“Time is a flat circle. Everything we have done or will do we will do over and over and over and over again – forever.”
– Rusty Cohle, played by Matthew McConaughey, in True Detective
For the whole of human existence, we have created new things with no idea if, when, or how they will affect humanity, society, or business. New things can be a distraction, sucking up time and money and offering nothing in return. Or they can be a bridge to a better future.
As a leader, it’s your job to figure out which things are a bridge (i.e., innovation) and which things suck (i.e., shiny objects).
Innovation is a flat circle
The concept of eternal recurrence, that time repeats itself in an infinite loop, was first taught by Pythagoras (of Pythagorean theorem fame) in the 6th century BC. It remerged (thereby proving its own truth) in Friedreich Nietzsche’s writings in the 19th century, then again in 2014’s first season of True Detective, and then again on Monday in Jamie Dimon’s Annual Letter to Shareholders.
Mr. Dimon, the CEO and Chairman of JPMorgan Chase & Co, first mentioned AI in his 2017 Letter to Shareholders. So, it wasn’t the mention of AI that was newsworthy. It was how it was mentioned. Before mentioning geopolitical risks, regulatory issues, or the recent acquisition of First Republic, Mr. Dimon spends nineparagraphs talking about AI, its impact on banking, and how JPMorgan Chase is responding.
Here’s a screenshot of the first two paragraphs:
He’s right. We don’t know “the full effect or the precise rate at which AI will change our business—or how it will affect society at large.” We were similarly clueless in 1436 (when the printing press was invented), 1712 (when the first commercially successful steam engine was invented), 1882 (when electricity was first commercially distributed), and 1993 (when the World Wide Web was released to the public).
Innovation, it seems, is also a flat circle.
Our response doesn’t have to be.
Historically, people responded to innovation in one of two ways: panic because it’s a sign of the apocalypse or rejoice because it will be our salvation. And those reactions aren’t confined to just “transformational” innovations. In 2015, a visiting professor at Kings College London declared that the humble eraser (1770) was “an instrument of the devil” because it creates “a culture of shame about error. It’s a way of lying to the world, which says, ‘I didn’t make a mistake. I got it right the first time.’”
Neither reaction is true. Fortunately, as time passes, more people recognize that the truth is somewhere between the apocalypse and salvation and that we can influence what that “between” place is through intentional experimentation and learning.
JPMorgan started experimenting with AI over a decade ago, well before most of its competitors. As a result, they “now have over 400 use cases in production in areas such as marketing, fraud, and risk” that are producing quantifiable financial value for the company.
It’s not just JPMorgan. Organizations as varied as John Deere, BMW, Amazon, the US Department of Energy, Vanguard, and Johns Hopkins Hospital have been experimenting with AI for years, trying to understand if and how it could improve their operations and enable them to serve customers better. Some experiments worked. Some didn’t. But every company brave enough to try learned something and, as a result, got smarter and more confident about “the full effect or the precise rate at which AI will change our business.”
You have free will. Use it to learn.
Cynics believe that time is a flat circle. Leaders believe it is an ever-ascending spiral, one in which we can learn, evolve, and influence what’s next. They also have the courage to act on (and invest in) that belief.
What do you believe? More importantly, what are you doing about it?
You’ve heard the adage that “culture eats strategy for breakfast.” Well, AI is the fruit bowl on the side of your Denny’s Grand Slam Strategy, and culture is eating that, too.
1 tool + 2 companies = 2 strategies
On an Innovation Leader call about AI, two people from two different companies shared stories about what happened when an AI notetaking tool unexpectedly joined a call and started taking notes. In both stories, everyone on the calls was surprised, uncomfortable, and a little bit angry that even some of the conversation was recorded and transcribed (understandable because both calls were about highly sensitive topics).
The storyteller from Company A shared that the senior executive on the call was so irate that, after the call, he contacted people in Legal, IT, and Risk Management. By the end of the day, all AI tools were shut down, and an extensive “ask permission or face termination” policy was issued.
Company B’s story ended differently. Everyone on the call, including senior executives and government officials, was surprised, but instead of demanding that the tool be turned off, they asked why it was necessary. After a quick discussion about whether the tool was necessary, when it would be used, and how to ensure the accuracy of the transcript, everyone agreed to keep the note-taker running. After the call, the senior executive asked everyone using an AI note-taker on a call to ask attendees’ permission before turning it on.
Why such a difference between the approaches of two companies of relatively the same size, operating in the same industry, using the same type of tool in a similar situation?
1 tool + 2 CULTURES = 2 strategies
Neither storyteller dove into details or described their companies’ cultures, but from other comments and details, I’m comfortable saying that the culture at Company A is quite different from the one at Company B. It is this difference, more than anything else, that drove Company A’s draconian response compared to Company B’s more forgiving and guiding one.
This is both good and bad news for you as an innovation leader.
It’s good news because it means that you don’t have to pour hours, days, or even weeks of your life into finding, testing, and evaluating an ever-growing universe of AI tools to feel confident that you found the right one.
It’s bad news because even if you do develop the perfect AI strategy, it won’t matter if you’re in a culture that isn’t open to exploration, learning, and even a tiny amount of risk-taking.
Curious whether you’re facing more good news than bad news? Start here.
8 culture = 8+ strategies
In 2018, Boris Groysberg, a professor at Harvard Business School, and his colleagues published “The Leader’s Guide to Corporate Culture,” a meta-study of “more than 100 of the most commonly used social and behavior models [and] identified eight styles that distinguish a culture and can be measured. I’m a big fan of the model, having used it with clients and taught it to hundreds of executives, and I see it actively defining and driving companies’ AI strategies*.
Results (89% of companies): Achievement and winning
AI strategy: Be first and be right. Experimentation is happening on an individual or team level in an effort to gain an advantage over competitors and peers.
Caring (63%): Relationships and mutual trust
AI strategy: A slow, cautious, and collaborative approach to exploring and testing AI so as to avoid ruffling feathers
Order (15%): Respect, structure, and shared norms
AI strategy: Given the “ask permission, not forgiveness” nature of the culture, AI exploration and strategy are centralized in a single function, and everyone waits on the verdict
Purpose (9%): Idealism and altruism
AI strategy: Torn between the undeniable productivity benefits AI offers and the myriad ethical and sustainability issues involved, strategies are more about monitoring than acting.
Safety (8%): Planning, caution, and preparedness
AI strategy: Like Order, this culture takes a centralized approach. Unlike Order, it hopes that if it closes its eyes, all of this will just go away.
AI strategy: Slightly more deliberate and guided than Purpose cultures, this culture encourages thoughtful and intentional experimentation to inform its overall strategy
Authority (4%): Strength, decisiveness, and boldness
AI strategy: If the AI strategies from Results and Order had a baby, it would be Authority’s AI strategy – centralized control with a single-minded mission to win quickly
Enjoyment (2%): Fun and excitement
AI strategy: It’s a glorious free-for-all with everyone doing what they want. Strategies and guidelines will be set if and when needed.
What do you think?
Based on the story above, what culture best describes Company A? Company B?
What culture best describes your team or company? What about your AI strategy?
*Disclaimer. Culture is an “elusive lever” because it is based on assumptions, mindsets, social patterns, and unconscious actions. As a result, the eight cultures aren’t MECE (mutually exclusive, collectively exhaustive), and multiple cultures often exist in a single team, function, and company. Bottom line, the eight cultures are a tool, not a law(and I glossed over a lot of stuff from the report)
Using only three words, how would you describe your company?
Better yet, what three words would your customers use to describe your company?
These three words capture your company’s identity. They answer, “who we are” and “what business we’re in.” They capture a shared understanding of where customers allow you to play and how you take action to win.
Everything consistent with this identity is normal, safe, and comfortable.
Everything inconsistent with this identity is weird, risky, and scary.
Your identity is killing innovation.
Innovation is something new that creates value.
Identity is carefully constructed, enduring, and fiercely protected and reinforced.
When innovation and identity conflict, innovation usually loses.
Whether the innovation is incremental, adjacent, or radical doesn’t matter. If it conflicts with the company’s identity, it will join the 99.9% of innovations that are canceled before they ever launch.
Your identity can supercharge innovation.
When innovation and identity guide and reinforce each other, it doesn’t matter if the innovation is incremental, adjacent, or radical. It can win.
Identity-based Innovation changes your perspective.
We typically think about innovation as falling into three types based on the scope of change to the business model:
Incremental innovations that make existing offerings better, faster, and cheaper for existing customers and use our existing business model
Adjacent innovations are new offerings in new categories, appeal to new customers, require new processes and activities to create or use new revenue models
Radical innovations that change everything – offerings, customers, processes and activities, and revenue models
These types make sense IF we’re perfectly logical and rational beings capable of dispassionately evaluating data and making decisions. SPOILER ALERT: We’re not. We decide with our hearts (emotions, values, fears, and desires) and justify those decisions with our heads (logic and data).
So, why not use an innovation-typing scheme that reflects our humanity and reality?
Identity-enhancing innovations reinforce and strengthen people’s comfort and certainty in who they are and what they do relative to the organization. “Organizational members all ‘know’ what actions are acceptable based on a shared understanding of what the organization represents, and this knowledge becomes codified u a set of heuristics about which innovative activities should be pursued and which should be dismissed.”
Identity-stretching innovations enable and stretch people’s understanding of who they are and what they do in an additive, not threatening, way to their current identities.
Identity-challenging innovations are threats and tend to occur in one of two contexts:
Extreme technological change that “results in the obsolescence of a product market or the convergence of multiple product markets.” (challenges “who we are”)
Competitors or new entrants that launch new offerings or change the basis of competition (challenges “what we do”)
By looking at your innovations through the lens of identity (and, therefore, people’s decision-making hearts), you can more easily identify the ones that will be supported and those that will be axed.
It also changes your results.
“Ok, nerd,” you’re probably thinking. “Thanks for dragging me into your innovation portfolio geek-out.”
Fair, but let me illustrate the power of this perspective using some examples from P&G.
Radical Moved P&G into services and uses a franchise model
Identity-stretching Dry cleaning service is consistent with P&G’s identity but stretches into providing services vs. just products
Do you see what happened on that third line? A Radical Innovation was identity-stretching (not challenging), and it’s in the 0.1% of corporate innovations that launched! It’s in 22 states!
The Bottom Line
If you look at innovation in the same way you always have, through the lens of changes to your business model, you’ll get the same innovation results you always have.
If you look at innovation differently, through the lens of how it affects personal and organizational identity, you’ll get different results. You may even get radical results.
You are a savvy manager, so you know that you need an innovation portfolio because (1) a single innovation isn’t enough to generate the magnitude of growth your company needs, and (2) it is the best way to manage inherently risky endeavors and achieve desired returns.
Too bad you’re wrong.
According to an article in the latest issue of HBR, you shouldn’t have an innovation portfolio. You should have an innovation basket.
Once you finish rolling your eyes (goodness knows I did), hear me (and the article’s authors) out because there is a nuanced but important distinction.
Our journey begins with the obvious.
In their article “A New Approach to Strategic Innovation,” authors Haijian Si, Christoph Loch, and Stelios Kavadias argue that portfolio management approaches have become so standardized as to be practically useless, and they propose a new framework for ensuring your innovation activities achieve your strategic goals.
“Companies typically treat their innovation projects as a portfolio: a mix of projects that, collectively, aim to meet their various strategic objectives,” the article begins. “MOO,” I think (household shorthand for Master Of the Obvious).
“When we surveyed 75 companies in China, we discovered that when executives took the trouble to link their project selection to their business’s competitive goals, the contribution of their innovation activities performance increased dramatically,” the authors continue. “Wow, fill this under N for No Sh*t, Sherlock,” responded my internal monologue.
The authors go on to present and explain their new framework, which is interesting in its focus on asking and answering seemingly simple questions (what, who, why, and how) and identifying internal weaknesses and vulnerabilities through a series of iterative and inclusion conversations. The process is a good one but feels more like an augmentation of an existing approach rather than a radically new one.
Then we hit the “portfolio” vs. “basket” moment.
According to the authors, once the management team completes the first step by reaching a consensus on the changes needed to their strategy, they move on to the second step – creating the innovation basket.
The process of categorizing innovation projects is the next step, and it is where our process deviates from established frameworks. We use the word “basket” rather than “portfolio” to denote a company’s collection of innovation projects. In this way, we differentiate the concept from finance and avoid the mistake of treating projects like financial securities, where the goal is usually to maximize returns through diversification. It’s important to remember that innovation projects are creative acts, whereas investment in financial securities is simply the purchase of assets that have already been created.
“Avoid the mistake of treating projects like financial securities” and “remember that innovation projects are creative acts.” Whoa.
Why this is important in a practical sense (and isn’t just academic fun-with-words)
Think about all the advice you’ve read and heard (and that I’ve probably given you) about innovation portfolios – you need a mix of incremental, adjacent, and radical innovations, and, if you’re creating a portfolio from scratch, use the Golden Ratio.
Yes, and this assumes that everything in your innovation portfolio supports your overall strategy, and that the portfolio is reviewed regularly to ensure that the right projects receive the right investments at the right times.
These assumptions are rarely true.
Projects tend to enter the portfolio because a senior executive suggested them or emerged from an innovation event or customer research and feedback. Once in the portfolio, they progress through the funnel until they either launch or are killed because of poor test results or a slashed innovation budget.
They rarely enter the portfolio because they are required to deliver a higher-level strategy, and they rarely exit because they are no longer strategically relevant. Why? Because the innovation projects in your portfolio are “assets that have already been created.”
What this means for you (and why it’s scary)
Swapping “basket” in for “portfolio” isn’t just the choice of a new word to bolster the claim of creating a new approach. It’s a complete reframing of your role as an innovation executive.
You no longer monitor assets that reflect purchases or investments promising yet-to-be-determined payouts. You are actively starting, shifting, and shutting down opportunities based on business strategy and needs. Shifting from a “portfolio” to a basket” turns your role as an executive from someone who monitors performance to someone who actively manages opportunities.
And this should scare you.
Because this makes the challenge of balancing operations and innovation an unavoidable and regular endeavor. Gone are the days of “set it and forget it” innovation management, which often buys innovation teams time to produce results before their resources are noticed and reallocated to core operations.
If you aren’t careful about building and vigorously defending your innovation basket, it will be easy to pluck resources from it and allocate them to the more urgent and “safer” current business needs that also contribute to the strategic changes identified.
It’s that time of year. The summer sun is beating down harder than ever. The grass is fading from green to brown, and no amount of watering seems to be enough. School supply lists hit your Inbox as Back to School sales fill your mailbox.
Yep, it’s almost Strategic Planning & Budgeting season.
You’ve been through this before, so you know what a strategy is (a set of choices and actions to get you closer to your long-term goals). You know why you need one (set common goals, create shared understanding and responsibility, align key stakeholders, inform priorities and decisions, enable your team to be proactive).
But do you know how to create a strategy that gets used?
No, I’m not talking about a process (though that is important). I’m talking about the experience you create and the expectations you maintain for your team as you develop the strategy.
Earlier this week, a client and I talked about this. We were preparing for a strategic planning offsite, one that we vowed would be different from previous strategic planning efforts that were somewhat successful (a new idea was launched and has since become an essential part of the organization) but left the team with lingering frustration about the process and skepticism about this one.
As we shared our thoughts and I scribbled notes, themes emerged. The next day after the themes were presented to the nearly 50 people in attendance, the head of the group raised his hand. “You’ve just described the I Love Lucy approach to strategy.”
Now, I love a good pop culture reference, especially one that requires a bit of history. But I did not get this one. As I scrunched my face in confusion, he explained, “It’s Ay yi yi yi yi!”
And thus, the I Love Lucy approach to strategy was born.
If you want to create a successful strategy, one that gets you closer to your long-term goals despite an uncertain and changing environment, how you create it must be:
Inclusive: Use the IKEA effect to your advantage and give everyone in your organization a voice. Different voices bring different perspectives to the process and help you avoid groupthink. Research from BCG indicates that “organizations that engage a broad group of internal and external stakeholders in their strategy development efforts yield better results than organizations that leave strategy in the hands of a small, central team.”
Illuminating: In the same way, it’s easy to ignore the softball-sized dust bunny under the bed until your mom comes to visit, it’s easy to ignore the parts of the business that aren’t broke but aren’t in an ideal state until strategic planning season. Your process needs to shine a light on all the nooks and crannies of your business, revealing all the opportunities and flaws to be addressed.
Innovative: You would never write a strategic plan that makes your business worse, but are you writing one that makes it better? In most cases, and often for very sensible reasons tied to incentives and metrics, teams write strategic plans for steady and safe growth. But there’s no such thing in unsteady and uncertain times. If you’re not thinking about what’s possible, you’re not planning to achieve your long-term objectives.
Internalized: A common entertainment trope is a villain who monologues for so long that the hero can escape. So you know who else monologues? Managers talking about strategy. And yes, everyone is looking to escape. Don’t be the villain, be the hero and create a strategy everyone can remember and repeat.
Implemented: The most useful strategic plan I ever saw was in a binder being used to straighten a wobbly table. It was useful, but not in the way its creators intended. If no one acts on your strategy, you just made a great table leveler.
Bonus Recommendations
For best results, I also recommend chocolate during the process and Vitameatavegamin after (or during but outside of work hours)
What are your recommendations for a good strategy development experience, a successful strategy, or an I Love Lucy marathon? Let me know in the comments below.
That means you know the answer to every question, make the right decision when faced with every choice, and act confidently when others are uncertain. Right?
(Insert uproarious laughter here).
Of course not. But you act like you do because you’re the leader, the boss, the person in charge.
You are not alone. We’re all doing it.
We act like we have the answers because we’ve been told that’s what leaders do. We act like we made the right decision because that’s what leaders do in a volatile, uncertain, complex, and ambiguous (VUCA) world where we must work quickly and flexibly while doing more with less.
But what if we didn’t?
What if we stopped pretending to have the answer or know the right choice? What if we acknowledged the ambiguity of a situation, explored its options and interpretations for just a short while, and then decided?
We’d make more informed choices. We’d be more creative and innovative. We’d inspire others.
So why do we keep pretending?
Ambiguity: Yea! Meh. Have you lost your mind?!?
Stanford’s d.School calls the ability to navigate ambiguity “the super ability” because it’s necessary for problem-finding and problem-solving. Ambiguity “involves recognizing and stewing in the discomfort of not knowing, leveraging and embracing parallel possibilities, and resolving or emerging from ambiguity as needed.”
Navigating ambiguity is essential in a VUCA world, but not all want to. They found that people tend to do one of three things when faced with ambiguity:
Endure ambiguity as “a moment of time that comes before a solution and is antagonistic to the objective – it must be conquered to reach the goal.”
Engage ambiguity as “an off-road adventure; an alternate path to a goal. It might be rewarding and helpful or dangerous and detrimental. Its value is a chosen gamble. Exhilaration and exhaustion are equally expected.”
Embrace ambiguity as “oceanic and ever-present. Exploration is a challenge and an opportunity. The longer you spend in it, the more likely you are to discover something new. Every direction is a possibility. Navigation isn’t simple. It requires practice and patience.
Students tend to enter the program with a resignation that ambiguity must be endured. They leave embracing it because they learn how to navigate it.
You can too.
In fact, as a leader in a VUCA world, you and your team need to.
How to Embrace (or at least Engage) Ambiguity
When you want to learn something new, the library is one of the best places to start. In this case, the Library of Ambiguity – an incredible collection of the resources, tools, and activities that professors at Stanford’s d.School use to help their students build this super ability.
It’s easy to get overwhelmed by the number of resources, so here are three that I recommend:
What it is: A tool to help individuals better understand the tolerance of ambiguity, especially their comfort, learning, and panic zones
When to use it: Stanford used this as a reflection tool at the end of an introductory course, BUT I would use it at the start of the project as a leadership alignment and team-building tool:
Leadership alignment – Ask individual decision-makers to identify their comfort, learning, and panic zones for each element of the Project Scoping Guide (problem to be solved, target customer, context, goals, and priorities), then synthesize the results. As a group, highlight areas of agreement and resolve areas of difference.
Team-building – At the start of the project, ask individual team members to complete the worksheet as it applies to both the project scope and the process. Individuals share their worksheets and, as a group, identify areas of shared comfort and develop ways to help each other through areas of learning or panic.
Why I like it: Very similar to the Project Playground concept I use with project teams to define the scope and set constraints, it can be used individually to build empathy and support amongst team members.
What it is: A tool to build trust and confidence amongst a team working through an ambiguous effort
When to use it: At regular pre-defined intervals during a project (e.g., every team check-in, at the end of each Sprint, once a month)
What I like about it:
Individuals complete it BEFORE the meeting, so the session focuses on discussing the dashboard, not completing it
The dashboard focuses on the usual business things (progress against responsibilities, the biggest challenge, next steps) and the “softer” elements that tend to have the most significant impact on team experience and productivity (mood, biggest accomplishment, team balance between talking and doing)
Learn It. Do It.
The world isn’t going to get simpler, clearer, or slower. It’s on you as a leader to learn how to deal with it. When to slow it down and explore and when to speed it up and act. No one is born knowing. We all learn along the way. The Library will help. No ambiguity about that!
