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Innovation

Culture: Other Financial Research

by Ron Potter February 6, 2020

Through the years the Denison Organization has continued to perform research on the original model. One piece of research that caught my eye early in the process looked at six normal measures of performance that most companies look at on a regular basis. Those six measures included:

Profitability
Sales/Revenue Growth
Market Share
Product Development – Innovation
Quality of Product or Service
Employee Satisfaction

Most Culture Surveys focus on the last of the six measures, Employee Satisfaction. Research originally done by the Gallup organization indicated that satisfied or engaged employees lead to better organizations. I’ve looked at several of those surveys as my customers have used them. I agree that more satisfied/engaged employees do lead to better organizations. But, it was always difficult for me to figure out what actions lead to more satisfied employees. The Denison Survey always provided me with more direct and measurable actions that would lead to employee satisfaction.

Four Quadrants

First, let’s remind ourselves what is included in each of the four quadrants.

Mission

Adaptability

Involvement

Consistency

Now, let’s take a look at each of the six measures of success and look at the Quadrants that drive them.

Profitability

Mission
Involvement

The description of this one given by the Denison organization is “Do we know where we are going?” If it’s not clear where we’re going, it’s hard to figure out where profits will come from.

The description given to Involvement says “Are our people aligned and engaged?” Know where you’re headed and engage the people in getting there. Strength in these two quadrants will lead to profitability. Notice that profitability requires elements of each of the “four” halves of the chart. Mission is in the upper right quadrant. Involvement resides in the lower left quadrant. Top/Bottom, Left/Right. Profitability requires a bit of it all.

Sales/Revenue Growth

The two quadrants driving this success factor include:

Mission
Adaptability

The description given to Adaptability is “Are we listening to the marketplace?” This means that our Mission is being tweaked along the way to meet the needs of the marketplace. If we’re listening.

Also notice that both of these quadrants are at the top of the chart. This is the half that creates an Externally Focused organization. This type of organization is very focused on the forces in the market place.

Market Share

Mission
Adaptability

These happen to be the same two as Sales/Revenue Growth. In hind-site that might be abundantly clear. But what has been interesting to me (and makes this connection even more powerful) is that even when the industry is trending downward at the moment, companies with strength in these two quadrants tend to perform better than others facing the same difficulties.

Product Development and Innovation

Adaptability
Involvement

Once you’re familiar with the layout of the survey, this one also becomes abundantly clear. Both quadrants are on the left side of the chart which creates very flexible organizations.

Quality of Product or Service

Mission
Involvement
Consistency

This is the first of the performance measures that has strength in three areas rather than just two. It adds Consistency. People need to know what the Core Values are and the consequences for violating them. They also require Agreement from everyone plus Coordination and Integration across the organization. There can be no disagreement on how we do things around here and no piece of the business making decisions that benefit themselves and not the whole company.

Notice it does not include customer focus. Quality is internally driven, not externally driven.

Employee Satisfaction

Mission
Involvement
Consistency

This is usually the one that is measured by Culture Surveys. What’s interesting to me is that this one is driven by exactly the same quadrants that drive Quality. A clear mission, active involvement and consistency drive quality, and satisfaction!

Where do We Start?

One of my colleagues calls this the “So what, Now What?” question. Now that I know this information, where do I start or what do I do with it?

One way to answer that question is to see how many of the performance maesures are driven by each quadrants.

Mission is involved in five of the six performance measures:

Profitability
Growth
Market Share
Quality
Employee Satisfaction

Involvement is involved in four of the measures:

Profitability
Development/Innovation
Quality
Employee Satisfaction

Adaptability is involved in three:

Growth
Market Share
Development/Innovation

Consistency is involved in two:

Quality
Employee Satisfaction

I always suggested that you start with Mission, get everyone Involved, increase your Adaptability and change and finally make sure that you’re absolutely consistent in your approach.

Build a Great Culture

Great cultures are absolutely required to build great companies. Just don’t forget the other two elements of being great:

TLC

Team Leadership and Culture.

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Blog Culture

Culture: Four Halves

by Ron Potter January 27, 2020

Yes, I have an engineering background and I know there are two halves to every whole. However, the best way to start looking at the results of your culture survey is to look at each half: left vs right, top vs bottom.

Photo credit: Denison Consulting

Stable and Flexible Organizations

The right side of the chart: Mission and Consistency, creates very stable organizations.

The left side of the chart: Adaptability and Involvement, creates very flexible organizations

The trick is to exhibit the right amount of each half depending on your situation. I’ve seen a couple of companies do this the wrong way. Both are companies that are over 100 years old and during that time have been the largest company in their industry.

Too Stable

One of the companies took an approach that was way too stable for their changing environment. As they lost market share and profitability over several years their approach was to “do things the way we’ve done them for over 100 years. That approach has weathered downturns in the past and will do so again.” Unfortunately, it didn’t weather the downturn and they became a small provider in the industry as other companies took the innovative lead.

Another company that was also over 100 years old knew they were falling behind the competition. They hired a “visionary” CEO from a very different industry to help them innovate their way back to a leadership position. This leader lept to a vision of the future that was so far beyond their current position that most people complained they didn’t even know what he was talking about. Consequently, they continued with a “business as usual” approach because they had not been prepared to function differently then they had for many years.

Just like many sports teams, companies often go into a prevent defense posture once they’ve gained the lead. There is great fear in the organization of losing the gains that have been made so they try to protect their current position.

Teaching a Fifth Grader

Because most leaders don’t want to be labeled as the ones who lost the gains that have been made over several years, I see more of this issue rather than the case of trying to leap-frog forward to an entirely new position. Becoming an innovator is tough to pull off if your company has not been prepared to let go of old habits and products in favor of a new, innovative approach.

This issue was made very relevant to me when my children were in about the fifth grade. If one or both of them (they were two grades apart) were having difficulty with a particular subject in school they would turn to me for some help. However, as I began to explain the issue from my level of understanding or education, their eyes would glaze over and they would finally toss their homework on the table and tell me that I was no better than anyone else at explaining the issue from their level of understanding. I then asked to see their textbook and read one or two chapters ahead. Once I remembered the concept that needed to be learned next, they usually responded with something like “Why didn’t you say that in the first place? It all makes sense to me now.” With that approach, I was astounded at how quickly they learned and advanced through the topic, often faster than their schedule dictated.

If you want your organization to advance quickly to the next level of understanding so that they can compete at an innovative level, show them the path. Help them see one or two steps forward. You’ll find that they will get quicker with each step along the way until you (and they) realized that they’ve turned into an innovative organization.

Need for Change and Innovation

Don’t let go of the stable side of the culture survey. No organization can get out of balance and remain successful. While I often see companies maintain the stable side of the survey, it must be balanced with the flexible side in order to obtain long term success. Both sides must be expanded in order to be successful.

Difficult to accomplish? Yes, but necessary. While some people think that leadership is easy, it never is. Balancing stability and flexibility is difficult. But that’s what it takes to be a leader. Accomplish the impossible during the day then go home and be an ordinary family member at night. It’s worth it but it’s not easy.

Internal vs External

In our next blog post, we’ll take a look at the other two “halves” that are just as difficult. Then we’ll take one last look at culture in general and how it impacts the bottom line. Stay tuned for next week.

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Blog Trust Me

Quality Chaos: Creativity

by Ron February 4, 2019

The irony is that a certain amount of chaos is necessary because “quality” chaos stimulates creativity. Organizations that do not create some space for creative chaos run the risk of experiencing staleness, loss, and even death.

“Life exists at the edge of chaos,” writes Stuart Kauffman, author of At Home in the Universe: The Search for the Laws of Self-Organization and Complexity. “I suspect that the fate of all complex adapting systems in the biosphere—from single cells to economies—is to evolve to a natural state between order and chaos, a grand compromise between structure and surprise.”

If a leader fears the creative tension caused by chaos, trouble is often not far away. Leaders need to understand that creativity comes out of chaos, and even what has been created needs to be exposed to chaos just to make sure it is still viable and working. Even the new creation may need the chaos of re-creation to survive in a highly competitive world.

Meg Wheatley writes in her book Leadership and the New Science, “The things we fear most in organizations—fluctuations, disturbances, imbalances—are also the primary sources of creativity.” The question is, how do leaders get people from the scary, agonizing, and anxiety-filled feelings of chaos to the liberating place of creativity, change, and steadiness?

Before we answer that question, we do need to look at creativity and chaos. The reality of today’s world is that millions of ideas for innovation, change, and improvement lie within any factory, distribution center, high-tech office, retail storefront, or operations center. You can also multiply that number by millions (or so it seems) when you bring people together in a team setting and allow them the freedom to create, innovate, and change. In many organizations this causes chaos and uncertainty.

Leaders, then, who understand the positive side of chaos can begin leading people through the confusing maze that creativity causes. They can help people understand that disruptions are opportunities. They can focus their attention on a building a culture that understands change and brings teams together, creating synergy among the members. These leaders explain how necessary it is for a company to respond to change in order to remain competitive.

Leaders help their employees understand the chaos going on around them by making meaning out of it. It is not easy, but it is so very necessary. “Leaders must have the ability to make something happen under circumstances of extreme uncertainty and urgency. In fact leadership is needed more during times of uncertainty than in times of stability: when confusion over ends and means abounds, leadership is essential.”

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Blog Trust Me

Balancing Innovation and Execution

by Ron September 28, 2015

Source: Missy Schmidt, Creative Commons

At some point, every leader seems to grapple with the balance between innovation and execution. Many leaders struggle with the notion that one great idea will save the day for the organization. Others spend an inordinate amount of time focusing on “getting out the laundry” and not on new ideas.

Innovation for innovations’ sake can be detrimental. Innovation is best when it helps get things done. A clear vision and strategy are not enough. Competitors have this as well. Success comes from effectively executing strategies and objectives as well as anticipating and preparing for future contingencies. Successful organizations accomplish their objectives faster than their competitors.

Innovation results from creative ideas successfully implemented. Execution and strategy result in competitive advantage.

It seems that everyone wants to innovate, but in practical, day-to-day leadership, only what is accomplished matters. A significant part of getting things done is focus.

My partner and I used to work with the leadership of an international organization. The founder was a man of tremendous vision and creativity. It seemed he had new, out-of-the-box ideas every day. Fortunately for him and the organization, his senior leadership team consisted of people who understood focus and execution. They had the ability to take his ideas and, in most cases, make them work.

One idea, however, was a complete flop. The organization lost millions of dollars. Why? Because the idea was well out of the organization’s scope. It lacked focus, was not part of the organization’s passion, and failed to be executed. The formula for this organization’s success required team focus and execution, not just the leader’s innovative ideas.

Ram Charan, in his Fortune magazine cover story “Why CEOs Fail,” points out the primary reason CEOs do not make the grade: “It’s bad execution…not getting things done, being indecisive, not delivering on commitments.” They have plenty of good ideas and strategies, but in many cases they lack the ability to execute them.

Charan has also written,

People think of execution as the tactical side of business, something leaders delegate while they focus on the perceived “bigger” issues. This idea is completely wrong. Execution is not just tactics—it is a discipline and a system. It has to be built into a company’s strategy, its goals, and its culture. And the leader of the organization must be deeply engaged in it.

Innovation is a strong gift. It helps companies find new markets, new products, and new customers. Innovation alone, however, does not matter. Innovation requires focus, and part of that focus is execution or achievement.

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Blog Leadership

Change and Innovation are Difficult

by Ron July 2, 2015

Image source: Creative Commons HQ, Creative Commons

Almost all of my clients (all successful business leaders) are in their mid-forties to mid-sixties. That means they were born between 1950 and 1970 and developed their approach to leadership at their first jobs in the 1970’s and 1980’s.

Think about what was making our businesses strong and prosperous during that era and later:

Constantly increasing productivity
Getting as lean as possible
Creating ever-increasing efficiencies
Precision in operational systems
World Changing logistics

Change and innovation in this environment is risky. Corporate boards and investors don’t have much stomach for anything beyond the list above. And, by the way, get better at each of them every quarter! This doesn’t leave much room for trying something new, bringing forth a new idea or innovative approach or certainly launching a disruptive product that is going to be self-disruptive.

In a meeting the other day, one VP said, “I think we can reduce the number of jobs in one area and then use the saved headcount to put toward some change initiatives.” The second VP immediately responded with “I’m pretty sure if we found out how to reduce headcount, we would simply make the reduction in order to get the cost savings. We don’t have any other choice.”

He’s probably right. Reducing the headcount this quarter and for the next three quarters will be highly rewarding but I’ll guarantee you that someone, somewhere is launching a disruptive idea today that has you in the crosshairs four quarters from now.

Change and innovation is hard, really. Lack of change and innovation is deadly, really.

What restraints have you seen that makes it difficult to change and innovate?

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