Tokyo Stadium, June 2009
Connecting Dots is the monthly newsletter for global professionals leading innovation.
◎⁃◎
Disruption is Disturbing
Organizational Culture and Innovation
A Disruptive Discovery
In 2017, one of my teams pioneered an AI assistant for financial managers at a leading global bank. Powered by IBM’s AI platform Watson, the assistant multiplied the performance of high-performing managers while average or underperforming managers experienced marginal to nil improvements.
The unexpected discovery was not the tangible performance variance but the intangible impact on the culture. Employees in this company were proud of how carefully they managed funds through collaborative practices and how thoroughly teams worked together to design business processes and client interactions. The investment managers loved to describe their confidence in the product development and operations teams they worked with daily.
The AI assistant was different as it wasn’t a carefully designed process but a self-service capability. The assistant sat in a corner absorbing conversations while behind the scenes continuously ingesting the masses of reports and analyses published daily by the bank's research department. The tool was a solitary and impersonal interaction that provided managers with recommendations and summaries after the meetings without any need to engage with colleagues.
Empowering Effects
The benefit of the assistant came from how the individuals used it and adapted it to their real-world situations. What the assistant suggested to a manager was less important than how the manager interpreted, elaborated and applied the suggestions. Using the assistant was empowering and individualistic. Contrary to the team-centricity of the culture, which had served them well.
High performers logically felt more confident deploying and adapting the assistant. A variance that could possibly be explained by their mindset, upbringing, training or breadth of professional exposure in various cultures over their career. Whatever the individual explanation, as a cohort, high performers were able to switch between different cultural modes within the same organization. Inward and collaborative in one mode, the classic way of working. Outward and individualistic, the AI-powered way.
Disturbing Implications
Surprisingly, a result of this new AI-powered capability, was that high performers started to question their place in the firm. They wondered if they needed the scale and gravitas of the firm to provide excellent service to their clients while generating good personal returns. Or, could they do it on their own?
The lower performers also started to question their place in the firm. They often were equally competent, well educated and generated above-industry average performers. However, they started to experience anxiety about being replaced by software, losing a sense of mastery over the craft and fearing negative performance reviews even though they were in the same relative rank in terms of performance.
Thus, the assistant while technically beneficial was harming the culture. An implication of innovation that can be very hard to sense and interpret if you aren’t looking beneath the surface. It’s much easier to stay enamoured with the positive performance numbers. The greater threat and potential cost of ignoring the cultural implications of innovation in this situation were talent turnover, inefficiency and ultimately worse commercial outcomes after the initial sugar high of boosted performance.
Why Disruption is Disturbing
It’s worth an unpack of disruption. We aren’t talking capital “D” Clayton Christensen Disruption from a strategy perspective. This AI assistant was lowercase “d” disruption, where aspects of business and life as you know it are knocked off course. However, the overall business model was stable. From the outside, it seemed a small bit of turbulence, but for those in the middle of disruption, the experience can be deeply unsettling.
It’s disturbing because in the moment we often don’t fully know what it means, why the results are happening, how to explain them or what to do next. Small signals can be over-amplified and loud signals downplayed. Everyone involved is at risk of projecting their idealization or demonization of the results into the soup of sense-making.
Most executives are very good at the technical aspects of navigating disruption. How to fix the thing, address legal policy or adjust resource levels for example. Few are very tuned into the cultural processes triggered by innovation’s disruptions nor how to work with culture to enable the fuller benefits of innovation while containing the costs for a net benefit.
Cultural Navigation
The good news is that there is a way to identify and map how a culture can adapt to disruptive new technology. A task that I believe has become even more important with the increasingly accessible and powerful AI platforms, in particular generative AI, machine learning, large language models and a decade of digitalization and cloud migration.
Important because:
The assistants are already prevalent and causing disruption in how someone performs key tasks in their roles or how peers work together which can conflict with cultural values
The ever-expanding AI capabilities are ever closer and literally at the fingertips of entire organizations, which can have significant cultural implications for what is valued in how the work is done, how it’s rewarded and what we lose along the way.
It’s easy to see that the tools can be hugely empowering and create more difference rather than similarity in organizations which often conflicts with process or collaboration-orientated cultures.
Each of these implications creates a loss of how things had been—pragmatically and perceptively. In the opening example, the AI assistant caused a loss of a collaborative culture and stability knowing who was behind what you recommended. In the AI assistant version of their culture, you interacted with a flat impersonal digital interface, not a colleague sacrificing the collective culture as you knew it. A disorienting experience.
The Competing Values Framework
I love using the Competing Values Framework in situations where culture is potentially disrupted as a result of innovation. The premise of the Competing Values Framework is that like people, companies can hold multiple and even contradictory values, but can only act on one value set at a given time. There are two axes—internal vs external focus and flexibility vs control, giving four quadrants. Over time companies intentionally or unbeknownst to themselves can shift between quadrants. For example, at different stages, Apple has succeeded in each quadrant.
As a leader of innovation, your task is to work with the cultural aspects as much as the technical or commercial aspects of your innovation. Each is a parallel track of work for the team doing the tangible product, service or process development. The actual cultural response will depend on what’s being developed. It’s emergent but can be anticipated. Your innovation might be perfectly suited for the culture as it is, or is in conflict calling for a considered cultural shift.
It can also be overwhelming as it’s hard to sense the subtle signals of cultural shifts. or threats Sometimes it’s overt when conflict fires up, emotions run hot and disagreement is palpable. Often it’s silent as people withhold what they really think, withhold support without saying no and go about their work as if nothing has changed. The image of a smooth elegant duck comes to mind, with frantic feet fluttering underwater.
In addition to looking for cultural implications in project reviews and performance data, you can also sense your responses. The Innovation Leadership Map is a structured way to evaluate how you are responding to the work. Equally, your engagement with innovation politics can give you signals of emerging anxieties, resistance or momentum. All tangible data points measure intangible culture.
Application of the Framework
There are three steps where the Competing Values Framework is particularly useful as an innovation leader.
Envision
As the scope or validation data defines the proposition, envision how might your culture change to realize the full potential of the innovation
Evaluation
When a proposition is validated and heading to market the Organizational Culture Assessment Index (OCAI) gives an objective evaluation of the culture by people in your organization who score what is the culture today and what it needs to be in the future
Transition
If there is a gap between current and future culture, offer learning and development support to add capabilities and enable talent to internalize the shift and co-create its implementation starting with top management and most impacted departments
Realize a Positive Future Through Culture
Too often innovation leaders overlook or disregard the cultural aspect and implications of their work. Yet, it directly influences the success of innovation or can catch leaders off guard with disastrous consequences. Not just failed projects.
For example, the tragic case UK’s Royal Mail “Horizon” management platform led to the suicide and unjust prosecution of 900 postmasters. As well, once-heralded executives are potentially facing criminal charges. There was a conflict in the culture of empowering the postmasters while head office management secretly centralized and used back door control. A cultural, strategic and leadership delusion of tragic personal and professional costs.
Instead, to realize the full benefits of innovation, such as the paradigm-changing nature of AI, it’s good to be enthusiastic but also realistic about cultural implications. By using a structured (and evidence-based) approach to working with the culture you can create a better future that minimizes the costs to maximize the upside.
*Note: the introductory story is a proxy of multiple similar experiences with various teams and companies.
◎⁃◎
Learn more about Brett’s leadership development practice for global executives with innovation responsibilities.
◎⁃◎