Ken Dovey Interview Transcript

Bruce McCabe: Welcome to FutureBites, where we look at pathways to a better future through conversations with scientists and leading thinkers, and wonderful people who are trying to make a difference to the world. And our guest today is a very good friend of mine, Dr. Ken Dovey. Ken, welcome.

Ken Dovey: Thanks, Bruce. Nice to be here. Nice to be with you.

BM: And you are a very good friend. So I think this is going to be a wonderful conversation.

KD: Yeah. I'm looking forward to the conversation.

BM: I want to briefly introduce you to listeners so they know who you are. There's a professional introduction here, that's about academic achievement and leading an elite program, a Master of Business and Technology, at one of our universities. That's where I first encountered you. At the University of Technology, Sydney, which you ran for many years. And then there's a long history of that sort of academic excellence in the fields of leadership and innovation, particularly within organizations. I think that's fair to say. And beyond that coaching, researching which you're still doing in organizations around the world. So that's the resume ...

KD: Yeah, that's pretty good … in a nutshell. [laughter]

BM: Yeah, but I think that Ken Dovey the person is the reason we're here, because our friendship really has come from what I've learned from you as a human being and, to embarrass you slightly, and it's a long introduction, but it's important I think people understand why we're talking, you are a person of immense integrity. No question about that. And our friendship formed from that. When I look at your personal contributions in leadership, they go back to leading multi-racial groups and football teams in South Africa during the apartheid era. I look at the effect you've had on individuals graduating from your program, and it's not the academic stuff that stands out, we've got middle managers graduating from your program and I've read the reviews saying, ‘This man changed my life,’ ‘This man changed my life.’ Again and again. In fact, I've had some of your students cry in front of me, telling me how much you've affected them and how you've changed their way of leading from being bullies, if you like, to being much more in tune with their values and demonstrating their values as leaders. So, I think it's more that, that is why we're here today. And you think deeply about innovation, but you think about it from that very intensely human perspective. So here we are.

KD: Yeah, yeah [laughter].

BM: Sorry to embarrass you.

KD: No, no. Well, you are embarrassing me. But I think one of the points that I’d like to make is that I have never tried to change anybody's life. It is something that happens in the dynamics of a relationship. And it's something about the unspoken values and orientation to the world that is far more powerful than what you say. A mantra one of my friends liked to quote was that "what you are thunders so loud that I can't hear what you say." And that always stuck in my head - that it's who you are and not what you say that is really going to influence other people.

BM: Yeah. Interesting. And I just thought to frame this discussion because I want to get some of the gems out, I guess, from your life and what you've seen, because you've seen so much in innovation, and this podcast is intended for people who are trying to understand better pathways, or pathways to a better future. And a large part of that is how do we contribute to a better future around better innovation. And I know a lot of people listening to this, or I hope a lot of people are inside large organizations trying to make a difference in changing their trajectory. So I wanted to sort of ease into that human side. What does it take to make good change inside large organizations? It’s almost the hardest thing in the world to accomplish, isn't it?

KD: It is.

BM: But we all want to do it [laughter]

KD: Yeah, it is. Well, it has a term as well. It's called being an intrapreneur. That's with an I rather than an E. So it's the same process as an entrepreneur, except you're inside a large organization. And as an academic, that was one of the things I had to learn right from the start. I went in full of creative ideas and innovative things of how we were going to change the university and make it more relevant to society and the social issues that were all around us. And it took some time before I realized that to innovate, you really have to change the status quo. And to change the status quo is dangerous because those with power very often have a vested interest in the status quo … [laughter] … so you now are starting to mess with the big boys, in organizations and they don't like it. So, one of the things about an intrapreneur is you’ve got to go to work every day expecting to be fired if you're going to be an honest intrapreneur in the process.

So that was one of the key learnings that I gained, it took some time and some hurt and mistakes and those kinds of things. I think reflexivity is another issue that we need to exercise continuously; to reflect not just on failures, but on successes as well. As to what we did, which resulted in that outcome. What needs to change, what doesn't need to change, in the process. And so, yeah, that I had to learn from every experience. I had to ask myself critical questions about how I was involved in either the failure or the success of the process.

BM: So, let's go back to that very emotional word. It's going to be, it's dangerous. And in a sense, if we step outside the academic context and I talk about what you did in the apartheid era, it was dangerous. It was truly a dangerous thing to do. Literally a dangerous thing to do. To go against the system.

KD: Yep.

BM: To go against the big boys. So maybe let's start with danger. How do we... Because you talk a lot, you've taught me so much about this word, courage, which is the flip side of danger, I guess. If you're going to get something done, you're going to need, I think the way you articulate it or the way I now articulate it, maybe it's a bastardization of what you taught me, but every day, I think the first ingredient of innovation or doing something different is courage. But what I learned from you is that it can come not just from within, which is that traditional form of how we arrive with it, or we're born with it, but you can give it to other people, and you can take it away from other people. So, it's actually something that can be built up or... Yeah. So where does it come from? And I'm going to open this door because it's going to get really hot in here.

KD: Okay. Okay.

BM: So we're... Beautiful sunny day, so we're going to open this up, take the risk of some wind noise.

KD: Yeah, that's fine. Where does courage come from? Well, that was something I had to learn as well. I had to learn to analyze what my sources of courage were, to try and identify sources of courage. So there are various sources, for example in a business context if you've got enough personal backing, funding, in your life, you can have courage because being fired is not a catastrophe for you or your family.

BM: Yeah. So if you're financially okay, if you've got other alternative prospects.

KD: Again, if you've got a really good, relevant education or a reputation in the field, it won't be too difficult getting another job, so that's a source of courage. On a more personal level, I found one's partner is a critical participant in the process. If your partner is someone who's nervous about the outcomes of your courage, that will put a break on the courage in most cases. And so, the most courageous intrepreneurs, I've discovered, usually have partners who are pushing them all the way to go get it, and they'll take the consequences without any blame on the intrapreneur.

BM: I love that.

KD: Yeah. So, there are a variety of sources of courage. Integrity is another one. Where you're driven by a particular set of values that are integral to your identity. And to violate those values would be to violate your own identity. That’s intolerable so you'll push through the process courageously.

BM: Yeah.

KD: But getting back to your earlier point about the politics of innovation, one of the things I found in pushing the boundaries in apartheid South Africa in terms of confronting it, was that at one stage, I had to really consider the consequences, which were severe, as you've pointed out. One of the potential consequences of them taking umbrage at what you're saying and what you're doing, is that they would put you in jail for 10 years. Now, that consequence, I could not take the risk on; there was no source of courage to face it because I had two little girls, and a family, and that came first. Now I've seen a lot of people who are driven by achievements, in either politics or in business, who are absolutely selfish and that's the reason for their success. They can invest all their time and their energy and their thoughts in that process. 

But if you've got other priorities, like your family being a bigger priority than your success, then you have to think twice about confronting the politics of being a change agent – which is what innovation is about. So in that case, once the heat got too much after I started getting calls from the security police at four o'clock in the morning waking me up and telling me they've got my number, I realized, hang on, this is too far and we need to get out of the country to protect the family. 

So that's when we first came to Australia. It was really to protect the family from that issue. Once I thought things had died down, I went back. Well, ‘things dying down’ wasn't an accurate perception of the situation. But, yeah... To get to the point, it's about understanding the consequences of your courage and knowing that those consequences will be supported by all of those who you love and who will encourage the process and are happy to take those consequences on board.

BM: And I mean that's... It's a whole other level when we're talking about imprisonment and that sort of courage. And if we reflect... And it's perfect, isn't it? Because if we then reflect on all of the various things in business, one of the more extreme ones in business... not in life, would be this idea of starting... Leaving employment and starting ... doing a startup for example. A lot of people dream of change in the world through, “I'm going to start this operation building satellites in my garage”, or “I'm going to get into artificial intelligence and do something really cool in the medical sector”. They say that if you're going to do a startup, you need to do it before you have kids and lots of commitments.

KD: Yep.

BM: And all of those other concerns, or later in life when they're all independent, your children are grown up. It does relate to that, doesn't it? Because you can't possibly take that risk when you've got those other things on your plate.

KD: No, you can't. But the other thing in initiating a startup is understanding yourself in a way that's relevant to the demands of the startup. And success in the startup. So for example, there was an article by a guy called Seymour Sarason, that I came across when I was studying in the States, looking at the attitude of startup members in the early days where their mentors – they usually find a mentor – acted as ‘an external critic’ who was outside the organization but deeply committed to its success. Their role was to give honest feedback on the founder’s behaviour and choices with a view to helping them succeed. He found that initially the founders accepted and enthusiastically implemented what the mentors told them, but once they achieved a level of success, they stopped listening to the mentors, resulting in the downfall of many of these startups. 

[laughter]

KD: With success they assumed they knew it all. So, after looked like having a successful future, the startup crumbles because of arrogance setting in with success, and the founder’s refusal to accept the objective feedback from a mentor who really cares about the success of the startup rather than the reaction of the founder to his critique.

BM: Hubris comes into it.

KD: Yeah.

[laughter]

KD: So that's another issue ... Are you prepared to take on a mentor who can stand back objectively, who is passionately involved in the project, wants you to succeed, but will tell you the truth? And are you prepared to accept that truth? Because if you're not then you're running a risk of arrogance coming with success. And I've seen this a lot.

BM: Yeah. Interesting. Well, that gets into the bigger picture here because so much of this is a social phenomenon. Almost all of it really, isn't it? And I love … you really helped me years ago with almost a single word that encapsulated so much of what's going on. Innovation is a collective achievement, it's a collective outcome. And you broadened that even more. You said leadership is a collective outcome. So it's a social outcome. It's about somehow harnessing, influencing, guiding a community of people towards an outcome and, with a mentor being one of them, making sure you're learning from the right people. So where... Is that a good place to go next?  To sort of think about, if someone's listening to this, what are the mechanics of that? Because it seems that's the crux of it. If you do that well, you can make a difference.

KD: Yeah. So I think we are getting to the point of purpose.

BM: Purpose, okay.

KD: And purpose to me is critical to any kind of successful endeavor. The passion initially may come from the person who's the instigator of the innovative process, but ultimately that purpose cannot be achieved single-handedly. So somehow, leaders and founders have to facilitate the process whereby those around them buy into the purpose. In fact, to align that business or organizational purpose with their personal purpose in life. Once you do that, you've got massive power. But then you also have to tolerate that this is a process where you are allowing people to have creative freedom and that you are dispersing the decision-making power across a whole lot of people.

BM: Loss of control. Yeah.

KD: Yeah. And that's where a lot of people fail. So, the notion of them having to control it all if it's going to be successful … that if they delegate decision making responsibility too widely, then they're going to lose control.

BM: [laughter]

KD: And the analogy I like to use, Bruce, as an ex-rugby player, is on the field in the action, the decision making is delegated to every single individual. They must make split second decisions and take the consequences of those decisions. And usually if the decision's wrong, people will rally around and encourage the individual who made the poor decision and move on so that the collective will achieve. So, sort is a very good example of where there may be nominated leaders like the coach or the captain, but once you're on the field, it's a collective performance. It's a collective decision-making process. And the collective must take responsibility for good and bad decisions in that process. 

So that taught me a lot. Again, if we could apply that to a business context or another organizational context and recognize that every single person in that organization needs to be free and able to make decisions in their domain. And if they can't make decisions in that domain to own up to that fact. So that's one of the other problems that I've seen coming through you - that in contexts where people's identity is tied to being an expert, they are terrified of making mistakes. 

BM: That's a great one. Yeah.

KD: So if you take one, a top company...

BM: You're in trouble already. Aren't you? …

KD: You're in trouble because you cannot concede imperfection of knowing.

BM: Humbleness is critical to this process.

KD: Absolutely. Because if you know everything, there's nothing to learn. And I've seen many examples in the big tech companies, of many divisions or teams failing to innovate because of everyone holding the assumption that if they admit imperfection of knowing, it will have negative career consequences.

BM: Failure.

KD: Or inadequate knowing. In a context where they're supposed to be technical experts, if they fail to admit imperfect knowing, then there's nothing to learn. And so, I've seen them fail to innovate over the years. We need to recognize the role of social innovation in all forms of innovation - where innovation depends on the social dynamics within the organization and the freedom or lack thereof that people have to confess their imperfect knowing. 

BM: Okay. So I just want to reinforce a couple of things, there's lots to unpack in that already. And just the rugby analogy, that collective, it's a collective on the football field, but it also reminded me that courage is a collective resource. When you see someone completely stuff up, and the opposite team scores because of it, so there's big consequences, but then you see the rest of the team not only rally around the person, like you mentioned, but pat them on the back. It's quite a beautiful thing to watch …

KD: Yes.

BM: Because they're actually sharing courage and recharging that courage. And we use the word encouragement, but we never think deeply about it. But actually, they're literally giving that person courage to continue by saying, "It's okay. We all make mistakes." And on an organizational level, you see that coming up again and again. They always use these trite terms like it's okay to fail or but really it's, they're playing with the same problem, we want to tell people you have permission to take some risks. And we know that sometimes it won't go right. And there'll be mistakes ... and if you can have a culture that does that, suddenly it's very powerful. Very hard to do because a lot of leaders don't want to be seen to even make one mistake. So allowing their personnel the freedom to make some mistakes or encouraging them that way although it's critical, it's hard for them personally to do.

KD: We're coming back to alignment of personal purpose and the collective purpose. In a team sport, absolutely every single member of that team wants the team to win. And so the collective ...

BM: Unified purpose. [laughter]

KD: The collective purpose is aligned with the individual purposes and hence the reactions you're describing there. So if somebody fails, rather than them becoming demoralized and losing confidence, leading to more failure, the team has to rally and rebuild that confidence quickly, because it's in the team's interest that everybody is firing at a hundred percent. So, there's method in the process there. It's not just compassion and empathy for the person who failed, but it's also essential to the collective effort that everybody jumps up and recovers quickly from any mistake.

BM: This reminds me of some, lots of examples like that. I was doing some work in a science institute in Abu Dhabi, in the Middle East. And all these top scientists had come together as a team from across the world. And I think, how did they get these people together? But it was all because they received a phone call basically saying, honestly, we need to prepare for the last barrel of oil. And that's what got them right in the heart. And when I was going and talking to the scientists individually, and just to learn about them and their world, they all raised this phone call or email, but it was typically a phone call, as the critical moment, which got them to come. Because they all wanted to make a difference to the planet ...

KD: Yes.

BM: By being greener. So, they've gone to, completely out of their space, their comfort zone, the Middle East. Really, it was that message from all of them individually. They expressed it to me. I didn't ask, they all came out with, “I want to help get to the point where there's industries to replace the last barrel – when we get to the last barrel of oil”. That collective, hiring diverse people on the basis of knowing they've got the same goal, is powerful as well.

KD: Absolutely. And so, reading the context to me is a key aspect of good leadership and that's what they've done regarding ‘the last barrel’. They're reading the context: the future is going to be different. Therefore, we have to change, we've got no choice. And I've seen this in other ways. So there’s an ex-student of mine who has a logistics company, that's one of the biggest in the world. When 9/11 occurred, he was still in the program and had a small business at that stage. And he came to me and said, this is going to change everything. It's going to change all the freight forwarding and customs clearance rules. At that stage his small logistics company had quite a big footprint in Australasia.

KD: He said, “this is an opportunity to go global”. And I said, “jeez, that's an amazing insight. Let's do it”. And I backed him all the way over many years to do that and, ultimately, he's been very successful. But the key to his success was his insight into the fact that the context was changing – insight that comes from what I call ‘contextual literacy’. And again, if I look within organizations at who does the scenario planning and so on? It's usually the very senior management or someone around there. But the context on the ground, who's reading that? Years ago I came across an article, I think it was on Intel, where they were saying that their people out in the market place dealing with customers, talking to customers, were an incredible source of insight into what was changing in the economic context. They were one step ahead because the people on the ground were able to inform them.

We did some consulting with a small green building products company that was one of the most innovative companies in Australia.

BM: So they make what? Insulation.

KD: Ventilation, insulation, and various other ...

BM: To make buildings greener.

KD: Greener and so on.

BM: Keep going. Yeah. [laughter].

KD: Okay. They had no rules for their R&D people. They could …

BM: No rules.

KD: No rules. In most corporate contexts, only the marketing people can speak to customers, etcetera. These guys had free rein to go and talk to anybody, labs in universities, customers, customers of customers, etcetera. Yeah. And they said it's...

BM: So they've got a huge social network of connections with ideas and inputs and ...

KD: Which enables them to read changes in the context quickly and early in the process.

BM: They connected to ... how the world is changing and what's being invented.

KD: To what's changing in this little customer's life, what he's noticing or she's noticing in their customer's behaviour.

BM: Yes.

KD: And what they're buying and what they're not buying. That all informed the innovation that produced these new products that won multiple awards for innovation.

BM: Because they were free to engage outside …

KD: They were free to engage.

BM: Under controlled. They weren't being told it's all secret, and we can't interact with all these other people.

KD: Sadly, what happened is that that company was acquired by a corporation. The corporation immediately imposed the corporate regime on it. The R & D people who were the...

BM: Which was what? Which was, we don't connect? Or...

KD: Which is a permissions regime with rules such as who can talk to customers and who can't talk to customers.

BM: Ask before you quit... Got it.

KD: Etcetera. And KPIs and so on and so forth.

BM: KPIs, yes.

KD: And all that stuff.

BM: Totally metrics and ... the inertia of big business.

KD: Which tied the hands of the people who were out there in the world picking up all this information about the context and using it to generate, as I say, award-winning innovative products, award-winning export performance, etcetera of this little company.

BM: Oh, what happened?

KD: Well, what happened is all the R&D people left the company and now it's just producing basic products from cheap imported components without any kind of innovation. It's just gone to a strategy of boosting turnover and revenue.

BM: And that happens. Like it only happens like a thousand times a week, doesn't it? This idea... big companies acquiring small ones because they're innovative, because they're creative, because they're evolving very quickly because they're engaged. And then suddenly they're part of the elephant, which doesn't move quickly. And all of the systems and processes of the elephant just strangle them and they die. People leave. It just happens again and again. But the way you articulate it is, it's about restricting the social freedoms to engage and maneuver. Yeah.

KD: And to make decisions based on what they're learning from the context. So reading the context is a very important aspect of leadership, which is very seldom mentioned.

BM: So doing it badly is strangling the ability to read the context.

KD: Yes.

BM: Doing it well is trying really hard to get everyone at the coalface, everybody, give them permission and freedoms.

KD: Yes. Whatever level of the organization they're at, there's something going on in their world that could be relevant to the changing nature of business. Because I mean, change is inevitable in any context. And so how do we read those changes, and do we read them early enough to make it at an advantage for us?

BM: And you touched on something that I think is important to just pull out here. When you said that all the strategy and scenario planning is often done at the top, whereas everything you've just said over the last five minutes is about the bottom, and enabling it or strangling it. And innovation in the corporate world, in a fast-moving environment, it can't happen from the top down. It can't be planned because we can't plan six months ahead very well, let alone, you know, they get these three-year plans together and it's almost an exercise in insanity.

KD: Yes.

BM: Or fiction, at least. So the way I try and think of the organization now, is the successful organizations are simply those that evolve a bit faster. They're allowed to... They've got the freedoms and permissions you talk about so that they can evolve amidst the chaos of change and try stuff and maybe get it wrong, but then get some right faster than their competitors. I mean, to me, that's the game. It's not the grand plan. It's how do we create a social system that can evolve?

KD: Yes.

BM: Is that fair?

KD: I think that's fair because the social systems behind even technical innovation, are not apparent. And that's what we've discovered with some of the large global corporations, the high-tech corporations we've dealt with. One of the things I've also picked up though is that the ‘powers that be,’ generally are more permissive when it's technical innovation, because that technical innovation they can control and they can utilize it for their own interests and their own situation. So, if the company expands and that technical innovation is a breakthrough, etcetera, their position is enhanced. It's when we get to business model innovation or social innovation that you have problems with the status quo. Because very often the benefits - the financial and other benefits that the upper echelon gain - are dependent on the existing social structure. So, when you're looking at social structures characterized by hierarchies, permissions regimes, and so on and so forth, you may still get technical innovation, but you will struggle to get the social innovation that breakthrough technical innovation depends on.

BM: So, to try and give us some examples or illustrate that if your innovation involves a new way of servicing customers, which means changing some job descriptions and who gets to own customer service relationships, or … that's what you're talking about here? Once you start and institute those sorts of changes, it's much harder because of that. Whereas, as opposed to patenting a new widget to make refrigerators more efficient, everyone gets behind you and goes, ‘Terrific!’ because they share the benefit of that. Is that a reasonable metaphor?

KD: Yeah. And again, now we are coming back, I think to the issue of power. So, if you look at the funding that goes behind ideas. Very often those with power in the organization will fund something that they see will enhance their power.

BM: Yeah.

KD: If we are looking at funding social innovation very often it won't happen.

BM: It's the opposite.

KD: Because it's the opposite. Yes.

BM: The social innovation will diminish their power and status...

KD: Absolutely. So that's where the intrapreneur comes in. But most of the organizations, and this is fairly widespread in the literature, most of the organizations that are able to innovate, both technically and otherwise, in terms of transforming the structures and so on, very often those organizations are prepared to take the risk of transforming. So, one of the things I've noticed is that very often it is owner-led organizations that are more likely to innovate than where you've got a CEO whose interests are strongly embedded in the status quo. Owners are prepared to take risks because...

BM: And the CEO just wants to make sure the next quarterly bonus comes in.

[laughter]

KD: Absolutely. Absolutely. So if we look at the world...

BM: And owners are passionate about whatever started this venture. Yeah.

KD: Absolutely. Look at the world and see the most innovative organizations in the world, and you'll see they are founder-led.

BM: Yes.

KD: So that's the other issue. We are now talking about power, the power to motivate and push the transformation, the power to take risks, etcetera. Power is important. You cannot achieve anything without power. Sometimes power has a derogatory connotation in the English language. We talk about it as if it's always a negative thing, as an oppressive thing. But you cannot do anything without power. So the issue comes back to how is power managed and utilized in an organization? And if I go back to the small building products company, the power was dispersed. Why?

BM: Initially it was dispersed.

KD: Yeah, before it was taken over by the corporation. But why was that the case? Because the founder introduced the mantra ‘technology for a sustainable future.’

BM: Beautiful.

KD: So the technology was linked to a social good. It was linked to climate change and stuff like that. And so very clearly, he was going to allow that freedom to produce the kinds of technology that would make a difference socially, politically, in the world.

BM: Yeah.

KD: So it comes back to the alignment with the purpose. Where there's no purpose ... we are currently in a research process with a big government organization, who initiated the research project, etcetera. But one of the things that came up in a recent conversation is them saying maybe the purpose of the process needs to be identified. Hello! [laughter] This process has been running for donkey's years.

BM: And they don’t know the purpose!

KD: Now want to discover what its purpose is. So, it's a complete contradiction of what we are talking about. With the building products company we’ve discussed, some of the people who joined the company didn't come there with any intent to change the world in terms of climate. Once they were there, though, and experienced how staff aligned themselves with the purpose embedded in the organization’s mantra, they found something bigger than themselves to work for. Once that happened, wow, the energy that was liberated!

BM: They worked day and night. Yeah.

KD: They worked day and night. Weekends. They said to me that they used to come in on the weekends just for fun, because they loved what they were doing. That power...

BM: That's the magic.

KD: That's a form of power that is very seldom tapped into...

BM: And we never talk about it.

KD: In organizations, we never talk about it.

BM: Yeah. That's the power of shared values and purpose. And that purpose needs to be something meaningful that, I mean, connects to all these studies around the world.

KD: Yes.

BM: Which show that younger demographics rate even higher than the previous generation. Needing purpose and meaning in their job. And if you can tap into that, you have enormous power.

KD: Yes.

BM: And if you're a company that only exists to perpetuate money-making through shifting money around. For example, half the financial sector, [laughter] find it really hard to get younger employees excited about what they're doing. So how are you ever going to be an amazing, innovative ...

KD: Bruce, the classic example of this in my experience was in 1993 in South Africa. The country was on the cusp of political change. The country became a democracy in 1994, so it was right at the final days of the apartheid regime. I was employed as a consultant by a, what should I call it? An elite German motor manufacturer.

BM: [laughter] I love it. Well, there's only two. So we won't... [laughter]

KD: They had a big manufacturing plant in the city in which I was living in South Africa. They produced all the right-hand drive vehicles for the global market in that facility.

BM: Wow.

KD: Now, this was still the apartheid era. The company had been run with a top-down militaristic approach. And so most of the workers ...

BM: Command and control.

KD: Command and control. Most of the workers on the shop floor were uneducated black people, and most of the managers white men who were a little bit better educated. And the organization wanted to transform the shop floor in line with the new Japanese philosophy of ‘just in time production’, etcetera. So they decided, okay, they're going to flatten the shop floor into teams. 52 teams were created.

BM: 52 teams … So they've subdivided the shop floor...

KD: The production process into 52 teams. The work of one team led on to the work of another team, which led to another team et cetera. And the old managers …

BM: Yeah. The mandarins that have been there for a long time and a lot of power and status …

KD: They were now appointed as coaches of these teams. And my task was to teach these coaches how to coach!

BM: Oh my goodness.

KD: It was a big challenge.

BM: I bet it was.

KD: But one of the assumptions they went into it with was that, okay, that the teams will just do this because it’s been initiated, it’s been ordered, and the teams of black workers would just do it. And maybe the workers thought that they're going to get a little more money or something like that.

BM: So command and control. So they're assuming that ‘We can implement our changes. The workforce will come along, because they’ll do what they're told.’

KD: And we can continue doing what we've always done. It's not going to be any different other than flattening the structure a little bit. So one of the things I picked up by now was alignment of purpose. So the purpose of the organization was clearly to be more profitable.

BM: To be more profitable.

KD: Yeah. To pay its shareholders big sums of money, etcetera. Now that was not going to resonate with the black workers. I mean, there was almost a civil war going on between the black workers who were deliberately stalling practices and breaking tools and breaking machinery in opposition to the management, because of the apartheid situation.

BM: Okay. Let’s slow down. So that activism from the workforce was already happening as a background.

KD: Was already happening. The cops had been in once to sort it out and so on. So I had to find a way to motivate these black workers?

BM: Yeah. I mean, they were already disengaged. They were already completely unhappy.

KD: Unhappy. So I sat down with the coaches, saying that their first task was to find out what really matters to these teams. What is it that really matters to them? We thought it would be money, but that wasn't the case. What came out of that was they were very aware that the first general election was going to occur in early 1994, and they wanted the ANC to win the election so that...

BM: This is Nelson Mandela.

KD: Nelson Mandela to win the election and govern. That was what really mattered to them.

BM: What mattered to them most in life is Mandela running the country, and the whole transformation at that point.

KD: The transformation and the elimination of apartheid. All the rules and the laws against black people. So, when we identified that, I built a financial incentive into the process as well, which management agreed to. And again, it was the performance bonus was based on the collective performance - the incentive was only gained by everybody if they achieved their target. If they missed their target fractionally, nobody got it. So we were saying it's a collective responsibility. But coming back to the alignment of purpose, I facilitated that these coaches then sit down and ask people, okay, so how is the ANC going to survive economically? Because the workers weren't stupid. They'd been well educated by the struggle, the political struggle. They knew that no government's going to survive if the economy collapses. So what role does this company play in the economy, particularly the economy of that region? Which had a population of about 1.5 million people, but probably 70% of those people were abjectly poor. So, there was very limited infrastructure.

BM: So this company has a huge impact on the...

KD: Huge impact on the local economy.

BM: Overall economy of that province.

KD: So through questioning and talking, we got to the point that the success of the company will lead to the economic success of the region; to more jobs and, generally, to better wellbeing for everybody there. So, what we identified was a political purpose. The economic purpose did not matter to these people. But it was the political purpose that really mattered. So, if this organization succeeded, the workers would be making a difference to all the people, particularly all the poor people, because there were many supplier organizations in that town too, who were employing people. 

And that was incredibly successful. In 1994, the first real year of our shopfloor operation, productivity went up by 47%. In 1995 it went up by a further 77%. And then guess what happened? Management did not anticipate the impact of their own initiative to flatten the shop floor, because I don't think they really understood what we were going to do; that it was a political purpose driving the process.

BM: [laughter]

KD: So they had 7,000 vehicles at one stage in a railway goods yard. These are large trucks, all sorts of vehicles, elite vehicles, standing unsold because marketing had not anticipated the increase in production. And, therefore they were over...

BM: They were so successful at increasing production … [laughter]

KD: So successful, they overproduced. So what did management do in 1996? They shut down the workforce to a four-day week. They took away all the incentives that we had.

BM: Oh, no.

KD: And the company went from the biggest profit in its history in 1995 to the biggest loss of its history in 1996. So again, this is... We are talking about purpose, we are talking about motivation, we are talking about management, reading the context, understanding, they were living in another world and they just...

BM: The manager's world.

KD: Yes. And they did not get what they had initiated. I mean, they were paying me, they were initiating this whole process. And they didn't even understand their own initiative. Which comes back to my comment about the government organization. Same thing. 

BM: Just before we move on to the government, just draw the dots for me. What do you think was in the average person's head, with their connection to political purpose? So by working collectively, by making this a success, the province would do better. Employment ... Give me the, just give me a sense of how this connected to Nelson Mandela.

KD: Well, they employed, probably at that stage it must have been around 5,000 people. Most of whom were black, poor black people. Each of those people probably supported a household of, I would say 8-10 people.

BM: That draws a picture. Yep.

KD: Their survival depended on their job, even though they hated the job, they hated performing for the white management, etcetera. They knew they were dependent on it. There were many supplier organizations around that also employed large numbers of people. So they were aware of that too. They were also aware that the infrastructure of the city was really poor because of the poverty of everybody. So, basically, this was a chance for them to contribute to the political success of the new government, plus attraction of the significant financial incentive that we introduced, if they hit their targets on a weekly basis. On the Friday, the production metrics came out and they collectively received a significant amount of money if they achieved their targets.

BM: But all those economic things you just described, employment, all that, that they were mostly economic, that connected to political in their minds though, did it?

KD: Yes. Because they knew from the education they had received from the leaders of the political struggle, that the well-being of the economy is crucial to the success of the new government.

BM: Right.

KD: That no government will succeed without economic success. So they went to work for South Africa. They went to work for the ANC government.

BM: Because their success would mean the new government would be a success and...

KD: Yes. And therefore there would be other benefits, social good ...

BM: I understand.

KD: Would come out of the process as well.

BM: And so they connected it very directly to validating the new government. Or they would... The opposite would be they would let down the new government and it'd be seen as invalidated. A black South Africa is not a successful South Africa, so therefore it's not a valid... They wanted to make sure.

KD: But also ... If the government failed, they knew that the economy would fail. And so their dependence again on government performance but this time it was a government that they could align with. Not the despotic old government.

BM: And when we look at the German managers, the institutionalized mandarins here [laughter], they obviously, at some level bought into what you were doing. But then later on when this overproduction occurred, they're sitting there, they couldn't get their minds around the success and say, can't we perpetuate that? Export more or to other markets?

KD: Interestingly, I think the South African government at the time must have given them major tax concessions to have the facility there. There were very few German managers. The top management was all South African. And I think that might have been part of the condition for the tax concessions. Once this thing failed and they had all these vehicles they couldn't sell...

BM: Or over succeeded, let's call it.

KD: Yeah. Over succeeded possibly. Yeah. And they experienced their biggest loss, all the senior management was replaced with Germans. And they went back to a German style of operating.

BM: Got it. Corporate headquarters...

KD: Corporate head headquarters.

BM: … Just looked at the balance sheet and said, no.

KD: The team concept went out of the window, and they went back to the more traditional corporate way of doing things.

BM: Interesting.

KD: Yeah. So it was... But it opened my eyes as to the powerful energy that can be released when people really believe that what they're doing is making a difference in the world.

BM: It seems that there's a straight-line correlation here between size of organization and the challenge of doing this stuff.

KD: Absolutely.

BM: So it's almost like the bigger the corporation, it's destined to become non-innovative, if you like, because it's now a slave to shareholders and quarterly KPIs, and management and bonuses and, yeah. It's not a hundred percent the case but the bigger you get, the more you're going to have to work at maintaining social mechanisms and understanding the coal face and the values that drive people...

KD: And again, it comes back to power and the delegation of power and fear of delegating power. Historically most innovation has occurred in skunkworks. Skunkworks are facilities that are set up independent of the business, where there's a different set of rules that apply and you don't control the staff. They do it. And gradually they become the new organization. And as they grow, eventually they're absorbed back into the organization...

So you're exploiting that freedom that a skunkworks provides people who are participating in it to innovate, to think creatively, to exercise a creative license in their process. Now, interestingly, the logistics organization that I was talking about earlier, even though it was a relatively small organization when we started the transformation, the founder started the transformation with a skunkworks. So he put his top eight programmers in a circle in the middle of the facility, and placed himself in the midst of that circle.

BM: Oh, brilliant.

KD: They had special freedoms. The founder had a brilliant insight into how the transformation process would be managed. He said, "I'm not going to coerce people into becoming the new organization. We are going to create the new organization in the midst of the old organization, and every day they can visibly see what we are doing and see that we have a different set of rules. I want the other members of the organization to desire being a part of the new organization and thus not need other forms of encouragement to transform. 

BM: Makes you want to work there already. Just hearing that.

KD: And they wanted to climb over the fence into that skunkworks. And so gradually the founder let them climb over the fence, and gradually that became the new organization. It was brilliant insight on the founder’s part. However, as he scaled to becoming the biggest organization of its kind in the world, from my perspective, arrogance and the fear of loss of control kicked in.

BM: On his part or middle managers?

KD: On his part. He's still got tight control ...

BM: So his own success. He doesn't want to lose it now...

KD: He doesn't want to lose it. And, apparently from what I hear from people working there, he still makes all the decisions, which is crazy, absolutely crazy, given the global scale of the operation.

I tried a few years ago to talk to him. To say, “listen, if you still want to be innovative like you wanted to be 20 years ago, why don't you consider the skunkworks thing which you used so successfully in the beginning? Create a skunkworks to facilitate the development of the new technology that you're going to require in the process?”

BM: Yeah. And what was the response?

KD: No, he didn't want to do it. He said, “we are already innovating.” I can’t see any innovation. And I've talked to lots of the people working there because I know most of the people there. There's no innovation going on.

BM: Well, we've talked about this many times over the years. In a sense it seems that lots of very senior managers, leaders, CEOs, inevitably, one hundred percent of them will say, “we want innovation”. But the reality is that a lot of them don't want it.

KD: Exactly.

BM: Because it threatens their position or it's a risk they don't want to take because they're quite comfortable.

KD: Yeah.

BM: And if the company is not a good match for a changing environment two years from now, it doesn't matter because they won't be there.

KD: Yes.

BM: Or five years from now. So they're much more interested in their entrenched position.

KD: Yes.

BM: And they'll say to the media and everyone else they want to innovate because you have to, but the reality is they don't.

KD: That's right. So we're going back again, to the issue of founders as leaders. As I mentioned earlier, the danger is that arrogance will set in with success. In the case of the logistics company we’ve been discussing, this has not undermined the success of the organization (yet!). However, I have also argued that founders are the biggest innovators because they're not afraid of risk. Okay? They will take the risk because of their identity, it's more than money. Their identity - who they are - depends so much on the innovative capabilities of the organization. The difference, I think, goes back to their biographical experience and the motivation it inculcated to succeed. Where there is fundamental insecurity of self, arrogance may manifest with success.

BM: Yeah. Can we speak to... There's a wonderful example which you again, through you I learned about many years ago, Semco. I know it's a big story. We don't have to tell the whole story. People can look it up. There's Harvard papers coming out your ears on this, case studies, because it's so remarkable. But it is a story of retrofitting, if you like, a large non-innovative organization, very large and making it more innovative through social change and a leadership change. And it is owner-led. But maybe we, let's just do the quick version of that story because it encapsulates a lot of these principles of power, doesn't it?

KD: Mm-hmm. It does.

BM: And the ability to give up power and...

KD: It does, so if we look at it from the beginning, the founder was an Austrian who emigrated to Brazil and founded this manufacturing facility. He was very keen on his son, Ricardo, taking over the business when he retired but Ricardo did not want to take over the business. He was involved in rock and roll bands and things like that. And his father was a real autocrat. And so that's what put him off taking over the business or joining the business while his father was managing it. Anyway, the father was getting old and desperately wanted Ricardo to take over. So, Ricardo said, “I'll take over on condition you get right out of the business. You've got nothing more to do with the business”.

BM: Ricardo had some foresight right from the beginning really, didn't he?

KD: Insight into power. So, in effect, you could talk of Ricardo as a founder, being the son of the founder. So he's got absolute power in the organization, but he was very interested in trying to create an organization that managed itself.

BM: And that was for selfish reasons because he almost had a heart attack at some stage, but it wasn't just because he wanted to be innovative. He was thinking, I want to live a nice life. I don't want to be the CEO of this beast every day. Is that fair? [laughter]

KD: Perhaps, yeah. I think he had a motor car accident as well, which was life threatening. Which made him rethink the whole process. But, yeah, I think he also had an insight into what we've been talking about. That if you can mobilize the interest and the energy of the workforce and make it see that it wasn't... that they weren't working for his company, they were working for their own company. In other words, what he did was create co-founders of the company by introducing the award of 25% of annual profits, post-tax, to be shared equally amongst the staff.

BM: So now every employee is a stakeholder, has skin in the game …

KD: Has skin in the game.

BM: … and the incentives have changed now. Yep.

KD: Absolutely.

BM: Yep.

KD: And I remember, Bruce, just to divert a little bit, a workshop we had in Sydney. And this one woman was very unhappy with her company and what it was doing. And I said to her, "Why don't you leave?" She said, "I won't, because I'm an owner." She had taken shares as part of her salary. And she saw herself as a co-owner. So as unhappy as she was, she was still … laughter … committed to the company. But yeah, to get back to Semco, what he did was he liberated the process. He flattened the old organization, splitting it into teams. He also ensured that no division could be bigger than, I think it was, 250 people. Something like that. So he kept it as a conglomerate of small organizations that all worked towards this general well-being of the organization, but all were working for themselves at the same time. Because they were getting a share of the profits.

BM: And he devolved power to... He devolved all the authority to let them make all their own decisions. And in doing so, now they've really got skin in the game. It was tied to values because there was a lot about … setting your own working hours. We need you to have a good life. And we need you to have freedom to define that. And they did. They set their own salaries, didn't they?

KD: Yes. They set their own salaries.

[laughter]

BM: And elected their own managers or chose their own managers and it worked.

KD: Yeah. And again, he was asked once in an interview on ABC’s 7:30 Report, years ago, isn't this dangerous letting them set their own salaries? He said, "Well, it could be dangerous for them because if they set their own salaries and their team doesn't think they've performed in alignment with that salary they'll be fired."

BM: Yeah. They're gone. [laughter]

KD: They're gone. So, it's a dangerous thing setting unrealistic salaries. But also, as you say, working hours at which they're most productive. So, if somebody was really into surfing and the waves were good, he or she could go surfing and make the time up some other time. You could come back in the evenings and maybe the whole team had decided to work in the evenings.

BM: Perfect. And yeah, it's outcomes based. It was the true measure … we are after results. We're not after managing people and power and how many hours you put in. We're after results, however they come.

KD: So, you're taking ego out of the situation. Because when ego comes into it then it's, “look at my badge. I'm shining my badge every day. Look at me. I'm a successful person. I'm the CEO of this company”. How do you take ego out of the process? I think that's one of the issues because the moment ego gets into it, then you've got a top-down power structure. And people are going to try and control everything because they're controlling the basis of what they perceive to be their ego requirements. And how do you do that?

BM: I remember there were two little things that came out. A lot of the middle managers left the company because they'd lost their power base and so they didn't like it. And that was a good thing for the company. And probably for them, they found a new home where they could cement their power and...

KD: Yes, that was after Ricardo took over. Because his father had middle managers who were autocrats. But they just couldn't cope once Ricardo took over.

BM: And the extraordinary postscript is that this became an innovation machine. They were evolving new business units left, right, and center. Because the employees were part of it. They had a stake in it. They could live their lives in a more independent way.

KD: It was incredibly successful, profitability-wise, and in every other way. [laughter] But interestingly, and the last time I read something about this was a couple of years ago because I think Ricardo's retired now, but interestingly, they had visits from all sorts of people from different countries and so on, but there were... I think there was one company somewhere in the world that managed to emulate it.

BM: Okay.

KD: Nobody else could emulate it.

BM: Yeah. Yeah. [laughter]

KD: Which was very significant again, in terms of the human situation and the need for power and the need for ego and...

BM: A big comment on the human condition.

KD: Yes.

BM: Yeah. Yeah. And anecdotally, from when I use that story in a presentation, I have to be quite careful how I introduce it. Because I see senior managers go quiet, and their eyes sort of get a bit dark, because it's almost like you've introduced communism into the system, and it's distrusted! So, I always have to preamble it, and say, “I'm going to tell you about an extreme case. I'm not advocating you emulate in its entirety, but there are lessons to be learned.” [laughter]

KD: I thought someone in your last audience said the front of your t-shirt had the word ‘courage’ on it, and you got all these compliments for being courageous in your presentation. By the sound of things, you weren't courageous enough (laughter)

BM: No, I wasn't courageous with that, that's true. [laughter] And on the t-shirt, I wear that t-shirt because of what you taught me. I wear that almost every time I present. It's got courage in Japanese on it. Because of that. And it makes people ask, “what does it mean?”

KD: Yes.

BM: And it's an excuse to then have this conversation. Because so much of what I'm doing is almost technical. It's like here's what the future could look like. Here are the pathways technically, with science and new inventions, but then you force them to have a discussion with me afterwards about the human side. And so that's through you that … that mechanism. [laughter]

KD: But, again, getting back to the collective performance, if I compare sport with businesses and organizations, I mean, one of the huge differences is sports performance is visible. Everybody...

BM: Visible, yeah.

KD: It's visible.

BM: Oh, everybody knows if you won or lost.

KD: Everybody knows whether you won or lost, and everybody knows how well or badly you played.

BM: Yeah.

KD: Whether you played well or played badly. And therefore, in sport, the coach doesn't last too long if the team is failing. Players who are failing time after time, their coaches and team mates try to encourage and support them, but there's a limit to how long that can be tolerated if they're letting the team down. Now in a business context, what's going on in the internal workings of the organization is not visible. All that's visible are the outcomes, the performance, the final result in terms of their profitability. But managers are well protected from bad behaviors because no one basically can see them other than the people who suffer them within the organization. So, another problem for many organizations is the visibility of behaviour and other phenomena.

BM: So the more transparent you can make it, the better it is.

KD: Yes.

BM: And the bigger the company, the more places they're able to hide in.

KD: Absolutely.

BM: There's a few little corollaries to that, aren't there? And we have to be cognizant of that.

KD: So that's what Ricardo Semler solved so well because in each team, each person's naming their own salary was then scrutinized, their behavior and their performance was scrutinized right at the micro level. And by the same token the performance of the collective determined the amount constituted by the 25 percent of profit that was going to be shared by the team. So much depended on the scrutiny of each other's behavior, and this was the same thing at this motor manufacturing organization discussed earlier. People have assumptions, and assumptions drive their behavior. And you can't change assumptions directly because they're subconscious. You've got to change behavior before assumptions will change. And so, because the collective got the reward on Fridays if they achieved their production targets, I got the team to facilitate a critical review of each other's behavior during the week, to ensure that they didn't let the team down. Now this was the antithesis of what would've happened in the black teams before, because anybody who showed any kind of initiative or enthusiasm was immediately classified as a traitor to the political cause. So now you...

BM: You needed to be conformist and be quiet and just go with it. Yeah.

KD: And now we are asking them to be exactly the opposite in these teams. And it was amazing because I learned something else about the power of the peer group. It's another form of power that we don't often think about. For example, one of the guys on one of the teams was absent every Monday and Tuesday. And the rule was that no team was supplemented by a casual worker. If somebody was absent, the team had to perform without that person. So, this team was suffering in terms of reaching their targets on a weekly basis.

KD: What came out of one of the discussions was why don't we go and speak to the family of this worker and find out what is going on? Ask why he is always absent on Mondays and Tuesdays, because they couldn't get it out of him. So they went into the township, they spoke to this guy's wife, and she said that he's drunk the whole weekend and he's got epilepsy.

BM: Oh my God.

KD: He doesn't take his medication on weekends because he's drunk. And so every Monday he has a fit, and Tuesday he's recovering from the fit, and then he goes back to work on Wednesday. So they then confronted him and said, “look, either you've got to stop drinking on the weekends or you've going to find a way to take your medication on weekends, because we're suffering and you are the cause of our suffering”. The transformation of that guy, Bruce. I used to see him cycling his bike all over the bloody place! He became a fitness fanatic just through the pressure of his peer group to say, you've going to lift your game. And again, I think that happens in team sports as well, not as coercive as that example. But if people are failing in a team context, their loyalty to the team is questioned and they're motivated to find a way to perform better because they know they're letting the team down. I mean, one of the principal values of a team effort is you don't let the team down. You don't damage team spirit … you try your utmost all the way through. So, this was another little aspect of power, and the management of power, where the collective power could bring individuals into line because those individuals valued the ...

BM: Community.

KD: The community, and their position in that community.

BM: I love that word.

KD: Yeah.

BM: Because I think it speaks to a broader biological need as well. Before I even say that, just in my head, I was thinking also of another company, which was interesting and which we had a bit to do with some time back, ARUP engineering - a huge civil engineering firm that designed the Sydney Opera House, and many other iconic buildings around the world. Danish company. I'm not sure what the current ownership structure is, but when we were digging into it, we found out, first of all, they had very low staff turnover. So, something good's happening there. Secondly, they're just doing extraordinary beautiful buildings consistently. And drilling into it, you found it was owned by... Owned on behalf of the employees. I think a trust was the mechanism, but the employees owned it. The employees were all owners like Semco. So it's owner-led in that sense, they all got skin in the game and therefore, they're stepping forward. They're all part of that community. And the other thing that was beautiful about it was in terms of connecting to values. Their mission statements were all about quality architectural outcomes, and they spoke only of profit as a by-product for doing a good job for the client. I love that, and everyone can connect to that. And I believe they tolerated... I don't know if they still do, but I believe they tolerated losses some years because they wanted to do an exceptional quality outcome, knowing that if they practise their values consistently, the profit will come. Clients, loyalty, would come. The reputational benefits would come. And so that's another example that always stood out for me.

KD: Yeah.

BM: And I think they had salary transparency at a level. I'm not sure about that. I'd like to validate that, but yeah.

KD: It's a great example, yeah... But it brings to mind the fact that you can't seek happiness. Happiness is a by-product of a certain lifestyle; a way of being in the world. I think that if you're seeking a profit for the sake of a profit, it's probably not going to work. But if you're giving people a workstyle that is fulfilling and satisfying, profit will occur as a by-product of that process.

BM: And we started on that word community. All the things you talk about, like the people going to see this employee and talking... Putting him back on the right narrow, and reading him the rulebook, it's almost a team thing. When we think of the places we want to work … so many of us out there who are not working independently are working in a corporation where they're coming to work as individuals, they're maybe making a few social connections for survival inside the structure of the corporation … they're living a life which they feel is pretty empty because of that. They then go home, long commutes, all the rest of it, that's just... That is the modern world. But they would just die to be part of an organization where there's a really strong sense of community. It's a place they want to be, just from a human biology point of view, we crave more community. There's always. Data at the moment, loneliness has been going up, steadily year by year, and it's like... If we can give them a sense of community, there's so much, I don't know, motivation and power in that, just alone. Yeah.

KD: If you just think of the subtle affirmation that we get from being in a community .. the sense that we exist; that somebody recognizes us. You exist. I see you. In a very subtle abstract way, that's motivational. If we were never affirmed by anybody around us, the outcome is going to be depression and lack of energy, lack of commitment, and ultimately, if it gets bad enough, suicide.

BM: Yes, yes.

KD: So, yes, we are social beings by nature and that kind of affirmation we get when we exist in a way that is meaningful, is fundamental, I think, to our well-being.

BM: And if we want to do innovation, the ideal way is to connect into that. We're social beings by nature. You know, maybe that's a good way to wrap today up.

KD: Wrap it up. Yeah.

BM: Anything else you want to say because there's so much more to talk about? But maybe we can come back and...

KD: We can come back to it. Yeah, but I think we've done enough for today, Bruce. And hopefully it's been useful to the people who are listening.

BM: Yes. And yeah, it's all social, I mean, that's the big message here, it's all about social mechanisms, if you want to make innovation happen, it's all social. That's really the overriding message here.

KD: And that's one of the insights that came out of the research of a PhD student of mine, who did a big research process with a top Hi-Tech organization, a global organization, and he came to the conclusion that social innovation precedes technical innovation, because these were teams that had not technically innovated for three years.

BM: Social innovation precedes technical innovation. Lovely.

KD: Because the problems were social that prevented them from innovating technically, and once they sorted out the power struggles and the structures and the alignment of purpose, they started producing really interesting, innovative technologies that have impacted thousands of people's lives.

BM: Yeah, brilliant. Well, you're a good man, Ken and a great friend. Thank you for making time.

KD: Yeah, you too. Thank you. Thanks for initiating this as well. I hope it's useful to others. That's the main thing, Bruce.

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