Think at London Business School
Friday 23 September 2022
Alex Yang and others explore how market-led technology-enabled innovations could strengthen supply chain delivery
By Nitish Jain, S. Alex Yang
“This is a once in a lifetime opportunity to enact positive change and plant the seeds for a better world… don’t blow it”
Management guru and author of In Search of Excellence
As the pandemic began to strengthen its grip, the business world surprised itself by the goodwill and can-do attitude that it brought to the situation. Companies like Siemens, McLaren, Hewlett-Packard and Burberry were among many to uncover previously hidden levels of agility and innovation to support the health sector.
It became clear at an early stage that the same attitudes would be essential if the businesses themselves were to survive. Changing work practices, new consumer behaviour, flawed supply chains and different delivery channels were among many existential threats faced by organisations both large and small.
The pandemic compelled organisations to cast aside traditional structures and established business practices to become more innovative. With no immediate answers to hand or precedents from which to learn, it meant organisations were forced to become more experimental to survive. Businesses began to improvise and become more curious. They tried different products and services, they sought new customers and markets.
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“Even though an experimental approach has proven to be so powerful, evidence suggests that many business are drifting back to more familiar, established habits”
Yet, as we move to some degree of normality, there are signs that even some of the ‘success’ stories are being challenged. Whilst companies like Facebook are promising workers they may never need to return to the office, others like PwC are using incentives or directives to encourage a return to normal working, whils Goldman Sachs’s CEO David Solomon called working from home “an aberration that we are going to correct as soon as possible.”
With this trend comes the danger that other benefits, in terms of changing attitudes and management practices, may be lost. Even though an experimental approach has proven to be so powerful, evidence suggests that many business are drifting back to more familiar, established habits.
Most businesses have been taken way beyond their comfort zone during the pandemic and like a stretched piece of elastic they have felt the tension. It’s as if they want to relieve that tension and get back to a semblance of ‘old normality’ to give themselves time to draw breath before they begin to push on again and perhaps use the lessons learned from the experience. The danger is that they just stay with the old normality once they are back in their comfort zone.
If the ‘new normal’ is really going to be ‘new’ then it means organisations grasping the opportunity highlighted by Tom Peters above. It means utilising the experiences of the last 18 months as a platform on which a more experimental approach to today’s business challenges can be built.
Learning from others is a starting point. Here, we have selected 10 characteristics that we have observed most frequently in innovative businesses.
In business, there is a deep-seated reluctance to accept that trial and error, along with risk and failure, can ever have a place when efficiency and delivery of results are the priority. And yet… experimental organisations embrace thoughtful risk-taking and accept failure as part of the learning. They test strategies or new processes in discrete market segments or small parts of the organisation. By “farming the bets” rather than “betting the farm”, they spread the risk and create a sense of freedom. It enables a wider range of ideas to be explored because the costs of failure are lower.
Experimentation exemplifies the virtues of patience, open-mindedness, curiosity and objectivity. Qualities that are often rare in business where leaders rely more upon authority, experience and alacrity to get the job done. This contrasts sharply with the characteristics in experimental organisations where the virtues described provide the dexterity and creativity to succeed. It requires organisations to unshackle themselves from deep-rooted practices and hierarchies and make space for complementary behaviours that encourage delivery through a more agile approach.
An experimental culture requires a humility that accepts we don’t always know the answers. Experimentation calls into question the infallibility of the expert, the need for hierarchy and the authority of leaders. It suggests that we know much less than we think and that age and experience are not always accompanied by wisdom. Innovative organisations respect knowledge and expertise but are not tied to edicts from above, nor do they dutifully obey best practice. They encourage challenge in equal measure. For those leaders rewarded and recognised for their knowledge and unquestioned expertise it can be a difficult balance to achieve.
For every bold hypothesis that is corroborated by experimental evidence, there are many, many others that are refuted. Experimentation can be seen by some to be a ‘wasteful’ business and a diversion from the ‘real’ job of delivering results and meeting targets. Innovative organisations accept that exploring new strategies or ways of working can be a slow and frustrating process and that setbacks will occur. But, they also realise that fortune favours the brave and when they alight on an extraordinary discovery it pays for all the bumps on the road.
An experimental organisation forces the business to make its reasoning explicit. It
challenges business planners by saying: “Stop asking ‘what results and numbers you want to achieve and what outcomes count as success?’” – questions to which every competitor in any industry will have broadly similar answers. An experimental culture begins by asking instead: “What assumptions are you banking on to deliver these outcomes, and what evidence do you have that they are true? It means taking an experimental approach to test the assumptions and seek evidence. For those raised on a diet of mission statements, management by objectives and action plans this can be a difficult transition.
The characteristics above can often be influenced through changes in structures, processes or systems. However, those levers will only work if they are underpinned by a set of collective attitudes, mindsets and values. Here we list five behavioural values that we see most commonly amongst leaders where a “culture of experimentation” thrives.
In an experimental culture, challenging our own beliefs and assumptions is fundamental. Yet, it is rare that a management team takes the trouble to surface the assumptions that underpin a strategy or new process. It is rarer still if they become the subject of rigorous debate, let alone experimental testing. Our business plans invariably reflect a large dose of confirmation bias, loss aversion, and wish fulfilment. Innovative organisations create a balance between giving credence to data that corroborates their beliefs and those which threaten to refute them.
This is the precious habit of paying particular attention to whatever takes us by surprise. It is nature’s way of telling us that something in our belief system is awry and the inquisitive mind will seek to reveal it.
When businesses develop strategy, address a problem or exploit an opportunity they almost always do so from a narrow field of vision. That perspective is usually limited to individual experiences or previously ‘tried and tested’ solutions. They play safe with familiar solutions rather than seeking new alternatives. The innovative organisation sees ‘discovery’ as a reward for curiosity. By widening horizons and questioning the status quo, the business uncovers new ideas, explores new opportunities and ways of working.
In an innovative organisation, the skill of identifying problems that demand solutions and generating ideas that deserve to be tested are not necessarily related to seniority in a hierarchy. The curiosity and imagination that sparks discourse is to be found at all levels and in all functions within the business. Creating an environment of psychological safety where open dialogue can flourish becomes a leadership virtue that is fundamental if widespread experimentation is to find a natural home in the organisation.
Questioning and challenging are an essential part of an experimental culture but they are never an excuse for riding roughshod over others or cutting corners on moral obligations. This means having the skill to balance the responsibility of challenging a firm’s orthodoxies with an ethicality that is sensitive to the needs of stakeholders. In an innovative organisation, such balanced challenge is seen as a virtue and not disruptive or disrespectful. Rather, it is expression of allegiance and enthusiasm.
The final value of courage might be a composite of the others, but is defined here as a discrete value to underline its importance. Without courage to take risks, to challenge convention or to move beyond a comfort zone, experimentation will not happen – even if the other values are present. Courage in this sense means being bold enough to question personal beliefs and try something new. A culture of experimentation demands this type of courage at many levels, but the focus here is the additional challenge of courage in leadership. Innovative organisations only prosper because their leaders are courageous enough to embrace the values we describe here.
How do YOU measure up against the values?
If you are interested in assessing yourself as an ‘experimentalist’ a questionnaire is available from email@example.com
How experimental is YOUR organisation?
If you are interested in assessing your own organisation against an expanded version of the characteristics described, a questionnaire and activity guide is available from firstname.lastname@example.org
Rob James MBE is a Programme Director and Experiment Tutor at London Business School. Since establishing his own leadership consultancy practice in 2003 and after senior roles in executive development at PwC, he has worked globally across many industry sectors using experimentation to create greater value for businesses.
Dr Jules Goddard is the leading proponent and practitioner of action learning programmes and business experimentation at London Business School, UK. He was the first person to be appointed Gresham Professor of Commerce and serves as a member of the Council of the Royal Institute of Philosophy.