Discovery Driven Growth: An Idea Whose Time Has Come
Greetings. From New York City and Columbia Business School executive education my. Name is Scott Gardner and I'm very happy, to be with my friend my colleague professor Rita McGrath for today's webinar discovery. Driven, growth an idea, whose time has come but, before I introduce professor. McGrath I'd like to go over a few quick logistics, for the webinar if you'll see on your screen right now a recording. Will be made available of, the webinar if, you'd like to tweet about the webinar please use our hashtag CBS. Exec, and, finally. We. Encourage you to upload your questions to the Q&A box throughout the webinar and we'll get to as many of those as possible in the last 10 minutes Thank You Rita, it's great to be with you today, delightful, rita is a professor, at Columbia Business School she, has received the number one achievement, award in strategy, from the prestigious management. Rankings group thinkers, 50, and has, consistently, ranked, in their top 10 of management. Thinkers she has been recognized, as one of the 25. Smartest. Women on Twitter and, one. Of the top 10 business professor, thought leaders on Twitter, and LinkedIn she. Is also a regular speaker, at the World. Economic Forum, in Davos Switzerland and, finally, she is the faculty director of two of our open enrollment executive. Education programs. Leading, strategic growth and change which we've worked on many times together and, the women in leadership program. And our online program, mastering. Corporate. Entrepreneurship. Rita so great to be with you I know how. Busy you are and so I'm very happy that you could be with us today it's a pleasure I'm delighted to be here great should we get started oh great, so I've. Worked with you for many years I've, been with you in classrooms, I've been with you with clients, I've read. You know your articles, your books one of the things is the truth is that every company promotes. Innovation or. Should provoke promote, innovation but many are finding that their attempts, sadly. Have a low success rate and you, and your work have observed five common, challenges, that, they face should we go through them one by one so great, okay the first one up is.
Innovation. Is, episodic. Now. When I look at this one I really think that this challenge supports, the point that process, matters, and that, innovation must become a, a tangible. Part of a company's culture it's a living thing we've, said this in other webinars it's a living thing would you agree I would what. I find today is that everybody's talking about innovation, but when you look at what they're doing it's actually what I call innovation theater, right so we we get our senior team we fly them off to Silicon Valley they get their picture taken next to the Google sign, and. That's wonderful and it's so exciting or even better like you and I have been through this right we do boot camps and the walls are covered with post-it, notes and people go oh that was fabulous and then, we get back to work and nobody knows what's going on and so the, the thing that we teach in leading strategic growth and change the thing like I teach in my own work is, the intonation is actually a process that you can learn and it's three things people. Always confuse it with being just getting the ideas that's, not enough you've got to do ideation, but, then you have to follow that up with incubation. Which is taking, your idea and turning, it into something you can take to market and, then you've got the acceleration, process which is taking your incubated, idea and now it's got to become a parent grown-up so you know what that's like like all of a sudden you, have to make nice to the lawyers and you have to bring in the quality people and legal has to be on board it's a phase change and, that's, oftentimes where innovations, get stuck yeah, yeah, and so do. You think what percentage of companies do you think are nowadays. Compared. To fifteen years ago are looking at innovation as an, absolute necessity well. There was a recent McKinsey study that, found that only 6%, of, thousands, of companies they had in their survey felt, that they were getting it right six percent six percent getting, it right getting it right and what percentage you think are even trying. More. Than you used to be I was just part of the big IBM, study and, it was called something like The Empire Strikes Back and it was that I'd, say 15 years ago people were totally freaked out at these start-up disruptors, that were gonna you know change now, I think companies are starting to get the notion that we can be our own disruptors, you know we can disrupt ourselves so it's less scary, than it was back then but I think they're still we're, kind of at the awareness, stage we're. A long way from a lot of companies knowing exactly what to do right and if you don't know what innovation, is, it's. Just a word it's, just a buzzword it's it's not a cool word to use and it's a cool word but I would think it's if it isn't part of the culture then it may be debilitating. To the people who work for that company because it looks like well what was all that work for exactly, well what the episodic part is the part that's really dangerous because you get, critical mess people have the fire in their bellies they have the scales have fallen from their eyes and then they run right into this brick wall of the parent company and it's worse than if you've done nothing right, and then it just sort of ends. I'll. Go somewhere else. Okay. All right interesting so let's move on to the next challenge, our. Next challenge our resources, are, trapped, and held hostage, by, incumbent businesses. And you know this challenge, reminds me of one. Of the phrases that another, of our professor says is the most dangerous, phrase, for a company to believe if it ain't broke don't fix. It, very dangerous where it simply is you, know for a company less disruptive, to just keep existing where, you're having current success.
Yeah. There's there, are a lot of reasons why this principle, is so important, which is that if you're not able to look across your whole corporate portfolio and, see, what's coming. You're. Very likely to keep resources, the way that they have been which is fine as long as everything's stable but we know things aren't stable these days and so the heads of these big important, businesses will continue to put resources into, those big important, businesses, and not move, on right it's a little bit like you know the head of the film business at Kodak being told oh well in the future chemicals. Go away film goes away it'll all be digital and it'll all be on a device that isn't even a camera that, person's not going to be inclined to put resources into this new thing they're gonna be inclined to sort of dig. The moat and defend right and that's totally the wrong response and why do you think that it what's the psychology around, that because I mean is it just simply is. It apathy, is it is it fear, is it you know is it wanting, to see if somebody else and then trying to beat I mean you know what have you discovered when you when you ask leaders why are you not. Existing. Outside of your current success which we know is not sustainable, which we know change happens we know customers, want more yesterday's, exciters, are tomorrow's, and ragers you know we've talked about this for years so what do you find that they feel about that well part of its personal self-interest you know to be blunt the, fact that digital. Is going to be important, if my whole experience in background and history and library are about chemicals that's, going to be scary so there's there's fear there's self-interest. I think the larger question though is it always feels like a loss right because the early days of anything, it requires investment, it requires more, energy it requires changing. My habits, it requires talking, to different people bringing, in different capabilities into, the firm's so there's, a lot of challenge, to doing it properly now the good news is I think once firms get used to working this way once people get the, excitement of being in a company that's continually, reinventing, itself and finding new territories, and able to do new things that. Almost becomes addictive, and you get things. Happening the other way right your people get excited by it right well that would that was a college. Of it for people who work within an organization, is that we are not, changing, past. Successes, because, we don't honor them you. Know then I think people feel that way well, you know I I was part, of this as somehow not worthy. Anymore, and there, is a psychological component oh there is so how, do you counteract that oh I think you have to you have to provide guidance, for people as to where they fit in the future so one of my clients is a company called, United.
Paper Mills or UPM very, exciting business they cut, down trees and they take trees and they make them into paper and they make the paper that The Economist is printed on for example, and. They, split the company some years back into the mature businesses, and the growth businesses, and I thought that was a terrible idea like I mean how crazy could you be like how much fun would it be coming to work every day and being told you you're running the mature business here and just hand over the cash to these New Balances and, I went and I interviewed, the managers and I thought oh these guys are gonna be demoralized, and upset and it's not gonna be great I. Could not have been more wrong they, were like, we are Rambo, you know we are, keeping, the wheels turning all those guys get their act together and their CEO had a very insightful, Esat them down and said look when, this thing converts. To being this new bio business. That they wanted to build I'm gonna need you I'm gonna need your skills of scaling I'm gonna need your skills that operate exactly I'm gonna need your supply chain knowledge, so, he had painted a future for them which made it a lot much less difficult for them to embrace it I like that he painted a future for them and that is really I think what I'm getting out there is to paint a future for the people and also the, leader it's a responsibility, of the leader to, sort of honor the. Talent, they have, move forward not to just wipe it out and start from scratch you know that constant, feeling that people have a we're, gonna wipe out the old bring in new wipe out them in five you know it's like really honor that yeah that's great I love it okay so we move on Dena story. Number. Three. You're trying to fit innovation. Into, the structure, that you have so I was. Laughing I was thinking about this one because I thought you know the term habit, the, habits that we have is most times delineated, by good, habits and bad. Habits right and we mark, those on either side of the fence but this instance. Your theory is that even, good habits can, obstruct, the innovation, process Oh totally yeah I mean what I see is companies are so, concerned. About making big changes to their organizational, structure that, they'll, try this for example fit a service business into, a business that makes products and it doesn't, work it's a different business model different. Metrics different rhythm different cash flows I mean everything's different and yet they try to sort of squeeze them in and, when you look at most really innovative, ideas they, tend to fall between the cracks of, the existing, structure, and if you try to force fit them into the existing, structure, it's. Going to be the wrong. Everything. The wrong measures. The wrong people so, what I recommend is something similar to what IBM, did back in the days of Lou Gerstner which, was very clever which was he, actually carved, out a small, team that would figure out what an opportunity could. Look like and, then he started to pull pieces of the existing business and put them under that team and, so what he rebuilt, was a new structure, that was suitable to the business that he was trying to get into rather, than something that was like the mainframe business right and it was a very clever way of navigating, that, organizational. Structural, thank you so it's in in sort of an efficient, and smaller way of using pieces. Of what working well so those people can continue, to work well continue. To do what they've done but, almost in not Anna furtive way but just in a way of like sort of pulling. Them in a way that is sort of adding. Value almost.
Unbeknownst, Yeah what you're doing is you're creating a structure that makes sense for the new stuff and you're also weakening. In a good way the. Existing, structure so that you're loosening. The inertia not. Just smash okay, great. So what would you be say it would be, you know that that example you gave what is the first step you know if you're trying to you. Have a structure you have a culture you have a very definite, way of running a business everything what, would you say is that what would you say is the first thing, a leader should do an organization, well if you want to follow the IBM example, the way they got into this was they actually had a terrible painful experience, so they they, had the first few years of the turnaround and that was kind of stable as the ship and then it was okay now it's time to start to grow again and what, Gerstner was finding was his business, unit leaders because they were under these short-term pressures. Were. Systematically, undercutting, the budgets and the resources that were dedicated to new things so, he created a separate reporting line that went up through a guy, called. Ralph whose, last names right now forgotten but so, he was in charge of the emerging business opportunity, program and all. Budgets, and all people who were dedicated to that program reported. To him and his sole job was making sure those resources stayed on growth not on the business as usual and then, what they would do is they would develop a point of view about the future so as an example one of the things they looked at was something they called pervasive, computing today. We would think of that as the Internet of Things but they had this very early idea, and the, dynamic. Was that it had to be big enough to be worthy of IBM it had to be rich, enough that companies would actually, devote significant. Resources to computing, power in that area and it had to be something where they felt they had a right to play and if it was big enough then they would take a senior person and, put them in charge of that exploration. And then as it gained knowledge as they got, to understand, where the opportunity, really was that's when they started to do the reconfiguration, well that's see that's what I like I like that process, so before you you, know because one, of our professors says well you know when a leader spits it's a waterfall. So, in other words this kind, of reconnaissance, or what would have you has been done way before they're. Starting, to pull those resources, because if you're just pulling resources in the discovery, phrase that.
Can Be debilitating oh I, like this process it might not work another thing people always forget is yes, innovation, is great but we have this pervasive Pro, innovation, bias where nothing ever goes wrong the, thing that we're inventing is better than what ever came before that's, just not right you know not all innovations. Deserve. Exactly. And it's, and if that. Would be like the you, know announcement to what you know innovation, is if you just think that it's all success the whole point of innovation is that you fail learn. Recalibrate. Try. Alright. Great this is interesting all right number four. Challenges. To, little diversity, of thought too, much isolation. From customer, experience, and you. Know this is very interesting to me because you know I really feel that in this day and age with. Such easy access, to our customers, current, our customers. Potential, it. Just, seems to me that it's unnecessary, for us to be sort of making decisions in the dark anymore crazy isn't it yeah so talk more about that sure so one, of the things I see with businesses, that have been around for a while is they, kind. Of back to habits right you you get in the habit of not really. Listening to what what's going on with your customers, and this. Can manifest itself, in all kinds of interesting ways so here's one that caught my eye just from the other day which. Was there, was an article that was being written about managing, the hours, of retail, workers and a company that's really making an effort in that regard is the Gap clothing. Store and, this, manager, for the gap was being interviewed about why was it so difficult for them to get stable hours, for their workers, and he said oh well you know headquarters. Makes these decisions about promotions, but, even worse than that he said I had, to double, shifts, running because we were expecting, an executive, visit mm-hm, now, let that sink in for a minute the. Executive. Thinks, they're doing the right thing they're going into the field they're gonna see what's going on in the stores they're gonna have earnest conversations, with their customers but the gap they're visiting is a gap that has three, times as much manpower in, it or the gap you or I are gonna go to right. So without you, know and, so without anybody meaning, too bad by it you, know meaning, would know with no ill intent what this store managers doing is creating a, fantasy and when, that manager, goes into that store what they're seeing is not the truth and so I think we, fall into these habits, of trying, to look good internally. We. Call on the same people we have the same conversations. Over and over again instead, of having really, diverse. Representations. Of people on. The, committee's that decide what programs were going to go for and on the design, teams and on the groups. That are gonna go look for new, inspiration it's, very, very easy to get isolated from, what the, customers really experiencing. Exactly and, you know I wish I had a client. Just the other day a big bank and for, the first time we went and did a customer, exploration, and out of that one visit, came, the. Insight that the projections, they've been making as to how much people would buy of a certain product were three times too optimistic.
And. That's so easy to find, it. Sort of like being a mystery shopper and walking in and saying I'm the mystery shopper. The. New york times restaurant critic, right you know. But. I just think there's such easy access and, you. Know there's a whole generation of, people who are willing to tell you the truth totally so you, really can learn a lot very easily and, cost-effectively. Nowadays. You know it doesn't even have to be you, can just get much a lot of data well, and as my friend David Rodgers who teaches in our digital strategy, programs, as you know would, say every, business today is a digital business every business is a social business right if you're selling hammers on Amazon I'm sorry there are reviews, on those hammers and you can get other people's opinion yeah and it really does affect everything, to, ignore it is, there's. No excuse, it's. Great all right let's move on to the last challenge, we have here treating. Assumptions. Like, knowledge so, you know again when I look at this issue I think of you know again, what comes to mind that while process, is enormous ly important, it, must coexist, with. Flexibility. The, agility to pivot quickly. So. Do great yes that's something we spend a lot of time on in leading strategic growth and change which is the process, of converting assumptions. Into knowledge it's just so, critical and human. Beings as you and I have over, many years talked about we are terrible, at processing, assumptions, right like, we say something and either it becomes a fact in our head immediately and all of a sudden the world revolves, around that fact or we. Forget them and so we make a decision we put investments, in something and then six months later come back and we've completely, forgotten why, we were doing what we thought we were doing so, what we do in discovery, driven planning, which is part of the. The theme that we pursue in leading strategic growth and change as we actually dock, teach people to document, their assumptions, call. Them assumptions, don't call them projections. Or targets, or goals call. Them assumptions, hypothesis, testing, effects, and then we teach you how to how to learn your way to what, the real opportunity, is right great. Well that's interesting so I think if, you had we. Went through the five and, you. Know they're I think they kind of break down in a systematic, way again, so being systematic. You. Know having, a very. Holistic view, not. Trying to put it into a model that you already have and you and then you know trying. To sort of pull from the resources that work and not just focus on that or be afraid to move away from that. You. Know what would you say they're the one or two things that anybody. Who's watching us now because, everybody when they watch this they want to know like okay what do I do today. And what do I do long term like what can they think today, if you're a leader in an organization what, would be the first thing you want to think about if you're trying to move your organization into being an innovation, excellence.
So, I think one of the first observations. I would make is that a lot of companies get the message right they got the memo innovation is important okay you, you you go go form a skunkworks in it and do stuff and that's totally unnecessary today, because, we have a whole body of knowledge about how to innovate. Effectively. Inside a corporation at scale and we, teach it in leading strategic growth and change we teach it in master and corporate entrepreneurship, so my first encouragement, would be if, you wanted to try to do anything that was new whether it's learning to scuba. Dive or play chess or you, know be, a gymnast, you would take lessons you would get your get, educated and yet somehow when it comes to innovation people. Seem to feel oh no no I've got to take these three bright people and put them in a garage somewhere and, you know make glass. Fiber glass buildings, and have cool slogans on the walls so. My first encouragement, would be to be get, yourself a basic, education, in what. Is needed, because what is a fallacy, is that innovation, is undisciplined, innovation. Is incredibly, disciplined but it's a discipline, that makes sense given the high levels of uncertainty that you're dealing with so, the first thing I would recommend people do is just, you, know get, a copy of my book have a look at our, courses have a look at the websites. Begin to get smarter and it's not just me it's also people like Steve Blank Alexander, Osterwalder. You know people like that that have really kind of broken down some of the challenges, of innovation. Into, manageable chunks and once you've gotten a little bit of an education at least now you know what you're trying to accomplish right. Great. Well this. Has been so interesting and again, I you, know I keep reiterating with, a lot of the webinars that we do is that, you know the, the fact of the matter is is you believe in a process, but, you've also worked with so many companies to see realities, so, I think the process that you're talking about is also followed, by realities. You know one thing you talk about in the industry to growth and change is just general, realities, of your individual, company that's why there's a personal case in there because again, you're.
Not Trying to fit your your process, into, a company, you're, trying to give it like a template, there for working on this let. Me spend just a minute on that because this is something that might be kind of useful for you guys what we do for every. Participant, in leading strategic growth and change is, they come into the course with a problem. An issue that they want to work on and we actually ask them to write it down before they come not not so much because we need the document, but because we need the thought process that goes into creating the document and then, throughout a whole week what, you do is you get put into a team with three or four other people and, each, of you works on your case and then, at the end of the course we sort of come back to it and say well okay how is that progressed and in just about every case we've seen massive, progress because you're, getting what, you don't get it work if it work you're, buried and emails and meetings and you're traveling for. LS you see you're there for a week with other people who have no political. Ax to grind right they're there your peers and you, get to actually bounce your ideas off of them so a lot, of times we'll find people came in with the wrong question, or they've really rethought their assumptions, or they've seen an opportunity, they never realized was there and. So by the end of the week it's just it's thrilling, to see so much progress on very important, strategic questions, or they're living with those challenges we've outlined today and not a not even knowing it right, now the first thing is to get it hear that oh I didn't I wasn't even seeing this you know correctly but also I think that the great, thing about learning. This stuff is that, you go back and you teach it and that's, the best way to reiterate it you know so we're very big on leader, teachers as you know has it you know to go back and you know really we, have a lot, of questions coming in right so I would love to we've got about eight minutes left I'd love to go through a few of those if I'd like okay great. So from Alexander. You've. Talked a little bit about this but I'm sure you've worked with so many companies you know, you can probably right at the tip of your you know tongue, and you've probably list, a hundred of them but can you give an example of, a company that's currently, using, these principles sure. Alexander. That's a great question and I'll give you an accompany that I'm not working with but I think does exemplify. A lot of this and that's Adobe, and. What Adobe did some years ago much to the consternation of, some of their customers is they went through a complete business model transformation, they went from selling, essentially. Shrink-wrapped, software, in boxes to, selling software that you subscribe to as a service, and, it, was much more a flow, and among. The things they did that I thought were very smart is they really did a good job of articulating to. All of their stakeholders, what this change would mean for them and really, kind of got ahead of the the change happening, in their, investing, community and in their employee community, and in their user community, and not everybody was happy but they eventually managed. The transition well, and today. They're doing a really innovative thing which is they, have a red box they call a kick box and, it, provides an easy entry for people to begin to, participate. In their innovation, program wherever, they are in the company so I think that's something really good to look. At and learn about right. So. From, Deana what. Are the roles of, leaders in an innovation, program. Oh Deena. That's a great question because there are actually three roles and people don't really think about them as different enough, so, the first role is you need someone setting the strategy, within which innovation takes place and if that's not clear, to people you have innovations, going all over the place and most of that is gonna be a waste of breath because if, it doesn't provide a good strategic, fit right from the beginning then it's not even worth starting so you need somebody to define that then.
You Need somebody to run the ventures and these are your internal entrepreneurs. Your pirates, you know your radicals, the people that are, non conformists, that don't like to come to your Thursday meeting but that are. Going to get to come to try to do their own thing and then in between you, have a role that I call the Sherpa, and. Sherpas, kind, of like if you're off to, Mount Everest right your Sherpas, gonna be the one that tells you well you know if the wind is blowing this way we should take that trail or I think, the weather forecast, is this so we should leave in the morning your, organizational. Sherpas, typically, a person who knows, the company, very well has, very strong social, connections. Across the company a lot of social capital and who can help knit, together the venture and the parent, company and so it. May be many different people but those three kinds of roles I've seen be extremely. Important to the success of a corporate venture okay so the three roles the first role is the executive leadership their, leadership second, role the entrepreneur, internal. You. Know the cowboy type person out there yeah and the Sherpa or what you want show business a stage manager that you know type thing yeah great, great all right let's keep going. From. Quan what, got you started researching, in this area oh thank. You one for asking well. I started working on this years ago when I was actually involved in IT. Projects, and IT projects, were big. Organizational. Change, efforts, in many cases not just the technology but also the organization around them so that kind of got me interested in large-scale, organizational. Change and what I came to do my PhD I, did, that at the Wharton School and, I was affiliated with the Entrepreneurship, Center there Iain Macmillan Center and he, said well why, don't you think about innovation. In, a corporation as a large scale organizational. Change type, and, I got very interested in that and that that, really set me off looking, at corporate innovation as opposed to individual, entrepreneurship. As a real focus and I do some work in entrepreneurship, as well I just most, of my efforts been spent on the corporate side and, that set us off on a whole, set, of investigations, which, I think the biggest landmark, that started, it was the publication, of discovery. Driven planning, in 1995. And that has since become deeply. Embedded in the way a lot of corporate, entrepreneurship, is taught it's. In entrepreneurship curricula, and I followed that up with all series of books and articles and, and so forth culminating, in this discovery driven growth moment, and, this is probably a good time to come back to the title of this webinar because, I published, discovery driven planning, in 1995. Discovery, driven growth was 2009, so, you're already seen quite a passage of time and only, now today are we starting to see really widespread recognition, that, these ideas are, critical, if you're going to be strategically, successful, yeah right, all right we have some questions, are coming in you know a lot so let's get to another one from, Jorn our, companies using innovation, as a process, and a precursor, to, creating, transient, advantage example, using a systematic approach based on a strategic vision going, forward like a sales force yeah. I think I think they are I, think what you see in companies, that are more forward-looking, now is they really understand their portfolios, and they have investments, they're making that keep today's business fresh investments. They're making that open up opportunities, for tomorrow's business and then they're very selectively. Investing, in what I call options which are small, bets you place today that could open up a big opportunity in the future and I think the smarter ones are doing that very systematically, and strategically. So. Let's. See here. What. From. Terry, I like, this question because I think a lot of people are probably going to be asking it out there how do you determine when to give up on an idea that's not working. How. To disengage, how, to shoot the zombies you, know those businesses, that like oh just give me one more year, so. I think there are two principles, here the first principle, is fall, in love with the problem that you're trying to solve don't. Fall in love with one particular solution. So, if you think you've got a really clear, grasp on what a customer pain point or a customer issue is you, don't need to let that go to let go the things that you're trying that aren't working out so that's the first principle right don't don't. Be afraid to change your methodology even if your goal remains the same second.
One Is you really need to be very. Honest. About does. The potential, of this as we've looked at it as we've tested our assumptions, as we've kind of rerun our models is the potential what we once thought and if it's a couple of months of no it's not no it's not no it's not that's a good time to stop good, I think as. Much as there needs to be a template to begin it there, also is a template, to end it because, otherwise that's debilitating, again to a company as well and one of the sessions we talked about is what I call healthy disengagement, I actually run a whole session on just that problem, because it's so, hard you know in companies it's so hard to get stuff started, by the time you have it started you don't want to have it stopped and, yet you need both that. Session I've been in it many times very fruitful I there's a lot of good conversation, in that session all right let's do one or, two more questions. Phillipe. Could. You share with us an example of a company currently using, discovery, driven planning, at the acceleration, stage the. Acceleration stage I, can't, talk about them publicly because it's a private thing but yeah they're they're actually using it now, by the time you get to acceleration, a lot more, of the assumptions, you're making relate. To things that are internal so, you. Know bringing in your lawyers and your compliance people and your HR and the, checkpoints, become much more about paths to maturity than they are paths to understanding, the market so, you start to bring in a lot of those internal dimensions, in the acceleration, phase, wonderful. Well Rita, thank you so much for being with us today there's many more questions and, as we've been doing in our past webinars recently, we, will continue. To film after. We close out today please look for the, conversation, continues, where Reed and I will answer more of your questions that will also be sent to you along with the webinar thank you very much for joining us Rita has been wonderful thanks Scott. You.