Thinking the Unthinkable

The New Leadership Imperative

by Holly G. Green

People ask me all the time what I consider to be the biggest challenge facing today's business leaders.

I don't even hesitate on this one. It's the automatic assumption by most business leaders that we still live in a fairly predictable world.

Think about it. Six months ago, who would have thought that Toyota would be in the position it is today?

Here we have one of the largest, most successful, most respected companies in the world. And now it faces a crisis that is not just destroying its hard-earned reputation, but could well put it out of business.

That's unthinkable! And yet it's happening right before our eyes.

Sales of Toyotas are plummeting. The U.S. government is launching a full-scale investigation into the company's business practices. And a tidal wave of lawsuits around the faulty floor mat/throttle issue is about to be unleashed.

If Toyota is found to be at fault, and if it turns out they had knowledge of the defective design and did nothing about it, punitive damages could run into billions of dollars. Not even Toyota could withstand that kind of a financial hit and still survive.

I'm not saying the unthinkable will happen. But the possibility that Toyota could go out of business in the near term is very real. And that's the kind of world we now live in.

Leading a business in this kind of environment requires a new way of thinking. Considering that most business leaders still view the world as fairly predictable, the question becomes:


How do we train ourselves to think differently?


The answer is simple - pause, think, focus, run.

• Pause. Make it a habit to back away from the day-to-day and evaluate what is happening outside your industry as well as inside.


• Think. Constantly challenge your beliefs and assumptions about what you know to be true about your customers, your markets, your industry and the way you do things inside your organization. Take nothing for granted.


• Focus. Identify opportunities to add value to your customers in ways that nobody else is doing. Identify significant initiatives that support leveraging those opportunities, and get and keep everyone in your organization clear on achieving them.


• Run. Implement quickly, with focus and flexibility, knowing in advance that your new initiatives will not unfold exactly as planned.
  Then repeat this process.

During the think phase, develop the habit of engaging in scenario planning. Ask questions like:


"What would happen if our biggest competitor suddenly went out of business? What is taking place in other industries or other parts of the world that we could use to transform our industry?"


Many companies do this once a year during the strategic planning process. In today's world, that will no longer suffice. When a company as large and seemingly invincible as Toyota can have the rug pulled out from under them so quickly, it's clear the old rules no longer apply.

Pondering the imponderable should become an everyday occurrence in organizations. To be a successful leader today, thinking the unthinkable must become a way of life.


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Holly is the CEO of THE HUMAN FACTOR, Inc. (www.TheHumanFactor.biz) and is a highly sought after and acclaimed speaker, business consultant, and author. Her unique approach to creating strategic agility, helping others go slow to go fast, will change your thinking.

Innovation gone too far? - The Toyota Recall

by Robert F. Brands with Jeff Zbar

Once upon a time, to start your Toyota Camry, you placed a key in the ignition and turned until the electrical connection was made and engine started.

To accelerate, you pressed the gas pedal, which pulled a cable attached to a mechanical throttle. Assuming the shift had been manually placed into gear - the car moved.

Today, electronics and computers have replacement many of the mechanical parts that once made cars move. To start many cars or place them in gear, buttons are pushed. To accelerate, the gas pedal is connected not to a cable, but to a computer - via electronic circuitry.

In light of Toyota's massive recall of 10 million of Camry, Tercel, Prius hybrid and luxury Lexus models (and that's a shortened list), one has to wonder: At what point does innovation encourage failure?

In other words, has Toyota gone too far? In the interest of fairness, these issues potentially affect any modern automobile. Already, GM is facing recalls related to steering.

The costs - in terms of finances and consumer confidence - can be great. As Toyota mechanics are correcting millions of cars and consumer confidence lags, rival automakers have reported double-digit sales growth.

But the question of innovation for innovation's sake - or for the sake of "technological evolution" - begs to be asked. Sure, innovation of the vehicle and the way it's manufactured cuts costs, including labor and benefits. We continually innovate to cost reduce. But now, cars don't just turn on with the turn of a key. And when they don't roar to life as expected, the corner mechanic must be trained not only in auto repair, but in computers technology (assuming he or she owns the equipment).

This reminds me of a story. It was the 1970s. Two adventurers once were traveling by pick-up truck in northern Mexico when their vehicle broke down. The local mechanic took a look under the hood, grabbed a coffee can of old parts, and fashioned a fix.

How does this all relate to the innovation imperatives? In "Robert's Rules of Innovation", it mentions two key imperatives that seem to have gone awry here. First, Toyota sought the imperative of value creation in pursuit of innovation. Yet, any value created through their innovation-gone-awry is more than lost through the recall and labor costs and lost sales and good will.

Second, who has been held accountable? After first declining to do so, Toyota President Akio Toyoda made a very public appearance on Capitol Hill. He apologized and promised to "do everything in my power" to ensure the malfunctions and tragedies don't happen again. Do Americans buy it? Can Toyota afford to wait and wonder?

To that end, the complexity of the conundrum facing Toyota at one point was belied by the simplicity of their first apparent fix. After spending days in conference over how to remedy the stuck throttle, high-paid engineers came up with a simple solution: Shorten the gas pedal.

To be sure, in the end, the issues facing the automaker were far more complex than nipping an inch off a too-long pedal. But could the issues have been remedied in the designer's or accountant's office years ago - when the company believed innovation would save money?

We - and Toyota - may never know. But we've learned that innovation poorly planned can have the greatest expectations, but the worst outcomes.


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Robert Brands is the founder of InnovationCoach.com, and the author of "Robert's Rules of Innovation: A 10-Step Program for Corporate Survival", with Martin Kleinman - to be published in March by Wiley (www.robertsrulesofinnovation.com).

To Uncover Great Ideas, Generate a Large Quantity of Them

by Paul Sloane

One of the great problems with the Western education system is that it teaches that for most questions there is one correct answer. Examinations with multiple choice questions force the student to try to select the right answer and avoid the wrong ones. So when our students leave school they are steeped in a system that says find the "right answer" and you have solved the problem.

Unfortunately, the real world is not like that. For almost every problem, there are multiple solutions that may solve the problem with varying degrees of effectiveness. In other words, in the real world, there is more than one "right" answer. We have to unlearn the school approach and instead adopt an attitude of always looking for more and better answers.

To be really creative, you need to generate a large number of ideas before you refine the process down to a few to test out. To make your organization more innovative, you have to increase the yield. Why do you need more ideas? Because when you start generating ideas you generate the obvious, easy answers. As you come up with more and more ideas so you produce more wacky, crazy, creative ideas - the kind that can lead to really radical solutions.


Real-world examples

The management guru Gary Hamel talks about "corporate sperm count" - the virility test of how many ideas your business generates. Many managers fear that too many ideas will be unmanageable but the most innovative companies revel in multitudes of ideas.

When BMW launched its Virtual Innovation Agency (VIA) to canvass suggestions from people all round the world it received 4,000 ideas in the first week. And they continue to roll in. You can even make your own contribution to BMW's idea bank.

The Toyota Corporation in-house suggestion scheme generates over 2 million ideas a year. Over 95% of the workforce contribute suggestions; that works out to over 30 suggestions per worker per year. The most remarkable statistic from Toyota is that over 90% of the suggestions are implemented. Quantity works.

Thomas Edison was prolific in his experiments. His development of the electric light took over 9,000 experiments and that of the storage cell, around 50,000. He still holds the record for the most patents - over 1,090 in his name. After his death 3,500 notebooks full of his ideas and jottings were found. It was the prodigiousness of his output that led to so many breakthroughs. Picasso painted over 20,000 works. Bach composed at least one work a week. The great geniuses produced quantity as well as quality. Sometimes it is only by producing the many that we can produce the few great works or ideas.


Putting these lessons to work for you

When you start brainstorming or using other creative techniques, the best idea might not come in the first twenty - or even in the first 100 ideas. The quality of ideas does not degrade with quantity. Often the later ideas are the more radical ones from which a truly lateral solution can be developed.

What do you do when you have a mountain of ideas and suggestions? You sort them, analyze them and try out those with the most potential. The really promising ideas are critically examined from the perspectives of technical feasibility, customer acceptance and profitability. If they pass these hurdles, they move rapidly to a prototype phase. They are then tested in the harsh reality of the marketplace, where a sort of accelerated Darwinism occurs - only the fittest survive. The interesting ideas should be kept in a database and allowed to incubate. When you revisit them later, you may well find that you now see a way to adapt or combine them into something worthwhile.


The venture capitalist's strategy for testing promising ideas

The most innovative companies have an approach to trying out promising ideas that is like the philosophy of a venture capitalist. The VC invests in a portfolio of different start-up companies, fully knowing that most will fail. A few may break even, and one or two may become successes. But one big success can pay back the costs of all the failures.

Even though he is smart, the VC does not know which ventures will succeed and which will fail, so initially he backs all of them. As time goes on, he cuts funding for the failures and gives it to the winners. It is the same with prototypes in business. The leading innovators run many different pilots and measure progress carefully. They cut funding the losers, but nurture the successful trials with additional resources. That way they are first to market with the real winners.


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Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.

Four Quadrants of Innovation

Incremental versus Disruptive

by Hutch Carpenter

I recently wrote up a post, "Innovation Perspectives - No Shooting Stars." In it, I discussed the issue of organizations myopically focusing on only disruptive innovations to the exclusion of more incremental or sustaining innovations.

In doing more research on the subject, I began thinking about the dynamics that apply when a firm pursues different kinds of innovation. A post by Venkatesh Rao, Disruptive versus Radical Innovations, was very useful for distinguishing between disruptive and radical innovations.

Building on that, I wanted a framework for delineating innovations based on their technology and business impacts. Because they're not necessarily the same. The four quadrants below describe the dynamics for innovations according to their technology and market impacts:



In each quadrant, there are different rationales and issues that apply. Let's take a look.

Existing Tech, Manage Existing Market

The lower left quadrant represent innovations that leverage existing technology, and service existing customers. This is every day innovation. The block-n-tackle innovation that keeps companies nimble and operating at rates above industry averages.

Example? See how Wal-Mart improved the fuel efficiency of its vehicle fleet:


"Wal-Mart has taken a number of steps, including the installation of diesel Auxiliary Power Units on all its trucks, and applying aerodynamic skirting. On the tire side, Wal-Mart is working with super single tires. and is testing nitrogen-filled tires and an automatic filling process to maintain constant tire air pressure."


Improving the customer experience is also a critical opportunity. In an era of social-media empowered customers impacting your brand, the consequences of failing to improve the customer experience are higher than ever.

But this quadrant is the one often pooh-poohed by many in innovation. I like the way PriceWaterhouseCoopers puts it in this blog post:


"An unintended consequence of the Innovators Dilemma has been that companies have begun believing that unless they were pursuing a strategy of seeking disruptive innovations, they were somehow losing out."


Wal-Mart's efforts have paid off. The retailer has held relatively strong during the Great Recession, as seen in its stock price. And Toyota famously gathered over million ideas a year from its employees to emerge as a global leader in the automotive industry.

Existing Tech, Create New Market

In this quadrant, existing technology is leveraged to create a new revenue streams. This is the quadrant where the following phrase applies:


"Good artists borrow. Great artists steal."


The simple application of a technology that serves one purpose toward a different purpose can be disruptive from a market perspective. It's not a large technological leap. It's the intelligent application of what's already at hand.

Twitter is a great example. The technology itself is...simple. Web form. Subscription model. Limit to 140 characters. Yet it's revolutionized the way people share and find information, causing Techcrunch's MG Siegler to compare it to a modern day Walter Cronkite. All for a simple little web app. Here's what WordPress founder Matt Mullenweg says about Twitter:


"Whether the Twitter team intended it or not, they've built a killer and highly addictive reader platform with dozens of interesting UIs on top of it."


The thing with these innovations is that they are very much a market-determined disruption. This isn't some sort of EUREKA! the moment the technology is rolled out of the labs. It takes the market to say that it's disruptive.

Clayton Christensen (Innovator's Dilemma) types of innovation will often fall in this quadrant. Existing technologies applied in new ways to address the lower end of the market.

Venkatesh Rao has a great perspective on this quadrant:


"In fact, in most documented cases of disruption, the disruptive innovation was a minor/incremental change and well within the technical capabilities of the incumbent (and was often taken to market by a renegade spin off from the original company)."


This quadrant is the best one for producing organic growth for companies. It has lower risk, but produces meaningful revenue growth.

Radical Tech, Create New Market

If any one quadrant defines the popular view of innovation, it's this one. And that's not without good reason. In the previous quadrant, existing technologies are applied to new markets. Well, existing technologies have to come from somewhere. That's this quadrant.

This is the cool stuff that the press writes about. Check out AT&T's Technology Showcase for a great example of some of these new technologies.

Amazon's Jeff Bezos has done well in this quadrant. His latest innovation, the Kindle, is an example. It includes a new "electronic ink". Ability to read text aloud. It's incredibly thin profile.

And it's paying off. Amazon reports that the Kindle set a new sales record this November. Which points to the Kindle as a strong new revenue stream down the road, and a new source of sales for Amazon's book sales. A home run in this quadrant.

These types of innovations are important for maintaining the long-term growth rates of companies. They provide needed growth, replenishing changes in existing markets.

Which leads us to the final quadrant...

Radical Tech, Manage Existing Market

There are times a company's business is under attack, and it needs to address changing behaviors in its market. Innovations in this quadrant share the high risk profile of the previous quadrant, but they have a defensive nature to them. They don't seek to find new opportunities, they seek to address changes in customer behavior.

Hulu strikes me as an example of this. A joint venture of NBC, Fox and ABC, Hulu lets users view shows on computers. This initiative addresses the emerging market shift away from televisions to viewing on all sorts of devices. It's a better answer for this shift than the music industry initially had for the proliferation of MP3 songs on various P2P sites.

Gary Hamel has noted the increasing volatility of markets across the globe. Customers have better access to information about new options, and are willing to shift their spending more quickly. With this dynamic, expect some increase in activity for innovations in this quadrant.

Companies Need a Portfolio of Innovation Opportunities

In a recent Accenture survey, 58% of executives said their organization is looking for the next silver bullet rather than pursuing a portfolio of opportunities. When I hear that, I think first of the upper right quadrant (radical tech, create new market). These types of innovations are incredibly important, and should be part of a company's innovation efforts.

But there's really a good basis for expanding that view to look at the other types of innovation: technology vs. market, disruptive vs incremental.

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Hutch Carpenter is the Director of Marketing at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.

Part 1 - The Power of the Question (Shanghai)

Lots of bad stuff happening in China right now. So let's talk about some good stuff. Like the design coming out of Shanghai.

Innovation, no matter where it occurs, always begins with a burning question (or questions), centered around "Is there a better way?" Artist-turned-designer Lu Kun has almost single-handedly put Shanghai on the international fashion map by pursuing three such questions:

Why doesn't China's clothing industry pay attention to detail? Why is it so cheap and uninspired? Why can't we do it differently?

Tired of his country being perceived as one big factory, Kun is on a mission to demonstrate that creativity and innovation are alive and well in China. His bold designs are doing just that. Drawing his inspiration from what he knows best - the streets of Shanghai - Kun's original creations are being hailed as elegant and imaginative, yet at the same time distinctly Shanghainese.

Undaunted by China's lack of a financial backing system for developing promising fashion designers, Kun has broken new ground. Until the arrival of Mr. Lu, no Chinese designer had achieved a presence on the international catwalk.

Kun did it in less than five years. How?

It's as if Mr. Lu took the advice of Sakichi Toyoda, who said: "Never try to design something without first gaining at least three years hands-on experience."


Kun's six-step path to innovation:

1. Learning the basics of fashion design in a vocational high school.


2. One year of cutting and sewing at a Shanghai tailor shop.


3. One year at a startup Hong Kong label.


4. One year teaching sewing technique and production design at LaSalle International Fashion School in Shanghai.


5. Then out on his own as a personal fashion designer for wealthy individuals.


6. And finally the design of an entire line of special occasion and upscale casual wear.

As with all great innovators, it's the power of the question that drives Kun's artistry.

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Matthew E. May is the author of "IN PURSUIT OF ELEGANCE: Why the Best Ideas Have Something Missing." He is constantly searching for creative ideas and innovative solutions that are 'elegant' - a unique and elusive combination of unusual simplicity and surprising power.

GM Followup - The Clouds Darken

As discussed in my previous post, GM is betting a lot on the Chevy Volt as a potential savior for the company. GM plans to deliver the Chevy Volt in November 2010.

However, yesterday, I came across two articles in the Seattle Times that cast additional doubt on whether the Chevy Volt will be the savior that GM thinks it will be. The first article was about how Chrysler is currently developing three electric or extended range electric vehicles for release in 2010. Chrysler did say however that it will probably only deliver one of the three vehicles on that timeline. But which one?

In a related article it was announced that Toyota plans to introduce a plug-in version of their Toyota Prius hybrid next year (2009), a full year before the debut of GM's Chevy Volt offering.

I had previously theorized that Toyota would get to market before GM, and now it looks like that will be the case. So, can GM still win if it gets to the publicly available plug-in party a year after Toyota?

What do you think?

Ask the Consultant - Question #1

Brian Shields poses the following:

"Can you post/comment on what you think it will take to "fix" General Motors (GM)? I would very much appreciate your views on the subject."

Well, Brian, here you go:

GM has an extremely difficult challenge ahead, and continuing to follow Toyota will not get them out of the pickle they are in. GM lost $15.5 Billion last quarter and expect to bleed red ink every month for the foreseeable future. GM claims to be well capitalized and capable of operating through 2008 and 2009 without difficulty. However, GM's so-called conservative forecasts are likely to be optimistic as America's credit spigot is turned off and Americans are forced to live closer to their true means. The tightening of home lending standards will spread to auto lending standards (if it hasn't already), putting added pressure on auto sales. Finally to top it all off, GM faces higher than normal vehicle returns at the end of leases, with GM suffering losses in the resale of those vehicles.

So what is GM to do?

On the finance side they should, of course, continue to work to make themselves cost competitive with others producing on American soil and elsewhere, while also working with labor unions to identify ways to boost union worker productivity beyond what non-union workers are capable of. Reducing salaries is not the only way to reduce costs. For example, in an industry where most apparel is shipped over from China, American Apparel makes a tidy profit despite using American labor. Finally, I'm sure in their search to cut costs GM and others will continue to push the boundaries of what "Made in America" really means.

Operationally, GM should strive to endow all plants with flexibility as a core capability. Here Honda outperforms even Toyota (leading in part to their sales increases while others' sales fall), and GM would be well served to look at what Honda is doing and try to do them one better. At the same time, they should strive to endow all of their vehicles with modularity as a core capability. This will enable them to break out of the model year trap, and refresh their product line more frequently as improved battery (silver-zinc in 2009), engine, or hybrid drivetrain technology emerges from their design labs. Energy management hardware and software will become more important as the use of electricity increases, and vehicles should be designed to be easily updated as these key components improve. But where the real opportunity still lies in the auto industry is the part of the process that begins when a vehicle drives off the production line. Nobody has nailed that yet, so there is a huge opportunity to better optimize the sales channel.

Finally, on the design side, GM needs to enable customers to choose any vehicle with either their head or their heart (instead of just one or the other). Want a Chevrolet Malibu that gets good fuel economy, choose the head version. Want a Chevrolet Malibu that rockets off the line, choose the heart version. At the same time, trim levels should be sharply curtailed to limit manufacturing complexity, and design modularity should be extended via dealer-installed options and 3rd party partnerships. The end result for the customer should be easy, clear choices for most of us, and easy modification for those customers who require it. GM should consider creating joint production partnerships with 3rd party modification companies to enable GM to ship selected modification partners a mostly complete vehicle for them to customize, deliver, and warranty to the end customer.

Whether GM is up to the task, I'm not sure. I saw a Charlie Rose interview with GM CEO Rick Wagoner recently and I was disturbed that he felt GM should be able to charge a premium on the first round of Chevy Volts and that the government should subsidize it. The company has come up with a brilliant brand promise for the Chevy Volt, referring to it as a "fuel-free" vehicle at every opportunity, but it is really just a plug-in hybrid. Toyota has the lead here, having hybrid vehicles on the market since 2004 and plug-in hybrids nearly as long (through 3rd party mods like Hymotion), and will likely get its own version to market before GM. So, GM faces a stiff challenge, but they are moving in the right direction. They just need to push to get there faster and go farther, or they may come up short.