Tuesday, March 19, 2013

What workforces need ...

Every now and then I read an article which is more like a physical workout consisting of twisted facial expressions and face palms. Today's pleasure is the Guardian article on "Worforces need innovators and operators for business success" and I can't help but quickly write this response.

"Innovation comes in many shapes and sizes from big and radical to small and incremental. It is not just about inventing new products but increasingly about service innovation, process innovation, business model innovation and social innovation."

Yes, Innovation is a completely useless word as it used to describe many entirely different things. In other words, as activities evolve they go through different domains (see figure 1) - genesis, custom built, product and utility but we have an annoying habit of calling each of these innovation as though the creation (genesis) of the first phone was somehow the same as the addition of a new feature on a modern phone.

Figure 1 - Evolution

"Let us think a little about what the 'default' mode of organisations is. If a crisis hits, profits fall and a competitor gains market share, what is the company's first reaction? It is usually to reduce costs and improve efficiency to get the company into shape."

There isn't really a default mode but instead a mode which is related to the style of competition the company is used to (peace, war, wonder - see figure 2). For example, take computing infrastructure and the last 30 years of relatively peaceful competition in which computing infrastructure is provided as a product, where sustaining change has exceeded disruptive change and the focus has been on maximising profitability.

The shift from product to utility (nee cloud) is simply the process of evolution and is highly predictable. It has changed the style of competition from peace to war, with the introduction of new players, a rapid shift, a fight for survival and where disruptive change now exceeds sustaining. It's is perfectly normal for companies to fall back on there previous way of operating (though this is fatal), to deny the shift and to succumb to inertia. All organisations will exhibit these characteristics, inertia due to past success is actually perfectly healthy in most circumstances just fatal in this one.

Figure 2 - Evolution and competitive states

Fortunately, this is where the role of the CEO becomes so important as it is their job to see the clearly visible and predictable storm and move the organisation out of the way. Their job is to steer the Titanic out of the path of the huge iceberg. Lucky for us, in this case the iceberg has been known about for over a decade and is clearly visible with big neon signs saying "Iceberg here!"

The fact that a company fails to change course and instead ploughs into the iceberg is not the fault of the company, they are behaving normally. Companies crash because the one job the CEO really needs to do ... their CEO failed to do. Of course, there'll be endless whinging about the "Innovator's dilemma" except most of the disruptive changes we see (such as cloud computing) have been entirely predictable for over a decade and they are not unexpected in any shape or form. They should have been planned for, no excuses.

"As London Business School professors Costas Markides and Paul Geroski say in one of their articles: 'The skills, mindsets and competencies needed for discovery and innovation are not only different from those needed for mass market optimisation, they conflict …'"

This is known as the Salaman and Storey Innovation Paradox, from  Managers’ Theories about the process of innovation, Management Studies, 2002. It is a well known and understood phenomenon caused by the changing characteristics of activities (see figure 3). As activities, practices and data evolve (from more Chaotic to Linear) then their characteristics change and the techniques we need to deal with genesis (i.e. the novel and new) are polar opposite to the skills we need to deal with the linear.

Figure 3 - Example company map and change of characteristics as activities evolve.

"An operational excellence mindset is well suited for cost cutting and improving efficiencies, focusing on numbers and details, eliminating risk and ambiguity, as well as analysis and evidence. Contrast that with a mindset thriving on innovation, where there is a preference for visual language and the big picture, being comfortable with risk and ambiguity, as well as trusting intuition and dreams."

Here we fall into the innovation trap as "cost cutting and improving efficiencies" can be seen as operational innovation or process improvement etc. It is so important to define the terms you're talking about. The assumption that different techniques are needed depending upon whether we're talking about Chaotic (i.e. creation of the novel and new) or Linear (commodity and utility) is well known (see figure 4)

Figure 4 - Different Techniques are needed at different stages of Evolution

Then the article continues to go on about these two different groups. Ok, a word of warning. The article is pretty smart if it was written in the 1990s. Today, it's pretty poor. No discussion on next generation practices, use of cell based structure (two pizza model) and hence nothing which moves the topic forward beyond early 2000s.

Yes, there are two extremes but you need three groups to connect it all together. I've seen many examples of companies who've focused on the two extremes (chaotic and linear) and not the flow (the constant process of evolution) between the extremes and what happens is you get two isolated groups. In defence of the article, well, at least it has moved beyond "one size fits all" and attempts to make everything homogenous. That's not much of a saving grace but I thought I'd at least give it that.

Anyway, enough of this - the article is giving me shivers and it is forcing me to make face palm gestures.  More on structure here.