Making Innovation Happen (Part II)
This is the second post following my visit to Barcelona at Esadecreapolis. In this article, I’d like to present some topics we discussed during the session, and in particular, the insights we generated on change management.
A great way of discussing the topic of change management is to introduce Netflix: firstly, because they keep re-inventing themselves, and second, because they are not shy in admitting a mistake and fixing it when their decisions do not resonate with customers. Also, I believe that Netflix is (vis-a-vis to Blockbuster) the quintessential example of the tagline “kill your business model before it kills you”, one of the best strategic messages I have read in the past several years.
If you don’t know much about Netflix, you should probably watch this branding video. Netflix’s philosophy on change can be easily summarized by the following logic: when complexity grows, the number of required processes grow, top performing employees leave the company, and the chaos that flows from having less qualified people managing complexity generates a need for more processes, hence the cycle repeats.
In a nutshell, Netflix’s solution called for increasing the percentage of top performing employees managing all of the necessary complexity without a formal change management process. The key elements needed to manage change are embedded within the culture and in the values of the company, all of which builds upon an employee’s freedom, context and lack of rigid control. Top performance is rewarded through top pay, and, of course, a personal development plan is created that “walks to the talk”. The bottom line is simple: when growing complexity needs to be managed, no process/planning/IT system is going to substitute for the lack of high quality, high performing people. This is particularly true with the transformation of innovation from product to value, from feature to business model, where complexity is often associated to ambiguity, and flexibility is critical to survival.
On the other end, not every company belongs to the Netflix arena, and therefore not all companies can aim at being (or pretending to be) Netflix. For those other companies, a change in management system can enable innovation and, additionally, can still be inspired by Netflix’s unique approach. First and foremost, by building processes that enhance autonomy and freedom, especially downstream in the innovation process, management will only be involved upstream, not becoming too heavily involved in the details and slowing the process.
This also translates into a light control system: a system of checks and balances in a way that control is not overwhelming or impeding change. It builds processes in such a way that experts in its field do not have to undertake three rounds of approvals to obtain a green light for an action
Furthermore, when any changes occur, program planning is critical, because change without planning is random at best. However, therein lies another potential innovation killer, when the planning of activities and number of status meetings reach a double digit percentage of the whole project time. This is the moment when innovation passes away.
This is particularly true in turbulent industries and marketplaces where planning reaction time becomes a literal “dead weight”. Planning is instrumental. It is a tool, and it is a means to an end, but it is also overhead.
In companies I have worked with and worked for, I have observed professionals at the director level whose job is to roam from status meeting to status meeting, from planning session to planning session. I once dared to ask one of these individuals (who is also a close personal friend): “with all of these meetings, when do you have time to do any actual work?!?”. Surprisingly, his answer was: “well, actually this is my work”. We are surprised when strategic marketing is run by external management consulting firms, and yet this will, perhaps, shed more insight into why that strategy is employed.
There is also another way of resolving the change management conundrum, and this solution often relates to what we call disruptive innovation. In the latter, we acknowledge that the corporate weight, its speed and reaction times, are limiting the innovation ability of an organization. This explains why companies set up venturing, incubators and entrepreneurship programs. Ultimately, they will help them embrace more radical-centered innovation. This is also their way of acknowledging that some change cannot be managed through processes, only through people.