Thursday, November 10, 2011

Small Bets - Big Challenge

This past week I attended Anne Marie Slaughter’s innovation presentation to an Association of Finance Professionals (AFP) luncheon audience. There are lots of folks who opine on innovation, but part of what makes her unique is that she works in the field of politics - having held roles in both academia and government.
Why is a pocket full of change better than a large note?
One of Dr. Slaughter’s presentation slides was of an innovation center layout in Shanghai – a couple of universities, a talent growth center, and lots of peaceful forests and rivers (from which to draw inspiration presumably) among other things.
Illustrative of a “big plan”, Dr. Slaughter questioned this approach, noting that innovation is usually a process that starts with “small bets”.
The small bets element reminded me of Skunkworks projects, whereby a small group of people are separated from the rest of the organization in order to allow them to push envelopes, get outside boxes, breath bureaucracy free air, and avoid being stifled by its organizational culture.
In fact, this “small bets” thinking has been visited here in prior posts such as “Oops! We Made the Company Analytical” and “How to be a Corporate Revolutionary in 50 Easy Steps” posts.
Analogously, small bets thinking is the practice of venture capital, who invest in many in order to manage uncertainty about which firm might succeed and which ones will fail.
So if we have the good fortune to find ourselves with large denomination notes, if we want innovation we should convert them to many units of small change and spread it out accordingly.
Organizational Paradox
Dr. Slaughter then went on to discuss the characteristics of a society that encourages innovation. One of the identified elements is “challenge authority”.
Organizations are a paradox. An organization is created to accomplish things collectively, either because these things otherwise simply cannot be done (e.g. building a jumbo-jet) or can be done more efficiently and effectively (e.g. lawn care service).
In order to coordinate the collective activity to achieve the goals, a leadership and management structure is established, and voila - airplanes get built, lawns get mowed.
Because leadership and coordination are necessary to achieve the collective effort, it is generally not wise to tolerate those who would rebel against that authority. “My boss told me to bolt that wing onto the airplane, but I just ain’t gonna do it – I’m gonna make another wheel for this baby instead!”
Guess what? Not many airplanes get built under that scenario, and the ones that do have serious defects, like 6 wheels and only one wing!
Thus a paradox – to achieve the goal we need to follow authority, yet in order to innovate we need to challenge authority. Is it any wonder a common complaint in organizations is the lack of innovativeness?
Balance or Synthesis
If we view challenging authority and following authority as the ends of the same continuum, then it is possible to achieve a state of balance between the two extremes. The proverbial “middle road”. In all likelihood, this is a situation that can allow small innovations to occur, though not likely to achieve major breakthroughs.
If we can allow both of these forces to exist at the same place at the same time, then some type of synthesis or transcendence occurs, and we can achieve something totally different. This is difficult to accomplish, however, because it means being able to live in the paradox. Not all are cut out for this.
Key Takeaways
We need to decide what type of innovation we want to occur within our organization, and then we need to manage organizational authority accordingly to achieve this objective.
Does your organization allow authority to be challenged? How much on a scale of 1 to 10?
What name would you give to a synthesis of following and challenging authority at the same time?

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