Read this insightful “Taking the entrepreneurial approach” interview conducted by Eyeforpharma on the impact of hierarchy and how executive mindset inhibits adapting to the rapidly changing commercial landscape. It outlines how “intrapreneurs” and internal “angel investors” can get large, mature organizations moving again!
Tag: measurement
Read Intrapreneuring Case Study “Leading Innovation” by Ivey Business School!
The prestigious Ivey Business School of the Western University in Ontario, Canada, published an insightful new teaching case study on intrapreneuring and corporate innovation titled “Boehringer Ingelheim: Leading Innovation” in which the case writers, Professor J. Robert Mitchell, Ph.D., and Ramasastry Chandrasekhar, follow the footsteps of the newly appointed innovation director.
Meant to raise questions and serving as a learning opportunity for graduate students in academic program around the globe, this case study lifts the corporate curtain a bit to show how innovation through intrapreneuring really happens and decision points along the way.
Outline (by Ivey Publishing)
The newly appointed director of Innovation Management & Strategy at Boehringer Ingelheim, a German-based multinational pharmaceutical company, is finding his way forward in his firm’s new, first-of-its-kind role, which is central to the company’s growth rejuvenation strategy. His job has a threefold mandate: to build internal networks, to establish internal structures and to leverage internal ideas. His biggest challenge, however, may be transforming the organization’s DNA. The blockbuster business model that has characterized the company for decades is no longer appropriate. Instead, the firm needs to develop healthcare products available to end users over the counter. This shift in strategy requires innovative changes in distribution, delivery and customer focus. To accomplish this goal, he needs to institutionalize innovation so that it becomes sustainable. But in doing so, he must also identify the metrics for assessing progress. The case provides an opportunity for students to step into the shoes of an innovation leader, to develop an innovation roadmap for the organization in the face of uncertainty and to understand how to engage in innovation leadership at various levels of a global enterprise.
Learning Objective
This case has two key objectives. First, this case provides students an opportunity to grapple with the difficult decisions associated with innovation in an uncertain environment. Second, this case highlights that anyone has the ability to cultivate an entrepreneurial mindset and to lead innovation. The case divides the attributes of an innovation leader into five components: observing, questioning, experimenting, networking and associating. It shows the real-life experiences of a manager doing seemingly routine activities, who evolved into a leader who transformed the DNA of a global enterprise. The case also provides a template of the tasks, responsibilities and value-added changes as an individual moves progressively within an enterprise from an operations manager to a senior manager to an innovation leader. This case can be used either toward the beginning or toward the end of any course that addresses innovation and creative thinking in a large organization. At the beginning of a course, it illustrates the challenges of acting in the face of uncertainty in a large organization. At the end of a course, the case provides an opportunity for students to apply what they have learned about innovation, entrepreneurial thinking and innovation leadership.
‘School for Intrapreneurs” finalist in eyeforpharma awards 2015!
We are honored by eyeforpharma’s announcement for Boehringer Ingelheim “School for Intrapreneurs” to be a Finalist for yet another award: the prestigious eyeforpharma Philadelphia awards 2015 in the Most Impactful Emerging or Global Initiative category!
One juror, for example, believes the Boehringer Ingelheim School for Intrapreneurs adds value beyond the pill to patients and customers: “Great program that ensures that the company keeps up to date and a competitive edge. I also like that everybody has the opportunity to contribute and participate.”
The winners will be announced on April 7th during the upcoming eyeforpharma Philadelphia 2015 conference (from April 7-8th, 2015, Hyatt Regency Philadelphia at Penn’s Landing, Philadelphia, PA.), so join the conference and stay connected via Twitter at #efpPhilly
About the Awards
The eyeforpharma Philadelphia Awards recognize those in the pharmaceutical industry who are driving pharma forwards not just with higher short-term profits, but with better customer innovation, value and outcomes leading to longer-term success.
eyeforpharma’s mission is to make the pharmaceutical industry more open and valued, which means these awards are a literal translation of why we exist. It is our responsibility to shine a light on where pharma does well, to inspire others into similar or better action.
‘School for Intrapreneurs” nominated for 5th annual Corporate Entrepreneur Awards
We are honored that the Boehringer Ingelheim “School for Intrapreneurs” got nominated for Market Gravity announce the fifth annual Corporate Entrepreneur Awards in New York.
The awards will be held at an inspiring new venue, 7 World Trade Center, and include the opportunity to explore some of the top corporate innovations in North America, network with innovation leaders, and hear from our guest speaker from Virgin Galactic.
The awards recognize and celebrate the achievements of individuals and teams who are working within large companies to deliver game changing innovation and growth.
Meet me at the 5th annual Corporate Entrepreneur Awards, New York City, Nov. 4, 2014
After four successful years, Market Gravity is proud to announce the fifth annual Corporate Entrepreneur Awards, and this year the Awards are coming to New York.
The awards will be held at an inspiring new venue, 7 World Trade Center, and include the opportunity to explore some of the top corporate innovations in North America, network with innovation leaders, and hear from our guest speaker from Virgin Galactic.
The awards recognize and celebrate the achievements of individuals and teams who are working within large companies to deliver game changing innovation and growth.
“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.
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.
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.
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:
Balancing Risk of Innovation Project Portfolios
Risk of Disruption
Innovation projects are risky explorations. Disruptive innovation projects even more so, and individual projects can be quite a gamble. So, how can you limit the risk across your portfolio of innovation projects? The goal is to increase the likelihood for the portfolio to succeed overall even if individual projects fail.
(Quick note for project management professionals: I am deliberately not differentiating terms like “portfolio” and “program” here. My goal is to get the basic idea across. More particular definitions don’t add value here.)
In mature organizations, incremental improvement can easily be and often is interpreted as ‘innovation’, which makes sense when optimizing a production environment, for example. Here, at the back-end of operations, big “elephant” projects tend to bind the organizations resources (How to grow innovation elephants in large organizations). The innovation project portfolio I am referring to, in contrast, aims at the disruptive end: the “small elephant projects” with higher risk but the potential of extraordinarily high returns if they succeed.
Why to manage risk
In large organizations you hardly get a “carte blanche” to manage just highly risky projects. With a corporate focus on predictable, short-term results there is too much concern of the portfolio easily becoming an unpredictable money pit. You are likely to get shut down after playing around a while without demonstrating clear success in terms of return-of-investment. Thus, you will need to come up with a strategy on how to compose your project portfolio to keep your stakeholders happy and your experimental playground open.
Risk Categories
Managing risk across a project portfolio comes down to finding the right blend of high-risk/high-return projects and lower risk projects that come with less impressive potential for revenue or savings. You also want to include a few projects that produce returns short-term to demonstrate you are making progress and reap some quick wins for impatient stakeholders while the longer-term projects need time to mature.
A common way to approach categorizing projects into into Core, Adjacent and Transformational based on their risk and return profiles:
- Core projects are merely optimizations to improve the existing landscape of systems, processes, assets or products in existing markets and with existing customers. These incremental improvements are the “safe bet” and “next small step” that, typically, comes with low risk, predictable outcomes but also limited returns. They do not need high level sponsorship, are easy to predict and plan resources for, and so they are the favored playing field of mature, large organizations. These can often be ‘large elephant’ projects seen as ‘necessary’ that the organization more easily buys into.
- Adjacent projects come with more uncertainty and risks as they usually extend existing product lines into new markets. Though not an entire novelty it is may be new territory for your company. Sometime, ‘imitating’ a successful model in a different industry does the trick (read also: Imitators beat Innovators!).
Adjacencies add to the existing business(es), which requires a higher level sponsorship (such as Vice President level) to move forward, to allocate resources and to accept the risk to fail. - Transformative projects are experimental and risky. They create new markets and customers with bold, disruptive “break-through” products and new business model. While the risk to fail is high, the returns could be huge when you succeed. Highest level (C-level) sponsorship and support is crucial for this category not only to persist and get resources during the development phase but also for the mature organization to adopt and support it sustainably.
Finding the balance
When you manage a portfolio of disruptive (read: transformative) innovation projects, you should expect projects not to succeed most of the time. Instead of calling it “failure,” see it as a learning opportunity. As Thomas Edison put it so famously referring to his experiments leading to the invention of the light-bulb: “I have not failed. I’ve just found 10,000 ways that won’t work.”
The common rule for playing a safe portfolio is a 70-20-10 mix, i.e. 70% core, 20% adjacent and 10% transformative projects. This way, many low-risk/low-return core projects keep the lights on while you play with few high-risk/high-return transformative projects.
Experiences
From my personal experience with the portfolio I manage, I leans towards accepting more risk, so you would expect and be comfortable with a lower success rate as a consequence but also higher returns. To my own surprise, we completed 55% of our projects successfully and ended up discontinuing 26%. Fortunately, also the average ROI from our “small elephant” projects is substantial and pays the bills for many years out. Thus, for my portfolio, the 70-20-10 mix is too conservative.
As for how we select projects and fund projects, read also Angel Investing within the Company – Insights from an Internal Corporate Venture Capitalist and School for Intrapreneurs: Lessons from a FORTUNE Global 500 company.
Before re-balancing your portfolio in favor of a majority of risky transformative projects, however, make sure you have continued high-level sponsorship and alignment with strategy and organizational culture of your organization. – If culture, strategy and sponsorship don’t align to support your innovation portfolio efforts, your risk increases for painful learning without sufficient business success.
> Interested in Project Management? – Don’t miss VASA’s historic project management lesson!
How open offices kill productivity – and how to make it work
Open offices are not a new invention. They have been around for a long time as hallmark of start-up companies that simply cannot afford glitzy corporate skyscrapers with plush corner offices (yet). Open offices emerged less by deliberate design than driven by need.
Start-ups typically run on a vibrant culture of passionate people wanting to spend time together to create something great, everyone works together closely in the tight space available. Information flows fast and freely. Recreational elements and other services offered remove the need or motivation to leave. Employees hang out to work maximum hours as a team in a fun, inspiring and supportive environment. Productivity is up and work gets done.
Growing pains
Large companies are attracted by this powerful value-proposition for open offices – or so it seems. Mature organizations struggle with their increasing size that, over time, entails increasing specialization and complexity with a stifling system of red tape and inertia.
While jobs are large in small companies and come with broad scope and high accountability, which are diluted when jobs narrow in large companies by increased specialization over time. Functional silos emerge and sub-optimize often to the detriment of other business functions.
This siloed corporate world only contributes to a climate that works against diverse collaboration and inhibits breakthrough innovations; and business results degrade from 10x to 10%. (See also 10x vs 10% – Are you still ready for breakthrough innovation?)
Cutting costs is a questionable driver
The reasons for large organizations moving to an open floor plan are often glorified and communicated as a measure to increase creativity and productivity in an appealing modern working environment: employees connect casually and spontaneously at the ‘water cooler’ to network and innovate together again.
The true and paramount driver for tearing down the office walls, however, is often more sobering: it comes down to simply cutting costs by reducing the expensive office footprint. Fitting more people into less space comes at a price for the workforce.
Cost savings only get you so far. It’s an easy approach but not a sustainable business model for productivity. What do you really save if productivity goes down? How sustainable is your business then? Sacrificing productivity for cost savings is a narrow-minded approach lacking long-term perspective and, therefore, not worth it. That is unless your goal is to achieve short-term gains without consideration for the future of the business, which is a disqualifying business perspective altogether.
The popular phenomenon in large companies is a move for the wrong reasons (the better driver being increased productivity) and entails serious consequences that jeopardize the company’s productivity, workforce satisfaction, and even the bottom line.
Design constraints
It gets even worse when the new environment is retrofitted space with structural limitations, founded in the legacy of existing buildings and investments, and if no flanking measures taken to enable effective collaboration needs.
A design from scratch has the potential support the collaboration needs and flow of the workforce best. This is an advantage start-ups have when they can shape and rearrange loft space to their immediate needs without limitations carried forward.
Size matters
Controlling cost is necessary and reducing office footprint is an effective business measure. Aetna, for example, has nearly half of their 35,000 employees working from home already, which saves ~15% to 25% on real estate costs – that’s about $80 million saving per year.
Do not get me wrong, there are undeniable benefits to open office spaces – when applied for the right reasons in the right context, with right priorities and proper execution. The point I am making is that cost reduction alone is not a worthwhile driver if it sacrifices productivity. There comes a point where a hard decision has to be made and if you prioritize cost savings, you sacrifice productivity and other aspects automatically.
What does it take?
Unfortunately, the start-up company model with open office space and its agile and enthusiastic does not scale for large organizations. The corporate one-size-fits-all approach does not do the trick for several reasons.
Let us look at aspects that make the open office work:
- Tear down cost center walls
- Make presence easy
- Level the (remote) playing field
- Embrace work style differences
1. Tear down cost center walls
Proximity favors who needs to work together closely. In a start-up company, staff is few and jobs are big. This ratio flips in large organizations where many employees work in highly specialized functions. With increasing specialization comes complexity that leads to functional silos. The employees become separated by every rising departmental and organizational walls.
In large organizations, work space is typically paid for by department and charged to cost centers. Staff gets corralled this way and kept separated in functional clusters that are easier to administer but counteract productivity, streamlined workflow, and diverse collaboration cross-functionally. After all, it wouldn’t make sense to have any department operating completely independent from the rest of the organization.
These artificial and structural boundaries make no sense (unless you are an accountant, perhaps). Therefore, trade the urge for financial micro-management for what makes the workforce more productive, as this is the most important aspect of collaboration and, ultimately, the bottom line.
2. Make presence easy
Make it easy for your employees to go the extra mile. Now here is where large companies can learn from how start-ups: offer incentives for employees to hang out and remove reasons for them to leave to maximize time to work and collaborate.
The list seems endless: free beverages and food, services such as laundry, hair dresser, spa or receiving deliveries, exercise equipment, healthy snacks, child and pet care, and other useful perks that cost-cutting companies often omit.
Sounds like a waste to many large companies. But is it really? You get more out of your employees’ carefree working along longer than by pinching the free coffee and have them leave during the day or early to run their necessary errands.
3. Level the (remote) playing field
It may sound counter-intuitive but when cost saving rules, the open office space often only works when not all employees are around at the same time. If all employees showed up on the same day there may not be enough room and resources (seating, access to power and networks, etc.) to fit and accommodate everyone, since the physical office footprint is now too small ‑ a Catch-22.
When only a subset of employees can be present in the office at any given workday, the rest has to work remotely forming an –at least- virtual organization. Consequently, the random personal connection “at the water cooler” becomes less likely as does spontaneous cooperation by “pulling together a team” since your pool of physically available staff is limited.
Management needs to take deliberate and determined measures to level the playing field for remote workers by giving them the same opportunities as colleagues present in the office. Why? “Out of sight, out of mind” is a powerful and human nature. If not managed effectively, it only becomes worse when remote staff easily is continuously overlooked when it comes to projects staffing, development opportunities and promotions, for example. The resulting inequities undermine workforce cohesion, effectiveness, and talent development.
Read more on virtual teams at Why virtual teams fail, and how to make them work (part 1) and How to make virtual teams work! (part 2).
4. Embrace work style differences
There are too many individual work styles to list them all – for example, just think of
- Generational differences and preferences (see also Generation Y for managers – better than their reputation?) or
- Introverts vs extroverts (see also Why virtual teams fail, and how to make them work (part 1) and Boost ‘Group Intelligence’ for better decisions!)
FastCompany recently came up with a list of reasons by workers arguing against open offices, which is a good indicator where the pain-points are. Representative or not, the list tends to resonate with people that experienced first-hand working in a corporate open office environment.
The key complaints are about
- Distraction – hard to concentrate with surrounding noises of all sort; loud speaking coworkers; interruptions of coworkers stopping by at any given time
- Discomfort – no privacy; by-passers looking at your screen and documents; food, bodily and other odors; white-noise generators blamed for headaches; spreading contagious illnesses; having to talk to people when you don’t feel like it; “hiding” by wearing earphones
- Workflow obstacles – competing over quiet spaces, conference rooms or other rare resources; no place to store personal items or personalize the space.
In summary
One size does not fit all and it does not do the trick for large companies, in particular. So if you have to downsize office space or accommodate more employees, take a sound and sustainable approach by making productivity the driving priority and not cost.
After all, we are human beings that work best when we have control over our work environment and schedule. When we perform at our best, it is also for the better of the company as a whole. Flexibility, empowerment and inclusion go a long way – otherwise, mind FastCompany’s warning: “What was supposed to be the ultimate space for collaboration and office culture was having the opposite effect” – also for the bottom line.
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!
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!
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.
Starting an ERG as a strategic innovation engine! (part 3 of 3)
While many companies demand creativity and innovation from their staff few companies seem to know how to make it work. – Is your organization among those hiring new staff all the time to innovate? The hire-to-innovate practice alone is not a sustainable strategy and backfires easily.
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
Why too much trust hurts innovation
Research shows that too much trust decreases innovation. Read what ‘trust’ is and how it affects your workplace and innovation.
Most managers understand that trust is a key ingredient to effective collaboration and innovation yet few actively try to cultivate and nourish trust in their own organization to achieve the right mix between trust and constructive tension.
The trust gap between theory and practice
Over 80% of managers believe trust is important to have good work relationships that enable effective collaboration and superior results. So why do only 40 or so percent actually take action to build and maintain trust within their organization? Obviously, there is a disconnect between the theory and the practice. Why is that?
My assumption is that ‘trust’ is perceived as an ‘intangible’ that managers like to stay away from because they find it hard to measure and to manage. It further requires an individual to open which comes with vulnerability. Perhaps we also fall easily into the only so human trap of making over-confident assumptions when it comes to ourselves and our single-sided perception of the trust we believe to have established with people we work with….
What is trust?
Let’s take a closer look – what makes up trustful work relationships? Trust is the degree that people trust one another, so trust is an interpersonal phenomenon. It comes down to three factors that make up trust at the workplace as Karen Sobel Lojeski, NYU professor at Stony Brook and CEO of Virtual Distance International, identifies:
- Benevolence – co-workers have your best interest at heart
- Ability – co-workers have the knowledge and ability to get the job done
- Integrity – co-workers will do what they promise.
Trust is the ‘glue’
Trust is the social ‘glue’ that holds together teams and organizations. It is critical for success of virtual teams, i.e. the increasing trend of co-workers worked separated from another and spread across different countries and time zones. With a lack of trust productivity dwindles as does the willingness to share information. Instead, our energy gets wasted every day on avoiding perceived threats from others.
Innovation needs trust
High trust correlates with more successful innovation – why? When colleagues trust another they open up and share information. Besides the obvious benefit of cross-fertilization that leads to more ideas and creative approaches, by giving away your views and knowledge you become vulnerable as an individual and even more so in a competitive professional environment. This openness comes with a risk to fail that people are only willing to take if failure is acceptable among colleagues and does not come with repercussions.
Sharing ideas alone is not enough though. Asking thoughtful questions, constructive criticism and mutual support lead to better solutions while curbing hostility and competitiveness. Opening up happens when a task-related conflict will not easily deteriorate into a personal conflict. Innovation within an organization relies on trust among colleagues as a key ingredient that cannot be substituted.
Too much trust impedes innovation!
So, how much trust is needed? And can there be too much trust? The MIT’s Sloan School of Management (MIT Sloan Management Review, Summer 2010, Vol. 51, No. 4) offers some answers. An increasing level of trust leads to more effective innovation, as we expect, but the researchers also observed that there is a limit after which the correlation negates and where innovation declines with too much trust. What happened here?
Too much mutual trust deteriorates the innovative effectiveness of partners. Where trust sparked creativity and led to better solutions earlier constructive criticism and challenging each others ideas now suffers. Finding the ‘sweet spot’ is the tough part where a high level of trust consistently fuels innovation and leads to best results.
Take-home message for managers
Should managers reduce investing in trust? Certainly not!
A high level of trust remains the most crucial requirement to build a solid relationship between people that becomes the basis for effective collaboration and innovation. Most organizations seem to suffer from a lack of trust more than anything. It makes collaboration a drag and leads to poor results and mediocre solutions.
Actively building trustful relationships is an important part of a manager’s role and even more so in virtual teams, when the team members work separated by barriers of location, time, culture, language and others. Trust must be built and nurtured actively especially when face-to-face communication is not possible and becomes replaced by using less-rich digital media (video conferencing, phone, email, etc.).
When trust is getting very high, however, we need vigilance and a reality check. You do not want to lose constructive argument and challenging dialogue between team members that turn creative ideas into innovative solutions.
Driving the ROI – where to start your projects metrics?
The most compelling metrics focuses on the business impact of an ERG rather than on ‘measuring the ERG’. Here are the rationale and a generic approach to deriving meaningful and business-relevant metrics for ERG projects.
Driving the ROI – where to start your projects metrics?
So you have started your ERG and done your homework on what the business strategy of your organization is. You also found areas of need in your organization that you want to address with some serious projects. – But where to start building a project metrics? What is important, what makes sense and is meaningful?
Establishing metrics can be stressful and confusing. What metrics persuade your stakeholders? Less is often more, so focus on just a few parameters that are to the point rather than drowning in a myriad of complicated and detailed measurements that will quickly suck your precious time and bore your audience to death.
In general, your project metrics can reflect the ERG or focus on the business results that the ERG achieves – I opt for emphasizing the latter.
ERG focused metrics
Let’s look at the ERG focused metrics first. It seems the traditional approach for most ERGs that may have evolved from affinity and network groups: The basic idea in establishing this kind of metrics is to help justify the ERG by demonstrating its growth and maturity over time. The typical metrics are, for example, the number of active and passive members, the participants in meetings, how many new faces (=potential recruits) show up and how many of them signed up as members, etc. These figures are helpful to explain that there is an interest in the ERG, what happened to funds (often spent on catering) or if the organization met demographic goals of diversity, for example.
However, if you measure along these lines alone you may miss out on leveraging your ERG to get recognized and valued as a credible business resource to the organization.
Business-focused Metrics
Question for you: which message does an executive find more compelling? “The ERG has 300 members and meets monthly for two hours.” or “The ERG contributed to $260 million in sales last year.”
Now, this kind of metrics takes a different approach, doesn’t it? It aims at driving business results, the famous return-on-investment (ROI), the ‘bottom-line’. It easily grasps a stakeholder’s attention because it demonstrates a significant and direct value proposition for the company.
By the way, the above example is real! According to DiversityInc.com, Ford Motor Co. directly linked the sales of $260m in one year to an initiative of its InterFaith ERG!
– Look it up yourself if you like: http://www.diversityinc.com/cgi-bin/cms/article.cgi?mode=printable&id=284
Not all goals are high rolling and they also depend on the business you are in. The spectrum of possible success metrics is broad and ranges from obvious business goals such as increasing revenue, profit, market share, quality, speed and customer satisfaction to –perhaps‑ less obvious ones such as increasing employee satisfaction, intellectual property created, employee acquisition and retention or reducing turnover, waste or business risks, just to give some examples.
How to get started
For many ERG leaders, the most difficult question is how to establish a metrics when the targets appear fuzzy and are not as easy to grasp as a sales figure that was either met or not.
To find your bearings, try this: Relax. Breathe deeply. Then take a step back and use your imagination… Envision a picture of what the results look like when the project completed successfully. What do you see when you have reached the goal, what are the visible and tangible results, what has changed?
Now describe this envisioned picture in words in a demonstrative way using clear and unambiguous terms such as “By September 1st I want to be able to touch X and use to do Y with Z!”
This provides you with a great starting point to refine more specific requirements and also leads quite naturally to meaningful metrics in a simple but effective way such as the tangible deliverable (X), the target time until completion, some required feature (Y) and some input (Z) requirements in the example.
How to approach ‘metrics’?
There is confusion around why, what and how to measure. Resistance to measuring also seem to originate from a too narrow interpretation of the term ‘measuring’, a fuzzy approach and a lack of creativity on how to measure what. Douglas W. Hubbard offers guidance by asking powerful questions.
How to approach ‘metrics’?
There is much truth in the saying that comes in many variations: “What gets measured gets managed”, “Everything that can be measured can also be managed” or even “What isn’t measured can’t be managed”. ‑ If you don’t measure progress or success, how would you know you reached the goal?
Now, there is much confusion around why, what and how to measure as well as resistance to measuring that seem to originate from a
- too narrow interpretation of the term ‘measuring’
- fuzzy approach
- lack of creativity on how to measure what.
Some people associate ‘measuring’ with lab coats, values with many digits behind the decimal point or requiring complicated formulas and ways to produce valid results. This –typically- does not reflect reality nor is complexity always necessary.
There also seems misconception that measuring has to eliminate any error and that there simply is no metrics possible for less tangible problems like ‘employee engagement’, ‘employee satisfaction’ or ‘strategic alignment’ just to name a few.
It becomes much easier if you understand measuring as a means to reduce uncertainty. When stakes to fail are high in an environment with much uncertainty, then reducing uncertainty is worthwhile, as it reduces risk and provides a quantifiable value. Even a very simple metrics can often help to answer the critical question.
When it comes to how to a systematic approach to measuring, here are some guiding questions that I found in a book of Douglas W. Hubbard; find specific answers before you measure:
- What is the decision this is supposed to support?
- What really is the thing being measured?
- Why does this thing matter to the decision being asked?
- What do you know about it?
- What is the value to measure it further?
(Source: “How to Measure Anything – finding the value of intangibles in business” (p.43) by Douglas W. Hubbard; www.howtomeasureanything.com)
If you take a sharp look around, you may find that many things are being measured without adding any benefit. For example: no decisions being made based on a measurement, such as a periodic report or detailed survey results.
Other things aren’t measured but should. For example: what business value does an ERG add to a company?
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