Dear CEO, (a series)
About what follows:
I have been speaking around the world, from Singapore to Copenhagen and back, to audiences of all shapes and sizes, about the innovation imperative and how to create a culture of innovation in order to realize that imperative. The reception has been incredible, the feedback consistently positive and the questions from the audiences often the same: “How do I get my CEO to embrace the need for my company to change and how do we change?” Those questions are often followed by this question, “Would you be willing to meet with my CEO and try to convince him/her of all this?” Well, since I can’t likely meet with your CEO, I thought I’d write him or her a series of letters explaining why and how to change, and more specifically how to create a culture of innovation. The sub-title of the series is, appropriately, “letters to the reluctant.”
Dear CEO, Letters to the reluctant: here to help.
We are between a rock and a hard place you and I.
The fact is every leader today is being pressed on both sides, tasked to keep the current value proposition ticking while we decipher and invest in what the future business will look like. And that future view is muddied up by a massive and growing list of unknowns, charmingly presented as “disruption”.
The funny thing about disruption is that we humans tend not to acknowledge it until it’s too late. We do that in part because we’re necessarily focused on our current business but also because we are reluctant to embrace the truth of our vulnerability, the changes in the world and the changes we might have to make as a consequence. And to admit that we are vulnerable is to admit either defeat or mis-management, and neither of us are going to do that.
The other thing most of us are unwilling to admit is that the pace of change is now faster than our organization’s current natural capacity to change. And maybe even our own. And therein lies both the real problem and the source of the solution.
The only way to get out from between that rock and the hard place is to change our organization’s and our personal capacity to change. We can’t solve this problem by synthetic means, e.g. hiring a chief innovation officer or building an innovation lab. We can’t solve it through acquisitions or making massive investments in “digital transformation.” To prove that last point a recent study by CIO Magazine revealed that of the $1.3 trillion spent on digital transformation over the last ten years, $900 billion was determined to be a waste of money. The study also revealed that five out of the top six reasons for that failure rate weren’t technology related but rather human issues, behavioral issues to be exact. Which sets up my conclusion and fundamental advice.
We can only solve the innovation task organically, which means a top down, bottom up sustained effort to change our behaviors. Innovation is not a thing, getting better at change is not a thing, it’s a behavior. I know you don’t want to hear this. Nobody does. But it’s true.
So, the question then becomes how do we change the behavior of our organizations? How do we shift our culture from what it is to a culture that is more innovative, more capable of productive change? How do we motivate (and require) people at every level of the company, including the executive team, to think differently, act differently, collaborate differently to produce the insights and the ideas that can result in a sustainable future? The bad news is that the answers are complicated. The good news is that I have spent the last ten years contemplating the question and have determined seven basic lessons that lead to the outcome that we are after. An organization that is aligned, driven and pretty damn unique in its capacity to not just keep up with the pace of change but actually get ahead of it. I’ve got to run catch a plane now, but I’ll follow up with another letter soon that begins to share those lessons and the pathway. In the interim, hang in there. And know that you are not alone.
Dear CEO, Letters to the reluctant: the right measure
I hope you are well, and that the world swirling around you is swirling a little less and that you’re feeling less stress about the path forward. Unlikely, but it’s okay to hope! As I shared in my first letter, the challenge for us all is that the pace of change is now faster than our organization’s current natural capacity to change. The disruptions we face, the torrent of new competitors, new technologies, and even new ways of connecting the basic dots of how to run a business are overwhelming, befuddling and down right debilitating. Because rather than rise to the challenge of change, most organizations and most people either run the other way or simply stop dead in their mental tracks, ignoring the truth while longing for the good old days. Until it’s too late.
So in order to respond to change we must get better at it. We must increase our organization’s capacity not just to change but to change quickly, effectively and in perpetuity. Because the other ugly truth is this dynamic is not going away. In fact, I think you’d agree that the pace of the change and the consequences it carries are only going to get bigger.
So what exactly do we do? Well, it turns out that the only way to substantively increase your organization’s capacity to change is to motivate it, teach it, exemplify it, require it, align around it, and measure it. And interestingly, measuring it is the essential starting point. For in order to make something better, we first have to agree on what better is. So, when you tell me you want a nimbler organization, what do you mean? When you say you want to create a culture of innovation, what does that mean? And how do you know that you don’t have one already? How are you measuring your current innovative or change capacity? If you’re like 99% of the organizations I talk to, you don’t. So, we have to start there. We have to define what we’re after in really specific terms, and then use those outcomes as guides for what we actually need to do to make the outcomes happen. It’s basic systems design thinking but not often applied by organizations seeking to change their capacity to change.
After years of working at this What are we after? question, I have come to believe that the measures of a more change capable, innovative, nimble organization are both functional and behavioral. Sure, the old measures of revenue and profit growth are still valid, but they don’t really capture whether the organization is better at creating, connecting, and manifesting value out of the aforementioned swirl. Remember an organization is nothing but an aggregation of individuals. So, if we want it to be more innovative and nimbler, then we want/need them and us to be more innovative and nimbler, and that should be the focus of our outcome definition and what we’re measuring.
I call my measurement dashboard for an organization seeking to be better at change, at innovating, the Latitude Index. It’s an amalgam of hopefully positive movement measures across multiple dimensions that measures how people (leaders, managers, employees, and customers) feel, think, behave and are able to actualize their potential for positive change, i.e. latitude. The Latitude Index looks at structural, cultural and individual components of the organization, from how aligned the leadership team is around the vision and values of the organization to how safe individual employees feel regarding their ability to tell the truth about what’s working and what’s not, and how to make it better. It looks at things like learning growth, personal happiness, definitional clarity and cross-organizational collaboration or the lack thereof. It seeks to measure not just how an organization works but how good it is at working to work better.
For our organizations to become better at change, to become more innovative and adaptive to the swirl around us, we have to start by doing the hard work of defining what better is. And then working at each of the attributes and variables. The Latitude Index is just one approach, but it does underscore another essential truth. If we want to create new change amenable behaviors within our organizations, we have to measure the behaviors that will result in those behaviors. Including yours and mine.
I hope this helps. I’ll be in touch next week with some follow-on thoughts.