Seeing Around Corners

by Rita McGrath

  In 2007, it had a 49.4 percent share globally of the smartphone market. Its CEO was on the cover of Forbes in November, accompanied by the headline “Nokia: A Billion Customers—Can Anyone Catch the Cell Phone King?” And yet, the early warnings of its collapse were already in place since the introduction of Apple’s iPhone and the commercialization of the Android platform earlier that year.

  I know, because I was working closely with the company in the early 2000s. I started to get emails from people in the know, saying that the bean counters had taken over at Nokia and the talented folks who used to be so close to the market were being squashed. That even though I held in my hand a device that would be recognizable today as an Internet-connected tablet, no customer would ever see it. And, most dispiritingly, that the venturing and growth processes that I and others had worked so hard to put in place were being dismantled. Nokia’s leadership had lost touch with the edges—with the places in which negative inflection points for their business were gathering force. A similar success-fueled ignorance seems rife at Facebook.

  Facebook’s data collection and targeting practices have led to extraordinarily troubling outcomes. And if spokespeople for the company are to be believed, this has all come as a terrible, terrible shock.

  Leaving aside cynicism about such claims, we can identify a consistent pattern of ignoring external concerns that characterizes challenges for Facebook. Whether Facebook eventually extends its competitive advantage (as it has done before, with the acquisitions of fast-growing WhatsApp and Instagram) or not, it’s clear that its leaders would have preferred not to be “at war” in 2018.

  In the next chapter, I’ll introduce a methodology for spotting and interpreting weak signals that things may be changing. Here, I focus on how you can detect those signals before the news is obvious to everyone, using some examples from the Facebook saga to illustrate.

  Being Present at the Edges

  If snow melts from the edges, it behooves you to have mechanisms in place to see what is going on there. This is a prescription widely made by futurists, such as Amy Webb in her brilliant book The Signals Are Talking. And yet, when I consider how many executives I work with spend their time, getting to the edges is one of the last things on their agenda. Citing the pressures of the day-to-day, the need to deliver to the current quarter, or even a lack of concern because of tremendous ongoing success, they stay safely at headquarters and surround themselves with internal team members.

  Consider, then, the following eight practices that can help you make sure there isn’t something brewing at the periphery of your organization that could have an explosive impact on the company before you realize it.

  1. Create Mechanisms That Direct Information Flows from the Corner Office to the Street Corner

  A very common reason that leaders miss potentially important inflection points is that they are isolated from the people who could tell them what is really going on. By closing themselves off from critical communication with people who may disagree or who may have different vantage points, such leaders develop a false sense of what is going on in the world.

  This seems to be part of the story at Facebook. At this highly successful company, it isn’t surprising that its leaders have kept to a fairly narrow circle. These leaders, many of whom have been at the organization for a decade or more, have often described the senior team as a “family.” On the positive side, they report strong, trusting ties and relationships of long standing that allow the company to move fast. One indication that the inflection point has arrived for Facebook is that many members of this tight-knit team have announced their departures.

  Some observers, however, have not been so complimentary about this cozy arrangement. One has said that “Mark Zuckerberg is surrounded by sycophants and people who think just like him; that he’s unaware of the negative impact his company has had on the world.” Some have gone so far as to argue that Facebook is “cult-like,” a workplace in which dissent is discouraged—a surefire recipe for creating blind spots.

  Organizations looking for the early warnings of an inflection point have practices in place that allow the information and trends bubbling up far away from headquarters to be seen and heard. One practice is the deliberate creation of information flows that reach directly from leaders’ offices to the front lines of the business. This can take many forms. When Lou Gerstner was running IBM, he spent his first months in office visiting customers and talking to frontline employees to get a feel for what was really going on. In a very hierarchical system, he drove staffers crazy by organizing “deep dive” sessions to which participants were invited depending on how much information they had, regardless of their hierarchical level.

  Level-skipping conversations are another source of unfiltered information. One practice I’ve observed is a leader who regularly invites various employees, chosen at random by a computer program, to breakfast. Another, famously in use at Citibank’s credit card division, is to regularly ask leaders to report on one insight they have learned from an actual customer that month.

  The key here is to provide a methodical but organizationally safe way for those with decision rights to get exposed to what is changing at the interface between the organization and its external environment.

  2. Make Sure You Are Leveraging Diversity of Thought

  For better or worse, human beings draw their expectations about the world from their own frames of reference. Facebook’s founding team, and its initial sets of users, had not just a collegiate frame of reference, but an Ivy League one at that. This led to their missing the implications of what could be done with their platform once all of humanity—with different cultural norms, different institutional expectations, and different motivations—had access to it.

  Or, put more bluntly by Anil Dash, a blogging pioneer and the first employee of Six Apart, the creator of Movable Type: “If you are twenty-six years old, you’ve been a golden child, you’ve been wealthy all your life, you’ve been privileged all your life, you’ve been successful your whole life, of course you don’t think anybody would ever have anything to hide.”

  Lack of imagination and the inability to see how other people might take advantage of a situation in a way that you never would is a typical blind spot. For instance, the optimistic souls behind the LinkNYC project, an effort to put abandoned pay phone booths to better use, created public places to access the Internet in them. In the minds of the project’s founders, the terminals would be used by tourists looking for local information, by people tracking down good restaurants, and for other relatively benign purposes. Imagine their dismay when reports started to come in of people watching porn on the street, setting up outdoor living rooms around the terminals, and using them in conjunction with other unsavory conduct!

  Ask yourself: Am I inviting diverse viewpoints into our discussions? Are we listening to people whose life experiences and views are different from our own? Are we all homing in on one scenario to the detriment of even being able to imagine others?

  3. Balance Type 1 and Type 2 Decisions: Empower Agility but Create Balance

  Amazon founder and CEO Jeff Bezos has famously observed that there are two basic decisions that an organization needs to make. What he calls type 1 decisions are those that have huge implications for the organization, are potentially highly risky, and are irreversible. Type 2 decisions, in contrast, are reversible, low risk, and rich in learning potential. A well-documented success at Amazon is Bezos’s use of small teams to act on type 2 decisions.

  This approach reflects the popularity of “agile” methods as an alternative to conventional bureaucracy. One principle is that teams should be small and empowered to make decisions about low-risk activities under their control. At Amazon, Bezos instituted his famous “two pizza rule,” meaning that no team should be so large that it could not be adequately fed by two pizzas. In his view, a team of ten, perhaps twelve people is as large as teams should get, since they don’t require much coordination and can work t
ogether fluidly. He also describes delegating authority in making type 2 decisions. Such decisions, Bezos argues, should not have to be made under the heavy scrutiny of corporate bureaucracy.

  As an example of how this feels, consider this description of the difference between an agile, connected team and conventional corporate action. In 2015, consultants Chris Zook and James Allen of Bain & Company observed the practices of John Donahoe, the CEO of eBay. Donahoe regularly convened meetings with employees who were under thirty (who often came in through acquisitions). One of them, Jack Abraham, had an idea for a major redesign of the company’s web page. Donahoe told him to figure out what resources he needed to make it happen. Abraham took the five best developers out for drinks one night and convinced them to take a two-week trip to Australia the next day to work on a prototype. Donahoe was blown away. “Had we asked a normal product team,” he said, “I would have gotten back hundreds of PowerPoint slides and a two-year time frame and a budget of $40 million. Yet these guys went away, worked 24/7, and built a prototype. These guys build. They do no PowerPoint. They just build.”

  Empowered and trusted people at the front lines of a business are hugely important, which has been a big part of Home Depot’s turnaround—after forgetting this most critical lesson for a while. The way not to achieve this goal is to hire a bunch of expensive consultants who talk to the people who actually know what’s going on, and then have the consultants report back to the decision-makers what they heard!

  I would argue that Facebook has gone overboard on the use of small, empowered teams to make decisions that in retrospect are actually of the type 1 variety. Consider the company’s many hugely public mishaps, from the introduction of its advertising service Beacon, to the permissions and access granted to developers, to charges of emotional manipulation, to the Cambridge Analytica fiasco, to accusations of election meddling. The truth is, the “move fast and break things” mantra that serves organizations well for exploring and making type 2 decisions can be deadly in the execution of type 1 decisions. Facebook itself seems to have recognized the dangers of using type 2 processes when operating at the scale it does. In 2014, Zuckerberg announced the retirement of “move fast and break things” and instituted the implementation of “move fast with stable infra.” While this was aimed at the developer community, I would argue it would have been useful to apply this discipline to the consequences of Facebook’s external activities.

  4. Instrument the Edges: Foster Little Bets

  Facebook gets this one right. The recommendation follows Peter Sims’s notion in his book Little Bets.

  As another example, Adobe uses its Kickbox program to solicit ideas and input from people throughout the organization who normally wouldn’t be heard at the strategy or innovation planning meetings. Their philosophy is that the most creative ideas can easily die fighting corporate bureaucracy for the chance to be discovered. Hence, the Kickbox—a red cardboard box with a “pull in case of ideas” graphic.

  Inside is a set of instructions to “beat” the box, a Bic pen, two sets of Post-it notes, a timer, a Staples mini-notebook for “bad ideas,” a slightly larger spiral notebook, a World Market caramel and sea salt chocolate bar, and a $10 Starbucks gift card. The latter two because all good innovations depend on a steady stream of sugar and caffeine. One thing that distinguishes the Kickbox from suggestion boxes or innovation boot camps is that it also comes with a $1,000 prepaid Citi card that employees can spend however they like, without ever justifying any purchase to a manager or filing an expense report.

  The idea of Kickbox was developed by Adobe chief strategist and vice president of creativity Mark Randall. In the midst of the company’s transition from shrink-wrapped-on-premises software to a cloud-based offering, Randall took advantage of this major shift to take a hard look at how Adobe brought new ideas to the surface. He used a best practice for getting insight from the edges—in this case, interviewing dozens of employees to find out what obstacles were in the way of their pursuing promising ideas based on insights that they might uniquely have about customers and next steps.

  What he found is consistent with my thesis here: Often, the big problem was not coming up with interesting ideas. The problem was fighting one’s way through the bureaucracy to get the approvals necessary to move forward. Randall had a world-class insight: for the price of funding just one $1 million project, he could fund one thousand $1,000 little bets. Any employee can request a Kickbox, and there are no deadlines or penalties if the idea doesn’t pan out. Participants are urged (but not required) to attend a two-day course that teaches them about some of the basics of vetting an idea and nurturing it, such as gauging customer interest. The curriculum that comes with a Kickbox consists of six levels, each of which has its own suggested next steps and a few questions. Complete all the levels, and you “beat the box.”

  Of the roughly one thousand people to have obtained a Kickbox so far, relatively few have made it to the next level, although Adobe credits insights developed through the Kickbox program as instrumental in its acquisition of the content company Fotolia for $800 million. Some twenty-three Kickboxers have, however, made it all the way through the six levels. At that point, they have everything they need to sell management on their idea and to receive a prized blue Kickbox. The contents of the blue box are a mystery, but that transition represents a journey from the edges of the organization (the red box) to key decision-making roles (the blue box).

  Adobe has, moreover, made the Kickbox program open-source, so that other organizations can give it a try.

  5. Get out of the Building

  Whatever their motivations, it is relatively clear that what might have begun with good intentions on the part of the data marketing firms has had any number of unintended consequences. I would assume that Facebook never intended its targeting to extend to political manipulation or tyrannical citizen suppression. But the inability to see how things work “in the field” creates blind spots that can be readily exploited by bad actors.

  Alert leaders make it a point to personally connect with the external environment, looking for what is changing and how. As serial entrepreneur, educator, and inventor of the “customer discovery” process Steve Blank is fond of saying, “There are no answers in the building.” His encouragement is for everyone in the organization to get out and find inspiration and ideas from customers outside their normal interactions. This is complicated because frontline employees often unintentionally hide information from their leaders in a misplaced effort to give a good impression.

  In a New York Times story that is ostensibly about worker hours, you can see how this happens. The main point of the story is that the Gap had seen some business benefits from offering workers more stable and predictable hours. Not all managers, it reported, were finding this to be easy. Indeed, one store manager said that he had “probably extended two to three shifts every day in the run up to the visit” by an executive.

  Let that sink in for a minute. The laudable effort on the part of the executive to experience his organization’s contact with customers in the field was completely undermined by the manager’s decision. The store he was experiencing was not the one that customers normally encountered, but one with staffing levels significantly higher than were budgeted for. No wonder the leader overlooked the signals that all might not be well: there was no opportunity to see them at all. Not that the store manager was to blame. In many company cultures, this would be standard operating procedure. It’s kind of like straightening up the living room when you are expecting guests. We all know the living room doesn’t usually look like that!

  Another example of this pitfall is an executive from a wireless telecom company who attended one of my classes. At the time, the company was famous for spotty coverage and generally poor network performance in many parts of the country. He mentioned to me that one of their executives from headquarters (which happened to be in Europe) was going to be coming to the United States the following week. I asked him
, “How do your executives react to the poor quality of the service here in the States?” He responded, “Oh, they don’t have those problems. We know their itineraries, the routes they take to get from place to place, and where they’ll be working. Our technical guys always make sure that the signals they get are nice and strong and that they don’t have those problems. After all, they have work to get done while they are here.” Once again, a deliberate, if unintentional, decision to shield decision-makers from the reality of how their organization feels to its customers.

  The encouragement here is to make sure that you don’t disappear into the safe spaces at corporate headquarters, but instead let yourself experience direct exposure to what is actually going on in the connection between your customers and your organization.

  Another way of guaranteeing that this will happen is to put leaders in a position where running into customers occurs naturally. For instance, consider moving your desk to be near where the action is, or make a point of being present when critical conversations are taking place.

  A number of “get out of the building type” exercises can be very helpful here. One I like is borrowed from my colleagues at Solve Next and is called Brand Takeover. Basically, what you do is imagine that your organization was taken over by a different one. Then you ask yourself: What would they have you start doing? Stop doing? If you had vastly more marketing money to spend, how would they want you to spend it? Just imagining that you are part of an entirely different organization can be immensely liberating.

  6. Create Incentives That Reveal Useful, If Awkward, Information

  Given that Facebook’s business model relies on selling personal information, it isn’t surprising that reports that this process was deeply flawed were not exactly welcomed with open arms. Facebook executives simply did not want to listen. These executives brusquely dismissed questions regarding privacy, arguing that users “gave their consent.”