Wednesday 23 April 2008
Professor Lynda Gratton
Hot Spots: Why some companies buzz with energy and innovation and others don’t
BFI IMAX, London
Sometimes, without explanation, particular organisations become a focus for great ideas and explosive growth - it seems they can do no wrong. But are these periods of brilliance really without explanation? Can these golden moments be cultivated and replicated?
Professor Lynda Gratton believes they can. In her address to the London Business Forum at the IMAX Cinema, Gratton drew on her experience studying corporate behaviour at companies such as Unilever, Nokia and Goldman Sachs to offer a few guidelines for how others can nurture creative 'Hot Spots'.
First of all, she is quick to point out that Hot Spots are not something you can 'make happen'. You can't just write a memo telling people to be highly energised. Hot Spots are emergent phenomena, produced by a combination of factors.
Even with the right conditions, results aren't guaranteed. But you can increase the chances of being in a Hot Spot from, say, 20% to 50%.
Gratton's work at the London Business School has helped her to identify the three factors that promote the development of Hot Spots.
The first she defines as a cooperative mindset. If there's no trust or willingness to share ideas, you'll never generate a creative atmosphere.
The second factor is boundary spanning. New ideas are often the product of two previously unassociated thoughts, so crossing boundaries within and beyond organisations can be very fruitful.
The third Hot Spot factor Gratton calls the igniting purpose. Getting a diverse bunch of cooperative people together creates the potential for a Hot Spot, but it takes a fresh idea or challenge to really ignite their creativity.
So how can businesses promote each of these three factors and start generating heat? Gratton sheds some light.
It's easy to cooperate with people who are similar to you. If they share the same office as you, the same training, the same language, then you have plenty of common ground on which to build a relationship.
But what about the modern global team, made up of colleagues around the world who might never even meet? How can they trust each other and truly cooperate?
Gratton asserts that cooperation is a product of upbringing, role models, attitudes and values. She cites Goldman Sachs as a prime example. The financial services industry has a reputation for being highly competitive, and yes, the traders at Goldman Sachs are very competitive - but only with their competitors. Internally, they have a very cooperative culture. The corporate philosophy is that, to survive and grow, everyone at Goldman Sachs needs to work together.
This approach is deeply embedded in the way the firm does business, and Gratton illustrates this with a few telling examples.
Firstly, the recruitment process is extremely rigorous. Prospective employees are interviewed up to 30 times, and not just by HR professionals. The most senior partners are involved in the process too. At every stage, the main criterion for selection is whether the candidate is able to work as part of a team or prefers to act as an individual. Team players are welcomed. Individuals are recommended to a rival firm down the road.
Successful applicants can then look forward to a thorough and generous mentoring programme. As Gratton puts it, the easiest gift you can give to your employees (or your children) is money; but the most precious gift is time. A cooperative culture allows senior members the freedom to give their time coaching others in the organisation.
Gratton points out that nobody can be paid to truly mentor someone, in the same way that no one can be paid to give a gift. It's not cooperation if you're doing it for selfish reasons.
Further proof of Goldman Sachs's cooperative attitude comes from a story - possibly apocryphal - about the niece of one of the firm's top executives. She joined the firm straight from Harvard and, keen to show her uncle that she was making the most of the opportunity, she would make copies of her trades and send them to him, along with a note saying, in essence, "Look what I did." She did this four or five times before the uncle responded. His was a simple one-line message: "At Goldman Sachs, we use the word we, not the word I."
We is the language of cooperation. I is the language of self-interested competition.
Some industries - sales, for example - thrive on internal competition, with lavish rewards for top performers and penalties for those who fall behind. Succession tends to be competitive too, leading to rivalry between colleagues - not always friendly rivalry. Yet Gratton notes that this model has never definitively been proven as effective. Might a cooperative sales team be more productive? The evidence, so far, has not been conclusive either way, but cooperation certainly creates a more pleasant atmosphere for all concerned.
When worlds collide, they create friction and heat. Unfortunately, most organisations have physical and social barriers that keep their different worlds very separate. But there are ways of crossing those boundaries and combining separate ideas to produce a third, original thought.
Gratton uses the example of Unilever. She reliably informs the audience that more and more teenage boys these days are smelling of chocolate. The reason? Lynx deodorant has created a chocolate scent - the fastest-selling teen deodorant ever - which they claim is attractive to girls. Gratton suspects it's no coincidence that Unilever owns both Lynx and Walls, the makers of Magnum ice cream, which also uses chocolate to enhance desirability. Perhaps a Lynx executive met a Walls researcher at one of Unilever's many multidisciplinary conferences? Or maybe they just bumped into each other in a corridor? However it happened, two ideas were synthesised into a third, and a Hot Spot flared into life.
In academic terms, this is know as exploration through synthesis: the generation of new ideas by combining very separate concepts or disciplines. There is still a place for specialisation, of course: lock a dozen deodorant experts in a lab for a year and they will thoroughly explore the possibilities generated by their collective expertise. But it seems to be the 'accidental' collision of different fields that produces the most dramatic developments.
Nokia deliberately tries to create networks between their employees that run right across their corporate structure, and beyond. They run exchange and research programmes with 120 universities around the world, always sharing and learning new ideas.
But Nokia also makes the most of their own preoccupations. Every year, they ask their staff to write down and submit the six work-related issues that are most on their mind. These issues are collated and working groups are formed involving everyone who said they were interested in that particular topic, no matter what part of the company they come from. For instance, many of them were preoccupied with their falling sales among teenagers in China. What was going wrong? It was only when people from across the organisation got together and pooled their knowledge that the picture became clear: Chinese teenagers didn't want efficient functionality from their phones, they wanted them to be shiny fashion accessories. Nokia therefore revised their whole Chinese strategy, placing more emphasis on looks and less on functionality. Without this cross-boundary process, they might have continued down the wrong road for much, much longer.
So, you have a diverse group of people ready to cooperate. This is what Gratton calls 'latent energy'. What you need now is a purpose, a spark to ignite their creative potential.
What form can that spark take? In many cases, says Gratton, it can be a simple question. The CEO of Indian car giant Tata asked one such question four years ago: "Why can't we make a 100,000-rupee car?" Thus began the development process of the new Nano, a low-cost car that looks likely to revolutionise transport throughout the subcontinent.
If a provocative question doesn't work, then perhaps a vision will. This can take the form of a sentence beginning, "Imagine a world where..." The aim of a vision is to fire the imagination. "Imagine a world where we get a 15% return on capital employed" is not a vision.
Complex tasks can also be an igniting purpose. To the right people, they become a challenge.
For a purpose to really ignite a Hot Spot, it needs to be complex, meaningful in its potential outcome, and open to many possible approaches. That means it will require cooperation from people across boundaries.
The great joy of Hot Spots is that those involved become highly motivated and willing to contribute, regardless of reward. Wikipedia, for example, is an enormous work of scholarship created entirely by volunteers, who contribute because they believe in the vision of a world where every person has free access to every piece of information.
Linux is another case in point. Thousands of volunteer developers have created an open source software architecture that has been refined over several years - to the point where it now underpins the operations of many global institutions, including Gratton's London Business School.
The internet has been instrumental in allowing these voluntary communities to form and, with a sufficiently compelling purpose, there's no reason why online communities can't form to solve business issues too.
To support this principle, Gratton is gathering her own community to promote the generation of more Hot Spots. You can sign up now at www.hotspotsmovement.com.