anti-Innovation Sentiment and Intrapreneurship Collide

In order to stay current in a subject area that is constantly changing, one must be well read and, beyond that, follow the bets though leaders around. Last week, I had the opportunity to discuss intrapreneurship in person with one of my favorite innovation bloggers, Jeffrey Phillips. Tonight, I read a blog post by one of my other favorites, Gijs van Wulfen.

Gijs tackles the subject of anti-innovators in his recent post.  His writing echoes some of what Jeffrey and I discussed last week. As we  looked at different models for commercializing business ideas last week, we camped out for a while on what stultifies innovation. While many leaders acknowledge that innovation is a top priority, they would also be quick to add that implementation of innovative practices can be a challenge. The consequences, according to Phillips, include: 

 Poor execution of innovation goals
 Failure to achieve strategic goals
 Limited organizational design to sustain innovation
 The growth of disbelief or cynicism when innovation isn’t pursued.

Stubborn personvan Wulfen describes personnel as a main hindrance. He writes of employees who “are stuck in their habits.. ignorant the world is changing fast and (thinking) they have nothing to fear.” He goes on to describe the anti-innovator as a (negative) contributor to team culture:

There are often quite a few anti-innovators. Everybody knows this extravert guy or woman who is anti-everything. They have “the biggest mouth” at the lunch table in the company restaurant. Their influence on the company’s culture is often quite substantial. Don’t underestimate their impact. The herd goes as fast as the slowest animals. If the anti-innovators lean back nothing moves. So how do you get them up and running. That’s the question.

You can try to convince them. Unfortunately that often fails because they are experts in coming up with idea killers like: “We are too small for that… There is no budget… We need to do more research… We don’t have time… It’s too risky… That’s for the future. Everything is OK now.”

You can try to do it without them. But that won’t work either. You need an awful lot of colleagues and bosses to share your vision before a big change can truly take place. You need R&D engineers, production managers, IT staff, financial controllers, marketers, service people and salesmen to develop the product, produce it, get it on the market and service it. You can’t do it without them: you can’t innovate alone.

The way to get anti-innovators up and running is to respect them, to understand them, to connect with them and to let them experience change is necessary. They will only change their attitude if they get new insights themselves. So, you have to give them a chance to discover what’s happening out there. Invite them to join your innovation team and take them out on an expedition to discover how markets, customers, competitors and technology are changing.

If they, as the slowest animals of the herd, find out there’s a group of hungry lions following the herd they stop leaning backwards. They start running too as necessity is the mother of invention. They will spread the urgency to innovate among their colleagues. And that’s good news because If the slowest animals start running, your organization’s innovation power really gets up to speed.

Think about the anti-innovators in your organization. What motivates them? Do they travel in herds? How can innovators infiltrate their ranks yet respect them and build bridges for collaboration? As a mentor in an upcoming venture challenge competition, I will be working with teams that must have creatives and analysts. Often, including an anti-innovator on your launch team can bring helpful perspective. Stew on it!

 

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Free is Costly and Cost is Freeing

As a consultant to small businesses, I have had to fight the trend of owners wanting something for nothing. In the start-up world, it is almost unheard of for something to not be free. Yet, I see organizations like EntreDot introduce business models that ask entrepreneurs to invest in themselves and wonder why that is not the norm. Mike McDerment, co-founder of FreshBooks, concurs in an article he recently wrote entitled, “Why Free is Bad: Businesses Should Be Happy to Pay For Key Services.”

McDerment noted that, late last year Google Apps for Business eliminated its free version (see Google Dares Businesses To Switch To Microsoft Office). He acknowledged that, while some may have thought the decision to be a bad thing for small business owners, he did not. In fact, McDerment lists several downsides to free:

1. Free things are never really free. When we don’t fork over dollars for products or services, we think of them as free. But we always give up something. When it comes to online services, that something is usually personal data or content you’ve created — think Facebook and Instagram, whose privacy policies obscure the line between what you own vs. what they own. For consumers, that might be an acceptable bargain. But for small businesses that trade may be unacceptable.

2. Free services don’t serve you. Free services can’t provide great customer service. You know this to be true if you’ve ever sent an email to a free service to get help. Imagine relying on one of those free services to run your business!. What happens when you need help, and you need it now?

3. Free services for small businesses don’t last. Free services for small businesses come and go. Google Apps used to be free, now it isn’t. Free services don’t last for the small businesses because the market is so challenging to reach and serve. My guess is that understanding the market challenges is the key to why Google Apps for Business going paid is a good thing for small businesses.

Google Apps For BusinessMcDerment also goes on to argue how “Free” stifles competition:

In the dot com era, companies were terrified to do anything that Microsoft might be interested in, and venture capitalists would stop a hundred businesses before they could start with one simple question: “Why won’t Microsoft do this?”

Similarly Google has scared people out of doing things, because thanks to the significant advantage created by its search business, the company can afford to lose money on other activities, starving the competition and limiting innovation.

Fact is, Google can always return to the free model, but it’s a good signal that it has started to charge for things. Wall Street will be happy, and small business owners should be too. That’s because I expect Google’s paid model to give entrepreneurs the confidence to step in and start innovating more for the small-business market.

This innovation will encourage services tailored for the long-underserved small businesses of the world. Sure, those services won’t be free, but they will be affordable, just as Google Apps remains affordable at $50/year.

Just as important, these new services won’t come with all the downsides of “free.” In exchange for services they need, businesses will trade dollars, not their data or their content.

I’m hoping this signals the start of a new era, one where for the first time ever, competition, innovation and choice are healthy in the small business market.

After discussing the competitive effects, McDerment then offers his insights into the upside of payments for services by small businesses:

…Why should small businesses care about their vendors’ problems? Why is it a good thing for them that Google Apps For Business went paid? How are small businesses going to benefit by paying for something they used to get for free?

The answer: innovation and the arrival of services tailored to meet their needs. Just think of how many things small business owners run on Word and Excel and you get a sense of how under-served this market really is. Google Apps for Business going paid makes serving the small business market more attractive – for everyone. As long as all Google Apps were free, smart entrepreneurs and competitors were inclined to avoid investing in innovation for small businesses for fear Google could step in and wipe them out with a free service.

Private Equity Challenges in Family Businesses

Most family owned businesses survive through the ingenuity, hard work, and resourcefulness of the founder(s) in the first generation. As the founders grow older and the business hits certain barriers to growth, often there is a need for a capital infusion to satisfy the goals of the founders and the other stakeholders in the continued growth and success of the business. Private equity, while a viable option for many privately owned businesses, can be perceived as a solution that is unworkable for the typical family owned business because of the fear of loss of control. In an article last year in the Journal of Family Business Strategy (Volume 3, Issue 1, Pages 38-51, March, 2012), authors Florian Tappeiner, Carole Howorth, Ann-Kristin Achleitner, and Stephanie Schraml describe some research they performed on a group of family firms in Germany. The research focused on issues these firms faced in soliciting private equity investment. Excerpts are provided below, along with a diagram, and accompanied by some commentary:

Under the pecking order hypothesis, private equity is a finance of last resort. Tests of the pecking order and its assumptions have provided conflicting results. For family firms, the pecking order hypothesis is incomplete because it ignores family effects. Case studies of 21 large family firms in Germany are analysed. Testable propositions are derived. Family firm owners balanced financial and non-financial resources of private equity with the need to cede control rights. Non-financial resources were valued more highly when resolving family issues. The observed pecking order was driven by control rights. Important implications for family firms and investors are discussed.

The authors articulate that private equity is perceived as a final option for owners of family businesses. No surprise there. Control is seen as the most important factor in determining what outside resources to enlist. Private equity is seen as less widely used than non-financial resources when the goal is to resolve family issues.

Family and business influences are equally important in terms of the demand for private equity in large family owned firms. Private equity was sought out for reasons that included the exit of a sibling, parents’ wealth diversification and business growth. The authors note an “interdependence of demand and supply in financing decisions, most noticeably in the negotiation of control rights, which featured strongly in the interviews. (Sometimes the underpinning reason for seeking an investor was to consolidate control, for example, buying out a family member with conflicting views or concentrating ownership in one branch of the family, which, it was argued, would free up decision making within the family firms.)”PE Finance in Family Firms

Minority private equity investments provided study participants with needed finance while allowing the family owners to maintain family control. Private equity also provides managerial resources. The presence of outside money and potential ensuing leverage in executive decision making illustrates the potential for better corporate governance practices and enhanced expertise to pursue business opportunities, such as IPOs or globalization. Said the authors, “Firms with family issues may value the non-financial resources that private equity investors may provide. In particular, family firms wishing to reduce family conflicts may value the neutral or professional role of a private equity investor.”

It was noted that business performance issues led to loss of control in two of the family firms receiving private equity infusions. Still others negotiated control rights guidelines aggressively because of their concerns over the potential of such an occurrence. The investors, for their part, acknowledged that dealing with family firms presented a unique set of challenges usually not experienced in other deals.

Climbing Your Management Everest

Stretching oneself to the maximum can reveal what we are made of. Whether the subject matter is a test of mental strength or physical, it is exhilarating to overcome a daunting obstacle. Sir Edmund Hillary is celebrated for his perseverance in conquering Mount Everest. One of my LinkedIn contacts and an internationally known innovation resource is Gijs van Wulfen. Van Wulfen states that, in the 1950s, the route to Everest was closed by Chinese-controlled Tibet. Nepal allowed one expedition per year.

Sir Edmund Hillary had been part of a British reconnaissance expedition to the mountain  in 1951. The 1953 Everest expedition for which he is now famous consisted of a huge team of over 400 people. Expedition leader Hunt named two assault teams. Hillary and Norgay were the second assault team. The first team only reached the South Col, about 100 meters below the summit. Then Hillary and Norgay got their chance. They reached the 8,848-meter high summit, the highest point on Earth, at 11:30 a.m. on May 29, 1953.Mt Everest

Gijs says the following 10 management lessons came to mind as he read the Hillary accounts:

1. Passion. As a youngster, Hillary was a great dreamer, read many adventure books and walked many miles with his head in the clouds. He was unaware his passion for adventure would make him, together with Tenzing Norgay, the first man to set foot on the highest point on Earth.

2. Urgency. In 1952 the British heard that in 1954 the French had been given permission to attempt Everest. The British wanted more than anything to be first. The expedition just had to succeed.

3. Teamwork. Getting to the summit of Everest is all about teamwork. As Hillary wrote: “John Hunt and D Namgyal’s lift to the depot on the South-East Ridge; George Low, Alf Gregory and Ang Nyima with their superb support at Camp IX; and the pioneer effort by Charles Evans and Tom Bourdillon to the South Summit. Their contribution had enabled us to make such good progress.”

4. Courage. The higher you get on Everest the more courage you need. At 7,800 meters Hillary wrote in his diary: “Even wearing all my down clothing I found the icy breath from outside penetrating through my bones. A terrible sense of fear and loneliness dominated my thoughts. What is the sense of this all? I asked myself.”

5. Test. On the 1951 reconnaissance expedition, team members tested oxygen equipment and did research on high-altitude physiology. The results of both studies were important in determining the right approach for Everest in 1953.

6. Initiative. While in India, Hillary read in a newspaper that the British were taking an expedition to the south side of Mount Everest in 1951. He contacted expedition leader Eric Shipton and suggested that a couple of New Zealanders could make a substantial contribution to the team. And they were invited!

7. Choices. The British Himalayan Committee replaced the 1951 expedition leader Eric Shipton with Colonel John Hunt, a climber. After eight failed attempts on Everest they needed someone to the top first, before the French would have their chance.

8. Overcome setbacks. Along the way there are always major setbacks. After finding a new route up Everest during the reconnaissance expedition of 1951, the British heard that the Swiss had obtained permission for two attempts on Everest the following year. The only thing the British could do was wait and see if the Swiss would succeed.

9. Competition. Hunt proposed that Evans and Bourdillon should use the closed-circuit oxygen equipment to reach the South Summit and Norgay and Hillary would push to the top with the open-circuit oxygen. The competition fueled the eventual success of Hillary’s team.

10. Luck. Hillary, a New Zealander, was lucky to qualify as a British subject and be invited to join the British team. Secondly, in 1952 the Swiss failed to climb Everest on their two attempts. 

How do you view these management lessons in light of your own organization’s efforts to be innovative and competitive?

 

 

My China Shop Needs No Bulls

Too many corporations put “bulls” in executive roles, and surprisingly hope for good things. Hard-nosed tactics may produce some short-term gains. Under the surface, employee engagement often suffers, which can spur greater turnover and undesirable business performance. Peter Friedes, founder of the management think tank Managing People Better, offers a parable to illustrate (below):

Roger the Bull

Roger always “tells,” rarely “asks.” He knows what he wants, demands it, and pushes everyone to adapt to his schedule and expectations. He believes that every second counts and does not view relationship-building as time well spent or a necessary activity for getting great work done.

He is not empathetic or understanding. He rarely changes his mind, even with new information. He operates solely on his own agenda, showing little or no interest in his employees’ opinions. He rejects suggestions quickly, as he knows others’ ideas won’t work. He easily confronts people, often using words that are harsh, strong, or judgmental. He can be arrogant, as if to say he has all the answers. He doesn’t trust his employees to do a good job, so he hovers and corrects them.

Roger doesn’t include others before making decisions. While he thinks he coaches his employees, his “coaching” comes across as demands. No one would call him nurturing or encouraging. His language and tone exude frustration and anger. He is extremely unpleasant to work for.

bull in china shopFriedes writes that, while Roger may have flourished as a department of one in the past, his lack of understanding of how to motivate others is a huge drawback to managerial effectiveness. What is recommended are two key skill sets:

  • Relating, which includes relationship-building activities such as asking, listening, including, coaching, and encouraging.
  • Requiring, which encompasses results-oriented activities such as setting expectations, focusing on goals, insisting on excellence, establishing appropriate controls, confronting performance issues, and asserting your views.

Read about Friedes’ experiences in trying to coach Roger-types:

Bulls are the hardest managers to coach. They typically don’t listen well. They often think they have the answers already. Over the years, I’ve tried the following messages, with limited success:

  1. “You are a results-oriented manager. But you would get far better results by asking, listening, including, coaching, and encouraging your people more often, and lowering the volume on how you demand and require of your people.”

  2. “You were an excellent, hard-working individual achiever. But now your success is measured by how well you let others achieve. This takes a different set of skills. Unless you develop these skills, you cannot be effective as a manager.”

  3. “Your goal is fine…to do a lot of excellent work and meet productivity objectives. But the manner you use to get results is damaging our business and sabotaging your career.”

  4. “Our top employees will not work for an over-Requiring, under-Relating manager very long. They will seek a more reasonable manager and leave or transfer. That will require you to start over with new people, lowering your productivity. Over time, the company will not want to give you any new people.”

  5. “You have taught your people to give you exactly what you want, but they no longer give you new ideas or suggestions for how to do things better. You have demotivated them, which is why you see them lacking.”

  6. “I know you don’t need to be liked. But you do need people to appreciate and respect being managed by you. You are not on track to get that respect.”

Since Bulls feel justified in their treatment of others, none of these statements are likely to produce changed behavior. However, being straightforward, according to Friedes, and saying “You are failing as a manager” or “You will be fired if this over-Requiring, under-Relating behavior continues.” may have the desired impact.

(Want to see how Bullish you are? Take a free assessment !)