Innovation Follows Culture Follows Structure
Once in a while you run into ideas which are refreshingly thought-provoking, while at the same time seeming to be resonating with your own view. This holds for the key statements in “Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries”, a worthwile new book Countering a famous saying, Safi Bahcall suggests: Culture eats strategy for breakfast. Structure eats culture for lunch. What does he exactly mean To understand what I mean A related idea introduced A key feature we wish to understand in any complex system is the sudden change between two types of emergent behaviors. That sudden snap is known as a phase transition. Water, for example, will suddenly change from liquid to solid. Highways will suddenly change from smooth flow to jammed flow. Why? Systems snap when the tide turns in a microscopic tug-of-war. Binding energy ties to lock water molecules into rigid formation. Entropy encourages those molecules to roam. As temperature decreases, binding forces get relatively stronger and entropy forces get relatively weaker. When the strengths of those two forces cross, the system snaps. Water freezes. All phase transitions are the result of two competing forces, like the tug-of-war between binding energy and entropy in water. And that’s how we can begin to apply these ideas to teams and companies: when people organize into any kind of group with a mission, and a reward system tied to that mission, they also create two competing forces – two forms of incentives.
From: Safi Bahcall, “Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries” (2019)
Phase transitions turn out characteristic for complex systems. They exhibit some interesting features:
- Separation of two distinct emergent behaviors (of identical system constituents, i.e people in the case of organizations). The system cannot adopt both behaviors at once.
- Co-existence of the distinct behaviors at the point of sudden phase transition.
- Inevitability of phase transitions for complex systems.
- Manageability through identifying and changing control parameters (e.g. temperature in the case of water).
The preceding thoughts tie in with our proposed Dual Innovation approach (see visual below). Key principles thereof are:
- ‘Optimize the Core’ (focus: exploitation) and ‘Create the New’ (focus: exploration) are to be regarded virtually incompatible, separate corporate settings with dedicated operating models. Both directions of impact cannot be combined in one organizational setting (Safi Bahcall: Do you want innovation? Do you want high quality? You can’t have both).
- Due to their incompatibility, an organizational interface (‘Reshape the Core’) is to be established to ensure proper integration of the two disparate ‘camps’ (Safi Bahcall: artists and doers – love them equally).
- The distinct interfacial operating model needs to balance the inherently opposing characteristics of the outer operating models to enable interplay and exchange (Safi Bahcall: dynamic equilibrium).
Particularly, in the course of ‘Scaling-Up’, i.e. the transition of validated concepts into an established business (Safi Bahcall: transfer), key parameters along the different operating model dimensions are to be shifted in order to obtain a change in the dedicated corporate environment from ‘Explore’ to ‘Exploit’. This corresponds well with Bahcall’s above ideas of identifying and shifting control parameters (e.g. incentivization) with the aim of transitioning between distinct system phases and their emerging characteristics (e.g. culture).
Takeaway
Establishing and effectively managing an organizational interface between separated ‘Explore’ and ‘Exploit’ systems proves pivotal to corporate innovation success. This is the Innovation Playing Field we call ‘Reshape the Core’. A fundamental aim of corporate innovation leadership encompasses
- Identifying, setting and adjusting sensitive control parameters, related to incentivization and reward, personal fit, organizational setup and other factors, which affect staff behavior and thereBottom line: Integrating explorative innovation activities and core business might pose in large part a structural issue as collective behavior and culture of organizations (as complex systems) tend to be significantly determined
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