When workflows, even entire workplaces are beginning to stagnate, it’s very likely that a culture change must happen in order to turn things around for the company. Dr. Diane Hamilton speaks with Siobhan McHale, who’s helped thousands of leaders create more agile and productive workplaces. Learn how to get to the heart of your company’s issues and create the culture change you want to see.
A company’s growth is reliant on what it can provide the very customers it aims to serve, which is why adapting through innovation is such an important piece in every company’s toolkit. Innovation thought leader Dan Toma discusses how workplaces can foster innovation. While innovation isn’t a measurable quantity or statistic, it certainly can make or break the future and fortune of your company, so don’t get left behind.
I’m so glad you joined us because we have Siobhan McHale and Dan Toma. Siobhan is a cultural transformer. She’s the author of The Insider’s Guide to Culture Change. Dan is an innovation thought leader. He’s the author of The Corporate Startup. Both of them are Thinkers50 Radar from 2020. This is going to be a great show.
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Culture Change With Siobhan McHale
Siobhan McHale has worked across four continents helping thousands of leaders to create more agile and productive workplaces. She’s been on the inside as the executive in charge of change in a series of large multinational organizations. One of these inside jobs was a radical seven-year change initiative at Australia and New Zealand banking group that transformed it from the lowest-performing bank in the country into one of the highest performing and most admired banks in the world. Professor John Kotter used her work as a Harvard Business School case study designed to teach MBA students about managing change. She’s got a book that is getting a lot of attention. It’s called The Insider’s Guide to Culture Change. She’s also been nominated to Thinkers50 Radar for 2020 as one of the greatest minds to watch. This is so exciting. Welcome, Siobhan.
Thank you, Diane. I’m excited to be talking with you.
I was looking forward to this. That we have a lot of things that overlap in what we are looking into. Culture covers so many things. Since you are a culture expert, I’m interested in getting your insight. When I looked at what they said on Thinkers50, they said, “The most groundbreaking thinking on how to change a workplace culture that I’ve seen in many years,” that was a quote by Carolyn Taylor, the author of Walking the Talk, which is quite the endorsement. Before we get into your work though, I want to get a little background on you. It helps people to know a little bit more about how you got to be this culture expert.
I studied Psychology and while my classmates were going into clinical psychology, I decided to take the less worn path into organizational psychology. I studied organizational psychology and spent the first decade of my career flying in and out of organizations, advising leaders about how to change the culture. I spent the second part of my career within organizations as the executive in charge of culture change. That’s a career in two hands, if you like, Diane.
John Kotter is pretty amazing. I’ve taught thousands of courses in my day and John Kotter’s probably listed in every single course I’ve ever taught. What was that like to have him gain interest and to take your case as something they use at Harvard?
That was amazing. I was sitting at my desk one day at ANZ, which is a bank in Australia. John Kotter was patched through and I nearly fell off my chair. What was this guru of change management doing calling me? Essentially John was looking for global case studies for organizational transformation that he could teach his MBA students at Harvard. He selected the ANZ’s, the radical transformation, over seven years that ANZ, as a case study to help students to learn how to manage culture change.
How did you do that to manage culture change? We say leadership has to buy-in for it to trickle down and that type of thing. What did you do exactly that caught his eye?
This was in the early 2000s when a CEO called John McFarlane had joined the bank. When I joined, I was head of projects and then three years later, I was appointed as the Global Head of Culture Change. One of the things I noticed almost as soon as I joined the bank was that there was a dysfunctional pattern that was running the organization. Essentially, the staff in the 700 bank branches were taking up the role of basically order takers. Whereas the head office was taking up the role of order giver and there was a relationship between those two, between head office and branches, which was it’s your fault for the poor customer service.
We saw that pattern. That was the key thing. We saw the pattern that was running the organization and we reframed the role of the head office and the branches by a new operating model. We reframed the role of the head office to support providers to the branches. We reframed the role of the branches to serve as provider to customers. That was the beginning of a radical transformation that took the bank from the worst-performing bank in the country to one of the highest performing and best-regarded banks in the world. The number one bank on the Dow Jones Sustainability Index.
Seeing and establishing patterns are a key thing. Click To TweetYou’re talking about your experience from the inside. You described yourself as an insider in the book, The Insider’s Guide to Cultural Change. Why an insider? What are you writing about from an insider’s guide?
I spent a decade as an outsider. I was in a management consultant for a decade flying in and out of organizations. That’s a unique perspective. You need an outsider perspective often to give you a line of sight to blind spots. I was standing in Chicago’s International Airport after a decade as a management consultant. I was working at Accenture at the time and I hit a U-turn where I decided, “I want some skin in the game.” I wanted to roll my sleeves up and actually make culture change happen rather than flying in and out and advising leaders about what to do. That was a critical career U-turn for me where I joined a series of large multinational organizations as the executive in charge of culture change. That is where I got to apply the theory and test what works to accelerate culture change and make it happen faster and with less noise. That’s what I capture in my book is these insider secrets to what lies at the heart of culture and what works when it comes to cultural transformation.
You talk about what works and what doesn’t work, which is an interesting thing to discuss. What do you think are the top things that don’t work?
One of the key things is you’ve got to be able to distinguish the dancers from the dance and the dancers are the behaviors within the organization. The dances are the patterns or the agreements between the part. Often, I see leaders intervening at the level of the dancers. They’re trying to fix the behaviors. For example, if we go back to the ANZ example, if you intervene at the level of the behaviors, you would look at the branch staff and you would say, “The branch staff needs some behavioral training and customer service.” You would send the branch staff to customer service training, but that wouldn’t address the pattern of relatedness between the head office, who was the order giver and the branches who were in the role of an order taker. You could send a branch staff on training but they would still be taking up the role of order takers when they came back from the training potentially. This pattern of relating between the different parts of the organization would continue to run the bank. You might be able to distinguish the dancers from the dance. You must be able to see the patterns that lie at the heart of workplace culture.
What patterns are you seeing? Are there any other examples that you could share?
There are lots of big patterns. One of them that’s pretty common is the pattern that change will be done to you. Often during cultural transformation, one part of the organization is given the leadership of change. It might be HR, it could be change champions, it could be a steering committee made up of well-intentioned people and they are told that they are the change leaders. Essentially, that begins a pattern of changes done to you. The more that that part of the organization takes up the role to do the change, the less that the line managers step into their change leadership roles. They begin to see change as somebody else’s problem and somebody else’s taking responsibility for it. You get these dysfunctional patterns of no change is happening. That’s quite a common one actually, that organizations can become blind to.
I’m trying to think of all the people I’ve had on who’ve given some great examples of some change. I know I’ve had Doug Conant and I’ve interviewed him a couple of times with the work he did at turning Campbell’s Soup around. What great cultural changes have you seen other than of course the one you did?
Some of the bright ones and I talk about these in my book. I’ve got quite a few examples. Mary Barry at GE is a great one and Southwest Airlines. There are multiple great ones and they’re all so great examples of spectacular failures of companies and leaders that became blind to what was going on around them. One of the first steps in culture change is actually to see what’s happening not just in the organization but beyond the organization. You’ve got to be able to see what’s going on in the marketplace and adjust to culture to make those emerging demands. That’s what great companies are doing constantly. They are not caught by the patterns. They’re seeing what’s emerging and constantly adjusting their culture to make those external as well as internal demands.
You’re talking about spectacular failures. An issue that comes to mind is the recent Wells Fargo incident. You were talking about being blind to what’s going on. Is it about being blind or are we pushing too hard? Are we asking too much of people in certain roles? What happens in that situation?
One of the key things to do in those scenarios like Wells Fargo or Boeing is to take a step back as the executive team and do a deep dive diagnostic into what’s going on. Some of the things you mentioned might be at play, but I always say that culture change is leader-led and you can’t abrogate your responsibility as a leader for understanding what’s going on in the culture and taking up your culture change role to create a more functional culture. The first step that I talk about in my book having the four steps is to diagnose what’s happening in the workplace and beyond. That would be my strong advice to leadership teams. Rather than rushing to a solution, which is often the pressure point. Leaders are under enormous pressure to put in place action plans and solutions. Often, they don’t take the time to fully understand what’s going on and their role in co-creating that in an often inadvertent way.
I hear that a lot that sometimes they are throwing darts without looking at what it is that’s happening. I love that first step one. Let’s go through the steps because this is important. What would be the second step?
The second step is to reframe the roles. The reason this step is incredibly important is that often we have a mental map of our role that we seldom talk about or share with others. That mental map of a role is like a GPS in your car and it guides you and it influences the direction that you take. Sometimes it can take you into my direction, but sometimes it can lead you down the wrong path. To get faster change with less noise, leaders can change the mental map and reframe the roles of people and parts of the organization to accelerate change. It’s an incredibly powerful tool. Often, I see leaders intervening at the level of personality and trying to change people’s personalities. What I think is an easier way to affect change, which is to reframe the role.
I can give you lots of examples of reframing roles that are even from your personal life. If you think about an example, let’s say, Sarah Connors, who’s a department head at a New York hospital. She gets up in the morning. She greets her husband in the role of wife and then she goes down to get her nine-year-old twins ready for school. She switches into the role of mother. She gets on the train, she’s in the role of a commuter and her behavior changes. At work that morning, she meets a group of first-year medical students and she switches into the role of teacher. At lunchtime, she catches up with her boss to negotiate new imaging equipment for her department and she steps into the role of negotiator. Later that afternoon, a colleague sweeps in for some advice, a second opinion on a medical matter and she steps into her role as advisor. In each of those roles, Sarah’s behavior changes, but she doesn’t change who she is authentically as Sarah Connors, but the role that she’s taking up in her mental map of that role influences her behavior. This is the remarkable power of role reframing that can lead to faster change with less noise.
A lot of what we expect out of people in the work setting, we don’t get a lot of questioning and asking, how would you approach this and would you like to do this or maybe this interests you? That all ties into my research in curiosity. What you’re talking about, it’s so important to have some of these discussions of everybody’s roles and how to reframe them. Let’s go to the third step because I’m curious, what’s next?
The third step is to break the pattern. Essentially, you’ve got to see the pattern, which you do in the diagnose. You reframe roles in the part of the organization, not the individuals. You can reframe the role of the whole department, so you get past a chain and then you need to break the pattern. The leaders need to type up their role, not just to role model. Role modeling is necessary, but it’s not sufficient. You’ve got to actively break the patterns that are not serving your organization anymore. The fourth step is to consolidate your gains because often culture change won’t happen overnight. Many leadership teams tend to run out of steam. In my experience, they go on and offsite. They’ll do a workshop and come back with lots of flip chart paper and lots of ideas, but they quickly can run out of steam. The fourth step is to keep going. We brought on the change accelerator and consolidate your gains over the longer term.
How do they get themselves to not give up? I see a lot of that. I see that in personality assessment and you might get people giving DISC, but then they do a one-day thing and then they don’t follow up or they do some training and it sounds great and we’re going to talk about engagement. They don’t put it on the calendar to follow up. Is that something that you’d have to deal with a lot, I would imagine? How do you get people to continue with that?
Essentially, this is how reframing can help you because if you’re an executive team trying to change the organizational culture, let’s say you want to become more customer-focused, what can help you is that you reframe the role of the executive team to not just run the business. They have a key role to run the business, but the second role is to change the business. You invite them to take up that change leadership role. As the executive in charge, you put in the infrastructure to help you to regularly get back on the balcony, the Heifetz concept of the balcony and the dance. Get on the balcony and a regular basis review how you going and taking up your change leadership role, putting in ways to measure your progress, to review your progress and to learn as you go.
Often, this is not a strength of leadership teams. They’ve been taught how to do the technical part of that role but not necessarily the adaptive content, which is about change leadership. That’s one of the things that motivated me to write my book. I wasn’t seeing many practical tools out there that could help leaders. I was seeing a lot of theory, but nothing as practical. What can you do? Exactly the questions that you’re asking, which is what everyone knows. That’s what I’ve tried to distill in The Insider’s Guide to Culture Change is what can we do to make change stick?
Leaders can reframe the roles of people and parts of the organization in order to accelerate change. Click To TweetWhen you’re talking about all this, it ties into some of the work I’m doing in perception right now. Culture is defined in so many ways. We’re starting to talk about culture in terms of diversity and different aspects and how it impacts business. When I was researching perception, I found that there was a lot of impact on emotional intelligence. IQ always, but cultural quotient will tie it in and so did their curiosity quotient to how we perceive ourselves and others. How big is perception and what leaders should be aware of when they’re dealing with culture change?
It’s such a great part. I’ll give you a small example. One manager I was working with wanted to give her employees a gift for Christmas because they had worked so hard and she was new to the team. She’s French by background. She decided to give all of her maintenance team a hamper with beautiful cheese and wine and took them to the cinema. The meaning-making from her team was completely different because they made it mean that she didn’t care because she canceled the annual festive season party, the annual Christmas party. Their meaning-making around the hamper was, “The new boss doesn’t care about us because if she did, she’d would have hosted the regular Christmas party.” Meaning-making is essential. One decision or activity that you implement as a leader can be interpreted in multiple ways depending on where you are and where you sit within your organization.
It’s interesting because having been in sales for many decades, I remember so many times where they tried to motivate us with different incentives. I can remember the one time they offered us tickets to a basketball game at night. To me, that’d be more of punishment because I want to go to bed early. It wasn’t something that motivated me but since I was super competitive, I wanted to win anyway. I would do well and then I’d give the prize away because it wasn’t something I wanted. A lot of times the rewards that people give are things that they think would be great for them and that’s a mistake. Are there a lot of other mistakes that leaders do try to make cultural changes and to appeal to people?
I love the example you gave because that’s exactly what leadership teams should be doing when they catch up regularly to review, how is our culture change going? It’s not a straight-line journey and it has many twists and turns, but the opportunity to come together as a leadership team and to reflect, to review where we put in that intervention. We gave everybody tickets to the basketball, how did that go? What was the response to that? What feedback did we get? How might you need to move and adjust as we go rather than assuming that, “That worked well.” Often the interventions we put in place, sometimes they become our problems rather than our solutions.
I found a lot of the rewards they offered were always better for men than women of what we wanted. They’d have a business casual Friday or whatever. Business casual to men means they get to work khaki pants and a comfortable top, where the women, there’s no such translatable version. We’re all still wearing uncomfortable clothes. It’s something that is important to ask people what motivates them, what would be a perk, what wouldn’t be a perk. Sometimes they reward you with more work and they think it’s a perk. That’s a problem too. I’ve had a lot of people on and in all my experience with consulting and things I’ve done that the same thing comes up. If leaders are at the top and there’s a cultural problem and they don’t recognize it and employees will always ask this. HR people always ask me this, “What can you do if the leader doesn’t buy into the need for change?” That’s a tough one. A lot of people who will hire you are already buying in for the need for change, so they’re a little easier to work with. Let’s say it’s somebody who hasn’t hired you and they need to hire you, if they’re reading this, how can they recognize that they’re the problem sometimes?
Get feedback from the organization about multiple perspectives is what I talk about in my book. We need to get multiple perspectives on what’s going on and avoid becoming blind to often the deeply embedded patterns in the organization because otherwise, they can catch you. If you’re in that type of culture, it can be tricky because of the power of the role of leader or manager and the manager role does have an unorganized influence on the culture. Sometimes you’ve got to nudge in time and get feedback to that person in multiple ways so that they can see what’s happening and adjust how they have taken it up.
Anytime we ask questions, it helps in so many different aspects of life and business and everything. That’s why I was looking forward to having you on because everything you’re working on ties into everything that I’m interested in as well. There’s so much we could do to improve workplace culture. I was thrilled that for you to be on the Thinkers50 Radar 2020 as one of the great minds to watch. I’m going to be watching your work and a lot of people want to. If they’re reading this and they want to find out more about you, how can they do that?
The best way to connect with me is via LinkedIn. It’s Siobhan McHale on LinkedIn. I’ll be very happy to connect and I tend to post quite regularly there. That would be the best avenue.
This has been so great to have you on the show, Siobhan. Thank you. I wish you luck with the success of your book. This is going to be fun to watch.
Thank you for talking to me. I enjoyed it, Diane.
Investing In Innovation With Dan Toma
I am here with Dan, who is an innovation thought leader and co-author of the award-winning book, The Corporate Startup. It won Management Book of The Year for Innovation and Entrepreneurship by Chartered Management Institute and The British Library. It has received all kinds of notices, unbelievable success. Also, Dan is noted as a Thinkers50 Radar class of 2020. He’s the lean startup expert for big businesses, as they call him. It’s so nice to have you here, Dan.
Diane, thank you very much for having me over. By the way, congrats on being featured on Thinkers50 list as well.
Thank you because to be listed alongside people like you is quite an honor. What a great group. Were you at the November London event by chance?
No, I was not there. I traveled so much on business. I was in Mexico around the time of the event, although I did my very best to attend.
It was a great event and I got to meet so many amazing people who have been on, Amy Edmondson and so many people. If I went through the list from Marshall Goldsmith and everybody on down who was there, it’s a real honor, but it’s hard to get nominated to be an in any part of the Thinkers50 group. I’m curious about what led to your interest in studying what you study now? You talk about corporate startups and as they tell you, you’re the lean startup expert. Give me a backstory to becoming the lean startup expert.
The story starts with me not being happy with what I was studying in school, to be honest with you. I was doing my Engineering degree and I realized that I won’t be working as an engineer anytime soon. I started my first company when I was nineteen and my background is in entrepreneurship. I worked with my startups, I worked with other people’s startups, I’ve worked with the accelerator programs. I helped design accelerator programs and so on and so forth. At one point, I got headhunted by a major telco company in Europe helping them become more innovative. That’s where everything started because after joining them, I realized how backward their process was and not backward in terms of like, not being up to date but backward.
They were doing things in a reverse where other startups were doing. Instead of starting from understanding the customer’s problem or need, they were starting the other way around from, “Let’s create a business case. If the business case is good enough, then we’re going to start the investment,” which was something that startups were not doing and obviously are not doing now. They have me there to help them become more agile. That’s when I started recording my journey in a blog, started speaking at conferences and events. I’ve met my coauthors and we decided to put together a book that’s going to help other people like ourselves to change larger organizations to become more innovative. This is how The Corporate Startup started.
A lot of things that you said that were interesting to me because I teach a lot of the courses in some of this stuff and a lot of people are doing it backward. When you go to the customer to find out what they need and what they are missing, do they always have the answer?
You can't be curious if you're not humble, and you can't be humble if you're not curious. Click To TweetMost of the time they don’t. That’s the beauty of The Lean Startup Methodology that Eric Ries created because The Lean Startup Methodology is helping you design experiments to understand customer behavior. If you’re going to ask them what they need, you won’t learn much. If you’re going to observe their behavior, how do they behave, with respect was a certain problem or this was an issue that they have, then you probably will stumble upon a great idea.
Creating a great idea is what I’m hoping to help people do too with developing their curiosity. A lot of discussions I’ve had is the connection between curiosity and innovation. I’d like to hear your perspective on that. How curious are these people you work with? What could they do more to develop their curiosity to become more innovative based on your experience? You’ve been working with some of the top blue-chip organizations to see what they’ve been doing. I’m interested in your insight.
The thing is that a lot of people ask me, “What do you need to become an innovator? What do you need to become a good entrepreneur?” I usually say two things and those two things are very well connected to each other. I usually say curiosity and humbleness. You cannot be curious if you’re not humble and you cannot be humble if you’re not curious. For a good innovator, it’s required to be curious. Instead, taking the world as it is, always ask the question, “Why is it so? Why are things happening in that way? Isn’t there a better way to solve this issue? Isn’t there a better way to do the things that we are so used to doing in this old way?” That’s one. There’s the curiosity part.
The humbleness part is to design those experiments and to be okay with them failing, to be okay with putting the landing page up and nobody clicking. That curiosity kicks back in and says, “Why haven’t people clicked?” Instead of being stubborn and arrogant and push stuff into the market, be a bit humbler, accept that the customers know better when it comes to how they solve their own problems. Be curious to design a better experience for them and better experiments and they’re going to show you their behavior.
As you brought that up, it ties into my work with perception as well. You travel around the globe. As you’re doing business with other countries, you’re starting new markets and you’re doing all these things, in my research I found there’s a lot of things that tie into perception in terms of IQ. They are your emotional quotient, your curiosity quotient, your cultural quotient. How much do we design our products and should we be thinking about designing products based on art and not our perception, but other people’s perception of what they need? How do we know what other people want?
There are two sides to this question. First of all, you mentioned how much do we do it now? I honestly don’t believe that we’re doing it enough. I’m looking specifically at large organizations where scale-up companies that now have a global footprint. It’s one thing to design a product that works in your geography and your cultural context that you understand very well. It’s another thing to try to work that to another culture and have that work there. How much should we do it? That should be basically standard. Whenever you’re moving something from one part of the world to another, you need to adapt it culturally and contextualize it to, first of all, the needs of the geography and then obviously the cultural component of the geography.
I worked for a good amount of time in Southeast Asia where we’re one year in Vietnam and then another year in Thailand and the Philippines. One part of my first year was working in economic aid to help boost the innovation ecosystem of Vietnam. The second part of my adventure actually in Southeast Asia was working with a large European-based insurance company and working with their product teams in Indonesia. What was interesting for me there is, for example, talking about cultural context. People there find it very difficult to say no. If you take let’s say the Western world approach to customer interviews, try to identify a problem, people will never highlight the problem to you. They will never do that. They are very happy with what they use and how to use it. They will never flag anything as being the problem. Although deep inside they know they have that problem. In that geographical context, in the cultural context, doing other things than interviews, it’s so much better in terms of understanding the customers’ need. This is one of my personal lessons from spending time in a different culture and working in a different culture.
It is interesting to see how we hold onto the status quo because it’s comfortable.
It’s so easy to say, “I’ve applied this methodology in Berlin. I applied this methodology in Toronto. I applied this in San Francisco. It works. You better follow what I say.” All of a sudden you realize that those things in Bangkok are different. People will not flag any issues and will not talk bad about a product because they are nice.
It fascinates me that it’s across the industries, across geography, across all areas. It’s human nature to hold onto certain things that have worked. We all know from experience and Marshall Goldsmith loves to say, “What got you here won’t get you there.” You’re helping companies become more innovative and you do a lot of that with your book. Congratulations on the success of your book. It’s done amazingly well, The Corporate Startup. You write about both the challenges most companies face is how to develop new products for new markets while still managing their core business at the same time. Can you elaborate on that? Do you have examples of companies who have struggled with this and how they overcame it?
Pretty much I believe that every big company is struggling with that. They suffer from the innovator’s dilemma, the phrase that late Christiansen said. The problem is that they suffer from what I call the infamy opposite of success. Success is probably one of the worst teachers one can have because, in success, you don’t learn much. You’re happy to enjoy the actual results, but you’re not learning why you succeeded. Failure, on the other hand, is a better teacher. You learn so much more from failing. The thing is with large organizations, they can’t give away their core business. They can’t give up on that and they shouldn’t. At the same time, they are so drawn by the success and they’re so drawn by the predictability of the core business that they find it very hard to innovate outside of work. The front runners in these companies should look at in terms of having solved the innovator’s dilemma, are the new companies or the Microsoft of the world, the Apple of the world, Amazon and Facebook.
They’re able to run their core business while at the same time creating something new. The more traditional industries, we can get traditional manufacturing companies like 3M, VSF or other companies like that. They find it a bit more difficult to do that and don’t even get me started on the pharma. In pharma, it’s a big issue there. They’re so stuck into their old way of doing things, mainly research in a molecule, package it and sell it that they find it very hard to think outside of the pill business model. They need to change because in this world if you don’t adapt, you are going to die. There was research that came out years ago showing that the life expectancy of large companies has dropped significantly ever since the ‘60s. If you started the company in the ‘60s, the life expectancy of the company with me around 60 to 80 years old. Those who started a company now, you should not expect it to live more than twelve.
That’s quite a drop.
It is quite a drop. In 40 years, it did drop by six-fold.
I’m always surprised by some companies that survive sometimes when they have such poor practices. I remember asking a prior leader I reported to why our company still even in business because they did everything wrong. It’s harder to kill a company than to start one. As you’re talking about pharma, I worked for AstraZeneca for close to twenty years and I work with pharmaceutical companies now. I’ve been working with Novartis and others. I know Novartis is doing a lot to focus on the value of curiosity. They get a whole cultural movement towards curiosity development and so does Verizon. I’ve been working with them and a lot of other companies. It’s easy to get stuck in old ways. How do you get them out of that thinking process?
Usually, it’s with facts. I have a family-based approach to change. Showing them how much threat they are under. Showing them that their portfolio, for example, I like showing them how many of their products are under threat from patent loss and the fact that they don’t create any new growth avenues that can replace those. For the power of the examples, I usually encourage them to invest small in a couple of ideas here and there to show them, build up the confidence, the fact that they can do it. Some companies respond to this better than others. You mentioned about Novartis. I’m sure Novartis is going to be a successful company in the future because first of all, they work with curiosity.
Second of all, everybody in product development in Novartis is I would say forced to read my book. They have a Novartis edition of The Corporate Startup and everybody that’s joining the company product development, the R&D for they need to read the corporate style. That combines well with our pools of thought or pools off intelligence if you want. To your question, I usually use facts and use examples from their own companies because that resonates best with them. It’s difficult. At the end of the day, the companies that will survive are the companies that are going to have the leaders that are most open to innovation and most open to change.
You asked me previously an example of a good company that’s changing and always been a front runner in that. My favorite example is IBM. It’s is a company that’s been constantly on the move. They started with those mainframe computers. They made the leap to laptops and portable devices. No, they’re doing consultancy and cloud-based infrastructure. They evolved a lot ever since they were created some 80 years ago, whenever IBM was created. I’m not sure how many of the companies were created at the same time as IBM that is still around.
Success is one of the worst teachers one can have because you don't actually learn much from it. Click To TweetIt’s hard to remember. I worked with a company that was like a value-added reseller with IBM in the ‘80s. Watching them go up and then maybe drop, they’ve done a lot of roller coasters since that time. You have to help so many companies in so many industries that you’re talking about pharmaceuticals, you’re talking about technology companies. How do you help all these industries? I mean obviously, R&D is big for pharmaceuticals, but maybe it’s a little different situation if you’re talking to maybe AOL in the day of what they should be doing versus what Blockbuster should be doing. How are you able to be a specialist when you can’t know every industry’s unique situation?
I didn’t see myself as an industry expert, although I worked a lot in banking and pharma. I understand those industries better than I understand others. The thing is that most companies suffer from the same thing. However, the flavor of the medicine they need to take, this is contextualized to their own industry and obviously to their own internal culture and whatnot. I’m there to facilitate them to get those things in place. For example, every company should have an innovation strategy. I’m there to create a strategy for the company as much as I’m there to facilitate a process of the company to create its own innovation strategy. Regardless if you’re a pharma or a telco, you still need an innovation strategy. I’m going to be there to help you create that for you. I’m not going to be the one creating it because I don’t have the deep experience in pharma required to create an innovation strategy nor do I have it with telcos. That’s my approach. I would like to see it and I’m more of a facilitator rather than an expert or do more than an expert.
When people have you come in to discuss what’s going on in their corporate culture, what’s their biggest concern when they hire you? What are they looking to do most often?
Most often they’re trying to get everybody to move in the same direction. This is the biggest problem that I’ve seen in most organizations, regardless of size and industries. It’s pretty much size and industry agnostic. They’re trying to get everybody to move in the same direction because sometimes the R&D department believes one thing and the marketing department believe something different and then the people doing a corporate venture capital business, something entirely different. Probably the issue that most boards have is, “How do we create a single vision and how do we move together in one direction as a team?” The second question is, “How do we do it fast?” In case the direction is wrong, we’re able to change, we’ll change direction and moving to another entirely different direction without actually damaging reputation, without damaging people’s egos and so on and so forth. That’s what I’ve observed as a pattern over the years.
You’re talking about measuring things, which is interesting and how fast the subjectivity of certain things. How do you measure innovation? Is that something that you would like to address? It’s this fuzzy subject for people in terms of telling are they innovative? How can they tell if they’re on track? Do you deal with that?
I deal with that a lot. We have a bit of insight into the book The Corporate Startup. We have some chapters there on a few called innovation accounting. Now, I’m working on the second book looking squarely of how we measure innovation. The book is called Innovation Accounting and you can find more under InnovationAccountingBook.com if you want to keep up with our progress and our research. It’s very interesting because I read the Gartner Research of 2019 saying that measuring innovation and the inability to measure innovation is the second most cited reason for executives not to invest in innovation. It’s very important to give the executives the toolbox and give them the framework on how to measure innovation because otherwise, they will not invest.
I can tell you that right off the bat, there are some things that you should do and there are things you should not do. For example, one of the things you should not do is use financial KPIs to measure innovation because financial KPIs are very good for your existing core business. It’s something that you’ve been doing for, in some cases for 100-plus years looking at some of the pharma companies who are looking at automotive companies in running the same business model for 100-plus years. On the other hand, something that you create now or you created last week cannot be measured using the same system. You’re going to be utterly dismayed by the results if you do that. In general, I encourage people not to look at the financial sides of things early on when they measure innovation.
Second, what’s very important is that unlike the mature core business, for innovation, you need to change and adapt to the question that you were asking that particular team every single time the team evolves. You need to adapt the question to the maturity level of the team or of the project. In the early stage, some questions are more relevant than others. As the project or product progresses, other questions become more relevant. To give you an example, we can ask a team that started how many customers they’ve interviewed or how many experiments they’ve made. It’s a question that is super relevant to them.
However, three months down the line, the same question is no longer relevant. Probably other questions will be more relevant such as, for example, what’s your customer acquisition costs or what’s your monthly recurrent revenue? How does your marketing campaign convert? You need to understand that the questions that you are asking are going to influence behavior. If you’re going to ask their one question at the wrong time, this is going to put the team on a wrong trajectory. They will start developing stuff to answer that particular question. You ask instead of doing what’s relevant for them and their maturity stage. Hopefully, this makes sense, by the way.
I’d want them to be asking questions as part of curiosity, but how do we know what is the right and the wrong questions?
That comes a bit with experience and it comes with education. If there’s an executive team that wants to get better at that, I would encourage them to look at the local VC community, local angel community. Those people have years of asking questions. Those people have years of investing and divesting from businesses all based on those KPIs and those questions that are the right moment in time. There’s a lot of free education if you want out there. They can reach out to people. We can help them. The local investor community, it’s very interesting to look at because there’s a lot of experience there they can tap into easily.
It’s very hard sometimes when you haven’t done anything. You’d learn more from failures sometimes than you do from anything else. Many people are afraid of failure. The fact is though I’m interested in how you deal with the quantitative aspects. The title of your book, it was fascinating to me, the innovation accounting. Are you dealing with quantifying? When you say accounting, what exactly are you covering there?
We’re looking at helping companies create a complementary system to measure innovation because we’re not trying to replace the existing accounting system that they use because that’s working and it’s useful. However, we’re trying to help them improve it. We’re trying to help them create the measurement system for innovation because at the moment they don’t have the tools to measure innovation. We’re looking both at the quantitative side, but the qualitative as well. Quantitative indicators are more useful in the early stages of the maturity of a product and quantitative are going to be more relevant as the product matures. This is what we’re suggesting, that people should start by creating a product life cycle.
What are the questions that the teams need to answer at each stage of the product life cycle and then put a set of indicators on top? We’re differentiating indicators based on performance indicators and results indicators because a lot of people use results indicators thinking that they are performance indicators and vice versa. If you don’t understand the difference between performance and results, we’re going to set up a team for failure because you’re going to ask the wrong question. What do I mean by that? If you’re going to ask me financially how much have you earned, last work with that particular product? That’s a result indicator. The performance indicators should be based on the activities that the team is doing to get to revenue. As a manager, you can only influence those activities. You cannot influence the results itself.
Everything you’re working on is fascinating. I love that you’re getting people thinking and questioning and developing their curiosity. I know we’d have a fascinating discussion and I know a lot of people are going to want to follow you since you are one of the 30 minds to watch in 2020, how can they do that?
Through social media. LinkedIn is my best friend. I am also active on Twitter, but I’m more active on LinkedIn. It’s more fun. It’s an international platform rather than Twitter, which I find to be very much skewed towards the English-speaking world.
Do you have a website?
I do have a website. It’s DanTo.ma. InnovationAccountingBook.com will be where you can learn more about the work we do on innovation accounting. TheCorporateStartupBook.com is the website of the old book, The Corporate Startup.
Dan, this was so much fun. Thank you so much for being here. I always learn something from everybody. The Thinkers50 group, they’re always the most interesting and amazing. Thank you again for being on.
Thank you very much for having me over. I enjoyed it and hopefully, we can do this again once The Innovation Accounting book is going to be out.
Hopefully, I’ll get to see you at the next Thinkers50 event. That will be great.
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I’d like to thank Siobhan and Dan for being my guests. We get so many great guests. If you’ve missed any past interviews, please go to DrDianeHamilton.com. You can find the radio show there and everything about curiosity is there as well. I hope you enjoyed this. I hope you join us on the next episode of Take The Lead Radio.
Important Links:
- The Insider’s Guide to Culture Change
- The Corporate Startup
- John Kotter – Previous episode
- Walking the Talk
- Doug Conant – Previous episode
- Siobhan McHale – LinkedIn
- Amy Edmondson – Previous episode
- Marshall Goldsmith – Previous episode
- The Lean Startup Methodology
- DanTo.ma
- InnovationAccountingBook.com
- LinkedIn – Dan Toma
- Twitter – Dan Toma
- TheCorporateStartupBook.com
About Siobhan McHale
Siobhan McHale has worked across four continents, helping thousands of leaders to create more agile and productive workplaces. She has been on the “inside”, as the executive in charge of change in a series of large, multinational organizations. One of these inside jobs was a radical seven-year change initiative at Australia and New Zealand Banking Group Limited (ANZ) that transformed it from the lowest-performing bank in the country into one of the highest-performing and most admired banks in the world. Professor John Kotter used her work with ANZ as a Harvard Business School case study designed to teach MBA students about managing change. Siobhan is currently employed as the EGM People, Culture & Change at DuluxGroup and is the author of The Insider’s Guide to Culture Change.
About Dan Toma
Dan Toma is an innovation thought leader and the co-author of the award-winning book ‘The Corporate Startup’ (published by Vakmedien in 2017 and awarded ‘Management Book of the Year for Innovation and Entrepreneurship’ by Chartered Management Institute and The British Library in 2018)
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