THE FIVE ELEMENTS OF ORGANIZATIONAL DISRUPTION
In my high-tech startup days, I once ran the product management team for a software company that sold utility products to software and network engineers. It was a promising venture with modest ambitions. At some point, the founders decided they wanted to stop playing small ball and instead go big. This meant pursuing corporate customers with multi-million-dollar budgets. For that, they brought me in to help.
The process for developing a new product looked roughly like this:
- 1. The CEO had a “vision” of what he wanted the business to accomplish within a specific enterprise networking market. The vision was light on details, but he was, you know, the boss.
- 2. I traveled extensively with our company account managers in order to better understand what customers were trying to accomplish, what their priorities were, and where we stood relative to the competition. The competition was, by the way, the proverbial eight-hundred-pound gorilla in the market.
- 3. I merged the vision with reality to come up with the product “marketecture,” which was what I called the nontechnical version of what the product needed to do.
- 4. The product management team negotiated with the engineering team to create the product specification and the release date.
- 5. Engineering built, iterated, and eventually released the negotiated version of the product on the agreed-upon date.
- 6. Marketing and Product Management managed the launch.
- 7. Sales prepared customers and then sold the product.
Despite the planning, it took us multiple versions of the product and often years to get it right. In the end, the customer determines what is right. The customer determines when the product is done. We had been in business for many years and had built a strong reputation; we developed a product that was technically superior to the competition’s, and one that cost significantly less. We received positive attention from analysts and the media, but had a tough time selling it to the enterprise market. Despite the superiority of the product, there was not a compelling enough reason for IT directors to risk replacing the incumbent product, which was “good enough.”
Disruption hit with the tragic events of 9/11. War and economic collapse followed. Crazily, much like many of the digital businesses that benefited from the COVID-19 tragedy, our startup grew during this period. The new economic environment meant that enterprise price for performance requirements suddenly made us the best choice. Hindsight is 20/20, of course, but it’s easy to see that we were operating through the entire process in “execution” mode. In other words, we were light on learning or exploring. Despite our breakthrough, we had done it wrong:
- - We failed to truly understand our customers.
- - We had no concept of learning from the market, other than getting feature requirements and paying attention to competitors.
- - Our strategy was determined by internal strength of personality as opposed to market-based evidence.
We could have benefited from another approach, a better way of thinking. And this is where the Five Elements of Disruption carry massive power and meaningful application for all organizations. Especially in these times of continuous ripples and constant disruptions, we must purposefully address uncertainty.
THE FIVE ELEMENTS OF DISRUPTION
- 1. Empathy: Understand customers deeply
- 2. Exploration: Deploy learning
- 3. Evidence: Make informed decisions
- 4. Equilibrium: Work toward balance
- 5. Ethics: Do the right thing
1. Empathy: Understand Customers Deeply
Empathy is vitally important to organizations seeking to succeed in the complex world of the twenty-first century. Yet it is an overused and often misunderstood term. It’s easy to get empathy wrong, and many of us do. So what do we mean by developing empathy in a business context?
Trying to be empathetic toward someone is not determining what you would do if you were in their shoes. Empathy is accepting and seeking to understand their perspective. It’s not drawing conclusions about their view or judging what you hear. In the moment, you don’t want to be evaluating what you might do with the information you glean. You’re in listening-and-trying-to-understand mode. This is a process, one that requires time and reflection. The goal is to connect with the emotional component of what people share. You try to understand how something makes them feel.
But why is this important? Because when operating in uncertainty, there’s no one right way to understand a problem, nor is there one right way to address it. When we “know,” we can look to best practices to solve a problem. We can teach people how to solve it and we can course-correct as we proceed, if necessary. We can evaluate how well the problem was solved. But if we “don’t know,” then we need to learn all these things.
Customer empathy is almost a corporate buzzword these days, and while I’m skeptical that millions of corporate employees are actually out developing a deep understanding of their customers, the fact that some are trying to pay attention is meaningful progress. Truly developing empathy for customers—understanding beyond feature requirements—can pay huge dividends across the organization. It’s not just useful for core product development, but also for making incremental improvements to all aspects of commercialization, including pricing strategies, marketing messages, and sales objections that must be overcome. Through empathy, unknown issues, such as channel problems, product complaints, partnership opportunities, and customer service needs, come to light.
Future growth is dependent on having an ear to the market, which is not simply reading market research reports. Maybe strategic objectives seek growth through capturing market share? Maybe there are companion products or services you could offer? Maybe a product retooling opens adjacent markets? The possibilities come from insights into customer needs.
In each of these examples, the customers do not necessarily know what they need. Customers often don’t understand what the possibilities are. It’s your business’s responsibility to understand each of these opportunities to serve, satisfy, and solve your customer needs. You may be able to solve bigger, more painful problems by understanding your customer more deeply. And therein lies a key payoff of empathy.
As the axiom goes, you can’t win the game if you don’t play the game; you can’t know your customer if you don’t listen to your customer. In a business environment where technical risk is less problematic than market risk, customer insights represent your new and vastly underappreciated intellectual capital. The risk to business is less “Can we build the product?” than “Should we?” For the vast majority of product ideas, we know they technically can be developed. Customer insights represent an important and vastly underappreciated intellectual capital versus, say, patents.
Striving for efficiency alone without incorporating the business mission hurts the empathy development process. You may have a centralized customer research organization, but that isn’t the same thing. Customer research primarily seeks to market and sell more efficiently. Traditional customer research answers the question “What is the top gaming platform of fifteen- to twenty-five-year-old white, suburban males?” Surveys and focus groups can help in understanding characteristics of broad market swaths, but aren’t great at uncovering insights. Customer research doesn’t answer, “Why?” It doesn’t explore human emotion or the unknown.
It’s also important to note what empathy development is not:
- - Market research, such as typical surveys, net promoter score, focus groups
- - Imagining you are the customer
- - Customer journey mapping or agile user story development without customer validation
Good empathy development helps you understand:
- - Customer environment or culture
- - Why customers make the choices they make
- - What customer needs, desires, and aspirations look like
- - The priority of customer needs
- - Obstacles to implementing product
- - Behaviors the customer must change to get value from the product
- - Objections to purchase
A leading insurer in Malaysia, we’ll call it KL Co, ran a series of weeklong “lean innovation” sprints, where internal teams comprised of individuals pulled from various parts of the organization develop empathy and run experiments to generate evidence for ways to improve business. The then–chief customer experience officer, Troy Barnes, was a great cheerleader to getting his teams out of the building and speaking with customers.
One team, led by innovation coach Van Tran, thought an AI chatbot might help lessen the load on the overburdened call center. Talking to the head of the call center, the first thing the team learned was that the top callers were not customers, but the independent agents that sold and supported KL Co products. Many of these people were a couple hundred feet away, in the building next door to KL Co headquarters. One in particular was a very influential and “difficult” agent.
So they made the walk over to the agent’s office. Tran recalls, “She blasted us for a good ten, fifteen minutes. It was incredibly uncomfortable hearing just how difficult we, KL Co, made her work. And she was like, ‘I’m one of the highest sellers. I’m sending you all this business and we never see anyone from HQ. You just throw over new apps and we don’t know how to use them.’ I remember feeling, ‘Oh, wow, that’s a really difficult way to start a conversation about a new app.’ "
The head of the agency shared that she and her agents, as well as other agencies, worked outside of the KL Co–provided tools. They belonged to a WhatsApp group where they could share tips and other information to answer customer questions. They were on Facebook, not the KL Co website.
Says Tran, “The agent took out her iPad and she’s scrolling, saying, ‘I’ve got all these apps. I don’t even log in. I don’t know what they do. No idea.’ Our learning was we need to support these agents by going where they are. They’re on Facebook, I’m on Facebook, too, I’m two seconds away from Facebook. So that was a big turning point for us. KL Co interacting with Facebook or a platform that was already established with the agents was, I think, a radical idea for us.”
The minimum result one gets with developing customer empathy work is a feature set. The ultimate result? To get insights that act as a competitive advantage for your business. The practice of developing empathy can be learned by anyone. Democratizing the ability means that everyone in the organization is capable of discovering insights from their stakeholders. It means that empathy skills can be employed internally as well.
Back-office-support functions benefit from understanding their colleagues better when they are launching internal initiatives. With empathy practices, departments can share information better and build new processes to improve efficiency. Employees work better when they are heard and understood. Leaders manage their people more effectively when they understand those people’s situations better. All this is more important in remote work situations.
Dr. Brené Brown’s work on empathy is focused on internal application; specifically, on how executives become better leaders through empathy. In her book Dare to Lead, Brown identified ten common issues leaders face in their organizations, most of which are resolved through a greater understanding of employees, colleagues, and leaders (empathy flows both ways), and a willingness to speak directly. The common issues include, for example, that people are scared to look wrong or not in the know, that they are unwilling to take the time to identify problems or shift away from ineffective solutions, and diminished trust among colleagues.liv
The work of developing empathy drives real value across the organization and positively affects all teams, but even more so in situations of uncertainty. I often get a raised eyebrow when I suggest the idea that employees develop empathy for leadership. But one of the biggest obstacles to reinventing old-school business management is that to effectively work within a complex system, decision-making must be pushed down the hierarchy. Leaders must recognize that the smart people they’ve hired, those employees who are closer to the problems, can make better, more timely decisions to solve them, without running everything up the stack for approval. For this to work, however, empathy needs to go both ways.
It’s rather obvious that a leader better understanding their people will help empower them. Perhaps less intuitively, if people understand more about managers and leadership, their backgrounds, the experiences that shape their worldviews, their philosophies, what keeps them up at night, their business fears, and so on, they will better learn how to make the most of that empowerment. They will learn how best to ask for and accept guidance, when and how to push back, what evidence to bring to conversations, and when to seek help for a key decision. This requires openness, awareness, and vulnerability on both sides.
A former innovation leader at GE—we’ll call him Samuel—shared a story with me that demonstrates the type of learning that can lead to internal changes in the way people work, while directly benefiting the organization. Samuel’s team struggled to receive adequate funding for their innovation projects. As is the case in many companies, his team was funded as a program or project, with an annual operational budget that is scrutinized each year based on how the money was spent and its “return on investment.” This term (also known as ROI) is in scare quotes, since it’s next to impossible for an innovation group to get a return each year. It was one of these flawed, Dilbert-ish management-by-efficiency moments where a program designed to find future growth is funded according to the requirement of an immediate return.
Samuel went about changing the funding mindset through a series of friendly lunch meetings with the head of finance. Samuel’s goal was to learn about her mindset:
- - What sort of accounting background did the CFO have? Was she a CPA? Did she work for any of the industry titan consulting firms? Had she ever worked at a startup?
- - What kept her up at night with respect to the current state of the business?
- - Outside of the normal operational budget process, what sources of funds did she have at her disposal to fund multi-year initiatives?
Samuel sought insights that would inform him of how she thought about being a steward of the complex finances of a massive corporation. Next, Samuel wanted to get her thinking on certain hypotheticals that affected his team, but also would benefit the future of the company. These had to do with philosophy:
- - If she had her druthers, where would the company focus its growth efforts?
- - If Finance was administering the company’s innovation, what data would she expect reported back to her and at what cadence?
- - How might she alter financial practices if unspent funds were immediately returned?
Samuel looked for insights that would instruct how he could demonstrate that he, too, would serve as a good steward of company money, and that he would be more transparent than in typical budgeting scenarios. Finally, the concept of returning unspent funds before the year was up was so mind-blowing that he knew he would have to ease the finance group into that. But, in a sense, he was “training up.” He was teaching the CFO and other leaders how investments in innovation require a different approach (one that funds based on learning metrics) from execution-minded programs where immediate ROI might be more appropriate.
This was not a one-and-done conversation. They designed a plan to ease into funding innovation teams as investments using funds from a multiyear capital expenditure bucket versus an annual operational one. A deep understanding of each other and the subsequent alignment between the innovation group work and company priorities changed long-held beliefs and practices.
This gets to a broader point about empathy work. There are two sides of the empathy coin:
- - Understanding people better
- - Doing something with the information learned
As human beings—workers, parents, students, patients, constituents, consumers, and so on—we wish we were better understood. We are confident we could do better in those roles if those on the other side of the relationship would take the time to know our needs, desires, and aspirations better.
Of course, we are also those people on the other side. As employers, doctors, care providers, teachers, politicians, and policy makers we can seek to understand our stakeholders better. It flows both ways. Only good can come from it. It doesn’t mean we all need to hug it out. It simply means deeper understanding.
After you have built an understanding, you get to do what you want with the knowledge you gain. To some degree, Samuel was using empathy development for his own advantage. He was looking for how he might apply what he learned in order to get what he wants. There are ethical limits to how one can and should use the information, of course, and in this case Samuel was using it to better the company.
I almost hate to say it, but there may be a selfish aspect to developing empathy. One could develop empathy for whole swaths of customers and choose not to build a product that serves them. Or to ignore features for one group in order to concentrate on another. While economic or industry policy makers benefit from understanding the impact of their actions on constituents, they have a variety of points of view they must consider and multiple variables to weigh when developing policy.
2. Exploration: Deploy Learning
Exploration is the new innovation. Exploration better captures the spirit required to both continuously improve existing business, as well as discover, test, and validate new opportunities for growth. The term “innovation” means too many things to different people. Most often, the term conjures technology, even when new technology might not be what drives value to customers, at all.
3M makes for an interesting example, not least of all because it is a diversified technology company. The company relies on invention. And yet their history is replete with stories of turning what look like failures into wins. In other words, they succeed at inventing, but if no market is found, invention doesn’t matter. Even their very founding was a failure. Starting off as the Minnesota Mining and Manufacturing Company, they sought to mine corundum to make sandpaper and tools for grinding. However, underground was anorthosite, not corundum, which is completely unsuitable for sandpaper, and this forced the company to creatively explore other applications. More than one hundred years later, 3M is a multi-billion-dollar company serving multiple industries and billions of customers around the world.
Ideas truly are a dime a dozen. Most companies do not have an “idea” problem. Choosing which idea to work on is the real problem. The command-and-control era dictated for ideas to be chosen by rank. Idea competitions and clichéd corporate shark tanks are a low-cost effort to reward employee input and creativity. But the ideas typically go nowhere, since it’s impossible to justify funding idea development based on the old-school, business case PowerPoint presentation. They are designed to fail.
The subjective quality of the idea is immaterial. If instead of encouraging people to come up with ideas, we empower people to test ideas and teach them how to do so, the impact on businesses will be immediate. Similar to how scientists use the scientific method to achieve technological invention, people can run experiments to test and observe whether ideas will work in practice, without fully investing in developing the idea. This is true, whether exploring ideas to improve a process, such as lean manufacturing does on the factory floor, or exploring a new business model, like using an app to immediately transfer money person to person. The savings of resources, time, and money in this process are immense compared to the old-school technology invention model.
All new products, services, or internal processes require a change in customer, user, or stakeholder behavior. This is a simple fact. For a new product to succeed the customer must do something different from what they do today. There are numerous potential obstacles to a new behavior taking hold. In other words, for the new initiative to work, multiple assumptions about behavior must be true. Exploration seeks to answer: “How can we figure out whether customers will change behaviors such that the idea is viable?”
In the example of KL Co described earlier in this chapter, they hoped to resolve the known difficulty of their agents getting timely information to better serve customers. But when the KL Co team spoke with the agents, they uncovered their frustration with KL Co apps. While the idea they had of the chatbot might have resolved the former, many assumptions had to be true for another app to actually solve the problem. The old-school way would be to turn the findings over to the project management group, who, if the project were approved, would build the app like all the other apps, without any customer involvement. The exploration method instead had the team running experiments to test assumptions during the same sprint.
“We found,” Tran said, “that 95 percent of agents did not use their KL Co–issued email accounts. Because they said, ‘I don’t know how to log in.’ KL Co was sending 90 percent of their updates via a platform that no one was using. So we decided we’d build the app on Facebook instead.”
They quickly built a new Facebook page and hid the chatbot behind an access code. They watched as agents (in their offices) would pull up the page, access the bot, and interact with it. The trick for the experiment was that the bot was actually a teammate back at HQ messaging live with the agents, pretending to be the bot. The team was watching the agent behavior and asking follow-up questions to learn whether the product was viable before building it.
Barnes, KL Co’s lean innovation early adopter, urged the five teams forward throughout, exalting them to more than six hundred customer engagements during the one week. KL Co launched on their chatbot app on Facebook less than six months later, overcoming old-school resistance about “doing things differently,” such as using external cloud-based platforms for customer applications. Going where the customers (or agents, in this case) are is how companies must work in the digital age.
Investors were not interested in the startup I described at the beginning of this chapter, until after we started growing. No one cared about our enterprise strategy, or whatever business case we showed them that was made up out of whole cloth.
What investors want is evidence that proves what startup founders believe to be true is actually the case. Market-based evidence is the output of empathy and exploration. Again, more than intellectual property, insights are the gold nuggets companies seek in order to know where to head next.
3. Evidence: Make Informed Decisions
Evidence-informed decision-making seeks to eliminate the biases we all bring to decision-making. Twentieth-century command-and-control organizational structure supports decision-making by rank. The quality of the decision, the reasoning, or the evidence in support of it doesn’t matter, since the structure assumes those with a higher rank have more knowledge or better experience. “The buck stops here” is a valuable ethos in certain situations, especially in times of crises or where decisions must be made despite a lack of information. At other times, rank perhaps properly assumes a greater understanding of the bigger picture. But many other circumstances require specialized expertise or knowledge that are independent of hierarchy. Here, an organization needs to enable the right people to make the call. Evidence-informed decisions are one of the best ways to accomplish this objective.
Insights based upon customer empathy work, and data generated from experiments presented to leadership in support of an idea is a more powerful way to invest in projects versus decisions made by rank, old-market experience, or bias. It also promotes a shift in culture, conferring trust across the rank and file, empowering them to take ownership.
Traditional military hierarchy, for example, determines how, what, and when specific tactics will be undertaken. In special forces, however, the responsibility to lead during portions of a mission depends upon expertise and knowledge of the individuals, not their rank. In this sense they work as an agile team facing massive uncertainty. Going back to General McChrystal, “we restructured our force from the ground up on principles of extremely transparent information sharing (what we call ‘shared consciousness’) and decentralized decision-making authority.”lv The information shared horizontally across services and vertically up the stack is based on the evidence developed by those with “boots on the ground.”
Evidence is a powerful way to resolve conflict. Even if not everyone agrees on a course of action, agreeing to rely on evidence to help choose between various courses of action is a powerful way to build consensus.
Using the phrase “research shows” is, however, often an attempt to selectively use evidence to confirm bias. Problems arise when you can’t determine whether the research is timely, relevant, and well understood. Without the experts who performed the research, this is difficult to know. Exploration is a good way to create new evidence that should confirm the research.
Dr. Brené Brown’s concept of “rumbling with vulnerability” is useful here. The leadership skills she discusses, such as empathy and vulnerability, are in service to driving business impact. When difficult decisions are made in the face of uncertainty, checking egos at the door is vital. But the process of making a difficult decision is not a woo-woo, kumbaya session. It requires participants to show up ready to defend their case. Bring evidence. If leadership decides not to proceed with a team’s idea, for example, based on the shared evidence, the team learns the level of proof required for funding.
Optimize What You Measure
An important question regarding evidence is, what data should be considered? Big companies tend to measure the efficiency of execution, which is why it is the focus of optimization. Key Performance Indicators (KPIs) and Outcome and Key Results (OKRs) define execution-oriented metrics. Often what ends up being measured does not have a direct impact on company performance, but rather portends a specific outcome based on historical precedence.
Sales performance is an obvious exception. For existing products in existing markets, sales managers sum up their people’s output to report their group’s revenue numbers. Sales projections use historical data to predict future numbers, assuming no disruptions occur.
The other end of the spectrum may be the typical innovation metric: number of patents. Technology firms with business models dependent on product commercialization often produce hundreds, if not thousands, of patents annually. Their annual innovations, however, are actually typically zero, since it’s highly likely the inventions never see the light of day. But the company achieved its measured objective. Google “most innovative company” awards and you’ll likely see patent portfolio as the number one measure.
Most company performance is measured in this disconnected way. Strategic priorities determine the company objectives for the year. The specialization of skills that characterizes particular departments determines what outcome their group needs to accomplish, based on what they’ve accomplished in the past. Those accomplishments are laid across the calendar to determine what needs to be done by when, creating the milestones. There need not be, and most often is not, an obvious causal relationship between the group’s output and the company’s performance. These milestones are distributed among members of the group as their KPIs or OKRs.
This method doesn’t work very well when facing uncertainty, since, as all prospectuses like to say, “past performance is not an indicator of future results.” As a matter of fact, the more uncertainty, the more the guarantee that future results will not be the same. Startup investors, on the other hand, understand learning metrics better than most, since they don’t know when they’ll see measurable desired outcomes. Startups by their nature understand learning metrics versus execution metrics.
Learning Impact Metrics (LIMs) is a method I introduced in The Lean Entrepreneur to determine the learning metrics one might track for a new product, an internal startup, or any initiative faced with uncertainty. As mentioned above, anything that requires behavior change (including culture-change programs) faces uncertainty, and for the initiatives to succeed, certain assumptions must be true. The way to track the progress of a startup, for example, is to measure customers’ behavior.
Customers go through seven states from being Aware to being Passionate about a product or service:
- - Aware: I am cognizant that a product exists within some meaningful context.
- - Intrigued: The product seems to address a need I have.
- - Trusting: I believe the product will actually work for me.
- - Convinced: I am willing to exchange some sort of currency for the product.
- - Hopeful: I am waiting until I receive the promised value of the product.
- - Satisfied: I receive the promised value.
- - Passionate: My experience goes above and beyond my expectations.
For each state, the startup hypothesizes the business action required to induce customers to behave in a particular way that indicates progress to a specific state. The behavior can be measured. Using this method, teams can use exploration techniques to generate evidence that indicates the project is headed in the right direction. Further investment is based on the evidence.
As the team progresses, unknown aspects of the business model convert to known; items that have been learned are now executed upon. Here’s a simplistic software as a service video sharing example:
- - When first starting, where the customer, problem, and solution are not well understood, learning metrics might be the number of customers talked to each week, and the results of specific experiments demonstrating potential customer behavior with respect to recording and uploading videos.
- - As learning progresses, learning metrics might be: the number of users who uploaded a video and a list of their colleagues to share it with (via a form, perhaps, not the actual product, which hasn’t been developed).
- - The startup team proceeds to fulfill the value proposition by hand, as the metric shifts to the month-over-month growth of people who send one video per week and a list of people to share it with.
- - At some point, the numbers indicate a minimum viable product should be built; metrics regarding marketing and conversion funnels are added. For example, the number of unique website hits, the number of account creations, and so on.
- - When the MVP is in the field, the number one metric is the month-over-month growth of satisfied users, based on the number of videos sent per week, the number of shares per video, and the number of views per video.
- - Perhaps a premium plan is tested to determine what customers might pay for, so metrics that are tracked include conversions to pay, amount of time to convert, and even revenue.
- - Revenue, marketing, and conversion execution metrics are now reported alongside continued funnel learning and product learning metrics.
4. Equilibrium: Work Toward Balance
Startups want to execute as soon as possible but are often stuck in mostly exploration mode for years. Achieving an execution-dominated mode means they’ve figured out much of their business model and they’re growing. Big companies, on the other hand, are great at execution and only want to execute, ignoring their need to explore wherever uncertainty exists in the organization. This could be anything from trying to close a sales gap, to adding a fallback supply chain, from launching a new HR recruiting system to reinventing a business model using artificial intelligence.
The amount of time spent executing known practices versus learning new practices depends upon the amount of uncertainty laid out across time horizons. For this reason, everyone in the organization needs to have both skills to some extent. The concept of equilibrium establishes the balance to these two ways of working.
Leadership helps create equilibrium by adding an evaluation of “what’s known versus what’s unknown” to the decision-making process. KL Co’s Troy Barnes shared with me the senior leadership team’s frustration that they struggled to get the desired outcomes from major initiatives they undertook.lvi I suspected they were going through execution motions on projects that were rife with uncertainty.
To measure this, I had the leadership team work in five teams to lay out on a two-by-two grid the company’s top twenty initiatives that were under way or that they were considering funding. The vertical axis measured the predicted impact to strategic priorities, and the horizontal axis measured the teams’ level of confidence in their ability to achieve the desired outcome.
Confidence includes internal capabilities, how well they understood the problem they were seeking to solve, the stakeholders’ needs, and so on. The five teams distributed the same twenty initiatives on the grid. Two results became instantly clear:
- - There was little alignment on the importance of the initiatives or their level of confidence.
- - Small clusters existed in the upper right quadrant representing high impact and high confidence; and the upper left, representing high impact and lower confidence.
These projects were both fully funded and assigned to the same Project Management Organization, or PMO group, which in most companies, and certainly in this one, is very execution focused. They receive full funding, so there’s not a lot of incentive to use a different mindset just because no one knows whether the project will be successful or not. The hierarchical, command-and-control structure tells you to go and do what you’re told—give it the old college try.
This is, of course, not the most efficient process. Instead, those projects should be funded in tranches based upon evidence of progress. They should use a learning mindset at the start and report learning metrics. As they figure things out, producing positive or negative evidence, the leadership team should decide whether to continue to fund the project.
The outcome of the simple workshop was that KL Co decided to split up their initiatives, so that those facing uncertainty went through the lean innovation team, while high-confidence projects continued down the traditional PMO path. The innovation team practiced empathy, ran experiments, and worked as agile teams, launching new products in record time.
Agile is a powerful way to balance execution versus exploration work on any team. The concept of agile originated with the Manifesto for Agile Software Development, which was published in 2001 on agilemanifesto.org. They’ve been widely adopted by tech startups in particular, but also by corporations of all types and sizes, and in any company department, not just software development. In addition, an entire industry of frameworks, consultants, and digital tools has emerged to sell and implement the concept.
If possible, ignore all that for the moment. Agile philosophy, principles, and the various tools form an instrumental part of creating a resilient, aware, and dynamic organization. It’s ideal for working within a complex system. Without worrying about the specific structure of various agile implementations, which are often anti-agile in practice, flexibility exists in the philosophy such that one can tailor agile principles to fit desired outcomes. Much is left to interpretation and adaptation. With that in mind, I offer my own characterization.
I describe an agile organization as being one which at regular intervals picks its collective head up to take in information from the outside world and decide whether to change its work based on the new information. New information could be relatively minor, such as a change in personnel, or it could be a large, disruptive force reshaping needs and markets, such as emerging technology or a global pandemic.
In complex systems, the further away you are from the source of an issue, the less effective you are at addressing it. Smart companies hire smart, creative people. An agile organization is one that empowers those people to solve problems. They are given a mission they are accountable for, the resources they need to succeed, and the authority to make the decisions on how to achieve their mission, within some defined constraints. Like a startup, teams at this level balance execution and exploration activities based on the needs of their specific mission. Using agile practices provides the means of prioritizing what to work on over a period of time.
Agile organizations share context, show work, and report progress. Human beings fill in gaps of information with fiction. In other words, when we store memories, we complete the “picture” in order to enable better recall. This is why storytelling can be so powerful. If you share points or facts, people essentially invent their own stories with their own assumptions interspersed with the information you shared. But if you tell a story, people will remember the story.
Often running directly contra our tendencies in a command-and-control organization, an agile organization paints as much of the picture as possible so that gaps aren’t filled with the human’s innate ability to compose fiction. Further, by making the agile teams responsible for this information, leadership is freed up to focus on the things they most need to keep in mind. They perhaps can finally achieve their ideal state of being proactive and pulling together context, rather than managing outcomes at the team level.
Scaling this structure is difficult. The speed and flexibility that makes an agile team effective begins to break down if you simply expand the sizes of the teams. More agile teams are great, but there’s risk that the larger context gets lost. Information flow becomes critical.
While the best agile organizations are less hierarchical than they were pre–agile transformation, they’re not nonhierarchical. Since decisions on what to do on specific items are bottom-up based on knowledge of issues at the source, less management is required at that level. Self-organized teams manage that.
Middle managers become consolidators. They organize the output of teams’ work in order to fill in the larger picture. They aggregate teams’ progress, steer resources, and ensure the bigger picture remains aligned to group or division priorities. Another layer aggregates the portfolio of products and projects, ensuring they are aligned to company priorities.
The middle management layer doesn’t act as a conduit (in other words, a filter or a bottleneck), but rather a coordinator and an organizer of the flow of information—leadership down, teams up, and horizontally across the company. They own the merging of output into the full context, and the structure below necessary to achieve objectives.
General McChrystal ran into a similar “scaling” issue with his “agile” military force. The coordination of the various components of the military operation was vital, but they knew they couldn’t return to the top-down, command-and-control operation of the traditional structure.
“It was not possible to make the Task Force one big team, but we also could not stick with our command of teams compromise; stacking our small teams in silos had made us unwieldy. At the same time, we couldn’t simply remove the reductionist superstructure and leave each team to its own devices; we needed coordination across the enterprise. Somehow we would have to scale trust and purpose without creating chaos.”lvii
We must tackle this issue in due order as well.
It’s worth noting that the value of Equilibrium can also be applied to employees. To be productive, they need to be able to establish equilibrium within their own lives. The human right described in the Declaration of Independence as the “pursuit of happiness” does not stop at a company’s front door. Family, health, wellness, rewarding work, and spirituality are all factors that should be considered in allowing humans to find balance that works for them.
The 2020 pandemic drove this point home, literally. In the United States, 64 percent of married-couple families saw both parents employed.lviii From March 2020 and well into 2021, many of them were working from home. Both those who were and were not at home likely had to deal with their children being home from school. Further, gyms, playgrounds, sports leagues, recreation centers, and other exercise outlets were unavailable. Places of worship were closed, as were numerous other outlets people use to exercise various aspects of their personalities.
All of their “being human” was crammed into their living spaces. Anyone managing people working from home quickly learned that the nine-to-five work era was not only untenable but unnecessary. It was impossible for workers to juggle all of these moving parts while at the same time pretending they were on their work premises. Yet generally, productivity didn’t suffer; in fact, for many companies, productivity increased.lix
Managers feeling comfortable only when they know their workers are at their stations is an artifact of the command-and-control era. The assembly line–inspired hierarchy rewards managers who squeeze more tasks/time out of their people. The fact is that people in the office have never been 100 percent productive 100 percent of the time. Humans are not wired that way—and also, eight hours for a workday is purely arbitrary. Focused time is likely half that, and that’s being generous.
One study on productivity conducted in the United Kingdom revealed that “the average UK office worker is only productive for 2 hours and 53 minutes out of the working day; with social media and trawling news websites labeled as the main distractions affecting employee productivity each working day.”lx
The future of work will undoubtedly be driven by measuring impact of work versus number of tasks completed, as discussed in the “Evidence” section in this chapter. Although the pandemic drove home the need to juggle the various aspects of one’s life, it didn’t change the items that were being juggled. In other words, when employees were commuting into work for that arbitrary eight hours a day, they still needed to find time for the other activities.
Happy people are more productive. Equilibrium also means allowing people to balance their various needs to achieve being content people, seeking to pursue happiness while driving impact for the business.
5. Ethics: Do the Right Thing
It’s my belief that a vast majority of corporate managers and employees wish to live positive lives, use their intelligence and creativity to solve problems, and contribute to society. Yet the reality is that time and time again, corporations are busted for serious transgressions against the laws of society and common societal understanding of ethical behavior. While most human beings, including those who work in big corporations, believe they should adhere to the laws, they have a powerful ability to rationalize. They will allow circumstances—money, power, pressure, lack of understanding, inconsistent accountability—to sometimes override their better judgment.
Companies must do better. Scratch that. Companies don’t make decisions, behave good or bad, rationalize or not—people do. Company management, including boards, needs to better define and model their mission, values, and expected behaviors. They must create a system that enforces rules and regulations, provides guardrails, and holds individuals accountable.
Society, through government, can improve, too. Laws must be clear and concise and as easy as possible to adhere to. They should also get boiled down to the level of expected behaviors in order to demonstrate their intent. Archaic laws should be removed. Laws should result in as little bureaucracy as possible.
The toughest part of this is the relationship between business and government. As mentioned briefly before, business is part of an economic system, the equilibrium of which is dependent upon the balance of several forces. The government is responsible for managing the balance based upon the desires of society. The system doesn’t work if one of the forces controls how the government manages the balance. Balance is not possible in this circumstance.
Of course, a business must be allowed to manage the pursuit of its mission, within the laws of the land. But the deal is, then, that businesses follow the laws, and even stand down in their attempts to influence those laws through lobbying and funding candidates. Business managers, of course, are members of society and can fully participate in the democratic practice of choosing who represents their interests in government and the laws those representatives establish. But the business entity itself is not entitled to the same benefits of voting rights. This is the ethical take.
In managing its business, founders, and subsequently officers, define the reason the company exists. This is the company mission. It says whom you are serving and what you’re hoping to help them accomplish, and how. The mission answers why customers choose to have a relationship with you. Hopefully, the mission inspires employees. It also forms the basis of the “contract” with investors. Part 1, Item 1 of an SEC 10-K filing: “ ‘Business’ requires a description of the company’s business, including its main products and services, what subsidiaries it owns, and what markets it operates in.”lxi This is what investors choose to fund, not an empty business entity whose purpose is subject to investor whims.
Company values represent what the company stands for in pursuit of its mission. They serve as guardrails for the organization’s behavior in relationship with society. They are not aspirational; they should be grounded in reality. They must be defined at a level of specific behaviors that can be taught and evaluated. People must be held accountable to values, or those values are meaningless.
The twentieth-century focus on efficiency in the maximization of value for shareholders led to overlooking ethics, since abiding by ethics might have reduced value to shareholders. As mentioned before, if one looked instead at the actual relationship between businesses and shareholders, efficiency in the execution of its mission would perhaps have avoided some of the violations.
In many respects, the digital revolution makes managing ethics more difficult, since many workers spend a majority of their time behind computer screens and keyboards. Digital products collect vast amounts of data—not just the “private information” that Facebook gets dinged for mismanaging year after year, but personal behavioral data that exposes biases, fears, emotions, and even highly sensitive personal “secrets.”
Businesses owe it to their customers to treat that information ethically. Values and behaviors need to reflect that. Protecting the information is consistent with their mission in creating value for customers through their products. Here’s an example of where that fails:
Facebook’s declared mission: “Give people the power to build community and bring the world closer together.”lxii Facebook’s stated principles:
- - Give People a Voice
- - Build Connection and Community
- - Serve Everyone
- - Keep People Safe and Protect Privacy
- - Promote Economic Opportunity
Yet before a congressional antitrust subcommittee staff, a former Facebook employee testified on working to increase a specific user engagement metric: “Your only job is to get an extra minute. It’s immoral. They don’t ask where it’s coming from. They can monetize a minute of activity at a certain rate. So the only metric is getting another minute.”lxiii
Motivating and incentivizing metric optimization without managing employee behavior according to stated principles or values leads to unethical behavior. The result is selling diet pills to anorexia sufferers, gay aversion therapy to homosexuals, or political insurrections fueled by inflammatory conspiracy theories fed to anxious and fearful people vulnerable to such thinking. This runs directly counter to Facebook’s declared values. None of this “gives people a voice” or “builds connections and community.” At least not healthy ones. And the behavior clearly does not keep people safe.
As with the other elements, Ethics needs to be applied internally as well. This not only includes “human resource management,” which seeks to improve how employees are treated in support of the organizational mission. But it includes diversity, inclusion, treating people with respect, open and transparent communication, and creating policies that allow humans to live balanced lives.
Ultimately, the test of real values is determining what company managers are willing to forgo in order to stay true to the values. In other words, choosing to stop a behavior that would lead to increased market share or profits because it would violate values. This seems reasonably easy to do, but as history informs us, it requires an ironclad commitment from top to bottom, leadership to rank and file, and back.
Agile practices can help enforce values. Specific team-level mission statements should include behavior guardrails that reflect corporate values and empower employees to safely refuse to do tasks they deem unethical. “I did it because I was told to” should never fly.
The fact is that the best way to enforce this ethos is through the social nature of agile teams. Rather than the dystopian method of “spying” on colleagues, agile teams have a natural way of discussing ethics and including such practices in their sprints. In agile organizations that live up to the original principles, culture reinforces ethics and people hold each other accountable.
The Five Elements need to be applied by all people within the organization. They form the basis for the desired behavior. Leaders, middle management, and grassroots team members apply them in their own way, in service to their missions. In other words, this is not a top-down mandate to march down the right side of the hallway in single file, as some of us used to do in elementary school, but rather are applied in a decentralized way that achieves the desired behavior.
The behavior makes individuals more aware of the environment within and outside the walls of the organization. Awareness means people pick up on both subtle and significant changes in the environment that might affect the missions or the ability to do work. A more aware organization picks up on economic changes, acts of god, or ripples of chaos sewn in various corners of Earth.
Having employees working in agile teams, self-organized and empowered to act in the best way they deem fit, means an organization is dynamic, able to respond quickly to changes, and able to take action to the benefit of the company’s mission. Organizations whose people must wait for permission to act respond slowly to changes and breed inaction. The opposite is also true, granting authority and responsibility to people makes them proactive problem solvers.
Ultimately, a resilient organization is one that is sensitive to changes in the environment and able to adapt. In addition, it must be both flexible and strong. It must be able to take a hit but continue to function. In my early IT days, we never had a proper disaster recovery plan until after the disaster. We were more resilient after the event than before. I recommend not waiting for the disaster.
Cargill is a 155-year-old company with 155,000 professionals in 70 countries. Cargill is a “global, privately held company that brings together the worlds of food, agriculture, nutrition and risk management with the purpose of feeding the world in a safe, responsible and sustainable way.” It is a decentralized company, but its seventy-plus business units are consolidated under one Cargill roof. Innovation is one of the strategic drivers for the company and is encouraged at the grassroots level, keeping it as close to the customer as possible.
As part of this effort, Cargill’s Marleen Dekker was asked to establish a global Center of Excellence (CoE) for Innovation, to offer programs that build internal innovation capabilities, help accelerate transformational innovation, set standards for processes and tools, and so on. One such program is the Innovators Studio, which is essentially the CoE face to the business units, connecting and empowering innovators across Cargill’s businesses.
The Innovators Studio goes down to the level of those grassroots innovation efforts, offering services to groups trying to do innovation in the modern world. The food and agriculture industry is changing rapidly. To operate successfully, insights to the changing needs of consumers are a starting point. The Innovators Studio seeks to leverage these insights, with the independent groups understanding their local markets extremely well, and use them as input for longer-term, customer-driven innovation. The studio also seeks to improve the skills of the network, while not forcing frameworks top down.
“When we took the approach of an Innovators Studio, we knew we couldn’t have a one-size-fits-all innovation framework or a very defined set of capabilities,” says Pete Richter, chief customer officer. “We need to mirror the needs of our customers and the new realities of changing consumer markets. We launched the Innovators Studio concept to take advantage of our expertise, while moving quickly to bring new value-driven solutions to market with our customers.”lxiv
Chuck Gitkin, chief marketing officer at Cargill Protein, says, “Cargill has invested in R&D, sales, and business management. We realized that we needed a more integrated approach to win with customers and drive growth through innovation.”
Richter describes fundamental changes to Cargill’s business model: “Consumers historically didn’t have the ability to customize their own buying experience. A large percent of our customers used to buy very similar products from us, standardizing the consumer experience. Consumers today want a personalized experience that fits their unique set of buying criteria. We see this across all of our key customer segments. Cargill’s innovation process and corresponding value proposition integrates this level of supply chain agility and customization. We can’t simply bet and scale singular solutions today.”
Gitkin adds, “In the past, Cargill competed on economies of scale and as a low-cost player. As markets have become more commoditized, the company’s focus now is moving up the value chain. We aim to be more strategic partners to our customers, bringing them innovative products and solutions.”
Launched in early 2019, the Innovators Studio now is a thriving network across Cargill businesses, functions, and regions. The Innovators Studio teaches people how to think about customers and consumers: about market segmentation, developing new business models, testing them, how to differentiate based on need, and also how to apply those skills to the product development the groups already do well. It acts as the connective tissue between functions and roles. Innovators can participate in an Innovation Catalyst Certification program, follow Innovation Masterclasses and more; the managers of the participants are involved as well and actively participate in learning programs, as well as active innovation projects. This way, Innovators Studio is scaling innovation skills across the company.
Sensitive to the perception of an internal CoE sweeping in to tell teams how to “fix” themselves, the Innovators Study took a grassroots approach, inviting innovators to help move the needle. This ran counter to the consultants’ recommendations, who prefer to “drive efficiencies” using the CoE model. Richter shares, “The sustainability of a Cargill COE and a program like the Innovators Studio is directly linked to establishing creditability, building trust and serving the customer and business needs. Your ability to influence broad-scale change only comes after these areas are established.”
Global CoE Lead Dekker says the idea is to find the champions in the businesses already applying some of these skills or eager to bring them in. “We want to create the appetite, the feeling of need in multiple places in the company. And that means not only skill building, but also that by people doing design thinking and more agile work, others begin realizing that the traditional way to organize themselves doesn’t really work anymore.”
Business leaders start to feel the pressure from the grassroots work. “I think we created a lot of fire at their feet and we’re now seeing a significant number of leaders coming to us and saying, ‘we need some help because we see how this could work, but we need some different ingredients,” says Dekker.
This is how momentum is created. Gitkin says, “You’re seeing Cargill leaders sharing best practices, saying ‘I’ve got to change my business model. I noticed that you’ve done some interesting things. Can you tell me about that?’ We have seen this dynamic really pick up speed in the last twelve months, where people are willing to have the hard discussions.”
Dekker adds that this creates new scaling issues: “I see the role of the CoE as helping to scale so people become self-sufficient and we keep the CoE team as small as possible. How can we equip other people to act and take the lead? We keep trying to find examples, stories, tool sets, skill sets, and connecting them so we can scale capability development. The core role of the CoE has become to connect the dots.”
The first step in disruption-proofing your organization is through grassroots behaviors, which are defined well enough to result in quick impact, but with loose controls so that groups and teams can find what exactly works best for them. Acceleration happens by doubling down on the behavior that works, providing the coaching resources, tools, training, and other resources that make the new behavior easier to do in daily work. Scaling requires broader systems that expand and protect the behavior from resistance that emerges from legacy parts of the business, while also helping those business change. Endure happens with enough of the new behavior entrenched in all levels of the business, as well as a structure that in itself reinforces it.
And like Cargill, the new business your organization will become emerges from within. It retains the legacy of your DNA, the positive aspects of your culture and ethos, your original entrepreneurial spirit, even. But it must change to become more resilient, aware, and dynamic (RAD) RAD), and this happens in the four-phase process described previously, which we’ll unpack in the chapters ahead: Kickstart, Accelerate, Scale, and Endure—that is, KASE.
The Five Elements—Empathy, Exploration, Evidence, Equilibrium, and Ethics—are now downloaded and embedded in your gray matter. But the real work of applying these 5Es remains and will require regular practice across your organization. Whether it’s your wily senior leadership team, steady middle management, or hungry rookie front line, everyone can hone their work in this arena. As NBA legend Allen Iverson put it well, “We’re talking about practice.”lxv
Now it’s time we turn the page and get to kickstarting, the first phase of building a disruption-proof organization. It’s how we build momentum. Let’s get moving.
parts of the Kickstarting
- might pay for, so metrics that are tracked include conversions to pay, amount of time to convert, and even revenue.
- Revenue, marketing, and conversion execution metrics are now reported alongside continued funnel learning and product learning metrics.
- might pay for, so metrics that are tracked include conversions to pay, amount of time to convert, and even revenue.
- Revenue, marketing, and conversion execution metrics are now reported alongside continued funnel learning and product learning metrics.