Sunday, July 27, 2014

Building New Strategies with Lessons of the Past

At last month’s Cannes Lions festival, I had the privilege of participating in a session with advertising legend Chuck Porter on “building new strategies for creative excellence.”  The session was organized by the Berlin School of Creative Leadership around the contrast between strategic insights drawn from the successful creative work of his agency, Crispin Porter + Bogusky, and more orthodox strategic approaches associated with Harvard Business School Professor Michael E. Porter (no relation).  In preparation, my Berlin School colleague, Professor Paul Verdin, and I had drafted a White Paper on the topic.

The session and paper yielded several conclusions about new priorities for building strategy for creative excellence.  For example, while acknowledging the greater need for flexibility and speed in decision-making today, we identified the persisting importance of making adaptive commitments to brand values and strategic priorities.  Likewise, we identified other crucial principles: serving communities of participation, building trust through storytelling, and finally recognizing accumulative value creation rather than pursuing competitive advantage for strategic success.  Overall, we proposed a fundamental shift from the traditional, largely adversarial orientation focused on competitors to an emphasis on value creation through the engagement of customers.

In doing so, the White Paper picked up on several currents of thought about the evolution of strategy.  Customer-centricity, involving better understanding and engagement of customers as well as enhancing capabilities for serving customers, is one such stream.  Another is the transformation of traditional value chain and scale economies by digital technologies and an information economy whose creation, distribution, and transaction costs have an entirely different structure.  Perhaps best-known, to use the title of Rita Gunther McGrath’s 2013 book, is “the end of competitive advantage.”  Rather than achieving a long-term, stable and sustainable market position in a well-defined industry, following Michael Porter, the new world of strategy is marked by developing a portfolio of transient advantages able to capture shifting “connections between customers and solutions.”

At same time as the Cannes festival, another debate around innovation and disruption began roiling.  Jill Lepore, a professor of history at Harvard (in the Faculty of Arts and Science, not Business School), published a withering piece on the contemporary “gospel of innovation” in The New Yorker.  “The Disruption Machine” took on the prevailing model of disruptive innovation associated with Clayton Christensen, another Harvard Business School faculty member.  His theory contends that while an incumbent firm seeks to maintain its market advantage through sustaining, or incremental, technological innovations, it is often overtaken by new entrants whose disruptive innovations, typically offered at lower-cost and with lower-performing technologies, end up remaking the market and leading to the failure of the incumbent firm.  Lepore alleged the theory, which she extracted primarily from Christensen’s groundbreaking 1997 The Innovator’s Dilemma, mistakenly explained the emergence of new technologies and the dynamics of firms.  In doing so, she also personalized the critique by questioning the integrity of his research and his claims about the theory’s ability to predict market failures.  In a Bloomberg BusinessWeek interview, Christensen responded briefly and quizzically both about the personal nature of the attack and the lack of actual difference in their questioning of innovation.

Much commentary and side-taking has ensued.   Many pieces noted how “disruption,” in particular, had become an overused shorthand for innovation-driven (some would say, -fixated) entrepreneurs and businesses.  On, for instance, Timothy B. Lee’s post was tellingly titled, “Disruption is a dumb buzzword.  It’s also an important concept.”  Kevin Roose similarly wrote on that, for actual disruption to work best,‘disruption’ has got to go.”   Some comments took on the larger state of innovation in both business and management studies.  In the Financial Times, Andrew Hill thus made the case for a more measured use of the theory of disruption, citing its relevance to analyzing corporate failures like Kodak and Blackberry. 

While Christensen has understandably been at the heart of many of these discussions, Michael Porter’s place has also been important.  On, Stephen Denning wrote that Lepore had been “the assistant to the assistant of Porter” and he then cast her attack in terms of the conflicting views of Porter and Christensen.  Specifically, this meant distinguishing the strategic goals of maximizing shareholder value and creating and maintaining customers.  The recent imbroglio around disruption is a “symptom,” in Denning’s word, of a more far-reaching debate around core assumptions of contemporary management and business.

In fact, among the most important lessons of the Lepore-Christensen exchange seem precisely the value of reflecting on and wrestling with one’s own guiding principles and assumptions in business leadership.  That lesson was also a basis of the Porter vs. Porter White Paper and Cannes session.  Such questioning can include:

1. Language
Too often, as with “disruption,” we use or overuse language without fuller explanation or understanding.  Sometimes context is lacking.  For those in creative and marketing communications, for instance, Jean-Marie Dru, now the Chairman of the TBWA Worldwide advertising agency, developed the distinct concept and specific creative methodology of “disruption” at the same time as Christensen in the mid-1990s.  More generally, as I wrote in a recent post, we don’t take adequate care in our everyday usage of key words like innovation and creativity to ensure clear and effective communication of their meaning in given situations.

2.  Assumptions and Contexts
If the language around disruption or innovation would benefit from greater care and precision of usage, the assumptions underpinning that language can likewise have greater impact when more fully understood.  This is not to suggest, of course, that any discussion of innovation should revert to exploring the finer points of Christensen’s (or Porter’s) research.  It is, however, to posit the value of stepping back and assessing the larger ideas behind, or wider implications of, specific potential decisions, actions or strategies.  Some of the best commentaries on Lepore and Christensen, like John Hagel’s, are illuminating exactly because they analyze seemingly familiar ideas more acutely and pose bigger questions.

3. Beyond Prediction
One of Lepore’s major critiques in “The Disruption Machine” is how poorly Christensen’s model predicts business success or failure due to disruptive innovation.  Similarly, in the Cannes session, Chuck Porter observed how our White Paper about his agency’s creative work amounted to “backfilling” explanations for earlier strategic and creative work that may not be practically useful going forward.  Any prediction or forecasting for an increasingly uncertain future is obviously challenging.  Yet predicting the future is not the only standard or purpose for analyzing and modeling the past.  Even more, as Lepore herself allows (in quoting a recent New York Times report on innovation), “disruption is a predictable pattern across many industries” – patterns being a matter of deeper understanding and far different from concrete predictions about future performance at specific firms.

4. Models and Theories – and Learning
The distinction is essential.  As an educator who uses historical cases and models, my priority is often to connect particular examples to wider patterns.  However, the purpose in doing so is not the connections themselves but to help build individuals’ capacities for effective analysis and action.  Those capacities are enabled by learning multiple examples and experiences, models and patterns, and developing the discernment and agility to use them, as appropriate, to make sense of different situations and contexts.  Models and theories, like that of disruptive innovation, are always only potential means for conducting analyses.  Rather than ends in themselves, we should look to them to help us improve our thinking, sharpen frames of reference, and ultimately serve as aids to better understanding, decisions, and problem-solving. 

Friday, July 4, 2014

Review of 'Collective Genius: The Art and Practice of Leading Innovation,' by Linda A. Hill, Greg Brandeau, Emily Truelove & Kent Lineback (Boston: Harvard Business Review Press, 2014)

The Introduction to Collective Genius: The Art and Practice of Leading Innovation calls for a different kind of leader who creates organizations both willing and able to innovate.  From that innocuous opening, this new study quickly moves to engage the challenges and complexities confronting those wanting to enable innovation.  Much of the complexity is captured in six paradoxes – from “support” and “confrontation” to “bottom up” and “top down” – that create ongoing tension.  These are then summarized in a “fundamental paradox” between “unleashing” and “harnessing” the talents in an organization.  Through the dozen case studies that follow, these paradoxes demonstrate not only the potential of different kinds of leaders but the value of different kinds of thinking about leadership in fostering and driving innovation.

In less capable hands, such a reliance on paradoxes or tensions in describing leadership might reflect indecisive or incomplete analysis.  For Linda A. Hill, Greg Brandeau, Emily Truelove, and Kent Lineback, it instead conveys with evidence and assurance the complicated realities of new organizational forms and behaviors.  In fact, despite its presentation of a series of individual leaders, the book establishes a category of its own that yokes together the best of conventional analyses of leadership and innovation.  The result is an invaluable guide to enabling collaboration and collective behavior at a time when innovation and creative problem-solving are increasingly the norm.

The first major section of Collective Genius addresses how leaders create a willingness to do the hard work of innovation.  There are three major challenges here:
  • Purpose: Why we exist
  • Shared Values: What we agree is important
  • Rules of Engagement: How we interact with each other and think about problems
Defining these elements helps to create a context in which others can innovate.  Looking at Volkswagen and Pentagram, the design agency, the authors offer practical instances of encouraging risk-taking, trying new ideas, and building solutions together to form a greater sense of community.

The second major section takes on how leaders can create the ability to do the hard work of innovation.  It is also defined in three aspects: 
  • Creative Abrasion: The ability to generate ideas through discourse and debate
  • Creative Agility: The ability to test and experiment through quick pursuit, reflection and adjustment
  • Creative Resolution: The ability to make integrative decisions that combine disparate or even opposing ideas
Together, these organizational skills correspond to the major elements of the innovation process – collaboration, decision-based learning, and integrative decision-making.  Tracking efforts at Pixar, eBay in Germany, and Google, the authors offer examples of how practically these skills can be operationalized and also integrated with each other.  

Amidst all the discussion of innovation processes and organizational behavior, how exactly do leaders fit here?  They may be visionaries – but don’t have to be.  Even if they are, they don’t hold forth and inspire from the mountaintop.  Instead, the role of the leader is re-cast again and again in these pages.  Vineet Nayer, of HCL, is a “social architect”; Larry Smarr of Calit2, “a dot-connector extraordinaire”; and managers at Google, according to then CEO Eric Schmidt, “aggregators of viewpoints, not dictators of decisions.”  What is consistent in Collective Genius is that traditional formal authority gives way to nimble orchestration, informal facilitation, and contributions to community-building.

The real hero for Hill and her co-authors, as a result, is less the individual than the innovation eco-system.  Successful leaders, they conclude, work to create innovation environments “in which the unique slices of genius in their organization are rendered into a single work of collective genius.” Moreover, and this is ultimately the book's most illuminating lesson, that collective genius not only yields more sustainable innovation but transforms leadership itself.