— 2019 —

CHAPTER TWENTY-THREE

The Three Types of Leaders of Innovative Companies

An interview with Deborah Ancona and Kate Isaacs by Curt Nickisch

Command and control has lost its mojo. Nowadays, if you want to create an innovative organization, no one would tell you to build a rigid bureaucracy. But what should you build? How can you have creativity without chaos?

That’s a question that grabbed Deborah Ancona, professor at MIT Sloan School of Management and founder of the MIT Leadership Center, and Kate Isaacs, a research fellow at the center. They wanted a clearer picture of the ideal company, so they looked at two organizations: PARC, the R&D division of Xerox; and W. L. Gore & Associates, the materials science company best known for GORE-TEX.

In this interview, they describe how three different kinds of leaders at these organizations work in conjunction, flexibly, within a set of prescribed rules—what they refer to as nimble leadership.

CURT NICKISCH: Why did you choose these two companies?

DEBORAH ANCONA: We were interested in this idea of what we used to call distributed leadership—what we’re now calling nimble leadership. We wanted to look at companies that were at the forefront of leading innovation and had entrepreneurial behavior inside of them, but ones that did not do so with a lot of bureaucracy and rules.

They were also not startups. They had been around for a long time and were a proven concept, if you will, of an organization that could continuously adapt to a changing environment, continue at high levels of innovation over time, and continue to have employees who are very engaged and excited about the work they were doing. The companies we picked were the prototypes of this kind of organization.

Do you feel right away that you’re in a different sort of company when you visit these places?

DA: Absolutely. I do a lot of interviews with employees in many different kinds of organizations, and some of those interviews are fairly scary. People are disengaged from their work. They don’t like coming to work. We had some interviews where people were actually crying.

It’s a completely different experience to go back every couple of months, let’s say, to Gore, and people are so excited. “We just invented this.” “This is a new thing that we’re working on.” “We just created a new idea of a business model that will reshape the way the organization operates.” There was a lot of energy, excitement, and movement all the time, without being frenzied. People were doing a lot, and they were satisfied with what they were doing.

If you hear about a company where people can be creative without being chaotic, some people would think, “Well, there’s a CEO who really knows what they’re doing.” What do you think is the secret sauce of Gore and this sort of company?

KATE ISAACS: At Gore there are certainly leaders; there’s a CEO. But it’s the culture that really embodies the principles that keep it running like it does. The individual leadership, the culture of the place, and the structures they have—that’s what makes the whole system work. The principles that make it operate that way have been there since the beginning and have been refined over time.

One thing that struck me reading your HBR article “Nimble Leadership” is that you said that a high proportion of people at these firms describe themselves as leaders. This is the idea of distributed leadership. Why do you think nimble leadership is a better way to describe what’s happening?

KI: I have always disliked the term “distributed leadership.” It makes me think of a glass of water that you put a drop of red food coloring in. Everything turns slightly pink. To me, “distributed” evokes this idea of everything being diluted a bit. That’s not what we mean by “distributed.”

What we mean is that in these sorts of organizations, everyone feels they are empowered. They step up and lead in their domain of expertise, and they even step out of their domain of expertise and stretch into new areas of experience—and they’re supported in doing so. There’s a constant developmental process going on at these organizations that’s supported by the culture, their peers, and other sponsors of their development.

So, when we use the term “nimble,” we mean that the leadership itself is appropriate for whatever needs to happen in the moment inside the organization, and the organization as a whole is able to quickly adapt to changing market conditions and what they’re sensing from their customers. If a customer is unhappy, they’re able to quickly respond, because everyone is empowered to do what’s needed to execute according to their strategy and what their customers need and want.

It sounds like everybody there is in tune with the company strategy.

DA: Yes, and the strategy is not just some esoteric set of terms that people have learned. It’s really in-depth: Here are the kinds of products we make. This is how we make money. It’s amazing to me when you go to other organizations and they’re working on projects—they don’t necessarily even think about whether it’s going to win in the marketplace. Whereas, in these organizations, you have people who really understand what the business model is and how the organization can be successful with the inputs they are creating.

KI: And it’s broken down into pieces that people can understand in their domain, wherever they are in the organization. For instance, at Gore there is a simple rule called “fit for use.” Whatever you do, whatever product you’re creating, has to be fit for the use that you’re intending it. They don’t want to send a cable up into space that’s going to fail. They don’t want to send somebody to the top of Mt. Everest with a jacket that’s going to leak.

That drives the extensive testing, constant attention to quality, and constant communication with customers about how the product is performing in the field. It’s a simple rule that’s true both at the organizational strategy level and the product development level. These simple rules knit together the high-level strategy with what people are doing on the ground everywhere and throughout the organization.

You came up with taxonomy for different types of leaders, at different levels of the organization. Entrepreneurial leaders at the lower levels, at project levels; enabling leaders a little higher up; and then architecting leaders above that. Tell us more about these three different classifications.

DA: Entrepreneurial leaders are the folks that are creating that frothy, bubble-up innovation for the organization, and they do so because they’re constantly coming up with new product ideas, new business models, and new ways of organizing in the firm. It can be enticing others to follow them, to come and work with them on a particular idea. They’re the ones who create teams, and those teams bring new ideas through the organization. It’s not just coming up with an idea; it’s also seizing the opportunity and moving it through the organization.

There is also a lot of freedom for people to leave projects and join other ones.

DA: What that does is create a kind of prediction market in the organization, because people are free to go and join a product that they think is a better bet for success in the environment. People are orchestrating what the next projects will be by voting with their feet. Managers aren’t sitting in a room making these decisions; people are actively choosing what projects will be the best. So, managers beware.

KI: This also puts demands on the leaders of project teams to be willing to let talented people move around to other teams instead of trying to hoard talent. By and large, we found that managers knew that OK, over there is a cool project that has a lot of potential for the organization and Gee, I’d rather keep this person on my team because they’re very talented, but I know that while they’d be able to contribute a lot over here, they want to contribute over there. Far be it for me to keep them here against their wishes and against the greater organizational good. They were constantly paying attention to what would be best for the whole organization and what would be best for the individual.

Deborah, you just said “managers beware.” Is this the point where people are afraid of losing control?

DA: I do a lot of executive education, and almost every company we see wants to make this move from command, control, and bureaucracy to a more nimble, distributed-learning network—whatever word you want to use—kind of organization. This is in keeping with a lot of research being done now: that executives feel like there are going to be major changes in their industries and their environment in the next three years—76% of executives believe this, compared to 26% last year. The sense that there’s an increase in change is going to require a different kind of organization.

But with that comes incredible anxiety and inertia in making the move, because of a fear of not knowing what to do. I don’t know how to create this system. It’s going to mean that I lose my power as an executive. What’s going to happen if I let go of the reins? This is a big fear that we see in these leaders. It’s scary.

You describe enabling leaders as those who direct and manage resources—that sounds like middle management. What makes that different?

DA: The enabling leader is helping the entrepreneurial leaders. Often the entrepreneurial leaders are a bit less experienced. They aren’t always able to do everything that needs to be done, so enabling leaders step in to help them, not by ordering them around but by guiding and asking questions. That’s a very different approach to leadership.

Are the questions like, “Which way do you think you should go?” “Where do you think the opportunity is?” or “Have you thought about talking to this person in this other department?”—that kind of stuff?

DA: Absolutely. It’s not “do this” or “do that.” It’s “Have you thought about this?” or “Have you thought about that?” It’s a much more open-ended approach that helps people develop their own independent way of thinking through a problem. Their jobs are not rigidly specified.

We often depict organizations as little boxes, where people inhabit a box that says you can do this, this, this, and this but nothing else, whereas enabling leaders are more fluid. They help in whatever way is needed. If they need to reinforce something about the culture, they can reinforce something about the culture. If they have to be more of an explainer of the organizational strategy, they can do that. If they have to roll up their sleeves and help out with what the team is doing, they can do that. It’s a flexible, moving, emergent kind of relationship.

They are also connectors. Very often the enabling leaders have broad networks, and they travel. They know lots of different people. So, they’re connecting the team—the entrepreneurial leaders and those teams to others in the organization to create what we call creative collisions, collisions with other forms of expertise that help innovation to grow.

KI: I would add to that: Imagine a traditional hierarchy that has the folks at the top and senior leadership. Then you’ve got middle management, which is like a layer of clay through which all the resources, approvals, and everything has to come up and down to the people who are doing the real work on the ground.

I’ve heard somebody describe that layer as permafrost.

KI: Permafrost. Beautiful. I love it. You get stuck at that layer of permafrost, and if you do drill through finally and get your message to senior management, then maybe your initiative and bright idea will get some play at some point. But by the time you get some budget or some attention, the moment may have passed, and your competitor has already moved.

We chose the name “enabling leaders” specifically because, as Deborah was describing, it’s their job to make sure that the people who are on the front line have what they need to move forward with their ideas, to respond to customer concerns and problems and manufacturing issues. They are enabling the work of the front line to happen. It’s not their job to restrict anything. They are to make sure that the flow of resources, attention, coaching, networking, and connections that those frontline leaders need happens.

Let’s talk about the architecting leaders, which other places would call senior leaders or the executive suite. What makes these leaders special and different?

DA: First and foremost, the architecting leaders are creating the game board—the structures and culture necessary for the entrepreneurial leaders to be able to create and follow through on their ideas and for the enabling leaders to be able to do their jobs. They’re the keepers of the culture. They are very mindful of what the values of the organization are and what the rules of engagement are.

Ironically, the architecting leaders are the ones who are designing change, yet they’re in an organization where they’re not dictating, because that’s not how these organizations are run. So, first, before they’re able to make change, they must have a reputation for being a great leader and caring about the company.

Second, they do a huge amount of consultation with members of the community to make sure that they understand why this change is necessary and why it’s a good idea. They have to listen to people who don’t agree with the change and respond. One funny example is a CEO who was so nervous about making a change from on high that it was taking a very long time. People in the organization were complaining, OK, enough already. Just rip the Band-Aid off and let’s get to it, because of that necessary process.

KI: One of their functions is to knit together the emergent product ideas and new innovative ideas into a coherent organizational strategy. Architecting leaders have to be good “sense makers,” to use a term that Deborah has been developing for a long time, in that the people who are at a more senior level have their eye on global, market, technological, and economic trends.

These aren’t things that everybody in the organization is paying attention to. That information resides in their heads, and then they’re watching all the innovative ideas that are bubbling up throughout the organization, and they’re knitting all that together into an emergent, strategic process.

It can sound loosey-goosey to some people, but there’s actually a lot of discipline in the way things are structured.

KI: Yeah, there is a lot of discipline. However, it’s a different kind of discipline than the top people deciding. It’s much more collective. It’s much more inculcated in people’s view of the strategic and culturally appropriate moves to make inside these organizations. And, because people have such high degrees of autonomy, good talent sticks to good ideas.

We’ve talked about this idea of prediction markets. If you have a good idea, that’s going to attract talent. It goes along through the organization, and as you continue to talk about it—if you’re a champion of a project and it’s a good idea—people will flock to it. If it’s a bad idea, you’re not going to be able to attract the kind of talent that you need to move it forward, because eventually people are going to see that it’s not going to work for one reason or another. That’s another way that this control happens through the process. Does talent stick to it, or not? Do people make autonomous choices to sign on to what you’re selling or not?

So instead of deciding what the market forces are and then coming up with commands to respond to them, these architecting leaders are essentially letting the market forces work throughout the organization.

KI: Yes. That’s the difference.

DA: This type of organization is not for the faint of heart. It’s complicated and complex. One of the things that I’ve done, though, to help people navigate changing in this direction, is a little card exercise. There are 21 cards with one attribute of a nimble organization on every card. I ask people, “Pick the cards. What do you have now in your organization? What do you wish you had? And, of the things you wish you had, what are the top three things that you can do right now to get change started?”

Results of that exercise have been really fun. Sometimes people in an organization agree on what they have. Sometimes they don’t. People from Google think they have everything, although not everything is as strong as they’d like it to be. Other people think they have none of those attributes. But the exercise is a way of getting people to think about what this whole system looks like and how they can start with small steps to make the changes needed to move in a new direction.

Is nimble leadership possible anywhere?

KI: A number of organizations are experimenting with this way of working. A successful Dutch bank called ING has shifted to “an agile way of working,” which looks very similar to what we’ve described in our piece. They reorganized themselves into 350 nine-person interdisciplinary teams, and they have mechanisms to make the connections across those teams. Leaders there say, “Yeah, I was kind of a control freak and I’m finding this way of working is challenging me, because I have to let go and give people more autonomy.”

But the reports from this bank are that it’s a lot more fun to work there. They’re much faster at solving customer problems. It’s a bank. They’re dealing in mortgage securities and things like that. So, if a bank can do it, it’s probably transferrable to a lot of other industries beyond the product innovation space.

DA: In the HBR article, we also talk about Satya Nadella and the change at Microsoft. That’s a company of 125,000 people, and it is an example of where you don’t have to take on the entire system that we’re talking about, but there are ways to move your organization in that direction.

Nadella did somewhat of a turnaround at Microsoft. He came in, in 2014, and the organization was kind of a hierarchy and pecking order, where different groups were at each other all the time. That was stifling collaboration, creativity, and innovation. In his mind, this was not how the organization was going to grow and develop. So, he came in with some of the similar kinds of steps that we saw in the companies we’ve been describing. He brought in a new game board, a new senior leadership team. They got rid of a stacked-ranking performance-management system, and instead moved toward more of a coaching and developing approach like you would find at Gore or at PARC.

It also gave more authority to managers below to change compensation and a lot of those things that had been more centralized.

DA: Absolutely. They were giving people more freedom to do the things they needed to do to keep that innovation flowing. They also refocused the culture on something called the growth mindset, which is built off the research of Carol Dweck, a psychologist at Stanford. She had the idea that people are not fixed in what they can learn and how they can develop; rather, they can grow. They can always learn more. They can pick themselves up from failure and say, What can I learn from this and how can I do it better the next time? as opposed to stopping right there.

There’s not a culture of blame. It’s a culture of, How do we do it better? How can we innovate next time? Nadella has worked hard to inculcate that notion of a growth mindset within the entire company. He’s taken a number of steps that bring this closer to the model we’ve identified.

Adapted from “The 3 Types of Leaders of Innovative Companies” on HBR IdeaCast (podcast), July 9, 2019.

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