Strategic Innovation Part I: A Toolkit for Leadership Team Conversations

December 20, 2010 / General /

By Ryan W. Quinn and Tony Golsby-Smith

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This is the first part of a three-part essay on managing strategic conversations. The second part can be found here, and the third part can be found here.

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When James Howe became the CEO of Infrastructure, Inc. (“James Howe” and “Infrastructure, Inc.” are pseudonyms for a multibillion-dollar engineering company based in the Asia-Pacific region and its CEO), he inherited a company patched together from acquisitions, with no integrated strategy. The five divisional CEOs saw themselves as independent contractors, had little interest in working together, and, after years of being excluded from strategic portfolio decisions, had little respect for the corporate office; the previous CEO lost investor confidence, lost the company hundreds of millions of dollars, and eventually lost his job.

When Howe was hired, financial analysts recommended that he sell off significant portions of the business, particularly consulting. Howe asked the board for 100 days to investigate and develop a strategy that would not simply stop the bleeding but leverage a distinct competitive advantage.

Competitive advantage depends largely on a company’s ability to carve out new and relatively uncontested space in the marketplace (Hamel & Prahalad, 1996). Companies that develop such space create value for customers by providing them with exciting new products, services, and solutions; for investors by growing the business; and for employees by inspiring creative new ventures. Companies that do not develop such space may languish in stagnant or even shrinking markets.

Given this imperative, executives should approach strategy formulation as an innovative activity—re-conceiving business models, markets, products, services, and competencies in productive and useful ways. Innovation is not only cognitive but also social, occurring as people share ideas, address inconsistencies, ask questions, and communicate across domains. It is a process understood by design shops and R&D departments, which is why some authors are beginning to write about strategic challenges as “wicked problems” and strategy development as design (Camillus, 2008).

Design shops, R&D departments, and other innovation-focused groups may excel at innovation-friendly communication, but then they seldom face the same constraints as executives who, like Howe, encounter bureaucratic silos, entrenched political positions, financial and accounting language resistant to design thinking, and ambiguous economic and social systems. Such obstacles make an already challenging process more difficult by requiring translation at every juncture.

A practical solution is to 1) redefine the strategy development process as a conversation and 2) structure that conversation with five rhetorical devices. Our purpose is to use the story of Infrastructure, Inc. to introduce these rhetorical devices and explain how to use them.

STRATEGY AND RHETORIC

Howe began his regime at Infrastructure, Inc. by engaging his top management team in a conversational process both to develop an innovative strategy and to reengage his disillusioned executives. We facilitated this process, helping them create an overarching strategy and corresponding divisional strategies in support. As a result, they developed business models that have never been seen in their industry in that part of the world and, in the process, learned how to work as a team. The investment community responded by strengthening the share price significantly in comparison to their competitors and to the general index.

Each of these changes grew out of applying five rhetorical devices to the Infrastructure executives’ strategic conversations. We illustrate these devices in Figure 1, and discuss them below.

Figure 1: Tools of Rhetoric

  • Authors: We positioned participants as authors (rather than readers), and design strategic conversations to empower that authorship.
  • Audiences: We focused on persuading relevant audiences to act rather than on demonstrating and verifying facts independent of those audiences.
  • Arguments: We reframed strategy as an argument rather than as a plan using a rhetorical form called the AcdB model.
  • Invention: We designed the process as one of invention rather than analysis. This opens up two major sets of tools:
    • Visualization, using models and maps to ‘draw’ the conversation as it happens.
    • Heuristics, using metaphors and models to stimulate creativity and stretch thinking.

Rhetorical Device #1: Reframing Participants as Authors

When Howe invited us to facilitate his management team’s strategic conversations, his managers were already working with a large, traditional consultancy that had spent days and weeks conducting analyses so all of the answers would be ready for their clients. Our approach was the complete opposite. We began conversations without answers, data packs, or analyses. Their approach treated the executives as readers; our approach treated them as authors.

The degree to which people explore, energize, and produce innovative outcomes in their conversations depends much on whether they adopt the role of reader or author. As reader, they study positions formulated and presented by others. As author, they treat their company’s situation as something they can shape and build, asking not, “What is the data?” but “What do we care about?”; care, desire, and voice come before reason. This is why Aristotle’s Rhetoric and Cicero’s De Oratore begin with the character, power, and believability of the speaker. To place logic and analysis before rhetoric is to forget that humans are driven at least as much by agency, desire, discovery, and possibility as they are by data. Strategy must exercise both intellect and will; it must galvanize a group’s ideas, but also its intent, hope, and desire.

The impulse to be readers. When we began working with Infrastructure, Inc., we wanted the executives to be authors, so we designed the strategic conversations to begin without answers, data packs, or analyses. This was too much for our partners in the traditional consultancy. They could not restrain themselves from creating extensive data packs before the first strategic conversation. They did not understand that this would invite the executives to be readers instead of authors.

Our consulting colleagues, having worked night and day to analyze the largest and most successful of Infrastructure’s divisions, proudly presented their initial report to the divisional CEO on a public holiday. He read their analysis and critiqued their findings; the discussion never got beyond the second page, and the lead consultant came away wounded and critical, telling us that the divisional CEO would resist any change in his business.

Even when executives are not invited to read strategy, the temptation is strong to read and critique rather than author and create. Authoring is riskier than reading, opening one to the critique of others. Often, strategic authors must rely not on numerical analysis but compelling prose, forgo detailed plans and act in faith, and sacrifice personal interests for the greater good. The choice to be an author is a choice to be vulnerable, which may explain why many avoid the option. Authoring challenges the idea that executives need to be experts who can defend their expertise, budgets, and positions. Organizations that privilege reading over authoring—from managers or consultants—may increase their expertise but are likely to diminish their agency. This is the situation the critical divisional CEO and the wounded consultant found themselves in.

Creating a Safe Space. To help the critical divisional CEO and the wounded consultant move from an adversarial relationship to a productive one, we created a “safe space” in which they could be authors. First, we divided the strategy into form and content, form being the shape, structure, and arrangement of the strategy, content the industry-specific knowledge populating that form. Consultants could suggest form but could not dictate content, which had to come from the people who would own and execute the strategy. Infrastructure’s managers expressed this shift to authorship as “You are doing this with us, not to us!” The conversations became collaborations.

Other actions that help executives feel safe when authoring strategy include

  • setting norms for what should and should not be shared outside of the meeting,
  • speaking in plain language,
  • convening conversations in off-site locations, away from interruptions and the trappings of authority,
  • differentiating the role of author from that of reader,
  • beginning conversations by asking participants to state their desired outcomes for the meeting so they are focused on creating rather than critiquing outcomes,
  • designing the physical space to be more like a studio than a boardroom (displaying materials on walls and leaving room for people to walk around and sit in circles), and
  • having leaders who model acting without a plan, relinquishing bureaucracy, making sacrifices, listening to others, and taking risks of their own.

The CEO of Infrastructure modeled safe but accountable behaviors for his team. He said that the company would be forgiving of mistakes and small failures. When people would make mistakes, they should “’fess up and learn” without having to worry about punishment; consequences would be reserved for repeated errors. He tried to model this kind of behavior throughout the conversation. Leaders who model a willingness to admit mistakes or failures inspire others to take risks and learn from mistakes. As they learn how to author together, they can suggest adaptations to norms and practices until they are comfortable taking the risks.

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