Onlookers, rarely think of a large corporation as though they were following a herd’s instinct. When profits are good their motives seem clear. But when profits erode, or evaporate, business titans are described by their inability to keep up. Which is too bad really. What is really at issue is their inability to adapt – to new ways of sense making – independently of the herd.
Yogi Berra’s advice is well known. ‘When you reach the fork in the road, take it.’ Simple enough I guess. In a behavioral sense we just search-and-replace ‘or’ for ‘and’, and presto! We have created the yogi-berra-algorithm for assured success. While this is plain enough for one person to follow, it is not so simple for a group to abide by.
For starters, for every project that we had to conduct before, we now have two. Not very practical when marshalling tens of thousands people – toward one corporate goal – especially if they are changing their behavior independently of one another at will.
By exploring all paths forever we risk multiplying the work that we do, rather than simplifying it for the better – or rather for the difference that is required of corporate change. Some changes are bigger than others.
We should also recognize that people will likely take sides. This amounts to choosing between: applying the rules that made old-corp tick, or tackling the work of establishing the rules that will generate the new-corp prosper. Which leads to the polarization of groups. To return to yogi’s metaphor, one group takes the high road, the other takes the low road.
Exercises in change.
I love to read about cases where an executive states publicly that it is time for change. When an executive is using the c-word you can expect the change to be big. Regardless of how often we hear about the need for businesses to adapt and change it remains dizzying, confusing work to structure, prepare for, and implement.
Find comfort in discomfort
In a 2003 report the Danish Design Center suggested that “design-related employee training” can boost revenues by 40% on average. And since that time we have seen a parade of executive leaders from P&G, GE, Steelcase explaining just how effective this approach has been for them. This new approach doesn’t just graft a best practice from a distant source. It generates better practices by making the most of existing conditions.
“We warn them that they’ll be uncomfortable,” says Peter Coughlan, who co-leads the transformation practice at design consultancy IDEO. “I tell clients you won’t understand it until you experience it.” Changing a company’s culture can take years, he says, but the quickest route is to get managers to think about themselves as designers of their own organizations, which will help build support at all levels. The trick, says Cynthia Tripp, marketing director for global design at P&G: “Don’t turn it into an education program. Turn it into a problem-solving machine.” Tripp has worked for the company for 21 years and approaches her own work with the same attitude. “Design education is not what we’ve been doing,” she says. “I am trying to grow the business.” P&G operates offsite design thinking workshops that bring together employees from across the consumer-products giant, including R&D, market research, and purchasing, to use design methods such as visualization and prototyping to solve real problems for the company. The workshops, run around the world by volunteer employees called facilitators, last anywhere from a half-day to a week.”
Whether I have been a participant in, or observer of a transformation effort, I have come to recognize that the discomfort that Peter Coughlan speaks of in a rather immediate and visceral way. Experience has taught me that there are two cognitive paths that leaders choose between. Are you interested in trying them on for size? Well imagine for an instant that you are the corporate leader that needs to change the direction of a corporate herd (which you presumably work in). Would you:
A – Make design decisions according to new information, and prepare to make decisions with different assumptions.
B – Look for new information to design with, but hold on to the assumptions that helped you succeed so brilliantly in the past.
You can only reap from what you are ready to assume.
If you are drawn to proposition B, you must believe that positive change will come from making your decisions better. Where better amounts to collecting new knowledge, to be the judge of.
Maybe you feel the urgency of change. Maybe you need to make your numbers. Maybe you think that others in your company will choose not to change, if you make trade-offs differently tomorrow, than you do today. In any of these cases change is mostly about matter of finding the right businesses to be in.
What makes proposition B sound so attractive? Well, you have the machinery in place; the structure, the people, the communication channels, and the corporate culture. The only reason your growth is not what you want it to be, is that you don’t own the best properties. In other words boardwalk and park place were already taken. The only change to make in this case is a company-wide memo: “Our mission and vision have changed. Proceed as you were. Good luck with that.”
If on the other hand you were drawn to proposition A, you must believe that most of what you know is probably wrong – in the sense that it is likely out of step with time and out of sync with consumer’s behavior. This will be hard to admit openly. The social costs of making a declaration like this could cost you your position, as the reformed arbiter, sometime before decision-making can ever take effect.
Undeterred, you must also believe that the positive change will come from making decisions differently. You know that innovation will require significant change in the engine room. Your first order of business will be to develop some new ways for recognizing and acting upon insight. Because having new knowledge isn’t the same thing as knowing what to do about it. You will need some independent ways of thinking about the whole corporation.
Sounds scary for sure, but if you chose proposition A you are in good company. Einstein was one to argue: “We can’t solve problems by using the same kind of thinking we used when we created them.”
Massive culture change
So when Dave Novak, the chief executive of YUM Brands, (KFC, Taco Bell, Pizza Hut) tells the Economist that his ‘training programme’ will be the “biggest culture-change initiative in the world”. It is because he is planning on affecting all of the firm’s 1.4m workers who are spread over 112 countries.
It is hard not to want to stand up and cheer him on.
We know from the Danish Design Report (2004 edition) that this scale of capability development is what more companies should declare publicly and invest in when they are making changes. Unfortunately most business leaders prefer to keep this info to themselves. Usually they fear what analysts will say or do. Which is curious I guess given that YUM brands is happy to report 7 consecutive years of + 10% growth.
That’s a whole lot of transformation going on. But let’s read closer about what he has in mind.
…a couple of years ago he launched a review, both to identify best practice internally and to learn from Yum!’s fiercest rival, McDonald’s.
The exercise turned up three big areas for improvement: selling more healthy items, offering a greater variety of drinks and changing menus according to the time of day. The main obstacle to such ideas was Yum!’s corporate culture, in which different brands and operations in different countries had little to do with one another, slowing the spread of new initiatives.
Massive changes? Yes. Clearly stated? Yes. Clearly planned? Yes. Reasons to believe that this model will achieve positive sum change in the industry? Not so much. The missing link in ‘the review process’ was the consumer. Just how are people’s behaviors changing?
Does the world benefit when two industry titans pursue the hearts and minds of consumers using the same ideas? Perhaps it will lead to a cost war. Perhaps Dave feels YUM can do what McDonalds do better than McDonalds do now. But the goal of transformation is Innovation: Positive sum. New-to-the-world. Why didn’t I think of that idea.
To paraphrase Einstein, Innovation means achieving success differently than we are used to. When we use the word better we are dooming talented people to wander down well-worn paths.
Leaving the herd behind; from best practices to better practices.
It is easy to forget that corporate transformation has entrenched enemy: the generals who won the last war, the people who worked hard build old-corp up to its current stature. Even if that current status – is lame duck.
Competitors can never stand in the way of your transformation. But those who remain loyal to old-corp , those who work alongside you can, and will. Like carbon monoxide, unchecked assumptions have no smell, no taste, and they can’t be seen. But they are toxic to the work of making real changes that last.
A time-honored response to this concern is to hire the outsider. Maybe we hire the outsider for their tacit knowledge. Maybe they have come from our fiercest rival. We hire for their iconic potential to lead us from misery.
With no loyalty to past assumptions we expect them to call bullshit, when they witness it. We expect that they shine light on dark corners of the industry. We expect them to deliver and complete the hail-mary pass; everyone is ready to rush the quarterback… time is running out… so get the ball up and away from the pocket, and you outmaneuver all attempts to block your forward progress. The payoff comes in just one play. The quick win. Momentum takes a turn in your favor. But this short-term relief, doesn’t explain what we do with the rest of our playbook.
In order to succeed at transformation a leader must first define what reinvention will mean. Employees will need to know from leaders: what they should do more of, what they should do differently, and what they should stop doing. The last point seems to be the hardest to identify. It is even harder to live with in practice.
This is because even when we know when something is wrong, we are inclined to use as it, as long as every body else is going to use it as well.
Perhaps we could blame the power dynamic. In work environments we have people to please and status to maintain. In his book Risk, Dan Gardiner argues that we are hardwired to operate this way even when power is not at play. Gardner illustrates what it might have been like to participate in a test at the Institute of Personality Assessment at UC Berkeley, based on the experiments of Richard Crutchfield and Solomon Asch.
“…the questions are simple enough at first. Geometric shapes appear and you are asked to judge, which is larger. At the beginning, you are the first person directed to respond. Then you are the second to answer, which allows you to see the first person’s response before you give yours. Then you move to the number three spot. There’s nothing that takes careful consideration at this point so things move along quickly.
Finally you are the last of the group to answer. A slide appears with five lines on it. Which line is longest? It’s obvious the longest is number four but you have to wait before you can answer. The first person’s answer pops up on your screen: number five. That’s odd, you think. You look at the lines and number four is longer than number five then the second answer appears: number five. And the third answer: number five. And the fourth: number five.
Now it’s you turn to answer. What will it be?
Clearly everything is wrong. You shouldn’t hesitate to flip the switch [to vote] for number four. And yet there is a good chance that you won’t…
[Gardner goes on to explain…]
… test subjects abandoned their own judgment and went with the group at least once. Overall, people conformed to an obviously false group consensus one third of the time…
…the group’s opinion isn’t everything; we can buck the trend. But even when the other people involved are strangers, even when we are anonymous, even when dissenting will cost us nothing, we want to agree with the group.”
There is some plenty for change agents to learn from Dan Gardner’s Risk. Additionally, there it leaves unanswered. His scope of inquiry is not applied to corporate change. But this challenge is one that we all will need to overcome regardless if you like proposition A or B.
And then there is this. Gardner asks what is required to become an independent thinker? And whether or not that is practical idea in the most innocuous moments in life. Like whether to vacation on a beach in Mexico, when you know there is a risk of cancer from the exposure to sun.
“ Clearly today’s fully independent thinker will have to have a thorough knowledge of biology, physics, medicine, chemistry, geology and statistics. He or she will require an enormous amount of free time. Someone who wants to independently decide how risky it is to suntan on a beach, will find that there are thousands of relevant studies. It would take months of reading and consideration, in order to draw a conclusion about this one single risk.”
Groupthink vs the network effects of integrated thinking.
Without some measure of conformity companies will never develop a brand that consumers would trust, support and remain loyal to. But conforming to the new takes, practice, methods and a meaningful vision of what we mean by new.
Rebuilding the railroad
When most people think of design manuals they usually refer to corporate design manuals found in brand management, design pattern libraries found in interaction design and design language guides found in industrial design. These are prescriptive guides that help to keep the trains running on rails that lead to the next station. That is until someone changes all of the stations.
When we change from old-corp to new-corp all of those bets are off.
We need to prepare the company with a different type of design manual. Maybe it would be better called an innovation manual. In order to balance independent thinking with a common purpose an innovation practice manual must first make sure that integration is possible. And that consumers are understood; not simply sold to.
Constraints are not the enemy of change. Tacit practices are. They remain tacit because they are built on unchecked assumptions. Assumptions about what a corporations purpose is. Assumptions about what is risky to execute. Assumptions about how people will value your goods and services. These assumptions have a more familiar name – common sense.
Constraints tell designers when to they are done. This is a good thing. Knowing when to quit is as hard as knowing what to start. Constraints also enable systemic thinking. Even when has yet to be built.
Design the right thing. Design the thing right. But, design the thing last.