7.

CHANGING THE ORGANIZATIONAL CULTURE

Culture isn’t just one aspect of the game, it is the game.

—LOUIS GERSTNER¹

For most organizations, the shift to Agile management and Strategic Agility means a change in organizational culture—perhaps the most difficult thing that any organization can attempt. An organization’s culture comprises an interlocking set of goals, roles, processes, values, communications practices, attitudes, and assumptions, many of them unspoken. The elements fit together as a mutually reinforcing system and combine to prevent any attempt to change it. That’s why single-fix changes, such as the introduction of lean practices or of Agile management, may appear to make progress for a while, but eventually the interlocking elements of the organizational culture often take over and the organization is inexorably drawn back into its preexisting culture.

The bad news: Most efforts to change an organizational culture fail. This causes some people to question whether it is even worthwhile trying. Let’s look at an example of success: Curt Carlson’s introduction of a culture of innovation at SRI International.

In 1998, when Curt Carlson became president and CEO of SRI, it was practically bankrupt. It had been established in 1946 as a research institute headquartered in Menlo Park, California. The trustees of Stanford University formed SRI as the Stanford Research Institute, a center of R&D and innovation, initially to help support economic development in California and then the world. It is now an independent company.

When Carlson became CEO, the management challenge was massive. SRI had almost run out of money. If it didn’t change, it would have to sell off assets. It hadn’t made a profit in years. SRI had excellent people and a legendary history as the inventor of the computer mouse, the modern personal computer interface, the first ARPA-net message, ultrasound imaging, and much more. But its organizational culture had become dysfunctional. Carlson’s predecessors had tried tighter top-down control, but that crushed innovation. They had tried bottom-up innovation but that led to chaos. The organization was in a spiral of decline. Lack of trust. Lack of collaboration. Failure to share resources. Ineffective operational controls. And poor financial results. SRI’s organizational culture had become so toxic that many questioned whether it could survive.

Over the next sixteen years with Carlson as CEO, SRI and its organizational culture were transformed. SRI tripled in size, became profitable, and created many world-changing innovations. One of its best-known successes was Siri, the personal assistant on the iPhone.

Under Carlson’s leadership, SRI molded its organizational culture to become highly collaborative. It produced a series of market-creating innovations worth billions of dollars. I talked with Carlson about what was involved in the culture change. How did SRI become a serial innovator? Why had he succeeded where so many others have failed? What elements led to success?

Interestingly, one key element in changing SRI’s culture was that Carlson never talked about “changing the culture.” “People are generally proud of their culture,” he says. “So if you go into an organization and talk about changing the culture, it makes people wonder: ‘What is he talking about? What’s wrong with my culture?’ You don’t want people worrying about this. I never once used the word ‘culture’ at SRI in any of my discussions with the staff. What I talked about was what we needed to do. I had a couple of big themes. And I repeated those themes all the time. I never used the words, ‘culture change,’” he says.

What did Carlson talk about? He arrived at SRI with the notion that inventive ideas were not enough. He set out to develop a methodology for rapid, large-scale, serial innovation, starting with a focus on important customer and market needs addressed with compelling hypotheses for both the product offering and the business model. His insight was that, until that was done, all efforts at technical development would be premature, if not a total waste. He had seen most efforts at innovation fail for these reasons—no customers and no business model. His game plan included many of the hallmarks of Agile management: a focus on important customer and market opportunities; rapid, continuous team and customer cocreation; mostly self-organizing teams led by champions; positive human values and incentives; and a specific value-creation methodology that assures a high probability of success. Carlson wanted to go further and develop a value-creation playbook that would apply to the entire enterprise and generate multibillion-dollar innovations on a continuing basis.

Carlson saw that SRI had strengths on which he could build, including being in the center of Silicon Valley. The SRI staff were technically excellent, as they were in most of the companies he had worked in. The problem wasn’t the staff. A key problem was the focus of the initiatives being developed. Too often, they were interesting, but not important. The initiatives were managed and developed in an ad hoc fashion. And staff members were working together mostly as individuals, not complete teams.

Carlson had the advantage of arriving at SRI with a track record of successful innovations at the Sarnoff Corporation, a subsidiary of SRI. Carlson had led the initial development of high-definition television (HDTV) and a system to assess broadcast image quality, both of which received Technology and Engineering Emmy Awards. He had pioneered the commercialization of R&D at Sarnoff and helped form over a dozen new companies while he was there.

Given this track record of accomplishment, Carlson had the support of his board, who trusted that he would succeed, even if they didn’t have a deep understanding of his value-creation methods. After all, they were mainly senior operating managers—superbly accomplished professionals, but with different skills.

Carlson’s track record of technical achievement also gave him credibility with the staff of SRI. He wasn’t a marketing guy or a finance whiz. He had lived the life of a scientist and an engineer and had enjoyed success at the highest levels. He had written serious technical papers and given talks at professional conferences. He had the kind of credibility that is important with technical staff, who worried that an incoming CEO might be coming in to “dumb the place down.”

Carlson saw that he had to change the basic way in which work got done at SRI. The previous presidents were not bad people. They were highly successful professionals in their previous roles. They were doing what they knew. The problem was that they were using an obsolete management model.

Carlson arrived with the notion that SRI had to make basic changes to focus on important customer and market needs. They would have to develop a value-creation methodology that would allow SRI to deliver higher customer value than its global competitors. The goal was to be the best at delivering new, high-value technical innovations. In a globalized economy, SRI’s competition was whichever firm was the best on the planet. He also saw that if SRI was to be financially successful, it would need to be systematically hunting for “big game”—market-creating innovations with the potential of hundreds of millions of dollars of market value.

I asked Carlson what happened when he arrived at SRI and started talking like this.

“Well,” says Carlson, “some of the people just loved what I was saying, and some of them hated it. They thought that aspiring to be the best in the world was ridiculous. But I was convinced we could do it, because we had achieved that at Sarnoff.

“I eventually replaced eight vice presidents,” he says. “I didn’t fire anybody. They were all solid professionals, but they didn’t want to work in the new way and they left, one after the other. Because we were basically bankrupt when I got there, we didn’t have any money to hire new people. I now think of it with some amusement as a total-immersion method for learning how to create a business!

“Even though we initially had no funds to hire new people, I didn’t consider that a handicap,” says Carlson. “We were able to find people who wanted to work this way. Just tremendous people. You don’t need thousands of people today. You need a few excellent people who want to work collaboratively and productively on important opportunities. When they find a place to work like that, they come and they stay.”

There were some difficult moments at the start. Carlson gives one example.

“In my first month, I got a phone call. I learned that a team had moved its laboratory at night from one part of the company to another without telling anybody. Imagine! I called up the vice president and said, ‘Do you want to undo this?’ He said, ‘No, that would be too hard and destructive.’ So, I called a meeting that brought everyone together,” Carlson says. “I explained that from now on, we weren’t going to behave that way. If anybody did this again, the entire management chain would have to go somewhere else.

“It sounds like crazy stuff, and it was exactly that: crazy stuff,” he adds. “When an organization has been in decline for decades, it becomes dysfunctional. There were all kinds of team-destroying behavior going on. Every week it was something else. People often asked me why I had taken the job. It was because I knew the staff were superb and that the value-creation methodology we had pioneered at Sarnoff would be transformative. For me it was the ideal job: to be in Silicon Valley with so many brilliant colleagues.”

One advantage was that Carlson had a core team of partners from the start. Without that core team, he says, it couldn’t have worked. These were people who were committed to SRI’s success, understood the importance of innovation, and who rolled up their sleeves to make it happen. They were working sixty-plus hours a week to make the right things materialize. He never could have made it without them.

A key person in the core team was Norman Winarsky. Carlson brought Winarsky in from SRI’s subsidiary, the Sarnoff Corporation. He was one of the smartest guys Carlson had ever met. Solid. Reasonable. Fun. Great human values. And the best brainstorming partner one could imagine. At SRI, Winarsky led the new ventures and licensing practice.

Another member of the core team was Bill Wilmot, at the time a professor at the University of Montana. He was one of the world’s most accomplished communication experts. He had literally written the textbook on the subject. He understood teams and behaviors, and knew how to communicate effectively.²

“Working with Bill,” says Carlson, “was one of the best things I ever did. Every month we spent a weekend working twelve-hour days on all the people and organizational issues I was having.” For example, Wilmot taught Carlson that he couldn’t afford to get upset about things. You had to be firm, but not get upset. You needed to understand why people were doing those things. Many people at SRI were acting that way because they loved the place and they wanted it to be successful. But nothing was working right. It wasn’t their fault. They felt helpless and afraid. They were doing what they were doing to survive.

Another key person was the head of marketing and communications, Alice Resnick. Carlson teamed with her on all communications and staff engagement activities. Carlson says, “By working closely with Alice, every communication effort was profoundly improved. We all need smart partners who add perspectives that we lack,” and she was wise and perceptive about the needs of both staff and customers.

The head of human resources, Jeanie Tooker, also played a key role. She was a person with great judgment and human values. The staff completely trusted her. Later Len Polizzotto joined SRI as vice president of marketing. He had a deep understanding of the principles of value creation and added fundamental concepts. All of these people had superb human values. And they were also great fun to be with.

Carlson knew that he needed a systematic process for innovation. When Sarnoff became part of SRI in 1987, Carlson had worked to understand how to systematically create major new innovations and put the required organization in place. He was learning this for the first time. In big companies, value-creation skills were rarely taught and even more rarely used. “The trappings of success in a big company are beguiling,” he says, “but too often completely counterproductive.”

His problem was that he didn’t have an efficient incubation process for creating new innovations and ventures. “We were working hard,” he says, “but our initiatives didn’t have the quality and customer-value needed to be successful. The biggest challenge was putting in place an organization that would make the results ‘inevitable.’ That is the heart and soul of the challenge and the opportunity. Getting people to change their attitude, their skills, and their ability to collaborate only comes from the way they work every day.”

The thinking Carlson brought to SRI originated at Sarnoff but evolved significantly at SRI. Every other Monday night, from 5 p.m. to 9 p.m., Carlson would get his core team of fifteen people together for what he called “value-creation forums.” Pizza and Coke were provided and, one after another, Carlson, Winarsky, and their colleagues would stand up and give a short value-proposition presentation for the initiative they were driving. Then the team would critique it from the perspective of what worked and what could be improved. Everyone also had to share something they had learned about innovation, markets, or potential customers. “It was a process to learn fast, not to fail fast,” Carlson says. “Failing fast is a very bad idea. The goal is always to learn fast.”

The process went on for about eighteen months with little success because they didn’t really know what they were doing. In retrospect, Carlson says, “In those early days, we didn’t understand innovation or value creation. We thought that we did. But in reality, we had been depending on the prestige and financial resources of RCA [the parent of Sarnoff]. These were super-smart people. But they didn’t know how to innovate on a systematic basis. For SRI, that was going to be essential.

“For the first year, our presentations at these value-creation forums were just terrible,” says Carlson. “We didn’t know what a genuine value proposition looked like. What are the minimum number of questions that must be answered to have a complete value proposition? How do you know that they are good enough?”

That’s how Carlson’s team eventually came up with the heart of the value proposition—or what he now calls NABC (need, approach, benefits per costs, and competition)—a framework that starts the creation of any new innovation, as discussed in Chapter 6. They kept on trying different frameworks. And finally everyone said, “This is it! You’ve got to answer at least these four fundamental questions for any serious new innovation. You can make the list of questions as long as you want, but the list can’t be smaller than this. If you take one of these four questions away, you no longer have a value proposition for innovation.”

As Carlson explains, “The four questions are, What is the important customer and market need? What is your approach for addressing this need? What are the benefits per costs of your approach? And how do those benefits per costs compare with the competition and the alternatives?”

Carlson calls the answers to these four questions “a value proposition” or, in short, “NABC” for Need, Approach, Benefits per costs, and Competition. “They are the fundamentals; it doesn’t make sense to write up a big report until you can explain them in simple language to a knowledgeable person.”

Says Carlson, “NABC seems simple. Actually, it has proven to be profound. Because it contains the fundamental framework for creating customer value, it applies to the entire enterprise. It brings all functions together using a short, easy-to-remember meme that starts every conversation with a focus on customer needs. That is transformative. Add ‘important customer and market needs’ and ‘constant team iteration’ and you have the basic recipe for systematic organizational success. When I retired from SRI in 2014, these principles were being applied throughout the company. How many companies can say that the entire company is focused on value for their customers and that they have a memorable definition for what that means? Only a handful, in my experience.”

Moreover, it wasn’t enough to have a value proposition in the abstract. The value proposition had to be owned by a champion—someone who believed in the idea and would do the work necessary to make the idea a success. It meant a standard catechism of commitment, teamwork, corporate responsibility, full engagement in the value-creation process, and perseverance.

“We expected everyone to be the champion for their part,” says Carlson. “We avoided the terms ‘manager’ and ‘leader’ as being confusing, inappropriate, and not collaborative enough. Champions came from all parts of the enterprise. Merit and passion were the metrics for encouragement and additional resources; not position. Our rule was, ‘No champion, no project, no exception.’ A champion had a family of personal attributes, human values, and high-level skills, including an understanding of what it took to innovate successfully. They were expected to be 100 percent committed to success—no excuses. We provided workshops to all staff so that they understood what this meant. We helped them gain essential value-creation skills and they would understand why, in the global innovation economy, being a champion was essential.” Says Carlson, “We also made clear why it was critical for their careers to learn these skills and perform in this way.”

At the same time, Carlson was doing a great deal of communication to staff. He did everything he could think of to get alignment. He gave talks. He visited the teams. He held forums where they brought people together. And every day he was at SRI, he had lunch with different staff members in the cafeteria. It didn’t take long for everyone to know that if Carlson sat down with them they were going to have a discussion about their NABC value propositions and why it was so important for them to acquire SRI’s value-creation skills.

Carlson and Resnick from marketing and communications started a conversation about creating an “SRI Card” that would encapsulate SRI’s values and strategies. The goal of the discussion was not to produce the card. The purpose was to generate substantive discussions about SRI’s needs, values, vision, and strategy. If it had taken three years to develop the consensus, that would have been fine. Until they had alignment on those basic topics, it would be hard to move the whole organization forward. So, they held meeting after meeting. They would get feedback from staff at every level. Then they would do it again. Finally, the feedback stopped coming. People started saying that they liked what they saw. That was one milestone. It took about eighteen months. Carlson wasn’t in a hurry to bring it to closure. It was about having the discussion and getting agreement on how to move forward.

I asked Carlson whether there was a tipping point when people suddenly realized that things were going to be different. “There was a funny moment at the start,” he replied. “Obviously, a key challenge for SRI was to start making a profit. SRI hadn’t made a profit for years. So, I set a goal of making one dollar of profit for the year. We called it ‘make a buck.’ That may seem underwhelming, but at the time most staff thought we would fail. To make the challenge more intriguing, I promised that if we succeeded, I would play the violin at my January all-hands presentation. I had been a professional violinist at fifteen, so I thought it could work,” he said. “We did a lot better than make a buck that year, but the day I played the violin was a big deal. It was a milestone. It became a public celebration that SRI was back in business and moving forward.”

I asked Carlson what he did in those early years to get people’s buy-in. Carlson says he included everyone but he worked mainly with the early adopters. “You never get a 100 percent,” he says. “We focused on the people who wanted to work this way. You can’t convert everyone on day one. That takes years.

“One essential principle in motivating professionals is to build on existing skills and values,” he says. “One of the most fundamental is ‘achievement.’ Super-smart people will argue with you about anything and everything. But the one thing that they agree on is the desire to achieve. It’s who they are. It’s their identity. It’s also one of the strengths of SRI—superbly smart professionals who wanted to make major, positive contributions to the world. Every talk I gave started by addressing that fundamental need—doing transformational R&D and creating world-changing innovations. Then I would describe the ‘how’—our value-creation playbook.”

One of the most spectacular and best-known SRI wins was Siri. Siri is an intelligent personal computer assistant and online knowledge navigator. It uses a natural-language user interface to answer questions, make recommendations, and perform actions by delegating requests to a set of web services. The software learns and adapts to the user’s individual preferences and returns constantly improving individualized results. Siri was developed by SRI over a seven-year period and sold to Apple in April 2010 for hundreds of millions of dollars.

Siri illustrates the power of the NABC approach. Siri is a spin-off from SRI’s Artificial Intelligence Center and an offshoot of the DARPA-funded CALO project led by SRI, which was the biggest artificial intelligence project in the history of America, with a budget of over $100 million.

“While we were doing the research on artificial intelligence for DARPA [the Defense Advanced Research Projects Agency],” says Carlson, “we were also incubating value propositions for a number of ventures. We had four or five different ideas on the table. Siri was one of them. The technical work was mostly defined but we lacked a compelling business model. So, we kept iterating value propositions without spending much money. It took two years before we finally had a good working hypothesis for the business model. Only then did we hire the best team for that value proposition. Then we iterated the business model and the product concept for another year with the new team to remove additional risks. It was only toward the end of the third year that we started building prototype products to test with early customers who were ‘friends of the family.’ Finally, the company, Siri Inc., was spun off in the middle of 2009.

“About six months later,” says Carlson, “Steve Jobs saw Siri and he invited the Siri team to his home. We said that we didn’t want to sell. But the price got to be so good that eventually the team said, ‘Okay, let’s sell the company to Apple. They have the platform to make it a huge innovation.’”

Siri was sold to Apple in April 2010 and it has been an integral part of the iPhone since October 2011. Siri helped Apple transform the mobile phone market and make the iPhone the dominant “must-have” mobile phone. Since then, four other companies using Siri-like technology have been spun out of SRI focused on different market opportunities.

It’s easy to be dazzled by the technology involved in Siri, with its conversational interface, personal-context awareness, service delegation, and speech-recognition engine.

But Carlson stresses that the key element in the success was not the technology. It was getting the entire value proposition right. “We weren’t spending a lot of money while we were working on different value propositions. One of the things that changed at SRI was the realization that we needed solid working hypotheses, both for the product and the business model, before we started spending significant money on technology. That’s one of the biggest mistakes firms make,” he says. “They rush ahead and want to build stuff. If we had tried to spin off the company before we had a viable business model, it would have crashed and nobody would have heard of Siri. In the 1960s to 1980s, SRI had made that mistake repeatedly. SRI spawned over twenty companies and they were mostly failures. They went out the door without a business model and they went bust.

“SRI was full of brilliant people who did amazing things,” says Carlson. “But it lacked a systematic value-creation process to be fully successful. That has become even more critical for all enterprises in today’s competitive environment. SRI hadn’t taken advantage of all the genius it had. We had licensed the mouse to Xerox, and then to Apple, for almost nothing. SRI wouldn’t do that today. That’s no way to run a firm. That’s also why SRI didn’t get the credit from all the world-changing innovations it created.”

Implicit in Carlson’s approach to being a serial, multibillion-dollar innovator is having a long-term strategy. If a CEO is only going to be around for three years, what’s their interest in doing a seven-year project?

“It’s rare that you can make what Steve Jobs called ‘a dent in the universe’ in just three years,” says Carlson. “That’s a fundamental issue for many firms that chase short-term shareholder value. You don’t develop multibillion-dollar ventures in a few years. And if somebody in leadership doesn’t support the development of major innovations, it can be the end of the company.

“You visit these big companies. You walk in the front door and it looks like the Taj Mahal. You are expecting wonders, but you start talking to people and you find that it’s just an ordinary place with dispirited staff. They aren’t pursuing big ideas and, even if they are, there’s no mechanism for developing them.” He adds, “I often walk out of these companies depressed about the waste of the human talent working there. These companies must become profoundly more productive if they are to survive in our competitive global economy.

“The problem is that you can’t learn how to launch billion-dollar innovations just by reading a book or taking a course. This is a discipline with both conceptual and experiential elements. If it’s not practiced experientially,” Carlson says, “the results are always poor or nonexistent. That’s the big challenge we constantly see. How do you take these ideas and embed them in an organization? You need to have experience in doing that. There still aren’t very many folks in senior positions with that kind of experience.”

I asked Carlson to sum up what made the difference in changing the vision, organizational design, and spirit at SRI.

“First, you need a few really good partners who have the skills, values, and credibility required,” he says. “People who know what to do and who have the perspectives and skills that you are missing. That is essential. You must have at least one partner; you just aren’t smart enough by yourself. You need ‘buddies’ to test your ideas and to help you through all the challenges. The partners can be internal or external. I had both and that was ideal.

“Second,” he says, “change happens in logical steps. There must first be agreement on the need to change. When you initially go into an enterprise suffering from challenges, people say, ‘What’s the need for change?’ Until you have established the need, they are not ready to move.

“When people see the need, they then ask, ‘What’s the vision? Where are we going?’ You are then ready to develop the vision. To gain alignment you must, as much as you can, do that in collaboration with the staff,” he says.

“Third, once you have a shared vision, people start asking, ‘Okay, I get the need and the vision—what’s the plan?’ It’s need, vision, and plan, in that order. Many people jump to the plan before they understand the need and the shared vision. That will always get you into trouble with the staff and it is almost always wrong—as with all innovations, the first goal is to deeply understand the need,” says Carlson.

“Fourth, a focus on early adopters. Even if people generally agree with you, most are naturally cautious. You need to find the 5 to 10 percent who will be your early champions to help you establish the principles and prove them out. Typically, 10 percent will never agree with you but once you have the early adopters on your side, you are well on your way. That’s the key thing,” Carlson says. “It’s the champions who drive progress and become role models for everyone else. When I came to SRI, one essential person was Bill Mark, the brilliant VP of the information and computing sciences division. Bill immediately embraced the strategy, ran with it, and helped improve it. His teams created Siri and many of SRI’s major innovations.”

Then, “fifth, the language you use is critical,” Carlson says. “I never used demoralizing and misleading words like ‘culture change,’ or ‘work harder,’ or ‘fail fast’ in my discussions with SRI staff. Rather, I talked about making a bigger impact, working smarter, and learning faster. I talked about the specific things we needed to do to be successful. To be heard and understood, you can only have two or three big actionable themes that are repeated every time. Otherwise people don’t hear or understand you. Even then, getting only a few major concepts understood is not an overnight task. My themes included, one, to make an impact focus on important customer and market needs; two, to use the Innovation-for-Impact Playbook as the essential framework for success; and three, to employ intense, continuous team and customer iteration to learn fast and efficiently enough to succeed. In short: important needs, the Innovation-for-Impact Playbook, and continuous team iteration.

“I repeated these messages over and over and over. Not many themes. Just a few. Those few were always the same. Again, I would always begin by talking about achievement. Doing great things. Doing important things. Making a positive difference. That’s what motivates people,” he says, “particularly the kind of colleagues I had at SRI. The staff were initially worried that we were going to dumb down the place or tell them how to do their work. That’s not what we had in mind—just the opposite. What we had in mind was accelerating and amplifying their achievements, both through basic research and major marketplace innovations. The only way to do that was to liberate the genius of our teams. Over time, they realized that we shared their passion and were committed to these goals.

“If I had come in and said that we are going to have to lower our standards and turn SRI into a mediocre place because that’s what customers wanted, they would have thrown me out the door. But of course, many leaders make that mistake. They don’t use those exact words, but basically that’s the message they are delivering. In today’s global innovation economy,” Carlson says, “if you are not striving to be the best at what you do, you are going to disappear—fast. At the same time, we felt we were giving our colleagues many of the essential skills they needed to thrive throughout their careers. It was a huge win-win.

“You lose people if they think you’re really not serious about achievement. That’s what they tested me on the most. The skeptics’ question was always some version of, ‘Are you really serious about this, or is it just another management system du jour?’ That was the test. As CEO, I knew that I had to walk the talk more than anyone. For example, I used the same value-creation principles as everyone else when I was the champion for a new innovation. People can immediately see what you really believe through your actions. Any lack of belief, commitment, or cynicism is deadly. I said in every way I could, ‘Yes, I am serious. We are going to achieve big things. I want you and SRI to have an even bigger impact. Together we are going to change the world for the better.’ I had those conversations all the time,” he says.

“I constantly talked about the process for value creation, what I now call the Innovation-for-Impact Playbook.³ It described how to work together to achieve our goals. It included the language, concepts, and processes that encapsulated how to implement the fundamentals of innovative success, such as champions, NABC value propositions, and value-creation forums. Our playbook included the importance of great human values. For example, a team will not work together with the intensity required if someone on the team is disrespectful of the others. Because collaboration is required for all major new innovations, in the global innovation economy positive human values are increasingly essential,” Carlson says.

“Keeping the support of the board is important. In my case, they liked the success we were having even if they weren’t entirely comfortable with the way we were going about it. They would be thinking, ‘Presenting NABC value propositions every two weeks? Is this serious?’ I never found a way to get them to really understand why these practices were fundamental to our success. The reason for this doubt is that, unless you have actually experienced the results of working this way, it can sound like a bunch of fuzzy words—or worse. To someone brought up on 400-page business plans, it doesn’t seem thoughtful and structured. You need to be a value-creator yourself to appreciate that all the fundamentals of innovative success are part of the method,” he says. “At its heart, it’s rapid learning based on the core principles of active learning. It’s very rigorous. But if you haven’t experienced it, it’s hard to understand at a deeper level. Yet these principles are fundamental. The next generation of innovators and management leaders will need to master them.”

Changing a culture is thus a large-scale and long-term undertaking, involving many players. Eventually all of the organizational tools for changing minds will need to be put in play (see Figure 7-1). However, the order in which they are deployed has a critical impact on the likelihood of success. In general, the most fruitful success strategy is to begin, as Carlson did, with leadership tools, including a vision or story of the future, then cement the change in place with management tools such as role definitions and measurement and control systems, and then use the pure power tools of coercion and punishments as a very last resort, when all else fails.

A more draconian top-down approach to culture change took place at Apple, as sketched in Chapter 1. Steve Jobs removed thousands of top- and middle-level managers and set up his own circle of leaders to run the company. The change was successful, because the leadership was obsessed with delivering value to customers and ultimately did deliver that value and because staff believed passionately in the mission of the organization to produce insanely great products. For most organizations, the CEO will not have enough power to undertake such a change, nor the knowledge to implement it effectively. It’s not a practical model to be emulated.

Figure 7-1. Organizational tools for changing minds.

Frequent mistakes in trying to change culture include:

Overuse of the power tools of coercion and underuse of leadership tools

Failure to use leadership storytelling to inspire people to embrace change⁴

Beginning with a vision and a plan, but failing to put in place the Agile management that will cement the behavioral changes in place