Reports from the Knowledge Labs about our recent findings, research topics, and interviews with lifestyle leaders who are creating their own futures.

How to stimulate your own powers of foresight. Consider the following thought provokers. Ask yourself, in these categories what are the brand new trends and forces? Which are the ones growing in importance? Which current forces are loosing their steam? Which have peaked or are reversing themselves? Which are the "wildcards" about to disrupt us in the future? POLITICAL AND TECHNICAL thought for food: Electronics, Materials, Energy, Fossil, Nuclear, Alternative, Other, Manufacturing (techniques), Agriculture, Machinery and Equipment, Distribution, Transportation (Urban, Mass, Personal, Surface, Sea, Subsurface, Space), Communication (Printed, Spoken, Interactive, Media), Computers (Information, Knowledge, Storage & Retrieval, Design, Network Resources), Post-Cold War, Third World, Conflict (Local, Regional, Global), Arms Limitation, Undeclared Wars, Terrorism, Nuclear Proliferation, Weapons of Mass Destruction, Governments (More/Less Power and Larger or Smaller Scale), Taxes, Isms: Nationalism, Regionalism, Protectionism, Populism, Cartels, Multinational Corporations, Balance of Trade, Third Party Payments, Regulations (OSHA, etc.) Environmental Impact, U.S. Prestige Abroad. SOCIAL AND ECONOMIC Food for thought: Labor Movements, Unemployment / Employment Cycles, Recession, Employment Patterns, Work Hours / Schedules, Fringe Benefits, Management Approaches, Accounting Policies, Productivity, Energy Costs, Balance of Payments, Inflation, Taxes, Rates of Real Growth, Distribution of Wealth, Capital Availability and Costs, Reliability of Forecasts, Raw Materials, Availability and Costs, Global versus National Economy, Market versus Planned Economies, Generations: Y, X, Boomers, Elderly, Urban vs. Rural Lifestyles, Affluent vs. Poor, Neighborhoods and Communities, Planned or Organic Growth. Got Knowledge?

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The Journal of 2020 Foresight
Wednesday, May 21, 2003  

Start-ups: Paradoxy-Morons and the One Percent Solution Gang

Chapter Two: The Ridge

By Steve Howard, CKO
The Knowledge Labs

Table of Contents
Chapter One: Basecamp
Chapter Two: The Ridge
Chapter Three: The Outpost
Chapter Four: The Tribal Territories

"Albert Einstein used his extraordinary imagination to envision himself riding through the universe on a single beam traveling at the speed of light. Try to envision yourself, as he would, as a "passenger riding on the edge of a tiny particle of sand. At this minute, your piece of sand, also known as silicon or quartz, is subjected to immense heat inside a volcano. The temperature rises so much that your grain of sand becomes liquefied. You're surrounded by confusion, turmoil, and chaos as other atoms hurl past in every direction. All is tumult and disorder. Slowly the heat dissipates, and as it does your tiny atom of sand begins to settle into a comfortable relationship with other silicon atoms. Slowly gathering together, the atoms form layers, fitting snugly into a tiny quartz seed crystal. As more and more atoms join the group, the world around you changes radically. The wild ride has settled down. Your trip has moved from disorder to order. You just passed through a natural Breakpoint!"

George Land & Beth Jarman, “Breakpoint and Beyond”

Journal of 2020 Foresight: Taken together, the 8 scenarios ( 4 Lifework and 4 Worklife) help us figure out which organizations make the most sense for us to target as a potential employer, customer or client.

Trailblazer: That’s right. We can figure out which might be the the best fit for our current stage in our own lifespan. And by knowing the unique challenges to the potential organization based upon its state in its lifespan , we can propose several ways that we can contribute to the best of our abilities.

J2020F: Talk more about the start-up phase, since there is no other previous stage.

TB: OK. Let’s examine the start-up, and each succeeding phase by identifying their requirements in terms of people, processes, and organization structure.

J2020F: Those represent the key areas the HR executives focused on, right?

TB: Yes. In terms of people, we look at differences in three areas: Vision, Mission, and Core Values; Leadership and Culture; and Talent.

J2020F: Define what you mean by vision, mission and core values.

TB: OK. How are the purpose, preferred future, and type of business communicated to the rank and file? What is the core foundational story – the story that provides significant meaning or guiding principles that everyone subscribes to, regardless of individual differences?

J2020F: And leadership and culture?

TB: Here we describe how top talent and key managers behave when they achieve their organization’s top goals, strategies and objectives. We have them articulate, as much as possible, both the informal and written rules. Those behaviors and norms that make the organization unique must also attract top talent it wishes to retain.

J2020F: And Talent?

TB: Within the context of the current and next growth stage, we want to describe the distinctive capabilities necessary for success. We want to validate a profile of expertise, competencies, and orientation common to those top 20% who produce 80% of the results.

J2020F: Oh, the management profile for succession planning?

TB: No, some managers, but the “go to” people at all levels and across the enterprise in all functions.

J2020F: So, these would refer to the talent clusters – Agent, Athlete, Associate, and Academic profiles ?

TB: That’s right.

J2020F: How about the Structure?

TB: Here we’re identifying gaps in alignment between the strategy and the structure necessary for implementation.

J2020F: So strategy in terms of what?

TB: A definition of the organizations competitive posture. What is its unique value proposition or combination of value propositions at this stage and for the next? Does it succeed in providing a framework everyone can use to focus on what’s important for making decisions? Can it be referenced to decide how to marshal resources, especially during turbulent times?

J2020F: In turbulent times?

TB: Yes, does the strategy prevent FUD?

J2020F: FUD?

TB: Fear, uncertainty and doubt. Has Human Resources communicated the strategy in such a way that everyone is able to assimilate shifting business environments, new threats and emerging opportunities in a confidence building context?

J2020F: And, the alignment issues?

TB: Essentially, this refers to the tightening and loosening structures. How do the organization structure pieces fit together in the most efficient or innovative manner to meet current and future customer requirements? Do the roles and relationships synchronize in the everyday operations in clearly understood ways?

J2020F: So that’s people and structure. What do you mean by process?

TB: Here we focus on incremental improvements or radically, fundamental process innovations needed in the core proprietary business systems. Selecting the right combination depends upon the pace of change required, the scope of implementation, and the degree of resistance present.

J2020F: If I follow you, continuous incremental improvement matches the need for efficiency and consolidation, while radical innovative improvement matches turning point transition periods, right?

TB: That’s correct. A slower, wide-scale implementation in a highly resistant culture requires continuous incremental improvement. For an organization in the midst of a revitalization re-alignment – an initiative that requires emerging knowledge and a more fundamental innovation – the choice is business process innovation, because resistance remains low.

J2020F: What if the change in process is more localized to a function or two?

TB: If resistance remains low, as part of a renewal effort, then focused process improvement that is more incremental in pace makes the most sense. Here the time frame is more intermediate, than long-term and progress unfolds in a step-wise fashion.

J2020F: But, what if the resistance remains high and the pressure to change is significant?

TB: Restructuring initiatives favor focused re-engineering – fast and disruptive, but not requiring whole scale immediate shifts in behavior. Re-engineering complements abrupt shifts in strategy and structure.

J2020F: How do you choose which process approach to take.

TB: We track how information and knowledge flows throughout the organizations in formal and informal networks. We consider the degree of resistance and the pressure to change. And then, we select the best approach to address gaps in business alignment.

J2020F: So in terms of people, in the Start-up, we begin with a disruptive innovation – the creation of a business by finding an adequate customer base to stay in business – by an AGENT-Agent?

TB: In terms of the 4 worklife scenarios according to the HR executives, yes. This is the maniac with a mission. In the first phase energy is spent on experimentation. This period is very ingenious and unpredictable, a time of trial and error, of success and failure, of untold frustration and great triumphs.

J2020F: We’re referring to an AGENT-Agent’s disruptive innovation – a radically new science, innovation, and technology or business model.

TB: Yes. This period certainly isn't a period to merely survive, but to find, in the most creative and inventive way, how to operate and structure the enterprise in order to connect with the larger environment.

J2020F: But, in high tech organizations populated with a small core of AGENT-agents the "paradigm shock” associated with their disruptive innovation is so high and the benefit is so low, typically because applications for the new technology have yet to be fielded.

TB: Sure. It is the realm of pure science and prototypes. At this stage, only technology enthusiasts are interested. Slowly the early market emerges built up around one or more visionaries seeing the potential for the new technology and funding the first application breakthroughs.

J2020F: These early application breakthroughs, then generate the dramatic competitive advantage that visionaries seek, thereby warranting the pain of displacing the paradigm shock?

TB: But, that doesn’t mean the start-up organization run by AGENT-Agents is home free by any means.

J2020F: Why?

TB: If you come up with a discontinuous technology whose sole benefit is to lower cost and improve productivity within a well-worn application arena, you have an essentially unmarketable opportunity.

J2020F: Why?

TB: The reason is that conservatives simply will not tolerate paradigm shock, nor will they invest in helping vendors reduce that shock over time.

J2020F: What’s a start-up to do?

TB: It needs to attract more AGENT-Athletes.

J2020F: Why is that?

TB: It’s the trickle down theory. The conservatives only buy in to a new technology after the pragmatists, who in turn only buy new technology when it can give them significant breakthroughs in workflows, have vetted it.

J2020F: That’s where the AGENT-Athletes come in?

TB: Not yet.

J2020F: Why?

TB: It takes visionaries to sponsor the early demonstrations of those workflow breakthroughs. AGENT-Athletes specialize in commercial applications, licensing intellectual property, joint R&D alliances, and the rapid prototyping necessary to appeal to the visionaries.

J2020F: So clearly the start-up runs up against a set of challenges unique to its stage – developing a viable product or service; generating enough cash to fund the business; marshalling enough resources for survival; and creating a market niche while satisfying the earliest customers – right?

TB: And ATHLETE-Agents to provide a marketing roadmap while setting up a kind of commercial incubator – the physical space, technology support, and basic business procedures. To survive and stabilize the start-up needs to set and meet sales and marketing break-even volumes. So the sales and distribution channels grow in importance.

J2020F: The longer it takes to convert visionary influence into early pragmatist orders tests the start-ups capacity for survival. It has to generate enough cash initially, and then stabilize its business by eliminating cash flow problems – typically not the strong suit of the Agent talent cluster.

TB: The Agent start-up business is so vulnerable to shifting business environmental threats and changes, as well as internally to the Peter Principle of its early managers.

J2020F: Peter Principle?

TB: You remember. People rise to their level of incompetence. The shift from the freewheeling, ingenious inventiveness of the entrepreneur to the narrow limits of management is a massive leap.

J2020F: You’re talking about the 180-degree shift, right?

TB: Yes. Second phase success factors conform to orderly, established routines with predictability and control. If these management practices don't take over from the entrepreneurial style, the enterprise will fail.

J2020F: On the People dimension, then, individualistic and creative talents who share a technical and entrepreneurial orientation gravitate towards the loosely controlled, and organically structured start-up?

TB: That’s true. The whole Agent cluster distains management activities because of their technical core identity. They practice a product leadership approach to creating a market niche, and then making and selling the product.

J2020F: Product Leadership?

TB: Remember when we discussed value propositions? A product leader operates in much the same way Edison did when he ran a laboratory to discover all the commercial uses for electricity.

J2020F: You’re referring to the shear amount of trail and error required to find a breakthrough product?

TB: Yes. The discovery process follows a disorderly probing and exploring of the whole environment. The purpose is to discover what exists in the environment, how individual pieces might be rearranged into a new pattern, and finally how that pattern can extend into and organize the larger environment.

J2020F: If I understand what you are saying, as in Edison’s case, an extreme AGENT-Agent isn’t focusing on product extensions or alternative products at all?

TB: No. All discontinuous innovators only focus on alternative breakthrough possibilities. To them, there are no alternative products against which to compete in the marketplace.

J2020F: So, that means their initial customers – the visionaries and early influencers – want to gain some sort of dramatic advantage by doing something outside of the norm?

TB: That’s true. Successful product leaders consistently strive to provide that market with leading edge products. For an extreme Agent to remain a product leader once he has survived and stabilized, he has to push the rate of diffusion beyond the traditional rate of demand.

J2020F: How do you go about accomplishing that?

TB: You need just the right blend of Agent and Athlete talent, because you have to excel at larger than life product launches, early adopter programs, and massive marketing education.

J2020F: What does that mean from a Process standpoint?

TB: They must master three challenges. The first is that no matter what, they must remain creative.

J2020F: In what way?

TB: They have to recognize and embrace ideas that may originate anywhere – inside or outside of the product leadership laboratory.

J2020F: Secondly?

TB: Secondly, they must commercialize their ideas quickly. To do so, all their business and management processes are engineered for speed.

J2020F: And thirdly?

TB: Third, they must relentlessly pursue ways to leapfrog their own latest product or service.

J2020F: Relentlessly leapfrog?

TB: Right. Their whole attitude has to be, “If anyone is going to render our technology obsolete, it better be us.”

J2020F: So, they’re continuously crossing into new frontiers, then, on a mission to break new ground?

TB: Of course. They have to be adept at rendering obsolete all the products and services that they have created, because they realize it is only a matter of time – faster than they think – before someone else will develop the next generation.

J2020F: But, how do you develop a process capable of creativity and rapid obsolescence?

TB: Starting with an impossible problem or a breakthrough goal, individuals first dynamically explore their own minds and their immediate environment. They generate large numbers of alternatives and unusual combinations of ideas.

J2020F: Then what?

TB: They intuitively make the most unlikely associations using any and all types of exploratory, open, imaginative techniques.

J2020F: What do they do next with all these combined ideas?

TB: They put together enough bits and pieces to trigger a consolidation process by which they select the most promising combinations and discard the other ideas that are unworkable.

J2020F: And the basic pattern gets tested and refined?

TB: Yes, and then they assemble or synthesize a complete solution into a unique original expression.

J2020F: Can you give us an example?

TB: Sure. Back in his day, people thought Edison was completely crazy. He experimented with anything he could get his hands on to make a light bulb filament. He tried over 10,000 different materials.

J2020F: I read somewhere that he even tried putting electrical current through spider webs and Limburger cheese to see if they might be the solution.

TB: He had to go through all the experiments. Finally, by applying what he had learned from filaments made from burned thread, he synthesized and integrated some of his earlier experiments. And he wound up with a workable solution that changed the world.

J2020F: For an AGENT-Agent to survive the start-up phase, he not only has to successfully market his first blockbuster product, but he has to build an organization that takes a long-view on profitability, right?

TB: That’s the trick. Once survival, stabilization, and growth arrives to the product leader, he must have the right kind of product development processes in place to maintain that leapfrog momentum.

J2020F: How do you achieve that?

TB: The way Edison did for starters. As his business grew, he continued to study the life cycle of each invention.

J2020F: What did he learn?

TB: He realized the ebb and flow of investments and returns and prices and margins clearly were a function of each product’s lifecycle stage.

J2020F: Which are?

TB: Development, launch, growth, maturity, and decline. So his core process fine-tuned invention, product development and market exploitation.

J2020F: How does that differ than other process improvement efforts?

TB: Considerably. Unlike the typical TQM approach, Edison’s business grew out of his design principles. His business wasn’t driven by procedure, but by the highly energized and extraordinarily talented individuals who developed and marketed breakthrough after breakthrough.

J2020F: How did he keep them focused and motivated?

TB: Two ways. First, he focused on end results – not the means of getting there. Before development ever began, he created an inspiring vision of each new product.

J2020F: And, the second?

TB: He aligned the organization’s structure to the vision.

J2020F: How?

TB: Instead of pigeonholing his employees into a department function, he structured their jobs around the creation of products that realized the stated vision.

J2020F: So the business structure looked like what?

TB: A loosely knit, ad hoc ensemble that was ever-changing to adjust to the entrepreneurial initiatives and redirections that characterized his emphasis of working in unexplored territory.

J2020F: Edison favored a fluid organization?

TB: So much so, that he regularly reorganized and redeployed his talent towards the most promising projects.

J2020F: So today’s product leaders keep their processes free of procedures so their talent can flex their muscles and minds without causing disruptions. How do they pull it off?

TB: Well, each product leader is unique, but three ways in general. The first keeps people on track by organizing work in a series of well-paced challenges. Each one has a clearly defined outcome and a tight deadline.

J2020F: So the process remains robust enough to afford efficient coordination without dampening the inventiveness and discipline required, right?

TB: Yes. And, secondly the organization structure at large companies replicate smaller scaled start-ups by breaking up hierarchical reporting relationships into teams and clusters. And they locate their research labs away from stifling headquarters.

J2020F: And third?

TB: Finally they emphasize discipline where they get the biggest ROI.

J2020F: Where?

TB: During the final leg of the product development process. The looming deadlines and commitments tense the work that increases velocity and accelerated activity.

J2020F: Teams work at hyper-speed, right?

TB: So it takes a certain kind of person to put up with last minute shifts in direction and make or break pressures.

J2020F: What kind?

TB: The most original, best and brightest among gadflies, concept champions, mavericks, the unconventional and eccentric.

J2020F: How do you reward product leadership behaviors?

TB: Based on results measuring new product success without punishing the experimentation on the front end to get there.

J2020F: Describe the culture, then.

TB: It’s a culture that encourages individual imagination and achievement, as well as, stellar out-of-the-box thinking. It caters to the special kind of mindset that is driven by a desire to create the future.

J2020F: We’ve talked about the idea product leader over time. But, in the start-up stage, we know a good many fail. Why is that?

TB: Well, what the HR executives discovered in the last step of the scenario process was too much creativity in the small start-up phase triggers a leadership crisis. And directive management solves that disruptive turning point.

J2020F: So the management practices changes to re-align the strategy and structure?

TB: Right. Remember, in the start-up stage the buyers must be convinced to buy the product, since it is usually a high-income purchase. Start-ups always face high degrees of buyer inertia. Buyers typically encounter poor quality due to frequent design changes and too many variations without a standard.

J2020F: From the manufacturing and distribution side, I imagine you need highly skilled labor and initial productions costs are high as well.

TB: Yes. This is the time of short production runs and over capacity. That equates into high prices and margins, but low profits. The only good news is there are few competitors. So, this is the best period to increase market share by beefing up research and development and engineering.

J2020F: What about the leadership crisis?

TB: Once the start-up survives and begins to grow, new knowledge about efficiencies and quality is required.

J2020F: More employees coming into the organization can’t be managed exclusively through informal communication, as before.

TB: Right. And, coming in after the fact, most new employees aren’t motivated by that same intense dedication to the product and its vision.

J2020F: Isn’t new capital needed to fund expansion?

TB: Yes. And new accounting procedures for financial control. So, the founders find themselves burdened with the unwanted management responsibilities. They long for the good old days and still act as they did in the past.

J2020F: They don’t realize that’s the kiss of death?

TB: No. Not until the crisis arises out of the conflicts.

J2020F: So when the key talent begins to ask, “Who will lead the company out of this confusion and solve the management problems we are facing?” – it becomes painfully clear that the answer is not the founder?

TB: Yes, in many cases. A strong manager is needed who has the necessary knowledge and skill to introduce new business techniques to help them bridge the widening gulf between start-up and early growth stage.

J2020F: I imagine the founders hate to step aside during this turning point, even though they don’t have the temperament to be managers.

TB: If they don’t, they prolong the inevitable. But, as we see in the next stage the directive management style plants the seeds for a new crisis at the end of the early growth stage.

Got Knowledge?
Copyright ©2002 - 2006 Aarnaes Howard Associates. All rights reserved worldwide.

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