by Adam Hartung | Jan 15, 2010 | Disruptions, eBooks, In the Swamp, Innovation, Leadership, Lock-in
Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs). But increasingly we're learning that goal setting is not correlated with success. At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals."
The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%. It became a huge, multi-year campaign. Lapel pins with "29" were made and all kinds of motivational programs were put in place. The GM organization had its goal, and it was highly aligned to the goal. But it didn't happen. Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy. The goal made no difference.
Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior. Instances are cited where goal obsession led company employees to falsify documents, even ship bricks in place of products to meet sales targets. No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.
Results are exactly that. Results. They are an outcome. They are the way we track our behaviors and activities – our decisions. When we focus on goals – usually some sort of result – we lose track of what is important. We have to focus on what we do. And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper. But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter. Goals don't help you fix a Success Formula returning poor results. Just look at GM.
In fact, it can make matters worse. In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem. Tell somebody not to think about a white bear – and it's all they think about. When your company has a problem and you try to tell employees "hey, don't think about the problem. Go do your job. Work harder, increase your focus, and all will work out. Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem. It will reinforce doing more of the same – perhaps manicly. Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm. Goals don't produce innovation – they produce repetition.
So what should you do when facing a problem? Disruptions. GM didn't need a big goal. GM needed to Disrupt its broken Success Formula. GM needed to attack a Lock-in (or two). GM leaders needed to admit the market had shifted, and that competitors were changing the game. GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently. Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results.
Only a Disruption would have helped save GM. After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas. Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive. Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader. By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around. Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.
You can see a 40 second video about the value and importance of Disruptions on YouTube here.
A 75 second video on White Space effectiveness on YouTube here.
Read free ebook on "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes"
by Adam Hartung | Nov 1, 2009 | Current Affairs, Defend & Extend, Leadership
Jim Collins has decided to start telling people how to manage innovation. In "How Might We Emphasize Cost Effective Evaluation Tools" at the Good.is Blog Collins lays out his prescription for managing innovation. And it's pure Collins, because he's a lot more interested in focus than results. In fact, he is more concerned that before attempting innovation companies put in place a review process to rapidly cut off funds for innovations that go awry than figuring out how to behave differently.
Jim Collins has decided to tell people how to innovate. Only his first recommendations don't sound anything like the road to innovation. His five rules are timely, efficient, focused, sharable and actionable. There's no mention of getting market input, or figuring out how to behave differently. In Collins' world if you are efficient, mindful of the clock, focused and committed to extending your past Success Formula he's sure profits will evolve.
His passion for evaluation is paramount. He loves to talk about being efficient in innovation, prototyping toward some goal that is pre-set. Being "efficient" about the exercise drives his discussion – as if markets are efficient, or understanding how to make money in a shifted future marketplace is an efficient process. And he is obsessed with being vigilant. Collins is fearful that people will waste money on their innovation exercises. Efficiency, ala Taylor and scientific management, is a dogma Collins cannot escape. He wants his followers to be efficient, pre-planned, and obsessed about making sure money is not wasted from this escapade into innovation.
Jim Collins' prescription for success is one of the biggest snake oil
sales in business history. His book sales, and speaker fees,
demonstrate what a big PR budget from an aggressive publisher can
accomplish with content that sounds like "common sense." Jim Collins'
"great" companies are anything but. Just run the list and you'll find
he loved companies like Circuit City, Fannie Mae, Wells Fargo and
Phillip Morris. Companies that failed at innovation and ended up
smaller and less profitable (or gone completely.)
Today's economy has shifted. While Collins and Hamel spent years looking backward to see what worked in the 1970s, 80s and 90s those analyses are of no value today. We aren't in an industrial economy any longer where building economies of scale or entry barriers works. Being good at something is the mantra Collins lives upon, but when the market can shift in months, weeks or days to something entirely different being good at something that's obsolete does not create high rates of return.
Collins is so afraid that companies will over-invest in something new he would rather kill an innovation than possibly spend too much. His obsession with efficiency indicates an approach that is bankrupt intellectually, and has demonstrated it cannot produce better returns. It sounds so good to be very focused, to be fearful of pouring good money after bad. But reality is that businesses regularly accomplish just that – making bad investments – by trying to defend & extend a business that is no longer competitive.
Only participating in changing markets creates high returns. No business, not even huge companies like GM, Chrysler or Sun Microsystems, can "direct" a market. There are no entry barriers in a globally connected digital economy. If companies aren't willing to abandon their BHAGs (Big Hairy Audacious Goals) in favor of creating new solutions they simply are made obsolete. Nobody's "hedgehog concept" will save them when the market shifts and previous sources of value are simply no longer valuable (just ask newspaper publishers, who never imagined that customers would move so fast to the web instead of waiting for their daily paper.)
Almost 100 years ago a little known economist named Schumpeter said that value was created by introducing new solutions. His work demonstrated that pursuing optimization led to lower rates of return, not higher. As a result, he concluded that those who are flexible to market shifts – bringing new solutions to market rapidly – end up the big winners. As we look at companies today, comparing Google, Apple, Cisco and Nike to GM, Kraft, Sara Lee and AT&T we can see that Schumpeter had it right.
The gurus of business management helped us all realize how you could make improvements via optimization. Peters told us to seek out excellence, Hamel and Prahalad encouraged us to understand our core capabilities and leverage them. Collins drummed into us that we should focus. And most recently, a New Yorker editor with no business training or experience at all, Malcolm Gladwell, has admonished us to practice, practice, practice. Yet, when we really look at performance we see that these practices make organizations more brittle, and subject to competitive attacks from those who would change the markets.
We know today that innovation leads to higher rates of return than optimization of old strategies. But few recognize that innovation must be tied to market inputs. We build organizations that are designed to execute what we did last year – not move toward what is needed next year. This can be changed. But first, we have to eliminate the innovation killers — and that includes Jim Collins.
by Adam Hartung | Oct 11, 2009 | Current Affairs, General, Innovation, Leadership
Saturday I had the good fortune to attend a presentation by President Bill Clinton. He spoke at the Indian Institute of Technology alumni conference – an event I attended as a speaker myself.
President Clinton must have used the word profit 100 times. In today's divided political climate with words like "socialism" bandied about you might be surprised. But his talk focused on the importance of making a profit as businesses meet customer needs.
The 42nd President discussed how new fish farms in Haiti were important to improving the devastated economy – because they allowed everyone involved to make a profit. He discussed how forests devastated for charcoal were being replaced by a new business that converted used paper and sawdust into a charcoal replacement for 75% less cost to the user — and yet created over 100 good paying jobs and produced a profit. His point was simple, you can't fix a down-and-out country's economy unless there is a profit in it. And he was seeing, through his foundations, multiple profit opportunities.
Across the board, the President reminded listeners that they can maintain the profit motive and solve big problems if they think about the business differently. American competitiveness is seriously challenged by rising health care costs. Yet Pennsylvania has shown it can contain costs by reporting cost and outcome statistics – a practice not shared in the other 49 states. Switzerland has a private health care system, and it incorporates wellness programs, but it spends only 11% of GDP on health care. The U.S. spends 17%. The U.S. needs to rethink how health care is sold and administered first – and if it does that private enterprise can continue to lead. But it takes a shift on the part of the health care insurers and providers.
After many years as the country with the highest percentage of college graduates in the 25 to 34 age group, in the last 8 years America has fallen to 10th. America has priced college out of the range of too many students, while other countries have modifed their approach and improved completion rates. To improve competitiveness requires an educated society. It takes different thinking if America is to regain strength as an educated country. Now that American competitiveness is being challenged (the theme of this meeting) the former President challenged whether that competitiveness can be regained if we don't think differently about how we provide education.
Of all his comments, I most enjoyed his discussion about how much . Americans love zero sum games. He and then pointed out that almost all games (football, soccer, etc.) have been modified to allow for overtimes so somebody wins. He brought up an Arkansas football game that went to 7 overtimes! Americans hate non-zero sum situations, where multiple people can win, or where it's possible to win by doing things differently. But he pointed out that in life, almost nothing is a zero sum game. That is limited to the sports field. Even in battles, it's often not clear who the winner is – for both sides will declare victory. He commented "all economic systems carry the seeds of their own destruction." And when it comes to succeeding in business you don't need to create a zero sum game. You can succeed by doing things differently.
Far too many business gurus discuss business like it is zero sum. For example, Jim Collins' BHAG and his love of fighting for a "hedgehog" concept is all about viewing business as a zero-sum game that you have to win. But today most growing, high return businesses intentionally avoid zero-sum games. Those lead to price wars and declining returns. Instead they (like Google) employ innovation, like the folks making charcoal from recycled paper, to develop new solutions that are superior and earn higher returns.
