Transcript Follows and link to the mix
James Franklin: If we look forward, what are those things that we haven’t discussed that are trends that really help companies and separate the ones that are getting innovation. How are we going to innovate in the years to go, and what do we have to do differently, because it comes up a lot? There are two things that come up, you say innovation and competitive advantage and that’s easy to say but probably not as easy to do. So maybe you could share some thoughts on trends going forward and how do companies, whether IT organizations or companies in general, start really tipping the balance in hitting those things. And if you have seen some examples of where its really working well that kind of ties in to what we have talked about, at how their employees and their workforces changed and companies have had to make changes to meet that and take advantage of it and see some success.
Gary Hamel: First I think the premise behind the question is one hundred percent right. We live in a world where at least in the medium term innovation is the only way you can create value. In the short term you can do another amount of cross-cutting, you can pick another two percent out somewhere, maybe you can do an acquisition and take some consolidation gains. But in the medium term there actually isn’t another strategy, other than innovation. And the innovation can be radical innovation on the cost side where we say how do we take the next seventy to eighty percent of the costs out, it can be on the demand side. But I guess here is the frank reality. I don’t know one company out of a hundred today that has made innovation everyone’s job. So when somebody says to me, "Gary we are really serious about innovation in our company," I would like to say okay, to test that lets go find first level employees. The folks on the tech support line and the call centers and the field sales organization and administrative assistance and I want to ask them three questions.
Number one, how have you been trained to be a business innovator? Has a company made an investment in teaching how to see new opportunities and develop robust plans for experimentation and testing of all those? Number two, if you have an idea how long would it take you to get maybe half of your time and a couple of thousand dollars to do little experiment with that idea. How many layers of bureaucracy, would you know where to go, could it happen quickly? And then number three, is anybody measuring your innovation performance? Will they notice if you don’t do it and if you do it successfully does it influence compensation or anything else? Well you ask those simple questions and ninety five percent of the employees are going to tell you I don’t feel I am part of an innovation process. Yes we have an electronic suggestion box, yes we have an award ceremony.
I think that’s the real challenge, Jim. If you think about how over the last decade companies dramatically reengineered their operating models around speed and agility and cost. I think now we have to reengineer our management models, our management practices, around the task of innovation because the things that kill innovation in a company are the fact that I am an employee and it takes me too long to get my idea heard or the only place that I can take my ideas is up to the chain of command. So where does IT play a role? I think in every single dimension of this challenge IT can play a role.
One of the companies I know that’s done quite amazing here is Whirlpool. It’s a highly commoditized industry, domestic appliances, and they were already number one in the world. They have done everything the consultants ask, low costs, global manufacturing platforms, still with declining real prices you walk into a appliance store and they all look the same. So ten years ago Whirlpool said we want to make innovation everybody’s job, everyday. And what that meant was training thirty thousand people to be innovators. It meant making innovation the single largest component of long term executive compensation. It made creating an innovation pipeline where any employee all over the world has the same chance to share their ideas, where they got peer evaluation, or all of the insights you need to drive innovation, all that data that today has balkanized around customer insight, technology insight, competitor insight, that became available to every single employee around the world. And the proof is they have been raising real prices, they have taken a new product pipeline from zero to four billion dollars, and they have outperformed the Dow Jones and all of their competitors. So I am sure it can be done, but it takes the same kind of systematic approach that we have taken over the last few years to webify our businesses in the back office on the back end, then we webify them in terms of dealing with the customer, now we have to webify them inside, in a way that makes innovation something that’s happening all the time, everywhere. So it’s a big challenge, but a big payoff and I am pretty sure every company sooner or later is going to have to do this. I would rather it be sooner than later.
James Franklin: Gary, you have talked about a lot of great concepts, maybe you can share with us exactly how you are applying those concepts in your world, in your workplace, and tell us a little bit more?
Gary Hamel: I really do have this passion for reinventing management and its kind of weird because for most people management is boring. When you think about it, I don’t know many ten or twelve year old kids who would say "I want to grow up and be a manager one day." So a lot of people took a wrong turn somewhere on the way to being a fireman or whatever. But if you think about it, management of these tools and methods we use, how we allocate resources and make plans and set goals and so on, I mean they have really determine what we can do as a species. The management systems and tools we have, boy they were really good when the problem was getting human beings to show up and to just follow the rules and kind of be semi-programmamable robot, but now we have all these new kind of fundamental challenges we are facing about accelerating change and so on. So what we are doing is we are trying to crowd source this challenge of inventing the future of management. This started a couple of years ago. I got to kind of thinking about this and I invited together thirty-five who are some of the smartest people I could find around the world who think about these things. Some of them are academics like CK Prahalad, now sadly departed, and Henry Mintzberg and Peter Senge. But also some CEO’s, Eric Schmidt from Google came along, Terri Kelly who runs W.L. Gore, John Mackey from Whole Foods, and we basically said for those of us who care about organizations and management, what’s our equivalent to the Human Genome Project or to putting somebody on the moon, and over several days in a lot of conversation we teed up twenty five management moonshots.
Things like how do you create organizations that feel more like communities than bureaucracies, how do you dramatically improve the level of trust in organizations, how do you make our organizations much more open and able to learn from the outside? And we have teed all of those twenty five moonshots up online at a website called managementexchange.com and we are asking managers all over the world to come share with us what they are doing to make progress on those challenges and therefore to learn from others. If you think about it most of what human beings know today, it's still not up on the web. We have a lot of data, a lot of information, but this deeper pass of knowledge of how we are solving these fundamentally new problems is not really there yet. So we are trying to make it really easy for management innovators all around the world to come share what they are doing and sometimes its just an idea, just kind of a hack, right here something we should do. So anyone who goes there, you will find contributions from people at Dell, from Pfizer, Microsoft, Google, companies all over the world who share a passion of getting in front of this thing. It's really just creating that as a resource where anybody around the world can come and be inspired and share their idea. I am pretty sure that the web is going to play a huge role in how companies are run in the future and we just decided why not use it as kind of the backbone for reinventing management itself.
James Franklin: Well thank you Gary, I think those insights and examples you gave are tremendously helpful. Definitely I think as far as CIO’s, and quite frankly any leader in business today, those are the challenges we face and we really are at one of those inflection points. We have tremendous enablers available to us and I think it’s upon all of us as leaders to really encapsulate and capture many of those things that you just talked about and apply them in our businesses and really bake those into our strategies going forward, because management has to change. Our workforce is changing, the technology enablers are there and evolving, and I think there is a great opportunity ahead of us to do those things. Thank you very much.
Gary Hamel: It’s a pleasure