Institutional Innovation - The Untapped Opportunity

Everyone talks about transformation these days, but the term is used so loosely that it’s begun to lose some of its meaning. I recently wrote a blog post suggesting that the ultimate test of transformation is whether the caterpillar became a butterfly – is it so different that it’s unrecognizable? That’s a useful metaphor, but many have asked me to make it more tangible in the world of institutions.

OK, you asked for it, so watch out! I believe there’s an untapped opportunity to re-frame transformation. The opportunity is to transform all our institutions in ways that can help all of us to achieve more and more of our potential. As I explore this opportunity, I’m going to refer to a lot of the work we’ve been doing at the Center for the Edge since I’ve been pursuing this opportunity for a quite a while.

Let me start by clarifying that the transformation I’m focused on isn’t the transformation involved in moving from one business to another (let’s say, moving from being a retailer to becoming a clothing manufacturer). Yes, the business would look very different in terms of the specific activities being performed, but the overall approach to how to be successful in business would not necessarily change. I would prefer to call this diversification rather than transformation. What I’m focused on is the more fundamental transformation that is typically required to be successful regardless of what business you’re in.

Also, the transformation I am seeking is not what most companies today describe as “digital transformation.” When you look more closely at these initiatives, they tend to be applying digital technology in ways that can help the company do what it’s always done, just faster and cheaper. As I'll suggest, digital technology can help to drive a much more fundamental transformation but it could first be necessary to challenge all of our cherished assumptions about how to run an institution.

Institutional transformation

For those of you familiar with our work on the Big Shift, we’ve developed a perspective that all our institutions are going to need to go through a fundamental transformation from a scalable efficiency model to a scalable learning model. Scalable efficiency models typically drive success by tightly specifying every activity that needs to be done, standardizing those activities so they’re done the same efficient way everywhere in the organization and tightly integrating those activities. Scalable learning models, on the other hand, generally focus on how to motivate people to learn faster, how to foster practices that drive faster learning and how to create environments that amplify the potential for learning.

This institutional transformation can be an imperative because the scalable efficiency model is increasingly challenged given the profound changes playing out in our global economy (see our work on return on asset trends for US companies). But it’s also important because this new model can effectively target and reap the rewards of the expanding opportunities that the Big Shift provides.

While I'll be talking primarily about corporations in this blog post, I should clarify up front that all of our institutions - governments, schools, NGO's, etc. - are expected to go likely through this transformation in order to achieve greater impact.

Diving deeper into learning

So, what does scalable learning imply? It implies that everything in the institution will need to change – nothing will remain the same.

Before I dive into that, let me clarify what I mean by scalable learning. I’m focused on learning in the form of creating new knowledge through action and reflection on results – it’s not about sharing existing knowledge or just coming up with new ideas. Much of this new knowledge is tacit knowledge that we have a hard time articulating to ourselves, much less to others. And a key dimension of scaling is the need to go beyond your institutional boundaries and build relationships with a growing number of external participants where everyone can learn faster together.

OK, so what are some of the key dimensions of transformation required to pursue scalable learning? I’ll explore this transformation at three broad levels: motivation, practices and environment.

Motivation

More and more pundits are talking about the need for lifelong learning and the need to learn faster, but very few are focused on what is required to motivate people to pursue this with excitement, rather than being stressed by it. This is ultimately the foundational element to the transformation required for scalable learning.

Motivation: Shift from punishment and cash to passion. Sure, cash compensation will still matter – we’ll want to be paid for work well done. But the real motivation that could drive all workers could be the passion of the explorer. We could move from a focus on extrinsic motivation to intrinsic motivation. Every worker in these institutions could be motivated by a deep passion that could drive them to learn faster and achieve more of their potential.

Aspiration: Shift from target to trajectory. These institutions could be driven to accelerate performance improvement – linear performance improvement might not be enough, they may want to accelerate that improvement – forever. People with the passion of the explorer are never satisfied with one-time, or even linear, performance improvement – they’re driven to get better faster.

Performance metrics: Shift from financial results to addressing unmet needs. Sure, financial metrics will likely still matter, but the metrics that will matter the most are expected to involve the ability to address more effectively the evolving needs of key stakeholders, with a focus on customers. People with the passion of the explorer aren’t driven by financial results – they typically want to make a difference that’s meaningful to themselves and to others that are impacted by their actions.

Leadership practices

In institutions that are driven by scalable learning, leadership can help to inspire and focus everyone on growing impact that matters.

Strategy: Shift from static to dynamic. These institutions often pursue a zoom out/zoom in approach to strategy, focusing on very large, long-term opportunities that are emerging on a 10-20 year time horizon while also identifying the 2-3 initiatives that can be pursued in the next 6-12 months to accelerate progress towards the longer-term opportunity and amplify the opportunity to learn through action. The goal is generally to inspire everyone with a very significant opportunity to create much more impact, but also focus on near-term action that can start to demonstrate impact.

Leadership: Shift from answers and orders to questions and invitations. Leaders should focus on framing powerful questions that can inspire everyone in the organization (and outside). They often freely acknowledge that they don’t have the answers and that they’ll need help in finding the answers.

Worker practices

Scalable learning often requires a fundamental redefinition of the work to be done and active cultivation of the practices required to accelerate performance improvement.

Work: Shift from routine tasks to addressing unseen problems and opportunities. A key driver for learning is focus work on seeing what hasn’t been seen in terms of opportunities to create more value but also with an emphasis on action - developing approaches to those opportunities and seeking to evolve those approaches to generate more and more impact.

Performance improvement: Shift from process to practice. A key to driving performance improvement in these institutions can be to focus on cultivating a set of practices that can accelerate learning both within individual workgroups and across workgroups.

Internal environment                                                                                                                               For these practices to achieve greater and greater impact, it can be necessary to redesign the entire environment within our institutions to support scalable learning.

Corporate focus: Shift from bundle to one business type. To accelerate learning, companies might need to unbundle. Today there are three very different and often conflicting business types: infrastructure management, product innovation and commercialization, and customer relationship businesses. By choosing to focus on one of these three businesses, shedding the other two and building deep relationships with world class players in the other two business types, companies can focus more effectively on what will be required to accelerate learning and performance improvement.

Organization: Shift from departments and hierarchies to workgroups and networks. The core organizational unit is expected to be small workgroups of 3-15 people who connect with others through scalable networks. These workgroups will often include participants from “outside” the organization and can connect with a growing number of workgroups outside the organization. Organizations could become “creation spaces.”

Operations: Shift from push to pull. Rather than pushing all the right people and resources into the right place at the right time to meet demand forecasts, the focus could be on participating in scalable pull platforms where the right people and resources can be drawn out as needed and where needed.

Work environments: Shift from cost and comfort to accelerating learning. Design thinking and methodologies is expected to be systematically applied to redesign work environments with the primary goal of accelerating learning and performance improvement. The focus could be on redesigning the entire work experience – physical environment, virtual environment and management systems.

Front line management: Shift from control and enforcement to coaching and development. Front line managers could be focused on how to help individuals and workgroups to develop more of their potential and deliver more impact that matters.

Technology: Shift from tasks to learning. With the growth of service oriented architectures and more and more powerful sensor and analytic technologies, these institutions may focus on how to flexibly support workgroups in learning faster in rapidly changing contexts by giving them richer and real-time visibility into the context and richer feedback loops regarding the actions they take to address the context. To the extent that these activities become routine tasks, the technology could take these tasks over and free up the capacity of the workgroups to address unseen problems and opportunities.

External environment

Scalable learning doesn’t just stop at the four walls of an institution. Scaling learning ultimately can require a systematic effort to reach beyond the institution and develop deep, trust-based relationships with an expanding array of third parties so that everyone can learn faster together.

Growth: Shift from make or buy to mobilize. Greater institutional focus can help institutions to tap into a third and much more powerful path to growth: leveraged growth. This form of growth involves connecting with and mobilizing a growing number of third parties to add more value to the customers being served, and then taking a share of the value creation as compensation for the initiative taken.

Ecosystems: Shift from static to dynamic ecosystems. Institutions can be deeply embedded in a number of growing ecosystems, but the focus should be on building relationships with a larger and larger number of participants where everyone learns faster together, rather than simply executing short-term transactions.

Platforms: Shift from aggregation platforms to mobilization and learning platforms. These institutions can participate in a growing range of platforms, but the platforms should be explicitly designed to help mobilize a growing number of participants in sustained interactions designed to produce shared outcomes and, in the process, help all the participants to learn faster from the initiatives being pursued.

The Bottom Line

If we take scalable learning seriously, it could change everything we do in institutions. The caterpillar will indeed become a butterfly, flying off to areas that were never even seen, much less experienced, in its previous life.

Why go through the potentially traumatic effort to transform? There are many reasons, shaped by the Big Shift that is transforming the global economy. But the bottom line is that the scalable efficiency model is ultimately a diminishing returns model. The more efficient we become, the longer and harder we have to work to get that next increment of performance improvement. The scalable learning model can allow us for the first time to move from a diminishing returns outcome to an increasing returns outcome – the more participants we bring together and focus on accelerating learning, the more rapidly we can create increasing value.

This transformation could ultimately be a powerful way to achieve two objectives that tend to be in opposition in the scalable efficiency world: the opportunity to achieve more and more of our potential as individuals and the opportunity to achieve more and more of our potential as institutions.

<A version of this posting originally appeared on my Edge Perspectives blog site>