In the April issue, he muses over “Why Businesses Don’t Experiment.” Naturally (perhaps I should say “Predictably“), he looks at behavioral reasons–companies seeking to avoid creating discriminatory situations (i.e., being unfair), or preference for action over insight leading to reliance on expert opinion–”Do this.”
There’s probably some pretty rational fear at work, too: the fear of making a career-limiting mistake. Relying on others helps to distance us from situations that don’t turn out right.
I experienced one more reason. I was in a large meeting with a client in which they were discussing whether certain actions by their staff were impacting revenue.
It was a plausible hypothesis, but it was a volatile moment in the industry & there could have been many factors contributing to the revenue loss.
Plus, even if the staff actions were the cause, what impact would changes make? What side effects would ensue?
It seemed to me a situation ripe for an experimental approach. But it was not to be. Action was needed–the shortfalls amounted to millions of dollars. “Come up with a plan by next week & start rolling it out.”
So, another impediment to experimentation: time pressure, real or perceived. We can’t wait for the results of an experiment; we need to act.
Since that experience, I’ve been thinking about what I can do to make a better case to my clients for experimentation. One requirement, I think, is to detect problems earlier, to buy a little time to put a mechanism in place to measure the effectiveness & side effects of a change.
Are there other steps to take to make experimenting easier?
The Harvard Business Review this month features a fascinating piece by Jeffrey Dyer of Brigham Young University, Hal Gregersen of Insead, and the omnipresent Clayton Christensen, entitled “The Innovator’s DNA.” The authors have completed a six-year study, summarized in the article, involving an in-depth analysis of 25 innovators and a further survey of 3,500 others who were connected to innovation in some way. The study attempted to identify key skills that separated great innovators from the rest of us.
The authors found five key innovative skills – Associating, Questioning, Observing, Experimenting and Networking.
In the article, a chart compares four iconic modern innovators (Michael Dell, Pierre Omidyar, Scott Cook and Mike Lazaridis) with noninnovators, in each of the five skills. The innovators are much above the noninnovators in each dimension, but in two skills the difference is stark: Associating (according to the authors, “the ability to successfully connect seemingly unrelated questions, problems or ideas from different fields”) and Questioning (”ask[ing] questions that challenge common wisdom”). Noninnovators fell below the 50th percentile on these dimensions, while the icons were with one exception above the 95th percentile of those studied.
An interesting piece in today’s WSJ Business Insight section (”The New, Faster Face of Innovation” by Eric Brynjolffson and Michael Schrage of MIT) asserts that information technologies are reducing the cost of business experimentation and increasing the speed of rolling out new processes and approaches to the organization as a whole. As a result, more and more businesses are moving to use experimentation as a basis of their innovation programs. Here’s an excerpt:
Innovation initiatives that used to take months and megabucks to coordinate and launch can often be started in seconds for cents.
And that makes innovation, the lifeblood of growth, more efficient and cheaper. Companies are able to get a much better idea of how their customers behave and what they want. This gives new offerings and marketing efforts a better shot at success.
Companies will also be willing to try new things, because the price of failure is so much lower. That will bring big changes for corporate culture—making it easier to challenge accepted wisdom, for instance, and forcing managers to give more employees a say in the innovation process.
There will be even better payoffs for customers: Their likes and dislikes will have much more impact on companies’ decisions. In globally competitive markets, they will ultimately end up getting products and services better tailored to their needs.
I agree with Brynjolffson and Schrage that experimentation-based innovation will have tremendous impact on improving products and reducing companies’ innovation costs. But while they credit IT enablers, I think there’s another crucial reason that experimentation is growing in popularity. Schrage touches on it in this video companion to the article:
The framework is useful for lots of purposes: knowledge management, strategic planning, managerial action (the subject of Snowden and Boone’s HBR article, “A Leader’s Framework for Decision Making“). But here I’m discussing applying it to thinking about innovation.
Schrage’s casual comment illuminates innovation’s relationship to Cynefin. “The culture of grand planning and initiatives” is dominant in most companies, and shows that they view innovation initiatives in the Complicated domain of the Cynefin framework (I find the original terminology from Kurtz and Snowden helpful–”knowable”). Knowable or complicated systems are ones where cause and effect are related–but may be separated in time. You often need expertise to diagnose and act on a situation, but once the system is solved, the way forward is clear.
Traditional innovation initiatives treat the interactions between companies, customers and markets as a Complicated system. Innovation projects are expensive and time-consuming – you often hire consultants to lend their expertise. There is a solution–certain objectives and expectations that the initiatives must meet (these are often encoded into business plans and pro forma P&L’s). Of course, you only need to be involved in one such initiative to know that they never deliver to plan. Innovation initiatives are always surprises–sometimes delightful upside surprises, but more often long, expensive failures. This is because they treat a Complex problem (in the Cynefin definition) with a tool suited for the Complicated domain.
In the Complex domain, cause and effect are not observable in advance–”grand planning” is not productive. The outcomes of a complex process seem logical – but only in retrospect. Why did Twitter evolve the way it did? Why was iPod/iTunes so revolutionary and so successful?
“The culture of experimentation,” on the other hand, acknowledges this complexity – that the objectives of innovation – creating interesting, popular, valuable and attractive new products and getting them into the hands of customers – are not straightforwardly attained and cannot be planned. When customers buy certain products, when they linger on certain web pages over others, when they flock to some brand-new platform, they are exhibiting behavior best described by the language of complexity. And the way to achieve progress in this domain is to use experimentation: generate lots of ideas – perhaps even some deliberate mistakes. Try them out. If something works, spread it around. If it doesn’t, kill it quickly and move on. Iterate. [The Toyota Production System applies this experimental thinking to manufacturing innovation.]
So, is the ability of information technology to make experimentation fast & cheap responsible for the increasing use of experimentation to achieve innovation’s goals? Yes, in part. But a great deal of the reason lies in the fact that the old way of innovating, “grand planning,” isn’t the right tool for the task.
[Another viewpoint on innovation and experimentation is in McGrath and MacMillan's recent book, "Discovery-Driven Growth." While the book doesn't use the Cynefin terminology or share the complex adaptive systems roots, it nonetheless focuses on the uncertainty of the innovation process and emphasizes the need to cheaply and quickly experiment, allowing successful projects to emerge.]
My friends at Listrak have allowed me to take over their webinar series on July 1 to discuss “Customer Insight From The Ground Up” – a 45-minute discussion about the “customers are talking” insight-gathering processes I’ve been using with clients for the past year.
I’ll talk about why we need to gather and look through customer stories; finding customer stories in places like Twitter, Facebook, blogs, etc.; how to make sense of what they tell us; and, perhaps most importantly, how to use that information to drive meaningful business improvement.
Click here for more information and to register. I look forward to meeting you at the webinar!
I’ve talked to dozens of companies in the past six months, and one pattern is coming clear: the downturn has put them on the defensive, at the cost of their adventurousness.
CFOs are stopping new investment to save cash. Layoffs are decimating teams and executive departures (voluntary and otherwise) are halting sponsorship of ongoing projects. Middle managers are stuck in the, well, middle: knowing what they need to do but lacking the wherewithal to get it done. And employees up and down the line are keeping their heads down, hoping to avoid the ax when/if it falls again.
And, while there may be long-term virtues in a more frugal approach to managing businesses (especially financial businesses), this hunkering down is a bad thing for corporate America.
So, here’s a plea to every company out there: stop worrying for a few moments and try something new. You might make a mistake, but you might hit a home run, too. At minimum, you’ll be able to peek your head out of the foxhole and begin the process of healing and recovery.
I’ve recently finished a new book, “The Catalyst,” which describes the mindsets of people who’ve successfully built new businesses inside established companies. Renewing organic growth is a difficult task, and “The Catalyst” is a very useful book for anyone working in new business development.
One point that comes out quickly in the book is the necessity to experiment, “fail fast,” learn and iterate. These points were also brought out in another excellent new book, “Discovery-Driven Growth.” I see these two books as companion volumes. Both address growing new businesses within companies. “The Catalyst” focuses on mindset, “Discovery-Driven Growth” describes the methodology.
Here is one of the “Catalysts” profiled in the book discussing mistakes. John Haugh was hired by Mars Inc. and put in charge of growing its specialty chocolate line, Ethel M.
Haugh decided to focus on creating retail “lounges” where customers could buy and enjoy the chocolates, rather than relying on the fiercely-competitive grocery channel. Haugh also carefully listened to lots of voices–customers, suppliers and partners–to learn as much as he could, fast.
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[Haugh] elected to launch with four different kinds of lounges: “We’re not going to go out and have one perfected prototype,” he explained, “because we don’t even know what that would look like.” The team checked in with consumers throughout the design process to determine the best color palettes, types of furniture, and overall ambience for the stores. They also asked suppliers, partners, and the vendors of their chocolate-making equipment for input. Their intent was to refine the new business as they went along:
We’d know within three days if a store was working. Are people coming in, are they sitting where you think they will, are they ordering what you think they will? You know very soon. And we’d test a slightly different design and layout for the next one to open. We did make errors–we knew we would. But we were prepared to react quickly and to fix them.
Indeed, Haugh viewed making mistakes as part of the process:
You know what? You’re going to make a bunch of mistakes. What you want to do is to try and correct them. When you’re younger, you don’t like to make mistakes. You think that’s the thing that is going to knock you off the track. You get a little bit older and get some gray in your hair, and then you realize it’s OK to make mistakes. It’s how you learn the most.
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From The Catalyst: How YOU Can Become an Extraordinary Growth Leader, by Jeanne Liedtka, Robert Rosen, and Robert Wiltbank, published by Crown Business. Reprinted by permission. (c) 2009. All Rights Reserved
