Thank. You guys for coming out today my name is Scott Bergman I'm part of the talks at Google program here in Ann Arbor and, I, have the distinct privilege of, welcoming doctors. Jeff and Stanny de Graaff to. Tell you guys a little bit about them I'll give you a little background at. 25, dr.. Jeff de Graaff became, a senior, executive at Domino's which became one of the fastest growing companies in America, and not. Only that he became a professor at the Ross School of Business here, in Ann Arbor and has, become a c-suite, advisor to over half of the fortune 500, not. Only that Jeff's, ideas on innovation, have been covered by the NPR, and PBS where, he has been a featured columnist, for Inc Wired, fortune. And Psychology Today just, name a few and, we. Have stain you too graph here today who is the CEO of innovate, reom a consulting, and training practice, here they also have offices in Atlanta and Ann Arbor and she's. Also an innovation community, builder where she runs innovation, tournaments, here in Detroit and is, also the creator of the collaborative open innovation, network used by the University of Michigan. Alright, guys well come, on up we're happy to have you thank you thank, you guys for joining us today thanks, Google thanks for having us thanks Scott, so what I want to do today is I want to challenge a lot of probably. Your most sacred, notions, about innovation, I'm going to tell you a little bit about my. Work and and what. We know about how innovation actually produces, value and destroys value, to. Do that it's gonna be like an old western movie, where we're gonna start with the long shot you, know of the city of dodge and then we're gonna move into the tumbleweed, street then, finally, we're gonna look at the, sheriff right we're gonna we're gonna talk about you, so. I want to start with a little backstory here I'm. All both stanley and i are technologists, were trained as technologists, that's what our advanced degrees are in but. Interestingly enough, whenever. I'm anywhere. In an airport and I travel, a lot somebody always wants to stop and tell me about new technology, they, have you heard about the latest thing and I'm sure you guys get this all the time and it's some of its apocryphal. You, know that we're being it's technologies. Coming from aliens, and some of it's some, of its stuff that you've already seen you're already know but, but you all know that technology happens. In the cycle of Technology, the Natuna men of technology, always increases. Over time and there's a bunch of laws about this and won't bore you with that but, around, around. The late 80s I got a call from. An editor at Life magazine, and she wanted to talk to me about. Innovation. So I thought she wanted to talk to me she said no I want you to have a commentary, we're writing a piece on the hundred most important, people of the, 20th century, and one. Of them is related to you now this was a huge surprise I, don't know any most people were related to me not doing so well right so there.
She Talked about this man named Charles fair de Graaff and she. Sort of yet I was embarrassed, I didn't know who, this person was and. You know nobody told me about so when she got off the phone I looked, him up and he, was the guy who created Pocket Books he created paperback books in the 1930s. And his, whole idea with this technology. Was, that people would become literate, if, books were cheap to bits people, would become literate but, they didn't and the reason it stuck with me I was doing a project with, Alan Kay and Steve Jobs in the state, of California, to try and develop literacy for. People, who would who are underserved. And we, the exact same result we, didn't get any results from, introducing technology into, the situation, and so, very early on that began, to galvanize, my thoughts about culture, and the role of culture, and technology and how in some ways culture. Overtakes, or co-op's technology. So. What, I want to talk about today is that innovation, isn't really an invention it's not just a gadget it's not you know it's not next the cool thing it actually has a lot to do with identifying. Patterns how, those patterns go together, identifying, how culture, and Copsey interact with those patterns and I want to give you some examples, of that but I want to start with this whole notion of dominant logic and it's a really big thing for Google and you're getting a lot of sort, of pressed negative, press about this and that, is one of the things that goes on in our world we sometimes call this in business micro segmentation the, notion, is we have a tendency to identify in, value people who are like us right. That's kind of one of the big challenges and when, social media started, I started writing articles that got a lot of negative, attention saying, that I wasn't sure that, social media was really creating. The kind of inclusive society, that in some ways it was micro segmenting, us the people who are your friends even though they may look different and they may seem different they actually believe all the same nonsense you, believe and, if they don't believe it what do you do you. On a dark night on a dark road you unfriend, them the Spanish, Inquisition couldn't, have thought of this so. The notion is we get these very vertical segments, so if you've ever talked to anybody about religion, or politics, you know what I mean by the whole notion of dominant, logic and it comes back to what that crazy philosopher.
Schopenhauer Said, you know over a century, ago every, man every person, takes the limits of his own field of vision for, the limits of the world and that's kind of where we're at now I'm gonna make the argument that this is the problem of modernity, and there's a way to solve this to get over this so the key is how do we get beyond this dominant, logic how do we develop a mindset to actually be more inclusive, and I'm going to talk about inclusiveness, in a way that's very different than you've probably heard, it because it's not just politically, correct it's not just morally correct it's essential, for innovation I'm going to prove it to you now it. Turns out that every organization has to do two things and boy Google this is really relevant to you the, first thing an organization, has to do is maintain itself, it has to per task to produce. Predictable. Outcomes, this is why capitalism, requires capitalist. Whether you're a private equity whether it's publicly traded somebody, has to show that you're going to do things on a normal basis and the way that that happens is we, get rid of variance, we create standards. We call this operating, rhythm right now the notion is that makes us that makes us all predictable, but the problem, is just like people we. Want to grow so, to grow, instead. Of eliminating, deviance what we need to do is introduce. It, so, innovation, by, definition, is a form of deviance, and so we're going to have this tension and it's not a tension. Of type, it's, not i'm an entp or. An infj, it's, not that it's, one, form, of value actually literally. Assaults. The other one, form of value destroys the other I want you to think about high growth economies, versus high quality or productive economies. They're oppositional. And there's a reason one, is creating, standards and one is creating deviants now I'm going to say something that's going to seem very radical, to you this, tension when. Used, properly is actually. Not only good it's, the basis of the growth engine so, let. Me give some examples of culture and how culture co-ops. Technology. Interestingly, enough, everybody talks about Tesla and it's a great technology and I love Tesla, but here's the problem, Tesla, last year sold fifty five thousand, cars and they lost six hundred million dollars now they're not gonna lose 600 million dollars going forward and they're gonna sell maybe twice as many cars but, the notion is we've had some soft quarters in the automobile industry haven't, we Tesla. Hasn't, destroyed the automobile, industry right, what's, affecting, the automobile industry is uber now, I want you to think about over for a minute where's the innovation uber ride-sharing I'm, an old guy, we had ride-sharing when, I was a kid you called the parish priest you called the coach got a ride look. At the app that, they use doesn't it look like 2007. Over the road trucking app it's not a particularly well-run, company, there's all kinds of legal problems with it where's the innovation, in uber, young. People, like you will get in the car with, a stranger right. It's a social, innovation I won't. It's like Airbnb, all, of the sudden the car is not just something you drive it's something you take someone an Airbnb. If someone, came to my house I have a nice house on the here on River and use my towel I take in the backyard burn it and bury died sick those dogs on them right the, notion, is this social form of innovation has co-opted, this same, is true for Goldman, Sachs anybody remember about four years ago not even for three years ago the number one selling book on the New York Times non-fiction book was nonfiction, list was a book called flash boys by Michael Lewis it was about spread networks the, notion was goldman sachs and credit swiss were trading, a little faster than you were could, trade so, they got the uplift on a stock and they got to sell get rid of the stock they got to short the stock as it started to go down now think of it this way they're the bookie, doesn't, matter whether Michigan, or Ohio State, wins the book he always makes money that's what this deal was and everyone, said the fix is in the 1% is going to get richer and richer until.
What Started happening until cryptocurrency, started, to come in and that's when you young people might, know where the cryptocurrency start, and don't say the 98 paper that's not where it started, where, it really started, was, in money laundering, it started, with drug cartels, where did streaming, really start I mean in earnest, where did that new technology, come from the porn industry right. Where did emoji start it started terrorist cells so one of the things I want to point out right off the bat is, that technologies. Are often used or first adapted, by groups that they're not intended, for anybody. See the problem happened in Amazon right before Christmas there's a little recommendation, engine the little problem they showed up the New York Times if you like fertilizer you might like black powder and ball bearings right the, notion, is technology, is powerful. When we start looking at people who are making the, smart phones going back a decade it's only been a decade, in. Their wildest, dreams they, never imagined, that you would use the camera to take pictures of yourself they thought you'd be at Yellowstone, and taking the vistas and things like that so culture, has this mitigating, factor, where what you want technology to do is completely. Different and think about the 13 indictments, two weeks ago that Muller has made so the notion is this, culture, piece is not only confounding, it actually does something more powerful and the biggest industry to look at for this right now is pharmaceuticals, the pharmaceutical, industry is reeling, why, is it reeling because all, of these big pharmaceutical, companies are all, of the sudden having to compete, with young people like yourself who've got together in a federation deal, and they have names like BIOS forum, and the open four of the and firestorm. And things like that and what they're doing is they're developing, medications. And therapies and drugs and. Their. Open source of patenting, them right. So the notion is here's the question, I was a Duke the other day and I was talking to head to the law school and I said where are all your lawyers going these days because it's tough to get a job if your lawyer and they, said pharmaceuticals, well the answer is simple what are they doing in pharmaceuticals, they're trying to protect their lunch or property here, becomes the question for you who's gonna win this bar fight is, it going to be the millions, of people who are trying to do things for free in this open source or is it going to be a handful, of sort, of these very monopolistic. Kind of companies that are trying to protect the intellectual property, that's why we're seeing these companies start in places that that don't have strong intellectual property laws Tanzania, places, like that parts of the Philippines Cebu, other kinds of places so, I want, to take a step back so there's this big trend, this trend, towards technology, coming out of places and people doing different things with it because of culture and then, this other big trend of the. Challenge, between organizations. Trying to control things we're going to call this well, we're going to call this longitude. An organization's. Network, we're gonna call this latitude, right longitude, and latitude of, organizations, well, how does innovation, actually relate. To all this it has, to start with what's our definition, about, 1993, I got to write the definition for the federal government for innovation, and all, I did was co-opted. A very, famous definition from innovation from the 1960s, from Marshall McLuhan, McLuhan. Said innovation. Has four attributes he said first of all an innovation. Enhances something well here we are Google were. You the first search engine no. What. Did, you you, know did you have the same sort of format as other search, engines no, you little box and, what Google made better was not so much it was a faster, search or a better search at the beginning it was an easier search it was a simpler, search right, so, you made it better by simplifying, it now the second thing is an innovation has to eliminate something, what. Is the innovation kill. Now, that's a tough one right I want you to think about what did Charles Schwab killed, anybody remember brokerage houses the, big brokerage houses in on Fifth Ave and down on Wall Street they're, all gone now yeah, if Hutton the quiet company is really quiet, why because.
We Disintermediated. The broker basically. We let trading happen directly of course this is an industry you have a lot of interest, in a lot of a a lot of mistakes on the ground here it has to return us to something here's. An interesting one it has, to make us feel like, we're like we're, do. We need to do something here we're. Okay all right it. Has, to make us feel like. We're returning to something so think about it what are the big trends and restaurants right now is it faster food or is, it slow food whole. Food, farm-to-table. Right, and the ultimate, the ultimat returning, us to something we feel we lost was developed about two. Blocks that direction, which, was viagra. Right 25, again and finally the most important, thing he McLuhan, said and. I've got your little logo up here right the, most important, thing called McLuhan said he said over time and innovation, reverses, into, its opposite, the anti innovation, does anybody remember when. When email was going to set you free anybody, remember that yeah, and now what we're all slaves right, we can't put a phone down we're all slaves to email and and, and SMS. And everything else now I'm going to add a few things to McLuhan number one. Innovation. Is a form of useful novelty. All that means is it can happen anywhere, innovation, could happen anywhere so I want you to think about Starbucks, for a minute it's a commodity the, Egyptians. Had it it's something that's been around for 3,000, years where's where's. The innovation, in Starbucks well it's theater right it's the whole experience are going to Starbucks and they've names for everything innovation. Pays in the future it's what's called a convex form of value how much data do we have on the future anyone. How. Much data so, I'm coming home from Shanghai the other day and, this guy sitting next to me says the dollar is it going up or down I said, it's going down he, said why do you say that and I said because it's up and that's what currencies, do they go up and down duh and he, said what he, said when and. I said I don't know when if I knew when I'd be George Soros I'd be speculating. The dollar and I sure wouldn't be telling a pathetic loser like you about, the dollar. So. The point is the, biggest, form of resistance to innovation, is excessive, planning or getting stuck in the planning cycle have. You been to the meeting about the meeting have. You seen the report about the report yeah. You're, the big guys now you used to be small guys right, so someone else is running the experiment, right now where you're doing that and finally innovations. Have a shelf life they, go sour like milk so the other day I'm in Chicago I'm giving, the keynote speech for the American Medical Association I'm, feeling pretty good about this it's a big it's a big meeting but, I notice on Michigan Avenue the line goes all the way down Michigan Avenue and I'm thinking holy mackerel. There's a lot of people here here my silly talk about innovation, and then it occurs to me what's, being released the.
New Apple, iPhone is being released and they're basically in line to get the new iPhone of course, what happens to the old iPhone, the minute the new iPhone isn't introduced, it's, rubbish, right it's discounted, it's falls off the commodity, cycle so the big challenge of innovation is it's only an innovation, for a moment in time so this is what an innovation, is which means it can happen in the supply chain can, happen in marketing, can happen the product itself it's a lot more than the gadget so there's other mythologies I think that people have about innovation, I wanted to spell you up first of all innovative, organizations, have very little in common when, we start looking at the indexes, for innovations, and there's about there's, about seven that started, there's about 13 legitimate, ones now there's hundreds of other ones but, let's say out of 13 once there's about 15% of the companies that they have in common which, tells you right off the bat that they're not talking about the same thing, - money. Is almost never a barrier to innovation out if you know this one of the big issues is money often creates, a, constraint. When, you have less money that you have to have an interesting workaround and we could talk about how the economy is flushed with money right now because, the tax cut and all the repatriation of, the money is going to put about a trillion, maybe two trillion dollars back in this economy so the notion is is this really gonna go to innovation, is it gonna go to stock buyback, is it is it gonna go to private equity where's the money gonna go competitors. Often compete an opposite way so this is one that relates to you Google you have how many companies now 5859. Companies, right, you make everything, your open-source, man right. Apple, what Apple, makes what they, make nothing right. Foxconn. And in Vitek and a consortium of companies make apples, product they make design, and they make brilliant designs you have to give that to Apple and the other thing they make is they make a closed operating, system right the, in their ecosystem, it's not just different than yours it's almost oppositional. Right, once playing offense once playing defense, so so the whole idea that people even in the same kind of in a Venn diagram you're, not in the exact same industry but in related industries compete the same way they don't incumbents. Are almost never first movers this is what you have to worry about Google right, think about it as a bar fight anybody from a blue-collar neighborhood like, I am anybody from a blue car yeah you're from the same neighborhood I am right the, notion is who throws is a big guy with the Budweiser jacket, or is that the little guy with crazy eyes is the, little guy we. Called this in business first, mover advantage and this is why startups, throw the first punch because they can't compete on scope or scale so, when I start looking at what's happened with Google I think your cap value this morning is like 600 billion dollars I think you're that second or third plus a valuable company in the world you're, no longer a start-up and the real challenge here is what getting, you to act like your startup I look at your new building your beautiful building, I see, all the trappings remember I built Domino's that I helped build Domino's the 1980s, which was the fastest growing company in the world in the 1980s the, interesting, thing is at some point you're going to have that real challenge, of maintenance versus growth it, turns out that breakthrough happens, at the edges the bell curve we'll talk about that later because that's a very important point and this is a point that standees, going to talk about which is when we started looking at innovation indexes, in 1993.
Less. Than 1%, of them on a regular basis beat the growth benchmark, on Wall Street so, the notion is most of what you believe about innovation. Is untrue, and we're going to talk about why it's untrue there's only one thing that we're pretty sure we know about innovation, and this is going to be the key to the whole discussion today and that is diversity, happens, in the 30 to 50 places on the planet that produce almost all the electoral property and when we look at these places whether it's Tel Aviv whether it's part of Shanghai, whether, it's Ann Arbor Michigan or, whether it's Palo Alto where you know Cary North Carolina wherever, you're at one. Of the things you're going to see is it looks very different than, any place if you drove 40, miles outside of the city boundaries right, and one of the things we see is that people are very different I'm going to talk about why that's so important now remember. The whole idea that I started with talking about the magnitude, of innovation, in the momentum or the speed and magnitude, the two things you have to think about is how much and how fast that's the question you always must ask yourself how, much innovation how fast is a meteor, careening, towards the earth it's gonna kill us all we better do something now or is, it that the, ice caps are melting and, we probably should do something in the next four or five years in order to get our handle, on this right maybe it's even a little more urgent than that who knows but, the first thing that companies do is they build a process now here's a question to you just process create deviance or eliminate deviance. What. Is process do it. Eliminates, deviance yeah, so the first thing we do to make innovation, happen is, what we build something to eliminate innovation. And this, is what we do in business schools this is stage gating, this is portfolio, management these are hurdle rates so, the notion is we're trying to gain control because. What we really want from innovation is what we. Want, predictable. Revenue we, want predictable, things so by definition when you build a process you're gonna be incremental because. That's what processes are designed to do that's what that tool is designed to do now what if we really wanted, to do something with much higher magnitude, for innovation, wouldn't, we have to change the gene pool it's like a great sports team or an orchestra, or a band or a great chef when we have to go out and get people right. How, longs it take to develop. A tremendous innovator. Here at Google a, longtime. Or a professor, at Michigan or, Stanford, or Harvard wherever you you know wherever you came from wherever you are so, the notion. This type of innovation it's much higher but harder to do that's, why Google spends a lot of money on you developing. You because that's really important we do the same thing at Michigan uh finally, if I really, really want to change culture what, I what if I really want to change, the culture to make innovation, happen is that gonna happen overnight. It. Takes forever now I'm going to say something that's really, controversial, there's, only two, ways, to change culture because culture isn't, a thing you can touch culture. Is in the ether, culture, is the way you talk it's their mindset, it's, the it's the it's the it's the way you interact, it's, not a thing, culture, is contained in two things number one is contained in leadership how you lead what. Do we do if you're acquiring an underperforming. Firm what is the first step when you acquire an underperforming, firm you got it there right knuckle, bump you. Get rid of the senior suite the, Chinese have a wonderful, saying the fish stinks, from the head they, have a wonderful saying for everything but that's what that means, that, means you got to get rid of people because culture is contained in leadership, and if you got great leaders you'd get golden handcuffs oh they're, gonna stay for two or three years the, second thing that changes, culture is how you work now I worked on a project that most you know as ecomagination it's, the first 30 billion dollars spent on the green technology.
That General Electric did, well one of the things that people get wrong about that is it was not just, to. To. Change the game about power, what's which it was partially but it was also to try and figure out how to get 28 divisions of one of the world's largest companies to work in sync, so you either, change. How people lead, or, you change how they work that's, how culture, gets changed but it takes a long, time so, the issue is we all know what's required but, are we willing to put the time and so. What's. The answer well, one of my favorite answers comes from an old an. Old philosophy. Called the doubt and. You're going to see that a lot of my a lot of my. Work and standees work really relates from this old Chinese idea, that's about, 200. Years before Plato, is around people start writing about this and, at the heart of the DAO is the notion of the yin and the yang construct, the notion that there are conflicting forces in the universe and these conflicting, forces produce, hybrids, they create new ways of doing things well, from this the Chinese have done something remarkable spent a lot of time in China over the years the, Chinese had developed a way. Of thinking called, the e Ching and it's called sometimes called the Book of Changes people, use it for yeah, you know like for predicting, the future but it's really used so, the people can think through all the options that they've got this is sometimes called heuristics or, cognitive. Algorithms, finally, out of this there's a lot of how-to books and the most famous one is a book called the art of war right written by Sun Tzu whether that's a real person or not it's a real controversy, right and then finally that family. Household how to use this day. In and day out will function right, the whole notion of a loop on the whole notion of having a compass to put this together and what it means is, you don't have to have inputs, and outputs, and process, because. You're thinking the way I'm thinking and you're, looking at all the options so I don't have to supervise you and tell you what to do well. This is the heart of our thinking and this is the heart of our book we had this sort of revelation, in the early 1990s.
And That was, the, most innovative companies, when we start looking at predictability of, what was gonna make an innovative company where, companies that had constructive. Conflict now. This is important, because when I talk about constructive, conflict I'm not talking about talking disrespectfully people. That's, not what I mean I don't. Mean marginalizing. People I mean, we have fine regard, filial. Piety, collegial. Piety, for each other hopefully we have we like each other maybe love each other but, it means when it comes to ideas we. Engage now. Engagement. Usually means we talk about engagement oh you really, like being here at work know when. We start looking innovation, it means you have an idea and I have an idea and they're different ideas, instead, of being a social media and uh sniping, at each other I was trolling each other I'm gonna engage you I'm gonna skid nose-to-nose, to you and say I think it should be like this and you're gonna say I think it needs to be like this now this is a caution. To Millennials, this. Is not an opportunity, for for. Compromise, this. Is trying to push this to the new place the next idea the third way a new way this, becomes the generative, power of innovation where you, do it all think about it for a minute think about healthcare debate I got, to give my TED talk when President Obama rolled, out the Affordable, Health Care Act at the White House is great the, the problem is you got one group that says you should all be public and the other group says it should all be private, are, those really our options. Aren't, the options, everything in between and, how do we take that forward right, we spend a trillion dollars basically, yelling, at each other yelling over the fence so my point about social media is we haven't had conflict, we've, had yelling at each other but no one is engaged somebody, following us so the thing is we're going to engage ideas, so there is no such, thing as a safe, place it means if we talk respectfully, we're going to engage and this means at the heart of innovation is this concept diversity, so, diversity, is more than just a moral issue and of course it is a moral issue but it's more and it's not just the color of your skin it's. Not it's your belief system it's your cognitive maps it's, how you interact, at your profession, so to do this Stanny. And I build. Our model on Quinn. And Cameron's model Bob Quinn had been here I believe and he, was sort of one of my mentors along with CK Prahalad and Rudolf Arnheim, quit. This is their model called the competing values framework we. Took it towards the innovation, direction did a lot of research on it over the past 30 years and it's, often, referred to as the innovation genome, if you read the popular literature the innovation coach so we're the developers. Of that it basically says there are four types of innovators. And they, compete, against each other and the key, to innovation is following, these these, kitty-corner, competitions. And looking, for hybrids, so I'm going to explain what each of these means in just a minute but to put it too to put it simply.
Innovation. Has. Longitude. And latitude there, are two Continuum's. In which you have to look at and if you can figure out those two Continuum's, the most important, thing are the dynamics, between the opposites, now I want to emphasize this is not an opposite of type this, is not an opposite of style this is what you're trying to create destroys, what I'm trying to create so when quality, goes up you reduce errors, right, and innovation, goes down when. Innovation, goes up I introduce, errors this is sometimes called economy, at risk right. So, there's a trade-off what, we're saying is when these two things show up together, what. We've learned in our research is those stocks over time, outperform. All the, other stocks right, and they outperform, the indexes, that people, have so these conflicts, are going to become central so let me talk a little bit about the conflicts now first of all this is not just about you I'd, like to call these Russian matryoshka dolls, Russian nesting dolls right I don't look do you do this I read self-help books and then I go you know what I'm gonna do I'm gonna do this I'm gonna go to Traverse City and I'm gonna I'm gonna just gotta quit my job and, I'm gonna I'm gonna write a crappy science. Fiction novel is what I'm doing and I've worked hard in my life made a little money I'm doing okay I'm chucking. It all that's what I'm doing everybody get to that point I've had enough of this. Yeah. But, there's another nesting, doll am i nesting doll it's. Called I'm married and I, have three children and I have a Dean and, I business partners and I people count on me right, yeah that's the other part and then what happens after that is there's the real world that's the big nesting doll there's a pandemic there's. War this, financial, crisis, boy you young people got blown out bad no wait I mean that was pretty bad yeah. The, notion, is you don't act alone do you you. Act in accordance. To your community. And you, act in accordance to the situation, so, it's not about you, it's not about I'm this type and that's all equal that's, not what's going on what's, going on is their situational.
Effectiveness. And it's not situation, like this is awkward like it's a social situation it's, like what's happening, in the outside world and how do you need to act to do this it's like playing a sports game like football or soccer whatever, you follow there's, a time that you do a certain sort of things because it's appropriate, to do it at time or surgeons, the same way so let's look at the first one the, first one is the creative type or the artist type I was, really lucky when I was young I got to be an advisor to Steve Jobs it was great you. Know Walt Disney, was one of my heroes anybody, like Disney you know other than kid here's some opinions, that were not very cool but. He did some cool stuff think. About Elon. Musk thinking, about Tesla, not, just a company but the Nicky, Tesla and all that kind of stuff so what's interesting about this type of person is that they're very good in unique situations, things we haven't seen before we're, trying to cure an incurable disease we're going into a Battlement, situation, we've never seen before you know as meteors careening, towards the earth it's highly, unique so, that you're making it up as you go along there isn't really a lot of precedents for these people they have a high tolerance for ambiguity love, ambiguity, right, they love to spread the field they love to try stuff my favorite example of this is Large Hadron Collider, anybody remember three years ago the Bo's the god particle right, here we are and at CERN in Switzerland we. Have seven Nobel Prize winners to believe, it will create a black Fischer do you remember this they thought it would create a black hole and destroy the universe they bet a beer and pull the switch see. You in hell you're gonna these are these guys they're. Gonna drive the Harley into the pool right. But, they're gonna see the future first because they're looking for it so the organizations, are very ad hoc they're, making it up as they go along they're morphing people, are coming they're going into these organizations and the artists themselves what they really want is they want to be creative, they're serial, monogamists. They don't like staying in their job they're always looking at a new thing they're all ad D every last one of them they pick up every pretty pebble on the beach you, know I mean this is it's a Fellini movie this is that group it's a Grateful Dead concert you, know Jerry's, playing Mickey's, in the bus the, girl in the white dress has had too many mushrooms and, she's spinning you know the spinners so you're probably too young to remember all this that's. What's going on here this is this group of people so there have a high degree of innovation but. Their speed, is relatively, moderate because the the, Delta is very large some so it's gonna happen tomorrow others when hell freezes over but, the biggest problem is they're high risk right. Hope they blow it up real good you remember last fall SpaceX. Blew up a billion-dollar akut and they blew facebook's rocket to it the tailor or they blow it up yeah how about that yeah, this is this group of people. So. Where we find them we find them taking risks we find them and strategy, we find them in the arts I bet, some of you were it wanted to be in the arts and you sort of are in the arts aren't you right look, at the a look at sheepish looks because, what you really want is freedom and you're held together by your vision right so one of the things I learned real early when being.
Around These people the early days of Silicon Valley where, these visionaries, who used to be like follow the dead or ski bums right, then they built these companies including your own right and how. The. Opposite. Of this group can engage this group is do, things like understand. That, this group is going to try and make problems bigger not smaller this. Group doesn't want an answer they want up they want to play so, bring a fifth of Jack Daniels and some crayons you're going to do some coloring right this is this group they're, never going to be on time right. These. Are these people right now. The, opposite, are the responsible, people. The engineers, I call them autonomous, Madame autonomous man I've. Thought of it coming in here today it came fully formed from my forehead like Athena and they quietly sing hi ho hi these are these guys they. Know the right way and wrong way to do things and they'll point it out too they love to tell you you know Jeff that's the wrong way to do that I'm on all these famous. Journals, and all these other journal the guys in the journal loved to tell me all the stuff I'm not doing right you know Jeff you didn't have value I'm like I got, it okay we wear funny hats, we, have medieval, ceremonies, the whole nine yards so these, people are gonna be in predictable, situations, where there's a lot of scale, and failure. Is not an option so you got to see three things scale. Right. We're bored where we're selling a lot of something where is he complexity, think, about Boeing in the new the new 87th. Has two million moving parts and and the whole notion is you know you said you bring that down the wrong way it goes kaboom bad things happen you operate the wrong way you send the young men and when women off to combat bad things happen now interestingly enough my favorite example predictable, is MacDonnell's some. Illiterate kid presses a cheeseburger button and simultaneously. Somebody shoots a cow in Argentina bang and everything in between happens, and Smithers, come here these are these guys right they want everything to work and. Ironically. In Google. As, in. Amazon, a lot, of your success is here. It's. Not in the green it's here, right you're, running a back office very. Intricate. Supply. Chain, is what you're doing with, algorithms, all over the place so, it's all about efficiency and, quality, where the other one was about innovation. And growth radical, innovation and growth this is innovation, to make things more efficient, and making work and the people who run this we're gonna call them engineers, it's. All about security and productivity, right, the whole idea of doing the right way in the wrong way so you see that these are quite different than from each other so these people are very good where there's large scale projects, we're going to build something really big like this whole campus, up here Google, and we're going to have a right way in a wrong way we're going to get these people who have technical, degrees, engineering, medicine the sciences, and what, these people want is they want responsibility. Because what they seek is they, seek process, and the reason they use process. Is because. What, they have to do is take the vision that. The artist, has and they have to materialize. It they have to build the stupid, right. And incidentally, artists, one of the things you love to tell the engineers, is it's 80% done what's it really mean it's, 20%, done, on a good day you're, not any and the artist will take credit for everything don't they engineers they take credit yeah, that's the way they artists are they crow about it so.
What You can do artists, when dealing with an engineer one show up on time you know you think they don't notice oh the, engineers, are the most passive-aggressive. Group you got here and on a dark night on a dark road you'll disappear, they got a file on you like J Edgar Hoover right, they've absolutely watch. You write nod look good yeah you know this right the notion is look at the day to actually, read the data right. How about that for a change and follow the accepted, form and in the book there's a lot of Aki's about this now here's, the point the. Point is the. Success, of this, group comes, down to your ability to, partner, with the opposite, so the first thing I'm telling you is on a very personal level the, person who makes you crazy is probably. What's missing, in your. Ability, to grow as a person and your ability to add value to the organization somebody. Following us number, two you, have to manage, appropriately to, the outcome, you want so, if I want the engineer, outcome I have to use process, it's complicated. If I want the artist outcome I'm gonna change the gene pool and i'm gonna hedge, that's, why startups run the way they do because they can't compete on scope or scale so, the notion is I've got, a screwdriver or a hammer or a wrench and a saw they're great tools they're not interchangeable and that becomes the first challenge, now we have to encounter the other that's, the key I want you think about your own organization think. About Larry and Serge you. See this they're opposite, lennon-mccartney, right. You're going to see this over and over again you, have to find the person that makes you crazy so I like superheroes. So. This is Johnny Storm the the, flame incidentally, superheroes, need to be more inclusive I couldn't, find any sort of balanced superhero, so I'm sorry about that but we'll have to get Stanley to work on that a little more maybe some of the newer ones I don't know about and then we got Richards, here who's sort of the red the red genius, guy well let's turn this around and talk about one, of my favorite, groups which, is the compete group the Blues. These. Are the athletes I teach, at the Ross School business where we grade on a curve right. We have sayings like don't send your ducks to eagle school and, it's like the universe Chicago. Or Wharton, or MIT, right. The whole notion is its competitive. Now, what we're trying to develop our athletes. People who are positive, they're go, forward moving but the notion is they're ready to compete they're ready to do what needs to be done so, these are people who are very good at contentious, situations, so last week I was, the keynote speaker, at the Air Force they're big annual convention, right you want assets, in your military services. Right because, what their job is what is to keep everybody safe that's, their job so, they're going to be aggressive in demanding situations, so whether you're a sports team and it's Michigan competing against Ohio State or whether you're competing for potato chips or you're making smart phones this is where there's someone else coming after, you right and we always make fun of these people until we need them now, we need them then we then all then it's all a different deal right, these are MBAs, these are businesspeople right and they're very market, based organizations.
Meaning They face outside and they're beholden to shareholders, or they be holding the guidance they have something that they told people they're going to accomplish so they're very interested on speed, and profitability, the, notion of profitability, even in a non-profit, is are you, know have we got bigger endowment, you know Michigan likes to say you know we're not interested in that but of course the truth is all the best schools have what they've used endowments, right, and that's kind of the score and finally these people are all about vitality, and prosperity. And you must have some of these people because I'm walking around your building you got a gym and, people are tracking how you know how far they fit and are they doing stuff and who's in first place and who's in last place and top ten in bottom ten so you're not fooling me Google you got these guys too and we need these people we're going to find these people in a lot of places we're gonna find them wherever the challenge is results-driven these are get it done people and they get it done very quickly these are not long, cycle, people so they're going to look where the goals are focused like we have to make the corridor where we got a problem we've got to solve something, didn't work and it's got to work but more importantly, more, importantly we're, going to find these people where, challenges, and resources, result in some kind of a score now, what. The sages can do this, is going to be an interesting thing because I, have to warn you about blues. Boomers. In the United States are typically. Blu's you. Know what when I came to college I came to college as a wrestler I got got, to comp College as a wrestler and that meant somebody got a gold medal and the rest of you were pathetic losers and either went to therapy or learn to drink that's what it was that my generation, you ever watched the Rudolph the red-nosed reindeer thing, at Christmas and, you think Santa Claus is a total jerk yeah that's that's my generation, right we went to the moon we licked the commies we built the net, right.
That's Us but. Our children are, not. Those people our children have, a little trouble with our goal centricity, our focus, on goals why we're obsessed with, goals how, why we compete, and fight over everything's, very confusing well our children are these sages and sages, collaborate, so they're very good at cooperative, of the. Lifestyle, things they're very good at searching and reapplying ideas, they're, very good at sharing right. They don't like the idea of intellectual property they, don't like the idea that somebody owns something asymmetries. They have a very democratic notion. Of the world very inclusive a very consensus. Notion of the world in general right in general these are generalities interestingly, enough, there are organizations, are very clannish, very, community oriented very Network oriented. So you're connecting, to people that, you want to connect with that you share some kind of personal affinity for your very, values. Oriented. Right where the Boomers are goal-oriented your, values, oriented, and I believe this is creating, the largest cultural shift in my lifetime it's, not like the sixties I want to tell you three things about young people that you probably already know over, half of all live births to women under the age of 30 starting at twenty fourteen or outside of marriage the, more educated the woman is the less likely she is to marry marriage is no longer normative, I've been married forever, right. She's, been married to me forever right, the, notion of what you want to do for a living here at Google is this a lifetime, event at Google you're going to be here forever interestingly. Enough according to Pew Charitable Trusts, what. Do you really want out of life you want to have impact you want to make meaning, you, want to take time off to cure river blindness, in Tanzania, because you care about culture. Right, supposed, to my generation and finally the other thing that's very big is we ask young people what their religious. Affiliation is. The number one growth area is what no affiliation, right so if you're talking to a boomer. Married forever right, I'm a practicing, Roman Catholic, and I'm a capitalist, Pig right, I teach in a business school so, we're different about this it doesn't mean we can't get along and it doesn't mean we don't have a lot to teach each other but, the notion is and it's and it's I'm doing this in a very gross way obviously. To sort of teach this but I also want to point out that the Chinese are a clannish, culture, they're. The opposite of American, culture, American, culture became American, culture in a very ballistic, way in a very hard way I want you think about 2008. September 15, when Lehman crashed. Between, September, 15th of January 1 we laid off 6 million people bang-bang-bang, right, but we also hired him back faster, this culture doesn't right. Takes care of people because of value centric but also takes longer to bring them back so it's a long cycle culture, we find these people and community, service places where our conflict, is managed, we find these people where we're. Dealing with people in, a way that we're trying to we're, trying to help them develop, we're trying to mitigate we're. Trying to mitigate conflict. And we're gonna find these people where we're harmony, is paramount, where people are respecting. Each other in a way that they don't they, don't have the kind of conflicts that I'm suggesting here so. How. Can the athletes engage people athletes, boomers like me we. Have to be more patient. That's a big one you know because you've got a lot of things that you'll say I need, more time on this and if you're a Boomer what's boomer said oh you don't have more time so on Wednesday we have to be more. Cheerful. With you you know how. People. Say you can do it there's all this big thing about positivity, now and, what our old boomers like me thinking, no, you suck, you can't sit down right that's what we're thinking but, no you're encouraged so we have to be understanding. Of that right, and of course I'm dealing in in gross generalities. Here but the notion is the, challenge, here the other thing that predicts value is that.
These Two things get along and that's one of the secrets. I think to when my generation in, your generation collaborate, we're an Americans, and Chinese collaborate, I think there's something very powerful, that, happens in those communities, so I think of this like Sue Storm and, the thing I drew storms, on my favorite one she could she has a force field how many like a force field she, can read your mind that's what I wanted to read your mind read my kids mind protect, them right and then the thing just smashes, stuff I'm sorry that my generation it's kind of the things thing we apologize, but things need to be smashed every now and then so there is a whole worldview here I'm not gonna spend any time on this but this is not sort of pop psychology, there's a lot of work about, how you think, about time how you think about space what you value what you chase who you want to be dealing with so these worldviews, are, very, deep, right. And and, they can be partially, cultural. And there's a lot of neurobiology. That says some of this may actually be hardwired, I don't want to go there because that you then you start getting into eugenics, but the notion we are a combination, of our biology and our history and our experiences, right so. There's problems, let, me tell you a problem this comes with with, anyone, who's been married for a long time will tell you that, can you change the other person now, you're all young and you think you can can, you check I just have to tell you as I'm, pod. From the future you're, not gonna change the other person the, number one year for divorces when it's your one your. One what, do you figure out in your one they're. Not gonna change you either can live with this or you can't that's, it so, why am I telling you this because you're gonna try and change these people and you can't so what's the problem when, you get the Reds in your group what do they always do they're very judgmental, they'll tell you the right way in the wrong way to do things right when, you get the greens in the groups what do they do they've, no discipline, they get up and walk away they, don't follow up their bad methodologies. What. Are the blues the blues love to take over the, blues a beginner they can be boorish here's. What we should do short-term let's make the meeting five minutes it's like a drive-by. Shooting bang, bang bang PowerPoint, slides everywhere, because they can't speak in complete sentences yet, right, and.
Finally When you get the yellows it's all about oh we can pull together we, can do let's just have another meeting the. Notion is you're gonna try and change that you, can't this. Is the the downside, that goes with the upside this is what you have to deal with nation. States also have this challenge now every nation state has all four of these Indian the whole idea of an of nation states kind of an old idea but think. About Japanese, culture why were the Japanese so good at quality after the war when, we invade basically. Invented quality of a, Six Sigma in New York right so. What's been interesting is the Japanese had a two thousand-year-old tradition of hari design this is part of their culture right think, about the Netherlands my name is the graph right the Netherlands how is the Netherlands been able to have this incredible, prosperous, community. It's a really small country, to the tallest country in the world you know this I'm I'm but not representing, well my mother's Hungarian, but, the notion is because, things have gone well after, the war because, the Dutch can't compete on scoper scale so they have to go out and trade they have to invent stuff right think about the United States how did we get to be the United States you either came here, to chase cold mountain you came to escape the Czar you came here in Chains or you thought you were here right, it was not exactly a picnic, right that's how we do things rather ballistically. And finally think about China where there are over 50 words in Chinese for which uncle are you are you the rich uncle are you the crazy uncle the uncle we avoid the uncle we saw a cop do who are you in the family the notion is you're always going to see this and what happens is we have a tendency to vilify the. People who aren't like us right. Instead, of understanding them. And that becomes the big challenge so we have to have the right person at the right job now I'm gonna take I'm gonna throw some self-help stuff out the window it's gonna upset you but I'm going to tell you what basically the research says first the substantive type doesn't mean competency, oh I'm, an artist but you suck right you're just not a good artist the, assumption that talent can be developed this is my favorite one it. Can be developed to a point but. You're not gonna make Mozart or Michael Jordan those are things that are a confluence, of natural talent and the situation, that they find themself in assumption. That all types are equal they're not if I'm an investment banker what am I trying to do I'm trying to do blue stuff if I'm a university, professor I'm trying to do yellow stuff so, the Blues are gonna be more valuable in one situation the yellows in another and, finally the assumption that balance is better not necessarily, so when, I'm starting a project the greens are geniuses because they love to the, ambiguity, make stuff as they go along at, the end the Reds are geniuses and everybody in between is a is a genius, now remember I haven't spoken about the Xers Xers.
What Their genius is at is connecting. Boomers and Millennials Xers, are the smallest generation, but the most ambidextrous. Generation, we've seen so the only reason I talk about boomers and Millennials, is we're the largest generation is by far relatively, X are smaller Gen Z are gonna be smaller but they might be the most valuable right, and incidentally, Millennials remember this there's, more of you now than there are of us you're. On the sunny side of the hill and if you ever figure that out politically, boy it's gonna get real interesting, real fast right, so, the direction you move under stress is what people really are so if you really want to know if somebody is see. What they do when they're really under stress do they go to get on social media talk to their friends do they shorten the field that sort of look at the things in front and they look at the data you know do they go and weasel out of stuff is sort of go off the reservation and do all kinds of creative stuff that will tell you what, that person is but here becomes, the, the money part of this this is the key part how, you innovate is what you innovate how. You innovate is what you innovate you want radical innovation you gotta embrace the artist you, want to get scale you gotta embrace the engineer you, want to go fast you gotta embrace the athlete you want to build some sustainable, embrace the sage and you need all four of these to win so, here's, the biggest problems you're gonna run into and we're going to talk about the data in one second on this the. Biggest problem you have is that the people who are in the green position, are orphans, the. Artists, are orphans, you know the city of that you're in right now Ann Arbor has more venture capital per person than any city of the United States the, problem is does it relate to anything else in the state, no, your. Orphans, so the problem is you got a snuggle. Up to people who are trying to make a living and do things in other areas, the second problem are the blues and the yellows and the problem is they're oppositional, dogs and cats so. One you have to really engage the conflict, and the second problem is this is by far the longest cycle of innovation it's sometimes called death valley or the bottom of the bathtub how many been on a project that lost momentum, anybody. Bite on a project that lost momentum you sort of and you have to platoon players in and out yeah this is that part if, finally the, Reds the engineers, the problem is they're so optimized, that, there's no room to try anything else so, when the new thing shows up they're not prepared, for the new things because every moment of their life is basically, taken up so we have to rely on each other now, the other thing that's very important, about the dynamics, which is a key point is. Innovation. Doesn't move from the inside out moves from the outside in and think, about this for a minute when do people really change when do you really change I mean really. Well. When you made a mistake when your life sucks when you get divorced, when you lose a job when, your house goes away somebody. Close to you passes away why do you change when your life sucks, because. The risk of trying something radical, and the reward of seeing reor at is reversed. In a crisis, they'll, be following us whether, this is Apple. Trading, at $3 a share in 1997. Right. Whether, this is Gandhi in the march to the sea it also has a negative effect this is also Hitler in the brown shirts the. No is it doesn't move inside out it moves outside in where. The middle of the organization, is trying to do what maintain and the outside is trying to do what introduce, diversity. Now the other time the people changes, when when they're in a role you win the lottery you got promoted you remove all, that stuff why, do you try stuff then because the same thing the risk of trying something radical, the reward of where you're at is reversed right it's called risk capital right in our world in incidentally, Google you've had a lot of risk capital that past ten years a lot of risk capital so the notion is don't, launch innovation, from the inside out because what will happen to that innovation is what the organization, will begin to converge it and, begin to make it more incremental, you have to start at the perimeter the farther away you can be from headquarters the. Farther you can be away from the watchful, eye the, better off you're going to be now, this leads us to this last slide here this. Is referred to as as. The. Schumpeter cycle, in. The Schumpeter cycle i want, you to think about this for a minute first. Of all, organizations. Are created by greens typically. They want it they want to have freedom this, is you this is Larry and Serge, created, in a garage in, Menlo right this is what this was but, next we got to get money involved and these are the people who gave you money early on right.
These Are the big these, are the big Apollo funds and things that gave Google money at the very beginning and they focus, the two then, what happens is you grow ballistically, we got to get the yellows on board because we gotta have the right people sell the right people build the right community and then we have to have ultimately, the redzone for because we have to get to scale somebody. Following us now, what's important about this once, we get to scale the, problem, is every, capital committee person every. Metric that we've got every. Every. Process. That we've run is designed, to do what to, deviance, to. Eliminate. It why. Didn't, why didn't Sears become Amazon. Why. Didn't Microsoft, become Google, right. Why, didn't McDonald's, become Starbucks. It. Had nothing to do with competition, they, had all the stuff in the lab right. You know this the, notion is and this is the radical part of this whole discussion what. Schumpeter said is radical. And whether it depends, on who you're talking to we had six or seven Nobel, Prize winners in economics, it's 1969, I've talked about this the radical, part of this is that, what Schumpeter, said is that we're not destroyed by competitors, but. Schumpeter said is we. Kill ourselves, we've. Seen the enemy and he is us our dominant logic becomes so strong we. Can't get over it right, and as a nation state in America, aren't we suffering from this right now that we can't get over our dominant, logic we can't see the other he, calls this the point of creative. Destruction, and, ironically. Organizations. That begin to fail quickly have, a much better chance of innovating, because they have to go back to, the beginning of the cycle Apple, trading at three dollars a share somebody, following us but think about General, Motors in 1950, had 53 percent of the world car market, drip. Drip. Drip. It's called flatlining so the notion is there's an interesting sort of confounding a part to this where, even. Though there's tension the best thing that can happen is when one, cycle. Shifts into the other cycle, in a relatively, straightforward, way so we can put cause in fact together so here's what here's the thing to do I'm going to turn this over to Sandy so you could talk about the book and what, you can do here in your work stop, believing, you can see the future make. Smaller wider bets, choosing. Big over fast no pick up your pace go faster, right. Mistaking. Your managers for innovators no encourage. Encourage. And. Support your weirdos, we, need weirdos, and incidentally. If you're an organization that's, really Green weirdos, are reds everybody. Following us if you're a total yeah you're AB yellow organization, the weirdos are blue they're, just not like you having. More ambition, than capability. Right, talent. Matters, you got to go out and build on the capability, you have I love what the armed forces say you don't fight with the army you want you fight with the army you have right, which i think is great starting, at the center and move out it's not student body right it's a perimeter game I worked on a project that you know that it was originally called c2 it, was you know it as Coke Zero works. On Coke Zero the
2018-05-21