Tag Archives: drucker

A Method for Avoiding Group Think

Have you ever been in a meeting where everyone else rallies around a position that you were sure was wrong? You wonder whether you should make waves by being the only one to disagree. Maybe everyone else knows something you don’t? Chances are good that you kept quiet, especially if the boss was among the supporters.

Extensive research shows that you would not be alone in doing so—and that organizations would be better off if they could keep dissenters like you from buckling under group pressure.

In 1955, Soloman Asch conducted a series of landmark experiments that demonstrated the tendency to acquiesce. Asch put a subject into a small group of people he hadn’t met. The group was taken through a series of visual tests where the answers were obvious but, after a while, all the participants other than the subject would give unanimous, incorrect answers. Unknown to the subject, the others were all cooperating with the experimenters.

As Asch put it, subjects were being tested to see what mattered more to them, their eyes or their peers.

The eyes had it, but not by much. Asch reported that, in 128 runnings of the experiment, subjects gave the wrong answer 37% of the time. Many subjects looked befuddled. Some expressed their feelings that the rest of the group was wrong. But they went along.

Interestingly, Asch found that all it took was one voice of dissent, and the subject gave the correct answer far more frequently. If just one other person in the room, gave the correct answer, the subject went along with the majority just 5% of the time.

In organizational settings, the tendency to conform is heightened because the subject is complicated, the answers unclear. There are social and economic bonds that tie a group together, and there is a very human tendency to yield to authority.

Following in Asch’s footsteps, a series of experiments conducted by Stanley Milgram in the 1960s demonstrated obedience to authority to startling proportions.

Executives too often squash dissent because they feel that it will keep them from moving quickly. Some argue that allowing disagreement can halt action entirely. Tom Kelly, the renowned innovation expert at design firm IDEO, wrote in The Ten Faces of Innovation:

“Every day, thousands of great ideas, concepts and plans are nipped in the bud by devil’s advocates.”

John Kotter, professor emeritus at Harvard Business School and a highly regarded expert on leadership and change management, captured the frustration of many executives when he said:

“Every visionary knows the frustration of pitching a great idea, only to see it killed by naysayers.”

But how do leaders know whether a contrary view is standing in the way of their bold, visionary stroke or a disastrous folly? They don’t.

Rather than reinforce conformity and squash dissent, leaders (at every level) should, instead, heed the advice of Peter Drucker, who wrote in The Effective Executive,

“Decisions of the kind the executive has to make are not made well by acclamation. They are made well only if based on conflicting views, the dialogue between different points of view, the choice between different judgments.”

More important, Drucker observed, only disagreement can provoke imagination and alternatives:

“A decision without an alternative is a desperate gambler’s throw, no matter how carefully thought out it might be.”

In The Essence of Strategic Decisions, Charles Schwenk reports that numerous field and laboratory studies found that decision-making was much improved if someone on the team is brave enough to dissent. In particular, dissenters are most useful when organizations tackle complex, ill-structured problems—such as critical business strategy questions. Constructive questioning and debate increase the quality of assumptions, increase the number of alternatives considered and improve decision makers’ use of ambiguous information to make predictions.

But as leaders try to encourage constructive questioning and debate, they must remember that there’s a catch for dissenters. As one executive warned me,

“Devil’s advocates, if occasionally right, will get hunted down and killed by the antibodies in a company. Remember, they just won an argument. That means that someone else lost.”

(I think he meant “hunted down and killed” figuratively, which isn’t as dramatic as when Saddam Hussein personally shot a senior minister in his government when that minister suggested, quite mildly, that Iraq might want to consider looking for a peaceful settlement of its 1980s war with Iran.)

Indeed, just relaying bad news can be hazardous to your career. A study cited by James Surowiecki in The Wisdom of the Crowds found that those who delivered bad news in corporations were tainted, even if they had nothing to do with causing the problem and even if their bosses said they knew the messenger wasn’t at fault.

The current emphasis on teamwork can create problems, too. In good conditions, strong teams can function with impressive efficiency. But the bonds of teamwork can make it hard to deliver tough news. Teams tend to be formed of people who resemble each other in many ways, and they become friends. You don’t want to tell your friend that he’s messed up.

So, somehow, a balance must be struck. Constructive debate needs to be encouraged without injecting paralysis into the organization. Always remember, however, that the natural tendency is toward conformity, not debate. And, without debate, the consequences can be disastrous for both the organization and its leaders.

Take Bill Smithburg, who led Quaker Oats’ $1.7 billion purchase of Snapple in 1994. Although analysts warned at the time that the price could be as much as $1 billion too high, Smithburg saw synergies. Those synergies never materialized. Quaker sold Snapple for $300 million just three years after buying it, and Smithburg was out as chief executive. Reflecting on the failed acquisition several years later, Smithburg said,

“There was so much excitement about bringing in a new brand, a brand with legs. We should have had a couple of people arguing the ‘no’ side of the equation.”

Quaker Oats was eaten up by Pepsico a few years later.

Sometimes the “no side of the equation” is the one that pushes for change. In this case, be careful not to follow the example of Ed Schwinn, when he was CEO of the business that bore his family name. When a Schwinn team looked at the possibilities of mountain bikes in the 1980s, Ed Schwinn felt that they were a passing fad and argued against major investment in them. Schwinn was the dominant maker of bikes, and he didn’t see any reason that would change. A senior executive felt otherwise and argued his position vociferously. Ed Schwinn adjourned the meeting and said the group would reconvene on the issue in two weeks. They did—after Schwinn fired the contrarian. That decision turned out to be a catastrophic misjudgment. Schwinn (the company) followed Ed Schwinn’s intuition and never caught up. The company went into bankruptcy in 1992.

Better to follow the example of Alfred Sloan, the legendary builder of General Motors. Sloan once said to a meeting of one of his top committees, “Gentlemen, I take it we are all in complete agreement on the decision here?” Everyone around the table nodded.

“Then,” Sloan continued, “I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.”

Next time you’re about to embark on a major initiative, or decide against one, make sure you have a couple of people arguing the “no” side.

Getting to 2020: Redefining the Culture (Part 3)

This is the third in a series of four articles that offer a “road less traveled” to Agency 2020. The first article focused on your agency in the marketplace’s current reality. The second article considered the world as it might be in 2020. Today, we address the processes necessary to ensure you have the “seed corn” to grow the culture and structure necessary to produce Agency 2020 and win in the marketplace of tomorrow.

Mohan Nair, in his book, Strategic Business Transformation, diagrams a world of yesterday where 80% of change was incremental/cyclical and 20% was structural/transformational. Today, he says, “When the unknown are threatening every variable we have counted on, 80% of the variables that shift are structural while 20% are predictable. We cannot use the strategic data used in the past to find our ‘true north.’”

Your successful organization today is driven by its culture: “the house rules,” “what’s tolerated.” This organization and culture were created for the world of yesterday (“Daddy, may I?”) and today (“What do our carriers say?”). If you believe the world of 2020 will be different, you must create a culture appropriate for that new world.

The Gospel of Mark (3:25) and then Abraham Lincoln stated that “a house divided cannot stand.” This was true in their world of incremental change. Theirs was a world that moved at the pace of a tortoise. Tomorrow’s world will move at the pace of the hare (but never stop for a coffee break).  As has been said: “It’s not the big that eat the small. It’s the fast that eat the slow!”

Most people are reluctant to change. As Maxine puts it, “Change is good as long as I don’t have to do anything different!” In your organization, most folks are comfortable in their jobs, see the world as it is and are terrified that things will change. A minority of folks who are enthusiastic about the new, virtual world and global economy see the world as it will be and are terrified that your organization won’t change.

Your house is already divided.  What you need to do is merely focus each segment on the role right for them.

Both groups are necessary for success, but you must answer one question for each group and each individual. WIIFM? – What’s in it for me?

Do this, and they’ll embrace your plan; ignore WIIFM, and they’ll sabotage your future. Be respectful of all. Understand that there are different “tolerances” for risk and that people discover, learn and adapt at different speeds.

Gather your team. Put them at ease. Make the environment safe for them. Explain that you want to structure change to give every contributor an opportunity to continue their success today and find the right fit in the world of tomorrow. Celebrate your past and thank them for their participation. Clearly articulate your embrace of the inevitable change necessary for tomorrow and your commitment to your team’s success in the future.

Announce your plans to begin an Agency 2020 initiative. Explain that to build a foundation for success you need two teams. This process will not be instead of their existing roles but as an extracurricular activity. This initiative is about assuring a future with opportunities for each other. This is about each voice being heard.

The first group will immediately focus on the existing organization – making it more efficient and effective to create the “seed corn” (profits) necessary to finance tomorrow. The group’s task will be to create an operational “to do list” defining and acting on what is necessary for enhanced success today and to quit doing those things carried forward from yesterday but no longer needed today – “we’ve always done it this way.”

The “tomorrow team” will be the young at thought and the young at heart. They will be your pioneers. They will be charged with discovering tomorrow as it will be and creating a blueprint to build your organization as it must be to fit in 2020. This process is not intended to exclude the traditionalists. Both teams will be encouraged to share their discoveries and enthusiasms – to create excitement about today’s improvements and refinements and tomorrow’s innovations.

Don’t create competition between the teams – encourage collaboration so that respect and trust will build. This will work because each group is focusing where “they live” – their comfort zone — and you are not forcing them, at this time, to go to where they don’t want to be. Assure all team members that, as the blueprint for 2020 is designed and new roles are defined, each person on staff will have the right to be considered for jobs right for them and your organization. Promise them the training necessary for success. If they can’t or won’t fit into the world of 2020, facilitate their exit. Make it as painless as possible.

For the Today Team, some ideas to consider and questions to ask (there are more):

  1. Focus – take out the microscope and study every function you perform.
  2. If “we’ve always done it this way” – it can be changed for the better.
  3. What are five things we do today that no longer need to be done?
  4. What are five things we do today that remain important and can be improved?
  5. What are the jobs skills that remain important today? How do we improve these?
  6. What are skills no longer needed in the world of today? How do we let them go?
  7. Do we have the technology (systems and social media) needed for today?
  8. What and how can we maximize our results from this technology?
  9. Does our “client experience” differentiate us, or are we “the same old same old?”
  10. Are we capturing the data available and converting this to actionable knowledge?
  11. Where must we invest our time and energy?
  12. What must we leave behind?

Please remember – the Today Team is about updating (remodeling) the organization you have. Its role is small steps – process improvement.

Think outside of the box. Remember the words of Einstein – insanity is “continuing to do what you’ve always done and expecting a different result.” The world has changed more in the past 10 years than the previous 50, yet most agencies continue to do what they’ve always done. Don’t be crazy. Discover and do what needs to be done today to prepare for tomorrow.

The Tomorrow Team is about designing a blueprint and facilitating the building of the organization and culture you’ll need for the future. The team’s role is “giant leaps” – innovation. You are moving from the mechanical processes of yesterday to a new “living” system for tomorrow. Be bold. Don’t be afraid to fall – just do it, and learn from the experience.

For the Tomorrow Team, some directions and innovations to consider (there are more):

  1. Scan the horizon of the world and technology. Look outside your comfort zone.
  2. Determine if “place” will matter — where you, your employees and clients are.
  3. Determine if “time” will matter? Is “Working 9 – 5” only right for Dolly Parton?
  4. Determine the role of cultures and generations for buyers and those who influence decisions.
  5. What are the talents needed? Prioritize communication, technology, insurance, etc.
  6. What will be client needs? How can you deliver solutions profitably?
  7. Shift your focus from products sold in the past – to client needs in the future.
  8. What will be the demographics and psychographics of the populations served?
  9. What will be the industries/market niches in collapse/decline? Avoid them.
  10. What will be the industries/market niches in ascendancy? Focus on these.
  11. How do you manage in a “virtual” (no time, place and more non-verbal) world?
  12. What will be the role of big data? What will be your ability to use it effectively

The questions are offered as a starting point for discovery. You have many more questions to ask and answer. Yours is a world yet to be – not a world that is. Nonetheless, the better you ponder and plan, the better your head start on the future – the New World of 2020 – will be.

Learn from the great change architect Peter Drucker, who said, “The best way to predict the future is to create it.”

3-Point Plan for an Innovation Portfolio

One lament I often hear when I advise large company executives on the need to “Think Big” is that their biggest innovation challenge is not thinking big—it is thinking too much. Purportedly great ideas come from the front lines where the organization interacts with products and customers. They come from technology or marketing wizards keeping a sharp eye on disruptive market trends. They come from executives and board members grappling with questions at the organization’s strategic horizon. The challenge is that organizations are overwhelmed with more ideas than they can sort out, much less pursue. Perhaps the best advice on how to deal with the challenge of too many ideas comes from Peter Drucker, who offered this general principle:

Innovation begins with the analysis of opportunities. The search has to be organized, and must be done on a regular, systematic basis.” Don’t subscribe to romantic theories of innovation that depend on “flashes of genius.”

Rather than relying on randomness or organizational influence to dictate which ideas find a receptive ear, here is a three-point plan for initiating a systematic process for uncovering, assessing and scaling the best ideas. 1. Inventory Opportunities Start by casting a wide net. For example, sponsor a series of innovation contests and workshops to educate, build alignment and uncover potentially good ideas. Hold scenario planning sessions with senior executives and board members to explore both incremental and disruptive future business scenarios. Questions to ask might include:

  • Can you augment your customer interfaces to reveal customer preferences and to customize the customer experience, as Amazon and Netflix do?
  • Are there opportunities to better utilize the big data being generated by your business processes, including customer, operational or performance data, for innovation?
  • How might you reimagine key business, customer, and competitive issues if you could start with a clean sheet of paper?
  • How do the six disruptive technologies affecting other information intensive companies apply to you?
  • What extreme competitive threats, i.e., doomsday scenarios, might new entrants wielding these disruptive technologies pose to your organization?

Opportunities should include both continuous and discontinuous innovations. Continuous innovations offer incremental or faster, better, cheaper-type optimizations, such as shedding costs, reducing cycle times and generating incremental revenue. Discontinuous innovations are those that rise to the level of game-changing potential. 2. Develop a Holistic View Using an Innovation Portfolio Next, assess each opportunity based on competitive impact and investment type using the portfolio analysis framework as shown in Figure 1. Figure 1 Figure 1: Portfolio Analysis Framework Competitive impact measures differentiation against what competitors might deploy by the time an idea is launched. Remember Wayne Gretzky (who famously said he skates to where the puck is going, not to where it is)! A key mistake is evaluating an idea against one’s current internal capabilities, as opposed to where the competition is going. This dimension forces an explicit calculation of an idea’s future potential competitive impact. Investments can be one of three types:

  • Stay in Business investments (SIB) are for basic infrastructure or non-discretionary government mandates. SIB investments should be assessed on how adequately they meet regulatory or technical requirements while minimizing risk and cost.
  • Return on Investment opportunities (ROI) are pursued for predictable, near-term financial returns. Standard measures, such as net present value (NPV), return on equity (ROE) or other well-understood metrics are applicable here.
  • Option-Creating Investments (OCI) are pursued to create business options that might yield killer-app-type opportunities in the future. OCI investments do not yield financial returns directly.  Instead, they build capabilities and learnings that can be translated into future ROI opportunities. Like financial options, OCIs should exhibit high risk and offer tremendously high returns.

After arraying opportunities in the framework, eliminate those that fall outside of acceptable boundaries. For example, companies should not pursue opportunities that, once completed, are already at a disadvantage against the competition. For the remaining opportunities, develop an initial sizing of investment levels and potential benefits according to each investment category. Filter as appropriate. For example, eliminate ROI opportunities that do not meet standard corporate hurdles rates. Eliminate OCI opportunities that do not exhibit extraordinary option value. Eliminate SIB ideas that do not adequately minimize cost and risk—be very skeptical of SIB opportunities aimed at providing ROI or OCI benefits. Such opportunities should be judged directly as those investments types.  Figure 2 illustrates how the analysis might look at the end of this stage. Figure 2 Figure 2: Portfolio Analysis Results 3. Balance the Innovation Portfolio In personal investment portfolios, it is important to not place all hopes in one or two investments. The same is true for corporate innovation portfolios. To ensure competitiveness in the near term and in the future, they should include a mix of incremental and disruptive innovations. The right balance and prioritization depends on a company’s investment capabilities and competitive circumstances. For example, as shown in Figure 3, a market leader might field a portfolio geared toward aggressive growth by enhancing its infrastructure, investing heavily in near-term profitable opportunities and developing a small number of killer app options for sustaining its competitive advantage.  (My experience is that the right number of such options is on the low end of the magic 7, plus or minus two. That is because the limiting factor is senior executive attention, which is very limited, not investment dollars. Market leaders have lots of money to waste, but no project with true killer app potential can succeed without significant senior executive attention.) Figure 3 Figure 3: A Market Leader’s Balanced Portfolio Other illustrative portfolio profiles are shown in Figure 4. Commodity businesses tend to minimize SIB and OCI investments. Companies that are retooling might emphasize infrastructure and near-term investments and make only minimal investments in future options. Underperforming companies tend to invest in programs that barely achieve competitive parity, or worse, and do little to prepare for the future in any of the three investment categories. Figure 4 Figure 4: Illustrative Portfolio Profiles

* * *

By adopting appropriate financial and competitive metrics and measures for each type of investment, companies avoid planning theatrics where guesses are disguised as rigorous forecasts. This can happen, for example, when infrastructure and other SIB investments are required to demonstrate explicit returns on investment. Or, it can happen when advocates of OCI efforts are required to calculate net present value of very uncertain long-term initiatives. Such forecasts can, of course, be made by  savvy proponents. But the analyses are better testaments to rhetorical and spreadsheet skills than certainties about the future. At the end of this three-step process, companies should have a prioritized and staged investment plan that represents a coordinated enterprise innovation strategy and follows the think big, start small and learn fast innovation road map. Achieving an adequate understanding of the entire landscape of possibilities facilitates and encourages thinking big. Continuing management of the innovation portfolio provides clear criteria for evaluating other big ideas as they come up. It also demands the discipline of starting small and learning fast in the pursuit of disruptive innovations that will shape the company’s future strategic prospects.