Strategy. Innovation. Brand.

Innovation

Strategy: Seeing What You Can’t See

How do you evaluate whether a given company (or product) will be successful or not? Clearly, you’ll want to study the business plan, interview management, talk to customers and competitors, and get an unbiased evaluation of the product. But is that enough? Unfortunately, it’s not — you’re only looking at those things that you can look at. You’re looking at the known knowns but omitting the known unknowns.

So how do you see what you can’t see? Instead of just looking at the individual case, look also at the category that the case derives from. If you’re evaluating a start-up company, look at all the details of the company. But also look at the category called “start-up companies”. What’s the success rate there? Studying the category won’t always tell you why companies succeed but it will tell you how often they succeed. That can provide you a “base rate” with which to compare your individual case. For a balanced view, always look at the case and the category.

Learn more in the video.

 

The Cloud Comes to Your Car

During the week you drive to work at fairly low speeds in stop-and-go traffic. You don’t need a lot of power but you would like to improve your fuel efficiency. On the weekend, however, you hook your big boat to the same car and trailer it to the beach. Now you want more power even if that means poorer gas mileage.

What to do? Traditionally, you might buy a car or truck that could handle the heaviest load you expected to carry. For hauling a boat, that means a big, powerful car. During the week, as you commute to work, much of that power is unused and wastes a lot of gasoline.

As the cloud comes to your car, you’ll have an alternative. Think of today’s cars as complex software systems mounted on wheels.  You can “tweak” the software to get more power or more fuel efficiency or some other characteristic. As cloud computing evolves, your car will communicate with “horsepower servers” that can set and re-set the performance characteristics of your car. Need more fuel efficiency? Just send some instructions to the cloud and get your software tweaked. Want to set a speed limit for your son? Just ask the “speed server” to set a limit whenever he logs in as the driver.

Cars are becoming computers.  We can already see this in a crude way with the “sports” setting available in many cars. Push the “sports” button and you get stiffer suspension and slightly more horsepower.  Turn it off and you get a cushier ride and better fuel economy.  Soon, we’ll see different settings for different drivers and, yes, you will have to log in. We’ll also be able to tweak the software into a virtually unlimited number of combinations.

Cloud cars could bring us more convenience and, potentially, much better fuel efficiency as you match performance to changing requirements. It can also create some nasty security concerns. What happens if you car gets a virus? More on that in the coming weeks.

Can you teach empathy?

In my last post, I asked about how one would go about teaching wisdom. It seems that we focus our attention on teaching skills and practical arts rather than wisdom or persuasion or (heaven forbid) the liberal arts. After posting my thoughts, I soon stumbled across an article in the New York Times titled “Can Doctors Learn Empathy?”

It turns out that even doctors can learn to be empathetic (OMG!) and can do so with as little as one hour of training. Empathy is certainly a significant component of wisdom, so perhaps we’re already on the road to teaching wisdom and, therefore, effective leadership.

Wisdom and Leadership

I just re-read a terrific 1998 Harvard Business Review article by Daniel Goleman titled, “What Makes a Leader?” Goleman argues that, while experience and IQ are important, it’s emotional intelligence that makes the crucial difference.  Managers without emotional intelligence tend to maximize only their own performance. Managers with EI tend to maximize their performance and their followers’ performance.

What struck me about the article was that the five components of EI are very similar to the five components of wisdom that we discussed back in April.  Here’s how Goleman defines the components of EI:

  • Self-awareness — knowing one’s strengths and weaknesses and their impact on others.
  • Self-regulation – controlling or redirecting disruptive emotions
  • Motivation – being driven to achieve for the sake of achievement, a passion for work and challenges
  • Empathy – considering others’ feelings, especially when making decisions
  • Social skill – managing relationships to move people in desired directions, persuasiveness, expertise in building teams

And here’s what we said about wisdom:

  • Willingness to resolve conflicts;
  • Willingness to compromise;
  • Recognition of the limits of personal knowledge;
  • Awareness that a given problem may legitimately be seen from different perspectives;
  • Understanding that things may get worse before they get better.

There’s not a complete overlap but the two lists are very similar.  My conclusion: it takes a lot of wisdom to be a good leader.  Now, the question I’d really like to understand is, how do we teach wisdom?

The Art of the Wrong View

In one of my classes at the University of Denver, I try to teach my students how to manage technologies that constantly morph and change. They’re unpredictable, they’re slippery, and managing them effectively can make the difference between success and failure.

The students, of course, want to predict the future so they can prepare for it.  I try to convince them that predicting the future is impossible. But they’re young. They can explain the past, so why can’t they predict the future?

To help them prepare for the future — though not predict it — I often teach the techniques of scenario planning. You tell structured stories about the future and then work through them logically to understand which way the world might tilt. The technique has common building blocks, often referred to as PESTLE.  Your stories need to incorporate political, economic, societal, technical, legal, and environmental frameworks. This helps ensure that you don’t overlook anything.

I’ve used scenario planning a number of times and it has always helped me think through situations in creative ways – so it seems reasonable to teach it. To prepare for a recent class, I re-read The Art of the Long View by Peter Schwartz. I found it on one of my dustier bookshelves and discovered it was the 1991 edition.  While I remembered many of the main points, I was surprised to find a long chapter titled, “The World in 2005: Three Scenarios”. Here was a chance to see how well the inventor of scenario planning could prepare us for the future.

In sum, I was quite disappointed. The main error was that each scenario vastly overestimated the importance of Japan on the world stage in 2005. In a way, it all makes sense. The author was writing in 1991, when we all believed that Japan might just surpass every other economy on earth. Of course, he would assume that Japan would still dominate in 2005. Of course, he was wrong.

So what can we learn from this?  Two things, I think:

  1. Always remember to ask the reverse question. If it’s “obvious” that a trend will continue (e.g. Japan will dominate) always remember to ask the non-obvious question: what if it doesn’t? Today, it seems obvious that health care costs will continue to rise for the foreseeable future. But what if we make a medical breakthrough and costs plummet?
  2. Remember that resilience is better than prediction. We’ll never be able to predict the future — partially because we can’t really explain the past. But we can be prepared by building flexible systems that can respond to unexpected jolts. The human immune is probably a good model. This means building systems and organizations where information flows easily, creativity is valued, and leaders can emerge from anywhere.

I’ll continue to teach scenario planning in the future. After all, it’s a good template for thinking and planning. I’ll also be able to provide a very good example of how it can all go wrong.

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