How to Become a Better Leader

The McKinsey Quarterly article How centered leaders achieve extraordinary results has five pointers to become more effective leaders:

  1. Meaning: Find and communicate what the work actually means.  When building momentum around long-term R&D strategies, stories on how the product will impact the customer is extremely important. Using effective stories can generate team ownership in the vision (Steve Jobs provides a great example of how).

    …leaders often talk about how their purpose appeals to something greater than themselves and the importance of conveying their passion to others. Time and again, we heard that sharing meaning to inspire colleagues requires leaders to become great storytellers, touching hearts as well as minds.

  2. Connecting: Innovation requires connection between multiple technologies. Creativity requires connections between multiple concepts.  And delivering innovative products to market requires teams of creative people to come together.  An innovative leader should build/leverage connections and encourage networks to form within the organization.

    CEOs have always needed to select exemplary leadership teams. Increasingly, they must also be adept at building relationships with people scattered across the ecosystem in which they do business and at bringing together the right people to offer meaningful input and support in solving problems.

  3. Positive Framing: By reframing problems, leaders can convert fear or stress into opportunity, and engender creativity.  Leaders are also are aware of their impact on their teams.

    Psychologists have shown that some people tend to frame the world optimistically, others pessimistically. Optimists often have an edge: in our survey, three-quarters of the respondents who were particularly good at positive framing thought they had the right skills to lead change, while only 15 percent of those who weren’t thought so.

  4. Engaging: Leaders listen and engage their teams. They encourage balanced risk taking, act rationally in the face of risk and encourage experimentation.

    But for many leaders, encouraging others to take risks is extremely difficult. The responsibility CEOs feel for the performance of the entire organization can make the very notion of supporting risk taking extremely uncomfortable. What’s more, to acknowledge the existence of risk, CEOs must admit they don’t, in fact, have all the answers—an unusual mind-set for many leaders whose ascent has been built on a virtuous cycle of success and self-confidence.

  5. Sustaining energy: Changing / improving organizations and culture is hard.  Leaders need to be able to create a sense of urgency and maintain it for the duration necessary to implement the change.

    All too often, though, a change effort starts with a big bang of vision statements and detailed initiatives, only to see energy peter out. The opposite, when work escalates maniacally through a culture of “relentless enthusiasm,” is equally problematic. Either way, leaders will find it hard to sustain energy and commitment within the organization unless they systemically restore their own energy (physical, mental, emotional, and spiritual), as well as create the conditions and serve as role models for others to do the same. Our research suggests sustaining and restoring energy is something leaders often skimp on.

The article has some benchmark data on what could happen if we master these skills:

A recent McKinsey global survey of executives shows that leaders who have mastered even one of these skills are twice as likely as those who have mastered none to feel that they can lead through change; masters of all five are more than four times as likely. Strikingly, leaders who have mastered all five capabilities are also more than 20 times as likely to say they are satisfied with their performance as leaders and their lives in general (for more on the research, see “The value of centered leadership: McKinsey Global Survey results”).”

How to Be More Creative

Wall Street Journal article Jonah Lehrer on How to Be Creative has a list of items that can improve creativity (or innovation).   :

  1. Color Blue: Subjects solved twice as many puzzles when surrounded by blue.
  2. Broaden the scope: Try to find ways to rephrase the problem so the solution space increases.  For example, instead of driving, think of the problem space as transportation or movement.
  3. Think like a child: People who imagine themselves as 7-year-olds are significantly better at divergent problem solving.
  4. Laughing: People who are exposed to short comedy video are 20% better at insight puzzles.
  5. Imagine distance from the puzzle: People are better at solving problems that come from far away.
  6. Work at unusual times: People working at their least alert time of the day are more creative.
  7. Relax: Being relaxed and not focusing too much on the problem improves creativity. As Einstein once declared, “Creativity is the residue of time wasted.”
  8. Be persistent: Not every problem can be solved immediately.  Keeping at it is important.”All great artists and thinkers are great workers,” Nietzsche wrote.
  9. Measure progress: If you are getting close, work harder. If you have hit a wall, take a break.
  10. Work outside the box: People who had a 5’x5′ box next to them did better at creativity problems.
  11. Daydream: People who daydream are better at creativity.  
  12. Get diverse experiences: Steve Jobs believed creativity is about making connections.  To make diverse connections, one needs to have a broad set of experiences.
  13. Develop a diverse network: Another Steve Jobs approach to obtaining diverse experiences is to talk to a diverse set of people.
  14. See the world: People exposed to different cultures or who have lived abroad are more creative.
  15. Move to a metropolis:  Moving to a larger city is shown to increase inventions. 

We have discussed approaches to become more innovativeenhance team creativitynurture disruptive ideas or engender innovation.  We have discussed Steve Jobs methods extensively.  Here is an excerpt from the article about Steve Jobs:

 Steve Jobs famously declared that “creativity is just connecting things.” Although we think of inventors as dreaming up breakthroughs out of thin air, Mr. Jobs was pointing out that even the most far-fetched concepts are usually just new combinations of stuff that already exists. Under Mr. Jobs’s leadership, for instance, Apple didn’t invent MP3 players or tablet computers—the company just made them better, adding design features that were new to the product category.

He found that those entrepreneurs with the most diverse friendships scored three times higher on a metric of innovation. Instead of getting stuck in the rut of conformity, they were able to translate their expansive social circle into profitable new concepts.

Finally, not included in the article, but another way to improve ability to tackle problems is to consume some glucose.

Beliefs + Experimentation = Success

Another interesting article from MIT Sloan Review discusses how to develop unique strategies and plans.  The article points out that many organizations follow strategic frameworks taught in business schools to formulate their strategies.

…many deploy frameworks and models from the strategist’s toolbox — industry analysis, market segmentation, benchmarking and outsourcing. By jumping straight to generic game plans (such as cost leadership, total quality or product innovation), companies short-circuit the real work of strategy and miss out on finding new insights into the preferences or behaviors of current or potential customers.

If all we do is follow a standard process for developing a strategic plan, we would probably not be able to build a distinct, differentiated business:

In a world of fierce competition and rapid imitation, companies that dare to be different capture our attention and our admiration. Some are globally recognized, such as Apple, Google, Tata, Virgin and Zara; others are less well known, or are niche or local players.

The article points out that a good strategic plan starts from determining what are the organizations fundamental beliefs (or culture, values, points of view, differentiators, etc) that set it apart:

Good strategies start from a distinctive point of view: for example, an insight into evolving customer needs or about how the world is changing. 

However, what are our unique beliefs or viewpoints? It is not easy to figure out what are an organizations true cultural traits that lead to success and what are just approaches that we have developed along the way.
The article gives a good example of Ikea trying to figure out the root causes of its success:

Consider the case of Ikea, the Swedish furniture retailer that continues to be highly distinctive almost five decades after its founding in 1963. Built on Ingvar Kamprad’s belief that he could “create a better everyday life for the many people” by providing affordable, good-quality furniture, the company grew internationally in the late 1960s and early 1970s by replicating what worked in Sweden.7 However, Kamprad and his colleagues didn’t fully understand which parts of their offering people actually cared about: Was it the expansive and customer-friendly showrooms? Was it the low prices and the products requiring relatively easy assembly? Was it the quirky Swedish product names and blue-and-yellow branding? Ikea’s repeated success in new markets it entered made executives wary of changing any part of the original formula.

Differentiators are even harder to figure out in case of R&D.  Many organizations make strategic decisions based on gut feelings without really having an approach to guide decision making. As we have discussed many times, most companies tend to develop product strategies without careful thought or experimentation.

However, few companies manage to develop original strategies by formulating hypotheses and then testing them out in a competitive setting. 

In case of Ikea, market realities in United States and Japan forced them to understand what are their true core values.  :

It was only when the company experienced problems in Japan and the United States that executives undertook to sort out the truths and falsehoods and create a more flexible business approach. 

The article provides a new approach for discovering an organization’s discriminators by focusing on beliefs.

Our perspective is built on two core premises: 1) that companies need a unique set of beliefs to stand out from the crowd, and 2) that some beliefs ring truer with customers and employees than others.

As such the article focuses on three types of beliefs: 1) about the market, 2) about the internal culture, and 3) vision of the future:

Beliefs can take many forms, but the three most important ones are: 1) those that predict how the market will respond to the company’s strategic choices, such as a new technology or service offering; 2) those that predict how employees will respond to organizational and managerial choices, such as a more flexible or empowered working environment; and 3) those that predict how the future will be different, for example in terms of emerging consumer needs, new technological possibilities or shifts in the geopolitical system.

 The idea is that companies in any market segment will share some common beliefs.  However, each organization will also have some unique differentiators or uncommon beliefs.  Some of these beliefs are true  and others are false.  The true uncommon beliefs (uncommon sense) are key drivers of success.

However, no one really knows the whole truth, so the article provides a unique perspective on how to use all beliefs to gain a strategic edge. The article suggest we could discover our uncommon true beliefs and focus on them.  Or we could discard our uncommon false beliefs and again gain more strategic focus. We could also change the industry landscape by neutralizing commonly held beliefs.  Or finally, we can exploit commonly held false beliefs to maroon competitors and gaining market share.

So how does one actually find these beliefs in the first place? Once found, how does one evaluate whether beliefs are common or uncommon, true or false? It is very hard to do.  I guess by constantly challenging the status quo, being entrepreneurial and encouraging questioning.  May be we could focus on some innovation in management processes?

Finding a distinctive place in a competitive marketplace can be extremely challenging. Studying and working with dozens of companies across a range of industries, we have found that it frequently requires willingness on the part of top management to examine and re-examine the prevailing industry norms — and from a variety of perspectives.

 Once you have found your beliefs, the only path to success is experimentation:

So how do companies put ideas they develop through our process into action? Based on our experience, successful companies don’t just talk about their novel beliefs or make risky bets on unproven ideas. Instead, they rely on a deliberate process of experimentation. They turn one of their novel beliefs into an operational hypothesis and then test it in as low-risk a way as possible. The feedback they get from the market informs their further testing, ultimately shaping the company’s decision to make a tangible change.

How to get the best from corporate R&D

MIT Sloan Review has an interesting article about corporate functions (Are CEOs Getting the Best From Corporate Functions?).  Many of the larger organizations I worked with have a central R&D organization that focuses on longer term, disruptive or innovative research.  Some of the lessons in the article are quite useful to these organizations. Overall it appears that most corporate functions feel that they are not tightly coupled in to the business and their performance is rarely evaluated for their true contributions:

In our survey, fewer than one in 10 function heads felt they had received sufficient guidance on how their function should contribute to the company’s overall strategy. Instead, they were expected to develop their own ideas and functional strategies.

The root cause seems to be poor strategic alignment and inadequate guidance from the executive team. The result is that the corporate functions become self serving and are not incentivized to provide practical support to business divisions:

Without sufficient guidance, corporate functions can become — often unintentionally — self-serving. Instead of developing policies and processes to give divisions the practical support they want and need, corporate functions measure themselves against industrywide best practices or implement initiatives that increase their influence or simplify their own work. The result is often a lack of cooperation from operating managers.

Here is my interpretation of the four suggestions from the article to address this situation:


1. Define key performance measures beyond division (P&L) goals: Develop a strategy for how the corporation can function better. Express the strategy in three to seven sources of corporate value creation. Ask each corporate functions to develop a plan on how they will contribute to the said value creation. In case of corporate R&D, this can be as simple as number of technologies or innovations transitioned into product development. We have discussed many such metrics for R&D in the past.  We can even develop similar approaches for functions such as training:

A Danish company recently defined three main sources of added value at the corporate level: helping businesses make better capital investment decisions, ensuring that businesses drive down costs even in good years and building a pool of executive talent superior to its competitors’. All corporate functions were then asked to assess their activities against these objectives. Significant changes resulted.

2. Monitor and guide corporate function performance to meet the defined measures: The article suggests at least annual reviews to ensure that functions are progressing along the defined strategy. As we have discussed in the past, large reviews and meetings tend to waste a lot of time, so these reviews need to be focused:

Most companies occasionally conduct a major review of the size and value of the corporate headquarters. However these large-scale projects can engender a defensive response that gets in the way of the objective, and any staff reductions that result often disappear again in the following years. Annual reviews allow the CEO and the heads of divisions to nudge corporate functions regularly toward better performance.

3. Develop a comprehensive approach to corporate improvement initiatives: Many disjointed initiatives from different functions may reduce the effectiveness of initiatives AND reduce morale in corporate functions. We have discussed that organizations need to build a sense of urgency before taking on change initiatives. This article suggests that the corporations develop a central matrix of all ongoing initiatives and coordinate their impact:

This helps different functions take an integrated approach and helps anticipate potential problems. For example, the CEO can see whether an initiative is likely to place unreasonable demands on an individual business unit, given the unit’s commercial pressures. The head of IT can assess whether IT resources are sufficient to support all initiatives.

4. Break out shared services from corporate functions: Pretty self explanatory. Services should be managed differently from functions.

The result is often an order of magnitude change in performance: better service at lower cost in the shared-services division, as well as clearer policies and controls that focus on adding value within the remaining corporate functions. In the early 1990s, Shell was one of the first companies to create a separate services division, transforming its sprawling corporate functions into a headquarters team of 100 and a professional services division of some thousands. More recently, the Dutch specialty chemicals company DSM completed a major project to separate all of its corporate services into a shared-services division.

Globalization Penalty

Ford recently announced it is investing $1B for a new plant in India (U.S. automakers in race for Indian market – The Washington Post). Ford is going to change its strategy for the region and design new products designed specifically for the market:

This new focus on India has required something of a philosophical shift for America’s big auto manufacturers, a post-downturn realization that the old ways of doing business no longer guarantee success, said Michael Dunne, president of Dunne and Co., a Hong-Kong based investment advisory firm specializing in Asia’s car markets.
In the past, U.S. carmakers tended to launch products in emerging markets that were successful in Europe “and anticipate that customers will trade up to the higher price level,” Dunne said.”

The article points out that the Indian market is going to grow at more than 12% per year and Ford needs to ensure a share of that market.  The effort to reduce product costs while still delivering reasonable products might even have some benefits to the core business from reverse innovation or frugal engineering.
As we have discussed recently, the drive to reduce cost might even drive innovation in general.  However, there is some penalty to globalization as pointed out by McKinsey Quarterly (Understanding your ‘globalization penalty:

The rapid growth of emerging markets is providing fresh impetus for companies to become ever more global in scope. Deep experience in other international markets means that many companies know globalization’s potential benefits—which include accessing new markets and talent pools and capturing economies of scale—as well as a number of risks: creeping complexity, culture clashes, and vigorous responses from local competitors, to name just a few.

The article analyzes data from hundreds of thousands of employees to arrive at three major risks of globalization: 1) Dilution of company vision / focus, 2) Reduced innovation and learning and 3) Ineffective collaboration and partnership between locations.

Clearly, having a larger product portfolio increases complexity, which reduces focus, dilutes vision and increases risks to overall performance.

Complicating matters further, our interviews suggested that, for most companies, about 30 to 40 percent of existing internal networks and linkages are ineffective for managing global–local trade-offs and instead just add costs and complexity. 

We have also seen that modularity can actually negatively impact innovation.  We have discussed some approaches to address global product development:

Managing culture / training across a diverse organization is clearly more difficult which might account for the lack of learning.  May be organizations need to improve global talent management? Or R&D managers can get involved to increase creativity.  The article finds that motivation for team members actually improved under globalization. This is counter to some of the work from Wharton which suggest that motivation reduces as team size increases.  May be rivalry actually improves performance?

The other problem may be with collaboration between multicultural teams:

Many companies, for example, can’t identify transferable lessons about low-income consumers in one high-growth emerging market and apply them in another. Some struggle to coalesce rapidly around market-specific responses when local entrants undermine traditional business models and disrupt previously successful strategies.

On the other hand, research shows that very little dispersion is needed before a team becomes virtual.  Since the teams are likely virtual to start with, the only major challenge would be different cultures.  We have discussed several approaches to improve multicultural team performance (here and here).

Innovation at Bell Labs (The Idea Factory)

A couple of articles in the Oil and Glory blog describe innovation at Bell Labs (Book Review: Jon Gertner’s “The Idea Factory” and What Obama could learn from Bell Labs).  Bell Labs, as the article points out, delivered many of the innovations that made modern devices possible:

“The name Bell Labs is synonymous with cutting-edge invention, winning seven Nobel Prizes (including by Energy Secretary Steven Chu) and turning out world-changing inventions like the transistor (pictured above), the silicon photovoltaic solar cell and radio astronomy. 

It is interesting to see that even fifty years back, Bell Labs had a clear understanding that innovation requires new technology and manufacturing processes integrated into a system that provides concrete benefits for the  user:

“It is not just the discovery of new phenomena, nor the development of a new product or manufacturing technique, nor the creation of a new market. Rather the process is all these things acting together in an integrated way toward a common industrial goal,” he quotes Jack Morton, a Bell Labs engineer.”

Even the leadership had a definition of what innovation meant that could be easily communicated. As we have discussed in the past, if the leaders do not know what innovation is, how are they going to encourage it?:

At Bell Labs, Mervin Kelly’s shorthand definition of innovation was something that is “better, or cheaper, or both.” If this succeeds, it will certainly fall into that category.

They even realized that the key to innovation is the ability to effectively address technological complexity and then mask it in the user experience.

“One of the more intriguing attributes of the Bell System was that an apparent simplicity — just pick up the phone and dial — hid its fiendish and increasing interior complexity,” Gertner writes. 

So, what made innovation happen at Bell Labs?  The most important factor was vast resources (probably funded by AT&T profits in addition to limitless government funding).  These resources meant a large and brilliant work force had the freedom to pursue many problems.  More importantly, they had a never ending stream of challenges that focused innovation:

Structurally, what defined Bell Labs was a large, brilliant, interdisciplinary work force that was supplied with freedom and vast resources and a never-ending stream of technical problems within the phone system that drew on the staff’s expertise. 

As we have discussed in the past, innovation happens at the intersection of technologies.  The Bell Labs model encouraged informal interactions between multiple disciplines and the abundance of resources facilitated experimentation:

In Bell Labs’ old days, an informal exchange of ideas (over lunch, during a stroll in the hallways, and so forth) was part of the innovation process. At universities and research institutions everywhere, it still is.

Furthermore, business processes were flexible enough to allow a variety organizational structures to nurture innovation in multiple ways – any thing from three person groups to very large teams:

With an invention like the transistor, Bell Labs used an orchestrated effort and a mid-sized team; but the silicon solar cell was quite different. Indeed, the latter breakthrough was serendipitous: Three men, each working in different buildings, somehow connected the right technology with the right problem at the right time. Meanwhile, later innovations such as cellular phone networks and the development of fiber optic systems required vast teams of hundreds of people. I think all these approaches — perhaps with the exception of the solar cell — were quite targeted, and are thus still viable today. 

So what can we learn from Bell Labs?  The author is uncertain.  I think we would be hard pressed to show a business case for the level of investment.  It is true that a lot of great innovations came out of the organization. However, we tend to forget major failures.

More important, perhaps, was that the Labs management at times made big errors in judging what technologies to pursue for the future. In my book I focus on two in particular: the waveguide and the Picturephone. 

Also, it is easy to forget that not everyone working at the lab was an innovator and the management really knew how to enable success.

And I think that’s a mistake. Bell Labs was not a great experience for everyone employed there; there were internal politics, personality clashes, miscommunications, and every other problem that affects a big organization. 

Much more importantly, the world has changed quite a bit in the last few decades and the idea of a walled garden for innovation probably will not be successful in the current environment.

Research efforts are expected to move faster today, and there seems to be a lower tolerance for failure, especially if any public funding is involved. Also, an ability (or willingness) to invest for the distant future, and to thus work with a new technology through an arduous and expensive development process, seems to be in shorter supply. 

Courier: R&D Planning & Portfolio Management at Microsoft

I have been meaning to write about development and cancellation of Courier, an innovative tablet concept from  Microsoft.  The c|net article on the subject provides quite a bit of useful information – both about innovation management best practices and some opportunities for improvement.  Courier was developed at Microsoft’s Skunkworks (Pioneer Studios).  They invested quite a bit of resources in the concept (130 employees and $25M in funding).  The concept was very well received (See Courier: First Details of Microsoft’s Secret Tablet in Gizmodo):

It feels like the whole world is holding its breath for the Apple tablet. But maybe we’ve all been dreaming about the wrong device. This is Courier, Microsoft’s astonishing take on the tablet.

However, they had to cancel the product because it did not fit into Microsoft’s product portfolio (See Microsoft confirms, kills Courier in one fell swoop — Engadget):

Well this is depressing. Word has just gone fluttering out of Redmond that work on the Courier project — a heretofore rumored dual-screen tablet which rightfully set the tech world ablaze — has been spun down by the company.

It is unclear which, if any, technologies developed as part of the innovation project ever got transitioned into the rest of the portfolio.  The cancellation led to significant organizational strife and hard feelings.  I think R&D managers can learn a lot from this event.

Courier’s death also offers a detailed look into Microsoft’s Darwinian approach to product development and the balancing act between protecting its old product franchises and creating new ones. The company, with 90,000 employees, has plenty of brilliant minds that can come up with revolutionary approaches to computing. But sometimes, their creativity is stalled by process, subsumed in other products, or even sacrificed to protect the company’s Windows and Office empires.

So lets dig in…
As we have discussed in the past (here and here), Microsoft’s portfolio process seems to be driven by senior executive champions. In case of tablets, there were two competing groups led by two senior executives working on competing products.

One group, led by Xbox godfather J Allard, was pushing for a sleek, two-screen tablet called the Courier that users controlled with their finger or a pen. But it had a problem: It was running a modified version of Windows.
That ran headlong into the vision of tablet computing laid out by Steven Sinofsky, the head of Microsoft’s Windows division. Sinofsky was wary of any product–let alone one from inside Microsoft’s walls–that threatened the foundation of Microsoft’s flagship operating system. But Sinofsky’s tablet-friendly version of Windows was more than two years away.

The senior executive ownership has some benefits: They get to ensure the product received the right kind of focus and resources to get it to market.  The approach may help overcome the valley of death in innovation maturation.  However, it also a key disadvantage: disconnected and conflicting projects in the R&D portfolio:

The Courier group wasn’t interested in replicating Windows on a tablet. The team wanted to create a new approach to computing.

The two lines of R&D were somewhat incompatible and underlying culture of executive champions prevented  integrated portfolio management.  Microsoft’s CEO, Steve Ballmer, had to call in Bill Gates to determine the path forward.  Gates did a product review and did not come out in favor of the new innovation (because of how far it was from the traditional Windows/Office business model):

“This is where Bill had an allergic reaction,” said one Courier worker who talked with an attendee of the meeting. As is his style in product reviews, Gates pressed Allard, challenging the logic of the approach.

Within a few weeks, Courier was cancelled because the product didn’t clearly align with the company’s Windows and Office franchises, according to sources.

The cancellation had a significant immediate impact on Microsoft’s business:

Rather than creating a touch computing device that might well have launched within a few months of Apple’s iPad, which debuted in April 2010, Microsoft management chose a strategy that’s forcing it to come from behind. The company cancelled Courier within a few weeks of the iPad’s launch.

Furthermore, the move away from innovation had a long-term impact on the product development cycle and the product portfolio at Microsoft:

But using Windows as the operating system for tablets also implies that Microsoft will update the devices’ operating systems on the Windows time frame, typically every three years. Compare that to Apple, which seems likely to continue to update the iPad annually, a tactic that drives a raft of new sales each time a new generation hits the market. By the time Windows 8 rolls out, Apple will likely have introduced its iPad 3. Moreover, Amazon’s much anticipated Kindle Fire tablet, which goes on sale November 15, will have nearly a year head start on the Windows-powered tablet offerings.

So what if anything could have been done differently and what can we learn from this?  First, many companies try to overcome the bureaucracy of a large organization by creating skunkworks (See Nokia).  The idea was similar at Microsoft:

The gadget was the creation of Allard’s skunkworks design operation Pioneer Studios and Alchemie Ventures, a research lab that also reported to Allard. (The lab took the German spelling of “alchemy” to highlight the stereotypical Teutonic traits of structure and regiment it hoped to bring to its innovation process.)

However, Skunkworks like environments are hard to integrate into the overall culture.  They tend to become quite segregated causing many of the innovations wither on the vine:

Allard created a fantasyland inside Microsoft where Apple fanboys could tinker on stylish products that would never see the light of day. They point to the opulent 36,000-square foot office of Pioneer Studios, headquartered in Seattle’s Pioneer Square, that featured huge open spaces, dotted with cushy Eames lounge chairs, angular white desks, blond wood floors, and exposed brick walls. It may have been 16 miles from Microsoft’s far more corporate Redmond, Wash., campus, but it was a galaxy away in terms of workplace design.

Clearly, Pioneer studios had envisaged this scenario and tried to form project networks that brought innovation cultures to the rest of the company:

He encouraged employees to seek out new colleagues with diverse backgrounds who could challenge Microsoft’s conventions and push the company to approach new opportunities in different ways.

Microsoft made an effort to implement a structured innovation management process:

Allard created Alchemie to focus on innovation process to make sure that the efforts of Pioneer were not scattershot. It studied best practices, both within and outside Microsoft, to “design a repeatable, predictable and measurable approach for building new business” 

Additionally, they integrated some cutting-edge innovation management practices such as clear timeline for technology insertion and a stage gate process to ensure the innovation projects do not spin to far from reality:

In fact, one of the mandates of Alchemie was to look only at product ideas and business concepts that were no farther than three years into the future. The Alchemie book includes something of an innovation process road map that lays out four “gates” that ideas needed to pass through to move from incubation to product development. And a source said that Courier had made it through all four gates.

Another interesting concept they implemented was clearly defined purpose and freedom to explore new solutions:

“Infuse them with our purpose,” Allard wrote. “Give them the tools. Give them lots of rope. Learn from them. Support where they take you. Invite them to redefine The Tribe.”

The Courier team also had a well defined mission – Free Create – that further focus development:

The phrase at the core of the Courier mission was “Free Create.” It was meant to describe the notion of eliminating the processes and protocols that productivity software often imposes on workers.

The idea of Free Create was imbued into the entire development process – which is a great idea.  Not sure of the business case for traveling to Milan to understand Moleskine…

The metaphor they used was “digital Moleskine,” a nod to the leather-bound notebooks favored in the design world. In fact, according to a few team members, a small group led by Petschnigg flew to Milan, Italy, to pick the brains of the designers at Moleskine to understand how they’ve been able to create such loyal customers.

One more interesting concept about Innovation Management was implemented: Disconnected prototypes allowing different subsystems to mature separately. This approach is advantageous in that it allows more experimentation and we have seen that experiments boost productivity.  Steve Jobs followed a similar approach when developing the iPhone.

When Courier died, there was not a single prototype that contained all of the attributes of the vision: the industrial design, the screen performance, the software experience, the correct weight, and the battery life. Those existed individually, created in parallel to keep the development process moving quickly. Those prototypes wouldn’t have come together into a single unit until very late in the development process, perhaps weeks before manufacturing, which is common for cutting-edge consumer electronics design. But on the team, there was little doubt that they were moving quickly toward that final prototype.

It appears that the Courier team made significant progress (and used significant resources along the way):

Courier was much more than a clever vision. The team, which had more than 130 Microsoft employees contributing to it, had created several prototypes that gave a clear sense about the type of experience users would get.
It’s clear there were substantial resources behind the effort. The commemorative book, designed to resemble the journal-like look of the Courier, lists the 134 employees who contributed to the gadget’s creation. Moreover, Petschnigg writes on his LinkedIn profile page that he “managed $3.5 (million) seed funding, (and) secured $20 (million) to develop this new product category.”

However, there was a clear lack of coordination at the product portfolio level and there were no processes to align development plans across different product lines or R&D projects:

Early on, the group opted to use Windows for Courier’s operating system. But it wasn’t a version of Windows that any consumer would recognize. The Courier team tweaked the operating system to make sure it could perform at high levels with touch- and pen-based computing. What’s more, the graphical shell of Windows–the interface that computer users associate with the operating system–was entirely removed. So while it was Windows under the hood, the home screens bore zero resemblance to the familiar PC desktop.

This is a key problem with the Skunkworks innovation concept.  A separate culture quickly becomes insular and product lines divergences can not be reconciled:

“A big lesson is that it may be easier to go into your quiet space and incubate. But when you want to get bigger and get more resources, you want to make sure you’re aligned,” a Courier team member said. “If you get Sinofsky on board from the start, you’re probably going to market.”

So the challenge again appears to be with Microsoft’s R&D planning and portfolio management process.  It is relatively easy to become innovative (may be not $25M, but at least to some level), however, it is not easy to align product portfolios to bring innovation to market:

For Courier to come to life, the team creating it would have to convince the Microsoft brass that the device would offer the company substantial opportunities that Windows 8 could not. In the end, that proved to be too large a hurdle for J Allard, Courier’s leader and Microsoft’s chief consumer technology visionary. 

One way to address this challenge is to have more detailed R&D plans that can be shared and linked across different product lines.  These plans could have allowed teams to decide how they can bring different development paths together over time without an outright cancellation of Courier.  Well communicated plans and roadmaps could have facilitated collaboration between Courier and Windows 8 teams.  This collaboration could have ensured that more of the technologies developed under courier could have been integrated into Windows 8.  This unfortunately did not happen.

It’s unclear what, if any, pieces of the Courier technology are finding their way into other Microsoft products.

The only way any new innovation got introduced to Microsoft was through unmanaged diffusion:

Courier team members scattered. Many moved on to other products at Microsoft, such as Xbox, Windows Phone, and Bing.Others are involved with different incubation efforts at the company. 

A final lesson could be better portfolio management processes such as more frequent portfolio reviews where executives could have either reconciled development plans or eliminated the project before significant resources and emotions were invested:

And a few employees who contributed to the product’s development have left the company altogether, joining other tech firms such as Amazon, Zynga, and Facebook.

Rethinking knowledge management for R&D teams

As we know, R&D is focused on generating knowledge.  Unlike manufacturing, where the outcome is products, R&D generates knowledge about how to build those products.  Hence R&D workers are all by definition knowledge workers. The article Rethinking knowledge work: A strategic approach from McKinsey Quarterly has a very thorough discussion about IT tools needed to help improve the productivity of knowledge workers.

In the half-century since Peter Drucker coined the term “knowledge workers,” their share of the workforce has steadily grown—and so has the range of technology tools aimed at boosting their productivity. Yet there’s little evidence that massive spending on personal computing, productivity software, knowledge-management systems, and much else has moved the needle. What’s more, a wide variety of recent research has begun suggesting that always-on, multitasking work environments are so distracting that they are sapping productivity.

As we can all relate, what information is provided to R&D teams is far more important than how much.  In fact, we need to reduce the information overload.

It’s time for companies to develop a strategy for knowledge work—one that not only provides a clearer view of the types of information that workers need to do their jobs but also recognizes that the application of technology across the organization must vary considerably, according to the tasks different knowledge workers perform.

The article defines two approaches for providing knowledge (information) to R&D teams: 1) Free access where team members have access to the entire knowledgebase and hopefully select the information they need and 2) Structured access where information is prefiltered for the team member.

Few executives realize that there are two divergent paths for improving access to the information that lies at the core of knowledge work. The most common approach, giving knowledge workers free access to a wide variety of tools and information resources, presumes that these employees will determine their own work processes and needs. The other, the structured provision of information and knowledge, involves delivering them to employees within a well-defined context of tasks and deliverables. Computers send batches of work to employees and provide the information needed to do it.

Free Access is the model employed by most R&D organizations because of their ease of implementation:

The information technology behind the free-access model is relatively easy to implement. The Internet and social media are readily accessible to anyone, and access to third-party databases is possible with any Web browser—although closed company cultures sometimes impede knowledge sharing.

Clearly, most R&D workers know are knowledgeable and know what information they want.  However, the problem with free access is the volume of information that one obtains when one starts looking for knowledge.

The problems of free access are fairly obvious: while workers may know how to use technology tools, they may not be skilled at searching for, using, or sharing the knowledge. One survey revealed that over a quarter of a typical knowledge worker’s time is spent searching for information. Another found that only 16 percent of the content within typical businesses is posted to locations where other workers can access it. Most knowledge workers haven’t been trained in search or knowledge management and have an incomplete understanding of how to use data sources and analytical tools.

The problem of searching for relevant information is exasperated even more in the R&D environment.  An employee searching for thermal cracking problems in an engine block will find all documents that have the words thermal and cracking.  Even when narrowed down, thermal cracking may be related to very different mechanisms.  The employee will likely give up the search and start working from scratch instead of digging through voluminous design documents.  This was a common problem I faced when I was trying to investigate failure modes in past systems to generate more robust designs.  A key answer would be to structure and filter the knowledge so that only the relevant information is displayed.

“Structured-provision technologies first appeared in the early 1990s and have improved considerably of late. They often have a range of functions. The most important is workflow technology that controls how knowledge workers get information and job tasks. These workers may encounter supporting technologies that include information portals, business rules or algorithms to automate decisions, document- or content-management systems, business process management-and-monitoring systems, and collaboration tools. Increasingly modular component designs make these technologies easier to deploy.”

Structured access has had some success in simple knowledge work like mortgage application processing or insurance claims processing:

Productivity is the major benefit: as measured by the completion of key tasks per unit of work time, it often rises by 50 percent when organizations implement these technologies. One automobile-leasing company, for example, achieved such gains after it implemented a new system for lease processing and end-of-lease sale offers. The reason for the improvement was that workers had few distractions and spent no time searching for information.

The key disadvantage of structured access is that by definition it reduces direct interaction between workers.  Furthermore, it requires a well defined process that can be automated to structure the knowledge.

In structured information environments, computer systems rather than knowledge workers integrate the work, so extensive system and process design is required up front for implementation. While these systems can be tailored to fit complex business processes, that kind of tight fit can become a problem if business environments or processes change.

This is easy to do in simple tasks but very difficult to do for complex R&D.  Some work has been done in structuring interactions for systems engineering requirements management.  However, I am not sure of any tool that can structure access for R&D environment (beyond those developed by my firm InspiRD.)   The article provides a useful framework to analyze what type of access would be beneficial in which environment.

R&D clearly falls under the top right corner of this 2×2,.  I would contend that even under that scenario, some amount of structure is absolutely critical to effectiveness.  In fact, we need a hybrid approach where the IT systems filters and narrows the search results for the team member.  It then provides free access only to the relevant information so that the R&D team member can reuse past development.

Another way of smoothing the path to structure is letting knowledge workers use familiar, typically free-access tools when they interact with a structured system. To alert them when it’s time to use a structured application, for example, have it send them an e-mail. If a structured task requires, say, passing financial information to and from the system, let workers use a spreadsheet. Always remember: high-end knowledge workers don’t want to spend all their working hours interacting with automated tools.

Limiting choices in a hybrid approach, if implemented correctly can actually enhance collaboration and interaction.  If team members are overwhelmed by the amount of information and start redeveloping technologies, free access will reduce interactions – not enhance collaboration. By limiting choices, we might be able to encourage R&D teams to engage in productive purpose driven communication and build networks.

We live in a world where knowledge-based work is expanding rapidly. So is the application of technology to almost every business process and job. But to date, high-end knowledge workers have largely remained free to use only the technology they personally find useful. It’s time to think about how to make them more productive by imposing a bit more structure. This combination of technology and structure, along with a bit of managerial discretion in applying them to knowledge work, may well produce a revolution in the jobs that cost and matter the most to contemporary organizations.

An example of a good R&D plan

As we have discussed in the past, R&D management is challenging because most new products require many technologies to mature simultaneously and many engineering disciplines to work together. The only real answer to effective R&D management is effective R&D plans.  R&D planning remains very hard and we have been discussing some approaches to address them.

  1. Good R&D plans have multiple milestones with clearly defined objectives at System AND Technology level.  These milestones bring constituent technologies together to evaluate / guide integration.  
  2. Good plans drive reuse of development between various development projects to reduce development costs and improve efficiency.  
  3. Good plans have multiple points of insertion from technologies into delivered products – i.e. Different subsystems from different development projects mature at different times and get inserted into delivered products.  These multiple insertion paths reduce long-term risks and improve return on investment.

I have been looking for good examples of effective R&D plans.  The article Mitsubishi Integrates Inverter With EV Motor System from Tech On discusses demonstration of a new product under development:

“Mitsubishi Electric Corp developed a motor system whose output power is more than 70kW for electric vehicles (EVs) by integrating an inverter and a motor on the same axis.”

This integration has many benefits including reduced volume, reduced weight and improved installation among others.

The integration enabled to shorten electric lines between the inverter and motor as well as to integrate pipes for water cooling that are required for each of the inverter and motor in the old system.
The mass of the new system is about 10% less than that of the old one. And the total efficiency of the new system is 3-5 points higher than that of the old system under the JC08 test mode.

This demonstrates one aspect of a good R&D plan: Clearly delineated objectives and goals.  These goals should be measurable so that progress can be evaluated at multiple points along the development pipeline. The company plans to commercialize the system only in 2017.  However, they are demonstrating some of the capabilities in the integrated system in 2012!  It is important to address integration challenges early and not wait till technology development is complete.

It is also important to identify major development hurdles and clearly define targets for technology development.  In this case, the company has identified heat from the inverter as the key challenge and identified multiple technology development paths to address it.  This clarity drives innovation:

Because the motor and inverter generate a large amount of heat, the company not only increased cooling capability but also made improvements to each of the motor and inverter to reduce heat generation. Specifically, it changed the magnetic design of the motor and employed a silicon carbide (SiC)-based power device for the inverter. With the SiC-based power device, the loss of the inverter was reduced by half, compared with the inverter of the old system that uses a silicon (Si)-based power device.

Since development of power devices is expensive, they have insertions of the SiC devices before the final system delivery.  Multiple insertion paths reduce the risk of wasted development effort:

The company aims to commercialize the system in 2017. And it plans to commercialize an EV motor system whose inverter using a Si-based power device and motor are separated in 2014.

Finally, there are incremental objectives for development at each stage, further enhancing management’s ability to monitor and guide R&D:

Currently, the motor system can be used for rotating tires and for simulated driving based on actual driving patterns in a laboratory. To commercialize the system, it is necessary to improve its structure for volume production, fine-tune it and further reduce its weight by 10 to 20%, Mitsubishi Electric said.

The Influence of Prior Industry Affiliation on Framing in Nascent Industries

A very useful paper from the HBS Working Knowledge about The Influence of Prior Industry Affiliation on Framing in Nascent Industries explores the digital camera market to identify some useful trends in firms entering new markets:

New industries sparked by technological change are characterized by high uncertainty. In this paper we explore how a firm’s conceptualization of products in this context, as reflected by product feature choices, is influenced by prior industry affiliation. We study digital cameras introduced from 1991 to 2006 by firms from three prior industries.

The paper hypothesizes that firms entering new industries tend to continue to behave like the industry from which they originate. A unique perspective and one that can be useful for all of us to understand because the corporate mindset is critical to how products get launched.

We hypothesize and find first, that prior industry experience shapes a set of shared beliefs resulting in similar and concurrent firm behavior; second, that firms notice and imitate the behaviors of firms from the same prior industry; and third, that as firms gain experience with particular features, the influence of prior industry decreases. This study extends previous research on firm entry into new domains by examining heterogeneity in firms’ framing and feature-level entry choices.

Let us dig to see what we can learn…
R&D has to always address uncertainty when developing new products. We have to experiment with product configurations, functions and technologies. However, new industries are even more challenging:

Potential customers have little or no experience with products, and their preferences are therefore unformed and unarticulated. Even basic assumptions about what the product is and how it should be used are subject to debate. Similarly, from a technological perspective, uncertainty exists about the rate of performance improvement of the new technology, how components of a technological system will interact, and whether different technological variants will work at all. Market and technological uncertainty are often compounded by competitive uncertainty as firms grapple with shifting industry boundaries and the convergence of firms from previously distinct domains.

The paper intends to analyze and explain how different firms decide to enter new markets and what drives them to be different from each other (heterogeneity). The digital camera industry studied by the authors is quite appropriate because it was at the confluence of multiple technologies / markets:

…the emergence of consumer digital cameras was characterized by high uncertainty and the entry of firms from three prior industries, photography, computing, and consumer electronics, enabling a comparison of the influence of firm background on decisions about which features a digital camera should include.

This interesting.  Digital cameras needed expertise from many different segments: Image Sensors (semiconductor), Optics, Digital Processing, Displays, User Experience (how a camera takes pictures – forte of vendors such as Nikon), film (Kodak) and consumer electronics (including mobile phones).  Market entrant from each participating industry segment approached the market based on their predispositions:

We find that prior industry affiliation had a significant influence on a firm’s initial framing of the nascent product market. Qualitative data indicate that digital camera product concepts and expected uses varied systematically, ranging from an analog camera substitute (photography firms), to a video system component (consumer electronics firms), to a PC peripheral (computing firms) before converging on a product concept that included elements of all three frames.

Also, different entrants from the same industry focused on similar products (based on their prior belief). However, as participants gained more experience with a particular product, they moved away from behavior corresponding to their previous industry – following a three stage model including an era of ferment, convergence on a dominant design, and an era of incremental change:

Our results suggest that firms from the same prior industry shared similar beliefs about what consumers would value as reflected in their concurrent introduction of features — firms were significantly more likely to introduce a feature, such as optical zoom, to the extent that other firms from the same prior industry entered with the feature in the same year, whereas concurrent entry by firms from different prior industries had no influence. Firms were also likely to imitate the behavior of firms from the same prior industry, as opposed to that of firms from different prior industries in introducing some, but not all features. Finally, we find that as a firm’s experience with a particular feature increased, the influence of prior industry decreased.

The paper suggest that industry level (or at least multi-participant) beliefs are important because they tend to shape the industry and the competitive landscape. Sometimes inability to develop all product features allows new entrants in the market. For example, few firms were able to integrate digital cameras with GPS locations  and provide a new user experiences.  It took Apple to combine a touch screen display with a media player in a mobile phone. In new industries R&D managers lack a detailed understanding of customer preferences (they have not evolved yet) and hence the prior experience becomes even more important. May be we should focus on thematic similarities a bit more to address this competitive weakness in traditional R&D management models. An approach focused on how customer would use the product and its features would help the exploration of thematic similarity (may be we can learn from Steve Jobs) .