Innovation Traps

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Hello, and welcome to the HBR IdeaCast, now coming to you weekly from Harvard Business School Publishing. I'm Paul Michelman online editorial director here, and I'll be your host. In today's first segment, the Harvard Business Review's Cathy Oleson talks with Harvard Business School Professor Rosabeth Moss Kantor about innovation and the traps that companies can fall into when they use it as a tool for growth. Kantor says that while innovation seems to be back in vogue now after a lengthy hiatus, business leaders appear to be falling prey to the same mistakes they or their predecessors made the last time innovation was in. Kantor helps us recognize some of the most common pitfalls in innovation management and offers her expert advice on how we can avoid them. And in our second Segment, Harvard Business School's Stacy Childress and Alan Grossman talk with IdeaCast producer Steve Singer about what urban school districts can learn from the business community. So stay with us as we show you how to avoid common innovation mistakes. First up, innovation traps.

Hi, this is Kathy Olufsen from Harvard Business Review, and I'm talking today with Professor Rosabeth Moss Kantor. She's a faculty member at Harvard Business School and has spent the better part of 25 years studying innovation. Over that time, she's observed the common mistakes companies make in pursuit of innovative new products and services. And that's the topic of her November HBR Innovation that classic traps. Welcome, Rosabeth, and thanks for joining us.

Thank you, Kathy.

So at the beginning of the article, you write that innovation is back at the top of the corporate agenda. Why did it go away in the first place? And why is it coming back now?

Partly normal business cycles. We had a recession, things get a little tight, companies aren't profitable, so they stop investing. And innovation requires investments in the future that sometimes take away from current profitability, current cash. And so it's a normal cycle, a normal process of companies sometimes getting tight and scared and conservative in bad economic times and therefore not really investing in their future, which actually prolongs the bad economic times.

So it's good that it's back.

Great that it's back. It's, it's wonderful because it not only provides new products and services, but it also energizes the people in organizations and it brings new opportunities to solve problems that customers care about.

But apparently, as you write in your article, companies make the same mistakes over and over again. One of them is what you call a structural trap that can lead to class warfare. How can companies prevent culture clashes between the old and the new?

First, companies have to recognize that they sometimes set up those culture clashes by defining new groups as the wave of the future. They're going to invent our new things. The old models no longer will help us in the years to come, therefore making everybody in the existing mainstream business feel like a dinosaur. And yet all those people are bringing in current revenues. The innovations haven't yet proved themselves. So by setting it up that way so that some groups feel they make all the money, but those young tiger innovators get to spend it and have all the fun, that naturally is going to lead to a lot of resentments. So companies really need to make sure that people in the mainstream business feel that they too can innovate, even if it's more incremental, and that they will make a difference to the company. And to have people have better communication and better connections between the R and D groups, the new venture teams, and the existing businesses.

One of the companies that you say does that very well is Gillette. And you talk about something you call an innovation pyramid. Can you describe what that is exactly and how it helped Gillette develop a string of new products and services?

The innovation pyramid is a tool that I developed a number of years ago as I studied innovation, because I didn't want companies to have to choose between big breakthroughs and the everyday work of continuous improvement. And I realized that the companies that are the most successful have innovations at three levels of a pyramid. At the top, they are in fact, taking a big bet on the future, on what kinds of technology will prevail, what big breakthrough products will make a difference. In the middle of the pyramid, companies need a range of project teams that are more temporary, that are fairly far along, but not all of them will necessarily succeed. And at the bottom of the pyramid, they need continuous improvement in which every department and every and thinks about how they can make a difference and do something new in their own area. So for Gillette, that for so many years before their recent turnaround and then acquisition by Proctor and Gamble, had emphasized generally just the big breakthroughs. If we don't have a blockbuster new razor, that's the important emphasis. And what they began to see is that those big new products only come along every so often. You can't always count on them. But meanwhile, you can be innovating in marketing. You can be creating variations on products by putting existing capacity together, which is how they created a battery powered toothbrush using Duracell plus oral B toothbrushes, plus their appliance expertise in their brawn division. And then at the bottom of the pyramid, they, they wanted every group, every department to think about how they support innovation, how they play a role in making a difference, however small. And they showcased the best innovations coming out of every business unit and every department at a company wide innovation fair. And that showed people that there were many levels of innovation and many ways to make a difference.

Like Gillette. A lot of other big companies are emphasizing innovation right now, like GE, IBM, Procter & Gamble, you know, then you have companies like YouTube, which really are small and come practically out of nowhere and they totally disrupt an industry. Does that hold a new dynamic for the bigger players? And what, if anything, can they learn from.

That? Well, that has always been the case. I mean, often big new innovations come from outside the industry, from entrepreneurial mavericks who are tinkering. That's how the personal computer was invented by Apple Computer. But remember back to the history of that innovation, the Apple. I mean Apple is certainly a good company today and they've had other innovations like the iPod. But IBM actually learned from Apple, duplicated the same development process of a garage. They just happened to do it in Boca Raton, Florida instead of Silicon Valley and gave their own internal innovators free reign. And soon the IBM PC came on the market and was much better in some people's minds than the Apple. The Apple was still a great computer, but that IBM PC took enormous market share away from Apple. So big companies can duplicate some of the invention process of small startups. But big companies can also have a whole range of partnerships that give them a window so that they can look in at the work that many small companies are doing. And this is very important. I mean, companies need multiple modes to sense innovation, including listening to ideas from their own people. Because I can guarantee you in every large company there is somebody somewhere who has thought of something similar to what the maverick, upstart, disruptive company is going to do, but they've just never had a chance to voice it. So collecting large numbers of ideas, opening the company to brainstorming sessions, and listening to voices inside and outside the company is a great way to spot trends. And then even if the small startup does do something that disrupts the industry, you're aware of it in advance and can be their first partner or the first to take advantage of.

It. So as a final question, you've been studying innovation for years. Why do you think companies make the same mistakes over and over.

Again? Oh, that's in the human condition. Oscar Wilde once said that marriage is the triumph of hope over experience. You know, we have all kinds of funny ways of saying we always think we'll be different. We won't make those mistakes. But the other truth is that with so much turnover of managers, a managerial generation now is about six years. I can go into a company every six years and see an entirely different group at top functions, and they often don't pass on their experience from the past. So that's one big reason. The other big reason is that people say, oh, circumstances are different today. But in fact, they're not always that different. That was said in the dot com boom that the laws of the business cycle have been overturned because this technology is so different. There's always a lot of hype. And I want to say to managers, slow down. Listen to the voices of experience. History can teach you something. And that's the point of my.

Article. There's a lot of hype today about Web 2.0. And do you see that managers need to sort of take a step back and be somewhat cautious right.

Now? I don't know about being cautious because innovation requires courage and taking some risk. But I do think that managers should temper the hype by saying, haven't we heard this before? And let's be at least let's analyze it, let's test it. Let's not throw away everything we know and leap into the future. Let's figure out how to have the right kind of blend. And that also is the connection between the ongoing organization and the wisdom people have. And the new. If you keep the conversation going and keep things balanced and realize that even new developments are not necessarily going to displace everything you're doing today, then I think you can have a much better conversation, take advantage of new developments without failing to learn from.

History. Okay, great. This has been terrific talking with you. Thanks for joining.

Us. Thank you.

Kathy. Next up, how to Manage urban.

Schools. Hello, I'm Steve Singer, and I'm here today with Stacy Childress and Alan Grossman, whose article how to Manage Urban School Districts is in the November 2006 edition of Harvard Business Review. Stacy is a lecturer at Harvard Business School, and Alan is the MBA Class of 1957 professor of Management Practice at HBS. They both study leadership issues in public education. Welcome to you.

Both. Nice to be.

Here. So let's start by talking about the challenges that urban school districts face.

Today. The challenges that Urban school districts face are really unique in the world as we know it. Fundamentally, they have a mandate to educate all students, regardless whether the students in many cases want to be there or not. That's their responsibility. And what they not only have to do is educate them, but they have to educate all of the students to a very high level. And they have to do it across many, many schools in a district. And each of these schools has a varying capacity in terms of the leadership, in terms of the ability of the teachers to be able to teach, in terms of the demographics of the.

Students. So most of the audience for this program is business people. What role can and should businesses play in helping to improve urban school.

Districts? It's a good question, and it's one that people ask us, as you can imagine, quite often, since we're both from the business school. But I think the first response we usually have to that is the first thing business leaders can do to help is take a step back and try to understand where there are differences between what it means to lead and manage a business and what it means to lead and manage an urban school district. And recognizing that many of the approaches that work for people in the private sector have value, but not as a straight transfer, that some adaptation is.

Useful. I think one of the best places to start is to think about the absolutely essential role of a good strategy. So most school districts hadn't really thought about strategy in terms of being able to come up with something that is focused on improving what happens in the classroom. They tend to think of strategy as a series of activities or multiple programs that they've put in, rather than what's the theory behind what we're going to do? So first, I would say businesses, no, it's almost endemic to a business that, you know, unless you have a very good strategy, you're not going to succeed in the market. So the first thing businesses can do in their community is insist that a strategy be put in.

Place. We asked school districts starting four years ago, you know what, what's the biggest managerial challenge you have to implementing your strategy? You know, what are the obstacles? What are your biggest barriers? And we heard about 20 categories of things, but they all told us five similar things. And what struck us about those five is that they're just pretty basic organizational challenges, regardless of what sector. You know, how do I implement the strategy across a huge organization that has 600 sites when all the sites aren't exactly the same? How do I consistently do that? How do I build all the systems and structures? How do I manage hr. How do I do resource allocation in a way that supports rather than inhibits what it is we're trying to accomplish? How do I use data to make better decisions? So the interesting thing about that, when you talk to a business person about those kinds of challenges, they actually don't see them as separate. Right? They intuitively recognize that those things are very interdependent with each other. They are not disconnected from having a good strategy. But when we talk to school people, they actually did see them as separate problems to be solved. Like, if I could just fix my hr, then I'd be set, and then I'll start working on my resource allocation. And so one of the things we've been working on, and I think business people can be very helpful in, is seeing all of those parts of an organization's life as being interconnected with each other and connected to the work of the strategy to improve performance. And that's a very different way of thinking about an organization than we've encountered in most of the. In virtually all of the school districts we've been working with for the last few.

Years. So accountability is a big issue. Now. How do school districts learn from the business people, from the business side about.

Accountability? We all know that there has to be an effective accountability system, a carrot and stick that people don't work hard because of punitive action. That doesn't work in business, it doesn't work in school system. What really works is when you can build consensus around the fact a culture, a culture of performance build consensus around the fact that what success looks like, that we're all in the boat pulling together, that I have a role to play. If I don't play that role, I should have consequences for not playing it. But the reality is that accountability systems are only as good as the culture that exists within any organization, whether it's a for profit or whether it's a school district. Now, historically, school districts have been rewarded, or the people in it at least have thought that they should be rewarded based on effort. It's been very hard to tie those efforts to outcomes. But in the last seven or eight or nine years or so, we are now all focused on outcomes. How much are the students learning? And we are setting expectations. In school districts, the best run ones are saying, it's not I taught and the student didn't learn, it's I must not have taught very well or I must change the way I'm teaching. And collectively we can work together. And when that happens, and it's starting to happen in Some schools, in some districts, accountability just goes way up and so does.

Performance. That's right. I think the other thing that schools can learn from business about accountability is first of all, we've only been asking schools to be accountable for student outcomes in a very serious way in the states for maybe 10 or 15 years and in the country for about five years. And so this is actually a brand new world for school districts.

Right? There's no child Left.

Behind. Exactly. And so we're asking them to be accountable for something we've never asked them to be accountable for. So having said that, what school districts can learn from businesses about this issue is businesses understand that while profit might be the goal or some particular growth target might be what we're aiming toward, and that the whole group will be accountable for eventually, there are a bunch of indicators on the way to that big goal that help us know whether we're on the right track to get there. It's just now the case that districts, schools, classrooms are starting to think beyond what's the year end test going to say about how we did, and figuring out ways to build in both indicators and responses to indicators that help them move toward the big year end test, where all the stakes are in a way that increases their chances that they're making good decisions along the way to that. And again, you know, it's only been five years or so that the stakes have been as high as they are. And so the field obviously has a long way to go. But that's something business has been thinking about and dealing with for a long time, that there's a big goal out there. How do we know that we're on the way to reaching that goal, whether it's on a quarterly basis or on a monthly basis. And districts have just never had to do that before. And so I think there's a lot to.

Learn. I think districts actually have learned because businesses base accountability on data. They have the information systems. Whether it's my sales objectives or my production objectives, or my profit objectives, the data has been available, is very refined. It's only recently that schools could actually track what any student and by the way, not every district can still do it, but can track how much is a student learning and what is effective with this student. There's a district down in Montgomery County, Maryland, where they actually now have developed a system with Palm Pilot where they can look at their Palm Pilots. A teacher can then observe just what a student knows, enter it into a Palm Pilot and come out with a course of action as to what that teacher should do to enable that student to learn at a higher level. I just want one other point on the school districts are highly political entities, Unlike businesses and historically, they've picked political objectives. We will have all children learn by the year, you know, in five years. Those are unrealistic. They're not attainable goals. Everyone's disappointed at the end of that. And what's happening now is that the better led districts are set are starting to set realistic attainable goals at some political disruption because it's not easy to say that in five years I'm going to move my graduation rate, which is the case in Chicago. It's now currently 51% of the students who begin high school graduate in five years. Now they've set a goal of 2010 of 70%. Is that adequate? No, it's still not very good. But it's realistic. It's a reach goal that everyone can work to. You can't have accountability if you set objectives that are completely unrealistic. So after the first year, no one makes them. They give.

Up. So what does the future hold for the business of managing urban school.

Districts? We're actually really excited and positive. We think we are just beginning to understand the possibilities that management leadership can bring in terms of upside potential to these districts. It's not the whole answer, but it's a key part of the answer that been neglected to.

Date. One of the things when we look back, been at this for almost five years, if you would have asked me then, the thing I was most worried about it was that the more I worked on this, the less hopeful I would be when I learned more about the problem, more about the capacity of the system. And that's absolutely not the case as we see districts taking responsibility for their own performance for their own students and really begin to see some real gains in places that are used to using our point of view, gains that outpace the state, outpace districts down the road. I'm actually more hopeful that urban education can be transformed really at scale across the country versus less hopeful. And so I think, you know, as a last thought to business leaders, really get into the business of your school district and find out where the good news is and see how to help them spread that across the district versus always thinking about what's wrong. Actually help them identify things that are going well and see how to make sure that happens in more of their schools versus fewer of their.

Schools. Well, thank you both very much for coming in.

Today. Thanks for having us.

Steve. Thank you.

Steve. We hope you've enjoyed this edition of the HBR IdeaCast. If you have any comments or ideas you'd like to share about our program, please send them to us at this address, ideacastbsp.harvard.edu and if you'd like to catch up on our previous IdeaCasts, please visit us at www.hbrideacast.org. thank you, and please be sure to join us again next.