Scenarios
A scenario is a future story covering a longer time period than a business model, which is set in the present or near future. A scenario spells out the long-term implications of either the activities of the organization or the expected context within which the organization will be operating. Multiple scenarios are needed to reflect the uncertainty of the future. Scenarios are to organizations what memories of the future are to individuals. Scenarios are broad in scope and deliberately include a variety of inputs from people inside and outside the particular organization.31
Visions
A vision is usually a description of a future state, particularly what the organization will be like when it has achieved its goal. “A vision is about a common goal, not just about what the leader wants. Vision means an ideal and unique image of the future for the common good. It implies a choice of values and something that brings meaning and purpose to our lives.”32 Typically, it is a description or image of the future state rather than a fully fleshed-out story of how the organization will get to that future state.
User Stories
Software developer Mike Cohn in his book, User Stories Applied, recommends a standard form for the user story: as a
As a parent, I want a comfortable, affordable home, so that my spouse and I can raise our family.
As the client of a boutique hotel, I want a comfortable room with a personal feel to it, so that I have an unexpectedly stimulating night away from home.
Other Aspects of Future Stories
Since ancient times, the concept of a perfect world has persisted as a symbol of hope, from the heavenly garden of the ancient Near East through Sir Thomas More's Utopia to the efforts in the past few hundred years to engineer a better society. In general, these efforts, such as Soviet collectivization, the Maoist Great Leap Forward, or Le Corbusier's mass housing projects, were begun with high hopes but ultimately didn't work. One of the most important common factors in these schemes is a high modernist ideology, that is, a belief that it is possible to engineer progress to make the world a better place.
High modernism typically lacks the quality that Homer gave to Odysseus in The Odyssey: metis, a Greek word meaning the knowledge that can only come from practical experience. Odysseus was successful because he was ready to adapt to the unexpected twists and turns the future threw at him.34 So-called scientific theories about engineering a better life typically fail to take into account the indispensable role that practical knowledge, informal processes, and improvisation play in making positive change happen in the face of unpredictability.
Beware the Anti-Story
Because future stories are inherently incredible, they run a significant risk of not being believed. The charge of being unrealistic or science fiction is frequently made. The attack on the message can quickly turn into an attack on the messenger, particularly if the future story puts in question some of the organization's fundamental beliefs.
The launching of a bold and different future story in an organization is in fact likely to be the start of a vast underground river of anti-stories, which will be disseminated widely regardless of the facts, the analysis, or the logic on which the story is based. Therefore, being alert to the appearance of such underground anti-stories can be important. Although the anti-stories cannot be combated by management fiat or by arguments, they can be addressed with springboard stories (Chapter Three) and counterstories designed to tame the grapevine (Chapter Nine).
The Role of Future Storytelling in Innovation
Future stories point to the general direction the organization will take in the future. They can create new concepts and language in the organization, raising the quality of strategic conversation and focusing attention on what is relevant for success. They can make the organization more perceptive of its environment and more adaptive, motivating action and paving the way for innovation.
However, to create and sustain innovation, particularly transformational innovation, future stories are necessary but not sufficient. What is needed is the capability to weave together the full array of narrative tools and use them effectively over a sustained period of time. It is to this challenge that I turn in Part Three.
Template for Crafting a Future Story
Take these principles into account when constructing future stories:
1. Be clear on the type of future story you are crafting: informal account, plan, premortem, business model, strategy, scenario, or vision.
2. To the extent possible, bring together the people who will be involved in implementing the future story and involve them in crafting the story. If appropriate, use role playing.
3. Understand as much as possible about the current situation, particularly the driving forces that have led up to it and the relative importance of those forces.
4. Consider bringing in outsiders to deepen understanding of the current situation and broaden the horizons concerning alternative futures.
5. Where possible, set the story in the near future, and use examples where “the future has already happened.”
6. Keep the story simple and evocative, and avoid clichés.
7. Consider a combination of working backward from an image of the future state and working forward from the present to the future state.
8. Make the future story as positive in tone as circumstances permit.
9. Link the future story to your listeners' current mind-set.
10. Exemplify the future story in your own conduct.
Part 3
Putting it All Together
11
Solve the Paradox of Innovation
Using Narrative to Transform Your Organization
“If at first the idea is not absurd, then there is no hope for it.”
Albert Einstein
So far I've been discussing stories as individual tools to solve specific leadership problems. In practice, of course, no leader faces these challenges in isolation. Multiple challenges appear simultaneously: people need to be persuaded, alliances need to be built, the grapevine needs to be tamed, and knowledge needs to be shared, and all at once. Nowhere is this more evident than in the domain of transformational innovation. A great deal has been written on the subject and many solutions proposed. In this chapter, I examine first why the proposed solutions don't work and then how to resolve the problem.
Why Current Approaches Don't Solve the Innovation Paradox
The need to innovate is now perceived as the key to organizational survival. It's not enough for companies to get better. They have to get different—not just at their periphery through extensions of existing businesses but at their core. Transformational innovation isn't an option; it's a necessity.
As a result, established organizations have to become as good at game-changing innovation as they have been at disciplined execution. Instead of innovation and organizational learning being the responsibility of a few courageous individuals or departments, innovation must become an organization-wide capability—part of the firm's DNA.
The problem doesn't lie in sustaining innovations, that is, innovations that target existing customers with better performance than was previously available, either as incremental year-by-year improvements or as technological breakthroughs.1 Succeeding in sustaining innovation is a question of how well the firm does relative to its competition. Established firms almost always win the battles of sustaining innovation, because incumbents have both the powerful incentives and the deep pockets to be successful.
The paradoxical aspect of innovation arises in what Christensen and Raynor call disruptive innovations, which concern new business models that transform the business landscape.2 Some disruptive innovations involve disruption from below: a way of doing
business that is simpler, more convenient, and less expensive and with appeal to new types of customers. In this way, digital photography disrupted print photography. Desktop publishing disrupted traditional publishing. Minicomputers disrupted mainframe computers, and in due course personal computers disrupted minicomputers. Disruptive innovations introduce products and services that initially may not be as good as currently available models but that end up taking over the market.
Disruptive innovation may also involve disruption from above: a more expensive model transforms the business landscape by getting people to think about the domain in a different way, as when Starbucks changed expectations about a cup of coffee. Disruptive innovation is not about doing more of the same but doing something fundamentally different. This is something that most organizations are not currently good at, in large part because the most commonly proposed theories of innovation don't work.
Create a Safe Environment for Innovation
Clayton Christensen and Michael Raynor's book The Innovator's Solution is a brilliant analysis of why companies fail to innovate.3 It explains in convincing detail why corporate managements don't learn about good ideas, and why managers succumb to inherent pressures to run away from the challenge of disruptive competition rather than stand and fight. The decisions made as a result of these pressures make sense in the short run. But in due course they send the organization into an inexorable death spiral.
But while Christensen and Raynor's analysis of the causes of failure to undertake disruptive innovation is immaculate, their proposal for solving the problem is less helpful. The central premise of their thesis—the innovator's solution—is to accept the grim reality that big companies are inherently disinclined to tackle disruptive innovation. A modern organization will crush disruptive new ideas because they represent a threat to management, careers, power structures, customary ways of thinking, client bases, brands, corporate culture.
The authors' solution is to protect genuine innovators and their disruptive change ideas from these hostile forces: corporate leaders should put up a wall between the innovation and the existing hierarchy. Leadership should create an independent business unit, which will provide a safe and protected environment for innovation. There the innovation can flourish without having to fight off the interferences and intrusions and anti-innovation attitudes of the hierarchy.
The approach is seductive but has several flaws. First, it doesn't address innovations that require organization-wide change. At IBM, the shift in focus under Lou Gerstner from selling computer boxes to providing services to networked organizations and e-business was not something that could have been undertaken in an independent business unit. At best, Christensen and Raynor's approach works where the idea is limited in scope and can be launched as a business independent of the parent organization.
Second, even where it is possible to put the innovators in an independent business unit, it is doubtful that they will receive the resources necessary for success. After all, as Christensen and Raynor point out, the parent organization doesn't really want the innovation to succeed.
Even if the innovative independent business unit is successful, the company still faces the issue of what happens next. It doesn't follow that the parent organization will quickly and easily adopt the modus operandi that has been successfully developed in the subsidiary. Christensen and Raynor cite several examples of success, such as Hewlett-Packard's launching of inkjet printing through an independent business unit. But here the change didn't involve any fundamental shift in the way HP does business—it was simply another type of printer. More typical are examples where the parent company is still unwilling to adopt the innovations of the subsidiary. Some of these cases are notorious, like the IBM PC division in the 1980s and the Saturn division of General Motors.
As David Garvin says: “Separate organizations don't work—or at least not for long…. Allowing a different culture to flourish in [a] separate organization eventually leads to repeated power struggles and culture clashes, which members of the mainstream organization invariably win. Interest in the new ventures tends to be cyclical. Brief surges of enthusiasm, triggered by abundant resources and the desire to diversify, are followed by sharp declines. The life spans of both internal venture units and corporate venture capital funds, therefore, tend to be short—on average, only four to five years.”4
That's the risk with this approach. It's not really the “innovator's solution” as Christensen and Raynor call it. It's actually a “deferring the innovator's solution.” At some point, someone has to persuade the parent organization to accept the change.
Christensen and Raynor's solution rests on the hope that if you can build enough commercial success in the marketplace, you have a bigger chance of eventually winning the battle of persuasion. Surely, their argument goes, the hard numbers will win the war. Unfortunately, the track record shows that hard numbers don't win this kind of war. Even with strong commercial success, numbers and reason are not enough to dislodge the forces of stasis and inertia.5
Fund Many Innovation Projects
Gary Hamel proposes breeding healthy innovation through a decentralized funding system that emulates open markets. Thus, just as in nature many evolutionary experiments precede the emergence of a successful species, so companies should fund many innovation projects and see which ones win out. By giving large numbers of managers throughout the organization the power to allocate budgets for innovation, Hamel hopes to exploit “the wisdom of the many” over the blinkered view of a centralized corporate decision-making process. The decentralized process will thus support genuinely different disruptive innovation, rather than tame me-too look-alike changes:
The arithmetic is clear: It takes thousands of ideas to produce dozens of promising stratlets [a swarm of low-risk experiments] to yield a few outsize successes. Yet only a handful of companies have committed themselves to broad-based, small-scale strategic experimentation…. The isolation—and distrust—of strategic experimentation is a leftover from the industrial age, when variety was often seen as the enemy. A variance, whether from a quality standard, a production schedule, or a budget, was viewed as a bad thing—which it often was. But in many companies, the aversion to unplanned variability has metastasized into a general antipathy toward the nonconforming and the deviant. This infatuation with conformance severely hinders the quest for resilience.6
Hamel's approach encounters three problems.
First, he overlooks the reason that centralized decision making is conservative—that it reflects a fear of disruption of entrenched power structures and careers. Line managers throughout the organization experience the same fears. In fact, middle managers usually have more to lose in any basic change than top management does. And so won't they also vote their resources for innovations that bolster their current fiefdoms and careers? If they do, the decision making will be more cautious, not less.
Second, Hamel's belief that more resources will resolve the problem of innovation isn't borne out by the facts:
Christoph-Friedrich von Braun, in his 1997 study “The Innovation War,” analyzed thirty Global 500 firms and found almost no correlation between increased R&D spending and improvement in profitability.
Booz Allen's analysis of global personal care and consumer health care companies showed no clear correlation between R&D spending as a percentage of sales and growth in revenues or profitability.7
Profitable innovation, in other words, can't be bought. Simply spending more usually leads to a waste of resources on increasingly marginal projects.
Finally, Hamel's hope is that by funding a variety of ideas, the organization will emulate natural selection and the best ideas will survive and prosper. But will it pan out this way? Once a disruptive idea starts to flourish and becomes more interesting than the normal bread-and-butter work of the organization, it risks becoming a threat to the entrenched interests of the hierarchy. The organization may well welcome the new idea into its bosom, but only to crush i
t to death. The organization applies its own procedures and processes and attitudes to the new idea and overwhelms it. Donald Sull and Sydney Finkelstein give many examples, such as A&P with its upscale supermarket, Laura Ashley with clothes for professional women, Firestone with radial tires.8 All of these companies had obvious ideas staring them in the face, which were tested inside the firm and then crushed, precisely because they were successful.
The Leader's Guide to Storytelling Page 28
