Google is able to encourage risk taking and failure because it can be pretty confident that most Google employees are very competent. Really smart and competent people might fail when they try hard things. That is inherent to innovation. However, if you are not confident that you have the “A team,” then you cannot be sure if the failure was due to thoughtful risk taking or simply sloppy execution.
Willingness to Experiment but Highly Disciplined: A willingness to experiment does not mean working like some third-rate abstract painter who randomly throws paint at the canvas to see “what sticks.” Experiment-oriented organizations—like really accomplished abstract painters (and other artists and scientists)—are highly disciplined in their approach to experimentation. They select experiments carefully based on learning value. They design experiments to yield as much information as possible relative to the costs. They keep the costs of experimentation, particularly at the earliest phases of explorations, as cheap and fast as possible. And they face the facts generated by experiments. This may mean killing a project that once seemed promising or redirecting it in a significant way. A willingness to experiment does not mean infinite patience with bad ideas.
Recall the example of Flagship Pioneering in an earlier chapter. Experimentation is central to its exploration process. But its experiments are highly focused. It runs “killer experiments” designed to create the clearest possible evidence about the feasibility of the science underlying a venture. The goal of a killer experiment, as the name implies, is to kill ideas quickly, not to confirm initial hypotheses. Venture hypotheses are either killed or reformulated in the face of contradictory experimental data. Bad ideas are not allowed to linger or to come back like Lazarus from the dead. Keeping experiments relatively cheap and fast is another critical dimension of discipline experimentation. At Flagship, venture hypotheses are usually tested with less than $1 million and within a few months.
Discipline should not be confused with sluggishness or bureaucracy. In fact, the opposite is true. Discipline means having a clear sense up front about the criteria for moving forward with, modifying, or killing an idea. Discipline drives speed in decision making. If you are disciplined about killing losing projects, then it is less risky to try new things. Amazon experiments a lot but also kills a lot of projects. Killing projects or reformulating ideas takes discipline because you have to be willing to admit that your initial hypothesis was wrong.
Psychologically Safe but Brutally Candid: We all love the freedom to speak our minds without fear—we all want to be heard—but psychological safety is a two-way street. If it is safe for me to criticize your ideas, it must also be safe for you to criticize mine. Most of us feel much more comfortable being on the giving rather than the receiving end of critical feedback. I have experienced the “joys” of tough feedback firsthand. As an academic for the past thirty years, I have presented my work in many seminars and scholarly conferences. The norm in these events is for the audience to poke holes in the presenter’s work. Their job is to be skeptical about the data, methods, logic, and conclusions. We all know that such feedback is essential to improving our scholarly work. As academics, we could not succeed without it. But anyone who tells you that they enjoy getting utterly hammered in front of a room full of their peers is either disingenuous or has a warped sense of pleasure. Getting tough feedback is like cod liver oil. Good for you, but not so tasty.
Unvarnished candor is critical to innovation because it is the means by which ideas evolve and improve. Having observed or participated in numerous R&D project team meetings, project review sessions, and board of directors’ meetings, I can see that comfort with candor varies dramatically across organizations.
Some years ago, while consulting for Teradyne, a manufacturer of semiconductor testing equipment, I got to see what productive candor looks like. The company had a strong engineering culture. It also had a very healthy learning culture. Engineers debated technical issues in the open, and they were expected to back up their arguments with rigorous technical analyses. In one project team meeting I attended, two engineers got into an extremely heated debate about the design of the cooling system to be used on a new tester (these are very large pieces of equipment packed densely with delicate electronics, so efficient cooling is critical). Their voices rose, and their faces became red as they fired back and forth at one another their different views on the design. They both believed they were right and were not hesitant to explain why the other was completely wrong. I never realized anyone could get so passionate about thermodynamic coefficients. Immediately after the meeting, I saw them in hallway. I was surprised to see they were having coffee together and sharing a laugh. They weren’t even talking about cooling systems. I learned that they had worked together for years, had enormous respect for one another, and had a great working relationship.
In other organizations, the climate is more polite. Disagreements are restrained. Words are carefully parsed. Critiques are muffled (at least in the open). To challenge too strongly is to risk looking like you are not a “team player.” At one large company I consulted for, one of the managers captured the essence of the culture well when she said, “Our problem is that we are an incredibly ‘nice’ organization. People are uncomfortable with tough conversations.”
When it comes to innovation, the former will outperform the latter type of organization every time. The latter confuses “politeness” and “niceness” with respect. There is nothing inconsistent about being frank and highly respectful of individuals. In fact, I would argue that providing and accepting frank criticism is a sign of respect. Listening to the devastating critique of your idea is only possible if you have respect for the opinion of the person providing that feedback. Frankness does not mean berating or belittling, of course (with which it is often confused). The two engineers I described above had the highest respect for one another. Their “fight” was never personal. It was about designs, heat transfer, thermo-efficiency, and other engineering parameters. They challenged (in the open) each other’s logic, data, and analyses, but never for a second did either of them imply the other was a bad engineer. Never was it about “winning” the argument, but rather about designing a better cooling system.
Still, with that important caveat aside, these are not necessarily the most comfortable environments in which to work. To outsiders or newcomers, the people in such organizations might appear aggressive or hard edged. No one minces words about data, logic, methods, design philosophies, strategy, assumption, or perceptions of the market. Everything anyone says is scrutinized (regardless of their title). No one lets anything slide. Most of us hold our ideas dearly, and there is a very fine line between attacks on them and attacks on us. Brutally frank feedback is essential to innovation, but it is also tough medicine to swallow.
Collaborative but Individually Accountable: Good teams collaborate and have a sense of collective responsibility. “We are all in this together.” (How many times have you heard a coach or professional athlete utter the cliché “it was a team effort”?) However, a sense of collective responsibility does not preclude individual accountability. Collaboration is not the same as consensus. Getting help and input from a broad variety of players is collaborative and, as discussed earlier, critical to innovation. But quick decision making is also essential to innovation, and nothing is worse for speed than consensus decision making, particularly for complex problems where opinions may vary significantly on the right path forward. Consensus, of course, can be comforting. It is good to know that a group of colleagues shares the same view. It can also make implementation a lot easier—no need to “sell” the idea to skeptics after the fact. But, unfortunately, consensus is not always possible, nor does it necessarily reflect the best decision. The overwhelming consensus among the aeronautical engineers at Honda and elsewhere was that engines could not be mounted above the wings of an airplane, but, as Michimasa Fujino demonstrated, the consensus was wrong. At Vertex, the consensus choice for which program to pursue turne
d out to be wrong (fortunately, the company did not use a consensus-driven approach: Josh Boger and Vertex president Vicki Sato picked which projects to undertake, and they did not go with the consensus).
Innovative cultures blend both collaboration (and the sense of shared objectives that go with that) and individual accountability for decisions. Committees might review decisions or teams might provide input, but, at the end of the day, specific individuals are charged with making critical design choices, deciding which features go (and stay), which suppliers to use, which distribution channel strategy makes most sense, which marketing strategy is best, and so on. Pixar has created several ways to provide candid feedback and help to directors of its films, but, ultimately, directors are entirely responsible for their films. They choose which feedback to take and which to ignore. They “own” the film. And they are ultimately held accountable for how it performs.6
In many ways, accountability can drive collaboration. Consider an organization where you personally will be held accountable for a specific set of decisions. There is no hiding. You own the decisions you make for better or worse. When the stakes are high personally, you have a lot of incentive to get all the help you need. The last thing you would likely do is to shut yourself off from feedback or from seeking cooperation and collaboration from others inside and outside the organization who can help you. In a fast food chain I studied,7 all store managers (called “owner operators”) were 100 percent accountable for the performance of their individual stores. Their entire personal income depended on the profits of their store (after two years in their position, they were paid no fixed salary). What was striking is how much the store managers collaborated. They met routinely to share best practices or would use some of their days off to help a store that was having trouble (or in a start-up phase), despite the fact they received no compensation for this. Why? Because in this super-high-accountability culture, collaboration was essential to one’s own performance. Not collaborating would be suicide. Think about Dwight Eisenhower’s position before Normandy. The invasion involved more than 150,000 troops from more than a dozen countries and every branch of the military.8 It was a massively collaborative effort, and yet, in the final analysis, Dwight Eisenhower, as head of the Allied Expeditionary Forces in Europe, was well aware that history would judge him personally for this extraordinarily risky endeavor. No wonder he demanded criticism of the plan a month before the scheduled operation.
There is a fairly simple way to know whether you are in a high-individual-accountability culture. Come up with a list of critical decisions made across various phases of a project and simply ask, “Who made that decision?” for each. If you hear things like “marketing” or “R&D” or “the project governance committee” or “senior management,” chances are yours is an environment with low individual accountability. Committees and groups make decisions. In high-individual-accountability environments, decisions can be traced back to specific individuals.
For organizations that have operated in a low-individual-accountability mode, the shift to high accountability can be challenging. If people are not used to making decisions or are simply incapable, then this kind of culture is very risky. They can feel threatened (a feeling that is not wholly unjustified if they have poor decision-making skills). Getting high individual accountability for innovation decisions can be particularly challenging given the inherent risks of innovation. As we have discussed throughout this book, when it comes to innovation, failure is more common than success. This means that in a high-individual-accountability culture, a fair share of your decisions will turn out to be wrong. Embracing failure is one of the most common mantras of innovation today. You are supposed to “celebrate failure” (a term quickly ascending the ranks of most overused business clichés). Such exhortations are disingenuous. As individuals, we do not really enjoy failure. We would always prefer to be right. In fact, if you have risen to become a senior executive, you probably have relatively little practice with failure. Let’s face it—you do not get to be a senior leader by failing a lot. If you operate in a high-individual-accountability culture, you have to become comfortable with the fact that you (not the team) will be the one “celebrating” the failure.
Flat but with Strong Leadership: Lack of hierarchy does not mean lack of strong leadership. Paradoxically, flat organizations require stronger leadership than hierarchical ones. Flat organizations devolve into chaos unless leadership sets clear strategic priorities and directions. Amazon is very flat. Recall that the idea for Amazon Web Services bubbled up from a smaller initiative within the retail group. The project was incubated by a relatively small team lead by (at that time) a relatively young manager (Andy Jassy). Teams at Amazon are kept small and entrepreneurial. The company has a “two pizza rule”—meaning that no team should have more people than can be fed by two pizzas. Yet, Amazon is a company with incredibly strong and visionary leadership. Jeff Bezos has definite ideas about the overall direction of the company and how it (and its culture) should work. Google is another example. Innovation at Google (now Alphabet) is highly decentralized. Engineers are given time to work on their own initiatives. But like Bezos, Google’s Larry Page and Sergey Brin are strong leaders. Josh Boger at Vertex wanted the person on the loading dock to be thinking about clinical trials, but at the end of the day, he was going to make the critical call on which program to select.
Legendary founder CEOs aside, the principle of strong leader / flat organization also applies throughout the organization. Strong project leaders (not coordinators or project managers) set the stage for empowered teams by setting priorities, clarifying objectives, and ensuring that the team gets the resources (human and financial) that it needs.
Conclusion
Innovative cultures are rare. Becoming one involves several clear challenges. First of all, innovative cultures are not rooted in one or two practices such as tolerance for failure or willingness to experiment, practices we so often hear about in discussion of “what it takes to be innovative.” Innovative cultures are complex organizational systems. They are composed of an array of practices. Second, innovative cultures are paradoxical. They employ practices that push the organization in seemingly inconsistent directions. This can be confusing for both employees and for leaders who are taught that they are supposed to be consistent in their styles. Yet, as discussed above, the “contradictions” are not contradictions. Innovative cultures require a delicate balance between different values. Getting this balance right is the job of leadership. And, finally, not all of the practices of innovative cultures will make everyone comfortable. Innovative cultures are not always pleasant to work in. They require some strong medicine. They are not for everyone. Before you decide to go down the path of creating an innovative culture in your organization, you need to make sure you understand the realities of such cultures and ask whether you and the organization are willing to take your ice cream with a healthy dose of cod liver oil on top!
9
LEADERS AS CULTURAL ARCHITECTS
Reengineering the Cultural DNA of an Enterprise
The year 1995 was incredible for Pixar. The animation studio had released Toy Story, a blockbuster film that won three Academy Awards, and had enjoyed a wildly successful IPO. As CEO of Pixar, Ed Catmull obviously faced a lot of different challenges. But, for him, the most important challenge was how to preserve the innovative culture that lead to Toy Story. Throughout his career, he had witnessed other once-successful companies fail, and he wondered what made leaders blind to the forces that threaten them.
My desire to protect Pixar from the forces that ruin so many businesses gave me renewed focus. I began to see my role as a leader more clearly. I would devote myself to learn how to build not just a successful company, but a sustainable creative culture.1
This theme of leaders owning culture shows up time and time again in companies that have striven to preserve innovative cultures or have had to become innovative again. Sergey Brin and Larry Page, cofounders of
Google, have been quite public in articulating their views on what Google’s culture should be (going back to their first letter to the shareholders, Brin and Page stated the now often repeated mantra, “Google is not a conventional company and has no intention of becoming one”). Steve Jobs created Apple University as a means to preserve the culture he created at Apple. Amazon’s Jeff Bezos talks to both employees and shareholders about the importance of keeping Amazon’s “Day 1” culture. Satya Nadella, CEO of Microsoft, has written, “The CEO is the curator of an organization’s culture. Anything is possible for a company when its culture is about listening, learning, and harnessing the individual passions and talents to the mission of the company. Creating that kind of culture is my chief job as CEO.”2
Organizational culture is not an accident. It is the product of decisions, behaviors, and attitudes of an organization’s most senior leaders. Many leaders think of culture as a “soft” construct because it revolves around intangibles like people’s thoughts, feelings, and expectations. But just because culture is intangible does not mean it cannot be actively engineered to support organizational priorities. In this chapter, we examine the concrete steps leaders can take to engineer an innovative culture.
Engineering an Innovative Culture at Scale
Engineering an innovative culture is particularly difficult because, as discussed in the previous chapter, culture results from a complex interaction of fairly diverse values and behaviors. In general, it is easier to create a culture from scratch than to change an existing one, and cultures are generally easier to build with a small group of people. It is much easier to get 10 people to agree on a set of values and norms than 100,000 people. This is why start-ups are generally considered to have more innovative cultures than established companies. The founders of a start-up get to, by definition, start from scratch. There is nothing to be “undone.” They can hire people who share their view of what the culture should be. Of course, they do not always get it right. Not all start-up founders focus on culture or know what kind of culture they want to create (remember, most start-ups do fail). But, the task of cultural engineering is easier (not easy, just easier) for the start-up than for larger companies.
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