For the last 4 years or so, I've dedicated myself to understanding how to build innovation capacity in large complex organisations. I've been meaning to start writing about this for some time, but (and this is not intended to be an excuse) most of my writing time went into essays for my MBA. A colleague recently shared this article about innovation being stifled at start-ups and, whilst the rest of this post is more about large corporates, it inspired me to write something.
I've spent a lot of time reading, watching, listening, and researching, not least as part of my studies. I'll try to add some of my favourites as a list at the end of the post and credit where I can. I'm going to keep the post as brief as I can and focus on one model that I use most frequently that offers a reasonable synthesis, to try to point out some key areas of consideration. I'll also try to tell a bit of the backstory on how I got to the model too.
The journey
The featured image is inspired by a great book, How to Lead a Quest a handbook for pioneering leaders. I really enjoy the adventurous and mythical imagery in the book and applying it in a business context is a nice break from the norm. When it comes to the topic of innovation, this playfulness is even more important in creating the right culture and behaviours. In the book, the "Kraken of Doom" represents 3 things:
- Default thinking and arrogance;
- Bureaucracy, politics and the curse of Efficiency;
- Disruption.
Building innovation capacity impacts (and is impacted by) both culture and strategy; it takes time and is often difficult. It is also context specific, by which I mean you cannot directly take what has been successful elsewhere and expect it to work without doing the work to make it your own.
"Culture eats strategy for breakfast"
As Peter Drucker put it. One of my mentors used a variation of the Will Durant quote, "We are what we repeatedly do", to define culture and that has stuck with me. It confirms that different organisations have different cultures in part due to what they do and how they do it. In discussing the subject of ways of working, I'll also regularly reach for Conway's Law, which states that:
Any organization that designs a system (defined broadly) will produce a design whose structure is a copy of the organization's communication structure.
Melvin E. Conway
Communication is King. Another way to look at this is, that if incentivised behaviours are not consistent with the long-term desired outcomes, it won't work. This sounds obvious, but it's often overlooked when the short-term gain is appealing and ad-hoc unsustainable ways of working are adopted.
The Model
So, to the crux of the post, and acknowledging "all models are wrong, but some are useful", here's the model I've put together which I will describe briefly below:
Originally, this diagram had different names for the zones (the definitions are the same) that I took from Simon Wardley's work on Wardley Maps. If you haven't seen his Crossing the River By Feeling For Stones presentation, and you work in a role that relates to strategy, I highly recommend you do so. The names you see now are from Geoffrey Moore's Zone to Win and actually substitute very well. I took this, and ideas from books like Playing to Win, and overlaid them onto the familiar 3 horizons graphic.
So, what you're looking at is a strategic view of a business, how work moves around it, the zones differing objectives, and a sense of how to distribute your resources based on your growth strategy. On resource distribution, considerations such as the profitability of the Performance zone, market dynamics, and corporate strategy, will all play a part, and it won't be an exact science.
The H3 company boundary is intentionally perforated to indicate the need to work in a collaborative/open way. Very few modern digital companies can operate without a strong partnership and ecosystem-building capability. A limitation of the diagram is that other zones will naturally work with external stakeholders, but work becomes more operational and internal (albeit customer focused) the closer you get to existing products and markets.
I think the final thing to say is that teams in the respective zones will work differently and will have different goals/objectives. I have strong opinions on the type of organisational structure that is required to support this model, most of which relate to free-flowing information (to connect back to Conway) and knowledge sharing. My views here align with Ralph Stacey's, who suggested that political activity and conflict arise primarily because of the construction of divergent objectives.
Making work visible
In The Phoenix Project - Bill Palmer and Erik Reid are up on the catwalk in the manufacturing plant. Although this part of the story is about learning the three ways (flow, feedback, and continual learning), my main reflection is about doing the right thing in the right place. Digital work is hard to see (Making Work Visible is another book I am fond of) and using a metaphor of a factory floor can help with certain concepts.
There are different types of innovation.
There is a lot of material out there on this, HBRs article "The 4 Types of Innovation" is a good start. For a more applied version, Beyond the Idea goes into a lot of detail on three models as the authors see it, Small, Repeatable, and Custom. The point here is innovation should happen everywhere, meaning this is more about culture and having the right tools and resources to support the ways of working. But this is where the Kraken of Doom I mentioned earlier often resides and that's a topic for another post.
Let's put that last section on making work visible into practice.
The main production lines are the performance zone, which is no place to start experimenting with odd parts you have lying around with people from outside of the business. Innovation in this zone is best focused on fine-tuning processes and enhancing technology to improve productivity to help out-perform the competition. A clear demand from customers, as well as people with deep subject matter expertise, is required here.
The transformation zone would be a good place to temporarily shut down a production line which you upgrade to deliver a new product line. It could be something new, downstream from incubation, that needs scaling up or an existing product that you're transforming somehow.
Finally, incubation. I've recently used the "Rumsfeld Taxonomy" after it showed up in Prediction Machines, this is the space for unknown unknowns. You simply don't know enough to expend resources on production lines yet, it's unclear what you're trying to do will be valuable in and of itself, the main area of value is learning and capability building, and once in a while you'll strike gold at which point you'll need a transition process. This would be a small area of the factory with experimental materials and tools and a small staff, away from the main production lines so as not to impact your key value streams.
Wrap up and reading list
This was helpful to get the thoughts down in writing. I'll add a few more books that I didn't manage to weave in below. Let me know your thoughts in the comments and feel free to connect to discuss more if you'd like.
- Humanocracy was recommended to me by our Chief Human Resources Officer, and I think it's one of the best syntheses of the many books I've read on these topics. I'd highly recommend starting here if this post piques your interest.
- All of the Innovators DNA books and really anything [co-]authored by Clayton Christensen or Jeff Dyer are incredible resources.
- The Practice of Adaptive Leadership I used as a core part of my MBA thesis. I only discovered Ronald Heifetz work at the end of my studies and I wished I had heard of him earlier.
- The Fifth Discipline is a classic in developing the right foundations to support high-performing organisations. The fifth discipline is systems thinking as well, so perhaps I am drawn to it for that reason.
- Good Strategy Bad Strategy was my first foray into Strategy books several years ago and was partially responsible for getting me hooked. It was recommended by our Chief Strategy Officer at the time and used analogies that appealed to me given my background.
- And finally, a podcast series featuring the Visa founder Dee Hock (RIP) that I found inspirational. The idea of the Chaordic Organisation, which is talked about in more detail in the book One from Many, really stuck with me.