Side Glance: Innovation

SG	Side Glance: Innovation

Daring ideas are like chessmen moved forward. They may be beaten, but they may start a winning game.

—Goethe, Aphorisms

A thinker sees his own actions as experiments and questions—as attempts to find out something. Success and failure are for him answers above all.

—Friedrich Nietzsche, The Gay Science

In Capitalism, Socialism, and Democracy, Joseph Schumpeter argued that innovation was the driving force behind change—in particular, business cycles—in capitalist economies.1 He was trying to show that very large, industry-dominant companies were not bad for the economy, as many had believed. The conventional view at the time was that large firms would use their monopoly power to lower production and maintain a higher price, resulting in less output for the economy.

In contrast, Schumpeter believed that large companies were forced to innovate to maintain their advantage, resulting in a better outcome for all as the capitalist economy generated a constant flow of innovations. Each time it launched a new innovation an enterprise temporarily gained monopoly power and the ability to earn monopoly rents—until the advantage was competed away and the company could only earn a normal return. That incentive to constantly innovate and earn extraordinary returns was what drove the capitalist economy forward.

For Schumpeter, it was evident that large enterprises were the engines of innovation. After all, they had the financial resources, the people, the distribution channels, the market knowledge, and many other advantages over smaller, newer entrants. But innovation meant killing off their earlier, successful products and processes. Innovation depended, he said, on a continuing process of creative destruction.

Therein lies the challenge—and the opportunity—for enterprises trying to transform to a model of continuous innovation. An enterprise must not only create its future conditions of success but also must undo its previous ones. Edgar Schein in the Corporate Culture Survival Guide says, “The fundamental reason why people sometimes resist change is that the new behavior to be learned requires some unlearning.”2 Or to take Hannah Arendt out of context, “The new therefore always appears in the guise of a miracle.”3

This is not a new idea. Hinduism, the oldest of today’s large religions, posits a trinity of major deities—Brahma the creator, Vishnu the preserver, and Shiva the destroyer. Shiva destroys not only in anger—though he does plenty of that (watch out if he’s opening his third eye!)—but also as part of an eternal process of re-creation. In fact, Shiva is also worshipped as a god of fertility, through the phallic image of the lingam. Some writers therefore suggest that it’s more appropriate to think of Shiva as a god of transformation.4 Although Shiva’s personality and attributes are ambiguous and full of paradox, it’s the resolution of these ambiguities—or perhaps the tension between them—that drives the world forward.

This cyclical aspect of Shiva’s destroy-re-create-destroy activities is illustrated in representations of Shiva Nataraja, or Shiva as Lord of the Dance. The dancing Shiva is depicted inside a circle, with his foot stepping on and defeating the demon of ignorance. Shiva Nataraja is said to encompass “creation, destruction, and all things in between.”5 His dance is a “fearless celebration of the joys of dance while being surrounded by fire, untouched by the forces of ignorance and evil, signifying a spirituality that transcends all duality.”6

To anyone who has experienced the pains of a large transformation, it should come as no surprise that Shiva’s son, Ganesha, is known as the Remover of Obstacles. Or that Shiva’s equivalent in the Japanese pantheon, Daikokuten,* is considered one of the seven lucky gods, particularly associated with wealth and prosperity.7

During my last year at USCIS, I was asked to take over the leadership of a large IT program called USCIS Transformation that had until then been managed outside of the IT organization. This program was (unjustly) considered an example of a failing IT initiative, the target of many unflattering stories in the press, and audits by the Government Accountability Office (GAO) and the DHS Inspector General. I knew that the program was in better shape than people thought, but there were still issues to resolve.

I started by meeting one-on-one with each of the program’s most important participants. My question to each was, “What do you think we could be doing differently that would lead to better outcomes?” Each of them had great ideas. One pointed out that we were putting a lot of effort into automating a paper process, without looking at ways we could improve it to take advantage of the digital world. And he listed some new ideas along those lines. Another pointed out that we weren’t talking enough to users and incorporating their ideas. She laid out some of the thoughts she’d gathered from them.

So I asked what seemed like the obvious question: “Why haven’t you been doing these things? You have great ideas—why are you letting the program struggle when you know the right thing to do?” The answer, though it was worded very carefully, came down to something like this: “Do you have any idea how hard it is to get approval for a new idea? How many people can veto it? How committed the leadership is to its way of doing things?”

“Why didn’t you ask me for help? I might have been able to knock down some of those barriers for you.”

They had learned helplessness and no longer bothered to promote their innovations.

Of course they had innovative ideas about how to make the program successful—they were involved every day, hands-on, struggling to bring about its success. They were deep in the smoke and mist of Borodino, making difficult tradeoffs and directing how people spent their time. The problem wasn’t a lack of innovative ideas, it was that those ideas had no chance of being implemented. And I was implicated in the problem.

Enterprises have tried various systems for acting on new ideas. A few months ago I asked a group of CIOs how their companies encourage innovation and found that their answers followed two patterns. Some said they had created an “innovation team” and given it special powers to bypass company rules. Others talked about their “innovation boards” who reviewed new ideas from employees and decided whether to move forward with them.

“Who sits on those innovation boards?” I asked. The answers, as I recall, were along the lines of “. . . the head of product development, the VP of marketing, . . .” In other words, the people who had created the status quo and were heavily invested in it. These are the people—let’s be honest—least likely to be open to innovative ideas.

I’ve already described my discomfort with this Star Chamber approach to governance; one charged with judging innovative ideas seems even less likely to succeed. But the idea of having a special innovation team that can disregard rules is perhaps worse, since it communicates to the rest of the enterprise, “Just do your job, don’t bother trying to innovate.” An innovation team is also less likely to have the constant stream of innovative ideas that others on the front lines have because they’re not dealing with the everyday issues and frustrations that breed those new ideas.

If you can let the innovation team bypass rules and bureaucracy, why can’t you let everyone bypass them? “That would be chaos,” one of the CIOs said. “You can’t just let anyone do anything they want!”

That’s true. But my point is something different. If you can set up the rules and bureaucracy such that they allow good innovative ideas to have a path to execution, then you don’t need to distinguish between good ideas that come from a special innovation team from those that come from everyone else.

There was a logic to the innovation team approach, and the many gates that USCIS Transformation project employees had to go through to get approval for a new idea. That logic centers on the avoidance of risk. As the CIO pointed out, you can’t just let everyone do whatever they want—that would be risky. The Important People on an innovation board apply their experience to weed out ideas that might not work. Setting up an innovation team and making it solely responsible for innovation reduces risk because ideas are fewer and come from “experts” in innovation. And the relentless series of gate reviews for the USCIS Transformation Project made sure every possible point of view was brought to bear on spotting potential risks.

But in this area too the calculus is changing as we move into the digital age. For one thing, trying out ideas has become much less risky. For another, remaining with the status quo has become much riskier.

Trying out new ideas has become much less risky because what used to require a large investment and a long lead time—developing IT capabilities to support the new idea—can now be done quickly, inexpensively, and at low risk by using DevOps, the cloud, and easily accessible open-source frameworks and components. When a new idea is proposed, instead of managing its risk by thinking of all of the things that could go wrong, remember that we can manage it by running small “experiments” that will teach us whether the idea will work, or how the idea needs to change to make it workable.

At the same time, the risk of remaining with the status quo has increased, for the simple reason that all of the enterprise’s competitors have access to precisely those same tools for experimentation. The market rewards innovation and customers’ expectations are constantly rising. Capital flows to startups that introduce new ideas and disrupt industries. We’re living in a Schumpeterian economy where innovation drives business cycles, where the financial markets look for companies that can earn rents through continuous innovation. Both consumers and investors value innovation and progress.

An important strategy in DevOps and cloud practices is the use of automated controls, or guardrails. Instead of having a team test once to see if a system is secure before it is deployed, an organization can develop automated controls to enforce security, thereby continuously ensuring that the system always complies with security requirements. Similarly, the enterprise can develop rules that will be applied automatically in the cloud for PCI, HIPAA, and other compliance frameworks; for cost management; and for transparency and auditability.

By using automated controls, the enterprise eliminates the tradeoff between speed and innovation on one hand, and compliance, security, and quality on the other. Where an organization using manual controls must stop progress while someone validates compliance, automated controls run continuously while the work continues to flow. The manual approach is a jerky, discrete, stop-and-start, gatekeeping and remediation approach. Automated controls allow work to flow in a continuous stream.

Automated guardrails (constraints) give engineers the confidence to be creative, knowing that while the guardrails are in place, they can’t go wrong. Artists have recognized that constraints are essential to their creativity as well. According to the composer Igor Stravinsky, “The more constraints one imposes, the more one frees one’s self. And the arbitrariness of the constraint serves only to obtain precision of execution.”8 Painters are limited to the canvas; they cannot dance their paintings. Western musicians have only twelve notes in the scale from which to create their music; they cannot draw from oil paints. A software engineer can be inventive within the bounds of automated tests, using only the constructs of their chosen programming language.

The construction of constraints is the art of management, you might say. Constraints help direct innovation to the right objectives, which include customer needs as well as financial, compliance, and security objectives.

Innovations need not always be large—what is more important is that they address a need or an opportunity. But each innovation, according to Schumpeter, while it might give the company a temporary advantage, will wind up being competed away. Or as Drnevitch and Croson explain:

. . . over time, even though none of the specific, individual head start advantages need be durable, the ability to create a continuous stream of these temporary competitive advantages through flexibility (as with innovation), can facilitate sustained long-term superior profitability.9

The challenge, therefore, is not just to create an innovation; it’s to create a constant stream of innovations, to make innovation a normal part of doing business every day. And that can best be done if we overcome the duality of IT and the business. Innovation flows when teams have everything they need to conceive ideas and quickly test them—both IT and business abilities. We need to institutionalize a continuous cycle of destruction and recreation, a Shiva-esque dance of transcending duality.

An enterprise’s digital goal is to build an environment where experimenting and learning can take place without impediments. The secret is in the three assets. The IT asset should be lean and flexible, to lower the risk and cost of learning. The organizational asset should be set up so that teams can quickly frame ideas and experiment with them: ideas should flow quickly and freely. And the data asset must make data accessible (subject to privacy controls) for discovering new ways to use it.

A digital company is one in which every employee has the opportunity to be an entrepreneur, as Ries puts it.10 Instead of forming an innovation team with the privilege of breaking the rules, the enterprise should set the rules—processes, practices, bureaucracy, people, management culture, and everything else—to support all employees in being innovative. That doesn’t mean a free-for-all. On the contrary, it means setting up guardrails and mechanisms within which employees can move quickly and creatively to innovate.

Innovation is encouraged when there is a continuous flow of creation, rather than a choppy, gatekeeper-controlled, stop-and-start-innovating attitude. Again, the parallel with the art world is striking.

A recent Washington Post article looked at improvisational arts. It interviewed GoldLink, a rapper; Jason Moran, a jazz pianist; and Andy Bustillos and Alex Song, the Upright Citizens Brigade comedy duo, about how they’re able to create art on the spot in front of an audience.11 The authors also spoke to a neuroscientist, Dr. Charles Limb, who has used fMRI technology to scan artists’ brains while they’re improvising. According to Limb, rappers who are freestyling actually rewire the neural networks in their brains to bypass its conscious-control, behavior-regulating parts. In other words, they achieve a state of flow where the “no saying” parts of the brain are turned off.12

This is similar to the improv comedy principle of always saying “yes, and.” According to this principle, each comic listens carefully to what the other says and accepts it, no matter how outlandish it is, then builds on it and advances it. With digital technology and techniques, we can create a flow that supports this kind of interchange of ideas and experimentation. Instead of installing gatekeepers who say no and demand rework, we can let employees move forward with ideas knowing that guardrails are in place, letting them adjust naturally if they bump up against one of them.

The traditional duality between IT and the business is a serious impediment to innovation—virtually all of which will have an IT component, with much of that being in the digital realm. If employees need to stop, write a requirements document, put it through a governance process, contract with IT, and wait until a result is delivered, well . . . that stops the process dead—experimentation can’t take place and every innovative idea again becomes a large risk. Instead, the enterprise needs to send the technologists and other employees off together on a voyage of discovery, brainstorming and testing ideas.

But even that isn’t enough. Each team must have some freedom to touch the entire enterprise, and sometimes its customers as well. In X-Teams: How to Build Teams that Lead, Innovate, and Succeed, Deborah Ancona and Henrik Bresman make a convincing case that innovative teams must be well connected to their environments. They present the idea of an X-team, a team that’s focused externally as well as internally.

Teams that scouted out new ideas from outside their boundaries, received feedback from and coordinated with outsiders, and got support from top managers were able to build more innovative products faster than those that dedicated themselves solely to efficiency and working well together.13

Returning to Lean thinking where handoffs are considered waste, teams can be made more effective if they can “go and see”† for themselves, and if they can directly experience operations and promote their ideas rather than working through channels. A team that truly owns its outcomes is really responsible for achieving business results, and must be able to reach out beyond its boundaries, to learn and to affect other parts of the enterprise.

High performing teams manage across their boundaries, reaching out to find the information they need, understand the context in which they work, manage the politics and power struggles that surround any team initiative, get support for their ideas, and coordinate with the myriad other groups that are key to a team’s success.14

Not only must the teams learn from those outside, but they must advocate for their ideas. Ancona and Bresman refer to this as ambassadorship.15 Ambassadors are able to sell ideas up their management chains, as well as to other stakeholders, and to link their work with the strategic objectives of the organization.

To encourage employees to have more innovative ideas, you have to practice and perfect the art of doing nothing. That is to say: the employees probably have good ideas already; you just need to avoid shooting them down. When the teams reach out to the enterprise with their innovative ideas, they are sure to run up against the two great demons of ignorance: bureaucracy and culture. In the next chapter, I’ll show that there is no need to worry—Shiva has his foot firmly on those two. Let the dance of creation and destruction continue!

* Interesting note: there is a custom that whoever steals an image of Daikokuten is assured of good fortune—but only if they are caught doing it. So much for financial regulators.