#149 Culture of Experimentation

Is your culture built on counting or caring for customers and their lives

 

For this episode – we got a proposal from a tech industry marketing person. He read the latest March- April 2020 HBR article called “Building A Culture of Experimentation,” that targeted, specifically, online technology driven businesses like travel and retail – so your Amazons, Googles, and Bookings.coms. He commented that engineers in his company were so excited and wanted to implement this idea immediately. Even as a marketing guy he couldn’t find a lot of fault with what was in the article. But he listens to Business Second Opinion every episode and was dying to know what we thought.

Business Second Opinion Review on the Article

The article left us feeling disturbed. The primary reason is that it shows how much technology approaches to change, and has the power to change cultures. But sliding them backwards from where we would be moving to work Regeneratively. The premise of the article is that if you set up a culture, really infrastructure and resources, then people can test ideas with organized processes to see if they improve customer conversation rates to sales and business revenue. That you can involve all workers in the process and work much faster to successful experiments and shut down those that are failing much faster.

What do we mean by sliding backwards?

First, it is moving customer relationships and decisions in regard to them are more toward counting with data and distancing us as humans from lives we affect. And away from Caring. Data does not, and cannot, inform us about effects on lives, only results set up in the test. Nothing downstream beyond the walls of the business. Particularly for users and buyers but also other stakeholder like ecosystems. The person who set the article was excited and missed the effects on these entities completely, even though he sits on an internal sustainability council as well as is a marketing analyst. What we want it to move toward processes that evoke caring.

 

Our second reason for being disturbed was something that is bad for business long term. They are working on improving current existence and not building systems, capability, and strategy for innovation. It is all incremental and the whole culture is built around it. A lot of mental, financial, and human capacity resources are poured into this.  All their eggs in one basket! They can probably get some of what they show in case studies. But is it what is good for the business, the workforce, and even our society longer term?

 

What is proposed by the HBR authors to demonstrate what we see as the effect of implanting this approach?

 

Key ideas in the culture change

 

There were basically four that they outlined. The first was adopting a mindset of curiosity and the love of surprise. The way they said that you evoke surprise and curiosity,  was primarily to avoid overemphasizing success. Because this tends to lead to using familiar tools that are proven. They recommend accomplishing this by hiring the right people-followed by rigorous onboarding, empowering them to follow their instincts, then give them the training and tools for experimentation.  E.g. For example, hire only some people that are seen as able to be surprised and curious, and second you give them tools to enable all this. This inherently limits this to the fortunate few, while leaving out the rest of the organization.

The example they use involves assessing the ongoing monetization and engagement around a mobile game that Amazon was developing. The focus of the experiment circled around questions of ongoing customer retention and revenue. This narrowing of the questions led them to experiment with different levels of difficulty of the game in order to encourage more playtime and more money being spent in game. What dropped out was a discussion of the means and methods they used in the first place to encourage monetization, which, looking at the game, are all based on behaviorism.

The second key element claims data is the decider! And if there is any question, it reconciles all conflicts because it is assumed to be infallible. This worries me because we’ve heard so much about the biases built into algorithms and their flaws. If our listeners want to learn more about this you all should take a look at the book Weapons of Math Destruction by Cathy O’Neil.  Data does let people contest decisions but these data are often fragmented and drop out too much as was noted earlier.

 

Data drops out caring altogether and makes it all about an internal view and internally calculated results. We want the use/buyer to be the reconciler as the first step. And all debates have caring as the decider. People should have debates as the first step about the effect on the user’s life, not businesses’ data.

 

The customer is “in the room” so to speak, even if only in the mind. You can’t do that with data. Then the other four stakeholder which we will come back to get a voice in the decision- again in our mind. But it is almost too late at this point to debate, after at the point of testing, experimenting with an idea. The debate is about an already formed plan. Lives being improved is what caring evokes. That is nowhere in the thinking, digesting or experimenting.

 

Democratizing experimentation is the third element. Now we like this on the surface because the idea behind implies decentralizing information back to the workers. But what has us questioning things a bit is the process that they suggest, which involves a detailed inventory of the experiment with no comprehensive look at the effects of those experiments. Now we don’t mean results. But instead, how is this stakeholders life different because of what we undertook? This looks like it is about participation rather than contribution. This doesn’t evolve folks’ capacity to express their essence into the business, which we’ve talked about is the key to real innovation. And, thinking of the stakeholder pentad that we use, it also fails to build capacity in the five groups of stakeholders as the core work the business is supposed to be doing for them.

 

Participatory models  are very seductive. Train people, organize around work and give their resources. But it does not evoke caring or capacity building. It uses current or new skills to be driven by data,  but does not evolve the scope of their thinking and considering. People have to be bound to real lives. Ultimately, and each day we want every member of the organization to be connected to a great purpose and meaning.

 

The initial change we need here is knowing people deeply who count on us more than to just satisfy a momentary need with a product or service. At point of sale. Customers have aspirations that led to that need or idea and to let us help them. Experimentation must be tied to their lives, not computer generated data that measures the outcomes for its business. That kills the soul and meaning in work. It is a bad use of surprise and curiosity. Data, and our ability to follow its lead,  can only give so much satisfaction and pretty much no meaning. That is producing a machine culture not a Regenerate Life culture in all living beings.

There is one last feature of the fourth element, that is, “Democratizing Experimentation”, which they tout. This one’s all about transparency. We wanted them to be more transparent about customer’s lives and have us all feel we can see them deeply. That takes more work than just shared access to spreadsheets and printouts and results and then pushing for the next improvement. But transparency is really more an issue with the outside world, beyond the walls of the company, so people who are affected by that data driven model can see our thinking. And potentially get involved. We can speak to the alternative here.

That is getting to a living systems way of creating experimentation that leads to large and rapid innovation with positive systemic effects for all stakeholders. What is counted is not the results for us but the outcome in the lives of users and other stakeholders. Be suspicious of any programs that promise better results for the business and measure the results for the business and have a separate process to take care of the externalities results even with customers. E.g. Customer service, sustainability department.

Number four is also about a new Leadership model, which frankly didn’t feel so new to us! It included the idea that management’s role is now to come up with new challenges that can be broken down in smaller pieces to test. They talk about building systems, resources, and organization design that fosters experimentation  – which as far as we can tell, really means computer systems. This is not really about culture as they suggest – unless you are trying to create a culture that is data driven. And the incrementalization of change now comes from the top as leaders are supposed to role model the change they want to see. Unfortunately what gets dropped out is the critical role of ensuring strategy and execution is all integrated.

We are now back to the first concern we had with this article and approach. It builds off of current existence and finds incremental ways to move it. It easily becomes not very strategic especially when management focuses on challenges that can be broken down into manageable pieces to challenge. Real innovation requires a Regenerative Mind, which comes from starting with the lives of users, and the essence of each buyer node and their aspirations. For example, when Merida Meridian moved away from a demographic market niche approach and the commonalities that ran across them, (They were selling in Pottery Barn and Crate and Barrel box like stores).

When we switched the business model to buyers with faces that shared values and approaches to life, and there was real aspiration, that all shifted. The whole business redesigned itself from nameless faceless customer buying generic rugs to high end interior design buyers that were one of three nodes of value:  trend setters, bespoke or eclectic designers. The organization reordered itself for these, with market field teams, focusing around these three market nodes and innovated rapidly for what these groups aspired to create in their clients homes and commercial spaces.

They built Customer Labs to co-create with each nodal group and including their artisan designers including the rug makers, who had astounding skills they brought with them when they immigrated and were not being used.  They were wasted in the incremental improvement model. Merida is not tech driven but the same thing has happened with technology companies, like Regen Network creating a new platform to understand how farming practices are behaving regeneratively, but using buyer nodes to innovate.

The last part of the fourth element we want to touch on again as it was for leaders to be role models. Basically be the people who show how to do all of this. In other words, Everyone has the same rules to play by so “everyone’s ideas are to be tested with the same data driven process.” That seems like a good principle but we still have the problem of how and what they are testing, and the lack of critical thinking skills being built in the process.

To move from counting to caring, which we have repeatedly shown grows revenue and margins faster than data and incrementalism ever can, you have to get everyone’s eye, mind and way of working starting from the outside, the customer/consumer and then other stakeholders. The reason this is not common is that not only have businesses have divided work, like a dissected frog,  into departments, all of which look inward but a few who look outside. Importantly, we have not built the mind to hold the entire value-adding process from idea to customer and stakeholders and a framework and process where innovation is everywhere in the value-adding process. And, decisions are always reconciled by those affected, not those producing.

What are the contrasting premises? 

The customer is the decider, not the data. The process is a team who specifically knows and speaks for the customer aspiration in their lives and what is needed next by them. Second, the driver is not data, but a contribution offered up from the workers who are fired up because of their connection to real people, not an interest in surprises and being curious. They feel compelled to conceive, design and deliver the precise thing that  matches the unreconciled aspiration of customers which is always a better source of margins shift. Third, this has the experimentation working from the essence of each buyer or user rather than abstract ideas about what might improve current existence. It is not pie in the sky ideas, “Blue Skying”, when you start with essence.

Plus, with this approach the essence of the business is expressed, in the ideation of any experiment. Every member of each market team is connected to the Business’s essence, that is for whom they work, tied to who they serve- the essence of the customer That requires very different work systems, they are right about that. But most organizations don’t know how to do development work design. We give a flash overview of that in The Regenerative Business. It takes a lot of work to build a mind that can think beyond existence and not become abstract. That is the role of essence. Grounded innovation and experimentation from the real world of customer improved lives.

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