“Innovation doesn’t happen by spontaneous combustion. You must set yourself on fire.”

A big thanks to my colleague Taavo who pressed me to read Gary Hamel’s The Future Of Management. Previously I’ve posted here about the importance of product innovation, as defined by Michael Treacy, or business model innovation, as described by Clayton Christensen, or operational innovation a la Michael Hammer. I’m here to testify in the wake of reading Gary Hamel’s The Future of Management, I’m converted. I’m a true believer in the importance, value and urgency of what he calls management innovation. As Hamel writes it, management innovation is the killer app, the ultimate competitive advantage and I’m inclined to believe he could be right.

Early in the book he outlines the “innovation stack” as consisting of – from the ground up in ascending order of competitive value

• Operational innovation – mostly the leveraging of short-lived replicable IT capabilities to optimize processes. IT advantages are time-sensitive and can be quickly and ubiquitously deployed and replicated and offer no proprietary long-term advantage.
• Product or service innovation – while a true product innovation can no doubt propel a company from obscurity to market competitor (he cites Dyson’s bagless vacuum cleaners), again even with patent protection, product and service innovation isn’t a barrier to market entry. Witness Whirlpool who, within eighteen months, had a competitive product to Dyson, which they were able to distribute on a scale Dyson can’t compete.
• Strategic innovation – a.k.a. business model innovation, which can produce true game-changing disruptors. For example, while the music industry first ignored online piracy, then enacted draconian scare-tactics (e.g. lawsuits against undergrads), and finally DRM-laden music products, Apple walked right through an open opportunity door with iTunes. Remember Apple went from never being in the music retail business to being the most powerful player around. It’s all catch-up now for Microsoft, RealPlayer and others.

Toyota has enjoyed a decade-spanning market-dominating run owing to management innovation. That’s right – I said the key is/was management innovation beyond all other identifiers. In a telling anecdote Gary Hamel describes a dinner with a group of U.S. automaker executives in which they had just completed their twentieth annual Toyota benchmarking study and Hamel inquired what, pray tell, did they learn this year that they couldn’t figure out over the past twenty years. Only now have other automakers acknowledged the innovative management practices at Toyota which empower each front-line employee to be “problem-solvers, innovators, and change agents.” In stark contrast Henry Ford once quipped, “Why is it, whenever I ask for a pair of hands, a brain comes attached.” Such is the management legacy and culture asked to compete against a market foe that believes innovation and solutions are welcome and expected at all levels of the org chart.

Hamel argues that only management innovation can produce the lasting and ultimate competitive advantage to protect your business from certain paradigm-shifting challenge. As Gary puts it, without question, “…sometime over the next decade your company will be challenged to change in a way for which there is no precedent.” And the way to be ready is to institute management innovation which is endemic, not crisis-based. While Gary would certainly laud Gerstner’s efforts at IBM, or Anne Mulcahy’s stern hand at Xerox, he argues these seismic change efforts are short, crisis-based, and built on out-moded command-and-control tactics in which senior tiers set agendas and execute effectively in a cascading manner.

Straight from the pages of The Future of Management, Gary offers a few questions to help start your journey:

• What’s the tomorrow problem that you need to start working on now?
• What are the tough balancing acts that your company never seems to get right?  What values does your company espouse yet have the hardest time living up to?
• What are you indignant about in your company? What are the frustrating incompetencies that plague your company and other organizations like it?

If you read this and feel like you’re lost in the beaucracy and lack the power to initiate change, pick up Hamel’s book - he has immediate recipes to help you be a change agent.  Beware - he will ask you to be bold!  Enjoy the journey!

Last week we did a gig with Keith Ferrazzi in Philly at SAP - webcast and satellite event to about 20,000 people around the world (although I’m guessing our friends in Singapore might not have stayed up to see it live…).  It was my second interaction with him and again I learned something new (this post was the first).  Before the live broadcast he was generous enough to spend about 25 minutes interacting with the studio audience of about 200 or so people in the local studio at SAP and he opened with a riff about recognizing our prejudices.

His point was that each of us upon initial interaction have prejudices we bring to the table.  Before most introductions we come with pre-conceived notions about who that person is - based on their looks, their title - whatever.  He has a funny ice-breaker in which he picks out someone in the audience and throws out a typecast.  That morning he picked a white guy in the front row and brought some laughs about how that person was probably an Irish beer-drinking, weekend golf hacker, etc…  The routine isn’t crass, he is also making fun of himself as he comes from a humble Pittsburgh background and has himself worked through such prejudices.  The point, of course, is when you open yourself to the possibility that each person can bring interesting, valuable insights to the conversation, you can create the possibility of instant intimacy in that moment.  Keith is inviting people to discard prejudices to then find and build powerful new relationships.

Ok - so that’s clear and obvious enough, but I started thinking about how long-time entrenched relationships can also be leaden with existing preconceptions you may have with the people you already know very well.  You can almost hear your mind say, “here she goes again” when the professional you know so well starts to weigh in on a conversation.  Consider your next meeting in which your long-time colleague starts in with, “In my opinion…” and halt your prejudices for a moment.  Just halt your expectations for a moment.  Your inclination might be to anticipate their point of view and shut off your mind to what they might contribute.

Don Sull, whom we interviewed last year at London Business School, makes a compelling case that organizational leaders need to lean far on the side of invitational openness in discussions in order to allow all voices at the table to contibute clearly and openly.  If the goal is to find a solution somewhere between linear command-and-control and unregulated chaos, a leader needs to err on the side of openness to bring the best ideas to the table.  The lesson here is to curb your prejudices not only in new interactions, but also among those fellow colleagues whom you may have known for a long time.  If we believe we have the capacity to grow in our thinking, have the similar mindset when listening to trusted colleagues.  We all have new tricks to share.

Last week we had the opportunity to spend three intense days filming and working with delegates at the Cornell Global Forum on Sustainability.  Representatives from Google, Intel, GE Healthcare, Cascade Engineering and many more, converged on NYC for three days dedicated to understanding the immense opportunities at the Base of the Pyramid, and to participate in closed working sessions to build disruptive innovations aimed at creating products and services to serve the BoP and build sustainable business models for global multinationals.

The concept is this: While there are nearly 7 billion people on the planet, historically business has created products and services catering to the very top of that pyramid - the wealthy communities and populations.  And the “Base of the Pyramid” has been largely relegated to unsustainable philanthropic activities.  While charitable donations and efforts from first world nations to aid emerging nations certainly has a welcome and important role to play, the challenge and fantastic opportunity available to both corporations and entrepreneurs, is to build effective, inexpensive services and products which both serve the BoP and unapologetically make profits for leading innovative groups.  For example, hand held cheap and readily scalable water purification systems selling for as little as $50 can purify local water sources and remedy dysentery and water-borne illnesses that incapacitate millions around the world.  Such a simple purification device can be built and deployed in markets of need numbering in the millions, even billions.  This simple device can then be improved and innovated up the pyramid long before (for example) a full-scale cost-intensive desalination plant is required.  Of course a full blown desalination plant and requisite distribution system is both expensive and requiring immense infrastructure to deliver the needed clean water.  Think of it!  Instead of competing for the narrowing markets at the top of the global population pyramid, companies and entrepreneurs can address the needs of immense markets.

While at the conference, we had the privilege to conduct video interviews with the leading environmental engagement and sustainability practitioners from Google, SC Johnson, Whirlpool and others.  Our interviews were conducted by David Bennell, Executive Director of the Organic Exchange.  And the entire event culminated at the 92nd Street Y in a panel discussion with Fisk Johnson, CEO of SC Johnson, Stuart Hart, Vice President Al Gore, Ratan Tata, and hosted by Charlie Rose.

During the course of the conference we filmed the proceedings and built a real-time video narrative to capture the intent and ideas generated.  Enjoy!

The best leaders understand that the best ideas come from the ground up - or rather in W.L. Gore’s case, in the round, in teams.  At W.L. Gore there are no bosses, only mentors, champions, and other self-descriptors as associates are invited to define their own roles and play to their strengths in a collaborative fashion.  This approach has yielded a company which produces over 1000 products.

Matt May was consulting to a car company prior to joining Toyota, and after interviewing people in the organization he discovered theirs was a culture that stifled ideas in a command-and-control hierarchical fashion.  The leaders of the company rejected his report, didn’t believe him and insisted they had an open environment where all ideas were welcome to the table.

So Matt played a trick on them at an off-site meeting - watch here:

Familiar story: One day Joe comes up with what he thinks is a killer new product app for his company that he is certain will rock the market.  So he takes the half-baked idea and spends a few days drawing up a provisional plan to present to his product team.  He works on the product development team so of course his colleagues like the idea with a few changes - mostly enhancements and expansions as they get excited and brainstorm over the concept.

Next Joe takes the idea to the sales manager, because of course you can’t take anything to market without the support of the sales group.  The sales manager takes a look and says, “There’s no way I can get my salespeople to focus on this.  The price points are too low and our commission structure, based on your proposed pricing, won’t motivate them.  And besides, your product requires a different buying point with our customers.  My people don’t have relationships with who you need to sell to.  My guys won’t even glance at this.  It looks cool on paper, but let me know when you have something we can actually sell.”  So Joe makes some price modifications and product changes so it is more appealing to both the sales group and their existing relationships.

Next Joe has a meeting with the CFO who says, “I’m not sure you recognize this, but we have a financial plan and margin goals here and your product doesn’t come close to meeting these targets.  You’re going to need to optimize the cost structure around your product before we can introduce it.  Come back to me when you can make it fit our financial model.“  So Joe and his team figure out how to optimize the cost and materials structure, and margin values of the product and finally the CFO approves.

Meanwhile Joe and his team have been having discussions with the engineering group to develop specifications to build the product application.  And the lead engineer says, “Your requirements exceed the talent and capacity of our team.  You’re gonna need to find some money and identify an external resource to build this thing.  Not only that, it will take us 18 months to integrate any external efforts to make your product market ready.”  So Joe and his team make more modifications to reduce the enhancements, scale back the performance, etc.. so it can be built for less, using internal resources, and on time.

Eventually what comes out in product release is laden with the constraints of the company’s business model and is no longer recognizable as what Joe and his team dreamed up.  And of course the product no longer looks like something that will satisfy consumer demand, but more like something that satisfies internal mechanisms.  Well, the customer doesn’t buy what is best suited to the business model conveniences of the manufacturer.  They buy to get a job done.

Clay Christensen makes the case that it’s the business model that needs to innovate to allow innovative products to emerge.  Business units do not evolve, but companies can.

When product development people dream up new products and services they typically think in terms of product market segments and/or customer market segments.  For example, car companies think in terms of compact, mid-size, luxury, SUV, mini-van, light truck, etc… Pharmaceuticals might think in terms of customer market segments - low-income/high-income, 18-24 year olds, married/unmarried, internet access or not, etc…  Christensen suggests that the most successful products answer a need for what the customer is trying to do.  In other words, think in terms of what job needs to be accomplished.  Scott Cook, founder and Chairman of Intuit said, “Looking back on it, whenever we failed with a new product, we followed a conventional marketing paradigm, of segmenting by a product attribute, or customer demographic.”  In other words, when Intuit created products that failed, they didn’t necessarily evaluate what job the customer was trying to accomplish - they thought instead of who they might be able to sell to, or how the new product might fill a narrowing niche in an already compressed market.

The original marketing guru Ted Levitt famously said, “People don’t buy a quarter-inch drill bit, they buy a quarter-inch hole.  You’ve got to study the hole, not the drill.  The drill is just the solution for it.”

Dr. Christensen illustrates the point in this amusing story about milkshakes.  Enjoy!

“[GenY] has been called ‘fatally-flawed,’ accused of lacking values, social awareness or caring about anyone, or anything. In fact, Professor Mark Bauerlein says we’re ‘The Dumbest Generation.’  In a book of the same title, arguing that the internet ‘stupefies youth,’ author and professor Jean Twenge dubs the Net Generation as Generation Me, saying that self-esteem programs in school, combined with the internet, may be unleashing ‘a little army of narcissists’ on society.  Others argue that youth, consumed with their own celebrity and web obsessions, are superficial and lacking social skills.”

So says www.dumbestgeneration.com

I had the privilege to spend Tuesday with Don Tapscott, author of Grown Up Digital, and a number of other books. His latest is the culmination of a study about GenY/Millenials and how they think, interact, learn – and how their behavior will affect the way we interact and collaborate in our communities of work and play. Don has come to the conclusion that the emerging generation may be, in fact, the smartest generation – a generation able to synthesize information through all varieties of media and iterate new ideas, products, services, who-knows-what, much faster than any other generation.  Basically Tapscott describes younger media-saturated kids as developing greater carrying and switching capacities in their brains.

Contrary to Bauerlein’s view, I’m heartened by Tapscott’s optimism. In his research he discovered that more than any previous generation in the last 100 years, GenY is less motivated by money, status and power and more by interest and curiosity to explore, travel, collaborate and volunteer. This generation has the highest percentage of those entering public and non-profit vocations, and the highest percentage of those going into social, environmental and public works jobs. From 1988 to 2008 the percentage of college freshman who say they have volunteered in the last year went from 65% to 90%.

Last year my boys – then 5 and 7 – and I cycled in the Trek Across Maine on behalf of lung cancer. I used their cute faces on our website to help raise the minimum required to ride. This year I’ll make sure they understand what we’re riding for and ask them to help raise the contribution.

About a year ago we embarked on a project to interview senior leaders working in the area of sustainability, environmental engagement, value chain management, green product development and more. The goal is to capture the leading practices and ideas of groups and organizations who have made cutting edge contributions to optimize resources, reduce emissions and build innovative processes and products to introduce in the marketplace. I posted about this previously when we did the Thomas Friedman event.

We have interviewed sustainability practitioners from Microsoft, Green Mountain Coffee, Cornell University, Aveda, and more but most recently we had the opportunity to sit with John Glowacki, Chief Technology Officer for CSC and David Moschella, Global Research Director for CSC’s Leading Edge Forum.I asked John what role senior leaders need to play in organizations to help Green initiatives work.  I thought he would talk about the importance of leaders modeling the way, but instead he talked about how organically change within CSC has been growing from the bottom up.  Groups within CSC across the globe have been creating and sharing their own innovative green initiatives.  This kind of bottom up change behavior has also fostered a kind of creative competitiveness - divisions are competing in a friendly manner how to best optimize and reduce the impact of their operations.  And in an effort to make gains, people are building creative and innovative solutions.  This is the kind of co-opetition has the effect of accelerating change.

This past weekend I read Laurence Gonzales’ Deep Survival: Who Live, Who Dies, and Why and although the book is studying the traits and behaviors of those who manage to survive calamities - plane crashes, lost-at-sea epics, mountain climbing disasters … - I think there is a strong metaphor for the types of behaviors among organizational leaders which allow them to rise up and survive economic and market storms.

Gonzales identifies the five stages survivors typically go through before turning the corner and building an action plan that allows survival:

1. Denial - the first instinct people have is to deny the position they are in and stick with the mental maps they have built in the planning and early execution phases.  Basicaly we each have a mental map we are following and ifthings don’t go to plan we ‘bend the map.’  That is: re-create was is actually happening to fit into the mental construct we created originally.
2. Panic - this is the stage in which people typically succumb to the rising sense of panic within and exhaust previous energy and resources.  People lost will often sprint to false peaks, dash in directions that fit the map they have ‘bent’ in their head.  The beginning of the end can start here if disastrously they break a leg, lose food, abondon gear, etc…
3. Adherence to ‘the plan’ - what happens next is people stick to self-imposed rules.  He cites the example of a firefighter lost in the Tetons who won’t make a fire to generate warmth and dry his clothes because open fires are banned in the National Park.  Or the example of 11 survivors of a plane crash who believe, falsely, that help will find them if they stay put.  A seventeen year old girl separated during the crash knows no such group-thin and follows her instincts to civilization.  At this point, there clearly is no ‘plan’ and it’s the inventive and creative who figure novel ways to adapt and survive.
4. Deterioration - by this point those lost are desperate and have squandered valuable resources and can lose the ability and willingness to make gainful efforts to survive, find help, and build strength.
5. Resignation - finally once options are depleted the lost can lose resolve and will.  Those that survive at this point are often carried forth by the draw of someone waiting: a loved one, or an unrealized dream.

Fantastically, often when lost in the wilderness very few will retrace known steps back to the car or point of departure even when the path they took is clearly understood.  Conversely, those who possess survival instincts typically early on in the dilemma show very sharp mental acuity - Steve Callahan’s boat sank abruptly in the middle of the Atlantic, at night, and yet in the first minutes he took a second to marvel at the clarity of the stars and the weather.  Steve even found humor to offset the deluge of panic rising.

Possibly above all other attributes including ingenuity, clarity, focus, etc… Gonzales points to Resolve as a defining characteristic of survivors. The following quote from the book is taken from Joe Simpson’s account of descending Siula Grande in the Peruvian Andes with his partner Simon Yates. Simpson suffers a broken leg and slides over a cliff into a crevasse. Believing his partner to be beyond reach and dead, Yates abandons his partner.

“Still hanging on his rope, Simpson began to experience a sense of wonder and even joy at his environment, that same spiritual and mystical transformation reported by many other survivors. It is always followed by a certainty of survival and a renewed commitment. With dawn came light, and with light came revelation: ‘A pillar of gold light beamed diagonally from a small hole in the roof, spraying bright reflections off the far wall of the crevasse. I was mesmerized by this beam of sunlight burning through the vaulted ceiling from the real world outside… I was going to reach that sunbeam. I knew it then with absolute certainty.”

I witnessed some wonderful things this weekend, including my six and eight-year olds out-maneuvering me through double-black glades and sheer-pitch head-walls while I take up the rear.  I swear, youth can’t be found in a pill or a bottle but by chasing single-digit kids through five gnarly peaks for two days.  Glorious indeed.

But what I want to translate is this:  We spent the weekend skiing with a friend Erich and his two boys 7 and 9.  Erich is a long-time ski patroller at Sunday River and well-connected to the ski community there and the mountain.  He was off-duty sharing his weekend with us, but responded immediately after we watched a woman crater into the snow before our eyes (later down on a sled).  And then within 45 minutes he responded to a variety of collisions (stretcher) and crashes (again back-boarded on the sled) which kept him focused and engaged while the boys and I bombed the mountain.  So in real time I was witnessing Erich doing his patrol thing and saving the world and all that.

Here’s what happened next: I’m solo with the boys while Erich saves the tourists, and Charlie, Will and Ian had skied on ahead and were entering the terrain park (don’t ask) when Owen and I watched a woman crash severely in front of us.  Owen stopped abruptly, then HIKED UP BACK THE SLOPE to ask how she is doing, retrieve her gear strewn about the slope, and make sure she is OK.  Owen is 7.  I don’t even have time to compute what’s happened and Owen has responded.

On the next run, again it’s me with the boys and while shooting through a narrow section, Ian notices the red flags and poles that designate a hazard have fallen over and are no longer obvious.  Ian stops and patiently replants the hazard poles and flags and carries on.  It’s not a quick fix - it takes a few deliberate minutes.  Ian is 9.  I pause to admire this act with Ian, but keep in mind the posse was moving fast and the competition was high while his friends continued the race on to the bottom.  Meanwhile Ian has stopped from the back of the pack, and committed this quiet gesture without any sense of heroism.  It just needed to be done.  Think about that.

We recently did a filming engagement with Keith Ferrazzi and of all his key insights and ideas, one struck me the most. Keith encourages the concept of leading with vulnerability when establishing a new relationship or deepening an existing relationship. Ever feel as if you’ve worked side by side with someone for years and you’re still not sure you really know them? Everyone has these kinds of relationships with variable depth and perhaps the first inclination is to ask more questions, probe more deeply, you know – try to get them to open up. Keith’s advice is the opposite – he says lead with vulnerability. Share something important, profound, memorable to you, and by doing so you’ll inspire empathy, familiarity and understanding.

Here is a rap I wrote about some of Keith’s ideas – enjoy!
This is also a build on a previous post about Susan Scott and her mantra ‘the conversation is the relationship.’ She has an amusing illustration about a young couple. One day the newly-wed wife approaches her husband and wants to address a number of issues and concerns she feels outstanding. He listens intently and pledges to change his behaviors, his habits to be more accommodating. Time goes by, and she approaches him again and wants to talk. Again he listens closely and hears the same concerns and says abruptly, “We’ve already been through that!” and promptly changes the conversation. Over time, she initiates a similar conversation and he responds with the same response about how he already fixed that and it’s time to move on. She feels ignored and he feels like she didn’t recognize his initial efforts. Until one day he understands the conversation is the relationship. It’s every day, in every interaction, that the relationship takes place. As Susan Scott learned in The Sun Also Rises by Hemingway, he realizes that his understanding came gradually, gradually, then suddenly.