While some might see the paring of discipline and innovation oxymoronic, Robert Herbold’s vignettes of various companies, along with his experience at Microsoft and Procter & Gamble, combine to support the thesis he shared with the World Innovation Forum audience at the New York City Center. Simply put: “You must balance discipline on one hand and innovation on the other.” Bureaucracies, Fiefdoms, and Silos
Herbold first talked of Kodak’s decline. “Kodak was a tower of strength in the ‘70s, ‘80s, and ‘90s,” he reminded attendees. “But beginning in 1996, the world began to pass them by and the stock began a long decline .” The digital age loomed over Kodak’s complex, bureaucratic structure that rested on its laurels, while film prices plummeted and digital became the rage. “The world was changing faster than Kodak,” said Herbold. Herbold addressed a similar structure at Sony. “Back in the 1980s and early-mid 1990’s, Sony owned the tv business, they were the giant in the game player business, and they invented the Walkman that changed the way people listened to music. But, by the late 1990’s, they were in trouble. New products like the iPod were hard for Sony to invent, since they required hardware, software, and music integration, and while Sony had all those skills, they were buried in separate fiefdoms at the company,” he noted. “Eventually, their response to the iPod was Connect,” a product that used a mini disk. “It was not the way people wanted to store music.” Recently Sony appointed a new CEO, Howard Stringer, whose job is to quell the fiefdoms and achieve the collaboration that will be necessary to launch successful product ventures. Fiefdoms and turf wars are the undoing of efficiency and innovation, according to Herbold, who illustrated Microsoft’s challenges. “When I visited the Microsoft sales subsidiary in Germany in 1995, I found out that they had 70 IT people with their own data center. The head of the organization handed me his business card. It said he was the President of Microsoft Germany . He thought he was President, and I knew he was the sales guy! ” Herbold knew a major infusion of discipline was needed to achieve a lean standardized operation, since all the Microsoft sales subsidiaries had become fiefdoms. In Germany, the data center was eliminated and the staff of 70 IT people was cut to two, he explained, “We had to fix it. It was an embarrassment. We had to make our systems and organization a showcase for our customers to see how lean you could run things with standardized Microsoft software and a global IT architecture, and how that puts the pressure back where it belongs: providing innovation to customers.” Herbold refers to “functional fragmentation” as a common pitfall in an organization. “It’s what happens in fiefdoms and silos.” Everyone wants to do their own thing. They go off and develop their own IT practices, and their own HR approaches; they develop complicated financial measures to support their claim that they are different. They aggressively justify their excessive staffing as being absolutely essential. “To avoid these kinds of problems, it’s important to rotate people. Once people are in their jobs for two to three years, they believe they have figured out how to do it. If you leave them there longer, they begin to form their fiefdom, hire too many people, close down any innovation, institutionalize their legacy practices, and tell management that such approaches are critical to their success.” The Right Ideas
Herbold also cautioned executives on excessive reliance on making decisions via getting approvals from all levels of the chain of command, offering Procter & Gamble as an example. “In the 1980s at P&G, if a brand manager got a bright idea, it went up the chain of command to the Associate Ad Manager and there were changes. Then it went to the Advertising Manager and there were more changes, then it went to the Division Manager, then to the group VP, etc.” In this scenario the bosses are pleased, but “the customer is being given a secondary role in whether the bright idea has any merit.” Herbold advised. “Don’t swamp good ideas with layers of wisdom; let the customers decide what represents genuine innovation.” Often leaders know the general direction they want to take their organization, he explained. “But they don’t know how to bring it about. Too often they rely on trickle down communications to describe the new direction and call for action, but what they really need to do is tell everyone at once, so middle managers don’t get to put their local twist on things and diffuse the sense of urgency” Herbold cited IBM’s former CEO Lou Gerstner as a great role model in doing it right. “After he worked with employees at all levels to formulate a new company strategy of helping customers solve their business problems through technology, he sent an e-mail to all 300,000 employees to explain the new direction” said Herbold. “It was a crucial step and it generated a ton of creativity against the new direction. People knew where the boss wanted to go and why” Herbold’s final points emphasized the power of reorganizing to make it clear that change is the goal, and getting the right people to do the right job. In one scenario, he discussed Motorola. “In the late 1990’s they had the means to compete, but all of their technologies and key personnel were buried in the silos of the company.” In 2003, however, the existing CEO was replaced with Ed Zander from Sun Microsystems. Soon after Zander arrived he saw the prototype of the new, super thin Razr phone and asserted, “We’re going to transform the company around this phone.” Herbold recounted how Motorola made the Razr the focus in rejuvenating the company and made it clear what success was to look like in the future at Motorola. Based on his numerous examples, Herbold concluded by saying “Creativity is essential to drive the success of an organization, but discipline is just as important, in order to be able to execute with excellence and achieve industry leading efficiency. Organizations need to achieve both creativity and discipline. The balance of the two is the secret to industry leadership” MEET THE SPEAKER
As the former COO of Microsoft, Robert Herbold is an expert in business profitability and organizational effectiveness who also spent 26 years at Procter & Gamble. He is the author of The Fiefdom Syndrome: The Turf Battles That Undermine Careers and Companies—and How to Overcome Them, and the founder of the Herbold Group, a consulting business. He serves on the Board of Directors of Agilent Technologies, ICOS Corporation, and First Mutual Bank, the President’s Council of Advisors on Science and Technology, and several major nonprofits. |
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