Leading Digital Business Transformation: Innovation Streams, Executive Leadership, & Ambidexterity

that first session talked about countries shooting themselves in the foot I'm here to talk about organizations shooting themselves in the foot and why is that and more importantly for the managers leaders in the room what you can do about it I have spent a career looking at this I'm a engineer by training and I worked in the best most profitable most admired test equipment company on the planet and while I was there this company shot itself in the foot this company went out of business I traveled back and forth with a bunch of engineers from where I lived in Medford Massachusetts to West Concord where this company was headquartered and I would be talking with these engineers and they could not understand why a firm filled with great engineers and all the capabilities of getting into this new way this new technology how can this company be going out of business so fast I thought that engineers could do anything I thought that the weight a way to build capabilities the way to build organizations is with fantastic science and engineering it turns out that that is not the case and I want to talk to you about my research pretty quickly and I want to work with John in some detail because we've done this magnificent piece of work on the relationship between Havas a large incumbent the sixth largest advertising agency on the planet headquartered in Paris and in New York and their attempt to recreate themselves through Victor's and spoils and I have just acquired John they have a board and a leader who wants to recreate this industry and I'm gonna work with John on sort of what happened that of us everybody I'm gonna try to get the group involved in my limited amount of time what's the story here we've our creme has already set this up what's the same about IBM Polaroid right down the streets Polaroid siebel Kodak General Motors the story here is what what are we talking about this morning sigit this is destruction disruption let me call it destruction this is a story of firms shooting themselves in the foot these are the best firms in their industry they started their industry fantastic numbers of our d-types and then something happens and they are at I'm going to use some images here if I can this morning these are firms that rock it up based on science will rock it up and that's what happens to these verbs they rock it up with a rocket down and then they drop like a rock at these junctures and I would just want to sort of brainstorm with the group I want to sort of try to get you involved why is it that great firms when the world shifts either because of Technology regulatory issues or political issues I'd like some sort of speculations from the groups why is it that great firms at these junctures almost always end up shooting themselves in the foot yeah but why do they why do they not adapt they have all the money they have all the talent why don't think I depth they don't listen to the market they lose touch with the consumers not really yeah they're actually still doing the difference between talk and action this issue with the customers is a really important one firms frequently fail because they listen too much to their customers and they get trapped by the custom so it's not a customer issue it's a knowing doing issue what else would have the other big issues yes sir no no no no no they have plenty of entrepreneurship they have plenty of capital these firms have gigantic amounts of entrepreneurs inside you know IBM a Polaroid but somehow like Henry Henry and Kona's over some of you know Polaroid they actually invest in entrepreneurship at Polaroid and Henry and his digital stuff at Polaroid gets destroyed I want to sort of put my have let's put our fingers on why is it and it's not entrepreneurship and it's not money and it's not customers it's something about talk and no action any other thoughts that come up and we'll gonna work with John on this arrogance yeah arrogance where do you see the arrogance it's a arrogance we got to talk about arrogance and I'm gonna really talk about arrogance with the board and with the senior team and there's a gigantic difference between talking and action these firms talk they don't act in the absence of acting they drop like a rock and then some of them like IBM is doing quite well they rise from the dead but where I want to go with you is back to general radio why isn't why didn't general radio when they had all the capabilities they could have done it and get better and better and better rather they dropped and many of you know a bunch of these firms are dead some of them have been recreated and all the work that the people that Bruce and I hang out with at the academy as around what why is that and more importantly what can you do about it and that's why this Havas Venus thing is so great I want to get up a couple of ideas here and then I want to go to John and vicars and spoils one of the strategic ideas I want to get on the table is different kinds of innovation everybody I'm going to ask you to think about incremental technical change that is better and better ways to do what you're currently doing I want to talk about a strategic space that is partly technology and partly your customers incremental technical change is better ways of doing what you're currently doing architectural change is adding and subtracting components to the service or product that you're delivering I run a program for HBS an architectural innovation would be I take out a course and I add to other courses and my participants need to hear an integrated program I'm going to call that form of innovation architectural and discontinuous is analog digital it is a completely different way of delivering an automobile if I may if I'm an automobile company so there's this an axis of technical change from incremental architectural and discontinuous and by the way everybody some of these discontinuities are competence enhancing they build on my capabilities this will be an important distinction in a few minutes with John and some of these discontinuities our competence destroying a competence destroying discontinuity is if I am a chemist doing crop protection in Basel and someone does through molecular biology for a farm all my chemistry books are pretty much irrelevant because I'm gonna he's gonna be working with a molecular biologist that's a confidence destroying change and this y-axis is customers existing and new customers and I'm gonna argue this morning that dynamic capabilities are rooted at the firm level in playing at multiple points in that space at the same time this is the watch industry and basically the the the move from mechanical watches to quartz watches everybody this is ten years of pathology in Switzerland this is a tire industry and by the way the quartz movement is a completely completely different way of doing oscillation that is way less costly and as is less costly it goes to a different customer so the swatches many of you have is a completely different product rooted in quartz technology if I'm a bias ply tire company a radial tire company is the same customers a completely different way of doing tires and you see every tire firm in the United States shooting themselves in the foot by the way in my prior example hundreds of firms in Switzerland go bankrupt at the same time 45,000 people lose their job this is a customer issue it's a gigantic managerial issue I believe is why they didn't move and I had and by the way many of you know after 1980 after they're bankrupt mr. Hayek comes in and gets them into the quartz movement and they back up to being number one again again I want to make these transformations here not here but there's something about organizations that gets in the way of that and Bruce begin that discussion a few minutes ago the tire industry this is the disk drive industry some of you know claves work this is our key this is when you go from an 18-inch disc drive to a 14-inch disc drive you go to a different customer this is lock-in from your customers the basic idea I want to get out right now that I want to go to Havas and we'll go to that video will be that dynamic capabilities at the firm level and the corporation level is rooted in exploiting what you're currently doing better than anybody on the planet exploiting your existing business model that is your existing farms and exploring into an uncertain future I'm gonna argue that the way incumbent firms live over time and what my general radio firm couldn't do is they get stuck in exploitation and where I want to go with you is the great firms out there both exploit what they're currently doing us were you making all your money right now and figure out the future faster than your competitors the problem is the better you are at exploiting the worse you are at exploring these are contradictory forces and work my way out of this trap is to build these inconsistent organizational architectures I'll get there soon but there is this challenge of doing several things well at once and the better you are here the worse you are here and by the way the better you are at exploring the worse you are at exploiting that's the disjuncture that partly john is that let me go to the video I want to set up this any thoughts on what I mean by while we're getting the video set up because I want to actually show this with the Havas victors and spoils there's something about doing well right now that traps you into the past and as Kareem set it up a few minutes ago or I want to go with you is building organizations that can simultaneously live and celebrate the past and create the future better than their competitors now what I've just said is completely inconsistent and paradoxical and that's where I'm going with you in my chunk of time is how do you live into this paradox yeah let me take one question yes sir yeah when you talk about companies that are successful at present and past but that somehow hinders their ability to explore the future right isn't there I mean you mentioned a list of companies all of which are capital intensive they tend to want to continue leveraging their resting assets over and over and that it would seem hinders their motivation to a tunnel or yeah yeah absolutely actually good let me go back to the before we go to the video I honest so yes so but but I think there's way more broad than capital intensive so this is the Harvard Business School dealing with the web I just thought can they just get can you move me I think where we are in this dig keep going in this digital issue let's get let's just sort of clip through here if you could just keep on moving here I want to go with this issue of digital and then move into with John what's happening now everybody let's keep on going right right where I want to go to a little bit of work that Kareem and I doing at NASA this is not digital this is not capital expense this is one of our participants the senior physician let me just refresh through the second I think prior to 2002 my field of field that Bruce and I are in knows the answer to my carpal question back when I was an engineer I think the world of the web and modularization and computational power increasing and cost decreasing changes the game completely let me give you an example of that and then I want to go to have us so Jeff Davis is a senior physician at NASA he's in charge of keeping astronauts safe in space Kareem and I are talking to him in one of our executive programs and Jeff thinks it's cute Jeff thinks that open source is cute but it's not for NASA because NASA has scientists and we have labs and his open-source stuff is for the rest of the world but it's not for him Kareem really pushed him pretty hard and said hey like Jeff like relax a little bit why don't you just experiment with some of these ideas these are from Jeff David these are his most technically challenging problems life sciences NASA 2009 there they are my favorite example is Sun SPOT prediction take a look it turns out if you launch an astronaut into space in a sunspot storm occurs this astronaut is in great risk they've been trying to predict sunspots for decades and Jeff has two laboratories of Helio physicists doing sunspot prediction and in 2009 the prediction rate the hit rate is like 50/50 as in no progress and this research thing and take a look he posted through InnoCentive to the community December 22nd 2009 he closes the competition March 22nd few months later 600 solutions everybody for free 11 are turns out are fantastic and he sends a check to a retired mechanical engineer in New Hampshire but gigantic gentleman with a cat on his shoulders they sent him to check 30,000 bucks problem solved this has nothing to do with capital expenditure this is when you open up your organization to the world and the world has free time this surplice that Bruce was talking about someone at the periphery that's what a good portion of Kareem's are someone at the periphery not a heliophysics heliophysics doesn't solve this problem some way at the periphery solves this problem essentially for free if you're a Jeff Davis and you have solved the problem in a few months essentially for free this is a giant this is what I think about as Jays work I think the web is a process revolution it's doing the same thing that Jay is doing the same thing the automobile world essentially for free this is Fordism on steroids it's not that the research is being done differently let me say it it's not that the research is different it's being done differently this is a revolution for firms and the issue for for Jeff Davis is how does he deal with this and he doesn't deal with it well let me go to her bus so we we can let's let's go to have us can we go back to the the have us video yeah I want to set up this discussion with have us and Vickers and spoils I have no idea where I am on my time with this this group what's my timing like everybody doing this I'm gonna give my gun yeah good luck with four minutes I want to get I want to get this video up with David Jones let's go to David Jones CEO Hova off of us this is the CEO of of us and he is so right visit the audio Polaroid depending upon how harsh you want to be probably adding it not here on blackberry and then on the right hand side you're visiting other brands like Amazon and Google Facebook Apple obviously will prevent like IBM and IBM's a very interesting example because what they have managed to do is they're one of the few companies who sit on the right side of that line in chromatically reinventing their business and they left the PC world and become a sort of one of the architects of all the backbones of the digital world and so very simply from a habits perspective we want to be the best company in the world so this is this is David Jones and I'm just going to when I go and I like you to bring me to to which side of the Revolution he has support from the board to transform of us and he wants to be on the right side of that revolution he sees the revolution happening and the way it's going to execute the revolution one piece of it is through the acquisition of victors and spoils he has board support is that fair to say John because board support from the Bolar a family he gets it John is the first crowd-sourced agency out there really successful this is and he has all the money and the customers want this this is a setup and Kareem and I is simply going to document the beauty of the transformation of of us that is the way we got into of us we're going to document by video the transformation of Havas let's go to the next and our industry is sadly we are changing slower than other can you pause that was it positive him one second right now I want you to pay careful attention to Mercedes Erez Mercedes is the one of the single one of the most powerful creative types in Havas any predictions about where she would be on John Windsor and Vickers and Spoils she's behind you know the Evian the Evian commercial series every type she's behind the Evian series this is a brilliant creative person any predictions from the group as to where she would be when she's introduced to John Windsor and crowd-sourced innovation you're the chief creative person she's conservative she is brilliant she's at the top of her game she's like the scientist at NASA pay careful attention speaking in French pay careful attention to how she labels Victor's and spoils let's go to the video what did you see with Mercedes and when I get to what did you hear from what did you see here feel for Mercedes RS readiness to meet a challenge self-criticism she was self-critical of herself again I realize I'm pushing pretty hard everybody but this is a woman who knows what she's doing who's proud of what she's doing and the word she uses to describe what John represents did you get that Sorcerer's Apprentice what does that mean when she uses the word John is a sorcerer what does that mean John what does that mean you're a Sorcerer's Apprentice he's the devil dangerous magical thinking we we do not yet know what the big deal here is of crowdsourcing and we're really good at what we're doing and the language she's using is this is a devil and by the way I should I should have mentioned it there's a gigantic organization John is here the the leader of victors and spoils he's also asked by David to be the chief innovation officer of Hamas this is this devil sorcerer is being brought in to be the chief innovation officer of Havas everybody do you see a nightmare playing out here this is going to be a very dark story for the integration of victors and spoils some of the senior leaders have labeled him a sorcerer he has taken the position of chief innovation officer this cannot possibly work totally makes her less special commoditization the masses are doing the work it's not Mercedes it's the masses let me go to one other let me go to one other thing and we'll get John to talk about what perhaps could have been done differently could you go to Chris this this this Chris we're here this is the CEO o of Havas we are a very intrapreneurial company and we are frequently saying that the last thing we wish to be is WPP because WBP is a very towards a very financially constrained company in which they don't encourage brilliant creative talent to flourish so people feel that they're working for a large financially well-run organization but the creative stars tend to feel that I want to go and run my agency I want to have the excitement where I'm not constantly having financial people tell you what to do so I think the success of half-assing the reason I've been thirty years but is that we're quite good at ensuring that the individual advertising agencies and other creative people who are key in those advertising agencies feel as if they're running their own agency responsible for that and shopping merrily can build their business but they're part of a network which provides the ability to run plants globally which provides tools resources single agency working within a single market what's his point of view on this digital revolution and later on by the way he talks about John and he says what John does is sort of like a hundred monkeys every once in a while the crowd will do something that is creative but it's not like a hundred monkeys what's his point of view on crowd-sourced generation of content what's this point of view on revolution because where I want to go with you everybody is firms renew themselves through revolutions and John represents the future and I just want you to when you look at this video of most of the leaders of Havas they are talking about highly decentralized we do our thing the old-fashioned way we have these creatives and John is the devil and 100 monkeys and he's going to get clobbered by the organization and eventually the end of this case it's so graphic is David Jones leaves the organization and this digital revolution is actually not I like to ask John McMahon up John let's let's do this together that I gonna code this as an organization back to this gentleman's point they know what to do they have all the talent they have all the technology they have all the capabilities of Bruce was here Bruce this is not a capability story this is a story of change and the messenger is getting shot is that let's sort of sort of talk about that John how come how come what could you have done differently and what was your role in getting shot well I think I think I thought that I could make change I think I assumed that David was really up for it and he had the support of the bureaucracy you know in retrospect I think that David's David's real desire probably subconsciously was he wanted to do more create more change in the organization but yet he couldn't be both positive and negatives so he put me in a role that allowed him to be more spacious to allow him to be to be better we talked about that and I was fine with that I have no problem being provocative and pushing the envelope I think what both David and I underestimated was the you know in the end the bureaucracy got rid of them let me push a little bit so partly the bureaucracy and partly let me just stick with Mercedes and where was the creative crowd and the creative crowded an advertising agent they have all the power they are behind the magic of of us and it truly is magic where were they on this no they hate they hate the idea that it's whatever somebody said earlier it takes aware their specialness right they did their reason for being is to win awards and to it you know a lot of times creatives and agencies really wish they would be fine artists but they couldn't make it so now they're commercial artists and there's this deep self-loathing that they couldn't make it on their own art so they you know they resent the fact that somebody outside the system can do what they do is is there anything and I I'm getting the one-minute thing is there anything that either you or David could have done to increase the probability that this crowdsource revolution would have taken hold that have us yeah I think that I probably shouldn't have been chief innovation officer that they should have made a smaller investment I mean since I since David left you know things have worked out great I have no even though I'm chief innovation officer I have no day-to-day involvement in that role since then you know we've gone from bumping along and growing a little bit to this year we'll grow up to hundred seventy percent we've created a billion impressions for our clients which is probably ten times more than any other agency in the network although we're tiny and we've won more creative Awards is there any way to have gotten the the creatives the old-fashioned creatives to have coated you as not the devil because partly the issue everybody is the coating of John yeah and where I want to go is can he be coded as a compliment not as a substitute yeah yeah I think what's interesting is that the word you know I I've written a few books and when Jeff Howe and I were talking originally the word crowdsourcing meant one thing it morphed into something else and and something much darker you know every agency uses a lot of freelancers so they really crowdsource things but it's a lot of it is that the terms that are used I also think that when we started Victor Spoils we were determined to be a dissenter mediator and the reason we did that was we thought we'd win business the day we started New York Times ran an article of about a seven hundred people joined our crowd and Dish Network the television satellite company gave us our TV campaigns so it was a very successful first week in in business in retrospect to really make change I think there should have been I should have added more of a perspective kind of re-enter mediation the idea that how do we how do we build technology like we do to support the current paradigm to make not a revolution that attacks them but more of an evolution how do we help that build the bridge to the future for them I feel like it's generational thing that a lot of people still my age wouldn't have come across the bridge but a lot of younger folks wouldn't have followed their own leaders and started using it that's happening for sure and that's where it's gonna go but it's I don't I don't hold out much hope for firms like Hamas to make it they're great

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