Let's Start with Culture

The second most quoted success factor for any business change is 'a supportive culture'. The first of course is 'top management support'. We throw these terms around as though simply saying them will make things happen. Then if nothing changes, we can blame these amorphous concepts.

One of the least understood is 'culture'. Let's spend a few seconds on understanding how 'culture' came about in organizations. I like to define the 'culture' of an organization as the commonly understood way of doing and getting things done. It is behaviour oriented.

The example I most often give is our behaviour in religious situations; the wearing of traditional clothes, food taboos or preparation, or commonly understood codes of behaviour while attending rituals. In a commercial setting, the base is usually established by the founders' either explicit or implicit reinforcing of behaviours that work for them. Over time new people are recruited into the organization. These people go through a number of conversations in which they try to make sense of what is required to behave appropriately. The conversations subtly change the culture. Of course, over time these conversations get embodied into meetings, decision rights, formal and informal levels of authority and various processes. At some point, these matters become ever more rigid and change to them becomes more and more difficult.

This sets up the challenge for anyone wanting anything (but especially the culture) to change in an organization. It must start with a number of conversations in which people are able to process the required changes. It is important to understand the context around the use of the word people here. To divorce the person from their formal and informal power structures is impossible. So, in an organization what is the weight of the opinion of the CEO in these conversations versus that of the shop-floor worker? It is so easy for a strong successful CEO to kill off innovative ideas simply by saying 'we tried that..' or 'that is not how we do things around here ...'. Each time this happens, in spite of wishing or thinking that they have an innovative organization, the CEO destroys their capacity for innovation.

A culture of innovation is one where the CEO and other senior executives actively and continuously allow conversations throughout the organization to blossom into action. Action that yields experiments to challenge the way in which 'things are done around here'.

Founders' Fire

"You have to be a little silly about the goals you set. ... You should try to do the things that most people would not.", Google's co-founder Larry Page told a group of students. I am fascinated by the stories founders tell of their trials and tribulations in going from their grand idea to implementation. There is so much to learn from these tales.

I recently interviewed the founder of a student portal in South Africa. He said, "At first we wanted to get a deal with the Universities for the student email accounts. But dealing with Universities is impossible, there is just so much bureaucracy. In the end we went and built the community person by person using any trick we could to entice members to the portal. This total change in strategy has really paid off because we are now free to do what we want."

So here is a digest of some of the lessons from the founders that I have researched.

1. Believe in the impossible

So many new businesses have flown in the face of conventional wisdom. "It doesn't work like this.", is a perfect response. The stronger you get it, the stronger your potential. Think about how the record labels have fought and fought and fought on-line music. Ten years or more later and so many missed opportunities they are coming to realise that their way of operating has changed forever. Think of discount airlines, most successful e-commerce sites and the Blackberry.

On opening his chain of Internet Cafes, EasyJet's Stelios Haji-Ioannou, told the media, "This is a category killer. I look for opportunities where I can totally change a market."

2. It needs dedication and focus

Of course just having the idea is not enough. "The idea is just the beginning, and I will openly discuss all of mine, because the hard work is in making it happen.", a serial entrepreneur once told me. So often I find that inventors are almost paranoid about talking about their ideas to anyone in case they get stolen. But ideas need to be hardened in the cauldron of debate.

Having done this, you are presented with the opportunity of fine-tuning the ideas. People will give you many practical reasons why you shouldn't be doing this. These are the obstacles you will have to overcome. Make a careful note of them. Then you have to decide whether you are able to push through these or whether they require a change in your approach.

There is a real skill in deciding between making a change, sticking with your original, or retreating totally and giving up.

3. Get it known by the world

The final piece of advice is you simply have to get it out there. This means finding the best way of getting exposure. In today's world we are spoiled for choice. But you need to rise above the clutter and become noticed.

Tools at your disposal consist of a variety of new media from blogs, wikis, and social networks.

The stronger you make the network surrounding your products the more secure your growth will be. The one thing that makes the iPod a success, other than the great design, is the network effect created by the iTunes store. Of course, Steve Jobs' social network with the record labels helped to make iTunes store great. Even Apple Music may finally concede and allow the Beatles music onto iTunes. Then Jobs' network with Hollywood has made it possible to add video and movies to iTunes.

We see these network effects over and over. What is a DVD without a DVD-player? I am sure not many people remember the MD music format. Here was a great piece of technology that simply didn't have content and so the format was doomed to obscurity.

So we see that a dedicated focus on implementing the impossible in a way that will capture the imagination of the world is all that is required.

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This post is cross-posted from Helium.

Reflection 1: The Innovation Value Chain

In the Reflection series on this blog, I want to consider lessons that can be drawn from some of the earlier articles. This Reflection is devoted to the idea of an innovation value chain.

The value chain refers to the sequential steps that support the achievement of a particular outcome. The word sequential is italicized because innovation is a complex set of interrelated processes with both positive and negative feedback loops that have deep roots both within and beyond your organization. But to make the discussion easier it is best to separate them into themes in a value chain.

Organizations can only be considered distinctive if they have distinctive value chains. So, it does not help to prescribe generic value chains. But it is important to establish the innovation value chain for your firm within your industry.

You are bound to find that your firm may not be able to describe its value chain, even though your firm may be considered innovative. Establishing your innovation value chain (at any level of detail) allows you to measure and diagnose where to place your emphasis; in some industries recruiting the right people might dominate, in others R&D effort, in others their patent process or relationships with academic research institutions.

More importantly, working in groups, you are able to conduct a focused conversation about innovation in your firm and what it means.

Here are a three starter topics to consider in these conversation. I will explore these and others in later blog posts.

- Organized for Innovation
Consider how your organizational structures, both formal and informal, support or detract from innovation and its success. Who are the power brokers? How do they respond to new ideas? From where do they take their advice and counsel? Are you or your team part of that power structure? Is there a tolerance for 'underground' experimentation?

- Generating ideas
What processes do you have generate ideas? Are they formal or informal? Is idea generation rewarded? What happens to the ideas once they are generated?

- Attitudes to experimentation and failure
At the heart of all real learning is an action, response, observation cycle that needs to be understood. How does your organization create opportunities for experimentation by doing? How does it respond to failures? How does it reflect on the experience?

When innovation in technology is not enough

"It was the holy grail of inkjet printing", Antonio Perez, the new CEO of Kodak told BusinessWeek in an interview last year. Ever since the lab produced specialist inks that promised archival vivid inkjet prints, Kodak had been working on a top-secret project to make a grand entrance into the inkjet business. The distant echoes of Kodak's founding by finding the mechanisms to switch from wet- to dry-plate technology is muted. This is not revolutionary, but merely incremental; improving on a theme.

"You press the button and we do the rest", is the famous catch phrase coined by George Eastman in 1888. At the age of 24, Eastman was about to go on holiday and a friend suggested that he record his trip on his wet-plate camera. While he never made it to his holiday, he became obsessed with simplifying the process of making pictures. This effort culminated in the Eastman Kodak Company, which has been around for close to 130 years.

The switch to digital away from film is a classic example of a "disruptive technology", where a slow-start, fringe technology is taken up and eventually threatens the existence of the major players.

Kodak's mainstream business of consumer and professional film and the associated ecosystem of processing and print shops seemed too big and stable to take any significant interest in the growing field of digital photography. However, the trend reached the point in the early 2000's that simply couldn't be ignored. In 2003, Kodak slashed its dividend to provide R&D funds to refocus its imaging business, which made up 70% of its revenue, on the digital market.

Now Antonio Perez, who hails from HP, is attempting to complete the turn-around. Besides the increased range and capabilities of the consumer level cameras and the retooling the processing shops to be more digital and self-service friendly, he has taken a huge bet on innovating the home printing business model.

He argues that people don't print at home because the costs of the inks are too high. Working with a team of ex-HP staff he has tried to rewrite the inkjet printer business model. Three years of R&D and some $300 million later, the new range of Kodak printers was launched in February 2007.

A year later the jury is still out on these printers, with Kodak selling only 520,000 units of their multi-function printer against global sales of 61 million.

Here we have an example of a systematic and strategic attempt at innovation in the hope of turning a company, if not an industry, around. Looking at Perez's background at HP it is not at all surprising that he is focused on the inkjet printer market. The dangling question is whether the market is appropriate for a late, but innovative, entrant who is using innovation to drive a low running cost, higher initial cost model.

Doing and Learning

Isn't it amazing how authors seem to have perfect vision when looking backward at innovations? The reason I mention this is because I recently read "Hidden in Plain Sight" by Erich Joachimsthaler. He implies that Apple spurred the iPod by activating the growth platform of “managing music” including its behavioral episodes: finding, evaluating, selecting, buying, listening to and storing music.

While I agree that understanding and playing into the behavioural episodes of customers can lead to innovative opportunities far beyond the product itself, my own research into the iPod shows none of the foresight attributed to this idea.

Steven Levy, in his book "The Perfect Thing", shows that there was a lot of serendipity in the iPod's rise to fame. In 2000 when Apple wanted a Mac-based music player they bought out Soundjam, one of the only two available on the Mac platform. iTunes was re-skinned to look like iMovie.

Then in 2001 realizing that there was dissatisfaction with the music devices of the day, Apple recruited Tony Fadell as a consultant to do an eight week feasibility study. Fadell coupled some commonly available parts together and the iPod was born. In presenting the results of the feasibility study to Jobs, Fadell and his team created two dummy products, knowing that Jobs routinely knocks the first ideas.

The marriage of iTunes, iPod and the deals that Steve Jobs did with the record industry to create the iTunes Store put an almost unbeatable ecosystem together. We can learn a lot from this, but we should not attribute any of this insight to the founders of iPod. They like most business executives (especially founders and entrepreneurs) simply play a game of survival and growth, ducking and diving, experimenting with new ideas, learning and responding.

This then is the ultimate paradox of business research; founders do amazing things because they are driven to do something special or know no better and business researchers find ways to understand why it was successful and then generalize this into techniques for others to follow.

The Bank of Ideas

My wife is an opera singer and was recently invited to take part in a brand new work. I went along to some of the rehearsals. These were a microcosm of business innovation.


The author of the work had a really good and original idea. Sadly, he was unable to translate it into action. Also, as it was an amateur company, they were constrained in many different ways; from costumes, sets, lighting and marketing budget.


In this video Seth Godin, points out that "ideas are only effective when they spread." He quotes the example of the inventor of sliced bread, whose idea languished for 17 years until it was marketed.

In a related experience, I was asked recently whether creating a bank of ideas was a good suggestion. By this I understood that the client wanted to create a kind of electronic bulletin board with a 'suggestion box'. I explained that while this looked good on paper more investigation was required.

What drives staff to put forward ideas into an anonymous suggestion box for others to process? If there is an incentive attached, would it be linked to the number of ideas, the quality of the ideas, whether the ideas get implemented, the effect of the ideas post implementation?

We need to tackle innovation in organisations in a more holistic fashion. This can start by diagnosing where in the innovation value chain we need attention. Sometimes a firm will have lots of ideas but not be able to implement them, others may suffer from not being able to get them marketed adequately.

Simply having a bunch of ideas in an electronic system is not good enough.

Innovation Black Belt

One of my clients recently interviewed and rejected a job applicant who was a six sigma "black belt". The role they were interviewing was for someone to work in the strategic projects area. I was really struck by the reason I was given for not hiring this individual. The manager said, "We are worried that the six sigma "black belt" will introduce practices that squeeze out creativity and over-engineer our organisation."

This echoes the 3M experience, where the BusinessWeek suggested that six sigma had removed some of 3M's renowned creativity and innovation. Of course, they also acknowledge that it's introduction helped improve the profitability of the organisation.

So we are left with something of a dilemma: lean or innovative. What I fail to understand is why we can't have both lean and innovative?

The process of becoming lean in and of itself can be seen as innovative to a bloated, inefficient organisation. What is required during this transition is to simultaneously change the culture of the organisation to be one that grasps novelty and experimentation. In introducing a transition like this the risk is that we inadvertently change the culture to one of "lean" above everything else. Where squeezing out all defects removes any chance of further creativity, variability and novelty.

We may irreparably damage the organisation in this process.

We should instead regard the process as a reason to encourage change and experimentation, where "lean and defect free" is a goal of some of the experiments that the organisation undertakes. Others goals of experiments could be looking for new products or markets. We need to do this deeply throughout the organisation and listen to what our staff are telling us. In so doing, we encourage all staff to take seriously their role and accountability for organisational goals.

We need to use these opportunities to embed the appropriate dynamic (learning) capabilities into the organisation. It is these capabilities that will ultimately give the organisation the "stretch" to be able to be both "lean" and innovative.

We are then setting the scene for more dramatic capabilities in the years to come. Imagine, what we could accomplish if we had the majority of our staff as innovation black belts.

Wishing you well with your start-up

"Dear Lara,
This is just a note to wish you well with your clothing business. We are hoping that the $200 we lent you makes the difference. We love your designs and are looking forward to your becoming a famous fashion designer.
John Smith
Credit Manager
A Big Bank"

This is not the usual type of letter one would expect to get from a bank. You are right! This is not the usual kind of bank. Prosper brings social networking and direct lending together to try to be the eBay for money.

In this CBS clip on Prosper, you can get a much better idea of how this works and the impact this kind of lending is having on the network of people involved.



Chris Larsen, has a real mission. He believes that credit is an essential ingredient in the American dream. He suggests that the banking system is elite and keeps the masses out, only lending to those who don't really need the money.

His novel approach of trying to be the eBay for money is starting to gain traction with over $36,000,000 lent out already. The Prosper system provides a complete auction market for money and a social network to support the lenders and borrowers.

My friends at the Built to Thrive Experiment, point out that Prosper is applying for patents for these ideas.

In an article I wrote for Helium, I made the point that one the characteristics of an entrepreneur (especially founders of start-ups) is "a dedicated focus on implementing the impossible in a way that will capture the imagination of the world." Clearly, Chris Larsen has this "founders fire".

In the words of Dr Seuss:

"If you want to get eggs
you can't buy at a store,
You have to do things
never thought of before."
- From Scrambled Eggs Super!

From Oil Change to Dance Troupes: Google's Dynamic Capabilities

I was recently involved in a process where an organisation wanted to generate ideas for new leadership practices. The idea was to get many in leadership positions to creatively present their ideas. Needless to say, the team members put in a lot of effort and many ideas emerged in the process. Some on the list met the response of, "We've tried this before" or "The MD doesn't want this".

This prompts me to contrast this with the deeply embedded practices at Google.

"We found someone who does oil changes here in the parking lot. That's not something that Google pays for. Employees pay for it. We just offer the space.", Anne Driscoll, Google's HR Manager, told FastCompany in a recent interview. Anne went on to explain the reasons for some of these internal people-focused services. They underline Google's commitment to their staff, "We're trying to make your life outside the office more efficient. We don't want you to spend three hours going to the doctor. Let's have doctors here on site so it'll take 20 minutes. Not because we want you back in your seat doing work. But because we don't want you to have to go home and do extra work because it took so long to go to the doctor."

They are also linked directly to Google's start-up and innovation culture. "[W]e bring in highly technical people, leaders in their field, who get together with a group of like-minded people to talk about those subjects. ... It fosters the ongoing learning culture here."

In a related article, David Glazer, Google's Engineering director, takes up the story. The founders of Google, Larry Page and Sergey Brin, emphasize the quality of the staff and the degree of risk they are required to take. "If what you're doing has the potential to really make a big difference in a good way, then don't distract yourself or me by telling me how and when you're going to make money from it. On the other hand, if you have something that's clearly going to make some money over the next few quarters or year but won't be big and exciting, then don't do it."

This sense of empowerment, coupled with Google's renowned 20% own-time culture has set up a platform for innovation and creativity. You can see the establishment of a very special set of capabilities in this process; from the type of people that have been hired, the way they are brought into the organisation, and the tolerance for experimentation and failure.

The late Sumantra Ghoshal, identified three key capabilities that would produce entrepreneurial businesses; getting the right people to start with, building relationships that encourage individual development, and, thirdly, trying to connect individuals' activities and beliefs to the core vision of the organization.