Mao Zedong told his compatriots to let 100 flowers bloom, but our ambitions are greater these days, and we often hear the phrase let 1,000 flowers bloom. Freek Vermeulen, a professor of strategy and entrepreneurship at London Business School, has no trouble when companies in their quest for innovation try to make 1,000 flowers bloom. But he urges them to accept that, if they are to be successful, they must let 999 flowers die.
Prof. Vermeulen draws his advice from evolutionary theory, which he believes explains many aspects of organizational change, in line with Charles Darwin’s suggestion in On the Origin Of Species that his ideas applied to more than flora and fauna.
While organizations understand this by trying for lots of innovations, or what Darwin called variation, Prof. Vermeulen feels they aren’t as active as they might be in ensuring another aspect of Darwinian theory, selection.
“Variation is only half the story of evolution. You need to worry about selection. Selection is the other pillar in evolutionary theory, and just as important,” he said in an interview. It is also, he stressed, part of organizational theory, but too often neglected.
Working closely with two companies, he was intrigued by the importance of middle managers in selecting between ventures. They understand the business well, and can weigh ventures realistically. But they usually don’t, he wrote in a Strategy + Business article: “Invariably, these managers did not select the proposals that they found most promising, but instead chose the proposals they thought their superiors would want to see. They feared that passing along a bold, risky idea that their superiors might reject would be bad for their reputation.”
Top executives also mess up. He found they picked the proposals they liked best, which too often meant ideas that fit their preconceived notions of what the company should and should not do, rather than those that might change the organization for the better.
He said the best companies tap into the collective wisdom of middle managers in judging – and weeding out – innovations. In the worst companies, the leaders decide themselves, thinking all wisdom resides with them.
He outlined five steps for overseeing selection:
1. Enable selection to happen
Top executives must accept that they shouldn’t decide which innovations will live and die. Instead, they must promote a system that can determine variation. At FremantleMedia Ltd., the London-based television production company that developed the Idol and X Factor franchises, former chief executive officer Tony Cohen resisted the temptation to select the shows he considered most promising. “Why would I know better than anyone else in the company?” he explained to Prof. Vermeulen. Instead, he set up an internal market that allowed ideas to be pitched and different executives to determine licensing for their area.
2. Tap the wisdom of the crowd
At computer chip maker Intel Corp., another company he studied, co-founder Andy Grove watched his engineers to see what technological improvements interested them, giving them control over some research and development money. “It’s almost internal crowd sourcing,” he said. He suggested installing some pricing mechanism that allows bidding on the best projects by different engineers or managers. He warned not to leave it to one or two middle managers, who have their own biases, but to widen the scope to the wisdom of the crowd.
3. Objectivize the process
Often selection occurs in a very subjective way, as people succumb to instinct and biases. A particular danger is “escalation of commitment,” when decision makers continue to pursue a failing course of action because it provided success in the past, or because someone’s reputation is tied to it, or because they have already invested heavily in the effort.
To avoid that, a more objective approach is required, in which the interests and emotions of the decision makers are held at bay. Intel developed a formula called the production-capacity allocation rule, based on factors such as efficiency, demand growth and margins, letting the formula dictate resource allocation.
4. Let the evidence match the investment
While numbers are important, they can also lead you astray. He warned that if you look at numbers too early in an innovation’s life, the figures are probably bogus, given how uncertain everything is. If it’s a new market, there may be no numbers to look at – or no accurate numbers. But managers feel they have to produce some data or their radical ideas will be blocked.
He suggests accepting that at the start you must go on a hunch. Later, you can add numbers as more is known and more investment is required. So view selection as a continuing process, with the data becoming more meaningful over time.
5. Put them a box
Variation and selection can only occur effectively when top managers prepare and communicate a strategy so everyone knows where innovation is expected to play out for corporate advantage. There needs to be some coherence.
At Freemantle and Intel, Prof. Vermeulen said the message was: “You can think outside the box – but only within this box in which we operate.” That direction helps to make innovation successful.
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter