Unleashing the potential

Brand. This is perhaps the most important and least understood word in our business world. Yet, loyalty to a brand is the most important predictor of business success.

A brand is far more than the superficial garb, it is the organizational persona.

To be successful, it must be authentic and purposeful, able to be align with the needs and aspirations of its customers in a way the unleashes the creative genius of its employees.

Well, at least, in theory. To be truthful, many companies are not able to define a purpose other than making money. And most employees are punching a clock. By some studies, fully 85% of employees would leave their jobs tomorrow if they they could.

Think about it. In our global economy, competitive advantage is no longer being defined by the ability to control a value chain, but by having a faster rate of innovation. We need to accelerate our innovation by aligning and unleashing the passions of our customers and employees.

Take a moment of reflection. How well has your company defined a transformational purpose that inspires customers? How well have you been able to unleash the creative potential of your employees to fulfill that purpose? Without asking these two simple questions, it is impossible to to define an authentic and successful brand.

How we listen matters

During the 90’s I was running around Asia listening to business executives about their needs for IT systems and support services. There were two main methodologies that I used, focus groups and one-on-one interviews. In the first, I sat behind one-way mirrors and observed executives, in the other I would engage them in a one-on-one conversation. Both were valuable, but the latter approach would always yield far greater insight.

The reason was simple. By being able to engage an executive in a conversational experience allowed me to adjust the questions based on their needs and their aspirations. As such, I could delve into both to understand what the pains were behind their needs and what the passions were behind their aspirations.

This is strategic insight.

It is very difficult to gain this strategic insight in a group setting because it is hard to have the laser-like focus you need to delve deep below the surface and people feel far more guarded when they are talking amongst their peers. On-on-one interviews are most effective.

But insight is what is critical for shaping effective strategies. If you can begin to find the commonalities of the needs and the commonalities of the aspirations and align your brand around those, a tremendous amount of focused, innovative energy has the potential of being released.

If this is all true, then we need to develop new ways of listening powered by new, web-enabled, tools.

Shareholder value vs. Customer value

There was a great column published this week by Joe Nocera entitled “Down with Shareholder Value“. In that column he challenged the long-held notion that the end-all and be-all of a corporation is the maximizing of shareholder value.  He point out that this “truth” has really only been with us for around the last thirty years. He discusses how this this singular focus has resulted in a fair bit of unintended, and not highly desirable, consequences.  He calls forth new theories coming out of business schools that look at a more holistic and long-term context for defining long-term strategic advantage and corporate success.

But he notes that one of the reasons why shareholder value is used as a measurement stick is that it can be distilled down to a simple set of metrics.

Metrics are important. No, essential. Without them, we cannot instill the feedback loop that improves performance.  But if we move away from standard profitability measurements for guiding improved performance, what then do we have?

I would argue that it is not only shareholder value but also customer value that is critical to define and measure against to guide long-term growth. Tools such as the Net Promoter Score (NPS) can become powerful tools – if strategically used — to help guide the tiller of the modern corporation. But the problem is that few use NPS and other measurements of customer value strategically – though that is the topic for a future post.

Fast Iteration: lessons from genetic programming

Okay, I am not going to get too geeky here, but there are important lessons that I have learned from hanging around with some serious geeks. One lesson was about the power of value networks (learned from the open source community). The other is the power of fast iteration. This one I learned from practitioners of genetic programming.

The origins of genetic programming dates back to 50’s but it really only began to come into its own after the turn of the century (doesn’t that sound quaint?) with cheap access to serious computing horsepower. The idea was that you could develop programs that could evolve themselves to solve complex problems.

Okay guys, let’s get one thing out of the way. Yes, there is evolution. Not all programs are created in unblemished perfection.

Key concept here: “evolve themselves”.

Basically, what you can do is to take a set of generic programs and point them at a complex question that needs to be solved. Turn them on, and walk way. Lo and behold, the problem is eventually solved.

In essence, in the darkened room of discovery, the programs begin to try to address the problem. They try, and fail, and learn from that failure, then morph, and try again. Over and over again until the answer is found.  This process often takes hours, but it has been successfully demonstrated multiple times.

But if you think about it, this process is the same for any innovation. It needs to be focused. It needs to iterate a potential new solution multiple times, and it needs to learn. At its core, the innovation process needs be obsessive, agile and unrelenting. In time, it will work. Always. Though probably not in the way you expected.

Why lean is not enough

Over the past two decades, companies have been focusing on squeezing more value out of their manufacturing operations. Cleaving the fat, making things lean. This process has, for the most part, been helpful in restoring competitiveness. At least for the short term. Because cutting costs is not enough.

Years ago I remember learning about the difference between competitive and comparative advantage.  Comparative advantage, I came to understand, was based on production costs and places like Asia, with its low labor costs, was a great environment for reducing that element of manufacturing costs. But comparative advantage is difficult, if not impossible, to sustain. Someone will always find cheaper labor costs.

I learned that competitive advantage is based on value. Create more value than anyone else and you can build long-term customers. The problem, however, is that value is not static, but is constantly evolving as customer needs and aspirations change.

What I now understand is that competitive advantage is not based on value itself, but on the speed in which it evolves, that is, the rate of innovation.  Innovating value faster than your competition is the only way to survive and thrive.

Which leads us back to lean. Improved efficiency is indeed important, but it is only one component. For a company to be successful it must also find ways to increase its agility and creativity.  Combined, efficiency, agility and creativity are the three core elements needed for increasing an organization’s rate of innovation.

The question, then, is this. When was the last time you measured your organization on these three dimensions? You should ask your employees. You may be surprised what you learn.

The power of community

Over the past two years I have been helping to build a community in East Portland. This area is now called Rosewood. When we started two years ago, it was a place of strangers, people living together in a place forgotten and ignored.

In the software world, we know the power of a connected community. The entire open source movement is based on the concept of community. People, spread out across the four corners of the world who came together to create some of the most sophisticated and powerful code possible.

How did this happen? It boils down to four key elements. Connection: there needed to be a way for people to be connected. Alignment: there needed to be a shared passion focused on a shared vision. Gratitude: as people contributed toward this goal, they needed to be recognized by the entire community. An egoless center: the hand guiding this process needed to keep the community focuses on the vision, not on them.

A powerful new model of creating value.

Rosewood, a broken, poor neighborhood, is about as far away from the sophisticated technologists of the the open source community. But what would happen if you took those same principles and applied them to such a community? What is happening there is the same thing that happened in the open source community. Magic.

The problem with Big Data

Okay, we all know the story about how Target used data mining techniques to improve the targeting of its advertisement campaigns.  It got real creepy, like when they started sending ads for baby clothes to a teen before her parents even knew that she was pregnant.  Whoa, they had to pull back and started to hide those ads among others so it wouldn’t feel so creepy.

But creepy it is.  Yes, sales at Target are up and all seems good.  But is it?  As people become aware of big data techniques, will it strengthen the brand relationship?  I doubt it.  In fact it may weaken it – forcing companies to continually have to “buy” loyalty in ways that weakens their margins.

Customers want to be heard. They want to be taken care of. They don’t want to be continually spied on.

Innovation, Coffee and German Philosophers

I’ve been thinking about coffee lately. And innovation. And, of course Nietzsche. Who doesn’t, after all?

Coffee has two roles in innovation. The obvious one is in keeping people awake so they can think of new ideas. The mathematician Alfréd Rényi called a mathematician a “device for turning coffee into theorems.”

But it also has a historical role. By the late 17th Century coffee had taken hold of Europe, and with it came the coffee house: a place where people of different backgrounds get together and talk, argue, exchange ideas, and pass the sugar. When Hobbes, Voltaire, Madison, Paley broke the intellectual ice with their startling new ideas, coffee houses were the perfect place to spread and refine them. The British called coffee houses “penny universities,” since you could rub shoulders with prominent people for the price of a nonfat caramel macchiato.

I’m not sure what Nietzsche’s drink was, but he proposed that truth was relative – what is true depends on a person’s perspective. Different people bring different perspectives. What the coffee house did was bring those perspectives together.

The power of open source is that it brings people with different perspectives together. Sure, Eric Raymond said that with enough eyeballs, all bugs are shallow. But it’s not the numbers, it’s the perspective – a million identical eyeballs won’t make a dent in a problem – they need to contribute from their own context.

The moral – when you’re innovating, bring in not just more people but ones with different perspectives. And don’t forget the coffee.

The dawn of the digital renaissance

I am beginning to see the future. Working with high school students helps you do that. Our business and political leaders are not the future, it’s the newly minted young adults that are. And they live in a world that is very differently from ours.

I have heard the complaints about this younger generation – that they are unmotivated and lazy. Or that they are not willing to pay the price of admission to success that we paid, but, instead, are impatient and want it all now.

The more that I spend time with this generation the more that I realize the disconnect between their world and ours. They are the first true digital generation whose fluency with electronic devices makes our heads spin. But we continue to teach them the same way that we did fifty years ago, in a slow, plodding and often painful journey with unclear goals. No wonder we have a crisis of relevancy and our graduation rates are suffering.

That is not how they are wired. As never before in the history of mankind, they have access to tool sets that allow them to quickly acquire knowledge they need on the fly or, with a click, connect themselves to someone with expertise they need.  But what they are missing is often a purpose to focus their potential. Put that piece in place, I believe, and we will be able to help them unleash an amazing creative genius which will underpin a new age, birthing a digital renaissance.

So I did an experiment. We took five students who did not know how to write a single line of software code, matched them up with a developer who had never taught kids, threw them at a problem that was really important for them, and watched what happened.

This was a classic information problem. In high schools, kids don’t know what is going on. There are so many announcements, both general ones and for clubs, sports, etc, that the information flow is overwhelming. On top of that, the primary means by which announcements are communicated are incredibly ineffective for reaching kids. Announcements are emailed to them (but no one reads email in this generation) or they are read over telephone speakers in the front of the classroom (where they are almost impossible to hear).

Really?

The kids said, look, we need to have our announcements on our mobile phones with easily customizable filters so that we are able to focus on those that are relevant to us.

In two short meetings, they mapped out the solution for a new mobile app and an underlying management system for the announcements and then started coding using agile methodologies and putting together a solution using readily available technologies and platforms. Six months later they are ready to release their beta version in what may be the most sophisticated dynamic messaging solution for any high school in the country.

Really?

Never underestimate these kids. They are going to transform the world.

Innovation and the Struggle for Control

You’ve probably known for a while that Firefox is moving to a faster development cycle, and a lot of corporations are peeved.

The complaint of the big IT departments: “We can’t keep up your release cycles. Slow down your innovation, if you please.”

What’s going on here? It’s a fundamental struggle – don’t we love fundamental struggles? – between Control and Innovation. Firefox is doing the innovating – making their tool faster, more adaptable, and more secure with every release (at least, we hope they are). Corporate IT departments want to keep control of the tools they use. They’ve established what Firefox calls “effort-intensive certification policies.” You can’t control something when it changes every week, and you’re not notified till it’s a fait accompli.

The IT guys can’t keep up with Firefox, which is doing its job trying to keep up with the market. I’m with Firefox here. If a corporation’s culture can’t adapt to others’ innovation, how’s it going to keep up with the increasing demands for rapid innovation from its customers? These companies are hobbling their employees with old tools.

It’s time for them to adopt a new model, including a new take on certification. And its time that we expeted our IT departments to get ahead of the innovation curve instead of dragging it down.