Hidden Asset :: Fast Company :: 01 March 2004

Hidden Asset

Bill Breen | Mar 01 '04

He's the most influential business guru you've never heard of. Reengineering, knowledge management, enterprise systems--Thomas Davenport helped midwife many of the biggest trends to have shaped business over the past 25 years. And yet, as he readily concedes, he was outflashed by others who got much of the credit (and in some cases, the blame) for these innovations in management thinking. Davenport lacks the theatrics of a Tom Peters and the revolutionary zeal of a Gary Hamel. He's a pragmatist who's painfully aware of how hard it is to effect change in large organizations. "Tom has the intellectual rigor to come up with game-changing ideas, and yet he's not isolated in some ivory tower," says Steve Kerr, managing director and chief learning officer at Goldman Sachs. "He's hard-wired into big, complex companies, which gives him a real-world understanding of how to put those ideas into play."

Davenport, a professor of information technology and management at Babson College, and a fellow at the Accenture Institute for High Performance Business, wrote some of the earliest articles and books on reengineering and knowledge management. Lately, he's been exploring the nature of the thinking that went into these and other business innovations. Working with Laurence Prusak and H. James Wilson, Davenport took on some of the big questions surrounding big business ideas: Where do ideas come from? Who are the idea advocates within large organizations? And how do they get traction for new initiatives, especially in this cautious business environment? The three men put their research into a book,
What's the Big Idea? Creating and Capitalizing on the Best Management Thinking
(Harvard Business School Press, 2003). In a wide-ranging interview with Fast Company
, he laid out his eight-point game plan for winning with ideas. Here it is, in his own words.

Companies compete with their brains as well as their brawn.

Organizations today must not only outgun and outhustle competitors, they must also outthink them. Companies win with ideas. Just consider the differing fates of Westinghouse and General Electric.

Westinghouse certainly had a culture of product innovation: Commercial radio, commercial nuclear power, air brakes, and lots of other amazing inventions came out of Westinghouse. But its managerial culture was incredibly insular. When Michael Jordan arrived as the company's CEO in 1993, he was surprised at how rarely people gathered around the water cooler and talked about new ideas. Innovation, such as it was, was devoted to thinking, "Should we keep this business or sell it off?" For all of its product breakthroughs, Westinghouse is a dead organization--its businesses have been dismantled and sold.

By contrast, GE--even before Jack Welch--has been an idea (and profit) machine. It's a prime example of a company that embraces a few big ideas--boundarylessness, Six Sigma, service businesses, digitization--and executes them really well. Once an idea becomes a corporate initiative, it gets embedded into the company's way of managing itself. These key initiatives are discussed and monitored in at least one management meeting every month. GE doesn't just talk about ideas, it gives them a bear hug, and we all know the result: GE sits at the top of the industrial heap.

Great ideas have three key elements.

All big ideas share at least one of three business objectives: improved efficiency, greater effectiveness, or innovations in products or processes. In a way, it's an exhaustive set of possibilities. You do things right, you do the right thing, or you do something new. Reengineering could have done all three--the mark of a truly big idea--but people used it solely for gaining efficiencies, which limited its power and value.

E-commerce has all three elements, which is why the idea has proven to be so durable. It was scarred by the dotcom implosion but is prospering once again because now it tackles the efficiency theme--the one objective that has truly prospered in this conservative climate. As of mid-December, holiday retail sales through online channels were projected to increase by 42% over the previous year. All of which speaks to the power of the e-commerce idea: Despite a massive negative reaction to it during the dotcom bust, it continues to thrive in many organizations.

There are no truly new ideas out there.

Every big idea owes a considerable debt to related ideas that came before it. Reengineering's key components already existed--they had just never been pulled together into one package. Of course, idea practitioners should avoid pointing out that the next big thing amounts to a reshuffling of other ideas. One of the tensions that idea sellers have to manage very carefully is, on the one hand, the need to get people's attention. The innovation has to be new and exciting. But they also have to talk about the idea in a responsible way so people understand how difficult it really is.

I wrote the first article on reengineering and the first book, but not the best-selling article or the best-selling book. What happened? I like to say that I bore the burden of academic respectability. Both the article and the book were less romantic, less revolutionary in tone than those that followed. Michael Hammer introduced his version with an article titled "Reengineering Work: Don't Automate, Obliterate." The headline for my piece: "The New Industrial Engineering" (which tells you something about the writing). Hammer and later James Champy were very successful in taking their ideas into the marketplace; they were not as successful in creating versions of their ideas that people could use. And that's what led to reengineering's decline. It became the innovation that forgot people.

Innovation comes from the front lines, but the top sets the tone.

The leadership at Hewlett-Packard used to encourage the notion that innovation should bubble up from below. HP was an early adopter of quality, which grew out of the company's Japanese unit. Change management, reengineering, logistics--HP was a laboratory for new innovations. Back when HP was pursuing knowledge management, I asked whether the CEO, Lew Platt, was interested in the idea. The general reaction was that the two words had probably never passed his lips--and nobody cared. They didn't need his buy-in. Instead, they pursued an idea at the business-unit level; then they developed some approach to sharing the idea across units. The real test of an idea was whether people throughout the organization--not just the CEO--were attracted to it.

Nowadays, I gather that HP has become much more hierarchical. If the idea doesn't have Carly Fiorina's sign-off, it won't get very far. In that environment, the idea practitioner really needs to understand the incentive for change--that is, where the demand lies--and ensure that the idea lines up with the leadership's focus.

Every new initiative needs a champion.

All ideas must have passionate advocates behind them--people who understand that business-improvement initiatives are vital to a company's success. These idea practitioners are the critical links between ideas and action. Their most noble attribute is their lack of cynicism. They certainly recognize the Dilbertian aspects of the contemporary workplace, and yet they have the ability to see through the problems of new business ideas to their true potential. They hold out a belief that people and organizations can change. At the same time, they are almost always business veterans whose decades of experience have taught them how difficult it is to bring about a new business idea.

Dan Holtshouse, who has helped lead Xerox's change from a copier company to "The Document Company," typifies a successful idea practitioner. First off, he minimizes his own role by giving the credit to his team. Second, he's been with Xerox since the 1970s, and he has the personal network inside the company to know whom to enlist in a change effort. He's a middle manager in the corporate strategy office, and yet he's well connected at the senior management level. Because he has pretty close ties to CEO Ann Mulcahy, his ideas manage to get some traction.

Idea practitioners have the seasoning to understand the company's culture and how to communicate their idea. My favorite example of this is Vince Barabba, who heads up marketing research at General Motors. GM executives spend a lot of time looking at new car models; they're accustomed to seeing things in three dimensions. So Barabba built a giant Lego model of a market-research study--people could literally walk among the bar graphs. That's a great demonstration of someone translating information and communicating it in a way that fits the company culture.

Sell no idea before its time.

An idea cannot take hold in an organization unless it is well timed. Lawrence Baxter, chief e-commerce officer of Wachovia Corp., is a good example of someone who understands that there's a time to pursue new ideas and a time to knuckle in to the task at hand. Not so long ago, Baxter was exploring some uses of superstring theory [an esoteric concept in theoretical physics] for effecting change management. But when we interviewed him for the book, Wachovia had just merged with First Union. Baxter was keeping his head down, trying to make the merger work. He knew it wasn't a good time at all to bring up superstring! But he believes that after the pressure subsides, the organizational culture will become more innovative.

Right now, we're just starting to emerge from an economic and an idea recession, a protracted hunkering-down phase. But the signs are starting to point to the return of an idea phase. We're seeing some growth in the economy, and people are talking about innovation again. And even in this conservative climate, smart companies are still in search of performance-boosting initiatives. Microsoft, for example, needs to figure out how to get people to buy more of these office-oriented productivity technologies. Bottom line: If I was an idea practitioner working within a company, right now I'd be cautiously raising some trial balloons for new initiatives that will enhance my business.

The story sells the idea.

The most important way in which ideas and experiences get communicated from sellers to buyers is through narratives. Stories give proof that your idea is going to work. Confidence-building evidence isn't statistical, it's narrative in form.

Here's a story about the power of organizational storytelling: As part of its knowledge-management initiative, British Petroleum rolled out some videoconferencing technology for rapidly sharing ideas. Soon after, one of their gas drills broke down in the North Slope of Alaska. BP's leading expert in gas turbines was working in the North Sea; it would have taken him 20 hours to fly to Alaska. Instead of putting him on a plane, BP patched him into the North Slope via videoconference, and he worked with on-site technicians to pinpoint the problem and get the drill back onstream. They finished the job in just 30 minutes. That story quickly circulated throughout BP; in time, it found its way into other organizations. Because it gave real-world evidence of a dramatic improvement, the story became part of knowledge-sharing's lore.

I doubt that anyone has ever validated these stories. I suspect that some of them are not entirely true. But it doesn't seem to matter. They still influence organizations.

All ideas have a life cycle.

History shows that hot ideas soon cool and fade from the scene. Customer-relationship management fell into that category. CRM quickly caught fire, but when people discovered it was more than a matter of simply deploying the right software, a backlash swiftly followed. Knowledge management has had a far more gentle rise and decline. Most of the people who were involved in it spent a huge amount of time saying it's not about technology, it's about changing cultures and behaviors. Everybody knows how hard that is, so people's expectations were never inflated.

Every idea has its own life span that follows its own trajectory. GE really understands this. GE adopted Six Sigma quality management at a very late stage in the idea's life cycle. GE knew this but didn't care--and it's still prospering greatly from Six Sigma. When it comes to ideas, GE doesn't mind being out of phase with the rest of the business world. Confident organizations adopt ideas not necessarily when others tout them, but when they're truly needed.

At GE, you knew an idea's time had come when Jack Welch wrote about it in his annual-report letter. Welch was such an idea-obsessed individual that if he didn't buy into it, the idea wasn't going anywhere. At most other companies, what's in and what's out is much less obvious. Idea entrepreneurs really need to be attuned to the zeitgeist in the society at large and focus on whether the idea fits with their organization's rhetoric.

Ultimately, an idea succeeds when it becomes pervasive--everyone practices the idea without thinking about it. The great example of this is quality and total quality management. By the late 1980s, 100% of large U.S. companies had some kind of quality program in place. No one does conferences on quality anymore because at most companies, quality is already baked into the way they do business. That's when you know that a big idea has truly taken hold: The idea itself is invisible. nFC

Bill Breen (bbreen@fastcompany.com) is based in Boston as Fast Company's Northeast bureau chief.