360 Feedback Summary

The Powerful New Model for Employee Assessment & Performance Improvement

New Assessment Model

360 ̊ feedback is a new model for performance appraisal. It is based on the idea that anonymous feedback from multiple sources is superior to direct feedback from a single source. It overcomes the false perceptions, blind spots and ignorance that may exist in single source assessments.

The story of “The Emperor’s New Clothes” can be updated to demonstrate the power of a 360 ̊ feedback process. In the story, the Emperor asks his courtiers how his new clothes look. Even though he is naked, having been tricked by traveling tailors, the courtiers give the response they think the Emperor wants to hear. “Superb,” they tell him. Since the Emperor knows that people often tell others what they want to hear, he asks everyone in his court to assess his new suit anonymously. The response is unanimous: the Emperor is naked. The use of anonymous multi-source feedback provides the Emperor with better information for making a decision about his clothes. Thus, the Emperor, in this updated story, does not go walking around his kingdom wearing only his birthday suit. Like the Emperor, organizations need to improve the quality of decision-making information.

The 360 ̊ feedback assessment model permits organizations to make more informed personnel decisions. This system draws feedback from multiple sources within the decision maker’s ‘circle of influence’ and not just from direct supervisors. Thus, the assessments tend to be more open and honest. Feedback from such sources is generally better than supervisor reviews for assessing employee competencies, specific behaviors and skills, personal strengths and career development areas. A 360 ̊ feedback approach aligns organizational goals to create opportunities for personal and career development. It links individual performance expectations with corporate values.

Traditional Feedback vs. the 360 ̊ Approach

To understand the structural and value differences between traditional feedback and 360 ̊ feedback systems, examine key stakeholders from each type of program. In traditional feedback systems, the key stakeholders are the supervisor and the employee. A 360 ̊ feedback system includes coworkers, team members, external customers, internal customers, direct reports, skip-level reports and others.

360 ̊ feedback also compensates for some deficiencies in today’s corporate organizational structure. Compared to the early 1980’s, organizations today are “flatter,” that is, they have fewer managers and are arranged around self-directed teams. Managers with direct supervisory responsibility now manage many more employees. They supervise employees whose technical or expert knowledge exceeds their own. And, they manage employees organized in project configurations. These scenarios make traditional feedback more difficult today.

Changes in organizational structure, culture and employee relations have led to an increase in the use of 360 ̊ feedback methods. It is now used to achieve corporate management objectives, including participation leadership, empowerment, customer service, quality focus, re-engineering, competency-based rewards and team-based rewards. This system can help achieve other personnel objectives, such as: career development, fair reward decisions, accurate and valid performance measures, non-performance measures, diversity management and legal protection.

How Organizations Use Feedback

360 ̊ feedback systems are instituted to measure personnel development and performance. Development feedback is instituted because it can facilitate an employee’s development within an organization. It permits co-workers to give an employee a confidential assessment that otherwise might never be articulated. This feedback is always confidential and is not shared with the supervisor. Co-worker feedback is never used in making pay or promotion decisions. Firms also use a 360 ̊ feedback process for performance coaching and organizational intelligence.

One 360 ̊ feedback system is the “Team Evaluation and Management Systems Model” (TEAMS). This program includes development and performance information. It helps companies get feedback from a competency-based pay structure by evaluating employees’ work accomplishments and methods. TEAMS is a proprietary program developed and owned by the authors.

Implementing 360 ̊ Feedback

A 360 ̊ feedback project has three phases. Phase I is Process Design, which requires some advance preparation. Phase II is Process Implementation and Phase III is Process Evaluation.

Phase 1: Process Design

For the system to succeed, you must accomplish several steps before initiating Phase I. The most important step is securing leadership support for this process. Support can come from senior management or a change agent within the organization. Ideally, the leadership team will include people from several departments.

After securing the top management’s support, be sure your organization is ready for a feedback process. One symptom is general dissatisfaction with established performance measures. This even helps the feedback process succeed. The leadership team selects a design team of six to fifteen members to assess readiness. If the assessment is favorable, then the design team identifies the process objectives. Finally, the leaders write a promotional plan to tell employees about the program.

Process design consists of selecting an application and developing a competency-based survey. The application selection is driven by the organization’s goals. Generally, organizational leaders want the process to give them either strategic or performance applications. The survey instrument should identify employee and organizational competencies. Developing this instrument is the most difficult part of the process. [Charts in the book offer guidance for assessing readiness and for creating a survey instrument.]

Phase II: Process Implementation

This phase consists of six steps:

1. Select evaluation teams of six or fewer members based on policy, trust and credibility concerns.
2. Conduct training, level one, to provide instruction on giving feedback to others.
3. Conduct the evaluations, using professional methods to gather the desired information.
4. Score and report the results, using both internal and external scoring. Software can facilitate this process, as can score range reporting.
5. Conduct training, level two, to instruct managers and employees on how to receive feedback.
6. Create action plans to highlight areas of personal improvement, areas of strength and areas for development. Action plans might also cover career development, life long learning and professional development.

Phase III: Process Evaluation

This phase also consists of analyzing safeguards and conducting user assessment. Safeguard reports involve computerized statistical analysis of the survey instrument. An analysis of a successful project will give high marks to both item reliability and respondent type. Your company then can conduct an assessment through user satisfaction surveys. Information gathered from this step is used to refine the process.

User Concerns and Needs

The 360 ̊ feedback process has several common pitfalls. The first occurs when companies misapply old knowledge. Users mistakenly try to force the multi-source model to comply with their existing assessment model. Statistical validity makes this impossible. The multi-source survey’s sample size is much smaller and does not conform to traditional survey sample size validity.

Companies make mistakes in this process when they rely too much on technology, substitute labor for technology or use “homegrown” technology. Over-reliance on technology is a problem when companies use adequate technology in the feedback process, but don’t provide enough internal support systems to manage the rest of the process. Substituting labor for technology is the opposite problem, which occurs when the organization tries to use personnel in place of technology. Without appropriate software, the feedback process is too labor intensive for most organizations. When organizations believe they can effectively develop their own software for this process, they may hit snags they could possibly prevent by purchasing the licensed applications [offered by the authors].

Administrative overhead is often a pitfall. Organizations tend to underestimate the total cost of this process. An organization needs a process administrator, a clerical person and an area coordinator to conduct this process successfully. Culture shock and autocracy also inhibit implementation. Senior managers generally do not embrace change because it can dilute their power. Fear of the unknown is an equally powerful pitfall. Employees whose positions depend on cronyism, nepotism or coasting have reasons to inhibit the process.

Day to day pitfalls can derail the process, including supervisor inaction and confidentiality issues. Organizations which allow managers to ignore the process, fail to train participants or breach confidentiality, are all at risk for process failure. Finally, organizations that misapply 360 ̊ feedback risk undermining employee confidence in the process. Misapplications include directing feedback at selective targets, or using it for discipline, discharge and work force reduction.

When users criticize the process, they cite value and cost concerns. Value criticisms range from the general (How do you know the 360 ̊ feedback improves productivity?) to the specific (What do you do if someone receives negative feedback and refuses to change?). In response to these concerns, a quote is given from Pat Riley, the famous basketball coach: “Professional athletes are not highly motivated by the coach alone. In fact, they are tough to motivate because they are paid so handsomely. But when they receive feedback from their teammates on their hustle factor – their effort demonstrated on a basketball floor – they are motivated to hustle, recovering loose balls and playing aggressive defense.”

The Promise and the Future of 360 ̊ Feedback

Research shows employees prefer feedback from additional sources beyond their immediate supervisor. Employees also see multi-source feedback as fairer than single source feedback. These employee preferences and perceptions lend credence to an organization’s use of a 360 ̊ feedback process to adapt personnel management policies and increase productivity.

Because a 360 ̊ feedback approach uses information technology to produce reports, it can become the central element for the development of intelligent systems (also known as learning models). These systems can be designed to identify effective performance practices. This design flexibility makes the 360 ̊ feedback system valuable today and in the future.

100 Ways to Motivate Others Summary

How Great Leaders Can Produce Insane Results Without Driving People Crazy

Do the One Thing

Managers like to think that they can do many things simultaneously, but even the most effective manager can only tackle one problem or deal with one issue at a time. Many times, your mind may seem to be racing at 100 miles an hour – tomorrow’s meeting with the vice president, the project that’s due in a couple of weeks, the inbox full of e-mails. But if you allow your mind to dart from one thing to the next, you easily can become overwhelmed. In most cases, that will increase your stress, build tension in your workplace and harm employee productivity. As a manager, combat feelings of being overwhelmed by establishing priorities. Decide which phone call to return, deal with the person who called in a calm, intelligent manner and then turn to the next task. Resist the temptation to think ahead.

“Manage Agreements, Not People”

Managers frequently make the mistake of coddling those employees who seem to experience the most emotional turmoil. Managers get caught up in this tumult to be liked, and to keep that attitude of constant churn from becoming contagious. The end result resembles a father-son or mother-daughter relationship, which is doomed to fail in the workplace. You can’t send an employee “to your room” if he or she fails to meet deadlines or submit reports. However, you can appeal to an employee’s professionalism and explain why a job must be completed. Feelings and emotions have little to do with such agreements. Establish a relationship that makes the employee feel accountable.

“Use Positive Reinforcement”

A positive attitude is always better than a negative attitude in the relationship between a manager and a team member. Embrace every opportunity to be uplifting, whether you are suggesting a team-building exercise or giving someone a pat on the back.

Welcome contributions from team members rather than rejecting ideas out-of-hand. When you embrace an employee’s idea, you elevate yourself in the eyes of your team members and convey the advantages of having a positive attitude.

“To Motivate Your People, First Just Relax”

Think about the batter who steps up to the plate in the bottom of the ninth. The team is losing by a run; the bases are loaded. Two outs. The third-base coach calls time, meets the batter halfway down the baseline, puts an arm over the batter’s shoulder and says quietly, “Just relax up there. Take it easy. Don’t squeeze the bat so hard. Don’t worry, you’ll be fine.” The coach knows that acting nervous or pressuring the batter would be counterproductive. Such behavior could convey anxiety to the batter, who might then fail. The same principle applies to the workplace. Nervous employees probably will not achieve maximum productivity. But employees who see that their manager is relaxed and patient may well adopt the same attitude. To motivate your team, be positive and calm.

“Motivate by Doing”

At a professional or college football game, frequently you will see that the head coach is holding a laminated sheet of paper. It contains the game plan – plays the coach feels can succeed and lead to victory. Success is not haphazard, nor is it based on feelings. Those who plan ahead enter their offices each morning knowing how much time they are going to spend on the phone pursuing sales. They make decisions based solely on business strategies, not on mood or on how upbeat they feel that day. People who get things done feel good about themselves and develop solid self-esteem. Leaders determine their goals, figure out how best to achieve them, set the wheels in motion and follow through.

“Score the Performance”

Although many managers are reluctant to deal in numbers, that’s really the only way to keep your team members apprised of their progress, tell them what you expect and show them how they can improve. Imagine a coach sending a play to the quarterback without knowing how many yards the team needs, what yard line the team is on or what the score is? As a team leader, you need to know the score and to be able to discuss scoring more points. A coach may applaud his quarterback for trying to score, but ultimately if the quarterback can’t get into the end zone, the team will get a new quarterback. Your salespeople need to keep their eyes on the scoreboard at all times. They need to know when they’re winning or if they need to adjust the game plan.

“Hire the Motivated”

Too often, the hiring process doesn’t get enough emphasis. Companies get stuck with underachievers, yet managers fail to acknowledge that more thorough job interviews could have detected the failing employees’ flawed personality traits. Because the hiring process is so crucial and a poor hiring decision ultimately can be quite costly, managers need to make a more serious investment in this aspect of their jobs. Start listening carefully to each candidate and trying to zero in on his or her true motivations. During the interview, try to get a sense of the candidate’s personality.

Just look at the rigorous process that NFL teams utilize to screen players coming out of college. Even though coaches usually have no questions about the young players’ physical abilities, players must undergo psychological and personality testing. After all, a general manager who guesses incorrectly could be stuck with a nonproductive malcontent, just as a sales manager could be stuck with a melancholic nonachiever. Frequently, salespeople who fall short of their goals, fail to meet their quotas and generally are a source of frustration, all suffer from the same core malady. They want a job but they lack a strong desire to succeed. A smart manager must be able to diagnose that condition.

“Don’t Be a Know-It-All”

Many managers, especially those recently promoted to positions of authority, think they always have to be right. They believe everyone will scrutinize them now that they have been promoted, so they can’t afford to be wrong because that would show weakness. They believe their credibility will be affected if they make a mistake or don’t know something. Quite to the contrary, a manager who admits mistakes and is willing to accept team members’ suggestions graciously will gain infinitely more respect and become a source of inspiration. Who is right and who is wrong doesn’t matter. Reaching goals and achieving success is the ultimate barometer. Great leaders make mistakes all the time, but the key is whether they are able to extract the very best from their people.

“Be a Ruthless Optimist”

Although they are involved in serious work, good managers try not to take themselves too seriously. They may be disappointed when something doesn’t go well, but instead of plunging into self-doubt and depression, they pick themselves up and attempt to resolve the issue from a different angle. Instead of spending time worrying or over-analyzing a failure, they try again. In the workplace, especially during challenging times or even when business strategies fail, it is easier to be pessimistic than optimistic, but that’s a wrong turn – especially when your team members are looking to you for a psychological boost. Memorable bosses maintain their optimism through the most challenging times.

“Get Some Coaching Yourself”

Almost every successful business leader has had a coach – someone who brings out their best qualities and helps them reach their potential. In years past, businesspeople didn’t think of themselves this way, although in sports and other fields most successful people can point to an individual who particularly influenced their lives. Now, the business world offers many “success coaches.” Take advantage of their expertise. However, if you enlist a coach, heed the advice you get. Coaching is useless unless it’s applied.

“Stop Apologizing for Change”

To lead, first embrace the principle that change is good. A good leader advocates change, instead of defending the status quo. One of the biggest mistakes a manager can make is to apologize for change and lament the passing of “the good old days.” Few companies can progress without implementing change, refining techniques and exploring new options. However, realizing that many employees are uncomfortable with change, managers often attempt to ease their staff members’ discomfort by sending the message that change is not welcome. This “I feel your pain” approach doesn’t work. In fact, it can do a great deal of harm by undermining the team’s ability to adapt. Point out all of the positives of change and tell your team the benefits of working for a company that has the vision to welcome change.

“Create a Routine”

It takes only three months to create a habit, good or bad. Routine builds good habits. Just look at a successful major league baseball pitcher. In all likelihood, he can tell you his game day routine down to the minute. He eats his pre-game meal at the same time, arrives at the ballpark at the same time, and does his stretching exercises and warm-ups at the same time. He has programmed himself to succeed by using this routine. Imagine a teenager who has a messy room, but who sincerely desires to become neater. If she starts by tidying her room 15 minutes every day, eventually the results will encourage her to do more. Soon, she’ll find herself straightening up instinctively. Sometimes, a lack of routine is the only thing that stands in your way. Even something as seemingly mundane as checking e-mail can be turned into a productive routine. Instead of checking your e-mail every 15 minutes, only check it twice a day. Pretty soon that will be a habit, too.


“Phase Out Disagreement”

One basic principle is essential for workplace success: Disagreement is not productive. When you are in the midst of discussions with team members, try to extract nuggets of valuable information rather than flatly saying, “I disagree.” That attitude can be very deflating and may make employees reluctant to participate in discussions. Watch effective teachers solicit answers from the students in a classroom. Even if a student does not have exactly the right answer, the teacher will try to reframe the answer and pull out something positive. Or the teacher will say, “Good. Now what about the next step?” Managers who are receptive to their team members’ input provide motivation. Constant disagreement just demoralizes employees.

Many “old-school” bosses still believe that the best methods for motivating employees are intimidation and raised voices. Although old-time bosses may not admit it, feelings matter and managers must consider them. The typical workplace is not the Army, where the commanding officer issues an order and people follow it without question.

“Pump Up Your E-mails”

Since most business communication now seems to be accomplished through electronic mail, take the opportunity to send positive messages. Put yourself in the recipient’s shoes and determine if the e-mail you are about to send is uplifting or deflating. Nothing works as well as positive reinforcement and e-mail enables you to send encouraging lessons often.

“Use Your Best Time for Your Biggest Challenge”

Almost all employees can tell you what time of day they are most productive. Some people are at their energy peak when they walk in at 9 a.m., sit down and switch on their computers. Others do better when they’ve just returned from lunch. Managers who have a lot of responsibilities should tackle their biggest projects when they have the most energy. When you’re tired or distracted, postpone difficult tasks.

“Play It Lightly”

Sometimes, managers can feel absolutely overwhelmed, convinced that they do not have enough time to answer e-mails, handle faxes and respond to company superiors. Negativity can creep in quickly. You may even complain that your job is “awful.” It’s easy to be too serious and lose perspective. But would a person who just returned from the food stamp office or who just received a shutoff notice from the electric company consider your job “awful?” Or would any job look good? Sometimes, you may need to reframe your thinking, approach your job from a fresh perspective and not take things so seriously.

Project Management: The McGraw-Hill 36-Hour Course Summary

Historical Projects

The need to plan and execute highly complex projects is nothing new. Indeed, project management strategies and techniques can be found in the records of the ancient Chinese war lords as recorded by Sun Tzu, as well as in the work of Machiavelli.

The ancient people who built Egypt’s great pyramids undertook a mammoth project management task. Scientists say 20,000 workers labored about 20 years to complete the Great Pyramid at Giza. The task required technology, skilled techniques and tons of raw materials. Workers used wooden beams as levers, and hauled loads of wet sand to construct surfaces for sliding multi-ton stone blocks off their pallets. By one estimate, building the Giza pyramid consumed more than three million work-years of labor.

In more recent times, the construction of the United States’ railroad system required 10,000 workers pounding away around the clock to install two or three miles of track per day. Each rail weighed 700 pounds. Massive modern project management initiatives in the U.S. include the Polaris submarine program, NASA’s Apollo space program that landed men on the moon, the Space Shuttle program and the development of the strategic defense initiative “Star Wars” system.

Project management continues to evolve. Today, many companies identify project management as “a new key business process” that plays a critical role in attaining strategic objectives. Many organizations identify the ability to manage projects successfully as a new “core competency.” In 1992, the Project Management Institute had 10,000 members; by 2005, it had 150,000.

Project Insights

Projects all have certain characteristics, including a time frame and schedule, a sponsor or sponsors, costs, required resources, deliverables and criteria for final acceptance. Every project has a life cycle, and fulfilling it often requires the ability to overcome challenges. Projects tend to move through natural segments. They begin with conceptualization and initiation. Then, they proceed to the planning and design phases, which establish the project’s aims and scope, and lead to a detailed work plan, project execution and closeout, to wrap up the project. All projects also face the “Triple Constraint.” While constraints may appear to limit a project, they also help define it. The triple constraint is represented as a triangle balancing three factors:

1. “Schedule” – The amount of time allotted for project completion.
2. “Cost” – The amount of resources dedicated to the project.
3. “Scope” – The quality or performance standards the project must attain.

The triangle is a useful metaphor, because when you lengthen or shorten one side of a triangle, you affect the other two sides. Changing the resources you put into a project will likely affect its scope and schedule. Conversely, if you expand a project’s scope, then it is reasonable to expect the project to take longer and cost more. The exact process of planning, accepting and executing a project varies based on the type of project. Common types include:

• “Concept Development” – Some projects are strictly intended to generate ideas on how to solve specific problems. For this type of project, familiarize yourself with the techniques available for generating, discussing and prioritizing ideas.
• “Planning Projects” – Developing highly sophisticated, so-called “master plans” is a project in its own right.
• “Design Projects” – Generally, architectural firms undertake this kind of project most often, but they can be important to other industries as well.

Project Leaders

Every project needs a leader and some may require several. A project leader needs these qualities, among others: The ability to plan, select team members, communicate and solve problems; relevant technical ability; conceptual creativity, especially during the design phase; organizational and time management skills; and integrity. The leadership team must include a “knowledge expert,” a “process engineer” and a “project engineer.” In any project, encourage smooth communication and feedback between the design team and the user.

Takeoff

The early stages of a project are pivotal: Selecting your team, assigning individual roles, making the project delivery schedule and – most critically – setting goals, deliverables and budgets. Many a project has failed because the project manager was unrealistic at this stage. To stay on top of the process, you must consider many different factors simultaneously, including:

• “Initial estimates are usually wrong” – If you think you’ve got it all figured out, you probably haven’t. Estimates often become stronger as a project goes forward, and various unknowns are exposed and handled. Be humble; early on, you probably don’t have all the data you need to make informed decisions.
• Consider your “technical approach” – How are you going to use technology and related processes to accomplish your objectives? Seek advice from technical experts and analyze the problems you expect to face, and the resources and constraints you must balance.
• “Define the business need” – What exactly does your organization hope to address? For every goal, the company has an underlying justification, be it competitive advantage, enhanced marketing capability, technological development or some other objective.
• “Project charter” – This document states management’s expectations and goals for the project, and may list critical factors for success, time frames, business needs, the project’s primary and secondary goals, deliverables and, perhaps, a list of key stakeholders. The charter delineates the organization’s commitment to improve certain areas of operation, and becomes a useful reference as the project moves forward.
• “Hiring vendors” – Develop clear and comprehensive requests for proposals (RFPs) and launch outside initiatives to support your project.
• “Feasibility studies” – If your company needs more data about the project or problem, urge management to conduct a feasibility study before making key decisions.

Planning Your Plan

Success takes planning, and the more detailed and accurate the planning, the better. Consider these key factors as you map out the course of the project you will manage:

1. What are your anticipated resources? – Capabilities, in terms of what you can do and how fast, tend to be linked to costs. Get an accurate count of the resources you’ll have over the course of the project.
2. How do you intend to distribute the workload? – Many planners create a “subproject tree diagram” that groups tasks in terms of who will be doing the work. As you move down the tree diagram, you’re developing a more and more detailed view of tasks that must be completed, and who is expected to accomplish them.
3. Do you have proper documentation, software and templates? – Existing software templates and formats will help you compose your ideas, document your plan and keep the project on track. An information bank can provide standard success criteria, a database of past projects and other valuable resources.
4. What are your process review points? – Use checkpoints to evaluate whether the necessary processes are occurring satisfactorily. Make sure the various aspects of the project are being properly integrated, whether “mission creep” is expanding the scope of the project, and whether events are taking place on schedule and reflect effective time management.
5. Conduct budget reviews to evaluate the pace of expenditures. Periodically evaluate whether the project is meeting its standards in quality control, human resources, risk management, procurement and communication.

The Work Plan

First, develop strategic plans and create a quick sketch of the various considerations that will affect the project’s success. Put these issues under the microscope for detailed planning and analysis, drilling deeper to develop a far more detailed planning landscape. This effort ultimately leads to a work plan – who does what and when – that will guide you and your team through the execution phase. The two key elements of your detailed plan are “activity duration,” estimates of how long each task will take, and “activity sequencing” or critical path planning, establishing which tasks should be performed first to avert bottlenecks and to insure the overall smooth flow of the project.

Ideally, even at this stage, your organization still hasn’t committed to carrying out the project. The company should undertake a new project only when all the parameters and planning issues are fully accounted for in a detailed plan. One you have a specific execution plan, present it to management for a “go/no-go decision.” Everything to date has helped you define the triple constraints the project will face: time, cost and scope of deliverables. Changing any aspect of the triangle from this point forward will change, if not jeopardize, the entire plan.

Maintaining Control

Once you begin to execute, maintaining control is the big challenge. In alignment with the “Triple Constraint” concept, you must control the project’s scope, cost and schedule.

• To control scope – Schedule a review of scope at key stages during the project’s life cycle. Verify that the original mission remains valid.
• To control schedule – Status reports will help you track the pace. Update the schedule status frequently, so that project leaders know whether the project is proceeding on schedule. Scheduling software may be useful.
• To control costs – Consider hiring a cost engineer to help with cost planning and control. Track your inventory and watch labor costs. Some managers use the “earned value” method to insure that the project pays a worthwhile return on the resources invested in it.

Delivering Deliverables

When the time comes to deliver the project as promised, tie up these loose ends:

• “Turnover of deliverables” – The responsibility for maintaining the deliverables now shifts to the operational group in charge. This often involves a period of training as the “operational owner” takes over.

• “Lessons learned” – Every project offers insights into how to handle future projects. Documentation is essential to record valuable institutional knowledge.

• “Releasing technical resources” – Transfer technical employees and their equipment to their prior assignments. This isn’t automatic; a transition period may be necessary. “Announcing project completion” – Stakeholders, customers and vendors will all want to know once the deliverable is up and running.

• “Team celebration” – A final team event helps mark the transition and recognizes those who have been instrumental in the project’s successful conclusion.

• “Administrative closure” – Once the paperwork is filed and documents are archived, it’s time to turn out the lights and formally announce the project’s closure.

Your organization’s ability to execute projects is a measure of its “project management maturity.” Most companies rely on projects as their primary method of executing strategic objectives, and some pull off excellent projects one after the other. Success at this level requires support from the very top of the organization. Some companies create a project management office (PMO) to facilitate ongoing series of projects. Good companies duly recognize project managers who help institute strategic change.

24/7 Innovation Summary

Streaming Business

The ancient Greek philosopher Heraclitus once observed that you could never step in the same stream twice. The idea, of course, is that while you can dip your foot in the water again, the stream itself is an ever-changing entity. The old water has slipped past and, though the stream may appear placid, in reality it is continually evolving. You might say the stream changes all day, every day. You might say it changes “24/7,” every hour of the day, every day of the week.

For your business to keep up with the stream of innovation constantly flowing through virtually every sector of commerce, your company must establish a culture where innovation is continual, an unceasing process that doesn’t take coffee breaks, personal days or comp time. Quarterly brainstorming sessions designed to dream up a better mousetrap are no longer enough. Your goal should be much more ambitious — constant innovation is necessary if your organization is going to attain its true potential.

Fair warning: this isn’t easy to achieve. The organization of the future must operate like a jazz musician who follows the written line of music only until inspiration and the muse lead elsewhere. You have to sell your organization on the idea that there must be a perpetual state of innovation that involves all employees. This is a departure from earlier change initiatives, such as process reengineering, total quality management and so forth, in several ways:

• It is strategic and will have a ground-up impact on your customers and markets.


• It is extended throughout the organization. No one is excluded.


• It is efficiency-driven and centered on generating stakeholder value plus organizational efficiency.


• It views technology as an enabler, not a solution. Technology is a tool of the business; the business is not constructed around the technology.


• It is people-centered. Innovation is never the result of technology per se, but rather comes from individuals who adapt technology in clever, new ways.

Innovation only occurs when someone somewhere asks the right type of question, and continues to ask it until it sparks a vision of an opportunity to improve a process. One helpful framework for asking questions that ignite innovation is called the “Seven Rs:”

1. Rethink — Question your organization’s basic assumptions and the processes that support them.


2. Reconfigure — Go beyond “why” to ask “what?” What activities can be stream- lined, what steps can be eliminated, what economies can be achieved?


3. Resequence — Perhaps you’re doing the right things, but are you doing them in the right order? You’ll find opportunities to resequence when you ask questions that begin with “when,” as in, “When do we retool the plant?” and “When do we check for quality?”


4. Relocate — This question begins with “where.” Today, you may be able to do business any place, but where is the ideal location for the activities you need to undertake?


5. Reduce — Can you cut back on the amount of activity in a certain business unit or in the frequency of any given activity. Hint: Sometimes the creative answer is to increase, rather than decrease, the frequency of a key activity.


6. Reassign — Ask “who,” so you can line up the right people to take on the right jobs.


7. Retool — This question goes to the heart of how you’ll get from A to B, and it’s a“how” question. “How can technology improve this system?” or “How do we make our business more flexible and responsive to market changes?”

The Wet Baby

Even after you’ve used the Seven Rs framework to develop a concept of the ideal situation for your business, you need to stop to consider the human side of the equation. As Ray Blitzer accurately noted, “The only one who likes change is a wet baby.” Because change challenges all of us, it can only be implemented with leadership from the top. Anything less won’t do.

As an executive, you should avoid two extremes when you’re trying to establish your corporate culture. The first extreme is “the right of infinite appeal.” This describes a culture where anyone can question any process at any time and too many people have a veto, so deadlock is rife. The second extreme is “run and gun.” Some companies encourage everyone to take the ball and run with it. This generates a lot of action but interpersonal communication suffers, units perform disjointedly and anarchy seizes momentum away from progress. Effective leadership will navigate somewhere between these two extremes.

Proficient change leaders exhibit certain common characteristics:

• Leaders instill a sense of urgency — They may achieve this through their unbridled intelligence, their charisma or simply their ability to foment a sense of crisis. They may drive change by claiming a “burning platform” situation, where the company must escape to a friendlier position or risk losing everything.


• Leaders communicate a sense of vision — Armies follow banners. Air Force pilots paint emblems on their planes’ fuselages. The cavalry charges after the trumpet sounds. No organization is going to arrive at the right destination without a leader whom the troops believe can take them there. One essential aspect of this ability is walking the walk, not just mouthing platitudes you expect underlings to execute.


• Leaders believe — Someone once described sales as “the transference of belief.” Leaders must be able to transfer and communicate their own sense of belief to those who will play an important role in putting the change into practice.


• Leaders overcome setbacks — Ted Williams once remarked that successful hitters in baseball fail seven out of ten times they step up to the plate. Yet the great leader shrugs off setbacks and plods forward, learning from errors without dwelling on them.


• Leaders inspire respect — Some might be tempted to substitute the word fear, but what’s really needed is clout. If the leader supports the change initiative, others should step into line. Leaders who lack respect may not be able to overcome organizational resistance.

Innovation Through Technology

Technology represents tremendous value if you view it in the proper perspective: in its role as a tool, not an end in itself. Technology offers the 24/7 organization these opportunities:

 

• Collaboration — You must retool your organization to facilitate the continual flow of tremendous amounts of information, to be shared both within and beyond the walls of your company. Collaboration across the value chain nurtures communities that become able to contribute true value and innovation, not just repeat established processes.


• Knowledge enhancement — This goes beyond sharing data, to actually sharing know-how. The sharing of knowledge and the dissemination of expertise throughout your organization is critical to its ability to innovate continually. Do not assume that a proper level of knowledge sharing is actually taking place. Chances are it’s not.


• Improving value — Make sure that your technology makeover is actually going to add to customer value. This sounds rather obvious, but it is easy to get caught up in new bells and whistles and to overlook who is actually supposed to benefit from the new gadgetry: your customer. 

Don’t Squeeze The Balloon

People make a classic mistake when they start trying to instill a more innovative culture — they squeeze the balloon. Squeezing the balloon means focusing on one aspect of the business, to improve it, while neglecting other facets. You squeeze the balloon and the rest of the organization deteriorates, with zero gains (...or worse). When you’re planning your change implementation tactics, make sure you don’t squeeze the balloon. Focus on the entire organization.

When you’re selecting the metrics to measure the success of your innovative path, choose accurate measures. One classic error, for example, is to measure an organization’s success by analyzing revenue growth rather than profit. More than one organization has dug its own grave by selling more while earning less. Don’t make that mistake. Honestly appraise the measures you are using. Does your “dashboard” of measurements really measure your level of productive innovation? If not, your metrics are missing the point.

Link your incentive system accurately to the objectives you seek to achieve. If you give people incentives for actions that don’t relate to your objectives, don’t be surprised if you end up lacking support for your goals. After all, you’ve already signaled what really matters.

Simulation

The surest path to success is to double your rate of failure. While no one wants to fail at anything, the more you try the more you’re likely to succeed.

This helps to explain why simulation is a tremendous asset when your firm is evolving into a 24/7 organization. Indeed, it’s hard to imagine how a company can truly accelerate its R & D activity, if it has to wait for an actual product to be introduced

to the marketplace before it begins to study what the next generation of products will be. Technology companies typically design at least three generations of a product in parallel fashion, knowing that the competition also is working at a furious pace to “obsolesce” a product the minute it is introduced...if not sooner. The 24/7 organization essentially develops “rehearsal” techniques to imitate reality and simulate capabilities prior to development and introduction.

Consider, for example, the 80-20 rule. This states that 80% of innovative ideas will occur in the first 20% of the product development cycle. Consequently, this suggests that the remaining 80% of the development cycle simply involves bringing the product to market. How much of a difference would it make in the innovation pace of your organization if you could develop new ideas at the 80% pace, rather than the 20% pace?

Computer modeling can be a big asset in this regard. It enables managers to “see” the flow of a product’s introduction and its impact on the marketplace. Computer simulation and animation create identifiable models and sharply increase your company’s internal acceptance of change. Once workers see what the company is up against, they understand that they really are standing on a “burning platform.” Building an atmosphere that is friendly to adaptation is perhaps the greatest advantage simulation offers in transforming an organization for 24/7 innovation.

The Organic Organization

To become a 24/7 innovator, your company must become an organic organization. The organic organization should be the model for the business of the future. An organic organization is a network of interdependent goals that are designed to satisfy changing competitive needs. The organic organization proceeds through a series of steps: setting goals, finding capabilities, committing to the tasks, completing the work, getting results and providing feedback on those results. Your organization must institute an organic cycle of innovation, feedback and response leading to more innovation. This cannot happen haltingly, with a series of “change initiatives” that leave everyone groaning each time a new change consultant is introduced. Rather, change must become a permanent feature of your company. If change is the only constant, then your company must constantly change.

 

22 Management Secrets to Achieve More With Less Summary

Productivity: The Missing Link

Companies have been improving the quality of their products and services for years. At the same time, many failed to invest enough time or money in productivity. Thus, even with better products and services, their profits aren’t skyrocketing, and their employees’ quality of life isn’t improving. There’s one simple reason: companies and employees need to learn to do more with their time.

Getting Ready to Be Productive

As a manager or executive, you probably know your company isn’t as productive as it could be. Why do you allow that? If your company was more productive, you would sell more products or services, and everyone would make more money and receive more benefits. Then, you could invest more in your products and services, making them even better (and of course making even more of them). Then, your employees and you would make even more money and receive even more benefits. Get it?

You already know that some of your employees are much less productive than others and are taking home the same paychecks. Why do you allow this? People who don’t pull their share are dead weight. If you can’t teach them to perform at least at the company average, you’ve got to let them go. You need a plan. Companies don’t get more productive by hoping for it. And the plan starts with you, the manager.

A Plan for Productivity

Take responsibility: To start, you must take responsibility for the performance of your group – no matter what. If you delegate a project to someone who screws up, you’re part of the screw up. Either you didn’t support the project sufficiently or you delegated it to the wrong person. Take credit when something works, but don’t take it all. Acknowledge employees’ efforts. The flip side of that is being willing to fire people who don’t make an effort. Tell employees that you will let nothing stand in the way of your group’s productivity. Project a sense of dedication and urgency, but help them any way you can.

Listen to the truth, tell the truth: To do this, you have to know the truth. Are your people afraid to tell you about mistakes? Do they sugarcoat the truth so you only hear part of it? If you want the truth, never (ever) get irritated when someone reports bad news to you. Stay cool and people will feel comfortable telling you anything. Then it’s your job to tell people what to do with the truth. The number one reason to have a firm grasp on reality (that is, truth) is to change reality. Share serious news with your group and explain how it affects their lives (salaries, benefits, continued employment, etc.). Since employees are likely to forget your pronouncements, repeat the important things. Then repeat them again.

Satisfy customers: Do you know how your customers feel about your business? How do they rate it compared to your competitors? Do they think your product or service is improving or getting worse? Do you know how your competitors could seduce your customers? Do you know why you’ve lost certain clients? These questions are crucial. If you can’t collect this data, you’re wasting a resource. If nothing else, ask direct questions to get direct answers. Listen to what you learn.

Build a great team: To be a great manager, you’ve got to have technical skills and cheerleading skills. To run the company, you’ve got to keep your people running. Do they know where they’re going? Do they have a firm grasp of your vision? It’s not enough to have a vision. You’ve got to be able to communicate it clearly and quickly – two sentences, max. Remember: You can’t change people. They are what they are. But you can create an environment that encourages people to do and be their best. That’s your job, in a nutshell.

Build productivity into your pay scale: Everyone wants a raise, but few people want to come face to face with the fact that funding raises requires increasing productivity. Tell people they will make more when they produce more, and they’ll rush to become productive. Of course, don’t implement a plan with a downside that rapidly deflates someone’s salary, but show people that the company’s success directly ties to their personal success.

To Be Productive, Leave the Past Behind

Bureaucracy must die: If rules, regulations, and routines block your company’s ability to serve customers (or management’s ability to serve employees), you’ve got a problem. Think back to your company’s original purpose and figure out what is impeding that purpose. Reason, not rules, should dominate your corporate environment. Your subordinates see things you can’t possibly see – they’re on the front-line everyday. Process is the key here. Ask them which rules make their jobs difficult, time consuming, or expensive. Everything should be process-oriented. Remind subordinates that they are serving their customers not their CEO’s and that you are a colleague, not a cop. Set people free; don’t lock them up.

Fan the flames of revolution: Talk to your people. Set up a meeting where they can get off the treadmill for a minute and think – really think – about how they could work better and how they could contribute more. Ask how they would make the company better. Ask which meetings waste time and which management requests seem nonsensical. Present their concrete suggestions for change to senior executives. Starting a revolution is a great way to refocus your staff, especially if the changes come from their suggestions.

Don’t tolerate poor performers: Revolutions demand strength and speed. Poor performers will slow the group down, physically and mentally. If your top performers have to pull dead weight, they go slower and tire more quickly. You must dispense with poor performers out of respect for your top performers. This doesn’t mean immediately firing people. Diagnose their performance problems and act fast to fix them. Maybe you can develop poor performers by designing an action plan with them to correct their failings.

Streamline your work processes: With input from those who do the work, diagram the ways things are done. Highlight wasted moments in the production chain, and change them.

Eliminate layers of organization: Bigger is not better. To emphasize productivity, concern yourself with your tooth-to-tail ratio. Real work produces tangible results: a product or a service. How many people are doing real work? If people aren’t producing products or paying attention to customers, what are they doing all day?

Forget the old standards and go for the gold: Find out who’s the best at what you do and try to catch them, match them, and pass them. When you set your benchmark against the best in the business, at the least, you will begin to internalize their successful practices. At the best, of course, you’ll surpass them. Having a benchmark is a useful motivator. If you show your people a company that’s doing exactly what they do, only ten times better, you won’t have to say much more.

Break out your stopwatch: Okay, your product or service is great. But to be truly productive, your organization has to produce them faster. The same is true with great ideas. If you sit on them, someone will beat you to the punch. Don’t get caught up in always being right. The best baseball players get less than forty hits for every hundred times they try – and they probably get paid more than you. If you make more right decisions than wrong ones, you’ll be a great leader.

Get the best people: You are only as good as your people. Find and hire the best; don’t compromise. Charge your HR department with finding the right people.

Hitch your organization to the stars: Identify your star performers and make their level of productivity your standard. Ask them to teach the rest of the company their secrets, make sure you reward them. They might be afraid to give away their secrets.

Never stop coaching: Your employees need feedback. They get lost in their jobs and can’t see ways to do them better. If you know your players and their potentials, you will be able to push them to be the best they can be.

To Be Productive, Embrace the Future

Big visions take flight on the wings of your people. Make sure their wings are broad enough. You can eliminate bureaucracy, streamline your processes, and set goals all you want, but if your employees don’t have superior skills, you’re wasting your time. Invest money in your workforce, and there is no limit to what you can do with your organization.

Training is the first step. Once you figure out what processes are fundamental to the success of your organization, begin to develop or seek out specific training programs. In the beginning, get your people up to speed. You’d be surprised how many people in your workforce could use some help with fundamentals or spend too much time on simple tasks.

If you really want training programs to take hold, require every employee to attend. Make sure the programs are teaching skills, and not feelings. People should be able to apply the skills they learn immediately. Finally, make sure that training programs are exciting. You don’t want your people to (A) fall asleep in their sessions or (B) forget what they learn because they were never fully engaged.

Education is another important, although less specific, factor in improving your staff. Encourage employees to take classes outside of work. People who are continually learning stay fresh and never forget how to learn. Clearly, this is of tremendous value to the future growth of your organization.

Teams Are the Wave of the Future

If you can organize effective teams within your organization, productivity will increase. This doesn’t mean developing teamwork. Teamwork can lead to teams, but it can never replace the real thing.

Competition within organizations is out. Cooperation and collaboration are taking over. To find out why, ask yourself: would you rather work in an environment where you have to keep things to yourself so you can outperform your colleagues? Or would you rather work in an environment where you engage with a friendly, intelligent group of people on a daily basis?

You can’t just build teams because you think they’re a good idea. You have to make sure that your people believe in them and are willing to commit themselves to them. Once people are interested, make sure they realize that they’re still expected to perform. Be sure you realize that you shouldn’t be telling teams what to do. To get the most out of your teams, you should be asking them questions and having them figure out what to do. Teams, for the most part, will manage themselves. Don’t get in the way. Instead, rely on your coaching skills, and on the trust you have established with your high-productivity employees. There, now, doesn’t that feel better?

10 Simple Secrets of the World’s Greatest Business Communicators Summary

Share the Excitement

Why can some people just naturally tell a story better than others? Well, because they know what they are doing. To join their ranks and become a better communicator, add expertise to your delivery by using 10 speaking techniques recommended by well-known communicators. With these principles, you, too, can make memorable and motivational presentations.

The amount of emotional energy that top speakers put into a presentation separates truly exceptional communicators from the ordinary. They are able to make an emotional link between their subject and their feelings that really touches an audience. However, not every communication requires a high level of emotional connection. Business presentations are targeted to three different levels of communication:

1. Communication focused only on delivering a message and preserving the speaker’s or the corporation’s reputation.

2. Communication that incites the audience to care and to participate in what the message invites them to do.

3. Communication that opens the door to a new perspective and creates a “reality distortion field” about how the audience views the world.

Superb presenters abide by the 10 following precepts:

1. “Passion: Use Your Head to Reach Their Heart”

Passion distinguishes great communicators. Passion can help you convey your story with added emotion that expresses power and exceptional confidence. You can become a passionate speaker by combining your enthusiasm and energy.

In many cases, speakers use passionate business presentations to mask ordinary content. Financial author Suze Orman, who holds the record for selling the most books in an hour on a national shopping network, says that her financial advice is not new. But the forceful way she delivers it helps her books sell well. Similarly, Sir Richard Branson, the British entrepreneur, combines zeal with his desire to have fun. That combination helped fuel the formation of Virgin Atlantic.

Many great communicators experience a moment of discovery, a turning point that leads them to realize their passion. For Starbucks founder Howard Schultz, it was a visit to Milan, Italy, where he first saw successful coffee shops, and admired how they evoked a definite mood. For California Governor Arnold Schwarzenegger, it was a national tour during which he saw disadvantaged children in all 50 states. As a result, he decided to work with inner-city kids and the Special Olympics.

2. “Inspiration: C’mon Baby, Light My Fire”

Charismatic leaders have a tremendous ability to inspire. They can convey their vision and are effective storytellers, able to explain how their ideas can change peoples’ lives. They often tell personal stories that connect with listeners at the emotional level and inspire them.

During his 50-year career, football coach Joe Paterno of Penn State University motivated his players to do their best to honor themselves, their families and their teammates. Paterno recognized that if every boy on the entire team played to his best ability, the team would win. This very successful formula involved getting the players to use their

“emotion, commitment, discipline, loyalty and pride.” Paterno’s team is arguably the best in U.S. college division 1A football history.

3. “Preparation: Toss the Script”

Being prepared is the best way to establish a rapport with your audience. However, relying on notes during your presentation is the surest way to reduce your effectiveness. The best speakers make presentations look effortless, although they rely on extensive preparation. Former New York Mayor Rudolph Giuliani started to prepare for his first February budget presentation in October. Great speakers make plans that include what they are going to say, how they are going to say it and how they are going to end. They never read from a script and rarely read directly from their PowerPoint slides. They are in command of their material and have mastered its contents and basic messages.

Rehearsal is also important. Top communicators review their notes, visit the hall where the presentation will be delivered, and examine the seating and lighting. When Al Gore was preparing to debate Jack Kemp, he asked that the temperature in the rehearsal room be the same as in the debate hall.

To prepare, video tape your rehearsal. Criticize your performance. Ask yourself: Do you appear energetic? Do you maintain good eye contact? Are you making effective use of body language and gestures? Correcting deficiencies during rehearsal is much better than recapping your hits and misses after the presentation. One venture capitalist, a stand-up comic in his off-hours, says a good presentation is 50% material and 50% delivery.

4. “Start Strong: Don’t Bury the Lead”

Jeff Taylor, the founder of Monster.com, makes as many as 75 speeches annually and energizes his audiences by starting with a bang. He invited a group of human resource professionals to take off their shoes and hold them up. He asked a graduating class at the University of Massachusetts to repeat words in unison. Taylor makes a memorable impression by getting everyone’s attention. Studies show that people remember the first and last things that happen at an event. Ideas presented in the middle often get muddled. That’s why newspapers use headlines: to get your attention and state the article’s subject.

Apple CEO Steve Jobs has earned a reputation as a powerful speaker because he gets to the point quickly and succinctly. At one major presentation, he began by discussing the new iPod. Within the first two minutes, he listed its key features. As is often the case with top speakers, his opening remarks led directly to his main theme. To focus on getting your most salient points into a 30-second opening segment, answer these questions:

1. What does my company provide, do or advocate?


2. How does my company solve customers’ problems?


3. What makes my company different?


4. What can my company do for you?

5. “Clarity: Lose the Jargon or Lose Your Audience”

On military missions, orders must be clear and concise. The task leaves no room for error or jargon. The message has to be simple and readily understandable. Once you eliminate jargon from your speeches, use analogies, anecdotes, endorsements, examples, statistics and testimonials to enhance your presentation. These techniques can drive home a point or help make a story more tangible.

When Jack Welch was CEO of General Electric, he believed in simplicity. His executives had to present business plans that were devoid of jargon. He also set simple rules. For instance, any GE business had to be first or second in its respective field, otherwise it would be closed. Jeffrey Immelt, who succeeded Welch at GE, continued to emphasize streamlined communications by teaching that messages could always be simplified.

6. “Brevity: Keep It Short. Period.”

Short speeches and presentations can carry powerful messages. John Kennedy’s famous 1961 presidential inaugural speech conveyed his vision for a new nation, yet it was only 15 minutes long. To make your speeches and PowerPoint presentations memorable, use

short words and cut excessive flowery language.

Given today’s frantic bombardment of messages, people tend to get bored quickly. That makes keeping things short even more important. TV or radio sound bites demonstrate the virtue of brevity. Today, a sound bite takes about six seconds. A business presentation should be no longer than 15 minutes. Even the “Great Communicator,” Ronald Reagan, gave strict instructions that his speeches should last no more than 20 minutes. Academic studies show that audience members can retain up to 90% of what they hear in a 20-minute presentation. After that, retention drops significantly. That’s why you should not confuse a presentation’s length with its effectiveness. They are often completely unrelated.

7. “Say It with Style: What Great Television Anchors Know...”

The way great business communicators look and act is often more important than what they say. That’s why vocal delivery is important. Great speakers, such as British Prime Minister Tony Blair, write their speeches for the ear not the eye. This means Blair uses short sentences and selects his words carefully. Broadcast industry research shows that the “ideal” voice should be clear, have an average volume and not have any distracting flaws. A pleasing voice is even an important factor in being well liked.

8. “Command Presence: Movement Does a Body Good”

Establishing a rapport with the audience includes having good eye contact, controlled hand gestures and an erect posture. Your body language affects your credibility. Slouching, putting your hands in your pockets or swaying while you speak detracts from your message and credibility.

Hand gestures actually help speakers clarify their thoughts. University of Chicago researchers found that when speakers made a concentrated effort not to use their hands, it actually reduced their mental acuity. The research found that the use of specific gestures indicates a more rigorous thought process. Making a gesture above the waist is considered more powerful than making one below the waist. Ways to make a point include clenching a fist, gesturing with one or both hands, and holding your palms open or closed. You have to know when to use gestures, so follow two rules: Use them rarely and, then, only to emphasize a key idea or fact.

9. “Wear It Well: Image Is Almost Everything”

Dressing professionally and being well groomed pay a compliment to your audience. Good grooming shows you care enough to make a special effort. It also helps you establish a presence and become the center of attention. This means you “look the part” of being a credible presenter or executive, so people can focus on your message and not be distracted by your appearance. People who dress well and look attractive get better service and are more warmly received than people who are not attractive. One study from London Guildhall University found that more attractive people had more successful careers, including faster promotions.

Men should follow three basic rules to dress their best, advises George Zimmer, CEO of the Men’s Wearhouse stores: 1) Buy a suit that fits. This is even more important than the fabric’s quality; 2) Buy suits in basic colors: black, charcoal or gray; and 3) Be stylish. Reflect fashion changes in your wardrobe.

10. “Reinvention...It’s Your Choice”

To remain fresh, stay topical and don’t repeat yourself. When you face a setback, use personal renewal to bounce back. Former President Reagan emerged as a powerful public speaker after his acting career ended. He was signed by General Electric to give speeches to its employees and to host a TV show. During that period, he perfected his speaking skills. Arnold Schwarzenegger also had to learn to speak English before he became a powerful speaker, but persistent practice made it possible. Exceptional communication is the key to reinventing yourself and your company. The most important factor is to believe in yourself and your ability to make a change in yourself and others.

10 Rules for Strategic Innovators Summary

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Even world-class companies, with powerful and proven business models, eventually discover limits to growth. That's what makes emerging high-growth industries so attractive. Although they lack a proven formula for making a profit, these industries represent huge opportunities for the companies that are fast enough and smart enough. But constructing tomorrow's businesses while simultaneously sustaining excellence in today's, demands a delicate balance. It is a quest fraught with contradiction and paradox. Until now, there has been little practical guidance.

Based on an in-depth, multiyear research study of innovative initiatives at ten large corporations, Vijay Govindarajan and Chris Trimble identify three central challenges: forgetting yesterday's successful processes and practices; borrowing selected resources from the core business; and learning how the new business can succeed. The authors make recommendations regarding staffing, leadership roles, reporting relationships, process design, planning, performance assessment, incentives, cultural norms, and much more. Breakthrough growth opportunities can make or break companies and careers. Ten Rules for Strategic Innovators is every leader's guide to execution in unexplored territory.

 

Strategic Innovation and Strategic Experiments

Change dominates business today. Companies face great pressure to give birth to the next major innovation. However, rather than waiting for change or stumbling across discoveries, you want to engage systematically in “strategic innovation,” redefine your customer relationships, and re-examine the assumptions underpinning your company and industry. This requires understanding your company’s “organizational code,” an underlying structure that parallels the human genetic code.

“Strategic experiments” are at the heart of strategic innovation. Such experiments offer great growth possibilities, because they happen in new or not-yet-defined industries, and because they can change your assumptions about how organizations succeed. Strategic experiments also can alter how you define business and success (rather than just making you better at what you know and do now). Strategic experiments generate uncertainty. You won’t know how to evaluate them and you’ll find them unprofitable at the start. Because of this uncertainty, keep strategic experiments distinct from your stable, familiar core business. To emphasize this distinction, call the strategic experiment “NewCo” and the parent business “CoreCo.” Follow the “ten rules for strategic innovation,” which are:

1. “In all great innovation stories, the great idea is only Chapter 1.”


2. “Sources of organizational memory are powerful.”


3. “Large, established companies can beat start-ups if they succeed in leveraging their enormous assets and capabilities.”


4. “Strategic experiments face critical unknowns.”


5. “The NewCo organization must be built from scratch, with new choices in staffing, structure, systems and culture.”


6. “Managing tensions is job one for senior management.”


7. “NewCo needs its own planning process.”


8. “Interest, influence, internal competition and politics disrupt learning.”


9. “Hold NewCo accountable for learning and not results.”


10. “Companies can build a capacity for breakthrough growth through strategic innovation.”

To understand how these rules work, first you need to know what strategic innovation is not. It isn’t “continuous process improvement,” in which you make a lot of little changes, as GE does through Six Sigma. It isn’t a “process revolution,” where your process stays the same, but you improve productivity, as Wal-Mart is seeking to do by using RFID (radio frequency identification) tags to track inventory. It isn’t “product or service innovation,” in which you create new items for sale, but leave the existing business model in place.
“Strategic innovations” may include any or all of these steps, but “always involves unproven business models.” However, you can create strategic innovations without changing your product, service or technology. To understand the different kinds of innovation, envision a spectrum. Put process revolution and product innovation in the middle. Continuous process improvement is at one end and strategic innovation is at the other. At the continuous process improvement end, changes are small, cheap and quick; results are fairly predictable. At the strategic innovation end, change can take an unknown amount of time and money, and then it may not work, at least not initially. However, strategic innovations offer greater potential for growth, especially the “nonlinear growth” that transforms an industry, bringing big potential profits. You and your colleagues probably won’t face the opportunity to carry out strategic innovation all that often in your careers (maybe only once), so it’s unlikely that anyone will have sufficient “direct experience” with such change to be of much help.

To Innovate Strategically, Do Things Differently

You’ve probably heard a CEO announce that things are going to be different. He’s got a world-changing idea. He studies, plans and organizes...and then shifts his focus away. Everything withers because he’s bought one of the great myths about innovation – that it is all about the great idea. It’s not. That is why Rule 1 says that a great idea is only the start. Unsupported, even the best idea will die. For innovation to succeed, at least one top executive must protect the idea by generating funding, resources and support without a lot of managerial involvement, and by helping the organization learn quickly from the trial steps in developing the idea.

This innovation champion must remember Rule 2’s warning that organizational memory springs from a powerful source. When your organization starts something new, it will tend to repeat things it already does well. That isn’t innovation. When you do something new, you can’t plan methodically or follow a regular process. Instead, encourage thinkers to explore new ideas or products. Eventually NewCo will be efficient, but now it needs to be creative. That means forgetting how CoreCo defines itself, its core competencies and even its business model. At the same time, NewCo wants to “borrow” expertise from CoreCo, and to design itself so it can learn. To consciously set CoreCo’s habits aside, follow Rule 5’s dictum that NewCo has to start fresh with new systems. Hire new people (creators, not implementation experts), organize them differently (a flatter structure, not a hierarchy), and breed an independent culture that is open to risk, and that emphasizes experimentation and learning.

Forget, Borrow and Learn

The three core challenges in establishing NewCo are forgetting, borrowing and learning. As you try to forget CoreCo’s powerful organizational culture, ask how your new business  model must differ. Who are your new customers? How will you serve them new ways? Which “areas of expertise” does NewCo need and in what proportions? Where can you use predictions and where do you have to deal with uncertainty? How should you evaluate management performance in a project that requires risk or could even collapse? Organizational memory gives you the business instincts that let your company react quickly to challenges, but if you don’t forget the old responses, you are doomed to fail.

To address organizational and technical challenges, hire a mix of old and new people. Set up new behavior models, especially in accountability and performance. One tough challenge is deciding when NewCo must make money. Too often start-ups are held to arbitrary demands that they show a profit, when, in reality, you need to expect them to lose money at first (they are experimental, after all) and give them grace periods.

Borrowing Tangible and Intangible Resources

You want to forget CoreCo’s constraints and culture, but you also want to borrow resources from it as needed. For example, the Internet division of the New York Times Company, New York Times Digital (NYTD), borrowed its initial organizational models directly from its parent firm, which lent it personnel and credibility. As a result, NYTD took only limited advantages of the Internet’s possibilities. Then, eager to pursue fresher opportunities, Martin Nisentholtz of NYTD hired more outsiders for new jobs, upgraded tech support and let new ideas emerge in a bottom-up, amorphous fashion, following emerging markets and technology. This created tension, turf wars and divided loyalties. Such tensions accompany any new project, because as NewCo succeeds, it seems to consume CoreCo’s resources and make it obsolete. Yet as NewCo moves into new areas, it will lose money, so negative comments may fly from both sides.

Nonetheless, as Rule 3 says, established organizations can defeat innovative upstarts if they can leverage their assets. NewCo should borrow from CoreCo, but it must diffuse the accompanying stress. That’s why Rule 6 explains that senior management’s primary job is to manage tensions. The two entities should plan for cooperation and demonstrate “common ground.” NewCo should borrow only in the areas where borrowing gives it a great advantage. Don’t link “support departments” (i.e., HR, legal, purchasing, etc.) even if that would be easy, because they are strong carriers of “an organization’s DNA” and will make NewCo too similar to CoreCo. Establish NewCo outside CoreCo’s physical limits (not the same building or campus), but near enough to borrow easily. As NewCo takes loans, find ways to repay. Heed all interactions, including how you price the transfer of resources. If you answer to both CoreCo and NewCo, coach colleagues at each one differently. Work to coordinate NewCo and CoreCo processes. When you create new projects, try to benefit both organizations. Let NewCo boost CoreCo’s established brand. Finally, use CoreCo’s established manufacturing capabilities and knowledge.

Focus on Learning

To survive, emphasize learning. As Rule 4 cautions, strategic experiments face crucial unknowns. Your greatest learning task is to address these unknowns through better predicting and functioning, even though an unknown or emerging industry can’t use formal prediction tools or intuitive rules of thumb. Instead, you must learn through “trial-and-error” as you engage in repeated experiments. Make your experiments clear, repetitious and speedy (as soon after one another as possible, so they stay fresh in your memory). Determine what you think will happen. Plan, execute, measure your results  and review how the results compare with your predictions. This will put you far ahead of most people who engage in strategic experiments, because they either don’t understand the learning process or they execute key elements badly. They ignore their predictions, plan badly and hastily, or they execute but don’t compare their results. That is why Rule 7 for strategic innovation mandates an independent planning process for NewCo.

Barriers to Learning

Barriers to learning are crucial. As Rule 8 explains, many factors can disrupt learning, including influence, inside competitiveness and political jockeying. Flawed planning also disrupts learning, as seen in Hasbro’s late-1990s attempt to develop interactive toys. Some insiders there manipulated predictions to support their positions, and made faulty and rigid predictions based on flawed assumptions. They also sought profit too quickly, which can sink an innovation. That is why Rule 9 makes NewCo accountable for learning, instead of results.

Surprisingly, management also can inhibit learning by being “reasonable, inspiring or diligent” – at the wrong times. These good qualities are likely to be informed by CoreCo’s values or, more simply, to be misapplied. A mature company can insist on a lot of planning data because it operates in a known field. An innovator in an unknown field cannot, so seeking more planning information will force attention there, and away from learning.

“Theory-Focused Planning”

Planning in a new or changing industry might seem futile. Much planning is, but you can gain a great advantage with theory-focused planning, in which you create a theory “with testing in mind” and then test it. Describe the new business and what it must do. Then “identify metrics,” by asking what you can measure. Set goals and spending guidelines. Predict outcomes and identify areas where you cannot presume a result. Note and test assumptions. Analyze the gap between what you predicted and what happened, and revise your plan based on what you learned.

The first, essential step in theory-focused planning is making sure everyone agrees on the business function. Using graphic organizers, such as an “influence diagram” (also called a “bubble-and-arrow diagram”) can show how the planned steps relate to each other. Show the chain of cause and effect. Your plan will differ from traditional approaches. You’ll revise it more often, since traditional annual planning is too slow. Fill in the unknowns in your plan as you develop your business. Make the theories behind your business explicit. Revisit that logic as your experiment develops. Include more factors in your plan, such as tracking trends that shape your emerging industry. To review performance, balance this wider focus with a detailed historical examination. Finally, hold managers “accountable for learning.” They can’t just execute known processes; they must understand and articulate new ones, so that all of NewCo gains a better understanding. And everyone will agree with Rule 10, that strategic innovation is the way organizations can generate breakthrough growth.

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