“But even more importantly, our employees were working from home for two and a half years. And in hindsight, it turns out, it’s really hard to do bold, disruptive innovation, to develop a boldly disruptive shoe on Zoom.” – John Donahoe, Nike CEO
I am so glad CNBC’s interview with Nike’s CEO didn’t hit my feed until Friday afternoon. It sent me into a rage spiral that I am just barely emerging from. Seriously, I think my neighbors heard the string of expletives I unleashed after reading that quote, and it wasn’t because it was a lovely day and the windows were open.
Blaming remote work for lack of innovation is cowardly. And factually wrong.
I’m not the only one giving Mr. Donahoe some side-eye for this comment. “There were a whole bunch of brands who really thrived during and post-pandemic even though they were working remotely,” Matt Powell, advisor for Spurwink River and a senior advisor at BCE Consulting, told Footwear News. “So I’m not sure that we that we can blame remote work here on Nike’s issues.”
There’s data to back that up.
In 2023, Mark (Shuai) Ma, an associate professor at the University of Pittsburgh, and Yuye Ding, a PhD student at the university’s Katz Graduate School of Business, set out to empirically determine the causes and effects of a firm’s decision to mandate a return to work (RTO). They collected RTO mandate data from over 100 firms in the S&P 500, worked backward to identify what drove the decision, and monitored and measured the firm’s results after employees returned to work.
Their findings are stark: no significant changes in financial performance for firm value after RTO mandates and significant declines in employee job satisfaction. As Ma told Fortune, “Overall, our results do not support these mandates to increase firm values. Instead, these findings are consistent with managers using RTO mandates to reassert control over employees and blame employees as a scapegoat for firm bad performance.”
Or to justify spending more than $1B to double the size of its Beaverton, OR campus.
When you start blaming employees, you stop being a leader.
CEOs make and approve big, impactful, complex, high-stakes decisions. That’s why they get paid the big bucks. It’s also why, as Harry Truman said, “The buck stops here.”
Let’s examine some of the decisions Mr. Donahue made or supported that maybe (definitely) had a more significant impact on innovation than working from home two days a week.
Ignoring customers, consumers, and the market: Nike has a swagger that occasionally strays into arrogance. They set trends, steer culture, and dictate the rules of the game. They also think that gives them the right to stop listening to athletes, retailers, and consumers, as evidenced by the recently revealed Team USA Track & Field uniforms, the decision to stop selling through major retailers like Macy’s and Olympia Sports, and invest more in “hype, limited releases, and old school retro drops” than the technology and community that has consumers flocking to smaller brands like Hoka and Brooks.
Laying off 2% of its workforce: Anyone who has ever been through a layoff senses it’s coming months before the announcement and the verdicts are rendered. Psychological safety, feeling safe in your environment, is a required element for risk-taking and innovation. It’s hard to feel safe when saying goodbye to 1500 colleagues (and wondering if/when you’ll join them).
Investing too much in the core: Speaking of safety, in uncertain times, it’s tempting to pour every resource into the core business because the ROI is “known.” Nike gave in to that temptation, and consumers and analysts noticed. Despite recent new product announcements like the Air Max DN, Pegasus Premium, and Pegasus 41, “analysts point out these ‘new’ innovations rely too much on existing franchises.”
Innovation is a leadership problem that only leaders can solve
Being a CEO or any other senior executive is hard. The past four years have been anything but ordinary, and running a business while navigating a global pandemic, multiple societal upheavals, two wars, and an uncertain economy is almost impossible.
Bosses blame. Leaders inspire.
Mr. Donohue just showed us which one he is. Which one are you?
One MORE thing
This is a losing battle, but STOP USING “DISRUPTIVE” INCORRECTLY!!!! “Disruptive Innovation,” as defined by Clayton Christensen, who literally coined the phrase, is an innovation that appeals to non-consumers and is cheaper and often lower quality than existing competitors.
Nike is a premium brand that makes premium shoes for premium athletes. Employees could spend 24/7/365 in the office, and Nike would never develop and launch a “boldly disruptive shoe.”
“Time is a flat circle. Everything we have done or will do we will do over and over and over and over again – forever.”
– Rusty Cohle, played by Matthew McConaughey, in True Detective
For the whole of human existence, we have created new things with no idea if, when, or how they will affect humanity, society, or business. New things can be a distraction, sucking up time and money and offering nothing in return. Or they can be a bridge to a better future.
As a leader, it’s your job to figure out which things are a bridge (i.e., innovation) and which things suck (i.e., shiny objects).
Innovation is a flat circle
The concept of eternal recurrence, that time repeats itself in an infinite loop, was first taught by Pythagoras (of Pythagorean theorem fame) in the 6th century BC. It remerged (thereby proving its own truth) in Friedreich Nietzsche’s writings in the 19th century, then again in 2014’s first season of True Detective, and then again on Monday in Jamie Dimon’s Annual Letter to Shareholders.
Mr. Dimon, the CEO and Chairman of JPMorgan Chase & Co, first mentioned AI in his 2017 Letter to Shareholders. So, it wasn’t the mention of AI that was newsworthy. It was how it was mentioned. Before mentioning geopolitical risks, regulatory issues, or the recent acquisition of First Republic, Mr. Dimon spends nineparagraphs talking about AI, its impact on banking, and how JPMorgan Chase is responding.
Here’s a screenshot of the first two paragraphs:
He’s right. We don’t know “the full effect or the precise rate at which AI will change our business—or how it will affect society at large.” We were similarly clueless in 1436 (when the printing press was invented), 1712 (when the first commercially successful steam engine was invented), 1882 (when electricity was first commercially distributed), and 1993 (when the World Wide Web was released to the public).
Innovation, it seems, is also a flat circle.
Our response doesn’t have to be.
Historically, people responded to innovation in one of two ways: panic because it’s a sign of the apocalypse or rejoice because it will be our salvation. And those reactions aren’t confined to just “transformational” innovations. In 2015, a visiting professor at Kings College London declared that the humble eraser (1770) was “an instrument of the devil” because it creates “a culture of shame about error. It’s a way of lying to the world, which says, ‘I didn’t make a mistake. I got it right the first time.’”
Neither reaction is true. Fortunately, as time passes, more people recognize that the truth is somewhere between the apocalypse and salvation and that we can influence what that “between” place is through intentional experimentation and learning.
JPMorgan started experimenting with AI over a decade ago, well before most of its competitors. As a result, they “now have over 400 use cases in production in areas such as marketing, fraud, and risk” that are producing quantifiable financial value for the company.
It’s not just JPMorgan. Organizations as varied as John Deere, BMW, Amazon, the US Department of Energy, Vanguard, and Johns Hopkins Hospital have been experimenting with AI for years, trying to understand if and how it could improve their operations and enable them to serve customers better. Some experiments worked. Some didn’t. But every company brave enough to try learned something and, as a result, got smarter and more confident about “the full effect or the precise rate at which AI will change our business.”
You have free will. Use it to learn.
Cynics believe that time is a flat circle. Leaders believe it is an ever-ascending spiral, one in which we can learn, evolve, and influence what’s next. They also have the courage to act on (and invest in) that belief.
What do you believe? More importantly, what are you doing about it?
You want to make life better for others. This desire is reflected in the optimism and positivity of your language – create value, love the problem, and delight the customer. But making life better requires change, and, as the adage goes, “People want change, but they don’t want to be changed.”
You are confident that the solution you created will make life better and that the change people need to make is quite small and painless, well worth the dramatic improvement you offer. Yet they resist. No amount of explaining, showing, convincing, or cajoling changes their mind. What else can you do?
To quote Darth Vader, “Give yourself to the Dark Side. It is the only way to save your friends.”
“If only you knew the power of the Dark Side…”
The Dark Side is populated by “negative” emotions like anger, fear, and frustration, which are incredibly powerful.
Consider that:
Negative events are remembered more accurately and in greater detail than positive events
Unfortunately, these are also some of the first emotions experienced when confronting change.
Change requires people to let go of what they know in exchange for the promise of something better. This immediately triggers Loss Aversion, the cognitive bias in which the pain of losing is psychologically twice as powerful as the pleasure of gaining.
As a result, people won’t let go of what they know until the pain of holding on becomes unbearable. When you point out the problems and pain of the current situation, you help people understand and experience the unbearableness of the current situation.
“Anger, fear, aggression; the Dark Side of the Force are they”
Not every “negative” emotion elicits the same behavior, so carefully choose the one to tap into.
Fear motivates people to seek safety, which can be good if your solution truly offers a safer alternative. It’s a motivator used well by companies such as Volvo, SimpliSafe, and Graco. But lean on it too much, and people may feel overwhelmed and remain frozen to the status quo.
Anger motivates people to take risks, which can be good when the change requires bold decisions and dogged persistence. It can be great when it bonds people together to achieve a shared goal or protect a common value. Apple used this emotion to brilliant effect in its famous “1984” commercial announcing the launch of Macintosh. But incite too much anger, and things can get broken and not in a helpful way like Apple’s ad.
Frustration, one of the emotions that often drives aggression, is anger’s polite little sister. When people feel frustrated, they’re likely to act, persistently pursue solutions, and creatively approach and overcome obstacles. But if the change is big, feels scary, and puts their sense of self at risk, frustration isn’t powerful enough to convince people to let go of the old and embrace the new.
“If you start down the dark path, forever will it dominate your destiny.”
Yoda is incredibly wise, but he gets this one wrong. Using the Dark Side to speak to people’s “negative” emotions doesn’t doom you to a life or career of fear-mongering or inciting violence. Start here, don’t stay here.
Multiple research studies show that positive emotions, like hope and joy, are more powerful than negative ones in maintaining motivation and even enable more creative thinking and problem-solving. By speaking to both negative and positive emotions, the Dark Side and the Light, you enable change by giving people a reason to let go of the past and a future worth reaching for.
When people stop resisting and start reaching to the future you’re offering, change happens, and you realize that Yoda was right, “Luminous beings are we, not this crude matter.”
It’s award season, which means that, as a resident of Boston, I have the responsibility and privilege to talk about The Departed (pronounced: The Dep-ah-ted). The film won the Oscar for Best Picture in 2007 and earned Martin Scorsese his first, and to date only, Academy Award for Best Director. It is also chock-full of great lessons for corporate innovators.
Quick Synopsis
If you’ve seen The Departed, you can skip this part. If you haven’t, why not and read on.
The Departed is loosely based on notorious Boston crime boss Whitey Bulger and features three main characters:
Frank Costello (Jack Nicholson), a vicious and slightly unhinged Irish mob boss
Colin Sullivan (Matt Damon), a Massachusetts State Trooper in the Special Investigation Unit (SIU) formed to catch Costello, who, in his spare time, is a spy for Costello.
Billy Costigan (Leonardo DiCaprio), a police academy recruit who goes undercover to infiltrate Costello’s organization
But wait! There’s more. Alec Baldwin plays Colin’s SIU boss, George Ellerby. Martin Sheen and Mark Wahlberg (who received an Oscar nomination for this role) play Billy’s Mass State Police (MSP) bosses, Captain Queenan and Staff Sergeant Dignam, respectively. Completing the chaos is Vera Farmiga, who plays Madolyn Madden, Colin’s girlfriend and Billy’s court-ordered psychiatrist.
There’s a lot of other stuff going on, but that gives you enough context for the following quotes to hopefully make sense.
Listen to the words people use.
Colin (after Dignam refuses to hand over undercover files): I need those passwords.
Ellerby: No, you want those passwords
It’s not often that Ellerby says something useful, let alone wise, but he nails it with this one. Colin wants the passwords to Dignam’s files on undercover agents because it will make both Colin’s official job of finding Costello’s rat in the MSP and his unofficial job of finding the MSP officer in Costello’s crew easier. He doesn’t need the passwords, however, because, with enough time and effort, he can find the rats he’s looking for.
When we hear from customers that they want something, it’s tempting to run off and create it. But as Ellerby points out, wants and needs are different. Just because customers want something doesn’t mean they are willing to pay for or change their behavior to get and use it.
Figuring out what a customer needs is difficult because it requires them to trust you enough to admit they have a problem they can’t solve. It’s also difficult because most of us have access to solutions to our functional needs (think the bottom few layers of Maslow’s hierarchy). As a result, the needs consumers grapple with tend to be emotional and social, and it’s far more challenging to admit those to a stranger, especially in a focus group or product-focused interview.
How you feel impacts everyone around you
Madolyn (after a counseling session): Why is the last patient of the day always the hardest?
Billy: Because you’re tired, and you don’t give a sh*t. It’s not super-natural.
Billy and Madolyn get off to a rough start in their first counseling session, culminating in Billy asking for a prescription for Valium. Madolyn calls him out for “drug-seeking behavior” and throws two Valiums across the desk before Billy storms out. A few minutes later, Madolyn catches up with Billy, hands him a prescription for Valium, and asks the above question.
Being a corporate innovator can be difficult, sometimes soul-crushing work (ask the good people at Store 8). It can also be thrilling and inspiring. It can even be all those things in one day. That’s what makes it tiring, even when you give a sh*t.
Managing your energy and monitoring your behavior are leadership qualities we don’t discuss often enough. It’s okay to be exhausted after a day of facilitating ideation sessions or intense strategic meetings. It’s normal to be frustrated after a contentious conversation or demotivated when you get bad news. But leaders usually find a way to not take those emotions out on their teams. And, in the rare instance when they punish the team for someone else’s sin, they apologize and explain.
Your job is not your identity.
Billy: Look, I just want my identity back, all right? That’s all.
Colin: All right, I understand. You want to be a cop again.
Billy: No, no, being a cop’s not an identity. I want my identity back.
Towards the end of the film, Billy is tired of working undercover and reports to MSP headquarters to complete the paperwork required to expunge his criminal record and get his identity back. That’s when Colin makes the same mistake most of us make and confuses Billy’s job with his identity.
We spend so much time at work. We rely on our paychecks for so much. We even introduce ourselves to new people using our job titles. It’s easy for your job to feel like your identity, especially when your job aligns so closely with your deeply held beliefs and values. But your job is not your identity. You are still a Tempered Radical, even without your corporate title. You are still an optimistic problem-solver, even when it’s been months since your last brainstorming session.
You are an innovator, even if you don’t have a business card to prove it.
In September 2006, I moved to Copenhagen, Denmark, on a temporary assignment with BCG. As one does when arriving somewhere for an extended period, I went to the grocery store to stock my kitchen.
Since the grocery store was on the ground floor of my building, I bought enough food for a few breakfasts and dinners, made note of the other offerings for future trips, and learned through painful public embarrassment that one must purchase grocery bags (and those bags are nowhere near the checkout lane).
The following day, yogurt was on the menu, and I grabbed the first of the three options I had bought the previous day – a small container of strawberry yogurt.
My heart sank when I peeled off the top.
Instead of super healthy, organic, natural (I’m in Scandinavia, for crying out loud!) yogurt, the stuff in my cup was a rather suspicious beige with dark brown flecks.
Stifling my instinct to dry heave, I chucked the cup into the garbage, along with the five other cups in the clearly spoiled pack, and pulled Brand #2 out of the refrigerator. Surely, this strawberry yogurt would be safe to eat.
But it, too, was beige. A lighter beiger and without the disturbing brown flecks. But still beige.
“You’ve got to be kidding me,” I muttered. Admittedly, the grocery store was more of a glorified convenience store, but c’mon, how hard is it to keep track of Sell By dates?
Into the garbage, it went. Out of the refrigerator came Brand #3 (Yes, I take a portfolio approach to innovation AND food purchases)
Closing my eyes and saying a quick prayer to both the grocery and yogurt gods, I peeled open the yogurt. Not beige but a slight hint of pink, just enough to reassure me that it contained strawberries and hadn’t curdled but not so much that I suspected an American-amount of food coloring.
Later that day…
At lunch, my new colleagues asked how I was settling in. I regaled them with my “bumbling American experiencing culture shock in a country where she looks (and is initially treated like) a local” stories.
As we gathered up our dishes and returned to the kitchen, I commented that I was surprised that my local grocery would keep expired products on the shelf. When they echoed my surprise, I told them about the spoiled yogurt and that 2 of the three brands I purchased were bad.
Based on the glances they exchanged, I knew I had another story to add to an already uncomfortably full book.
It turns out that. The “good” yogurt I ate that morning was from the lowest quality brand, one that no self-respecting Dane would consider eating but that is sold to unsuspecting foreigners (Hi, that’s me). The “bad” yogurt was from respected all-natural brands. All yogurt, they explained, falls somewhere in the spectrum from white to beige or even tan. That’s why they print the flavor name and a picture of the fruit on the label.
How often do we make the same mistake?
How often do we reject something because it’s not what we expect to see? Because it’s not what we’re used to?
Maybe not often when it comes to yogurt, but what about other more important things, like:
Trends
Technologies
Ideas
Business Models
Startups
People
And what happens when we don’t have people willing to point out that we’re no longer in a place where our status quo applies?
“Isn’t continuous improvement the same as incremental innovation? After all, both focus on doing what you do better, faster, or cheaper.”
Ooof, I have a love-hate relationship with questions like this one.
I hate them because, in the moment, they feel like a gut punch. The answer feels obvious to me – no, they are entirely different things – but I struggle to explain myself clearly and simply.
I love them because, once the frustration and embarrassment of being unable to offer a clear and simple answer passes, they become a clear sign that I don’t understand something well enough or that *gasp* my “obvious” answer may be wrong.
So, is Continuous Improvement the same as Incremental Innovation?
No. They’re different.
But the difference is subtle, so let’s use an analogy to tease it apart.
Imagine learning to ride a bike. When you first learn, success is staying upright, moving forward, and stopping before you crash into something. With time and practice, you get better. You move faster, stop more quickly, and move with greater precision and agility.
That’s continuous improvement. You’re using the same solution but using it better.
Now, imagine that you’ve mastered your neighborhood’s bike paths and streets and want to do more. You want to go faster, so add a motor to your bike. You want to ride through the neighboring forest, so you change to off-road tires. You want a smoother feel on your long rides, so you switch to a carbon fiber frame.
That’s incremental innovation. You changed an aspect of the solution so that it performs better.
It all comes down to the definition of innovation – something different (or new) that creates value.
Both continuous improvement and incremental innovation create value.
The former does it by improving what exists. The latter does it by changing (making different) what exists.
Got it. They are entirely different things.
Sort of.
Think of them as a Venn diagram – they’re different but similar.
There is evidence that a culture committed to quality and continuous improvement can lead to a culture of innovation because “Both approaches are focused in meeting customer needs, and since CI encourages small but constant changes in current products, processes and working methods its use can lead firms to become innovative by taking these small changes as an approach to innovation, more specifically, incremental innovation.”
Thanks, nerd. But does this matter where I work, which is in the real world?
Yes.
Continuous Improvement and Incremental Innovation are different things and, as a result, require different resource levels, timelines, and expectations for ROI.
You should expect everyone in your organization to engage in continuous innovation (CI) because (1) using CI helps the organizations change adoption and risk taking by evaluating and implementing solutions to current needs” and (2) the problem-solving tools used in CI uncover “opportunities for finding new ideas that could become incremental innovations.”
You should designate specific people and teams to work on incremental people because (1) what “better” looks like is less certain, (2) doing something different or new increases risk, and (3) more time and resources are required to learn your way to the more successful outcome.
What do you think?
How do you answer the question at the start of this post?
