As companies grapple with the hard work of digital transformation, developing a more open, innovative culture may be the hardest to-do item of all. Making a large-scale shift requires different leadership strategies and getting comfortable with ambiguity, says Red Hat President and CEO Jim Whitehurst.
Whitehurst explored this subject in depth with more than 30 CIOs during a recent Boston CIO Leadership Association event at Red Hat Open Innovation Labs in Boston. The conversation, moderated by Boston Consulting Group IT COO Chris Bowers, touched on some of the ways that leaders can react to change and innovate more quickly.
If you’re trying to lead your organization through culture change to build a more agile and innovative team, consider these four points:
1. Look in the mirror: Culture is an output, not an input
Most of today’s companies were organized for “static efficiency,” and leadership principles developed accordingly, says Whitehurst. But innovation requires quite different leadership strategies.
“The reason – and I see this on the technology side all the time – that agile transformations fail, it really does come down to how you are running the organization,” Whitehurst says. “The problem is that everybody comes around very simply to, ‘Well, it’s a culture problem. My culture just is unwilling to change.’ And what I want to say is, culture is an output; it’s not an input.”
“Your culture is an output of your leaders, the messages they’re sending, and the processes and systems you’ve put in place. So you’re right, culture is probably the problem, but culture is the problem because of how you’re leading. If leaders could understand that the messages they send, and how they act, and what they celebrate within their organizations … those are the kind of table stakes that actually make an agile transformation work.”
“You can’t order innovation until you recognize the issue and change how you lead and operate. That’s why most people, when they go through some form or flavor of digital transformation, fail, or only get 30 percent of the benefits. It’s really not the process or the methodology. It comes down to the leaders.”
[ Read our report from HBR Analytic Services: Transformation Masters: The New Rules of CIO Leadership. ]
2. Train executives to manage differently in the age of agile
Training managers to shift their leadership thinking and style is no small task. After all, many IT executives came up through the ranks in the age of massive ERP projects. These tightly managed projects were the antithesis of agile sprints. Whitehurst shared some tips on how leaders can help teams make this shift:
“Here’s the hardest problem that I see that happens more than any other. Somebody says, ‘Ah-ha. I have to be different. I have to be more of a servant leader because I can’t order this stuff to happen.’ And that’s a good step one in the process.”
“The problem is, most people then navigate to, ‘Okay, I have to be more collaborative and more supportive' … because what everybody’s trying to get to is productive interactions among people. But productive interactions among people generally require getting people to actually be more confrontational, not less. Most people are nice. And so people start saying, ‘Oh, I want teamwork. I want to get people together.’”
“As early as the 1960s, academic research started showing that brainstorming was a lousy way to get good ideas. Because, simply, getting a lot of ideas is not the same as getting a great idea. Great ideas require people pushing, saying, ‘That was a bad idea,’ and building on each other. And that requires people having difficult conversations.”
Another example: “Think about the manager of an agile team when it comes time to do a performance review, at the end of the year. Today, you have a set of really crisp, arbitrary ways that you’re measuring people and ranking them. That doesn’t quite work. With agile, it’s less about the person and more about what did they contribute to the overall project. And a lot of people have real trouble having a hard conversation about, ‘Here are some real issues with your performance. I don’t have an arbitrary measure of ‘You didn’t deliver this, this, and this,’ but I have to tell you, you were an average member of the team.’”
“If you don’t work to build those capabilities in your leaders and trust in your culture, it’s really hard to get things to happen.”
3. Get everyone comfortable with ambiguity
You may have been quite good at planning. Perhaps it helped you achieve your current leadership role. However, the age of planning is over, Whitehurst says. Processes such as performance management need to be dramatically shortened and focus more on experimentation. Innovation, he says “requires greater comfort with ambiguity all the way through your organization.” A prerequisite for that comfort is an understanding of corporate strategy.
“Most leaders are saying, ‘My people really need to know the details of their job function. They don’t necessarily need to know the strategy of the whole company,’” Whitehurst says. “But to be more innovative, you have to flip that around. Everybody needs to know the strategy of the company and how they fit into it.”
“And you frankly want to be kind of ambiguous down to what the organization and the individual needs to do – because that’s where you’re giving people latitude to try. One simple way to say it: Successful ERP implementations were all about driving variance out. Innovation is all about driving smart variance in. It’s the opposite. It’s hard to get people’s heads around that.”
4. Innovation words matter
Some vertical industries, and some internal functions, find their people are more change resistant. An audience member asked Whitehurst about articulating innovation goals to finance professionals. He stressed the importance of not only leadership mindset but also vocabulary, using an example from a recent discussion he had with a large bank’s executives:
“Innovation never happens in a planned-out way. Think of it more as, you throw a thousand seeds out there and one is going to grow into the oak tree. The likelihood you pick the right seed is small. So what I said is, ‘Be very careful and intentional with your words.’ Tell your team, ‘I want to see 25 experiments. You can’t spend more than $25,000 on any one of these things. And in 90 days, I want to come see the results of these. We’re going to kill all but one or two. Or we’re going to kill them all and take those learnings and figure out what the next sets are.’”
“Financial services has this risk aversion that you have to get over. The CEOs of a lot of the big financial services companies, they’re where they are because they deftly avoided risk. Innovation requires some risk. On the trading side, banks get the value of risk. You get this portfolio, take a risk. How you apply that and start thinking about ‘What’s the portfolio of initiatives, and how much risk do I have across this, and how do I then harvest that and build?’ is, I think, really critical anywhere, but in particular, in financial services.
People kind of understand this idea of portfolio. But you have to use the word “experiment,” not “initiative,” because nobody wants to tie their career to an initiative that fails. A lot of people are willing to try an experiment that might fail because the whole point is you’re trying to learn from it. And so words matter, timeframes matter, budgets matter to make experiments work.”
[ Want to explore this topic further? Get the free eBook, Organize for Innovation, by Jim Whitehurst. ]
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