How a company allocates its resources defines its strategy. But it’s tricky business to allocate resources in a way that makes the most of the existing products, services and business models yet accomplishes what’s needed to create the future.
To strike the right balance, and before any decisions on specific projects, allocate the desired spending into three buckets – short, medium and long. Or, if you prefer, Horizon 1, 2 and 3. Use the business objectives to set the weighting. Then, sit next to the CFO for a couple days and allocate last year’s actual spending to the three buckets and compare the actuals with how resources will be allocated going forward. Define the number of people who will work on short, medium and long and how many will move from one bucket to another.
To get the balance right, short term projects are judged relative to short term projects, medium term projects are judged relative to medium term projects and the long term ones are judged against their long term peers. Long term projects cannot be staffed at the expense of short term projects and medium term projects cannot take resources from long term projects. To get the balance right, those are the rules.
To choose the best projects within each bucket, clarity and constraints are more important than ROI. Here are some questions to improve clarity and define the constraints.
How will the customer benefit? It’s best to show the customer using the product or service or experiencing the new business model. Use a hand sketch and few, if any, words. Use one page.
How is it different? In the hand sketch above, draw the novel (different) elements in red.
Who is the new customer? Define where they live, the language they speak and how they get the job done today.
Are there regional constraints? Infrastructure gaps, such as electricity, water, transportation are deal breakers. Language gaps can be big problems, so can regulatory, legal and cultural constraints. If a regional constraint cannot be overcome, do something else.
How will your company make money? Use this formula: (price – cost) x volume. But, be clear about the size of the market today and the size it could be in five years.
How will you make, sell and service it? Include in the cost of the project the cost to overcome organizational capacity/capability constraints. If cost (or time) to close the gaps is prohibitive, do something else.
How will the business model change? If it won’t, strongly consider a different project.
If the investigations show the project is worthwhile, how would you staff the project and when? This is an important one. If the project would be a winner, but there is no one to work on it, do something else. Or, consider stopping a bad project to start the good one.
There’s usually a general tendency to move medium term resources to short term projects and skimp on long term projects. Be respectful of the newly-minted resource balance defined at the start and don’t choose a project from one bucket over a project from another. And don’t get carried away with ROI measured to three significant figures, rather, hold onto the fact that an insurmountable constraint reduces ROI to zero.
And staff projects fully. Partially-staffed projects set expectations that good things are happening, but they never come to be.
Image credit – john curley
When it’s time for new work, the best and smartest get in a small room to figure out what to do. The process is pretty simple: define a new destination, and, to know when they journey is over, define what it looks like to live there. Define the idealized future state and define the work to get there. Turn on the GPS, enter the destination and follow the instructions of the computerized voice.
But with new work, the GPS analogy is less than helpful. Because the work is new, there’s no telling exactly where the destination is, or whether it exists at all. No one has sold a product like the one described in the idealized future state. At this stage, the product definition is wrong. So, set your course heading for South America though the destination may turn out to be Europe. No matter, it’s time to make progress, so get in the car and stomp the accelerator.
But with new work there is no map. It’s never been done before. Though unskillful, the first approach is to use the old map for the new territory. That’s like using map data from 1928 in your GPS. The computer voice will tell you to take a right, but that cart path no longer exists. The GPS calls out instructions that don’t match the street signs and highway numbers you see through the windshield. When the GPS disagrees with what you see with your eyeballs, the map is wrong. It’s time to toss the GPS and believe the territory.
With new work, it’s not the destination that’s important, the current location is most important. The old sea captains knew this. Site the stars, mark the time, and set a course heading. Sail for all your worth until the starts return and as soon as possible re-locate the ship, set a new heading and repeat. The course heading depends more on location than destination. If the ship is east of the West Indies, it’s best to sail west, and if the ship is to the north, it’s best to sail south. Same destination, different course heading.
When the work is new, through away the old maps and the GPS and channel your inner sea caption. Position yourself with the stars, site the landmarks with your telescope, feel the wind in your face and use your best judgement to set the course heading. And as soon as you can, repeat.
Image credit – Timo Gufler.
Is it disruptive? Is it innovative? Two meaningless questions. Two questions to stop asking. More strongly, stop using the words “disruptive” and “innovative” altogether. Strike them from your vocabulary and replace them with novel, useful, and successful.
Argument is unskillful but analysis is skillful. And what’s needed for analysis is a framework and some good old-fashioned quantification. To create the supporting conditions for an analysis around novelty, usefulness, and successfulness, I’ve created quantifiable indices and a process to measure them. The process starts with a prototype of a new product, service or business model which is shown to potential customers (real people who do work in the space of interest.)
The Novelty Index. The Novelty Index measures the difference of a product, service or business model from the state-of-the-art. Travel to the potential customer and hand them the prototype. With mouth closed and eyes open, watch them use the product or interact with the service. Measure the time it takes them to recognize the novelty of the prototype and assign a value from 0 to 5. (Higher is better.)
5 – Novelty is recognized immediately after a single use (within 5 seconds.)
4 – Novelty is recognized after several uses (30 seconds.)
3 – Novelty is recognized once a pattern emerges (10-30 minutes.)
2 – Novelty is recognized the next day, once the custom has time to sleep on it (24 hours.)
1 – A formalized A-B test with statistical analysis is needed (1 week.)
0 – The customer says there’s no difference. Stop the project and try something else.
The Usefulness Index. The Usefulness Index measures the level of importance of the novelty. Once the customer recognizes the novelty, take the prototype away from them and evaluate their level of anger.
5 – The customer is irate and seething. They rip it from your arms and demand to place an order for 50 units.
4 – The customer is deeply angry and screams at you to give it back. Then they tell you they want to buy the prototype.
3 – With a smile of happiness, the customer asks to try the prototype again.
2 – The customer asks a polite question about the prototype to make you feel a bit better about their lack of interest.
1 – The customer is indifferent and says it’s time to get some lunch.
0 – Before you ask, the customer hands it back to you before you and is happy not to have it. Stop the project and try something else.
The Successfulness Index. The Successfulness Index measures the incremental profitability the novel product, service or business model will deliver to your company’s bottom line. After taking the prototype from the customer and measuring the Usefulness Index, with your prototype in hand, ask the customer how much they’d pay for the prototype in its current state.
5 – They’d pay 10 times your estimated cost.
4 – They’d pay two times your estimated cost.
3 – They’d pay 30% more than your estimated cost.
2 – They’d pay 10% more than your estimated cost.
1 – They’d pay you 5% more than your estimated cost.
0 – They don’t answer because they would never buy it.
The Commercialization Index. The Commercialization Index describes the overall significance of the novel product, service or business model and it’s calculated by multiplying the three indicies. The maximum value is 125 (5 x 5 x 5) and the minimum value is 0. Again, higher is better.
The descriptions of the various levels are only examples, and you can change them any way you want. And you can change the value ranges as you see fit. (0-5 is just one way to do it.) And you can substitute actual prototypes with sketches, storyboards or other surrogates.
Modify it as you wish, and make it your own. I hope you find it helpful.
Image credit – Nisarg Lakhmani
At the most basic level, business is about allocating resources to the best projects and executing those projects well. Said another way, business is about deciding what to work on and then working effectively. But how to go about deciding what to work on? Here is a cascade of questions to start you on your journey.
What are your company’s guiding principles? Why does it exist? How does it want to go about its life? These questions create context from which to answer the questions that follow. Once defined, all your actions should align with your context.
How has the business environment changed? This is a big one. Everything is impermanent. Change is the status quo. What worked last time won’t work this time. Your success is your enemy because it stunts intentions to work on new things. Define new lines of customer goodness your competitors have developed; define how their technologies have increased performance; search YouTube to see the nascent technologies that will displace you; put yourself two years in the future where your customers will pay half what they pay today. These answers, too, define the context for the questions that follow.
What are you working on? Define your fully-staffed projects. Distill each to a single page. Do they provide new customer value? Are the projects aligned with your company’s guiding principles? For those that don’t, stop them. How do your fully-staffed projects compare to the trajectory of your competitors’ offerings? For those that compare poorly, stop them.
For projects that remain, do they meet your business objectives? If yes, put your head down and execute. If no, do you have better projects? If yes, move the freed up resources (from the stopped projects) onto the new projects. Do it now. If you don’t have better projects, find some. Use lines of evolution for technological systems to figure out what’s next, define new projects and move the resources. Do it now.
The best leading indicator of innovation is your portfolio of fully-staffed projects. Where other companies argue and complain about organizational structure, move your best resources to your best projects and execute. Where other companies use politics to trump logic, move your best resources to your best projects and execute. Where other successful companies hold on to tired business models and do-what-we-did-last-time projects, move your best resources to your best projects and execute.
Be ruthless with your projects. Stop the bad ones and start some good ones. Be clear about what your projects will deliver – define the novel customer value and the technical work to get there. Use one page for each. If you can’t define the novel customer value with a simple cartoon, it’s because there is none. And if you can’t define how you’ll get there with a hand sketch, it’s because you don’t know how.
Define your company’s purpose and use that to decide what to work on. If a project is misaligned, kill it. If a project is boring, don’t bother. If it’s been done before, don’t do it. And if you know how it will go, do something else.
If you’re not changing, you’re dying.
Image credit – David Flam
I don’t believe the role of Chief Innovation Officer has a place in today’s organizations. Today, it should be about doing the right new work to create value. That work, I believe, should be done within the organization as a whole or within dedicated teams within the organization. That work, I believe, cannot be done by the Chief Innovation Officer because the organizational capability and capacity under their direct control is hollow.
Chief Innovation Officers don’t have the resources under their control to do innovation work. That’s the fundamental problem. Without the resources to invent, validate and commercialize, the Chief Innovation Officer is really the Chief Innovation Mascot- an advocate for the cause who wears the costume but doesn’t have direct control over the work.
Companies need to stop talking about innovation as a word and start doing the work that creates new products and services for new customers in markets. It all starts with the company’s business objectives (profitability goals) and an evaluation of existing projects to see if they’ll meet those objectives. If they will, then it’s about executing those projects. (The Chief Innovation Officer can’t help here because that requires operational resources.) If they won’t, it’s about defining and executing new projects that deliver new value to new customers. (Again, this is work for deep subject matter experts across multiple organizations, none of which work for the Chief Innovation Officer.)
To create a non-biased view of the projects, identify lines of customer goodness, measure the rate of change of that goodness, assess the underpinning technologies (momentum, trajectory, maturity and completeness) and define the trajectory of the commercial space. This requires significant resource commitments from marketing, engineering and sales, resource commitments The Chief Innovation Officer can’t commit. Cajole and prod for resources, yes. Allocate them, no.
With a clear-eyed view of their projects and the new-found realization that their projects won’t cut it, companies can strengthen their resolve to do new work in new ways. The realization of an immanent shortfall in profits is the only think powerful enough to cause the company to change course. The company then spends the time to create new projects and (here’s the kicker) moves resources to the new projects. The most articulate and persuasive Chief Innovation Officer can’t change an organization’s direction like that, nor can they move the resources.
To me it’s not about the Chief Innovation Officer. To me it’s about creating the causes and conditions for novel work; creating organizational capability and capacity to do the novel work; and applying resources to the novel work so it’s done effectively. And, yes, there are tools and methods to do that work well, but all that is secondary to allocating organizational capacity to do new work in new ways.
When Chief Innovation Officer are held accountable for “innovation objectives,” they fail because they’re beholden to the leaders who control the resources. (That’s why their tenures are short.) And even if they did meet the innovation objectives, the company would not increase it’s profits because innovation objectives don’t pay the bills. The leaders that control the resources must be held accountable for profitability objectives and they must be supported along the way by people that know how to do new work in new ways.
Let’s stop talking about innovation and the officers that are supposed to do it, and let’s start talking about new products and new services that deliver new value to new customers in new markets.
Image credit – Neon Tommy
In strategic planning there’s a strong forcing function that causes the organization to converge on a singular, company-wide approach. While this convergence can be helpful, when it’s force is absolute it stifles new ideas. The result is an operating plan that incrementally improves on last year’s work at the expense of work that creates new businesses, sells to new customers and guards against the dark forces of disruptive competition. In times of change convergence must be tempered to yield a bit of diversity in the approach. But for diversity to make it into the strategic plan, dissent must be an integral (and accepted) part of the planning process. And to inject meaningful diversity the dissenting voice must be as load as the voice of convergence.
It’s relatively easy for an organization to come to consensus on an idea that has little uncertainty and marginal upside. But there can be no consensus, but on an idea with a high degree of uncertainty even if the upside is monumental. If there’s a choice between minimizing uncertainty and creating something altogether new, the strategic process is fundamentally flawed because the planning group will always minimize uncertainty. Organizationally we are set up to deliver certainty, to make our metrics and meet our timelines. We have an organizational aversion to uncertainty, and, therefore, our organizational genetics demand we say no to ideas that create new business models, new markets and new customers. What’s missing is the organizational forcing function to counterbalance our aversion to uncertainty with a healthy grasping of it. If the company is to survive over the next 20 years, uncertainty must be injected into our organizational DNA. Organizationally, companies must be restructured to eliminate the choice between work that improves existing products/services and work that creates altogether new markets, customers, products and services.
When Congress or the President wants to push their agenda in a way that is not in the best long term interest of the country, no one within the party wants to be the dissenting voice. Even if the dissenting voice is right and Congress and the President are wrong, the political (career) implications of dissent within the party are too severe. And, organizationally, that’s why there’s a third branch of government that’s separate from the other two. More specifically, that’s why Justices of the Supreme Court are appointed for life. With lifetime appointments their dissenting voice can stand toe-to-toe with the voice of presidential and congressional convergence. Somehow, for long-term survival, companies must find a way to emulate that separation of power and protect the work with high uncertainty just as the Justices protect the law.
The best way I know to protect work with high uncertainty is to create separate organizations with separate strategic plans, operating plans and budgets. In that way, it’s never a decision between incremental improvement and discontinuous improvement. The decision becomes two separate decisions for two separate teams: Of the candidate projects for incremental improvement, which will be part of team A’s plan? And, of the candidate projects for discontinuous improvement, which will become part of team B’s plan?
But this doesn’t solve the whole challenge because at the highest organizational level, the level that sits above Team A and B, the organizational mechanism for dissent is missing. At this highest level there must be healthy dissent by the board of directors. Meaningful dissent requires deep understanding of the company’s market position, competitive landscape, organizational capability and capacity, the leading technology within the industry (the level, completeness and maturity), the leading technologies in adjacent industries and technologies that transcend industries (i.e., digital). But the trouble is board members cannot spend the time needed to create deep understanding required to formulate meaningful dissent. Yes, organizationally the board of directors can dissent without reprisal, but they don’t know the business well enough to dissent in the most meaningful way.
In medieval times the jester was an important player in the organization. He entertained the court but he also played the role of the dissenter. Organizationally, because the king and queen expected the jester to demonstrate his sharp wit, he could poke fun at them when their ideas didn’t hang together. He could facilitate dissent with a humorous play on a deadly serious topic. It was delicate work, as one step too far and the jester was no more. To strike the right balance the jester developed deep knowledge of the king, queen and major players in the court. And he had to know how to recognize when it was time to dissent and when it was time to keep his mouth shut. The jester had the confidence of the court, knew the history and could see invisible political forces at play. The jester had the organizational responsibility to dissent and the deep knowledge to do it in a meaningful way.
Companies don’t need a jester, but they do need a T-shaped person with broad experience, deep knowledge and the organizational status to dissent without reprisal. Maybe this is a full time board member or a hired gun that works for the board (or CEO?), but either way they are incentivized to dissent in a meaningful way.
I don’t know what to call this new role, but I do know it’s an important one.
Image credit – Will Montague
Whether you’re a country, company, organization, or team, revolution is your mortal enemy. And that’s why the systems of established organization are designed to prevent impending revolutions and squish those that grow legs. And that’s why revolutions are few and far between. (This is bad news for revolutionary innovation and radical change.)
With regard to revolutions, it’s easiest to describe the state of affairs for countries. Countries don’t want revolutions because they bring a change in leadership. After a revolution, the parties in power are no longer in power. And that’s why there are no revolutions spawned by those in power. For those in power it’s steady as she goes.
Revolutions are all about control. The people in control of a country want to preserve the power structure and the revolutionaries want to dismantle it. (Needless to say, country leaders and revolutionaries don’t consider each other good dinner company.) And when the control of a country is at stake, revolutions often result in violence and death. With countries, revolution is a dangerous game.
With regard to revolutions, companies are supposed to be different from companies. Companies are supposed to reinvent themselves to grow; they’re supposed to do radical innovation and obsolete their best products; and they’re supposed to abandon the old thinking of their success and create revolutionary business models. As it turns out, with regard to revolutions, companies have much more in common countries than they’re supposed to.
Like with a country, the company’s leadership party is threatened by revolution. But the words are a bit different – where a country calls it revolution, a company calls it innovation. And there’s another important difference. Where the president of a country is supposed to prevent and squelch revolutions, the president of a company is supposed to foster and finance revolutionary innovation. The president of a country has an easier time of it because everyone in the party is aligned to block it. But, the president of the company wants to bring to life the much needed revolutionary innovation but the powerful parties of the org chart want to block it because it diminishes their power. And it’s even trickier because to finance the disruptive innovation, the company president must funnel profits generated by the dominant party to a ragtag band of revolutionaries.
Where revolutionaries that overthrow a country must use guerilla tactics and shoot generals off their horses, corporate revolutionaries must also mock convention. No VPs are shot, but corporate innovators must purposefully violate irrelevant “best practices” and disregard wasteful rigor that slows the campaign. And, again, the circumstances are more difficult for the company president. Where the country president doesn’t have to come up with the war chest to finance the revolutionaries overthrowing the country, the company president must allocate company profits for a state-funded revolution.
Just as revolutions threaten the power structure of countries, innovation threatens the power structure of companies. But where countries desperately want to stifle revolutions, companies should desperately want to enable them. And just as the rules of engagement for a revolution are different than government as usual, the rules of engagement for revolutionary innovation are different than profitability as usual. With revolution and innovation, it’s all about change.
Revolutions require belief – belief the status quo won’t cut it and belief there’s a better way. Innovation is no different. Revolutions require a band of zealots willing to risk everything and a benefactor willing to break with tradition and finance the shenanigans. And innovation is no different.
Image credit — Lee Wright
Successful commercialization of products and services is fueled by one fundamental – making the new one better than the old one. If the new one is better the customer experience is better, the marketing is better, the sales are better and the profits are better.
It’s not enough to know in your heart that the new one is better, there’s got to be objective evidence that demonstrates the improvement. The only way to do that is with testing. There are a number of types testing mechanisms, but whether it’s surveys, interviews or in-the-lab experiments, test results must be quantifiable and repeatable.
The best way I know to determine if the new one is better than the old one is to test both populations with the same test protocol done on the same test setup and measure the results (in a quantified way) using the same measurement system. Sounds easy, but it’s not. The biggest mistake is the confusion between the “same” test conditions and “almost the same” test conditions. If the test protocol is slightly different there’s no way to tell if the difference between new and old is due to goodness of the new design or the badness of the test setup. This type of uncertainty won’t cut it.
You can never be 100% sure that new one is better than the old one, but that’s were statistics come in handy. Without getting deep into the statistics, here’s how it goes. For both population’s test results the mean and standard deviation (spread) are calculated, and taking into consideration the sample size of the test results, the statistical test will tell you if they’re different and confidence of it’s discernment.
The statistical calculations (Student’s t-test) aren’t all that important, what’s important is to understand the implications of the calculations. When there’s a small difference between new and old, the sample size must be large for the statistics to recognize a difference. When the difference between populations is huge, a sample size of one will do nicely. When the spread of the data within a population is large, the statistics need a large sample size or it can’t tell new from old. But when the data is tight, they can see more clearly and need fewer samples to see a difference.
If marketing claims are based on large sample sizes, the difference between new and old is small. (No one uses large sample sizes unless they have to because they’re expensive.) But if in a design review for the new product the sample size is three and the statistical confidence is 95%, new is far better than old. If the average of new is much larger than the average of old and the sample size is large yet the confidence is low, the statistics know the there’s a lot of variability within the populations. (A visual check should show the distributions to more wide than tall.)
The measurement systems used in the experiments can give a good indication of the difference between new and old. If the measurement system is expensive and complicated, likely the difference between new and old is small. Like with large sample sizes, the only time to use an expensive measurement system is when it is needed. And when the difference between new and old is small, the expensive measurement system’s ability accurately and repeatably measure small differences (micrometers vs. meters).
If you need large sample sizes, expensive measurement systems and complicated statistical analyses, the new one isn’t all that different from the old one. And when that’s the case, your new profits will be much like your old ones. But if your naked eye can see the difference with a back-to-back comparison using a sample size of one, you’re on to something.
Image credit – amanda tipton
Two words to live by: Critical Path.
By definition, the next task to work on is the next task on the critical path. How do you tell if the task is on the critical path? When you are late by one day on a critical path task, the project, as a whole, will finish a day late. If you are late by one day and the project won’t be delayed, the task is not on the critical path and you shouldn’t work on it.
Rule 1: If you can’t work the critical path, don’t work on anything.
Working on a non-critical path task is worse than working on nothing. Working on a non-critical path task is like waiting with perspiration. It’s worse than activity without progress. Resources are consumed on unnecessary tasks and the resulting work creates extra constraints on future work, all in the name of leveraging the work you shouldn’t have done in the first place.
How to spot the critical path? If a similar project has been done before, ask the project manager what the critical path was for that project. Then listen, because that’s the critical path. If your project is similar to a previous project except with some incremental newness, the newness is on the critical path.
Rule 2: Newness, by definition, is on the critical path.
But as the level of newness increases, it’s more difficult for project managers to tell the critical path from work that should wait. If you’re the right project manager, even for projects with significant newness, you are able to feel the critical path in your chest. When you’re the right project manager, you can walk through the cubicles and your body is drawn to the critical path like a divining rod. When you’re the right project manager and someone in another building is late on their critical path task, you somehow unknowingly end up getting a haircut at the same time and offering them the resources they need to get back on track. When you’re the right project manager, the universe notifies you when the critical path has gone critical.
Rule 3: The only way to be the right project manager is to run a lot of projects and read a lot. (I prefer historical fiction and biographies.)
Not all newness is created equal. If the project won’t launch unless the newness is wrestled to the ground, that’s level 5 newness. Stop everything, clear the decks, and get after it until it succumbs to your diligence. If the product won’t sell without the newness, that’s level 5 and you should behave accordingly. If the newness causes the product to cost a bit more than expected, but the project will still sell like nobody’s business, that’s level 2. Launch it and cost reduce it later. If no one will notice if the newness doesn’t make it into the product, that’s level 0 newness. (Actually, it’s not newness at all, it’s unneeded complexity.) Don’t put in the product and don’t bother telling anyone.
Rule 4: The newness you’re afraid of isn’t the newness you should be afraid of.
A good project plan starts with a good understanding of the newness. Then, the right project work is defined to make sure the newness gets the attention it deserves. The problem isn’t the newness you know, the problem is the unknown consequence of newness as it ripples through the commercialization engine. New product functionality gets engineering attention until it’s run to ground. But what if the newness ripples into new materials that can’t be made or new assembly methods that don’t exist? What if the new materials are banned substances? What if your multi-million dollar test stations don’t have the capability to accommodate the new functionality? What if the value proposition is new and your sales team doesn’t know how to sell it? What if the newness requires a new distribution channel you don’t have? What if your service organization doesn’t have the ability to diagnose a failure of the new newness?
Rule 5: The only way to develop the capability to handle newness is to pair a soon-to-be great project manager with an already great project manager.
It may sound like an inefficient way to solve the problem, but pairing the two project managers is a lot more efficient than letting a soon-to-be great project manager crash and burn. After an inexperienced project manager runs a project into the ground, what’s the first thing you do? You bring in a great project manager to get the project back on track and keep them in the saddle until the product launches. Why not assume the wheels will fall off unless you put a pro alongside the high potential talent?
Rule 6: When your best project managers tell you they need resources, give them what they ask for.
If you want to deliver new value to new customs there’s no better way than to develop good project managers. A good project manager instinctively knows the critical path; they know how the work is done; they know to unwind situations that needs to be unwound; they have the personal relationships to get things done when no one else can; because they are trusted, they can get people to bend (and sometimes break) the rules and feel good doing it; and they know what they need to successfully launch the product.
If you don’t know your critical path, you don’t know very much. And if your project managers don’t know the critical path, you should stop what you’re doing, pull hard on the emergency break with both hands and don’t release it until you know they know.
Image credit – Patrick Emerson
There are many different organizational structures, each with its unique set of strengths and weaknesses. The top-down organization has its strong alignment and limited flexibility while the bottom-up has its empowering consensus and sloth-like pace. Which one’s better? Well, it depends.
The function-based organization has strong subject matter expertise and weak cross-function coordination, while the business unit-based organization knows its product, market and customers but has difficulty working east-west across product families and customer segments. Is one better than the other? Same answer- it depends.
The matrix organization has the best of both worlds – business unit and functional – and isn’t particularly good at either. And there’s the ambidextrous organization that I don’t pretend to understand. If I had to choose one, which would I choose? It depends.
The best organizational structure depends on what you’re trying to do, depends on the environmental context, depends on the organization’s history and biases and the general state of organizational capability, capacity and profitability. But that’s not the whole picture because none of this is static. All of this changes over time and it changes in an unpredictable way. Because the best organizational structure depends on all these complicating factors and the factors change over time, there is never a “best” organizational structure.
Constant change has always been the dominant fundamental perturbing and disturbing our organizational structures. But, as competition turns up the wick and the pace of learning builds geometrically, change’s ability to influence our organizational structures has grown from disturbing to dismantling.
Change is the dominant fundamental, but its real power comes from the uncertainty it brings to the party. Our tired, old organizational structures were designed to survive in a long-dead era of glacial change and rationed uncertainty. And though our organizational structures were built in granite, the elevated sea levels of uncertainty are creating fissures in our inflexible organizational structures and profitability is leaking from all levels
If uncertainty is the disease, adaptability is the antidote. The organization must continually monitor its environment for changes. And when it senses an emerging shift, the organization it must move resources in a way that satisfies the new reality. The organization structure shifts to fit the work. The structure changes as the character of the projects change. The organizational structure never reaches equilibrium; it survives through continual evolutionary loop of sense-change-sense.
I don’t have a name for an organization like this, and I think it’s best not to name it. Instead, I think it’s best to describe how it behaves. It’s a living organization that behaves like a living organism. It wants to survive, so it changes itself based on changes in its environment. It’s an organization that self organizes.
Directionally, organizational structures should be less static and more dynamic, and they should evolve to fit the work. The difficult part is how to define the explicit rules on how it should change, when it should change and how it decides. But it’s more than difficult to describe explicit rules, it’s impossible. In domains of high levels of uncertainty there can be no predictability and without predictability a finite set of explicit rules will not work. The DNA of this living organization is implicit knowledge, evolutionary experimentation and personal judgement.
I’m not sure what to call this type of organizational structure, and I’m not exactly sure how to create one. But it sure sounds like a lot of fun.
Image credit — actor212
There are countless books and articles on innovation. You can read how others have done it, what worked and what didn’t, how best to organize the company and how to define it. But I have not read much about how it feels to do innovation.
Before anything meaningful can happen, there must be discontent or anger. And for that there needs to be a realization that doing things like last time is a bad idea. This realization is the natural outcome of looking deeply at how things really are and testing the assumptions of the status quo. And the best way to set all this in motion is to do things that generate immense boredom.
Boredom can be created in two ways. 1. Doing the same boring work in the same boring way. 2. Stopping all activity for 30 minutes a day and swimming in the sea of your boring thoughts. Both work well, but the second one works faster.
Next, with your discontent in hand, it’s time birth the right question. Some think this the time for answers, but with innovation the real work is to figure out the question. The discomfort of trying to discover the right question is seven times more uncomfortable the discomfort of figuring out the right answer. And once you have the right question, the organization rejects you as a heretic. If the organization doesn’t dismiss you in a visceral way, you know you don’t have the right question. You will feel afraid, but repeat the cycle until your question threatens the very thing that has made the company successful. When people treat you like you threaten them, you know you’re on to something.
To answer your question, you need help from the organization, but the organization withholds them from you. If you are ignored, blocked or discredited, you’re on the right path. Break the rules, disregard best practices, and partner with an old friend who trusts you. Together, rally against the organization and do the work to answer your question. If you feel isolated, keep going. You will feel afraid and you will second guess yourself. Proceed to the next step.
Make a prototype that shows the organization that your question has an answer. Don’t ask, just build. Show the prototype to three people and prepare for rejection. You and your prototype will be misunderstood and devalued. Not to worry, as this is a good sign. Revise the prototype and repeat.
Do anything you can to show the prototype to a customer. Video the customer as they interact with the prototype. You will feel afraid because you are breaking the rules. This is how you should feel. Keep going.
Set up a meeting with a leader who can allocate resources. If you have to, set up the meeting under false pretenses (the organization is still in rejection mode) and show the video. Because of the uncertainty of their response, you will feel afraid. Show the video anyway.
The organization is comfortable working in the domains of certainty and control, but innovation is done in the domain of uncertainty. By definition, the organization will reject your novel work. If you are rejected, keep going. Revise your heretical question, build a prototype to answer it, show a customer, show someone who can allocate resources, and be afraid all along the way. And repeat, as needed.
With innovation, mostly you feel afraid.
Image credit – Tybo