It has never been more important for leaders to learn from and respond quickly to economic, political, and competitive changes. In a world where change is constant, that response must be rapid and inspiring.
Some of the changes business leaders face, such as demographic trends, can be predicted reasonably well. Others — technology, for example — are much more difficult to anticipate. In a 2015 Fortune survey of CEOs, almost three quarters responded that the “rapid pace of technological innovation” was the greatest challenge to their companies.
It’s not a matter of if but when your assumptions about your market will be upended. How can leaders learn to adapt quickly to new knowledge and trends — to disrupt themselves before others do? Speed and agility in learning are critical. How fast is fast enough?
According to Barry O’Reilly, coauthor of Lean Enterprise: How High Performance Organizations Innovate at Scale, your true competition is moving like lightning — “three-to-five iterations ahead” of what you are aware of. That may be a traditional rival or an upstart that’s just a faint blip on your radar. And it’s as true if you’re operating in tech or manufacturing as it is if you’re battling global terrorism. Development cycle times are shortening, as are customer adoption trends and windows of competitive advantage, O’Reilly told me.
This fits with what I increasingly hear and experience in my work: Executives and government officials are now speaking in terms of an infectious-disease evolution model — learning through constant and rapid iteration — rather than linear approaches to innovation.
Yet most organizations are still built to create and preserve stability through their hierarchies, approval processes, and even hiring practices that emphasize “cultural fit.” Existing products and business units have powerful constituencies that can swat down new ideas they see as threatening. Clayton Christensen’s famous theory of disruptive innovation has been illustrated numerous times by incumbents slain by competitors initially dismissed as not good enough. In fact, legacy companies sometimes welcomed that competition because it allowed them to off-load low-margin customer segments and concentrate their energies on more lucrative opportunities. That is, until they were fully displaced by insurgents.
“The problem with transformation is never a lack of ideas. It’s lack of behavior change.”
I asked O’Reilly what he’s learned about what fuels and what confounds large organizations that try to disrupt themselves. He told me that the biggest issue is that while C-level teams often espouse the need to transform, they generally mean everyone but them. “The problem is,” he said, “those are the very people who need to transform the most.” They are the people who determine strategy and allocate resources — and they are also the most likely to squelch new ideas if they haven’t been involved in discovery and development.
O’Reilly identified six principles of effective self-disruption.
1. Allot enough time. O’Reilly takes teams of senior executives out of their offices for full-time innovation immersion experiences. They create tangible, and sometimes radical, new business models or product and service offerings for four weeks at a time. Yes, that’s right — a month. I am constantly pressured to make my seminars shorter, so I was astounded to hear someone insisting on prolonged, focused executive attention. “A one-day workshop or a short education course has two fatal drawbacks,” O’Reilly said. “Participants learn theories but don’t have time to exercise them, and people tend to come in in love with pre-baked ideas rather than exploring completely new terrain. The problem with transformation is never a lack of ideas. It’s lack of behavior change. That simply takes time, deliberate practice, and multiple iterations of learning and reflection.”
2. Go to a different physical space. Familiar surroundings reinforce traditional thinking, according to O’Reilly. And the office is full of distractions: chats with colleagues in the hallway, the temptation to duck into one’s office to catch up on email, and the like. While O’Reilly has taken some teams halfway around the world, more often he uses a local entrepreneurial coworking space where executives will experience more vibrant energy and attitudes while still being able to go home for the night.
3. Define the principles of working together. Senior executives are often more attuned to analyzing and approving than to doing. That mind-set has to change for transformation to gain momentum. O’Reilly says that executives need to embrace these principles: “Think big, learn fast, start now” catalyzes action; “build the right thing. Then build it the right way” helps leaders focus on discovery rather than over-refining a nascent concept; and “create feedback loops with our customers” encourages executives to get out of their corporate bubble to engage with customers.
4. Create psychological safety. Leaders at all levels need to embrace risk. To do that, they must feel safe among their colleagues when they share ideas. Further, there needs to be an understanding of people’s strengths, weaknesses, fears, and aspirations in order to get them working productively. O’Reilly explained that while four weeks seems like a long time, it really is not in terms of building a highly functioning team engaged in new creative activities. As Google validated, a high-performance team needs to be comfortable taking risks and even failing in front of each other.
5. Introduce design thinking. Coaching in the principles of design thinking is also essential — this human-centered approach to innovation draws from designers’ toolkits. The method focuses on the people whose problem you are trying to solve, then the technology you’ll use to solve it, and finally the business model that will make it profitable. In legacy businesses, one of the last two steps often comes first, which can drastically narrow the possibilities for creation.
6. Commit to keep it going. No matter how successful the off-site experience, enthusiasm can quickly dissipate after reentry into day-to-day business activities. To maintain momentum, O’Reilly asks participants to commit to a certain amount of time each week to continue to develop the new innovations. “You have to have a cadence to meet and work on it,” he said. Otherwise, even the best new ideas will die.
Reinvention is never easy. It requires a willingness to look beyond current success — sometimes contemplating the demise of highly profitable products and services. Leaders must have the courage to ask hard questions and open their minds to imagine new possibilities. The alternative? Ask the many companies that have fallen off the Fortune 500…or worse.