Ep. 237 - Rita Gunther McGrath, Author of Seeing Around Corners and Professor at Columbia Business School

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By Brian Ardinger, Founder of Inside Outside Innovation podcast, and The Inside Outside Innovation Summit. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

On this week's episode of Inside Outside Innovation, we sit down with the legendary Rita Gunther McGrath, best-selling author of books like The End of Competitive Advantage, Discovery Driven Growth, and her latest book Seeing Around Corners. Rita and I talk about what companies need to do to navigate the pace and intensity of today's changing environments and what needs to happen to foster the skills, the culture, and the metrics around innovation.

Inside Outside Innovation is a podcast to help new innovators navigate what's next each week. We'll give you a front row seat into what it takes to learn, grow, and thrive in today's world of accelerating change and uncertainty. Join us as we explore, engage and experiment with the best and the brightest innovators, entrepreneurs, and pioneering businesses. It's time to get started.

Interview Transcript with Rita Gunther McGrath, Author of Seeing Around Corners and Professor at Columbia Business School

Brian Ardinger: Welcome to another episode of Inside Outside Innovation. I'm your host, Brian Ardinger, and as always, we have another amazing guest. With me is Rita Gunther McGrath. She's the author of Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen. Welcome Rita.

Rita Gunther McGrath: It is a pleasure to be here.

Brian Ardinger: I can't tell you how excited I am to have you on the show. I've been a big fan for a long time. You're a best-selling author of a number of books: The End of Competitive Advantage, Discovery Driven Growth. You're a sought-after speaker and consultant and a long-time professor at Columbia Business School. So, thank you very much for coming on and sharing your insights about innovation.

You've written this new book, Seeing Around Corners about how do you navigate and become better prepared for this inevitable change. What made you decide like this is the right time for this particular book and it came out right before COVID.

Rita Gunther McGrath: For once I got the timing on a book right. Well, the idea of strategic inflection points intrigued me beginning back in the nineties with Andy Grove's work on how Intel had to make this incredible transformation from selling memory devices, to selling microprocessors and what a courageous journey that was for them.

And there hasn't really been a lot done on that theme since then. Not a lot. As we were looking at inflection points and, you know, before the pandemic, the ones I was watching were certainly digital touching every part of everybody's life. The merging of strategy and innovation as separate fields, we know they've really been separate for and now I really, as competitive advantages, get shorter, I think they're really emerging.

And then perhaps the whole issue around productivity, automation, what's the right kind of social contract. And it seemed to me, these were all the kinds of change which feel really slow moving until they hit some kind of tipping point. And that's when you have the inflection point. And what got me intrigued about the book at this particular time was how far ahead you can pick up the weak signals that something really is brewing.

And if you keep an eye on it, right, it can take your business to new heights. And if you sort of stick your head in the sand and pretend it's not happening, that's where we see the great corporate catastrophes.

Brian Ardinger: And your book breaks it down really into three core questions. Like how do you see an inflection point coming? How do you decide what to do about it? And then how do you bring the organization along with you to make that happen. To set the stage, how do you define an inflection point. What's out there? And why is it so important to identify an inflection point.

Rita Gunther McGrath: Yeah. So, I define an inflection point as some external force that exerts a 10X pressure on something about your organization or your business. That would be, that often is technology, but it could be other things. It could be a regulation, it could be social norms, you know, it could be a number of different things. So, for instance, if you're in the energy world today, you know you're staring at dramatic pressure on the fossil fuels business, and that's not a big mystery.

And it's not going to happen overnight, but you know, that's something you're going to have to respond to. So, the reason I think this is an interesting way of thinking is that if you think about it, any business, any organization is born at a certain point in time. And there are things that are possible and things that aren't.

You can almost think of it as like living within an envelope of constraints. So, 30 years ago, if I wanted to get a video message to millions of people. I had to be Metro-Goldwyn-Mayer or Sky News. I mean I had to own satellites and production equipment and camera crews all over the world. Huge investment required to do that.

Fast forward to today and if I want to get a message that's compelling to 30 million people, you know, I can pick up my device. Hopefully I'm talented enough that I can post it on Instagram or wherever if it goes viral, Voilà. And what have you spent almost nothing.

And that to me is an example of the kind of inflection point that overtakes businesses sometimes before they're really aware of it. Because we built our assumptions around what's possible at the time those assumptions were formed. And when those assumptions change, it's super easy to miss them.

Brian Ardinger: Yeah. I mean, the pace of change is absolutely accelerating. We've got technologies, markets, access to capital. Think about we're filming this a couple of weeks into January. If you think about the first three Wednesdays of January, you had a riot on the Capitol, an impeachment, and an inauguration, and that's just the political side of change.

Is it the inflection points? Are they coming more frequently? Is it the number of inflection points that are happening right now that's making it so dynamic or is it the intensity of these inflection points or both?

Rita Gunther McGrath: Yeah, I kind of go with intensity, right? If I go back to my media example, to think that in the span of just a couple of decades, you went from something that was literally a multimillion-dollar, tens of million dollar required investment to something where any kid on a scooter can do it for nothing.

You know, that to me is just an intensity level of inflection point that I don't think we've really adjusted to. The other thing I would argue is that these inflection points happen before our institutions catch up. And there's always a lag between what's possible, human and technology wise, and what the regulators are there to provide and what is happening with institutions.

So an example that's playing out right now is the whole conversation about personal privacy, the data mining and advertising business that's made out of money, people's personal data and the whole third party data selling kind of things. And in my book, I talk about this as an issue where, you know, institutions and the public in general, just haven't caught up to practice.

So if I go all the way back in time and look at the previous regime, like, what was privacy, how was privacy defined? How was it valued? And an interesting artifact is the National Librarians Act. And in the National Librarians Act, it was actually considered completely unacceptable for any librarian to record the information someone came into a library to seek because that could be considered an invasion of their privacy.

If you were looking up diseases or you were looking at political parties, or you're looking up something that might be a little dangerous and their librarians were sworn to secrecy, that they would not betray that. Which seems almost ludicrous, when you look at what's being done with our data today. And that to me is an example of an institutional norm, which is just beginning to catch up to the reality on the ground.

Brian Ardinger: So, do you, you think with COVID, the pandemic has made your job easier? Has it made it more evident for the majority of companies out there to realize like, Oh yeah, I've been hearing about change. I've been hearing about these challenges, but yeah now it's actually at my doorstep. Do you think that the majority of companies out there realize the dynamic nature that they're operating in now?

Rita Gunther McGrath: Well, the good news is I don't have to explain to people why they need to change. I don't have to make the case for, so that's good. I would say the nature of my work has changed in kind, in content tremendously. What I used to get asked for a lot was, you know, come give us this entertaining amusing thought-provoking talk about your research and your book and bring people into our conference, because you've got a good name and people are interested in you.

That's really not. What's top of people's minds right now. What I'm getting a lot is help us figure this out. Help us understand how the tools of innovation can help us get through this unprecedented uncertainty we have right now. And the good news is the tools that innovation really do help in a time like this, as you would know, and your listeners would know.

But there's a vast number of people out there who've never touched the tools of innovation. So, it's all new to them. And it's a lot of, you know, help us make sense of this, help us define the next steps, help us get ready for what unknowns may yet come. And I think that's been very interesting for me. It's certainly made my life very interesting because I'm getting asked to sort of sit with companies facing real existential decisions that they have to make. And to be helpful in that regard is very satisfying, but it's definitely changed the nature of what I do.

Brian Ardinger: So, let's dig in a little bit about the book and the tactics and that around it. You outlined eight or so different themes that corporations and people within organizations should be thinking about when it comes to innovation and seeing around corners, things like being able to live on the edge and find information outside of their core. Things like small, empowered teams and that. Why don't you outline some of the core tactics that are outlined in the book?

Rita Gunther McGrath: As you said, the book is really around. How do you see them? How do you decide what to do about them? How do you bring the organization with you? So on the seeing front to me, there's a couple of questions to ask yourself.

The first question is, am I getting enough exposure to where these small changes are first making themselves felt. And Andy Grove put it really well, he said, if you want to know where spring is making itself felt you must travel to the periphery because that's where the snow is most exposed. So, the way I talk about that is snow melts from the edges.

And what I find is, especially as you get more senior in a company, it gets harder and harder to get absolute unvarnished information. And you just have to make much more of an effort because everything gets sort of packaged and beautified by the time it gets to you. Similarly, your words and actions have so much impact on people that you may not even be aware of, that you could be ineffective, inadvertently cutting off valuable flows of information.

So, when I say getting out to the edges it's practices, like personally getting it to the edges, it's things like what David Cody used to do as the CEO of Honeywell, he would finish most major decision-making meetings by turning to the youngest, the least senior person in the whole room and say so, you know, what do you think of this?

And of course, this young person would be totally terrified. What does my boss think? And he's like, no, no, I want to know what you think of it because I know what we all think of it, but I really like to get your perspective and made it really clear if somebody could come up with something that was a different point of view that was valued.

So, getting diverse perspectives, making sure that you regularly, as Steve Blank would say, get out of the building. You know, don't just be doing your email and talking to your inside people all the time. Developing an external focus, you know, hugely important. Don't just listen to the internal noises, face your attention outside.

And then, you know, from science fiction, we have a wonderful phrase. You know, the future is already here, it's just not evenly distributed yet. As William Gibson, very famously said. And so, think about where are the bits and pieces of the future that are starting to show up that I could go visit.

You know, not that they're fully formed. Not that they're exactly what it would be, but you know, if I were in the 1950s, where would I go look at a picture phone. Today where would I go look at what AI is doing or what the ten-year-olds of the future are doing or something like that.

So, it's little hacks that you can insert in the course of doing your daily business, that can just help you get that opportunity to get exposed to something that's quirky or that's different, or that's never worked that way before. When did that start happening? You know, those kinds of questions. And once your people become aware that you're interested, you'd be surprised at the number of ways you can develop of getting, you know, information that may be a little bit contrary to prevailing norms.

Brian Ardinger: Well, I imagine it's a trickle-down effect as well from the standpoint of the CEO at edge, maybe seven layers deep or whatever, but the same principle can apply to the middle manager who needs to get down to the two levels deep to understand what's going on.

Rita Gunther McGrath: Oh totally. You know, one of the interesting things that I've found when researching the book was there was always somebody that knew, always. You know, that if you look at Nokia, there was somebody that knew these smartphones were going to be an issue.

If you go talk to the people at Blackberry, if you go talk to IBM in its dark days. So, there are all these people that know because often they're at the edges, right. They're exposed to it, but they don't have access to the strategic decision makers. They're not regarded seriously. Oh, he's a geek. What does he know or worse yet? They're always sounding the alarm about something or other. So, when they finally get one, right everybody thinks it’s not wisdom. You know, so that was an interesting thing.

And so, another question your listeners can ask is who in my organization would be likely to know? And it's very often the scientists, the programmers, the technical people that, you know, they look at data and they form an opinion based on the data. They don't have an opinion and then go look for data to support it. That's not how they're trained. And so, they're often invaluable. Now they may be cranky. They may be awkward. They may not be socially fluid. They're often very knowledgeable about what might be happening.

Brian Ardinger: When it comes to culture, do you think a lot of this has to be driven from the top down? Or is it a bottom up or how do you perceive creating and fostering this innovative culture that can see around corners?

Rita Gunther McGrath: Well, if the top isn't on board, it's very difficult, because you're working around the power structures in the organization and at that point it's nearly impossible. The kinds of things you see that go wrong at the top are yeah, yeah, I see this as a big problem, but my contract ends in three years and as long as I can keep the stock price where it is for three years, I'm good. So why should I take on all this work of transforming the organization when the next person's going to benefit. If you've got that kind of mentality. It's going to be very hard to get traction.

So, I do think the top needs to be at least supportive, at least get out of the way. At best, you know, really encouraging and leading the charge. I do think there's a lot of mythology about culture and innovation that gets in the way.

So, you know, I've seen companies that go off on these, Oh, we've got to foster a culture of innovation, you know, so we're going to have innovation boot camps and post-it notes in their thousands are going to die and it's going to be great. And no idea is a bad idea and you've all... innovation theater. We've all been down there, but you know, real innovation is, as you know, Brian is, it's a process, it's a set of practices, it's a set of structures. You know, you can't run an organization where 9 to 12, we're all like, Ooh, what does blockchain mean for the future of Persian rugs?

This is actually a thing I found out about this on LinkedIn yesterday. There's this guy who's selling Persian rugs who thinks if I can detect the origin of the Persian rug by linking it to a blockchain, I can sell more Persian rugs. But anyway, so in the morning, you're all about blockchain and Persian rugs, and God knows what. And then the afternoon it's all about so what happened in this quarter's shipments? And what's the delay.

I mean, you just can't do those things as human beings together. So, you really need. It's separate kinds of work, separate work streams, separate structures. And it's very hard to build that without real support from the top of the house.

Brian Ardinger: That kind of leads to the question around metrics and measurement. And how do we know if we're getting better at this as an organization? Or what should we be looking at? I know in the book you talk about lagging versus current versus leading indicators and that, but can you talk a little bit about how we measure if we're getting better at understanding these dynamic changes?

Rita Gunther McGrath: As you mentioned, so a lagging indicator is great data, but it's about something that's already happened. We can't change it. Current indicators tell you where you are. So, what's happening right today. And then leading indicators, which are the hardest to get, give you some insight into future possibilities.

So, a couple of caveats. First is I'm not a huge believer in prediction. I mean, who could have predicted what happened at the White House on January 6th? Civil insurrection would not have been at the top of our minds when we woke up the 5th of January. So, prediction's really hard. What I do think you can do is prepare.

And so, the measure of a good leading indicator is did it expose us to scenarios in the future that were realistic enough. It merits putting some investment in preparing. And this is where I think, again, a lot of companies, either they settle on a point forecast of a preferred future, and that's where we're going and we're not looking right and we're not looking left and that's it.

Or they confuse their preferences with their predictions. And that's dangerous too. Like, no, I know what world I'd like to live in, but that doesn't mean that's the world we're going to, just having the time to have those conversations about let's look at these dynamics. And I get invited a lot with companies to go through this now, which is let's think of what plausibly could be the kind of future you're going to be living in.

Brian Ardinger: So, a lot of our audience is also involved in the startup realm. And how does this book and how does your process differ in a startup environment versus a big corporate environment? Are there things that startups should be looking at differently when it comes to seeing around corners versus bigger corporations? Or how does that play out?

Rita Gunther McGrath: For startups inflection points always represent opportunities. If you look at YouTube, right? That whole media transition that I was talking about, well, YouTube was both an enabler and a huge beneficiary of that. The digitization that we've talked about has created untold entrepreneurial opportunities in all kinds of areas. So, the fact that there is an inflection point by definition means the established order is going to be shifted in some way. And that always opens up entrepreneurial opportunities.

In terms of being prepared to see what's going on, it's easier if you're smaller. There's not as much bureaucracy. There's not as much entrenched. That's not how we do things around here. So, it's easier to be more fluid in your operations. That being said, you know, entrepreneurs are no less vulnerable than the rest of us to falling in love with a given worldview, to settling on a given course of action despite all evidence is not going to work.

And, you know, if they can get backing, and this has been a critique of mine, of the startup phase that we're in sort of late-stage capitalism right now, is there's just no place for all this money to go. And so, it's going into rakes even. I mean, WeWork is a poster child for that, but many others.

And here's the problem that when you're designing and driving a company, to benefit your investors because that's actually the core stakeholder that matters the most to you because you want to keep the wheels turning on the money train. If that's the kind of company you're building, it's very difficult to build a company that really is focused on customers, where it's really focused on a core technology or something.

And so, you end up with these companies that limp their way through an IPO, and then it's kind of like, Oh, now what? So, I think some of what we see in Seeing Around Corners in terms of where you can go wrong. Too much big money, too much here's my preference, not the reality. And that can be very dangerous for startups.

Brian Ardinger: Can you talk a little about some of the companies that are doing this well or seem to be ahead of the curve when it comes to positioning themselves for change and disruption?

Rita Gunther McGrath: Sure. I think companies like Aetna CVS in healthcare, really trying to think about what does patient-centered distributed health care look like? Very interesting. Companies like Costco have certainly shown that in part, because they really do release and empower the talent of their employees. They're doing great, you know, through all this pandemic. I see companies like that, setting aside the time and really being thoughtful about what the future holds. So, among companies I'm working with.

Procter & Gamble, looking at what does the next phase of consumer life look like? And after we're through this pandemic, and really asking very thoughtful questions about what would this need to look like if we were to meet the needs of those consumers of the future.

So, companies like that, I think you're taking the time and really thinking about it. And Nestle is another one that I think is really giving a lot of thought. Unilever. Unilever, in fact, just announced that they're going to insist that their suppliers pay living wages to their people.

So, they're trying to get ahead of this humanism curve. I think that is highly likely to mean to follow on the heels of this pandemic, because what it's done, it's just revealed how precarious so many people's lives are, even in what supposedly is the richest country in the world. It's really needed obviously.

Brian Ardinger: What corners are you looking around or what are you exploring? What trends excite you and what are the next things that you're going to be tackling?

Rita Gunther McGrath: Well, personally, I think if I just take the pandemic, we went through this first phase where it was all very exciting and new and catastrophic for some, but for a lot of people, it was a chance to really, yes, we're finally going to digitize. Yes. We're finally going to make remote working possible. Yes, we're probably to do these things. Followed by just exhausting, nonstop around the clock, kind of working.

Then we have this middle phase where it was sort of, well, it's going to be over by Easter and then it's going to be over by July and then it's going to be over by the time school starts. And where we are now, I think is a combination of exhaustion and people sort of saying, I can't do this anymore, but also new possibilities emerging.

And I think that's what's going to be really interesting, because we've learned a lot about how to do things in a very different way. And so, I'm intrigued by what does the future of work hold? How has the pandemic made us rethink careers as an example?

So, it is a lot of people out there and have gotten basically what our battlefield promotions because they alone in their organizations were able to rise to this, make something happen, you know, get the results regardless of external situations. And so, it's brought a lot of different kinds of leaders to the fore who may not have done so in a traditional environment.

On that kind of human side, future of work things, I'm very intrigued looking at that. I'm also intrigued, and I think this is where innovation really comes in, I think we may be on the opening pages of really finally getting innovation right at scale and as a capability, rather than innovation theater.

And I think it all kind of comes together with this major inflection point around competitive advantage and strategy. Which is back in the day, if you had a major innovation that really worked, you could enjoy that for decades, right? DuPont invents Nylon, and 40 years later, you know, they're making money on Nylon, and today that just, you know, things are happening much faster.

And so, your innovation engine needs to be able to produce new advantages, to replace those that have faded away. So, to me, there's a tremendous amount of kind of a feeling of we're on the brink of something really amazing in the innovation community, that all of a sudden people are saying, not that that's not irrelevant anymore, that really is relevant.

That's where we need to be investing some time to build capability now. I think there's a fair amount of cluelessness about how to do that, but at least the awareness that that would be a good thing to do is out there.

Brian Ardinger: And the final question I have is what question do you wish more interviewers would ask you about your work or what insight is most overlooked in what you do?

Rita Gunther McGrath: That's a fascinating question. Well, hopefully the pattern recognition is really core to what I do. I remember once I was teaching, when I first start teaching in the MBA program, on one of my emails that came back the comment, Professor McGrath has an uncanny ability to connect to everything, to everything, in a way that I don't think I've ever seen before.

And I wasn't sure the student meant it as a compliment, but I do think a lot where you get the insights is what does battery power in India have to do with you know, the fate of autonomous vehicles in Europe and they're connected.

And I think seeing those connections is often something people don't see enough, people get very surfacing in these kinds of things, but if you go deeply into how certain people are able to really see these patterns, I think it's that, it's that pattern recognition.

Brian Ardinger: That Butterfly effect. How does it all come together? Well, Rita, I do thank you so much for coming on Inside Outside Innovation and being a part of this. I look forward to having you back on and talking in the future as things progress in general but thank you very much for being on the show.

Rita Gunther McGrath: It's a pleasure. Thank you.

Brian Ardinger: That's it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.

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