John Hagel III, Co-Chairman of the Deloitte Center for Edge Innovation and co-author of The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion joined our show recently. You can listen in streaming on-demand at this link.
This book dazzles.
John and his co-authors have clearly and concisely explained The Big Shift from push, top-down, command-and-control structures to pull, bottoms-up, organic, collaborative structures better suited for faster cycles of product and market development, greater competition from greater numbers of competitors, and the need presented for more resources from more sources...many that remain unknown today but vital to success tomorrow.
John’s answers dazzled, too.
Mr. Hagel, thank you for joining our show today. I don’t encourage stalking. But I’m sure you’re working on another exciting venture. Where are you? What are you doing?
Thank you, Zane. I’m continuing to pursue a variety of themes and initiative We’re continuing to do exploration in business opportunities. We’re focused on two opportunities. We’re continuing to explore social software within ongoing enterprises to drive resources and key performance metrics. On the other side we have a 2nd initiative is trying to make sense of executives understanding that it’s important to participate in broader business networks, what are these different types of networks and the implication for participating in them and create a taxonomy of networks and construct a decision framework to understand under what conditions should they participate in these networks.
You and your co-authors together wrote an outstanding book. Again, the title is The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion. All the authors on this show have prepared great books. But very few of them inspire me to scribble 6 pages of notes from reading the first 75 pages.
What inspired you to write this book? Was there a challenge you were trying to address or some trend in play?
The catalyst was about a year ago when we saw data that showed executives were very focused on short term cycles. The key metric that caught our attention was a key metric that showed corporate profitability which showed that if you look at it in terms of return on assets we’ve been in a long sustained decline in this key metric of corporate profitability. The specific focus of the book was understanding this trend and understanding what specific kinds of actions you can take to more effectively address that trend.
What’s caused this and why has no one noticed?
We’ve become so focused on short-term trends. We’re so focused on what we’re doing in the next quarter.
We were shocked when we saw this statistic that show that ROA, Return on Assets had declined by 75% since 1965. And we thought surely someone has done this analysis. And we couldn’t find anyone.
This is new for most executives and most economists and analysts.
We focus on two underlying forces shaping this trend. One is an increasing adoption of technology infrastructure, read, the internet. This removes barrier to entry and barriers to movement for companies and resources, which leads to more competitors and increasing economic pressure.
Then in addition there is a 2nd force playing out in parallel...for decades back to World War II and it’s a global trend and that’s the trend towards economic liberalization. That means freer flows of ideas, people, money on a global basis. The implication is that there are lower barriers to entry, lower barriers to competition.
The metaphor of the red queen is cited to show that we’re running faster and faster to staying the same place. And our analysis shows we actually had it good back then. Today, we are running faster and faster and falling farther behind.
My friend Erika Andersen coined the phrase reasonable aspiration or hoped-for future. What was your reasonable aspiration or hoped-for future from writing this book?
At the highest level we wanted to have the book be a catalyst on two levels. The first is find passionate people and connect them on a platform, pull them to the surface, have them identify and connect with each other. We’re tyring to bring people together and have them enter into discussions over time.
The other piece more for executive in business is being a catalyst focusing on more long term opportunities. I worry that people focus on the profitability trend and certainly that’s a big challenge.
Overall the book is a very optimistic book. These same forces creating these challenges are the same forces creating opportunities. We wanted to be a catalyst to pull executives back and have them look at these long term trends.
What are or will be signs you are reaching it? What will be the metrics?
Certainly one metric is the broader media world is grabbing on to these long term trends and bringing debate to these long term trends.
Ther is an understandable focus on short-term trends. But our success is measured by how we shift the debate to these long-term trends.
Bruce Springsteen once said he sang every concert to one fan in the audience. Real or imagined. Describe for us the ideal reader you had in mind as you wrote this book? Are they reading it? Why them?
I had two readers in mind and they’re both personal friends of mine.
One was a friend of mine from law school. She was in law school because her parents believed that the key to success was to become a lawyer and she was a good daughter and she got her law degree and she felt that she could earn enough money to pursue her passions outside her day job.
A key message in the book is that increasingly your personal success and personal fulfillment is making your passion your profession. The more we try to segment it to pursue our passion someplace else...that is a broken model.
A 2nd friend of mine has become CEO of a corporation and I’ve seen that process where he becomes more narrow in his focus and loses perspective of the marketplace he’s operating in and the broader trends and what’s the meaning of these broader trends.
What was basis for the Power of Push?
At the most fundamental level, the power of push is that if you can predict the future of demand you can organize resources to meet that demand, push them to meet that demand.Iif you look back at large corporations in the 20th century that was the business model. And it created large amounts of wealth for customers and stakeholders.
Unfortunately it has a set of assumptions embedded in it that it becomes hard to make those assumptions implicit much less challenge them. That was one of the goals of the book was to challenge that assumption of the Push Model.
What is the source of The Power of Pull? That means The Power of Pull must arise from trends exactly opposite?
At one level, we’re calling into question that basic assumption of the Push model that you could predict and forecast demand accurately. If you get it wrong you have people and resources in the wrong place and it is very hard to push them around to get them in the right place.
The power of pull is how can you create platforms to pull out the resources when you need them and where you need them.
It creates a lot more opportunity for innovation, improvisation and experimentation. If you can have these platforms to draw out resources when you need them, where you need them, then you can play with things and see if there’s a better way to do these things.
The other power of pull is embedded in the subtitle. Small moves made smartly can result in big things. Ultimately the power of pull is about leverage. It’s a very powerful form of leverage where small groups of people in small business can accomplish great things and deliver more value to the marketplace. People on their own or in small business can accomplish great things by more effectively connecting with the resources.
What are the three waves of this Big Shift from the power of push to the power of pull?
It starts with the notion of what is the key catalyst that shapes the broader landscape. This digital infrastructure and gaining performance and economic liberalization. This first stage is all about intensifying economic competition. This all contributes to economic pressure and the stresses we feel.
The 2nd level starts to trace out the implications from how do you deal with this increase economic pressure. We’re shifting from a world where economic value is in the form of knowledge stocks which you get to protect what you know so nobody else gets access to it and how you can extract value from it ... to where economic value hinges on how you can connect in to richer knowledge flows from a very diverse set of participants so you can refresh your knowledge stocks more rapidly.
The 3rd wave is much more the opportunity side. As we understand the value of these flows, and develop the techniques to develop and engage in them, we can for the first time start to think about extreme performance improvement that moves us from a world of diminishing returns to a world of increasing returns.
Push is all about efficiency, doing things at lower costs. But that’s a diminishing model. The lower you go at cutting costs the harder it is to get that next increment in cutting costs.
Pull is all about creating new knowledge and new flows. Now we think for the first time you can organize resources and people to learn faster. By working together you all learn faster and get to higher levels of performance faster.
Your book titles are about 5-10 years ahead of public discussion of those same topics. When does our economy finish this Big Shift? When does the Power of Pull become mainstream?
I’m a big fan of the science fiction writer William Gibson. And he’s got a great quote that the future is already here, it’s just unevenly distributed. There are examples of it playing out as we speak today. This is not some long-term futuristic projections. There’s a lot to be learned from understanding the experiences of those people and those companies today.
Obviously this is going to take a long time to play out in people and companies, on a broad basis.
We’re probably in the early stages of the 2nd wave. We’re now just in that phase of understanding the basis of value-creation and competition is moving from knowledge stocks to knowledge flows. We think it is a 10-20 year proposition before we all can fully engage in that opportunity.
The 3rd wave is described as institutional innovation in your book. How will the Power of Pull change this term from a contradiction to a collaboration?
When I talk with executive and talk about innovation, very quickly the conversation focuses on product or technology innovations. And if you’re talking to western executives it’s all about breakthrough innovations. They don’t want to be bothered with incremental innovation.
One of the key themes in our book is you have to broaden your horizons about how you think about innovation. We’re talking about a broader definition of innovation and that’s institutional innovation. Our institutions today have been built around a push model where it’s all about protecting proprietary knowledge stocks and effectively extracting value from those knowledge stocks.
On the other hand if it’s about knowledge flows, our institutions are not built around handling knowledge flows. It’s not about a single institution and when you think about knowledge flows and how do you rethink your institution and your relationship with other institutions and the roles you play.
- How do you get more institutions to participate?
- How do you rethink your institution and your relationships with other institutions so you can scale this?
- How do you get more participants involved without getting overloaded with the complexity of coordinating that activity?
That’s a significant opportunity.
Talking with executives I tell them If you’re really serious about innovation you have to broaden your thinking about this form of institutional innovation.
I’m an optimist. I do believe this will become more central to our business activity in part because the pressure is mounting. The pressure on our economic performance is not sustainable. It presents a very clear and present danger.
The best way to get change to happen in an institution is to present them with this clear and present danger. That gets the mind focused in a way that grand visions cannot.
35:05.
Corporate and institutional leaders are really going to engage around this theme of institutional innovation as they recognize this clear and present danger.
We’re not just talking about corporate institutions. We’re talking about institutions of all types. Our educational institutions were built around the Push Model from the early 20th century. You knew when someone was born what they would need to learn in first grade, 5th grade and you could predict what they would need...How do you help people learn in the future in ways you cannot predict?
It looks like as institutional innovation becomes a reality and the mounting performance pressure becomes recognized and leaders get their minds focused...then they will make changes to their business models and they will recapture some of that ROA lost since 1965.
Our thesis is that if you invest time and energy thinking through institutional innovation you’re going to drive innovation in business models and processes and products you’re going to generate a flood of new products, new business models that we cannot predict today and create a lot of value.
Mark Johnson the author of Seizing the White Space was a guest recently. Is this 3rd wave, institutional innovation, the time when the majority of institutions are able to seize the white space and innovate new business models?
If you really understand the potential around this Institutional Innovation, it creates an opportunity to mobilize a lot of participants around innovation activities and focus them on a set of innovation challenges and white spaces that are out there. Innovation is not just your responsibility as a single institution but you can mobilize a a very broad range of institutions to innovate and you can learn from a lot of companies out there innovating and experimenting to address that white space.
This is a much more leverage model in that says you can do it faster and get other people to invest around that white space and not just yourself.
These three waves are macroeconomic. Can a company skip ahead to the 3rd wave...by year end? Are there three things a company can do to skip ahead from Wave 1 to Wave Three?
You know it’s the reason we call them waves and not stages is that they are not purely sequential in that you have to go fully through one to get to the next. Waves are overlapping waves. Again you can see early examples of each of these waves happening today.
It’s a similar proposition in individuals and companies. At one level you can start to employ opportunities from that 3rd wave today. In another sense there is a cumulative effect, the opportunity in the 3rd waves is how do you learn faster in a broader network of relationships where you’re all focused on extreme performance challenges and opportunities.
To do that you need to make some very hard choices around focus. Not enough companies focus on what is truly distinctive in what they can do. Outsourcing is a first step in doing that.
Once you have the focus right then you can build capabilities and skills around a broader range of people and resources that are not just buy/sell relationships but are trust based relationships. If you don’t have focus and the skills around building a broader network of these trust-based relationships it’s going to be difficult to create those learning opportunities.
I ask executives can you identify the 10 smartest people in your industry or network. Most cannot.
If they can name them, then the 2nd question I ask them is how well do you know these people, have you reached out and tried to connect with them about their needs and challenges?
Very few executives have got to this stage.
The 3rd question then is if you know them and their challenges have you been able to build relationships with these people by collaborating around really difficult performance challenges you both share.
You can start today if you have connected with really smart people and start to think about how you can figure out a way to work together and learn faster.
And by the way I think this applies not just at a corporate or professional level, but in our individual lives. All of us in our individual lives are facing more and more pressure. There is more competition for talent. If we’re not learning as fast as we can and we’re developing our talent, then we are at risk. There are people developing their talent and skills.
At an individual level how do you find the smartest people around you and how do you build relationships with those people so you can learn together and faster.
How will our educational system change in order to accelerate this shift and educate our kids on how to find answers to new challenges not answers to standardized tests...
A huge issue is because just as in companies where we’re facing this disconnect between business driven institutions and an increasingly pull drive n world out there is for educational institutions to realize learning is not limited to a certain period of our life. Some ed ins realize learning is a lifelong process and there is a real opportunity to stay connected to the students they have and to build tools and environments to continue learning and to stay connected to those students and those relationships they built when they were in school. That’s a key opportunity for educational institutions
I think the other piece is rather than hardwiring a curriculum around ok, here is what you need to know and we’ll provide it to you, it’s finding ways to get students to engage around their passions and creating an environment where they can connect and drive learning around those passions and the people that share them.
Passion is becoming more and more central to our lives. We’ve historically been taught that in the world of push you get a job to earn a paycheck so you can pursue your passion outside of work. Passion in work in a push world is unpredictable, it’s dangerous. Passionate people go with the flow. Passion is not what you want if you’re trying to get people to fit into tightly defined routines around building efficiencies.
I would say that our educational system has been intentionally designed to squeeze passion out of students. It’s to teach them to follow instructions. You didn’t want people going into the workforce who were passionate about work. You needed people who could follow orders, follow instructions and follow routines.
Obviously at one level there are some basic skills we need to succeed. But these are relatively basic levels of skills. Instead you should provide platforms where people can connect with their passions and help each other learn faster about how to drive better performance around those passions.
The reason I’m focused on passion is not because it’s good and makes us happy, it’s if in the world of increasing performance pressure then if you’re not pursuing your passion you’re going to be increasingly burned out. The pressure is not going away. The stress we’re feeling is that we’re not passionate about what we’re doing at work. We’re encountering all sorts of challenges at work and that’s why we’re feeling stress.
On the other hand, if you’re passionate about your work then a challenge is exciting.It gives us another chance to learn and become better at what we're passionate about.
Who benefits most from The Power of Pull: big institutions or small?
I’d like to think that everyone will benefit. We’re feeling increasingly stressed. What can we do about it?
We’ve gotten tremendous response both from entrepreneurs here in Silicon Valley and on the other side I deal on a day to day basis with corporate executives and they find these issues hugely relevant too.
Let’s talk about small business. Small Business is the source of new jobs, historically. And while the economy is recovering...it’s a jobless recovery. Chris Anderson, editor of Wired magazine said recently we could be entering the golden age of small business.
What role does the Power of Pull play in all this, maybe creating a job-filled recovery?
Let me answer that on two levels. On one level it’s a huge opportunity not only for small business but for us as individuals. It’s forced us to step back and ask what am I really passionate about? And they are building really interesting 1 or 2-person businesses around their passion.
A lot of people are saying this is an opportunity to do what I really want. If you understand how to use pull you can make really small moves using really small resources and create big things.
There will be very different institutions. It’s not going to everyone is a small business. There is an opportunity to create really big institutions.
Leaders are Readers. In your spare time...what are you reading? What’s been your favorite three books this year?
I encourage people to visit another of our websites called edgerati. We tried to show the people who influenced us, the authors. It’s a list of resources we’ve been inspired by.
As far as books, go:
- The Facebook Effect, David Kirkpatrick ( A history and an analysis of its effect in our lives.)
One of our things we’re doing is a very active calendar around launch events for the book. DC in June, LA, several in SF. Come to ourwebsite at Edge Perspectives and signup for updates. We have a Facebook page, Power of Pull, to keep people updated on our progress and these events.
Our upcoming guests include:
May 11 - Tom Rath: co-author of WellBeing: 5 Essential Elements
May 12 - Paul Williams: author of The Innovation Manager's Desktop Reference
May 19 - Tom Kouloupolos, author of The Innovation Zone: How Great Companies Re-Innovate for Amazing Success.
