David Matheson - SmartOrg, Inc.

Striving for the best ideas

At a recent meeting of CEOs, I had the opportunity to hear Bill Campbell present his advice on being a leader.  His career is tremendous, starting as a football coach, then working at Kodak, then jumping over to Silicon Valley where he had top management positions at Apple, Claris, Go and Intuit.  He now is a valley legend and on the board of many companies.

Of the many interesting things he said, one really struck me,  "Don't go for concensus, go for the best ideas.  A concensus is too often a common denominator solution that won't piss anyone off.  A consensus is a B."

In many companies, concensus has become a good thing, as if it is at the core of the company somehow.  I've seen it expressed in many ways, from "socializing" an idea before really proposing it, to programs to foster "inclusion" in decision making.  While there is a lot to be said for talking with your colleagues and working to develop a collective best approach, too often consensus becomes an anchor preventing great things from getting done.

In innovation especially, success may require pissing some people off because you are often looking for things outside of the status quo.  Yet you need people to rally around an idea and support it to be effective in an organization.  This is a real challenge. 

Bill invites us to think about our role in getting the best, "Your title makes you a managager; your followers make you a leader."

Defining creativity

At a recent innovation conference, I ran across an interesting definition of creativity:

Creativity = constructively deviant behavior

Here are some dictionary definition, none of which get to the heart of the matter nearly as well:

"Using imagination rather than imitating something else. Generation of ideas, images and/or solutions."

"The process of developing new, uncommon, or unique ideas."

"The production of previously non-existent information."

"The ability to produce something new, to generate unique approaches and solutions to issues or problems or opportunities."

The winner in useless defitions goes to "The ability to create."

Can you do better than "Creativity = constructively deviant behavior"?

Managing Change and Uncertainty: The Second Way - Jim Matheson

On a recent drive, I listened to a CD on Chinese history, which discussed an interesting period of intense Buddhism in China.  In brief, the Buddha concluded that people suffer because of their emotional attachment to their expectations about their situation, their relationships, their things, etc.  When their situation changes in a manner that does not meet their expectations people suffer.  In the Buddha’s view, all suffering is caused by unmet expectations—the cycle called Maya.

Is there a parallel in corporate culture?  Companies and their investors have high expectations for continued growth and profitability.  When there is a hiccup, heads roll, scapegoats are found, and new executives are forced to make promises – to set expectations – that they hope they will be able to keep.  And “the cycle of suffering” continues. 

The Path of Withdrawl

The Buddha said that to be free of suffering we must liberate ourselves from our attachments.  In Chinese Buddhism this liberation took the form of renunciation and meditation.  By the fourth century, large numbers of people had moved into monasteries and nunneries as a way of avoiding attachments.  These institutions took so much land off the tax rolls, that later emperors banned them and confiscated their holdings. Unfortunately in the corporate world withdrawal is not an option.  Individuals maybe able to withdraw to less stressful careers, but the corporate world continues.  Even companies that have made spectacular crashes, such as AT&T, have a way of turning up again. 

The Path of Engagement

For those of us who choose to live in and experience the world, particularly the business world, there is a second way I call the Path of Engagement.  The key to this alternate path is avoiding the Buddhist trap of unmet expectations by not forming them in the first place.  Along this path, we must embrace uncertainty and change.  We must admit that we cannot predict the future and that change is inevitable. 

Expectancy

Unexpected change provides us with exciting learning opportunities.  If we come to expect change we need not suffer because of it.  View unexpected change as a wonderful learning opportunity.  Do not become attached to your expectations; rather, have high expectancy that interesting things will happen. Accept what you get and move on.  Learn to love the surprises the world gives us.

Action Level

At the action level, do not expect that your predictions or desires will always come true.  In the face of uncertainty, logic demands that we distinguish decisions – the actions we take – from the outcomes – what actually happens.  For example, most people would agree that paying $1 for a 50% chance of winning $100 is a worthwhile investment, and of course the person making this investment desires the $100 prize.  However, the investor knows in advance, at the time of the decision, that there is an equal chance of losing.  If the investor (or the organization) gets emotionally attached to “winning” he has a 50% chance of suffering loss.  If the investor understands that this is just one result of many, over a lifetime of investments, he just moves on to look for more good opportunities.  He is confident that he made a good decision and does not worry because he cannot guarantee the outcome he likes.  In more complex situations, the investor has an opportunity to learn from whatever happens and can take advantage of his new knowledge in making a future investment.

Managing Change and Uncertainty the Second Way

• Expect change and uncertainty. 
• Separate decisions from their outcomes in your thinking and planning.
• Do not focus on single forecasts, but vet sources of uncertainty and prepare for them.  Do not ask for optimistic forecasts: ask for deep insight into the possible and the probable.
• Investigate the sources of uncertainty and prepare for a range of outcomes.  Do not regard preparation for events that do not happen as wasted: value the preparation for the events that do happen.
• Avoid attachment to particular results.  Be flexible and take advantage of what you get.  Adapt to change: do not stay the course in the face of new circumstances.
• Celebrate whatever happens and go on: do not wallow in the endless cycle of suffering.

References

• Kenneth J. Hammond, From Yao to Mao: 5000 years of Chinese History, The Teaching Company, 2004 (CD)
• David and Jim Matheson, The Smart Organization: Creating Value through Strategic R&D, Harvard Business School Press, 1998.

About SmartOrg

SmartOrg helps organizations pursue “the second way” by providing solutions for value-based decision making that embrace uncertainty and change.  SmartOrg embodies these principles in advanced software and provides associated consulting to help organizations build new capabilities.  See www.smartorg.com.

Futurist Paul Saffo on Uncertainty - David Matheson

Technology Forecaster Paul Saffo recently wrote about forecasts in the Harvard Business Review. He articulates very well the fact that forecasts are all about uncertainty.

Here are a few sentences from his "Rule 1: Define a Cone of Uncertainty":

"As a decision maker, you ultimately have to rely on your intuition and judgment. There’s no getting around that in a world of uncertainty. But effective forecasting provides essential context that informs your intuition. It broadens your understanding by revealing overlooked possibilities and exposing unexamined assumptions regarding hoped-for outcomes. At the same time, it narrows the decision space within which you must exercise your intuition.

"I visualize this process as mapping a cone of uncertainty, a tool I use to delineate possibilities that extend out from a particular moment or event.

“The forecaster’s job is to define the cone in a manner that helps the decision maker exercise strategic judgment. Many factors go into delineating the cone of uncertainty, but the most important is defining its breadth, which is a measure of overall uncertainty.

"Drawing a cone too narrowly is worse than drawing it too broadly. A broad cone leaves you with a lot of uncertainty, but uncertainty is a friend, for its bedfellow is opportunity—as any good underwriter knows. The cone can be narrowed in subsequent refinements. Indeed, good forecasting is always an iterative process. Defining the cone broadly at the start maximizes your capacity to generate hypotheses about outcomes and eventual responses."

Value-Based Management software tools like SmartOrg’s Portfolio Navigator™ focus decision-makers’ attention on dealing with uncertainty and monitoring its impact throughout the decision-making process.

Check out the article at

http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?articleID=R0707K&ml_action=get-article&print=true&ml_issueid=BR0707

Also, if you are in Silicon Valley, you can hear Paul speak at the Churchill Club on Tuesday, Aug. 28  http://www.churchillclub.org/eventDetail.jsp?EVT_ID=744.

Case Studies from Hewlett-Packard - Don Creswell

I am extremely pleased to announce that our September 27 SmartOrg Webinar will feature case studies from Hewlett-Packard.that illustrate how HP uses their unique New Business Creation (NBC) process to identify new market opportunities, develop innovative products to meet them, and achieve highly profitable growth targets.The webinar will feature Dr. Michael Menke, former Chief Portfolio Advocate and Business Strategist, Strategic Planning and Modeling at Hewlett Packard.

OVERVIEW: It is intrinsically hard to grow a $100 billion organization faster than gross domestic product. In fact, many studies have shown that nearly all large companies hit growth ceilings or points where growth stalls. So, how to keep growing or even accelerate growth? HP met this challenge through strategies that emphasized innovative product development. In this Webinar, Mike Menke will take you on the journey of two products from concept to launch, using HP's NBC process.

I hope to see you there!

Date: Thursday Sept. 27, 2007
Time: 9:00 a.m. PT.
To register: https://www.gotomeeting.com/register/385429309?Portal=www.gotowebinar.com

The Courage to Act - David Matheson

After a successful project with a customer, I went out to dinner with the CEO and another officer, who I will call Ann. These two remarkable women had created a productive, fun, and high-performance culture that delivers business results and get awards for "best place to work." After a fine dinner swapping personal stories, as Mary and I walk across the parking lot, I say "We should probably coordinate some business briefly, how do you want to handle some of the next steps from the meeting?"

Then the bombshell: "There is something you need to know about my personal situation: I'll be leaving the company in a few weeks. We will need to work out someone else for you to liaise with." I am a bit shocked, and the implications for the company and for our business relationship with it whirl through my head. She continues, "I have been working flat out since I was about 15. I promised myself long ago that I would change gears at 50.

My birthday is two weeks away, and I am going to do it. My father is in poor health and I want to spend time with him. I have a major trip planned with my (grown) children. After that I will probably work at the company about a day a week, and will probably still be involved with SmartOrg. I want to slow down while I can still play a little, rather than slowing down because I have to."

A bit relieved that there will be some continuity in our business relationships, I realize that the step Mary is taking takes a lot of courage. Courage we all wish we had. A kind of courage that helps build high-performance teams. A kind of courage about creating the future you want to live in. A kind of courage I had seen before.

Several years ago, I was leading a large program at AT&T as part of a consulting organization. We were having significant difficulties with the political situation and a dysfunctional culture. The venerable AT&T later pretty much went out of business and was bought by SBC who retained the brand. The company died in part because its culture was so toxic it prevented them from capturing the opportunities all around them. Anyone who wanted to do something a little new, a little innovative, was crushed--not through any specific action, but through a death by a thousand cuts imposed by the culture and status quo.

In my little corner of AT&T, we were working as consultants on a program to improve innovation. It called for business and R&D leadership working together to define the sorts of opportunities they wanted to pursue. The program was not going well. The situation was highly political, there was lots of conflict, and we were being slowly crushed by the culture.

The one unqualified success was a particular project: it was strongly supported, being executed well, and delivering real results. It was a complex project, with about twenty people working on a strategy in a situation of high conflict.

One the consultant who was leading the project, Bob, an extremely competent man in his 50's or 60's, comes to me and says "I am quitting, leaving in a few weeks." I am shocked. He continues, "I have always wanted to teach high school, and I have an opportunity to be a math teacher. My kids are grown, my mortgage is paid, and I am ready to give back to the community."

I was prepared for the worst. In this highly political environment, I was sure people at AT&T would jump on the moment of weakness and things would go from bad to worse. It was only an accident of fate that had resulting in Bob reporting to me, he was clearly more experienced than I and the single most important member of the team (myself included). I was not sure the project, or even program could survive without Bob.

Happily, I was completely wrong.

When Bob announced his intention to the project team, there was a moment of shock and surprise. Then Joe, the head guy on the AT&T side walked up to him and said "Congratulations. It is a rare moment when someone has such an opportunity and is willing to take it." You could see that he hoped to have the courage to do the same someday. Indeed, everyone's response at the meeting was admiration. Joe turned to me and said, "This is going to be a bit complicated for you and for the project, but we will work with you to support Bob's leaving and dealing with the staffing change." From the expressions around the table, you could see that he spoke for everyone, not because of his position of authority, but because they all agreed with him.

Everyone rallied around making it work, and the project continued on its success trajectory. In the middle of a high-conflict political environment and a in company where dysfunctional behavior was the norm, Bob had somehow created a pocket of effective culture and a high-performance team.

I have kept in touch with Bob, and he continues to inspire me and others through his actions and the courage of his convictions. He offered this advice which continues to stick with me: "Don't let what you cannot do get in the way of doing what you can." He consistently treated people with respect, considered options, figured out which was best, and acted. He was open and honest. He had conviction and courage.

In organizations, some choices are hard because of conflict. In organizations or personal situations some choices are hard becuase it is difficult to figure out what is the right thing. But the hardest choices are often fundamentally personal: having the courage to do what you know is right.

In having the courage to take these decisions you know are right, not only do you make good choices, but you effect the people around you, enabling them to make good choices as well. Modeling thoughtful and respectful deliberation, considering the options, selecting one for the right reasons and having the courage to act leaves a precious cultural legacy. Bob did it in the most difficult of environments. Mary contributed to it for her whole company.

I wish Ann well on her new adventures, confident that things will work out fine for her, for the company, and for our business relationship.

Open Innovation and the Hype Cycle - David Matheson

At a recent major convention on innovation, I got into a discussion with Henry Chesbrough, author of "Open Innovation" (http://www.amazon.com/Open-Innovation-Imperative-Profiting-Technology/dp/1578518377) and general innovation rock star (http://www.haas.berkeley.edu/faculty/chesbrough.html). We discussed management fads and recognizing how the idea of Open Innovation echoes an older fad on Benchmarking...both involve getting ideas from other companies. Open Innovation is hot now; Benchmarking is a mature technique with well understood strengths and limitations. While requests for Henry to speak are clearly rising rapidly now, where is Open Innovation as a management fad?

We borrowed Gartner's Hype Cycle model to make some comparisons (http://gsb.haifa.ac.il/~sheizaf/ecommerce/GartnerHypeCycle.html). This model is used to describe IT approaches, like business intelligence and customer relationship management. It says that each technology goes through several distinct phases, here in abbreviated form:

1. Early Adoption, who try out the technology and prove that it can really do something. These early adopters them become the poster children and get lots of publicity. This leads to...

2. Maximum Hype, in which the fad seems to be everywhere and can solve virtually all problems. Press coverage is intense, consultants pop out of nowhere, and everyone is talking about it. This leads to...

3. Unmet Expectations, in which people trying out the technology find it fails to meet all the claims during the period of maximum hype. Disillusionment and bad press crush the technology into the background. This leads to...

4. Maturation, in which people quietly find the strengths and limitations of the technology and use it to solve real business problems. It works its way into the way things are done.

Henry and I both agreed that Open Innovation was in the earlier phases. He leaned more towards early adoption, "Open Innovation is just at its beginning phase." I thought it was approaching the period of maximum hype, "It is hard to imagine more press coverage and accolades." P&G is definitely an early adopter, and has been on the speaking circuit for a while now. It seems to me that their success is going to limit the success of later consumer products companies that try the techique. P&G is already prospecting the world for great consumer products ideas using Open Innovation, and has undoubtedly found many of the good ideas. Perhaps the vein has been mined.

Henry was less sure. But he pointed out that P&G's version of Open Innovation is only one of three parts: they focus on getting ideas from other companies. Nobody has really mastered taking one's own ideas and putting them out to others, nor have true markets really emerged for the exchange of ideas. Both of these aspects of Open Innovation remain in the Early Adoption phase.

Uncluttering Metrics - David Matheson

I was talking to Ron Howard, a pioneer in Decision Analysis, about value.

How do you know what you want? Usually there are some high-level constraints, such as ethical and legal behavior, then many possibilities.

In many business contexts the answers are relatively straightforward: more money, sooner, and at less risk. But often discussions get muddied by many objectives: strategic fit, difficulty, market potential, budget, etc.

Dr. Howard offered a crucial distinction about value metrics: direct vs. indirect value. Direct values are those you trade off directly, indirect values are proxies for things you really care about.

Consider purchasing a car. You might have objectives around total cost of ownership and MPG. But MPG is simply part of total cost of ownership--based on fuel consumption and prices, this translates into dollars quickly. So MPG is an indirect value: you could compute whether or not it is desirable.

However, MPG today conveys bragging rights. This is distinct from the economics of MPG. So the MPG metric may be obscuring a direct value: green pride. You have to make a value judgement about how much you are willing to pay in total cost of ownership to achieve green pride. Nobody can tell you the right answer, as this is a value judgement.

Dr. Howard's advice is to always look for the direct values and focus your decision making on those. Get one or two clear direct value measures, and understand your tradeoffs among these. What are you willing to pay for green pride bragging rights?

This advice has always held me in good stead. I have seen very complex situations and choices literally littered with metrics and infested with confusion become crystal clear by identifying the real direct values and tradeoffs among them. From decisions on whether to run the Tennesee Valley Authority River system for Power Production or Recreation, to decisions about which house to buy, to portfolio prioritization in R&D, getting clear about the direct values is often a key to turning confusion into insight.

In business, it usually boils down to money. Even the three I mentioned at the begining: more money, sooner and at less risk can usually be reduced.

Money sooner versus later is usually an indirect value, based on discounting at the cost of capital. The direct value for money sooner versus later usually has to do with meeting street expectations, not money per se. Usually this is not really an issue.

Often "risk" is a stand in for "we have made assumptions nobody believes", and is not really a value at all, but rather a symptom of poor information.

Treating information as uncertain and modeling uncertainty in an economic case goes a long way into dealing with risk. When risk remains part of the decision, then it often remains as a direct value: greed versus fear.

In the Eye of the Hurricane of Change - Final - David Matheson

My son takes recorded sound for granted, he expects books to read to him. Even though the book talks, my grandfather would undoubtedly recognize our domestic scene. The son reading, the dog wanting to go for a walk and the father not sure if he should interrupt the son to take the dog for a walk. Even in the hurricane of mental and social change was live in, there is still a calm central eye that is still and that the storm whirls around.

Some things do not change. For example, consider the sports car.  It is a pinnacle of a technological society.  It travels on smooth paved roads. Its high-performance engine requires the most carefully refined fuels. The engine itself is computer controlled, the car computer designed.  The shape of the vehicle takes into account our best knowledge of aerodynamics.  Even the paint is carefully engineered.

Yet what do people do with sports cars?  Many young men buy them to impress women. My grandfather and many generations of grandfathers before him would recognize this unchanged center of human behavior and social interaction.

As we plan and invent our futures, these foundational elements are always there, providing landmarks to guide us and a vocabulary for understanding how to do the things we have always done. We all make our choices, whether consciously on unconsciously, based on the best information we have at the time and to the best our ability.

In the Eye of the Hurricane of Change - Part 4 - David Matheson

My grandfather’s life, from 1889 to 1974, represents one season of technological and social change.  The impossible was proven possible. Cultural assumptions about transportation, communication, health and lifestyle were challenged and overturned. People like my grandfather had to adjust, overcome their own biases and prejudices, and take their role in inventing the future.

Many of these adjustments, while unsettling or difficult like mental and social storms, were imaginable for my grandfather. The term “horseless carriage” provides some continuity back to the familiar and a context for change.  But one of these inventions stood out from all the others as the most “mind blowing” (my term, not his), a sort of mental and social tornado.

Can you guess what it was? 

I’ll give you a hint: it is nothing I’ve mentioned.

Go on, bring something to mind.

It was the victrola. The mind-blowing innovation was recorded sound. My grandfather was absolutely and utterly astonished to see a machine talking and singing.  He said “it would have been easier to understand if my dog had talked.”

While my dog doesn’t literally talk, it definitely does communicate.  So it is easy to see how my grandfather saw it as a small leap for a dog to talk. But he had no basis of experience for a machine talking. 

What do you think will blow the minds of our generation?