Interview: Robert Sutton The new excellence: spreading constructive beliefs and practices from the few to the many

Citation

Gorrell, C. (2014), "Interview: Robert Sutton The new excellence: spreading constructive beliefs and practices from the few to the many", Strategy & Leadership, Vol. 42 No. 5. https://doi.org/10.1108/SL-08-2014-0058

Quick takes

Article Type: Quick takes From: Strategy & Leadership, Volume 42, Issue 5

These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.

Interview: Robert Sutton The new excellence: spreading constructive beliefs and practices from the few to the many

Brian Leavy

In his new book, Scaling up Excellence, Robert Sutton provides a leaders’ guide to encouraging customer-focused product and service innovation and then scaling it up throughout the organization. In this interview by Brian Leavy, the conversation centers on:

• Defining excellence.

• Offering guidance on how to scale up excellence.

Excellence

The gold standard for excellence depends heavily on the context. It begins with asking and answering the questions “effectiveness at what” and “effectiveness for whom.” There is no one true measure of excellence – not profits, stock price, sustained survival or net promoter score, to name a few. Those can all be useful, but none of them applies to every team or organization.

Instead of setting one measure, leaders should seek out excellence in the organization, often in small pockets of customer-focused innovation, then spread it to more people and places. The art is to spread such performance from “the few to the many” without screwing things up in the process.

Scaling

Even after extensive review of prior research and numerous detailed conversations with leaders and teams charged with scaling, it is difficult to codify unqualified “scaling steps.” But although there are no easy solutions or sure-fire success formulas, there are major insights about “scaling well.” Here are three:

1. Spreading excellence should be a “ground war,” not an “air war.” An air war is a top-down program of conferences, speeches, and massive deployment of new tools. In contrast, a ground war fosters skilled innovators who eventually embed in several dozen units. It is a process of slowly spreading the pocket of excellence to the next pocket, then the next. This is a process of “connect and cascade.”

2. Successful scaling is about spreading and sustaining a “mind-set” about producing customer solutions. The mind-set is the shared beliefs and behaviors that employees actually live – and that help guide and motivate them in the pursuit of excellent performance that serves the customer.

3. A basic decision is whether to take a Catholic vs. Buddhist approach. That is to say, choosing either “replication” (doing the same thing in the same way everywhere) or “adaptation” (having a general shared mind-set but allowing employees to customize behaviors and beliefs to fit local tastes and their own preferences). The decisions and actions embraced by this continuum are constant considerations for every team and leader. It is perhaps the most important and vexing scaling decision.

The next digital transformation: from an individual-centered to an everyone-to-everyone economy

Saul Berman and Anthony Marshall

The next digital transformation is already underway. It is a shift from customer-centricity marketing to an everyone-to-everyone (E2E) economy. Based on hundreds of consumer surveys, industry analysis and interviews with futurists this research report offers practical ways to prepare for a fast-approaching evolution in digital connectivity.

What’s ahead: the new playing field

Driving the transformations are technological and social changes – technological disruptions, social media explosion, mobile revolution, advancing analytics, cloud enablement – that focus competition on specific elements or functions. When linked together, the functional specializations of different companies can create a seamless customer experience. Think of the emerging travel ecosystem that offers an end-to-end experience. The resulting specializations will drive industry convergence and the formation of new value nets (ecosystems) to cut across multiple organizations, functions and industries.

Three characteristics of an E2E economy

Because the E2E economy is centered on the consumer’s heightened expectations for seamless, connected experiences, participating firms must adopt three guiding principles:

• Organizations will only be as relevant as their ability to deliver the best experience through the right partnerships.

• The demand for data by contextual and predictive analytics will become insatiable.

• Open standards do not mean the end of intellectual property – successful organizations will protect what they do best and open up the rest.

In order to make a successful transition to the new E2E business environment companies should learn to assess their prospective model in terms of four dimensions: connectivity, interactivity, awareness and intelligence (see Exhibit 4).

The emerging E2E economy entails reinvention from the ground up. To prepare to operate in a radically different and rapidly changing environment, constantly assess the firm’s alternatives in terms of 1) how best to open up to external influences, 2) how to connect to new ecosystems and partners, and 3) how to drive digital mobilization across its organizations.

Seize the future

Digital disruption has begun: it marks the start of a new technological and economic paradigm requiring the re-imagination of markets, strategy – and value itself. Continue to invest in consumer-centricity, but do so while anticipating the demands of the E2E digital economy that is becoming increasingly evident in rapidly evolving markets.

Masterclass Metrics for the emerging Creative Economy

Stephen Denning

In the emerging Creative Economy making money and corporate survival now depend not merely on pushing products at customers but rather on delighting them with continuous innovation so that they want to keep on buying. In the Creative Economy, firms’ survival will increasingly depend on grasping the fundamental shifts in management practices:

• shifts in goals (from shareholder value to customer delight);

• shifts in the way work is organized and coordinated (from hierarchical bureaucracy to self-organizing teams);

• shifts in values (innovation and transparency ahead of efficiency); and

• shifts in ways of communicating (from top-down to multi-directional conversations).

Among the more important issues are those related to metrics and analytic tools. Clayton Christensen and Derek van Bever argue, in the June 2014 issue of Harvard Business Review, that we need “new ways (tools) to assess investments in innovation.” But is it a question of tools or is the real solution in using existing analytic tools and the application of a different mindset of leaders?

In each of the following key measure categories, tools and examples are discussed to illustrate that the answer is to stop seeking new tools (effective ones already exist) and to stop blaming the tools themselves for negative results. Instead change the mindsets of those using the tools and their deployment will change the outcome.

• Investing in efficiency vs. market-making innovation.

• Assessing innovation’s benefits – using abductive logic.

• Keeping control of costs – options reasoning.

• Managing multiple innovations – portfolio approach to innovation.

• Measuring time – value-stream mapping.

• Attracting and educating investors.

• A tool to calculate the hidden costs of offshoring.

• Balancing multiple innovations – the portfolio approach.

• Measuring the real bottom line: the customer.

• Introducing radical management.

The root cause of the problem of metrics in the Creative Economy is thus not the functionality of tools like the ROA, ROIC and IRR, but rather the notion that the purpose of a firm is the pursuit of short-term profits and the maximization of shareholder value. To counteract this, business leaders need to digest and spread Peter Drucker’s fundamental insight that the only valid purpose of a firm is to create a customer.

Emancipating managers – from themselves

Many managers experience frustration with the current system of metrics which pushes to make decisions that they know are wrong. Ultimately the discussion of metrics isn’t just a technical wrangle about what’s the right metric or analytic tool to apply. It’s a conversation about what the organization values should be. Is management’s purpose to add enduring value to the organization and to society or is the organization simply a short-term money-making machine for the managers and today’s shareholders? Thus the revolution in management implicit in the Creative Economy goes far beyond identifying metrics and analytic tools. It means inspiring a radically different mindset about the true purpose of the corporation – continuous customer-focused innovation of products and performance.

Stories that drive the future: how narratives can improve scenario planning

Steven H. Kenney and Bryan A. Pelley

Big-picture, data-driven scenario planning may not adequately prepare companies for the operating environment that actually unfolds. Although such conventional scenarios can successfully identify major trends and explore their potential effect on society, they often fail to effectively capture the non-linear events and the unexpected ways that societies often behave in reaction to the trends. The future will always produce surprises, but this is especially true for those who construct scenarios based on extrapolations of present trends and ignore society’s evolving reactions to them.

An alternative approach

Scenario planning can be improved by better anticipating how people will react to the unfolding future. To accomplish this, decision makers need to be made aware of how deep-seated human beliefs, attitudes and perceptions can shape or create trends, as well as the counter-forces that sometimes turn them on their heads.

Those beliefs, attitudes and perceptions – and the stories, images, anecdotes and aphorisms used to articulate them – are narratives. As an example, since the 1930s the narrative of “The American Dream” has pervasively influenced perspectives on a wide range of issues in the USA.

The process of scenario planning, when it is infused with identification and analysis of relevant narratives, can produce potent insights. Bringing these two methodologies together represents an important evolution in the use of scenarios to inform and drive strategy.

How to identify narratives

A systematic process that uncovers a fuller range of narratives around a particular topic, not just those closely held by an organization’s managers, is required. A three-step process can be used to reveal the narratives:

1. Understand the conversations about the narratives.

2. Determine which stories motivate behavior.

3. Discern the narratives that are most relevant to the chosen scenarios.

Going forward

As scenarios are used in practice over time, their methodology is evolving. Bringing the analysis of narratives – the deep-seated beliefs and belief systems of organizations, nations and cultures – into the art and science of scenario planning is a step in that evolution. The results are already starting to be reflected in the success stories of leading adopters.

Case Co-creation in design: how the UK company Own Label combines openness and ownership to manage talent

Thorsten Roser, Robert DeFillippi and Julia Goga Cooke

The past few years have seen an increase in successful co-creation business models that have allowed firms access to a supply of talent and trend-discernment resources they could not otherwise reach.

In the fashion industry co-creation models are disrupting the industry, democratizing the process by which design choices are made, and allowing new ideas to emerge through work with one individual user, with a group of experts or with the crowd. Looking further out in this increasingly transient and fast-paced design industry, digital technology, cost pressures and competition for brand equity may further enable and foster design co-creation and strategic user involvement.

Case

Own Label is an online fashion-design company (http://www.own-label.com). The firm, offers market exposure to emergent designers, seeks to give consumers input into which designs get made and the opportunity “to be the first to get their hands on the next big name designer of tomorrow.” Own Label differentiates itself by fusing concepts of exclusivity and co-creation in a professional format.

Business model

At first glance Own Label’s fashion co-creation activities seem to follow a simple crowd-sourcing approach (see Exhibit 1). However, the company’s business model is more evolved than that, as it also engages promising designers and fashion-conscious communities in a way that goes beyond the “submit a design, crowd votes, design is manufactured, winner rewarded, crowd buys” co-creation process. This includes a number of strategic openness and ownership choices that involve both B2B and B2C relationships. It also includes a portfolio of co-creation practices within distinct phases of the firm’s value creation and product development processes (see Exhibit 2).

Benefits

By using co-creation and strategically positioning itself in niche markets, Own Label can adapt faster to trends, lower design and innovation costs and accelerate the design process itself.

Looking ahead

The democratization of fashion design, powered by co-creation, is indeed a disruptive force in the industry and is influencing a new generation of designers, design firms and their buyers. It is far too early to forecast whether these co-creation-focused, fashion-design houses will ultimately displace more established fashion-design houses and the domination of fashion by the elite fashion designers. However, there is already evidence that new-entrant fashion-design firms such as Own Label are establishing new positions in the industry that can attract net-savvy millennial designers and millennial buyers.

Catherine Gorrell

Catherine Gorrell is a veteran strategy consultant newly based in Portland, Oregon (4mcgorrell@gmail.com) and a contributing editor of Strategy & Leadership.