@hauge2: What are the characteristics of organizations that help its people innovate? Vice versa: What do they look like, organizations that unintentionally obstruct creative work?

Innovation can be categorized from continuous (improving existing products, e.g. the Hybrid car) to disruptive (changing an entire market, e.g. the digital camera). In order to understand serial innovation – companies that succeed with innovation over and over again – I however believe we need an additional organizational dimension:

So what could be the labels of my organizational dimension? New vs. established? Top-down vs. bottom-up? Independent vs. embedded?

There are many ways to classify a creative organization, so let’s first take a look at some archetypes. In the realm of established companies who want or need to innovate, we can imagine the following four organizational types: The Copy Cat, The Disobedient, The Disrupted, and The Leader.

The Copy Cat is your everyday “safe but not different” organization, with an existing cash cow business that for now allows the organization to endure expensive failures. This cow acts as a keeper of out-dated thinking, and at best the Copy Cat organization is able to create marginal improvements of existing products in their markets. That being said, a lot of great people work in such organizations. They spend their energy on half-hearted attempts to satisfy superficial desires to create: The actual reason they have been asked to innovate is to defend the very cash cow business that prevents them from being creative. A Copy Cat eventually goes under or – in some painful way – translates into becoming Disrupted.

The Disobedient has people working under conditions similar to that of the Copy Cat, but in a flare of naughtiness they actually create something awesome. There are stories from established companies where a few engineers one day, “for the hell of it”, released a feature they made while their skeptical boss was on vacation. And the customers loved it. In fact, it was so well received in the market, there was just no way of pulling it back. Later on the organization may be regarded as innovative, although few recognize the fact that the innovation was a result of system opposition, as opposed to system exhibition. Sadly, the heroes making an organization Disobedient usually won’t endure for ever, and this is how the company eventually translates into Copy Cat.

The Disrupted (my co-workers like to call them “Innovate or die”) have one advantage over the other types: They are about to go under. Some new market innovation has extinghuised their world as they used to know it, and they realize they must change to stay alive. So they do what they have to do: No politics, no heavy process, no hidden agendas. Instead they learn what needs to be done from the outside world. Besides, with the cash cow gone, they have nothing to lose, hence they are not afraid to try even the stupid ideas (and this might be where they find their innovation). Freeing themselves from the pull of the past, in a burst of outwards focus, the disrupted organization promotes innovation. When they succeed, however, they get back to cautious. A few disobedient heroes might cling on to the insight they had during crisis, but as they will run out of lives, they will eventually get back into Copy Cat.

Finally, there’s The Leader. They have a culture for improvement so strongly anchored they ace out any new or existing competition in their markets. Over the years they’ve spent their time wisely, focused long-term and gained competitive advantage almost all steps along the way (as opposed to the copy cat rivals whose short term solutions, sins of the past, continuously pop up and slow things down). Unless some disruptive innovation get’s in the way of The Leader (possibly converting them into Disrupted, but that’s another story), there’s simply no way to outperform them. They are however a hot target for being acquired by a Copy Cat (having a cash cow that allows big spending). As they are gradually integrated into their new owner, they will inevitably become like them, unless they manage to transform them from the inside.

(Yes, there are some exceptional cases out there – companies that may not fit any archetype. I would however argue most companies fit. And that’s my quest: To analyze and learn from the representative cases.)

Good. Now that four archetypes and their possible transitions are in place, I need to figure out their characteristics: What do the organizations above the line, those who promote innovation have in common? Similarly: What’s a least common denominator for the organizations that obstruct innovation?

All kinds of organizations are potentially able to create an innovative product. In order to become serial, however, you are much better off with an organization that supports you. I believe the key to distinguishing obstructive organizations from the supporting ones is found in the drivers: An organization that supports innovation is driven by outside factors, such as curiosity, customer problems and market needs, whereas an organization that obstructs innovation has an internal drivers such as improving margins, strengthening a position, building capabilities and so on.

On a side note: I don’t think there’s anything wrong with ambitions related to position, capabilities or improved margins – they are just not going to help you innovate, that’s all.

This is the key to distinguishing innovative organizations: Are you solving our own needs or someone else’s needs? With this perspective we could argue the organizational dimension transcends from Extrovert to Introvert.

Characteristics of Extrovert vs. Introvert organizations

We can explore the driving factors behind our introvert to extrovert scale in more detail. I like to think about these factors as a kind of circumstantial evidence: In isolation one factor might not prove anything, but seen together they might enlighten us (factors in bold are further elaborated below):

Factor	Introvert	Extrovert
Ramp-up activities	Stakeholder Promises	Opportunity Exploration
First Solution to market	Solves a solved problem	Solves an unsolved problem
Product Naming	By feelings	By experimentation
Cultivation of Ideas	Mature when presented	Immature when presented
Invidual Competence	Gets deeper	Gets wider
Priorites	Myself, team, product	Product, team, myself
Biggest uncertainty	Internal politics	External markets
When Pivoting	The responsible deals with it	Everybody deals with it
Timing of Optimizations	When competence is available	When multiple products / teams scream in despair
What is quality	Constant and universal	Depends on product maturity
Value Statements	Explicit	Implicit

(There are surely more factors than those outlined here, and I hope to synthesize them into some small, consistent set of “core drivers” soon.)

Moving on, let’s look at some factors in more detail:

Product Naming

The mother of all established truths about a product is the name of the product. How did the organization choose that name? Who were involved? What information was used to reach a conclusion?

This is about where we are located on a scale from gut feeling to proven facts, and the introvert organization – which is often emotional about its names – is located towards the left. The choice is made by some kind of internal voting process, by committee,  by “a manager with a vision” or any combination of the above, and any external anchoring is mostly related to legal issues, copyrights and cultural awareness (how does this sound in Korean? Etc.)

The extrovert organization is able to decouple itself from its names: Pragmatically, they gather data from their markets and they may experiment with multiple names before some predefined objective criteria makes the conclusion for them. If this turns out to be a name they originally didn’t believe in, they endorse it by writing off the whole process as valuable learning – sometimes making it a part of their narrative: “Our favorite name turned out to be miserable, in fact we ended up with the name we least believed in.”

Question: In what way did freshly retrieved data from the outside world contribute to choosing the name of your most important product?  

First solution to market

What did it look like, the first product your organization made money from?

If the organization as a whole truly wants to innovate, the organization as a whole is customer oriented. Hence our solution (in a disruptive or continuous fashion) solves a hitherto unsolved problem.

Hotmail didn’t invent email, but they solved the problem of private email servers being blocked at work, by offering a web-based mail client. So we could argue they were continuously extrovert. When Microsoft on the other hand launched SkyDrive they were neither creating something new, nor solving any unsolved problems – there already exists several products for syncing files. The motivation (I would guess) is simply to gain a position in an existing market and compensate for sub standard collaboration features in their existing products, and thereby stay longer in business. An introvert approach – and obviously not their first one.

Question: Which previously unsolved customer problem is my organization solving?

Ramp-up activities

What’s going on in the beginning, when the dust from the new organizational unit still swirls in the air?

If focus is outwards and away from yourself you would by definition do some kind of customer exploration: You think reality checks are the best way to justify your existence. You learn important lessons from early paying customers, but your organization avoids market awareness, and – for the sake of learning – works under the radar until the product is reasonably proven. You do not regard copying a competitor’s product as proof.

An introvert organization initially justifies its existence by argument. This means satisfying concerns of stakeholders, which usually act on a “need to know basis”. The introvert’s main concern initially is to liberating itself from “the mothership” – they have little or nothing left for external focus. Besides, their stakeholders don’t relate to early learning and multiple business models: They want early promises and a few encouraging business cases.

There’s also a more independent kind of introvert, who typically has some technology they’re so proud of, their quest for innovation couldn’t possibly go wrong (someone else just has to figure out how to make a business from it ..)

Question: What is the degree of assumption in the promises we’ve made to our stakeholders?

Cultivation of ideas

What daily behavior will bring employees honor and glory?

I suppose most of us at some point have been trained by a pedigree workshop facilitator, who teaches how early phases of brainstorms should be creative (as opposed to analytic): Good ideas are like flowers growing out the dirt of bad ideas, so feel free to open your mind and spill your guts, and don’t evaluate yourself or anyone else or the storm will go over prematurely.

Both kinds of organizations are able to follow this methodology in time-boxed brainstorms (like workshops) because most people are disciplined enough to filter their thoughts for an hour or so, keeping statements like “what an extremely silly idea” to themselves. But brainstorms don’t just happen in meetings and workshops. In fact, to my experience those are the least valuable brainstorms: It’s the every day dialogs and discussions that produce excellent ideas.

Hence, what really matters is our behavior outside of workshops. This is where the introvert organization, where focus is on the individual, abandon its “brainstorming guidelines” the second the workshop is over. After all, smart and experienced people don’t come up with bad ideas (the more they present their idea as “probably stupid” the more likely it is they’ve given it serious thought). Besides we’re already tied up to tall stakeholder promises, so bad ideas are waste. So without the protection of the workshop facilitator they neutralize the bad ideas they need to create good ideas with prestige-driven analysis.

In the extrovert organization on the other hand, you lose prestige when presenting a mature idea: People will ask you why you didn’t involve anyone in your process earlier, and made your idea better by making it everybody’s idea. In extrovert organizations you present your ideas at such early stages that getting feedback feels embarrassing.

Question: Of five ideas which have turned out valuable to the company, to which degree can we name one person behind each idea?

Timing of Optimizations

With scaling I mean everything from building brand awareness to outsourced call-centers to better server hardware to optimized software. Scaling is any kind of improvement in the company which has the intent to improve an ability to deliver. Such ability is usually in conflict with the ability to learn, and this is essentially why premature scaling is so obstructing to innovation.

To take one typical example: If you divide your software development team into a back-end team and a front-end team, you might gain higher velocity locally in each team, but you also introduce barriers: The front end team may for instance discover unexpected user behavior in their logs (or even in conversation with externals) which makes them want to change something in say how a new user registers an account. This however requires a seemingly small change in a backend service, which is maintained by the backend team, who now serves other teams as well. Hence, they have their priorities and plans, and the front end team (who in the old days would have implemented the backend change already by now) is kindly asked to file a ticket and wait for their turn. Next week perhaps. Or next month. Or quite possibly never.

The above example demonstrates how less cross functional teams too early creates a less responsive organization. But that’s just the tip of the iceberg. What’s even more dangerous with premature division is how the front end team pretty soon will start dealing with the situation: The second time they need a change in the backend, they will first ask: Is there any way we could by-pass changing the backend? Could we maybe implement some more modules that we control, so that we don’t have to rely on the priorities of the backend team? This will certainly make the backend guys happy – it means fewer requests, and the front-end team are happy because they may work and learn faster. But now the front-end team is slowly starting to implement a backend of their own. So the company needs an architect who can say NO to the overzealous front-end developers (after all they’re just trying to learn how to make the user experience the company needs to survive..) But the architect is experienced, and knows what to do. He introduces code reviews, sophisticated work tracking systems, architectural review committees, and before you know it he needs a team of his own, to keep track of the other teams, etc, etc.

Had the division into front- and back- end been postponed until everybody were screaming for it in despair, you would face several advantages: Management would before the split have multiple opportunities to explain to people why we’re not splitting yet. “Right now we’re rigged for learning, and before we know what our product should be like, we expect everybody to be focused outwards on users, customers, and market demand”. So they use the organization as a catalyst to build its culture. Moreover, the longer the cross-functional team exists, the more time for each team member to learn what else is going in with the product. (If they don’t learn new skills, your so-called cross-functional team is really multiple teams hiding under a common name). You can regard each and everyone’s competence as a T: They have deep skills in one area, and a generalist’s knowledge in multiple supporting areas. By investing time in making this T wider, teams will collaborate more effectively when they are split up and inevitably start drifting apart.

There will be technical compromise in the extrovert organization as well: Anything standing in the way of learning will have to yield. But because the extrovert doesn’t optimize prematurely, they are able to contain complexity at a much lower level than their counterparts. This means dealing with side-effects of compromises will be less expensive when the time comes.

The introvert organization times optimizations from internal needs and desires, whereas an extrovert organization makes such decisions based on their progress in the market they are trying to serve.

Question: What came first in your organization: Brand or customers? Load balancer or live user metrics? Features or automated deployment? PR or viral marketing? Management group or fully cross-functional development team?

Time to face the root cause

With factors like these in mind, my axis of serial innovation looks like the following:

So why do organizations become introvert?

I think there are multiple causes, and hence nobody to blame. When there’s nobody to blame, owners and top management are to blame. They might have good intentions, but they are trained to think in certain ways that directly and indirectly create a center of gravity with the Copy Cat organization. In coming posts (announced on @hauge2) I will try to elaborate on more factors and how to use them to understand how to get extrovert: How to build an organization that innovates because of the way it’s organized.

And not to mention: How to get top management aboard the long series of innovative journeys you could have in front of you!

(In the mean time you might want cultivate any disillusion on DotComicguy)