Why Your Company Emphasizes Experimentation When Shared Priorities Should Come First

Nov 17, 2020 - 4 minutes read time

Why Your Company Emphasizes Experimentation When Shared Priorities Should Come First

Strategy is about making tradeoffs. Without making tough choices, a team ends up making a millimeter of progress in a million directions. The only way to win is to generate tremendous momentum toward accomplishing a few things that are truly vital.

That means having shared priorities. Unfortunately, most management teams disagree on their companies’ objectives. A group of researchers at MIT asked management teams at 124 companies to list priorities. Only 27% of the companies studied had more than two-thirds of the top executives on the same page. In other words, 73% of the companies had top leaders who couldn’t agree. 

This is why you see a lot of companies talk about the process of innovation in general, but avoid specifics. 

When Strategy Fails to Get Results

I teach innovation and run executive training programs. Recently, I had a call with the chief financial officer (CFO) of a multinational based in North America. It’s an electronic device manufacturer with tens of billions of dollars of revenue a year. It has tens of thousands of employees worldwide. The company has placed sustainability and innovation at the core of its new strategy. 

Why Your Company Emphasizes Experimentation When Shared Priorities Should Come First

I asked the CFO what needed to change about the way the company measured managerial performance. Surely, a new strategy would yield new outcomes. Were there any changes in key performance indicators?

“Nothing. We have rolled out our measurement system over the last decade. I’ve taught it with my people,” he said.

“Oh.”

“Sure, we need to do all that sustainability stuff, and maybe a bit of diversity too. But I’ve spoken with our largest shareholders. Seriously, don’t confuse our managers. Please.”

But his boss, the energetic CEO, is set to pursue the new strategy. The human resource department has been tasked with rolling out a massive training program (which is why I have a job) to teach their managers “agility,” “design thinking,” and “diversity management.” The aim is to unleash the potential for innovation among their employees. 

Predictably, all the new initiatives will be measured against the existing financial system at some point. At that point, they will all get shut down because their profitability looks lackluster in comparison.  

Most Executives Handle Difficult Conversations by Ignoring Them

There is a simple reason why shared commitment is rare in big companies. We all hate arguments, especially in the workplace. Unless it’s about personal compensation, it’s best to avoid a heated debate.

Smart managers know this, and pick their battles carefully. Today’s enemy can be tomorrow’s best friend. They don’t know who they will depend on down the road. So when discussing a company’s strategy, they prefer the status quo. They default to the incremental. They do this to avoid conflicts and build consensus. 

And so, the head of sales, the financial controller, the director of operations, and the digital officer can each interpret the same corporate strategy vastly differently. Their departmental priorities don’t align.  

But shared goals and a shared viewpoint are needed. They’re the only way to turn a company around. The story of Microsoft shows us so. 

What A Committed Innovation Effort Looks Like, And Why You Need It

In 2014, Satya Nadella took over Microsoft. In an open letter to employees, he wrote, “I am 46. I’ve been married for 22 years and we have 3 kids. . . . I buy more books than I can finish. I sign up for more online courses than I can complete. I fundamentally believe that if you are not learning new things, you stop doing great and useful things.”

Under Nadella, Microsoft transitioned to a subscription model. It won big in cloud computing. It ramped up its augmented-reality offerings. It scaled Azure, Microsoft 365 and HoloLens.

You may think Microsoft under Nadella is open-minded, inquisitive, and creative. But in fact, the company is laser-focused. On the explore-exploit spectrum, Microsoft doesn’t aimlessly explore new space. It commits to exploiting its chosen arenas. 

My research team at IMD took everything The Wall Street Journal, the standard-bearer of business journalism, has reported about Microsoft. We fed all of it to an algorithm. We wanted to see how Microsoft has talked about itself in interviews. We looked at how journalists have described it over the years. 

Well, Microsoft has become far more focused under Nadella than ever before. From what the CEO has said in interviews to the way journalists have reported on what Microsoft did, it’s clear that the company has narrowed its focus to only a few areas. Its employees still conduct a lot of experiments. But they all fall under a few areas and are measured against the new yardstick. 

General Electric, in contrast, has kept exploring. We saw GE couldn’t commit itself to a few areas of innovation, and still less to making tangible progress in those.   

Howard Yu, graph

Figures are compiled by the authors with data from the Wall Street Journal

Doing the Hard Thing About Innovation

The hard part about innovation is scaling up. A company may keep exploring in the name of being open-minded when, in truth, it’s because leaders can’t agree and prioritize. They are avoiding difficult conversations. 

But of course, leadership cannot “agree to disagree” forever. As we’ve argued here before,  contrary to common belief, a company can, in fact, explore itself into oblivion. 

 

Stay healthy,

Howard Yu signature

PS. Have you ever initiated a difficult conversation with your own team in order to arrive at a shared viewpoint? What was it like? How did you manage it? Have you seen the top management team at your company do so too? What was the effect? Join the discussion below… 💭


Comments


3 comments

R
Ramon della Torre Feb 10, 2021 at 9:54am

Blaise Pascal said: “Small minds are concerned with the extraordinary, great minds with the ordinary.” That is the key to innovation: looking at ordinary reality with an inquisitive mind, rather than working on extraordinary abstract designs.
Innovation is made of small steps of adaptation: that is what Nature teaches us. However, Nature, in doing so, has an advantage over us: it has no conscience and as such it progresses freely by trials and errors. On the opposite, for humans to advance, it is important to “de-familiarize” themselves from what they consider “normal”, like Socrates taught us. Tolstoy used to describe objects from a distorted perspective and refused to use the customary names for objects: de-familiarizing the otherwise familiar is the beginning of a journey that leads us to great discoveries.
That is the reason why it is important to highlight how the specialization in the “knowledge” fields is more dehumanizing and impoverishing than the division of labour. This is because “Knowledge” is a unicum that rests on many fields, composing the reality around us. Once the degree of specialization becomes too narrow, communication amongst “professionals” from different fields (in a corporation, from different departments) becomes very cumbersome. Thinking that people that do not share a common base can communicate and work together towards reaching a common goal is much more than an illusion.
Each of us, know that once we are presented with a steady image in our peripheral vision, we actually stop seeing it after a while. This is because neurons stop firing once they have sufficient information about an unchanging stimulus. Hence, an innovative leader must shake off the veil of familiarity from our eyes to alert us on tackling issues from different angles, in the “grey zones” where we superficially think that nothing happens.
In this deteriorated context (which needs to be changed as soon as possible) it is paramount to have innovative and authentically committed leaders able to disclose new views over otherwise “familiar” issues (making them unfamiliar to us) and shape a common ground amongst all stakeholders to force us to quit the old paths and enter into new ones through innovative thinking.
At the intersections between fields there is much to explore to move forward. A good leader must be able to point at these intersections where people from different background can meet and grow together

C
Christer odmalm Nov 21, 2020 at 3:18pm

Based on my experiencies from different organisations ( of course it is not valid for all companies): Most members of the management teams (Finance, HR, Sales, Production.....) perform best when there are incremental changes in the company. Radical changes are often driven by CEO, R&D or IT and they often like these disruptions where the company's existing strategy is challenged. Radical changes can only be performed if they are led by the CEO or if he protects the group performing the change. Otherwise they will be "killed" in different sophisticated ways. It is enough to have one (1) strong leader ( who is empowered by receving a lot of negative feedback from other parts of the company) to succeed with a radical change but they are really hard to find. I have just met 1-2 persons who has all the capabilities needed to identify the radical change, lead the transformation and gradually convince all opponents that it is the right way.

J
Jessa Reed Nov 17, 2020 at 8:59am

Very timely and interesting article Howard, thank you for sharing this!

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