Congrats on your promotion. Here’s your cap and your badge. I’ve just made you the head of a military fighting force. Bad news: you happen to be at war. Worse, you’re up against a superior force.
Now, here’s what the stats show will probably happen: If your military takes on a superior force in the conventional way, you have no more than a 28.5 per cent chance of winning.
However, if you refuse to play by the accepted rules of the game, your chances of winning, as verified by a study of wars spanning 200 years of human history, go up to a whopping 63.3 per cent. That’s a switch from ‘probably will lose’ to ‘probably will win’.
Do I have your attention?
Sometimes, breaking the rules is incredibly effective. In the business world, the same dynamic applies. You can topple industry giants if you act unconventionally. Sometimes, breaking the right rules can hand you an industry on a platter.
Rules and norms accumulate over time
As we explore the art of strategic rule-breaking, this idea is important: no system naturally tends towards simplicity. Left to evolve, everything becomes more complex, as each contributor builds new layers of rules and norms on top of old ones. Increasing complexity is actually the path of least resistance. Simplicity, far from being a natural state, requires intelligent design.
It’s a big part of the reason that so little disruptive innovation comes from within an industry. Taxi drivers didn’t invent Uber, and bankers didn’t invent PayPal, because the people within these industries think through the lenses of their own complex norms. It takes a rule-breaking maverick to see a thing afresh and venture that there might be a better way.
Fight complexity
Take Steve Jobs’s obsession with simple, clean, elegant design. In no small part, it’s what saved Apple upon his return to the company. But it meant saying no to a great many things. No to an extensive product range – keep it simple. No to extra buttons – keep it simple. No to excessive complexity – the system must be easy and intuitive to operate.
Clearing away clutter, resisting the creep of added complexity and disbanding out-dated rules requires a simplicity champion. It requires leadership willing to challenge existing systems.
How much do bad rules really cost you?
At the most glib level, mindless adherence to rules is merely annoying, sometimes even the stuff of comedy (Google the Little Britain skit ‘Computer says no’). But is that sufficient justification to embark on a campaign to overhaul your systems?
It turns out we can do a lot better than that. There are plenty of compelling reasons for reducing and relaxing the rules in your organization. Here are 6 of them.
As part of your own efforts to change the rules-based culture at your company, this list may be useful as you begin to persuade others to your point of view. Why not present it at your next staff meeting? Ask attendees if they’ve seen real-world examples of each idea. Let their passionate discussion begin to drive the change:
The cost of rules
1. Speed
Rules entail processes that have to be followed. Each process may take a small amount of time in isolation. But pile rule upon rule and even a simple procedure can become an unreasonably slow process. The slower things happen, the greater the total lethargy.
Sometimes useful things are not allowed to happen at all, because a rule flat out prevents them from being done. Other times, a useful idea can’t get to market quickly enough. It took Google two years to get all the vetting they needed from Legal and Marketing to release Google+. By then, Facebook had such a critical mass that Google’s excellent compliance didn’t matter.
2. Willingness
When simple acts are slow to do because of the burden of procedures, the willingness to do them drops. People perceive that going above and beyond is too much trouble. They are trained and conditioned to actively reduce their contribution.
With decreased speed and increased procedures, the word ‘no’ is heard so often it becomes a form of cultural conditioning. ‘No’ trains away initiative and propensity for risk-taking. ‘No’ starts to become normative. It becomes your organization’s default setting.
3. Mistrust
The greater the weight of the rules, the more you need people watching people, in order to enforce those rules. In an ideal organization, where people are trustworthy and operate in a high-trust environment, you require only one person to police each person: themselves. Hierarchy becomes zero-sum and need not accumulate.
4. Loss of talent
Feelings of empowerment and a sense of purpose are among the chief needs of employees. Feelings of disempowerment are strong incentives to leave. Maintain a sense of powerlessness and frustration long enough, and you might haemorrhage top talent.
In a rules-based culture, the highly obedient, low-initiative workers stay; the frustrated innovators and high-initiative workers leave. Taken to its logical conclusion, everyone who remains blindly obeys the rules and kowtows to authority, because no one has the ‘radical value’ not to. You create the conditions for extreme groupthink.
5. Security trumping risk-taking
In cases when rules directly contradict goals, your people will tend to choose safety and job security over risk and bold action. The possibility of messy innovation attempts is shut down, precluding the possibility of smartcuts that can equal exponential growth. Multiply this behaviour and eventually no risks are taken, severely diminishing potential.
6. Silos galore
In a high-rules culture, people tend not to focus on the big picture. They lose sight of the mission. They are terrified of contradicting the internal norms and rules of their team or division, and will tend to priorities behavior that creates safety for themselves within that smaller division (silo), over behavior that helps the company as a whole. They may not even know how their contribution helps the organization, which can create immense conflict between divisions. Unfortunately, your competition will not honor your internal divisions. They may see opportunity in such weakness.
The result of these accumulated costs will be that growth will only happen incrementally in your organization, if at all.
They also introduce all the inherent dangers of a behemoth that is unable to adapt to change.
Think of it like an old locomotive steam train, running with irresistible momentum on set railway lines. You may run your behemoth to optimized perfection, but if you’re the Kodak of your industry, making film, and you can’t adapt your optimized perfection to the new reality of digital, your optimized behemoth will run, perfectly and unswervingly, with great and irresistible momentum, right off the edge of a cliff. Disruption kills off the dinosaurs that can’t adapt.
Which rules does your organization cling to, for no reason other than that the rules have always existed? What if you appointed yourself to champion the drive toward greater simplicity and agility? After all, they’re your rules. You can break them. And the ones who do so strategically acquire the leverage to topple the industry giants. They gift themselves with the space necessary to create truly disruptive innovation.

Congrats on your promotion. Here’s your cap and your badge. I’ve just made you the head of a military fighting force. Bad news: you happen to be at war. Worse, you’re up against a superior force.

Now, here’s what the stats show will probably happen: If your military takes on a superior force in the conventional way, you have no more than a 28.5 per cent chance of winning.

However, if you refuse to play by the accepted rules of the game, your chances of winning, as verified by a study of wars spanning 200 years of human history, go up to a whopping 63.3 per cent. That’s a switch from ‘probably will lose’ to ‘probably will win’.

Do I have your attention?

Sometimes, breaking the rules is incredibly effective. In the business world, the same dynamic applies. You can topple industry giants if you act unconventionally. Sometimes, breaking the right rules can hand you an industry on a platter.

Rules and norms accumulate over time

As we explore the art of strategic rule-breaking, this idea is important: no system naturally tends towards simplicity. Left to evolve, everything becomes more complex, as each contributor builds new layers of rules and norms on top of old ones. Increasing complexity is actually the path of least resistance. Simplicity, far from being a natural state, requires intelligent design.

It’s a big part of the reason that so little disruptive innovation comes from within an industry. Taxi drivers didn’t invent Uber, and bankers didn’t invent PayPal, because the people within these industries think through the lenses of their own complex norms. It takes a rule-breaking maverick to see a thing afresh and venture that there might be a better way.

Fight complexity

Take Steve Jobs’s obsession with simple, clean, elegant design. In no small part, it’s what saved Apple upon his return to the company. But it meant saying no to a great many things. No to an extensive product range – keep it simple. No to extra buttons – keep it simple. No to excessive complexity – the system must be easy and intuitive to operate.

Clearing away clutter, resisting the creep of added complexity and disbanding out-dated rules requires a simplicity champion. It requires leadership willing to challenge existing systems.

How much do bad rules really cost you?

At the most glib level, mindless adherence to rules is merely annoying, sometimes even the stuff of comedy (Google the Little Britain skit ‘Computer says no’). But is that sufficient justification to embark on a campaign to overhaul your systems?

It turns out we can do a lot better than that. There are plenty of compelling reasons for reducing and relaxing the rules in your organization. Here are 6 of them.

As part of your own efforts to change the rules-based culture at your company, this list may be useful as you begin to persuade others to your point of view. Why not present it at your next staff meeting? Ask attendees if they’ve seen real-world examples of each idea. Let their passionate discussion begin to drive the change:

The cost of rules

1. Speed

Rules entail processes that have to be followed. Each process may take a small amount of time in isolation. But pile rule upon rule and even a simple procedure can become an unreasonably slow process. The slower things happen, the greater the total lethargy.

Sometimes useful things are not allowed to happen at all, because a rule flat out prevents them from being done. Other times, a useful idea can’t get to market quickly enough. It took Google two years to get all the vetting they needed from Legal and Marketing to release Google+. By then, Facebook had such a critical mass that Google’s excellent compliance didn’t matter.

2. Willingness

When simple acts are slow to do because of the burden of procedures, the willingness to do them drops. People perceive that going above and beyond is too much trouble. They are trained and conditioned to actively reduce their contribution.

With decreased speed and increased procedures, the word ‘no’ is heard so often it becomes a form of cultural conditioning. ‘No’ trains away initiative and propensity for risk-taking. ‘No’ starts to become normative. It becomes your organization’s default setting.

3. Mistrust

The greater the weight of the rules, the more you need people watching people, in order to enforce those rules. In an ideal organization, where people are trustworthy and operate in a high-trust environment, you require only one person to police each person: themselves. Hierarchy becomes zero-sum and need not accumulate.

4. Loss of talent

Feelings of empowerment and a sense of purpose are among the chief needs of employees. Feelings of disempowerment are strong incentives to leave. Maintain a sense of powerlessness and frustration long enough, and you might haemorrhage top talent.

In a rules-based culture, the highly obedient, low-initiative workers stay; the frustrated innovators and high-initiative workers leave. Taken to its logical conclusion, everyone who remains blindly obeys the rules and kowtows to authority, because no one has the ‘radical value’ not to. You create the conditions for extreme groupthink.

5. Security trumping risk-taking

In cases when rules directly contradict goals, your people will tend to choose safety and job security over risk and bold action. The possibility of messy innovation attempts is shut down, precluding the possibility of smartcuts that can equal exponential growth. Multiply this behaviour and eventually no risks are taken, severely diminishing potential.

6. Silos galore

In a high-rules culture, people tend not to focus on the big picture. They lose sight of the mission. They are terrified of contradicting the internal norms and rules of their team or division, and will tend to priorities behavior that creates safety for themselves within that smaller division (silo), over behavior that helps the company as a whole. They may not even know how their contribution helps the organization, which can create immense conflict between divisions. Unfortunately, your competition will not honor your internal divisions. They may see opportunity in such weakness.

The result of these accumulated costs will be that growth will only happen incrementally in your organization, if at all.

They also introduce all the inherent dangers of a behemoth that is unable to adapt to change.

Think of it like an old locomotive steam train, running with irresistible momentum on set railway lines. You may run your behemoth to optimized perfection, but if you’re the Kodak of your industry, making film, and you can’t adapt your optimized perfection to the new reality of digital, your optimized behemoth will run, perfectly and unswervingly, with great and irresistible momentum, right off the edge of a cliff. Disruption kills off the dinosaurs that can’t adapt.

Which rules does your organization cling to, for no reason other than that the rules have always existed? What if you appointed yourself to champion the drive toward greater simplicity and agility? After all, they’re your rules. You can break them. And the ones who do so strategically acquire the leverage to topple the industry giants. They gift themselves with the space necessary to create truly disruptive innovation.

It seems that no matter how complex our civilization and society gets, we humans are able to cope with the ever-changing dynamics, find reason in what seems like chaos and create order out of what appears to be random. We run through our lives making observations, one-after-another, trying to find meaning – sometimes we are able, sometimes not, and sometimes we think we see patterns which may or not be so. Our intuitive minds attempt to make rhyme of reason, but in the end without empirical evidence much of our theories behind how and why things work, or don’t work, a certain way cannot be proven, or disproven for that matter.

I’d like to discuss with you an interesting piece of evidence uncovered by a professor at the Wharton Business School which sheds some light on information flows, stock prices and corporate decision-making, and then ask you, the reader, some questions about how we might garner more insight as to those things that happen around us, things we observe in our society, civilization, economy and business world every day. Okay so, let’s talk shall we?

On April 5, 2017 Knowledge @ Wharton Podcast had an interesting feature titled: “How the Stock Market Affects Corporate Decision-making,” and interviewed Wharton Finance Professor Itay Goldstein who discussed the evidence of a feedback loop between the amount of information and stock market & corporate decision-making. The professor had written a paper with two other professors, James Dow and Alexander Guembel, back in October 2011 titled: “Incentives for Information Production in Markets where Prices Affect Real Investment.”

In the paper he noted there is an amplification information effect when investment in a stock, or a merger based on the amount of information produced. The market information producers; investment banks, consultancy companies, independent industry consultants, and financial newsletters, newspapers and I suppose even TV segments on Bloomberg News, FOX Business News, and CNBC – as well as financial blogs platforms such as Seeking Alpha.

The paper indicated that when a company decides to go on a merger acquisition spree or announces a potential investment – an immediate uptick in information suddenly appears from multiple sources, in-house at the merger acquisition company, participating M&A investment banks, industry consulting firms, target company, regulators anticipating a move in the sector, competitors who may want to prevent the merger, etc. We all intrinsically know this to be the case as we read and watch the financial news, yet, this paper puts real-data up and shows empirical evidence of this fact.

This causes a feeding frenzy of both small and large investors to trade on the now abundant information available, whereas before they hadn’t considered it and there wasn’t any real major information to speak of. In the podcast Professor Itay Goldstein notes that a feedback loop is created as the sector has more information, leading to more trading, an upward bias, causing more reporting and more information for investors. He also noted that folks generally trade on positive information rather than negative information. Negative information would cause investors to steer clear, positive information gives incentive for potential gain. The professor when asked also noted the opposite, that when information decreases, investment in the sector does too.

Okay so, this was the jist of the podcast and research paper. Now then, I’d like to take this conversation and speculate that these truths also relate to new innovative technologies and sectors, and recent examples might be; 3-D Printing, Commercial Drones, Augmented Reality Headsets, Wristwatch Computing, etc.

We are all familiar with the “Hype Curve” when it meets with the “Diffusion of Innovation Curve” where early hype drives investment, but is unsustainable due to the fact that it’s a new technology that cannot yet meet the hype of expectations. Thus, it shoots up like a rocket and then falls back to earth, only to find an equilibrium point of reality, where the technology is meeting expectations and the new innovation is ready to start maturing and then it climbs back up and grows as a normal new innovation should.

With this known, and the empirical evidence of Itay Goldstein’s, et. al., paper it would seem that “information flow” or lack thereof is the driving factor where the PR, information and hype is not accelerated along with the trajectory of the “hype curve” model. This makes sense because new firms do not necessarily continue to hype or PR so aggressively once they’ve secured the first few rounds of venture funding or have enough capital to play with to achieve their temporary future goals for R&D of the new technology. Yet, I would suggest that these firms increase their PR (perhaps logarithmically) and provide information in more abundance and greater frequency to avoid an early crash in interest or drying up of initial investment.

Another way to use this knowledge, one which might require further inquiry, would be to find the ‘optimal information flow’ needed to attain investment for new start-ups in the sector without pushing the “hype curve” too high causing a crash in the sector or with a particular company’s new potential product. Since there is a now known inherent feed-back loop, it would make sense to control it to optimize stable and longer term growth when bringing new innovative products to market – easier for planning and investment cash flows.

Further Questions for Future Research:

1. Can we control the investment information flows in Emerging Markets to prevent boom and bust cycles?
2. Can Central Banks use mathematical algorithms to control information flows to stabilize growth?
3. Can we throttle back on information flows collaborating at ‘industry association levels’ as milestones as investments are made to protect the down-side of the curve?
4. Can we program AI decision matrix systems into such equations to help executives maintain long-term corporate growth?
5. Are there information ‘burstiness’ flow algorithms which align with these uncovered correlations to investment and information?
6. Can we improve derivative trading software to recognize and exploit information-investment feedback loops?
7. Can we better track political races by way of information flow-voting models? After all, voting with your dollar for investment is a lot like casting a vote for a candidate and the future.
8. Can we use social media ‘trending’ mathematical models as a basis for information-investment course trajectory predictions?

What I’d like you to do is think about all this, and see if you see, what I see here?

Quick Quiz: What do the following have in common?

• The iPhone
• The Tesla Model S
• Spanx
• The self-cleaning litter box
• The Sputnik 1 satellite

Answer: They were all the product of a creative idea. As was every single other breakthrough that made a million dollars, cured a disease, or changed the world.

They all came from a creative idea.

Every company that exists-or that ever existed-originated with a creative idea.

Every billionaire on the Forbes 400 list is there because of a creative idea. (Sometimes that creative idea happened a generation or two ago.)

Every breakthrough your competition made that kept you up at night came from a creative idea.

So why in the world aren’t you doing everything you possibly can to increase your creativity and that of your team?

Here’s why. Because, although academically you understand that creativity is absolutely, unarguably, indisputably one of the most essential skills any leader can posses-deep down inside you think that creativity training is a gratuitous and unnecessary waste of time and money that invariably involves funny hats and Nerf balls.

I’m right about this, aren’t I?

Think about it. If I told you that there was a tool that could…

• equip you to react effectively to changes in the marketplace, and at the same time
• equip you to proactively initiate changes in the marketplace, and at the same time
• allow you to see patterns in your industry and marketplace that help you predict the future of your business, and at the same time
• unlock a virtually endless supply of lucrative products and services, and at the same time
• increase employee engagement, attract millennials to your workforce, and reduce turnover

… you’d probably say (to quote Liz Lemon), “I want to go there!”

Until I tell you that the tool that does all of this is creativity.

At which point, you say, “Oh.” And then turn your attention back to your iPhone (which, I remind you, is a multi-billion dollar product of a creative idea).

Let’s be absolutely clear here. If you, as a leader, turn your back on creativity as a strategic tool for moving your team, your business, and your industry forward, you are committing leadership malpractice.

Creativity is not a “game” reserved for poets, musicians, and Cirque du Soleil performers. Creativity-strategic creativity-is:

• the ability to find better ways of doing what you’re already doing,
• the ability to spot trends ahead of the competition,
• the ability to incorporate best practices from other industries into your own,
• the ability to engage your team with work that challenges and invigorates them,
• the ability to generate profitable ideas-on demand!

So please stop thinking of creativity as an option. It’s not. Let’s be blunt: If you think creativity is an option, and your competitor thinks of it as a necessity, your competitor will win-period.

Get serious about creativity. Because creativity-strategic creativity-is serious business.

After it emerged in 2008, the technology behind the world’s most notorious crypto-currency, Bitcoin, held court on the fringes, attracting attention mostly from startups and the financial services sector. However, it has recently started to receive a lot of attention as companies gradually realize it could be valuable for many other things besides tracking payments.

Simply put, a blockchain is a distributed ledger that sorts transactions into blocks. Each block is chained to the one before it, using sophisticated math, all the way back to the first transaction. Entries are permanent, transparent, and searchable, which makes it possible for community members to view transaction histories in their entirety. Each update constitutes a new “block”, added to the end of the “chain” – a structure that makes it difficult for anyone to modify the records at a later stage. The ledger allows information to be recorded and shared between large groups of unrelated companies and all members must collectively validate any updates – which is in everyone’s interest.

To date, much attention and money has been spent on financial applications for the technology. However, an equally promising test case lies with global supply chain relationships, whose complexity and diversity of interests pose exactly the kinds of challenges this technology seeks to address.

A simple application of the blockchain paradigm to the supply chain could be to register the transfer of goods on the ledger, as transactions would identify the parties involved, as well as the price, date, location, quality and state of the product and any other information that would be relevant to managing the supply chain. The cryptography-based and immutable nature of the transactions would make it nearly impossible to compromise the ledger.

Now, a slew of startups and corporations are deploying blockchain to re-invent their global supply chain and run their businesses more efficiently:

1. For Maersk, the world’s largest shipping company, the challenge is not tracking the familiar rectangular shipping containers that sail the world aboard cargo ships. Instead, it is circumnavigating the mountains of paperwork associated with each container. A single container can require stamps and approvals from as many as 30 parties, including customs, tax officials and health authorities, spread across 200 or more interactions. While containers can be loaded on a ship in a matter of minutes, a container can be held up at port for days because a piece of paper goes missing, while the goods inside spoil. The cost of moving and keeping track of all this paperwork often equals the cost of physically moving the container around the world. The system is also rife with fraud as the valuable bill of lading can be tampered with, or copied, letting criminals siphon off goods or circulate counterfeit products, leading to billions of dollars in maritime fraud each year.

Last summer, Maersk has sought cooperation from customs authorities, freight forwarders and the producers that fill the containers. It began running its first trials of a new digital shipping ledger with these partners, for shipping routes between Rotterdam and Newark. After signing off on a document, the customs authorities could immediately upload a copy of it, with a digital signature, so that everyone else involved – including Maersk itself and other government authorities – could see that it was complete. If there were disputes later, everyone could go back to the record and be confident that no one had altered it in the meantime. The cryptography involved also makes it hard for the virtual signatures to be forged.

The second test tracked all of the paperwork related to a container of flowers moving from the Port of Mombasa, in Kenya, to Rotterdam, in the Netherlands. As both trials went well, Maersk followed up by tracking containers with pineapples from Colombia, and mandarin oranges from California.

2. Like most merchants, Wal-Mart, struggles to identify and remove food that needs to be recalled. When a customer becomes ill, it can take weeks to identify the product, shipment and vendor. To remedy this, it announced last year that it would start using blockchain to record and log the origins of produce – crucial data from a single receipt, including suppliers, details on how and where food was grown and who inspected it. The database extends information from the pallet to the individual package.

This gives it the ability to immediately find where a tainted product came from in a mater of minutes versus days, as well as capture other important attributes to make an informed decision around food flow.

Wal-Mart, has already completed two pilot programmes – moving pork from Chinese farms to Chinese stores, and produce from Latin America to the United States – and is now confident a finished version can be put together within a few years.

3. BHP relies on vendors at nearly every stage in the mining process, contracting with geologists and shipping companies to collect samples and conduct analyses that drive business decisions involving multiple parties distributed across continents. Those vendors typically keep track of rock and fluid samples and analyses with emails and spreadsheets. A lost file can cause big and expensive headaches since the samples help the company decide where to drill new wells.

BHP’s solution, which started this year, is use blockchain to record movements of wellbore rock and fluid samples and better secure the real-time data that is generated during delivery. Decentralized file storage, multi-party data acquisition and immutability as well as immediate accessibility are all aspects that will enhance its supply chain.

BHP has now required its vendors to use an app to collect live data – with a dashboard and options on what to do that are very streamlined to their respective jobs. A technician taking a specimen can attach data such as collection time, a lab researcher can add reports, and all will be immediately visible to everyone who has access. No more lost samples or frantic messages. While certain elements of the process are the same, the new system is expected to drive internal efficiencies while allowing BHP to work more effectively with its partners.

For now, in most first deployments, blockchain is running parallel with companies’ current systems – often older databases or spreadsheets like Microsoft’s Excel. The hardest part will be to create new business models. Deploying blockchain enterprise-wide means companies will often have to scrap their existing business processes and start from scratch. An endeavor not for the faint hearted.