“It’s increasingly important for companies to design value propositions for their employees, not just for their customers. The job market for talent is competitive. The organisations with the best employee value propositions will succeed in attracting the best people!”
Alexander Osterwalder (pictured right) is an entrepreneur, speaker and business model innovator. He and Professor Yves Pigneur, co-authored Business Model Generation, a global bestseller on the topic of business model innovation, and Value Proposition Design, their latest book. Osterwalder’s Business Model Canvas, a tool to visualise and (re-)invent business models, is used by leading organisations around the world, like GE, P&G, Ericsson, and 3M.
Recently, he partnered with management consultant, Dave Gray, to create the Culture Map, a tool which helps companies design their organisational culture. Osterwalder says: “We often think that we cannot design organisational culture. But we actually can. It is not like creating a car where we can control everything – culture is more difficult to manage – but we can consciously design a culture just as we can consciously take care of the garden.”
In this interview, Osterwalder shares his views on the best approaches to achieve a desired corporate culture, the difference between a culture of innovation and a culture of execution, the skills of business innovators, and the role of communication in nurturing an innovative business environment.
Gloria Lombardi: How should an organisation start approaching the creation of a culture of innovation?
Alexander Osterwalder: It starts from having the right conversations using the right tools, then putting in place the right structures. For example, the Culture Map is a tool that allows you to have better conversations. Simply put, it has three different boxes. The first box is for the existing behaviour – how people behave in the company today. You map them out. The second box shows the outcomes from those behaviours. Then, most importantly, the third box maps enablers and blockers that lead to that particular behaviours.
So, you start discussing what the culture is today. Then, you have a second conversation focussing on how you want your organisational culture to look tomorrow. You do the same exercise once for your existing culture, and once for the desired culture. Ultimately, you work towards building the desired culture.
Building a desired culture is a deliberate, long-term, commitment. You cannot generalise how long it will take. It depends on the existing culture, the size of the company, the kind of conversations they can have. But the most important part is to start; then you will get a fair indication of how long it will take.
Creating an innovation culture in addition to an execution culture is a big challenge for many organisations. It is wrong to imagine that everyone needs to be an innovator. In fact, you need people who can run the existing business and you need people who can invent the future. They both need to work together.
There is not one culture – there are several cultures, in this case two: one culture of execution, and one of innovation.
GL: So, not everybody needs to be an innovator. Some people need to be very good at executing existing business models and managing existing processes. But if we talk about innovators, are there some specific skills that they need to master?
AO: There are a couple of characteristics, the most famous one is the T-shaped skill: innovators go deep on some areas but they also go broad on others. They always keep the big picture while also navigating through the details.
It’s about staying open to the world, understanding how things fit into the context. Entrepreneurs are very good T-shape thinkers.
Take, for example, Niklas Zennström and Janus Friis, the inventors of Skype. Originally, they had a peer-to-peer networking technology, which they tested in the music space. But, they could not succeed there because it was illegal. They took that technology, which they mastered very well, and asked themselves, ‘Where else can we use it?’. They had to go broad. Ultimately, they went to the telecom industry and they applied the tool there for VoIP (Voice over IP, or voice communications via the internet). They used that technology to disrupt an entire industry. This is an example of being good at one thing – technology in this case – and going very deep, but also seeing the big picture – where this tool can have a broader application.
But not every technology person is good at that, and they don’t have to be. Some people are pure specialists. That is their calling and role. That is what they enjoy and what they should do. But they should work with teammates who can see the bigger picture.
AO: Building on your earlier point around having conversations, what’s the link between internal communications and developing a culture of innovation?
AO: You can only create a culture of innovation when people are sincere. When you have conversations around what your culture is today, you need to create a safe space where people can actually say, ‘This does not work; this is a disaster’. It takes very strong leadership to inculcate this openness. Many senior leaders are afraid of hearing what is not going well, so, they will not have open conversations.
But, the more transparent the internal communications the easier it is to design a desired culture. If you cannot honestly discuss what is going wrong and what is going well in the company, then you should not even start thinking about purposeful culture-shaping.
GL: Could you give me an example of a company that has created a successful culture of innovation while developing transparent communications around it?
AO: One company that is most explicit about their culture, and shares how they nurture it, is Amazon. In the last letter to the shareholders, the founder, Jeff Bezos, writes why they are successful. He describes the innovation culture that they put in place. It is not a coincidence, nor pure genius that they are succeeding. It is because they have a culture that allows people to experiment and innovate.
Bezos specifically says that you should not have a ‘one size fits all’ decision culture. Amazon uses different decision mechanisms for considering innovative developments and when considering day-to-day execution challenges. In practical terms, they distinguish between different types of decisions. With some decisions, they need to be careful. If it’s about execution, they take their time and discuss all the details. With other decisions, they need to go fast.
Additionally, they accept failure. They know how to fail productively. Jeff Bezos has specifically said that he thinks Amazon is the best place in the world to fail. But what he means by that, is that you need to experiment to come up with big new things – and that is what a lot of companies get wrong. They are afraid of taking risks. They shut down any type of failure. But what they also shut down is innovation.
Innovation cannot happen without experimentation and without having some sort of failure. You cannot get it right 100% of the time because nobody can see the future. The venture capital industry has known this for a long time. Conversely, many large companies do not know how to deal with it, except for a few exceptions, and Amazon would be one.
GL: New ways of working are emerging – global teams collaborate via their digital workplace, and the freelance economy affects workforces of all sizes. What do companies need in order to create a thriving working environment in such a complex landscape?
AO: More management innovation. Meaning, different ways to organise the way we work and organise teams. We need to create practical tools to do that. This isn’t just about mental models of communication. If I am a senior leader, I want concrete tools and action points. Only a few senior leaders have the time to think about organisational design in a philosophical sense. What they really want to know is ‘What do I do next? How can I do this? What’s the impact this is going to have? Why should I even do this?’.
Traditional hierarchical structures just do not work any more – the problem is that they are fixed. So, companies have re-organisations every couple of years. But that is not the right approach. We need flexible organisational structures. Some companies, such as Gore, have understood that for decades.
Currently, there are not many good tools. Very few models are thought through. There are hundreds of different concepts, but for a tool to be very good it needs to be conceptually sound, based on robust theory, and it needs to be insanely simple and practical – not simplistic but simple and practical.
Large companies need to think about new organisational design – and that is not just about putting ping pong tables in a fancy building. Studies show that 7 out of 10 people are not engaged in their work. Those people are wasting their time and their life. We need to be able to create workplaces where people come to work every morning and are excited, and that requires new organisational structures. If we don’t do that, then we will have a lot of frustrated people at work, which doesn’t lead to a happy society.