Tuesday, October 12, 2004

Strategic innovation

A strategy is an effective one if it creates a certain level of competitive advantage and if it's able to sustain this advantage over time. Many companies develop a strategy but fail to implement and execute well. True success lies in the ability to implement the strategy.

In earlier posts and articles I emphasized the fact that strategies do not implement themselves. People do.

However, a company consists of different people, different functions, different agendas, priorities and ways of working. All of these must be aligned around the shared strategic goals. Therefore it is absolutely necessary that there is sufficient clarity about goals and values so that these are reflected in day-to-day interactions and operating relationships. Even in highly focused organizations decision processes are quite often a matter of "muddling through" since over time the company has developed a lot of inefficiencies.

When operational inefficiencies become too intense, organizations attempt to do something about it, usually by introducing the latest management technique. In most cases they find out that it comes down to software or training. Do these solve the problem? No; at least that is what managers and CEO's say. As one of them put it: "after the smoke has gone, we're still faced with the same questions:

· We keep operating chaotically, we keep on struggling with getting agreement on where we are and where we should go to;

· Marketing, sales and operations keep on acting as if the others weren't there;

· We keep on having trouble with internal communications;

· New software-packages allow us to produce output faster, but it isn't any better;

· Value added by new technologies is wiped out by value lost on the people front.

Why do change and innovation efforts keep on failing like this?

There are a number of facts you cannot discard if you want to develop an organisation that is innovating and that ensures your competitive strength:


· Remember that innovation is mostly a matter of reworking available knowledge to find useful things for the organization. Small improvements are as welcome as important shifts.

· Innovation can only come from individuals and small teams. Processes, systems, software, training or large R&D budgets do not innovate, only people can.

· Individuals and small teams are the core and the cornerstone of innovation. Innovation actually happens at the interface between individuals or groups. The surrounding environment (whether your organization or not) can support their efforts or prevent them.

· Innovation should be embedded in teams. Teams will always do better than individuals to create innovation. Teams are able to incorporate different roles, provide different points of view, different bodies of knowledge etc.

· Individuals and people in teams can learn to become more innovative. If the new 'paradigm' makes sense to them as well intellectually as emotionally, their attitudes and behaviour will change. Innovation is a skill that can be taught.

· Make sure that everyone sees the bigger picture and that everyone is given room enough.

· Make sure to keep people or managers that "always have the best answer to any problem" as far away from your innovation efforts as possible.

· Don't expect that everything will be done right from the first time. If you do, then forget about innovation and copy some competitor.

· Lack of respect and acknowledgement for your people is one of the surest ways to ruin their innovation contribution.

Then how can an organization proceed to create sustainable change that is both profitable and appealing to people? Our experience is that if you take a truly innovative approach, the benefits are both long-term, as well as short-term.

What can you do to enable true innovation:


· Demonstrate 100% commitment at the top. No benevolent agreement but true commitment. If you are not committed, forget it. People will find out sooner than you think.

· Demand innovation and give the organization a clear mandate.

· Start wherever in the organization you find volunteers. Not everyone is ready and able from day one.

· Eliminate barriers to innovation as soon as they are uncovered (rules, patterns, paradigms, etc.).

· Listen carefully to your people and make sure to create direct unbiased feedback channels and channels for new ideas that do not fit the current structures.

· Use the existing planning and budget processes, to make change official.

· Train the mid-level managers on the management of innovation. Make sure they understand their job: not to know all the answers, but to make sure the team finds the best possible answers.

· Balance change and stability over time, so that no area is overwhelmed by a change-overload. Regularly check the organization for readiness. That is the place to start the next wave of initiatives.

posted by es @ 18:14 1 comments

Monday, October 11, 2004

Traps in Decision-making

It is part of a managers' daily task to make decisions. Most of the decisions they make seem to be good - or at least good enough. If not most of our companies wouldn't last long before going down the drain. However. Most decisions are made in the absence of sufficient information. That is one of the reasons why the quality of a decision can only be evaluated post factum. That is, after it has been made and when the consequences are (becoming) clear.

Under circumstances in which not all information is available, the decision-maker's first decision is whether he or she has enough information to make a decision or not. The decision itself then, follows.

How then, does a person make a decision?
We found that two principles are basic to understand this process:
1. Every action and every decision eventually comes down to a human-made choice.
2. Every choice that a person makes, is always intended to make the best deal, at that moment, for that person.

These principles have some far reaching consequences.

Therefore:

· Whatever goes wrong, is caused (in the end) by people, not by circumstances, software or lack of time.

· Improving outcomes (e.g. results of an organisation) necessitates changing the way the decisions are made.

· What "the best possible deal" for a person is, depends on the knowledge as well as on the value scale used at the moment of making the decision.

We must realize that the process of making a decision is a minefield. A manager or CEO may think that a collaborator or manager will use exactly the same value scale as he would, and that the collaborator or manager will use the same body of knowledge. But usually these are nothing more than assumptions. False assumptions.

Some of the major flaws in decision-making: what can (and according to Murphy: will) go wrong?

  • Arrogance. Arrogance is the tendency to make decisions alone. Many people with power and influence (genuinely) believe their expertise or gut feeling is more reliable, plausible and credible, than the consensus of their team, advisors, critics or customers. Others are convinced that the simple fact of being the boss warrants the quality of the decisions. To some managers asking for more information or asking other people for their opinion is unnecessary and even a sign of weak leadership. Effective leaders remain open-minded, respectful and thoughtful.
  • Groupthink. This concept, identified by Irving Janis, refers to faulty decision-making in a group. When a group is highly motivated, under pressure, too excited about a topic or too enthusiastic to make a decision, groupthink is likely to occur. Groupthink does not consider all alternatives, is not critical of each other's ideas, does not examine early alternatives, does not look at the problem at hand from different angles, does not seek expert opinion and wants unanimity at the expense of quality decisions. Groupthink is especially dangerous in teams lead by a leader who suffers from 'Arrogance'.
  • Representativeness. People tend to judge the probability of an event by finding an event they consider as ‘comparable'. Then they assume that the probabilities will be similar. Usually the fallacy is in assuming that similarity in one characteristic, implies similarity in all characteristics. One example of this is what we call "the expert's fallacy". Experts may jump to conclusions, based on early recognisable aspects, just to demonstrate they are experts.
  • Availability. This is the tendency of people's judgement to align with readily available information. It is a way of finding answers by deciding, based on information the mind can retrieve. Information that is not immediately available is considered as not necessary. This heuristic can very easily lead you astray. Check here whether you use this heuristic.
  • Imaginability. This is the tendency to accept an idea or a thesis, if one can imagine it. Being able to imagine some event, makes people believe it is more likely to happen. If you can't imagine all chickens being destroyed in Europe due to bird flu, does that make supply definitely assured? If a CEO says "I can't imagine that our largest competitor will start an action plan to gain market share", does that make it impossible? Try to imagine(!) the effects in clinical practice of doctors that can't imagine AIDS occurring in their patients in a 'non-AIDS'-country. Before 9/11 it was un-imaginable in the USA, that terrorists could attack America on American ground.
  • Recency. Another decision-making flaw may be induced by the effect of recency. People tend to believe that an event that happened recently is more likely to happen again. After 9/11 safety and security regulations in airports were sharpened and applied much more severely than before - because public and politicians were convinced it could very well happen again.
  • Illusory correlations. Illusory correlations and stereotypes occur when one perceives a relationship between two events, when that relationship does not exist or to a much lesser extent than we believe. Examples are e.g. older employees - less motivated; technical skilled - male; price - quality; formal training - performance; umbrellas sold - cases of flue.

An outsider watching the flawed decision-making process, witnesses a person or a group whose judgement coalesces around a single and heavily biased point of view. What happens is that the person (or group) wants to believe something and therefore attaches too much importance to assertions that support that belief, and deny, or negate, assertions that contradict it.

The consequences of flawed decision-making can be catastrophic, and usually it is not the decision makers that are the victims.

So in order to improve the quality of decision-making in an organisation, we must ensure as much as possible that relevant knowledge is provided, accessible and available to every person in the chain from decision to execution. Second, we must ensure that every person uses the same scale of values. If this scale is not absolutely clear to everyone involved, every person is likely to make a different decision. Third, we must ensure that decision-makers gain insight in the process itself and more specifically make them aware of the dangers that threaten sound decision-making.




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posted by es @ 19:44 0 comments

Friday, October 08, 2004





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posted by es @ 17:02 0 comments

Why do some organisations fail to deliver?

In many organisations there are units that are very busy with all sorts of activities, but that unfortunately fail to deliver the intended results. How is it possible that in one and the same organisation, there are units that deliver and others that don't?
Findings from our consulting practice and recommendations from researchers indicate that there are four variables that have an important influence on the fact that an organisation is able to produce results effectively. Understanding and managing these variables is a very important issue for managers of all kinds in order to deliver effectively.

For ease of remembering we call them "CASE".
* Clarity
* Alignment
* Steering
* Execution

Clarity: failing to clarify goals
Alignment: failing to ensure that every member of the team understands priorities
Steering: failing to provide the necessary tools, resources and means to the team
Execution: failing to set standards, to measure and to collect and give feedback

posted by es @ 11:23 0 comments