A New Economic Era Emerging: The Conceptual Age
Sometimes it's easier to describe what not to do than what to do, so we're gonna be shifting into culture here in a second, but I've worked with lots of large companies, and here's a scenario that I've heard played out over and over again. It goes something like this. The senior level executives of a company get together and they say you know what? Innovation is critical to our future, so we need to put together an innovation team. So they gather a couple people together, they put 'em over in a box, they have them start to generate ideas. They also put an idea management system in place. They announce to the whole firm that innovation is critical to our success and please send us your ideas. We have this idea management box. Send your ideas in and we're gonna take a look at them and we're gonna do something different and better. And the employees are all jazzed 'cause they finally have a voice into the system, 'cause everybody has an idea of how to improve things at the company, and so...
they all send in their ideas and then they bring in these consultants with cool glasses and dark shirts, and they get in the room with this hot team and they talk about the ideas that they have, and then they fall in love with one and they ignore all the ideas from the employees, by the way, and then they fast track a new idea that they've come up with, that they love, and they push it into the system and because it wasn't properly researched and they didn't take the time to do all the right steps, it fails, and it's public, and everybody's humiliated, and so then they go back and they meet up with the consultants again, and this time they're super cautious and they take an idea and they pare it back, and they pare it back and they pare it back, and they make it less risky, and then it's either too late to market or too pared back. They launch that, it doesn't really do anything. Meanwhile, the employees are like what happened to our ideas and why are your big ideas failing? And finally, the senior executives get back together again, and they say we're gonna focus on what's important, quarterly results, and the whole thing folds. This has played out in every company I've ever been to. I told this story once and they were like oh, you were here for project ... So this happens, right, and the reason this happens is because strategy is declarative, but innovation is interrogative, meaning you can declare a strategy. We are going to be this kind of company, we're gonna do this kind of revenue. We're gonna do these things, that's fine. You can declare that. You can't declare innovation, it doesn't work. You have to ask it out of the system. You have to ask people what are your ideas? How might we, what could we do differently? What does the future look like? It is a question, not a declaration, and when you try to declare innovation in a company, it always fails, every single time. So how to create a culture of innovation? Well, first I think what you need is to back up and look at some macro-economic things that are going on in the world right now. This is borrowed right from Daniel Pink, great book, it's 10 years old now, still true. He talked about how there's these sort of economic eras that have been shifting faster and faster. We used to be in the agricultural age. Before that, you know, we were hunters and gatherers, agricultural age for quite a long time, where the primary business of business was food. And then we moved into the industrial age in the 1800s, where it became about machinery and operations, and this very sort of linear approach to getting things done and the specialization and all of those things that led to trains, planes and automobiles. And then relatively recently we moved into the information age, where the currency for the last 20 years has been information, not machinery, not food. What Daniel suggests, and I agree, is we are moving into what he calls the conceptual age, the ideas age, where the currency of the future is ideas. And this makes actually a lot of sense if you think about it. With 3D printing, you can sometimes take an idea and have it the same day. You couldn't do that five years ago. You know, you had to make a mold, and you had to send it to China or Japan, or over to the machinery shop up the street, and then you got it back in a few months. In the currency of tomorrow, we're gonna take ideas, I mean you could take an idea and turn it into an app in the same day. You get these groups together in some of these shared spaces, they take an idea and they have an app in a day or two, that's ready to test with a prototype and a beta. So this is happening, we're moving into the currency of ideas. Unfortunately, our culture, particularly in large business, is still stuck back here between the industrial age and the information age, and unfortunately because of those cultural attributes, there is a really unforeseen consequence that happens in large companies, and so when we look at the leadership, the people, and the processes in large companies, there the forces from the industrial age are very strong, hierarchy and traditional systems, right? Hierarchy was the way to do business in the industrial age. IQ was the best predictor of peak performance because if hierarchy is what determines who makes the most decisions, you want the smartest person at the top. It just makes perfect sense. The smartest guy at the top, guy or gal at the top, and so on and so on and so on, 'til you get to the workers at the bottom that do what they're told. From a process standpoint, it became about risk aversion, defect elimination, quality. All of these are wonderful things. This is how we can drive a car 200,000 miles. None of these are bad things by themselves, and then finally, division of labor allowed specialization, which again, led to quality and led to the kinds of things that we enjoy today. Unfortunately, all these four things had an effect on the culture that was unintended. This is when you cue the music from Star Wars, you know, when Han Solo says something bad's about to happen, the trash compactor. These forces squeezed the cultures of large companies and they pushed in efficiency, structure, risk aversion and cost reduction, not bad things by themselves, but it pushed out creativity, engagement, risk tolerance and customer focus, the four key drivers of innovation in most companies. So the unintended consequence of the industrial age cultures, is we drove out the things that lead to innovation. So how to reverse this? Well, in this emerging conceptual age, there are ways to reverse this. Hierarchy is no longer important in most businesses. You want the smartest person to do the right job at the right time, so there's a book called The Complex Adaptive Systems. But this is something that exists in nature. When you see a flock of birds moving in synchronicity or fish, or things like that, they move when there's a idea. There's a place called 1871 in Chicago, and there's entrepreneurs all sitting in spaces and if somebody has an idea, they put it up on a whiteboard and suddenly there's an app developer, there's a lawyer, there's a accountant, there's a marketing person, that coalesce on that idea, and within a few days they've got a working prototype of something, and they've got a plan for how to bring it to market. That coalesces naturally. This is a very organic process. That's what a complex adaptive system is. IDEO would call it a hot team, and that's the way they work with companies. You assemble people throughout the business to come together on an idea as long as necessary. They support it, they figure it out, they make the plan, and then they move back into the business when it's ready to operate. That's a complex adaptive system. What you don't want to do is hierarchy your way to innovation. It doesn't work. You need the right experts at the right time for the right idea to take it to market. IQ is no longer the predictor of peak performance, it's EQ. What idea these days can somebody take from start to finish by themselves? I don't know of really any, frankly. You need a lawyer, you need a marketing person, you need a salesperson, you need an app developer, you need, you know, sometimes regulatory and compliance, and HR. There's all these different needs to bring an idea to market, especially if you're in a big company, 'cause if you have an idea in a big company you're gonna hear marketing won't market it, sales won't sell it, IT won't build it, legal won't approve it. Like this is what's gonna happen unless you've got the EQ, the ability to work with groups to massage that idea into people's heads so that they're ready to support it when the time comes to invest. So EQ is much more important than IQ in the future world of the currency of ideas. Instead of defect elimination, by the way, these are all still good things, but you need to think about creativity and risk taking. This risk tolerance has to be part of your culture. Yes, for items and products and services that are already in market, you want Six Sigma, you want quality, you want risk aversion for those things to get them to market. But for the new stuff you have to have this second side of your brain that says wait, what risks are we willing to take? What ideas are we willing to generate? And finally, instead of division of labor, you want collaboration and engagement, and we hear this over and over in companies. There's just silos everywhere. Nobody's talking to each other. So if you have an idea, you can't get it through the system because you don't even know who to talk to. I was in an enterprise, I had been there for a year and a half, I had talked to this woman two times a week for a year and a half, and one day I was talking on the phone, and I heard like a weird echo, and I said, hey, where are you located? She's like oh, I'm here in Madison. I'm like oh, I thought you were in Chicago. She's like no, I'm here on the 4th floor. I'm like I'm on the 4th floor. A year and a half, she's 50 feet away from me, we'd never met. This happens in business. We get so focused on the stuff we have to do that we don't even meet the people that are necessary to make stuff happen, for collaboration and engagement to happen. These things are super important to bring ideas to the future, so but if you can bring these things in, that's when you can unwind the trash compactor and you can start to drive in good things, creativity, engagement, risk tolerance and customer focus, and start to drive out the silos, the hierarchy, and the risk aversion that tends to go in sync with the industrial age cultures that still permeate large companies the world over.