There are lots of articles and books written about the culture of innovation: creating patterns of behavior that encourage new ideas. Group brainstorming, celebrating victories, lots of bean bag chairs, and so on.
Let’s talk about something different: structure.
There’s a common saying in business that culture eats strategy for breakfast. Let’s see why structure eats culture for lunch.
To understand what I mean by structure vs. culture, let’s start with what seems like an odd paradox: Take 100 people each of whom individually might be excited about some wild, crazy idea that could transform their industry. Organize them into a group with a mission, and a reward system tied to that mission, and they will reject that same idea.
Why? Why would the same people who individually support an idea, collectively reject an idea?
Let’s consider something often overlooked in the thousands of books on culture: their incentives.
Two people, on their own, pursuing a big idea each may have 50% stake in the outcome of the idea (assuming for simplicity all stakes are split equally). The titles they give themselves clearly don’t matter compared to their big stake in the outcome. They’ll roll up their sleeves and do whatever it takes to nurture that idea and save it from the inevitable stumbles of an early stage project.
Four people will each have a 25% stake in outcome. In this case, one person may be “team captain” and the other three may be team members, but whatever perks of rank go along with being captain still won’t matter much compared to the still very high stake in outcome.
With 100 people, however, each person will have a 1% stake in outcome. Since 99 people can’t report into 1 person efficiently, the group will need some layers. If each person has say 5 direct reports there will be a total of 4 layers: 1 CEO, 5 SVPs, 25 VPs. The rest are “associates.”
Now which is bigger: perks of rank or stake in outcome? Individual stakes have become quite small, 1%. But the perks of rank—being promoted from associate to VP, from VP to SVP, or from SVP to CEO—might be quite large. Not only in base salary and bonus but in the many additional other perks that might come along for the ride.
As soon as perks of rank outweigh stakes in outcome, individual incentives begin favoring a focus on politics and promotion rather than project success. Sometimes those two overlap, but often they don’t, especially in the case of fragile, early-stage ideas that are easily written off as crazy. For lack of any better word, let’s call those kind of ideas “loonshots.”
Loonshots are easily dismissed because they arrive covered in warts—the flaws and seemingly obvious reasons they could never work. Skilled communicators can highlight those warts with smart, condescending comments in group meetings. The comments might make those skeptical project-killers sound thoughtful, even wise, to others—especially to their boss or boss’s boss, who might be sitting around the table. If those wise project-killers can pull that off well enough, often enough, by redirecting to a safer-bet project—especially a project favored by their like-minded bosses—they might earn the big prize: a promotion.
It may appear that the “culture” has changed: from a four-person team in which everyone rolled up their sleeves to nurture some wild idea, to a 100-person group riddled with politics.
But underlying that change in culture is a shift in incentives.
In other words, structure drives culture.
The Four Control Parameters
A sudden shift in collective behaviors—like the shift from an innovative culture to a political culture—is triggered by changes in what physicists call “control parameters,” which is just a fancy word for something you tweak that causes a big shift. In the case of water, for example, a small change in temperature can transform a flowing liquid into a rigid solid.
The bad news is that those shifts in behavior are inevitable. All groups will shift from innovative to political, just like all liquids will freeze.
The good news is that understanding the control parameters allows us to manage the transition. Water freezes at 32 degrees Fahrenheit. On snowy days, we toss salt on our sidewalks to lower the temperature at which that water freezes. We want the snow to melt rather than harden into ice. We’d rather wet our shoe in a puddle than slip and spend a week in the hospital.
We use the same principle to engineer better materials. Raw iron is a weak metal. Adding a small amount of carbon to iron creates a much stronger material: steel. Adding nickel to steel creates some of the strongest alloys we know: the steels used inside jet engines and nuclear reactors.
Understanding the equivalent control parameters for teams and companies allows us to design more innovative organizations. It turns out there are four such control parameters (described in detail in my new book Loonshots).
Those are the elements of structure that drive culture inside organizations.
Life at 32 Fahrenheit
Articles and books on culture are filled with urgent messages on innovation: Innovate or die! The CEO must be the CIO (chief innovation officer)! And so on.
Inventing new products or strategies to stay ahead of competitors is important, of course. But unless a group can consistently deliver those products to customers on time, on budget, on spec, that team or company will eventually get beaten by its competition.
In other words, we need to balance radical innovation with operational excellence.
In Loonshots, I discuss how and why being good at radical innovation vs. good at operational excellence are two “phases” of human organization, just like being liquid vs. solid are two phases of water molecules.
The problem is that a system can’t be in two phases at the same time. Water can’t be both liquid and solid at the same time. Yet teams and companies need to do just that in order to survive. So what can we do?
There’s one exception to the rule that two systems can’t be in two phases at the same time: right on the edge of a phase transition—life at 32 Fahrenheit.
Imagine bringing a bathtub full of water to the brink of freezing. A little bit one way or the other and the whole thing freezes or liquefies. But right on the cusp, blocks of ice coexist with pockets of liquid. The coexistence of two phases, on the edge of a phase transition, is called phase separation. The phases break apart—but stay connected.
The connection between the two phases takes the form of a balanced cycling back and forth: Molecules in ice patches melt into adjacent pools of liquid. Molecules of liquid swimming by an ice patch lock onto a surface and freeze. That cycling, in which neither phase overwhelms the other, is called dynamic equilibrium.
Phase separation and dynamic equilibrium, translated back into the world of teams and companies, are the key ingredients to balancing radical innovation and operational excellence.
That means separating your artists and your soldiers; tailoring the tools to the phase; leading as a gardener, not a Moses (managing the transfer, not the technology); and—most importantly—learning to love your artists and soldiers equally!
Structure Vs. Culture
That a word or subject like “culture” has been abused to the point of meaninglessness doesn’t mean it should be dismissed entirely.
Complex systems—the term of art for many interacting agents, whether cars on a highway, buyers and sellers in markets, employees and managers in companies, or the atoms and molecules of a turbulent river—have earned that term for a reason. Their most interesting questions rarely have simple answers.
In the complex system of our human body, for example, certain genes make diabetes or cancer more likely. But lifestyle choices also matter. Drinking sugary drinks by the gallon can bring on diabetes. Smoking cigarettes by the carton makes lung cancer more likely. Both genes and lifestyle matter.
And so with teams and groups: both structure and culture matter.
The aim of Loonshots is not to replace the idea that certain patterns of behavior are helpful (celebrating victories, for example) and others are less so (screaming at your employees), but to complement it.
This piece was adapted from Quora.
How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries
Loonshots reveals a surprising new way of thinking about the mysteries of group behavior that challenges everything we thought we knew about nurturing radical breakthroughs.