Monday, December 22, 2008

Innovative management: A conversation with Gary Hamel and Lowell Bryan – Final
Forward-looking executives must respond to the growing need for a new managerial model.
NOVEMBER 2007 • Joanna Barsh

Joanna Barsh: So I’m a CEO. What do I do? I have the courage; I’ve got the audacious goal.

Lowell Bryan: Assuming you’re well managed, the direction that most companies need to go in is improving how they enable their people to collaborate with one another at much lower cost by dramatically reducing unproductive search and coordination costs. And that means deploying such devices as talent marketplaces, knowledge marketplaces, and formal networks to make intangible assets flow throughout the company, as opposed to going up and down vertical chains of command.
I will say that the ideas on how to organize for the 21st century have now reached a stage of maturity where people are ready to consciously innovate. It isn’t like ten years ago, when we were still trying to figure out digitization and globalization.

Gary Hamel: I would argue there’s not 1 company out of 1,000 today that has created an organization in which innovation is truly everyone’s responsibility.

CEOs tell me, “Gary, we’re really serious about innovation”—and what CEO isn’t these days? My response is to go down to first-level employees and ask them a few questions. The first question I ask is, (1) “How have you been trained as a business innovator? What investment has the company made in teaching you how to innovate?”
The second question I ask is, (2)“If you have a new idea, how much bureaucracy do you have to go through to get a small increment of experimental capital? How long is it going to take you to get 20 percent of your time and $5,000 to test your idea? Is that a matter of months or is it very easy for that to happen?”
The third question is, “(3) Are you actually being measured on your innovation performance or your team’s innovation? Does it influence your compensation?”
And finally I’ll ask, (4)“As you look at the management processes in your company, do they tend to help you work as an innovator or get in the way?” When you ask these questions of first-line employees, you quickly discover that in most companies there’s still a big gap between the rhetoric of innovation and the reality.

Joanna Barsh: Final thoughts?

Gary Hamel: In any field of human endeavor you ultimately reach a point where you can’t solve the new problems using the old principles. I think we’ve reached that point in the evolution of management. When you go back to the principles upon which our modern companies are built—standardization, specialization, hierarchy, and so on—you realize that those are not bad principles but are inadequate for the challenges that lie ahead.

Lowell Bryan: More economic integration has taken place in the past 30 years, you could argue, than in the previous 10,000 years of human history. And the organization of companies, as Gary has said, is lagging behind the changes in the world economy. But to my mind, it’s just an incredibly exciting opportunity for the world at large because, for the first time, the ability to create wealth is being liberated from the inputs of labor and capital.

Ideas are being monetized in ways never before possible, and the world is a richer place. I’m not just talking about creating financial wealth; I’m talking about a much more stimulating work environment, with more interesting jobs for employees to create more valuable products and services for the world’s consumers. It is just an incredibly exciting time to be alive.

Thursday, December 18, 2008

Innovative management: A conversation with Gary Hamel and Lowell Bryan – Part 2
Forward-looking executives must respond to the growing need for a new managerial model.
NOVEMBER 2007 • Joanna Barsh
This is part 2 of the interview with Hamel and Bryan.

Joanna Barsh: Let’s discuss what management innovation looks like. Gary, your book talks about experimentation as the key, and Lowell, you’ve got a number of ideas that are very, very different from what is actually going on in companies today. What really gets you excited as you start to innovate?

Lowell Bryan: What I find exciting are ideas that already exist in practice, that have been innovated over the past 10 or 15 years on a small scale, but have not been integrated together on a large scale. The necessary innovation is to adapt the specific organizational-design ideas that enable individual companies to perform better.

So it might be bringing talent or knowledge marketplaces inside a company or building formal networks or introducing dynamic management principles to a company. These are all ideas that have been tried somewhere; they just haven’t been integrated together, at scale, in very many companies.

Gary Hamel: The outlines of the 21st-century management model are already clear. Decision-making will be more peer based; the tools of creativity will be widely distributed in organizations. Ideas will compete on an equal footing. Strategies will be built from the bottom up (I agree with this BUT I believe fundamental diection must be top down). Power will be a function of competence rather than of position. In terms of the future of management, we’re at the beginning of what will be a fairly long journey. You can see some of the pieces starting to come together, but we’re not there yet.
To become inspired management innovators, today’s executives must learn how to think explicitly about the management orthodoxies that bound their thinking—the habits, dogmas, and conceits they’ve never taken the trouble to challenge. For example, many people believe that it takes a crisis to change a large organization, and when we look at the evidence this seems to be the case.

And yet it’s important to dig underneath that belief and ask, “Is this a law of physics? Is crisis-driven change the only way to change a large company, or is this reality the consequence of something we designed into our management system 100 years ago?” I would argue it’s the latter. It often takes a crisis to change an organization because in most companies the authority to set strategy and direction is highly concentrated at the top. As a consequence, a relatively small group of people at the top can hold the organization’s capacity to change hostage to their own personal willingness to adapt and to change.
So the orthodoxy is that it takes a crisis to change. OK, but in order to change that reality you have to change the distribution of power in large organizations. Some of these things are not going to happen overnight.

Richard Florida, who wrote a wonderful book called The Rise of the Creative Class,4 argues that some of the most bruising battles that will be fought over the next 15 to 20 years will pit the forces of organization against the forces of creativity. One model is not going to simply surrender to the other. To go back to Lowell’s idea about the S curve, I don’t think you shuffle your way from one S curve to the other. You have to jump.

Frederick Taylor often talked about the need for a mental revolution when he was trying to move organizations from the craft-based model to the factory model. Today we need a new mental revolution. Some companies will lead and some will follow, but we won’t be able to reinvent management for this new century without some trauma and some risk taking.

Joanna Barsh: So how should companies change as they jump to this next S curve?

Lowell Bryan: I like the notion of designing a managing concept or master plan—a master architecture, if you will—for every company. Such a master plan should lay out the big foundational elements to get your organization to work differently, including, for example, what is your fundamental metric for performance? Should it be return on capital or profit per employee?

Once you’ve designed your master plan, you can launch a series of initiatives aimed at achieving your goals. Part of this process is to stage-gate the initiatives in order to manage the risks of innovating. The thing that really stops innovation is risk. CEOs can be terrified of organizational disruption because it can put at risk a company’s ability to meet quarterly earnings, which in turn is often what causes CEOs to lose their jobs.
So part of what you need is a bridge so that they can be innovative but also keep their jobs.
I think if you take the principles of private equity, venture capital, and R&D and bring them inside the company to stage-gate your investments in organizational innovation, you can first learn what works and then scale it, without taking excessive risk (This is why we preach the importance of process like Options Management -- manage the cost of failure, not the rate).None of us are smart enough to see in advance the ultimate answer, because the real answer lies in discovering the operating detail to make new ideas work in practice. You can see the broad directions, but you can’t see how it’s going to really work. You can’t even understand the secondary and third-level consequences of the design decisions you make. Those have to be discovered through trial and error.

Gary Hamel: When it comes to reinventing management, you must have the courage to set seemingly aggressive objectives—like GE’s goal of growing at twice the rate of GDP, net of acquisitions. But the actual work of reengineering our musty old management practices will be more evolutionary than revolutionary. You don’t take a large, complicated company and tear up all the track at once. To do so would expose a company to an intolerable level of operational risk. Yet companies must become as purposefully and creatively experimental in thinking about their management systems and processes as they already are in thinking about R&D or new-product development.

Joanna Barsh: Who in companies should spawn that portfolio of experiments that Lowell was referring to?

Gary Hamel: The folks who are responsible for the big management processes: the executive vice president for human resources, the CFO, the director of planning, and so on.

Lowell Bryan: In terms of companies that are really pushing innovation and mobilizing mind power, some of the best examples are private-equity players. With private equity, you have principals who are activists, and they’re really shaking up many industries.

Joanna Barsh: OK, I’ve got the courage, I’ve got the architecture. I can’t believe that’s all a company needs.

Gary Hamel: Most of all, there is a lot of discipline and work needed to migrate from one management model to another. I don’t think it’s obvious to a lot of companies that it’s really possible to experiment with management. (!!!!!)

As in any scientific experiment, you have to set some very clear boundaries around what kind of risks you’re willing to take and then challenge people to test new ideas within the boundaries. That’s a new skill for most organizations. A lot of the inspiration will come from looking entirely outside the world of large organizations and management—and understanding how experimentation is used in the sciences to engender new insights will minimize risks.

Lowell Bryan: The real opportunity that companies have today is to take control of their own destinies and begin to consciously innovate. By that I mean they need to take on strategic initiatives and organizational initiatives at the same time. The scarce resources in any company today are discretionary spending, talent, and the ability to focus. You need the ability to focus in order to be able to allocate the resources. Like it or not, in order to really create any innovation and scale it, you’ve got to deploy some resources. (We must have processes and the will to make the tough portfolio decisions that afford the budgetary head room to resource and scale these initiatives to win. This is even more critical in the times we are in whether we are talking about growth and/or cost initiatives – both require the resources to win.)How do you do that? The issue is not just raw innovation; it’s actually being able to scale the innovation through at a large company. That’s where the wealth will be created.

Gary Hamel: In this experimentation it’s critical to have what I call the voice of the user very much front and center—the individuals, throughout an organization, whose work is heavily influenced by a company’s core management processes. These people know which processes choke off innovation, impede adaptability, and frustrate employees.

Monday, December 15, 2008

Innovative management: A conversation with Gary Hamel and Lowell Bryan – Part 1
Forward-looking executives must respond to the growing need for a new managerial model.
NOVEMBER 2007 • Joanna Barsh
Over the next few positings, I will excerpt a tremendous, insightful interview lead by Joanna Barsh of McKinsey with Gary Hamel and Lowell Bryan on the future role of leaders. An underlying theme of these discussions is that management must evolve to profit from new technology and globalization. This is true whether we are in good times or bad—innovation is needed as much if not more in these times than when the markets were growing. As we discussed before, companies must be ambidextrous. Management must be in place to do repetitive things exceptionally well while at the same time create the environment and empowerment to encourage and profit from innovation; process is critical in both.

“Sometime over the next decade,” warns renowned strategy guru Gary Hamel in his new book, The Future of Management, “your company will be challenged to change in a way for which it has no precedent.”What’s even more worrisome, he argues, is that decades of orthodox management decision-making practices, organizational designs, and approaches to employee relations provide no real hope that companies will be able to avoid faltering and suffering painful restructurings.

McKinsey partners Lowell Bryan and Claudia Joyce, in their recently published book, Mobilizing Minds,2 arrive at a similar conclusion from a slightly different perspective. They find that the 20th-century model of designing and managing companies, which emphasized hierarchy and the importance of labor and capital inputs, not only lags behind the need for companies today to emphasize collaboration and wealth creation by talented employees but also actually generates unnecessary complexity that works at cross-purposes to those critical goals.

Forward-looking executives will respond to this looming challenge, these authors conclude, by bringing the same energy to innovative management that they now bring to innovative products and services.

The opportunity is substantial. Against the backdrop of the digital age’s dramatic technological change, ongoing globalization, and the declining predictability of strategic-planning models, only new approaches to managing employees and organizing talent to maximize wealth creation will provide companies with a durable competitive advantage. It won’t be easy. As companies discard decades of management orthodoxy, they will have to balance revolutionary thinking with practical experimentation to feel their way to new, innovative management models.

Hamel is the founding director of the Management Innovation Lab, a nonprofit research organization with offices in London and Silicon Valley dedicated to accelerating the evolution of management practice.3 He recently joined Bryan for a conversation on the subject of management innovation. Joanna Barsh, a director in McKinsey’s New York office, moderated their discussion.

Joanna Barsh: What is the opportunity both of you have identified and how did you spot it?

Gary Hamel: For almost 20 years I’ve tried to help large companies innovate. And despite a lot of successes along the way, I’ve often felt as if I were trying to teach a dog to walk on his hind legs. Sure, if you get the right people in the room, create the right incentives, and eliminate the distractions, you can spur a lot of innovation. But the moment you turn your back, the dog is on all fours again because it has quadruped DNA, not biped DNA.

So over the years, it’s become increasingly clear to me that organizations do not have innovation DNA. They don’t have adaptability DNA. This realization inevitably led me back to a fundamental question: what problem was management invented to solve, anyway?
When you read the history of management and of early pioneers like Frederick Taylor, you realize that management was designed to solve a very specific problem—how to do things with perfect replicability, at ever-increasing scale and steadily increasing efficiency.
Now there’s a new set of challenges on the horizon. How do you build organizations that are as nimble as change itself? How do you mobilize and monetize the imagination of every employee, every day? How do you create organizations that are highly engaging places to work in? And these challenges simply can’t be met without reinventing our 100-year-old management model.

Lowell Bryan: I arrived at the same point from a slightly different perspective. McKinsey asked me about 12 years ago to try to understand the impact of technology and globalization on our clients. We concluded that these forces were creating a fundamental discontinuity. Or to put it differently, that technology and globalization were creating a set of opportunities that didn’t exist before.

We observed that companies were struggling to take advantage of the opportunities created by digitization and globalization because their organizations were not designed for this new world.

Joanna Barsh: Is this a topic that CEOs are eager to hear about?

Gary Hamel: Not necessarily. The Internet is making it possible to amplify and aggregate human capabilities in ways never before possible. But most CEOs don’t yet understand how dramatically these developments will change the way companies organize, lead, allocate resources, plan, hire, and motivate—in other words, how new technology will change the work of managing.
Throughout history, technological innovation has always preceded organizational and management innovation. Think back to the end of the 17th century, when muskets started to be introduced into European warfare. At the time, battle formations were very deep, very square, with the archers in the middle of the formation shooting over the heads of the archers in front of them.
Eventually, those formations changed in size and scope to better reflect the capabilities of muskets. But it took almost 100 years for this to happen. Why? Because a couple of generations of generals had to die off before military planners were able to use this new weapon in a productive way.
It won’t take 100 years this time. Still, if we’re going to fully mobilize human minds, to borrow Lowell’s phrasing, we’re going to have to turn a lot of our legacy management beliefs on their head. The old model was, “How do you get people to serve the organization’s goals?” Today we have to ask, “How do you build organizations that merit the gifts of creativity and passion and initiative?” You cannot command those human capabilities. Imagination and commitment are things that people choose to bring to work every day—or not.

Lowell Bryan: I think the technological revolution that occurred in the past 15 years was basically equivalent to the industrial revolution—a fundamental discontinuity. And just as technologies have S curves, the technology of management also has an S curve.

If you look at the big management innovations that Gary has talked about—from, say, Taylor in the 1890s up to [Alfred P.] Sloan in the 1920s and then popularized by [Peter F.] Drucker and [Marvin] Bower—you could argue that the maturity of the 20th-century management model didn’t come until the 1960s and 1970s. Only then did what we view as modern management become pervasive throughout the world. In other words it took 50 to 60 years. Modern management itself was basically an effort to deal with the aftershocks of factories, which were created over 100 years before Frederick Taylor was born.

In other words, we are in the early stages of a very long innovation of organizational design that will eventually go to places we can’t yet see. But you can see enough to identify huge opportunities for companies to take advantage of what is already known. Innovation in organization is occurring all over the place, but a lot of those innovations go nowhere. There’s lots of experimentation going on, but organizational barriers prevent the adoption of good innovations throughout the company.

Gary Hamel: There are three reasons the technology of management may well change as radically over the first few decades of this century as it did during the adolescence of the last one. First, as Lowell says, is the impact of new technology. The availability of powerful new tools for coordinating human effort will profoundly change the work of management over the next few years. And then we have that new set of challenges I mentioned earlier: the increasing demand for companies to be adaptable, innovative, and exciting places to work. A third force for change is a revolution in expectations. Take a look at our kids—the first generation that has grown up on the Web. Their basic assumption is that your contribution should be judged simply on the merits of what you do rather than on the basis of your title or your credentials or providence or anything else. This is the lesson they’ve drawn from the experience with what I call the “thoughtocracy” of cyberspace.

Joanna Barsh: Are the thinking-intensive industries driving what Gary is talking about?

Lowell Bryan: New organizational models are needed in all industries because all companies engage in thinking-intensive work. The traditional, hierarchically based 20th-century model is not effective at organizing the thinking-intensive work of self-directed people who need to make subjective judgments based upon their own special knowledge. Such people work in all companies, in all industries, and in the digital age it is these people who create wealth. We need a model for such work—a model that uses hierarchical decision making only for activities that need that authority, such as allocating resources, appointing people to jobs, or holding people accountable—but at the same time enables self-directed professionals to collaborate with their peers continuously. And that’s where you need to adapt the model: by creating mechanisms to enable such collaboration to be efficient and effective. Such mechanisms can help the organization to work horizontally as well as vertically.
Every large company, even a retailer or a mining company, has large numbers of thinking-intensive employees who need to collaborate with one another. That’s where the value is today. The winners will be those that enable their thinking-intensive employees to create more profits by putting their collective mind power to better use.

Joanna Barsh: You both talk about talent and human beings as a company’s biggest asset. Are CEOs on that wavelength?

Lowell Bryan: Part of the issue is the definition of talent. Everybody says they want more talent, so it’s almost uninteresting to ask people what their biggest challenge is; it’s always going to be talent. But to be very clear, it isn’t just intrinsically talented people you need. You can hire all the intrinsically talented people you want. There’s a market for talent, and as long as you’re willing to pay what that marketplace demands, you can attract talented people. The real challenge is making profits off those talented people. That’s where the big opportunity is. The leading companies today are combining talent and technology and organizational design to generate much higher profits per employee than was possible in the past. So the trick becomes, “How do I hire talent that I can profit from?”

Gary Hamel: In a market where talent is largely a commodity and can be bought anywhere, the secret sauce is creating an environment in which you push that frontier out, in which you can steadily raise the returns on human capital. The combination of technology and talent is a powerful catalyst for value creation, but to take advantage of the Web’s capacity to help us aggregate and amplify human potential in new ways, we must first of all abandon some of our traditional management beliefs—the notion, for example, that strategy should be set at the top. So I think Lowell is 100 percent right: in terms of managing creative-thinking people, you have to separate the work of managing from the notion of managers as a distinct and privileged class of employees. Highly talented people don’t need, and are unlikely to put up with, an overtly hierarchical management model. Increasingly, the work of management won’t be done by managers. It will be pushed out to the periphery. It will be embedded in systems. I think we’re on the verge of what I would call a postmanagerial society. The idea that you mobilize human labor through a hierarchy of overseers and bureaucrats and administrators is going to look extraordinarily antiquated a decade or two from now.

Lowell Bryan: These thinking-intensive people are increasingly self-directed. In fact, they’re directed as much by their peers as they are by supervisors. The management challenge is akin to urban planning. The art of it is that you must enable people to make thousands and thousands of individual decisions about how to live and work, but you have to create the infrastructure to make it easy for them to do so. You’ve got to have the sewer lines, you’ve got to have the four-lane highways, you’ve got to have the pedestrian malls thought through in a way that individuals find it natural and easy to work either by themselves or with others.

Gary Hamel: There’s a danger too, I think, of creative apartheid. Too many executives seem to believe that while a few people in the company may be really clever and creative, most folks aren’t. When you look at companies like Toyota, you see their ability to mobilize the intelligence of so-called ordinary workers. Going forward, no company will be able to afford to waste a single iota of human imagination and intellectual power.

Thursday, December 11, 2008

Reinventing Your Business Model
Mark W. Johnson, Clayton M. Christensen, Henning Kagermann
HBR, December 2008
Reprint: R0812C

This is a fabulous article that highlights a key premise of our work at Kellogg – systemic innovation must occur across the whole Business Design that we define by:

This is similar to that proposed in the HBR article. Our work starts with defining the target customers and the outcomes we hope to create for them; this is built from deep customer insights. We then define the Value Proposition for these customers focusing on three vectors: function, economic, and emotive that creates significant competitive separation in the eyes of our customers. Finally, we define how we hope to capture value by clearly defining what we are selling (the Unit of Business); the profit model we hope to deploy; and , how we sure our position.

I strongly recommend you order the article.

Why is it so difficult for established companies to pull off the new growth that business model innovation can bring? Here's why: They don't understand their current business model well enough to know if it would suit a new opportunity or hinder it, and they don't know how to build a new model when they need it. .... .......Successful companies already operate according to a business model that can be broken down into four elements: a customer value proposition that fulfills an important job for the customer in a better way than anything competitors offer; a profit formula that lays out how the company makes money delivering the value proposition; and the key resources and key processes needed to deliver that proposition. Game-changing opportunities deliver radically new customer value propositions: They fulfill a job to be done in a dramatically better way (as P&G did with its Swiffer mops), solve a problem that's never been solved before (as Apple did with its iPod and iTunes electronic entertainment delivery system), or serve an entirely unaddressed customer base (as Tata Motors is doing with its Nano - the $2,500 car aimed at Indian families who can't afford any other type of car and usually use motorcycles to get around—(we discussed this in an earlier posting. Doing so doesn't always require a new business model, but a new model is called for under certain conditions. It is often needed to leverage a new technology (as in Apple's case); is generally required when the opportunity addresses an entirely new group of customers (as with the Nano); and is surely in order when an established company needs to fend off a successful disruptor (as the Nano's competitors will now need to do).

Friday, November 28, 2008

Lessons from innovation's front lines:

An interview with IDEO's CEO Tim Brown, whose company specializes in innovation, distills the lessons of his career.
NOVEMBER 2008 • Lenny T. Mendonca and Hayagreeva Rao

IDEO is a fascinating company that we feature in our classes. The following is an excerpt from an interview from the McKinsey Quarterly. Go to the original site for the full text. They talk about some real pertinent issues. Remember, we use the term innovation a lot but we are really talking about growth.
I would like to wish our American audience a very Happy Thanksgiving; our Indian members a rapid return to peace; and a wish to all a return to “normalcy” whatever that is!

Many companies claim to be innovative, but few can claim innovation as their raison d’ĂȘtre. One such innovation machine is IDEO—a designer of products, services, and experiences ranging from Apple’s first mass-market computer mouse to aspects of Prada’s store in New York City to the patient-care delivery model at SSM DePaul Health Center, in St. Louis, Missouri.
IDEO’s single-minded focus makes it an intriguing port of call for executives seeking insights on innovation. The company’s deep experience collaborating with other businesses and with nonprofits and government agencies gives it valuable perspectives on what distinguishes winning from losing innovation efforts. Yet as CEO Tim Brown is quick to point out, what works at IDEO won’t work everywhere.

Brown has worked at IDEO since its formation, in 1991, when three established design firms came together. He became CEO in 2000, after stints heading IDEO Europe and the company’s San Francisco office. Over the years, Brown has stood for the development of ideas through action—observing customers, prototyping, testing, refining—rather than abstract thought.1
In this interview with McKinsey’s Lenny Mendonca and Stanford professor Hayagreeva Rao at IDEO’s offices in Palo Alto, California, Brown provides his perspective on innovation at IDEO and at other organizations. He focuses not on a philosophy of design but on the role of leadership in stimulating creativity, the barriers that sometimes inhibit it, and the incentives that really help to generate new ideas. He also discusses opportunities to innovate in public services and the promise of user-generated online content.

The Quarterly: You’ve written and spoken extensively about IDEO’s design philosophy and its potential relevance for other companies. What lessons does IDEO, as an organization, hold for others?

Tim Brown: …………..
So we talk a lot about managing tensions. On one end of the spectrum is running a business well. On the other end is having the most creative culture you can. You’ve got to have both. And you can’t just pick a spot on the spectrum. You’ve got to move around. It doesn’t worry me to do that. But it drives some people completely crazy.(You need to be ambidextrous!!)

The Quarterly: Presumably, those tensions also exist in other organizations trying to innovate. What approaches can help resolve them?

Tim Brown: Even though companies want everyone to be thinking about innovation all the time, the reality is that everybody’s got other roles to play. So innovation is not a continuous activity; it’s a project-based activity. If you don’t have a process for choosing projects, starting projects, doing projects, and ending projects, you will never get very good at innovation. Projects need some form—you call them something; you run them in a certain way; you fund them in a certain way. That sounds simple, but, actually, a good process for getting projects going and done is often not obvious to companies.

The Quarterly: What’s the role of leadership in stimulating creativity and innovation?

Tim Brown: You really notice a difference in organizations where the senior leadership immerses itself in innovation. I don’t mean that it runs projects. I don’t mean that it does the innovation itself. But it immerses itself by, for example, playing an active role in reviewing the innovation that’s going on at various levels in the organization in order to give people permission to take risks. Or by playing a really active role in deciding who gets to do innovation, making sure project leaders pick people who are naturally comfortable taking risks.
(Systemic innovation/growth cannot happen without the active involvement of leadership, period!!)

In some cases, leading innovation means standing up for ideas when they get to the point where they need to be sold throughout the organization. Most of the extinctions that happen in the innovation ecosystem happen inside the organization—long before the ideas get to market—not in the marketplace. The antibodies that organizations naturally have to fight new ideas win out. It’s often the role of senior leadership to defend new ideas until they’re actually out in the marketplace and able to stand up for themselves.

The Quarterly: What gets in the way of innovation?

Tim Brown: The biggest barrier is needing to know the answer before you get started. This often manifests itself as a desire to have proof that your idea is worthwhile before you actually start the project: “show me the business proof that this is going to be a good idea.” You can understand this, of course, because it’s an attempt to mitigate risk. But wanting to know whether you’ve got the right idea—or the assumption that you’ve got to have a business case—before beginning to explore something kills a lot of innovation.

Now, if you want to do some incremental innovation in a market, with products you understand well, then there’s a reasonable argument that you should have a pretty good business case. But not if your ambition is “to create the next iPod.” Steve Jobs didn’t know what the business case was going to be for the iPod before he started. (This huge. In our discussions we often talk of needing to be an ambitexrious company. You need to match the approach and appropriate tools aginst the goals of any particular project. Projects that extend or defend an existing business should have a pretty sound business case. But, if you are reinventing or making a significant change to you business design, you cannot possibly have a solid business case at the outset. This is when we deploy tools such as Options Management and Discovery Driven Planning that are designed to manage the uncertainty/assumptions until a firm business plan can be developed.)

The innovation process is a series of divergent and then convergent activities—a very simple concept, but one that a lot of leaders used to managing efficient processes in their businesses struggle with. By “divergence,” I mean a willingness to explore things that seem far away from where you think your business is today. The discomfort that a lot of business leaders have with innovation is with divergence. They think that it’s divergent forever and that they’ll never be able to focus on something that makes business sense. I think that’s where some business leaders, historically, have had a bit of a problem with their internal innovation units: the leaders have a sense that these units are endlessly divergent. If you understand that convergence follows divergence, and that it’s really hard to converge without first diverging, maybe that’s a bit comforting.

The Quarterly: What role do you see for user-generated online content—which often seems pretty divergent—in stimulating innovation?

Tim Brown: It’s better to have a bigger ecosystem for innovation than a smaller one. You’re going to get more ideas and increase the likelihood of better ideas. The more people, all other things being equal, the better for innovation. So there’s definitely a role for user-generated content.
But it’s really early. ………

The Quarterly: Thus far, we haven’t talked much about incentives. What’s their role in creating a culture where innovation flourishes?

Tim Brown: I think organizations have a hugely unfair advantage when it comes to innovation and incentives: people want to put things out in the world to leave their mark; they want to be creative. I think it’s a basic trait of human nature—if you give people the chance to do things that have an impact in the world, that is inherently motivating to them. Time and time again, I hear people say that putting something out in the world that didn’t exist before was a life-changing experience.

This means that if you want to be an effective innovation organization, to motivate your people as innovators, you’ve got to be prepared to measure yourself by the impact you have on the world—not just your sales or your margins, which are important, of course………….

The Quarterly: If translating innovation into impact is critical to motivate people, how, in practical terms, do you do that—both organizationally and for individuals—in ways that matter to them?

Tim Brown: At IDEO, we try to do this on three levels. Everybody has a portfolio of all the things they do. We’re now rolling out a software platform for knowledge sharing. Everybody has a page on that, which is basically their personal portfolio. One of the things in it is the impact of the work they’ve done—on their colleagues, on their teams, or on the outside world.
Then we’ve always encouraged project teams, at the end of a project, to share the impact they’ve had.. ………..

The Quarterly: Why are you doing that?

Tim Brown: People want to work on things they believe in. I don’t mean that every project we do is in the social-impact space, of course. But we get more pushback now than we ever did about whether a project is something that people want to work on……….

Monday, November 24, 2008

P&G Changes Its Game
How Procter & Gamble is using design thinking to crack difficult business problems

By Jeneanne Rae
July 28, 2008, 2:42PM EST text size: TT

This emerging thought process is intriguing but potentially difficult to incorporate broadly. We will keep you abreast of progress as it evolves.

"Design thinking" may seem like just another new buzzword in the lexicon of innovation, but Procter & Gamble (PG) is using the approach to change its culture. Leadership is listening, learning, and deploying; cross-functional teams are cracking vexing problems across its business landscape; and visualization, prototyping, and iteration are facilitating communication internally and with customers like never before. Here's a look inside one of the most intriguing change management efforts going on in Corporate America today.

"It has been transformative for our leadership teams," says Cindy Tripp, marketing director at P&G Global Design, as she describes her work rolling out the company's Design Thinking Initiative. With a cadre of 100 internal facilitators, more than 40 design thinking workshops have been held in P&G business units across the globe during the past year. The design thinking facilitation team comes from every function at P&G (such as marketing, research and development, info tech, and product supply as well as design). Perhaps most important, half of the workshops focused on something other than new product initiatives to include other types of pressing business issues such as strategy, retail relationship building, and matters of operational excellence. "We want people to use these techniques daily in their work—using broad insights; learning faster; failing faster. Design thinking can be applied everywhere, every day," says Tripp.

This attitude signifies an extreme shift for the $81.5 billion global consumer-product giant, whose long-tenured design managers describe P&G's former attitude about design as "the last decoration station on the way to market."

Reframing Is the Key

"Once business leaders see they can use design thinking to reframe problems, they are transformed," says Tripp. "The analytical process we typically use to do our work—understand the problem and alternatives; develop several ideas; and do a final external check with the customer—gets flipped. Instead, design thinking methods instruct: There's an opportunity somewhere in this neighborhood; use a broader consumer context to inform the opportunity; brainstorm a large quantity of fresh ideas; and co-create and iterate using low-resolution prototypes with that consumer."

In his new book, The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation, P&G CEO A.G. Lafley explains the difference between the two methods: "Business schools tend to focus on inductive thinking (based on directly observable facts) and deductive thinking (logic and analysis, typically based on past evidence)," he writes. "Design schools emphasize abductive thinking—imagining what could be possible. This new thinking approach helps us challenge assumed constraints and add to ideas, versus discouraging them."

Mass-Market Offerings Reconceived

An excellent example of this type of reframing can be experienced by going to As a female consumer, I'll be the first to tell you that Olay products are frustrating to shop for. There are too many, you can't zone in easily on what's right for you, and it seems like you ought to feel a little better about shelling out $29 for a tube of goo to try to keep yourself looking good. Apparently I'm not the only woman feeling this way. Through the insights into these frustrations gleaned at a design thinking workshop, Olay marketers came up with the Web site, a streamlined way to connect with consumers online.

With her soothing voice, the site's narrator walks you through a series of engaging questions about your skin. What are your habits and goals? What problems are of concern? The experience is simple yet conveys a deep understanding of the myriad factors that make up your specialized needs. Analyzing your responses, the system quickly assembles a tailored set of recommendations for a regime that is designed to meet your age and stated desires. I found myself wishing that all retail encounters could be this easy and fulfilling. provides a calming, easy way to receive a credible consultative experience without ever leaving your own home. P&G now offers a beauty service. Through menu choices that indicate your interests and skin issues, Olay marketers are able to start a new type of dialogue while collecting important data on users that can be more informative than expensive market research. Consumers can opt to have send a personalized skin-care regime profile by e-mail.

Dan Hamilton, brand manager for, said: "The most important result is that people are finding the right solutions and sticking with them. They describe increased satisfaction and a better experience. As a result we are seeing an increase in our equity scores and better loyalty to the brand."

Witness in this example the underpinnings of business model innovation. With this seemingly small enhancement, Olay will also differentiate itself in a highly complex, competitive market; speed up the time in which it understands and can build new solutions for its target prospects; and build a database that will enable P&G to reach out directly to its customers on a personal basis (which is a rarity for consumer-product companies).

The innovations through design thinking continue to come: Herbal Essences' brand transformation (, 6/17/08), a Tide media breakthrough, and new business and organizational development strategies represent how design thinking is changing the game at P&G.

A Hard Problem Requiring a Creative Solution

The Design Thinking initiative was the brainchild of Vice-President for Design Claudia Kotchka, who got the task from Lafley, to "get design into the DNA of the company" when she took on her position seven years ago. In a process-laden place like P&G, this is no easy task, especially because there is no way that design could take hold if perceived as tangential to P&G's existing set of operating models. Kotchka drew together the "deans of design thinking": Roger Martin, dean of the Rotman School of Management at the University of Toronto; David Kelley, founder of Stanford's D.School; and Patrick Whitney, dean of the Institute of Design at Illinois Institute of Technology. "How do we teach people what design thinking is and how to use it in a way that it could scale across a company with 130,000 employees? How could we engage more functions within the organization?" says Kotchka. "If we could get this right, then the prospect of fulfilling A.G. Lafley's vision had hope."

The first prototype workshop with the hair-care business in London in November 2005 yielded mixed results. "Somehow it didn't quite deliver—people didn't take action; the lessons didn't have staying power," said Tripp. The workshop agenda was redesigned with more emphasis on business. "There was too much academic stuff—philosophy and theory of design. We got rid of all the theory and settled on a completely experiential approach. To effect a major transformation in the way a problem is viewed through design thinking, the team must engage completely," Tripp continues. "Our business people wanted to get on with it. We will always engage when working on a problem in our business; but not necessarily engage when working on theoretical problems. From then on we were very selective to find worthy problems and assemble the right types of stimuli to get to the crux of the matter."

Nondesigners Design

The resulting design thinking workshop structure became more of a fast-paced immersive experience that ends with a serious reflection point about what's different using this methodology. Says Tripp: "Most of our workshop reflections suggest that the power of doing design thinking rather than just reacting to design thinking shifted many standoffish leaders into real partners for design. Once they get it, they can't get enough of it."

"Participants get scared using such rough prototypes to elicit consumer feedback at the beginning, but they are won over when they see the benefits of co-creation," says Kotchka. "We have found that the more finished a prototype is, the less feedback people will give you. When you give prospective users something half-finished, they think you don't know the answer. They know you need their help—and really open up."
(Test early, quickly, and cheaply!)

Having facilitated so many workshops over the past year, Tripp reflected on the impact the initiative has had on her personally. "I get goose bumps at the high level of dialogue and caliber of discussion that happens. Design thinking activates both sides of the brain—it makes participants more creative, more empathetic toward the human condition P&G consumers face. (this would work for B to B situations as well) Our managers don't leave their analytical minds at home; instead they are able to operate with their whole brain, not just the left hemisphere."

Kotchka, who recently announced her retirement from P&G after 31 years, said: "Design is going to continue to grow and prosper at P&G. That was my goal when I took this position. Our senior leaders are really engaged in design now; we have amazing global design talent, and design thinking gets all the other disciplines engaged. We have a wait list of people from every function in the company that want to become facilitators in design thinking."

Time will tell, of course, whether design will get into P&G's DNA as Lafley has envisioned. At any rate, the efforts of Kotchka and her team to change P&G's game with design will go down in business history as one of the most challenging cultural transformation efforts undertaken by a major global corporation.

Saturday, November 15, 2008

The Challenges of Innovation
Indifference, hostility, and isolation are among the major obstacles to a healthy innovation environment
by Irving Wladawsky-Berger
August 22, 2008, 2:57PM EST

This is a fabulous article that really sums up how management/leadership can help or hinder innovation and growth.

In most companies, just about all the cards are stacked against the nurturing of innovation, especially the kinds of new ideas and disruptive innovations that generally lead to major changes in the marketplace and within the business.
Following are some of the behaviors I have observed in companies throughout the years that have convinced me how difficult it is to create an environment in which innovation can flourish.


While just about every CEO and senior executive of a company pays lip service to innovation, many do not really mean it. They mouth the words—it would be politically incorrect not to embrace innovation—but they do little beyond that.

That's not because they are not good, smart, and highly competent people. It's just that innovation is not a part of their DNA. The majority of executives make it to top positions by being very good operational managers: meeting sales objectives, improving products and services to keep up with competitors, supporting existing customers and acquiring new ones, managing mergers and acquisitions, achieving the required financial results quarter after quarter, and so on. (This often leads to what we call a Congealed Leadership Mindset that is a huge barrier to growth) These management jobs are very tough and getting tougher, given our rapidly changing, fiercely competitive, global business environment. Being a good manager takes very hard work, attention to detail, and organizational discipline.

But as executives rise up in the organization, other skills become increasingly important. They need to transition from being a manager to being a leader.

Management is about business results and processes. Leadership is about people. The key quality you need in good leadership is passion—the urgency to attack and solve the complex problems that all organizations face. To do so, you need to be surrounded by highly talented people, and you need to find a way to transmit your passion to them, so they will buy into your vision of the future, perform at the highest possible levels, and come up with innovative solutions to the challenges of achieving the vision.

When skies are blue, a company might be able to cruise along with top managers who are indifferent leaders. Such managers are typically executing tactical, incremental strategies where the critical ingredients are good, disciplined management as well as operational excellence. But once the skies begin to darken, (they are very dark today)as they inevitably do, such managers will get into deep trouble, and often end up taking a business down with them. Their most talented innovators and strategists, those whose skills are now badly needed to help set the business on the proper course, have either long departed or become so disenchanted that they have nothing left to give.


In general, managers who do not actively encourage new ideas and innovations in their organizations do so because of indifference. They will typically listen politely to your new idea, provide some encouragement, and offer good advice. If they are being honest, they will tell you they barely have the time, energy, and budget to help much beyond a pat on the back now and then.

But some managers go beyond indifference. Their initial reaction to any new idea is negative, if not downright hostile. This is particularly true if the idea comes from someone outside their own organization.

Some of them also exhibit characteristics that many of us would associate with being a bully. Typically, the corporate bullies I have met have achieved their high management positions because, despite their poor interpersonal skills, they are very good at other parts of the job. Sometimes, they are excellent innovators themselves, but given their autocratic tendencies, innovation for them is a one-man or one-woman show. They tend to be poor team players: Collaborative innovation is not for them.

Such hostile behavior is hugely detrimental to a healthy innovation environment. People championing new ideas, especially if they are potentially disruptive new ideas, are going against the grain of what the business is currently doing. Rejection is painful, especially coming from people in positions of authority. Senior managers can nurture those new ideas through positive words and actions, or they can stop them on their tracks by being overly negative and combative.


I strongly believe innovation is a team sport. The 2004 National Innovation Initiative report observed that innovation "is multidisciplinary and technologically complex. It arises from the intersections of different fields or spheres of activity." That is why it often takes a group of people who are not only highly talented but who bring together diverse skills and points of view in order to successfully tackle the kinds of complex problems we face in the 21st century.

But perhaps even more important, a collaborative approach to innovation helps provide the energy and emotional support that new ideas need in their very early stages. New ideas are almost always rough and ill-formed at first. In my experience, nothing works better than bouncing ideas off other, supportive people. This back-and-forth dialog is crucial in helping to shape the idea into something more concrete, understandable, and actionable. Then it is more ready to face the tougher challenges and criticisms from line management and others in the organization.

That is why isolating people in organizational silos is one of the biggest obstacles to innovation. Companies that are serious about innovation do everything possible to break down silos and encourage communication and collaboration across the organization and beyond. (We have found this to be one of the biggest barriers to growth within companies. Most companies are not organized around customer needs or outcomes. They are organized around functions, technologies, product lines, brands, major customers, etc.. Thus, when trying to innovate to bring new outcomes to customers, innovation requires leveraging the skill base across the silos as well as going outside the company.)

Fostering innovation is very hard, especially if the innovation is disruptive in nature. A spirit of innovation and collaboration does not come naturally to an organization. For such a spirit to take hold, it must become an integral part of the company's culture. None of this is easy, but it is what a company must do if it truly wants to create a healthy environment in which innovation can flourish.

Irving Wladawsky-Berger retired from IBM last year after a 37-year career at the company. He is presently working on technology and innovation with IBM and Citigroup, and is a visiting professor at MIT and Imperial College.

Tuesday, November 04, 2008

It’s No Time to Forget About Innovation

James Yang
Published: November 1, 2008, NYT

This is a very thought provoking article that was referred to me by both Professor James Conley from The Kellogg Sch00l and Denise Fletcher from Affiliated Computer Services. I highly suggest you go back to two earlier postings that discuss efficiency issues for innovation.

"Ambidextrous" companies can handle incremental change and bold initiatives
At 3M, A Struggle Between Efficiency And Creativity

A key message is that although these are VERY difficult times, do not sacrifice the future for once you hit the “stall point” of stagnation, all the data suggests it is VERY difficult to breakout of it.As you will see below, I do not agree with all the comments. I invite your thoughts.

BY its very nature, innovation is inefficient. (I am not sure I like this characterization. Innovation is riskier and more uncertain than initiatives targeted to extend or defend the current business but, because of this, they must be managed differently to be efficient—“Manage the cost of failure, not the rate of failure”. The above two posting deal with this in more detail) While blockbusters do emerge, few of the new products or processes that evolve from innovative thinking ultimately survive the test of time. During periods of economic growth, such inefficiencies are chalked up as part of the price of forging into the future.

But these aren’t such times. Wild market gyrations, frozen credit markets and an overall sour economy herald a new round of corporate belt-tightening. Foremost on the target list is anything inefficient. That’s bad news for corporate innovation, and it could spell trouble for years to come, even after the economy turns around.(This just emphasizes the importance of using the right processes for managing uncertainty)

“To be honest, we had a problem with innovation even before the economic crisis. That’s the reason I wrote my book,” says Judy Estrin, former chief technology officer at Cisco Systems and author of “Closing the Innovation Gap.” “We’re focusing on the short term and we’re not planting the seeds for the future.”
In tough times, of course, many companies have to scale back. But, she says: “To quote Obama, you don’t use a hatchet. You use a scalpel. Leaders need to pick and choose with great care.”
There are important things managers can do to ensure that creative forward-thinking doesn’t go out the door with each round of layoffs. Fostering a companywide atmosphere of innovation — encouraging everyone to take risks and to think about novel solutions, from receptionists to corner-suite executives — helps ensure that the loss of any particular set of minds needn’t spell trouble for the entire company. (I do not necessarily agree with this simplistic statement. There are many models that companies are experimenting with to drive innovation. Secondly, there are many functions within a company that demands processes like Six Sigma where you do not necessarily want these folks taking risks.Refer to the "Ambidextrous" companies can handle incremental change and bold initiatives" posting)

She suggests instilling five core values to entrench innovation in the corporate mind-set: questioning, risk-taking, openness, patience and trust. All five must be used together — risk-taking without questioning leads to recklessness, she says, while patience without trust sets up an every-man-for-himself mentality.

In an era of Six Sigma black belts and brown belts, Ms. Estrin urges setting aside certain efficiency measures in favor of what she calls “green-thumb leadership” — a future-oriented management style that understands, and even encourages, taking risks. Let efficiency measures govern the existing “factory farm,” she says, but create greenhouses and experimental gardens along the sides of the farm to nurture the risky investments that likely will take a number of years to bear fruit. (Refer back to the postings highlighted above)

“I’m not suggesting you only cut from today’s stuff and keep the future part untouched,” she says. “You have to balance it.” (This is critical. Although easier said than done, leaders must try to maintain their business renewal efforts while meeting their current requirements. Look at taking “the scalpel” carefully, not just pruning initiatives that may not bear fruit immediately but are required for renewal. Try to prioritize within each category – defending the base, extending it, and renewal.)

Yet even that approach has its drawbacks. Companies that create silos of innovation by designating one group as the “big thinkers” while making others handle day-to-day concerns risk losing their innovative edge if any of the big thinkers leave the company or ultimately must be laid off.

Innovation has to be embedded in the daily operation, in the entire work force,” says Jon Fisher, a business professor, serial entrepreneur, and author of “Strategic Entrepreneurism,” which advocates building a start-up’s business from the beginning with an eye toward selling the company. “A large acquirer’s interest in a start-up or smaller company is binary in nature: They either want you or they don’t, based on the innovation you have to offer. The best way to foster innovation is to create something, put it to the test, build a good company and then get it under the umbrella of a world-renowned company to move it forward.”
David Thompson, chief executive and co-founder of Inc., based in San Mateo, Calif., says that innovation “has a bad name in down times” but that “bad times focus the mind and the best-focused minds in the down times are looking for the opportunities.”

“You do have to batten down the hatches and reduce expenses, but you can’t do it at the expense of the big picture,” Mr. Thompson adds. “You always have to keep in mind the bigger picture that’s coming down the road in two or three years.

“The last thing you want to do with innovation is just throw money at it. It’s a very tricky balance.” (refer to the blog postings from above)

In fact, hard times can be the source of innovative inspiration, says Chris Shipley, a technology analyst and executive producer of the DEMO conferences, where new ideas make their debuts. “Some of the best products and services come out of some of the worst times,” she says. In the early 1990s, tens of millions of dollars had gone down the drain in a futile effort to develop “pen computing” — an early phase of mobile computing — and a recession was shriveling the economic outlook.

Yet the tiny Palm Computing managed to revitalize the entire industry in a matter of months by transforming itself overnight from a software maker into a hardware company.

“Our biggest challenge right now is fear,” she says. “The worst thing that a company can do right now is go into hibernation, into duck-and-cover. If you just sit on your backside and wait for things to get better, they’re not going to. They’re going to get better for somebody, but not necessarily for you.”

HOWARD LIEBERMAN, also a serial entrepreneur and founder of the Silicon Valley Innovation Institute, says innovation breeds effectiveness. It’s not about efficiency, he argues. “Efficiency is for bean counters,” he says. “It’s not for C.E.O.’s or inventors or founders.”(I would counter this comment a bit. There are VERY efficient tools to manage projects that are highly uncertain. The key, as discussed in the early blog postings noted above is choosing the right process. We cannot afford to do innovation inefficiently)
The current economic downturn comes as no surprise to him, he says, because it mirrors the downturn at the time of the dot-com bust. Then and now, the companies that survive are those that keep creativity and innovation foremost.
“Creativity doesn’t care about economic downturns,” Mr. Lieberman says. “In the middle of the 1970s, when we were having a big economic downturn, both Apple and Microsoft were founded. Creative people don’t care about the time or the season or the state of the economy; they just go out and do their thing.”

Thursday, October 30, 2008

Cisco Changes Tack
In Takeover Game

WSJ, April 17, 2008; Page A1

One of the critical components to growing beyond your current Business Design is how best to build the “Capability Platform” required for success. Do you build the capabilities internally or do you buy them? This is an interesting article on how Cisco is facing this challenge as its growth slowed from its heyday and how it is altering its acquisition strategy going forward.

When Scott Weiss heard that tech behemoth Cisco Systems Inc. wanted to acquire an email-security company like his startup, he emailed a vow to his staff: "Said acquiree will not be us."

Cisco was famous for fueling its stellar growth by buying dozens of companies and digesting them completely, installing its own executives and leaving little trace of a target's identity. The method made Cisco the envy of the technology world, where so many acquisitions go awry. Mr. Weiss feared losing control of the firm he co-founded, IronPort Systems Inc. When Cisco made an offer in early 2006, he declined.

Then last year, Mr. Weiss agreed to sell, for $830 million. His convictions hadn't shifted. Cisco's had.

The Silicon Valley icon has been remaking its acquisition strategy as it carefully tries to move into the 21st century's hot tech markets. The company ultimately offered Mr. Weiss an un-Cisco-like proposition: Cisco would buy IronPort, but let it operate as a stand-alone unit, with its own managers, brand name, engineers and salespeople.

"They wanted to make sure they didn't screw it up," says Mr. Weiss. This month, Cisco promoted Mr. Weiss, 42 years old, to head all of its security-technology business.
Cisco's new focus mirrors the efforts of other large technology firms -- including Microsoft Corp., Oracle Corp. and Sun Microsystems Inc. -- to avoid losing their status in a new tech era in which growth is led by products powered by the Internet. Cisco's once-torrid quarterly growth has slowed to around 15% year-to-year, from between 30% and 40% or more early this decade.
Cisco's strategy shift is particularly striking because the company, the country's third-largest tech firm by market capitalization, is viewed as a bellwether for the industry. Chief executive John Chambers wants the networking giant to move beyond its core business -- making gearlike switches and routers that direct computer and telecom traffic over corporate networks. It's entering entirely new markets, such as online video and Web conferencing. (Changing the Business Design)

That means adding new pages to Cisco's much-admired acquisition playbook, which has been the subject of Harvard Business School studies. "We can't buy a company and tell it to do as we see fit if we don't have a true understanding of the marketplace," (critical!!!!) says Ned Hooper, Cisco's head of business development, who is leading the new acquisition and integration strategy.

Buying innovative small firms rather than developing new tech from scratch has long helped Cisco stay in front of the pack with a fresh stream of new products, while largely sidestepping the merger messes that peers often faced. (their strategy to build the Capability Platform) The San Jose, Calif., company has gobbled up 126 companies since its first acquisition in 1993, most of them small, privately held and closely related to its networking-equipment business.

'Platform' Deals

But in the past five years, while spending about $2.5 billion on 44 companies in its core business, Cisco has spent more than four times as much -- $11 billion -- on a handful of new-style acquisitions that it calls "platform" deals. (dramatic investment for the future -- the balance of protecting and growing what you have vs. driving new ground is very aggressive) Instead of its typical two months to integrate companies, Cisco plans to take 18 months to two years on more-unfamiliar businesses.

Cisco has long followed a strict guideline for buying other companies, targeting small businesses that establish early market leadership but are inexperienced in getting their wares to customers. Cisco has nearly six dozen full-time staffers dedicated to shepherding newcomers into the company. They make sure that within two months, newly acquired employees get a new Cisco boss, a Cisco bonus plan and a Cisco health plan. Salespeople are either laid off or folded into Cisco's own massive sales organization, while top managers are offered two-year retention contracts to help ease the transition. Acquired companies typically lose their brand names.

Cisco began experimenting with a new approach in 2003, when it shelled out $500 million to acquire Linksys Group Inc., which makes home-networking equipment that allows multiple personal computers to share files and an Internet connection.

At the time, the most sophisticated Cisco networking gear cost more than $100,000, while Linksys's consumer products started at less than $100. Linksys also sold its products through retailers, with which Cisco had little experience. To avoid inadvertently damaging the newly acquired company, Cisco has kept in place the Linksys brand name, Linksys manufacturing agreements and its sales team. (really important)

Cisco used the same hands-off method when it bought set-top box manufacturer Scientific-Atlanta Inc. in 2006 for $6.9 billion. While most of Cisco's acquirees are within 20 miles of its Silicon Valley headquarters and have fewer than 300 employees, Scientific-Atlanta was based in Lawrenceville, Ga., and had 7,600 employees.

To deal with the distance and size of the acquisition, Cisco tossed out its playbook, which called for a single executive to manage the process. Instead, it parceled out different units and departments among a tiny platoon of Cisco managers.

Last year, Cisco snapped up a 2,200-person online conferencing start-up, WebEx Communications Inc., for $3.2 billion. Cisco allowed WebEx to keep its Santa Clara, Calif., headquarters and left in place WebEx's sales team.

Market Leader

There are signs the new tack is working. Scientific-Atlanta contributed $2.76 billion, or about 8%, to Cisco's 2007 revenue of $34.9 billion. The company doesn't break out numbers for its Linksys or WebEx divisions, but Linksys remains a market leader with a strong brand.

To be sure, as Cisco seeks farther-flung businesses, the company faces the possibility of falling into integration morasses it had dodged. The slow pacing for some of the "platform" integrations suggests they're not as easy. Cisco decided to take a year and a half learning Scientific-Atlanta's business before sitting down with its executives to discuss detailed sales synergies. Mr. Chambers last year said publicly that he would phase out the Linksys name, but later recanted, saying Cisco's name hadn't made enough inroads with consumers.

Sunday, October 26, 2008

In a New Age of Impatience, Cutting PC Start Time
Published: October 25, 2008

Sorry for the delay in posting, but we moved back down to Florida and Comcast cable acted like Comcast Cable—it took about a week to reengage the cable. This article appeared on the front page of the Now the New York Times talking about how the computer industry is dealing with dealing with a nagging problem of the time it takes to start up a computer. I immediately reflected on the Attribute Map we discussed in an earlier posting
which is briefly summarized here.


In an effort to further the discussion comparing competitive advantage vs. separation, I would like to introduce a very powerful tool developed by McGrath and MacMillan that is summarized in perhaps the greatest business book ever written – The Entrepreneurial Mindset. The tool is the Attribute Map and it shows the dynamic nature of how your target customers react to your offering’s attributes:

The labels going down the table –POSITIVE, NEGATIVE, OR NEUTRAL – describe the type of reaction from the customers. Obviously, the more positive and less negative the better. The labels on the top of the table –BASIC, DISCRIMINATORS, and/or ENERGIZERS – define the intensity of the reaction.

For the BASIC category:
- A POSITIVE defines table stakes – you need these attributes to play and you are conspicuous by their absence (Non Negotiable)
- A NEGATIVE defines attributes that the customer is willing to tolerate (Tolerable) if there is no other alternative.
- A NEUTRAL is one that has no or little impact (So What) on the customer but does add cost

- Differentiate between competitors to influence the purchase decision. The POSITIVE (Differentiator) attribute is in the positive direction and the NEGATIVE (Dissatisfier) is in the negative direction.
- The NEUTRAL is an influencer to the purchase decision but is not directly related to the purchase

- Attributes are so powerful that they overwhelm the purchase decision either positively –the Exciter – or negatively – the Enrager

I believe our current “patience” with the time it takes to startup a computer is currently a ‘TOLERABLE” situation. As the computer manufacturers shake up the market dynamics – when there is true improvement--people will no longer tolerate the wait and our feelings will move to a DISSATISFIER at the least. However, the competitive separation created by the early entrants with these new computers will eventually disappear as consumers begin to expect this from all systems ,i.e., “instantaneous” startups become a BASIC table stake

SAN FRANCISCO — It is the black hole of the digital age — the three minutes it can take for your computer to boot up, when there is nothing to do but wait, and wait, and wait some more before you can log on and begin multitasking at hyper-speed. (the critical attribute)
Some people stare at their screen and fidget. Others pace or grab a cup of coffee. “Half the time, I go brush my teeth,” (how we TOLERATE it) said Monica Loos, 40, who is starting a business selling stationery online from her home in San Francisco.

Now the computer industry says it wants to give back some of those precious seconds. In coming months, the world’s major PC makers plan to introduce a new generation of quick-start computers, spotting a marketing opportunity in society’s short attention span.

“It’s ridiculous to ask people to wait a couple of minutes,” said Sergei Krupenin, executive director of marketing of DeviceVM, a company that makes a quick-boot program for PC makers. “People want instant-on.”

Hewlett-Packard, Dell and Lenovo are rolling out machines that give people access to basic functions like e-mail and a Web browser in 30 seconds or less. Asus, a Taiwanese company that is the world’s largest maker of the circuit boards at the center of every PC, has begun building faster-booting software into its entire product line.

Even Microsoft, whose bloated Windows software is often blamed for sluggish start times, has pledged to do its part in the next version of the operating system, saying on a company blog that “a very good system is one that boots in under 15 seconds.” Today only 35 percent of machines running the latest version of Windows, called Vista, boot in 30 seconds or less, the blog notes. (Apple Macintoshes tend to boot more quickly than comparable Windows machines but still feel glacially slow to most users.)

There is nothing new about frustration with start-up times, which can be many minutes. But the agitation seems more intense than in the pre-Internet days. Back then, people felt less urgency to log on to their solitary, unconnected machines. Now the destination is the vast world of the Web, and the computer industry says the fast-boot systems cater to an information-addicted society that is agitated by even a moment of downtime. (the changing dynamic)

Yet it is a condition that the technology industry — with smartphones and other always-on gadgets — helped create, said Gary Small, a professor at the Semel Institute for Neuroscience and Human Behavior at the University of California, Los Angeles. “Our brains have become impatient with the boot-up process,” Dr. Small said. “We have been spoiled by the hand-held devices.”
PC makers are not merely out to ease our data anxieties with the new machines. They want to help themselves, too. The industry has grown so competitive, and profit margins so thin, that each company is looking for any advantage it can trumpet. Computer makers say the battle for boot-up bragging rights could resemble the auto industry’s race to shave tenths of a second from the time it takes a car to go from 0 to 60 miles an hour. (but will it create sustainable competitive separation or eventually “just” fundamentally improve performance for the consumers but still leaving thin margins as this attribute becomes a BASIC table stake.)

Hewlett-Packard research shows that when boot times exceed more than a few minutes, users have an exaggerated sense of the time it takes. Four or five minutes can feel like an eternity.
In June, H.P. introduced a new kind of fast-booting laptop, for $1,200, and the company says the technology is destined to spread quickly. Right now, H.P.’s goal is to offer PCs that boot in 30 to 45 seconds, said Philip McKinney, chief technology officer for the company’s personal systems group. “In 18 months, you’ve got to be 20 to 30 seconds.”

Until Microsoft comes up with a way to greatly shorten the time it takes to load Windows, PC makers are speeding up boot times using programs that bypass Windows. The systems vary technically, but they all rely on a version of an operating system called Linux that gives users quick access to Web browsing and other basic functions of their computer. In some cases, Windows never boots, while in others, Windows starts in the background.

DeviceVM, the maker of a fast-boot program called Splashtop, says it charges PC makers $1 to $2 a machine for its software. The company hopes to make more revenue over the long term by charging other software providers that want to include their applications in the menu of programs accessible without a full boot.

Of course, some computer users try to avoid slow boot times by never turning off their machines; they simply leave them in standby mode. But PCs sometimes have a hard time waking up from standby and tend to crash the longer they run without rebooting. Leaving a machine on also wastes electricity and, for laptops, can drain the battery.

Victor Dailey, 54, a computer engineer from San Diego who works at NASA, has an alternative prescription for boot-up anxiety: “I’ll do the cigarettes and a cup of coffee while I wait.”
But he would much rather skip the caffeine and nicotine and get his fix from his computer. “If you could just open it up immediately, just like you do with your cellphone, and text somebody or whatever and close it back up, that would be ideal,” he said.

Monday, October 06, 2008

Creativity and the Role of the Leader
Your organization could use a bigger dose of creativity. Here’s what to do about it.
by Teresa M. Amabile and Mukti Khaire
HBR, Reprint: R0810G

This is a great article that delves into the critical role of leadership in driving creativity and therefore growth in their companies. I strongly recommend reading the full article.

Creativity has always been at the heart of business, but until now it hasn’t been at the top of the management agenda. By definition the ability to create something novel and appropriate, creativity is essential to the entrepreneurship that gets new businesses started and that sustains the best companies after they have reached global scale. But perhaps because creativity was considered unmanageable—too elusive and intangible to pin down—or because concentrating on it produced a less immediate payoff than improving execution, it hasn’t been the focus of most managers’ attention.
A summary is:

A Manager’s Guide to Increasing Innovation
If you’re trying to enhance creativity...

...remember that you are not the sole fount of ideas.
Be the appreciative audience.
Ask the inspiring questions.
Allow ideas to bubble up from the workforce.

...enable collaboration.
Combat the lone inventor myth.
Define “superstar” as someone who helps others succeed.
Use “coordination totems”—metaphors, analogies, and stories—to help teams conceptualize together.

...enhance diversity.
Get people with different backgrounds and expertise to work together.
Encourage individuals to gain diverse experiences that will increase their creativity.
Open up the organization to outside creative contributors. the stages of creativity and tend to their different needs.
Avoid process management in the fuzzy front end.
Provide sufficient time and resources for exploration.
Manage the handoff to commercialization.

...accept the inevitability and utility of failure.
Create psychological safety to maximize learning from failure.
Recognize the different kinds of failure and how they can be useful.
Create good mechanisms for filtering ideas and killing dead-end projects.

...motivate with intellectual challenge.
Protect the front end from commercial pressure.
Clear paths through the bureaucracy for creative ideas.
Let people do “good work.”
Show the higher purpose of projects whenever possible.
Grant as much independence as possible.