Category: Topic – Innovation

How to Digitally Disrupt an Industry – (And whether it’s a good idea)

THE FOUNDATION FORUM

19th September 2018. WRITTEN UP WITH THE HELP OF SIMON CAULKIN

To download a PDF of this write up, please click here: How to Digitally Disrupt an Industry – The Foundation Forum Write Up

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Progress.  It’s relentless.  And positive.  But boy it is painful too.

One assumes it’s always been this way, but a bit like childbirth or running a marathon the pain fades and only the memory of euphoria remains.  The ‘never’ falls off ‘never again’ so easily. But you can’t say never again to progress.

Back in September 1963 Harold Wilson sounded like he was in a similar place… ‘The Britain that is going to be forged in the white heat of this scientific revolution will be no place for restrictive practices or outdated methods.  We shall need a totally new attitude to the problems of apprenticeship, training and re-training for skill.’

You can hear the grinding of wheels and clashing of interests as society faced its version of the innovator’s dilemma – the new world promises much but not enough yet to see how whole industries, workforces and livelihoods might be replaced.  Just that they are being threatened.  And yet they work perfectly well at the moment, thank you, so why all the fuss?

Later on the challenge shifts, from Canute-like resistance to herd-like not wanting to be left behind.  Both groups have to face up to the next difficult part of their respective journeys:

  • For incumbents, how do you learn freely enough to really take advantage of the new and fast enough to avoid the invisible ‘Kodak cliff-edge’ that you are hurtling towards?
  • For the newbies, how do you grow up so your scaling is sustainable and you don’t just fall back into being a troubled large organisation – Uber or Tesla’s manufacturing challenges or Facebook’s malpractice or Google’s ‘do good’ doubts or Apple and Chinese workers or lots of them and tax… plenty spring to mind

 

We know so many people wrestling with aspects of this that we thought it deserved a platform and some intelligent exploration…

  • First to understand more about what it’s like being in the white heat and how hard it is simply to succeed when with hindsight it all looked so obvious.
  • And then, on reflection, where it’s taking us – as customers or colleagues. Or the effects on competitors.  Or the unintended side-effects on parts of the world that might be struggling as a result.  Or even a dark side that emerges like a cloud doggedly attached to a silver lining.

 

So when we gathered in mid-September, we came to listen to three perspectives from different stages in the journey

We had a view from what feels like a while back, the digital music battles and the response of the establishment, with Barney Wragg, SVP for Universal’s eLabs from 2000 to 2006 and then Global Head of Digital at EMI to the end of 2007.  He was originally one of the first employees at ARM as a bright-eyed Physics graduate and when he joined Universal he was plonked in the corner to fiddle with this digital distraction while the main work was done by the main people.  He saw first-hand how digital became a great deal more than a distraction and found himself front and centre as the organisation took responding seriously.  Having done a good job he took on a more influential role at another of the majors, EMI.  He’s done some very interesting things since too, but this is the most immediately obvious element that relates to our story.

We had Deliveroo in the form of wonderful Foundation alumnus, Lisa McDowell, Head of Brand Strategy and Insight and part of their team since June 2016.  She describes the journey, from a proper customer insight about an un-met need at the start, a clear-sighted view of a different strategy to meet it (one that’s different from Just Eat, Dominos and the like, not just the establishment), the scale and pace of global expansion that is breathtaking, and the intensity of the competitive battles that lead to continual innovation and evolution of the model.  Alongside the survive and thrive cut and thrust they have had their share of ethical contemplation to consider too, most notably around the gig economy.  Are they really a force for good not just for good food?  How do they win well not just win big?

And we had one you might not have heard of yet, Truphone, and the irrepressible Sarah Speake who has just left as their Global CMO.  Truphone are poised to turn the world of mobile telephony upside-down, for example with SIM cards that are profiled remotely and NOT run by a network operator.  She also spent time at Google in the London office as the company grew at a furious pace, and she ultimately became Strategic Marketing Director looking after B2B customers and agencies across the Google portfolio of advertising & tools (so this meant teaching them how to use the rapidly evolving service too).  She’s been in the more traditional camp too, most notably at Clear Channel Outdoor as CMO where they set about the wholesale digitisation of what used to be called posters, reinventing outdoor media before it was reinvented by somebody else.

 

A Disruptive Influence.  The discussion that followed, summed up by Simon Caulkin

‘Disruption’ may currently be the most overused word in business, attributed indiscriminately to almost anything vaguely new.  Yet, ironically – blame it on fear, denial, attachment to doing things the way they’ve always been done (a recurring theme) – we may if anything be underestimating the full impact of the present wave of data and platform-driven disruptions.

Fed by Moore’s Law, network effects and the exponential increase in personal data gathered by our devices, what began by upturning music and publishing will eventually transform every industry, including public services.  The pattern is clear – a tech firm arrives, finds a way of digitising the master element of the value chain and for the first time delivering individual service to avid consumers. Hello Apple, Google, Amazon (and Netflix, Uber, Deliveroo…); goodbye music, newspapers, bookselling (and television, taxis and restaurants…) as the mass-production industries of old.

Yet this description of disruption in the abstract bears no relation to the heat and smoke engendered at the point where the rubber hits the road. Here, as an attentive September Forum heard from some of those in the thick of it, aggression, panic, bewilderment and exhaustion are often the order of the day, offset by short-lived periods of exhilaration and euphoria before the lurching shape-shifts begin again.

One of the most striking things to emerge from the evening was the degree to which disruption was, well, disruptive. Business in periods like today is almost comically unlike the rational, planned and predictable activity of the textbooks. It doesn’t matter much whether a company is doing well or badly, leading or lagging, none of the normal calculus applies.

So for those in the eye of the storm, the only way to really know whether what they are doing is sensible is to wait for actual events to prove them right or wrong.

‘The thing about disruption is that everyone thinks you have a plan, or that you can refit a plan – but the reality is that you can’t ever foresee the variables’, says Sarah Speake, currently running her own consultancy but previously at Clear Channel and Google Europe. She was speaking of her experience at an incumbent changing to catch up, but even when things were going swimmingly at Google, there were moments of sudden reversal – as when a new leader’s fresh eyes, perhaps surprisingly, saw the company’s recruitment process was too homogeneous, focused only on millennials at the expense of greyer hairs. And Speake apologised to other companies for the expensive and, she now feels, over-generous working conditions pioneered by the search company, which, while great for retention, gave new hires ‘a sense of entitlement that that wasn’t necessarily so smart in the long term’.

For his part, Barney Wragg, now out doing his own start-up after a career taking in ARM, two music business ‘Majors’ and The Really Useful Company owned by Andrew Lloyd Webber, delivered a compelling portrayal of the complacency he found when, in 1999, he was pitched as a digital geek into a record industry flush with a decade’s extravagant CD profits.  The leaders had literally no conception of what the internet was about to do to it and when at a Board meeting Wragg demonstrated how pirate site Napster worked, he was met first by denial because it sounded awful (‘It’s all bollocks anyway, isn’t it!’) followed, once he plugged the new-fangled laptop into the room’s main speakers, by utter panic (‘Christ alive, we’re all doomed!’)

But initial shock was just the start. Noted Wragg: ‘What I realised with the level of disruption we were facing was, even when we thought we’d got to an equilibrium, it changed on us before we knew it. So we had these layers of people doing what they’d previously done that you were trying to unpick.  You’re talking to people and you say yes, I know you used to make CDs like that 15 years ago, but it just doesn’t work like that any more’. Then to other people a bit more with the programme you’d say ‘yes, we worked that out a month ago but it’s no longer right’.

He described the rollercoaster flips vividly – from having no business to having a multi-hundred-million-pound ringtones business to having no business again when smartphones took over, It wasn’t just that everything was wrong: it was wrong in multiple layers, time-scales and dimensions.

The 1990s music industry was way behind the curve. But the picture painted by Lisa McDowell, head of brand strategy at Deliveroo (reportedly Europe’s fastest-growing start-up), was one of a life that was no easier and sometimes more lonely than that of those they are disrupting.  Even for a disrupter-in-chief in super-growth mode!

Deliveroo was born in 2013 of a London-based New York investment banker’s irritation at being surrounded by good restaurants that he was too busy to eat at, with alternatives being a Tesco sandwich or a low grade local takeaway.  A mere five years later Will Shu’s baby is earning revenues of more than £277m (that being the 2017 figure, the latest available as we write late in 2018) through 50,000 riders in 500 cities and 13 countries from over 50,000 restaurants with no more than 30 minutes from order to receipt.

Less happily, along with competitor Uber, Deliveroo has found itself at the heart of debates about one of today’s most contentious business issues, the gig economy and the future of work.  McDowell described their aim to lead by negotiating with governments to improve legal frameworks on behalf of riders who want a blend of flexibility and protection not currently allowed. It’s bold and it sounds good, but an awful lot of people are waiting to be convinced.  On another front she showed how data is used to spot underserved areas, where local customers lack access to cuisines Deliveroo can see are popular in similar locations.  Of course they are re-writing more rules in response.  They now have ‘dark kitchens’ where chefs from affiliated restaurants cook up dishes for delivery in converted shipping containers, and this has also brewed controversy.

Neither of these was anywhere near the Deliveroo management team’s radar at the start – and nor was this year’s sudden need to pre-empt a Just Eat launch by creating news of their own.  They developed a brand new service linking 1,000 independent restaurants, this time with their own delivery fleets so changing the Deliveroo model, and then created three apps to make the various parts of it function, all from a standing start in eight weeks.

McDowell said the company got by on aggression and adrenalin – in an organisation already growing at 650 per cent a year, the job simply wouldn’t have got done without it.

In this kind of business, going full tilt and then some, there’s not much room for management niceties: left hand down a bit; careful – dangerous bend ahead; or just occasionally whoa, STOP!

All the speakers agreed on the need to maintain momentum, which in practice meant a constant battle with the strong human desire to retreat to the comfort zone. In a business environment like today’s, ‘you have to be comfortable with being out of your depth for 50 per cent of the time,’ said McDowell – or, as race driver Mario Andretti once put it in automotive terms, ‘feeling in control just means you aren’t going fast enough.’

A casualty of speed and chaos can be keeping everyone on the bus (or bike). ‘Unless you bring the people with you, unless top down everybody is genuinely an advocate and understands their individual role in the disruptive journey, you’ll screw up quite speedily. It’s not a box-ticking exercise,’ warned Speake.

Deliveroo learned this the hard way. Because it was moving so fast, McDowell acknowledged it sometimes left people behind. This was the case in 2015 when riders didn’t just object to being moved from a system of payment by the hour to payment per delivery, they went on strike.

Riders are genuinely at the heart of everything, McDowell insisted: Shu himself was the first Deliveroo rider, and every new hire has to ride, or at least deliver, as a condition of employment. ‘In big cities like London, riders make more on average with payment per delivery. We knew that. What we didn’t do a good job of was telling them’.

Wragg agreed, emphasizing the positive role of ARM’s cute growth mantra, ‘an ARM in every pocket’, in keeping the Cambridge company focused in the early days as it sought to make its IP-based business model work. He added caution that the desperate recourse to mandating certain behaviour or action simply didn’t work.  Even when he technically had that power, in a ‘pants-on-fire’ crisis at record company EMI, ‘I didn’t build enough consensus. The idea that a great leader can come in and just get it done is crap’.

Yet as the stories showed disruption isn’t entirely about chaos (just partly). Lessons are being learned. Disruption itself is evolving. Speake pointed to emerging ideas around ‘collaborative advantage’, in which firms combine to build ecosystems that can work for many players as well as customers, without a competitive fight to the death. And when the dust of battle has settled, the basics of business and marketing haven’t changed, she noted, although the means of delivery and the division of the spoils certainly has: a firm has to make money at some stage, and this means keeping very close to feedback from customers and employees.

Of course the wider narrative continues. In his introduction, chair Charlie Dawson observed that as well as turning the business landscape upside down, disruption has consequences that are wide, deep and often unintended for communities and society at large.

We know already that the main beneficiaries of the current phase of digital transformation are us, as consumers. And for now at least the tech titans who have gratefully hoovered up the personal data that we have all too willingly surrendered.

But viewed from the perspective of producers, citizens and the communities we live in (which are also us of course), maybe not so much.

How will this play out in the longer term?  Who knows. Certainly not the disrupters, despite the illusion of control. Their intense urge to reinvent is truly a force of nature – but whether it’s a good idea…?  They just don’t have the bandwidth to deal with that as well, so it sounds like if it gets done at all then it’s addressed in the ways we respond.  We need to be more than self-interested customers and maybe that’s what’s emerging now.  A push-back has begun?  One for another Foundation Forum perhaps.

 

The Foundation’s view

Intense as a double espresso, it was a visceral evening.  The smarts of disruptive ideas were elbowed aside by the energy, drive, aggression and ruthlessness to make them win.  We had two lasting impressions and they weren’t what we’d been anticipating.

 

  1. Disruption only happens when something’s burning. And by burning we mean any of pain, fear or ambition, in descending order of effectiveness.  Pain means it’s going wrong now, fear that it’s fine now but you can see it’s going wrong soon, and ambition suggests it’s fine but that you want or need to get to somewhere better.

 

Things are only truly burning when the feeling is so strong and so visceral that all of the conventional approaches simply won’t work.  This means all of the mad things you could possibly do, that truly upset the apple-cart and for which the costs are clear but the benefits are hopeful, are the only possible courses of action.  It gives you courage because it takes away any alternative!

Usually this works in favour of a start-up – the ambition has been enough to burn bridges and take a leap, then fear fuels the work needed to make the idea take off.  Even so the stories from Deliveroo and Google were startling in the energy and pace of movement – these weren’t just start-ups but organisations on a path to somewhere altogether bigger and more substantive.

Barney meanwhile brought to life what it takes to shake a comfortable incumbent out of its zone of complacency – and the music industry sounded pretty well entrenched.  The initial Boardroom dismissals of Napster were hilarious yet chillingly real. As he said, you had to persuade people it’s not going to be alright when they’ve been very successful for years previously.  And then keep on doing it every time it looked like there might be light at the end of the tunnel, because every time the market moved away from them again.  In the end the industry was rescued by Apple and Steve Jobs’ brilliantly simplifying vision, but the record companies only bought into it because by then, they had truly stared into the abyss.

 

  1. To survive AND thrive AND contribute to society requires speeding up or slowing down, depending on where you’re standing. Having just spent a couple of days helping run a global conference for the asset management group in a large bank, the issue of pace is front of mind.  They could see themselves that they needed to speed up, but that meant shaking off years of steering carefully, where any downside seemed far bigger than rewards for trying something new.

 

Contrast this with Google’s recruitment – Sarah was spending 25% of every day interviewing streams of people, then learning with hindsight that the Millennial-heavy outcome was not nearly balanced enough to do the job.  Or with Deliveroo’s rush to update their riders’ remuneration approach, when they changed from hourly to ‘per delivery’ payments they had a two day strike on their hands and a march on their Headquarters in Soho.

In both cases the issues were resolved when a bit more time was taken, or available.  It was a new CEO at Google that helped the team pause and see what was happening, and at Deliveroo the response at HQ was helpful – to sit down and listen to the views of their riders, and then much more carefully respond.

This didn’t come naturally.  There is clearly an aggression to the pace of things and to the character of the businesses.  You can see why too.  You start and the challenge is trying to survive.  You get further and the challenge is changing the world, fulfilling the potential of your bold ideas.  And then you find simply MASSIVE unintended consequences with no time to spot them or tune things in response.

No wonder we have the issues we’ve seen from disruption – somehow the organisations involved have to find a balance, to go fast and go carefully, to put people back into the mix.  Easily said.  But somehow, it must be done.

 

 

About The Foundation

We are a management consultancy working with all kinds of organisations to achieve customer-led success. This means tackling big organic growth challenges; growing faster, growing into new markets or fending off threats to growth by starting with what matters to customers and then making it work for the business as well.

The aim is to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren’t challenged

We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value

This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different

By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get around the natural and limiting inside-out beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success

We answer three sizes of question:

  • Small – a new proposition or an improved customer experience
  • Medium-size – growing value per customer or improving retention (a sub-set of the former)
  • Large – creating customer-led business success, often by uncovering a true outward-looking purpose and the genuine belief needed for it to be acted on

Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth

Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well

This link will take you to more information about us and our Forum events: http://www.the-foundation.com

 

Contact Details

Charlie Dawson (Founding Partner):

cdawson@the-foundation.com / +44 7785 268 859

Charlie Sim (Director)

csim@the-foundation.com / +44 7958 574 917

Anna Miley (Director)

amiley@the-foundation.com / +44 7816 261 987

John Sills (Managing Director)

jsills@the-foundation.com / +44 7990 943 402

 


Reconnecting Managers with the Real World – Why hard, why crucial, why now and how

THE FOUNDATION FORUM

16TH november 2017. WRITTEN UP WITH THE HELP OF SIMON CAULKIN

To download a PDF, please click here: Reconnecting Managers with the Real World – Why hard, why crucial, why now and how

Losing touch is the easiest thing in the world on a personal level. It’s also remarkably common at work. It’s hard enough to stay in tune with customers and colleagues. It seems harder still to stay in touch with the mood of the nation. If the people in charge of the nation’s institutions prioritise themselves, feathering nests, looking out for their own, then unsurprisingly, eventually, support wanes. If at the same time organisations we buy from and work for treat hitting the numbers as everything with people’s wellbeing a bonus at best, despite the good words on the website, you can see how a country might start coming apart at the seams.
So managers are evil? That may be a bit hasty. Any group of people who spend time working closely together develop a shared view of the world and common beliefs about what matters. As social animals we’re good at fitting in with our tribe. What it looks like from a distance, standing in other people’s shows, is hard to empathise with, at least without deliberate effort. Out of sight is out of mind. No one means to become out of touch – it happens naturally. So what can be done? And is there more to this than the thoughts above?

“Almost certainly, and so we asked three people to share their views one dark November night, people who know about the boardroom and about the real world, people brave and honest enough to say it how it really is. They were…”

Rita Clifton, who has a long and strong-speaking background in brand and communications with Saatchis, Interbrand and now as a Non-Exec at Nationwide,
Asos, Ascential plc and Populus. She has also served on boards including Dixons plc, BUPA and Emap plc. She has publicly challenged high pay (and some highly paid individuals), and is closely connected to the world of the customer and to issues faced by society more broadly. She saw environmental challenges coming in the late 80s and started to urge the business world to act. Now, a scarcely believable 30 years on she’s just as vocal and even better informed, seeing what to be inspired by and what to worry about from groups of leaders around Board tables and groups of ordinary people around the world.

Danuta Gray, ex of O2, now sits on the boards of Aldermore, Direct Line Group, Old Mutual and at the Ministry of Defence. O2 in its prime was famously and customer-led, pioneering all sorts of industry changes in a bid to make the world of mobile work better for the people it served and better for the people who worked there. It took bravery and conviction, qualities she brings to her Non-Executive roles. From these experiences she feels strongly, and more than ever, that it’s essential always to have customer and people on the Board agenda.

And Anthony Hilton, a business journalist and writer who speaks as he finds and whose honesty and experience led to early calls that all was not well on the subject of which we plan to speak. He is at his paint-stripping best around issues like this, and he’s been banging on about the risks of business leaders remaining in their own over-paid bubble for many years. He’s challenged leaders directly and seen occasional outbreaks of common sense, but more often it’s been pointing out that what feels wrong is indeed wrong and foreseeing the issues that follow.

So what did they say? And where did the discussion take us? Can the country be put back together again? Simon Caulkin has summarised where we got to, which was arrived at via a strikingly bold and challenging discussion.
It’s the paradox of the age. Never have we been more connected. Never has so much been known about so many by pollsters, marketers, probably governments and also crooks. We quantify ourselves and almost everything else.
Yet the age of Big Data is also the age of the Big Disconnect. Elites from the just-about and really-not-managing. Politicians from voters. London and Washington from their hinterlands. News media from those they aim to inform. And business from customers and workers.

“The speakers at The Foundation’s November Forum on ‘reconnecting managers with the real world’, in a conversation that was both fascinating and sobering, all agreed that business and the people it serves increasingly appear to inhabit different planets.”

‘The values that business executives run on are increasingly divorced from the values of society’, observed the Evening Standard’s Anthony Hilton, the gulf between the two neatly reflected in, and exacerbated by, the widening pay ratio between CEOs and the average worker. The pay disparity between top and bottom currently stands at 140 times, compared with 33 in 1984. The resulting evaporation of trust in business, was indeed ‘the elephant in the room’, according to brand guru and experienced non-exec Rita Clifton.

It is one that many boardrooms have had the utmost reluctance to acknowledge and the panel described the way some boardroom conversations were capable of making them cringe. ‘Most people don’t live in the bubble that those making decisions about their lives inhabit. There is a disconnect that has got greater and greater as the years have gone on’ confirmed Danuta Gray, also in demand as a non-exec as well as being a member of the Defence Board at the Ministry of Defence.
Business people like to tell each other that they have a communication problem. No, said Clifton: the problem is that they do alien and unacceptable things that distance them from the society of which they now seem only nominally a part.

women-in-leadership

Evidence of the divergence is everywhere. Business people often look and sound different from ordinary folk, noted Clifton, their strange jargon sometimes reflecting the linguistic strain of trying to euphemise the unjustifiable. Banks and telcos unwittingly demonstrate what they think of their customers by placing their service centres on the other side of the world. Ignoring the evidence that many people prefer humans to machines, retailers and airlines automate check-ins and check-outs, and governments boast of making their services digital by default, irrespective of human cost – see Universal Credit.
Boardroom discourse centres on the numbers, share price and City opinion, pointed out Gray, which is also how success is measured, while customers and workers who make it happen barely get a look in. According to Gallup, the thing most people in the world want more than anything else is a steady job and a paycheck. Yet work gets ever more precarious and oppressive (think Amazon, Ryanair, social care), and as Gray noted average pay has lagged behind economic growth for the past three decades.

“In other words, the disconnect with business is not an illusion. We’re not stupid. Interests have diverged. What’s good for business is no longer necessarily good for society as a whole.”

How this happened? Several hypotheses emerged. Hilton noted that fear and loathing largely centred on large and remote public companies, as opposed to the local shop or enterprise – an important distinction. Among the former, herd behaviour and fear of standing out from the crowd play a part; Paul Polmans – leaders who are willing, like the Unilever CEO, to speak up for sustainable, inclusive business – are rare. Clifton felt that issues of high – and low – pay could be difficult to discuss in many or most boardrooms. A generally macho, aggressive business culture didn’t help. As Hilton remarked, business is a game played by alpha males to norms devised by men, to which many women understandably decline to submit themselves. ‘On that basis many people get to the top not because they are the most talented or aware or sophisticated, but because they are best at corporate infighting, or luckiest, or both’.

A weightless economy coupled with an abject race to the bottom in national tax regimes has allowed large corporates to swerve taxes for which everyone else believes they are liable. And Hilton described a version of Gresham’s law
in which bad business methods drive out good – a prime example being the rapid spread of unscrupulous sales tactics by banks and derivative houses chasing seemingly unlimited profits in the early 2000s, culminating in the great crash of 2008. If you acted responsibly your figures looked poor next to competitors who didn’t play by the rules. Pressure was applied to the good guys to behave like the bad, who didn’t get found out until years later.

“Because questions weren’t asked about how such good news was being generated, we sowed the seeds of bad business. And it’s still happening now. Just as striking is the adoption by recent Silicon Valley ‘unicorns’, copiously backed by venture capital, of business models incorporating tactics clearly bordering on the unlawful.”

The big unsaid here, as hinted at by both panelists and questioners from the floor, is the doctrine of shareholder-value maximisation, which despite increasing criticism from outside business still holds hard-to-question sway in most boardrooms, at least in the Anglosphere. By demanding overriding allegiance to capital markets, and by linking executive pay to this narrow result, current corporate governance orthodoxy is itself responsible for driving a wedge between executives and other stakeholders. At the same time it both legitimises the behaviours that have fostered the great disconnect and creates a formidable vested interest behind the status quo.
‘Although a lot of chief executives I know are well aware of the problems and can articulate them better than I can, whether they will follow through with embracing the wider stakeholders is another matter. Ultimately their personal financial interest is against change,’ reflected Hilton. ‘Does this mean the gap is now so wide as to be unbridgeable?’

No, said the panel – although for all the above reasons doing so may be painful. But a burning platform is a powerful motivator for change: ‘Human beings only respond to catastrophe, and what has happened over the last year socially, politically, economically has certainly been a catastrophe. This is one good thing [that may come out of it],’ opined Clifton. One unexpected ally is social media. ‘I mean, you used to be able to rape and pillage with impunity, but now it’s out there so you can’t get away with it,’ noted Hilton. Turning it round, transparency mandates authenticity: ‘You can’t be a fat, lazy and evil business and cover it up by spending a ton of money on marketing and communication,’ added Clifton. ‘This is good.’
Perhaps ironically, the strongest argument for an impending break with the past may simply be that the pendulum has reached the end of its swing. Changing economic and working conditions are dramatically shortening the life cycle of the traditional large hierarchical public company, Hilton suggested. Too inflexible to cope with the new world of networks and distributed information, it is being left behind by flatter, fleeter, more fluid organisations in better sync with the needs of individuals and today’s evolving society, and thus ‘perhaps better able to avoid the mistakes of the past’.

busy-street

This tallies with wider research showing that in both the US and UK the population of publicly quoted companies is in decline, having more than halved in the last 15 years – a finding that to many suggests that the short-termist, stock-exchange driven prescriptions of Wall Street and the City of London are simply not conducive to long-term corporate survival.
But even if the Darwinian thesis is correct, human effort is urgently needed to hasten the new age into being. As Stanford’s Jeffrey Pfeffer, a dispassionate observer of power in organisations, has put it, getting the powerful to do good is above all a matter of getting more of the good into power.
The case for gender (and other) diversity is incontrovertible – all the panel agreed that more women in the boardroom is a pressing necessity. Gray signalled that boards need to be uncompromising in their choice of leaders as well as how to reward them. ‘Having a leader who is genuinely curious and passionate about putting the customer at the heart of decision-making, and who also understands that to get great service you have to treat your own people really well’, had to come before financial track record in the selection, she insisted.
If we want a better, more inclusive business world, then responsibility is inclusive too. ‘Whatever capacity we work with in business, if it’s to do with driving diversity then we should own that personally. If it’s to do with challenging the thinking in a boardroom, then do that,’ she urged. ‘We should each reflect on how we consume goods and what messages we give to business by what we allow them to do on our behalf versus what they shouldn’t do; we should all take personal ownership of this as well’.

THE FOUNDATION’S VIEW

So we did we make of it all? The three points we took home with us at the end of the night were these, some of which Simon has drawn out above.

  1. To really change the situation might take a catastrophe, which would explain what’s going on now and why it isn’t necessarily a bad thing
    As Rita said, we only make really big changes when we’re faced with disaster and there seems to be no other way. Danuta described the need to force it, to push hard and confront some of the dissonant behaviour going on. The panel seemed to feel there were often fine words about purpose and values, but then self-serving behaviour in remuneration committees and the Executive Suite (we’ll come on to language in a minute!) The force is needed because we seem to be stuck in some kind of social glue. Carefully crafted language is used to explain outrageous decisions, such as what leaders are paid (as Anthony said, CEOs were paid 33x average salaries in 1984 and 140x now). The precise-sounding waffle makes the situation justified enough to allow the practice to continue, but it doesn’t convince anyone really.
    Then we get plain speaking outsiders – think Trump and Farage – who talk in words that make sense even if the ideas behind them aren’t sensible. In a world paralysed by politeness, being forced to confront some of the catastrophic decisions that come from their rise in popularity will shake-up the status quo. Only when a current situation becomes untenable do we invest completely in creating a better alternative. The NHS and the European Union came out of the last World War. Let’s hope we use the unfolding crisis well before we need another battle on that kind of scale.
  2. Changing the conversation, literally, is a much more crucial part of this challenge than it sounds
    The reality of the Board Remuneration Committee was described, including the fear of looking silly in challenging the easy conversation to do more of the same. It sounds like it shouldn’t matter but we are social animals and it literally hurts to be excluded. Despite some progress on diversity, diverse views are difficult to embrace.
    The language we’re surrounded by shapes our perceptions of what’s going on. As Anthony described, the media and the markets respond only to numbers and don’t question how they are achieved. So the business smashing sales out of the park without integrity puts massive pressure on the lower performing competitor doing the right thing. It is far harder for them to justify their approach than for the charlatans who might or might not get found out years down the line, bonuses banked, hero status enjoyed.
    We explored measurement and interestingly it is possible to measure the beliefs, or the discourse to give it a more precise anthropological term, of an organisation. Linguistic Landscapes http://www.linguisticlandscapes.co.uk/ is a company doing just that, and for leaders who want to make a change, something that holds a mirror up to people’s conversations can give a means to steer with a little more skill.
  3. Fashion in business may have a part to play, with a new kind of leader becoming an aspirational role model for the next generation
    Part of the problem with money is that it becomes a proxy for status, and given the human quality that more status is good, more money becomes the aim whether or not you already have so much that you couldn’t possibly spend it all.
    The focus is on the peer group in the race, not on what the race looks like from the stands. Individuals have bucked the trend. Richard Pennycook when he was CEO at Coop had to lead the difficult and painful turnaround from a proper disaster to something true to their values and commercially sustainable. But what stood out was his request in April 2016 for a 60% pay cut – he explained that the job had been very intense and would now be less so, and so he should be paid accordingly.
    Paul Polman has tackled other parts of the problem, announcing on his first day as CEO that Unilever would abolish quarterly reporting because it was unhelpful in building a business to succeed in the long term and in the right ways. He reasoned that his first day was the one on which he was least likely to be fired.
    What we need is for this kind of behaviour to start to equate to status, for leaders who do the right thing, who call out the system where it is failing us and take action not just say stuff to be the most admired of the lot. If enough of our next generation find this kind of leader, this kind of choice and this kind of organisation aspirational then maybe our human instincts can take us to a better place. Smoking used to be cool. These things can change.

So the situation is tough. But to have hope is not to admit insanity! 

ABOUT THE FOUNDATION

The Foundation is a management consultancy specialising in growth. We help clients address big organic growth challenges; growing faster, growing into new markets or fending off threats to growth

What these challenges share is the need to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren’t challenged

We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value

This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different

By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get round beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success

We most often answer three questions:

  1. Developing new propositions
  2. Improving customers’ experiences
  3. Developing customer-led strategies for broader issues such as increasing retention or lifetime value

Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth.

Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well.

Contact Details

Charlie Dawson (Founding Partner): cdawson@the-foundation.com / +44 7785 268 859

Charlie Sim (Director) csim@the-foundation.com / +44 7958 574 917

Anna Miley (Director) amiley@the-foundation.com / +44 7816 261 987

John Sills (Director) jsills@the-foundation.com / +44 7990 943 402


Dinosaurs Weren’t Replaced By Better Dinosaurs – Upsetting the establishment: how small and purposeful beats power and scale

THE FOUNDATION FORUM

22nd june 2017. WRITTEN UP WITH THE HELP OF SIMON CAULKIN

To download a PDF, click here: Dinosaurs Weren’t Replaced By Better Dinosaurs – The Foundation Forum 22nd June 2017

Disruption has become one of the most familiar and therefore least disruptive words used in business today.  Talked about endlessly it’s often an idea that sounds good in theory but then makes only a tentative step or two in the direction of practice.

That’s not really a surprise.  Truly disruptive businesses tend to reverse whole sets of industry assumptions.

“While adding value for customers they take value away from the businesses supplying them, until such time as their new ways of making money come into their own at scale”

While adding value for customers they take value away from the businesses supplying them, until such time as their new ways of making money come into their own at scale.

So disrupting a sector isn’t just mentally hard because the approach is hard to imagine, it also looks like proactive suicide for a business apparently doing well and therefore very hard indeed to argue for until a crisis makes the decision the best of a set of poor options.  Often by then it’s too late.

The aim of this particular evening of upset, for the establishment at least, was to bring vividly to life the way three disruptors see their world, and then to draw conclusions from their approach and achievements thus far – what are the kinds of insights that make their new models so strong, and what could be learned by bigger businesses trying to do similar things in their own way?

Our three examples came from three great people and three strong organisational ideas in various states of distance travelled:

  • We had Client Earth, with their Deputy CEO Beth Thoren. Their reason for existing is to use law as a tool to mend the relationship between human societies and the Earth.  They are part of a new breed of activist charities, using belief in the cause to attract motivated individuals who apply scalpel-sharp skills to create impact many times their scale and resources.  They protect the environment through advocacy, litigation and science, and they have had a string of successes such as their EU court ruling forcing the UK Government to act on air pollution back in 2014 and then following-up in early May, forcing the government to publish their clean air plans ahead of the General Election.  Beth has been there for 9 months after a career that included Directing Fundraising and Communications for the RSPB as they moved to campaigning for nature not just protecting birds, running marketing for the campaign to switch the UK over to digital TV, and playing a similar role for the BBC with their digital marketing
  • We had Riversimple, with their Chief Engineer and co-founder Hugo Spowers. They are a Hydrogen fuel cell car company with not just technology that challenges convention but also a business model that creates advantage from apparent constraint. By using Hugo’s motorsport background in combination with his desire to save the planet from our love of moving around, they have a beautiful lightweight high tech car that produces only clean water as an emission.  It is owned permanently by Riversimple so they profit from efficiency and longevity and can recycle and re-use all the parts that last for decades.  Initially the cars will be leased to people living close to a Hydrogen fuel station for use as their local car, so a genuine market can be created at a small scale.  The technology is open, so makers can reproduce the idea around the world at low, profitable volumes and with only what’s needed where they are based – no heating in Saudi for example.  Hugo found himself ignored by the major manufacturers thus far, and has duly ignored them in return on the basis that they are the wrong businesses to make the most of the potential in the technology.  They are, indeed they have to be, determined to fit it into the rest of what they do like a new and more shiny component. Hugo’s conviction is that the problem needs a new systemic solution, and that applies as much to the business model and the companies involved as to the technology, which is why he has chosen to run his own race in such a determined fashion
  • And we had Zopa, with their Chairman and co-founder Giles Andrews. They were the world’s first peer-to-peer lender, and we’re proud to say that one of our alumni, James Alexander, was there with Giles from the start too.  They saw that digital technology and the way we liked the communities that followed as a means of toppling the banks, reinventing what they do from the first principles they followed – take money from savers and give them a return, while lending it to borrowers and manage the risk.  They are the furthest on in their journey of our three and can describe hurdling a succession of barriers that threatened to disrupt their progress – getting people to trust them or even understand them in the first place, getting beyond the early enthusiast adopters, dealing with competitors when once they were alone, broadening the business while staying true to their principles, and managing succession, for example in CEO, a role Giles filled from 2007 to 2015 before taking the Chair.  Giles had form as an entrepreneur, growing a (conventional, polluting) car dealership business before consulting and then Zopa-ing for a living

 

How then did the conversations pan out?  An overturned establishment might be messy but the views exchanged turned out to be more elegant than that, especially with Simon Caulkin summarising

It sometimes seems as if the acreage of print devoted to ‘disruption’ over the last decade is in inverse proportion to the insight it generates.

“It sometimes seems as if the acreage of print devoted to ‘disruption’ over the last decade is in inverse proportion to the insight it generates.”

No kidding – ‘disruptive mayonnaise’? In 2012 a celebrated spat between historian Jill Lepore and the begetter of disruption theory, Harvard’s Clayton Christensen, broke out in the pages of the New Yorker, the New York Times and HBR over whether ‘disruption’ existed at all.

One thing missing in all the after-the-event analysis and Silicon Valley hype over Uber, Airbnb et al, is the worm’s-eye view – where the new idea came from, how it happened, what it feels like to the people actually doing it: ‘unpasteurised’ disruption, as Foundation Partner and Forum Chair Charlie Dawson put it in his introduction. ‘Before the neat case studies have been written making it appear obvious that the million-to-one shot was nailed on from the start, what was really going on?’

If we didn’t know before, we certainly did at the end of a remarkable June 2017 Forum, which under the title ‘Upsetting the Establishment’ heard three vivid stories of innovation that make Silicon Valley’s ‘we move fast and break things’ look both glib and grotesque. Here instead were examples of the kind of breakthrough innovation that tired economies and tetchy societies badly need,

“…replacing older business models not just with newer but also better ones that align first with human and planetary needs and only then with venture-capital wallets.”

Aligning business and human need was a key idea of the evening. Take peer-to-peer lending, the first example, as described by Giles Andrews, co-founder and now Chairman of pioneer lender Zopa. Zopa was born of the conviction that the banks had forgotten who their customers were, selling, or mis-selling, them stuff that they didn’t particularly want but that the bank could conveniently supply. This opened an opportunity, using today’s technology, to start from scratch at the other end: ‘If we look at the business from the customer’s point of view, can we generate enough scale to have an interesting business, rather than looking at it from our point of view and asking, how much money can we make from the customer?’

Zopa’s idea was to use technology not just to align lenders and borrowers but through it also to engender a sense of shared purpose that has vanished from traditional banking. It was a good call. Lenders liked knowing their savings were being recycled to ordinary people rather than money markets or launderers; less expectedly, borrowers responded by prioritising Zopa repayments over other owings.

birmingham_northern_rock_bank_run_2007

On the other hand, admiring press coverage of the bank’s ‘disruptive’ business model did not translate into marketing advantage. Mass market consumers don’t want a service to be mould-breaking, says Andrews ruefully: they just want it to be better. The message was underlined in the Global Financial Crash of 2007-2008. In contrast to other lenders, the money Zopa had lent out all came back, and it began to be written about approvingly as stable and boring – for a financial services brand, a much better recommendation than being disruptive, Zopa realised. The crash, which had the additional effect of making Zopa’s returns look attractive as well as stable, was its second piece of luck. The first had been banning of PPI; shorn of its insidious cross-subsidy, the mainstream banks were forced to put prices up for their legitimate services.

However, while an interesting idea and a dose of good fortune are fine, necessary even, they don’t of themselves guarantee success: you have to be good at something, too. Zopa, data-driven and customer-focused (with ‘literally hundreds’ of customer service awards to prove it), is good at credit. So good it now has a lower cost of capital than all of its competitors, which is a real advantage in a sector with razor-thin margins.

Zopa’s final piece of alignment, controversial within Zopa at the time since it had a big head start, was to band with its emerging competitors to form a fledgling industry association.

“Looking back, we gave our competitors an enormous leg up by aligning ourselves with them,” acknowledges Andrews. “Yet I still think it was the right thing to do, because we’ve grown faster as a result”

…partly by leitimising the sector as a whole and partly by making it into a credible interlocutor for the government, which responded by taking a positive view of Fintech in general and allowing sector members to sell ISAs. With all the signs pointing in the right direction, Zopa is now halfway towards launching a bank – ‘the most exciting thing we’ve done since the day of the original launch. It will allow us to use the skills we’ve built in customer focus, in efficiency, in underwriting credit, and providing great user experience to become, simply put, the best consumer bank in the UK’.  We look forward in hope!

Disrupting the motor industry sounds even more quixotic than taking on the banks. Massive capital requirements, giant factories, economies of scale: you’d have to be certifiable to decide to compete against the US, German and Japanese multinationals – wouldn’t you? But wait. Hugo Spowers, the second disrupter, yields to no one in his respect for the auto industry’s achievement – ‘there’s nothing on the planet that’s remotely as good value for money as a modern car with all its complexity and refinement’, he says. The small snag, he adds, is that its product is utterly unfit for purpose in the 21st century.

chaine_citroen_typea-1

“Yet the fact that the combustion engine and the business model it engendered are now radically mis-aligned with human and planetary needs gives today’s insurgent an improbable opportunity.”

Today’s cars are optimised around the 100-year-old technology of the combustion engine, and there is no obvious incremental route to advanced replacement technologies such as hydrogen fuel cells. On the other hand, notes Spowers, redesigning the vehicle around fuel cells lowers the technical challenges and risk, with huge improvements to costs and a three-times boost to energy efficiency. ‘Riversimple [Spowers’ firm] as a start-up has very few advantages, but the one we do we have is a clean sheet of paper. It’s not to be underestimated’, he says.

rasa1

Which explains the business model. ‘We’re the only car company that hopes never to sell a car,’ says Spowers proudly. Instead, like Michelin in commercial tyres and Rolls Royce with jet engines, Riversimple will sell mobility for a monthly fee that includes fuel. This reverses the usual incentives: the more efficiently they operate, the longer they last and the fewer cars it can build for a given customer mileage – cars which remain on its balance sheet, with long-lasting parts re-used not disposed of – the more successful it will be. Suppliers are aligned too, retaining ownership of their contribution, rewarding them for investing in quality by achieving longevity rather than engaging in a win/lose negotiation with their customer that rewards the highest possible price for the lowest possible cost of production.

To stay true to purpose it has adopted a unique governance arrangement under which the board’s fiduciary responsibility is to provide benefit not only to investors who are promised a fair long run return, but also the environment, customers, staff, supply chain and community, six interests explicitly recognised and given equal weighting in decision-making. The aim, says Spowers, is everywhere to align interests taking a careful long-term view, in accordance with the principle that you can’t optimise a system by optimising the individual elements – you can only do it as a whole system.

The evening’s final variation on the alignment theme was a more direct, even brutal one. Client Earth is a charity with a difference – a legal firm which uses the law to realign governments with their own rules respecting the environment. ‘We sue governments,’ says deputy CEO Beth Thoren cheerfully. (“It’s a fraction of what we do, but it is what we are best known for”, she added, carefully.)

Client Earth’s insight was the powerful influence it could bring to bear through the law. It’s thanks to Client Earth’s small team of full-time lawyers (earning a fraction of what they would in a commercial firm) that the UK government was obliged first to commit to action on air pollution in 2014 and then to publish its clean-air plans before the 2017 General Election.

It has closed coal-powered power stations throughout Europe. Sometimes matters don’t even get to court. In the case of the UK’s 30 marine protected areas, ‘one of our lawyers wrote to the officials saying, you know, allowing fishermen to dredge the reefs in marine protected areas probably isn’t meeting either the letter or the intent of the law. Oh, and by the way we’re lawyers’. Amazingly, no lawsuit was needed:

“3,000 square kilometres of marine areas and reefs are now protected, effectively because of one letter”

Now, after 10 years, only a minority of Client Earth’s work is adversarial. On the contrary: it has used its reputation to ‘make friends with the establishment’. ‘Two-thirds of what we do is working with governments and helping them write the laws,’ notes Thoren.  It advises pension funds on their fiduciary duty around climate risk, constrained resources and various climate effects – even the implications of Brexit. ‘They want our advice, and it’s not a conflict because they realise that, yes, we can challenge them but actually it’s in our interest to help them if they want to listen to us.’

air-pollution-1866788_1920

If Client Earth now wields an impact out of all proportion to its size and resource base, however, it didn’t come about automatically. As Andrews and Spowers also recognise, game-changing implementation often requires a change to the context as well. In this case, putting the insight into practice –  that the law could be used to reset the relationship of human societies and the planet – was in practice near-impossible because of the huge legal costs involved. So before it could fulfil its purpose, Client Earth had to convince the EU and national governments that the cost represented a denial of citizens’ rights to justice. Eventually it did, establishing a £10,000 maximum that brings legal recourse within reach of most charities and some individuals too.

As this suggests, scale, like everything else, looks somewhat different in disruption-land.  Convinced of the imperative to stay small and agile, Client Earth ‘grows’ by expanding the scope of its leverage, and by seeding small imitator groups in other countries. Ignored by the major manufacturers, Riversimple makes its technology open-source so the smart thinking behind its high-tech hydrogen powered prototype, the Rasa, means other makers can reproduce it around the world, each operating at low volumes but as a group finding economies of scale.  The Riversimple brand is the differentiator within its narrow market – its mind-set and systemic worldview, as a means to exploit the technology, the difference against the established industry.  Zopa shrewdly made its sector more robust and attractive by making common cause with its peer-to-peer rivals, giving it a smaller slice of a much bigger pie; now, with the new bank, its seeks to export its learning into adjoining business areas.

Although all are deeply immersed in science and technology, each is an object lesson in subordinating activities to an overall purpose. Thus for Andrews, blockchain is a technology searching for an application. Spowers thinks the same of self-driving cars, which address none of the industry’s primary issues. What’s more, he adds, they come with a number of negative consequences which given our track record in misapplying technologies will surely dominate. ‘There you go; we can retrofit it to our Riversimple cars, but it’s a red herring’.

“What all three most conspicuously share is a commitment to the great leap forward rather than the incremental improvement beloved of business schools, together with a rock-like sense of purpose.”

Indeed the two go tightly together. Purpose can’t be overcommunicated; living it is the leader’s first job, says Andrews. Spowers notes that the reason step-change looks daunting is that it’s viewed from within the old context; challenge the latter and it suddenly seem both logical and doable: ‘I mean, dinosaurs weren’t replaced by better dinosaurs.’ For that reason, purpose can’t be compromised: ‘It’s easier to stick to your principles 100% of the time than 99% of the time, and we have to be pretty rigid about that.’

Perhaps the most disruptive thought is this: we must do these things not because we can or because they make us money (although we hope they will), but because they matter. Let Thoren’s ringing conclusion speak for all of them: ‘I work [at Client Earth] because I care that by 2020 70% of wildlife will have disappeared from the face of the earth. I care that if you believe the United Nations by 2040 there’ll be no fish left in the sea. I care that by 2050 cities that we know – New York City, Miami, Guangzhou – will be at grave risk for flooding. I care that instead of a million people immigrating into Europe it’ll be hundreds of millions. It’s not right that we use our skies as a sewer. It’s not right that we leave such a world to our children. And it’s for that reason I’m so incredibly proud to be working for a disruptive charity’.

 

THE FOUNDATION’S VIEW

An impressive set of big ideas from small organisations.  The smaller you are the more able you are to think holistically, and to do something about it if you have courage and conviction too.  Our reflections overlap with the account above but bring some of our experience, especially in encouraging the world to succeed by starting with customers, to the fore.

  1. The point about good disruption is not that it’s disruptively different, just that it’s simply better
    As Giles observed, disruption tends not to be described as such until after the event.  People rarely set out intending to disrupt an industry, just to improve it, and most customers don’t want to buy something disruptive, just something that works better.  He described the early Zopa days where they tended to talk about the completely new peer-to-peer approach but this only attracted a small band of innovation enthusiasts.  Once they ditched the idea of telling people how the business worked and focused instead on the benefits – lower rates for borrowers, higher rates for lenders – serious growth into the mainstream took off
  2. To create a step change in performance comes not from hard work improving elements of the existing system, but from hard thinking re-imagining the whole system
    Hugo described the huge investment and vast teams of people needed to gain the small increments of improvement that characterise something like a new car launch. Roughly the same as before but a few percent better is hard work, usually coming from teams working in silos on each aspect of the overall system.  When a step change in technology is introduced, performance improves in leaps by working very differently, seeing the entire system and imagining a very different configuration of its elements.  He told of Formula 1 history when Ferrari, so strong and with huge teams focussed on ultra-powerful engines, was usurped by Cooper and then Lotus from the UK, using much less special and less powerful motors – in fact, neither ever designed an engine.  They had re-imagined the car, taking the engine from the front and putting it behind the driver, making it a part of the chassis and making the cars lighter and much better handling as a result.  He is doing something similar with his hydrogen fuel cell car which is part of a dramatically different business model, one that aligns the interests of his company with customers, suppliers and the planet in a number of ways.  By only selling miles not cars, Riversimple is encouraged to achieve what customers need with as few cars and using as little fuel as possible, with vehicle designs that stay current for as long as possible.  By paying suppliers in similar ways they are incentivised to raise quality and spend more because they, and not their customer, gets the benefit.  There’s more to it than that, but you get the idea – smart thinking and the bravery to follow it through produce the potential to leap forward
  3. The ingredients of success – wholesale re-imagining then rapid ego-free learning – come most easily from small teams of young people with a blank sheet of paper
    As Beth talked us through the Client Earth approach one of the many factors that stood out was that they do best by hiring young, smart but relatively inexperienced lawyers not those that know the ropes.  Because although people further on in their career might tackle aspects of what they need more effectively, to make something new that started with a blank sheet re-design operate well requires energetic experimentation and a willingness to keep adjusting, in their case finding ways to make the law work for the environment not just for the establishment.  Their motivation to get to the outcome and their willingness to take risks, to be wrong in their pursuit of the cause, means the team as a whole has achieved amazing things in the last few years, with the UK’s air and undersea habitats benefitting accordingly

ABOUT THE FOUNDATION

The Foundation is a management consultancy specialising in growth. We help clients address big organic growth challenges; growing faster, growing into new markets or fending off threats to growth

What these challenges share is the need to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren’t challenged

We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value

This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different

By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get round beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success

We most often answer three questions:

  1. Developing new propositions
  2. Improving customers’ experiences
  3. Developing customer-led strategies for broader issues such as increasing retention or lifetime value

Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth

Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well

This link will take you to more information about us and our Forum events: http://www.the-foundation.com

 

Contact Details

Charlie Dawson (Founding Partner):
cdawson@the-foundation.com / +44 7785 268 859

Terry Corby (Partner)
tcorby@the-foundation.com / +44 7446 173 137


Innovate or Die A challenge for specialists or crucial for all?

THE FOUNDATION FORUM

23rd February 2017. Written up with the help of Simon Caulkin.

To download a PDF, click here: Innovate or die – a challenge for specialists or crucial for all?

Innovate or die, apparently. And many organisations seem to choose the latter. Not consciously of course, but as a by-product of finding it so hard just to be big. Most people spend most of their time making sure what’s planned to happen is what happens in practice. There’s precious little left for finding a better plan.
Given innovation is crucial and it’s largely badly done (UK productivity figures make the point all too eloquently), we thought we’d shine a trio of lights on the issue and see what that told us about how to improve.

  • We had Julian Birkinshaw, Professor of Strategy and Entrepreneurship at the London Business School, where he is the Academic Director of the Deloitte Institute of Innovation and Entrepreneurship. He recently co-founded the Real Innovation Awards alongside Management Today with the stated aim of showcasing the authentic, haphazard and, as a result, exciting business of real innovation
  • We had Mark Evans, Marketing Director at Direct Line, where a determination to steer clear of the price fighting aggregators led to the only alternative, innovating to create something worth paying more for. A search for wow factors and a deliberately grown capability in digital technology have led to a business enjoying rude health in a market with a heavy dose of flu
  • And we had Scott Cain, a leader at the Future Cities Catapult, with the challenge of nudging a whole country into more innovative action to make our cities work better by becoming smarter. When you stop for a moment to think how many organisations have a view on how cities work, and competing views on how they might improve, you realise this is the mother of all pieces of string to push and a serious motivation and co-ordination challenge

According to the ONS it takes a German worker four days to produce what we make in five. In the time a British worker makes £1, a German worker makes £1.35. Unsurprisingly the average British worker toils away for longer, in return for lower pay, than their German equivalents. No wonder they get to the sun loungers first. Their towels are thicker too.

But to be fair everyone, even the Germans, finds it tough to make new things happen in large organisations

And good new things are rarer still.
At the heart of the conundrum is the need for innovation (which starts small) to make a significant difference (which means big).

At the beginning end of the equation, having ideas, it seems self-evident that a focused group of people intent only on finding new and better ways will get a great deal further than an army marching in step on a route that’s prescribed trying a bit of juggling on the side. But later on, when the small team of lateral thinkers has something that works, they find they have a serious persuasion job on their hands, and a question or two about whether their baby can survive a serious growth spurt without losing its essential but delicate brilliance.

This is only one way that specialists have been tried. We’ve also had corporate accelerators that became all the rage at about the time of peak beard. And catapults are another example of a specialist team, in their case taking raw potential from academia and building bridges to the commercial world and issues that society needs solving.

But maybe this is all a distraction. Maybe innovation never really takes hold unless its everyone’s job, front and centre, what we do all day. When a business or a charity or a government gets a serious challenge under its skin, a sense of purpose that is authentic and all consuming, then mountains get moved. When Singapore was ejected by Malaysia and found itself becoming a nation state in 1965 it was assumed to be ‘non-viable’. Economic development wasn’t nice to have, it was critical, and 20 years on it was thriving with unusual approaches to tax, education, chewing gum and more.

pexels-photo-123318

When something’s burning, most often a platform but sometimes an ambition to go further, faster, to win and to prove people wrong, then a whole body of people spend their time on improvement. Necessity really is the matriarch perhaps?

But where are the matches kept? if you’re somewhere that’s comfortable, at least on the surface, how do you create the urgency that seems to be needed?

The Real Innovation Awards took a more bottom-up approach to understanding. It’s a scheme that’s kicking back on some of the neatness above. The assumption behind them was that, for such a crucially important process, innovation is badly served by awards that largely describe a simplified, sanitised and inaccurate view. The belief was that real innovation is messy, more uncertain, and more serendipitous than most believe. And the first winners’ stories, which we at The Foundation enjoyed playing a small part in helping choose, bear this out.

So many thoughts, so much familiarity, serious importance and a need for some guidance.
So to the discussion itself – three views, plus wisdom from around the room, on how to innovate not die.

How do we do innovation?

It’s a question that has worked its way steadily to the very top of the economic agenda. At national and international level, fading innovation is one important reason why some leading economists foresee a period of global secular stagnation as the long era of growth comes to an end.
At firm level, the same innovation drought has left large incumbent firms across a swathe of industries perilously vulnerable to disruption from digital-savvy insurgents with massively more efficient business models.

And without a jolt from innovation, a public sector confronted with the need to do ever more with ever less faces a future of near permanent austerity.

Yet as a crowded February Forum heard, innovation, like the Holy Grail, is fervently desired, difficult, mysterious and often tantalisingly out of reach. There are a number of reasons for this elusiveness. One is that although the need to innovate seems obvious, setting out to do it in the abstract, like deciding to paint a masterpiece, is meaningless. There must be something to drive and shape it – a purpose. While there are good negative reasons to innovate (change will overwhelm you if you don’t), as Mark Evans, marketing director at the Direct Line insurance group, put it, the positive imperative for innovation is purpose, in its hard-edged sense of ‘having a legitimacy for your business in the future.’

Five years ago, he recounts, Direct Line was a broken brand (part of RBS) in an industry that, having spent the last two decades talking only about price, was absolutely ripe for disruption. Actually, the pivotal insight was hiding in plain sight: ‘blow me, it’s not a point of purchase thing, it’s point of need: insurance is about fixing things, putting things right. How could we have lost that category insight for 20 years?’ Then it was a question of going back to marketing 101 ‘and saying, we have a better mousetrap, we do insurance better. We do it at point of need and we differentiate ourselves that way’.

A 40 per cent rise in the motor insurance business last year is proof of the pudding. Thus emboldened, and in line with its purpose of ‘protecting an ever-changing Britain’, and the principle of prevention, it has launched eye-catching innovations like a ‘Shotgun’ app which rewards safe young drivers with pizza and coffee during their first 1000 miles when they are most accident-prone, and ‘Fleet Lights’, a system of drones to light the way in dark streets.

 

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A second reason why innovation is elusive (one dear to the Foundation’s heart) is the difficulty of maintaining a customer focus. Most organisations look at the world from the inside out, through the prism of their boardroom or their product or service, rather than from the outside in, through the eyes of the customer. Even if you can maintain this unnatural stance, it’s easy, as LBS’s Professor Julian Birkinshaw pointed out, to pay attention to the wrong kind of customers or misinterpret what they are saying. ‘What we’re trying to do of course is to get to the unarticulated views – what is the underlying thing that the customers need but they don’t actually know quite how to express, what is the underlying ‘job to be done’?

This means much real innovation is a gamble based on guesswork (‘unreasonable conviction based on inadequate evidence,’ as Tom Peters once put it) – gambles often don’t sit well with shareholders or those with a vested interest in the status quo. Mark speaks feelingly of the internal ‘vitriol’ that was directed at Marketing as a result of suggesting, then pursuing, bold and unusual initiatives. Not surprising, then, that for every Direct Line that cracks it, there’s a Kodak or Nokia that can see the tip of the iceberg ahead, but can’t change direction fast enough to avoid the hidden bulk below.

Further blurring the issue for would-be innovators is the widespread assumption that never mind the question, the answer is technology. For Scott Cain, who leads on business and project development at an organisation called the Future Cities Catapult, ‘where innovation fundamentally failed over the last 10 years or so, it’s primarily because people are saying I’ve got this great big technology hammer and I just need to find that available nail and keep on hitting with it.’
Thus in his field there is a plethora of vibrant, exciting technologies for making cities smarter or more liveable, to the extent that city authorities are overwhelmed by the proliferation of choice. But features don’t necessarily translate into benefits – particularly in complex entities like cities, systems of systems where each has knock-on effects on others so that it’s hard to establish reliable evidence of what works or work out a viable business model between them.

Again, purpose is key. When Dubai in 2014 decreed its aim of being the smartest and happiest city in the world (by 2017), it approached the Future Cities Catapult to establish just what that meant in context and how technology could contribute to its achievement. The city state has now worked through the first set of projects from the findings and is into its second.

Finally, most organisations are good at either being efficient (‘exploitation’) or being inventive (‘exploration’) – and for all the reasons above exploration is the road less taken, which of course makes it all the more desirable, and essential.

But innovation-driven companies such as Apple, or Intel in semiconductors, that exhibit this drive are rare. Those that don’t have it in their DNA and have to summon up the impetus from elsewhere. Evans calls it a ‘groundswell’, a combination of pride and striving to do the job better, that Direct Line has channelled into an ideas lab that yielded 3000 suggestions in its first year.

Organisations should focus on areas they are competitive in – ‘not necessarily Real Madrid or Bayern Munich; Arsenal will do,’ says Cain – and where something is broken, or markets are not providing a good solution. Internally, a burning platform, as at Direct Line, may be the stimulus to get things moving. The timing needs to be right – innovating too far ahead of customers is as bad as being too late. And while scaling up is a huge issue in itself, ‘the way it becomes a bit more viable is to start at the smallest scale you want to be operating at’, counsels Cain. ‘Start at the very, very human scale, that’s my insight’.

Unsettlingly, innovation isn’t primarily a matter of cold management reason. On the contrary, cautions Birkinshaw, big data and analytics can be bad for innovation. With information everywhere and research costs approaching zero, marshalling data can take only a company so far. (In any case, most of what we call disruptive innovation is actually emergent: the disruption only becomes clear after the event.) So it’s avoiding the trap of over-analysis with decisive action and emotional commitment that are the key to successful innovation, Birkinshaw argues: ‘When we look at the Facebooks, the Amazons of this world, the companies that succeed are the ones that know when to stop gathering information and when to start actually acting on a little bit of intuition’.

This puts a premium on leaders with the wit and courage to make the important calls (and knock some heads together if necessary to bring the talking to a stop) – and on the cussed, unreasonable people, sometimes lower down in the organisation, who make it their business to provoke, stir up the status quo and go on asking the uncomfortable questions until they are either kicked out or get their way.

On the people, in fact, for whom the phrase ‘innovate or die’ has a literal meaning.

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The Foundation’s view

Three points most starkly stood out for us from the evening, complementing Simon Caulkin’s summary.

  1. Diversity matters. And in a substantive way. Mark Evans shared his belief in Neurodiversity, a hitherto unrecognised version referring to people who literally have different brains. Dyslexia, dyspraxia, colour blindness, autism and plenty more lead to very different ways of seeing the world, of drawing conclusions from it and of having ideas. If you want to look round corners that usually get in the way, ensuring diversity of thought and style matters, in version 1.0 gender, ethnicity, sexual orientation and the like, and in this version 2.0 way as well (as he described it). What also emerged less intentionally was a rather masculine way of describing the qualities needed to succeed with innovation, and cajones along with their Anglo Saxon counterparts were referred to several times, and called out by one of our questioners too. It was a sobering moment and showed how less visible things like language matter when discussing and framing issues, opening up or closing down options unconsciously
  2. Innovation is no way to have an easy life. All the way through the examples that were shared, unreasonable people were the ones who had to put up with the slings and arrows on their way to outrageous fortune. Mark described the vitriol that was directed his way as a result of suggesting then pursuing bold and unusual initiatives in the insurance business, like helping young drivers have a ‘shot-gun’ riding alongside them, coaching them towards safety and away from £20m claims that result from disfiguring best friends in all-too-common accidents. There are more or less challenging styles that go with being unreasonable, but relentlessness and unshakeable will are at the core, and ideally these people need some air-cover and space, so they can work through the process of ruling out all the wrong ways to do something towards the right way where the pot of gold lives
  3. Well-meaning collectivism is an enemy. Well-meaning collectivism is fantastic for many many things and would ideally be far more common in the world of work. But innovation is not one of them. Ask enough people and someone will find a reason to say no, or a sensible suggestion to modify, or to test a bit more carefully. Benevolent dictators made their presence felt, labelled, like unreasonable people, by Julian Birkinshaw and described by him at places like Oracle (Larry Ellison – we are moving to cloud, no debate) and by Scott Cain in cities like Dubai where interestingly the person in question was female (we want to create the world’s happiest City, and we’ll do it by a week on Tuesday – well, three years, but you get the idea). This kind of unarguable direction can also come from a deeply held purpose that gives direction and conviction that something matters to everyone involved. Direct Line now has a belief in being fixers, there to put things right when insurance is called on, and people across the business are in action with their interpretations like delivering a replacement TV in person because otherwise it wasn’t getting there before a crucial boxing match that a customer desperately wanted to see

 

About The Foundation

The Foundation is a management consultancy specialising in growth. We help clients address big organic growth challenges; growing faster, growing into new markets or fending off threats to growth What these challenges share is the need to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren’t challenged.

We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different.

By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get round beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success.

We most often answer three questions:
1. Developing new propositions
2. Improving customers’ experiences
3. Developing customer-led strategies for broader issues such as increasing retention or lifetime value Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth

Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well

This link will take you to more information about us and our Forum events: http://www.the-foundation.com

2007-10-07 at 23-39-27

Contact Details

Charlie Dawson (Founding Partner):
cdawson@the-foundation.com / +44 7785 268 859

Terry Corby (Partner)
tcorby@the-foundation.com / +44 7446 173 137

 


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