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What lessons do the CEOs of large established organizations need to learn to make continuous innovation a part of the firm's DNA? Instead of innovation and organizational learning being the responsibility of a few iconoclastic, courageous, and rare individuals or departments, it needs to become institutionalized as an organization-wide capability.
Pull management poses the complex challenge of delivering steadily increasing value to customers and engaging employees and customers in conversations. This is a radically different business environment. It requires understanding and mastering a radically different kind of management.
Game-changing innovation
For the past few years, leading CEOs have been trying to figure out how large established organizations can become as good at game-changing innovation as they have been at disciplined execution.
Books urge a better compromise between the reliability of the supply chain – producing consistent, predictable outcomes – and the innovativeness of the design function – creating new value for customers. Today's organization should achieve a better balance between the supply chain that operates in a rigidly predictable fashion and the part that operates with the creativity and experimentation of a design shop.
The result of even a better-balanced compromise however is often “war in the boardroom”. The efficiency-focused thinking of the supply chain, supported by traditional management theory, business school teaching, and embedded assumptions tends to crush the creativity of entrepreneurial thinking about new ways to add value.
In a radical new approach, a number of groundbreaking consultants and corporate leaders started from the assumption that an uneasy compromise between reliability and innovativeness is not enough to avoid obsolescence and irrelevance. They argue that in a world of ever-accelerating change and global competition, in which the balance of power has shifted to the customer, continuous innovation and learning by the entire organization is required for survival.
So how can a bureaucracy learn to how to generate continuous innovation? Can ordinary employees become extraordinary innovators? How do you manage, measure and lead innovation across the entire organization?
The shift from push to pull management
We are moving from a world of push business models to a world of pull models. In the world of push, management forecasts demand and tells employees what to produce, and then organizes the resources to meet the demand in the most efficient fashion. Management then communicates to the mass market of customers the messages that induce them to want to buy the firm's products.
In contrast, to succeed in the new world of pull business models, a firm needs employees who are engaged and empowered to continuously add new value to customers. Everyone in the organization needs to have a clear and current understanding of what the customers want and how they are responding to existing products and services. They need to be constantly improving their performance to generate more value for the customer.
Success comes by:
- Accessing resources and people with know-how, whether those resources and people are outside the firm or within.
- Attracting people and resources to collaborate in generating more value.
- Achieving results based on these knowledge flows, by facilitating partnerships based on collaboration and reliable production.
The new economy is about scalable collaboration embracing tens of thousands and eventually hundreds of thousands of participants in pull platforms. The more participants involved, the more rapidly everybody learns. The network effects of scalable collaboration can trump the experience curve and create what was unthinkable in traditional 20th century management: an increasing performance improvement curve.
Whereas the pre-occupations of the 20th century management were tight control and cost reduction through economies of scale, the mantra of the 21st century firm is continuous innovation driven by passionately committed workers. Employee “satisfaction” is not enough. Effective participation in knowledge networks requires fully engaged people who see problems as a challenge. The challenge of management is to support them and channel their energies in constructive directions.
“The shift from doing business in the world of push to the world of pull involves fundamental change.”
Communication in the world of pull: authentic and interactive
In push businesses, traditional management communication is almost entirely limited to sent messages. With this one-way communication model, however, the understanding that emerges is often different from what the management intends. As a result, most change programs in organizations fail to achieve their goals and most employees remain less than fully engaged.
By contrast, pull management recognizes that people construct their understanding of the world through their relationships and interactions. Meaning is created in conversations and dialogues, often a messy, iterative experience.
Managers can engage in authentic conversations that drive business results. It offers a detailed guide for CEOs and other senior leaders on how to communicate authentically and interactively to unleash the talents of those doing the work and on how to support them so that they become and remain fully engaged. It recognizes that when innovation depends on buy-in and commitment, interactive communications are essential.
Pull leadership requires learning how to communicate so that people get the message and spread it. In pull management, leaders must learn to ask questions that trigger professional excitement, set goals for interactions with others, and learn guidelines for interacting with audiences of different sizes. Managers must learn how to Identify and energize a firm's most valuable players, including champions, partners, and other valuable stakeholders, as well as critics and detractors. They need to understand the territory of change, identify emerging conflicts, potholes, misinformation, and new high-value ideas. Leaders need to learn how to accelerate change through performance communities. To do this requires building social groups that take on the toughest challenges and create solutions. Underlying all these specific communications skills is a core concept: leaders of pull organization must develop a thorough understanding of what they must do to enable the passion of the workforce to contribute to the goals of the organization.
A CEO's journey in the world of pull: find the value zone
The people doing the work customers value create a value zone within any organization. Without them, your firm is nothing but a shell, layers and layers of management, and aggregators who have nothing to offer the customers. Often, management gets in the way of creating value. Overall, management isn’t helping the people doing the work. Instead, it wastes their precious time and energy by requiring them to make endless presentations about irrelevant things and write reports.
Management has to stop wasting employees' time and start supporting them and enabling them to create more value for customers. The value zone has to be put at the centre of an organization.
Management has to be accountable to the value zone and the people in it, rather than have the people in the value zone be accountable to the management. To enable employees to create value for customers, you must establish a new level of trust and transparency within the firm. In the process, the role of management changes from controller to enabler.
By putting employees first – doing everything possible to enable those people who bring real value to customers – employees will serve customers better than ever before. The goal is to unleash the power of the bright minds in your firm so that they can align themselves with the customers' challenges and in turn become the customer's enablers and facilitators. Develop partnerships based on transparency and trust and this will create value for the customers.
The CEO's role is shifting from being a crafter of strategy, the person who motivates by giving speeches, and the one with the brightest ideas, to being someone who enables the employees to excel, helping them discover their own wisdom, engaging them fully in their work, and accepting responsibility for making change.
Lessons for corporate leaders
The shift from doing business in the world of push to the world of pull involves fundamental change. It would be a mistake to view this article as merely offering a miscellaneous collection of unconnected business practices from which a CEO might pick and choose. It’s not designed to supplement traditional management practices, or additional skills that a CEO might decide to acquire to upgrade his or her current performance, but to stimulate a paradigm shift.
Making continuous innovation an organization wide-capability and perpetuating it as part of the firm's DNA involves a fundamentally different way of looking at and understanding the world. It involves different ways of communicating. It entails a learning radically different ways of driving business results.
Pull management poses the complex challenge of delivering steadily increasing value to customers and engaging employees and customers in conversations. Because pull companies will compete in a radically different business environment, they will be required to understand and master a radically different kind of leadership.
December 2010.
This is a shortened version of “Rethinking the organization: leadership for game-changing innovation”, which originally appeared in Strategy & Leadership, Volume 38, Number 5, 2010.
The author is Stephen Denning.