Following the bright spots and its implication for designing a strategy

In an interview Andrew Grove narrates his experience at one of the exit interviews while being CEO of Intel. Steve, a young employee who is leaving Intel, said, “Andy, if I were you, I would take microprocessors seriously. We should learn how to use microprocessors, how to develop applications and become experts.” Andy said, “Sure” and never paid any further attention to the remark. In fact he says, “It was inconceivable for me to think of it.” Looking back Andy feels, “He was so right and I was so wrong.” What Steve was pointing to was an internal bright spot – the microprocessor business – doing well at the time but without any strategic attention from management. Question is: Can focusing on bright spots be a good option while designing strategy? If so, can it be done systematically??

Strategy answers 2 questions: What game are we playing? How will we win it? At the time of Steve’s exit interview with Andy, Intel was playing memories game and losing it badly. Many companies are in a situation like Intel and figuring out what to do next. Most of the time the attention is put on the questions “What is not working? And why?” In this article I want to explore what happens when the attention is put on the questions, “What is working? And can we replicate it elsewhere?”

For Intel the bright spot Steve alluded to was already quite bright. In most organizations it is much dimmer and needs some digging like that done by archaeologists. When Sudhir Kumar started working with Lalu Prasad Yadav in 2004, Indian Railways was heading towards bankruptcy, fast. Dr. Rakesh Mohan committee had already submitted an eight volume report on the causes of the failure and possible remedial actions. The committee had attributed the falling market share of Railways to high freight rates that subsidized low passenger fares.

When Sudhir Kumar studied the data on freight traffic, he discovered an interesting anomaly. Market share of some of the commodities (like steel and cement) had gone down. However, some other commodities (like iron ore and coal) had held on. What was happening? After analysing it further, Sudhir Kumar discovered that the Railways was providing door-to-door service for the winning commodities. On the other hand, it was doing station-to-station service for the losing ones. This lead to the insight of creating differentiated freight rates based on the value created for the customer. This became a key element of the strategy designed by Railways and it paid handsomely. Point to be noted in this story is that Sudhir Kumar followed the bright spots i.e. he asked “What is working? And can we clone it?”

Peter Drucker referred to this approach as pursuing the “unexpected success” in his book “Innovation and Entrepreneurship” written more than a quarter of a century ago. He begins chapter 3 as follows:

No other area offers richer opportunities for successful innovation than the unexpected success. In no other area are innovative opportunities less risky and their pursuit less arduous. Yet the unexpected success is almost totally neglected; worse, management tend actively to reject it.

Of course, the knowledge of an unexpected success may not come to you on a platter like it did for Andy Grove. Like Sudhir Kumar you might have to go hunting for it. The good news is that there is a systematic approach on how one can go about hunting for the bright spots. See the figure below adapted from Chip & Dan Heath's Switch.

Sources:

Sudhir Kumar story is from “Changing tracks: Reinventing the spirit of Indian Railways” by V. Nalakant and S. Ramanayaran, Collins Business, 2009, pp 112-115.

“Follow the bright spots” approach is explored in detail in “Switch: How to change things when change is hard” by Chip and Dan Heath, Broadway Books, 2010, chapter 2 titled “Find the bright spots”.

Sudhir Kumar’s photo is from IIM Indore site.

Baseline rates in innovation management

Wikipedia says that Fetal Heart Rate (FHR) should be between 110 beats per minute (bpm) 160 bpm. Anything beyond this range is considered abnormal. These rates are called baseline rates. FHR baseline rate is the same no matter which culture or nation the baby is born into. Are there any baseline rates in innovation management similar to FHR baseline rates? I don’t know. However, I feel that we need to establish them as they are going to be very useful in making various decisions in managing innovation. Nobel Laureate Daniel Kahneman highlights in “Thinking, fast and slow” that baseline rates are a good starting point while making risky decisions. In this article, I present my current view and a first attempt at the baseline rates relevant for innovation management.

Let me qualify the data set first. These rates are based on the data from 25 to 50 organizations depending upon the parameter. There are some parameters like the “idea per person per year” and “participation” where data is available from more organizations (50). And there are parameters like “response time” and “success rate” for which data is available from fewer organizations (25). Moreover, these numbers are not averages. Like FHR baseline, they are linked to the health of the innovation engine. Currently I have used my judgement in calling some rate “poor, OK or Good”. I have used publicly available information such as INSSAN benchmarks as well as data published from companies like Toyota and P&G. Moreover, I have also used data from a dozen odd organizations where I have seen the innovation engine personally.

Let’s look at each parameter briefly:

Idea pipeline (General): This parameter says that if you are 1000 people organization and if you have an idea box (physical or on intranet), then you should get at least 1000 ideas in a year to qualify for “good” category. If you get, say 150 ideas, then you are OK. And if you get 70 ideas in a year then you are poor. The maximum number I have seen is from Brasilica (a Brazilian firm) is at 143.

Big idea pipeline: Many organizations manage a separate pipeline for large impact ideas. Take each idea in the pipeline and identify how much business impact (annual) it projects today. Let’s say your big idea pipeline has 3 ideas with following potential revenue: 1 crore, 3 crore, 1 crore and if your revenue is 100 crore then total business impact of the pipeline is: 1+3+1 = 5 and the ratio of total business impact to revenue is 5/100 = 0.05. The table says it is “poor”. GE’s breakthrough imagination has 100 ideas each with a minimum potential of $1 billion. That makes the ratio at least 0.67 (perhaps the actual ratio is > 1).

Participation: Less than 5% employees giving at least one idea in a year is “poor”. More than 30% doing the same is “good”. See here how this parameter evolved in Toyota over 40 years.

Response time: How soon are you getting in touch with the person who submitted an idea? Less than a week is “good” and more than a month is “poor”. For example, Shell Gamechanger process promises to communicate input on your idea within 48 hours.

Success rate: This is the trickiest parameter. Too high of a success rate may mean nobody is taking any risk. Check out my article “Lower your batting average to improve innovation productivity”.

Will these baseline rates change as we get more data? Yes. Will the role of baseline rates diminish? I doubt it. As I mentioned this is my first attempt and your inputs would be greatly appreciated.

3 challenges in implementing a strategy

If designing a good strategy is difficult, then designing a strategy as if implementation matters is far more challenging. Louis Gerstner articulates the challenge in his autobiographical account of IBM turnaround¹ “Who says elephants can’t dance” - It [IBM] had file drawers full of winning strategies. Yet, the company was frozen in place. IBM hadn’t missed predicting any technological trend and yet the company was paralyzed enough not to act on any of those effectively. What are the challenges in implementing a strategy? Here is my reflection based on Prof. Richard Rumelt’s video interview.

1. Not simple enough: A few weeks back I witnessed following conversation in a senior management meeting. It got started when someone asked, “How is our innovation program aligned with our strategy?” One response came, “What is our strategy?” This was followed by a noticeable silence in the room. Then answers started - One answer was “Our vision statement articulates our strategy”. Another one was “We have percolated our strategy through a balanced score card. Hence, our KRAs tell us what to do in line with our strategy”. Each answer had an element of truth. However, my conclusion after witnessing this discussion was, “If the company has a strategy, nobody in the room has articulated it in a simple manner.” Each member in the room was making various decisions – including selection of large impact ideas. And yet there was no coherent view on how they would win in the market – today & tomorrow. I like what Rumelt says in the interview, “A good strategy is essentially simple. If you can’t explain your business strategy in a few minutes and in a few pages, there is something wrong.”

2. No good progress indicator: Infosys announced its results last week and missed its annual guidance for the first time in two decades. Infosys revenue had grown by 15.8% YoY and profits by 14.5%. Market reacted harshly; the stock shed 13% in a single day. It has been little over a year since Infosys announced Infosys 3.0 goal of getting its revenue equally from transformation, innovation & operation. In March 11, 2011, transformation, innovation & operation constituted 25%, 10% and 65%. Last week, Infy CEO Shibulal emphasized their commitment to make the portfolio balanced. However, its “innovation” bucket portion seems to have dipped from 9.5% to 6.2% of its revenue. Is Infosys strategy working? There is no easy way to find out, especially for an outsider, perhaps even for an insider. As Rumelt says in the interview, “It is difficult to determine whether or not you are accomplishing your strategy by looking at current results. You can have a company that is producing excellent results but has a poor strategy. Vice versa, you can have a company that has poor results but an excellent strategy.” My friend Prof. Rishikesha Krishnan who visited Infosys Labs recently is right in pointing out, “It may be premature to knock Infosys off”.

3. Ambivalent messaging: Andrew Grove tells a story of his Intel days², when he & CEO Gordon Moore made a significant strategic decision in the middle of 1985 – that of getting Intel out of the memory business. This was the business Intel had identified itself with for more than a decade. Initially when Grove talked about it to his team, he had a hard time getting the words out of his mouth without equivocation. In his own words, “Saying it to Gordon was one thing; talking to other people and implementing it in earnest was another”. Several months after this decision, Grove was visiting a remote Intel location. He was still not ready to announce that they were getting out of the memory business. He would usually give negative-to-ambivalent answers to questions pertaining to memories. And one of the senior managers attacked him aggressively, “Does it mean that you can conceive of Intel without being in the memory business?” In Grove’s own words – “I swallowed hard and said – yes, I guess I can. All hell broke loose.” Communicating an intent (like that of getting out of memory business) with clarity is not easy. Most companies mess it up. Rumelt says in the interview, “There is an essence of compromise that is part of human character. While competitive success comes from focus of resources, our natural tendency in the organizations is to satisfy multiple constituencies.”

Sources:

1 “Who says elephants can’t dance” by Louis Gerstner, HarperCollins, 2003 (reference to drawers full of winning strategies is on page 16)

2 “Only the paranoid survive” by Andrew Grove, Doubleday, 1996. (reference to the visit to the remote location is on pages 89-90).

Highlights of the Tech Reach program, April 12-13, 2012

I co-facilitated the Tech Reach program held at Hotel Grand Mercure, Bangalore this week (April 12-13). The participants had 7 to 15 years of experience as technical experts and had designations like: Architect, Principal Engineer, Senior Lead Engineer, IT Manager, Program Manager etc. The objective of the program was to learn 3 levers that increase your sphere of influence as a technical leader. These levers were: communication, innovation and mentoring. Here are highlights of the program:

Destination postcard: As a first step, each participant went through a self-assessment exercise to answer the question: “Where do I stand?” Next, he reflected on what he would like his brand to be one year from now. Here is what we got (click on the image to see each card):

Communication: Taking and communicating a position on a technical issue is an important attribute of a technical leader. In this session, each participant wrote a 300 word position blog and got it buddy-reviewed using a simple framework. For example, we checked if the problem definition is clear. To add a fun element, some of the ideas were presented through a 2 minute skit.

Innovation: We were privlieged to have Lakshman Pachineela facilitate the session on Design Thinking. Lakshman is the Head of Innovation at SAP Global Delivery and also a visiting faculty at School of Design Thinking at Hasso Plattner Institute, Potsdam, Germany. Design Thinking is rooted in the three core elements of systematic innovation: multi-disciplinary teams, iterative process and variable space. Participants got a glimpse of the design thinking process through an exercise of re-designing the wallet of their partner.

Mentoring: When a junior engineer comes to you for help – either as a sounding board for an idea or with a technical issue – how do you react? Through role plays we explored the 3 different helping roles we take on – expert, doctor and catalyst. And various traps associated with these roles. We also assessed what role Gokhale played in this meeting with Gandhi as depicted in the movie: expert, doctor or catalyst?

Panel discussion: As one of the participants has mentioned in the feedback, the panel discussion with senior technical leaders was “icing on the cake”. We had Dr. Sanjeev Krishnan, Founder Director of Magic Lamp Software (earlier a Senior Architect at Sun Microsystems), Balaji Rangaswamy, CEO of Sooktha Consulting (earlier Chief Architect at Nokia Siemens Networks) and Abhijit Tongaonkar, Director, Software Development at Cisco to discuss the topic: Role of technical leader in Indian technology industry – today & tomorrow. Questions that got clarified were – Does a senior architect code? How do you innovate in a delivery / offshore organization? What does a senior manager value? How to overcome fear of failure? How to find a mentor?

Registration has begun for the next Tech Reach program scheduled on May 17-18 at the same venue.

Preparing to fight a crazy system? Learn to become invisible

Do you really want to fight a crazy system? Say, a system that is hugely corrupt & unforgiving to non-conformists? Or a system steeped in bureaucracy and unsupportive of new ideas? A system that can easily tame the likes of Anna Hazare and Dr. Kiran Bedi? Think again. As the Intelligence Bureau agent Khan tells Vidya Bagchi (Vidya Balan) in Kahaani, “This can be very dangerous”. Do you still insist? Then you may have to prepare an arduous journey like going through 36 chambers of Shaolin. Question is: what do you learn in the first chamber? Well, here is a good candidate: How to be invisible. Every crazy system has ingenious ways of making you part of its extended family. So, one of the best ways to avoid getting crushed is by becoming invisible. Let’s see how using the Hollywood movie “One flew over the cuckoo’s nest”.

Randle McMurphy (Jack Nicholson) finds himself in a mental hospital and realizes that the whole system is torturing its patients through therapy sessions and subtle humiliation. McMurphy rebels against the system loudly and gets himself trapped in the process. What do you expect happens to McMurphy? Hospital management ensures that his brain gets appropriate treatment and becomes numb. Nothing new in this. This is what is expected from a crazy system. So what does one do?

Well, there is another dumb looking character in this movie whom McMurphy calls “Chief”. The tall Red Indian Chief (Will Sampson) is not part of any of the therapy sessions. Why? Because he is deaf & dumb. Or so everybody believes… until one day when McMurphy and Chief are sitting next to each other, McMurphy offers a gum to Chief. And Chief says, “Thank you”. And that is when McMurphy realizes Chief is not dumb. He is normal like anyone else but pretending to be deaf and dumb. Why? Because he can remain in the background – almost invisible – until he can figure his way out of the crazy system. And Chief does find his way at the end to escape the mental hospital.

Does this strategy work in real life? Yes, it does. Edgar Schein, Professor Emeritus at MIT, discovered this strategy when he talked to prisoners of war in Korea. He says in an interview, “In organizations, individual learners lie, cheat, go underground - they do whatever they have to remain invisible. And in large organizations, going underground isn’t that difficult.” Remember what Patrick’s boss in IBM, Jim Canavino, Senior VP for Strategy and Development, told him about their Internet project? “You know, we could set up some kind of department and give you a title”, Canavino said, “But that would be a bad idea. Try to keep this grassroots thing going as long as you can.” Here is a rare case where boss helps you remain invisible – away from the management review meetings. Do you work on a sunset product? Congratulations! You are already in the first chamber. Make the most of it.

In the world of Facebook and Twitter “learn to be invisible” may look just as bad as suggesting “learn not to breathe”. Don’t be so sure. Andrew Wiles used a brilliant ploy to fool “the system” before embarking on a solitary journey in his attic to solve Fermat’s Last Theorem. Instead of sending one long paper to a journal from the results he had before embarking on the journey, he split them into several smaller chunks and kept sending one small paper at regular intervals. “The system” kept thinking Andrew is slowing down.

Now, please go ahead and conclude what I am up to based on my Facebook status!

Image source: http://nativeamericanactors.tumblr.com/post/11095074717/will-sampson-with-jack-nicholson-in-one-flew-over - McMurphy discovers Chief is not dumb

Catalign Quarterly - March 2012

Catalign Quarterly is an attempt to put together insights relevant for fostering a culture of innovation in organizations. This is the second issue of the Quarterly.

Theme for this Quarterly is “Intuition & innovation”. There are five articles in this issue. The first article is a book review of what I believe is a landmark book on the theme of this issue. It is written by Nobel Laureate psychologist Daniel Kahneman. The second article is on the legendary mathematician Srinivas Ramanujan and marvels & flaws of his intuition. The third article explores the relationship between creativity and intuition as discussed by Kahneman. The fourth article explores a classic bias called fundamental attribution error through the question "Is poor idea flow a people issue or situation issue?" Finally, the fifth article looks at the metaphor of weighing scale as a type of measure and its relationship with culture change.

Hope you find some of the articles helpful.

1. Book review: Thinking, fast and slow by Daniel Kahneman (Nobel Laureate and the living authority on the subject)

2. The marvels and flaws of expert intuition: story of Ramanujan’s first letter to Hardy

3. Is creative thinking an oxymoron?

4. Poor idea flow and fundamental attribution error

5. Weighing scale, intelligent gossip and the culture of innovation

Next quarterly will be based on the theme: Design of strategy as if implementation matter.

Poor idea flow and the fundamental attribution error

Imagine you are looking at the flow of ideas coming into your idea portal. You see the rate of ideas languishing for the past several months. What will you conclude? Will you, for example, feel that the employees don’t know how to think creatively and need some kind of training on tools / techniques for generating ideas? In case you feel this way, you may be committing what psychologists call fundamental attribution error. It is a deep-rooted inclination to attribute people’s behaviour to the way they are rather than the situation they are in. In this article, let’s explore how lack of ideas could potentially be a situation problem.

A few months ago I facilitated an idea generation session for a corporate finance team. The expectations weren’t high. Traditionally finance folks are the low scorers on the innovation activity. We thought of first gathering “top of the hat” ideas and then after 10-15 minutes when we begin to get long silence breaks, prompt with some leading questions. The session began with the manager highlighting the importance of small ideas and how when added up they can cumulatively create a large impact. It was pointed out that one of the participants has submitted an idea in the past and was recognized by the organization. And then the idea generation session began. And to my surprise, it continued uninterrupted for the next hour when 53 ideas were gathered. Many ideas were built on top of each other’s ideas. At the end, every participant among the 18 had given at least one idea.

What happened here? Did the participants become more creative? Did they learn any tool? No. What happened was that a space & time was created where idea generation was the primary focus. There were no other distractions. People were told by their manager that small ideas are welcome. And in this case people believed him. What changed was the situation not the people.

There could be several reasons why ideas don’t come into your suggestion box or portal. Here are a few:

Unresponsive: The system could be slow in responding to submitted ideas. For example, it might be several months before you receive any response. You lose faith.

Lack of transparency: Similar to Roger Smith’s experience you might get a “not selected” response with no further explanation. You don’t even know if there is a well-defined criterion and if so, it is being used.

Conflicting message: On the one hand, the campaigns may be saying that small ideas are welcome. One the other hand, top management rewards / mentions only BIG ideas. You doubt whether you have any BIG idea.

There are several ways to tackle these specific issues. Scott Cook of Intuit talks about how an environment of experimentation shifts the decision making related to idea selection from politics and power point to validation through low-cost high-speed experiments. This reduces the burden on the idea selectors and improves responsiveness. Similarly, organizations use social networking features – peers commenting, doing “like” on ideas to improve both transparency and speed of idea movement.

This does not mean that tools / techniques for idea generation are unimportant. In the organizational innovation ecosystem I identified learning & development as one of the five key dimensions. Besides, training programs also tackle the situation problem by bringing the people out of their cubicle and creating a space conducive for idea generation – irrespective of the tool / technique. The point is that we sometimes view training programs as the primary lever for improving innovativeness and ignore the other dimensions.

Next time when you label something as a people problem, ask yourself, "Am I committing the fundamental attribution error?"

Related articles:

1. It's the situation, not the person, 3:23min video by Dan Heath (YouTube)

2. Fundamental Attribution Error, wikipedia.org