Learning organisations embrace R&D, academia, and professional development

Graduate students presenting to industry in my Mobile Web App class at OCAD University

Remember “Microserfs” and we how we laughed at the way Douglas Copeland described the hideous corporate culture of brain washing and pettiness among staff at a thinly disguised fictional Microsoft? This would never happen in our own loft-style open plan hipster businesses, where we sip our soy decaff lattés and ponder the salad of the month in the free canteen. And yet.. in the digital gold rush, staff are hired or stolen from other businesses because of what they can do today and their current experience. They get slotted into teams and produce. But where and how do the staff continue their learning journey? A learning organisation gives this a top priority.

Those egalitarian flat hierarchies can look suspiciously like no career opportunities after a while. How often have you dropped into a growing digital business or the groovy office of a digital giant and wondered where the 50-somethings were, or the 40-somethings.. or sometimes the 30-somethings? You’ll usually see those older folk in the boardroom and as investors, but rarely in the flat, flat, flat employee hierarchy. It is strange how many of those elders still have traditional glass goldfish bowl offices and keys to a c-suite washroom. How can you get there? You have brilliant skills in Java, or React. You’re hired, you use them. Who is sending you off to learn new skills? Who is the grey haired wizard or sorceress that mentors you in their wise ways? Who encourages you to be noodling around with an academic collaboration that looks to be, well, just academic? Would you ever fund somebody to do a PhD? Does it matter? Can’t staff just take the fat pay check, eat the salad of the week, work insane hours and stop asking questions?

It is incredibly worthwhile having deep relationships with academic institutions and your staff. Universities are still the engine room of innovation. Osage University Partners studied 400 IPOs and acquisitions that originated from university research in the US. Over 75% of these had valuations in excess of $50M. One of these was Google, valued at $23Bn in 2004. Exits took an average of 4–8 years. 20 universities had start-ups exiting for greater than $2Bn. Interestingly, the report’s author writes that “..the magic formula is a motivated academic paired with an experienced core-technology entrepreneur. Alums of the academic flywheel understand this, and so do the university tech transfer offices that are doing more work than ever to promote those marriages.” A bi-directional flow of knowledge and people is necessary to create a symbiotic relationship for both innovation and learning.

One side effect of organisations focusing on hiring based on what people know rather than their capacity to learn is a huge shortage of highly skilled people in the digital sector. But almost equally, there is a large pool of people with digital skills who are not quite good enough to meet exacting hiring standards. Colleges and universities do their best, but industry also has to invest heavily in training. In my first job as a young graduate in the late 1980s, I was hired by Cray Research — they made the world’s fastest supercomputers. I was a reasonably smart engineer with mediocre programing skills. I had no work experience at all. Cray took me anyhow because I showed some initiative and I had a passion to learn. The company then spent an entire year training me in classes before I became a systems analyst. If I graduated today, I would be cannon fodder.

Staff can usually get a pay bump when they change jobs, but how about making people want to stay with their employer? The learning organisation does just this. It’s a two way deal: staff are given time and support to keep learning and employers get loyalty and retention. Staff rotation of 5% keeps things fresh, but more than 10% gives a workplace that has the collective learning of a goldfish, forgetting everything on each circuit of its bowl. A low retention organisation where staff can’t learn creates a business spiral of death.

In the mid to long term, a learning organisation benefits the employers just as much as the employees. It is not a new idea. Peter Senge wrote a seminal book about it over 20 years ago called “the Fifth Discipline”, but I’m not sure it is on the shelves of that many managers.

Technology and automation of process and workflow is really visible in the tech giants when I visit their offices. White collar automation takes out the need for initiative-taking innovation and development just as much as blue collar automation. It reduces the staff headcount and builds the value of the business, but the number of people doing really valuable things drops remarkably fast. Tech companies should watch out: today’s disruptors will always be tomorrow’s disrupted. A beautiful cash cow that needs little human intervention can be left in the dirt when some former employees set up something different down the road, often as much out of frustration with their roles as out of a sense of entrepreneurship.

In its golden years, IBM was home to more Nobel Prize-winners than any University and it dominated Wall Street just like Apple. IBM had the smartest employees who were always innovating in the best labs around the world. Then it became a process junkie, streamlining everything around customer services and squeezing out the best bottom line. The smarts left. They went and built better businesses.

The tech giants tend to swallow up start-ups and promising founders instead of fostering innovation from within. It seems like a quick win, after all those founders have sweated away and maybe shown that there is an embryonic market. But see how often the core ideas get dismantled or lost during an integration process. Sometimes it works, but often as a bubble of people in a “skunk works” that is kept separate to the main business. How many staff at Facebook get to benefit from John Carmack’s genius at the Oculus VR subsidiary? John is one of a tiny handful of the fathers of 3D games — think Castle Wolfenstein, Doom and Quake. Google restructured new business areas into Alphabet which keeps subsidiaries such as the amazing team at Boston Dynamics at arm’s length. The amazing robots at Boston Dynamics admittedly do look like they are the spawn of the devil. Perhaps Alphabet/Google didn’t want consumers looking at those steel beasts and wondering how this fits with Google’s “Don’t be evil” slogan. Whatever, Boston Dynamics just got sold to SoftBank in Japan.

Invest in your teams’ learning and you’ll be amazed how your business will grow organically and innovatively in all sorts of directions. Harvard University professor Clayton Christensen writes about how most innovation in business is about efficiency or incremental improvement, which is great in the short term. If you don’t let your team “waste” time with deep learning, that’s what you’ll get. The original, step-change innovation stuff happens in labs and universities with epic funding and brilliant people for a reason. It also happens in the tiny start-ups that the folk from the labs get involved in. And it happens when your best smarts leave because they can’t take time off to go learn some more and expand their thinking on a part-time graduate degree or PhD.

You’re investing in learning at your organisation already? OK, let’s see — is R&D and staff development 10% of your turnover? It really does need to be at least this for you to qualify as a learning organisation. By this measure, how did the tech giants do last year? Amazon spent 9% of revenue on R&D in 2016, but they include “content” in this figure, which means making movies and TV shows — is that really R&D? Alphabet looks way better: their R&D spend was a massive 46% of revenue. Apple’s R&D was only 3.8% of revenue. PWC’s global innovation1000 study shows that Amazon, Alphabet and Apple were all in the global top 20 in terms of the pure amount of R&D expenditure. But the report also notes that the world’s top innovators are

“.. moving into a new world in which R&D is shifting more and more to developing the software that enables and enhances the performance of their products, and on developing services they can sell along with the products, which provide customers with additional features and improved usability.”

In other words, they are moving away from Christensen’s longer term fundamental step-change innovation and towards improvements and enhancements.

There are businesses with a long term outlook. Dyson the vacuum cleaner business is focused on creating step-change R&D and puts one third of profits back into R&D and they’ve had spectacular and profitable growth over many years. But perhaps no surprises as James Dyson’s role model is Thomas Edison. Amazon knocks it out of the stadium with their R&D expenditure, but the focus does not seem to be on staff development and there are some worrying reports about their workplace culture.

Ultimately, when there’s no sign of competition, it’s hard to remember that you’ve still got to innovate or die. But business value is about the future earnings and that requires foresight. Put your staff, your colleges and your universities at the heart of your plans and you may yet get to grow thought leaders in your workplace and even retain them when they stop skateboarding and start to gray a little. Create a learning organisation and over time you’ll get a much better bottom line.

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