Strategy

Back to the Future

December 19, 2011 By Wendi Leave a Comment

Sometimes I’m hard pressed to understand why I read what I do. What is it that actually interests me about some stories? Then, after a while, I see that it isn’t the content per se but rather the narrative which keeps me engaged and draws me along. Of the handful of narratives that mesmerize me, the recursive innovation narrative (or back to future story) stands out.

In this narrative, innovation comes about by rediscovering something that has been lost along the way. Typically, the loss occurs because popular or commercial interest becomes caught up with an idea that, in the long run, is either revealed or proven to be false. Or one idea has become so widespread that it crowds out another idea that is equally, if not more, important. The innovation lies in reclaiming or reasserting the thing that was once known but became lost in the process.

Here are two stories of recursive innovation:

Running Redux

Humans are born runners. The combination of an ability to cool ourselves through perspiration (rather than panting as other animals do) and the “springiness” of our legs allowed humans to outlast their prey when it came to running. So, why is it that close to 80% of all contemporary runners suffer injuries each year despite specially engineered running shoes, running surfaces, and training regimes? And why is it that in some cultures which lack all of these advantages, people we would consider elderly can run 100-mile races as a matter of course?

Christopher McDougall believes “…we don’t need smarter shoes, we need smarter feet” He has resurrected an exercise routine that rewires the brain and the body to run the way that nature intended – the 100-Up Exercise. An undeniably simple routine, the 100-Up (see the YouTube video) is a three-minute exercise that upends modern running dogma. It isn’t about the shoes, the surface, the intensive training – it’s about rediscovering the way that humans were born to run.

So when and where did it go wrong? Apparently, not so long ago and also apparently, the commercial shoe industry in the U.S. played a major role in leading runners astray. In the 1970s and 80s, runners became obsessed with the notion that the proper running shoe was the key to great running because the biggest problem with running was heel-strike impact. The first inkling that the shoe solution to heel-strike impact might be wrong came when researchers began to observe barefoot runners. What they noticed was that barefoot runners did not land on their heels, but rather, on the balls of their feet. This was not a shoe-problem, but a form problem. However, ingrained notions of running are difficult to dislodge and even though barefoot running has taken off, it is still shoe- rather than form-focused for the most part. The biggest evidence of shoe-bias is the invention of those strange looking glove-like shoes. You can shell out the bucks for Vibram Five-Fingers, but if you are still running heel first, you are highly likely to injure yourself. According to those who practice the new method informed by 100-Up, you can run with the shoes you already have because it’s not the shoes, it’s the way you run that matters.

Apples Lost and Found

The apple as a healthy snack is a relatively new invention. Apples have been around a long time (from a human civilization perspective), but up to the Civil War period they were primarily used as either feedstock for animals or an alternative to water in the form of hard cider for humans because apples were not particularly tasty to eat. Prohibition was especially bad for apples (hard cider was alcoholic), and it was during this period that they got a PR makeover with an adage promoting their health (“An apple a day keeps the doctor away”) and an agricultural focus on propagating better tasting varieties. Before industrial scale refrigeration, most people enjoyed local apples and there are a multitude of types associated with particular geographies.

Some Fun Apples (Esopus Spitzenberg and Yellow Newton Pippin):

However, with the advent of refrigerated rail cars, apples could be transported over long distances. Refrigeration and the rise of the national grocery chain combined to promote the apple attributes of durability, long shelf life and aesthetic appeal. As a result, the plethora of apple species dwindled to three – McIntosh, Red Delicious and Golden Delicious — and apples as a local treat gave way to the national grocery produce staple. Apple breeding increasingly focused on making sure apples looked rather than tasted good. We all know how delicious apples can look and how disappointing they can taste. That shiny, beautiful outside masking a mushy, mealy, flavorless inside. This is how it came to be that Americans now consume about half the amount of apples as their European counterparts.

The sorry state of affairs persisted for some time until a confluence of events turned the tide to favor a tasty apple with great texture and crunch. In the 1970s, several new apple varieties – so called “super apples” – were imported from outside the U.S. and began to be cultivated here. At the same time, price controls were imposed to help the U.S. deal with stagflation, but produce was exempt from this constraint creating an opening for these new apples. Americans got a taste of delicious, but less than perfectly formed apples and loved them. Once again, the apple as a flavorful, nutritious food found in many varieties was back on the scene and apple consumption began to increase.

Recursive Innovation

The article from which my much abbreviated apple mini-history is derived goes on to describe the equally fascinating business model of patenting and controlling the production of apple varieties. But what struck me as I read about apples past and present was how much it reminded me of the story about running. The themes in both stories are the same. In the push to scale an innovation, to achieve industrial capacity, a critical artisanal element was lost, left by the wayside because its importance was not understood. This element would turn out to be a sustainability factor which had to be rediscovered in order to breathe life back into the innovation.

I am not suggesting that the sustainability factor is always apparent. Clearly if people knew what it was they would not so casually allow it to be jettisoned in favor of other elements which might turn out to be helpful for a time, but ultimately outlive their usefulness. Yet this challenge – knowing what to discard and what to retain – remains a key challenge of innovation.

As we come to the close of the year, this question – what to hold onto and what to let go of as we move ahead – has particular resonance, both organizationally and individually. Much of the world is captivated by the idea of sustainability whose light and fluffy exterior is characterized by “doing well by doing good” and whose dark underbelly is the stuff of self-preservation. What I like most about sustainability as a screen for what should be retained or discarded is its strategic urgency. Strategic – doing well by doing good. Urgency – self-preservation. I’ve been told and have experienced it to be true in my own life that what gets done is whatever is threatened by a burning platform (regrets to the “what gets measured, gets done” crowd – burning platform trumps measurement). As we move into the new year and look for new ways to separate the proverbial wheat from the chaff, one possibility might be found in the recursive innovation narrative and its North Star of sustainability.

Sources:

“The Once and Future Way to Run,” Christopher McDougall, The New York Times Magazine, November 6, 2011
“Crunch,” John Seabrook, The New Yorker, November 21, 2011

Filed Under: Business Model, Innovation, Strategy, Sustainability

Counterinsurgency and Organizational Transformation

September 15, 2010 By Wendi Leave a Comment

What can be learned from counterinsurgency efforts in Afghanistan about transformation in large organizations? After reading “A Civic War” in Sunday’s New York Times Magazine, I’ve concluded that the answer is “a lot.”

Let’s agree that organizational transformation refers to a wide-ranging overhaul of both structure and process and typically strives to embed a new or substantially recharged cultural norm(s) in the transformed organization’s DNA. As a result, transformations invariably inspire resistance which comes in many different flavors. There are those who put their heads down and wait for it to blow over; those who agree in public, but share their “concerns” in private; those who find fault with what is proposed and suggest that caution dictates more study. And these are but a sampling of what might be otherwise called “insurgents.”

Counterinsurgency doctrine proposes that insurgents emerge in response to transformation because the legitimacy of the current governing structure is questionable. As a result, “’the primary objective of any counterinsurgent is to foster the development of effective governance by a legitimate government.’” Most organizational transformations occur under the leadership of a new CEO who typically has installed many new executives (or has sometimes cleaned house completely). For this reason, the legitimacy of the governing structure is questionable. After all, it is new and can offer no proof that what is being proposed will succeed.

But, according to counterinsurgency doctrine, the most effective tactics for dealing with insurgents are frequently galling to those with power to command and control because “’the more force used, the less effective it is.’” While you can give people their marching orders and even compel them to march, the more that these tactics are used, the more likely it is that the transformation will fail. Successful counterinsurgency seeks to transfer the power to get things done to those who operate at the local level, building legitimacy at the top from the bottom-up. The transfer of power is a process, carefully monitored and crafted with powerful incentives, but when the goal is a self-sustaining system, power to adapt and adjust must be distributed throughout the system.

To whom is the power transferred? In Afghanistan, it is going to people who are viewed as key local leaders, those willing to defy the Taliban (which can be thought of as the existing order). In my mind, this is a step that most large organizations fail to take. Much time and effort is spent insuring that key leaders at the top are in place, but much less time and effort is spent at the local level to insure that the same is true. Key leader engagement at the local level strikes me as a significant contribution to successful transformation.

Large organizations expend tremendous effort grooming people to lead at the top, but very few focus on how people lead at the bottom which may be why many transformations fail to take hold. Without strong leadership at the bottom, the local level, that has the power to adapt and adjust, it simply takes too long for guidance to filter down from the top. In the interim, things fall apart, reverting back to old habits. Counterinsurgency doctrine seems to suggest that for a governing structure to be legitimate, it must be supported by governance that reinforces the interdependence and ability to act of those at the top, the middle and the bottom.

Source: “A Civic War,” James Traub, The New York Times Magazine, June 20, 2010

Filed Under: Decision-making, Leadership, Strategy

Blurred Vision

June 29, 2010 By Wendi Leave a Comment

“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” (Western Union internal memo, 1876)

“Heavier-than-air flying machines are impossible.” (Lord Kelvin, president, Royal Society, 1895)

“I think there is a world market for maybe five computers.” (Thomas Watson, chairman of IBM, 1943)

“There is no reason anyone would want a computer in their home.” (Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977)

“640K ought to be enough for anybody.” (Bill Gates, CEO of Microsoft, 1981)

“The hubris of Tesla is ‘We’re not going to fall into the trap of being like Detroit – we’re going to be the Silicon Valley guys, nimble and innovative,’” Lutz said. “Everyone who tries to reinvent this business believes that auto companies are populated by dummies who don’t understand Moore’s Law. But, unlike a silicon chip, the modern automobile has to be a certain size, and carry a certain number of people, at a certain speed. Over thirty-five hundred parts sourced from around the world have to come together at the right place and the right time to produce sixty to seventy of these things an hour. These things are called cars. And to make them you need a large engineering staff, a workforce that demands retirement benefits, a tax staff, a fleet of accountants, and an unbelievable amount of reliability testing that Tesla can’t afford to do right now – and we can’t afford not to do. Inevitably, Tesla will discover that the only way to succeed on the scale we have is to be exactly like us.” (Bob Lutz, vice chairman of GM, 2009)

While not as pithy as the other famously wrong quotes unless you reduce it to the last sentence, the amount of hubris in Bob Lutz’s statement about Tesla is astonishing. The number of statements that assert absolutes in terms of how people will travel from place to place using vehicles is telling. I count 12 and that’s being charitable (not breaking some of the statements into even smaller statements and not counting the culmination of the argument which itself is an absolute).

I suppose that’s what we look for in leaders – confidence and vision. But it seems to me that it is precisely this kind of confidence that is the enemy of innovation. In fact, this doesn’t seem like confidence to me at all – it seems more like overconfidence. One way to understand overconfidence is as the “illusion of control: confidence spills over from areas where it may be warranted…to areas where it isn’t warranted at all.” This is how overconfidence leads to bad decisions and an inability to imagine a future outcome that is different from what you currently believe it will be.

At the same time, social scientists view human overconfidence as an adaptive trait. “’In conflicts involving mutual assessment, an exaggerated assessment of the probability of winning increases the probability of winning,’ Richard Wrangham, a biological anthropologist at Harvard, writes.” As human beings, there is a benefit to seeing things with rose-colored glasses or what “social psychologist Roy Baumeister [calls]…an ‘optimal margin of illusion.’” The real trick, of course, is knowing where to draw the line. Nobody seems to have a good rule of thumb for that. However, “all we can say unequivocally is that overconfidence is, as Wrangham puts it, ‘globally maladaptive.’” If everybody is overconfident then a kind of colossal one-upmanship results in which the stakes become higher and higher and if everyone is wrong, losses can be catastrophic.

How does one reconcile the notion of vision – having a passionate belief or conviction about the future – with overconfidence? We want our leaders to have vision. Innovation is in large measure a visionary act. And yet, as we read famously bad predictions from visionary leaders, we see that their success in certain areas has spilled over into confidence about making predictions in areas that seem to be, but turn out not to be, related.

The personal transportation industry is just one example of how difficult it is predict the future. Andrew McAfee’s blog that relates the evolution of cloud computing to the evolution of electrification describes why it is difficult to predict the path that a profoundly transformative technology will take as it evolves. To a large extent that is because the evolution occurs over a long period of time and the development process itself contributes to the direction that the evolutionary path takes. However, at some juncture, a combination of factors leads to an inflection point that draws a bright line between before and after.

Very smart people have a very hard time imagining that the future could look different from an extrapolation of the present. Maybe it isn’t as important to be able to imagine that kind of future as it is to admit that a future which is discontinuous with the present is possible and even probable. Holding that perspective might provide leaders with a wider, if not clearer, view and encourage them to make a few more small bets on a future that is nothing like the past.

Sources:

Famously Wrong Quotes from: http://wilk4.com/humor/humore10.htm

Tesla quote from: “Plugged In,” Tad Friend. The New Yorker, August 24, 2009. An article about Tesla Motors and its founder, Elon Musk, and the electric cars that the company is producing.

Comments about overconfidence from: “Cocksure,” Malcolm Gladwell, The New Yorker, July 27, 2009. An article about how overconfidence leads to bad decisions and its possible contribution to the collapse of Bear Stearns.

Andrew McAfee’s blog: http://andrewmcafee.org/?s=Cloudy+future+of+IT

Filed Under: Innovation, Leadership, Strategy

Is Everybody Unhappy?

May 26, 2010 By Wendi Leave a Comment

When groups are engaged in difficult decisions, the standard refrain that facilitators use to gauge the soundness of the decision that has been reached is along the lines of “Can you live with it?” or “Are you comfortable with this decision?” As a result, people are left with the impression that they should feel reasonably good about the decision that the group has reached – comfortable, satisfied, maybe even a little bit happy. But, a better gauge that a group has reached a good decision when faced with a very difficult problem to solve might be that no one is happy.

While the circumstances of the difficult decision that I am about to relate rise to the level of life and death that fortunately most corporate decisions do not, the lessons learned translate to many of the difficult corporate decisions that face executive groups. About 15 years ago, in 1994, members of the Hutu majority in Rwanda slaughtered more than a million members of the Tutsi minority. About a decade later, the government in one of its many efforts to rebuild the country, instituted a judicial process known as “gacaca” in which those who were responsible for the genocide confessed their crimes before the community and sought forgiveness. The proceedings were formal and resulted in a judgment which could include time in prison (Rwanda abolished its death penalty in the period following the genocide).

The “gacaca” provided a way for the mixed communities of Rwanda to move forward together toward a common future. Rwanda’s President, Paul Kagame, said of the process “’Not the victims, not the perpetrators – nobody will tell you he is happy with the gacaca…’ Kagame didn’t want either side to be happy – ‘because whichever way we go we are left with nothing. Gacaca…gives us something to build on.’”[1]

Successfully dealing with difficult decisions, the outcome of which is that no one is happy, reveals the critical importance of an explicit vision, mission, and guiding principles (or beliefs or philosophy). To cope effectively with temporary dissatisfaction, groups must be united in a commitment to a future state that is supported by a clear common cause and bounded by agreed upon rules of the road. Too often, groups are unable to make difficult decisions because they do not invest the requisite time in formulating or understanding their vision, mission, and guiding principles. As a result, when faced with a difficult decision, the yardstick that individuals fall back on is their personal comfort level. However, for truly difficult decisions, the outcomes of which propel organizations toward achievement of their goals, individual comfort may be the last thing that reflects a good group decision. In these cases, individual unhappiness that everyone accepts may be a much better indicator that the group decision supports the organization’s vision, mission, and values.

[1] “The Life After,” Philip Gourevitch, The New Yorker, May 4, 2009, p. 43

Filed Under: Decision-making, Strategy

Garbage Out, Gold In

March 16, 2010 By Wendi 1 Comment

Back in my knowledge management days, I used to think that the kind of organization that would succeed in the future would be the organization that sat on a lot of interesting data, understood that it was sitting on a lot of interesting data, and, most critically, was able to do something to transform that data into knowledge. I still believe that what will separate organizations that are successful from those that are not is the ability to transform data into knowledge – actionable information. However, ownership of the data itself appears to be a lot less critical than being able to lease access to the data, understanding how to learn from data, and engaging communities in the learning process.

The Economist’s recent report on managing information introduced me to a few concepts that are clearly going to impact wealth creation for an increasing number of organizations in the near future beyond those that have already grasped these concepts and applied them to the creation of new business models. Craig Mundie, head of research and strategy at Microsoft, is quoted as saying, “What we are seeing is the ability to have economies form around data….” So, the notion that success in the future will derive from data might be in the early stages of taking shape. Here are my favorite new concepts:

Data exhaust – The detritus of digital interactions. Example: When I make an online purchase, the ultimate goal of the vendor is to get me to the object I desire at a price point that I’m willing to pay. Along the way, I might enlarge photos, change colors of the object, check out reviews on another site. Some vendors might consider all of that data to be garbage. Others are zealously collecting it and using to better understand how to present purchase opportunities to me, Wendi Bukowitz. And some of them are selling that knowledge to other vendors who want me to consider their products but lack the data and the ability to analyze it.

Big data – As the amount of data skyrockets to a mind-boggling size, analytics on very large data sets is revealing previously hidden connections – some of the most important may be the ability to detect early indications of pending system failure, whether in machines or in human beings. The store of data surpassed storage technologies in 2007, and is growing at a compound annual rate of 60%. And it coming from more and more sources, not just the old standby’s of computers, cellphones, and cameras but increasingly sensors that are embedded in everything – products, buildings, pets, roads, people.

Crowd-sourcing is better than smart algorithms – Okay, it’s good to start with a smart algorithm, but if you can get lots of people to tweak that algorithm by using it, it turns out that you will achieve a better outcome. For example, rather than trying to write the best translation rules, it’s proving more successful to write good enough ones and then let people who use translation systems select the translation option that is most accurate. The combination of judgment and number crunching, rather than an exclusive reliance on one or the other, is asserting itself as the best way to make really good decisions about almost anything.

Most organizations treat the majority of the data they generate as garbage – data exhaust. They routinely fail to investigate the possibilities of mining their data for new opportunities and, under the knee-jerk banner of data security, routinely lock anyone except a (relatively) small stakeholder group of employees and customers out of the data creation playing field. This is not to say that there aren’t good arguments (and sometimes requirements) for sequestering some of the data, but I would like to see a more thoughtful and strategic approach to exploring the possibilities of gigantic piles of data. Because, more and more, it’s looking like garbage out, gold in.

Filed Under: Business Model, Knowledge Management, Strategy

Strategic Thinking Principles Derived from Sustainability

December 22, 2009 By Wendi Leave a Comment

Sustainability is the new hot topic (as well it should be, I don’t mean to sound snarky when I say this). It is becoming a perspective that informs strategic thinking and innovation thinking. The Harvard Business Review contains a piece by Ram Nidumolu, C.K. Prahalad, and R. Rangaswami called “Why Sustainability is Now the Key Driver of Innovation.” In this article, the authors propose a set of simple rules that they have gleaned from their observations of organizations which have embraced sustainable principles to renew themselves and grow. I like these rules, but believe that they equally apply to strategic thinking and flow from a set of beliefs that many organizations would do well to consider. I’m going to present an adapted and paraphrased version here (you can read the original in the article itself) as a set of principles for strategic thinking:

Start from the future. Most strategic thinking is (as these authors put it) “an optimistic extrapolation” of the present. As a result, most strategy is not strategy, but a souped-up set of tactics. To derive strategy, it is important to envision the future and then explore the best way for your organization to get there. Underlying belief: While it’s not possible to know what the future will be, it’s important to think ahead and consider what it might be. Those who have considered the future are better positioned to thrive in it.

Develop next practice. Best practice limits true advances because by the time you’ve caught up to best practice, best practice organizations (if they really are best practice) have abandoned it in favor of something else. Benchmarking is not nearly as important as figuring out where your organization needs to be and how it will get there. Underlying belief: The biggest problem for most organizations after they’ve set strategy is executing against it. This is an especially big problem for big organizations. They’ve generally lost the art of conducting small, quick experiments and the stomach for failure.

Flexibility trumps everything. One test of goals is whether they persist over time. They should. Strategy sets goals and broad approaches. But over the long term it will prove impossible to remain true to the tactics that were originally envisioned. They will need to change. Underlying belief: Learning organization was not just a buzz word in the 1990s. Organizations need to learn and adjust as they work towards achievement of their strategic objectives. To succeed, tactics must change.

Collaboration is essential. Once upon a time, organizations might have been able to go it alone. But success increasingly belongs to those who can form partnerships and alliances with institutions and stakeholders of all types. Winning has become a team sport. Underlying belief: No one organization can know enough, have enough, or change quickly enough to succeed in this increasingly interconnected world.

Filed Under: Strategy, Uncategorized Tagged With: Strategy, Sustainability