We have three learning objectives in the embed module. First we want to understand embed In its role in innovation within companies. And secondly, we want to identify embed related actions that your company can take to enable innovation for the long term because embed is about making innovation work for the long term. And lastly, we just want to understand embed as an evolution, not a revolution. So it's a slower movement than let's say generate. Okay, let's look at the innovation wayfinder.
We've completed the introduction frame and generate frame is the strategic mandate the linkage generate is the customer driven problem solving the actual innovations. And now we're ready to do embed and embed is about innovation. Organization renovation, it's changing your organization to make innovation work. Okay, the next element in embed that I want to highlight is something called organization principles. And it's another one of these invisible things, something that sits just under the surface of an organization. They're the underlying factors that have been used since the company was founded and probably across all companies since the Industrial Revolution on how we manage and control organizations.
We just the term management principles or organization principles begins to date it. Let me give you just some brief history on it because I think it's important to understand where it came from. In the early 19 hundred's, any large organization and those were mostly what they called production factories moving in to the first era of the Industrial Revolution, and then up to the 1900s. They learned that they needed a set of disciplines for how to manage these factories. And there is this scientists called Andrei fail and he set up The first principles and began, what we now known know is scientific management. We don't use that term anymore.
But that's really what he created. And these first concepts were also called principles of management. And they're the underlying factors for what it takes to successfully manage a company. He laid this out in his book general and industrial management, and it was written in 1916. Now managers are historically people have the power responsibility to make decisions and oversee the company. And so let's look at the beginning of Management Science.
And this chart you can read down through it shows a lot of the elements that he talked about, and what's interesting, and the reason I bring this chart up is many of these elements or fragments of them, still exist in organizations. divisions of work as far as how is the best way to organize work, so organize it around expertise? That can be distinguished in knowledgeable areas. So in these, you know, functions that have a common expertise versus, let's say an innovation team that requires a very diverse set of functions. The manager has the authority to give orders to employees versus an innovation team where everyone is equal and trying to figure it out together. The discipline one is really interesting.
It uses this word obedience. Obedience is the engine of an organization runs smoothly. I don't have to even say anything about that. It's so so alien to the way we think about organizations today, certainly innovation, unity of command, you only have one person that can tell you what to do, unity of direction and subordination of interests of the individual interest, personal interest are subordinate to the interest of the organization. That is really something but yet, this arcane is this looks in the list there are many of these elements that are still running companies. Now, this isn't exactly the same list, but later Peter Drucker, in the 70s came up with five basic operations in the work of a manager.
He said a manager sets, objectives, organizes, motivates and communicates measures and develops people. So it's beginning to kind of move it into this era but still not quite. The way we would think about it in the innovation world. You know, on the individual subordination to the company, I used to work when I got out of college. I can't tell you what your that is. It's too embarrassing, but I worked for a company named Kaiser aluminum, and it was a rolling and smelting mill and we had factories in Louisiana around New Orleans and they're and they were under the lower than the water.
Level. So if there was a flood in the employee handbook, if you worked in the factory, your first responsibility was to go to the factory and save the factory. And once that was put in place, you could go home and save your home from the flood. In fact, it's some companies, I think you'd have to sign this to agree that you would do this now, can you imagine in this day and age, putting all of your personal, your family and your home second to to this factory, but you know, that's how we used to think about organizations. Now, that isn't exactly 100% changed yet, but that just gives you an idea of how these organization principles, fragments of them are still driving organizations. Pay I want to turn now to look at some new ideas and organization principles.
I've been very fortunate to be invited To the innovation roundtable that's held in Copenhagen. It's an annual event. And it's a fantastic event I was there many years ago and was, was there again a few years ago. So I've been there twice as a speaker and a collaborator with this very energetic fun group. And at one of the events, we had a huge room and we had a set of round tables. And we had a host at each round table.
And that host was able to pick a topic and I picked organization principles for the innovation economy. And I don't know if you've ever been one of these things, but you know, they list it and then people go to whatever table is interesting to them. And I was like, well, no one's ever going to show up at my table. But I had lots of people at my table, we had a very interesting, fun conversation. And what came out of it is the list you see in front of you. I'm not going to read through all of it.
I'll just do some highlights. But it was really interesting listening to these people from around the world. Talk about how Organization needed to change. So not necessarily culture, not necessarily management principles, this is another aspect. And to get rid of some of these fragments that are still remaining from the days of enry fail and some of the other early Industrial Revolution, Eric, scientist, if you will, who gave us an idea of management that was about controlling it. So this is the list and just a few highlights.
The second one is interesting from workgroups to networks. I think this is a really important concept from departments from functions to this idea of networks. And we're going to see in the lead module, which is next the role of leaders and creating networks. From job descriptions to headlines, remember that discussion or story I told you about the CEO when we started, Whirlpool asked me, you know, I want innovation from everywhere and everyone I want every job to change and because I wasn't very smart. I thought, Oh my gosh, I'm gonna have to rewrite every job description. I don't even know if people still use job descriptions.
But this is like moving from this. Someone's going to tell you step by step what you need to do in your job to we're just going to give you the headlines from functional manager to inspirational leader from giving you the answers all the details to giving you a frame and allow you to deal with the uncertainty from constancy to a high rate of change, from opaqueness to transparency, and from clear boundaries to permeable suggestions, and I like that one a lot. So that's the list after lots of discussion, and that was the summary the group allowed me to summarize it. And I think it's a really provocative list. And so we're going to see in a second MVA I want you to think about what are the remnants, the fragments that are left in your company that need to be renovated Maybe eradicated but let's say renovated because that's the theme of embed, so that innovation can work.
And we'll talk about that in a second. This is on organization principles. And just as the example I gave you the Copenhagen example, what I'd like you to do is I'd like you to think about your company. Think about what organization principles they're probably not ever articulated. But you think what might be fragments that are left over, perhaps from the Industrial Revolution, or from a very early time, let's say pre innovation, that you think needs to be let's use the word renovated and not eradicated because we're in the embed platform and that's about renovation, needs to be renovated to make sure that innovation can work and remember, think about these at an organizational level. We're going to talk about leadership in a second and more on the end.
Vigil level and what has to happen to lead people in the innovation economy. This is these organization principles, this mindset or this idea, this prescription about what has to exist to create an and run an organization. So I'd like you to turn off the module, take a few minutes, use this form or just use a piece of paper. Just think about what exists in your company, and what needs to be changed. And this is a great exercise to do with a group of people, particularly innovators, or other people who are trying to change the organization. And just think about what those changes mean.
It is interesting to bring them to light to take them out of the where the monster lives in the basement of the HQ and begin to talk about why did they even exist and why are they still remaining? And what could replace them, how might you replace them. So I'll see you in a few minutes. Okay, we're looking at the four elements of embed. And now we're going to look at endo systems or management systems. And this is a big one and embed.
And this is also a big one that companies Miss. This is taking all the management systems and beginning to re engineer them carefully, slowly, deliberately. But first, we have to make them visible. So let's look at management systems. You know, I've been trying to figure out the best way to describe endo systems and management systems. And over the last 20 years, I've used every analogy you can imagine and after 20 years, I finally came to the conclusion that the best analogy the best teacher, maybe of management systems, is a little teeny, baby.
So for this section, I just want to put you into To an alternative universe and picture yourself in a happy relationship with your significant other, and you've moved in together and you live in this stunning condo, it's very contemporary clean edges. open concept. It's kind of this amazing space. You have this apple store like staircase in a kitchen any chef would envy with open shelving and gas cooktops. And well, life is going really well. Then one day, you as a couple, learn that you're expecting a baby and your life is going to change forever.
And at some point during the pregnancy, because you have so many things on your mind. You wake up in a cold sweat in the middle of the night because you're thinking about this house and you realize that after the baby's born you're only have a few months if that to protect the baby so the house doesn't hurt. And you calmed down a little bit because you realized, okay, I can baby proof the house and off to go buy a new house, we'd have to move out, we can baby proof it. So you begin to baby proof it so to keep it until the baby can take care of themselves. So the same is true with innovation. You bring this fragile thing into the company.
And there are things there that will hurt it. Remember in the introductory module, I said, there's this monster, this thing that lives in the basement of your HQ. And it's there day in day out running the company and if you don't begin to adapt it, it will kill innovation, same thing. So in in the formative years of innovation, this adaption is best accomplished through re engineering, what I call the endo systems or the management systems of your company. Now we talked about eco systems in the frame. Module.
These are endo systems. These are their cousins. These are the ones that live inside. And they really are the thing that drives the company day in and day out. And they were more likely put in place before your company thought about innovation. And so, one of the things you have to think about is how do you begin to adjust them Now, a lot of times I have people in my workshops or when I'm working with companies that they say that really what's stopping innovation is culture and why that may be true.
I often think it's more likely management systems and management systems and culture are the opposite sides of the same coin. Only management systems are the harder edge side of that. And they're the things that very rarely get addressed but need to get addressed to make innovation work. So in the next section, I'm going to show you an example list of some managers But system categories. And I'm going to give you some examples from over the year of companies that have gone into those categories and begin to reengineer the management systems so that innovation can thrive. Here's a depiction of a generalized set of management system categories and these exist in many companies.
Now, they may be named something differently and depending on the type of business you are, you may have product related management systems if you're a product company, etc. But generally these are the management system categories. Now, management systems are this framework of policies and procedures, and practices that are used by the organization to ensure that it can fulfill all the tasks required to achieve its objectives. Now, sometimes they manifest themselves into functions or departments. So you will see some names here that look like Like perhaps departments in your company, but they're still management systems. And there are others that float throughout the organization that cut across that may not have a department associated with them with them, but they're just as formidable as the ones that have departments associated with them.
Now note that these are not culture and remember that double sided coin management system is the other side. It's the harder edge business side of the coin. management systems are generally invisible to most people who work in the company. And they were likely set up as the condo example. Before innovation, and as with the condo if you want innovation to survive and thrive, the systems need to be re engineered to enable innovation. They don't need to be thrown out, but they need to be re engineered.
So we're going to look at some management system examples using This wheel, but let me give you three kind of things to think about as changing Management Systems and how they may, how you may approach it depending on the uniqueness of your company, they are where you are in the innovation journey. If you're at the beginning, you perhaps have more management systems than you can address but as you go through, you keep chipping away at them and re engineering them. The second one is just the unique nature of the of your company. And thirdly is how much change your company can withstand. Now, let me go around the wheel and give you some examples. These come from many, many companies, not just one company, so it's a little bit deceiving, but over time over several years, you may have dress as many as shown on here or more, but I just want to bring them to light.
So let's start with organization. I work with a manufacturing company now that wants innovation from everywhere and everyone. And the hourly blue collar workers on the line have a hard time leaving the line to be an innovation session. So they had to go through a series of changes in Union rules in work roles in how the line is operated in replacements, that kind of stuff to allow these frontline workers to be part of innovation. So that's an example of a tweak. Now a lot of companies need to do this for all employees because getting them off the job, whether they're on a manufacturing line or not, is still very difficult.
An example in Strategy and Finance. First, the finance one this was written about in the Harvard business cases that were written about on Whirlpool in 2001, and Whirlpool doesn't If you came up with an idea in the middle of the year, when we started innovation, the budgeting process was already allocated and there was no money to give you to work on your idea. And I'm not talking about big money, I'm talking about 10,000 $20,000. And so one of the first things Whirlpool did was set up seed funds, took money out of the operating budgets and set them aside. And basically use those to fund the ideas is kind of an artificial way to address budgeting until budgeting and finance systems overall could be changed so that there could be funds available for innovators. And that would not be a barrier to innovators pursuing their idea.
Another one that I showed you earlier was the dashboard. I showed you that in frame but the beginning of changing finance systems. So that reporting innovation is on par with reporting other key business processes. Now the next example here is research and technology. And this could be technology in general how the company looks at advanced technology or brings in new technology that's out in the world and decides whether it's something that they want to put into their company and innovate around it. In this example, I'm going to go to the unleashing innovation book, where in one of the chapters I talked about the long reengineering of the product development process at Whirlpool, and the innovation process so that they could work together.
They, as you know, have different outcomes. One is to de risk and in this case to manufacturer, the other one, the innovation one is to look at all kinds of ideas and figure out what's the biggest idea possible. And we first brought innovation, those two processes were at war, if you will. And so it took many, many people many years to re engineer both of those That innovation became, if you will, the fuzzy front end to the product development cycle. This customer facing area is just all the functions that interact with the customer, customer service, sales, marketing, etc. And the one I'm going to use here is one that happens in a lot of companies is they're bringing innovation and in a lot of companies market research, that function has been one of the only functions in the company that access to customer information.
And when you start an innovation, innovators are out in the marketplace with customers all the time learning things firsthand. Sometimes there's a conflict between that market research group who in the past has kind of controlled all that information and innovators. And the truth is you need both of those. So getting those groups to work together so that market research could help train the innovators, but also figure out this archival process. where we store information about the customer, and in what format so that successive innovators can have access to it. HR and communication.
This is a really big one, I just put a few HR ones here. And one communication, I put compensation here. I don't have time to get into compensation. I talked about it in my book a little bit. But the only thing I'd like you to think about is in a compensation system that you're trying to re engineer to make innovation work to do it very, very carefully. Because oftentimes, when you make changes, it can be divisive, and it can have unintended consequences.
So I would not start with compensation, I would be very careful and mindful, and take enough time to figure out what changes might need to be made. Now the other example here is talent. This is how you promote people what is the criteria in the company and putting innovation in that criteria takes some work It's not gonna happen naturally. The other thing is hiring I work with a company who uses their unifying process. And there I'm mentors and brings in new MBAs and puts them through that innovation process working on a real innovation, and observes how they do in that setting. And that's part of the criteria that they use in making selection decisions.
And the last one here is an all hands meetings if you have a communication group that helps with how you communicate the important things that are happening in your company, and maybe they do some kind of an agenda for all supervisors or managers for their weekly meeting or whatever, putting innovation in there. And being mindful of how that's communicated. And making sure it's always on the agenda so that people are talking about it is an important reengineering. The next one is it it is huge. You know, it is enterprise wide and As I said earlier, some organizations the head of innovation sits in it because of this enterprise view mindset. But when you're working on innovation and you're out in the marketplace, creating innovation, there's a lot of IT issues that you run into and a lot of plug and play things, things you want to bring in and use to advance the innovation to be on the social media side, etc.
So I work with a group who puts it people on every innovation project not knowing where it's going to go so that if if they do need innovation support, that those people are very emotionally connected to the innovation. Legal is huge. And I've talked about this a little bit earlier and ecosystems, but the whole IP strategy, how you deal with IP when you start collaborating with other companies and other entities, who owns what and changing that to make sure that that does not become a barrier to innovation and NDA or work with a lot of companies who have innovation on the walls and innovation everywhere. But they have these formidable MBAs that you can't talk about anything in a session. And so even when you're doing fuzzy front end innovation, you know, that's really hard if you're really controlled by strong strong NDA, now you still need to protect the company is have to do this in a smart way.
Learning is big. I work with a company who has a book club and innovation book club for all employees. And about every quarter, they introduce a few new books and they have physical bookshelves in the company that people could check out the books. Knowledge Management is huge here, the democratization of knowledge and who has access to it, how it gets stored, how you find it, that's knowledge on competitors, customers, trends, you name it, and so changing that so innovators have access to it. And changing the notion of transparency. This was this is Very hard for some companies who are used to keeping things close to the vest, if you will, and then going through a process to open that up is can be very scary sometimes.
But that's necessary in innovation space, you know, all this move toward open spaces. And I think it was in one of the one of the space junk cartoons, but not right away. But figuring out where innovators are going to work at the beginning, before you have before you hit, let's say breakeven, and you have are showing some results, innovators can work anywhere, but over time, you might want to have an innovation space. So that just give you some examples around that we'll have management systems that need to be changed. And what's really important here is someone has to be accountable to make those changes. And it's usually not the frontline innovators.
It's the person running the Innovation Initiative. It's that council that's overseeing innovation. It's so An entity that understands management systems that has the wherewithal and the credibility in the organization to work with the people that they need to work with to re engineer management systems so that innovation can work. Okay, now that we've seen management systems and get some idea of not just the categories, but within those categories, some examples of things that need renovated again, across many companies, I'd like you to look at your company and this is the practice in the MBA the minimal viable approach, and we're going to use the wheel and I have several steps I'd like you to go through here. First of all, I'd like you to download the wheel. And then I have five steps that I'd like you to think about first is to go around the wheel and identify the management systems associated with the categories that might need renovated.
And that means checking off the categories but also as I did in my example, writing out some of the management systems in the blank spaces Now, if the innovation management system will doesn't work for you make any changes that you need to make. And then once you do that, and by the way, talk to some innovators, some serial innovators to help you identify things that are getting in the way. But once you get a pretty good list, then select one and just one and select it based on your belief that you can possibly address it within the next six months. So not the biggest one, but one that will have an impact. Secondly, do some management system ethnography, if you will, like what is it? What is this management system?
What is its business purpose? In other words, what did the company hire it to do? What job did it did the company hire it to do? How does it fit in the strategic architecture? is it part of a business cycle? You know, if it's something on a five year cycle, then you have to be mindful of that when you start renovating and if It's not a six month cycle or no cycle at all that has impact on how you think about changing it.
What's its timing, its key stakeholders, how's it measured? And then number three, what is the relationship of this management system to innovation? Can you describe it? Number four, identify two or three things that that will cause your good intentions to derail. Often, when you get into the management systems place, you're in a political space. And so think about things that might derail you, maybe you're trying to move too fast, maybe you really don't understand it, maybe those that you're asking for help really don't understand innovation.
Maybe there's a stakeholder out there that can halt your progress, etc. And then, take the first step, perhaps have a meeting with the management system owner and begin discussing possible changes and synergies that are going to help both. So take a few minutes, turn off the module. Download what you need. And just do this as a thought process for now you can do it later. And you can imagine taking this wheel and starting working on things.
And as I said earlier, innovation is a continuous improvement exercise. And this is a lot of it every couple years thinking about what are the big management systems that need adjusted? You know, when I started my job at Whirlpool, I thought I'd spend most of the time creating innovations. But as it turns out, over the many years that I led the initiative most of the work that I did most to help Whirlpool become more innovative I and others did was in the management system area. So I'll see you when you get finished. Okay, just to look at embedded a glance, remember this is about renovation, how you renovate the organization itself, so that innovation can work.
This is what sits around, generate around all these teams to make sure that in happens, that barriers are removed and that innovation can happen in the long term. So it's about how you change the company, how you change the way it runs, how you remove barriers, how you adopt a mindset on change, and how you address the underlying principles that are guiding the organization. And we looked at four areas, we looked at change models, and the change models. These are perspectives and levels of how we change the organization. We looked at the enterprise initiative, individual and stakeholder. And that we understood that change sits in a political arena, if you will.
This is really important these levels of change and our notion of change, because we need to adapt the organization to make innovation work and how we do that and at different levels are important. And the MVA we use here was the stakeholder analysis. Then we looked at culture, evolution. And we talked about maybe in the ideal state, what is the kind of culture that drives innovation. We define culture as a shared set of assumptions and beliefs that are passed down generation to generation. And we understood that often there are competing values or competing cultures within a company.
And this is important because culture can be adapted to help enable innovation. And because innovation itself creates sweeping changes that our culture needs to go through to remain competitive, and the MVA here we used is the competing values model and instrument. Now the next element, the third element was organization principles. We realize that these are things that are used to run the organization and they're generally command and control kind of things. And they often permeate how we treat each other, how we're supervised etc. in an organization and for the most part They're very old in nature and they have some fragments that remain.
We don't follow the bat list anymore, but we have some that remain. And that understanding how to run a vote rate these and bring those up to date are really important. And in this case, we use the MVA is the organization principles, steps. And then lastly, the endo or management systems. And this is really a big section in here. These are these heart edge management, procedures, policies, practice practices that run the organization.
This really is that thing that lives in the basement. And management systems are the other side of the coin to culture. And we understand that re inventing them or re engineering them to remove barriers are going to make innovation work in the long term and we use the the NBA the five step change management system model. Okay, so that's the embed model with the four elements. And, again, embed is a really important platform in the innovation universe. Because embed is what makes innovation long lasting.
It's what makes it part of the DNA, or always on second nature to the company. And if you don't work on embed, the halflife for generate is about 18 months, because as I said earlier, things in the organization began to shut it down. And so having someone accountable in the organization to focus on in bed, whether that's the person leading innovation a council, and making people in your company aware, particularly innovators of what embed is and why it's so important, so they can help identify the barriers and then doing it slowly and not throwing the baby out with the bathwater. Congratulations you just finished the module on embed and now the next module up will be lead