Is ownership the problem?

How do you motivate staff, do money and perks still cut it?  Or is possibly setting up your employees in their own entrepreneurial system a better way?

Recently, I’ve been thinking about the issues of retaining highly motivated and intelligent staff within knowledge intensive firms such as IT or consulting.  Seems to me that the attrition based management of hire-lots-of-people-work-them-hard-and-the-people-that-don’t-burn-out-must-be-management-material isn’t really the basis of an outstanding business (clearly it does work to an extent, PwC has about 135,000 accountants globally), and I honestly think it’s going to float even less in the future.

But what are the alternatives to running a company based on the churn-and-burn policy?  I personally think that the doesn’t have a simple solution, where you can somehow motivated your staff through measures that may have worked in the past (money, training, perks).  I really think that traditional organisational structures, where a pyramid of progressively more well paid individuals work away under a small pool of owners is not the most effective way to build a company.

Where I think organisations should be going in the future, is thinking about their organisation from a question of ownership, actually thinking about how they motivate employees by giving some part of their company to their employees, and go into business with them directly as partners rather than employing them as subordinates and waiting for them to get a better offer.  This is a view that is somewhat mirrored in the interesting WSJ article The End of Management, and also in the great Richard Koch book the 80-20 Revolution.  A future point of differentiation may be that organisations become excellent at finding ways of reversing ownership in through development of spin-outs, Joint Ventures, intrapreneurship or any number of mechanisms.

There’s a lot more to be said about ownership strategy (or maybe anti-ownership) and the consequences that will arise in organisations, I think I’ll write a little more on this in the future, but if anyone has any inputs on looking at ownership as competitive advantage, I’d love to hear about it.

What are the arts of innovation?

When I’m thinking about any subject I usually like to organise my thoughts around what the main parts of a subject are.  My day job is consulting, mostly in strategy, and as a field strategy has some order as to what it include, if you take some financial analysis, economics, and marketing, add in organisational and system dynamics you’ve got a pretty good core toolkit for a strategist. Recently Tim Kastelle had a great post on what defines innovation, and Hutch Carpenter on blogging-innovation has developed 25 definitions of innovation, but what is the core toolkit for an innovator?  I’ve studied technology and innovation management at uni, but didn’t quite feel that I learned the whole deal, and since then I’ve put a bit of brain power to what skills make an innovator and came up with the following:

  • Design thinking and creative problem solving – Design thinking is becoming super cool at the moment, and although I don’t think an MFA is going to save your company any more than an MBA was 20 years ago, understanding the concepts of design and “design thinking” are a good start for making a company more innovative and creative.
  • Social science/market research – Personally, I think that the quantitative and qualitative arts of social science, and the business focussed version – market research, provide the tools and techniques to understand important stakeholder groups and use this understanding as an important input into innovation.
  • Business modelling – Business models have emerged as one of the most important aspects of capturing innovation within organisations.  Learning the art of business modelling provides innovators with the skills to structure businesses around innovations and hopefully capture enough value (i.e. money) to keep the doors open.
  • Research and development – Whether scientific, engineering, product, or software R&D, I think that all innovators have to understand some of the fundamentals of research and development.  Although, I think that R&D management has a long way to go (i.e. “money != innovations”), there is some good ground to be made by learning the systems of research, including: peer review, knowledge management and collaboration, and the systems of new product development.
  • Project and portfolio management – This might seem a bit operational, and it is, but as almost all innovations are project based, and as all innovations are risky, unless you can afford for a company to go down due to one misfire, you’ll need a portfolio of them.  There is a huge literature on project and portfolio management out there (the PMI is a good place to start) and it’s worth looking at to provide some rigor to budgetting, resource planning, risk management and valuation of organisational innovation programs and innovation portfolios.
  • Intellectual property protection – Innovations are usually built upon a core of valuable and unique knowledge.  While you might not neccessarily need own that core to capture value, if you do, understanding the mechanisms for protecting intellectual property, both legal and non-legal (not illegal, through business models and the like) is important for ensuring the payoff on hard R&D work.

Finally, there are a few others, but  I’m unsure about how “core” they are, including:

  • Evolutionary economics – underpinning all innovation theory is Schumpeter’s evolutionary economics, although I wonder if the economist view of innovation vs the innovation studies view of innovation is developing into a similar schizm to the military and business strategy schizm we see today (although I’m sure you still see the occasional copy of Von Clauszwitz on a CEO bookshelf).
  • Social network analysis – recently trendy, and surprisingly useful for understanding innovation networks and the like, though I wonder how useful it is for the innovation practitioner.  I think the combination of SNA, system dynamics, and epidemiology would make a pretty potent innovation dynamics toolkit, although I don’t know if that’s out there at the moment.
  • Community building – This is hard to define, and while there are a number of books out there on building web communities, I don’t really know how defined it is as a discipline in it’s own right and whether it’s truly core to innovation.

There you go, of course, any fully rounded business leader should be comfortable with both strategy and innovation, as well as the essential operational and hard to define leadership skills.  But that’s my thoughts on what makes an innovator.  Any feedback?

Late reading of The Cathedral and the Bazaar

After watching the documentary revolution OS about the boom of linux and the FOSS (Free and Open Source Software) movement, I was inspired to read the somewhat seminal essay on the open source development model, “The Cathedral and the Bazaar”, by Eric S. Reymond (available here and later bundled with some more essays into a book – amazon link).

The essay is a somewhat geeky anecdote of both the success of the linux project and the author’s experimentation with using the open source development model on the fetchmail software program.  What, I found interesting was that that the essay actually made really good reading on the importance of building a network while you’re building something or doing business (not facebook friends, actual networks where people help each other out).  Most of the OSS observations that I read seem to think that it’s magic fairy dust that turns crap software into gold and where you can get people to update your outdated app that’s been underinvested in for many years.  The essay was primarily for software development but I think there are some useful lessons for anyone who wants to engage community in what they do.  Particularly, what I took out of the essay was that:

  • People need to value something to get involved. I think a lot of mainstream commentry about Linux’s success has been about how people prefer open systems and freedom of software usage, but I actually think that people just like better software.  You can see linux dominating in the web server and HPC sectors, where it is vastly superior to closed source systems, but still far from achieving market share in desktop markets (~1%).  Users value the software, a couple contribute and everyone is happy.
  • Lots of linkages are great, cultivate the few really valuable ones. Although having loose connections with hundreds or thousands of people are great, but the real value is to be had in cultivating a core network of people who will actually tell you when things aren’t going right or give you good ideas.  ESR (Eric’s tag) in this essay cultivates his core with an email list (the essay is pre-facebook era), who he is careful to keep motivated with chatty emails and genuine appreciation of input and feedback.

I’m sure there’s a lot more to take out of the essay, but I’ll stop there. I’d really love to figure out how you would apply (or even if it’s possible) some of the more interesting parts of the OSS business model to a more traditional business.  I know in my heart of hearts that command-and-control (and really all management is command-and-control in some way or form) isn’t the most effective way of running a business, but I can’t quite put together the whole picture of an alternative.