Plus ca change, plus c’est la meme chose. The more things change…the more they stay the same.
We have moved to a hosted website, and until we figure out how to move my old posts with me, they will remain available here.
Creative efficiency or efficient creativity?
Is the great paradox in managing innovation a red herring?
The paradox in managing innovation is the difficulty–if not impossibility–of simultaneously having an efficient organization and an innovative one.
Organizations must perform efficiently to survive and thrive in their current environment, but they must also retain the ability to adapt should the environment change. The tension is between adaptation and adaptability, between exploitation of current resources and opportunities and exploration for new ones.
A red herring is a device (literary, academic, or otherwise) that is “laid across the track” to divert or distract people from solving a problem directly. Like this definition.
Our obsession with the tension between the wild and crazy side of innovation and the button-downed nature of ongoing operations is distracting us from one of the more real problems in managing innovation.
A recent article on 3M describes the “struggle between efficiency and creativity” that is represented by their recent CEO succession. James McNerney came to 3M from GE, and brought with him Six Sigma, the efficiency program GE made a standard management practice in the 1990s. McNerney cut costs and improved margins:
The plan appeared to work: McNerney jolted 3M’s moribund stock back to life and won accolades for bringing discipline to an organization that had become unwieldy, erratic, and sluggish.
But, as the great tension would suggest, the plan came at a steep price:
At the company that has always prided itself on drawing at least one-third of sales from products released in the past five years, today that fraction has slipped to only one-quarter.
The author and a host of academics then lay bare the tension:
Those results are not coincidental. Efficiency programs such as Six Sigma are designed to identify problems in work processes—and then use rigorous measurement to reduce variation and eliminate defects. When these types of initiatives become ingrained in a company’s culture, as they did at 3M, creativity can easily get squelched.
The tension here is clearly between exploring for what you don’t know (the protagonist) and exploiting what you already know (the antagonist). Between color and light, and drab routine.
The terms exploitation and exploration harken back to the oil companies who used to have (and had to have) two separate divisions. One division was responsible for exploiting existing fields, in which productivity was measured in barrels/day and $/barrel, and improvements could be proposed and tested with relative confidence. The skills of exploiting were disciplined management, analysis, and the routinization of work.
But wells inevitably dry up and market demands grow, so oil companies also needed a division that continuously explored for new oil fields. The skills of exploring for oil were independence, risk taking, intuition, and an ability to live out of a suitcase.
This tension was immortalized in the organizational literature by James March, one of the founding fathers of the field, in a brief 1991 article entitled “Exploration and Exploitation in Organizational Learning.”
There are profound differences, however, between searching for oil and developing a firm’s next new products or strategies. One of the biggest differences is that, when oil is discovered, there is little doubt that it’s oil, that the organization is capable of exploiting it, and that it will contribute to the bottom line in some way at some time. This is more akin to discovering a warehouse of widgets just like the ones you’re already selling. Regardless of whether you drill 6 wells or 6,000, if one of them is a gusher nobody debates whether this will cannibalize existing markets, not work at all, distract from our current focus resources, etc…
I can’t recall a single innovative new product that was obviously and unambiguously valued in it early days by the organization. So there is more to innovation than simply exploring for new ideas.
What is missing is a very significant step that lies between innovation and operations (between exploration and exploitation): execution. At least, that’s what I would call it. It’s the process of converting an idea, even a prototype, into a set of resources, procedures, metrics, and marching orders that can enable an organization to effectively replicate, scale, and manage the new venture.
I move around in the worlds of design and innovation and have met a lot of wildly creative people. Having good ideas is actually pretty easy for them. I also work with a lot of smart people in operations, and knowing how to ferret out problems, reduce variability, and manage others to task comes pretty easily to them. The challenge is in how these people work together. Good ideas only help the company to the extent they can be routinized–exploiting the exploration.
The big challenge in managing innovation lies, I would suggest, not in building up two very strong skills in innovation and in operations, but rather in building the bridge between them–of developing the people and processes that facilitate the routinization of novelty. Of turning good ideas into practical processes that the larger organization can value, adopt, implement, and manage.
Forget 3M–think about Toyota. They are leaders in manufacturing efficiencies and also at exploring the new frontiers of innovation automobiles. How have they managed the tension? Read any number of books on them (but the original Machine that Changed the World remains the best read) and you find that they are extremely effective at recognizing those ideas that can be routinized and doing so before their competition. Sometimes decades before. Consider the Prius. Ford and GM had many of the same technologies lying around R&D, but having the ideas is not the same as converting them into manufacturing routines, processes, supply chains, and ultimately customers. That’s execution.
With the obsession between innovation and efficiency, the skills to execute–and the people who have them–are being largely ignored in modern corporations. And certainly ignored within business schools. Which is a shame.
Creative efficiency or efficient creativity?
Is the great paradox in managing innovation a red herring?
The paradox in managing innovation is the difficulty–if not impossibility–of simultaneously having an efficient organization and an innovative one.
Organizations must perform efficiently to survive and thrive in their current environment, but they must also retain the ability to adapt should the environment change. The tension is between adaptation and adaptability, between exploitation of current resources and opportunities and exploration for new ones.
A red herring is a device (literary, academic, or otherwise) that is “laid across the track” to divert or distract people from solving a problem directly. Like this definition.
Our obsession with the tension between the wild and crazy side of innovation and the button-downed nature of ongoing operations is distracting us from one of the more real problems in managing innovation.
A recent article on 3M describes the “struggle between efficiency and creativity” that is represented by their recent CEO succession. James McNerney came to 3M from GE, and brought with him Six Sigma, the efficiency program GE made a standard management practice in the 1990s. McNerney cut costs and improved margins:
The plan appeared to work: McNerney jolted 3M’s moribund stock back to life and won accolades for bringing discipline to an organization that had become unwieldy, erratic, and sluggish.
But, as the great tension would suggest, the plan came at a steep price:
At the company that has always prided itself on drawing at least one-third of sales from products released in the past five years, today that fraction has slipped to only one-quarter.
The author and a host of academics then lay bare the tension:
Those results are not coincidental. Efficiency programs such as Six Sigma are designed to identify problems in work processes—and then use rigorous measurement to reduce variation and eliminate defects. When these types of initiatives become ingrained in a company’s culture, as they did at 3M, creativity can easily get squelched.
The tension here is clearly between exploring for what you don’t know (the protagonist) and exploiting what you already know (the protagonist). Between color and light, and drab routine.
The terms exploitation and exploration harken back to the oil companies who used to have (and had to have) two separate divisions. One division was responsible for exploiting existing fields, in which productivity was measured in barrels/day and $/barrel, and improvements could be proposed and tested with relative confidence. The skills of exploiting were disciplined management, analysis, and the routinization of work.
But wells inevitably dry up and market demands grow, so oil companies also needed a division that continuously explored for new oil fields. The skills of exploring for oil were independence, risk taking, intuition, and an ability to live out of a suitcase.
This tension was immortalized in the organizational literature by James March, one of the founding fathers of the field, in a brief 1991 article entitled “Exploration and Exploitation in Organizational Learning.”
There are profound differences, however, between searching for oil and developing a firm’s next new products or strategies. One of the biggest differences is that, when oil is discovered, there is little doubt that it’s oil, that the organization is capable of exploiting it, and that it will contribute to the bottom line in some way at some time. This is more akin to discovering a warehouse of widgets just like the ones you’re already selling. Regardless of whether you drill 6 wells or 6,000, if one of them is a gusher nobody debates whether this will cannibalize existing markets, not work at all, distract from our current focus resources, etc…
I can’t recall a single innovative new product that was obviously and unambiguously valued in it early days by the organization. So there is more to innovation than simply exploring for new ideas.
What is missing is a very significant step that lies between innovation and operations (between exploration and exploitation): execution. At least, that’s what I would call it. It’s the process of converting an idea, even a prototype, into a set of resources, procedures, metrics, and marching orders that can enable an organization to effectively replicate, scale, and manage the new venture.
I move around in the worlds of design and innovation and have met a lot of wildly creative people. Having good ideas is actually pretty easy for them. I also work with a lot of smart people in operations, and knowing how to ferret out problems, reduce variability, and manage others to task comes pretty easily to them. The challenge is in how these people work together. Good ideas only help the company to the extent they can be routinized–exploiting the exploration.
The big challenge in managing innovation lies, I would suggest, not in building up two very strong skills in innovation and in operations, but rather in building the bridge between them–of developing the people and processes that facilitate the routinization of novelty. Of turning good ideas into practical processes that the larger organization can value, adopt, implement, and manage.
Forget 3M–think about Toyota. They are leaders in manufacturing efficiencies and also at exploring the new frontiers of innovation automobiles. How have they managed the tension? Read any number of books on them (but the original Machine that Changed the World remains the best read) and you find that they are extremely effective at recognizing those ideas that can be routinized and doing so before their competition. Sometimes decades before. Consider the Prius. Ford and GM had many of the same technologies lying around R&D, but having the ideas is not the same as converting them into manufacturing routines, processes, supply chains, and ultimately customers. That’s execution.
With the obsession between innovation and efficiency, the skills to execute–and the people who have them–are being largely ignored in modern corporations. And certainly ignored within business schools. Which is a shame.
7 questions to ask a potential co-founder
In starting a business, one of the first and most important decisions you can make is choosing the right partners. The more new businesses I am involved with, the more I see just how critical are these early decisions about the people rather than the ideas, company names, logos, and other distracting conversations.
The success or failure of a new venture hinges on the performance of the founding team: the mix of skills determines whether you can manage the diverse challenges you will face; your ability to support and challenge each other will decide how well you manage setbacks; and the culture you create through your interactions will have a lasting impact on the company.
Choosing a partner not only can be a difficult and time-consuming decision, it should be. If it’s not, there is something wrong. What follows are seven questions you should ask a potential partner before deciding to drive a new venture forward.
1. How well do you know your partner?
Business partnerships are often equated to marriages. Knowing your partner can eliminate many future uncertainties and headaches. Whether you are partnering with a coworker, friend or family member, make sure you really know your partner’s strengths, weaknesses, work ethics, and family and financial obligations. Going with your gut–or with longtime friends–can often backfire as we tend to focus on the positive aspects of the relationship and ignore and underestimate the warning signs. Asking tough questions of each other in the beginning will avoid potential disaster in the long run.
2. What strengths and weaknesses do you each bring to the partnership?
Opposites attract. A good partner will complement your skills and assets. Though you may share the same visions, having a partner with a different skill set will enable you to double your strengths and minimize your weaknesses. Choose a partner that is able to challenge your viewpoint and strategy, in an effort to find the best possible solution.
3. Do you have a shared vision?
Although a strong partnership will often consist of two people with different but complementary skills, sharing a common vision gives the partnership focus, drive and ambition. Make sure ahead of time that both parties are committed to the partnership’s success and are willing to invest the necessary time, energy and money required.
4. What type of partnership will you form?
Put your legal affairs in order. Even partnerships with the best of intentions can fail miserably if the proper legal agreements are put down on paper. At first, begin by putting in writing such things as expectations (and agreements) about profit-sharing or ownership. Then answer the harder questions: How will decisions be made (easy if you agree, not so if you don’t)? What will happen if one of you decides to leave the business? Whether for professional or personal reasons, this happens often); In the event of one’s death, how is ownership and control going to be determined?
5. Do you like this person?
Liking your partner is essential to your partnership’s success. Much like a marriage, a long-term partnership will suffer the same ups and downs. Make sure this is someone you like enough to want to weather through adversity when the going gets tough.
6. If your partner is a friend, how strong is your friendship?
Partnership with a friend can be fun and rewarding but also brings the possibility of greater devastation. If the partnership fails, chances are the friendship may as well. Decide ahead of time if your friendship can withstand the inevitable disagreements, downturns, and even dissolution of the business.
7. What is the exit strategy?
Before the ink even dries on the partnership papers, sit down and decide what the exit strategy will be. Having this conversation ahead of time can prevent heartache and dissension in the future. Decide how, when and why the partnership will dissolve. A well-thought out exit strategy can allow partners to exit a partnership gracefully and with dignity, rather than with recriminations and regret.
A New MBA Experience
As a whole, business has become increasingly aware of the role
experience plays in the consumption of goods and services. Pine &
Gilmore’s The Experience Economy
is one of the earlier and more thoughtful calls for rethinking what we
think we are really offering, and what is really being consumed, when
someone buys an iPod, takes in a movie, or goes out for a burger.
Taking this approach, it’s valuable to ask “what would make your
customer’s interactions with you a transformative experience?” Granted,
buying a burger doesn’t need to change anyone. But it could. And why not?
As usual, those of us in management are late to this insight and
opportunity. Our MBA programs remain safe from such business ideas
because we, as much as any organization, resist ideas that require
widespread individual risk and change.
I’ve often wondered what would make the MBA a truly transformative
experience–in which students emerge with a new and disciplined approach
to thinking and acting that is fundamentally different from how they
came in. And this is not unrealistic. Our closest counterparts, Law
Schools and Medical Schools, produce graduates who do think and act in
very different ways than when they entered.
How, then, can we replicate the process? On the one hand, business
schools can increase the rigor of their program–focusing on teaching
the discipline of thought and execution required of our graduates. This
would change the nature of the experience by changing the content of
the courses–a necessary change but also more about content than
experience.
There is also the design of the entire MBA experience: How MBA
students–many in the their late 20s and 30s–go to school, where they go
to school, and how they interact with one another, their professors,
and the schools community of administrators, staff, leadership, and
extended community. And while most MBA programs will give lip-service
to the rigor and relevance of their coursework, they would not consider
changes in the fundamental delivery of the content. They are stuck
thinking that the value of the MBA is in the course content (the
product) and not how that product is consumed (the experience).
All of this became crystal clear when I had the chance to visit Bainbridge Graduate Institute (BGI) in mid-June. I was there thanks to the invitation and persistence of Paul Hudnut,
who teaches at BGI as well as at Colorado State. Bainbridge Graduate
Institute is one of the early pioneers that offers an MBA program with
emphasis on sustainability, and triple-bottom line is the language they
speak. While this is a very important part of BGI’s mission and the
identity of its students, it hides one of the more compelling and
unique aspects of the place.
From the website:
Our MBA in Sustainable Business is a 2- or 3-year,
part-time program designed for working individuals. Students and
faculty meet in intensive classroom sessions for a 4-day weekend once a
month, October through June, at the IslandWood environmental learning center on Bainbridge Island,
35 minutes by ferry from downtown Seattle. The academic year is kicked
off with a 5-day orientation at Channel Rock, our eco-retreat center on
Cortes Island in British Columbia.
The “campus” is a beautiful environmental retreat with great
accomodations (and in truly modern business fashion, outsourced to
reduce committed capital). Student are on-site only four days a month,
but for those four days are there completely.
The MBA program combines distance learning with
monthly, intensive, face-to-face classroom sessions. Students build a
strong, cooperative learning community with each other, the faculty and
staff.
Granted, I happen to come upon the students when they were in the
fire lodge, gathered around a campfire watching the graduating class
put on skits, sing songs, and pass the mantle (t-shirt) of leadership
to the next year’s class. I hadn’t seen such a display of a total
immersion organization since summer camp. But then the next morning I
judged the presentations of their new business ventures for Paul’s
entrepreneurship class and was delighted with the quality of and
commitment to the ideas.
In rethinking the MBA–as an experience rather than as a set of
topics–I left Bainbridge with the realization that transformative
experiences can tap the depth rather than the length of the immersion.
Business students, faculty, and staff may get more out of 4 days of
complete immersion interspersed with time away, online, and in
reflection than they get from 4 weeks of routine lectures.
A new MBA experience
As a whole, business has become increasingly aware of the role experience plays in the consumption of goods and services. Pine & Gilmore’s The Experience Economy is one of the earlier and more thoughtful calls for rethinking what we think we are really offering, and what is really being consumed, when someone buys an iPod, takes in a movie, or goes out for a burger.
Taking this approach, it’s valuable to ask “what would make your customer’s interactions with you a transformative experience?” Granted, buying a burger doesn’t need to change anyone. But it could. And why not?
As usual, those of us in management are late to this insight and opportunity. Our MBA programs remain safe from such business ideas because we, as much as any organization, resist ideas that require widespread individual risk and change.
I’ve often wondered what would make the MBA a truly transformative experience–in which students emerge with a new and disciplined approach to thinking and acting that is fundamentally different from how they came in. And this is not unrealistic. Our closest counterparts, Law Schools and Medical Schools, produce graduates who do think and act in very different ways than when they entered.
How, then, can we replicate the process? On the one hand, business schools can increase the rigor of their program–focusing on teaching the discipline of thought and execution required of our graduates. This would change the nature of the experience by changing the content of the courses–a necessary change but also more about content than experience.
There is also the design of the entire MBA experience: How MBA students–many in the their late 20s and 30s–go to school, where they go to school, and how they interact with one another, their professors, and the schools community of administrators, staff, leadership, and extended community. And while most MBA programs will give lip-service to the rigor and relevance of their coursework, they would not consider changes in the fundamental delivery of the content. They are stuck thinking that the value of the MBA is in the course content (the product) and not how that product is consumed (the experience).
All of this became crystal clear when I had the chance to visit Bainbridge Graduate Institute (BGI) in mid-June. I was there thanks to the invitation and persistence of Paul Hudnut, who teaches at BGI as well as at Colorado State. Bainbridge Graduate Institute is one of the early pioneers that offers an MBA program with emphasis on sustainability, and triple-bottom line is the language they speak. While this is a very important part of BGI’s mission and the identity of its students, it hides one of the more compelling and unique aspects of the place.
From the website:
Our MBA in Sustainable Business is a 2- or 3-year, part-time program designed for working individuals. Students and faculty meet in intensive classroom sessions for a 4-day weekend once a month, October through June, at the IslandWood environmental learning center on Bainbridge Island, 35 minutes by ferry from downtown Seattle. The academic year is kicked off with a 5-day orientation at Channel Rock, our eco-retreat center on Cortes Island in British Columbia.
The “campus” is a beautiful environmental retreat with great accomodations (and in truly modern business fashion, outsourced to reduce committed capital). Student are on-site only four days a month, but for those four days are there completely.
The MBA program combines distance learning with monthly, intensive, face-to-face classroom sessions. Students build a strong, cooperative learning community with each other, the faculty and staff.
Granted, I happen to come upon the students when they were in the fire lodge, gathered around a campfire watching the graduating class put on skits, sing songs, and pass the mantle (t-shirt) of leadership to the next year’s class. I hadn’t seen such a display of a total immersion organization since summer camp. But then the next morning I judged the presentations of their new business ventures for Paul’s entrepreneurship class and was delighted with the quality of and commitment to the ideas.
In rethinking the MBA–as an experience rather than as a set of topics–I left Bainbridge with the realization that transformative experiences can tap the depth rather than the length of the immersion. Business students, faculty, and staff may get more out of 4 days of complete immersion interspersed with time away, online, and in reflection than they get from 4 weeks of routine lectures.
7 Things to Ask a Potential Partner
In starting a business, one of the first and most important decisions
you can make is choosing the right partners. The success or failure of
a new venture often hinges on the performance of the founding
team–their mix of skills determines whether they can manage the
diverse challenges they will face, their ability to support and
challenge each other will decide how well they manage setbacks, and
the culture they create through their interactions will have a lasting
impact on the company. Choosing a partner should be a difficult and
time-consuming decision. What follows are seven questions you should
ask a potential partner before deciding to drive a new venture
forward.
1. How well do you know your partner?
Business partnerships are often equated to marriages. Knowing your
partner can eliminate many future uncertainties and headaches.
Whether you are partnering with a coworker, friend or family member,
make sure you really know your partner’s strengths, weaknesses, work
ethics, and family and financial obligations. Going with your gut–or
with longtime friends–can often backfire as we tend to focus on the
positive aspects of the relationship and ignore and underestimate the
warning signs. Asking tough questions of each other in the beginning
will avoid potential disaster in the long run.
2. What strengths and weaknesses do you both bring to the partnership?
Opposites attract. A good partner will complement your skills and
assets. Though you may share the same visions, having a partner with a
different skill set will enable you to double your strengths and
minimize your weaknesses. Choose a partner that is able to challenge
your viewpoint and strategy, in an effort to find the best possible
solution.
3. Do you have a shared vision?
Although a strong partnership will often consist of two people with
different but complementary skills, sharing a common vision gives the
partnership focus, drive and ambition. Make sure ahead of time that
both parties are committed to the partnership’s success and are willing
to invest the necessary time, energy and money required.
4. What type of partnership will you form?
Put your legal affairs in order. Even partnerships with the best of
intentions can fail miserably if the proper legal agreements are put
down on paper. At first, begin by putting in writing such things as
expectations (and agreements) about profit-sharing or ownership. Then
answer the harder questions: How will decisions be made (easy if you
agree, not so if you don’t)? What will happen if one of you decides
to leave the business? Whether for professional or personal reasons,
this happens often); In the event of one’s death, how is ownership and
control going to be determined?
5. Do you like this person?
Liking your partner is essential to your partnership’s success. Much
like a marriage, a long-term partnership will suffer the same ups and
downs. Make sure this is someone you like enough to want to weather
through adversity when the going gets tough.
6. If your partner is a friend, how strong is your friendship?
Partnership with a friend can be fun and rewarding but also brings the
possibility of greater devastation. If the partnership fails, chances
are the friendship may as well. Decide ahead of time if your
friendship can withstand the inevitable disagreements, downturns, and
even dissolution of the business.
7. What is the exit strategy?
Before the ink even dries on the partnership papers, sit down and
decide what the exit strategy will be. Having this conversation ahead
of time can prevent heartache and dissension in the future. Decide
how, when and why the partnership will dissolve. A well-thought out
exit strategy can allow partners to exit a partnership gracefully and
with dignity, rather than with recriminations and regret.
Wisdom in the entrepreneurial world
There is a strong survivor bias in studies of innovation and
entrepreneurship–both in the academic literature and in the stories of
practicing professionals. We tend to study the winners, the companies
that made it out of the garage and onto NASDAQ. They’re easier to find.
Even the losers we study tend to have survived long enough to be
noticed, which by itself makes them more successful than most new
ventures.
When you’re business is investing in new ventures–in picking
winners–there is some value in studying how you’ve done that well.
There is likely more value in studying what you did wrong. Bessemer
Venture Partners has a pretty unique site describing the companies that
they did not invest in: they call it their Anti-Portfolio. Every VC firm has such a history–few would acknowledge them publicly.
Welcome
Welcome.
Wisdom in the entrepreneurial world
There is a strong survivor bias in studies of innovation and entrepreneurship–both in the academic literature and in the stories of practicing professionals. We tend to study the winners, the companies that made it out of the garage and onto NASDAQ. They’re easier to find. Even the losers we study tend to have survived long enough to be noticed, which by itself makes them more successful than most new ventures.
When you’re business is investing in new ventures–in picking winners–there is some value in studying how you’ve done that well. There is likely more value in studying what you did wrong. Bessemer Venture Partners has a pretty unique site describing the companies that they did not invest in: they call it their Anti-Portfolio. Every VC firm has such a history–few would acknowledge them publicly.
Andrew Hargadon 