Courage is the new competitive advantage

A lot is currently written about challenges mature corporation face to innovate : various mavens and gurus exemplify Uber, Airbnb (add yours here) as models to follow, urging businesses to disrupt themselves and behave like startups.

techcrunch-disrupt-sign-5-24-11-large1

There a is indeed a wide broadcasting of this polarised view of old world vs new world, without much thought being given to the underlying laws of strategy and business at play nor long-term impact on wealth, labour, society, etc…

We are hammered with the transformation imperative, with an obsessive focus on technology and a total ignorance of the challenges of adoption inherent to human behaviour.

Big players create research lab, corporate accelerators, hackathons to look like startups:
it seems it is more important to appear innovative, then to actually do the hard work of rethinking the way you do business.
They spin off digital academies, digital or disruption days, visits to Silicon Valley, or dedicate a section of their executive training programmes to this thing called “digital”.
It’s like going to visit the gym – only once – to get an idea of what it could look like to be fit.

fake-muscle-shirt
Less than ten years ago, I remember a client of mine at Nokia stating that Nokia was now an ”internet company” (today, the equivalent is “everlasting startup”).
Makes me smile: You can mimic the looks of an internet company or a perpetual startup, but you ain’t one: you copy the artefact, not the underlying “reason why”.

As I’ve stated this previously:

  • mature organisations are good at executing a business model, but not good at innovation (mostly because they tend to only focus on one type of innovation: product)
  • Startups are good at creating products, but not good at operating at scale.

Both mature companies and startups both face a common challenge:
how to design an organisation for scale in a highly unpredictable environment,
when obviously organisations models inherited from previous ages do not work anymore.

Our current model of how a company works is inherited by previous industrial revolutions, and a “machine view”: a business is a well-oiled machine, with multiple parts, each assigned to a specific task. Inputs/Outputs.

“The mechanistic view of the world that evolved in France after the Renaissance maintains that the universe is a machine that works with a regularity dictated by its internal structure and the causal laws of nature. This worldview provided the basis not only for the Industrial Revolution but also for the development of the machine mode of organization (Gharajedaghi and Ackoff, 1984).”

Therefore you “just” need to optimise the parts to run at maximum efficiency.

But as the company grows, so does complexity, and the common solution is to increase processes and procedure to control chaos, by limiting the autonomy of each part.

And we roughly end-up with two types of control:
– monolithic and central: senior management reviews all tactics, lots of buy-in meetings, slowness increases with size.
– independent silos: everyone does their own thing, alienation and suspicion between departments.

Efficiency trumps flexibility. In a fast-paced and unpredictable environment: the company become irrelevant.

“The most stubborn habits, which resist change with the greatest tenacity, are those that worked well for a space of time and led to the practitioner being rewarded for those behaviors. If you suddenly tell such persons that their recipe for success is no longer viable, their personal experience belies your diagnosis. The road to convincing them is hard. It is the stuff of classic tragedy.” (Charles Hampden-Turner and Linda Arc)

Contemporary research in various fields indicates that this machine view is flawed: the interaction of the parts (ie. the dynamics of the system) matters more that the intrinsic performance of individual parts:
Proof is recent news about Google’s Aristotle Project, IMD’s or MIT’s research on collective intelligence cognitive diversity team performance

I also find Netflix’s culture deck very insightful in this matter:
“context, not control”: clear and articulated context allows autonomy and relevant, decentralised decision-making
“highly aligned, loosely coupled”: all parts are aligned to deliver on clear strategy and specific, broadly understood goals. Teams interact around strategy and goals, not tactics.

 

Screen Shot 2016-03-31 at 14.34.40

To thrive in complexity, companies need to be purposeful systems and have a purposeful strategy: be able to produce the same outcome in different ways in the same environment and different outcomes in the same or a different environment.

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To achieve that leaders and managers need to become designers : learn how to use what they already know, learn how to realize what they do not know, and learn how to learn what they need to know.
Producing a design requires an awareness of how activities of one part of a system affect and are affected by other parts.
Unfortunately, the task is not just an academic discourse; it demands enormous emotional struggles and a huge cultural challenge. Engagement in this process, in addition to competence, requires courage.
I guess courage is the new competitive advantage.

(to be continued)

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[Thoughts] Think like a startup… or why you need to doubt to be lean in the corporate world

I cannot count the number of times I’ve heard that phrase: “think like a startup, act like a startup”… I guess you stopped counting too.

But this imperative calls for a deeper question, why is it so hard for existing businesses to do so?And aren’t we underestimating the harshness of being a startup?

You need to start with the definition of a startup: A startup is an organization formed to search for a scalable and repeatable business model (according to Steve Blank, in “The four steps to Epiphany”)
Read it again. The startup is formed to seach
The establish organisations isn’t formed to search – it’s designed to execute.

Startup entrepreneurs undergo tremendous pain and agony through the growth process between idea and product/market fit and revenue generation.
They will have to go through  the hard questioning, doubting, hole-poking and criticism inside an accelerator to make the venture even stronger.  I haven’t met any manager or executive in established businesses willing to go through such pain… because they don’t have time to do so, and they have no incentivized to do so.

So maybe for established businesses to think and act like startups, they need to institutionalise some time to doubt, to assess wrongful assumptions, challenge their limiting beliefs, articulate their intuitions, raise questions (see leads of belief change in one of my previous posts).

Dare to doubt

As I write these posts and continuously research and read about contexts and behaviours enabling innovation and creativity, I have found doubt/skepticism and questioning at the foundation of most approaches.

It is the framework which changes with each new technology and not just the picture within the frame (Marshall McLuhan)

To harness doubt in a positive way I often suggest this framework:

  • the things you know you know: norms, rules, bright spots, best practices…

check that these facts are still valid or true against data (see my previous post here)

eg. This mobile carrier brand is destined to young adult and teenagers (Sosh by Orange)… when it actually observed great take-up with unemployed population.

  • the things you know you don’t know: these are the additional questions and assumptions you’re trying test.

Try to answer the question through further analysis with the data you already have…

eg. How sensitive are our Mom consumers to the presence of this ingredient in our recipe, given growing negative buzz around the topic.

  • the things you don’t know you know: that’s you’re intuition, your know how

Try to identify and normalise it to improve effectiveness, efficiency and transferability, Turn your hypothesis into evidence

  • finally the things you don’t know you don’t know: that’s you blind spot.

This is the area where you need to accept to doubt and put your discovery skills to practice (the why? the how? the if?)

This is also where the opportunity awaits.

It is a huge task. Startup entrepreneurs have to do it, or they will fail to find a market/product fit and scalable business model or pivot to new markets.

Established businesses have a market/product fit and business model but are alienated by them, and will fail to survive if they don’t adapt to a fast moving and uncertain environment.

Data informed vs Data Driven

In both cases – this framework has to be data informed.

I’m purposefully writing “data informed” and not data-driven as I’ve encountered many data-driven-ish companies loosing sight of the bigger picture, trapped in analysis paralysis or worshiping irrelevant KPIs in the scorecard. I have so many stories it is embarrassing.

The reason I suggest data informed framework is because good metrics change the way you behave, they are a driver of action and incentive specific behaviours to create better alignement with strategy. They make you accountable.

As Jedi Master Yoda would say: “Good metric is the path to the Force. Good Metric leads to clarity, clarity leads to accountability,  accountability leads to alignement”

If you have found an nugget, idea, insight or opportunity during this discovery process it is either in line with your current product/market fit and business model – … or not:

  • If you’re a startup, that’s the opportunity to pivot it into a new market…
  • if you’re in an establish business, good luck: you are kryptonite (unless you work a P&G) – get an executive sponsor and make sure everyone else knows you’ve got one.

Measuring what matters: Debunking a few myths

  • Brand Awareness/Top of Mind: Actually consideration is a better proxy for sales and marketshare in most industries I’ve been working with
  • Number of Fans, followers, Likes: that’s a typical vanity metric. If you can’t get them to do something useful for you, they are useless
  • Number of contacts in database: as previously, useless unless you know how many will open an email for eg. and act on what’s inside.
  • Number of visits / Market Share: is it one person who visits/buys a hundred times or a hundred people who visit/buy one time?
  • Number of downloads: Downloads alone have no value. Activations, ARPU do.

Now ask yourself this question – and feel free to contact me if you wish to discuss this further:

  • What are the metrics you are working towards?
  • How are they aligned to what your business – startup or established is trying to achieve today, tomorrow?
  • How many help you make business decisions?
  • Can you kill the ones not adding value?
  • Some industries use a single or aggregated success metrics for e.g.. NetAdds or CLV or ARPU… would it be possible for you?

[Thoughts] The OCD of CDOs

Two pieces of informations came to bug me recently.

On the one hand, Innosight’s executive briefing on strategic readiness and disruptive change stating:

  • Fully 85% of respondents say their organizations need to transform in response to disruptive change
  • yet only 49% say that feel very confident or confident that their organizations are prepared for transformation in 3 to 5 years.
  • That number drops to 42% in a time frame of 5 to 10 years.
  • Only 12% of organizations have a formal growth strategy with at least a 5+ year time horizon.
  • The remaining 88% either have no formal growth strategy or it is shorter term.

One the other hand, the rise of the Chief Digital Officer …:

  • 25% of companies will have a CDO by 2015 as reported by Gartner in 2012
  • the number of Chief Digital Officers in 2013 doubled again in one year—to a total of 500. And the CDO Club is conservatively projecting that number to double again, to some 1,000 Chief Digital Officers by the end of 2014.

As if the answer to the increasing need for lasting transformation is to be addressed by this new created role of the Chief Digital Officer.

Now when you look a CDO Club figures, CDOs were predominantly represented in the following industries/categories

  • advertising sector, at 36%
  • media at 18%,
  • publishing (13%), nonprofits and municipal (10%),
  • and financial (8%).

68% of them are in the US, 23% in Europe (mainly United Kingdom, France, Spain, Italy and Germany).

Now that bother’s me. So I tried to understand what CDO means and what is their remit, given the 3rd industrial revolution that is taking place is impacting many parts of the organisations value chain, not just Marketing and communications.

Russel Reynolds, the executive leadership and search firm explains that “traditionally, digital was positioned as part of the marketing function within the business, responsible for driving the organization’s online presence. The last two years have seen the rise of the Chief Digital Officer, a senior executive who sits at the right hand of the CEO and is seen as instrumental to the future of the organization.” Gasp!

Understandably “For many companies, especially those in the retail and leisure sectors, digital is the fastest- growing revenue stream, and a Chief Digital Officer (or, sometimes, SVP Online) is extremely important in driving that growth”. But according to Russel Reynolds, CDOs will “be the executives with the operating experience, management skills, strategic mindset and vision to lead businesses in an increasingly technological future.” (…) and the role will “require change management capabilities that can impact the whole company” (also they mention this specifically for traditional media industry).

Although I understand the need for companies to realign their business models, and processes to address their customers. But Digital Transformation goes beyond MarComms function.
In his post about the 2014 State of Digital Transformation, @BrianSolis form Altimeter group makes an interesting point:

  • investing in digital technologies does in of itself not equate to digital transformation
  • digital transformation has become yet another victim of the technology first efforts that miss the human mark, i.e. how people in organisation use tools and techniques to get the job done
  • true implication of digital transformation spans beyond technology on the real of infrastructure, organisation and leadership – across “everything from HR to collaboration to sales to supply management and beyond”.

Erik Brynjolfsson – director of the MIT Center for Digital Business and a research associate at the National Bureau of Economic Research (see the video in footnotes), explains that 120 years ago, when American factories began to electrify their operations: productivity did not increase in those factories for 30 years. “That’s long enough for a generation of managers to retire.

the first wave of managers simply replaced their steam engines with electric motors, but they didn’t redesign the factories to take advantage of electricity’s flexibility.It fell to the next generation to invent new work processes, and then productivity soared, often doubling or even tripling in those factories.”

and just as the earlier generations of managers needed to redesign their factories, we’re going to need to reinvent our organizations and even our whole economic system.
He’s TED Talk explains brilliantly the cascading effects of technology, and the specifics of what he calls the machine age, i.e.the revolution supported by machine computation (see my previous post: “I don’t believe in Digital”): replicable at no cost, exponential and combinatory.

SO even though CDOs might be useful, for some companies and businesses – as is, i.e. eCommerce and Marcomms roles to engage with digital customers at every touchpoint of their journey, I doubt the creation of the role alone will be sufficient for organisation to understand and act upon how they need to transform and survive in the long term.

When the Wise Man Points at the Moon the Fool Looks at the Wise Man’s Finger

 

Digital MarComms, Social Media, technologies are the finger. They distract us from understanding the profoundness of the disruption taking place.

As Gary Hamel states in his HBR article:

Until we challenge our foundational beliefs, we won’t be able to build organizations that are substantially more capable than the ones we have today.

That’s all folks!

Sources:

Innosight:  The Strategy Confidence GapResults From Our Survey on Strategic Readiness and Disruptive Change
Gartner: Every Budget is Becoming an IT Budget
CDO Club: Number of Chief Digital Officers Doubled in 2013
Russel Reynolds Associates: The rise of the Chief Digital Officer
Altimeter Group:  2014 State of Digital Transformation
Erik Brynjolfsson: The key to growth? Race with the machines
Gary Hamel:  The Core Incompetencies of the Corporation

[Video] Ricardo Semler: Leading by omission or… why change and disruption can’t happen from inside

I’m exceptionally posting two videos today. Another talk from Ricardo Semler – see my previous post for newest talk at TEDGlobal – and yes, it’s official I’m in love with that guy.

This talk was originally given at MIT Sloan School of Management in 2005.

There’s “something fundamental about organizations and ‘ leadership that makes it almost impossible for people inside a business to change their own industry.

Ricardo Semler discusses why it is difficult or impossible to innovate or disrupt from inside the organisation – giving examples in Automotive and legacies of military hierarchies. Although I don’t agree with his point on intuition alone, I cannot but agree with his point on wishful thinking for having experimented it in multiple companies.

source: MIT Tech TV

[Thoughts] Everything you know is wrong… and it’s exciting

I have discussed in the two previous posts how a belief can determine a reality (“I don’t believe in digital”) and how our beliefs are fundamentally flawed and dangerous anyway (Quantum physics, The Matrix and the corporate world).

There is maybe an opportunity to escape this determinism, as history seems to repeat itself, and the disruptors become the disrupted (eg. Kodak, Motorola, Nokia…).
And the only way is to acknowledge that everything we know is wrong: no industry, category, company or product is safe.

Disruptive change is accelerating, driven by the rapid emergence of new technologies, the blurring of lines between industries, and competition from both traditional and nontraditional players.

As a result, corporate lifespans are shrinking. On average, a company drops out of the S&P 500 list and is replaced once every few weeks. If current trends hold, about 75% of companies on today’s list will fade away or get acquired by 2030.
(Innosight, The strategy confidence Gap, 2015)

U2 – ZooTV Tour

…And that it’s OK. It’s super-exciting. Now we can question everything, even the unquestionable as Einstein did when he questioned the definition of Time or the nature of Gravity.

 

As our biases are cognitive and behavioural, the solution to overcome them lays there too.

In The Innovator’s DNA, authors Jeffrey Dyer, Hal Gregersen, and Clayton Christensen build on what we know about disruptive innovation to show how individuals can develop the skills necessary to move progressively from idea to impact.  By identifying behaviours of the world’s best innovators—from leaders at Amazon and Apple to those at Google, Skype, and Virgin Group—the authors outline specific skills.

They outline that all innovative disruptors have in common: specific cognitive and behavioural skills, institutionalised processes to support a large number of people in the organisation using these skills, and a culture/philosophy to sustain the process.

When you question your beliefs (what I think I know and what I know I don’t know) you’ll have to face your blind spot  (what you don’t know you don’t know).
Innovators cognitive and behavioural skills, people and processes allow them to look into the blind spot by asking questions :Why? How? If?

Why by Carl Richards. Source NY Times For more of his drawings see link in source

“There’s nothing more dangerous that the right answers to the wrong questions”
(Peter Drucker,1994)

  • Questioning: posing queries that challenge common wisdom,

How do you ask yourself questions about things you’re unaware of, and incompetent at?
By starting with a clean slate, leaving all of your assumptions away.
Asking yourself how many things you are wrong about.
Simple questions – just a few words. The process is called Catalytic Questioning, as asking questions changes your perspective on the problem.
This step is hard, as it requires being comfortable with being uncomfortable (see an example with Pixar BrainTrust).
The Heath Brothers provide fabulous examples in their book “Decisive” about the importance of the devil’s advocate role.

  • Observing: scrutinising the behaviour of customers, suppliers, and competitors to identify new and different ways of seeing/doing things

… Look for what is surprising and unexpected.

  • Networking: meeting people with different ideas and perspectives.

In order to get valuable insights you need to go to different people – different industry, category, gender/age group…
This is a little bit like in Chip & Dan Heath’s Book “Switch”: did someone else answered that question successfully?

  • Experimenting: constructing interactive experiences and provoking unorthodox responses to see what insights emerge

Make it small, fast and cheap. Experimenting should be accessible and facilitated to all in the organisation.

  • finally Associating: drawing connections between questions, problems, or ideas from unrelated fields, the combinatory play: selecting and probing the answers helps new ideas emerge from connecting the un-connected.

Innovation, Strategy, Change even are often mistaken for an Event, when they are a process. It’s everybody’s job, and anchoring it in our behaviour requires routine: we are what we repeatedly do. We are wired to solve problems (see David Kwong’s TED Talk).

We are what we repeatedly do. Excellence, then, is not an act, but a habit.
(Aristotle)

As a 4 y.o. I was always asking Why? and If? I never stopped since.
When did you?

 

Sources:

Innosight – The strategy confidence gap

HBR – Catalytic Questioning

New York Times – Carl Richards Personal Finance on a napkin

Credit Suisse / Forbes – The most innovative companies methodology

FastCompany – Inside Pixar BrainTrust

David Kwong – Two nerdy obsessions meet — and it’s magic