Collin's Observation On CEO Succession

In his book How the Mighty Fall... Jim Collins points out that eight of the eleven declining companies when to outside CEO’s while only one of the contrast thriving companies went outside for their CEO. Also in the research for Good to Great, 90% of the CEO’s who led their companies to ‘great’ came from inside the company. Then he says “Now you might be thinking ‘but wouldn’t companies in trouble need to go outside?’”

There are, of course great examples on either side. Collins points out Lou Gerstner who came from outside to turn IBM around. In my book I mention Grant Halverson who came from outside to engineer a spectacular turn around of a company in Australia. And there are plenty of others. Whether or not the board looks inside, or goes outside, is a symptom of trouble, not its cause.

Boards of directors are often poorly mixed together and fail in their primary responsibility. Their principle job is to ensure that the leadership in the company is building an environment of engagement. Highly engaged employees are the ones who drive spectacular results today while developing the engine for tomorrow. That is because, to foster engagement the leadership must empower and trust the workforce. Building and maintaining the corporate culture is the CEO’s foundational responsibility. It is culture that determines the level of trust, empowerment, and thus, engagement.

When this is done well, a company quickly realizes that the ‘right people on the bus’ are the people you already have. When you ask the question of a leader CEO “Is there someone inside the company who could take over if you dropped over dead in five minutes” he or she is likely to laugh and say “I’d prefer to retire, thank you very much!” but then can immediately point to two or three people in the organization who would stretch themselves into the role right now.

When an internal change in leadership happens it is always a stretch. A.G. Lafley at Proctor and Gamble had to stretch himself into that role very quickly. At Texas Instruments, Tom Engibous faced this stretch with no warning when his predecesor keeled over dead while on a business trip. Jack Welsh proudly talks about having to choose a successor from three equally capable internal people in GE.

People come up to or down to the level set for them by their environment. In any environment, leadership sets the fulcrum point for lifting people to their potential. In companies, that environment is the culture and the leader is the CEO. If the fulcrum point is set low people will not perform at their potential because they are unable to. If people are not performing at, or near, their potential, it is not possible to detect what that potential is.

If the existing culture fosters the level of empowerment already exists inside the company then it is much easier to pick an insider to take over the CEO role. That is why Collins found that good companies promote from within.

The Innovator's DNA (HBR article - continued)

In my last blog, I commented on a Harvard Business Review article entitled The Innovator’s DNA and promised I would look next at the ‘five discovery skills’ the authors suggest make up the innovator’s creative intelligence.

These five discover skills are:

• Associating
• Questioning
• Observing
• Experimenting
• Networking

I think they are right that these are all useful skills when it comes to being creative. But some of their explanations of these skills are confused.

For example: the discover skill “Associating” is described as the ability to successfully connect seemingly unrelated questions, problem, or ideas from different fields. “To grasp how association works, it is important to understand how the brain operates.” The authors then describe how the brain stores experiences in such a way that memories can be pulled up that cause new associations when fresh inputs are presented to the brain. This is what we at Superinnovator call synthesis. (And describe in detail in Advantage: Business Competition in the New Normal ) It is a brain function. All brain functions take place in individual brains. There is no such thing as a collective brain. Synthesis is not well understood because we don’t really understand how the brain pulls up memories or makes connections between ideas. We do know that some people are very good at this. And we know how to identify these people.

After telling us that this is a brain function, the authors give the example of associating by talking about Frans Johansson’s Medici effect as bringing together people from a wide range of disciplines and by letting them connect, new ideas will blossom.

This description of the Medici effect accurately describes the fifth discovery skill of Networking. Which is getting ideas by exploring the different perspectives of a diverse set of individuals. It is not “associating” which is a mental ability taking place in the brain. Synthesis is a rich source of new knowledge and the principal source of innovative ideas in the modern world.

We prefer a crisper, more precise and more useful description of innovation skills in terms of the ability to create new knowledge. Synthesis is one of the ways we do this. We also do it through Discovery, stumbling upon something and perceiving its utility and value. The third way we create new knowledge is through Experimentation. Experimentation is trying different things to find a solution that works. The authors of the article give erroneous examples of experimentation such as Steve Jobs taking apart a Walkman, or Jeff Bezos taking apart his crib, or Starbucks’ Shultz visiting Italian coffee shops. First of all, these are not examples of creating knowledge, they are examples of gaining knowledge. Innovation happens when we create knowledge, not when we gain it.

Anyway, enough complaining. The article does end strongly. It rightly points out that you can become a great leader of innovation through practice, practice, practice. We teach that leading innovation organization is a different skill from being innovative, and a successful organization needs great innovation leadership, and skilled innovators.

They also rightly suggest that networking with diverse people will help you gain different perspectives which will help you think in new ways and gain new insights.

They also rightly point out that asking surprising questions stimulates new ideas. They suggest ‘why” and “why not” questions. While these are good questions as long as they don’t invite the devil’s advocate in us to emerge (which “why not” questions are prone to do). We prefer questions that ask “how”. These are questions such as: “how” can we better understand a problem?; “how” can we test a hypothesis?; “how” can we beat the competition? “How” questions are more profitable than “why” or “why not” because they focus on solutions and solutions are what innovators produce.

HBR December 2009 article: The Innovator's DNA

Last month I’d glanced at the Harvard Business Review’s December 2009 article called The Innovator’s DNA, by J.H. Dyer, H.B. Gregersen, and C.M. Christensen and didn’t think to blog on it. Then this week, Chris Broxon pointed the article out again and I reread it. It is a fairly narrow piece, and as Chris was saying on Thursday, often people talk only about the idea generation part of innovation and not the implementation. This article is about people who come up with these ideas.

The thrust of the article is that “Five ‘discovery skills’ separate true innovators from the rest of us.” Strangely the article points to Steve Jobs, Jeff Bezos, eBay's Pierre Omidyar, and A.G. Laffley at P&G asking "how these people come up with groundbreaking new ideas? If it were possible to discover the inner workings of the master's minds, what could the rest of us learn about how innovation really happens?"

The authors go on to say that most top executives facilitate innovation. But “in stark contrast, senior executives of the most innovative companies…don’t delegate creative work. They do it themselves.”

This is a strange statement especially when I think of Steve Jobs or particularly A.G. Laffley. Laffley is famous for expanding innovation at P&G by getting ideas from outside the company. That’s delegating creativity at the extreme.

If we look at Jobs, one of the earliest things Apple Macintosh had before Microsoft was the windows interface. But that wasn’t invented by Jobs, it was done first by Xerox at PARC. Likewise, Jobs didn’t come up with the idea for the iPod. The digital audio player was invented by Kane Kramer of England, who is credited with inventing the device in 1979. For iPod's software, Apple also went outside and used 3rd party PortalPlayer's platform. To top off the theme, the name ‘iPod’ came from outside of Apple, created by Vinnie Chieco, a freelance copywriter.

Even the icon of the great innovator, Thomas Edison was hardly the sole inventor the mythology portrays. He worked closely with folks in his Menlo Park lab. Charles Batchelor was the fellow he worked most closely with. In fact, why would the ‘sole inventor’ Edison split all patent royalties 50-50 with Batchelor. Because Edison was not the sole inventor! One of the lab assistants once said “Edison is in reality a collective noun and means the work of many men.”1 Thomas Edison was an amazing front man, the salesman/showman dealing with clients and investors.

Likewise, that’s what Jobs, Bezos, Omidyar, and Laffley are. They are salesmen and leaders first. What makes their companies successful is their openness to other people’s invention. They are networkers. Today the key to innovation progress is found in the way companies exploit the internal network structures and connect them to the outside world. And that is not new, it’s what Edison and Henry Ford did so well.

Next time we’ll look at the authors’ five 'discovery skills'.

[1] Andrew Hargadon Focus vol. VIII/1 pp 32-35 2004

Dichotomy of Mind

Dichotomy of Mind

In doing research for my just completed book on innovation (available as an audio book at http://store.payloadz.com/go?id=770643 ) I looked into a number of interesting studies of what is going on in the brain, to gain insight into how it is we created knowledge and solve problems. One thing that struck me is that the field of Psychology has lock-in.

Aristotle postulated a view of psychology that describes two minds. One is the logical mind where reasoning takes place. The other is the alogical or emotional mind where feelings and desires reside. Much of psychology still subscribes to this view. The next big leap in psychology and neuroscience may well come from abandoning this view. We’ve evidence to suggest that the functions we describe as reasoning and those that we describe as emotions have the same foundations.

In the field there seems to be a competition between cognitive psychology and neuroscience to describe what’s at work in the human mind. The methods used represent the difference, that one observes behavior and looks for environmental causes and emotional triggers for understanding the behavior. The other looks into the mechanics of the brain to describe what is going on in terms of functions and electro-chemical interactions.

Perhaps neurology offers the best of both. “Neurology is an essential part of the enterprise because it provides both important behavioral data on human subjects and hypothesizes connections between specific brain structures and behavior.”