5 X-Team Principle 3 Pivot along the Way: Make Timely Transitions
The ProPrint team at a large West Coast computer company was launched with much fanfare. Charged with developing a revolutionary printer, the team began work with the support of top managers, who hoped to take the company in a new direction. ProPrint set out with ample financial and personnel resources and six months to “play in the sandbox,” experimenting with different technologies. Team members worked on separate aspects of the printer and got input from groups inside and outside the organization. They had a great deal of information about the market potential, technology applications, and design ideas. The team was excited and happily worked long hours, brainstorming innovations.
After nine months, however, team members still could not agree on what exactly the printer was going to do or what components they would use in its design. They responded to being behind schedule by seeking additional ideas and changing the product design. Although top leaders had been lenient early on, eventually they started applying pressure, hoping to get commitments on the schedule. Still, the team was always late. In addition, the team leader was often hard to find—always promising that the solution was “coming soon,” he avoided meetings with top managers.
Because the team never settled on one plan to implement, the promised solution never came, and in the end, the division manager was forced to put together a new team to continue ProPrint’s work. The original team leader never understood why his group could not get past the continuous search and move on to solutions.1
How did such a promising team lose its way? It appeared to be doing everything the best x-teams do. It engaged in high levels of sensemaking of the market and organizational expectations; ambassadorial activity leading to managerial support; and task coordination so that team members knew how to work with other groups. Moreover, the ProPrint team also had an exemplary internal process, whereby team members divided up work and did intense amounts of brainstorming.
The problem was this: whether a team is creating a product, suggesting a new organizational process, consulting to a particular geographic region, selling complex services, or writing software code, members need to shift their core focus over time—and ProPrint didn’t understand that. As the demands of the task change, team members must be flexible enough to shift gears and change what they do and how they do it.2
Pivoting along the way, then, represents the third x-team principle: x-teams make timely transitions. This ensures that they don’t get stuck in any one mode of operating. More specifically, effective teams move through three phases, each with a different focus: exploration, experimentation and execution, and exportation.
Team members need to be able to shift from an emphasis on exploration—in which they work to thoroughly understand the product, process, opportunity, or task that the team has undertaken—to experimentation and execution, using the information from exploration to innovate and actually transform their ideas into something real, and finally to exportation, in which they transfer their expertise and enthusiasm to others who will continue the work, bringing the product into the organization and possibly the marketplace. Each of these phases requires a different focus and different amounts and kinds of x-team activity.
For some teams, these transitions seem impossible. Not all realize that, at some point, members must shift from exploring the terrain to moving ahead. Not all understand that, at some point, their idea needs to extend beyond their boundaries and be integrated into ongoing organizational routines. Too many teams become stuck in one mode and fail because they are unable to shift into the next one.3 Like the ProPrint team, they become so enamored of playing in the sandbox during exploration that they don’t want to come out. Or they keep waiting for one more piece of data, or one more report, before continuing on. Whatever the reason, sometimes the shift never happens. These teams may even have members who thrive on viewing a problem in new ways, questioning prior assumptions, and pondering the myriad possible directions that the team can take. This is fine for exploration, but then the team must move ahead.
Other teams have the opposite problem. Instead of getting stuck in the exploration phase, they err by skipping right over it and beginning with experimentation and execution. The drive to get things done is so intense that they just start with the first solution that comes to mind. Sometimes management can unknowingly emphasize this “solution-mindedness” by pushing the team to make tough targets quickly. The trouble here is that members may be moving quickly in the wrong direction or fail to think outside the box.
Finally, some teams never want to let go of their product; no one takes responsibility for easing the product out of the team and into the rest of the organization (the exportation phase). Without this transfer of enthusiasm and ownership, team members may find their work rejected or simply ignored.
Before we launch into a more detailed look at the three phases, we want to offer an important insight into how they overlap with and inform the sequence of external activities described earlier in the book: sensemaking, ambassadorship, and task coordination. In general, while those external activities support the basics of x-teams, timely transitions dictate the “sentence structure” or “grammar” by which these basic elements are ordered and combined.
To be specific, sensemaking occurs in all three phases, but it is highest during exploration. Ambassadorship also occurs in all three phases, but it’s most important during exploration and exportation. Likewise, tasks are coordinated in each of the phases, but that coordination becomes much more critical as the team moves toward the last two.
Table 5-1 summarizes the key tasks of each phase and the leadership and team activities that need to occur to successfully move from one phase to the next. Let’s look now at each phase in turn, beginning with exploration.
Exploration
A team of equity traders from Merrill with eight to ten years of experience at the firm was charged with designing a new product. The goal was to use cutting-edge ideas about financial risk as outlined by Professor Andrew Lo in an investments course taught at Merrill by MIT Sloan School of Management faculty.
Coached by one of us to take an x-team approach, team members began by sensemaking about their industry. At the time, financial services was going through a tough period: margins were getting compressed and the business was getting more automated, resulting in increased cost-cutting. In both equities (stocks) and debt (bonds), markets had become too efficient. If word got out that something good was going on at Coca-Cola or Citigroup, everyone joined the feeding frenzy, and there was no way to make money. The Merrill team determined that it wanted to find a place where the market was not so efficient—where there was not so much coverage on Wall Street in terms of research and information.
With this goal in mind, the team went into intense sensemaking, looking for ideas and buy-in for a new product. One team member organized his colleagues to engage in exploration, saying that the team had to divide and conquer to get things done. He identified a series of tasks: (1) interview customers about their interests, (2) look at research, (3) explore technology and compliance issues, and (4) network within Merrill to find interest, support, and ideas inside the company itself. With the tasks organized and spread out before them, team members volunteered for the things they wanted to do, from tapping connections in departments like technology and compliance, to gathering information at Merrill’s New York headquarters, to organizing all the data the team was gathering.
Soon the team’s queries brought in lots of ideas. The energy in the team heightened as members began reaching out to others in the company. For example, a team member and a senior desk analyst brainstormed several ideas, but the one that seemed to stick was the notion of trading distressed equities—that is, trading stocks of companies that were coming out of bankruptcy. But they pushed beyond just having their own side of Merrill—equity—involved. Top management had been stressing the importance of getting the debt and equity groups to work together more. The team’s idea did this and presented a real opportunity: it was something new where Merrill had a competitive advantage, an answer to one of top management’s needs, and something that the team would have real interest and energy to pursue. And it presented the possibility of financial gain.
Trading distressed equities was only one of three ideas that team members were considering, but they agreed that it was the best. Now their exploration took a more focused turn to learn more by involving both debt and equity. At this point, they were already ahead of the ProPrint team mentioned earlier in the chapter. The Merrill team was able to collect lots of ideas but also to figure out a way to winnow those ideas down and move ahead. The key for timely transitions, remember, is to keep the process moving by shifting gears as needed.
To push the idea forward, one team member drew up a list of twenty-five people to contact who might have some expertise in distressed equity trading, and the team talked to all of them. As one member told us, by talking to other people around the company about the idea, “the whole thing just blossomed. If you start talking to people who have more experience than you do, then they ask, ‘What about this and what about that? And maybe you should think about this’—and suddenly it just took on a life of its own.” As team members’ enthusiasm and expertise started to rise, they garnered some sponsorship from top management. Talking to top management pushed them beyond their early idea of having just one liaison person to link debt and equity. One senior leader said that the company was struggling with siloes and this was a solution to that problem. He recommended a new debt-equity trading desk—a set of people working on the trading floor, matching buyers and sellers for one particular product or market—that combined sales with analysis to trade distressed equities. The team was now creating a whole new structure for this new business.
With this new idea in mind, the conversations with the debt folks shifted to how to make this new desk work. The idea had evolved from the debt department offering advice to the traders to actually having debt and equity work together at the same desk. The debt folks now had more skin in the game.
As the Merrill example demonstrates so well, the goal of exploration is to collect lots of information and multiple perspectives on what exists now and what is possible going forward. Basically, this first phase is sensemaking. Sensemaking within exploration becomes a learning activity, with team members trying to comprehend all they can about the terrain that surrounds them. So, initially members need to brainstorm ideas with others around the company, talk to customers to discover needs that are not being met, look at the competition to see what their own company is missing, and interview other employees to understand where the pain is. Team members also need to talk to colleagues to uncover cultural and political traps that threaten the feasibility of their ideas. Finally, they need to talk to people who have tried to solve the problem before so that they do not repeat the same mistakes. Ultimately, for the Merrill team, one of the most fruitful encounters during this phase was a discussion with a senior leader who expanded the scope of the project because it served his needs as well as theirs.
But exploration is not solely the realm of sensemaking. Of course, one of a team’s primary relationships is with top management, and so a large amount of ambassadorial activity is aimed at representing the team’s interests and ideas, lobbying for resources, and linking the team’s work to the firm’s strategic direction. This is also the time to get input and buy-in from senior leaders so that they feel some ownership of the team’s ideas and become sponsors of its activity in the organization’s broader political arena. Leaders also may have a good perspective on how to link the team’s work to organizational initiatives and to provide a broader perspective of the problems that it faces.
By the end of a successful exploration phase, a set of people are committed to the team, patterns of interaction within the team have been developed, and the product or project that the team is working on has been investigated and defined. Hopefully, team members have discovered that the team’s goals are feasible and that they can work together to meet those goals. If the team has done its external work well, then this phase also results in a set of external relationships that can help it adapt to its environment and get the information, expertise, and support it needs. Then the major challenge becomes moving from the world of ideas and possibilities into the world of reality and focus.
Experimentation and Execution
Unlike exploration, during which a team determines what’s out there and looks for options, the experimentation and execution phase is about choosing one option and making it happen. This is when the team transforms its abstract ideas into reality. In this stage, team members must focus internally on creating a concrete product, strategy, or other offering that meets expectations while still maintaining and building relationships with outside groups. The team still needs the support and blessing from upper-level managers, still needs external information and expertise—and now needs to work even more closely with other teams, with whom coordination is essential.
The shift here is from seeking lots of information and viewpoints and seeing the world with new eyes, to choosing one direction and figuring out the best way to make it happen. The shift is from divergent thinking about multiple options to commitment and convergence around one.4
Once a direction has been chosen, team members must produce a prototype of what they are trying to create or enact a plan for how they will get feedback on the prototype and then sell it. What specific features and form will the product or offering have? What options are most important, and what trade-offs will have to be made?
In the experimentation and execution phase, sensemaking, ambassadorship, and task coordination are of a very different nature than they were during exploration. Sensemaking is generally about looking at how other teams have implemented similar efforts and searching for best practices; it may also be about getting potential customers’ reactions to the team’s ideas. But compared to the exploration phase, sensemaking activity decreases during experimentation and execution. Ambassadorship during this phase is about keeping upper-level managers informed, maintaining their interest, and getting their ideas on how to move into specifics. Once buy-in is achieved, ambassadorship activities begin to decrease. Task coordination then takes on a much larger role as the team finds other groups whose input will be essential for bringing the new idea into the light of day. These groups need to be linked to the team’s schedule and sometimes cajoled into helping. Let’s look at the experimentation and execution phase via the Merrill team.
The Merrill team members knew that they were at a transition point. They spent time discussing their vision to have a distressed equities desk that spanned debt and equity—something that had never been done before. They knew they had a great idea, but now they had to figure out how it could be implemented.
Meeting the goal of having their project be a reality in three to six months (if the team received the go-ahead) would require sensemaking to determine the systems that would need to be put in place, how the desk would work, who would have to be involved, and how much money they thought they could make.
The team ran scenarios to get a better understanding of the kinds of situations the desk might face. Such scenarios were critical given the complexity of distressed equities—one week there might be one hundred companies coming out of bankruptcy, and another week there might be only one. They looked at four companies that had recently come out of bankruptcy to determine the kinds of volumes they traded, the resulting number of shares Merrill would have traded, and how much they would have made if they created this new desk. Team members went through a variety of scenarios with different interventions. Then they worked through staffing: How many people would be needed, and how much would they have to be paid? And where would the desk be, in debt or equity?
As the Merrill team wound its way through experimentation and execution, its product idea started to move from concept to reality. Team members were clear on and committed to the vision of what they wanted to create, and they had to invent the structures and processes to get them there. Here the team was working on the execution part of the process—that is, getting the job done. The team continued its sensemaking, but now it was focused on the details of how this desk would actually operate. Members continued to garner support and engage in ambassadorial activity—but not as much as in the exploration phase; the goal was to report progress and questions to senior leadership. And now the team members were more focused on task coordination—getting ideas and feedback about the functioning of the desk and coordinating with the systems and compliance people who had to design the systems and approve the activities that would take place there. Next, it would be time to see whether the team could spread that enthusiasm and expertise to others and test-market its new product to get feedback and further refine it.
Exportation
Exportation involves taking what the team has done and moving it out into the organization and the marketplace. Here team members need to transfer their knowledge and enthusiasm to others who will continue their work. Exportation might mean shifting from a prototype to large-scale manufacturing and marketing, taking a tool that worked very well in one department and implementing it elsewhere, or executing a new strategy. In exportation, team members are challenged to effectively communicate all the tacit knowledge they have to others and to motivate others to take on something that those people might not understand or want to do. Team members also have to figure out the best way to present the work that they have done.
This is another transition, and it is often a tough one. Sometimes team members cannot let go. They feel that what they have created is never quite right and they need to keep working on it. But even if the team is OK with the transition, sometimes there is no one waiting at the other end. Whatever problem moving from experimentation and execution to exportation presents, without this transfer of enthusiasm and ownership, team members may find their work rejected or simply left to wither and die.
The Merrill team made this transition by first focusing on sensemaking and ambassadorship. Their sensemaking now aimed at understanding how best to present their case to the top brass and convince them that their ideas should be implemented. They continued their ambassadorship by getting the support of as many managers as they could. They wanted commitments that these managers would work with the new desk if it was created. They continued to do task coordination, trying their ideas out on other groups and creating new ways that the desk could operate. And they continued to work as a highly honed team, with members in what were now their established roles.
Ultimately, the team was given two chances to present to management, and they were determined to make their case successfully. At this point, internal task coordination became critical. One team member put together presentations and set up all the logistics. Other members chipped in with suggestions. They thought long and hard about how best to communicate their ideas. The team had united around their proposal—now they wanted everyone else to know what a great idea they had.
On the day of the presentation to the executive vice president and the president of global markets and investment banking, team members were nervous; however, the presentation went well, and they got positive feedback. It was a happy team that left the conference room that evening to head out to dinner. Later, team members learned that the executive vice president had decided to move ahead with their idea, and the new desk was created.
In this chapter, we’ve discussed exploration, experimentation and execution, and exportation as three phases of activity that follow one another sequentially. In reality, the process is not always so smooth, as other teams at Merrill illustrate. While developing a new product, one group was well into experimentation and execution when it heard that Merrill’s lawyers found the product too risky and would not give their approval to move ahead. The team, therefore, had to move back into exploration mode and return to one of the earlier options on the table. Yet another team learned that an idea its members were trying to implement had been tried before and that one set of customers had been very resistant. This group went back to experimentation and execution and tried to make some changes to the product that would appeal to that customer base. Yet despite the twists and turns of these two examples, successful x-teams often find that using the road map of exploration, experimentation and execution, and exportation helps them stay focused and shift gears as needed.
For the Merrill team’s new desk, following these three phases led to huge success. The first year was about learning and building, but the team still managed to generate millions of dollars in revenue. In the second year, the desk was restructured to achieve a better allocation of people and tools and to broaden its responsibilities. The desk grew from two people to six, and the number of companies covered doubled. Daily trading volume was up about fifteenfold, and revenue was on pace to generate twenty times that of the first year. Trading distressed equities had proved to be a valuable business, and Merrill has enjoyed a first-mover advantage.
Pulsing Activity
This chapter has illustrated how shifting across phases prompts a team to change its focus and mode of operation. Another way to think about it is that team members are constructing a rhythm of activity that periodically shifts. There are also other rhythms that can be created to help x-teams deal with complexity and signal changes in activity. We call this creating a pulsing rhythm that segments internal and external activity as well as in-person and remote activity.5
In terms of managing the rhythm of the internal and external work of the team, research suggests that it’s most useful to cycle between outward-facing and internal activities.6 For example, the team organizes to go out to explore the external environment, but then members come together to discuss what they have learned and what it means for the task, team design, and team culture. Then members go out again to make sure that there is support for the plan, and then come back in to revise and change it as needed. Then the team goes out yet again to learn from others about the best way to do the work, and then comes back together to figure out how to make it happen. Finally, members go out to present their work to others, get feedback, and make further refinements, and then they export it to the rest of the organization. Later they can focus on learning lessons to bring to future teams. This internal-external rhythm helps teams focus on either internal or external activities at any given moment in time.
A pulsing rhythm is also an effective way to manage teams with both in-person and remote members, an increasingly standard scenario. Early on, you may want to frequently bring the team together to compare notes, decide on future actions, and build rapport. Social bonds can be forged during these spurts of togetherness. Then team members separate to do the agreed-upon work. Members can still coordinate between spurts, but their focus is more on task fulfillment.
If all of this sounds difficult, that’s because it is. But many of the teams we describe in this book show that while the road may be hard and long, the benefits to individuals, teams, and organizations are profound. The good news is that the recipe for translating the theory of x-teams into effective action—“x-ifying” the team—can be laid out in a series of concrete steps, making the task easier. This is the topic for the final part of the book.
In this chapter we discussed the third of the x-team principles: make timely transitions. In essence, it means that as the demands of the task change, team members must be flexible enough to shift gears and change what they do and how they do it. This ensures that teams don’t get stuck in any one mode of operating. To make timely transitions, team members need to be able to shift from an emphasis on exploration—thoroughly understanding the product, process, opportunity, or task that the team has undertaken—to experimentation and execution, in which they use the information from exploration to innovate and actually make their ideas into something real, and finally to exportation, when they transfer their expertise and enthusiasm to others who will continue the work, bringing the product into the organization and possibly the marketplace.
Having reviewed the three x-team principles in part 2 of the book, we now turn to part 3, which offers a recipe for translating the theory of x-teams into effective action.