How do you sell innovation to current business leaders?

We are in an interesting situation. Businesses that could be investing in innovation are holding onto their cash and waiting to see how the global economy plays out. That’s one explanation. I have another.

There’s an old consulting joke that goes like this:

Question - How many consultants does it take to change a light-bulb?

Answer - The number of consultants is immaterial, the key issue is that the light-bulb has got to want to change!

Let’s unpack the current context:  what have we got?

• POLITICIANS: Who borrowed irresponsibly to create artificial economic growth & buy elections through unsustainable public service expansion and vanity projects.
• BUSINESS LEADERS: Who successfully rode artificial growth-curves but don’t know how to grow businesses in a recession.
• ORGANISATIONS: With Products/ Services & Business Models at the wrong end of the S cash-curve, who are betting their pensions and bonuses on product extensions.

And we have even got CONSULTANTS who can see the need to move out of EFFICIENCY strategies and into EFFECTIVENESS strategies but cannot package a new paradigm & don’t know how to sell it to current leaders, but we either innovate or we die and we cannot borrow our way into growth.

We can sell transactional efficiency, product optimisation process consulting BUT we know that having the right people with the right psychology will make a lot of the KPI architecture completely irrelevant. Unfortunately at the top, we have people (probably not really leaders in the true sense) who can play political games in a growth phase, but who may not be the right people to grow the business in the current environment through innovation.

So how can we sell change in order to innovate to people who don’t understand what it means?  We could possibly begin with the linguistic trick that launched Lean Thinking. The word “lean” was powerful because of the implication that those who didn’t adopt it were fat (organisations). We need a similar linguistic trick that carries a hidden insult for non-consumers to act as a Trojan Horse to begin a literally vital, viral makeover.

Creativity, Projects, Project Leadership and Project Managers

Spencer Holmes interviews me on Youtube, discussing creative thinking, project leadership and managers. An introduction to the 30/70 rule as a means of aligning specialists behind a project.

http://www.youtube.com/watch?v=1aigg1rMwZ8&feature=youtube_gdata_player

Toxic Efficiency: How to Kill Your Organization by Making Efficiency Your God

Back in the 90s, I read an interesting book about fighting power by a retired US Colonel (Trevor N, Dupuy) much of which I disagreed with, where he established that the German Wehrmacht had by April 1945, quadrupled the fighting power of their infantry battalions in comparison with their capability in June 1940, this in spite of virtually halving the manpower on an infantry battalion down from 800 to approximately 400 men. What the author didn’t discuss was the futility of such developments, since the war was already lost and this kind of fighting power was irrelevant.

But the futility of focusing on transactional efficiency is often hidden in organisational cultures which prefer to work on solving problems that they can solve, that reinforce the collaboration of existing power and resourcing structures, instead of focusing on the problem whose resolution will lead to systematic change that will demolish current accumulated reserves of Relational Capital, whose new shape is unpredictable.

A few years later, I found myself facilitating the leadership of an automotive assembly plant on their strategic rationale for achieving the appropriate level of lean-ness as being the means of ensuring that they would be a natural site for the assembly of future models from their Japanese partners. I realized that there was something wrong with this as a viable strategy, but couldn’t put it into words.

Subsequently, I led an exercise in reverse-assembly of a 4WD vehicle in order to discover how to simplify the current assembly process. This was useful in that it led to the simplification of the assembly process by focusing on pre-assembly of modular components (so we could appear to reduce the man-hours involved in assembly), a significant reduction in the variety of fixing devices, and the final realisation that the 4WD vehicle needed to be redesigned and light-weighted (since it was really based on a heavy truck sub-frame and suspension system). We constructed a new prototype vehicle with significant benefits and showed it to our Japanese partner. The outcome was unexpected. I was asked to formally apologize to our Japanese CEO. As he drily put it: we do the innovation, you just assemble the product. At that point, I realized the danger of focusing on efficiency: it can mean that you lose the ability to invent new products, yourself.

In 2000, I was headhunted from Cranfield University to become Pfizer’s Chief Learning Officer, setting up a corporate university, organising governance, metrics and a system of barefoot practitioners. I realised that if I wanted to be successful in my own terms I had to connect closely with the strategy (developing a system of Strategic Learning Plans that answered the question of what do you need to be good at to deliver the strategy?, and what do you need to learn to provide the capability required?). I worked on improving the learning process for drug project teams whose lifecycle can take 8-10 years and involve considerable member rotation meaning that teams can unlearn as fast as they learnt. This lead to the invention of the Baton Passing technique with some significant improvements in time and cost-saving and reduction in attrition or failure.

Then in 2003 I suddenly woke up. I noticed that acquisitions were not delivering and it wasn’t down to the costs of integration. I realised that there was no point in optimising a strategy that would never deliver the shareholder returns required in the long run, at a time when innovation productivity in the pharmaceutical industry had been flat-lining since 1981. We needed a new strategy. So I began leading skunkworks projects to harvest lost Intellectual Property in Pfizer and build awareness of the fractured nature of the current investment strategy and its limitations. But it was too late. Naturally, leadership (like all pharmaceutical businesses) told itself to cut costs and began the dreary ritual of down-sizing and attempting to learn how to operate efficiently, but like the Wehrmacht, they missed the strategic point of inflection, in other words, that all strategies have a lifecycle, but that when you focus primarily upon efficiency without a balanced, ambidextrous approach that includes effectiveness, you are doomed.

Key Learning Point for Leaders: try to balance transactional efficiency strategies with systemic effectiveness strategies!

Rediscovering the Lost Art of Strategic Knowledge Management in Business Administration

All strategies are knowledge strategies - in the sense that your strategy is the product of a series of conscious or unconscious knowledge choices.

Sometimes it can be helpful to go back to basics. Strategic knowledge management is taught in business administration courses, like the ones profiled on this MBA degree site. However, when professionals enter the fast-paced environment of the real business world, they sometimes leave the fundamental tools and lessons of school behind them."

A few years ago, I was consulting at a senior level in a business where every year more money was being pumped into product development and yet the number of products getting to market was static. Reviewing the data within a variant on the porter Competitive Advantage matrix (price and product differentiation) was leading us into a 2nd-best trap of minor differentiation because low risk had become the name of the game. Similarly, productivity was being affected by dangerous, institutionalised assumptions that the minute survival ratio of successful products to prototypes and high attrition (failure) ratio required a necessarily large population of prototypes to work from to grow the business.

This low survival rate of successful prototypes was demonstrated to be another example of groups within the organisation exploiting and corrupting measurement systems over time (in other words if you want lots of prototypes that don’t work and will pay for them, we will provide them for you). However, the failing business model and associated strategy required a more indirect approach to open up and articulate the underlying and often tacit knowledge it was based upon which was clearly not working.


I noticed that although we had a lot of data about the situation, we never discussed the emergent strategy or tested the knowledge it was based upon. Although we talked about innovation, people seemed to think they were already doing it. Whenever I asked to see the organisation’s “innovation process”, they kept pointing at the New Product Development process (sometimes called the pipeline). The first problem was that we were committed to a default strategy that we never discussed and it was killing us; and the second problem was that people thought that the NPD or product pipeline WAS the innovation process, and thus it was impossible to question the business model or the potential for creating new value services around the old core products.

No-one was willing to directly question the business model that involved spending so much to deliver less. I decided to take another approach, and lead a disguised strategic conversation exercise through metaphor, based upon the 9-dot problem.

You know the one where you are asked to connect 9 dots in a box arrangement of 3 lines of 3 dots, using only 4 continuous straight lines. Usually what happens is that you try and try to solve this problem and it’s only when someone shows you the “arrowhead” pattern that extends the lines outside of the box that you realise that you sometimes have to step outside the box to understand the problem and see a solution. Working within the current emergent strategy was a bit like trying to solve the problem by staying within the box with similar emotional frustrations - in that it didn’t matter what you did with your resources, you still couldn’t solve the problem with current thinking. Having made the connection with the strategy, the next step was to invite people to connect the 9 dots using just 3 consecutive straight lines. After initial astonishment and disbelief, people would ask whether they could break the rules and in effect began to question their own constraining assumptions. We then transferred this thinking to our emergent strategy to ask ourselves: just what were the constraining assumptions? We then applied “reality checks”. Were these constraining assumptions still true, did they still constrain us? In every session, with a bit of preparation, the same 6 constraining assumptions that made up the organisation’s success formula would appear and we would demolish or modify them in the light of new knowledge and market changes. The outcome was a populated matrix or portfolio of new strategies that defined new freedoms to innovate in the language of the organisation. The scariest moment was presenting this to the head of new product development when he said: “you know, I only ever get to think like this on my own, late at night…”

There is a big difference between being efficient and effective. All strategies are knowledge strategies. Make sure that the knowledge you use to build your strategic choices is still current. Thinking outside of the box involves being a stranger to the familiarity of your own organisation. Knowledge is like fruit, the highest value is only realised when you connect the timing of the fruit ripening to the moment of the customer’s hunger. Don’t keep selling old fruit to people who aren’t hungry. Make sure your strategy is based on fresh knowledge, and that any old knowledge that remains within your emergent strategy is still edible and not past its sell-by date.

Implications:

1. How long has the current strategy got left?
2. How good is the knowledge you are paying attention to?
3. What is the knowledge you are deliberately ignoring, and why?

Innovation is a Political Act - Discuss

Innovation is about doing new things and learning to do old things in new ways to create new value. We need to understand why organisations become “sticky” under innovation pressure and the forms that this “stickiness” takes when innovators are trying to introduce new approaches to create new value through organisations.

• A culture is a by-product of a technology stabilization process, it is composed of the problem-solving experiences and processes involved in turning an invention into an innovation. All cultures are relatively “sticky” in the sense that they resist pressures to change.

• Strong cultures continually evolve new behaviours to block change, to maintain social stability and power structures based upon existing patterns and accumulated reserves of mutual Relational Capital.

• The greater the mutual Relational Capital in the network, the “stickier” the organisation. The stickier an organisation, the more pronounced its tendency to focus on the problems it can solve, rather than the problem it needs to solve (as a means of avoiding renegotiating existing stocks of Relational Capital).

Relational Capital is the social “capital” you build through establishing positive impressions and trusting relationships with key colleagues, stakeholders and potential internal customers, through trading and being able to bank favours at crucial times in the lifecycle of the business and personal careers. It explains the tendency within major corporations and political parties to appoint that “safe pair of hands” who turns out to be a dangerous idiot (unable to recognise that the context has changed, old customers want new things and new customers have emerged) instead of appointing the innovator who wants to move the strategy in a new direction, to change the rules and create new value. That “safe pair of hands” is usually the manager who is owed the most in Relation Capital transactions, the value of which would disappear if the technology and direction of the business changed and made the existing transactions void.

This explains the tendency to optimise existing products, services and business models instead of moving into the territory of creating genuinely new value by focusing on becoming effective. If you hold a big account of Relational Capital, would you want to give it up? This also explains the 60-70% failure rate of systemic change programmes. When you change organisations, you make all current existing Relational Capital void.

We need to unpack the nature of this Relational Capital, explore and understand the forms it takes, and the conditions under which it be both open and closed, positive and negative. In other words: whether it can be positive and open (when you have an “open” approach to constructing Relational Capital that is inclusive) and whether a closed approach is always negative and defensive, a conscious option or merely a social reflex that we can influence by working with leaders and persuading them of the benefits of consciously managing their approach to Relational Capital.

I will develop these ideas and this topic at Henley KM Forum Conference on 17th February 2011 (1345-1515 in the TK Conference Room).