Excerpt from the book “Creating innovations. Creative methods from Netflix, Amazon and Google”. When we get MBA alumni, we have to retrain them — nothing of what you have learned will help them succeed in innovation.
Above, we quoted Scott cook, criticizing traditional management trainings. Maybe it just provokes. Possible. But many other innovative leaders have also criticized traditional management education.
For example, Elon Musk, founder of Tesla, SpaceX and PayPal, insists. “As far as possible, try not to employ holders MBA. MBA programs dont teach to create the company. The position of my companies to hire not because of an MBA, but in spite of it”.
Why, if we all so highly value business education, some leaders of innovative companies subjected to such harsh criticism. Here is our vision of where we deviated from the path to innovation. In 1911, Frederick Taylor wrote the fundamental work “Principles of scientific management” (Frederick Taylor. Principles of Scientific Management). He had such a serious impact on the emerging industrial corporations the 20th century, Taylor has earned the title of “father of scientific management”.
Management principles Taylor was trained in the new emerging at that time, the business schools, these principles were applied in the growing industrial capacity of Ford Motor and General Electric. Of course, Henry Ford, Alfred Sloan and other corporate legends looked at scientific management as your textbook, and the influence of Taylor is still felt in the business schools around the world. What were the principles of scientific management Taylor. First, it is recommended to carefully plan the work and break it into separate tasks.
The idea was that managers could analyze the problem of production, for example, from the standpoint of time and labor movements, to determine the most rapid and cost-effective way to deal with them. The next task was to ensure that the task as much as possible standardized and workers are following prescribed procedures. Taylor insisted that the specialization of tasks is critical and gives a lot of advantages — in particular, a clear responsibility and accountability. In addition, it is possible to relate the workers skills with the task, thereby promoting division of labor.
These principles. Specialization of tasks, standardization of work, accountability, division of labour — has spread rapidly in industry in the USA. The ideas of Taylor extremely easier job of managing the complex challenges of the growing industrial corporations. Moreover, applied effectively, these principles had a significant positive impact on large companies of that time.
The creation of Taylor we see everywhere. All major companies are divided into divisions with special tasks. Design, supply, manufacture, marketing, HR, Finance. It seems that every big company tends to division of labor, standardization of work, accountability and adherence to tried and tested practices. The principles of Taylor, did a lot of good, but there is one problem.
They flatly contradict the innovation management. They are perfect for performing tasks on customer retention, but do not work, if the work is to create a customer (according to Peter Drucker, “the main purpose” of business and the obvious focus of a startup). They transform a person into a good Manager (regulatory performance), but in a bad innovator. How is it done.
Consider the specialization of tasks and division of labor. Specialization makes sense when the problem is clearly identified and is characterized by a low degree of uncertainty, these challenges companies typically face, moving on the famous S-curve from growth to maturity. For example, companies need to produce thousands of products per day at the lowest possible price and to take daily 5000 service calls. The company knows about how to produce goods and how many calls to answer, — it remains to determine the most effective method of execution.
These tasks differ from each other, so the company carries them in two divisions and recruits specialists in manufacture or service to fulfill them.
Managers report on performance indicators, for example, the price per produced unit of goods or level of customer satisfaction on service calls. Managers quickly learn the cost of hiring and training specialists (as opposed to universal staff with wide competence), because the problem is well described and to choose a specialist desired profile easy. These practices are suitable for the solution of many problems faced by managers, and often refer to them — so just be a good Manager.
Unfortunately, this approach is incorrect when you are trying to solve problems with a high degree of uncertainty, those with whom company or startup is facing in the beginning of the S-curve or stages of its growth (see. “Sloan vs Durant. Contrasting control styles”).
When you are met with a high degree of uncertainty in how to create a buyer, you do not know which competencies will be most valuable. So you want to get people with broad expertise, those who can see the problem and its possible solutions from different angles. Thats why practices that could make someone a good Manager can become an obstacle to the flashes of insights and the development of new ideas to market. To apply the innovator, already operating companies need to decisively move away from his natural inclination to rely solely on traditional management to the use of entrepreneurial management in the face of uncertainty of innovation.
We have identified four key roles which must be performed by the leaders, hoping to turn their organizations into successful innovators, leading innovative work as a network of startups. These roles are extremely important to be sure that the method of the innovator firmly rooted in the internal processes of the company and in everyday norms of behaviour of employees.
First and foremost, the leader must be the chief experimenter, not the chief decision maker. As shown in the figure, the three other roles support and enhance the role of the main experimenter. The second role is to deliver a great task. Not only to inspire others to do it, but to insist on the release of the organization from the principles of scientific management Taylor.
Thirdly, a leader needs to form a broad and deep skills in the technique of the innovator is to ensure that the organization is able to create insights, find problems that require solutions, to quickly generate prototypes for solutions. The fourth role of the leader is to remove barriers for change, and to establish a system that facilitates rapid experimentation to test the hypotheses of the team and the uncertainty at every step. Traditional management solutions are the leaders.
You analyze information and make decisions that will affect the future of your company. In some way you are trying to predict the future and make the company successful. For many managers in decision-making is the meaning of management or control. But when you act in conditions of uncertainty, the available information seems too daunting or too little to you with any degree of certainty could predict the future.
The best thing you can do is to guess and get it wrong rather than be right. But if you dont make decisions, what is your role as the leader of an innovative team?. The method of the innovator is able to make decisions about the future, but first want to determine for themselves their new role. You need to learn to be right anew.
For Scott cook and brad Smith of Intuit is often a matter of reprogramming the new employee. “Unfortunately, you know how big companies and their bishops make decisions, says cook. ? Always willing to rely on the policy, PowerPoint, and your beliefs.”. Instead of fine to make plans and make important decisions, the new leaders of the company are taught to be Champions of experimentation.
In a similar way to Google founders Larry page and Sergey Brin have always held the opinion that decisions should be made extensive experimental data. In 2002 they experimented even with a completely horizontal organizational structure that led to excluding technical managers. But this experiment lasted only a few months until too many people went directly to page with questions about expense reports, and even interpersonal and professional differences.
But the philosophy that even the top management of Google should support their ideas with data that lives. For example, at some point, Larry page and Marissa Mayer (former Google Vice President) advocated the development of large-scale digital repository of books.
But rather than simply use his position to order the execution of these two went so far that, crushing a 300-page book fanerku, manually photographing each page and then run it through recognizing the symbols of the program to ensure that the digitization of books will take no more than 40 minutes. What is the difference between the main experimenters of the decision-makers managers. They focus on three things:
As a leader, you dont have to do everything yourself. On the contrary, decisions are cascaded down the hierarchy to small teams, where the collected data allow us to understand what should be the solution or the following experiment.
Here is what says about this cook. “Brad Smith (CEO of Intuit) changed the questions that are asked. We used to say. “Well, whats your answer, and what analysis is behind this?” Now ask. “It would be good as soon as possible to conduct an experiment to test this idea?”.
Jeff Bezos manages Amazon in a similar way, using similar questions. A few years ago Bezos gave the team the task to analyse the supply chain and come up with suggestions for the General organization of logistics of the company. The goal was to make sure that it can be done quickly and economically.
Says one of the team members. “When we presented the results of the analysis, all the leadership they did, but Jeff is not. He insisted that we were more rigorous, and suggested that all decisions in the company may be taken on the basis of simulation.
Thus was formed the team to build a simulation for more supply chain — simulation, which would allow us to see the effect of different solutions. These tools simulate and is now frequently used for decision-making”. Simulation has allowed Bezos to experiment with uncertainty before taking a decision. This leadership style works with Amazon, Google and Intuit, because the leaders back up their words with deeds.
Cook says. “Brad and I have to live by the same rules. And currently we also ask questions like “I Have a clear conviction that we need to do.
What assumptions it is based at random. And how do we test these assumptions at random, which led to my conviction?” We need to do what we would expect from everyone else.. Experiments will remain a show-off, until you change who and how makes decisions”.
So a key step to becoming a great innovation Manager change the decision-making process, that is to start with yourself. After a famous visit to the Xerox Palo Alto Research Center (PARC) in 1979, Steve jobs talked about how you came up with a rough GUI. “It was incomplete, even wrong, but there was the germ of the idea. In ten minutes it was obvious that one day that would work for every computer”.
After that, the jobs with his technical team visited PARC and returned to Apple with the idea of personal computer that would combine and improve technologies PARC. Jobs gathered some of the brightest engineers, gave them the necessary resources and inspired the Macintosh team dream of creating the most easy to use personal computer in the world.
Thats what makes innovation leaders. The heads of Xerox, by contrast, lacked the skills pioneers needed to develop technologies that have appeared in their own company. As noted by PARC scientist Larry Tesler, “within the hour looking at the demo, they (Steve jobs and Apple engineers) understand our technology and its value more than any heads of Xerox, which we have shown it for years”.
Jobs had agreed to Teszler. “In fact, they were just copiers who had no idea about computers and what they could do.They saw the defeat that would be the biggest victory in the computer industry. Xerox now could own the entire computer industry.”. Years later, when Apple was considering the possibility of offering a portable music device, Steve jobs and his leadership team created the concept with the slogan “1,000 songs in your pocket”.
That is why the first iPod was that size — small enough to fit in your pocket. This example shows why Steve jobs was a great innovation leader. He had a nose for opportunities and put down large tasks. You do not have to be Steve jobs to understand its capabilities, but you have to be able to put his team in front of big challenges.
Steve cook of Intuit believes that “leaders need to ask such questions. “What is the most important problem, the major pain point with which we can handle. How can we get closer to the customer?” You do not have to verbalize the solution (e.g., the number of songs on the device), but you should encourage people to seek opportunities.
For example, when Intuit began to consider Indian market as a new opportunity, Alex Lintner (Alex Lintner), Director of Indian Intuit direction, asked the team “to create a new business that will improve the financial situation of the people of India”. This great task has led the team Mobile Bazaar to the opening of the possibility of 150 million farmers in India to improve the financial situation by obtaining best prices for goods. After that, Intuit launched the search for a product that could do it.
Another aspect of staging a big task, maybe even more important. He gives the team and the organization right to be free from the traditional management and use of entrepreneurial management. It is extremely difficult.
Like most people, in a preparatory class of elementary school you are told which Desk to sit, and clearly explained what to do next. Most of us remained since then to sit at their desks and specified to run the scheduled task.
To break this scheme, leaders must put another large task for the organization, saying something like. “I suggest you figure out where to stand your Desk and understand what the assignment is able to create something most valuable to buyers”. In the multi-billion dollar company Valve Software has already revolutionised the video game industry, its founder Gabe Newell holds radical concept hard fight for customer value.
To mobilize her employees, he rejected the entire bureaucracy. Each new employee, he admonishes. “Your Desk has wheels. Your job is to understand where you will find the greatest value for the buyer. There and move,”.
The Valve heads claim that as the Valve “over the last ten years of the skin of my teeth to find the most intelligent, innovative, talented people on Earth, but to put them at the table and say what they need to do, is to destroy 99% of their values”.
Among their latest innovations, requiring less than ten years — to create a platform on which there are 80% of all computer games, and the first foray into the market for game consoles is a newly established company. Similarly, Jeff Bezos of Amazon uses the slogan “Today again the first day” (or “All only begins” — Its still Day One) to remind employees that Amazon is still a startup and can go a long way. This motivational idea so much that Bezos gave the name to the Day One one of the buildings of the company.
The question of when Amazon will come “second day,” Bezos replies. “The second will be a day when the pace of change will slow down.. And this is why I believe we are still in the first day and still morning. Yet the pace of change only accelerated”.
The key role of Bezos — before Amazon can deliver great task — to act like a startup. Qualcomm is a Fortune 100 largest U.S. companies and is engaged in the production of semiconductors for wireless devices. When Rikado DOS Santos joined Qualcomm, he was sure that I will be able to transform a failing “program ideological management” (Bank of ideas) in a company-wide innovation program.
DOS Santos has enlisted the support of promising thinking of the Director General was mandated to create new breakthrough products and the freedom to develop and implement a program to launch new ideas. Since previous efforts have not produced results, DOS Santos was looking for ways to teach people how to turn ideas into experiments to test their fitness, but with the condition that the program will be integrated into the current business tasks, and people will continue to complete the work on current projects.
DOS Santos has built a two-phase program, called Venture Fest (Festival of risky projects). In the first stage, employees submitted ideas, of which the General collegiate Council was selected 20 of the best. After that, for the participants in the Venture Fest was organized three months training on a part-time job where they test their ideas with customers and create prototypes.
In the final phase they presented their ideas to senior management, competing for the allocation of funds, and then tried to convince a specific structural unit (existing businessunit.) to accept their ideas. In General, the Venture Fest was a success. In the first year received 82 ideas, and fifth to more than 500. Moreover, program participants have identified many breakthrough ideas.
Although Venture Fest contributed to the development of the few truly transformative ideas, some members of the company who have not participated in the program, began to ask questions and even attacking her. Individual managers were unhappy that we have to let go of their best employees to projects undertaken without their control. And with a more traditional management perspective projects, Venture Fest seemed too open, fluid and flexible, at variance with the culture of Qualcomm, driven by the mind and deadlines.
Perhaps even more dangerous was the fact that sometimes managers of research projects, many of which believed that they own the innovation, insisted that the emerging new ideas fall outside the scope of existing research programs or create intellectual property as high quality as before.
Despite the best intentions of many members of the Qualcomm Venture Fest has caused a kind of allergic reaction to innovation, the introduction of which in many other companies, according to our observations, enabled them to achieve success. After five turbulent and exciting years of the Venture Fest was quietly locked in the research Department. The Qualcomm experience is similar to many organizations that are trying to “innovate”, creating Islands of entrepreneurial and management skills in experimentation, not plunging deep into the process and goals that characterized successful programs.
This lack of understanding and acceptance of goals and methods can lead the uninitiated to the wrong interpretation of the method of the innovator and its results. DOS Santos says that the new ideas very successfully spurred the “selling party” Qualcomm (innovators) and gave the entire company the mood of a startup.
But if he had to do it again, hed concentrate on more important tasks. Learning the “buying party” (the rest of the company), “that all may speak one language and that research efforts are aligned.”. The deeper your companys awareness and recognition that innovation requires new managerial tools, the easier it will be to apply the method innovator. We are not saying that everyone should firmly hold to these principles, but we need to teach all to understand that managing uncertainty requires a different approach.
Of course, if your organization is facing serious uncertainty, you can comprehensively train all. In the Intuit cook and Smith insist that all new employees were trained in the principles of “Design experience” for one week training on design for the first three business months. The goal is not to make everyone an expert, but to make sure that everyone understands the principles of economic experimentation, know the steps to generate insights, connections problems and solutions.
Employees learn a common language description of the efforts to bring ideas to market. The fact that people have the language to explain their actions, gives them the strength to overcome the inertia that so often prevents change. Dozens of innovators in our interviews cited a common language as one of the most important reasons to teach everyone.
But there is another reason why reasonable executives want to understand the method of the innovator, he creates ideas. Almost all studies show. Wide search is the best way to open a new standing development ideas. Achieving a broad understanding is necessary but not sufficient.
It is important to build deep competence within the company. We have seen how effective it is doing in two ways. The first is to create a laboratory or rapid response team, which applies the method of the innovator to new ideas. In addition to the relevant engineering and technical experts in the lab of experts in design thinking and lean experimentation.
For example, AT&T, not seen in the innovations in the last 20 years, has recently created five laboratories (AT&T they are called “foundries”), each with 40-50 intersectoral expert. Their task — to test new ideas, born inside and outside AT&T. Foundry gave refuge to the experts of the marketing of businesses, telecommunication technologies and design thinking.
Moreover, AT&T has invited startups and successful companies from various industries to participate in the rapid development of new technologies and their experimentation. Every new idea passed through a 12-week project where the team used to it described in the book tools for the production of virtual or physical prototypes. Where the ideas come from.
A team of key leaders AT&T selects ideas from three sources: AT&Ts been doing this for less than five years, but records on account of the smelters, the development of ideas that has propelled the company from innovation awards to the minus 13% in the mid-2000s to the present — almost 10%. “Foundry proven their value, we use the verb “to melt”, says John Donovan (John Donovan), senior Executive Vice President AT&T technology and network operation. ? We have seen that moving from prototype to product is three times faster”.
Other companies have created similar laboratories, charging them more innovative results. Among them Hyatt hotels, Hallmark, and less well-known companies such as Banco Davivienda is a leading Bank in Latin America.
The second method is to create the competence of a huge number of people, startups. Each year choose 20-30 people who join them. Many activators are trained to be part of a team working on workshops “an Economical startup”. A group of employees find ideas relating to important unmet needs of customers, and in two days pass all loops. Assessment of the pain points of the buyer, creating a prototype solution and test it with customers.
Ben Blank, founder of the workshops, proudly emphasizes that many employees Intuit expelled from the stores Home Depot or removed from the Caltrain trains while they checked their ideas on buyers. Through the seminars,”an Economical startup” have passed more than 200 employees Intuit, forming a deep mastery of the technique of the innovator throughout the company.
Your final role is to remove obstacles and provide tools that people need to speed up experiments. What are the main barriers and what are the necessary tools. Lets look at what transpired during our interviews with dozens of representatives of large organizations. We often ask people who work in big companies.
“What is stopping you to market new ideas?” The most popular answer. “I dont have time. And so a lot to do”. Thats what working in a large organization created for execution of routine tasks processes. And this is the responsibility of a good Manager is to remove from the system all the weaknesses that human resources (and other resources) were fully utilized.
However, innovation takes time. We have seen how the company allocated to each employee 10% of free time (Intuit), 20% of project time for engineers (Google), and extreme — up to 100% of self-employed time (Valve Software).
The internal regulations stipulate Valve. “We have heard that other companies set the percentage of time on self-managed projects. Valve is 100%. Valve — homogeneous organization and people join projects, not because they said so. On the contrary, you decide what to work on, asking yourself the right questions.
Employees vote on projects with their feet. Strong projects in which people see the declared value, quickly completed the staff.”. Many companies have innovative training camps and other innovative activities, but few after that, give the time for generating and testing ideas, despite the fact that it can greatly affect the outcome. How long provides the company depends on the level of uncertainty they face, and the importance of innovation (for example, the Valve stands in the market with a high degree of uncertainty and believes that generates all of its values using buyer-oriented innovation).
Time can allow people to think about new ideas, at first glance seemed senseless, because the more diversity you tested ideas, the greater the probability to find among them standing attention. “20%” is given to projects of the time created such hits as Gmail, Google AdSense and Google Docs. One of the leaders estimated that up to half of the new projects Google created this way.
These projects provide more than 25% of income. Unfortunately, like other passing into the stage of maturity, the company Google has recently started to limit this program step, as predicted by observers, leading to overlapping innovation channel. Anyway, while Google is pouring substantial resources in his laboratory Google X lab and such projects as Google Glass, Google Express, Google Loon and Googles Self-Driving.
Like Google X-the lab and some other companies, such as Amazon, identify opportunities and form teams to create solutions confronting uncertainty. A time of innovation directly contributed to this.
No matter how, but leaders must ensure that employees were given time to consider and test new ideas, and that this is expected of them. Useful if the leaders set an example. Mark Zuckerberg of Facebook is trying to spend five hours a day on new product development. Scott cook of Intuit is committed to set aside one day a week to participate in the work of innovation project teams.
Ryan Smith, CEO of billion budget adopted by the data collection and analysis, told us. “Every leader is a player, and coach. You need to get down in the trenches, if you want innovation.”. Another obstacle for start-up teams — lack of tools.
For example, the team needs to conduct an experiment with potential customers, if they hope to find what you need to do, and then great to meet. Providing quick and easy access to customers, you will facilitate the experiment. Amazon gives employees list of customers (and wholesalers) that they can quickly test new ideas. Intuit once a week invites clients to headquarters for experimentation.
They also have a list of customers living in the neighborhood, who agreed to the visits. These actions doubled customer engagement in the format of “face to face”. Many were told that even had no idea how easy it is to test the solution, until the clients began to come to their office. To help startups to create a broad set of solutions, Intuit developed technological palette.
The company selected and hired experts in the technologies associated with mobile devices, social networks, user interaction with the system, collaboration, data processing and so on. The value of these experts is that they are expanding the search for a solution and help the team understand what will be technologically feasible. Google also provide tools for rapid prototyping. Digital layouts, flexible code structures for rapid prototyping software.
“Kitchen design” from Google X was designed specifically for creating simple prototypes and big ideas. It is located near the main offices of Google X and is a large-scale production, filled with 3D printers, high-tech lathes and other modern equipment for the manufacture of prototypes. These tools can seriously affect the productivity of the startup team.
For employees of companies that are firmly fixated only on the performance, experimentation seems to be the case risky, unnatural, against the rules. Duties and responsibilities for the result are often separated from each other, so employees need permission from the leaders to test ideas that go beyond the responsibility of their units. In Valve Software issue permits decided a radical way.
There really are no managers or formal titles among software developers.”Every — developer — stipulate internal regulations. ? Anyone can ask about the work of another. Each can draw the other into your project”. Not surprisingly, the approach of the Valve to the minimization of obstacles gives the employee freedom to engage in any startup that interests him.
Large companies are also trying to protect its image and limit liability for market experiments. As leaders of such companies can allow employees to take risks and to freely organize experiments. Lawyers Intuit developed a list of recommendations, following which you can test without requesting permission. For example, you do not need a permit if the following conditions are met:
These rules for employees. “We expect that you will have to experiment. Dont ask permission, just do it!”. If you attend business school, you have classes in Finance, accounting, production processes, organizational behavior and other similar topics, many pochernevshy in the logic of Frederick Taylor.
Rarely you will encounter a course on the development of the product or method innovator as Central in the curriculum (although some advanced teachers and teach individual principles, often in optional classes). Most business schools perceive the leadership as a set of skills required to manage a Mature organization focused on the implementation of the plan under low uncertainty.
But when you face uncertainty, you will need other management principles. Some of these principles are taught in schools of design, working under the auspices of the Stanford school of design. But we believe that, in addition to such schools, we need innovative schools program, close the business schools, teaching innovative leadership in all major functions of the organization. Innovative school as opposed to business school would deal with the emerging science of managing uncertainty.
In the field of innovative schools gets enterprising management and other functional areas that should also in the face of uncertainty be managed in new ways. The table shows these differences. For example, when you study marketing in business school, you usually learn about the importance of building and protecting their brand, conduct quantitative research to determine consumer segments and evaluating consumer response. But the innovative school we insist that initially you should not worry about the brand, the main — feedback from customers, should be established by a direct interaction, observation and interviewing.
Instead focus on building brand, satisfying a wide range of customers an impeccable product, the innovation school offers a focus on prototypes of low quality and small groups of customers, seeing mistakes as opportunity for learning. When you study Finance in business school, they teach you the logic of marginal cost.
The advantage of the maximum initial investment in fixed income instruments on new initiatives. But this approach inclines you to step-by-step movement for innovation. In innovative schools, you learn the dangers of the logic of marginal cost and other financial instruments.
In a world of uncertainty, the investment leverage is often a bad idea because it can lead to the development of a workaround is the only thing that will allow you to cope with the work that needs to be done. We are not saying that one approach is good and the other bad. Good both.
The key to managerial success is to understand when to apply the more traditional approach of business schools and when the schools innovative approach, despite the fact that the decision is primarily dependent on the degree of uncertainty. When uncertainty is high, use methods of innovative schools. When the uncertainty is already resolved, use the approach of business schools.
In the end, why waste time on the experiments, when the probability that your choice is wrong, is very small. With the above in mind in our conversations with the Directors, we see a rapidly growing need to approach innovative schools. Cook (Intuit) says. “We must use these new leadership practices in our core business, because they are dealing with a very high degree of uncertainty and needs to rediscover ourselves.”.
Readers with a business education, we want to ask two questions. “How many A/B tests you performed in the classroom to obtain a scientific degree. How many prototypes have you made?”.
For most of you the answer is “zero”. That has to change. The name “innovation school” describes a group of emerging practices for managing uncertainty, particularly startups.
But in the future, with the growth of uncertainty, we will see changes in how organized the entire business and how it is controlled. The science of management of uncertainties evolving, and the approach innovative schools need to teach in line with the traditional disciplines of business schools.