You still seem energised by the issues and organisations you talk about.
It’s a very energising time in which we live. There is so much new going on, and every time you go online, you pick up a paper, there’s some completely new idea that you hadn’t thought of, and it’s amazing. The rate of human progress has always been governed by how densely we were connected to one another, because the more densely connected, the more you see this melange and interplay and common chemistry of ideas and resources, and now it’s happening everywhere at warp speed. So, it’s a great time to be thinking and be alive.
Doesn’t every generation think that it is living through tumultuous change?
That’s true. But, if you look over most of human history, while you had upheavals and wars and famines, you didn’t have anything that was changing on a particular vector in a sustained way. In Britain in the mid-18th century, people lived, essentially, as they had lived in Egypt 4,000 years earlier. The quality of life, the number of calories somebody consumed in the day, the lifespan was not much different.
If you go back 30 years ago, more than two thirds of all the computational power in the world was in hand held calculators. Now, as you get more computational power you can solve more complex problems, you can start to model the world, you can just figure out ways to do things that you couldn’t have before.
And if you look at available bandwidth in the world and computational power per capita, both had a marked inflection point about ten years ago. How far does that go into the future? I don’t know, but the second and third order effects of those things are going to continue to reverberate for a long time to come.
Do you have a sense with the kind of things you talk around management that progress is being made?
It’s very hard to say how much is changing because, until recently, we had no systematic way of looking across the world and finding out who’s experimenting and who is not. So if your point of reference was the Fortune 1,000 then you’d probably say, not a lot. We just ran a competition and the winning organisation was a relatively small organisation from New Zealand that has done amazing things with building platforms that allow every associate to participate in the most important decisions of the organisation. Well, 20 years ago, we would have never heard about it; we could never have found that company.
There are a lot of these outliers, a lot of these fringe organisations, and some in bigger companies. Statoil, the huge Norwegian oil company, completely blew up its annual budgeting process and capital allocations to reinvent them in a dramatic way.
So I’m optimistic but I also think you have to apply the right timescale. I’ve made this argument before, but if you went back to 1890 there were few people who could have imagined a company with the scale of the Ford Motor Company. One generation later it was making half a million cars a year, and built the largest industrial complex in the world. We see the glimmers of this coming, but it’s still kind of hard to see it fully fleshed out in many organisations.
So, that’s why, my first priority over the last years was simply bringing enough of these examples to the surface, so they start to become credible. You don’t have to see many pigs fly before you start to believe in porcine aviation. Second, we have been trying to create the tools and the platforms that empower people to do this, because most people in most large organisations have a lot of helplessness. They believe those processes are run by somebody else – I can’t change those, I can’t … and so helping people get over that learned helplessness, giving them the tools so they can start that conversation in their own organisation.
Probably, the biggest barrier to this happening is that most of us have grown up in and around a traditional organisation. When it comes to changing something your first impulse is to look up and ask for permission. I think with the generation coming, the first impulse is to look sideways and build a coalition and enough influence that then you start to make something happen. That doesn’t mean you’re an anarchist, it means you’re an activist.You can love your organisation, you want it to do well, but you’re not sitting around for somebody to give you permission.
Where does this leave business schools?
They have, in some ways, a lot at stake in the old organisation model. Often, business schools saw themselves as training the administrative elite, if I can put it that way, the people who will fight their way up, by superior smarts and superior skills, to win the battle for promotion and climb the pyramid and hopefully one day make a big donation or wield their influence on behalf of the institution. But business schools are not alone – that’s how we all thought about organisations.
It is important to distinguish between research that characterises and research that changes things. There are a lot of people in business schools that do a lot of great research in understanding the incentives people respond to in organisations, and how the political process works in resource allocation, but so much of it is really based on understanding rather than true invention.
The two forms of research are symbiotic. If I want to change something, I’d like to start with as much knowledge as I can about how this system really works, how people behave and what’s possible and what’s not. But as you’ve seen in science, often it’s people who are out there experimenting and trying to change things who by accident discover some new theoretical principle. The big theoretical insight often comes as the unexpected side effect of an experiment gone wrong.
If you look, for example, at the pharmaceutical industry, until recently, most of the drugs we had, we actually didn’t know how they worked. We didn’t know the underlying disease process very well, we didn’t know the mechanisms of action for a drug. It was classic trial and error.
Right now in business schools, our research is over-weighted on the side of going out and understanding. If you want to do more change oriented research, beyond simply having a passion for a problem, which I assume most researchers do, I think there’s three more things that are required. You have to be kind of inherently annoyed, you have to be au contraire and you have to challenge what’s there. Classic academic training turns you into a kind of intellectual rule taker. You’re reading what the people before you said, you’re building on those theories, rather than being an intellectual rule breaker.
Number two you have to be deeply engaged with the phenomenon, in there up to your elbows, trying things. All those years ago, Elton Mayo and the Hawthorne experiments, turning up the lights, turning down the lights, you have to have that kind of engagement.
And then you have to have the perseverance for the trial and error aspects of experimentation, that you’re going to trial a lot of things, a lot of them aren’t going to work. And so the innovation, the deep engagement and then this relentless experimentation, those are not really things we trained most management researchers to do very well.
One of my idols was always the British inventor Sir Godfrey Hounsfield. He was just a humble bench engineer, but invented the CAT scan, and won the Nobel Prize for it. Radiography already existed, but the idea of rotating it through 360 degrees and then using the available computer power to reconstruct that image in two dimensions, ultimately three dimensions, was an amazing breakthrough. We need more people in business schools who really are trying to make that kind of difference.
One of the things when I moved from London to California, and I started to hang out with a lot of people from Stanford particularly, is I’d meet people in the engineering school who trying to master large scale manufacturing. Or people in computer science who were trying to create computers that can emote, or you’d meet people in medicine trying to cure Parkinson’s disease, but there were very few people in the business school that seemed to be as romantically enthralled by a big problem and making a difference as I found in engineering, medicine and so on. I don’t know why that is, but I think if we want to be more relevant and have more impact that has to change.
How does your world view chime with the idea of disruptive innovation?
Disruptive innovation, for me, is an oxymoron. Innovation, by definition, is disruptive. Everyone can have their own definition, but for years my definition has been, does it change customer’s locations, does it change industry economics, and/or does it change the underlying basis for competition? If it does not, let’s not call it innovation, call it something else.
The second thing is I think it’s basically just a re-statement of the fundamental principles of capitalism and open markets, that we live in a world in which newcomers can enter, they can do new things and if you don’t stay relevant you lose. So, in that sense it’s just a restatement of Schumpeter’s thesis.
And then in a more pragmatic way, when you talk about disruptive innovation you are, by definition, looking at this from a defensive point of view. Think about that word, disruptive. To who? Twitter is not disruptive to Twitter, but it may be disruptive to somebody else.
So, if I’m thinking about disruptive innovation, by the time I recognise it as disruptive and define it as such, it means that I’m still looking at the world through the lens of my existing business. If I’m just discovering something that’s changing the rules, well, I’ve already lost.
The focus should be not on the destructive part of creative destruction, the focus has to be on the creative part. My dream is organisations that never take refuge in denial, that rush out to meet the future, that are relentlessly optimistic, that change before they need to, that are opportunity driven. I think Amazon is that kind of a company; I think Google is probably that kind of company – at least they’re a lot more that way than companies 20 years ago.