Friday, October 31, 2008

Humming-bird, a poem by D.H.Lawrence.

D.H.Lawrence was an English writer who was born in 1885 and died in 1930. His prolific and diverse output included novels, short stories, poems, plays, essays, travel books, paintings, translations, and literary criticism. His collected works represent an extended reflection on the dehumanizing effects of modernity and industrialization.
He is is perhaps best known for his novels - Sons and Lovers, Women in Love, and Lady Chatterley's Lover. However, Lawrence also wrote almost 800 poems, most of them relatively short. Here is one I particularly like since my garden is full of humming-birds this year.

Humming-bird by D.H.Lawrence.

I can imagine, in some otherworld
Primeval-dumb, far back
In that most awful stillness, that only gasped and hummed,
Humming-birds raced down the avenues.

Before anything had a soul,
While life was a heave of matter, half inanimate,
This little bit chipped off in brilliance
And went whizzing through the slow, vast, succulent stems.

I believe there were no flowers then,
In the world where humming-birds flashed ahead of creation.
I believe he pierced the slow vegetable veins with his long beak.

Probably he was big
As mosses, and little lizards, they say, were once big.
Probably he was a jabbing, terrifying monster.

We look at him through the wrong end of the long telescope of time,
Luckily for us.

Thursday, October 30, 2008

Designing the product.

People interact with products on two levels: physical and emotional. The physical part is called “ergonomics” - what feels good to people. Some designers call the emotional level "psychonomics"- what makes people feel good. The baseline of good design is a perfect balance between the two. Form and function are developed together and are intertwined. A design that stands the test of time is done as efficiently as possible and has nothing more than it needs to do the job.

Charles and Ray Eames's molded-plywood chair of the 1940s is a perfect example. The wood was molded into flexible shapes that perfectly conformed to the body and absorbed shock when the sitter moved. Herman Miller's Aeron chair is descended from that Eames chair but it’s more concerned with performance - action, movement, and mobility. Like the Eames chair, the Aeron is pared down mechanically to exactly what's necessary and its cushion uses the least amount of material needed to achieve comfort. That’s the real art and skill of a designer: to achieve elegance in design with the highest degree of efficiency. Ultimately, any well-designed product or experience acknowledges the user. It's that respect for the user that makes a design great. That's true for a table, a chair, a book, a film or a Web site.

Designing a product is not so much about the end product as it’s about the process of use. This is especially true for Web design, which isn’t dealing with an immutable, static object. Instead, the focus is on designing sequential, ongoing activities - creating a series of linked interactions and experiences.

Design guidelines.

- Design from the outside in. Make the customer’s use of the product, not the technology, central to all product development. Ask, “How do our customers want to deal with us?”

- Create an intuitive product. No one has to read a toaster manual.

- Get physical fast. Prototyping provides opportunities for a concept to be visualized. It offers quick feedback from both users and investors. Fast prototyping squeezes time out of the product development cycle.

- Design products that can be produced efficiently using as few parts and as many standard parts as possible. Manufacturing criteria are as important to product success as ergonomics, aesthetics and function. Always keep quality, cost and delivery parameters in mind.

- Create a product improvement roadmap which plans to incorporate changes based on customer interactions.

- Surprise the user. Always build in something extra. Delivering more than the customer buys creates product loyalty and increases the chance of creating a truly “hot” product.

- Don’t delay a release in order to add ten more killer features in another six weeks. Ship it - chances are it’s good enough as it is. You can always improve it later.

Once you’ve figured out who the customer is and incorporated their needs into the design of your product or service, the next step is to make yourself known.

Wednesday, October 29, 2008

Understand your customer.

San Diego entrepreneur Neil Senturia started out believing that ATCOM/INFO was an Internet kiosk company but it eventually ended up as a software company. According to Senturia, “When you’re trying to sell your product, the first meeting is always with the wrong people, so try to get it over with as quickly as possible. It took us about six-weeks of meetings until we were finally talking to the real customer. We didn’t know who the customer was in the beginning. Then it dawned on us that we weren’t selling to business travelers - we were selling to hotels!”

To succeed in business, focus on finding the right customers and on learning what they want. Then use your skills and resources to surpass their future hopes, not just to meet their present expectations. A new company shouldn’t compete on price because it'll risk going out of business if it does. Instead, it should work to attract customers by offering them more value for the same price they’re already paying. Price takers are “me-too” competitors. Value makers, like Nike, create new categories and new price points. If you don’t have a clear distinctive capability, you’ll always be jostling for position in the middle of the pack.

Thomas Edison's business failures often came because he relied primarily on his own taste and technology-centered logic rather than trying to understand what other people wanted. For example, when he invented the phonograph, he studied both the cylinder and the disc, but made the mistake of selecting the cylinder because of its technological superiority (as the cylinder revolves, each part passes under the stylus at the same speed). He also preferred cylinders because phonographs using cylinders would allow people to make home recordings. Edison didn't anticipate that the phonograph would be used primarily for the distribution of music. He thought of it as a tool that would allow businesspeople to dictate letters onto cylinders that could be mailed to recipients without the need for transcription. Discs, however, had important advantages over cylinders: they were less fragile; took up less space; were easier to store, package and ship; could accommodate longer playing times by increasing the diameter; had a second side that added more capability without adding storage space; and were cheaper and easier to mass produce.

Being first, being best, even being right doesn’t matter. What matters is what customers think. Edison was first and had the best sound quality. But he lost out in the marketplace by pushing the cylinder when customers preferred the more convenient disc. Edison pushed the phonograph as a recording medium when customers were more interested in listening to prerecorded music. When Edison finally did switch to discs, he didn't use famous (and expensive) musicians, but instead hired excellent but lesser-known artists. As a result, he was never able to capture market share from his competition, the Victor Talking Machine Company.

Sometimes, entrepreneurs follow their own internal compasses instead of looking at the consumer’s needs. Potential investors want to see consumer data to support an entrepreneur’s belief that the product will sell. Once they believe the product will sell, they’ll want to examine the company’s business model to see how it plans to make money by doing it.

Whichever business model you use, the math’s got to work. You have to be able to show how you can make a profit - and the sooner, the better. As Vicki Marion, the CEO of Viadux Inc., says, “It’s never too early to be profitable.” While profitability depends on many things, one of the most important is the design of the product.

Tuesday, October 28, 2008

Understanding "pain" in the marketplace.

It’s always easier to sell an established concept that's been around for a while, one that people understand because it’s very, very expensive to educate a market.

Different levels of innovation please different people.
- Satisfied customers, who already feel well served, accept small, incremental improvements and resent major changes.
- Potential customers who are satisfied but not delighted by a competitor’s product are attracted by a distinctive innovation that shows clear advantage but remains reassuringly familiar.
- Revolutionary changes appeal to potential customers who reject or ignore all the options currently being offered to meet their needs. Innovation that’s too radical won’t be widely accepted.

It’s not such a serious problem to have a lot of competitors. You need to be different from them, but the more people who are making money in an industry, the better you should feel about going into that industry. Some people develop a business from their hobbies and interests. Others start by listening to problems that their friends and acquaintances are having. Many of the most valuable companies, products, brands and industries have been built around pain. For example, the Macintosh meant that you no longer had to know DOS to use a computer. FedEx made it easy, reliable and relatively inexpensive to send a package from one side of the country to the other, overnight. Saturn took the haggle out of buying a car. Jiffy Lube turned a daylong hassle of changing your car’s oil into a 20-minute errand. The common thread tying all these products and services together is that they addressed a pain felt by large numbers of people.

To increase the chances of succeeding when starting a business using these ideas, here are a few things to bear in mind (excerpted from “What a Pain in the Ass!” by Chris O'Leary).

1. Pain isn't an all or nothing thing but a continuum that ranges from minor inconvenience to life threatening. Some things, like being able to pay for gasoline at the pump, can save people a few seconds, while others, like Microsoft Excel, can save hours or days of work.

2. One person's pain can be another person's pleasure. For example, the earliest personal computers were sold to hobbyists who enjoyed putting them together. For them, the assembly process was a pleasure, not a pain.

3. There’s a difference between buying a gadget because it's cool and buying a product because it gets rid of someone’s pain. While the pet rock was probably useful as a personal security device, most people bought one for other reasons.

4. Pain depends on the circumstances. Abraham Maslow said we have a hierarchy of needs and we only worry about higher-level needs, such as finding expression for our talents, when our more basic needs like food, shelter and safety are already met.

5. Generally, a great idea eliminates a significant source of pain for a large number of people. However, it’s possible to make an excellent living by solving a big pain for a small group of people. Just make sure that they’re willing and able to spend a significant amount of money in the process.

6. A new product or service requires that people change, and changing is always hard. One of the best ways to convince someone to change is to point out how much less pain they would feel if they bought this product or used this service.

7. You need to relieve more pain than you cause. An idea that’s built around solving a pain and that doesn't introduce its own pain will have a much greater chance of succeeding. One reason that Lotus Notes had only limited success is because it was so complex to use.

8. Engineering-driven organizations are notorious for developing and selling products that are technically cool but fail because they don’t solve any real pain. Marketing’s job is to align the efforts of engineering with the pain being felt in the marketplace.

Monday, October 27, 2008

Recognizing new business opportunities.

In 1947, Johnny Barfield, the son of a black Alabama sharecropper, had no formal skills so he took a job as a custodian at the University of Michigan that paid $1.75 an hour. While cleaning the chemistry building one day, he sat down for a rest next to a pile of magazines. As he browsed through one, he came across an article on contract cleaning. “It suddenly dawned on me,” he recalled later, “that there were lots of people out there willing to pay for something I’d become an expert in.” So, in 1954, he and his wife, Betty, loaded up a station wagon with mops, buckets, ladders and sponges, and started up Barfield Cleaning Services, which ITT bought 15 years later for millions of dollars. From contacts he made cleaning auto plants, Barfield started a second business in 1977, Bartech Staffing Services, which provides companies with temporary technical workers. Today, The Bartech Group, billing and managing $1 billion in revenue annually for its customers, is one of America's most respected, successful and resourceful talent acquisition and management firms. Bartech is run by Johnny's son, Jon E. Barfield, a graduate of Princeton University and Harvard Law School.

While living in Paris in 1974, lawyer Tim Zagat launched his first survey—a two-page Xerox comparing his friends' ratings of well-known restaurants with those in the restaurant guides. He and his wife, Nina, duplicated the format when they returned to New York in 1979, handing out questionnaires to 150 other foodies so that they—and not the critics—could judge restaurants on a scale of 1 to 30 in the categories of food, decor and service. By 1994, the Zagat Survey had already grown into a $7 million business. Today, the pocket-sized Zagat Surveys, recognizable by their burgundy covers, have become best-sellers, with over 350,000 participants rating and reviewing restaurants in major U.S. cities and in more than 100 countries worldwide. The Zagats decided early on they weren’t really in the restaurant reviewing business; they were in the business of polling popular tastes. So, they now sell guides rating dining, travel, nightlife, shopping, golf, theater, movies and music.

Successful companies like Zagat frame their identity in terms of their core purpose rather than in terms of their products or services. What they stand for is more important than what they sell. Motorola grew and prospered, guided by its purpose of “applying technology for the benefit of the public.” Meanwhile, Zenith’s business declined because it didn’t take advantage of new opportunities, sticking instead to its mission of making TVs.

As the above examples illustrate, companies get started in many different ways. But the common denominator is that an entrepreneur saw an opportunity they thought had long-term market potential, figured it was only a matter of time until someone was going to make money at it, and decided they might as well be the one. They found many different ways to succeed. Burger King was a knockoff of McDonald's, only different. Fuddruckers was an innovator, offering premium burgers at three times the price with service and surroundings to match.

The most successful startups are precise and targeted. They go for a niche, getting into the nooks and crannies where other companies are too big or too lethargic to go. They make sure their products had a clear reason for being and a clear advantage over their competition. Having a niche is critical in a startup because it allows the company to earn high gross margins thus allowing its initial capital to last long enough for the business to achieve financial viability.

Friday, October 24, 2008

The first dream, a poem by Billy Collins.

The former U.S. poet laureate, Billy Collins, talked about poetry and read some of his new poems at D.G.Wills Books in La Jolla last Sunday, October 19th. He attracted such a large crowd that people spilled out the door, onto the sidewalk and into the street, causing the poet to worry about their safety. His latest poetry collection is called Ballistics.
This Friday, I'm using this occasion to bring you another poem by this wonderfully fresh, inventive, and accessible writer. I hope you enjoy it.

The First Dream by Billy Collins

The wind is ghosting around the house tonight
and as I lean against the door of sleep
I begin to think about the first person to dream,
how quiet he must have seemed the next morning

as the others stood around the fire
draped in the skins of animals
talking to each other only in vowels,
for this was long before the invention of consonants.

He might have gone off by himself to sit
on a rock and look into the mist of a lake
as he tried to tell himself what had happened,
how he had gone somewhere without going,

how he had put his arms around the neck
of a beast that the others could touch
only after they had killed it with stones,
how he felt its breath on his bare neck.

Then again, the first dream could have come
to a woman, though she would behave,
I suppose, much the same way,
moving off by herself to be alone near water,

except that the curve of her young shoulders
and the tilt of her downcast head
would make her appear to be terribly alone,
and if you were there to notice this,

you might have gone down as the first person
to ever fall in love with the sadness of another.

Thursday, October 23, 2008

Creating serial innovation.

One reason why the UCSD’s CONNECT program has developed so many new ideas and products is because it encourages interaction between creative scientists and business entrepreneurs as they hunt together for scientific answers to urgent problems. Successful innovators never lose track of what they’re doing; bringing together a concept of what's needed in the marketplace with what's possible in the world of science.

Turning a company into a serial innovator is like a new novelist, still flush with a best seller, who now needs to write that second novel. Hundreds of local technology companies are established businesses today thanks to CONNECT and now need to jump-start another product, a new story. In older, more traditional industries, the innovation crisis is even more serious, though less visible. Merger mania among the big drug companies is driven by the shortage of new Rx products ready to come to market - at a time when many of their most profitable products will soon run out of the patent protection that keeps their prices high. And although the packaged goods giants are rushing to market with thousands of new product ideas, 90% of them fail within 12 months of launch. We still don't know enough about how good ideas happen or where they can lead.

In 1918, an assistant US Postmaster General named James Blaksee put together a fleet of parcel-post trucks to pick up farm produce from designated spots along the country’s main roads and ship it directly to town. However, parcel post soon turned out to be something entirely different than what was originally envisioned - a means not to move farm goods to town but to move consumer goods from town to country. The nature of revolutions is such that you never really know what they mean until they’re over.

Creative guru, Roger von Oech, suggests that we question ourselves as we approach problems so we don’t miss the obvious. He recommends:

(1) Documenting observations without jumping to conclusions.

(2) Asking why, over and over again, to get to the root of the problem. He notes that problems aren't always well expressed; they’re often expressed as solutions and/or wishes instead.

(3) Circling the problem and describing its impact from multiple perspectives.

One of the best ways to promote creativity is through informality. What starts with an accidental discussion over a relaxed cup of coffee often has a surprising outcome. Companies should create more opportunities for these random and relaxed encounters. Today, more and more of these informal chats take place remotely via the internet.

People need to experience something within themselves that will spark and sustain their effort to innovate - and when they experience this "something," they’ll be self-sustaining. They’ll think about their projects in the shower, in the car, and in their dreams. They’ll need very little management from the outside as their intrinsic motivation will flourish. Inside out will rule the day - not outside in. People will innovate not because they’re told to, but because they want to.

Rolf Smith reminds us that, “Being creative is when you think about your thinking. Being innovative is when you act on your ideas.”

Great companies succeed because of their ability to shape and leverage multiple streams of innovation. These include incremental innovation (e.g., thinner mechanical watches), architectural innovation (e.g., SMH’s Swatch watch), and discontinuous innovation (e.g., Seiko’s quartz movement substituting for mechanical movements). They take advantage of brand new markets for existing technologies while proactively introducing substitute products. At the same time, they create new markets and competitive rules by cannibalizing existing products.

"The important thing is not to stop questioning," according to Albert Einstein

Wednesday, October 22, 2008

Leading innovation.

“When you think about a creative organization, whether it’s advertising or artists, a scientific institute, universities or baseball teams, what we want are the stars. And the stars know how to play their positions better than I do. I have to support them and help them be creative.” – William Brody, the newly announced president of the Salk Institute for Biological Studies.

CEOs who really shine are those who change the face of their industry by introducing innovation. They’re strategic visionaries and thought leaders who have a broad perspective and the confidence to take bold steps. They can look at a wide range of opportunities and then ask, “Which of these opportunities fits our company and what we’re good at?”

Visionary leaders provide a psychological focal point for people’s energies, hopes, and aspirations. They serve as forceful role models and set a standard of behavior to which others can aspire. Senior teams are powerful signal generators in an organization; they extend and institutionalize the leadership and management of innovation and change. The senior team must be cohesive, yet embrace diversity among its own members. It must be able to anticipate significant external events as well as internal developments across the organization, and be able to determine when proactive change is called for.

An effective way to extend the reach of the senior team is to include a broader set of individuals who make up the upper management of the company, including individuals several levels down from the executive team. Driving the leadership of innovation and change down into the firm in this way brings two advantages:

- it ensures that all senior managers have a shared strategic perspective, not a parochial or functional view of the organization,

- it develops and tracks a pool of talent that will be able to lead the organization of the future.

As companies mature, operations eventually tends to dominate. So, product development and idea generation gets treated in the same cultural mode as operations. Most companies become dramatically less innovative as they mature because they don't have the tolerance to support two quite different cultures under the same roof. They pay lip service to the innovative part of the culture as it’s gradually being squeezed out.

One solution is to organize the new separately from the old. Running the existing business always requires considerable time and effort from those responsible for it. Since the new always looks so small compared to what already exists, it tends to get neglected. Existing units invariably concentrate on adapting and extending what’s already there. It’s a mistake to make innovation an objective for people who are also responsible for running the current business. Somebody quite high up in top management must champion and support new innovations. Companies who are introducing more than one new innovative project at a time can have them all report to this senior manager.

Tuesday, October 21, 2008

Creating an innovative culture.

The culture of an organization:
* reflects and dictates the unspoken rules of interaction (Can we speak openly and share our opinions or our ideas?).
* drives the norms around how the work is done (Do we take ownership for our performance?)
* creates underlying expectations for those who take part (Do we act in ways that influence the success of our company?)
* is a powerful dictator of behavior

The key is a widely-shared corporate value system that promotes integration across departments and business units, and encourages people to share information and resources. Each company should have its own approach that takes into account its history and its vision. The culture should be loose, so that values can be expressed in ways that vary according to the type of innovation required in different parts of the company. At innovative technology companies, for example, managers value the openness and consensus needed to develop new technologies. Yet, when implementation is critical, they recognize that consensus can be fatal.

Decentralized decision making, with consistency achieved through information sharing, strong financial controls and individual accountability, can easily lead to fragmented strategies. The secret to avoiding this is strong social control, exercised through the corporate culture. Culture is the key both to short-term success and, if it’s not managed correctly, to long-term failure when it creates obstacles to innovation and change.

What if one of your executives or employees stops by your office, obviously excited by a new idea for the business. The typical first reaction is to acknowledge the idea and add it to your list of things to do. Many CEOs keep a yellow pad of good ideas that just keeps getting larger and often becomes a source of frustration. Jim Alampi suggests the secret to handling this is not to add yet another idea to your list, as counter-intuitive as that seems. The best response is to acknowledge the value of the idea but not add it to your list of things to do. A statement like, “That’s a really interesting idea and we should consider it. We already have our priorities set for this quarter and this idea doesn’t appear to be more impactful for the company than our current priorities, so please keep this on your to-do list and bring it up again at the next quarterly executive team meeting.”

Getting people to share their learnings triggers additional innovative ideas. I’ve found that:
- people can’t resist sharing when there’s a technical problem to solve and they have the expertise to contribute,
- people are eager to share when they have “bragging opportunities” – such as presentations at conferences, published papers and reports, brown-bag lunches, etc. Have someone document such presentations and post them on an internal website the next day for all employees to read. If it takes too long to disseminate the information, it’s likely to be out of date.

Three cultural elements that are strongly related to radical innovation are:
- a future market orientation,
- a willingness to cannibalize,
- a tolerance for risk.
Organizational tools such as incentives and product champions are also important. But perhaps the most important variable is constructive conflict: the climate of open debate, the honest and frank exchange of ideas. That’s something that can be significantly affected by top management setting the right example, rewarding people for sharing honest opinions, listening to what people are saying, and then doing something with it.

Monday, October 20, 2008

How smaller companies encourage innovation.

Smaller companies have significant advantages over large corporations when it comes to innovation. During a rapidly growing economy, every business is forced to keep up with demand for its products and services, and struggles to make investments that increase productivity. Other investments, such as those that drive innovation, are often put aside in order to meet short-term commitments. During an economic downturn, small businesses (and startups) can inexpensively access top talent as part-time consultants if not as full-time staff. By working closely with these talented engineers and designers, smaller businesses that invest in encouraging innovation will be ready with new products and services when the economy eventually turns around.

Where small companies generally fall down, however, is in building disciplines around the creation, capture, and execution of new ideas. Most small companies develop from a single successful idea, usually the brainchild of the founder. But founders can't afford to remain the sole font of innovation in their businesses any more than they can remain the sole salesperson. Nor can they rely on the passions of their staff and the mental sparks created when 30 people interact each day in close quarters. Innovation requires work. Work requires structure. For smaller companies, invention is 1% inspiration, 49% perspiration, and 50% smart routines. Typically, small companies can't spare employees to spend days or weeks observing customers to understand what turns them on. Instead, most ideas have to come from the employees themselves. So it’s critical to hire creative people and make them open channels to consumers by teaching them to sharpen their powers of observation as they go about their everyday lives.

Good leaders reward the behaviors they want by creating an incentive system for innovation. At an early stage in the company's growth, it pays to keep it simple. Give small awards - $100, perhaps, or a dinner for two - for new ideas. Present these awards at quarterly review meetings, to publicly celebrate the ingenuity of the employees. Later, if the company proceeds further with any of those ideas, their creators might receive $500. Employees who's ideas are taken to market, get paid more.

Innovative small business owners need to be:
- clear about what they want to achieve,
- able to assemble and lead teams of talented people,
- comfortable when dealing with the unexpected,
- able to learn at an accelerated rate.

These entrepreneurs don’t just wait for new ideas - they wheedle them, hunt for them, flirt with them, and coax them into being. They make a list of every possible way a product could be designed or something could be done. Then they try to figure out what hasn’t been done, or ignore physical laws and other constraints. They decide what would be the best possible way to do something; then move backwards, reverse engineering it step-by-step into reality. Inventor David Levy says he used to lie in bed every Saturday morning forbidding himself to get up until he thought of something new.

However, according to Dee Hock, “The problem is never how to get new innovative thoughts into your mind, but to get the old ones out.”

Friday, October 17, 2008

Going places, a poem by John Cotter.

I have a surprise for poetry day this week. I accumulated over four million miles traveling for my consulting business during the 1980s and 1990s and started writing a poem a week to send to members of my family while I was away. I kept this up until my children graduated college and it's been an infrequent pastime - anniversaries, birthdays, weddings - ever since. Here's a poem I sent to my son Jonathan in 1991 called Going Places.

Going Places by John Cotter.

Often, before I board the plane
I wonder who'll sit next to me.
Will they be nice and kind and pretty,
or will they be ugly, mean and gritty?
Once, I sat beside Tommy's step-dad
on a trip from Dallas to Tampa,
and up there in the blue,
we talked about you.
Another time, I sat next to Cybil Shepard
all the way from LA to New York.
She drank Evian and ate fruit
all along the route.
I also flew with Lea Thompson
one night from Phoenix to Burbank.
She had a kitten in her bag named "stunt cat."
Imagine that!
But, most of the time
I sit next to business travelers like myself.
It's late, and we're tired after a hard day.
We don't talk much, we just want to be on our way.
Once though, just once
I'd like to sit next to Melanie Griffith --
This idea seems nifty
to a guy over fifty!

Thursday, October 16, 2008

Some examples of innovative companies.

Consider three successful innovative companies: Hewlett-Packard (H-P), Johnson & Johnson (J&J) and Asea Brown Boveri (ABB). Each of these has been able to compete in mature market segments through incremental innovation and in emerging markets and technologies through discontinuous innovation. H-P went from an instrument company to a minicomputer firm to a personal computer and network company. J&J moved from consumer products to pharmaceuticals. ABB transformed itself from a slow heavy-engineering company based primarily in Sweden and Switzerland to an aggressive global competitor with investments in Eastern Europe and Asia.

Although these three companies combined represent hundreds of thousands of employees, each has found a way to remain small by emphasizing autonomous business groups. Take for example ABB, the U.K. giant of 60 businesses, 6000 profit centers in 1300 operating companies, and $30 billion annual revenue. ABB's success can be attributed to a great extent to its management style, symbolized by the 30-30-30-10 rule, which ABB's leadership applies to existing and acquired businesses. The rule provides that 30% of employees are kept at top management, 30% at middle management, 30%on the frontline management and 10% are laid off. The point is to push down as many managers as possible and thus to push decision making further down to where there’s actual contact with the market, and hence innovation, occurs. At ABB, frontline managers are now entrepreneurs driving a bottom up process; middle managers are coaches, leveragers, and developers of the organization; and top managers are institution builders and creators of the organization's values and purpose.

Similarly, J&J has more than 200 separate operating companies that scramble relentlessly for new products and markets. The logic is to keep units small so employees feel a sense of ownership and are encouraged to take responsibility for their own results. This encourages a culture of autonomy and risk-taking that couldn’t exist in a large, centralized organization. These kind of companies retain the benefits of size, especially in marketing and manufacturing. Size is used to leverage economies of scale, not to slow the organization down. H-P, for example, used its relationships with retailers developed from its printer business to market and distribute its personal computer line.

These firms accomplish this without the top-heavy staffs found at other firms. Some years ago, H-P set up an internal Work Innovation Network (WIN) for its managers. Participants met three times a year for 2 - 3 days at a site that was currently involved in some kind of significant innovation. Each meeting was organized by a planning team of WIN members. Short presentations focused on areas of current interest, with long breaks in between so the participants could create their own connections for learning. This “white space” turned out to be where most of the learning took place. People subsequently formed “Neighborhoods” around topics of mutual interest and later “Cyberhoods” where they worked together to help each other develop and deploy innovative ideas.

“In the modern world of business, it is useless to be a creative original thinker unless you can also sell what you create. Management can’t be expected to recognize a good idea unless it’s presented to them by a good salesman.” - David Ogilvy

The bottom line of these examples is that innovative organizations promote variation in products and technologies by decentralizing and encouraging individual autonomy and accountability. They select winners in markets and technologies by staying close to their customers, by being quick to respond to market signals, and by having clear mechanisms to kill products and projects. Finally, products and managers are retained by the market, not by a hierarchical staff who are removed from real customers.

Wednesday, October 15, 2008

The manager’s role in encouraging innovation.

The challenge for managers in innovative organizations is to improve the fit between strategy, structure, culture and process, while simultaneously preparing for the revolutions required by discontinuous change. This requires the skills to compete in a mature market where cost, efficiency, and incremental innovation are key, while at the same time developing new products and services where radical innovation, speed and flexibility are critical. While a focus on either one of these skill sets is conceptually easy, focusing on only one brings short-term success but long-term failure.

Management's new job is to learn to adapt proactively by positioning themselves to take advantage of what's coming, much like a surfer prepares to ride a wave. This new job description includes a willingness to undertake an endless quest for “The Next Big Thing." The role of management changes from manager-as-pilot to manager-as-lookout - a lookout who spots emerging developments and figures out what impact they can have on different aspects of the business. Finding, evaluating, acquiring and integrating useful technologies and innovations from external sources - customers, suppliers, other companies, both large and small, universities consulting organizations and individual inventors - will increasingly be a part of management’s overall business process.

The manager as architect uses strategy, structure, competency, and culture as tools to build innovative organizations. The manager as network builder and politician builds cliques and coalitions in the service of innovation and change. Perhaps most important, managers are asked to build in and integrate the tensions and contradictions inherent in innovative organizations and while also managing for today and tomorrow. The best management teams have the competency and behavioral flexibility to develop innovation streams on the one hand and to lead organizational renewal on the other.

Managing an organization that can succeed at both incremental and radical innovation is like juggling. A juggler who’s very good at manipulating just a couple of balls isn’t very interesting. It’s only when the juggler can handle multiple balls at one time that his or her skill is respected. For organizations, success for both today and tomorrow requires managers who can simultaneously juggle several inconsistent organizational structures and cultures and thius build and maintain innovative organizations.

Like good jugglers, managers must balance the contradictory structures, skills and cultures required to compete successfully. The dilemma confronting them is this: In the short run, they must respond to changes in their marketing environment with step-by-step changes to see that they survive as the fittest competitor. But in the long run, they may have to shelve the very strategy or product that has made their organization successful. These contrasting managerial demands require that managers periodically destroy what’s been created in order to reconstruct a new organization better suited for the next wave of competition or technology.

Creating new knowledge isn’t something that can be managed in the traditional sense. It’s the capacity of people and communities, continuously generated and renewed in their conversations, to meet new challenges and opportunities. People who create value with their knowledge need to be inspired and supported rather than directed and controlled. So managers have to work to develop an open culture of communication and collaboration that encourages the sharing of innovative work and business practices.

Traditional management's carrot and stick motivators are good to drive people to do the same things over and over, more reliably and maybe even faster. But to get people to innovate, they have to be driven primarily by intrinsic interest and fun in the work itself. Money, such as the payoff from a successful start-up, provides powerful reinforcement to the intrinsic drives, but can never replace them. Only a playful mind can be creative, and only people doing what they enjoy can come up with something original. Managers need to consider the whole person when creating an innovative environment

Tuesday, October 14, 2008

Building organizations that encourage innovation.

The forces of technology, globalization and diversity require new forms of organization and new concepts and capabilities from management. These concepts are being built around networks of talent and expertise rather than depending on individual heroes and blinding flashes of genius. Successful organizations are networks characterized by a marriage of concepts, competencies and connections.
- New concepts are important because they drive the innovations necessary for vitality and prosperity.
- Competencies are about broad know-how that incorporates technical literacy, global insight, and cultural sensitivity.
- Connections involve frequent interactions between previously isolated groups and individuals. Other prerequisites for innovation are that employees have a sense of security and a sense of possibility.

Features of creative organizations:
• Open channels of communication.
• Not run as a tight ship.
• Management has wide-ranging perspectives.
• Idea-generating units are freed from other responsibilities.
• Resources are invested in research.
• There’s a risk-taking philosophy.
• There’s a stable, secure, internal environment.

Start by creating a culture of innovation. Marines are taught that they must be prepared to improvise. One of their core maxims is: "That which is not forbidden is permitted." It’s often been said that the Army mantra is: "That which is not permitted is forbidden." If a business embraces a culture which says that whatever is not forbidden is permitted, it opens the door to innovation and allows people to improvise, change and grow. If an organization embraces a culture which says that whatever is not expressly permitted is forbidden, then the culture draws bright lines around what is acceptable and stifles creativity and innovation.

An innovative culture can be fostered in organizations which have internally inconsistent competencies, structures and cultures but share a single vision. Managing culture is generally the most neglected and highest-leverage tool for promoting innovation and change. It’s also the most difficult to diagnose and alter. Culture is a powerful way to motivate and focus behaviors in complex and changing settings. But culture can also hold a company hostage to its past. The key seems to be to create a clear vision with a limited set of core values that can, in turn, host diverse cultures within the company. Tools to shape culture include systems of participation and involvement, senior team behavior, and reward and recognition systems.

Monday, October 13, 2008

Finding sources of innovation.

According to the late Peter Drucker, there are seven systematic methods that have been used to understand needs and produce specific innovations.

The first of these techniques is to carefully watch for the unexpected event that may be signal a new trend. The introduction of the personal computer produced several events that were missed by companies that actually had people on their staff to spot just such events. IBM did react to Apple Computers' unexpected success but completely missed the opportunity to control the operating systems for these computers. An expected failure also needs to be analyzed for clues to creating a successful innovation. The Edsel car, introduced in the 1950s, was a big unexpected failure. Ford had spent considerable time and money researching and introducing this car, which was quickly laughed out of the marketplace. When Ford went back to analyze what had happened, they discovered the customers they’d targeted had shifted their tastes to a new lifestyle - sportier and more luxurious. Ford was then able to take this information and create the Thunderbird, which was a tremendous success.

The second source for identifying needs is to search for incongruities. These are not specific events, but trends that may be exhibited throughout an entire industry or company. An example is the way the large U.S. electronic companies responded to Japanese electronic products. U.S. companies would abandon any product line that couldn't produce at least a 15% return on investment. The Japanese priced their products low to start with, then gradually increased their prices to recover their investments. This incongruity happened many times over until U.S. companies decided to fight for market share with more aggressive tactics and innovative marketing.

The third source for identifying innovation possibilities involves looking at specific processes that can be improved. When analyzing a manufacturing process or a service process, there are always improvements that can be made. The automation of factories, when done systematically and rationally, is an example of the containing evolution in innovations. The problem here is not in identifying what to look at, but exactly what should be done to effect change. Quite a few companies become paralyzed in arguments over the correct changes to apply to the process.

The fourth method of identifying needs that require innovation is to examine market and industry structures. Markets go through cycles and stages that are fairly predictable. The beginning of new industries usually produces hundreds of competitors that are narrowed to half a dozen serious competitors during the maturing phase. The railroad, automobile, airplane, computer, and steel industries all went through these stages.

The fifth method of determining sources for innovation concerns demographics. These are changes in the size, age, composition, educational status, income, etc. of any population. Demographic studies can produce very clear and unambiguous information concerning what needs will exists in the future. In the U.S. population, members of the "baby boom" are currently changing from consumers of houses and material goods and are instead preparing for retirement. The current discussion on health care in U.S. is really about the needs of this aging middle class.

The sixth method looks for changes in perception. During the last twenty-five years, the life expectancy of Americans has increased substantially. However, the people have been gripped by fears over their health during the same period. This perception has been fertile ground for a range of innovative and entrepreneurial health products. One of the fastest growing industries currently is the sale of "organic" foods. Here’s an example of a negative fixation that’s driving billions of dollars into new purchasing patterns. Those who understand these perceptions can respond and / or act pro-actively.

The seventh type of innovation is "knowledge based." This popular theme includes the famous stories of Edison inventing the light bulb or the Chinese inventing paper. Knowledge based innovations usually cover long time spans and are high-risk propositions for the individual entrepreneur or organization. The Fax machines was invented 100 years ago but only became a major business product 75-years later. The technologies that are changing the way we work tend to be based on knowledge that’s at least 10 to 20 years old. Knowledge based innovations also tend to converge with other innovations before they become integral to our economy. The computer industry is a good example of knowledge based convergence covering 200 years and thousands of innovations.

The last source of innovation is "bright ideas." These are the flashes of brilliance that occur to individuals in the middle of the night and are the most difficult to fit into a methodical system. These ideas are generated in a situation that may have no connection to any organization, market, industry, convergence of available knowledge, or management. While there are an unlimited number of these ideas, only a very few become part of the economy.

Friday, October 10, 2008

Recessions, a poem by James Autry

James Autry is an author, poet, speaker and businessman. His poetry received national attention when Bill Moyers featured Autry on his "Power of the Word" Series. The interview with Autry from this series won an Emmy. Jim Autry does regular poetry readings in schools and communities. He’s a co-founder of the nationally known Des Moines National Poetry Festival. Whether writing about his boyhood experiences in Mississippi and Tennessee or about the pressures of corporate life, Autry's poems are the products of a man with something positive to say and the talent to say it.

Recessions by James Autry

Why do we keep on keeping on,
in the midst of such pressure,
when business is no good for no reason,
when the Fed does something
and interest rates do something
and somebody’s notion of consumer confidence does something
and the dogs won’t eat the dog food?

What keeps us working late at night
and going back every morning,
living on coffee and waiting for things to bottom out,
crunching numbers as if some answer
lay buried in a computer
and not out among the people who
suddenly and for no reason
are leaving their money in their pockets
and the products on the shelves?

Why don’t we just say screw it
instead of trying again,
instead of meandering into somebody’s office
with half an idea,
hoping he’ll have the other half,
hoping, what sometimes happens will happen,
that thing, that click, that moment
when two or three of us
gathered together or hanging out
get hit by something we’ve never tried
but know we can make work the first time?

Could that be it,
that we do all the dull stuff
just for those times
when a revelation rises among us
like something borning,
a new life, another hope
like something not visible catching the sun,
like a prayer answered?

Thursday, October 9, 2008

Understanding innovation.

Innovation is finding a new way to do something. In a fast-changing world, the ability to continually renew, replenish and enrich our views, philosophies, values and competencies by looking outside the lines and out-of-the-box is increasingly important. In business, the goal of innovation is positive change, to make someone or something better.

Organizational innovation is creating or adopting an idea or behavior that’s new to the firm. You can look this at from the three different perspectives:

- how the organization’s structure influences innovation,

- how the organization learns and creates new knowledge,
- how the organization overcomes its inertia in radically changing business conditions.

Until the early 1990s, research on innovation focused mainly on knowledge production and learning caused by formal organizational arrangements. Since the 1990s, interest has increasingly shifted to examining informal and personal networks as effective ways for producing, storing, and disseminating knowledge. We will later describe how to use these ideas in building "communities of practice" as vehicles for interactive learning.

However, in most cases, innovation is best shaped and disseminated by the interplay of ideas among different people. Sharing and implementing new ideas is less about technology than about clarifying where information is and who knows about it, so those who want to can find it quickly. No amount of technology can force people to share ideas, electronically or otherwise, if they don't want to share them. It's up to the firm’s leadership to create the structures and the culture that encourages the movement of ideas.

What happens to defeat the spread of ideas in a typical company?

- Success often leads to arrogance and stagnation.

- Larger organizations often find it difficult to successfully make small investments. At one firm I know, it was impossible to invest $20K to automate a simple routine process although the manager could sign off herself on $20K overtime for a single weekend. Investments had to be a million dollars or more just to get heard.

- The firm's culture becomes inwardly focused, with elaborate, slow-moving procedures for resolving issues through consensus. There's a sense of entitlement on the part of some employees to guaranteed jobs without a quid pro quo. There's a preoccupation with internal procedures rather than an understanding of the changing marketplace.

Other ways that ideas are stopped from spreading include:
· People are afraid of losing credit for their ideas.
· They're afraid of not being indispensable any more if their unique knowledge and
talents are shared with others.
· They believe that sharing ideas will create jealousy or resentment.
· They don’t know how to find others with relevant ideas.
· They don't know that anyone else has the information they're looking for.
· They believe that only people in their own inner circle have ideas worth pursuing.
· Stove-piped organizations discourage contact with others outside their own business
units, departments or functions.
· Their assignments don’t put them in regular contact with other people.
· They can’t spare the time it takes to share ideas, especially if it appears there’s
no immediate need to do this.
· They dislike the leadership or the goals of the organization.
· Inertia is the first law of all organizations.

Next week, I’ll write about how to avoid these conditions in designing more innovative organizations. But first, tomorrow is poetry day!

Wednesday, October 8, 2008

Final words on fast change.

One of the most frequent reasons for slowness in implementing change has to do with people’s non-conscious but habitual mental patterns. This automatic-pilot mindset creates an unconscious inertia in thinking and in individual patterns of behavior.

To illustrate this, quickly fold your arms. Now, reverse the way they’re folded, placing your other arm on top and see how this feels. Most people experience the second way as awkward and uncomfortable. It would probably take some time to get used to folding your arms in the new way. This illustrates how our habit patterns work.

A second reason is the bias toward training that assumes that ideas agreed to in the classroom will find ready acceptance in the office or on the shop floor. When you teach someone baseball, they become interested in knowing what the rules are because they’ve enjoyed hitting and catching. You don’t start by sitting them down and teaching them the rule book. When there’s too much bias toward training, a powerful means becomes an end in itself.

And a third reason is the general absence of support for the novelty (surprise, uncertainty, unfamiliarity) brought about by change. Support must be available in the form of changes in rewards, availability of new information, and access to additional skills needed.

The first year of any long-term effort is a critical year. Change has to begin with the business itself, not with the organization that’s there to serve the business. It’s important to deal with fundamental solutions initially rather than trying to change all the band-aids. You can do this later on, when there’s more time. On-going status reviews are supposed to bring up implementation problems. But, who wants to be the bearer of bad news? And if problems aren’t welcomed by the boss, somehow they never seem to come up in the reviews.

This is both a personal and a cultural issue. Typically, lots of people at the bottom of the organization know that all isn’t well. But people at the top often don’t accept that bad stuff can or will happen until it’s too late. Then comes the search for the guilty and the execution of the innocent and all that palaver, which we now see concerning the mortgage / credit crisis. So, it’s very important to get people to work together, focusing their conscious attention on the interdependencies that can screw them up. This shared knowledge and awareness is very powerful.

I’ve read that the audience of the game show, "Who Wants to be a Millionaire," is right 90% of the time, whereas the "expert" participants are right only 60% of the time. This phenomenon is known as the "wisdom of crowds." To manage significant change in a compressed time frame, it’s imperative to actively engage the collective IQ of the organization in making the right choices and taking preventative action before mistakes happen. The faster the rate of change, the more it pays to be reflective, that is, open, able to take in views other than our own. And being clear-minded is key. As the martial arts demonstrate, being fast on your feet means being thoughtful so you can accomplish more, using more force with less effort

Albert Einstein, when monitoring an exam at Princeton, was told by the students that the questions were the same as last year. ”That’s OK,“ he replied, “the answers are different this year.” When people are obsessed with prospective thinking, such as long-range planning, they’re often bewildered when events don’t turn out the way they planned. This is increasingly common as we move from an era of planning and prescribing to one of imagining and inventing.

In the next few weeks, I’m going to write about creating and supporting innovation in today's turbulent world.

Tuesday, October 7, 2008

Managing change in a disorderly world.

In the regimented world of the National Football League, quarterback Brett Favre is viewed with curiosity, suspicion and unrestrained admiration. Favre breaks all the rules of fundamental quarterback play. He doesn’t always plant and set, he moves into pressure rather than away from it, and he routinely throws risky long passes early in the game. What sets him apart isn't just his ability to scramble and see the field but to make the big play while he’s doing it. Favre can cause utter confusion and disorder in defensive teams, not because they don’t know what he’s going to do, but because he doesn’t. Favre seems to thrive on chaos. A lot of big plays come off Brett getting out of containment and throwing the ball over the defensive backs’ heads. If a receiver finds a hole, Favre scrambles and always seems to find him. Favre doesn’t like to run. Instead, he looks to create, to reconfigure the defense and force it to improvise as well. “That’s what I do best. Move around.” he says. “I like it when I’m out of the pocket.”

A common reaction of those who are used to being in control is to attempt to manage change into submission. It’s more effective to turn destabilization to your advantage. Having a high tolerance for disorder has become an essential survival skill in the world of high-velocity change.

Arsenio Hall says, “I don’t like to be comfortable in my work. I like to be nervous and find a way to use it.” Carroll O’Connor, the legendary “Archie Bunker” of TV fame said, “Professional acting has a kind of tension. The amateur is thrown by it but the professional needs it.” Like a wind-up clock, a person can't tick without some tension. However, Leila Josefowicz, the American violinist who has grown from a child prodigy into a concert hall star says, “I’m always well prepared. If you’re not, it can be torture. I like to find peace of mind before I go on stage: I try to assure that nothing can go wrong.”

Andy Grove of Intel observed that learning to adjust in today’s environment is like driving in a fog behind another car. It’s easy going as long as you have the other car’s tail lights to guide you. But when the leading car turns off the road, you’re suddenly stuck without the confidence that comes from finding your own way. The moral? - Followers have little future.

Peter Drucker once said in a Wired interview, “I don’t speculate about the future. It’s not given to mortals to see the future. All one can do is analyze the present, especially those parts that don’t fit what everyone knows and takes for granted. Then, one can apply to this analysis the lessons of history and come out with a few possible scenarios. Then one comes out with a few probabilities.... Here are today’s realities and what they imply for the next 20-years, and here are the probabilities based on the lessons of history. Everything else is quackery.”

Like solving a jigsaw puzzle, you can determine what’s required for a piece to fit, but until that piece has been found, you have very little idea of what the next pieces you're going to need will be. Because the path to puzzle solving isn’t linear, there are no routine procedures or predefined steps to rely on to solve puzzle-like situations. Puzzle solving is an exercise in perceptual synthesis rather than analytical conceptualization. The search for possibilities is what’s important and in this context, expert knowledge is no longer privileged. The emphasis is on becoming more perceptive of trends and possibilities. Since everyone has the potential to contribute knowledge and expertise about some piece of the puzzle, everyone’s an expert.

I’ve always viewed my professional role as helping executives consider alternative scenarios so they don’t define the boundaries of a problem or a strategy in such a restricted way that they limit their flexibility and opportunity.

Monday, October 6, 2008

Speeding up change.

Doing business today reminds me of a passage in one of Schubert’s piano sonatas marked, “As fast as possible,” which is followed a few bars later with the admonition, “Faster.” Today, it’s much better to be 80% right fast than 100% right slow. As General Patton said, “A good battle plan you act on today can be better than a perfect one tomorrow.” And as Thomas Edison said, “Everything comes to those who hustle while they wait.”

When Frances Hesselbein was running the Girl Scouts of the U.S.A., there was significant resistance to a new division she wanted to introduce called Daisy Girl Scouts for 5 year olds. Hesselbein choose to offer the program but not mandate it. “You can’t wait for everyone to get on the sled.” she said later. ”If you have people with needs, put them on the sled, and off you go. But don’t force those who aren't ready.” When the sled left, only 70 of the 336 local Girl Scout councils were aboard. Four years later, all of them were. By making change an option rather than an edict, Hesselbein found a way to walk in front while making everyone feel she was walking with them.

Hesselbein advocated eight principles to guide the process of planning and implementing effective change:

1. Figure out why you’re in business.
2. Mission comes first.
3. Challenge the gospel.
4. Ban the hierarchy.
5. Walk like you talk.
6. Lead from the front, don’t push from the rear.
7. The more power you give away, the more power you have.
8. Leverage your strengths.

You can change an organization quickly when;
- It’s small.
- There’s a crisis.
- You have power and are prepared to use it to force the change through.
- Core work processes are sequential and self-contained.
- The product life-cycle is changing rapidly.
- You have a history of success.

- Pick a few ambitious and significant enterprise-wide goals, carefully identifying those where change can yield the biggest “bang for the buck.”
- Involve everyone in transforming how they work to achieve these goals quickly.
- Keep your priorities straight and don’t get distracted. If you’re clear-minded about what you want to achieve, you can open people’s minds by narrowing their thinking.
- Tie senior management’s promotion and bonus opportunities to achieving the results.
- Keep the focus as positive as possible (improve, don’t fix).
- Create a sense of urgency. Implementation will peter out unless the case for doing it is compelling, urgent and constantly refreshed.
- Work to create a critical mass in change initiatives. Think of a snowball dropped on a hill. If it’s too small, it goes plop and just stays there; if it’s the right size, it begins to roll and gets bigger and bigger.
- Reinvent yourself every year, and concentrate on developing infrastructure to make even more change possible faster in the future.

Patience, persistence and insistence eventually lead to repetition and consensus. Dreams and dedication are a powerful combination. “Whatever you can do or dream you can do, begin it. Boldness has genius, power and magic in it” – Goethe

Friday, October 3, 2008

Executive, a poem by John Betjeman.

It's Friday - poetry day again. One of my favorite English poets, Sir John Betjeman, CBE, was a poet, writer and broadcaster who was born in London in 1906. Although he failed his degree at Oxford University, his early ability in writing poetry and his interest in architecture supported him throughout his life. Starting his career as a journalist, he ended it as British Poet Laureate and a much-loved figure on British television. Betjeman's poetry appealed to a very wide public. He managed to express the thoughts and aspirations of ordinary people while retaining the respect of many of his fellow poets, partly because of the apparently simple traditional forms and rhymes he used (which aren't quite as simple as they seem). He died at his home in Cornwall in 1984. He once said, “I don't think I'm any good. If I thought I was any good, I wouldn't be.”

Executive, by John Betjeman.

I am a young executive. No cuffs than mine are cleaner;
I have a Slimline briefcase and I use the firm's Cortina.
In every roadside hostelry from here to Burgess Hill
The maitres d'hotel all know me well and let me sign the bill.

You ask me what it is I do? Well actually, you know,
I'm partly a liason man and partly P.R.O.
Essentially I integrate the current export drive
And basically I'm viable from ten o'clock till five.

For vital off-the-record work - that's talking transport-wise -
I've a scarlet Aston-Martin - and does she go? She flies!
Pedestrian and dogs and cats - we mark them down for slaughter.
I also own a speed-boat which has never touched the water.

She's built of fibre-glass of course - I call her 'Mandy Jane'
After a bird I used to know - No soda please, just plain -
And how did I acquire her? Well to tell you about that
And to put you in the picture I must wear my other hat.

I do some mild developing. The sort of place I need
Is a quiet country market town that's rather run to seed.
A luncheon and a drink or two, a little savoir faire -
I fix the Planning Officer, the Town Clerk and the Mayor.

And if some preservationist attempts to interfere
A 'dangerous structure' notice from the Borough Engineer
Will settle any buildings that are standing in our way -
The modern style, sir, with respect, has really come to stay.

Thursday, October 2, 2008

Fast change at Weyerhaeuser, contd.

There are three key ideas in increasing strategic velocity (velocity = speed + direction):
- are people thinking strategically?
- are they focusing energy and resources on the right things?
- are they implementing quickly and learning as they go?
All three of these must be addressed simultaneously rather than sequentially.

At Weyerhaeuser, the success of the transition depended on all 15,000 associates understanding the new iLevel strategy. This was done using a leader-led DVD presentation, coupled with an innovative gaming platform. Each associate went online and was assigned a game character (an avatar) and placed on a virtual team whose purpose was to solve a challenge in the new iLevel world. There were four challenges, one each week for four weeks. Each challenge took an average of 15-minutes to solve. Thus associates learned what it took to build a completed house in the new iLevel business.

While all the associates were touched by the transition, none were touched more than the sales associates. The new value experiences promised to builders through the dealer channel required that the organization act so each customer thought they had a single point of contact for all the products and services they purchased. To do this, iLevel sales reps had to become strategic problem solvers for their customers. In four months, 670 sellers received extensive training in solution-based selling. They were also trained on new software, in conjunction with real blueprints and live examples, to help them compare material options with their customers and address their technical needs. This meant taking these sales reps out of their markets at a time when the company was getting ready to launch the new strategy. 

The iLevel Five Key Customer Experiences:

1. Reduce time, labor, and callbacks when building homes.
2. Optimize structural frame and reduced waste.
3. Streamline design customization (through innovative software).
4. Provide efficient, reliable delivery of products & services.
5. Simplify the way business is done.

In return, iLevel receives commitment to its branded products and services, and a premium price for its solutions.

Cultural change didn't happen overnight, but momentum was quick, resulting in a dramatic adoption of the new brand within Weyerhaeuser. The adoption was so successful that the brand launch team received the prestigious Weyerhaeuser President's Award.

Today, Weyerhaeuser is focused on managing through the housing downturn, driving the five key customer experiences, and implementing SAP software to improve supply chain efficiency. In addition, the division is looking for a correlation between associate survey feedback and customer and brand awareness data to continue to drive cultural change. 

Internally, employee survey results are up across the business and turnover of sales associates has decreased over historic levels. While it's still too early to claim victory, the indicators all seem to be pointed in the right direction. 

For more information on high-velocity execution, I suggest, Winning In Fast Time, by John A. Warden III and Leland Russell.

Wednesday, October 1, 2008

Fast change at Weyerhaeuser, contd.

Like most large organizations, Weyerhaeuser wasn't known for making major change happen quickly. In order for the iLevel brand to become visible to customers, the executive team knew that major behavioral change, as well as structural change, would be required. And it wanted an integrated execution plan that was sharply focused and rapidly implemented. 

This led to the development of a series of 90-day action plans created by the 300 transition leaders who were organized into 20 teams of 15 leaders each from throughout the US. These transition agents met "virtually," each Tuesday, for one hour. Their findings were summarized and delivered to the iLevel executive team the next day. The executive leadership team reviewed the results, discussed how to resolve the issues and barriers that were raised, then communicated their decisions back to the transition teams before the next cycle of meetings.

The first 90-day plan listed 178 items reflecting the seven execution gaps mentioned earlier that needed to be changed for the iLevel brand to be deployed successfully. The leadership team met weekly during the execution phase to measure progress against the action list and to resolve key barriers raised by the transition teams. The latter were running their own series of parallel weekly meetings. Leaders had to make fast decisions and then send this information back to the transition agents in time for the following weeks' meetings. They continued this practice, renewing the plan every 90 days all through 2006 until over 275 actions were completed. These actions included associate training, information system changes, product packaging, customer communication, metric and target development, sales incentive plans, and many more - all needed to implement the new strategy.

In addition, the executive and transition leaders were asked to answer the following three questions:

What existing behaviors should I continue doing because they clearly support the new strategy?

What new behaviors must I now start doing?

What existing behaviors must I now stop doing?

To be continued tomorrow.