This post was inspired by a comment from Andy Marks in a joint presentation he delivered with Martin Fowler to an audience in Melbourne yesterday. The presentation was on how to fail with Agile.
Andy asked the audience to put their hands in the air if they had ever read an e-mail from a manager within their business praising the success of a project. 100% of the hands in the audience went into the air. Andy then asked the audience to raise their hands if they had ever received a similar e-mail that was congratulating someone that had tried something bold and risky and had failed. No hands went into the air.
Today I had a conversation with an expert on innovation. He walked me through a very interesting model that he has developed that helps frame the dynamic of innovation within an organisation. He has three dimensions that he walks through, one of them being leadership. He argues that it’s the role of leaders to create a culture that accepts a degree of controlled failure, as it’s these activities that move the organisation forward.
Are we encouraging the right behaviours?…
June 17th, 2009 at 6:29 pm
You are so right. Thanks for sharing your thoughts. I would be interested in knowing more about the innovation model. If possible, can you send me a name or more details about this?
Would be great!
Thanks,
Markus
June 17th, 2009 at 6:30 pm
True Richard! Not heard much of appreciation in attempting something ‘bold’ and ‘failing’ achieving. Most established organizations over a period of time become pretty straight jacketed in their approach, the risk appetite get significantly reduced; this is coupled with recessionary times of today.
On a positive aspect on recession is that, organizations today have not other choice than to innovate the way they do business today. With both top line and bottom line shrinking, competition playing the blood bath, everyone seems to be trapped in the ‘red ocean’, to break out only option is the innovate into a ‘blue ocean’.
Also agree on the aspect of ‘controlled failure’ wherein the organization encourages the ‘bold’ and ‘risky’ in one hand and safeguards the organizational interest by limiting its exposure to failure on the other hand …. Leadership!
Bhanu Jasti
Consultant and Practice Lead_T2
QAI Global Services
June 18th, 2009 at 12:15 am
Richard
How was the question framed exactly? “Bold and risky” does not quantify the risks and potential benefits involved and it could be interpreted as meaning uneccessarily risky. Of course managers don’t like irrepesonsibly risky behaviour that results in failure. Most people don’t reward irrpesonsibly risky behaviour even when it does not result in failure. You are unlikely to hear “Joe Blow just played Russian Roulette and survived. Let’s give him a pay rise.”
Can you give examples of a “bold and risky” project implemenations H1 and a reference implemenations H0 and quantify for both, from the point of view of the decision maker,
- Probability of success: P(Hx)
- Benefits of success: B(Hx)
- Cost of failure: C(Hx)
Then
Average net benefit of Hx: N(Hx) = P(Hx) * B(Hx) - (1-P(Hx))*C(Hx)
and
Benefit of H1 over H0 = N(H1) - N(H0)
If H1 is being rejected when N(H1) - N(H0) > 0 then you have something to talk about.
These decisions depend on who in the company is making them.
If the cost *to a manager* of failing with a new unproven technology is very high, even though the risk/reward is good for the company then resistance to new technology is going to be high.
June 18th, 2009 at 12:21 pm
Hey Markus,
Yes! I’m going to talk to Gus about letting me publish some of his ideas and tools. Watch this space…
Rich
June 18th, 2009 at 12:28 pm
Hey Peter,
Thanks for your comments! The point that Andy and I are trying to make is that most organisations have a very rigid view of experimentation, learning and failure.
Many of the organisations that I work with have a very poor view of risk across their portfolio; they simply couldn’t say how much risk is in their portfolio and where it lives.
Some of the more mature organisations I work with have a much better view across their project portfolio, they take controlled risks in the knowledge that they will not all work out. This is a very high maturity behaviour and unfortunately not always that common. Doing this requires a revision of what ‘failure’ means. Sometimes having tried and failed really is much better than having not tried at all…
…and I agree. We don’t always want individuals taking chances in isolation, hence the term ‘controlled risk’. We need to help individuals measure and quantify risk before they act appropriately. I’ve found that this often requires a shift in management thinking…
Rich
June 18th, 2009 at 2:39 pm
Taking my experience from the toy industry, this pretty well describes how a typical toy or consumer product company approaches development. Usually there are a handful of blue sky kind of projects that are a calculated risk that will pay off well if they work out. Then there are the middle products that are more or less guaranteed to break-even at worst, but they are not very innovative. At the base of the product line are the evergreen items, things that just work, and there is no innovation going on whatsoever, but it pays the bills.
You can get by with the bottom two tiers, but it is the top tier items that can really turn into huge successes.
Another area of reference would be research heavy companies like 3M. It seems like there may be some negative impact of catering to share holders, which seems to have become more predominate lately.
For myself, with my background of invention and product development, I will be focusing on something like an innovation tithe within the company. As long as we are profitable, I would rather take that 10% of the profit and put it into blue sky research and prototyping with the firm understanding that it could just wind up being an interesting footnote within the company.
Another way of looking at this is that it effectively allows people to play and helps to foster creativity, which I think would filter down into their everyday work.
June 19th, 2009 at 8:57 pm
I see what you mean now.
I was touching on two things that I have encountered from time to time which Jonathan, unlike me, may actually understand.
1) The resistance to disruptive change in companies that Clayton Christensen explained so clearly. The basic idea is that successful companies are guided by managers whose pay, prestige and job security are determined by the many small decisions they make. For each of these small decisions, the risks of embracing disruptive technologies are extremely high while the potential rewards are low (probably to continue at about the same pay level in a disruptively changed company.) Therefore the tidal flow of small decisions drives companies to stick with technologies that worked in the past.
2) The effect of how questions are framed on outcomes. The Nudge people have publicized this a lot lately, and they are now embedded in the Obama administration. This is so trendy that Wikipedia has a Choice Architecture entry. Choice architecture looks like it is going to be challenging given the complexity of human information processing as illustrated by this list of cognitive biases.
June 21st, 2009 at 4:49 pm
Talking about disruptive change in the context that Peter mentioned in 1 above, I think that the scenario that he used is more likely in larger organizations where you really have divisions under middle manager positions. I think in that case, you would need an explicit understanding that they need to not just show bottom line results, but also breadth of work results. But, these things are difficult to put a metric against, so would not be something that is simple to peg a bonus against.
Actually, I did have an ideation performance metric tied to my annual review criteria when I was working for a medium sized toy company.
In the long run, doesn’t just boil down to those who innovate, prosper, but those that don’t, stagnate? (Of course, this is within the confines of making sure the day-to-day expenses are paid.)
I think Peter’s second point is more to do with fostering a culture of X within a company. If people view the projects as being risky and don’t see the return value because they won’t get their bonus if it fails, then internally the culture will develop to reinforce that.
Come to think of it, I’ve got a similar example from working with local companies here in HK. One of the side effects of the local schooling and culture is that a typical worker (engineers, sales people, or anyone) does not know how to deal with an open ended problem. They see it as being very high risk, and will generally don’t know where to start. Starting on a problem like that requires to decide an approach to use, and, consequently, making a commitment to that approach. So, if they fail, it is their problem. If you give them the same work, but just make that first decision on what the approach should be, there are no issues.
So, one thing that I’ve tried to do when working with factories or companies here is to find that line between the open ended problem and constraining the problem set too much.
June 22nd, 2009 at 11:36 am
I need to get hold of Christensen’s books - I still haven’t read them. Thanks for the interesting links, I’m working my way through them…
HK from my brief experience has a business culture all of it’s own!
Rich
January 5th, 2010 at 12:20 pm
Very interesting thought. I have never thought about it this way but make sense. Great links.