Thursday, November 19, 2015

The Recipe for Innovation Proficiency
Rita Mcgrath Newsletter

Sound familiar to the MDG fans

Here is a list of the ingredients needed for the recipe:
An appropriate governance and funding mechanism.
A balanced portfolio across different levels of uncertainty.
A mechanism to identify and test assumptions, at the absolute lowest cost.
The ability to stop or redirect ventures .
The ability to learn from intelligent failures.
And, essentially, these three competences:
1. Ideation (getting good ideas)
2. Incubation (nurturing them into an actual business concept) and
3. Acceleration (bringing them to market with the mainstream business)

Monday, November 09, 2015

Why Organizations Don’t Learn
Francesca Gino
Bradley Staats
Harvard Business Review,  R1511G-PDF-ENG

Great article. The following are the challenges they found., Their recommended actions to resolve these issues are in the article.

Why do companies struggle to become or remain “learning organizations”? Through research conducted over the past decade across a wide range of industries, we have drawn this conclusion: Biases cause people to focus too much on success, take action too quickly, try too hard to fit in, and depend too much on experts. In this article we discuss how these deeply ingrained human tendencies interfere with learning—and how they can be countered. 
Bias Toward Success
Leaders across organizations may say that learning comes from failure, but their actions show a preoccupation with success. This focus is not surprising, but it is often excessive and impedes learning by raising four challenges.
Challenge #1: Fear of failure.
Failure can trigger a torrent of painful emotions—hurt, anger, shame, even depression. As a result, most of us try to avoid mistakes; when they do happen, we try to sweep them under the rug.
Challenge #2: A fixed mindset.
Individuals with a growth mindset, who believe that intelligence and talents can be enhanced through effort, regard mistakes as opportunities to learn and improve. By contrast, individuals with a fixed mindset, who believe that intelligence and talents are innate and unchangeable, think mistakes signal a lack of ability.
Challenge #3: Over reliance on past performance.
When making hiring and promotion decisions, leaders often put too much emphasis on performance and not enough on the potential to learn.
Challenge #4: The attribution bias.
It is common for people to ascribe their successes to hard work, brilliance, and skill rather than luck; however, they blame their failures on bad fortune. This phenomenon, known as the attribution bias, hinders learning (see “Why Leaders Don’t Learn from Success,” HBR, April 2011). In fact, unless people recognize that failure resulted from their own actions, they do not learn from their mistakes. 
Bias Toward Action
How do you usually respond when you are faced with a problem in your organization? If you’re like most managers, you choose to take some kind of action
Challenge #1: Exhaustion.
Not surprisingly, exhausted workers are too tired to learn new things or apply what they already know
Challenge #2: Lack of reflection.Being “always on” doesn’t give workers time to reflect on what they did well and what they did wrong 
Bias Toward Fitting In
When we join an organization, it’s natural to want to fit in. But this tendency leads to two challenges to learning
Challenge #1: Believing we need to conform.
Early in life, we realize that there are tangible benefits to be gained from following social and organizational norms and rules. As a result, we make a significant effort to learn and adhere to written and unwritten codes of behavior at work. But here’s the catch: Doing so limits what we bring to the organization

Challenge #2: Failure to use one’s strengths.
When employees conform to what they think the organization wants, they are less likely to be themselves and to draw on their strengths

Bias Toward Experts

Beginning in the early 20th century, the scientific management movement introduced a rigorous approach to examining how organizations operate.

Challenge #1: An overly narrow view of expertise.
Organizations tend to define “expert” too narrowly, relying on indicators such as titles, degrees, and years of experience

Challenge #2: Inadequate front-line involvement.
Front-line employees—the people directly involved in creating, selling, delivering, and servicing offerings and interacting with customers—are frequently in the best position to spot and solve problems.

Monday, November 02, 2015

Bran Ferren on the Art of Innovation
A celebrated proprietor of R&D ateliers explains how companies can cultivate the rare people who create miracles.
by Art Kleiner and Juliette Powell

This is a GREAT article to read. The following excerpts are intended to stoke your intreest…

As we teach in class, innovation is taking something new and bringing to use. Invention, is bringing something new into being.: the iPhone — a communications-centric computer, designed in the form of a smartphone. There wasn’t a lot of new invention involved in it. Instead, it brought together inventions that already existed, that had evolved independently of one another. I was not an insider, but we all know what was involved. It required a high-resolution display, bright enough to read, and lithium batteries that could provide enough power in a small enough size. It needed thermal and chemically tempered glass, which Corning had developed. It needed a multi-touch touchscreen, which meant the appropriate capacitive conductive screen technology. It needed wireless digital networks — cellular telephony, Bluetooth, and Wi-Fi — but also the ability to surf the Internet. 
The iPhone and the Newton [Apple’s failed handheld device, released during the mid-1990s] essentially started with the same idea: a personal digital assistant. But the difference between them was profound, because the Newton existed without the Internet as we know it, and without voice and digital communications, and it was too big and heavy. A personal digital assistant that wasn’t networked was basically useless.
If you had shown them the iPhone 10 years ago and said, “This will be the future of how civilization works,” they would have said, “No, it won’t.” In fact, some companies looked at this space and elected not to pursue it.
This is because their innovation process doesn’t give their leadership a context for thinking about profound innovation. In a conventional company, an innovation process is often a substitution for creativity and thoughtfulness. Companies have come to us and asked for something like “disruptive innovation.” It is fashionable and they’ve read about it; they don’t know why they need it, but they hope it will help. However, they are seldom prepared to embrace what’s necessary to actually do this. 
They tell their engineers to think outside the box, and the engineers dutifully respond by immediately designing a new box. They take the boxes they’ve already got, the products and processes already with them, and they usually make those boxes brighter, shinier, lighter, and more efficient. The result is usually more of the same with incremental improvement at best. The business leaders are obsessed with getting the right answer, but they’re not willing to put the energy into making sure they’re asking the right questions. 
A good innovation process establishes context. It sets up a dialogue among the most capable people you can attract. So, should you have a revelation, you can recognize it and say, “That’s it!”…. 
… the heart of [the art of leading a company] is the ability to identify an idea, conceptualize it, bring a team of people together, execute it in a way that’s effective, and course-correct as you go. According to Steve, the iPhone was originally a tablet project. Partway through the R&D process, he said, “Hmm, we can make a phone out of this.” After the launch, many people rewrote history and said that the purpose of the iPhone was to reinvent the future of telephony. 
Suppose you had been at Research in Motion (RIM) — the creator of the BlackBerry — at that time, thinking about inventing the future of telephony, with no holds barred. Suppose you conducted market research with your most expert BlackBerry users and asked them, “What do you crave in a phone?” You would tell them to assume no boundaries or constraints, to just ask for something so great it would change their world.
What devoted BlackBerry user would have said, “Get rid of all the keys. Give me a screen three times as big, and it needs to be multimedia capable. I really need a music and video player, and multi-touch would be nice. I’d like one-third the battery life, and make sure that battery isn’t interchangeable, so when I run out of power, I can’t put in a new battery. Make it really thin, because I really care about thinness. And please give me apps (whatever they are), and I really need an online store where I can go buy those apps.”

Monday, October 19, 2015

Building a design-driven culture
It’s not enough to just sell a product or service—companies must truly engage with their customers. Here’s how to embed experience design in your organization.
September 2015 | byJennifer Kilian, Hugo Sarrazin, and Hyo Yeon

This article is a must read

Think about a product you recently bought. Now think about the experience you had buying and using that product. Increasingly, it’s difficult to separate these two elements, and we’re actually seeing many cases where customers prioritize the experience of buying and using a product over the performance of the product itself. In fact, customer experience is becoming a key source of competitive advantage as companies look to transform how they do business. 
This fixation on customer experience isn’t just for the cool start-up world. Consider HP and the mundane task of replacing printer ink. Through HP Instant Ink, the company has executed a subtle shift away from pure transactions—customers simply buying ink when they need it—and toward establishing an ongoing service relationship, wherein HP knows when its printers will run out of ink and preemptively ships more, saving customers time and effort. And making their lives easier not only makes customers more productive but also makes them happy and generates loyalty. Similarly, heavy-industry stalwart John Deere is transforming its business by moving beyond pure equipment to provide farmers with digital services such as crop advisories, weather alerts, planting prescriptions, and seeding-population advice… 
… Many companies are committing to improve the user experience. But making design a core capability that drives growth and competitive advantage means companies need to go further. 

The four elements of design-driven culture 

Really understanding the customerThe difference with design-driven companies is that they seek to go far beyond understanding what customers want to truly uncovering why they want it. 
Bringing empathy to the organizationOne essential to running a design-driven company is making sure the right people with the right skill set are in the right place. 
Designing in real timeDeveloping any customer journey requires input from many functions. We believe in a “braided” approach that combines design, business strategy, and technology as the core working group. These functions should work together to make decisions, ensure that the designed journey aligns with the business strategy and is delivering value, and keep customer experience a top-of-mind issue. 
Acting quicklyGood design is fast. That means getting a product to market quickly, which depends on rapid prototyping, frequent iteration, and adjustments based on real customer feedback

Monday, October 12, 2015

The Future of Management Is Teal
Organizations are moving forward along an evolutionary spectrum, toward self-management, wholeness, and a deeper sense of purpose.
by Frederic Laloux

This is a bit more philosophical than my usual posting, but I think it is important to understand how organizations may evolve in the future

Many people sense that the way organizations are run today has been stretched to its limits. In survey after survey, business people make it clear that in their view, companies are places of dread and drudgery, not passion or purpose. Organizational disillusionment afflicts government agencies, nonprofits, schools, and hospitals just as much. Further, it applies not just to the powerless at the bottom of the hierarchy. Behind a facade of success, many top leaders are tired of the power games and infighting; despite their desperately overloaded schedules, they feel a vague sense of emptiness. All of us yearn for better ways to work together — for more soulful workplaces where our talents are nurtured and our deepest aspirations are honored….…. In describing the pattern of organizational evolution, I draw on the work of a number of thinkers in a field known as “developmental theory.” One of its basic concepts is the idea that human societies, like individuals, don’t grow in linear fashion, but in stages of increasing maturity, consciousness, and complexity. Various scholars have assigned different names to these stages; philosopher Ken Wilber uses colors to identify them, in a sequence that evokes the light spectrum, from infrared to ultraviolet. I borrow his color scheme as a convenient way to name the successive stages of management evolution…

Tuesday, October 06, 2015

For Biggest Results, Focus On The Struggle

This is from a piece Co-Authored by David Schonthal and Bob Moesta, CEO of the Rewired Group (Originally published as a contribution Dave Kerpen’s column Inc Magazine)

Pretty nice thought the full article

Successful innovative products and technologies start by focusing on the consumers’ problems to be solved. What do consumers really want to do? What are they trying to do but cannot? What are the trade offs they are willing to make to achieve better outcomes? 
The solutions target consumers’ functional, social, and emotional needs and, even more important, their desired outcomes. Think Maslow’s Hierarchy, with its tiers of psychological, safety, love, esteem, and self-actualization needs. The further a product‘s benefits extend up that pyramid the better chance the company will tap into massive pent-up consumer demand for innovation… 
…..The key is to frame the forces of progress (function, social, and emotional) that cause people to make progress in their lives. As the “Forces Diagram” (below) illustrates, the push of the situation and the pull of a new idea are weighed against the habit of current practice and the anxiety of adopting a new solution. Progress only happened when the push and pull are greater than the anxiety and habit.

Friday, September 18, 2015

The Marketing Genius of Donald Trump
August 15, 2015
Mohan Sawhney

I normally don’t directly transcribe another’s work but this is vintage Mohan Sawhney

First, let me get something out of the way. I am not voting for Donald Trump and I think he is a megalomaniacal buffoon. That said, I think he is a brilliant marketer. As I observe the inexplicable phenomenon of the Trump campaign, I believe  there are important marketing lessons to be learned from him
Be Authentic: One Trump 60 year old factory worker, when asked why she supported Trump, put it simply – “He tells it like it is. A lot of politicians jut lie.”  One thing you have to grant Donald Trump – what you see is what you get. You might not like what you see, but at he is the only WYSIWIG candidate in the race. In a sea of poll-driven, focus group tested and think-tank vetted candidate positions, people find it refreshing to hear a candidate who says whatever he wants and sticks to his guns, polls and media be damned.  The branding lesson – be yourself. Don’t be a candle in the wind, swayed by market research and fickle consumer preferences. If you see yourself in the mirror of other people’s perceptions, you will get a very distorted image
Heart, not Mind: Media pundits and political analysts have criticized Donald Trump for having illogical or contradictory positions on issues like immigration and abortion. They are missing the point. You can’t fight emotion with logic. The Trump brand relies on charisma and emotional appeal. It has nothing to do with logic. People don’t expect him to have a nuanced understanding of the economic, geopolitical or social issues that confront the next President. Trump wears his ignorance as a badge of honor. While all other candidates pore over policy papers and briefing documents, Trump strides onto the debate stage with his million dollar smile and billion dollar hairstyle. He’s like the annoying kid we all knew in school who didn’t study a single day and somehow still managed to ace the tests.
Keep it Simple: Can you describe in a few words what Hillary stands for? Or Jeb Bush? Or the parade of clowns on the Republican side?  Except perhaps for Bernie Sanders, I’m not sure I know what the brand essence of any of the candidates really is. But I know what Trump stands for, just as I know what I’m going to get when I go to an Arnold Schwarzenegger movie. Trump stands for success, fame and fortune. He kicked ass in business and he will kick ass as President. Oversimplified? Perhaps. But the lesson I have learned in branding – simplify your message. Then simplify it some more. We dramatically over-estimate the ability of consumers (or voters) to understand complex value propositions. Trump Keeps It Simple, even if he is Stupid!
Stay in the News: After every appalling utterance that comes out of the Donald’s mouth, the media proclaims his demise as a candidate. When he called Mexicans rapists, we thought he was done. When he ripped into Kelly from Fox News, we thought this was definitely the end. Any candidate who dared make such outrageous comments should have imploded. Yet the polls continue to confound the experts. Trump understands that, like the Kardashians, he needs to constantly be in the headlines. It doesn’t matter what the headlines say. Ask poor Rick Perry or Chris Christie how it hurts when they aren’t newsworthy any more. Trump is like a train wreck in slow motion. You hate watching it, but you can’t take your eyes off it.

Monday, August 31, 2015

What Salespeople Need to Know About the New B2B Landscape—Part 2
Frank V. Cespedes and Tiffani Bova

Here are the tips promised in the previous posting. The article affords more detail and is excellent

Here are a few tips and insights to help you navigate the shifts. 
The sales force is more important than ever. Regardless of which path customers take, or in which order they take them, they want to deal with people who can help them move toward a purchase decision, be the internal champion at the vendor, and bring it together for that customer….… Don’t believe the hype. Sales people have not been replaced by digital, and providing relevant solutions remains key in most B2B buying scenarios. 
One reason why the sales force remains so important to the B2B customer is that most products and services sold to business organizations are components in a wider usage system at that buyer, and customer value ultimately resides in that usage, not just the individual product. 
Buying is a continuous and dynamic process. Specious talk about disintermediation of salespeople obscures the real issues facing firms. Sales people are not disappearing, but buying processes and therefore sales tasks are changing….…. In the past, a buyer might ask for references and that seller would cite a few satisfied customers. But through the web, customers connect with each other and get unedited versions of others’ experience through review sites……. Also playing important roles are events, white papers, and the seller’s website — activities that are typically part of marketing’s domain, not sales. This puts pressure on a notoriously fraught relationship: improving coordination between sales and marketing… it’s important to recognize that web sites, blogs, and other digital media have made vendor organizations more visible and transparent to potential buyers, which has disrupted the inside-out funnel approach. Prospects now touch your brand and company at many different points…  Buyers value interaction with others at your firm besides the sales…. n their buying streams, they expect the rep to orchestrate those interactions purposefully, and efficient coordination of these interaction points must be reflected in an effective 21st-century go-to-market strategy. 
Choices are often false. Despite what you often hear, no single tactic — e.g., a given selling methodology, “challenging” the customer, or more “big data” analytics — will address the new reality. Aligning buying and selling is a process, not a one-shot deal…. They should not waste lots of time and energy debating whether to be online or in-person, interacting via the web or through sales reps, digital or human. They need to do both, and create the right mix for their go-to-market programs.

Monday, August 24, 2015

What Salespeople Need to Know About the New B2B Landscape—Part 1
Frank V. Cespedes and Tiffani Bova

This posting highlights selling insights for the new challenges of the B2B landscape. The next posting will afford a few tips on how to address these observations

Selling has always been more about the buyer than the seller. So any effective sales model must adapt to changing buying protocols, not ignore or resist them. This is a big transition for firms who’s marketing, sales-training and enablement tools, and wider organizational processes reflect outdated assumptions about purchasing in their markets. 
For a century, buying has been framed in terms of moving a prospect from Awareness to Interest to Desire to Action (AIDA). The AIDA model and its variants are the basis for sales funnels at many B2B firms. The typical funnel starts with a marketing-generated lead for a “suspect” that, after qualification, becomes a “prospect,” and then a customer through steps that are measured and managed. In each step, sales people are expected to perform a series of tasks, usually sequentially, in order to close. It’s an inside-out process and CRM systems are there to provide data about progression (or not) through that company’s funnel steps — the famous “pipeline” metrics that dominate so much talk about sales. 
But research indicates a very different contemporary buying reality. Rather than moving sequentially through a funnel, buyers actually work through four parallel streams to make a purchase decision. 
Let’s examine these activities, one by one: Explore: Here, buyers identify a need or opportunity and begin looking for ways to address it, usually via interactions with vendors and self-directed information search on the internet. Evaluate: Buyers take a closer look at options uncovered while exploring, again leaning heavily on self-directed search and peer interactions as well as vendor sales representatives. Engage: Buyers initiate further contact with providers (or accept proposals from providers) to get help in moving toward a purchase decision. Experience: Buyers use a solution, increasingly in pilots or proof of concepts, and develop perceptions about its value based on that usage.

Monday, August 17, 2015

Keep Your Marketing Authentic

Some great insight on the brand promise:

Marketing messages surround us no matter where we are and what we do. It’s like we are trapped inside a singles bar all day, every day, having to endure pick-up line after pick-up line from a never-ending stream of advertisements hoping to score a one night brand-stand with us. 
Starbucks marketers work under the premise that marketing has become the enemy. They believe that consumers today are savvy enough to sniff out anything that smells the least bit insincere and contrived. Marketing authenticity is the antidote to the world being perceived as a gigantic advertisement. 

Starbucks marketers use a six-point unwritten code to ensure the marketing programs they create and implement are authentic, that they’re staying on message and on brand, and that they tell the story of what makes the product they are promoting Starbucks-worthy: 
  • Be Genuine and Authentic
Nothing is more genuine and authentic than brewed coffee. Starbucks believes its marketing messages should be as genuine and authentic as the coffee it brews
  • Evoke Feelings, Never Prescribe Feelings
Pedantic is not in a Starbucks marketer’s vocabulary, so preachy platitudes do not come across in the marketing messages they create. For these marketers, the words and imagery must work together to convey a sense of place, comfort, or mystique.
  • Always Say Who You Are, Never Who You Are Not
When a business says who they are not in marketing materials, they are actually saying more about their competition than they are about themselves
  • Stay Connected to Front-Line Employees
Starbucks believes if an employee doesn’t respect or feel connected to a marketing program, then customers will not either. After all, Starbucks relies on its front-line employees to communicate its marketing messages to customers. And if front-line employees cannot connect with the marketing program, they will not make connections with customers about it.
  •  Deliver on ALL Promises Made
Nothing will turn customers off more than promising something and not delivering. Authentic marketing is strictly tied to this, and it applies to everything that’s promised 

  • Respect People’s Intelligence
Starbucks treats customers as being interesting to get them interested. And interesting people, as Starbucks sees them, are constantly expanding their knowledge and horizons. For this reason, Starbucks uses a more educated approach when it speaks to its customers, from how it talks about itself as a company to the level of detail on its packaging.  

Leading Questions…
  • What does your company do to ensure your marketing materials reflect the company’s mission and innate integrity?
  • How does your company address its competition in its advertising? Does it speak to the value of your product or does it speak to the lack of value from your competitors?
  • How does your company respect the intelligence of its customers?

Monday, August 10, 2015

Creativity and the Role of Leadership
Teresa Amabile, Mukti Khaire

Some really great material and is very consistent with the tenets of MDG

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….…Here are some key leadership roles: 

Drawing on the Right MindsThe first priority of leadership is to engage the right people, at the right times, to the right degree in creative work. That engagement starts when the leader recasts the role of employees. Rather than simply roll up their sleeves and execute top-down strategy, employees must contribute imagination. 

Bringing Process to Bear—Carefully 

Map the phases of creative work.Process management, Mark Fishman explained, is appropriate in some phases of creative work but not others. The leader’s job is to map out the stages of innovation and recognize the different processes, skill sets, and technology support that each requires. For instance, efficiency-minded management “has no place in the discovery phase
Manage the commercialization handoff.Few people have equal capabilities in idea generation and idea commercialization; that’s why large corporations normally separate the two functions. The consensus is that, eventually, an innovation reaches a point where it will be best served by people who know how to take it to market. Unfortunately, since the passion for an idea is highest among its originators, projects often lose steam at the handoff. Management’s job is to limit the loss of momentum with adroit timing and handling of the transition
Provide paths through the bureaucracy…the manager must act as a shepherd….. executives must protect those doing creative work from a hostile environment and clear paths for them around obstacles.

Fanning the Flames of MotivationMotivating people to perform at their peak is especially vital in creative work. An employee uninspired to wrap her mind around a problem is unlikely to come up with a novel solution. 

Provide intellectual challenge.Early-stage researchers who were more motivated by intellectual challenge tended to be more productive. (Interestingly, this did not hold true among the group doing later-stage work.) A stronger desire for independence was also associated with somewhat higher productivity. It wasn’t that extrinsic motives were unimportant; a person’s greater emphasis on salary was also associated with greater productivity. The desire for intellectual challenge was, however, much more strongly linked to it.
Allow people to pursue their passions.If the keys to creative output are indeed intellectual challenge and independence, management must find ways to provide them. In large part, that demands awareness of individuals’ interests and skillsBe an appreciative audience.The fact that creative workers are intrinsically motivated does not mean that managers’ behavior makes no difference. A good leader can do much to challenge and inspire creative work in progress
Embrace the certainty of failure.Arguably, the managerial reactions that speak loudest to creative workers are reactions to failure. Virtually everyone in the colloquium agreed that managers must decrease fear of failure and that the goal should be to experiment constantly, fail early and often, and learn as much as possible in the process.

Friday, August 07, 2015

How Re-framing A Problem Unlocks Innovation


Very thought provoking for the real first step of any innovation effort: What is the question? Read the whole article for good insight on the importance of context and framing.

What is the sum of 5 plus 5?" 
"What two numbers add up to 10?
The first question has only one right answer, and the second question has an infinite number of solutions, including negative numbers and fractions. These two problems, which rely on simple addition, differ only in the way they are framed. In fact, all questions are the frame into which the answers fall. And as you can see, by changing the frame, you dramatically change the range of possible solutions. Albert Einstein is quoted as saying, "If I had an hour to solve a problem and my life depended on the solution, I would spend the first fifty-five minutes determining the proper question to ask, for once I know the proper question, I could solve the problem in less than five minutes."

Friday, July 31, 2015

Disruptive technologies: Advances that will transform life, business, and the global economy

byJames Manyika, Michael Chui, Jacques Bughin, Richard Dobbs, Peter Bisson, and Alex Marrs

PART 3: Often the drivers of organic growth are external forces that dramatically change the overall context in which we compete in our businesses. Accordingly, I believe it is essential for leaders to continually understand how “something new” could significantly impact your market and business. Remember our definition of innovation—“bringing something NEW into USE”. This is the final in this series. I STRONGLY RECOMMEND YOU READ THE FULL ARTICLE TO CAPTURE THE FULL IMPACT.

Disruptive technologies: Advances that will transform life, business, and the global economy, a report from the McKinsey Global Institute, cuts through the noise and identifies 12 technologies that could drive truly massive economic transformations and disruptions in the coming years…
…Business leaders should keep their organizational strategies updated in the face of continually evolving technologies, ensure that their organizations continue to look ahead, and use technologies to improve internal performance. Disruptive technologies can change the game for businesses, creating entirely new products and services, as well as shifting pools of value between producers or from producers to consumers…

Autonomous and near-autonomous vehicles-- Over the coming decade, low-cost, commercially available drones and submersibles could be used for a range of applications.

Energy-storage devices or physical systems store energy for later use. These technologies, such as lithium-ion batteries and fuel cells, already power electric and hybrid vehicles, along with billions of portable consumer electronics. Over the coming decade, advancing energy-storage technology could make electric vehicles cost competitive, bring electricity to remote areas of developing countries, and improve the efficiency of the utility grid

3D printing-- With 3D printing, an idea can go directly from a 3D design file to a finished part or product, potentially skipping many traditional manufacturing steps. Importantly, 3D printing enables on-demand production, which has interesting implications for supply chains and for stocking spare parts—a major cost for manufacturers. 3D printing can also reduce the amount of material wasted in manufacturing and create objects that are difficult or impossible to produce with traditional techniques

Advanced materials-- Over the past few decades, scientists have discovered ways to produce materials with incredible attributes—smart materials that are self-healing or self-cleaning; memory metals that can revert to their original shapes; piezoelectric ceramics and crystals that turn pressure into energy; and nanomaterials. Nanomaterials in particular stand out in terms of their high rate of improvement, broad potential applicability, and long-term potential to drive massive economic impact

Advanced oil and gas exploration and recovery --The ability to extract so-called unconventional oil and gas reserves from shale rock formations is a technology revolution that has been gathering force for nearly four decades… With continued improvements, this technology could significantly increase the availability of fossil fuels for decades and produce an immediate boon for energy-intensive industries such as petrochemicals manufacturing.

Renewable energy --Renewable energy sources such as solar, wind, hydro-electric, and ocean wave hold the promise of an endless source of power without stripping resources, contributing to climate change, or worrying about competition for fossil fuels.

Wednesday, July 29, 2015

Disruptive technologies: Advances that will transform life, business, and the global economy

byJames Manyika, Michael Chui, Jacques Bughin, Richard Dobbs, Peter Bisson, and Alex Marrs

PART 2: Often the drivers of organic growth are external forces that dramatically change the overall context in which we compete in our businesses. Accordingly, I believe it is essential for leaders to continually understand how “something new” could significantly impact your market and business. Remember our definition of innovation—“bringing something NEW into USE”.

Disruptive technologies: Advances that will transform life, business, and the global economy, a report from the McKinsey Global Institute, cuts through the noise and identifies 12 technologies that could drive truly massive economic transformations and disruptions in the coming years…
…Business leaders should keep their organizational strategies updated in the face of continually evolving technologies, ensure that their organizations continue to look ahead, and use technologies to improve internal performance. Disruptive technologies can change the game for businesses, creating entirely new products and services, as well as shifting pools of value between producers or from producers to consumers…
…Some technologies detailed in the report have been gestating for years and thus will be familiar. Others are more surprising. Examples of the 12 disruptive technologies include:

Mobile Internet-- Ubiquitous connectivity and an explosive proliferation of apps are enabling users to go about their daily routines with new ways of knowing, perceiving, and even interacting with the physical world. The technology of the mobile Internet is evolving rapidly, with intuitive interfaces and new formats, including wearable devices.
Automation of knowledge-- work Advances in artificial intelligence, machine learning, and natural user interfaces (e.g., voice recognition) are making it possible to automate many knowledge worker tasks that have long been regarded as impossible or impractical for machines to perform 
The Internet of Things—embedding sensors and actuators in machines and other physical objects to bring them into the connected world—is spreading rapidly. From monitoring the flow of products through a factory to measuring the moisture in a field of crops to tracking the flow of water through utility pipes, the Internet of Things allows businesses and public-sector organizations to manage assets, optimize performance, and create new business models 
Cloud technology-- With cloud technology, any computer application or service can be delivered over a network or the Internet, with minimal or no local software or processing power required…. The cloud is enabling the explosive growth of Internet-based services… The cloud can also improve the economics of IT for companies and governments, as well as provide greater flexibility and responsiveness. Finally, the cloud can enable entirely new business models, including all kinds of pay-as you-go service models. 
Advanced robotics-- These advances could make it practical to substitute robots for human labor in more manufacturing tasks, as well as in a growing number of service jobs, such as cleaning and maintenance. This technology could also enable new types of surgical robots, robotic prosthetics, and “exoskeleton” braces that can help people with limited mobility to function more normally, helping to improve and extend lives. 
Next-generation genomics-- Next-generation genomics marries advances in the science of sequencing and modifying genetic material with the latest big data analytics capabilities…. With rapid sequencing and advanced computing power, scientists can systematically test how genetic variations can bring about specific traits and diseases, rather than using trial and error. Relatively low-cost desktop sequencing machines could be used in routine diagnostics, potentially significantly improving treatments by matching treatments to patients

Monday, July 27, 2015

Disruptive technologies: Advances that will transform life, business, and the global economy

byJames Manyika, Michael Chui, Jacques Bughin, Richard Dobbs, Peter Bisson, and Alex Marrs

PART 1: Often the drivers of organic growth are external forces that dramatically change the overall context in which we compete. Accordingly, I believe it is essential for leaders to continually understand how “something new” could significantly impact your market and business. Remember our definition of innovation—“bringing something NEW
into USE”. The next few postings will discuss some of these trends starting with how they are defined:

Disruptive technologies: Advances that will transform life, business, and the global economy, a report from the McKinsey Global Institute, cuts through the noise and identifies 12 technologies that could drive truly massive economic transformations and disruptions in the coming years… 
…Business leaders should keep their organizational strategies updated in the face of continually evolving technologies, ensure that their organizations continue to look ahead, and use technologies to improve internal performance. Disruptive technologies can change the game for businesses, creating entirely new products and services, as well as shifting pools of value between producers or from producers to consumers… 
IDENTIFYING THE TECHNOLOGIES THAT MATTER The noise about the next big thing can make it difficult to identify which technologies truly matter. (Here the criteria they used):
The technology is rapidly advancing or experiencing breakthroughs. Disruptive technologies typically demonstrate a rapid rate of change in capabilities in terms of price/performance relative to substitutes and alternative approaches, or they experience breakthroughs that drive accelerated rates of change or discontinuous capability improvements.
The potential scope of impact is broad. To be economically disruptive, a technology must have broad reach—touching companies and industries and affecting (or giving rise to) a wide range of machines, products, or services
Significant economic value could be affected. An economically disruptive technology must have the potential to create massive economic impact.
Economic impact is potentially disruptive. Technologies that matter have the potential to dramatically change the status quo. They can transform how people live and work, create new opportunities or shift surplus for businesses, and drive growth or change comparative advantage for nations.

Monday, July 13, 2015

10 Principles of Change Management
Tools and techniques to help companies transform quickly.
by John Jones, DeAnne Aguirre, and Matthew Calderone

A very insightful article that I recommend you read for deeper insights

Way back when (pick your date), senior executives in large companies had a simple goal for themselves and their organizations: stability. Shareholders wanted little more than predictable earnings growth. Because so many markets were either closed or undeveloped, leaders could deliver on those expectations through annual exercises that offered only modest modifications to the strategic plan. Prices stayed in check; people stayed in their jobs; life was good. 
Market transparency, labor mobility, global capital flows, and instantaneous communications have blown that comfortable scenario to smithereens. In most industries — and in almost all companies, from giants on down — heightened global competition has concentrated management’s collective mind on something that, in the past, it happily avoided: change. Successful companies, as Harvard Business School professor Rosabeth Moss Kanter told s+b in 1999, develop “a culture that just keeps moving all the time.” 
This presents most senior executives with an unfamiliar challenge. In major transformations of large enterprises, they and their advisors conventionally focus their attention on devising the best strategic and tactical plans. But to succeed, they also must: 
1. Address the “human side” systematically. Any significant transformation creates “people issues.”
2. Start at the top. Because change is inherently unsettling for people at all levels of an organization, when it is on the horizon, all eyes will turn to the CEO and the leadership team for strength, support, and direction
3. Involve every layer. Change efforts must include plans for identifying leaders throughout the company and pushing responsibility for design and implementation down, so that change “cascades” through the organization.
4. Make the formal case. Individuals are inherently rational and will question to what extent change is needed, whether the company is headed in the right direction, and whether they want to commit personally to making change happen.
5. Create ownership. Leaders of large change programs must overperform during the transformation and be the zealots who create a critical mass among the work force in favor of change.
6. Communicate the message. Too often, change leaders make the mistake of believing that others understand the issues, feel the need to change, and see the new direction as clearly as they do.
7. Assess the cultural landscape. Successful change programs pick up speed and intensity as they cascade down, making it critically important that leaders understand and account for culture and behaviors at each level of the organization.
8. Address culture explicitly. Once the culture is understood, it should be addressed as thoroughly as any other area in a change program. Leaders should be explicit about the culture and underlying behaviors that will best support the new way of doing business, and find opportunities to model and reward those behaviors.
9. Prepare for the unexpected. No change program goes completely according to plan. People react in unexpected ways; areas of anticipated resistance fall away; and the external environment shifts. Effectively managing change requires continual reassessment of its impact and the organization’s willingness and ability to adopt the next wave of transformation
10. Speak to the individual. Change is both an institutional journey and a very personal one

Monday, June 29, 2015

Leaders as Decision Architects
   John Beshears
HBR, May 2015   HBR Reprint R1505C

This is the second posting. The following highlights the authors' summary of the decision biases that affect all of us. I highly recommend reading the article for their suggestions of how to deal with them.

Monday, June 22, 2015

The Five Traps of High Stakes Decision Making
Michael C. Mankins
HBR, NOVEMBER 14, 2013

The next two posts deal with decision making which is a critical component of any process within a business. You must recognize the traps (this post) many fall into and biases that affect everyone (next posting). The major traps are:

An unrealistic search for silver-bullet solutions. Most business problems are complex. But many executives badly want a silver bullet — a simple action that will leapfrog the competition or supercharge an organization’s performance in one fell swoop.
Failure to consider alternatives explicitly. Business is a game of choices, and you can’t make good choices without good alternatives. But most organizations do not explicitly formulate and evaluate alternatives in making big decisions.
Too many people involved. Important decisions are hard to make in large groups. Sensitive issues don’t get thoroughly discussed. Personalities interfere with reasoned argument.  In fact, our research highlights the “Rule of 7″: for every individual you add to a group beyond seven, decision effectiveness declines by 10%.
Failure to consider opportunity cost. The decision to start doing something new is only one form of high-stakes decision. Another—often with equally big consequences—is to keep doing something you’re already doing. The decision not to shut down an uncompetitive product line or exit an unprofitable market can consume as much scarce management time and other resources as any merger. Yet few executives appreciate the opportunity cost associated with continuing with a losing venture.
Underestimating the challenges involved in execution and change management. The complexities associated with a big-stakes decision rarely end with the decision itself. Indeed, recent Bain research indicates that only 12% of large-scale changes are executed as intended. 

Monday, June 15, 2015

Leading Your Team into the Unknown
Nathan Furr
Jeffrey H. Dyer
December 2014 Issue of HBR

I think this is a good summary of what leaders have to do to drive innovation:

Don’t Dictate a Vision—Set a Grand Challenge
Innovation is at heart a process of discovery, and so the role of the person leading it is to set other people down a path, not to short-circuit it by jumping to a conclusion right at the start. To lead innovation, you don’t have to be the next Steve Jobs, nor do you need to guess the future. Rather, you must carve out the mental space within which the innovation process can be carried out.
Don’t Make Decisions—Design Experiments
The innovator’s method reduces the risk involved in bringing innovations to market by offering a better tool for making tough choices—a process for systematically testing critical assumptions with customers. The tool has powerful implications for leadership: It requires the leader to change from being the chief decision maker to being the chief experimenter.
What does that mean? Essentially, the leader’s role shifts from providing answers to posing questions. When a manager or anyone else on the team says, “I think we should do X,” it’s the leader’s job to ensure that the next question is, “What’s the fastest way to run an experiment to help us know whether we should do X?”
Don’t Just Ignite Ideas—Prepare the Organization to Accept Them
    Educating the wider organization: It’s tempting to downplay the importance of something so basic as establishing a common language. But dozens of innovators we’ve interviewed have cited a common language as critical for communicating the logic of what they’re doing. That being said, there are elements of the language that appeal more than others to people with responsibility for core operations.
     Building expertise: Many people have an innate desire to innovate, we’ve found. They just haven’t been given the opportunity and don’t know how to begin. To tap into their potential and build deep expertise, they need immersion in the innovation process.
Don’t Just Give People Time—Provide the Resources They Need to Act Quickly
Innovation requires devoted time blocks because the associational thinking that leads to new insights is more apt to happen when the mind is totally absorbed with a particular challenge, whether through observations, conversations, experiments, or meditation. You might be able to focus this way by devoting 30 or 40 minutes a day, but you’re more likely to do so by setting aside a half day a week. Devoting a day or two each month to innovation “jams” can be a particularly good way to help people use time effectively

Monday, June 01, 2015

Red Ocean Traps
W. Chan Kim
Renée Mauborgne
HBR Reprint R1503D

For disclosure, I have never been a true fan of the Blue Ocean strategy but I wanted to share with our community their thoughts on creating new markets.

Trap One: Seeing Market-Creating Strategies as Customer-Oriented Approaches
Generating new demand is at the heart of market-creating strategies. It hinges on converting noncustomers into customers, as did with its on-demand CRM software, which opened up a new market space by winning over small and midsize firms that had previously rejected CRM enterprise software…..Growth comes from converting nonusers. EXAMPLE:Sony focused on improving e-readers’ legibility to please current customers. But Amazon’s Kindle addressed the number one concern of non-buyers: too few available titles. Amazon won.
Trap Two: Treating Market-Creating Strategies as Niche Strategies
The field of marketing has placed great emphasis on using ever finer market segmentation to identify and capture niche markets. Though niche strategies can often be very effective, uncovering a niche in an existing space is not the same thing as identifying a new market space….EXAMPLENiche marketing can be treacherous. Delta’s Song targeted too narrow a segment of fliers—stylish professional women—and didn’t last. But Pret A Manger thrived by “desegmenting” different customer groups—figuring out what they had in common—to create a new market space.
Trap Three: Confusing Technology Innovation with Market-Creating Strategies
R&D and technology innovation are widely recognized as key drivers of market development and industry growth. It’s understandable, therefore, that managers might assume that they are also key drivers in the discovery of new markets. But the reality is that market creation is not inevitably about technological innovation.. Technological breakthroughs don’t necessarily create new markets. EXAMPLE: Segway was a marvel but never found a wide customer base. New markets arise from value innovation, not tech innovation.
Trap Four: Equating Creative Destruction with Market Creation
But does market creation always involve destruction? The answer is no. It also involves nondestructive creation, wherein new demand is created without displacing existing products or services.
Trap Five: Equating Market-Creating Strategies with Differentiation
In a competitive industry companies tend to choose their position on what economists call the “productivity frontier,” the range of value-cost trade-offs that are available given the structure and norms of the industry. Differentiation is the strategic position on this frontier in which a company stands out from competitors by providing premium value; the trade-off is usually higher costs to the company and higher prices for customers. We’ve found that many managers assume that market creation is the same thing….In reality, a market-creating move breaks the value-cost trade-off. It is about pursuing differentiation and low cost simultaneously.

Tuesday, May 26, 2015

Microsoft (Yes, Microsoft) Has a Far-Out Vision

Very encouraging article for the future of Microsoft and there are some learnings for everyone.

Satya Nadella, chief executive of Microsoft, is focusing on new research as a way to spur growth.
Last June, in the basement of the Microsoft visitor center in Redmond, Wash., Todd Holmdahl, a Microsoft hardware guru, and others nervously walked Satya Nadella, the new chief executive, through a demonstration of a secret project...
..The team leaders thought this augmented reality product (HoloLens) had the potential to be the next big thing in consumer technology, as groundbreaking as the PC and the smartphone... 
...The HoloLens team members were confident in their creation. But they worried that Mr. Nadella, a two-decade Microsoft employee then looking at cost-cutting measures and mass layoffs, would kill it for being too risky and far-out.
Mr. Nadella didn’t flinch.
“He said right away, ‘This is something that we’re going to do,’ ” Mr. Holmdahl said. “We are going to create a new product category, and this is the type of thing that Microsoft should be working on.” 
That response says a lot about the reshaped Microsoft Mr. Nadella envisions — one with fewer internal fiefs and with more willingness to favor big bets on new technologies over protecting legacy cash cows...
...Not long ago, the company had about a half-dozen internal systems for managing the development of software; Mr. Nadella is pushing everyone to use a single one, in the belief that top-notch internal tools will help it create top-notch products (CRITICAL)
...He has rallied them around mantras, like making personal computing more personal through wearables and other devices. To better translate Microsoft’s innovation into products people want to buy, he has directed the company’s research group, the biggest in the technology industry, to work more closely with product engineers. 
And just as important, Mr. Nadella has shown a sense of humility...
... “Their arrogance consumed them,” (MAJOR TRAP FOR BIG, SUCCESFUL COMPANIES) said Marc Benioff, the chief executive of, a longtime critic of Microsoft whose company reached an agreement to cooperate on software integration with Microsoft last year. “Now with Satya, they have a much more open mind about working with people.”

Tuesday, May 19, 2015

Big Ideas Mark the Path from Strategy to Execution
The path from strategy to execution should be energizing and inherently inspirational.

This material may not be broadly applicable but it discusses when the leader or someone of importance in a company have a compelling ideas.

Business leaders know that great strategies with great execution produce winning companies. They also know that winning companies are far outnumbered by mediocre ones. What they may not realize is that it’s the path from strategy to execution that often separates the two. 
The typical path goes something like this: You start by setting your goals. These could be financially oriented (grow earnings a certain amount by so-and-so year) or strategic (become the leader in this-or-that market). Then you prioritize the actions that will get you there: invest here, cut there, reorganize this, buy that. And then you implement like mad: align the organization around your goals and priorities, review your progress quarterly, reward performance accordingly, and so on. Of course, some companies are much better than others at following this track. That could explain the difference between winning and mediocre companies — but in my experience something much more significant is at play.... 
...Walter (Cardinal Health), Schultz (Starbucks), Bravo, and Zeitz (Puma)  could have generated all the goals, actions, and implementation discipline that any “world class” executive would have wanted, but that would not have been enough to create a winning enterprise. Instead, they designed innovative strategies based on novel ideas they owned unconditionally, and their commitment to those ideas enabled them to lead their companies through thick and thin to execute their strategies. In other words, their path was problem-idea-strategy-leadership, not goals-actions-implementation. 
This tells us that mastering the strategy-to-execution challenge starts by asking two questions: 
•         What’s the big problem your company or business is trying to solve?•         What’s the big idea you have for solving it? 
If you have compelling answers to these questions, you can proceed to the next two: 
•         What strategy does your company or business have for commercializing its big idea?•         Do your company’s leaders own the idea as if it was their own (if it isn’t already their own)? 
Unfortunately, too many companies cannot make it past the first two questions. When that’s the case, they inevitably slide into a form of sleepwalking through an endless cycle of goals-actions-implementation — a cycle that’s doomed to produce mediocrity. And that’s no fun for the leaders or their organizations. 
The path from strategy to execution should be energizing and inherently inspirational. You shouldn’t need vision, mission, and purpose statementsto have that kind of atmosphere. It won’t work anyway. The fact is all companies (even the most “disciplined”) are a mess when you look inside them, with runaway bureaucracy, spirited politics, dispiriting waste, and pointless meetings. These everyday realities will suck the joy and energy out of anyone. To overcome them, you need leaders who have an exciting idea that solves a big problem, and a genuine commitment to seeing it through. This begets an organization with people who, even as they deal with the inanities of corporate life, intrinsically want to follow their leaders. That is how you master the strategy-to-execution challenge. 

Friday, May 15, 2015

Managing Risk with Your Innovation Portfolio
By: Langdon Morris

This article reaffirms the importance of our use of McKinsey’s 3 Horizon Model in balancing your innovation portfolio.

Concentration Risk 

Concentration risk has been a subject of focused and eventually quite sophisticated research by economists and finance experts since the mid-twentieth century, when investing became professionalized, and investment managers began to grapple with the problems of investment risk that would affect middle class investors who were accumulating modest life savings.²  The new class of professional managers needed systematic ways to assess the risks of various types of investments so that they could create investment portfolios that would achieve targeted investment returns at well-understood risk levels for their clients.
We know this today as the work of balancing our retirement portfolios by selecting a mixture among various sectors and types of investments, mostly stocks, mutual funds, and bonds, so that when we’re ready to retire we actually have enough money to live decently for a few decades. 
The design intent of any investment portfolio, whether it’s your retirement portfolio, the company’s treasury portfolio, a venture capital portfolio, or your innovation project portfolio, is identical: to manage risk strategically by choosing a variety of investments from across different marketplaces which have a variety of performance characteristics, such that you attain the appropriate level of overall risk while attaining the necessary level of return… 
….Most small businesses face the same sort of risk, because by definition they’re usually only in one or a few businesses, and if things were to go bad they might not have much, or anything, to fall back on. Concentration risk is one of the major reasons why the mortality rate for small business is so high (the other being just generally poor management). It’s worth noting in passing that the mortality rate for big business is pretty high also, and it’s climbing precisely because the big firms are also struggling to adapt to change, just as small business are. All the statistics indicate that big firms going out of business at a record and accelerating rate…. 
Four Types of Innovation
Incremental innovations (Horizon 1) are generally small changes to existing products and services. Companies typically invest in incremental innovation in order to preserve or sustain existing market share, or perhaps to make modest gains in market share 
Breakthrough innovations (Horizons 2 or 3) are higher risk, and much like venture capital investing, when successful they result in much higher rewards. The distinctive character of successful breakthroughs is that they change the entire structure of the marketplace, which is, after all, the very definition of a breakthrough. Breakthroughs therefore create significant competitive advantage for the organization that creates the 
The third type of innovation is business model innovation (Horizons 2 or 3). In this case the objective is not specifically to develop or sell new products or services, but rather to provide a different and better sort of experience to customers. 
New venture innovations (Horizon 3), which comes about when an entirely new market needs to be explored and developed,...
Overcome Concentration Risk
The principle of an innovation portfolio is consistent with any sort of investment portfolio, whether it’s stocks and bonds for your retirement account, or a portfolio of any investments that the treasury group in a big company’s finance department uses to get the best return from the available cash flow.
Venture capitalists design yet a third type of portfolio, typically investing in 10 or 20 high-risk companies in the expectation that a least a couple of them will break through to produce significant returns within a few years. 
The underlying premise of this type of investing is that investors must anticipate the future direction and needs of the market, and then seek investment opportunities that match this future vision, recognizing that while failure is common because of the high risks, the right combination of qualities and characteristics can also lead to huge successes.

Monday, May 04, 2015

The Haier Road to Growth—Part 2
Customers always come first for this Chinese appliance maker — even as it continually reinvents itself and expands around the world

Haier Group is a Chinese multinational consumer electronics and home appliances company headquartered in Qingdao, Shandong province, China. It designs, develops, manufactures and sells products including air conditioners, mobile phones, computers, microwave ovens, washing machines, refrigerators, and televisions. The following blog postings will highlight how this innovative company became a global powerhouse.
This first posting highlights their approach to developing a room air conditioner for the Chinese market. This posting dives a bit deeper into some of their key capabilities.

Customer Service Leadership
….the sharp focus on customer service leadership has given the company consistency even as it propels Haier through dramatic changes… the company should never see itself as just a manufacturer of products, but instead as a provider of solutions to its customers’ problems. In the earliest years, that meant bringing new levels of quality and reliability to Chinese products. Later, it involved increasingly sophisticated forms of customization and new types of services. Through its simplicity and continuity, this principle has given all employees a reliable compass with which to make decisions, even in the face of disruptive market challenges such as new technologies or new competitors.
The Niche Innovator 
In the late 1990s, a farmer in the Chinese countryside complained to Haier that his washing machine was full of dirt and was not functioning well. The local distributor sent a technician to the farmer’s house, where he discovered that the farmer had been using the washing machine not to wash clothes but to clean sweet potatoes. At this time, agricultural markets had been permitted to open in China, and cleaner vegetables commanded higher prices. The repair technician reported immediately to Haier’s headquarters about this practice, which was growing increasingly common in the region. Inspired, the company soon released a vegetable washing machine, designed to accommodate the extra grime and soil of the tubers. 
Around the same time, Haier’s researchers observed that unlike Western consumers, many Chinese people hand-washed their underclothes every day at home. They found it more hygienic and socially discreet to wash these separate from other clothes and away from public washing machines. In response to this consumer need, Haier launched a small, low-energy washing machine called the Little Prodigy that could easily fit into a small, crowded urban apartment. The machine became extremely popular, among, for example, families with newborn children. 
These episodes represented the start of the second reinvention at Haier: a new form of customer-responsive innovation. This was timely, because quality was no longer a great differentiator in China; other companies had caught up.(VERY TYPICAL--COMPETITIVE ADVANTAGES ARE TRANSIENT) Zhang (CEO) built upon the company’s hard-won workforce discipline, and the accompanying performance–pay relationship, to link employees directly to customers. To break down the “invisible walls,” as he called them, between functions, Zhang assigned teams made up of members of different functional departments to specific projects. He avoided the conflicts of a matrix structure by introducing “market chains” (based on the value-chain concepts of Michael Porter), in which it was possible for all individuals at Haier, no matter what their role, to trace their actions directly to the marketplace. These market chains replaced functional silos as the key organizational unit. 
This was also the phase in which Zhang began building Haier into a global company. He approached this challenge by adopting Mao Zedong’s strategy of “occupying the rural areas to encircle the city,” gaining strength first with niche products for sectors where there were few competitors. The company took full advantage of its customer-responsive innovation capability to do this. In 1997, recognizing the needs of college students in dormitory rooms, it launched mini-refrigerators in the United States. It followed with wine refrigerators in 2004. And then, during the 2000s, Haier parlayed that success into becoming a mainstream producer of appliances for the U.S. market. Meanwhile, in Pakistan, Haier sold extra-large washing machines designed for heavy robes. 
Intimacy and Entrepreneurship 
In 2005, Zhang recognized that most of Haier’s competitors in China were achieving acceptable levels of service responsiveness and that the company would once again have to reinvent its value proposition. He believed that Haier suffered from unnecessary time delays and guesswork about new product manufacturing volumes, which proved costly when it guessed wrong, and that could be reduced, if not completely avoided, by becoming more intimately aware of customer needs and wants. Employees would now have to get to know the customer better than they knew themselves, or, as Zhang put it, to “create zero distance with the customer.” 
Intimacy is a lot more complicated than responsiveness, and this third reinvention required employees to feel closer to their customers. Haier thus inverted its organizational structure into one based on self-organizing work units called ZZJYTs (an abbreviation for zi zhu jing ying ti, which translates to independent operating unit). Their three most critical functions — marketing, design, and manufacturing — were now supposed to work directly for customers. Instead of directing the employees who did that work, the ZZJYT managers became service providers to them, giving them the resources and guidance they needed to provide for customers. This minimized the decisions made at higher levels in the hierarchy, making the company more responsive to nascent market needs. Zhang went so far as to announce that this shift in organizational model would proceed even if revenues and profits showed signs of flagging, and even if it were necessary to use some of the returns from successful legacy offerings to make it work.
The new structure proved successful, and the ZZJYTs are still the basic organizational unit at Haier. Each comprises a team of 10 to 20 people — sometimes located in one place, other times virtual — who come from various functional roles and are brought together for a specific mission, and who are given profit and loss responsibility and accountability. They have their own independent accounting systems and complete autonomy in hiring and firing employees, setting internal rules about expenses and determining bonus distribution, and making almost any operational decision that typically would be made by an independent functional organization.
Haier organizes its ZZJYTs in three tiers. First-tier ZZJYTs have the task of directly facing the market, understanding customer needs, and providing customers with the right products. Second-tier ZZJYTs are responsible for supporting the first-tier ones, providing them with the resources and the guidance they need. Third-tier ZZJYT managers are the business division managers or functional managers who set corporate strategies and direction for the whole group. A typical first-tier ZZJYT is composed of sales, R&D, marketing, and finance people. Everyone, whatever their function, is expected to talk to consumers regularly.  (VIEW THE ARTICLE ON THE DETAILS OF THESE TEAMS--WORTH THE READ)