I’m participating in the Post2Post Virtual Book Tour for Exploiting Chaos: 150 Ways To Spark Innovation During Times of Change by Jeremy Gutsche. You can read the previous review and interviews of the book here. Exploiting Chaos covers some of the same ground as Scott Anthony’s Silver Lining, specifically the idea that chaotic times breed innovation. Jeremy Gutsche graciously answered these questions by email:
Q: I was interested in your take on the pattern of disruption. What do you think is the one most important thing managers can do to spot potential disruption and innovate an approach to it?
A: The most important thing is to avoid being dismissive of radical business models and smaller entrants. In almost every example of big companies getting toppled, the little guy didn't stand up and start fighting on day 1... New entrants creep up the value chain by offering innovative products and services to customers that incumbents typically ignore. They build strong customer insight and maverick brands. They slowly get stronger until the day they make a big alliance that enables them to compete at a higher level and topple the bigger incumbents and their outdated business models.
There's an urban legend about boiling a frog that suggest if you drop a frog into a pot of boiling water, he'll hop out right away. In contrast, if you drop a frog into lukewarm water and crank up the heat, he'll be boiled alive. Like us, the frog is more sensitive to shocking change. We need to find a way to take the smaller entrants more seriously, and decide whether or not these are companies are in areas where we should be competing, or acquiring smaller brands that we can foster (while letting them have the space they need to grow). Don't expect to be shocked. Find a way to experiment with new ideas and blossoming new entrants.
Q: Is that different from the one most important thing a small company can do to spot potential disruption and take advantage of it?
A: If big companies need to act small, small companies need to act big. Especially in times of chaos. Disney, Microsoft, Hyatt, GE, Apple, Sun, and HP were all founded during times of economic depression. The reason why is that people still buy things, but they become more conscious of what they need and why. They experiment with new things. Consumer needs evolve. Fortunately for small companies, larger incumbents are typically too slow-moving to detect these changes and act upon them. They focus on their core business and attempt to preserve profit margins. By moving quickly, small companies can identify disruptive opportunities and experiment with the business models that exploit that satisfy evolving consumer needs.
Q: You say in the book “Visualize disaster and opportunity.” In order to do that, it looks like you need to visualize the mistakes and unexpected things, and rehearse a strategy for dealing with them. But what’s a good strategy for understanding exactly what to visualize? Is there a way to visualize what you’ll do if you’re completely blindsided?!
A: When the world changes, and outdated business models topple, it's typically not from being completely blindsided. It's something more similar to the boiling-frog analogy described above. The challenge, then, is to identify some of the plausible ways that your industry could evolve, or be disrupted.
In the book, I talk about the way that you cannot predict the future, but you can develop scenarios and capitalize on what happens if those scenarios come true. Here's an excerpt:
In the 1970s, Pierre Wack was planning for the future at Royal Dutch Shell. For nearly three decades, oil prices had been relatively steady, but now the world was changing. Demand for oil had increased, US oil reserves were drying up, Middle Eastern countries grew stronger, and most of these countries resented the West, especially after the 1967 Arab-Israeli war.
Weaving this information together, Wack realized that Middle Eastern countries could spark an energy crisis. That fear led him to develop two potential scenarios.
The first scenario was based on the conventional wisdom that oil prices would remain relatively stable.
The second assumed an oil crisis, which he conveyed in detail with vivid storytelling. The potential impact was so severe that Wack’s managers were inspired to prepare for the worst.
In 1973 the world did encounter an oil price shock, but Royal Dutch Shell was ready. Once the weakest of the “big seven” oil empires, the company emerged as the most profitable and second in size.
In The Art of the Long View, Peter Schwartz refers to Wack’s example as one of the first modern uses of scenario analysis in business.
By developing multiple scenarios, you can avoid the certainty of being incorrect, and instead prepare for disruptive change.
Q: Your book talks about ideation. The hardest part of that is building on ideas. What are your rules of thumb for building on ideas?
A: Basically, start off by realizing that there is no point innovating if you think you already know the answer. We tend to enter brainstorming meetings with pre-existing ideas - especially if we are senior - and then we listen to other ideas and in our heads we reinforce our original idea. Instead, you need to throw away your favourite idea and build upon the ideas of others. Truly successful ideation happens when we springboard off the ideas of others.
In another excerpt from Exploiting Chaos, here are some ways to prevent ideation from sucking:
Set the stage: Invite the best people, create a useful space, and review the rules.
Crank it up: Get people out of their boxes. Start with a challenge like how to sell more pantyhose to men. Let sparks fly: Structure (create very specific questions). Seek flexibil¬ity (push for range and variety in the ideas suggested). Keep it fun (create group energy and encourage humor).
Add some salt and pepper: Reshape the question. Take an idea and dive deep. Contribute a crazy idea. Encourage physical movement.
Challenge with specific problems: For example, if you are trying to sell more pantyhose to men, try to answer the question, “How do we rename the color ‘pantyhose brown’ to make it more masculine?”
Wrap it: Get people to vote for their favorite ideas. Circle the room to see if there are any important comments.
What would you suggest people do who are working for a company that doesn’t move quickly and doesn’t embrace the ideas in your book? How can they develop a track record as an innovator?
I would say that right now, more than ever before, people stuck in those companies can wave a crisis flag to push the company to try new things. Now, more than ever before, it is possible to use the external credit crunch to cut through red tape, try new ways, and enhance our knowledge of evolving consumer needs.
