Solving Innovation's Killer Problems with Peter Compo Part 3

And I'm going to tee you up. The last episode concluded that change in innovation emerge at high levels from disciplined work and constraints at low levels. Aspirations, which are the high level desired outcomes cannot be managed or achieved directly and the actions at low levels don't need to look anything like the high level results that they cause. This is so important to get.

So how do we work at low levels to achieve high level aspirations, how exactly does strategy work and how are plans metrics and tactics used, we need answers to these questions so we can design frameworks and our guest Peter Compo is gonna tell us exactly how to do that Peter maybe you'll give us some context for this chapter and where we're gonna go with the killer problems of chang and innovation Yeah.

Well, , we finished up, like you said, in the last session in talking about this fundamental theory of adapt adaptation and how it relates to levels. and how creativity and freedom are not the opposite of discipline and the opposite of rigor, but that actually creativity and freedom come from discipline and rigor, but at low levels. The creativity and freedom is the high level outcome, the discipline and the rigor is the low level activity that you actually can do.

And we try to paint a picture of that in people's minds here, but we can dig deeper into this, and that is How do we make the decisions and take the actions at the low level to arrive at the desired outcome at high levels that we want? Well, there's some problems with that. There's some barriers, and these is what I call the killer problems of innovation.

The problem number one is that when you work back from your desired outcome, again, a new product, a new business, a new An improvement, a way to stave off somebody coming in and getting you a threat, dealing with a threat. Efficiency, it doesn't matter. Write a piece of music, change the way you write music, change the way you do art, write a book, name it. Whatever your desired outcome is, you know you can't just say, I'm gonna write a great book and then just make it happen.

Yeah, people like to think that you could do that, but of course we know you can't. or create a new business and so forth. But when you work back from that high level outcome that you want, you start to work backwards. Well, how would I have a great business? Well, I'd have a great business if I had high revenue and I had low cost and I didn't have to put that much capital in. All right, that's nice. What determines cost? Well, what determines revenue? What determines how much capital I need?

All right, let's look at the cost. Well, it depends on what I have to buy and who I have to employ, and the revenue depends on the quality of my products and how well I market them. And if you keep working backwards, asking those questions, You get what's called an influence diagram that takes you, and this is just as much part of the levels discussion as we had in the last session.

It takes you from this high level, overall concept of what you want, your desired outcome, or at least what you think is your desired outcome. and takes you all the way back to the things you actually are free to do. And this applies in music just as well. I want to great, write a great piece of music. Well, all I can really do is write down notes and rests and say how they should be played loud, soft, how they should be articulated and what, by what instrument in what tempo.

So how do we bridge between the fact that all I can do is write a bunch of notes I want to write a great flutin piano sonata. Well, that's the challenge in management and leadership in creativity and innovation. How do we bridge this local low level of what we actually can do to the desired outcome, the overall high level desired outcome? that we cannot manage directly. And I'll sum it up in is, that which you can do doesn't really matter. What really matters, you can't really do.

How do we reconcile this terrible problem? Of course, it is reality though, because if everybody could just do what they want right from the start, there'd be no, stock market, right? We'd all be Aidan McCullen (2): Absolutely i was telling you man I went on to play for the two best clubs in Europe and I, don't put it down to any talent.

It was, it was because I got what you're talking about here early is that all you can control are the inputs and what they used to say in teams that I played in was like, , Control the controllables on the outcome of look after itself or control the inputs and the output will look after itself. Now that doesn't mean the output's going to be successful, but it means that it will, there will be a definite output if you look after the inputs.

And this is where your selection of the players, the mindset of those players, their discipline, their hydration, their sleep, all these things that you can control.

Will affect that right side of the diagram and i thought we'd show i thought that one of the things you better does brilliantly the book is not make this all esoteric, he brings it down to very very accessible language and i love your example of the bike shop and if you run a bike shop you are in luck we're gonna show you if you were gonna set up a bike shop.

This is what you usually do so for those people joining us on youtube and spotify now by the way we're a preferred partner for spotify video.

You can see on the screen i'm gonna share how you normally start with that and this is the idea of aspirations so you may have these aspirations, what you have a lot of work to do this is not a strategy so Peter i'll hand over to you here and i'll build, as we go on to influence diagrams and i'd love you to give , the commentary of how to do this and where you're thinking as we build here.

well, this is the beginning of the explanation of the killer problems and this influence diagram that we've been talking about that takes you from the high level aspirations goals that you have back to the actual actions and choices you can make. And as you said, we can simplify this and turn it into practice and to show how straightforward it is. I used an example of a bike shop. Everybody can connect to that concept.

And what this shows is the beginnings of creating a strategy framework for a for someone who wished to create a bike shop and be successful with enough money and enough. Respect from the biking community. And so you can see a few of the points here, values, and that the aspiration that we would be aiming at is happiness by working in the biking world. And that that's defined with respect from peers and sufficient cash flow. And so therefore the mission is let's launch a a bike shop.

Maybe we can get into the diagnosis next, but to get to the killer problems, let's get that as the right hand side of this influence diagram, that aspiration to create a bike shop. There we go. And what, as I described in words a few minutes ago, if we keep working backwards from the questions of how would we know how to have a certain amount of cash flow, you start working backwards from costs, your taxes, your revenue, and you can blow out the cost.

into salaries, equipment, facilities, goods, overhead, price, into price and volume. As you work from the high level objective backwards to the things you actually can choose to do, this influence diagram grows exponentially, and it becomes a shape that I call the fluted shape. Or the characteristic shape of an influence diagram. And maybe we can show a shot of that, exactly.

And this is not yet fully developed, but you can see I go through all the steps in Chapter 3 about how to develop one of these. And you can see here that they start to get complicated. that the diagrams start to get complicated as you get cross terms, meaning the quality of your offering starts to influence more than just cost. It influences revenue. The marketing influences revenue, but what inventory you keep Influences both revenue and cost.

I don't want to go into every little detail of business 101 on all this. Everything here will be understood by anybody who's been involved with the business. The real points here is that if you move from what for me is on the right hand side. The overall aspiration, and you work backwards, the number of choices and actions you have to take grows until you get to the point where you actually can take them. So, in a bike shop, you are free to put in inventory, to borrow money.

To choose providers of phone, computer and bookkeeping. To choose what your marketing concepts will be. Service levels, who you'd hire. All that stuff is free choice. But whether it will lead to the overall outcome that you want is a different question. And in music, your goal is to write a beautiful piece. If you work back from that, what you will get is a diagram that looks just the same. And all you can do is decide notes and who plays them and when they play them.

Now, the killer problems is how do we decide to take all those actions and decisions such that they will lead to the outcome we want? All the decisions and actions on the left hand side that lead to the desired outcome, the emergent outcome on the right side. And we'll bring it back to levels. All the low level actions and decisions, that's all you can do that will lead to the high level outcome.

Aidan McCullen (2): I thought I'd just show that Peter, that, that diagram problem, What it all comes down to. What you can do versus what matters are at opposite ends. And the killer, this is the ultimate description of the killer problem. And what we can do is go a minute into what's the details of this killer problem and how do we solve it. Because this is the way you get to define and derive a theory of strategy. So the killer problems are this. Number one, there are so many choices to make.

You can't possibly have an individual thought process for every choice. In a bike shop, you can't just say, okay, I'm going to choose this bike and this accessory and this marketing scheme and this advertising and this, they have to be done in a coherent way. The myriad choices must be done in a coherent way.

So I can't just have a bike line that's made up of a bunch of disparate, Bicycles that make no sense as a complete line, or even , as a partial complete line, if you want to focus on one area. So that's number one problem. The sheer number of choices and actions you would take, and that they must be coherent. , Aidan McCullen (2): before you go on Peter to problem two, I thought it was so important to say so many people. I remember I was offered a job.

I was I worked in digital transformation, although I didn't know that's what it was at the time, because it was 2008 and it was in a media company and the job emerged just like a strategy did over time. And then I was offered to do it again in a different company.

I'm because i knew this i knew the sheer number of decisions and actions i have to take in retrospect i was like hell no i'm not doing that again and i thought about how actually that's the thing like when you're, your ignorance in a way can be beneficial because it's kinda like. The way people have like a second child for example and they forgot how difficult it was on the first one. It's like the machine in men in black where they hold up and then wipe your

memory and . That was a really important thing and then the next thing which i'd love you to take us through killer number two is the problem of the time delay that the time delay of your inputs materializing is outputs and this absolutely kills innovation and sometimes the inputs don't even get seen over on the right hand side Absolutely. So the problem that you've identified is the time delay between when you take an action or a choice , and when the implications of that are borne out.

So the consequences of those actions and choices. You may put in a marketing plan for your bike shop in your local area. And this actually is part of the story that was included in that runs through the book. You are competing with big boxes that sell inexpensive bikes. put together by people who aren't particularly good at it or mom and pop shops. And you want to create a more high end, high quality, bike shop.

You put in a marketing program for that to tell people and teach people about the value of more expensive bikes and maintaining bikes properly. It might take how many years before people really start to believe it? How many years do they have to take before they buy a inexpensive bike and realize they were better off spending twice as much and having one that's not breaking down all the time. And it doesn't squeak and squeal.

So the time delay between choice, action, and actual outcome is, is a whole killer problem in itself, right? And what if you're a company that's got to invest for years in developing something? How do you know the right things to choose are? So that's a second killer problem. Aidan McCullen (2): i just, can i can i jump in cuz i just love to expand on the killer problems a little bit because to make them really relevant to people so firstly in sports you see this so the teams that.

Invest in the academy at a young age. It's like, I'll grow these future futures, knowing that some of them will leave and get contracts somewhere else. And if this was all CFO based all with the head decisions made with the head and not with the heart, you go, it's not worth it, we're going to lose 70 percent of them. And, and that's the problem is that when we're measured too much on the right hand side.

It kills inputs on the left hand side and i'm sure you've seen this many many times i'm sure you've as an executive in your multiple roles a quarter of a century in dupont you've seen this as an advisor you've seen this where.

the right hand side those high level decision making kill possible inputs that could lead to huge outputs over the right hand side and the other problem is that many many ceos of organizations, are more custodians of the role than actually care because, their life cycle in the role is so short that stuff that's important here in the left won't materialize during their tenure so they're like on a gun while on the milk the cash cow, As much as I can and destroy the academy or.

Or take down the academy. Cause I'm not going to see the benefit of that. I think what you describe obviously occurs. It's interesting, I think there's many leaders who have no intention of doing that, who have no intention of killing the things that need to be done for the long term, but it almost is forced upon them in the, in the job. But also may be forced upon them by the lack of a true strategy method that reveals these things. And we talked about this in our first session.

A great example of what you describe is when somebody comes up with a new idea for a new process or a new product or a new service or whatever you want to call it a manufacturing process. If the first question is in response, will it work? Will it be profitable? Well, that kills it right there. Because if anybody knew the answer to that, you wouldn't even have to be in the room, just go do it. But of course, there's no such thing as that. And I had that personal experience several times.

Where the real answer was, or the real question from leadership should have been, what do we need to know to help us evaluate this? What's the next step? Can we buy another card is the analogy we made, right? What's the experiment we have to do? What's the research we have to do to explore this further? Working on the right hand side of the diagram doesn't lead to creativity. You have to work on the left hand side and hope that it leads to innovations at the right hand side.

Aidan McCullen (2): It's such an important point. I was telling you, I said it to my kids, that one of them, one of them does MMA. I I, I did rugby and I was like, neither of them showed any interest in rugby. I was like, Oh, that's great. They're not going to get injured. And then my, my older son's like, Oh yeah, I'm going to do MMA. And I'm like, no, that's even worse. So he but he's, he's extremely disciplined. And I think that.

He understands cause I didn't use the diagrams you showed in a fishbone diagram, for example. But the idea, the way I articulated what you said is that the right hand side, the aspiration, , that's what you want to achieve. That's your dreams. That's you when you close your eyes at night. And I want you to do this. This is me talking to about my sons because the older ones, MMA, the younger ones, soccer, and I was like, imagine yourself in that Jersey or holding up that metal, whatever it is.

Imagine that and go to sleep with that feeling and then do all the work on the left that you've got to do all the work on the inputs, your diet, your, your training, your concentration, your, your schoolwork, because your schoolwork becomes really important because later on, if you're a successful athlete, you're going to need to be a business in yourself. So you're going to need all this input.

I told your diagram so good so when your diagram and they're sick of hearing me you know my my wife the other day. Peters she gave it she's like oh my god sometimes living with you is like living in a ted talk. What are you talking to these brilliant people sorry for sharing. So anyway, I just wanted to show you the benefit of your work, that it's going to places that you probably didn't imagine that are emerging out there in the, in the real world as well. So back to you for killer problem.

Number three, I want to respond to your example with you kids. I think that some of this will seem pedestrian to people. I know, I know this, I know, I understand this idea of working on the fundamentals and that you can't just work on being a great football player, that you have to work on the things that lead to being a great football player. It's when it becomes larger, I think.

And when you're in an organization and the world is conspiring against you because there's competition and, and there's shareholders and there's bosses, and then it's easy to forget that fundamental truth about, it's easy to forget what we would hold ourselves to in private life or in simpler situations. Being a sports. A great sports person may not be easy, but it's simpler in scope per se than trying to run a multinational organization or even an organization with many people.

I think we forget these fundamentals and we, and you might describe some of what I've tried to do is. take these very basic fundamentals and show how they apply to the larger scale. And that's really what the killer problems are helping us, helping us do. So the first one was, there's so many choices and actions you have to take. You don't know most of them at the start, and they have to be coherent.

Second one, time delay between choice and action, and actually when you find out whether it was a good idea or not. Third one, all the influences on your world. That you don't control from the outside competitors, even other people in your company, bosses, government regulation, market trends, name it. All of these things influence whether the choices you made will actually end up being the right choices for your aspiration in the long run.

This adds a whole nother dimension of complication to the real world. To the real world. In the little bike shop example, will another competitor show up? Will people like biking more in the future or less? Because now electric bikes are taking over and are they are they changing the landscape? Would we be prepositioned for electric bikes? Are people much doing fitness in other ways? Is government promoting bike lanes and safety for bikes?

In the roads, like they've done in so many countries, all these things are outside of your control. You may be able to influence them a little bit, but many of them are things beyond control. So that's that bottom left hand, input in the influence diagram that can have such an impact. to any organization. So that's the third killer problem. And the fourth is really a summation. The way I think about it now, it's almost the summation that we made before.

The thing that you most care about, the thing that matters, the outcome, is the least actionable. And the things that are the most actionable, the individual choices you're free to make, ultimately don't really matter. only if they achieve the outcome. So that's the summary of the killer problems of change and innovation. How do you reconcile what you can do, what actions and choices you are free to take with what matters.

And those who read that chapter see that Richard Rumelt made a wonderful analogy to this 50 years ago. I don't think he really explored it that much. To Heisenberg's uncertainty principle. He called it a pernicious example of Heisenberg, where if you look at the right hand side of the diagram, if you look at the outcomes you want. The actions and choices you're free to make on the left hand side of the diagram become very blurry.

Whereas if you look very clearly at the choices and actions, you can see them very clearly, but then the impact on the outcome on the right hand side becomes blurry. And this is a beautiful description, this pernicious Heisenberg that he came up with of the reality of how hard it is to create and to innovate. Because what you are free to actually do is not what ultimately matters. And what ultimately matters is not doable. And that's really what leads us now. what is a strategy. It's a solution.

It's the best solution to these killer problems. And Rumelt's , pernicious Heisenberg. Aidan McCullen (2): I love them. And I hadn't heard of that before. I absolutely loved it. And maybe we'll conclude on the piece about while the killer problems in complex.

Adoptive systems can never be completely overcome right so let's let's put that out there the best possible solution is attained if any framework meets three requirements free choice real time guidance and then so so importantly and i think this is because of your experience of having multiple roles senior leadership roles with inside dupont is unify this idea of unification as well become so so important that's so often missed because decisions are made at the high level,

or in conjunction with the outside world with consultants for example, with no consideration of all the different silos that emerge inside an organization over time so i'd love you to take us through these three requirements perhaps give us. your context for them first as well. Yeah. Well, these are what are called the three solutions to the killer problems of change and innovation.

And how you think about these is that we've identified these four killer problems that keep you from directly working on what you want. Well, what would be a way to make the choices of all to choose and take action? What is a way to guide choices and actions? Well, three things come out of the analysis. Number one, it must give real time guidance. Now, why is that so important? Any solution to the killer problems must give real time guidance, and that's because of the time delay issue.

Could you imagine a strategy where you had to wait three years to decide what to do? You, because of the time delay, because of the time delay, we need to transform. The outcome into inputs where we can have guidance on in real time to be able to make decisions. So is this bike part makes sense in our, in our in our, in our bike shop strategy? Well, what's the, what's the real time guidance that would tell us that the answer is not. Well, if, if it's good for the business, we'll, we'll keep it.

Well, that doesn't give any information. Okay. Right? You need something that gives you real time guidance as to what that is. The second is, it must unify. You can't have a solution to making choices and actions that aren't coherent. Right? We've talked about this already. It must unify every aspect. You can't have a marketing strategy or marketing choices that are disconnected from supply choices. Right? Of how you, of what, of what bicycles and accessories and services you offer.

Your marketing and your services cannot be two different thought processes. They have to be unified by an overall concept of the bike shop. So this is the second requirement of a solution to the killer problems of change and innovation. And the third.

You could argue that it's a restatement of the big problem, and I'll have to think about whether it is, but it's that whatever the guidance is, it must be a free choice to do, meaning you can only work on the left hand side of the influence diagram. And so maybe this is a little bit redundant, but let's just repeat it one more time.

If you're creating a, trying to create a piece of You're not free to choose that this music is going to be successful, that it's going to be financially successful, it's going to be personally rewarding, whatever measure you put on how you would want that piece of music to end up. All you can do is choose notes. You're only free to choose notes and rests and articulations of those notes and a few other, and a few other things.

So this is another requirement on a solution to the killer problems of change of innovation. So let's list them. Must be a free choice. Must unify. all actions and decisions and must give real time guidance. Aidan McCullen (2): and it also speaks to so much stuff we talk about on the show Peter but the real time guidance is.

There's no point in creating something in a vacuum like you gotta get it out there and mvp start to get feedback from the customer there's loads there's loads there that we won't go on to today but i absolutely loved that chapter and the simplicity of the, the fish diagram as well.

I actually started to look at it my own, even my own business and the show and what elements of the fish bone am I missing and I started to map stuff out, even this new book I'm writing, I started to do the book that way instead of the way I was doing it. So it's working, man. It's working for this guy anyway. Well, I'm glad you raised the fishbone diagram because this may help people with an image in their mind of what this influence diagram looks like.

And a fishbone diagram has some of these characteristics. You're working backwards in a fishbone diagram to say, what are all the elements that make up this outcome that we're exploring? Same concept. Another one that's similar is flow down, I'm sorry, flow down diagrams in Theory of Constraints, early Six Sigma, you'd start with a flow down of what is the thing you're trying to fix, improve, change, work backwards to see all the things that influence it. And this is the characteristic shape.

of all of these diagrams. On the right hand side, you have your single aspiration, what you're trying to do. And as you work backwards, you come up with so many different choices and actions that you are needing to take to get that outcome. It would be nice if we could show the influence diagram of writing a musical piece to show the universality of this concept and the universality of this characteristic shape. So, to have a successful piece of music. Work backwards from that.

Well, what would be successful financially, critically, personally, and then start working backwards from that. The quality must be high. It must resonate with people's tastes and interests. Then, okay, what would the length, the originality, style, symmetry, length of musical sentences. The key, the rhythm, time signature.

Okay, I won't read it all out to you, but as you can see, the granularity of the choices you have to make get bigger and bigger till you get to the left hand side where you see the things you are actually free to do. You're free to write down a bloody note, but that's really all you're free to do. Now, what is your theory of how to write down those notes? Such that you have a successful piece.

And I don't think it's any different here in the creative aspect of writing a piece of music than it is in creating a new business or improving a manufacturing operation. Or becoming great in sports or anything else. This is the fundamental problem of creativity and the killer problems exist here in this music example, no different than in a business example.

Aidan McCullen (2): Love it man i am so much on your same page i think the biggest gift i've been given from the sport was the discipline and actually not being that talented because the discipline, is the inputs it's it's the consistency of those inputs as well and you know i was asked about you know what it's like writing a book.

Many people ask me how did you write the book and i'm like what do you mean by how and they're like on like how did you manage to get the time you like it's like going to the gym it's like show up do the work do the work everyday until it's done and i'm like you i just see.

it's just a formula like my son wasn't doing great in school one year and i said you know what you're doing here what you're trying just do that work in school that's the same formula and then next thing always he gets because of just, applying the formula you know so i'm i see it as a template for everything that we do that we want to achieve. And i'm also making choices and your point constraints about well.

So much of what i do is what i don't do so you know you're not watching tv all the time don't spend time on social media, you're reading you know so there's there's lots of stuff you don't do that helps you do what you do so i absolutely love it and i think it's so useful to understand this and when you get it, can apply it to everything so bravo man How do we translate it when organizations get big and when the stakes are so high, this is the part I think that's harder, how we

convert this into a strategy theory. And model that enables large multifaceted organizations to, to make the decisions on actions and choice and to how they may lead to the outcomes they think they want. This is the trick. This is the hard part and what in the next chapters. , Aidan McCullen (2): you were saying about the pheromones. I, I wrote about that in my book about wasps. So , the queen releases a pheromone, and that's like this orchestration pheromone.

So it's like what everybody's doing. And I, I, I actually think about it the same way and I, I talked about there as that's the leader's role to, to orchestrate that this is where we're going, this is the aspiration. And be speaking about that ad nauseum to make sure that that trickles down.

The entire organization and then if each segment inside the organization is like the ants with the discipline of showing up and doing their piece and not deviation no deviation from, from their role that like you just have a subset of subsets and it's like a hive. Approach so there's so many so many lessons from nature Yeah. But actually on that one, can we, can we be a little more specific about what the leader is demanding in the Queen's case?

The queen isn't demanding, make a great hive, make a successful hive that takes all the food from everywhere around here and gets rid of all the, all the competitive ants and other insects. All the queen is doing is reacting to her own environment. And there's no one saying, here's the goal. In fact, that was one of the things that E. O. Wilson in his book, The Ants Made Such a Point About. The Queen isn't orchestrating anything.

In fact, the Queen is probably the most victimized by this whole concept. It can't even move. It just sits there. And when it stops doing what it's supposed to do, they kill it and get rid of it and get a new one. The leaders, I think in org organizations, they're great challenge. is how to uphold the discipline, to demand the discipline on the left hand side of the diagram everywhere, because they don't know all the answers about how it should happen.

Yeah, we can pick some stories about someone had a brilliant idea. Henry Ford didn't think of necessarily doing the the, the assembly line. It was brought to him by other, his staff, but the discipline of hearing, not being seduced, that's, I think, the great leadership challenge. How do we stay on the left hand side? How do we stay on the discipline that we've agreed to stick to? And then we'll see if it brings the results we wanted. And of course, to judge whether that's happening.

reconfigure, but that's later in the book. Aidan McCullen (2): brilliant brilliant man well done what nice way to bring it all back together again so again, where is the best place to find you Peter for those people who haven't joined us already let us let's share where to find you and again to remind those people who may not have joined us.

Peter is so generous with many many resources that it gives beyond the book and i hope you do join us as we read through the book and release each episode hopefully after you've read the chapter, Yes. The emergent approach to strategy, adaptive design and execution. Available, Amazon, all online retail outlets. You can find me on LinkedIn, Peter Compo, C O M P O. And you'll also sign, you'll also find on LinkedIn many posts.

And commentary that give you a flavor for some of the key dimensions of the emergent approach. And then the emergent approach.com. Emergent approach.com website has supplemental material guidebooks and added examples that you can use to get more of a flavor. Aidan McCullen (2): a massive bibliography by the way he sent me down rabbit holes like, like the ants fall on the pheromone i followed him i bought the books so there's gonna be shows.

Shows that spawned from this, like a, like a fish diagram in the future as well. They'll be all coming back to Compo. He's the reason that we did it. So absolute pleasure. Part three of the emergent approach to Strategy, Peter Compo. Thank you for joining us. thank you aAidan Aidan McCullen (2): brilliant, man.