Charlie Munger, a longtime friend and co-investor with Warren Buffett and vice chairman of Berkshire Hathaway, calls mental models the “theoretical framework that helps investors better understand the world.” These mental models are tools we all use that enable us to compartmentalize vast amounts of information into manageable segments. Within a corporation, individual mental models are often subjugated to corporate intellectual frameworks, which guide resource allocation, strategic planning and corporate culture and ultimately become the basis for all decision making. It is this corporate mental modeling that penalizes failure, eliminates dissent and crushes the potential for creative destruction. A chief destruction officer (CDO) can play a valuable role to mitigate the effect of this corporate “groupthink” and propel the organization to greater heights.
Creative destruction is the provocative expression coined by Austrian economist Joseph Schumpeter in the 1940s to describe his view of the process of industrial transformation that accompanies radical innovation. In Schumpeter’s view of capitalism, innovation provided by entrepreneurship was the primary force that sustained long-term economic growth while destroying the value of established companies that enjoyed some degree of monopolistic control.
Within an industry, creative destruction can take many forms, including:
- New markets.
- New products/product features.
- New sources of labor and materials.
- New production methods.
- New methods of transportation.
- New organization structures/management techniques.
- New methods of communication.
To apply the concept of creative destruction to a company today, think of the limited role that the front-line worker plays in providing valuable information to the corporate decision-making process. Front-line workers – those who are closest to the customers and the products and services the company delivers – have historically been undervalued and ignored in major activities and decisions of the organization. Yet they are the ones who are the key to both sensing and responding to the magnitude of change in today’s market. Front-line workers are constantly accumulating experience and knowledge from the market. Depending on the position, a front-line worker might gather knowledge from hundreds of interactions a day. This is a wealth of information that is in no way being systematically captured and channeled into the vast array of decisions made within the organization. Those people who are closest to the action are the first filter to market and product trends. The opportunity for organizations is to pull the knowledge from employees’ day-to-day experiences, make decisions and act upon them through the “arms and legs” of those same employees.
In order to take advantage of creative destruction, companies must be willing to break free of the paradigms that enabled them to achieve success. Executives must strike a careful balance between the desire to maintain control of existing operations and the need to create the kind of environment that will enable new ideas to prosper. In other words, challenge the mental models that control the corporation. Mental models are impossible to see. They are neither explicit nor documented, but they are pervasive. When well designed, mental models allow management to anticipate the future and solve problems. But once developed, mental models become self-reinforcing and self-sustaining. The models, which generally rely on convergent thinking, wrest decision making away from the very executives that brought them in.
Convergent thinking, the most common approach to solving business problems and identifying promising opportunities, focuses on quickly providing well-worn solutions to common issues. Because most managers are rewarded for their problem-solving abilities, convergent thinking becomes an effective approach for personal success. Convergent thinking relies on order, simplicity, routine, clear roles and responsibilities, well-understood reporting relationships and unambiguous measurement systems. Although convergent thinking can be effective at solving small, incremental changes, it is confounded by large transformational efforts. Divergent thinking focuses on broadening the context of decision making. It is generally focused on getting the questions right rather than simply providing timely answers. Once the appropriate questions are asked, a convergent thinking process can take over.
One way to bring a divergent thinking process into a company is to create a position that does not fit the company profile – the chief destruction officer. The CDO should bring fresh perspective on how problems and opportunities can be viewed. The CDO should ideally possess several of the following characteristics.
- Visionary: Possesses the ability to rise above the day-to-day operations and look for the discontinuity on the horizon.
- Iconoclast: Challenges convention and encourages colleagues to push their thinking beyond the obvious.
- Pragmatist: Ensures that the decisions made in the boardroom can be readily implemented across the organization.
- Scientist: Is well aware of the latest technology, scientific discoveries and innovative breakthroughs and can bring a unique perspective to a discussion.
- Entrepreneur: Is able to turn any idea into a profitable business. Views most problems as opportunities and relishes piloting, prototyping, experimenting starting businesses within a business.
Because many CLOs share the objective of forcing senior management to consider which competencies will make them successful and then align development programs with their strategic objectives. They are also looking to create an environment in which that learning is readily available to employees and to try to determine what return on investment can be measured after learning occurs.
The CDO is rarely a new hire, nor is it a titled position. It is, however, a critical role for a senior executive to play to ensure the systematic capture of potentially game changing new ideas, an effective synthesis of the ideas considered and timely implementation into the business. And there is nobody in a better position to play the role of CDO than the CLO.
Consider the old expression “doing what you did got you where you are.” Perhaps it is time to try something (or someone) new.
Brian Klapper is the president and founding partner of The Klapper Institute, a management education, research and consulting firm. He can be reached at email@example.com.Filed under: Measurement, Technology