What I Learned on Mars: How to Build the Organizations of the Future
This article is based on a talk I gave at the Gartner IT Symposium in 2019.
Why does it seem that there is something different in the DNA of companies like Amazon, Netflix and Google that doesn’t exist at most other traditional enterprises?
What is it that sets these companies and others like them apart from the rest?
Most of my career has been spent working in and around startups & high growth tech companies, across areas such as health, energy, finance and retail. And I loved it. The hustle, the vibrancy, the uncertainty and the innovation.
But a few years ago I switched sides and began working with larger and more traditional organisations. Organisations that weren’t nimble and fast, but rather slow, hierarchical and looking for change.
Initially it was a massive culture shock, and for the first month or so I remember feeling like every morning arriving at work was like landing on Mars. But slowly I became acclimatised to my new environment and began to understand the key differences between my former world and my new world.
This article is about the five key things that differentiate the best organisations out there from the rest, and what you can do to make sure your organisation thrives in the future.
Outcomes Over Outputs
In 2013 I ran my second ever marathon in Sydney and I remember that marathon well. The first thing I remember is that my daughter had just been born 2 weeks prior and was waiting at the finish line with my wife. The other thing I remember is that I hit “the wall” really badly at around the 35k mark and the last few kilometres to get home were an agonizing mix of muscle cramping, stretching and walking to reach the finish. I had put a tremendous amount of time and effort in to my training over the months leading up to the race, completing longer runs with higher volume in a bid to achieve my goal time. But on that day all that effort came to nought, as I limped my way across the finish line well outside of my goal time.
Five years later and I had just completed my 4th marathon. I also remember that race well as I had just PB’d and shaved 20 minutes off my previous time, running well under my goal time. However I had put a lot less effort into my training, running far fewer kilometres in training and completing less training sessions. Instead I had focused on my sleep, nutrition and running form. Despite putting in a lot less effort, I had achieved a far superior outcome, which is directly opposed to everything we have been taught.
The science: The answer can be found in the worlds of cognitive biases and behavioural economics, specifically in a rule of thumb we use everyday called the Effort Heuristic.
This heuristic sees us measure the value or worth of something based off our perception of how much time and effort went into it. It provides a shortcut for us to determine the value of something very quickly, by substituting effort for quality. Sounds great right? The only downside to this is that equating effort with value turns out to not be very accurate.
“There is nothing so useless as doing efficiently that which should not be done at all”
What does this mean for us? In high growth organisations the focus is consistently placed on achieving outcomes and delivering results. The effort required to achieve these outcomes is left up to the team, with little attention paid to it by those outside of the team. Conversely, most traditional organisations still fall victim to the effort heuristic, being overly concerned with how much effort they perceive the team is exerting instead of how much actual value that team is delivering. If you are in organisation that spends much of it’s time worrying about the velocity of it’s teams, with little to no time spent worrying about key value metrics such as conversion rate, customer satisfaction, cost per acquisition, and lifetime customer value, you may find that all the effort in the world isn’t going to deliver the value that you desperately need.
Teamwork Makes the Dreamwork
At the 2002 Soccer World Cup France were red hot favourites, going in as both the reigning world champions and reigning European champions. They had a star studded line up filled with superstars like Zinedine Zidane, Thiery Henry, Patrick Viera and Frank Lebouef. In contrast, their opponents in their opening game, Senegal, were only ranked 42 in the world and had several of their players embroiled in a shoplifting scandal only days before the match. Yet on the 31st May 2002 , Senegal pulled off one of the greatest upsets in football history, defeating the world champions 1–0. As opposed to the French, who had star players all around the world playing for different clubs, many of the Senegalese players had known each other and played together since childhood. Years later, Salif Diao, one of the Senegalese heroes of that amazing match, recalled the unity of the team:
“We had something that was very powerful between us, we did not need to communicate,” he says. “We would be together, just talking with our eyes. I would be looking at you, knowing you knew what to do.”
The difference between the two sides that night was that while the French were a team of champions, the Senegalese were a championship team.
The science: In 2012 Google embarked on an initiative — code-named Project Aristotle — to figure out what creates a successful team. Over 2 years they conducted 200+ interviews with employees and looked at more than 250 attributes of 180+ active Google teams. What they were looking for was the ultimate mix of skills, personality traits or backgrounds that when combined made up the perfect team.
What the Google researchers found was that the “who” didn’t matter at all, whereas the “how” mattered completely. What made a team successful was presence and adoption of what are known as “group norms” — the traditions, behavioural standards, and unwritten rules that govern how teams function when they gather. And of all the norms, one was far and away more critical for a team to succeed. Psychological safety - whereby team members feel safe to take risks and be vulnerable in front of each other - proved to be the social norm to rule them all.
“A championship team will always beat a team of champions”
What does this mean for us? Some organisations try and optimise their teams by adding more people to the team, or replacing less experienced team members with people who are deemed to be superstars at their craft. However high growth organisations know that the culture is underpinned by deep relationships between team members. Every time you increase the size of a team or swap people in and out, you increase the complexity in the relationships between those people and thereby lessen the psychological safety required for them to perform optimally as a unit.
No Risk No Reward
When I think of risk taking there’s one guy that always comes to mind and his name is Phillipe Petit. Petit is a French high-wire artist who in August 1974 walked back and forth between the roofs of the World Trade towers on a wire suspended 400 metres above the ground. If that wasn’t risky enough, he did this illegally, having meticulously planned this performance for over 6 years. On the face of it, walking across a wire suspended 400 metres above the ground with the police closing in on you might seem like a big risk. However that’s only from the outside looking in. You see Phillipe’s highly risky performance was just the incremental progression of a bunch of smaller risks over time that eventuated in this bigger risk.
Phillippe didn’t start with the big risk, the wire 400 metres above the ground, rather he first took a smaller risk walking on a wire only a few feet of the ground. And even before that he took a risk that all of us have taken at some point — those first few steps as a toddler.
So why are so many of us so risk averse?
The science: Loss Aversion is an evolutionary cognitive bias that is hardwired into our brains because of the scarcity of resources humans needed for thousand of years and the importance of hanging on to these resources once we had acquired them. The bias refers to the tendency for people to avoid losses over acquiring equivalent gains, with the pain of losing being twice as a powerful as the pleasure of gaining.
What does this mean for us: Most organisations view risk as something that needs to be fenced off with big warning signs, alarm bells and walls put around it. Taking a risk is the last thing they seek to do. But what they are doing is viewing risk as that 400 metre wire above the ground. Instead risk should be seen as those first steps that a baby takes. A small experiment where when you fail (not if) the consequences are minimal but the learnings you take out of it are massive, and will enable you to grow and succeed the next time you attempt it.
Pay It Forward
In 1935 Ethiopia were in the middle of a bitter war with Italy after Mussolini had ordered his army to invade the African country. To support Ethiopia in their military efforts, Mexico sent financial aid to assist them in driving back the advancing Italian army.
Fast forward 50 years to the 1980’s and an 8.0 magnitude earthquake strikes Mexico city, one of the most densely populated cities on earth , causing widespread damage and the deaths of thousands of people. Ethiopia, going through a major famine and unable to feed their own population, donate $5000 to Mexico to support them in their time of need. Ethiopia remembered what Mexico had done for them all those years ago, and despite being in need themselves, still made the decision to repay that favour.
The science: Reciprocation bias is based around the social norm of returning a positive action with another positive action. If you do a favour for me, I feel a sense of debt to return that favour to you. Anthropologists Leakey and Lewin say that this bias is based off an evolutionary social norm where to evolve our ancestors formed into groups and learned to share their resources for mutual gain.
What does this mean for us: What we see in high growth companies is an honest and dedicated focus on the organizational culture. They know that their most valuable assets are the people, and they invest heavily into those people. They are not worried about investing in and growing their people with the chance that they will leave, they are worried about not investing in and not growing their people with the chance that they will stay. All organizations are at their essence a group of people who come together for mutual gain. They are stronger together than they are individually. And just as our ancestors did, our inherent bias is to reciprocate positive action with positive action in order for everyone in the group to succeed.
Power To the People
It was the summer of 1982 and Eddie Van Halen was relaxing at his home in Los Angeles. The phone rang Eddie answered and asked, “Who is it?”
The voice on the other end replied, “It’s Quincy!”
Eddie asks, “Quincy who?!”
The guy on the other end says, “Quincy Jones!”
Eddie instantly screams, “F%&k off!” and hangs up the phone.
This happened four times before Eddie Van Halen realised it wasn’t a prank call, and it was indeed legendary music producer Quincy Jones calling him.
At the time Quincy Jones was working with a young Michael Jackson on producing the Thriller album. They were working on a rock track called Beat It and wanted Van Halen to record the guitar solo on the track.
When Van Halen came in to record his solo they played him the track and Van Halen asked for the solo they wanted him to play. Jones paused then looked him in the eye and told him “We didn’t bring you here to tell you what to play — the reason you’re here is ’cause of what you do play.”
Quincy knew what Van Halen was capable and was able to empower him with the freedom and autonomy to achieve his best. Yet what cripples many organisations today is the inability to do this with their own people. Instead of empowering they constrain, telling them what to do and how to do it.
The Science: The overconfidence effect is a well-established bias in which a person’s subjective confidence in his or her judgements is reliably greater than the objective accuracy of those judgements. Studies conducted have shown that people are likely to be more confident in their opinion being correct than those of others.
What does this mean for us: What we see in many organizations is the HiPPO Syndrome — Highest Paid Person’s Opinion — resulting in decisions being made based on hierarchy, where stakeholders tell their product teams what to do because they believe they know best and they want the product teams to serve their needs. This is precisely the problem.
In most organizations, product teams exist to serve the business. But in growth organizations teams exist to serve the customers, in ways that deliver value to the business.
When organizations disempower their teams and tell them what to do, they are telling them that they need to focus on serving them. And when they do this they stop serving the person they should be focused on — the customer.
The Future is Now
At the start of this article I questioned whether there is something special in the DNA of high growth companies that sets them apart and enables their success? The Netflix’s, AirBNB’s, Amazon’s, and Spotify’s have all achieved huge growth and continued success, reshaping their industries and how we think about value delivery.
But it is not the tshirts, the foozball tables, the fridges stocked with beer or the free lunches that fuels their growth, it is their relentless focus on maximising value, delighting customers, learning & adaptation, empowering dynamic teams and growing their people that truly sets them apart. The truth is that it doesn’t matter whether you’re working in a start up in silicon valley, or an ASX 500 company or a government department, these five things apply to any team, in any organisation, in any industry, anywhere in the world.
So if you’re trying to evolve in to a fast and nimble organisation but feel like the change is more mechanical than meaningful, focus on ingraining these five values into your organisation and you’ll find that your organisation wont just survive , it will thrive and grow like never before.
About the Author: Josh is a Product and Innovation Lead at Hypothesis Consulting, a people focused digital transformation business. By helping clients follow an evidence based approach focused on the end customer, he is able to embed innovation across their business and uncover new opportunities to fuel future growth. He is a passionate believer in the power of technology and investment to enable large scale social impact and economic empowerment.