Perspectives on Leadership and Innovation

Building a culture of innovation – Part 2

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Learning to be more agile

Learning to be more agile - Perspectives on Leadership and Innovation

In this episode, Tom Pedersen and Steve Monaghan discuss the critical factors necessary for corporations to progress, innovate, and adapt to external forces of change. Steve shares his perspective based on his corporate experience, and emphasizes the need for a different approach. He highlights the importance of starting small, learning from failures, and quickly exiting unsuccessful ventures—a mindset he believes is lacking in many organizations. Steve suggests reevaluating approval processes, adopting agile practices, and rethinking financial strategies to mitigate risk and encourage experimentation. Drawing examples from successful companies like Tesla and Apple, which emerged from failures and embraced innovation, they emphasize the significance of capitalizing on failures and swiftly incorporating the lessons learned into the organization’s growth and development.

Key Takeaways

  1. Corporations should focus on starting small, learning from failures, and exiting fast to move forward, innovate, and embrace external changes.
  2. Approval processes and financial strategies need to be reevaluated to encourage risk-taking and agility in decision-making.
  3. Incorporating agile practices beyond operations and software development can drive innovation and adaptation.
  4. Learning from failures and capitalizing on the lessons gained is essential for growth and development within organizations.
  5. Companies that refuse to take small risks and embrace change may fall behind and miss out on opportunities for innovation.

The Conversation

Tom: What would be critical for larger Japanese corporations if they want to move forward, move quicker, and be more innovative and embrace these forces of change from outside? From your perspective, having now lived in Japan for a while and worked for a Japanese corporation on several projects, what do you think is a great way forward?

Steve: Start small, learn, and exit fast. Those are three characteristics that you don’t see here, unfortunately. I worked for another corporation somewhere else in the world where the management was so paranoid, they didn’t want to start anything that had any risk associated. They wanted a riskless project; which doesn’t exist, and they spent more money waiting for that to happen than to actually execute just the first steps of it and exit, which would have cost far less.

In other words, it became acceptable to have a bigger loss through inaction than it was to take a small loss to move forward. And I think that there’s an urgency not just in Japan, but everywhere to rethink how you take approval. We’ve heard of things like Agile, and you hear the mantra, “We have to be agile.” Well, we’re agile in operations and in software development and all these sorts of things, and that’s increasing around the world. But what we haven’t changed is our finance and our recognition of risk.

Instead of having a budget that you commit to at the beginning of the year and have to spend by the end, how do you make sure that: I’ve stage-gated this much investment, this is what’s at risk. If we lose now, it’s finite. And as per real options theory, if it fails, you kill it and if it works, you can look at how you reuse it and how you go to the next step. Unless you’re taking that step forward, you’ll never have that learning or discovery, and there’s a certain value in just having that experience and giving it a go.

So many startups are known for pivoting, so many corporations. If you look at some of the greatest innovations around the world, many have started out of failure. Tesla was a failure, and now it’s the most valuable car company in the world. And it was literally a failed startup.

Tom: Tesla was built on on the bones of NUMMI. It was built on the foundations of a failed joint venture between Toyota and GM. That’s the bones of it, right?

Steve: Absolutely. So what’s interesting to me is I remember we had Elon Musk come to speak at a Start Me Up Hong Kong event. I was running a kids accelerator there. He had come and was presenting before the kids, and when he was being interviewed he said, “You know what’s it like being an entrepreneur?” And I’ll never forget the quote. It’s just embedded in my brain. I live it every day. He said, “It’s like eating glass and staring at the abyss.”

So if you remember, Tesla almost crumbled. Tesla almost died with production hell, if you recall that. Then Space X blew up twice and if it blew up the third time it was dead, right? Now–I’m not sure if you saw the latest launch–what happened when it blew up? Everyone was clapping and cheering because they realized they had learned a lot and made progress, and they were prepared for that outcome.

Too many organizations aren’t prepared for the failure outcome and to look at what they can take away from it. Elon Musk has his successes and failures and whether you love him or hate him, you’ve got to admire the way that he approaches failure and risk. And the ability to keep driving forward even in the grimmest of times. And companies need to do that. We see it happened with many past companies, including ones I’ve worked for like Compaq, that aren’t with us today, because they refused to take those very small first steps to really changing the status quo.

Tom: I had a similar thought. Many years ago when Steve Jobs left Apple and went to Next computer.

Steve: Another almost massive failure: Next. And Apple was right against the wall right when he came back having driven it there himself.

Tom: I remember there was a magazine at the time in Japan called Computing Japan, and somebody asked me for a quote. I said, “Apple’s rotten to the core.” And now I look back on that, what I should have been doing is investing in Apple at the time, because I didn’t realize that, in the case of Steve Jobs, again somebody with positives and negatives, he was driven in the same way that Elon Musk is driven to do something that’s quite different about innovation.

Having many starts and many failures within an organization, capitalizing on those failures and learning their way forward. Those are large, iconic, disruptive types of companies. But I also see that they were against the ropes, too. And they were built on a foundation of failures, actually. And innovation in any organization is probably built upon that foundation of risk taking and accepting failures and learning very quickly what they can from those failures and taking it forward.

About the podcast

“Perspectives on Leadership and Innovation” is a podcast hosted by Tom Pedersen, Founder and CEO of BentoBox Innovation.

With special guest Steve Monaghan, General Partner, KK FinMirai.

Building a culture of innovation – Part 1

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Building a culture of innovation - Perspectives on Leadership and Innovation

Innovation and digital transformation are buzzwords that are often used in organizations, but developing a culture of innovation takes time and effort. Steve Monaghan, the first Chief Innovation Officer at DBS Bank, shares his experience on how they started their innovation culture. He emphasizes the importance of a shared language and communication, as well as starting with learning and venturing before investing in capital. He also highlights the misconception that the number of people in a team drives change, when it is actually the number of people engaged. By flipping the traditional model of capital, venturing, and learning, they were able to transform customer experience and positively impact the organization.

Key Takeaways

  1. Developing an innovation culture takes time and cannot be rushed.
  2. Shared language and effective communication are essential for fostering innovation.
  3. Engagement, not team size, drives change and innovation.
  4. Flipping the traditional model: Start with learning and venturing before investing capital. Experiential learning is powerful in driving innovation.
  5. Focus on continuous improvement, learning from initial steps, and purposeful application of technology.

The Conversation

Tom: Steve, thanks for joining me today. I wanted to have a conversation about cultures of innovation—what works, and how to get them started in organizations. So I think we hear the word, “digital transformation”—we hear the word “innovation” batted around a lot. Can we talk about the origins of innovation because you were the first Chief Innovation Officer at DBS Bank, and how did that get started? Can you give us a little background of that?

Steve: Yeah, sure. The answer to how it got started is, “slowly.” If I was to sum it up into one word, that would be it. And the reason for that is that, you cannot start a culture of innovation immediately. By definition, a culture takes time to develop and evolve.

And there’s often this misconception that people talking about “you’ve got to create an agile culture” or “you’ve got to create an innovation culture,” but what you’re really dealing with is the actual culture of an institution. And then you’ve got to break apart what a culture is.

So, one of the early lessons that I discovered at DBS was that if you didn’t know, K-N-O-W, then the only answer was going to be “no.” And the reason for that is unless you had a common language, unless you actually understood the basics about the things that we’re about to embark on, your only responsible answer as an executive was, “no.”

So, I’ll use the Chinese saying; it’s called “jī tóng yā jiǎng,” and forgive the mispronunciation, but what it means is “Chicken talk with duck.” Both lots of squawking, but no understanding. And I think that that was really my first experience at DBS. Here I am speaking my language of innovation and there was absolutely no comprehension on the other side of the fence as to what that meant. So, all cultures start with some degree of shared language and ability to communicate.

And I think that’s really the first foundation that needs to be laid.

Tom: You started out with a really small team. As I remember, you only had three or four people in the mix when you first started, right?

Steve: I think yes. And I hired one soon thereafter. And so we were, including myself, we were a massive team of six.

So, change is not driven by the number of people that you have in a team. It’s driven by the number of people you engage. And so the first thing was, how to get a multiplier around that. And I think you’ve actually covered off the most important thing because there’s an expectation that you’re going to get immediate results by creating magic, you know, “technology magic.”

And that’s driven by the fact that the way technology was dealt with inside large organizations and still is in many countries around the world, particularly in this country in Japan, is they tend to get enamored with the technology. And they buy technology, and then they try to work out how to use it. And then they find it’s not really fit for purpose.

And we’ve seen that at a national level here in Japan recently with the failure of a number of large projects which have spanned, in some cases almost multiple decades that were all about embracing new technology and delivering to market. But they never really understood what lay behind. So that model of: capital, then venturing, and then learning had to be displaced.

And one of the great things that I had as an advantage for me was the ability to work with you in HR in talent and learning, because learning is the place to start, not the place to finish.

So usually it would be that you would spend capital, you would try to test something and make it work. And the learning was, well, it didn’t work. Let’s not do it again.

And so i was armed. As you might also recall, with this massive budget, a couple of hundred thousand dollars. And so the first thing we did was get people engaged around understanding the tech, understanding prototypes and getting their hands on it, including the CEO, who once they managed to see how things actually transformed and customer experience transformed, actually started to become very positive about the potential of what lay ahead.

So we flipped that model to: learning, venturing, and then capital. And I think that that’s a big difference versus many corporations even today, that start with capital and create these huge budgets and then don’t get the result they want.

We did the opposite. We started with something small and then learned, pulled together the learning through venturing—and experiential learning is the most powerful form of learning—and then using capital to scale, not vice versa.

And one of the things that I see in Japan is they tend to create these massive budgets, but they never actually make any progress against them because they’re trying to get 100% solved when the most important thing is getting the first 1%.

How do you take that first step? How do you learn from it? How do you continue to build upon it, reuse it, all those sorts of things. And that’s how technology works.

About the podcast

“Perspectives on Leadership and Innovation” is a podcast hosted by Tom Pedersen, Founder and CEO of BentoBox Innovation.

With special guest Steve Monaghan, General Partner, KK FinMirai.

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