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Homa Taj In Conversation with John Hagel III (part I)

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How three distinguished business strategists had the audacity to write a book about: passion, seduction, tease & serendipity!

What do extreme surfers in Maui; green revolutionary youth in Tehran; an internet entrepreneur in Tel Aviv; and a manufacturing giant in China have in common? They all embody paradigms of success that are used by business gurus John Hagel, John Seely Brown & Lang Davison in their latest collaborative work The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion, Basic Books, 2010

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Actually the book could have been titled The Audacity of Pull. Or, how about The Power of Seduction? But, of course, the latter would have been the kiss of death for a business book. Except that The Power of Pull is not your typical business book. According to the 42nd President of the United States, William Jefferson Clinton, The Power of Pull highlights “fascinating new ways in which passionate thinking, creative solutions, and committed action can—and will—make it possible for us to seize opportunities and remain in step with change.”

John Hagel III is the Founder and President of Deloitte Centre for Edge Innovation and the author of a series of hugely successful strategy books including The Only Sustainable Edge, Out of the Box, Net Worth and Net Gain. A renowned technology theorist, John Seely Brown is the former head of Xerox’s legendary PARC (Palo Alto Research Centre) and a Trustee of the MacArthur Foundation. JSB (as he is known to friends & colleagues) is, also, the co-author of The Only Sustainable Edge and The Social Life of Information. Along with Lang Davison, the authors present a wholly original culturally responsive business model of management based on such unconventional themes as: passion, seduction, productive friction, creative destruction, tease, serendipity …and the virtues of playing World of Warcraft!

After reading The Power of Pull, I was convinced that my colleagues in the art world who are highly intelligent, creative & passionate individuals can benefit from the ideas that are outlined by its authors. These are men who collectively have more than eighty years of experience in managing a string of multi-billion dollar endeavours. After all, passion, aesthetic seduction and creativity are the themes on which our worlds are built.

As a curator & museologist who works with public and private collectors to forge mutually beneficial relationships, I am constantly asked by artists: “How can I introduce my work to public museums and private collectors?” Arts & educational institutions (especially museums), antique dealers and auction houses want to know: “How can we connect with new patrons – public & private collectors?” Then, there are fellow scholars and art historians whose inquiries may include: “Who are the most cooperative archivists (or institutions) that can facilitate my ongoing research on… say: The Tombs of the Norman Rulers of Sicily, or Brice Marden’s Early Works , or …a Biography on Pier Paolo Pasolini?” In other words, everyone wants to get connected to everyone else in – and out of – the art world but they just don’t know where or how to begin. This is especially true for those who don’t live in major centres like NYC, London, Berlin, or even, Beijing, Tel Aviv & Moscow.

About three weeks ago, I caught up with John Hagel to discuss some of the themes in the most aesthetically inspired business book that I have ever read.

Homa Taj – We, in the art world, have (supposedly) figured out where ‘edges’ are and what ‘edges’ do. But, business people aren’t supposed to do edgy things. Three years ago, you founded the Deloitte Center for Edge Innovation. What exactly do you mean by working on ‘the edge’?

John Hagel – Edges can take on many meanings. Basically, we focus on edges where unmet needs intersect with unexploited capabilities. They could be geographic edges (e.g., emerging economies), demographic edges (for example, younger generations coming into the marketplace and workforce), technological edges (e.g., new generations of technology) or cultural edges (e.g., the growing focus on “maker” do-it-yourself cultures). These edges attract creative and passionate risk-takers and are fertile seedbeds for innovation and opportunities to create new forms of value. Executives tend to ignore them because they are peripheral, highly uncertain and require new approaches – but that is also their great strength: they encourage, in fact even demand, experimentation and improvisation..

HT – I am interested in learning more about geographic edges. For example, this makes me think of emerging art markets like Brazil, Russia, India and China (acronym BRIC) which were the subject of a recent (Friday, April 23rd) auction at Phillips de Pury & Company. These are mainly developing countries which in the past several years have claimed their place as major centres of power, innovation and production.

JH – We often ignore geographic edges at our peril. In the business world, the focus for institutional innovation has now clearly shifted from the United States to China and India. Entrepreneurial companies in these countries are now at the leading edge of building and managing global business networks that embrace growing numbers of diverse participants and engage them in complex and performance sensitive business activities. For Western executives focused narrowly on product and technology innovation, this is an “invisible” form of innovation, likely to give rise to “innovation blowback” where new entrants gaining ground in these emerging economies end up attacking incumbent positions in developed economies. Participants in the art world may have a similar vulnerability as new art forms and new art collectors arise on the edge and, over time, drive changes in the core. Of course, we must always distinguish between edges that have the potential to scale and transform the core and fringes that will always remain marginal.

HT – Having worked on projects in Asia, I can attest that, too often, dealing with these types of cultural spaces can be quite frustrating for those of us living in the West. This is true since their rules are different from ours – and, I would even say that they are quite arbitrarily defined as new challenges arise. So these cultures (geographic edges), exactly as you said, “demand experimentation and improvisation.” And, yes, I do think that because of this very (however unsettling) quality, they can serve as curiously liberating experimental grounds where we can try out new ideas and methodologies for innovation…

JH – In the case of business innovation, entrepreneurial companies in these emerging economies are taking key barriers and turning them into opportunities through a process of improvisation and experimentation. For example, Western executives for a long time dismissed China because it did not have a well-developed financial system that was geared to supporting entrepreneurial companies. Facing this challenge, the entrepreneurial companies spawned vast networks of participants to help them deliver more and more value to customers while minimizing their own short-term financing needs. Similarly, these companies responded to the lack of intellectual property protection by developing sophisticated management approaches to rapid incremental innovation that allows them to stay ahead of anyone seeking to copy them. Challenges can become powerful catalysts for experimentation, improvisation and innovation.

HT – Another powerful catalyst for innovation which you talk about is “productive friction.” What I understand of this concept is that it is not the same as (excuse the cliché) “problematizing” an issue in order to deconstruct it but to take (fruitful) advantage of existing conflicts and convert them into opportunities for creative production…

JH – Productive friction represents a contrarian view relative to most business literature which celebrates the advent of a “frictionless economy”. Friction in the sense of inefficiency is certainly not desirable. But some forms of friction are actually very valuable and even necessary. Really creative ideas and approaches rarely come out of a vacuum. They often are generated in the course of heated debates among people from very diverse backgrounds who are wrestling with unexpected and new performance challenges. This kind of friction can be enormously productive and a significant catalyst for innovation and creativity. We believe that productive friction can be encouraged and shaped by understanding the conditions where it flourishes. Our book explores these conditions and helps people to better understand how to foster productive friction.

[youtube=http://www.youtube.com/watch?v=cyvDUVdsOKE&hl=en_US&fs=1&]

John Seely Brown & John Hagel of Deloitte Centre for Edge Innovation discuss “Innovation at the Institutional Level”

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HT – And, how is that different from your concept of “creative destruction”?!

Where there is no productive friction, creative destruction generally follows. Creative destruction is a concept first articulated by the Austrian economist, Joseph Schumpeter, in describing how markets spawn innovative new companies that rise up and challenge and often destroy entrenched companies who find it difficult to embrace new techniques and approaches to creating value. This destruction is creative because it delivers new value to customers that previous generations of companies were not able to provide and, in the process, destroys the incumbents who failed to keep up. We believe that these incumbents are destroyed because their leadership teams do not encourage productive friction and instead leave key assumptions about the business unchallenged. We all must continue to challenge our assumptions about the conditions for success by engaging on edges that require more aggressive innovation.

HT – The dramatic, and I dare say the overwhelming, gap between culture (& its institutions), academia and business (if not the masses) is pretty disconcerting. How do you think these gaps can be narrowed if not eliminated all together?

JH – We grew up in an age where all of our institutions were designed and managed to develop and protect proprietary knowledge stocks – knowledge that was not shared. This institutional architecture encouraged the deepening of “silos” that discouraged interaction and collaboration across institutional boundaries. In a more rapidly changing world, knowledge stocks – what we know at any point in time – depreciate in value at an accelerating rate. In this kind of world, we need to develop approaches that allow us to more effectively participate in a larger number of more diverse knowledge flows, so that we can refresh those knowledge stocks more rapidly. As our institutions evolve to address this unmet need, we will find that sharp boundaries that separated many of the domains in our lives crashing down under the growing force of proliferating knowledge flows.

HT – I have always believed that one of the best ways to facilitate this proliferation of knowledge flows is to promote inter-institutional collaboration. I am particularly interested in your proposition that “companies have to find new ways to interact with others within networks, rather than operating on their own.” But, how do you convince large – either for or non profit – institutions to yield their guarded impulse and open up to potential competitors, etc?

JH – This is very difficult. It is what I call the “curse of the deep pocket”. Institutions with a lot of resources are often tempted to do everything themselves. This tendency is compounded by a natural psychological response to growing pressure and challenge – our first reaction is to close down and tighten control in an effort to reduce risk. But as pressure mounts and little if any relief appears to be in sight, people subtly shift to more openness – they are more willing to question basic assumptions and to seek help from others. At the same time, it is possible to accelerate this process by focusing leadership on the broader opportunities that could be addressed if more resources were freed up. Even the largest institutions are ultimately limited by scarce resources and many opportunities are left unaddressed unless these institutions become more creative in leveraging the resources of others.

HT – Speaking of collaborations (& guild work), tell us how on earth does participating in the World of Warcraft help individuals with their managerial skills? …This, by the way, reminds me that the day after the release of The Power of Pull, a new Museum of Video Games (Musée du Jeu Vidéo) opened in Paris, on April 14th.

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Later this week, I will continue our conversation with John Hagel on The Power of Pull, World of Warcraft, passion, serendipity and Richard Florida’s forthcoming The Great Reset.

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