by Haydn Shaughnessy | shared from Forbes |
After Stephen Elop took over as CEO of Nokia a couple of years back one of his most dramatic interventions was the burning platform memo. The key sentence in the tetchy, to say the least, email that Elop sent to Nokia staff in February 2011, was this: “We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times.”
From then on he began making his own decisions rather than trying to bring Nokia’s various, historical planning streams towards some kind of unity and success.
You could argue he made disastrous decisions and limited Nokia’s options – but significantly he made decisions that hauled the company off a development path that looked shaky to say the least. In short he made decisions whereas his predecessors had lost the knack.
We assume that one thing companies do relatively well is make decisions. Yet, I suspect there is a decision making crisis and Elop’s intervention is just one example of it (pre and post the burning platform).
With a few honorable exceptions companies do not have rational decision-making processes that can lead them off bad pathways or create fruitful new ones. They do not know how to transform to meet today’s conditions. This is a crisis of process as much as of talent.
It’s not that executives are dumb. It’s more that decision-making is a sociologically bounded activity with limited scope for initiative and rationality. That’s the result of how corporate processes are currently set up.
Over the past three months I’ve been involved in a fascinating project to look at how major companies make their key decisions. My emphatic statement just now is a result of that research.
The research was spurred by moments like the burning platform memo, moments when major companies are saying – we are making all the wrong decisions. It looks specifically at how companies make decisions about innovation and transformation.
I worked on the research with Bryan Kirschner, Director of the Apigee Institute and former Director of Open Source Strategy at Microsoft, (I have interviewed 29 companies so far, those are in-depth, 30 – 60 minute interviews, and Bryan undertook a quantitative survey of 300). On a transparency note my participation was funded by Apigee, the API management company and ultimate owners of the Institute.
The first part of the results are now published in a paper called Swapping Innovation for Transformation, Core Competency for Fluid Core. It builds on some of the issues I raised in the Fluid Core paper published in June.
What cripples companies like Nokia and RIM is an inability to multiply their options and then make good decisions in uncertain times, an unwillingness to address new infrastructure, people and innovation issues. Put another way they are not using innovation as a tool for transformation and a big part of the problem is faulty decision-making processes.
I’ll come back with more on the research, but for now what I have tried to do is create a checklist for better decision making, based on the in-depth interviews.
1. Make space for projecting ahead. You’d be surprised how few companies seem to do it. Decisions often get made without the right information and process to optimize the outcome r to fit the decision in the right context. Sounds obvious, yet some companies actually avoid decisions-as-process. As one interviewee put it, her company only made big decisions when faced with crisis, often when it was too late. In fact they routinely delayed decisions until they became crises. They were more comfortable fighting fires than with finding a truly interactive process where peers could co-decide.
2. Push back on ROI. Creating space for projects to evolve, often means pushing back on financial metrics. Many companies with strong decision-making capability limit their criteria to financial metrics like ROI/NPV. It’s hard to be transformational with those criteria, even though decisions are easier to make when it’s just down to the numbers . Many of the companies I interviewed that had a strong ROI culture invested very little in their foundational capabilities. Enough said. Yet, fitting into the future is impossible without improving foundational capabilities.
3. Getting transformation and innovation in proportion. Companies earning billions avoid spending on concrete transformational steps or big innovations costing a few millions. We even came across companies that would take back from an innovation budget in order to “make their quarter”.
4. Getting off the linear track. Companies are hidebound by recent innovation theories like Open Innovation that more or less require companies to generate more and more initiatives, more and more projects. But new open innovation projects are not necessarily connected to strategy. The open innovation world needs to develop strategic options thinking that limits and guides new projects. Don’t do OI without it.
5. Drop the stage-gate. Some companies are moving beyond stage-gate decision-making, the practice of pushing new projects in front of decision-making committees at set stages of a project. They talk instead about “graduation”, about maturing a project and developing the capabilities of the people within it. They allude to a more mature process of negotiation over the types of projects that are going to work and the requirements of the people who are going to run them. In effect, they shun the committee as well as the stage-gate in favor of capability.
6. Investing in people’s decision making capabilities. As I said earlier, very few companies were investing in their foundational capabilities, or those of their people. They expected to do innovation off the back of a few inspired or crazy entrepreneur types in the organization who would somehow “get it done”. Or they expected to work with committee structures to force a project through, or find external experts to hep them reject projects that looked like they were no good. Very few saw bettering their own people in the innovation process as a must-have.
7. Questioning the decision models. What should replace a strict ROI/NPV type decision model? One company look at financial metrics as part of the discovery process. In other words, you find out as you go along. I have my own views here – think we have several information social decision models like customer engagement. We need to sharpen these so that they have a more formal place in decision making processes (see point 12).
8. Pursuing mindful decision making. Plenty of companies are happy to let the market dictate decision-making, especially those companies with a record of acquisitions. They look to create a sense of unity where it might not exist. The refrain to frustrated people who want to innovate? We can’t upset the markets, we have to make the numbers. They resist any sense of transformation in case it is seen as a diversion. The result is decision-making without the thinking.
9. Going beyond brand. Something similar happens with companies that obsess over the brand They make too big a virtue of sticking to core competency because that is closely identified with their brand building and intangible asset value. It also creates a top down CEO-led culture. Great companies like Apple can do this. Companies like BMW are good at it too. But without strong decision making power at the top, and real CEO excellence, the brand can become a millstone.
10. Building transformational narratives. Making big decisions requires a transformational narrative – decision making is part logic but significantly bigger parts emotion and inspiration; the transformational narrative must encompass these facets. Great companies (Autodesk comes to mind but the usual suspects are there too, like Google) tell the story of change not just of imminent disaster. It creates room for new types of decisions.
11. Avoid waiting for crisis. One of our interviewees was an executive in a major car maker. His complaint? Even though there has been plenty of crisis in the auto industry his company never felt threatened enough to make radical decisions. They were in business-as-usual mode and would not shift until crisis hit.
12. Bringing social decision making in. Companies that run events like hackathons and jams tend to have no process to make decisions about the outputs of those social innovation events. So they have a few new prototypes? So what? Are they connected to strategy? Is there a way to make a place for them?
13. Understand the downstream agenda in an accelerated service economy. Companies are still over-focused on the pre-market aspects of innovation and are not making decisions about downstream activity. If you want to run an ecosystem or build a customer community you have a whole bunch of decisions to make about how, and at what cost, to stimulate what kinds of revenue streams. Companies need a structured approach to downstream decisions because revenue is no longer about the margin on a product that a customer pulls of a shelf.
14. Seek out uncertainty reducing tools. We found companies are comfortable with certainty-making tools like NPV or business plans but are not really seeking out uncertainty reducing tools, the imaginative scenarios and intellectual work that builds some rationality into unpredictable times. The reality is there aren’t that many such tools around but there is a need to invest in uncertainty reduction as a risk reducer. I recommend GigaOm’s Vector Roadmap tool. I used it here.
15. Develop fluid core competencies. Finally we found that many companies would insist they were sticking to a core competency even when all the evidence was that they were developing new ones and moving in some fundamentally new directions. We have to develop a new language around competency and what is core to a company. Core purpose is survival and longevity. Core competency is whatever takes you into profitable directions to ensure you achieve your purpose.