one chip. “The design paradigm has shifted at Intel.”21Intel expects half of its chips to be at least dual-core by 2006.
In placing its bet on multi-core chips, Intel acknowledged the limits of its technological treadmill, especially given the need to reduce heat and power in the highly competitive laptop and consumer-electronics industry.
Even though rapid incremental innovation kept Intel a step ahead of the competition on processing speed, it needed breakthrough innovation to stay alive for the future. This is not to suggest that Intel will abandon its old sys- tem once the new chips are established, however. There is a time for break- throughs, and a time for technology treadmills. “We knew that we had to invest our way out of the downturn,” Intel’s CEO, Craig Barrett, said in 2004. “So continuing to invest in new products—$28 billion over the past three years—wasn’t frightening. I have a cast-iron stomach. It was just the recognition of, that’s the way the chip industry works, and that’s what we had to do. It’s a majority of self-preservation. Our whole product line turns over every year. About 80 to 90 percent of the revenue we have in December of each year comes from products that weren’t there in January.”22
As Intel’s decision suggests, organizations cannot be indifferent to alternative futures for their current products and strategies. Unlike Kvaerner, which bet the entire company on a single shipbuilding future, or the Russian Army, which bet its second visit to Grozny on a single strategy, Intel adapted an entirely different future by abandoning a product that had taken its global dominance in its market.
I was seated against a wall sort of perpendicular to the audience, which was seated by rank. The important guys were up front, middle managers were next, and all the guys in the back were the ones who had worked on the project.
Our guy started giving the presentation. We started point- ing out the serious things we had a problem with. The guys in the front are shaking their heads, “No, that’s not a problem;
we’ve solved that.” The guys in the back are shaking their heads,
“Yeah, yeah, that’s a problem, we haven’t solved that.” But the guys in the middle kept their heads exactly straight. They did- n’t nod at all. That’s the role of middle management because you need a stationary point in the hierarchy to translate this into that. If the organization is lined up, you’d like to hear somebody at a lower level volunteering not just what they do, but how what they do matches up to something in one of the slogans at the other end. You know, “Quality is job one, right after we get this puppy off the line.”
Inconsistency is a major theme of RAND’s evaluation of the ongoing New American Schools initiative. Launched in 1991 at the urging of Presi- dent George H. W. Bush, and funded with $130 million from some of America’s top corporations, the New American Schools Development Corporation eventually picked 11 school systems for what it called break-the- mold reform, including Cincinnati, Memphis, Philadelphia, San Antonio, and Miami. Although each of the 11 systems adopted somewhat different reforms, all included a mix of curricular and organizational change. In San Antonio, for example, one school adopted the Success For Allreading cur- riculum, another built a program around the Outward Bound expeditionary model, and still another embraced real-life problem solving via the Internet.
RAND was involved in evaluating every phase of the initiative, ask- ing whether the reforms actually changed classroom activities, improved student performance, and produced the durable whole-school improvement.
The answers are troubling at best. The initial notion that whole-school reform would improve student performance was largely unsupported, nor was there strong evidence that innovation in one group of schools changed district-wide attitudes. Bluntly put, RAND reluctantly concluded that schools do not provide fertile ground for break-the-mold ideas, in part because teachers are so busy implementing other reforms that they have little time to concentrate on any single initiative, and in part because dis- tricts are reluctant to give individual schools enough autonomy to innovate.
There were other reasons for the uneven success of the New American Schools effort, not the least of which is the level of poverty among students.
But as RAND’s research team concludes, school capacity and district support have emerged as critical factors in improvement, or the lack thereof.23 So did consistent leadership and clear communication.
Without strong principal leadership, without teachers who sup- port the designs and have a strong sense of teacher efficacy, without district leadership and support, and without clear com- munication and provision of materials and staff support on the part of design teams, implementation is likely to lag far behind.
These are sobering and important lessons for any efforts at school reform. They underscore the basic inequality among schools in terms of capacity to undertake reform and point to the need for development of leadership and staff capacity as the precursor to reform, not necessary the result of it.
R AND’s research group also came to wonder whether high-stakes accountability based on annual testing could co-exist with comprehensive whole-school reform. Indeed, it is entirely possible that the testing regimes embedded in the No Child Left Behind Actmight actually discourage schools from adopting the “rich and varied” programs that challenge students toward the kind of in-depth learning experiences that do not necessarily produce high test scores. Far better to teach to the test than take the risk that a school will be put on the failure list.
Although some of the problems are unique to public schools, RAND’s findings apply to virtually any organization bent on transformation, especially under extreme financial and/or political pressure to show immediate progress.
Organizations that rush to reform will almost always be disappointed.
RAND’s Robert Chapman found similar problems in the federal government’s failed effort to help Chrysler, Ford, and General Motors develop a new gen- eration of environmentally-friendly, high-mileage cars. At first glance, the effort should have succeeded: It was built around a formal partnership between government and the Big Three fueled by $2 billion in funding and full access to the federal research laboratories. It also had the Clinton administration’s complete support. Launched in a 1993 Rose Garden ceremony, the partner- ship promised to leapfrog the competition by a decade by developing an 80- mile-per-gallon, five-passenger, easily recyclable, affordable family car.
Eight years later the partnership was dead. Chrysler, General Motors, and Ford were well behind Honda and Toyota in the race to produce clean cars, and the federal government had switched its bet to hydrogen fuel cells.
Although all three U.S. manufacturers had met their part of the deal by developing concept cars by 2000, the National Academy of Sciences concluded that “no reasonable amount of funding” would achieve the 80-mile-per- gallon goal: “While the bulk of the requirements (e.g., performance, comfort, cargo space, utility, and safety) can be met, the combination of 80 mpg and affordability appears out of reach.”
Chapman saw the problems coming in an otherwise hopeful 1998 report titled The Machine that Could, a play on a best-selling book about Toyota’s lean production system.24Although there was much to admire in the Partnership, including progress made on hybrid engines and lightweight materials, he reports that there was very little true invention under the Partnership and plenty of hubris.
Some of the inconsistency came from the government, where 20 sepa- rate laboratories split the research funding from 12 different appropriation accounts, six in the House of Representatives and six in the Senate. Agencies not only had strong self-interest in defending their slice of the budget, the federal government itself was “a less-than-perfect partner” for industry. More- over, the risk in undertaking a multiyear, technically challenging Partnership with the government comes from both political and bureaucratic constraints.
“If the duration spans several election cycles, interminable reviews and sus- pended budget decisions could disrupt program schedules and disillusion the industry partners.”
Some of the inconsistency came from Chrysler, Ford, and General Motors. As Chapman also reports, the automobile industry had 100 years of experience and strong preferences for established technologies, meaning steel, internal combustion engines, and gasoline. Unfortunately, steel, internal com- bustion engines, and gasoline were not necessarily part of the high-mileage future.
The federal government and the carmakers also had cumbersome bureau- cracies that made decision making difficult. Although younger engineers clearly understood that core technologies needed to change, the older engineers at the top often took a defensive stance, if only because they could “remember, and readily recite, all the earlier innovations that were disappointments . . .”
However, most of the inconsistency came from the nature of the part- nership itself. The partnership itself was entirely voluntary, and had few measures of success and no independent capital to invest in particularly promising areas. More importantly, it was never quite clear just how com- mitted the partners were to each other, nor how breakthrough innovation could come from a linear budgeting system and a risk-averse planning pro- cess. As a result, the partnership often behaved more like a Model T than the Toyota Prius, the gasoline-electric hybrid that entered the market in
1997 at 60-miles-to-the-gallon, and eventually became Motor Trend’s2004 car of the year.
Procter & Gamble learned its own lessons about consistency toward the end of a decade-long drought in new product development. Although it invested heavily in research and development during the drought, its efforts were widely dispersed and poorly coordinated. It needed to move new prod- ucts more quickly to the market, and send a clear and consistent message down through the organization that innovation was the only way Procter
& Gamble could survive in an increasingly brutal marketplace.
The company clearly understood that the message had to come from the top, and picked its chief technology officer, Gordon Brunner, to rebuild the product development process. According to RAND’s history of the effort, Brunner started by creating an Innovation Leadership Team as a de facto venture-capital board. With $225 million to invest in new ideas, the team provides seed funding and technical assistance to both existing and new busi- ness lines. Brunner also took a more aggressive stance toward improving infor- mation flows under a new program called Connect and Develop. According to RAND, the program was designed to make the connection between “what’s needed” and “what’s possible,” whether through the company’s intranet and
“smart” report systems for knowledge sharing, its global technology pro- grams, committees of practice, or “connection-making” conferences.25
The company also adopted a more structured process for managing later-stage projects, using a go/no-go, stage-gate approach that subjects each idea to both laboratory testing and extensive market research before a the commitment to wider field tests and eventual commercialization. By 2002, 16 new brands had entered “learning markets,” and six had crossed over to national markets. By 2004 Procter & Gamble ranked third on Fortunemag- azine’s list of most innovative companies, first on employee talent, second on use of company assets, third on quality of management, and third on quality of products and services.26
Consistency does not mean constraint, however. “We totally changed our systems for innovating and manufacturing products,” Procter & Gam- ble’s CEO, A.G. Lafley, explained in 2004. “We need a much lower cost sys- tem. We began working with local suppliers.…The P&G of five or six years ago depended on 8000 scientists and engineers for the vast majority of inno- vation. The P&G we’re trying to unleash today asks all 100,000-plus of us to be innovators. We actively solicit good ideas, and if the concept is prom- ising we put it into development.”27
Nor does consistency mean isolation. Procter & Gamble developed its new Swiffer duster in collaboration with Japan’s Unicharm Corporation, the
GLAD Press’n Seal plastic storage bag with Clorox, and Prilosec antacid through a joint venture with AstraZeneca. “I’m a big believer that we some- times need help in solving problems,” Lafley explained. “So I have set a goal to get half of our innovation from the outside. We’re in the 20 percent range now, up from 10 percent three or four years ago. We have even worked with competitors. The competitors were nervous, and people in my company were anxious, too. But my point of view was, wherever they come from, you’ve got to get the people with the idea, the technology, and the ability to execute the idea in the marketplace together.”28
The merger of Astra and Zeneca also reflected a desire for greater agility, albeit in the form of increased research and development spending.
“R&D has been getting more expensive, and you do need to be big enough to afford the different technologies that will keep you competitive,”
AstraZeneca’s CEO, Tom McKillop, said of the Astra and Zeneca merger.
“But beyond a certain point you risk running a less efficient R&D business.
You need speed andcreativity. Those aren’t attributes that you normally associate with big companies.”29