The In­no­va­tor’s Mind­set: Rad­i­cal Can-do

Bril­liant strat­egy and high-tech wiz­ardry will only get you so far. In­no­va­tion de­mands re­lent­less ex­e­cu­tion driven by a rad­i­cal can-do mind­set.

Rotman Management Magazine - - CONTENTS - By Ri­cardo Viana Var­gas and Edi­van­dro Con­forto

Bril­liant strat­egy and high-tech wiz­ardry will only get you so far. Suc­cess­ful in­no­va­tion de­mands a rad­i­cal can-do mind­set.

are quizzed about what it takes to sucWHEN BUSI­NESS LEAD­ERS ceed to­day, they tend to sug­gest the usual sus­pects. In­no­va­tion is one con­stant re­frain. But, look around. While rad­i­cal in­no­va­tion is a com­mon as­pi­ra­tion, in­cre­men­tal in­no­va­tion is the more fre­quent re­al­ity. Very few prod­ucts or ser­vices are truly in­no­va­tive.

Is lead­er­ship to blame? Har­vard Pro­fes­sor Rakesh Khu­rana es­ti­mates that any­where from 30 to 40 per cent of the per­for­mance of a com­pany is at­trib­ut­able to ‘in­dus­try ef­fects’; 10 to 20 per cent to cycli­cal eco­nomic changes; and per­haps 10 per cent to the CEO. Our ex­pe­ri­ence sug­gests this is a max­i­mum fig­ure rather than a mean.

Orig­i­nal­ity is sim­i­larly over-rated. Re­search by Costas Markides and Paul Geroski of the Lon­don Busi­ness School high­lights the myth of the im­por­tance of be­ing the ‘first mover’. Markides and Geroski point out that Ama­zon was not the first com­pany to fo­cus on on­line re­tail­ing; nor was Charles Schwab the orig­i­na­tor of on­line share deal­ing. The com­mer­cial ge­nius of Ama­zon and Schwab was to take ex­ist­ing technology and bring it to the mass mar­ket. Hardly orig­i­nal — but hugely suc­cess­ful. So, if it’s not lead­er­ship or orig­i­nal­ity, what ac­counts for in­no­va­tive suc­cess?

The re­al­ity is that time and time again, the most in­no­va­tive or­ga­ni­za­tions are char­ac­ter­ized by what we de­scribe as re­lent­less ex­e­cu­tion driven by a rad­i­cal ‘can-do’ at­ti­tude and ap­ti­tude. They re­al­ize that the best strate­gies in the world will get you nowhere un­less you re­lent­lessly make them hap­pen.

Con­sider how Henry Ford rev­o­lu­tion­ized the auto in­dus­try at the turn of the 20th cen­tury. More than 17,000 Model Ts were sold dur­ing the first year of pro­duc­tion. Four years ear­lier, the world’s en­tire au­to­mo­bile in­dus­try pro­duced 22,000 cars. In the 19 years of the Model T’s ex­is­tence, Ford’s pro­duc­tion to­tal amounted to half of the world’s auto. Along the way, the en­tre­pre­neur­ial crowd that had set out to con­quer this new mar­ket be­came a se­lect few. In 1914 the Ford Mo­tor Com­pany, with its

13,000 em­ploy­ees, pro­duced 267,720 cars; the other 299 Amer­i­can auto com­pa­nies with 66,350 work­ers pro­duced only 286,770 cars com­bined. Ford had 48 per cent of the Amer­i­can car mar­ket, with US $100 mil­lion in an­nual sales.

Ford’s route to suc­cess was not about orig­i­nal­ity. There were a host of oth­ers ahead of him in terms of technology. The fledg­ling au­to­mo­bile mar­ket was highly com­pet­i­tive and crowded. Peo­ple like Charles Edgar and J. Frank Duryea, El­wood Haynes and Charles Brady King were all chas­ing the great au­to­mo­tive prize.

Ford’s much-vaunted pro­duc­tion process was ac­tu­ally an adap­tion of some­thing that was al­ready be­ing used else­where: The as­sem­bly line had been used in the food pro­cess­ing in­dus­try in the Mid­west United States since the 1870s. Ford him­self is re­puted to have toured Chicago’s meat pack­ing plants in search of in­spi­ra­tion, not­ing that the meat­pack­ers had an over­head trol­ley to speed up pro­duc­tion. He also would have noted the op­er­a­tions of Sears, Roe­buck’s Chicago mail-or­der plant, which opened in 1906. At the time, it was the largest busi­ness build­ing in the world, with three mil­lion square feet of floor space.

Time and time again, when you an­a­lyze the route to sig­nif­i­cant com­mer­cial suc­cess, you find that the mag­i­cal, sexy stuff of in­no­va­tion and en­trepreneuri­al­ism isn’t the main rea­son why an or­ga­ni­za­tion suc­ceeded. In­no­va­tion and en­trepreneur­ship skills are, of course, cru­cial, but suc­cesses like Ford and Ama­zon show us that there is a pre­mium on mak­ing things hap­pen and get­ting things done.

Un­for­tu­natley, this is some­thing mod­ern or­ga­ni­za­tions — backed by the full panoply of tech­no­log­i­cal marvels at their dis­posal — re­main poor at. A full 90 per cent of re­spon­dents to a global sur­vey of 500 se­nior ex­ec­u­tives from com­pa­nies with an­nual rev­enues of over $1 bil­lion, con­ducted by The Econ­o­mist In­tel­li­gence Unit (EIU), said they had failed to reach their strate­gic goals be­cause of flawed im­ple­men­ta­tion. More than half (53 per cent) of re­spon­dents ad­mit­ted that in­ef­fec­tive im­ple­men­ta­tion of strate­gic ini­tia­tives had a pro­found im­pact on the orga- niza­tion’s com­pet­i­tive ad­van­tage and per­for­mance. In ad­di­tion, the 2017 Project Man­age­ment In­sti­tute’s Pulse of the Pro­fes­sion Sur­vey found that for ev­ery $1 bil­lion in­vested, $97 mil­lion is wasted through poor im­ple­men­ta­tion.

The trou­ble with ex­e­cut­ing in­no­va­tion is that, un­like for­mu­lat­ing a clever strat­egy in a board­room, it has to take shape in the real world. And that in­volves mak­ing hard de­ci­sions — and tak­ing risks.

The Five Can-do Ca­pa­bil­i­ties

The re­lent­less ex­e­cu­tion of in­no­va­tion has five key char­ac­ter­is­tics:

1. CLAR­ITY

The beauty of re­lent­less ex­e­cu­tion is that it con­cen­trates man­age­rial minds. At its best, it cuts away su­per­flu­ous ac­tiv­i­ties and tar­gets all of an or­ga­ni­za­tion’s re­sources on what re­ally mat­ters to get things done. While other au­tomak­ers made their mod­els more com­pli­cated and ex­pen­sive, Henry Ford pro­vided ex­treme clar­ity: The com­pany would pro­duce just one af­ford­able car, in just one colour (black). This brand of smart sim­plic­ity is com­mon in rad­i­cal can-do or­ga­ni­za­tions.

Con­sider the Chi­nese bike shar­ing com­pany ofo (al­ways in lower case, to mimic the shape of a bi­cy­cle). “Ofo was cre­ated for shar­ing and aims to un­lock ev­ery cor­ner of the world by mak­ing bi­cy­cles ac­ces­si­ble to ev­ery­one,” says the com­pany’s web­site. Ofo be­gan life in 2014 when CEO Dai Wei and his co-founders saw an op­por­tu­nity to lever­age smart technology to im­prove cy­cling as a sus­tain­able form of trans­porta­tion. As stu­dents at Pek­ing Univer­sity, Wei and his part­ners con­vinced about 2,000 stu­dents to add their bi­cy­cles to a pri­vate reg­istry. The reg­istry could be ac­cessed through a mo­bile app and al­lowed par­tic­i­pants to use any regis­tered bike, any­where, any time.

To­day, ofo is op­er­at­ing in over 250 ci­ties in 20 coun­tries: China, Sin­ga­pore, the UK, the U.S., Kaza­khstan, Malaysia, Thai­land, Aus­tria, Ja­pan, Rus­sia, the Czech Repub­lic, Italy, the Nether­lands, Aus­tralia, Spain, Por­tu­gal, Is­rael, Hun­gary, In­dia and France. It

Ford’s much-vaunted as­sem­bly line had been used in the food pro­cess­ing in­dus­try since the 1870s.

gen­er­ates 32 mil­lion trans­ac­tions daily and is val­ued at more than $3 bil­lion. In 2017, it raised $700 mil­lion of fund­ing from, among oth­ers, Alibaba, Hony Cap­i­tal and CITIC Pri­vate Eq­uity.

Once again, ofo is not breath­tak­ingly orig­i­nal. Thanks to Airbnb and Uber, the shar­ing econ­omy is an in­creas­ingly main­stream idea. The Velib bike-shar­ing net­work was in­tro­duced in Paris in 2007 and a sim­i­lar pro­gram was in­tro­duced in Lon­don in 2010. ofo’s dif­fer­en­tia­tor is its ‘dock­less’ technology: Its eye­catch­ing yel­low bikes are hired through a smart­phone app and can be picked up and dropped off any­where that bike park­ing is al­lowed. In ad­di­tion, ofo does not re­quire riders to pay a de­posit be­fore use. To ac­cess a bike, they can sim­ply down­load the ofo app and un­lock their near­est bike via Blue­tooth. Once their ride is com­plete, users close the lock to com­plete their ride and make it avail­able for the next per­son to use. ofo uses ‘geo-fenc­ing’ technology to en­sure that riders use the bikes within the des­ig­nated ‘Home Zone’ shown in the app.

Such sim­ple, prac­ti­cal technology is driven by a bold sense of pur­pose. ofo is en­gaged in a con­stant round of rais­ing fi­nanc­ing and open­ing in new ter­ri­to­ries. Suc­cess in any highly com­pet­i­tive global mar­ket re­quires con­stant mo­men­tum and re­lent­less ex­e­cu­tion en­abled by clar­ity of pur­pose.

2. RE­DEFIN­ING FO­CUS

“You have to con­tin­u­ally pri­or­i­tize,” says David Mar­low, com­pany trans­for­ma­tion lead at Bris­tol-my­ers Squibb. “There are al­ways com­pet­ing ac­tiv­i­ties go­ing on in any or­ga­ni­za­tion and dif­fer­ing views of what to pri­or­i­tize. This re­quires a se­nior man­age­ment team to look at the en­ter­prise level, and con­duct a pri­or­i­ti­za­tion as­sess­ment once or twice a year. This will en­sure a fo­cus on where the big value driv­ers are and that they are be­ing prop­erly re­sourced and pri­or­i­tized.”

Such fo­cus is a pow­er­ful com­mer­cial weapon, but it needs to shift and change with time. To­day’s fo­cus will not be ap­pro­pri­ate to­mor­row. This was some­thing that Jack Welch prac­tised im­pres­sively as CEO of GE in the 1990s. Welch had a knack for dis­till­ing down his com­pany’s strat­egy into mem­o­rable phrases: ‘Num­ber one or two in ev­ery mar­ket’; ‘Get­ting the work out of the com­pany’; ‘Dot-com your busi­ness’. Each slo­gan was re­peated end­lessly by Welch as he trav­elled through GE and be­yond, pro­vid­ing fo­cus for the com­pany; but be­fore long he would al­ways move on to pro­vide the next fo­cus.

A sim­i­lar ap­proach has been taken by the CEO of Chi­nese white-goods man­u­fac­turer Haier. As the com­pany has evolved from a small lo­cal player into the world’s lead­ing white-goods com­pany, its CEO Zhang Ruimin has changed it’s fo­cus time and time again. “In the last three decades of ded­i­ca­tion to en­trepreneur­ship and in­no­va­tion, Haier has been through five stages of strate­gic de­vel­op­ment, each of which rep­re­sents a ma­jor en­deav­our of man­age­ment in­no­va­tion,” he ex­plains. “Our most re­cent strate­gic ad­just­ment be­gan in 2012, when we tran­si­tioned from be­ing a tra­di­tional man­u­fac­turer to be­come a plat­form­based and net­worked or­ga­ni­za­tion in line with the life­style changes brought about by the In­ter­net.”

Dur­ing the 1980s, Haier ded­i­cated it­self to brand build­ing. Its re­al­iza­tion was that to com­pete in­ter­na­tion­ally it had to raise the stan­dards of its prod­ucts. Zhang Ruimin pro­posed the prin­ci­ple of ‘a late starter with a high start­ing point’. Fa­mously, in 1985, af­ter re­ceiv­ing let­ters from con­sumers com­plain­ing about qual­ity prob­lems with Haier re­frig­er­a­tors, Zhang joined em­ploy­ees in de­mol­ish­ing 76 of the sub-stan­dard re­frig­er­a­tors with sledge­ham­mers. The point was made: Haier had to match or ex­ceed the high­est-qual­ity stan­dards.

In the 1990s, the com­pany’s fo­cus shifted to di­ver­si­fi­ca­tion, with a va­ri­ety of merg­ers and re­struc­tur­ings. The Haier re­frig­er­a­tor brand was ex­tended to a range of other home ap­pli­ances — wash­ing machines, air con­di­tion­ers, mi­crowave ovens, tele­vi­sions, com­put­ers and more. From there, Haier moved to fo­cus on gob­al­iza­tion, with an em­pha­sis on lo­cal­ized R&D, man­u­fac­tur­ing and mar­ket­ing. Its in­ter­na­tional moves were bold: Es­chew­ing eas­ier and closer mar­kets, it headed to the United States and Europe, where mar­kets were highly com­pet­i­tive and

Fo­cus is a pow­er­ful com­mer­cial weapon, but it needs to shift and change with time.

qual­ity ex­pec­ta­tions high. Fol­low­ing this stage, the fo­cus was on Haier’s ac­cep­tance as a pow­er­ful brand pres­ence world­wide.

In De­cem­ber 2012, Haier an­nounced its en­trance into a fifth de­vel­op­ment stage: net­work­ing strat­egy. Ruimin ex­plained, “The In­ter­net has elim­i­nated phys­i­cal dis­tance and en­abled busi­nesses to be­come net­worked. The com­pet­i­tive ten­sion among a com­pany, its em­ploy­ees and its part­ners should be de­fused with the aim of build­ing a col­lab­o­ra­tive, win-win ecosys­tem.”

3. COM­MIT­MENT TO CHANGE

For com­pa­nies ded­i­cated to re­lent­less ex­e­cu­tion, the only dan­ger is to press pause. Yet this is a fairly reg­u­lar oc­cur­rence. As small en­tre­pre­neur­ial com­pa­nies ex­pand into larger ones, there is a temp­ta­tion to ‘bring the grown-ups in’ to add bu­reau­cracy and pro­cesses. Some­times, this works, but it can bring an en­tre­pre­neur­ial rocket to an abrupt halt. Just look at Steve Jobs’ ini­tial de­par­ture from Ap­ple as the com­pany sought to bring man­age­ment dis­ci­pline to bear.

A com­mit­ment to change must be real and con­stant. The chal­lenge of change is to in­sti­gate it from a po­si­tion of strength. Re­peat­edly, com­pa­nies at­tempt to change things as their per­for­mance de­te­ri­o­rates or their mar­ket strength evap­o­rates. Not Haier nor the other re­lent­less can-do com­pa­nies; The more suc­cess­ful they be­come, the greater their ap­petite for change.

This con­tin­u­ous ap­petite for change is ex­em­pli­fied by Net­flix CEO Reed Hast­ings. “You have to fight the idea that as you get big­ger, your cul­ture gets worse. At Net­flix, we’re sig­nif­i­cantly bet­ter [than we were] be­cause we have more brains think­ing about the prob­lem. If you have 1,000 re­ally thought­ful peo­ple think­ing about how to im­prove, you’ll make a lot more progress than if you have 100,” he says. “Some com­pa­nies op­er­ate by the prin­ci­ple of the prod­uct ge­nius at the top. There’s this whole mo­tif that to be a great CEO you have to be a great prod­uct per­son. That’s in­tox­i­cat­ing and fun, but you’re much stronger build­ing a dis­trib­uted set of great thinkers.”

In 2010, Net­flix be­gan op­er­at­ing in Canada; in 2011, Latin Amer­ica, Cen­tral Amer­ica and the Caribbean; in 2012, the UK, Ire­land and Scan­di­navia; in 2013, the Nether­lands; in 2014, Aus­tria, Ger­many, France, Bel­gium, Lux­em­bourg and Switzer­land; in 2015, Aus­tralia, New Zealand, Ja­pan, China, Italy, Por­tu­gal and Spain; and in 2016, it ex­panded into more Asian coun­tries. “You are wit­ness­ing the birth of a global TV net­work,” pro­claimed Hast­ings as an­other 130 coun­tries were added to the com­pany’s reach to take the global fig­ure to nearly 200 coun­tries from Afghanistan through to Zim­babwe.

4. AC­CEP­TANCE OF RAD­I­CAL FAIL­URE

Of course, with a rad­i­cal can-do mind­set comes the in­evitabil­ity of fail­ure. Role mod­el­ling fail­ure starts at the top of any or­ga­ni­za­tion, di­vi­sion, team or small com­pany. “If we’re not mak­ing mis­takes, we’re not try­ing hard enough,” ob­served James Quincey when he be­came CEO of Coca-cola in 2017. Ama­zon’s Jeff Be­zos has been sim­i­larly vo­cal in mak­ing it clear that fail­ing is an in­te­gral part of suc­ceed­ing. “If you’re go­ing to take bold bets, they’re go­ing to be ex­per­i­ments. And if they’re ex­per­i­ments, you don’t know ahead of time if they’re go­ing to work. Ex­per­i­ments are by their very na­ture prone to fail­ure. But a few big suc­cesses com­pen­sate for dozens and dozens of things that didn’t work.”

At Net­flix, where the cul­ture is built around ‘rad­i­cal can­dour’, Hast­ings is an out­spo­ken cham­pion of fail­ure. “You should have more things that don’t work out,” he has ob­served. “As you grow, the drive to­wards con­form­ity is sub­stan­tial. As a leader, you want to drive peo­ple to take more risks.” Speak­ing at a re­cent con­fer­ence, Hast­ings lamented: “Our hit ra­tio is way too high right now. I’m al­ways push­ing the con­tent team. We have to take more risks. We have to try more crazy things, be­cause we should have a higher can­cel­la­tion rate, over­all.”

If you’re not mak­ing mis­takes, you’re not try­ing hard enough.

5. GET­TING (AND STAY­ING) CLOSE TO CUS­TOMERS

“In­no­va­tors and en­trepreneurs rarely fail be­cause their ini­tial idea was stupid,” ob­serves Alex Oster­walder, co-au­thor of Busi­ness Model Gen­er­a­tion. “They don’t suc­ceed be­cause they fail to lis­ten to the re­al­ity of the mar­ket. They fail to it­er­ate their idea and adapt their value propo­si­tion and busi­ness model un­til it’s scal­able and prof­itable.”

The rad­i­cal can-do mind­set is not about press­ing ahead and blindly do­ing things for the sake of do­ing them. As in­di­cated, it re­quires clar­ity and fo­cus, but it also de­mands an in-depth knowl­edge of what your cus­tomers want and what they as­pire to. In the most suc­cess­ful projects we have wit­nessed, there is a strong cor­re­la­tion be­tween em­ployee en­gage­ment and aware­ness of what cus­tomers want and need. “In­sight into cus­tomer needs and com­peti­tor moves, com­bined with the speed and agility to cap­i­tal­ize on this in­sight, will be in­creas­ingly crit­i­cal for com­pet­i­tive suc­cess,” pre­dict Perry Keenan and his col­leagues at The Bos­ton Con­sult­ing Group.

It is es­pe­cially chal­leng­ing for com­pa­nies in fast-mov­ing mar­kets to con­nect with the fu­ture as­pi­ra­tions and needs of cus­tomers. Given the iden­ti­fi­ca­tion with cus­tomers ex­em­pli­fied by its founder it is in­ter­est­ing to see the work of the mod­ern-day Ford Mo­tor Cor­po­ra­tion in this area. “Henry Ford’s mis­sion was to help peo­ple move. That’s still at our core, but now we’re look­ing at the larger scope of what ‘mo­bil­ity’ means,” ob­serves Jamel Sea­graves, an ad­vanced re­search en­gi­neer at Ford.

For Ford, re­con­nect­ing with its orig­i­nal pur­pose has brought the com­pany to Sil­i­con Val­ley. Among its in­ter­est­ing takes on ‘its place in the world’ is that tech com­pa­nies are in­creas­ingly au­to­mo­tive sup­pli­ers. In 2015, it opened the Ford In­no­va­tion and Re­search Cen­tre in Palo Alto. The Cen­tre is led by a for­mer Ap­ple en­gi­neer and is charged with ex­plor­ing ‘the fu­ture of mo­bil­ity’ with a team of 160 re­searchers, en­gi­neers and sci­en­tists. Among its projects are au­ton­o­mous ve­hi­cles and help­ing cy­clists and mo­torists share roads.

In clos­ing

Get­ting things done with a re­lent­less can-do at­ti­tude de­mands a de­gree of bold­ness and brav­ery that few ex­ec­u­tives and or­ga­ni­za­tions demon­strate. Th­ese char­ac­ter­is­tics are founded on a deeply held be­lief that the sta­tus quo is not good enough — that things can and must get bet­ter; that get­ting out there and con­nect­ing with peo­ple is prefer­able to build­ing in­ter­nal walls; and that fail­ure is in­evitable along the way. As in­di­cated by the sto­ries of Ama­zon, ofo, Net­flix, Haier and many oth­ers, for­tune truly does favour the brave.

Ri­cardo Viana Var­gas is Ex­ec­u­tive Di­rec­tor of the Bright­line Ini­tia­tive, a coali­tion led by the Project Man­age­ment In­sti­tute to­gether with lead­ing global or­ga­ni­za­tions ded­i­cated to help­ing ex­ec­u­tives bridge the gap be­tween strat­egy de­sign and de­liv­ery. Coali­tion mem­bers in­clude The Bos­ton Con­sult­ing Group, Bris­tol-mey­ers Squibb and Saudi Tele­com, and aca­demic part­ners in­clude the Univer­sity of Tokyo Global Team­work Lab, Tech­ni­cal Univer­sity of Den­mark and the Blockchain Re­search In­sti­tute. Edi­van­dro Con­forto is Head of Strat­egy Re­search for the Bright­line Ini­tia­tive.

For Ford, re­con­nect­ing with its orig­i­nal pur­pose — help­ing peo­ple move — has brought it to Sil­i­con Val­ley.

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