In virtually every sector of our economy, innovation and technology are accelerating the pace of change. To assure your company is keeping pace, you need to introduce “learning loops” throughout the organization. Successful learning loops generate a state of continuous learning and adaption by making sure that performance information is shared immediately among people empowered to experiment and make improvements. With effective learning loops in place, change is driven from the bottom up.
Why Accelerate the Pace of Change?
Every leader of a company today lives in fear of the disruptive innovation: the new technology, new service, or new government policy that enables customers to bypass your industry and get the same service or product from another source.
- It happened in the newspaper business, when online services stripped away its near monopoly on classified advertising
- It happened in the telephony industry, when cell phones decimated the business model of the “Baby Bells.”
- It happened in the banking business when deregulation enabled retail banks to move into investment banking.
- It’s happening in the energy industry today.
The newspaper industry knew the change was coming. It just couldn’t see the extent of it or plan well for it, because it couldn’t see the full benefit of cannibalizing its existing business to enter into a new business. As the CEO of one newspaper group put it,
“We didn’t appreciate the scale of change.”
To spark the kind of innovation that enables companies to change and adapt and not be displaced, you need to accelerate the pace of change and arm people with the ability to think – and act – strategically. The best way to lead in a time of accelerating change is to keep the foot on the accelerator. Which accelerator? I call it the “learning accelerator.” When learning happens, change occurs. If you install the right systems of communication and learning, you will experience higher levels of information sharing, trust, innovation and performance.
Don Winkler, the former chairman of Finance One Corporation, was once assigned the task of managing the subsidiary of an American bank in Greece. When he arrived in Athens, he discovered the bank was in deep trouble. Scores of customers were closing their accounts, appalled by the poor quality of customer service.
Winkler knew he had to change the bank’s culture. He also knew that in order to be successful he needed to get the bank’s Greek executives and employees fully engaged and committed to making the change happen.
He convened several brainstorming sessions. Initially, he encountered resistance, especially among the Greek managers of the bank who resented Don’s outside intrusion. But Winkler kept at it.
After the tenth brainstorming session, the executive team came up with a plan. The Greek bank president decided he would move his desk into the middle of the lobby. This would symbolize the bank’s new commitment to customer service.
An advertising campaign kicked off the event. Customers came to see the bank president sitting at his desk as they came through the doors. But as Winkler recounts it, then something surprising happened. The Greek president heard customers complain first-hand. The level of vitriol directed at the bank shocked him.
“We must do something,” he told his executive team. “Immediately.”
The bank president ordered a new customer complaint tracking system. He insisted that all employees be trained to respond immediately to customer concerns. The bank president personally presided over the customer service team. As the level of customer service went up, the bank’s business was revitalized. In less than six months, the bank’s customers were singing the bank’s praises. In less than five years, the bank realized a 5,000 percent increase in profits.
There are two takeaways from Winkler’s story. One is that you have to get close to your customers to know what is really going on. Second, employees need to be engaged in an accelerated learning process. Winkler’s ideas worked because he understood that employees could be agents of change only if they were given the knowledge and the means to invent the change themselves.
As Winkler says,
“They alone could identify the continuing sequence of small changes that add value, enhance efficiency, build competitive leadership and increase profits.”
They alone could accelerate the learning.
Bill Weiss, former CEO of Ameritech, describes his experience leading people through change as follows:
“It’s a race where you run the first four laps as fast as you can—and then gradually increase the speed.”
To accelerate the pace of change, leaders must focus on creating systems of learning. It sounds easy, but it’s not. The secret is what I call “learning loops.” Learning loops are similar to feedback loops except they are deliberately designed to achieve organizational change at maximum speed.
Toyota and Honda pioneered the practice in the 1950s and 1960s when they organized people into teams and gave those teams the power to measure their performance and improve. The “virtuous” circle of learning, innovation, and higher performance—what the Japanese call kaizen—has since been put to use in many manufacturing sectors. Our firm has worked with a wide array of clients to implement learning loops—and we’ve yet to find an industry, or a business process, that doesn’t improve when we do so.
Effective leaders arm people with the skills and tools to continuously learn, adapt, and navigate change by putting learning loops into place throughout the organization. They also weed out hidden “ignorance loops” that impede the organization from learning.
Learning loops have three critical elements:
- They have things to measure (metrics and targets). How are you measuring customer satisfaction? How about service reliability? Or safety or environmental protection? If you’ve read Chapter 1, then you know these metrics should be tied to your core values. Your metrics need to be figured out and translated into an ongoing system and process of measurement. Things can’t be measured once and forgotten. You need a continuous cycle of measurement to understand the trend over time.
- Real-time or near real-time communication about the metrics needs to occur with people who are empowered to make change happen. The right forums need to be in place and visibly supported by management. People need to be encouraged to talk about the data and figure out ways to improve the company’s performance. They also need to trust that the learning loops are intended to create change, not trigger reprisals. The executive of a bank purposefully invokes a “no reprisals” rule at the start of every learning loop meeting. He says: “There can be no reprisals for anything said in this room, so long as it is stated with the interest of the company at heart.”
- Real change needs to occur as a result of the learning loops. It’s not enough to generate ideas. Senior management must support and implement innovations that flower from the learning loop forums. Those innovations need to be tracked to determine whether they are successful and, if so, implemented across the organization.
As people begin to trust that the intent is not to penalize but to learn and adapt, they start to experience the power of learning loops and see real improvement. Often it begins with comparison of performance across teams.
One of our clients, a revenue collections agency, deploys teams of tax collectors and auditors in district offices across the state. As we worked with them to install learning loops, they began to measure things like the timeliness of tax filings, the efficiency of collections, and the effectiveness of tax audits. Over time, the teams started to talk about which districts were more effective in each aspect of the business. Some districts were more effective at tax audits, for example. It turns out they were using a specific modeling tool for predicting which audits would yield the most revenue. As a result, other districts adopted the same model and experienced real improvement.
The genius of the reciprocating engine lies in the cyclical action of the piston and cylinder. Each downward stroke exerts force on the piston rod while drawing fuel into the cylinder for the next cycle. The genius of learning organizations is creating an engine of accelerating change. The downward stroke, if you like, is the delivery of value to customers, while at the same time the downward motion sucks information and intelligence from customers into the organization—to be digested by it immediately for the next cycle.
The point is simple: the key to high performance is creating learning loops that energize the creative process.
The best learning loops are like brains, taking in data, responding to pressures, and above all continuously learning and adapting. While the notion is simple, it is difficult to pull off—especially in an organization where turf wars or political jealousies may cause managers to hoard information rather than share it. This can pose the greatest challenge for an organization—but it is also one of the most rewarding things that a leader can do.
Just as we are always becoming leaders, we are always in the midst of change. As a leader, your challenge is to make everyone in the organization a part of this dynamic to accelerate the pace of change. Sometimes it requires burning the bridges—tearing down a symbolic vestige of the old organization. Sometimes, as at Intel, it means telling people they have to join a new team, invent a new job, or leave. Often it means getting people to talk about issues they may initially not want to talk about.
Above all, accelerating the pace of change requires managing yourself differently. It means becoming increasingly aware of your own strengths and weaknesses—and learning the painful truth that you need to act in new ways in order to build trust and spark innovation.
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Next post: Practice #7: Stimulate Creative Flow