I interviewed Rod Collins who discussed Why Most Organizations Struggle with Innovation.
M first question is regarding the pace of change. Can you talk a little bit about what changes are taking place and why is change pushing the need for innovation?
Innovation is becoming more and more of a strategic imperative for many companies. They struggle with the innovation because their traditional structures are not designed for innovation. In the media industry, Napster came along. Napster was a new business model that became possible because we now live in a hyper connected world, thanks to the internet and the networks. The traditional media organizations really mishandle what could have been a great opportunity for them by putting Napster out of business. That was there response. While they were successful with that,they couldn’t kill digital downloading. And so today, a computer company, Apple, is one of the largest names in music and the traditional industry winded up, you know, inadvertently ceding a lot of its business to those new businesses.
We're going to see this increasingly--let's take for example the field of financial services. We now have block chain technology coming about. Block chain technology involves distributed users within the financial service in industry that are forming their own networks which are calling into question the traditional ways that we have brokered the transfer of dollars between buyers and seller. The financial services industry is going to need to come to terms with this very new and different business model. I think if we look down the road; we could probably see that this would impact the healthcare industry and then as the whole internet of things become more and more of an everyday phenomenon.
There is another example of a network structure, just the other day, there was a report that some of the automotive companies and I believe Google is in this space as well, are designing technologies so that it's going to become difficult for cars to crash because the cars are all going to be talking to each to the technology of the internet of things. There's going to be a form self-organization, literally among the machines. This is an entirely different context for business. Traditional organizations struggle because they have a hierarchical design, they're not properly aligned to deal with this increasingly network world in which we live.
Can you talk more about why organizations haven’t come term with this?
The thing they struggle with and the reasons traditional companies had so much difficulty with innovation,is there are two key ingredients that are pre-requisites for innovations. If you look at some of the Vanguard Companies, which are companies designed as peer-to-peer networks rather than top-down hierarchies. Examples would be Google. Now the online game company Zappos is in that space. To some extend Amazons certainly Apple is as well.
These are places that are known for innovation and when go inside their organizations what you begin to see is that there tends to be a free flow of information and a free flow of ideas. If anybody saw the movie The Internship, a lot of it was filmed on Google's Campus. You could see that that is very different workspace compared to a typical office, because Google is designed as a network. Its designed so that people don’t work in cubes in offices but rather are more in open spaces and they work in teams and they're sitting together. All of that is to facilitate the free flow of ideas and the free flow of information.
Using Google as an example,again they have their famous 20% rule. Why does that exist? Well, Google puts that in place so that people can disobey the supervisors because normally for 80% of their work they are told to work on something. For 20% time, if they think its good idea, they're free to work on it in that space. Google set-up a company like that because they don't want to stop the free flow of ideas. Whereas, in hierarchies--because every supervisor has the ability to kill ideas, they are so dangerous. You don’t have the free flow of ideas. The other thing in hierarchy is they have this phenomenon known as, "The need to know." Well, in a networking environment, the basic assumption is everyone has the need to know as much as possible. So the free flow of ideas and the free flow of information are the ingredients that leads to serendipity that is often soil in which innovation happens because remember innovation is creating something that doesn't exist. Because hierarchies inhibit the flow of information and they inhibit the flow of ideas they are killing the two ingredients that fuels serendipity that made innovation possible. That's why they struggle. They're not design to be invade.
Are there any success stories or any examples that you could provide of how this is done effectively?
I think Google and Apple are probably the biggest examples. I mean, if you just look the way that they operate, you know, when you go into their office places, you're going to see a real emphasis on the team, you're going to see this free flow of information and ideas and I think the things they produce,the iPhone, iPad, Google Maps, Google Working on the Driverless Car, etc. I mean they're all beginning to come to the terms with the fact that we are going to live in a world in a decade or two where there is going to be Driverless Cars on the road. There will be drone technology for delivering packages. So I think the proof of the pudding, It is in the products that these companies are producing.
What are your recommendations for organizations that want to innovate?
The key recommendation is to transform their organizations into some form of peer-to-peer network. And that's harder. It’s easier said rather than done because it's a complete mind shift. It is a shift in how to lead organizations. At our firm Optimly Advisors we developed a service we call, "Collective Intelligence Dynamics." The purpose of it is to provide simulators to organizations. The simulators help us bring the network affect to both the data and human systems. To aggregate the collective intelligence contained both within the data systems and in human systems and to do those in discreet ways so the companies have an experience of how the network affect works.
Through these demonstrations it helps business leaders get familiarity with how different structures work. It would be a form of a dual operating system. That is a recommendations that John Connor has come up with. He's come up with an idea where he recognizes it is hard for people to--you know, especially those long histories of hierarchy to change overnight. And so he recommends that a second side by side system be set-up that operates according to network principles but is populated by the same people.
Our service collective intelligence dynamics, is a structured way in which to do that in a facilitated fashion. Some form of dual operating system is probably the thing that companies could do now. But I think that these dual operating systems are transition steps. 20 years from now I think the vast majority of business organizations will be some form of peer-to-peer collaborative network. For the simple reason that the world at large is structured as networks and networks are smarter and faster than hierarchies. If the companies don’t transform it is just a matter of time before somebody enters the market with a network structure and then just essentially takes over their business. If you want examples look at what happened to both Kodak and Blockbuster, who got left behind because they could not adjust to the network environment of digital transformations.
Thanks again for sharing Rod, and this is an exciting topic. And looking forward to a great future and innovated future for businesses.
Dustin it's always a pleasure to, you know, talk with you.
About Rod Collins
Author, Keynote Speaker, and Strategy & Innovation Expert at Optimity Advisors