Driving corporate innovation is far more complicated than most observers realize. During my Innovation Development days I knew that successfully launching a new initiative was a long shot. but looking back I had greatly underestimated all of the forces at play, especially the internal politics. As many organizations are mining “big data” to make better business decisions some companies are looking to mine their “innovation data” to better understand these internal and external forces that determine an initiative’s success or failure.
Intel is one such organization that has been digging into this data. A couple of months ago I had the opportunity to interview Brandon Barnett – Director of Business Innovation at Intel to better understand their methodology. What I appreciated about Brandon’s story was how he and his colleagues were taking a very systemic approach by looking at the underlying technological, social, and economic forces that shape new business models.
This article was originally published on January 3rd in Innovation Excellence:
Failure Forums: Complexity Theory and the
Role of Failure in Driving New Business Models
Driving corporate new business initiatives can be an incredibly challenging job. There are the normal complexities of launching a new business, similar to entrepreneurship, but within a large organization there are many additional factors that can lead to failure.
Finding success in these endeavors requires navigating a series of complex forces like garnering internal resources, defining decision making criteria, and avoiding the landmines of corporate politics just to name a few.
Where some intrapreneurs see these forces as random obstacles others are trying to study them in a larger picture. Some innovation experts see these forces as data points to be measured and evaluated as factors in determining innovation success or failure.
Brandon Barnett has spent 11 of his last 17 years at Intel driving new business opportunities and studying the science behind Intel’s innovation work. He has come to understand that a failed initiative has more to do with internal and external forces than the merits of the opportunity itself. The goal is that by studying these forces organizations can learn to innovate better. This is Brandon’s story.
1. You have mentioned before that you have led a number of new business ventures where some have succeeded and others have failed. How have both shaped your thinking about growing new businesses within a large company?
The process has made me think differently about the foundational differences between the successes and failures. I realized that the challenges are much more about the “initiative within the organizational system” than the initiative itself. Looking back, my successes and failures were not determined by the market but by the internal corporate forces. I have observed that this is generally the case for most corporate innovation. This fact is discussed openly in heuristics like “you must have CEO sponsorship” but it is just one manifestation of a deeper underlying system at play.
These corporate forces driving the success or failure of an initiative are what got me thinking about the complexity in driving innovation. I had studied complexity theory in my PhD work years ago and as I expanded complexity to larger scales I found similar patterns for ventures within corporations, companies within markets, and markets within ecosystems. In my current work I focus on understanding how underlying technological, social, and economic forces shape an innovation program’s success or failure in creating new business opportunities.
2. It seems as though markets are shifting faster and faster in high tech. How have you seen that impact large company innovation programs?
I think about this in a couple ways. For a specific company, what is fast or slow is the speed at which a market drifts away from them, or conversely how nimbly a company keeps up with the changes of the market.
With the digitization of so many things – books, music, identities, reputation, accountability – the number of ways that people can access and combine technologies has exploded. So ‘speed’ is as much a matter of increasing the combinatorial possibilities as it is the shifts in the markets.
The latter is an evolutionary process and the former is an exploratory process. So for modern companies to be innovative they must continue to advance their products (sustaining innovation), adapt to foundational changes in their markets (disruption, or changing bases of competition), and they must engage in the search for new value. The impact to companies is the need for multiple innovation programs – each with different tactics and metrics – progressed simultaneously.
3. You have spoken about how you see Complexity Theory as a vehicle to better understand new business development. Can you explain more?
At a conceptual level embracing complexity relative to business ecosystems shifts the perspective and focuses not on the market as the fundamental unity of analysis but on the forces that underlie it. In other words, I think of a market as a system of exchange that emerges from the interaction of social, cultural, technological, economic forces. If I can understand those forces I can gain insight into how a market evolves or a new market forms.
More precisely, I’m interested in the metrics grounded in complexity that can inform business strategy. For example, we are working with Professor Rahul Basole at Georgia Tech to develop a theory of business ecosystem complexity based on coopetition and convergence measures. Any individual company can be assessed relative to the overall network. The theory is like the U.S. Military adapting from the cold war to combating modern insurgency. The complexity of an organization must match the complexity of the problem it is trying to solve. We are trying to advance a rigorous framework that comprehends this complexity
4. This is not language that most companies use when they describe their efforts to drive new business opportunities. Where do you recommend they start if they want to better understand this approach?
At Intel we launched a new business initiative called Digital Health. The group produced some great products that allowed technology to gather unprecedented data in the patient’s home and deliver it to physicians. After piloting the program we discovered that the physicians didn’t want all that data, especially if they were not being paid for their time to look at it. We took the time to understand why they preferred to act on a single number and with that to better understand why the initiative struggled.
We might consider that near sighted of the doctor but I’ve seen business leaderships fall into the same myopic trap by making decisions singularly focused on net present value (NPV). NPV is one measure of a business opportunity but it completely ignores all the complexity involved in a search problem – the search for value. So I first recommend an exploration beyond tradition business tools and frameworks.
Through this journey we have built our innovation processes to focus on the search for new value in a framework we call the Business Opportunity Canvas which we modeled after Alex Osterwalder’s Business Model Canvas. Other strong influences to the framework are from ecologist and TED Fellow Eric Berlow (collaborator on the WeTheData project) and Stuart Kauffman (author of At Home in the Universe). Finally I would suggest that others examine the work of a former Intel colleague Thomas Thurston (now at Growth Sciences). Thomas has shown how a data-based model can be distilled from theory and can be very influential in decision making (see the Innovator’s Manifesto).
5. What advice would you give corporate leaders who are trying to drive innovation within their organizations?
I would summarize my advice into three buckets:
Building new businesses within an organization has always involved portions of both science and art. The work that Brandon and his colleagues are undertaking is an attempt to broaden the science portion by examining all of the complexities involved in the process. With a better understanding how these underlying technological, social, and economic forces shape our businesses we can learn how to improve our chances for success in launching new business opportunities.
As a side note, Brandon and his colleagues are also taking what they have learned and are extending it beyond the confines of corporate innovation. Last summer Intel sponsored the largest ever U.S. hackathon (National Day of Civic Hacking) to search for new value opportunities within the public domain. They’ve also created an accelerator to bring strategically related startups together in order to catalyze the opportunities found. This work is the culmination of all the tools and the framework used together. Collectively they are learning from all of the complexities in order to build something new.
image credit: edukart.com
Much was made this last week over United Parcel Service’s (UPS) failure to deliver packages before Christmas. The media seemed to border on delight in sharing the stories of customers who were upset that their packages didn’t arrive in time. As I heard these stories played over and over again I kept wondering how we got to this point. Last minute shoppers who were Amazon Prime members could order their gifts on December 22nd and still expect them to be delivered anywhere in the country before Christmas with free two-day shipping. But when some gifts didn’t arrive in time who’s to blame – the retailer, the shipper, or us, the consumer?
Online gift buying continues to grow year over year and online retailer Amazon has taken advantage of this trend. While Amazon doesn’t normally comment on specific sales or order numbers they did issue their traditional post-holiday press release. According to the statement, the online retailer sold more than 36.8 million items world-wide on Cyber Monday at a record-breaking 426 per second. That was up almost 40% from their peak day a year ago. According to the Wall Street Journal, Amazon hired 70,000 seasonal workers for its U.S. warehouses, a similar 40% increase from the year before.
So if Amazon sees a 40% increase in their online orders how are their logistics and delivery partners expected to respond to that fact? Most likely they can’t react quickly enough to that spike in demand. For companies like UPS, that would require adding more planes, trucks and employees. I did notice that in my neighborhood UPS had added rented trucks to their fleet to assist with the increased volume of packages. Quickly adding more planes and pilots seems a little more complicated.
In fact, according to a UPS spokeswoman the planes were the bottleneck. On Monday December 23nd they had more shipments than the expected 7.75 million in their air network. Overcapacity and bad weather in the Northeast created a difficult scenario – some packages were going to miss their expected delivery date. In response, UPS and Amazon quickly began getting the word out that some packages were going to not arrive in time. They contacted the impacted customers, refunding their shipping fees giving them a $20 gift card for their inconvenience.
The response from Amazon and UPS was text book- communicate, apologize, and resolve. The communicated to their customers to let them know about the problem, they apologized for the impact that this problem had, and they moved quickly to resolve the problem and get the remaining packages delivered. What was missing from all of this was 1) addressing whether this “problem” was likely to happen in the future or 2) if we the customers need to rethink our expectations.
1. From the statistics this problem is not new and it will likely continue. According to Forrester Research analyst Sucharita Mulpuru, in a typical year about 15% of online shoppers who order items by retailers’ specified cutoff dates don’t get their packages by Christmas Eve. But with the continued growth in online shopping and more gifts being shipped the quantity of missed deliveries will likely rise even if the percentage doesn’t. According to Ms. Mulpuru, “Retailers think they can take orders up to the last minute, but they just can’t pick and pack fast enough.”
2. Where do we the consumer fit into the equation? In the era of instant gratification and expectations of perfection are we as culpable in making this problem? As a poster child for last minute shopping I have always known I would be in stores buying gifts a day or two before Christmas. But now with online shopping and “delivery guarantees” I don’t necessarily need to leave the comfort of my own home. The trouble is that too many of us last minute shoppers are moving to online shopping and the system can’t support the increased volume – this is when bad things happen.
If this trend is going to continue we will need to do one of three things: shop earlier – heaven forbid, shop in a store where we can take it with us, or change our expectations of “guaranteed delivery in time for Christmas.” I know that online retailers use the delivery guarantee as a sales enticement but perhaps it should read “Guaranteed to likely be delivered by December 24th.” As a society we need to move beyond our expectations of perfection.
Hoping that 2014 will be your best year yet!
If you would like to learn more about statistics and the probability of bad things happening I suggest that you check out Nassim Taleb’s The Black Swan (no, not the movie) and Nate Silver’s The Signal and the Noise. If you would like a great book that addresses our country’s increasing problem with perfectionism I highly recommend Brene Brown’s book Daring Greatly.
Image Source: www.nashvillescene.com
Over the last few years I have frequently helped friends and colleagues in their search to find new work opportunities. Every time I start our conversation by asking how they are building their personal brand. I know that it sounds a bit ridiculous but in the age of an abundance of job candidates, how are they going to stand out? How are they building their exposure to their professional network to improve the odds that they are found?
Since the advent of social media there are plenty of examples of over exposure but not all exposure is bad. Specifically, there is a professional level of exposure that brings an awareness of who you are without requiring you to be the next Kim Kardashian, Justin Bieber or Miley Cyrus. While it may seem daunting at first, building your brand can have huge benefits to your career or your business. Two of the most obvious ways are by arming recruiters with enough information to be able to find you or by helping to bring potential business opportunities directly to your door.
While the unemployment rate in my home state of Minnesota has dropped below most other states in the nation there are still more people looking for work than there are employers looking to fill positions. For most people it will take at least a months to find a new position that is a good fit. And for those that are looking to follow the entrepreneurial path finding your first few clients can be a challenge. Having a strong personal brand can help tremendously in your journey down either path.
In my previously role many of my colleagues had been with the same company for a decade or more. During that time most hadn’t worked on building their brand outside of the company. If they did update their resume it was usually for an internal position and it wasn’t ready for external recruiters or hiring managers. Many hadn’t been actively using their LinkedIn account to grow their professional network.
Some individuals had spent their entire professional career with the same company and few outsiders knew who they were or what they were capable of. They had a small professional network and they hadn’t spent the time to develop their personal brand.
For those who want to get started in building their personal brand, I have highlighted several steps to consider. This is by no means a comprehensive list but it is easy to get started and doesn’t require significant effort to maintain once you are up and running.
If what you are sharing is seen as valuable by your network and groups they will start to share it with others. These loose connections outside of your current network are critical in building your personal brand. Research shows that they will likely be the connections that will help you find your next job or your next business opportunity.
Good luck in your journey and may you find the opportunity you are looking for!
Feel free to reach out and connect with my network via the Linked In, Twitter, or Google+.
The truth is that nonprofits experience failure just like every for-profit business: new initiatives fall short of expectations, the synergy of partnerships fails to materialize, or expansion plans overburden an organization’s cash flow. But because nonprofits are so reliant on donations and grants to fund their operations even mentioning the word failure can be lethal. The perception, and perhaps reality, is that no donor wants to think that their contribution is being wasted and no foundation wants to report back to their board on “failed” investments. The result is that “safer is better” and failures are frequently covered up.
This same scenario plays out in government and education as well. Few are willing to admit to their failures and prefer to instead to go along with the facade that failures don’t happen. This farce only perpetuates the problem because “if failures aren’t happening then I certainly shouldn’t talk about my failures and risk being the outlier.”
The challenge with this reasoning is that if organizations are covering up their failures then it is unlikely that they are learning from them and it is certain that others are not learning from them. An alternative is that if organizations were willing to share their failures the entire ecosystem could benefit. Every organization would have the chance to learn from their experience and make a better decision next time.
This is the story of how one nonprofit, The Bridge for Youth, overcame a failed expansion plan after the economy collapsed in 2008. It was difficult and painful journey but the organization survived. The Executive Director, Dan Pfarr, is willing to share the story of their failure with the community to demonstrate that failures do happen and to encourage others to learn from their experience.
This is my third article in a new Pollen series titled Facing Failure. The series will share stories and the lessons learned from business, nonprofit, education, and government sector failures. The hope for this column is that we are able to learn from other’s failures and strengthen our Pollen community. If you have a story that you would like to share please contact me at matt@matthunt.co.
Running a business during an economic downturn can be difficult at best. Diligently managing sales, expenses, and cash flow is critical to the organization’s survival but each one of these business levers is within the leader’s control. Sustaining sales revenue is often the most challenging but if the company is willing to temporarily erode profit margins they can drive incremental sales by lowing prices and increasing their promotional campaigns.
But many nonprofits don’t have the same levers to adjust. They are not built around an “earned revenue” model where they receive fees for their services. Instead, they are highly reliant on government/foundation grants and donations to cover their operating costs. When the economy hits the skids, every one of these revenue sources gets called into question.
The Bridge for Youth (BFY) is a nonprofit that has been supporting homeless youth in Minneapolis, MN since 1970. In 2007, they were excited to expand their operations into a new facility in order to grow their services. But soon after the facility opened the economy collapsed. The expansion strategy had made sense but a new economic reality was causing severe hardship on the organization.
In the few years that followed, the organization struggled financially and had quickly cycled through several executive directors. In 2010, the board of directors brought in another executive director, Dan Pfarr. For The Bridge for Youth to survive, Dan knew he had to make several difficult decisions, each of which might have failed and could cost him his job. This is Dan’s story.
“Keep walking, though there’s no place to go…
Move within, but don’t move the way fear makes you move.” -Rumi
Matthew Hunt: Three years ago you took over as executive director for the nonprofit The Bridge for Youth. Can you explain what your organization does?
Dan Pfarr: The BFY serves 10-17 year old homeless youth and youth who are in crisis. For 43 years, we have worked with the youth and their families to resolve conflict and restore confidence in the youth’s ability to manage their life. We serve over 1,000 youth and families each year with the majority of them coming from Hennepin County. We also operate a crisis line, longer term housing for 16-17 year olds (Transitions Program), and counseling services including aftercare and groups.
MH: Prior to you joining the organization The Bridge for Youth had gone through a significant expansion project. Can you explain what had happened?
DP: In 2007, after operating out of a residential home for over 30 years, The BFY refurbished an old telephone exchange building across the street from our shelter, adding on a new wing that could efficiently house 18 youth each night and expand our transitional housing beds/capacity. This new facility housed the administrative offices, space for counseling services, an on-site medical clinic and space for community partners. The project was completed in 2007, followed by the great recession and tremendous cuts in government contracts and funding. This left the organization vulnerable with insufficient operating funds to fully support the expansion and keep the beds full.
MH: So with growth plans in place, the economic recession hit. How did the downturn impact the organization?
DP: The organization burned through its reserve fund, laid off staff and over the next 3 years, went through 2 executive directors and an interim director before I was hired in November 2010. The organization was using its line of credit when I arrived and the services were suffering from all the changes in leadership.
MH: You mentioned that you needed to dramatically alter course if the organization was going to survive. What happened next?
DP: When you enter an organization that is struggling, there is immense pressure on the leaders, staff and supporters to figure out what isn’t working. Usually, the simple solutions that we think of immediately do not go deep enough to address chronic issues. We spent a full year looking at data that was gathered by McKinsey & Co. We engaged in a strategic planning process that took into account the cultural vision of the organization, our mission, and feedback from our community partners. We looked at bold strategies to recover our core mission and not just place a band-aid on the problems.
MH: You also mentioned that you felt as though your own job was at risk, how did that factor into your decision making?
DP: Everything is at risk in a failing organization: the board, the executive director, the leadership team, the staff, and the clients we serve. Bringing an organization back to health requires difficult decisions that impact finances, long-term strategies, and expanded visions for both facility and mission. We made difficult choices in changing our leadership, recruiting new board members, and building a strategy that would bring the organization back to fiscal and organizational health.
The fear of failure can cripple a leader’s (or an organization’s) ability to make sound decisions. It’s a challenge to live with these risks on a daily basis and not let that fear overwhelm you as a leader. You have to deal with fear by asking yourself: what’s the worst thing that can happen here? And when you’ve come to terms with whatever that worst outcome could be, you have faced your worst fear and you find it no longer controls you.
In the end The BFY had to make difficult decisions on a daily basis but we based our decisions on our mission and on the concrete data that we had collected about our services.
MH: So looking back over the last year how did the changes play out?
DP: Our board passed a comprehensive strategic plan in May that has returned us to our core mission of serving 10-17 year youth and adding services for 16-17 year olds that needed longer stays to find stability in their lives. The plan called for us to better use technology to provide our services and record data as well as integrating mental health assessments into our work. We are in the process of implementing a new case management system, a Text for Help system, and a system for coordinating open shelter beds with our community partners. These innovations are all using cutting edge technology to improve our services. We have also succeeded in consolidating our services from two buildings, fully utilizing for the first time the refurbished building that was built in 2007.
These changes have caught the attention of a number of funders who had stopped their funding, but are now confident in both the direction and the leadership as we move forward. These changes have not been easy, but we have restructured the organization in such a manner that we can succeed in serving out our mission in innovative ways.
MH: Looking back is there anything that you would have done differently?
DP: I underestimated the amount of stress that turning around a troubled organization entails; and the impact that a stressful job like this would have on my own personal health. I am grateful for my mentors, coaches, and good friends who have supported me and helped me to navigate this process. All of these things are essential to a leader’s success.
MH: What resources or advice would you recommend for other nonprofit executive directors?
DP: Using strategic consultants that are both familiar with the community and capable of understanding organizational change are critical. Making strategic leadership changes sooner rather than later is also vital. On the flip side of that, hiring talented people who have the same culture and vision to support you is crucial. In the end, you need to have a team that understands the vision that you want to achieve.
MH: You mentioned that one of your previous funders has come back and reengaged with the organization. What was their response to the changes?
DP: They basically said that because of our solid strategic plan and changes in how we conduct our business they supported 100% the direction of the agency and were confident in my leadership moving forward. After what we had been through, I can’t tell you how heartening it was to hear that a donor clearly understands your message and trusts in your leadership.
The lessons learned were hard but The Bridge for Youth is back on stable footing. Prior to the recession funding for BFY had been 65% government grants and only 35% private donations. The team has worked hard to spread out their sources to include more supporters—flipping it to 65% donor contributions and only 35% government grants.
It was a challenging time for everyone in the organization. Dan looks back at the last few years as the most difficult in his career but he also recognizes that he has learned a lot along the way. As he noted during the interview, he wasn’t always sure that the decisions he was making were the right ones but he kept walking and he kept moving his organization forward.
I would personally like to thank Dan and his entire team at The Bridge for Youth for their commitment and dedication to making this a better community. If you would like to learn more about The Bridge’s innovative technology or service projects Dan has agreed to answer your questions directly. You can reach Dan via email at d.pfarr@bridgeforyouth.org.
Image courtesy: BePollen.com
As families gather in the United States this week to celebrate the Thanksgiving holiday there will likely be a common inconsistency in their stories. Many will likely be thankful for the job that they currently have even though they are considerably dissatisfied with that job. With the economic downturn organizations have been so focused on squeezing out costs from their operations that most have neglected investing in their people. The result is that most employees are at a historically low level of engagement with their employers.
Recently the CEO of Gallup, Jim Clifton, wrote a blog post on “A Failing Global Workplace.” In the post he cited Gallup’s recent report on the State of the Global Workplace where only 13% of employees worldwide are truly engaged in their jobs. No that’s not a typo, only 13% of employees are emotionally invested in and focused on creating value for their organizations every day. Responding to those numbers, Clifton calls into question the very practice of “management” and I have to say that I agree with him. While a long term solution to this problem will take some time there is at least one way you can build employee engagement before you leave for the holiday break.
Several years ago a friend and I were talking about the role of Human Resources (HR) within large companies. At the time most large organizations had already trimmed or outsourced sizable portions of their HR departments. What remained were a few of the specialist groups like compensation, benefits, etc. and the HR generalists supporting the business units. The challenges on the HR generalists in this model have become daunting. They are supposed to liaise with all of the specialist groups and act as a primary interface in support of their business teams. With the economic downturn and the layoffs that followed the HR generalist’s job priorities were made clear- support the needs of the business units or we may not be in business for long. Leadership development, training, and other employee centric programs fell by the wayside.
Cuts to employee development programs may have been justified as a short term fix in a crisis but they certainly aren’t sustainable in the long run. Every study ever published on employee job satisfaction cites the same key determinant of employee satisfaction – the employee’s relationship with their direct manager. Most seasoned leaders recognize that good managers aren’t born, they are made. The challenge is that when organizations are not investing in their managers every employee under them is going to struggle.
The recent article Why We No Longer Need HR Departments from author and consultant Bernard Marr highlights these opposing goals. While the title may have been purposefully dramatic the suggestions that he offers align well with building good managers and developing employees. In the article Marr suggests killing the “human resources” nomenclature and replacing the department by splitting it into two halves.
By creating a People Analytics team and a People Support team the HR generalists would no longer have to struggle with the conflicting agendas of two masters. The People Analytics team would be responsible for the “run the business” elements of the HR function and the People Support team would be responsible for investing in employee development and building employee engagement.
While splitting the HR function into two components will be a big change for any organization the process of investing in your employees doesn’t have to start there. Here is one step that you can take to build employee engagement before you leave the office for your holiday celebration.
Thank each employee for their contribution and remind them of your commitment to invest in them. Take a few minutes to talk with (or email) each of your direct reports to thank them for the job they have done. If you struggle with being thankful for something that is less than perfect here is a previous post to help you frame the challenges with perfection –Time to Move Beyond Expectations of Perfection and Be Thankful for the Satisfactory.
Before you end the conversation ask them for their ideas on how you can help them develop their skills in the next year. It could be as simple as committing to spending more individual time with them. But by asking your employees what they need you are empowering them, building trust, and investing in them.
Food For Thought:
Photo Source: Peter Baeklund
Seven years ago my team had just shut down the first of our two concept stores that we were running for consumer electronics retailer Best Buy. My team had spent the last two years operating these concept stores in an attempt to understand more about the opportunities in “small box” retail. During that time we had learned a ton and as a leadership team we were adamant that we needed to share what we had learned with the rest of the company.
Quickly we had discovered how valuable our insights were when we helped to launch the first wave of Best Buy Mobile stores in New York City. Because of our previous failures we knew what we would do different the next time. For example, we knew how important our decision in IT point of sale (POS) systems would be to the future success of these next stores.
In the early 2000’s Best Buy was growing rapidly and they were willing to try many new business ventures. As with most corporate ventures a majority of them would end up failing (see the post Connecting the Dots). But at the time the company lacked the discipline to ensure that these failures were documented and shared throughout the organization.
Without that process few employees inside the company would have the chance to learn from them. The fact that failures weren’t shared is completely understandable though. At Best Buy, as with almost every other company, failures were seen as a negative mark on a leader’s reputation. Many leaders would have preferred that their failures just went away.
Fortunately my team and I had an example of what good could look like in documenting an internal failure. A few years earlier JJ Schaidler, a vice president in our Entertainment group, had written an internal whitepaper on Best Buy’s failed entertainment media label – Redline Entertainment. By demonstrating personal courage in sharing her team’s journey JJ had paved the way for me and my team to share the lessons from our failures.
This article was originally published on November 15th in Innovation Excellence:
Failure Forums: Learning from Best Buy Media Label ‘Redline Entertainment’
In the early 2000s Best Buy launched their first entertainment media label Redline Entertainment. The goal was to help grow the organization vertically into the entertainment industry.
As an entertainment label Best Buy would sign artists to create new material, produce the content, and provided distribution of the final products into retail outlets – Best Buy stores and others. This was a new area for Best Buy but it was tangent to their core business of selling electronics, appliances, and media. Coming off of a successful national expansion Best Buy had strong momentum and it was hungry for opportunities to continue to grow their business.
Jennifer “JJ” Schaidler had unknowingly altered her career when she took the lead role in building out Redline Entertainment. As with many innovation projects the team had a good plan in place but without all of the pieces together it would be almost impossible to test individual hypothesis. Redline’s success didn’t hinge on just one element but on a series of organizational errors that JJ documented for the company in what came to be known as the Redline Whitepaper.
What makes JJ’s story unique is that she not only was willing to own her mistakes but she was willing to document them and share them with others inside the organization. Many executives would cower from this idea as career suicide but not JJ. During my tenure at Best Buy, JJ’s Redline Whitepaper had provided an example of what good innovation work should look like: build your hypothesis, test your hypothesis, and share the results of your tests – good or bad. This is JJ’s story.
1. So Redline Entertainment was going to be Best Buy’s entertainment media label. How did that idea come about?
Our Senior Vice President of Entertainment, Gary Arnold, had the idea of growing our business by creating our own label and developing our own content. This was right around the time that Best Buy had purchased Musicland (including Sam Goody) and Future Shop in Canada. The idea had come from two concepts: 1) that the combined entities offered a huge distribution channel and 2) the artists were becoming increasingly frustrated with their labels and their binding contracts. The plan was that Best Buy could go straight to the artists and offer distribution but allow them to own their masters.
At that same time, Best Buy was defining the ecosystems that they wanted to grow and expand into diverse businesses –even non-retail businesses. Entertainment was one of those ecosystems. Starting a label seemed like an adjacent idea where we could bring the leverage of the enterprise with all of the storefront assets. We had been developing direct relationships with the artists and had connections within the manager community.
A critical piece to the puzzle was that Redline also had a distribution relationship with RED distribution (no affiliation). RED was the independent arm of SONY distribution and they were in theory able to get Redline products into Target, Wal-Mart and all the rest of the music retailers. That foot print would allow us to offer the same distribution as a major label. The advantage would come from additional marketing and advertising from the Best Buy entities.
Ultimately the competitive nature of the other retailers was the undoing of Redline. They knew that the products from Redline came from Best Buy and they didn’t want to support a competitor.
2. When you committed to the project did you consider what would happen if you failed? What kind of odds were you giving yourself for success?
I actually thought there was a likelihood of failure but it didn’t concern me. My perspective was that the company was growing so fast that it would find a place for me. In retrospect, I should have been more concerned. Only after I had taken this new role was it clear to me that going back to my old role as Vice President of Advertising wasn’t an option.
3. Where there ever expectations set by the company for what would happen if things didn’t work out?
No. Truthfully we had never done these types of innovation projects before so it wasn’t discussed.
4. How long did the project last? What was the ratio of the time spent planning vs. executing?
Around two years. The planning phase was really getting the business plan approved and that took 3-6 months. Execution or “signing” of artists and projects were started before the plan had full approval.
5. Was there ever a clear indication that they project wasn’t going to succeed?
Yes, there were several factors that popped up where we knew that we had problems: 1) our inability to get significant radio air play for our artists – radio was still a driving force behind sales, 2) the resistance/refusal from Target / Wal-Mart to buy Redline products, and 3) the lack of incoming revenue while signing on new projects. If we were starting our own external company we would expect there to be a lag while building the portfolio of business but within a corporation there quickly needed to be something that was showing a positive return.
6. What was the most difficult task in shutting the business down?
For me the most difficult task was letting go of our people. The truth was that they didn’t do anything wrong. It wasn’t their fault. Many people did find other roles at Best Buy so we were pretty successful at transitioning but for those that didn’t make the transition it was painful.
7. After you had shutdown Redline you did something that had never been done before at Best Buy, you wrote a formal whitepaper on what had been learned through the project. Can you explain why and how that happened?
In a budget presentation with the President, he commented that “I’d be happy to lose $7m dollars on Redline if we really learned something from it.” In addition, he was always referencing the Clay Christensen book – Innovator’s Dilemma. I read the book and believed that Best Buy was exactly in that classic problem. So I wrote the white paper as a way of illustrating to the company that we would need to change how we do innovation if we wanted to succeed. At that same time Best Buy had hired the consulting firm Strategos to help build out an innovation process. I participated in that work and witnessed many of the same problems repeating themselves. When Best Buy hired Kal Patel, he read the white paper and encouraged others who were trying to innovate read it. It ended up taking on a life of its own. That was good because in one sense – it was a $7m white paper. Too bad I didn’t get any royalty payments on it!
8. Have you used the lessons from Redline’s failure in your work since then?
I still get emails from time-to-time from people asking me to send it to them. The frequent comments are that not much has changed since it was written in 2002. The bottom-line is that innovation inside of large organizations is very difficult. It takes people that are willing to take risks and willing to fail. When a company is growing and has the funds to support innovation it makes it less risky. Public corporations that need to report quarterly profits are also extremely tough. When the numbers aren’t looking good, new ideas that just haven’t had enough time to turn a profit are the easiest to cut. In our estimation Redline needed five years. It only had two. There was no appetite to wait that long.
Following her role with Redline, JJ went on to lead many other strategic initiatives at Best Buy, including the initial launch of the Best Buy & Carphone Warehouse joint venture – Best Buy Mobile. She continues to take risks in order to drive innovation in her work and in her career by continually defining new opportunities. JJ is currently General Manager for Brightstar – the world’s largest specialized wireless distributor and mobile service company.
Most leaders want their organizations to be innovative but just saying it isn’t enough. If they want their people to take risks and innovate they have to create a culture that can support and endure the ups and the downs of driving innovation. Driving sustained innovation requires the right people, processes, & tools.
In a recent discussion with human resource professionals we examined how one of the most used tools to evaluate “employee performance” was fundamentally flawed. By not taking into account the difficulty of the work the “Nine Box” performance management tool was misrepresenting top performers and killing innovation.
This article originally ran in Business 2 Community:
As the end of the year approaches many organizations are going to be plodding through their annual employee rating process. A common tool for coordinating this work is the Nine Box Talent Management grid. With this tool every employee is placed into one of nine boxes along two axes (usually Potential and Performance) for the purpose of rating and ranking them. The results of this ranking can be used to determine bonus payouts, promotion eligibility, or succession planning. Having used this tool for over a decade, I can say that it is great in its simplicity but it is fundamentally flawed. It doesn’t take into account the difficulty of the work and it over rewards superior performance of low risk activities.
A quick analogy from the sport of competitive diving can help make this point more clear. Before the diver takes to the platform each dive has already be rated with a degree of difficulty. The degree of difficulty rating determines the maximum and minimum point range that can be achieved for each dive. If two divers perform their different dives equally well but one has a higher degree of difficulty then that diver will receive more points. If you choose to go for the dive with the highest degree of difficulty and perform it well and you can take home the gold medal. But if you make a mistake on that difficult dive you can still achieve a higher score compared to those with perfect dives that are less difficult.
What the Nine Box lacks is the ability to evaluate the difficulty of the work when it compares employees across roles and business units.
The Director of Human Resources for a company with 9000 employees recently shared her organization’s challenge with the Nine Box rating system. What they found was that “top performers” who were in the A1 box sometimes struggled when they took on especially challenging projects. The organization’s leaders had noticed that there was a strong correlation between when the project struggled and when the employee struggled. Subsequently these star employees would get a dramatically lower rating on their next Nine Box review.
But had this individual really changed? Had they intentionally let their work “performance” drop off? A more likely scenario was that the rating system was misrepresenting the difficulty involved in their latest project? Unfortunately their struggle with the project was also diminishing their perceived potential.
In my time at consumer electronics retailer Best Buy I watched us mistakenly use this tool across job levels within the organization to the detriment of our employees. We were comparing individuals responsible for running a stable “core” business with others that were responsible for launching a new product category. The degree of difficult was vastly different in these roles but it was not factored into the equation. The downgraded ranking would leave the risk taker to wonder if their innovation work was worth the price. To protect their own self-interest many employees chose instead to outperform in roles that were more certain and stable.
If your organization wants to drive growth through new products and services you need to examine how your internal systems and tools are manipulating the risk vs. reward equation for employees.
Building new products or services will involve many unknowns and inherently will have a higher degree of difficulty. If you want your best employees to continue to take on these risky initiatives you need to ensure that your performance management tools are able to evaluate them accurately based on the degree of difficulty.
Photo Courtesy: Quinn Rooney & About.com
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