The key challenge for major organisations is how to innovate and grow like a start-up, but on a far larger scale. So, when launching a book club on the subject of innovation, we decided to begin here – with scalability.
We were challenged by our Advisory Board recently about whether we had a clear enough vision of the culture we want to create in Potential Squared. It was a fair, if uncomfortable, challenge.
It reminded me that our ultimate aim is to create an innovation culture. We have a rigorous recruitment process to ensure we have the right people. And we have a list of behaviours that guide us. What we’ve been lacking is an image of the culture we want to create, a destination we can work back from.
This is why, as we continue to iterate and evolve at Potential Squared, a book I’ve returned to recently is Exponential Organisations by Salim Ismail.
This book is a True North for me. It functions as a simple guide to everything you need to think about in order to create a scalable organisation. The book is very clear on the fact that you don’t need to meet all the criteria they list. Instead, we’re using the book to help us create a roadmap for simultaneously defining our culture, shaping our operating model and growing our business.
Getting a business off the ground is one thing. Growing and scaling at pace is a very different challenge. Even Tesla, who are mentioned in the book, have shown this recently. The popularity of their cars has outstripped their ability to scale and produce, with the result that people have been paying deposits but not receiving cars. There have even been reports of the CEO Elon Musk helping on the factory floor. Tesla has been a victim of its own success, which shows that exponential growth can be both a blessing and a curse.
To continue meeting the challenges of exponential growth, organisations need the ability to stay open to change. To take advantage of opportunities, they need to take risks. And to manage this successfully, they need to be constantly checking that they’re on the right path.
This is important because risk-taking poses a particular challenge for large organisations. The oft-quoted start-up success rate is just 20%. For larger organisations this is seen as unacceptable – especially to stakeholders. Yet the ability to pivot to meet changing demands, and discard less successful ideas quickly, is necessary for large organisations not just to grow, but to survive. Several recent stories have proven that there is no organisation ‘too big to fail’.
Eric Ries proposes a new mode of accounting to measure and keep track of innovation. He defines “innovation accounting” as “a way of evaluating progress when all the metrics typically used in an established company (revenue, customers, ROI, market share) are effectively zero.”
Instead, he proposes a framework of chained leading indicators to predict and track success: “Each link in the chain is essential and, when broken, demands immediate attention.” Focusing on these leading indicators allows us to better predict that we are travelling in the right direction.
Even with the leading indicators in place, organisations need to create a culture in which it is acceptable, and even safe, to take the necessary risks to innovate. Amy Edmondson coined the term “psychological safety” to describe the conditions in which your team can feel brave about putting a foot on the accelerator and taking a foot off the brake.
There is a misconception that psychological safety is about leaders being ‘nice’ and avoiding the tough conversations. Instead, when they can feel comfortable to leave their egos and expertise at the door, leaders can start to truly see hear their people, customers and stakeholders and really start to innovate in a way that maximises learnings and minimises risks.
I love the fact that there is now a conference called Risky Business that brings together industries where decisions involving risk can mean the difference between life and death, such as surgery and aviation. The aim is to encourage their tribes to share ideas and concerns freely, in an environment of psychological security.
Exponential organisations talk about the need to engender a culture where people feel safe to share and speak their truth without fear of retribution. This is one of the many areas of our culture we are working on to help us live in an exponential way.