Driving Innovation from Within: A Guide for Internal Entrepreneurs

CHAPTER EIGHT

Team

Building an Agile Team

Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.

—ALBERT EINSTEIN

JEAN KNEW SHE couldn’t do it alone. She also knew the company would not give her a team unless she first proved the idea had potential. Classic catch-22: can’t prove the idea without a team, can’t get a team until the idea is proven. So she decided to hold a pizza party.

She sent out an email to staff, explaining her “Romance 2.0” idea and inviting anyone interested in getting involved to come to a particular room on a particular date. There would be pizza. “If two people showed up, I wouldn’t do it,” she said. If seven showed up, she would. But on that day, thirty Macmillan volunteers filled the room. And they weren’t just editors. They were from marketing, sales, accounting, and operations. They were people who loved romance and were energized by the opportunity to work on something new, something that stretched beyond their day-to-day.

The group became a sort of shadow organization. They met every three weeks, for no more than an hour. They knew that if the meetings dragged on, people would stop coming. These were volunteers investing their extra time to advance the project. Everyone got a chance to speak. They talked a lot about what this could look like and decided it might echo American Idol, with fans and the company having a say in who wins.

After every meeting, people were assigned follow-up homework. For example, three people had to work on a mission statement, others had to look at the cost to build a similar website, others would talk to legal about issues. Then these subgroups would meet on their own, and report back to the main meeting.

Her boss Jon was not involved in these meetings. At first, he was skeptical. He was worried about the money the project would take, but he thought it worth trying. “There was a lot of groundswell for this,” he said, and so far the project was not costing the company extra money. “These people were not leaving at 5:00 p.m.; they were leaving at 7:00 p.m. They were engaged and empowered. They had an authority in that context that they didn’t have in their day-to-day job.” They were doing it because it was fun for them. Salespeople got to have editorial input, editorial people got to do marketing, Jon explained.

They ran through iterations of experiments, and with each iteration a new group would get involved. In their first experiment, they built a very basic site. To try it out, they invited about twenty people—bloggers and teenage writers, all romance fans—to assemble in a conference room. “This was the equivalent of pulling people off the street,” Jean explained. In exchange for gift cards, with the Swoon Reads team watching, this informal focus group tried out the site’s initial design and gave feedback.

The first experiment was encouraging, so they decided to expand to the next stage: a public launch of a beta site.

They issued a request for proposals to website-development firms and picked one that could build it for $150,000. But of course, it took longer than expected and cost more. The total amount spent on technology reached about $300,000 and would require a significant marketing investment. But by then momentum was building internally, and the team had worked out many of the issues.

They launched the beta site in August 2013, just a year after the very first meeting on July 23, 2012. Jean thought that as soon as the site was launched there would be a hundred thousand manuscripts, but over the first six months, they only attracted a hundred.

They might have pulled the plug on the project at that point, but instead they decided to figure out what went wrong. The answer was that they were not doing enough marketing and had no analytics to see what users were doing. The company wasn’t ready yet to dedicate a full-time person to marketing and analytics, so they recruited three employees to pitch in their extra time to do the job. Then the manuscripts started accumulating.

They tested the idea of letting users pick the book covers, and found that readers loved the opportunity. So they incorporated the book cover design as a competition, and the impact was huge.

They thought it was critical that they have an ereader so that users could review books on their tablets. They built one using open-source software, but learned that their users actually preferred reading and editing on computers.

Eventually, the project grew so large that the team needed to evolve. They hired Lauren Scobell to serve as a full-time project manager, director of Swoon Reads. Lauren was then working in a digital agency as a product manager, but was a passionate book lover who had been trying to find a path into publishing. Through networking with people in the industry, she learned that Swoon Reads was looking for someone with just her skill set. After interviewing with Jean, she took over and began further developing the platform.

Lauren realized early on that romance lovers often don’t consider themselves to be so. “You ask someone if they read romance and they often say no. Then you ask them what books they read and they are all romance books,” Lauren explained. So Swoon Reads repositioned itself to include all of young adult (YA) fiction and redesigned its look and feel.

You’ve designed the first experiment you want to conduct. Now it’s time to take action, for which you need a team.

This immediately creates several complications, because the kind of team norms that lend themselves well to driving innovation will inevitably conflict with the norms of the more established parts of your organization. Those units are designed for repetition, efficiency, and reliability, while yours will be built for learning, adaptation, and flexibility.

GE’s former CEO Jack Welch framed the challenge this way to me during a conference we presented at in Peru: “You’ve got to deliver on short-range commitments while you develop a long-range strategy and vision. The success depends on doing both. Its like walking and chewing gum.”

Harvard professor and change-management guru John Kotter attacks the challenge in his book Accelerate: Building Strategic Agility for a Faster-Moving World, and writes in a related Harvard Business Review article:

Any company that has made it past the start-up stage is optimized for efficiency rather than for strategic agility—the ability to capitalize on opportunities and dodge threats with speed and assurance…. But the old ways of setting and implementing strategy are failing us. We can’t keep up with the pace of change, let alone get ahead of it.1

Internal innovators I interviewed repeatedly cited team formation as one of their most significant barriers. They specifically pointed to four critical challenges:

• Assembling a great team. It’s difficult to pull together the perfect team because, as one internal innovator I interviewed put it, “You want the ‘A’ players, but their managers are less likely to let them join you because they are so valuable, and they are nervous to join because they worry that losing time on a risky project like yours could derail their careers.”

• Adopting flexible roles. You will be best served by a cross-functional team in which members adopt flexible roles, but your organization has evolved into divisions of specialists. As Jeff Sutherland put it, “The fact is, when you look at the best teams—like the ones that existed at Toyota or 3M…or the ones at Google or Salesforce.com or Amazon today—there isn’t this separation of roles.”

• Operating at a rapid pace. Your team will function best when it operates at a rapid pace, with daily or at least weakly check-ins, but your organization is geared toward a more deliberate pace.

• Managing expectations. Instead of the prove–plan–execute approach (see chapter 7) that established organizations are more familiar with, in which you work out all the details before launching the innovation, you and your team will likely require an act–learn–build philosophy, in which you pick up one question, learn, formulate the next question, and repeat. The line between planning and execution blurs. In the early days, your goal will be to learn; later on, your goal will be to deliver results. This creates an issue because, if your organization is like most, leadership won’t know how to gauge your progress in the early phases.

But here’s the good news: these issues are surmountable. Indeed, we owe many of the most significant innovations in the world to small entrepreneurial teams that attracted great players, adopted flexible roles, moved at a rapid pace, and were able to manage expectations. Consider Redbox.

The Evolving Team That Built Redbox

In 2002, Greg Kaplan, a manager in McDonald’s strategic and development team, had an idea. He was exploring ways to create an additional reason for customers to visit McDonald’s stores, which would increase foot traffic, which presumably would lead to more hamburger sales. So he conducted an experiment.

He placed fifteen automated kiosks in the Washington metropolitan area. Four kiosks sold grocery products like milk, eggs, and sandwiches; the other eleven rented DVDs. Although the grocery kiosks were closer to McDonald’s core business of serving food, they failed. The DVD kiosks, however, proved promising. So McDonald’s decided to expand the program with a second experiment. They put six DVD kiosks in their Las Vegas restaurants, more in Washington, and over the next two years, extended the experiment by placing one hundred machines in the Denver area.

In 2003, McDonald’s realized they needed to infuse the Redbox team with more entrepreneurial thinking and hired Mitch Lowe, a cofounder of Netflix. Lowe had attempted a similar service in 1982, launching a movie-vending company named Video Droid, which failed to take off. Lowe joined McDonald’s first as a consultant, then became vice president of purchasing and operations and, in 2005, became chief operating officer. He took over from Greg as president of Redbox in 2009.

As vice president of purchasing and operations, Lowe focused first on proving the concept, testing, and learning. Then, as the questions the team sought to answer shifted from learning to executing, they realized they needed kiosk-operations expertise, so they partnered with kiosk operator Coinstar, selling them a 47.3 percent stake in the venture.

Lowe’s team recognized that they couldn’t slow their pace. If they did, Blockbuster might have time to copy the program. With a stronger DVD brand, deeper industry relationships, and lots of inventory, Blockbuster could have relatively easily beaten Redbox. They also faced direct competition from a company called the New Release, which in 2007 had two thousand locations, primarily kiosks outside of grocery stores.

The Redbox team soon realized that, if they were to survive, they would have to move beyond generating foot traffic at restaurants. So, within months of signing the Coinstar deal, they set their sights on locking up the right to place DVD kiosks in supermarkets. They signed agreements with the Giant Food and Stop & Shop grocery store chains, then with Giant Eagle, Albertsons, SuperValu, and another half-dozen smaller supermarket chains over the next year. By 2007, McDonald’s had more than tripled its kiosk count to three thousand locations, surpassing the New Release.

Thanks to the focused, fast-paced, entrepreneurial approach introduced by Kaplan and enhanced by Lowe, and thanks to an aggressive marketing campaign by Greg Waring, the company grew from one hundred locations to 4,500, and from $3 million to $30 million, in just thirty months.

The team’s pace of learning and adapting allowed it to surpass its competition; challenge the dominant industry incumbent, Blockbuster (which eventually went bankrupt under the dual threat of Netflix and Redbox); outgrow the New Release (which eventually sold its kiosk business to Redbox in 2012); and continue to scale to a peak of 43,700 locations in 2012.2

It is tempting to think that this form of teamwork is appropriate for new products and services like Redbox, in which one can carve out autonomy, but less so for internal innovations. But even there, a fast-paced, dynamic team approach pays dividends. Let me introduce you to Don Hastings.

Unleashing the Leopards

Don Hastings, like most of the managers at the Lincoln Electric Company, was on edge. The company, an international conglomerate that sold machinery to large manufacturers, was facing a 40 percent plunge in sales. If they were like most corporations, they would have laid off employees to downscale the business and shrink losses. But Lincoln Electric prided itself on its commitment to a unique policy—lifetime employment. At Lincoln Electric, as long as you performed, you would have your job for life. This policy was central to the company’s culture, strategy, and purpose.

Pressure was building from investors to the board to abandon the policy. How else could Lincoln Electric survive the losses? To many, it would mean abandoning the company’s soul, but what else could they do?

Hastings has a lifelong history of innovating in face of trouble. The idea of laying off workers “didn’t sit right with me,” he told me, so he decided to do something about it. He argued that the financial crisis the company was facing was essentially a problem of people allocation. Because of the sales decline, the company now had too many people on the manufacturing floor and too few people selling. So he came up with a clever program to build a new team of salespeople, recruited entirely from their army of manufacturing personnel.

He proposed recruiting volunteers from the manufacturing floor and training them to sell a new type of machine developed for a new market. This was unorthodox for two reasons. First, it was generally accepted that manufacturing floor personnel lacked the personality or skills to sell. Second, the market potential of the new machine they would be selling was untested. Lincoln Electric generally sold machines to large manufacturing plants, and this new machine would need to be sold to small shops.

Hastings was able to build enough internal support for the program to give it a try. He did this by implementing many of the features we will examine in this chapter. He focused people on a compelling mission they all cared about—saving the company and saving jobs. He gave the project a memorable name—“Leopard”—to symbolize how the manufacturing workers would change their spots and become salespeople.

Hastings sent out the request for volunteers, hoping that maybe fifty people would sign up. They got more than a hundred volunteers. Even Don’s daughter Leslie, who was interning at the company, volunteered. They accepted sixty-eight of the volunteers and ran them through sales and product training. Within a few weeks the company had a new sales force, sixty-eight people strong, ready to hit the road and find new clients.

To get the “leopards” selling, Don also had to gain the trust of the regional sales managers to whom the leopards would report. He placed the leopards anywhere in the country a sales manager said they wanted one. Soon sixty-eight new salespeople were blanketing the country “from California to Maine,” knocking on the doors of small manufacturing shops. Back at headquarters, they held regular meetings to share feedback and incorporate it into the program.

The project worked. It generated new revenue, reduced manufacturing costs, and saved people’s jobs. It’s not too strong to say that Hastings also helped save the company. After a string of similar innovative ventures, he was eventually named CEO.3

Building an Effective Team in Seven Steps

As more organizations bump up against the challenge of activating internal innovation teams, numerous new solutions have emerged. In appendix C, I describe the most popular ones. We have tried several of them with clients, studied the efforts of organizations to implement them, and looked at the patterns by which successful innovation teams, like those of Redbox and the Leopard program, succeed. From this experience we have pinpointed seven critical steps to building an effective innovation team from within:

1. Remove organizational friction.

2. Assemble a cross-functional team.

3. Align around an important goal.

4. Use metrics and data to track the most important thing(s).

5. Build a scoreboard everyone can see.

6. Establish a rapid rhythm.

7. Generate positive velocity.

Step 1: Remove Organizational Friction

The first step is to diagnose where your organizational context will create issues for the team. Every organization is unique. Some impose multiple challenges, some none. Think through each of these and assess where issues might arise so you can preempt them.

• Resources: Al Shugart, founder of Seagate Technologies, once wrote, when describing the challenges of launching a startup, “Cash is more important than your mother.” For your idea to take hold, you need to ensure you will have the necessary resources. You will need both cash and time.

Only 11 percent of managers surveyed by Wharton professor George Day said that their company’s strategy priorities have the resources they need for success.4 The cash challenge for internal innovators means not only getting the budget you need, but establishing the internal political support to ensure that support will continue (we’ll dive more deeply into this in the next chapter). Future funding may dry up if your primary advocates change roles, unreasonably high expectations for your innovation are not met, or the exciting “newness” of your endeavor dims. Redbox was initially funded by McDonald’s Ventures LLC; its later partnership with Coinstar gave it access to new funding sources.

Time is another critical resource. Getting permission to dedicate 20 percent of your time to the project sounds great, but in reality it often just means you’ll be working 20 percent extra. You’ll do all you were doing before and spend nights and weekends on your pet project.

Have you secured the funding you need now?

Is there a risk they will pull funding later?

Will they give you the time or freedom you and your team need?

• Rewards and expectations: Because familiar managerial activities of the organization’s core business are easier to measure than creative, innovative ones, they are easier to reward. So the incentives placed on you and your team are likely to encourage working on the core business and not on your new innovation. Unrealistic expectations have also been shown to be one of the key barriers to internal innovation. The company, used to operating with big numbers and scale, expects you to reach higher, faster than what is reasonable.

Will your team’s incentive structure motivate scaling quickly?

Are the organization’s expectations achievable?

• Risk-taking: It’s one thing for leadership to tell you it’s OK to fail; it’s another for them to give a promotion, or even a second chance, to someone who does. Look for someone who has failed at an innovation initiative in the past. What happened to him or her? You are starting to explore here the potential limits that your organization’s culture will have on your team’s success.⁵

Is failure (really) an acceptable option?

• Senior leadership support: One internal innovator I interviewed warned against interpreting “the absence of ‘no’ for a ‘yes.’” Senior leaders may say they support you, but how committed are they really? Have the leaders that are supporting you been behind other innovation initiatives? Have they maintained that support through tough times? Getting this right can help you avoid a dynamic many internal innovators have described as a “pendulum of support.” Initially, you appear to enjoy the full backing of your organization; but later, interest wanes or priorities shift, and you find yourself without support.

Is your leadership support real and reliable?

Who, specifically, can you count on for sustained support?

What can you do to ensure your support endures?

• Organizational freedom: According to a study of eight thousand managers in more than 250 firms, 85 percent of respondents said they can rely on their bosses and 84 percent said they can rely on direct reports, but only 59 percent said they can rely on colleagues from other departments. In that same study, only 30 percent of managers said their organization can effectively shift funds across units to support strategy, and only 20 percent said their organization can do the same with people.6 Achieving cooperation across departments and other silos is persistently difficult. If your innovation will require expertise, talent, and buy-in from power centers scattered throughout the organization, you must make sure you have put in place the relationships and commitments to actuate cross-silo cooperation.

What cooperation, talent, expertise, or other support will you require outside of your current silo or department?

Have you gotten the buy-in you need to ensure you can rely on this support?

Step 2: Assemble a Cross-Functional Team

A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history.

—MAHATMA GANDHI

John Kotter speaks of the importance of building a “guiding coalition” and enlisting a “voluntary army” of supporters who, collectively, bring the skills and relationships you will need to get your innovation through. To implement “scrum,” you form a team composed of a “scrum master,” who leads the process, and a “product owner,” who holds primary responsibility for the initiative, both supported by team members with specific expertise. Several innovation teams apply tools like wikis, telepresence, social-collaboration tools, and virtual reality to make it easy for staff dispersed throughout the organization to contribute efficiently to the common cause. Doing so can help leverage the power of the crowd, creating an internal staff-on-demand model akin to Upwork (for freelancers), 99designs (for designers), and Marketeeria (for marketing and PR talent).

What is the alchemy that produces the right kind of team? Numerous studies give us some fact-based guidance, pointing to a broad spectrum of potential attributes. Five factors appear to matter most:

1. Variance in functional background (or job-relevant diversity): The greater the diversity in the functional backgrounds of your team members, the more innovative they will be. You don’t want a team dominated by marketers or engineers or salespeople; you want representation from a diversity of areas. Many innovation teams start with the functions their organization already has in place—an insurance firm we worked with wanted an actuary, a salesperson, and compliance, marketing, and human resource experts—but this is a mistake. Instead, the accelerated competitive environment encourages the opposite approach. Jeff Bezos calls this “working backward.” Imagine what skills and capabilities you will need in the future to meet the customers’ needs, and ensure you have those in place. That insurance company really needed consumer-data analysis (versus actuarial) and mergers-and-acquisitions experience to establish new partnerships.

2. Average (mean) education level: The higher the education level of your team—i.e., the greater the degree of formal education (it seems informal education also matters, but it is harder to measure, so no research I’ve found validates the importance of informal education)—the greater their innovativeness. In selecting your team, don’t only look at diversity of experience, but also look for overall higher levels of education. Some researchers and innovators I’ve interviewed suggest that what really matters is that you have people who want to learn—that you establish a learning culture within your team—and higher levels of education is an easily measurable indicator of that.

3. Tenure: In general, the lower the tenure of your members, the more effective they will be at introducing innovations. This is perhaps because, having spent less time in your organization, they have accepted fewer dogmas. They have less history to forget, which gives them greater freedom to pursue new things. Interestingly, age has less of an effect on team innovativeness. It is not so much about having a young team as it is about having a team that brings that rare combination of domain expertise and willingness to challenge accepted ways of doing things—starting with a “beginner’s mind.”

4. Team size: Larger teams tend to increase innovative output, but there is a limit to this. The studies analyzed teams of a certain size range; toward the top of the range, innovativeness increased. But very large teams have difficulty innovating. Bezos famously proposed the “two-pizza rule”—if you can’t feed a team with two pizzas, it’s too large. Various studies have tried to pinpoint the correct team size. At what size does the level of innovation peak? Overall, these studies agree that the ideal team size ranges between five and ten people.

5. Goal interdependence: When team members are bound by a common goal or mission or vision, they tend to be more innovative. They are both inspired and motivated to achieve something that is important, giving their effort meaning. But they also understand that they cannot do it on their own, that their success depends on others, which helps engender great teamwork. We will talk more about this in the next step of the process.

Balancing these factors takes some tinkering. Some are in conflict with each other. For example, greater variance (or diversity) in functional background would argue for a larger team, but ideal team size means pushing the team down to no more than ten. Ultimately, your team design should produce the right mix of functional backgrounds and include people who are learners (high educational level), unrestrained by accepted dogmas, and aligned behind a shared, compelling goal.

In one surprising insight, we found that the mythology of an internal entrepreneurial team that takes an innovation from concept to market does not match what really happens. Innovation teams evolve over time, during each iteration of the experimentation cycle. As they make new discoveries and change design, their needs for expertise evolve, so new people step in and former members pass the baton.

Step 3: Align Around an Important Goal

In life, as in football, you won’t go far unless you know where the goalposts are.

—ARNOLD H. GLASOW

4DX, a popular team methodology introduced by Chris McChesney, Sean Covey, and Jim Huling in their book,7 stresses the crucial nature of focusing on “wildly important goals.” Nearly every effective innovation team model stresses the import of creating a simple, well-understood purpose that team members can get behind.

Research shows that once you have assembled a diverse team, the team’s effectiveness will depend heavily on the presence of a shared goal. Interestingly, when there is less diversity among members of an organization, the presence of a shared vision has little effect on performance. But when you have a diverse team, the lack of a shared vision leads to dysfunction. People begin bickering over their differences rather than unifying behind their shared goal.⁸ So if you pulled together a cross-functional team, as suggested in the second step, creating a shared mission becomes even more important.

It’s also important to focus your team narrowly on one part of the goal at a time. In the scrum approach, for example, you focus the team on just one (or a few) priorities every week. Successful growth teams are also driven by focus. Brian Balfour—creator of Coelevate, founder and CEO of Reforge, and one of the leading proponents of a popular innovation-team approach called “growth teams”—puts it this way:

I’ve haphazardly given (and heard) the advice “you need to focus” many times in my career. On the surface I’ve always accepted it, but until recently I don’t think I really understood it. Focus is a big part of my approach to growth, and how I build growth machines.

Focus gets misinterpreted a lot. It isn’t about being short sighted. You need broader context to understand what and why you are doing something in the moment. It also isn’t about sticking to the same thing for a really long period of time. Achieving something great requires you to make smart iterations and changes based on lessons learned…. Maybe the best way to explain focus is simply this—zoom out, zoom in, zoom out.

Some individuals thrive on doing a lot of things at once. But they are the exception not the rule. A lot of startup founders are in this camp by nature. The mistake these founders make is to draw the conclusion that because they personally thrive on being unfocused, their company/organization will too.9

One particularly effective framework for building your team’s commitment to a goal comes from Marc Benioff, the founder of Salesforce.com. Marc claims that the secret to the success of Salesforce.com—which grew past $1 billion in revenue in less than ten years, despite competition from much larger software firms, and which at the time of this writing produces more than $10 billion in revenue—is a “secret management process”¹⁰ he developed called the V2MOM. This acronym stands for

• Vision: the outcome you want your initiative to achieve

• Value: why achieving this vision matters

• Metrics: what measures will indicate you have achieved your vision

• Obstacles: the barriers you will need to overcome to get there

• Measures: the actions you must take to get there

Here is how we have found it works best. You sit down with your team and spend a good two to three hours filling out a V2MOM template. Your agenda would go like this:

Vision: Discuss what it would look like to have achieved your goal. Think three to five years from now. Describe what impact you are having, what people are saying, what it looks and feels like to have achieved success. This will help clarify what your initiative is, and what it is not. It will bring to the surface hidden disconnects between what different people on your team believe you are up to. If you skip this step, you are likely to find that people are actually pushing slightly different visions. What they think to do, what actions they choose to pursue, will start diverging. The Vision discussion prevents this. It helps ensure that all of the actions your team takes become aligned along one direction, for one purpose, one vision.

Value: Open a conversation about why this is valuable. This is a way to anchor your team in the conviction that “this is important.” Think about why this is important to the company, but also why it is important to each of you individually and why it is important for the world. You are going to change the world. Why does the world benefit from the change you will cause? If you skip this step, you will find that your team lacks the conviction and passion to follow through when the initiative starts hitting obstacles.

Metrics: Get specific and define what measurable results you would need to reach to feel that you have achieved your vision. If you say you want to be the leading provider of a product or service, here you define precisely what that means: you have the largest market share, you are ranked number one on a specific industry ranking, you have more revenue than anyone else, or whatever. Define specifically how you will measure each element of the vision. This helps provide clarity to the team. There will be no vague, feel-good, pat-ourselves-on-the-back-just-for-having-tried rewards. You will know without a doubt whether you have made it or not. If you miss this step, you will find your team later lacks accountability because what they are pursuing is vague. Don’t set more than three metrics.

Obstacles: Explore and prioritize the key obstacles you will face. It’s powerful to discuss and define your obstacles now, before they appear, because when your team confronts them, they will not interpret them as reasons your idea is flawed. Instead they will think, “This is exactly what we thought would happen,” and so feel they must be on the right path. List the three to five most important obstacles.

Measures: “Measures” really mean actions or activities. Here you break down the things that you should focus on now that will enable you to advance your idea most efficiently and rapidly. The idea here is to focus your team on the 20 percent of activities you should take now that would deliver 80 percent of the results.

The process of defining your V2MOM as a group should align everyone around a compelling, important shared goal. It should leave your team clear on what success looks like (vision and metrics), agreeing that achieving that goal is important (value), anticipating the barriers you will face (obstacles), and being ready to take the most important actions now (measures) to advance the idea.

Step 4: Use Metrics and Data to Track the Most Important Thing(s)

It’s not enough to be busy; so are the ants. The question is: what are we busy about?

—HENRY DAVID THOREAU

The “measures” in your V2MOM define the most important things your team should be working on now to advance toward your vision. The next step is to put metrics against each of these measures, divide them up among team members, and start tracking your progress with hard data.

Every innovation approach being adopted today advocates using metrics and data to track the most important things. Google, for example, applies an approach they call “objectives and key results” (OKRs). It plays particularly well to Google’s philosophy because it provides data they can analyze. For example, a qualitative objective like “Transform user experience” is defined by three to four measurable “key objectives,” such as “Interview ten users to identify most important pain points” and “Create a list of twenty most important best practices in user design.” You may also have some results metrics such as “Customer-satisfaction score of users surveyed reaches nine.” Week by week, your team members update their scores. If they have interviewed two users out of ten, they get 20 percent, and so forth. Every week, you collect the data and update your scoreboard. You then have rich historical data that you can analyze.

Balfour says that one of the key guiding principles of growth teams should be “Math and metrics don’t lie, but they don’t tell us everything.” Scrum creator Jeff Sutherland believes that one key breakthrough was to start measuring “velocity.” Each item the team works on has to be independent from other items and has to be actionable. It is then assigned a “definition of done,” so that the team can actually measure when “done” is achieved. Velocity measures how quickly tasks get done.

There are three additional principles to keep in mind as you set your metrics.

The lead-versus-lag distinction. 4DX emphasizes the importance of acting on lead measures rather than lag measures. Lead measures are ones your team can directly affect; lag measures are the results of the lead ones. How often your car breaks down is a lag measure. How often you service the car and change its oil is a lead measure. If you focus your team on lag measures, which are only indirectly influenced by their efforts, you may see a sense of hopelessness or at least a lack of focus. “Well, there are so many reasons that the car might break down; we can’t control that.” In addition, your performance when driving an innovation is often affected by factors outside of your control. Revenue may be influenced by the performance of other products. Costs may be heavily affected by how costs are allocated internally to other divisions and initiatives. Focus on what your team can control.

Independent parts. It also helps to break the work down into smaller pieces. When actor Will Smith was a young boy, his father made him and his brother build a huge brick wall. It took years. What Smith got out of that experience, what he thinks his father wanted to teach, was the power of taking on a big project, breaking it down into parts, and knocking them off “one brick at a time.” Similarly, you are now breaking the big team objective down into parts, picking up one at a time, and focusing the team on that. If pieces depend on each other, then you find yourself staring at a block of interconnected bricks too large to act on quickly. Make sure every objective you choose to pursue in this cycle can be worked on independently of the others.

Learning, not only outcomes. Traditional key performance indicators (KPIs) used to manage the core business may not be appropriate for your challenge right now. The KPIs of your company—inventory turns, customer visits, etc.—are designed to manage outcomes or results. But innovations’ outcomes are less predictable. During this experimentation phase, you want to focus on what will help your team learn and adapt.

Step 5: Build a Scoreboard Everyone Can See

When Jeff Sutherland started developing the scrum method, seeking to identify and systematize the things that made his teams hyperproductive, he found that one of the most important elements was having a visual display of the team’s progress that was continually updated. In his case, he used—and scrum teams around the world continue to use—a whiteboard with sticky notes showing what tasks are being worked on, what progress has been made, what has been completed, and what is on backlog.

It’s universally acknowledged in thinking about innovation teams that every team member should always be able to know what the team’s current score is. You can do this with dashboards updated weekly or daily. You can do it even more frequently, updating the scores in real time. Jet Blue’s corporate control room in New York, for example, looks like a scene out of a spy movie, with screens tracking flights, weather patterns, and delays so teams can respond immediately to changes. Walmart tracks near-real-time sales by SKU so that if you are a designer, say, of a particular piece of clothing, you can see how quickly it is selling day by day, hour by hour.

Google takes scoreboard a step further. Every employee can see the OKRs for every other employee through an internal site. Since employees set their own OKRs, this becomes a powerful way of establishing accountability. You are saying, “This is what you can count on me for.” It allows people to understand the interdependence between OKRs. They can see who is depending on them to deliver on their objectives and track the progress of people whose objectives their success depends on. Remember that “goal interdependence” is one of the most important determinants of high-performing innovation teams.

Step 6: Establish a Rapid Rhythm

I wrote much of this chapter from just outside of a beach house in Colombia during the Olympics. The rattle of palm trees overhead and sounds of wind blowing up from the ocean did not distract me from the task. But this “writing retreat” also happened to fall in the middle of the Olympics, and with the U.S. women’s national soccer team playing Colombia’s, I kept looking up, through the screened windows, to see the score. It makes little sense that I looked every few minutes. My knowledge of the score had no bearing on the outcome. And yet, I could not stop myself from checking.

That’s the nature of games. They make us want to take part. Wharton professor Kevin Werbach has been studying exactly what makes games so engaging, and his field of study—gamification—helps explain the success of many of the most thriving businesses, movements, products, and teams. You have already installed, in the previous step, one important gamification principle by creating a score that everyone can see. Now you want to put in place another principle: a rhythm of stages or rounds to build engagement and anticipation.

The quarterly rhythm common in most areas of your business will not engender the level of engagement you want. Instead, establish at least a weekly review, preferably daily. Verne Harnish—author of Scaling Up, founder of Gazelles, and the creator of a business-growth methodology being used by more than forty thousand growth businesses throughout the world—advocates a “daily huddle,” lasting no more than thirty minutes, in which your team stands (rather than sits) to go through the numbers and discuss priorities for the day.

Consider a weekly or daily team review to achieve the following objectives:

• Update the scoreboard metrics.

• Review the score.

• Assess whether you are winning or losing.

• Capture and absorb lessons.

• Make adjustments.

• Remove blockages.

Meet Pat Pacious, president and CEO of Choice Hotels. He left a career at a large consulting firm to join Choice, one of the fastest-growing and most innovative lodging companies, and now the second-largest hotel chain in the world.11 Choice’s seventy-five-year history of industry firsts includes a telephone in every room, twenty-four-hour desk service, guaranteed reservations, and brand segmentation. The company has continued this legacy of innovation, developing the first global hotel iPhone application, the first internet-based property management system, a widely copied soft-brand concept, and a unique new model for vacation rental.

Although Choice is one of the largest chains, they are small relative to Pacious’s past consulting clients because they franchise their branded properties and do not operate the hotels themselves. With Choice in this sweet spot—small enough to implement faster-paced, innovative change and large enough to do so at scale—Pacious decided to establish a team model that would drive innovation. I had the opportunity to talk with him about how he did it.¹²

He began by establishing a strategy review team that would meet every month—a faster rhythm than the more common quarterly schedule—and instilled hyperefficiency to make sure these meetings did not eat up too much time.

First, the strategy team defined a shared goal—together. After that, every meeting opened with repeating that goal to make sure they were not losing sight of what’s important. Many companies use a framework in which meetings open with a discussion of that meeting’s goals, but Pacious avoids this, because he believes it focuses too narrowly on tasks and the meeting itself, and removes people from the bigger picture.

Then Pacious took a drastic approach to smash down silos. He ended the practice of individual departmental meetings, choosing instead to integrate representatives from each group or department in the broader strategy meeting and establishing interdependence among stakeholders. For example, discussing something like customer journey, decision-makers could see how each department had to consider that one issue—and also the bigger picture. Previously, they had only understood their own roles, as they were only meeting with their own teams.

Finally, he reinforced three key norms at each meeting:

• Ask dumb questions (this is OK).

• Stick to the agenda at hand (no tangents).

• It’s fine to say “I have nothing new to report” (this doesn’t get you branded as a slacker).

Pacious said it took about six months of repetition to get everyone on board, but in slightly over half a year (two fiscal quarters), his team was operating more effectively than before he arrived. Revenue was ticking up. Goals were being met, and people understood the work of others, reducing friction among decision-makers.

Step 7: Generate Positive Velocity

The final step is to make sure you are generating a positive, empowering sense of momentum. We’ve all been in reporting sessions that people dreaded because they were behind and were about to be scolded by their manager and peers. When the reviews become a weekly “Why haven’t you delivered?” conversation, you will sap your team’s motivation, innovativeness, and commitment. Remember that a willingness to accept failure is one of the most important drivers of innovation. This is why, in Google’s OKR framework, individuals and teams aim for an 80 percent score instead of 100 percent. Demanding 100 percent performance can demotivate the team (rarely will they reach perfection) and encourage them to set less aggressive goals.

It is also important to generate and celebrate short-term wins. This gives people a sense of progress and accomplishment that builds confidence. It also signals to people outside the team that the effort is succeeding. All of this builds excitement and commitment, which in turn makes the team more likely to succeed going forward.

To summarize: Build an effective team for your innovation idea with these seven steps: