Point: Admitting ignorance is a crucial first step to building strong knowledge that leads to innovation.

Story: Many of the 2010 World Business Forum presenters spoke authoritatively about what we know about business and economies.  But Steven Levitt (author of Freakonomics and Super-freakonomics) highlighted a systemic blindside in what businesses and leaders know.  In his discussions with companies, Levitt found that business people fear saying, “I don’t know.”  Such an admission seems to them like a reputation-damaging weakness in the eyes of their coworkers, bosses, shareholders, and customers.

Yet being unwilling to admit ignorance carries at least three types of stiff penalties.  First, the arrogance of presumed omniscience leads to hubris, which is the first stage of downfall, according to research by Jim Collins, author of bestsellers Good To Great and How the Mighty Fall.

Second, by not admitting ignorance, companies underinvest in gathering and creating knowledge. If we claim to already know something (e.g., “we know our customers”), then why invest in gathering more knowledge about them?  Third, and ultimately, willful ignorance are leads to mistaken decisions and failed innovation.  No wonder 90% of new product launches fail, according to data cited by Martin Lindstrom (author of Buyology).

Admitting ignorance need not signal weakness.  Saying “I don’t know” isn’t the same as saying “I can’t know.” A number of the presenters described four concrete ways of reducing ignorance.

First, A.G. Lafley (former CEO of P&G) stressed the value of reducing ignorance about customers simply by listening to them and watching them as they naturally interact with the company’s products.  P&G spends a lot of time and money trying to understand the two moments of truth — when the customer chooses products in the store and when the customer uses products in the home.  Even as CEO, Lafley made a point to visiting ordinary consumers and stores when he traveled.  These visits demonstrated to all P&G employees the importance of learning more about customers from the customers themselves.  The point is the listen more and go out in the real world — admitting (and resolving) ignorance about how customers really use products and services.  Charlene Li, author of Open Leadership and Groundswell, likewise stressed this point and cited the new-found power of social media to let companies hear what real people are saying about the company (see previous post: Getting CEOs on Board with Social Media).

Second, Martin Lindstrom showed exciting new tools such as fMRI (functional Magnetic Resonance Imaging) and SST (Steady State Topography) that can trace the activity of the subconscious parts of the brain.  With these tools, innovators and other business researchers can answer previously unanswerable questions about people’s innermost reactions to brands, products, and sensory cues associated with new or existing ideas.  With these tools, Buyology researchers can show how just the red color of a Marlboro cigarettes pack or the angular shape of a McDonald’s restaurant roof triggers a reaction in consumers.  These new technologies help business resolve age-old ignorances about why people really buy.

Al Gore (former Vice President of the US and Nobel Peace Prize-winning creator of An Inconvenient Truth) gave an impassioned plea for responding to global warming before more dire effects take hold of the planet.  His presentation illustrates a third tool for reducing ignorance: developing deep models to estimate the direct and indirect effects of various phenomena.  For example, climate models help predict the ongoing rise of humidity and the concomitant rise in the severity of storms such as those that caused this year’s floods in places like Nashville and Pakistan.

Modeling does come with risks.  Levitt criticized prevailing economic models for focusing too much on what was mathematically easy rather than what was relevant to real economies.  People need to validate the model by showing, for example, that the last 60 years of temperature increases track the increase predicted by climate models.  Good modeling helps people reduce ignorance about what might happen without the full costs of making it happen.

Finally, testing represents the natural culmination of the other ignorance-reducing tools:  will an innovation or new idea really work? Levitt recommended doing more experiments — testing the effects of changing the price, changing the advertising, changing the product features, and so on. Levitt also suggested leveraging accidental tests.  For example, when an intern at a consumer electronics company forgot to submit newspaper ads for three months in one local market, the company discovered that the lack of newspaper advertising had caused no corresponding drop on sales.  Lafley likewise encouraged managers to test new ideas, even if they couldn’t get permission beforehand. Resolving ignorance is too important to be stymied by bureaucracy. Moreover, testing need not be expensive these days. A.G. Lafley noted how much easier it is to test new packaging and merchandising innovations in a computer-based virtual 3-D simulation. P&G can create an accurate 3-D model of a consumer’s favorite retailer and graphically add and test new designs. Changing the color, shape, size, graphics, etc., only takes the click of button. Cost is no longer an excuse for ignorance.

Action:

• Admit ignorance and document what you don’t know but would like to know.
• Watch and listen by going out to customers and the world to glean potential insights and innovations.
• Use new data collection technologies to answer previously unanswerable questions.
• Build models to predict the impact of innovations and other changes in products, processes, and business.
• Test innovation hypotheses via various methods such as virtually, in test labs, or in select markets.

Tags: How-to, Innovation, P&G, World Business Forum

Point: Make social media relevant to CEOs by showing how it can help achieve corporate goals.

Story: Charlene Li, co-author of bestselling Groundswell: Winning in a World Transformed by Social Technologies and Open Leadership, spoke at the World Business Forum in New York City on October 5, 2010. Before the conference, I had the chance to ask Charlene if she had any tips for convincing the C-suite of the value of social media. Her answer: “Traditional ROI is not the way to go yet. Instead, ask the CEO his or her goals for the year.  Then, put social media in the context of that, explaining how social media can help them achieve those goals.”

For example, if one of the CEO’s goals is to increase customer satisfaction, then show the C-suite executives how social media can be used to listen and converse with customers and respond to customer problems. Shoe company Zappos is often mentioned as a paragon of this strategy, but even mainstream companies can use social media successfully. For example, entertainment and communications company Comcast, founded in 1969, uses Twitter (@ComcastCares) to respond to customers tweeting about Comcast problems. In one year, the company handled more than 21,000 customer service requests (official tickets) through social media.  Half of those were solved through Twitter, and that figure does not include the thousands of simple inquiries which Comcast customer service reps have responded to on their own.  Frank Eliason, Director of Digital Care at Comcast, also sees Twitter as a great early warning system.

Another important point Charlene made was that CEOs are often hungry for hearing what customers are saying about their company, especially because they’re often removed from those direct conversations. Social media monitoring tools give executives an opportunity to listen in. The CMO of Best Buy, for example, put a big plasma screen up on his wall to see all the mentions of Best Buy. “It’s powerful to be so connected to what your customers are saying,” Li said.

Action

• Ask top executives about their top goals for the company
• Cast social media strategy and benefits in terms of addressing those strategic goals
• Show executives how social media can give them the pulse of the customer and a deeper connection to the marketplace.

For Further Information:
Twitter Success Stories, MarketingProfs 2009.
Charlene Li, Open Leadership: How Social Technology Can Transform the Way You Lead

Tags: World Business Forum

Point: Instead of trying to change large organizations, we can create new human-scale organizations that embody the needed changes and inspire passion. Micro-volunteering site Sparked.org, citizen site SeeClickFix and Fabien Cousteau’s PlantaFish point the way.

Story: What makes you want to get out of bed in up morning? Inventure Group founder Richard Leider has been asking people this question for over 40 years. The crosscutting answer: purpose. Even better, Leider has found that people with a sense purpose live longer.
Contrast this with John Hagel‘s data that only 20% of US workers feel passionate about their jobs. And the larger the organization, the lower the passion. That lack of passion does not bode well for either these workers or their organizations.

At the Business Innovation Factory‘s BIF-6 summit, 37Signals co-founder Jason Fried posed a similarly fundamental question about organizational growth. Fried asked, “Should we grow?”  His answer: “maybe not,” because so many larger organizations struggle with inertia, bureaucracy, and passion-killing processes. Fried recommended having human-scale organizations of no more that $10 million in revenues.

So how can we keep passion and purpose yet still effect the large-scale changes we need to solve global societal problems like healthcare, climate change and ineffective education systems?

Two BIF-6 storytellers illustrated web 2.0 systems that enable small informal actions by large numbers of people to augment or supplant the activities of larger organizations.  First, Extraordinaries founder Jacob Colker described www.sparked.org , which is platform for micro-volunteering.   The system lets qualified organizations (such as a Kenyan village working to bring clean water to its citizens) post requests for simple, low-commitment, high-skill tasks (such as marketing recommendations, tech support, etc.).  Anyone can volunteer their professional services in quick 5-20 minute increments — volunteering while waiting in line, for example.

Second, Ben Berkowitz described his SeeClickFix.com site, which lets citizens report small problems in their communities to a single site. The site routes alerts of these problems to appropriate civic authorities and elected officials.

Both examples illustrate two key points about the future. First is the power of engaging informal, ad hoc participants. Rather than building a lumbering command-and-control workforce, these new systems rely on the billions of hours of idle cognitive and labor resources lying fallow in our communities. Second, these two examples illustrate the power of web 2.0 tools to create large-scale solutions without large-scale development efforts. Anyone with an idea, passion, and a modicum of technical expertise can build an online system that scales to millions or billions of users. Behemoth organizations are neither necessary nor sufficient to solve tomorrow’s problems.

Fabien Cousteau, grandson of oceanographer Jacques Cousteau and founder of Plant A Fish, provided compelling motivation for large-scale change: saving the planet takes precedence over saving any organization.  Rather than reform old large organizations, we can create new human-scale organizations that embody the needed changes and inspire passion.

Action

• Don’t assume that large, mature, centralized organizations can or should change
• Look for solutions that solve a problem through millions of small steps (handled by distributed crowds)
• Use lightweight online systems rather than heavyweight organizations to inform, engage, and mobilize far-flung participants/activists
• Invest in building the young and dynamic rather than changing the old and static.

For more information:

John Hagel’s website, Center for the Edge at Deloitte and new book, The Power of Pull

BIF-6 storyteller profiles and blogroll

Tags: Business Innovation Factory, Innovation, organizational change, passion, Productivity, volunteering