to take a chance on Intrapreneurs by allowing them into the program in the first place. Remember, Intrapreneurs tend to be disagreeable among other ‘features’ that, often enough, not win them an invitation by management to join their fancy Corporate Entrepreneurship program.

All these ‘If’ remain the biggest obstacles across corporations to embrace Intrapreneurs. More recently, the phrase “culture fit” tends to disqualify Intrapreneurs and their passion ‑or‑ as the Contently founder Shane Snow puts it: “When an organization has an ethos rooted in ‘culture fit,’ a nasty hidden habit develops. Whenever someone has an idea that doesn’t ‘fit’ the established way of thinking or of doing things, they’ll either shut up or they’ll get shut down.”

There is something about the passionate individual and somewhat renegade employee with a vision and a transformative idea that challenges the status quo, group-think, or widely accepted goals in

an organization who may just need that disruptive or transformational idea to grow, outrun their competition, or even survive while rejecting the change initially. In the end, it comes down to the power of one individual that envisions greatness and brings it to life against all obstacles.

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“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.

Overcoming the Three Big Hurdles to Innovation in Large Organizations

Large organizations have vast resources – but this advantage inherently bears also a disadvantage: like large dinosaurs, with increasing size and maturity they lose the ability to adapt quickly to a changing environment as their smaller competitors can to seize business opportunities.

The Big Three

Let’s first identify the three typical obstacles that large organizations struggle with before we address how to disrupt and overcome them as intrapreneurs. The task at hand is to spark new energy, employee engagement and business growth opportunities in alignment with business strategy and company culture.
By the way, if you are new to intrapreneuring, see also The Rise of the Intrapreneur and the Top 10 posts for Intrapreneurs.

So, these three big hurdles are the

Vertical Disconnect: Ideas from the bottom of the hierarchy do not find their way vertically to the top anymore to get implemented.
Horizontal Divide: Functional silos separate the workforce horizontally which limits putting to effective action the full potential of the company’s resources and diversity in a concerted way.
Inertia: More talking about change than taking action opens a widening gap between ideas and their implementation, as it is so much easier to lean back and improve incrementally than taking risks of major changes. Red-tape and ever mounting bureaucracy does its part to keep the wheels from turning and breeding a mindset of mediocrity.

These obstacles combine to form an unfavorable ecosystem of stagnation by containing innovative thoughts from growing and ripening, by inhibiting innovators to take action with passion and by blocking courageous action necessary to drive the organization’s future success and –possibly- survival.

Sketching a future innovation ecosystem

Here is what it takes to break the crust in order to reinvigorate and nourish innovation to flourish once again by creating an innovation-friendly ecosystem:

1. Vertical cut: Connect grass-root ideas with executive sponsors

Too often, “middle management” gets blames from keeping ideas and funds flowing more freely up and down the hierarchy (see also Leadership vs Management? What is wrong with middle management?).

A mechanism is needed to pipe fresh and promising ideas in an appropriate format from the grass-roots to find their way to executives, where the ideas get recognized, sponsored and put into motion for the better of the company. This holds true for disruptive break-through ideas in particular and in contrast to the continuous incremental improvement (see also 10x vs 10% – Are you still ready for breakthrough innovation?) that typically makes up most of the organizations day work.

Don’t be mistaken, executives worth their salt seek good ideas like the air they breathe. They are generally more open to necessary change and course corrections than one may think. The executives also hold the keys to feeding the ideas back into the machinery of the larger organization to get implemented.

A mechanism is needed that allows cutting vertically through the red-tape and hierarchical boundaries of the mature organization. It creates a pipeline of ideas that connect the top with the bottom of the organization and everything in between with intrapreneurial passion.

2. Horizontal cut: Connect across functions and geographical silos

Large organizations tend to foster functional (and geographical) silos to increase efficiency, quality, and reliability in their operations (again, see Leadership vs Management? What is wrong with middle management?). This, however, effectively inhibits ideas of game-changing nature to flow freely and being developed with input from diverse perspectives to the benefit of the larger organization.

A wise saying goes: “Innovation happens at the intersection of disciplines.” It is these diverse perspectives and adding brains to a problem that help to improve and develop an idea to become more robust, innovative and feasible. Thus, a mechanism is needed to effectively cut horizontally through organizational walls to allow employees to effectively collaborate, network and connect the established silos and islands.

Are you stuck with organizational silos too? (source: (communities.netapp.com) — Are you stuck with organizational silos too?
(source: (communities.netapp.com)

3. Tangible results: Bridge the “Idea to Implementation” gap

In the end, what we to achieve is giving good ideas a chance that otherwise would never get considered or implemented – especially in a mature business environment that favors low-risk incremental improvement over more risky breakthrough experimentation (see 10x vs 10% – Are you still ready for breakthrough innovation?).

We need a mechanism that frees the intrapreneurial spirit of employees and directs the passion and potential of our employees’ ideas to tangible results that, ultimately, drive new business growth.

How does it work?

The intrapreneurial instruments and mechanism of this innovation ecosystem include, for example:

School for Intrapreneurs,
Internal corporate venturing,
Networks for implementation and
Opening to outside perspectives.

Over the next blog posts I will address each of these approaches (and perhaps more) and share my experiences from implementing exactly that successfully in a FORTUNE Global 500 company. So, check back soon or get updates via Twitter @OrgChanger.

Join me in Boston for the Corporate Venturing in the Life Sciences conference this week!

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"Intrapreneuring" by Gifford Pinchot III. — “Intrapreneuring” by Gifford Pinchot III.

Women in Life-Sciences: Pharma Think Tank at UCSF on Oct. 30, 2013

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!

Why virtual teams fail, and how to make them work (part 1)

Turning back?

In times where many companies push their employees to work from home and employees request this new freedom, YAHOO’s announcement surprised putting away with it all and returning to the old 9-to-5 office hours. (WSJ, March 5, 2013)

Senior leaders like YAHOO’s new CEO, Marissa Meyer, have doubts if remote working models work – or they struggle how to make it work effectively.

Executive paragigm: Cutting cost vs. increasing productivity

When organizations move to remote work models such as “working-from-home” or variations of it, their primary objective is either

Saving fix cost by reducing their office space footprint or
Increasing the productivity of their workforce.

They cannot have both because once hard decisions have to be made, the other side falls short – and hard decision will have to be made on the way.

If the chosen approach is to increase productivity, the implementation focuses on how to enable employees to become significantly more productive in a sustainable way, even if it incurs cost lower than the productivity gains.

Open spaces for collaboration

Sadly, however, cost cutting tends to rank top on the list for large and mature organizations, which can ultimately sacrifice productivity. Reducing office space “footprint” aims to cut cost from entertaining the real-estate and work environment including everything from utilities, to furniture, to site security, to property taxes, etc.

In practice, individual (‘closed’) offices are replaced by open office environments with the goal to have more employees working in less, shared space. Setting up colorful open office environments with cubicle clusters or zones for different work purposes is often sold as boosters for creativity and innovation, which somewhat obscures the true motives.

These office setups typically mimic the environment and agility of entrepreneurial start-up companies. They suggest increased collaboration by enabling those spontaneous and valuable ‘water cooler’ talks that randomly bring together a diverse mix of employees to exchange their ideas and collaborate on a spur, which then leads to new products and creative solutions. Some offices spaces even seem inspired by “Willy Wonka’s Chocolate Factory” (with less edible elements): nice to look at and tempting to get close but caution is advised before taking big bites…

Why not to focus on cutting cost

While architecture and interior design can very well affect creativity and collaboration, there are many reasons why this approach tends to fall short:

The goal of cost-cutting is to have more people sharing less space, so the open office environment works best when not all employees work there at the same time, which becomes the end-game of cutting cost. The approach consequently requires some employees to work remotely, typically from home as ‘tele-commuters’, which effectively leads to creating virtual teams.
Thus, not all employees are physically present at the same time to start off with, which defeats the idea of spontaneous meetings around the water-cooler or pulling teams together spontaneously as needed.
Size does matter: start-ups take their energy and agility from everyone collaborating in the same space at the same time, which is the opposite scenario of large companies trying to reduce this footprint and, subsequently, ending up moving towards remote working models.
The start-up model does not scale for large, mature companies. This is one of the reasons why large companies often break the monolithic organization at some point to form more agile hence competitive entities. A lesson learned perhaps from Charles Darwin’s “survival of the fittest.”
Since cost cutting has priority, typically, the workforce was trimmed down, so the remaining staff carries more work on less shoulders. Not only does this leave less time for the remaining office staff to hang out next to the water-cooler for a random chat, but there is less staff to meet and hang out with in the first place.
Little to no attention is given on how to make the remaining workforce more productive to manage the increased workload and invest accordingly, as here these ‘hard decisions’ come in and cost cutting is given priority.

Now, this does not mean there are no more water-cooler talks – they do happen and can be extremely valuable. But they happen less frequent and with a smaller pool of people you could possible bump into randomly. Since this “water-cooler innovation” model does not scale under the cost-saving paradigm, it effectively reduces the innovation potential resulting from random meetings overall.

What does your workplace look like, does this sound familiar at all?

Paying the price for cutting cost: Virtual Teams

Under a cost-cutting paradigm, the need for working remotely leads to the formation of more virtual teams throughout the organization. We already find 66% of virtual teams in Global 500 Enterprises include members from at least three time zones and 48% including external business partners (Harvard Business Review study of Project Management Best Practices in Global 500 Enterprises).

When ‘cost-cutting’ has priority, the performance of virtual teams still comes second. Faced with the increasing need to enable communication for a distributed workforce, for ‘cost-cutting’ organizations here comes the next challenge: how to facilitate collaboration and information flow on a budget?
This is one of the hardest decisions management is confronted with.

With tight budgets in mind, the focus turns to ‘enabling technology’ and often leads to implementing a better phone or teleconferencing system. However, cost-saving and -consequently- company-wide standards lead to compromises and mediocre features due to (what else could it be?) cost saving considerations.

What is the cost of ‘rich’ communication?

Face-to-face communication remains the ‘gold standard’ (more about the why follows in part 2 of this blog post.)
Typically, information-rich channels such as latest ‘tele-presence’ systems are disregarded for their ‘expensive’ price tag. They allow communicating in the broadest possible (virtual) way peer-to-peer.

If they are purchased at all, they often remain restricted for privileged use by executives; so there is an implied business case for rich communication channels.

Unfortunately, these are far less frequently shared with their staff lower in the organizational hierarchy. Regular employees and middle management are often enough left alone with more limiting conferencing systems and other technology to figure out how to make ‘virtual teams’ work.

Interestingly, I have never heard serious consideration given to quantify the opportunity cost, i.e. what the costs are of not implementing a tele-communication system that gets as close to face-to-face conversations as possible. It would be interesting to find out if the actual cost to buy a more expensive system is offset by the gains for its users and businesses across the organization, don’t you think?

Though this would be coming from the less popular approach to increase productivity…

Composing effective teams

Also the mix of the team members should be considered and lots more can be said about this aspect alone, so let’s just pick a few that that tend to be less on people’s minds:

For example, generational differences translate into different work styles and preferences than can strengthen or weaken a team. As an example: “Generation Y for managers – better than their reputation?“

Another soft factor that remains stubbornly neglected is the team composition of introverts and extroverts complementing each other for better results. Extroverts seem favored by hiring managers over introverts, but extroverts don’t necessarily make good team mates as recent UCLA studies show:

Introverts are often perceived anxious or neurotic, which feeds into the stigma of volatility and negativity that can drag on the team, when in fact they tend to work very hard so not to let their team mates down.

In contrast, extroverts appear to be the better team players yet in their core personality its all about being in the center of attention. Extroverts are good at building relationships and getting themselves noticed; this self-presentation may leave a good first impression but the self-centric core proves rather disruptive in collaborative situations, so the researchers concluded.

Also little attention is given to whom needs to work together and should be closer connected or even collocated; this approach of looking at network and workflow is usually sacrificed by enforcing cost control top-down. Established departmental silos and cost centers effectively become barriers for collaboration rather than by following the internal workflow and connections throughout the lower levels of the hierarchical pyramid that often remain hidden from the executive view down from the pyramid’s tip.

Why to Invest in communication and collaboration

A study on communications ROI by Towers Watson finds a 47% higher total returns to shareholders by companies that are highly effective communicators. (Capitalizing on Effective Communications, ROI Study, 2010)

Even more reason to focus on enabling collaboration and productivity – and to invest into enabling communication and relating technology accordingly.

Let’s leave the misery of why virtual teams fail here – check back soon for part 2 on How to make virtual teams work!

How intrapreneurs find executive sponsors

Finding a sponsor can be frustrating!

Have you ever had a great idea and went to your manager for support but found they were just not interested in it? Did nothing come out of it in the end, and you were disappointed? Perhaps, you just turned to the wrong sponsor for your project, a common mistake of intrapreneurs. Here are some thoughts on whom to turn for with ideas to make them happen within an organization.

Intrapreneurs are ‘executive champions’ that connect people with specific ideas (‘technical champions’) to ‘business champions’ who can provide the resources to make this idea happen; typically an executive sponsor providing funding and political support. More on intrapreneurship at The Rise of the Intrapreneur and the intrapreneurial role of the executive champion at How to become the strategic innovation leader? (part 2 of 3).

Managers and leaders innovate differently

Let’s look at the ‘business champion’ or executive sponsor. It is crucial to understand the motivation of executive sponsors for a simple reason: only if your idea or proposition fits their agenda are they be willing to listen to you and getting actively involved. Consider that they take on risk too in supporting as poor results also reflect on them. You need to know whom to turn to for what kind of idea to find adequate support.

For an intrapreneur, it is critical to understand the nature of the executive position. More specifically if you approach a manager or leader to find support for an innovative idea.

Managers and leaders look at innovation differently, hence both groups innovate very differently and for different reasons. It translates directly into their understanding of what ‘innovation’ is, its risks and rewards, and consequently their willingness to listen to you. Turing to the wrong executive easily gets your idea rejected and you may not even know why.

Let’s take a look how the views of managers and leaders differ and how this molds their understanding of innovation and what kind of change. On a side note organizations need both, managers and leaders. Each role serves a different yet necessary purpose in the organization; see “Leadership vs. Management? What is wrong with middle management?”

Managers focus on predictability

Managers are charged with running the daily business smoothly. They manage a well-oiled ‘machine’ of people, tools and processes to deliver a certain output, a product or service, reliably and at a fixed cost ceiling.

The paramount goal for managers is business continuity – it is the daily bread and butter of the organization and what pays your employee salary today. Running a fast-food restaurant is a good example, the expectation here is predictability: to deliver food to the customer at a specific quality level with as little variability as possible at a defined cost and within a certain time. A competent manager delivers this predictability reliably over and over again.

With operational targets clearly defined, the appetite for improvements focuses on speeding up the process or cut cost here and there without compromising quality. Favorable changes to the status quo are small, gradual tweaks. This is the world of optimization and continuous improvement.

Little risk, little gain

Managers need to keep the risk small to fail or to jeopardize the production process with its predictable output. The low risk of disruption comes at a price though as it limits also returns.

Here innovations are primarily of non-disruptive nature, they are incremental or evolutionary. This approach is process driven. It lends itself to automation as it aims to make the process repeatable, reliable, predictable. No senior executive needs to be closely involved in operations to keep this ‘machine’ running; it comes down to the floor manager executing.

This is also the environment of a conventional development project, the ‘next version’ of something and ‘getting it right the first time.’

With an incremental change in focus, managers tend to look for ideas in their own organization, think ‘suggestion box’. It means following a clearly defined and detailed process with development stage-gates or other review mechanisms that filter ideas typically the criteria of cost, time, quality and, more recently, variations thereof such as customer satisfaction and being ‘green’ and sustainable.

Managers are interested in learning about ‘best practices’ from outside the organization but are often enough reluctant to adopt and implement them if they appear to be risky and disruptive.

Leading in uncertainty

Leaders face a different challenge. They ask: what needs to be done to prepare the organization for success several years down the road with much uncertainty ahead? – Well knowing that the answer may disrupt the established organization.

It is this uncertainty that opens up the so-called ‘fuzzy front-end’ (FFE) to develop entirely new products or services: It is too early to know exact specifications of a solution at this time, the future markets and technologies are yet unknown. Leaders focus is on getting a deep understanding of the problems that customers face to develop the technology and capability to address and monetize them.

Disruptive transformation

What we talk about here is, for example, a completely new product line, a major (adjacent) product line extension or a new (transformative) business model entirely. Think how Apple’s iTunes Store started selling digital media and apps has changed the way we use technology and whose devices we use (hint, hint) – this gamble worked out for Apple and was based on a deep understanding what customers are willing to pay for.

With nebulous solutions in far sight, a tightly governed development process with stage-gates makes little sense because this development model is designed for incremental change and tuned for refinement. It stifles the creative and broad view necessary to create something completely new in an unpredictable and yet undefined scenario of the FFE where much imagination, creativity, and flexibility is needed.

Creative with discipline

However, flexibility and creativity do not thrive only in the absence of discipline or some sense of order. The early-stage research or design process does not need to be chaotic – it’s quite the opposite. A company like IDEO, for example, operates successfully in this space and is famous for their disciplined process and methodology in producing creative and tangible prototypes over and over again.

Note, we are not talking about final products ready to go on the self in your neighborhood store tomorrow. Check out this case study on how IDEO works in more detail: What does it take to keep innovating? (part 1 of 3)

This transitional step narrows down the broad funnel of uncertainty to develop a range of concepts towards increasingly detailed specifications of the final product. The development of the final product itself is better left to the established development organization – back to the managers to cross the t’s and dot the i’s, if you will.

Active sponsorship needed

With disruption and revolutionary change comes high risk. The outcome is unpredictable and the reward uncertain, failure is likely. Yet, if the gamble works out the rewards can be enormous and the key players ‘rainmaker’.

When exploring which direction to go, the serial intrapreneur’s approach is trying many things. Expect to fail most of the time. See what ‘sticks’ and explore this option more.

Rather than rigid procedural guardrails, intrapreneurs need to secure top executive sponsorship for their continued active support, political weight and funding. Thus, for a unique and exploratory venture what you look for is a leader, not a manager. There is no staged process to follow really, only success determines what was right or wrong.

Maxwell Wessel’s blog for HBR on “How to Innovate with an Executive Sponsor” has some good practical tips for especially if your project takes the company down the disruptive, transformative route.

What kind of sponsor to you need?

Distinguishing the professional motives of managers and leaders comes down to the question of ‘Innovation Strategy: Do you innovate or renovate?‘

In general, leaders act more as strategic innovators and game-changers assuming the role of a Sponsor or an Architect while managers take more renovation-associate roles such as a Coach or an Orchestrator. Follow the above link for a more detailed description of these roles and when to chose which role.

What is my idea again?

Start by taking a hard look at your idea first to find out which category it falls into. Then decide what kind of sponsor, a manager or a leader, is best suited to approach and is, therefore, most likely to listen and catch interest.

Even better if you can already identify the role associated with the nature of your project (Coach, Orchestrator, etc.) which helps you framing and pitching the idea or a specific project to the appropriate executive sponsor in your organization.

Boost ‘Group Intelligence’ for better decisions!

How to increase group intelligence for better decision-making – or why not to rely on a group of geniuses! New research breaks the ground to understand collaborative intelligence – but how to apply it to the workplace?

Better alone than in a team?

Think about this: What teams make the best decisions?
We all experienced it at some point: Even a group of the best and brightest people often ends up with poor decisions that do not do its individual member’s intelligence justice.

What goes wrong? How does a group of smart individuals, even geniuses, end up with poor decisions when they stick their heads together? What are they missing? Moreover, how can we avoid those obstacles to come to better decisions as a group?

Measuring intelligence

Intelligence of individuals has been well studied for over a 100 years: A solid framework exists to measure the intelligence quotient (IQ). Individuals undergo a series of mental challenges under the premise that someone performing well in one task tends to perform well in most others too. Overall, the IQ is regarded as “a reliable predictor of a wide range of important life outcomes over a long span of time, including grades in school, success in many occupations, and even life expectancy,” as researchers put it.

Modern IQ tests consider an IQ close to 100 as average.

Does ‘Group Intelligence’ exist?

When we look at what it takes to make more intelligent decisions as a group than as individuals, the first question this raises is whether something like a measurable ‘group intelligence’ actually exists. If so, is it measurable and –perhaps‑ higher than the intelligence of its members?

Only recently, scientists took a deeper look at the intelligence of groups and made surprising findings. The joint team included MIT’s Tom Malone, whom we met previous in a post (“Collective Intelligence: The Genomics of Crowds”) as well as others from well-known academic institutions comprising the MIT, Carnegie Mellon, and Union College.

The researchers approached group intelligence following a similar systematic approach as the intelligence metrics for individuals. However, they linked group intelligence to performance as an endpoint, which makes their finding even more valuable for the workplace!

Group Intelligence - more than a myth! — Group Intelligence is real!

Outsmarting genius as a group

First, the researchers established that group intelligence in performance indeed exists and is measurable. They also found that the group’s intelligence does not add up to the sum of the intelligence of its individual members. In fact, the collective intelligence, or ‘c-factor’, shows only a weak correlation “with the average or maximum individual intelligence of group members” – this is remarkable finding! It means is that you cannot boost a group’s intelligence by composing or spiking the group with genius-level individuals!

Obviously, factors apply other than high individual IQ to increase the intelligence of the group.

The results from two studies consistently and overwhelmingly demonstrate that group intelligence outsmart individual intelligence – by far!

Group Intelligence-study results (original graphics) — Group Intelligence – study results

Here are more details on the science for those how want to dig deeper: Evidence for a Collective Intelligence Factor in the Performance of Human Groups.

Limited by a high IQ?

Individual intelligence only has a practical value to a certain point. There is an important difference between what an IQ test measures as general intelligence and what Robert J. Sternberg calls ‘practical intelligence’ in his book Successful Intelligence: How Practical and Creative Intelligence Determine Success in Life. The presence of one does not automatically imply the presence of the other.

What it comes down to is that a high general intelligence is merely a measurable value in the lab but it does not also translate into a more successful life! An individual IQ above 135 or so can lead to quite the opposite (for reference, ‘genius’ starts at 140 on Terman’s classification). The higher IQ becomes rather a hindrance than an advantage in real life: a very high IQ tends to clutter and confuse a genius’ mind with more irrelevant options, which make it harder for them to see the most applicable one and come to a decision.

In contrast, practical intelligence relates more to social savvy or ‘street smarts’ – a cunning and practical understanding that proves advantageous in the real world more than a high general IQ!

Here is the magic sauce!

Surprisingly, the strongest correlation of group intelligence is with three factors:

The average social sensitivity of the group members, i.e. “reading the mind in the eyes” of another person. There is something to be said for bringing together emotionally intelligent people.
Equality in the distribution of conversational turn-taking meaning an equal share of time to speak. Our society and businesses seem to favor smooth-talkers and attracted to extrovert and outspoken individuals that seem to signal competence, decisiveness, and determination.
Group intelligence, however, does not increase when there is a strong vocal leader, who dominates the discussion to push everyone in his or her direction. Be careful not to leave out the brilliance of individuals who may get steamrolled by the loud and dominating: introverts, in particular, are at a disadvantage. They are easily stuck in an extrovert world.
Given that the introvert/extrovert ratio in the USA is roughly 50/50 (according to the 1998 National Representative Sample), failing to include introverts effectively is a costly mistake, as it excludes their knowledge and valuable input to the decision making process ‑ and lowers the collective intelligence of the group. Introverts, for example, favor structured communication that plays to their strengths by allowing them to research and prepare; they need more time to express their refined response.
The proportion of females in the group composition; the more women the better. This appears to account largely to a higher social sensibility that women have over their male group members in general. However, all three factors have to come together, so building female-only teams does not do the charm either.

In a nutshell

When we bring it all together, what surprises me most is how little of this solid research has penetrated the workplace. Where employees and management teams make decisions, the survival of organizations is at stake and relies on leveraging the collective intelligence of the group effectively.

A myriad of practical applications for these findings come to mind. Here are just two examples:

Women still struggle to achieve gender equality in many organizations ‑ the amount of women in management positions is a widely used metrics that refers to the female proportion of the workforce. The common approach is to achieve this by ‘swinging the stick’ to establish and enforce quotas and leave it at that – Mission accomplished?!
Wouldn’t it be more compelling to offer the ‘sweet carrot’ of increasing group intelligence in leadership teams for better business results that includes leveraging the natural advantage of females?

Again, the female quota alone does not boost the group intelligence. We also need social sensitivity and equal shares of talking time. Thus, a flanking business application would go beyond how we compose teams based on gender. It considers social sensitivity measures and some structure to how we conduct group discussions or meetings to maximize the collective intelligence by including and engaging all participants. A challenge also for how we recruit, train, and evaluate our workforce.

Food for thought.

Collective Intelligence: The Genomics of Crowds

Group intelligence beats individual brilliance – and businesses are willing to pay for the crowd’s wisdom in the social sphere. The MIT’s ‘genetic’ model allows combining social ‘genes’ to harness the collective intelligence of crowd wisdom successfully and sustainably, for example in scientific research or business/employee resource groups.

We use collective intelligence every day

Whenever we face a big decision, we turn to our friends, our family, or our confidants. We seek information, guidance, advice, confirmation, or an alternative perspective. No matter if we make a life decision (partnership, job, picking a school, etc.), a purchasing decision (house, car, mobile phone) or a less monumental decisions (which movie to watch, which restaurant to go to), we make our decision more confidently and feeling better informed after reaching out to our personal network.

What we do is tapping into the collective intelligence, knowledge, or wisdom of a crowd that we know and trust: we are ‘crowd sourcing’ on a small scale. We do this because we instinctively know that the focused collective intelligence is higher than the intelligence of individuals.

What is collective intelligence or the ‘wisdom of the crowd’?

Wikipedia, the iconic product of global collaboration and collective knowledge, brings it to the point:

“The wisdom of the crowd is the process of taking into account the collective opinion of a group of individuals rather than a single expert to answer a question. A large group’s aggregated answers to questions involving quantity estimation, general world knowledge, and spatial reasoning has generally been found to be as good as, and often better than, the answer given by any of the individuals within the group. An intuitive and often-cited explanation for this phenomenon is that there is idiosyncratic noise associated with each individual judgment, and taking the average over a large number of responses will go some way toward canceling the effect of this noise.”

Scaling up to a ‘crowd’

When we read a movie review and rating on Netflix or customer ratings of a product on Amazon, for example, we tap into a larger and anonymous crowd. On the other end, Netflix and Amazon know how they get people like you and I to deliver them free content (reviews, ratings) that runs their business.

So, let’s take this to a level where it really gets interesting for you! How can you get a crowd to do your work? How do you build a framework in which strangers work on your business problems and deliver quality result for free.

Genetics of Collective Intelligence

MIT professor Tom Malone dissects the mechanics of collective intelligence in his groundbreaking article (MIT Sloan Review, April 2010). The MIT Center for Collective Intelligence researched to understand this matter better and identified a number of building blocks or ‘genes’ than need to come together to engage and tap into the ‘wisdom of crowds’ successfully and sustainably.

Since these ‘genomic combinations’ are not random at all, we can also combine genes to build a collective intelligence system. Depending on what it is that you want to achieve, the genes can be combined to a model that suits your specific purpose. This is ‘social genomics’ made easy, and you don’t need a biology major! 🙂

Interestingly, this social genomics can be used independently for social projects you have in mind but also in relation to Employee or Business Resource Groups (ERG/ERG). – The common link lays in the organizational design that is similar to the generic BRG/ERG business model discussed previously. Thus, collective intelligence systems need to address the same questions as a business model:

Strategy or the goal: what needs to be accomplished?
Staffing or the people: who does the work? Are specific individuals doing the work or is there collaboration within a more or less anonymous crowd?
Structure and Processes or how to organize and conduct the work? How is the product created, and how are decisions made?
Rewards or why do they do it? What are the incentives, what is the measure for success?

Motivation is Key

It is crucial to get the motivation right, i.e. why people engage and continue to come back to contribute more to the cause or project. It comes down to finding the basic drivers for human motivation. This explains why people invest much of their time and resources to crowd sourcing.

The famous $1million Netflix Prize was a 5-year open competition for the best collaborative filtering algorithm to predict user ratings for films, based on previous ratings. The winner had to improve Netflix’s algorithm by 10%. The million-dollar reward in 2006 gives a flavor of just how valuable the crowd’s wisdom is for a company! In contrast to common belief, money is not always the driver. If it was, how do you explain the popular virtual ‘farming’ on Facebook, for example, where players pay hard cash for virtual goods?

In the more clandestine intelligence community, recruiting individual operatives plays to four motivational drivers: Money, Ideology, Conscience, and Ego (easy to remember as ‘MICE’).
The drivers for attracting collective intelligence are a bit different, as Tom Malone found out. Nonetheless, there are parallels: He calls the key motivators Money, Love, and Glory.

Real-World Examples

Everyone knows Wikipedia, arguably the best-known social collaboration and crowd-sourcing project thriving from an intellectual competition over Love and Glory, no monetary incentives involved for the authors.

How powerful Glory and Honor are we see also in areas away from the mainstream where you may not expect to find crowd-sourcing and gamification: in scientific research. The following two impactful examples reflect successful implementations for large crowds collaborating and competing to solve scientific problems:

Seth Cooper’s AIDS research challenge on the “FoldIt” online platform challenged players to find the best way of folding a specific protein. We will not dive into the science behind it and its medical significance; here are the details for those who are interested to dig deeper: MedCrunch Interview with Seth Cooper at TEDMED 2012. For our purpose, we establish that a relevant scientific problem in AIDS research, which remained unsolved within the scientific community for a decade, took the crowd 10 days to solve!
You may find it surprising that there was has no monetary incentive involved whatsoever – yet FoldIt attracted over 60,000 players(!) from around the world. The winner of the AIDS-related challenge was later recognized and honored at the 2012 TEDMED. It was not a Nobel-prize laureate from an Ivy-League institution but a laboratory assistant from Britain – who, well, enjoys folding proteins and collaborating on the puzzle with think-alike from other countries. This is the power of Love and Glory!

Another example is the ongoing “Predicting a Biological Response” on Kaggle.com, a geeky online platform for people who like developing descriptive models. My friend and colleague David Thompson of Boehringer Ingelheim (a major yet privately held bio-pharmaceutical company) designed this scientific competition to compete for the best bio-response model for a given data set of scientific relevance.
The challenge offers a $10,000 prize for the winning model and lesser amounts for the models coming in second and third. The monetary award together with a time limit of three months helps to speed up the process and keep up the competitive pressure. Last time I checked, 467 teams competed and have already submitted 4,300 entries with another month to go. The quality of the model is summarized in a single number (‘log loss’), so competitors can compare their results directly and immediately, the same quantifier determines the winner.
Note that the Kaggle participation is not driven by the monetary incentive primarily; otherwise, the number of participants should correspond directly with the amount of money offered for a particular challenge, which is not the case. Thus, participants are in it more for the challenge and fun than for the cash. (If you are a participant and disagree, please correct me if I am wrong!!)
On the other hand, don’t underestimate the business value of the gamification of science either: another ongoing competition in Kaggle offers a serious $3million reward!

The bottom line

Social collaboration, crowd-sourcing, and collective intelligence all rely and depend on humans collaborating to make things happen. What holds true in the real world seems to hold true also in the virtual world: the magic formula is all in the genes…

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!

Job description for an Executive Sponsor

Job description for an Executive Sponsor
Executive sponsorship is an important prerequisite for the success of employee groups. The challenge is finding a great sponsor, so what should you look for? What would a job description for an executive sponsor look like? ‑ Here are some practical ideas that have worked.

Why executive sponsorship is critical

Employee groups consist of volunteers with good intentions. They work, typically, in addition to their day job and after hours driven by the desire to address a need close to their heart. Together with colleagues, they seize opportunities to complement the organization’s objectives and goals and to improve the workplace. In most cases, employee groups are not an integral part of the organization: they don’t show up in organizational charts and have no formal authority.

For most group members, this voluntary work is ‘on top’ of the regular job and not reflected in their professional goals or performance evaluation. What makes a difference is having a strong ally: the executive sponsor.

From the organization’s perspective, some governance is needed to:

Prevent the employee group left to operate in a void or detach from the rest of the organization
Align the goals of the group with the needs and strategy of the company in a complementing and synergistic way
Ensure the group’s practices comply with company policies and other regulations.

The leaders of employee groups owe their members to:

Focus the group’s work to make a meaningful impact on the organization (instead of wasting resources and the member’s time on projects or activities that do not create value, are meaningless or even harmful to the organization)
Get funds, active support, and political backing in the organization.

Both, the organization and the employee group benefits from the connection with an executive sponsor.

What to look for in an executive sponsor?

No silver bullet

When you are looking for an executive sponsor, what are you looking for? What are the relevant criteria? – Executive sponsorship is a role, just like any other job, so what would a job description for an executive sponsor look like?

Bear in mind that there is no one right answer for the working relationship with an executive sponsor. The sponsor role and level of involvement varies and depends on many factors. It also shifts over time with the changing maturity of the group and its leadership, for example, or levels of involvement and autonomy of the group. A new group may turn to the sponsor for help with forming, direction, and funding where a mature group may seek business insights, refined success metrics, and leadership development opportunities.

Criteria for an Executive Sponsor

A perfect sponsor effectively leverages their personal brand, relationships, resources to enhance the visibility and credibility of the group. Look to ‘recruit’ a well-known leader, who is well-connected within the leadership team and respected throughout the organization. In an earlier post, we briefly touched on “How to attract an executive sponsor?”

Ideally, the sponsor is a top-level executive ‑ you hit the jackpot if you can get the CEO!

Overall, the group’s expectations of the sponsor’s role usually include that the sponsor:

Serves as a champion of the group
Gives strategic direction to align with the organization’s business strategy
Helps to identify measurable success criteria that support business goals
Provides advice and counsel to guide the group’s development
Connects to a broad network of relationships
Liaises with the executive team and accepts accountability
Helps actively to identify and overcome obstacles and resistance within the organization
Supports the group through communication and visibility.

The stronger your sponsor, the stronger the group! A strong sponsor

Shares valuable business knowledge
Demonstrates leadership, and is
Genuinely willing to help others.

A good sponsor encourages people to focus on how to engage others and improve communication, enhances the members’ leadership qualities and developing partnerships while helping to overcome barriers.

The sponsor you do NOT want

On the other end of the spectrum, there are also people you should avoid as executive sponsors for the group. This category includes people who:

Provide lip-service over taking action
Use the group for selfish reasons; for example, by claiming and promoting achievements of group members as their own
Do not see the potential and value that the group can add to the organization and its businesses
Do not make enough time to work with the group
Are ineffective or unwilling to support and protect the group from opposing forces.

Finally, if you have the choice, avoid the temptation to have a group of executives ‘share’ responsibility and ‘champion’ the group collectively. This tends to dilute accountability and action while increasing communication and coordination overhead.

There is much truth in the saying: ‘Too many cooks spoil the broth.’

One of us?

Often enough, sponsors are chosen or step up because they originate from the group’s affinity core, i.e. they are of the same ethnicity that ethic-focused group represents, a female for a women’s group, a gay or lesbian for an LGBT group, and so on ‑ you get the picture. I advocate against this practice for two reasons, in particular: First, with an ‘outsider’ you achieve more diversity and mutual learning experiences in the group as well as for the sponsor. Secondly, the group becomes more believable as a business driver that attracts a broader membership base instead of risking to be perceived as an ‘insider club’ limited to members with a certain ‘diversity ticket’.

For the same reasons, you may also consider rotating sponsors every few years.

Quid pro quo

What you want is an involved and effective executive sponsor. Now, this sponsor role comes with additional work, responsibility, and risks for the senior leader’s reputation and career. Therefore, this ‘job opening’ must be compelling enough to attract a senior executive to step forward and sign up.

It is important to offer a value proposition that makes clear what is in it for the executive sponsor to make this symbiosis work. It is quite similar as discussed in “What’s in it for me?” (WIIFM) for the group members.

Know your sponsor

Sponsors are humans too, so here are some thoughts on how to approach them: Get to know your sponsor first, just as you would prepare and approach to meet any other very important customer or external business partner. Find out their goals, interests, beliefs, priorities, constraints of the political and economic environment, and personal work-style. What exactly is the sponsor’s interest in your group?

Clarify your expectations mutually. Once you know your sponsor and built rapport, it becomes easy to offer what is important to them and helping the sponsor to achieve their goals too.

A value proposition that addresses the (financial) bottom line is powerful and convincing. It also enables the sponsor to communicate the benefits with the leadership team in a (business) language that everyone understands. It takes business acumen, though, to specify and articulate the financial impact. If this is not your strong suit, you need to find other compelling upsides or values that the group can bring to the business and that is close to a sponsor’s heart.

Do and Don’t: How to work with the executive sponsor

Here is some practical advice on working with an executive sponsor.

On the Do side, preparation and focus are key. Remember, this is a business meeting. The executive’s time is valuable, so be respectful of it and do not waste it. You want the sponsor to remain approachable and willing to meet with you in the future whenever you need to see them urgently.

Schedule appointments regularly (monthly, for example, if the sponsor agrees) with an agenda of topics to discuss
Provide background information on meeting topics ahead of time and come well prepared
Be on time and keep meetings on schedule
Present any problems with a proposed solution
Inform of issues in the workplace that affect the group and propose what the sponsor can to mitigate or resolve the issues
Be honest with your sponsor – do not sugarcoat, blame others, or cover-up mistakes
Give your sponsor a heads-up also before taking more public and visible action so they will not get caught by surprise – if there is bad news, share it with the sponsor first
Discuss key goals and ask them for guidance, advice or assistance – allow your sponsor to help you and the group
Reserve your requests for sponsor appearances and events to where it counts most. For example, as a speaker at a ‘headline’ event to draw a crowd, attract new members, and demonstrate the group’s value for the business. Ask if the sponsor is willing to recruit other executives or respected business partners and customers as guest speakers or participants.
The sponsor could host a luncheon or dinner for the group’s leadership once or twice a year to meet everyone in person, discuss, and recognize achievements of the group and individual members.

As for the Don’ts, try to avoid these pitfalls:

Don’t come with a hidden personal agenda – it’s strictly about the group
Don’t bother the sponsor with petty day-to-day issues – focus on the meaningful impact on the business and the group
Don’t ask for general funding or support – be specific and have data and facts ready to support your case
Don’t be afraid to ask for guidance and advice – but also don’t come just to commiserate.

Beyond the job description

Don’t underestimate the importance of the right chemistry between the group leader(s) and the exec sponsor; it is crucial to establish and foster a trustful, constructive, and pleasant work relationship.

For an employee group, executive sponsorship is more than the group’s endorsement by senior management: a strong sponsor becomes the lifeline when times get rough.

So when you go out to ‘hire’ your executive sponsor, also hire for the right attitude.

Measure your company culture in real-time!

It is difficult if not impossible to assess organizational culture directly. Instead, managers favor surveys to measuring organizational climate as a first step. However, surveys fall short in many ways and can lead to skewed results as input to managerial decision-making. Better than surveys is observing employee behavior with a meaningful metrics.

What is your organizational culture?

No matter where you work, you are a part of it: the organizational culture. Culture is understood to comprise shared beliefs, values, norms, traditions but also myths of employees about interpersonal relationships, behaviors and activities of the organization.

A (favorable) strong culture indicates alignment to organizational values and goals – some call it the organization’s personality. This is the internal glue for collaboration and outstanding results as an organization. In a strong culture, ‘can do’ stories share ‘how things are being done around here’ that inspire and motivate employees to action and ‘organizational citizenship behavior’. A strong culture supports employee satisfaction and retention as well as innovation and productivity. (See also: How to create innovation culture with diversity!)

In contrast, misalignment of values and goals in an unfavorable weak culture has an eroding effect. They easily lead to extensive rules and bureaucracy that rely on exercising control. Working in this place is not much fun. Don’t expect anyone to go the extra mile!

Unfortunately, organizational culture is a slippery and complex subject, which makes it hard to grasp – and hard to measure directly. It is easier to feel than to express.
– Try it! How does the culture of your organization feel in your gut? How about putting it in words?

How to measure culture?

A common approach is to measure a company’s organizational climate by looking at the culture’s outcomes or consequences rather than trying to grasp culture directly. Thereby, the climate is used as surrogate marker for the underlying culture, since outcomes are easier to observe and to measure.

Here we find a handle on whether the employees are happy at work and feel valued, if they enjoy their work environment and trust their colleagues, if they go the ‘extra mile’ for their team – or if they are frustrated, disengaged or even act hostile against coworkers or the organization.
Factors to establish a metrics offer themselves relating to –for example- communication, accountability, behavioral standards, rewards, trust, and commitment.

Organizational climate’s primary driver is daily leadership that influences the expectations as well as the behavior of all individuals in the organization. The leadership also determines the organizational structure, another key to an organization’s effectiveness. Both enable the organization to reach its goals, but also reflect priorities and heavily affect how employees communicate, collaborate and interact with each other.

Many factors obscure the clear picture including rapidly growing workforce and geographic separation but also the way we actually measure organizational culture.

Yet another survey?

Many companies invest in surfacing climate data to ‘feel the pulse’ of their staff and to confirm positive effects or apply corrective action to adverse findings.

The most common way to measure climate is a climate survey and repeated to compare changes over time. Despite our daily information overload, many companies typically use surveys to collect data from as many employees as possible to paint a representative picture of the company.

Surveys seem the first tool in the managerial arsenal. They appear attractive, seem simple and powerful. Survey results are seen as straightforward, clear, quantifiable and reflecting the ‘truth’ since the workforce was asked directly.

‑ But are surveys truly the best tool available or even an proper tool at all as a starting point?

What is wrong with surveys?

Unfortunately, surveys are far from ideal for several reasons.

The first issue we face is that there is no common standard for measuring the ‘climate’. Every organization or consultant comes up with a different scale. If an organization introduces its own scale and applies their metrics consistently, it can build a database over time. The data, however, only compares directly against other client organizations or industries that were measured similarly, i.e. sharing the same scale, at a premium for this proprietary benchmarking.

Even worse, results hardly compare because surveys ask questions relying on language. A slight nuance in phrasing of a question may change the meaning and influence the responses. After all, words are ambiguous and open for interpretation – and even more so in a multi-cultural society and multi-lingual. For consistency and easy processing, they typically come with a fixed set of response options such as multiple choice, which can limit the responders’ options and influence what they respond.

Often overlooked, the real workload comes after the survey closed in the analysis, when you start slicing the data to combine questions, sub-populations or start exploratory analyses in an afterthought with all the shiny data you find in your hands that seem to open endless opportunity for finding answers. This is where you easily run out of time or budget – and where it becomes tempting to cut corners just to finish up and deliver results while sacrificing depth and consistency.

Surveys tend to be inherently skewed – Why?

When was the last time you enjoyed taking a survey?

Our email in-boxes are full of customer service surveys for a recent purchase or some service call over the phone or online. The whole world seems wanting to improve their services – and sends us a survey.

However, surveys are far from ideal for several reasons including these (and many more):

Fatigue – There is no shortage of surveys these days. Coming back to our information overload and time constraints, many people just don’t want to fill out another questionnaire or find time for it in the first place. ‑ Did you ever give random responses or skipped questions just to get it over?
Privacy – Some other questions you may not feel comfortable answering in the first place because they invade your privacy by collecting data with questionable benefit to you.
Anonymity – in the computer age, anonymity is hard to find. Even in an otherwise anonymous survey, the combination of responses can identify individuals under certain circumstances feeding privacy concerns.
Past – Surveys measure the past. Even the most credible survey questions inquire about past behavior at best, which is the most solid data you can get out of a survey. The results may be good for forensics but hardly reflect the current situation.
Diversity – a diverse workforce can come with communication barriers of language or cultural background that leads to misunderstanding. Geographic idiosyncrasies can induce further bias in distributed organizations.
Delay – surveys take time to prepare, to conduct and to analyze. Don’t expect to get the results anytime soon, especially because you cannot control when your responders choose to respond. You have to adjust to their schedule, so getting survey results removes you far from ‘real-time’.
Precision – in surveys, you can easily measure everything to a dot and even farther right of the decimal point. Some give you the tendency to ask and measure too much just because we can or we feel the results (and our work) look more credible this way. Often it is an illusion that a higher level of precision adds to clarity when it adds to inertia instead by a flood of obscure information irrelevant to the decision you want to make.

The list goes on… you got the point. The question remains what is a better approach to measure organizational climate?

Why it is better to measure behavior

A survey measures our intent – not our behavior. Unarguably, behavior is a much stronger indicator than intent. It comes down to whether we observe people putting their money where their mouth is or if we get only the lip service that a survey represents. – Think of it as the litmus test you remember from chemistry class: It shows you the truth and reveals whether your assumptions hold true!

Let us look at the benefits of measuring behavior using the same list again:

Fatigue – As human beings we can refuse to respond to a survey ‑ but we cannot stop behavior as such. Even if we refuse to respond, this is our observable behavior and becomes measurable. For example, if large parts of the surveyed staff do not respond to the survey, this tells you something about the organizational and what is important to the staff.
Privacy and Anonymity – Usually, your observable behavior as an employee is not a privacy concern, since you are out in the open and visible to your co-workers anyway. Again, you cannot not show behavior once you agreed to go to work, there is nowhere to hide.
(Let’s not derail by focusing on or encouraging questionable, unethical or even illegal intrusion of privacy at the workplace or outside.)
Past – Our observable behavior is now, it is the present. You can’t get better real-time data!
Diversity – For observations, it does not matter if your workforce is diverse or understands the questions you ask. There are no communication barriers when it comes to observing behavior. Actually, quite the opposite holds true: the employee behavior can help you to better identify communication barriers or other issues that a survey would not reveal!
Delay – observing behavior also takes time but it is mostly the time to identify what you want to observe for what reason as well as observing it and then summarizing the results. There is no polishing questions and response options. You get to results faster because you are on your schedule and do not have to wait for responses trickling in.
Precision – key is to measure only as much as needed, i.e. to establishing necessary and actionable facts. Forget the fluff and focus on the one or two most important aspects needed for effective decision-making.

How to measure behavior?

Now, measuring behavior is not always easy. It requires thinking through the cause-and-effect dependencies. – A well-known example of how not to do it is the questionable relation of using the price of butter in Bangladesh to predict the stock market in the USA…

What the right metrics is depends on what you want to find out. What is the underlying business problem you are trying to solve? Many roads can lead to Rome, so to speak, but the basic idea is to keep your target simple. Choose a target that is meaningful, robust and easy to observe.

Clarity helps. As much as we crave being informed and gather data this approach is not helpful, since it tends to produce clutter. Instead, focus on measuring the minimum you need as the basis for making a sound decision. Don’t fall for the nice-to-have and garnish data you could have in addition.

How precise do you need the results really to be? – As an example, you may be concerned about low meeting attendance. Does it make a difference for your decision-making if you find out that in three consecutive meetings “63.26%, 58.18% and 69.4% of the invitees did not show up” versus “on average, 2/3 don’t attend”? – Let me guess, “2/3” does just fine to decide slimming down who is invited in the future or to change the purpose of the meeting, right?

The key is to stick to clearly observable behavior. Some solid behavioral data may already exist within the organization. – For example, a long tenure and low turnover may reflect that employees prefer to stay with organization, while many internal job applications reflect dissatisfaction with their current position or department.

Bottom line

Next time you think of running a survey consider taking a close look at employee behavior first!

References

Butter in Bangladesh Predicts the Stock Market: http://www.fool.com/investing/general/2007/09/20/butter-in-bangladesh-predicts-the-stock-market.aspx

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

Idea Origin

Ownership

Passion

Mandate

Mindset and Results

Reward

The Golden Opportunity

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Circle of Young Intrapreneurs NYC Chapter

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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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