by Rita McGrath
Perhaps the biggest myth that gets in the way of innovation is that it is all about the big idea. Get a good enough idea, people say, and the rest will magically fall into place. Nothing could be further from the truth!
Good ideas are, of course, important, but the initial ideas that innovators pursue are seldom the ones that make it to market. Instead, innovators need to go from an idea through a process of incubation, in which the idea is made more concrete and market-ready, and then eventually through a process that I call “acceleration,” in which the idea is scaled up so that it can become part of the parent organization as an operating business. Discovery-driven planning provides the road map for navigating this process.
Key Takeaways
As the weak signals of an impending inflection point become stronger, there will come a time when it makes sense to explore what to do about them. However, you will still be grappling with a very high ratio of assumptions you’ll be making to knowledge based on facts. The best path forward, therefore, is to deploy a discovery-driven approach in which you plan to convert assumptions into knowledge, rather than simply try to prove that you were right.
Your goal at this stage should be to generate as many possibilities as you can and to see if you can invalidate them quickly.
Don’t worry about being “right.” Instead, think about whether it is worth it to learn about the next step.
Start with your arena: where are the funds going to come from, and is there enough there to make this effort worthwhile?
Habitual entrepreneurs use a set of practices that help them see around corners, such as building varied, nonredundant networks of connections for advice, resources, and insight. You can learn these practices as well.
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Galvanizing the Organization
Big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace.
—Jeff Bezos
Imagine a Microsoft senior leadership meeting kicking off with “EMPATHY” in all capital letters projected on a screen. For those with any historical experience working with the company, this would be a bit of a surprise, to say the least. And yet, that’s what Satya Nadella, Microsoft’s third CEO, passionately believes will transform the company—having empathy with customers, empathy with one another, and creating psychologically safe, growth-mindset-oriented working environments.
This is a far cry from the internally competitive, rather hostile culture lampooned in a cartoon featuring the firm’s organizational chart in 2011.
Nadella was determined to wipe out this impression and galvanize the organization to share a common point of view about the future. While he has been given a lot of credit in the media for making this change happen in his current role, the real magic of his approach began long before he rose to the top job in the company. Throughout his career at Microsoft, he has leveraged the power of the people around him to create alignment regarding the company’s perspective on the future.
That is the core message of this chapter. We tend to imbue CEOs and senior leaders with supernatural powers when they succeed and with damning deficiencies when they fail. But the real heroes of galvanizing the organization are typically elsewhere in the hierarchy. In fact, you might be one of them.
These are the people close to the coal face of the organization (the edges discussed in Chapter 1), who often have the flashes of real insight into what is going on. The senior leadership role is often more about providing a space for those insights to be heard, recognizing the ones that are significant, and empowering those with the most knowledge to do something about them.
In organizations that navigate inflection points well, these people are listened to, their ideas are acted on, and the people themselves are often promoted into more influential roles. In organizations that fail to handle inflection points effectively, the bearers of news (whether good or bad) are not “heard,” and subsequently their ideas are not acted on. The underlying concept is that we need to transition from a view of organizations as merely complicated to a view that recognizes them as fundamentally complex. The big difference here is that in a complicated operation, you can predict what is going to happen by simply knowing the initial conditions. In a complex one, because the outcome results from unpredictable interactions among components, no such predictability applies.
Flying a plane is a good example. A Boeing 747 is a massively complicated machine, but we have figured out how to make its operations relatively predictable. The air traffic control system, however, is complex—its parts are interdependent, which means things can change at any moment, creating outcomes that are surprising or unexpected.
In much the same way, before an organization can do something about an emerging inflection point, a critical mass of people need to believe that they are indeed at a turning point. That is, if no action is taken now, the future will be dim. Although senior leadership has a role to play in the process of capturing all employees’ hearts and minds toward this purpose, the actions of many people, up and down the hierarchy, are what truly lead to a desirable outcome.
Leaving this critical set of activities in the hands of those at the very top of an organization is an almost certain recipe for failure. The role of leadership—rather than trying to control a complex environment—is much more about orchestrating individual inputs so that people feel empowered, whatever their formal positions, to take fast, confident action when new information is revealed.
The Promising Rise and Tragic Fall of Microsoft’s Kin Phone
A tale that illustrates the downside of treating a complex environment as if it were a complicated one is the story of Microsoft’s disastrous introduction of its Kin mobile phone back in 2010 (long before Nadella took the reins). What makes it a tragedy to me is that I have long thought the strategy was really smart, the product itself had a lot of interesting elements to it, and the team working on it was exceptionally talented. Its failure offers a number of lessons to be learned about how not to take action in the face of a looming inflection point.
A Bit of History
J Allard joined Microsoft in 1991, shortly after graduating from Boston University. He started as a networking programmer. On January 25, 1994, he famously saw around one of the biggest corners of our time, the rise of the Internet.
First, some background. Allard had been one of those people on the edges, perceiving looming threats and possible inflection points early on and bringing that message to senior leadership to prompt organization-wide action.
After joining Microsoft in 1991, he was one of the first to see the impending inflection point that the Internet represented for a company that made most of its living selling boxed software for personal computers. Before the Internet inflection point was obvious to everyone, in January of 1994 Allard composed a memo titled “Windows: The Next Killer Application for the Internet.” He wrote, “The Internet provides an incredible opportunity for Microsoft to effectively explore large-scale networks from many levels: customer needs, technical challenges, quality-of-service issues, electronic commerce and information-browsing technologies.” He was all of twenty-five years old at the time.
Allard’s view of the world to come was vivid enough that Bill Gates convened a high-profile, all-day meeting bringing together senior executives and a group of the younger folks, Allard among them. Allard, described by the New York Times as an “evangelist,” made a passionate case that the Internet was going to change their world entirely. As one attendee later recalled, Gates concluded, “We’re going to make a big bet on the Internet.” The release of Windows 95 following the meeting incorporated the Internet-friendly TCP/IP protocols in the operating system (later getting the company in hot water for supposedly undermining the competitive chances of Netscape, a standalone Internet browser). Eventually, Allard’s message inspired a major redirection of the company.
Weak signals of another inflection point that thre
atened Microsoft were also picked up along the edges. In this case, it was Sony’s talk of its PlayStation 2 becoming the center for entertainment, information sharing, and other digital activities in the home, posing a threat to traditional personal computers. A group of Allard’s peers began mobilizing to push Microsoft to meet the looming challenge by entering the gaming business. After some arm-twisting, Allard joined what would become the Xbox team, and he was widely credited with having a critical leadership role in that product’s design and subsequent success. He then led Microsoft’s ultimately unsuccessful effort to enter the MP3 business with the Zune music player, although his reputation within the company (and strong relationship with Bill Gates) remained intact.
Enter the Mobile Computing Inflection Point
What happened next has its roots in the turn of the millennium. At that time, mobile phones were all the rage, with reports that over a billion people were carrying them around. Their main uses, however, were for making calls and engaging in various forms of messaging (remember the “BlackBerry prayer”?). Three former Apple engineers—Andy Rubin, Matt Hershenson, and Joe Britt—formed a new company called Danger in 2000. Their vision was to create an “end-to-end wireless Internet solution focused on affordability and great user experience.”
What they came up with was a tiny computer that could sit on your hip, hence its initial name, the Hiptop. Originally, the device—which later became known as the T-Mobile Sidekick—was referred to as “the Peanut.” Its designers wanted to make the Internet available to the average person on the go. At the time, the big Internet portals really only interacted with users at their desks, often only at work. In contrast, the Peanut was an inexpensive key fob–friendly device that would allow an ordinary person to download and carry around information, such as to-do lists, recent emails, and addresses, that was stored on the big portals. It used only one-way information transfer. The business model called for selling end users the device for $1, then charging the portals a monthly fee for every user.
What we now recognize as having been a big breakthrough, at the time seemed only incremental. The goal envisioned for the Peanut was that users would sync the device to their computer (and to their preferred portal) each day, which would download the most critical data (remember, this was a one-way sync to the device). The development team thought that more-minor updates would be sent to the device during the day over an FM radio subcarrier. The idea was that if you could receive FM radio, you could receive a signal, and the company intended to lease spectrum in major metropolitan markets to accomplish this outcome. The FM signal concept “turned out to be a really bad idea,” according to Chris DeSalvo, a senior Danger engineer at the time.
Abandoning the doomed FM idea, the team then turned to exploring the two-way communication potential of a technology hosted on GSM networks called GPRS. One of the firm’s investors even found a carrier interested in showcasing the technology, which was looking for devices that could take advantage of the new capability. That carrier was a company called VoiceStream Wireless, a spin-off from Western Wireless. (I was one of the original VoiceStream subscribers with an Ericsson phone I owned back in the day!) VoiceStream was eventually purchased by Deutsche Telekom in 2001 and renamed T-Mobile USA in 2002.
With the tantalizing prospect of real-time two-way communication before them, the team dropped the Peanut idea and built a new-to-the-world device they hoped other people would want to use as well. That led to the Hiptop, which DeSalvo described as “the first always-on, internet-connected smartphone.” Among its many innovative features was what we would recognize today as real-time storage of your data in the cloud and even an app store of sorts called “download fun.”
In October of 2002, T-Mobile rebranded the device, releasing it under the name Sidekick. It became enormously popular, the go-to device for celebrities and teens, and it even starred in a celebrity scandal involving the theft of nude photos of Paris Hilton, who carried one.
Conceiving of the Kin: A Disruptive Idea
Back to J Allard. Sometime, ironically, around the same time that Apple was inching toward releasing the first iPhone, Allard had a vision that there was space in the market for a phone along the lines of the Sidekick. It was to be a “platform agnostic, cloud-centric featurephone. A featurephone that could be had at a relatively low cost, and sold to a burgeoning market of teens and young adults who had little need for a BlackBerry-level device (or pricing).”
Allard believed that the market for such a phone could be huge—for people who wanted some of the functionality offered by smartphones without the huge price tag or expensive data plans. It would be sold to the kind of individuals (typically young) who lived on social media and wanted technology to support sending photos and texts to one another. The first step toward making this a reality was Microsoft’s acquisition of Danger, which took place in September of 2008 and reportedly cost $500 million.
I’ll editorialize a bit here. I actually think that strategy could have worked well. Making a phone that could appeal to the low end of the market but with some of the features found at the high end—if it were inexpensive enough—could have been quite disruptive and done for Microsoft what the advent of inexpensive personal computers did. To do that, however, they would have had to come quickly into the market and have the full weight of the company behind the product.
Allard is a persuasive evangelist, and others believed it was a good idea, too. Initially, a host of potential partners eagerly sought to be part of the project. Microsoft eventually went with Sharp to manufacture the phones and with Verizon to be the exclusive carrier for them. Allard (with the backing of Steve Ballmer, Microsoft’s CEO) kept his organization completely separate from the efforts of the higher-end Windows phone group. He sought to pull resources from across the company (for instance, from Zune).
The two operations were located in two different divisions at Microsoft—Project Pink (as the Kin project was called) was in the Entertainment and Devices Division, headed up by Robbie Bach, a very highly regarded senior executive who was also credited with the success of the Xbox. The Windows products were being developed in their own division, led by Andy Lees.
Meanwhile, Apple was already causing a stir with its iPhone. Android, purchased by Google (with Andy Rubin, the original founder of Danger), was revealed in 2007 as well and started shipping in 2008. And Microsoft? They were nowhere in particular. The mobile effort at Microsoft, according to one observer, was “withering.”
That is where the trouble started. According to Engadget, “To put it bluntly, he [Lees] didn’t like that Pink existed. To quote our sources, Lees was ‘jealous,’ and he was likely concerned that Kin was pulling mindshare (and presumably resources) from Windows Mobile’s roadmap. With enough pressure, Lees ended up getting his way; Pink fell under his charge and Allard was forced into the background.”
The rest of the Kin story is rather sad. Lees made a number of decisions (such as making the operating system more like that of Windows 7) that delayed the project. He also didn’t support much investment in critical features that users were expecting. Verizon, which had initially agreed to offer entry-level pricing for the data plans, ended up offering a far more expensive monthly plan than the intended customer segment could afford. The phone suffered an ignominious end, remaining on the market for only six weeks. The price tag? North of $1 billion, according to many observers. The product’s failure was cited as one reason Steve Ballmer’s bonus was cut in half that year. Another of Allard’s projects (an early version of something like an iPad, called Courier) was canceled, some said because powerful people at Microsoft felt it wasn’t consistent with the road map for Windows Mobile. Allard eventually left the company.
The Kin issues are emblematic of the difficulty Microsoft’s leadership had in galvanizing its troops around a common vision. Even as the world was moving toward tighter, more integrated customer experiences, Microsoft struggled to have people working together.
Wh
at the company historically got right was listening to people on the edges, particularly in the Bill Gates era. But what it historically was frustrated by was not being able to take those messages and transform them into a galvanizing common purpose.
Microsoft began the millennium with a market capitalization of $642 billion. Over the next ten years, it continued to reap the rewards of its dominant position in desktop computers, generating enormous cash flows. From 1996 to 2005, the so-called Wintel (Windows + Intel–designed microprocessors) enjoyed a dominant share of the market for personal computing operating systems. By 2012, however, Wintel’s market share was down to 35 percent, with Apple and Google devices edging it out.
Under Steve Ballmer, Microsoft released the Vista operating system, an ambitious overhaul of the core Windows platform that took a long time to design and was roundly criticized by customers. Some felt that the Vista episode distracted Microsoft from the growing shift in utilization posed by smartphones and mobile applications. Indeed, Ballmer laughed at the iPhone after its imminent arrival was announced. He reasoned, quite sensibly, that a phone without a keyboard would not appeal to businesspeople. He felt the expense of the product and its lack of a keyboard would confine it to the consumer market. “I like our strategy,” he said at the time.