Sooner or later, every company runs into challenges that force them to make tough trade-offs during the innovation process. Harvard Business School associate professor Rory McDonald calls these moments “tensions.”
The streaming service Netflix, for instance, has faced them a couple of times, navigating from DVDs by mail to creating content. The venerable cereal company Kellogg has been shifting from breakfast food to snacks. McDonald says the big question is whether a company can use those moments to chart a path to improved productivity, or let them become obstacles.
“Most business environments are ripe with some of these tensions,” says McDonald. “If left unaddressed or mishandled, they will hurt you. The key is to harness them, so they will not be a negative, but a positive.”
“McDonald says the book was inspired by the sobering reality that 90 percent of high-potential new ventures fail to meet their projected targets and 75 percent of new products fail.”
McDonald and co-author Christopher Bingham explore eight central tensions in the new book, Productive Tensions: How Every Leader Can Tackle Innovation’s Toughest Trade-Offs, published in April. The book arrives as a tool to help leaders more successfully innovate and change in their industries as they parse mixed messages about the global economy, with rampant inflation wearing on consumers and investors preparing for recession.
Productive Tensions covers all stages of business, from startups to established firms, that need to pivot. McDonald says the book was inspired by the sobering reality that 90 percent of high-potential new ventures fail to meet their projected targets and 75 percent of new products fail. Success seems to be “frighteningly hit and miss,” as he and Bingham, a professor at the University of North Carolina at Chapel Hill, write.
To improve the odds for entrepreneurs and leaders, they offer eight strategies. “They’re equally challenging,” McDonald says. “You have to figure out which are the most salient to you, but the solutions are going to seem counterintuitive to executives tasked with leading innovation in changing environment.”
1. Understand the opportunity paradox
How can organizations capture new growth most effectively?
“If you’re doing something new, it is inevitably going to be difficult,” McDonald says. The Burton snowboard company is a prime example of a venture that found its own path to success. Rather than betting on a single product, Burton stitched together one market after another—first snowboards, then boots, outerwear, and accessories, adding new customers along the way.
For companies like Burton, success comes from a combination of focused selection first, followed by flexible execution. McDonald says that might seem like the reverse of a good strategy—shouldn’t a new firm be flexible at the beginning to see what works? But he says focused selection earlier is what allows a company the best latitude for flexible execution later.
2. Engage in parallel play
As a venture develops, McDonald suggests borrowing from others’ ideas.
There are plenty of examples of companies doing this successfully: Uber drew inspiration from the carpool-match service Zimride (which became Lyft). Instagram adapted Snapchat’s stories feature.
McDonald compares this sort of borrowing to the way preschoolers play. “Put aside your differences, and, like kids, find something that works,” he says.
3. Know when to ignore the data
At a time when data analytics seem to be essential for decision-making, McDonald says it might seem like a mistake for an innovator to ignore so much information.
Netflix is one of his favorite examples of selective data use. The company’s data suggested that the science fiction series Stranger Things, a drama set in the 1980s with teen protagonists, might not resonate with its audience, but the company produced it anyway—and the bet paid off.
While he acknowledges that ignoring data seems “pretty provocative,” McDonald quotes Netflix’s chief content officer Ted Sarandos: “Data tells you what happened in the past, not the future.”
4. Crowd sequence to accelerate innovation
McDonald’s “crowd sequencing” isn’t the GoFundMe kind. He’s talking about enlisting product users, critics, and experts for a fresh view. He says the question for this tension is: “How do you best sequence the knowledge of others inside and outside the organization to solve the right problem with the right solution?”
Twitter’s iconic hashtag came from the service’s heavy users, who were looking for a way to organize all their tweets into subjects. Nintendo consulted non-gamers to design its Wii console, to make it easy for everyone to use. When Honda asked owners of its Ridgeline pickup truck what they would like, both frequent and occasional owners asked for tailgate redesigns—a response Honda executives and engineers hadn’t anticipated.
5. Keep it simple
For McDonald and Bingham, simple practices are key to helping companies manage complexities. Chick-fil-A servers say “My pleasure!” when customers thank them. Quicken Loans promises every customer a same-day reply by phone or email.
The rules aren’t mission statements, but rather a way to make learning experiences easier to adopt and follow. McDonald adds, “Even simple rules can outlive their usefulness.”
6. Make the new look familiar, then distinct
When a new product looks too new, the best strategy may be to pitch it as something both familiar and novel.
McDonald likes to tell the story of how West Coast restaurants introduced exotic Japanese sushi to diners by promoting the California roll, which made the dish seem both exotic and American at the same time.
But he and Bingham caution that it’s a mistake to dwell on the familiar for too long, because the real audience is looking for “what is new, fresh, and unique.”
7. Focus on the job to be done
One of the most challenging tensions is between product and purpose in sustaining a unique brand after it’s been created and marketed. As McDonald says, “People buy a product or service to solve a problem. They hire it to do a job.”
He says the online service TurboTax is successful at this: The name says what the job is.
It’s more important for a leader to spend time analyzing how well their brand lines up with the problem they face. “For a purpose brand, the goal is to be so tightly linked to job to be done that people think only of that brand when they have that problem,” he says.
8. Create stability amid inevitable change
Sooner or later, McDonald says, every successful company will have to make a pivot—adapt its product, move into a more promising market, or adjust to a changing business environment. Whatever the circumstance, he says this action turns on a basic question: “What’s your story?”
“How do you maintain trust and project your original vision during the adaptation?” he asks.
In the book, he points to other dramatic pivots: Twitter was created as a text-style messaging program for a podcast company. Yelp was born as an automated email service. YouTube was originally an online dating site. Now they’re anchors of the digital world.
“You need to explain how the new plan ties to the larger aim, the original vision,” McDonald says. “If you can tell a story about how it aligns, then stakeholders are less likely to view you as inconsistent. You’d be surprised how often people don’t that.”
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Feedback or ideas to share? Email the Working Knowledge team at hbswk@hbs.edu.
Image: iStockphoto/SimonSkafar