RU lEs BREakING - Roland Berger
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navigating complexity
REBeL
BREAKING THE RULES
02 | 2019
Think:Act #27
BREathkEING
RUlEs
In praise of rebels Workplace whistleblowers
Non-conformists are an Why business needs to
asset, says Francesca Gino listen to the truth-tellers
2 Think:Act 27 in this issue in this issue Think:Act 27 3
"To be a rebel "When I move into situations,
does not mean I need to say to myself: What's new?
being an outcast What's different here? I'm inviting
or troublemaker. myself to have that beginner's mindset,
It's what I call to be wrong about something.
constructive It's the starting point."
nonconformity." HAL GREGERSEN
photo: agnieszka stalkoper
Innovation culture expert and executive
director of the MIT Leadership Center
FRANCESCA GINO
→ page 64
Award-winning researcher
photo: pr
and author of Rebel Talent
→ page 48
4 Think:Act 27 in this issue Think:Act 27 5
"Rules are
temporary.
When they hinder
innovation and
no longer help
an organization
to run smoothly,
it is our duty
to break them!"
CHARLES-EDOUARD BOUÉE
CEO of Roland Berger
"Real leaders take care of their
people so their people will take care
of each other. Once that happens,
the rest – customers, shareholders,
finite s uccess – takes care of itself."
photo: thomas dashuber
photo: start with why
SIMON SINEK
Leadership guru and author
of Start With Why
→ page 80
6 Think:Act 27 in this issue in this issue Think:Act 27 7
Think:Act 27
In focus Wide angle
getty images; ragnar schmuck; csa images / getty images; david zentz; ralph alswang | illustration: joni majer
Breaking Think, act
rules
and stay informed
the 72
In this issue we explore
how rebel thinking can change Hyperloop:
how you do business. the 21st century's
great race
22 Re-entrepreneuring Five years ago, two
the organization companies emerged
Charles-Edouard Bouée on the pledging to turn
art of opening up to possibility. science fiction into
fact. Which – if
24 The new dream merchants either – has what it
How one US retailer came along takes to triumph?
BREAKING THE RULES
BREAKING THE RULES
and woke up a tired industry.
28 Changing the channel
Read about how Patty McCord 12 8 At a glance
Fast facts for thinking people:
68 The woman driving
a revolution
helped power up Netflix. the art the latest buzzwords, stats Catherine Perez answers a
of breaking the and business ideas. few questions about how
rules
42 "Here's to the crazy ones" "Start by she's guiding Nissan on its
Rebels who inspire us to just demanding 60 The new geography mission to make mobility
reimagine what's possible. more." of innovation simple and accessible.
cover + back cover artwork: joni majer / wildfoxrunning | photos: thor swift; start with why;
In today's world, the factors
48Channel the rebels at work How you step outside the that drove Silicon Valley's 78 Food for thought
Unlocking your inner rebel "Leaders box can be the difference success may no longer apply. Take a deep dive into new
is easier than you may think. between being a rulebreaker areas of interest including
Francesca Gino explains. are the and ending up broken. 64 Why questions matter artificial intelligence, bike
ones who Innovation and leadership sharing and automotive
52 How to culture creativity guru Hal Gregersen on how disruption and find out more
and think differently set the the practice of asking better in related articles and studies.
tone."
32 disruption 38
Andrea Breanna's 11 tips for How Lego rebuilt itself to tackle questions leads to better
throwing out the rulebook. solutions.
54 The business case how you
for whistleblowers Back from the brink of bankruptcy, can learn
from
pirates
ow companies are taking
H beloved Danish toymaker Lego has
lessons from those who've put proven that a successful turnaround
is anything but child's play.
Think:Act online
their own reputations on the line.
Take these lessons To read an exclusive interview with
in organizational HR and leadership guru Dave Ulrich
80 Rewriting the rules
agility and fostering as well as the full version of our interview
of the game
team engagement. with Hal Gregersen, please visit:
isionary thinker Simon Sinek
V www.rolandberger.com/tam
answers three questions on the
rules of good leadership.
8 Think:Act 27 at a g l a n c e at a g l a n c e Think:Act 27 9
Think Food Re-
Thoughts to thinking
in for live by buzzwords
numbers thought
Can we learn strategies from computers
"If you Get to grips with new
putting
a figure on…
industry lingo in a flash
immigration and to improve our day-to-day lives? with our stripped-down
economic growth by Tom Griffiths
can't
explanations of the
>1/2
latest jargon.
while we normally don't best solution to this problem is based
recognize it, many of the decisions on the "least recently used" principle
of the startups that we face in everyday life involve — you should get rid of the piece of
feed a
in Silicon Valley were computational problems. Organizing information that was accessed least
founded by someone born your wardrobe, choosing a restaurant recently. The intuition is that this is the
outside of the US. The for dinner and deciding what task item that is least likely to be needed
figure is similar when to take on next are all problems that anytime soon. You can apply the same
looking at the Fortune 500
have parallels in computer science idea to your wardrobe! "Workation"
team
companies, where some
(in caching, reinforcement learning,
40% were founded by an
and scheduling respectively). As a Not to be confused with
immigrant or the child of
an immigrant. consequence, we can get insight bleisure – the millennial
into the structure of these human travel trend of extending
44 % with two
problems by looking at the algorithms business trips for a bit
that computers used to solve of "me time." For the busy
them, and in some cases come up entrepreneur or business
of german companies with better strategies for human leader, being away from the
founded in 2015 were decision-makers based on the optimal business can cause stress
pizzas,
spearheaded by people algorithms. For example, the problem on a holiday. The workation
photos: getty images; pr
holding foreign passports, of deciding what to get rid of when tom griffiths is co-author with solution? Take the work and
a more than threefold your wardrobe gets too full is Brian Christian of Algorithms to Live your colleagues with you.
increase over figures Go on a yoga retreat,
equivalent to the problem that By: The Computer Science of Human
reported in 2003.
it's too
computers have to solve when Decisions. He is director of the or the Trans-Siberian
+ 0.5
determining what information to Computational Cognitive Science Lab railway, or a co-working
keep in memory. For computers, the at Princeton University. cruise. Enjoy the view and
relaxation for a few hours
a day and then get down to
large."
of a percent
that to-do list.
is the increase in the
average French worker's
wage for every 1%
increase in immigrants'
share of employment in
the country, according to
a recent study. — Jeff Bezos
CEO of Amazon
sources: new american economy
research fund; the economist;
south china morning post
AT A GLANCE
10 Think:Act 27 at a g l a n c e Think:Act 27 11
Economic
impact
The Chain Best
redacted Reaction practice
read
In the age of AI millennials get blamed for "killing" How to …
implementation: a all sorts of industries, from napkins to diamonds – and
most recently, the traditional wine cork. But before you
do a digital
tale of two nations point a finger at younger drinkers for the rise of screw
clean-up
Too busy to read the hot new caps and plastic stoppers, the story goes back before some email. jpegs. pdfs. apps. New vegan
books? We've got it covered for
you. Here's Kai-Fu Lee's latest
millennials were even born. Here's how the wine boom Data flow can quickly clog up our
systems but it's hard to know
business is brewing
of the 1980s helped spark a trend that challenged what to delete for good – leaving
offer AI Superpowers cut down in january 2018 Guinness announced
cork's dominance, but also helped turn it into one of the us prone to "cyberhoarding" and
to the bare essentials. "cyberchondria," to use the latest that it had fully removed isinglass – a
design world's favorite sustainable materials. buzzwords. So here are some fish bladder product – from its filtration
the combination of government quick tips for digital decluttering. process, making the product suitable for
On your smartphone, throw both vegetarians and vegans for the first
support, deep reservoirs of data
related apps into separate
collected by Chinese internet time since brewing began 250 years ago.
folders: put social media, maps
firms about their customers and a Beyond the bar, sales of vegan-labeled
and comms tools, for example,
cadre of experienced, hard-driving 1982-1989 Increased demand for in discrete folders and then try foods reached $12.8 billion worldwide
entrepreneurs suggests to Beijing wine drives up Portugal's cork to get them to fill only three in 2016 and the global meat substitute
export volume by 11%, and the
venture capitalist Kai-Fu Lee that value by 340%. The country's pages. Delete any apps you don't market is expected to grow at a compound
China will be the US' only real post-revolution industry has a use. You can always reload them annual growth rate of 7.7% between now
competitor in artificial intelligence in virtual monopoly but is in need of later if you find you need them. and 2025. But food and beverage is far
modernization. Quality slips. Your computer desktop, like your from the only industry adapting to meet
this century.
real-life desk, shows just how tidy growing demand for plant-based products.
The former Google China chief your mind is. Or not. It sounds
argues that AI has made such In September 2018, Adidas launched the
brutal but here's a quick fix:
tremendous advances that it's no Throw all those stray docs into
first vegan leather version of its iconic
longer in the realm of science fiction. EARLY 2000s Reports one folder and go through it later. Stan Smith sneaker, while three months
Instead, the technology is now at the say 7-10% of wine is And if you haven't touched it in a earlier Tesla reported the hotly anticipated
TODAY Sustainable product
sources: george m. taber, forbes, the atlantic, the guardian, nwf, the evening standard
contaminated with TCA, year, bin it. Simple. Model Y will be fully leather-free and
same stage that electricity reached and fashion design embrace or "cork taint." Eager to
in the late 19th century – mature and the material, producing every- even Bentley is exploring alternative
save their reputation, and
thing from "cork leather" their bottom line, more luxury interior materials. Consumers have
ready to be applied to all kinds of bags, shoes and umbrellas to winemakers move to spoken: What was formerly considered
industries and applications. solid cork chairs, homewares plastic and screw caps,
Economically, this is likely to be and yoga accessories. fringe culture is now big business.
a trend that began in the
as transformative as the industrial 1990s in response to
rising costs and
revolution, but with a difference: As diminishing quality.
many as 50% of all of today's jobs
may be replaceable by automation
in the next 15-20 years. But unlike
past technological waves, this one
EARLY 2010s Cork oak
may not generate new jobs to replace forests come under threat 2010 Despite improvements
those lost. A bout with cancer made due to decreasing financial in Portugal's cork products
incentive to maintain the led by companies like
Lee start to think that society will Amorim, cork stoppers have
trees. Industry and
need to focus on humanity's last environmental groups lost around 20% of market
remaining comparative advantage: work to highlight cork's share over just 15 years
earlier, and by some
photos: getty images (2)
giving and receiving love. sustainable properties for
other applications. estimates, 40%
since the
→ AI Superpowers: China, Silicon 1980s.
Valley, and the New World Order
by Kai-Fu Lee. 272 pages.
Houghton Mifflin Harcourt. $28.
AT A GLANCE
12 Think:Rebel Think:Rebel Think:Act 27 13
In
focus
In this issue
we take a close look
at how rulebreakers
have shaped the
A bout 2,350 years ago, a little town in
the middle of Asia Minor held the key
world of business. for ruling the whole continent. Or rather,
the knot. An old prophecy said that
whoever could disentangle the puzzling
knot displayed in the temple of Zeus
art
the in Gordion would become king of Asia.
Countless efforts had proven again and
again, year after year, that it was an
of impossible knot to untie – until a young
man named Alexander, then leader of
BREAKING
BREAKING THE RULES
BREAKING THE RULES
the Macedonian army, came up with a
rules
solution. He simply took his sword and
cut the knot in two. He – zap! – broke the
the rules and the knot to rule the region. A
kingdom for a rulebreaker.
Cutting the Gordian knot. It's probably
every leader's dream. And it's also
every leader's nightmare. It's a dream,
because the ancient legend shows how to
eliminate complexity and the bureaucracy
by Detlef Gürtler that surrounds it. And it's a nightmare,
illustrations by
Joni Majer / wildfoxrunning
because you might just as soon end up
not simply a rulebreaker, but broken as
well. Someone younger or bolder, more
audacious or more reckless, a latter-
day Alexander the Great or Donald the
photo: reuters / loren elliott
Trump could come along and destroy in a
moment what took generations to build.
UNdERsTAnD THE cOnsEQUeNCES Yes, it's tempting to "unfollow" the rules –
NFL quarterback Colin Kaepernick started a movement when he but is it really worth the cost?
began taking a knee before his games. The 30-year-old has since
'
been awarded the 2018 W.E.B. Du Bois Medal and has become
the new face of Nike; he's also been without a team since 2016.
14 Think:Act 27 Think:Rebel Think:Act 27 15
bReakinG
rules
the
brings iN i nstead. The obvious question was: "Will users be
tAKe THE RISk
The original iPhone
certainly wasn't the first
new
device to feature mobile
THE
willing to give up everything they know for some- web functionality, but it
thing they've never used before?" Internet pioneer was the first to do away
Marc Andreessen asked Jobs that very question just with a physical keyboard.
Would users take to this
before the iPhone was launched. Jobs' answer? new interface? It was a
"They'll learn." And we did. risk – but one that's now
One of the most outspoken protagonists of proven itself with over
one billion units sold over
rulebreaking business is Seattle-based aerospace the entire history of the
I
engineer and tech philosopher Venkatesh Rao. The device.
world is "breaking smart" from its own past, Rao
t seems like a common pattern: The says – and to emphasize this, he published his
BREAKING THE RULES
BREAKING THE RULES
person who breaks the rules gets essay series Breaking Smart not as a book, but as
praised to the skies. That moment "Season 1," a 20-episode blog designed for binge
when someone does something no reading. For the new to succeed, the old rules need
one's ever done before and enters to be broken. As soon as they "start to collapse
the history books – like taking your seat on a bus under the weight of their own internal contradic-
(Rosa Parks), picking up grains of salt (Mahatma tions, long-repressed energies are unleashed," he
Gandhi) or crossing a border river (Julius Caesar). says. If we want the gains from the new to be bigger
Even if "there's nothing more powerful than an than the losses from the old, the world "depends
idea whose time has come," to paraphrase French on free people, ideas and capabilities combining
writer Gustave Aimard, it still requires a definitive in unexpected ways."
action to bring the effects of that idea into the real Yes, it happens, and often. Rupert Murdoch's
world. And that action is, more often than not, an 1986 anti-union crusade in the UK ended trade
action that breaks the rules. a unions' grip on the British economy and set a
Rulebreaking heroism should nevertheless be
winNing hypercapitalist wave in motion. Only by scrapping
hAND
taken with a pinch of salt. There's an obvious Apple's iPhone the postwar rules for the German economy in 1948
"survivor bias": Less successful rulebreakers don't has been a could Ludwig Erhard ignite the "economic miracle,"
find their place in the history books. Take Fritz huge success. while the collapse of the Shogunate era in Japan in
6.1 million
Wandel. He called for a national strike in Germany were sold 1867 paved the way for the Meiji Restoration and
the day after Hitler came to power but only the 2007-08. the creation of a modern and powerful country.
workers in his hometown of Mössingen followed The 3G device But, no, not every collapse of the old ways will
sold 1 million
his call. Wandel survived the Third Reich in prison, lead to a thriving new world. The Dark Ages that
in its first
and after 1945 worked in Mössingen's cemetery. weekend. followed the implosion of the Roman Empire is
photo: david paul morris / getty images
The moment you break a rule, you simply don't
one historical example. And the demolition of the
rule-based world order we are currently witnessing Three usUal suSpects for pRofitable rulEbreaking
know if it will break the system or break your life. may become equally historical. The Trumpian
One of the most iconic of these moments in busi-
ness came in 2007 when an absolute newcomer to
transformation may lead to a deal-based world
order or the collapse of the last remaining
1.
Middleman muddle
2. 3. V
Customer friction
W
Legacy processes
the mobile phone industry (Steve Jobs) decided to superpower, unleashing a lot of long-repressed The chances are good that any Whatever enhances customer If everyone in your industry takes
equip his first phone (the iPhone) with none of the energies. Whether that will lead us into a new era institution that stands between experience and satisfaction is something for granted, see what happens
user and producer can be worth a try. Whatever stands in the if you don't do it. Possibly it's just some
physical interface elements used up until that of enlightenment or into a new Dark Ages remains replaced by technology. way of customer centricity is kind of legacy and dropping it produces
point, putting his money on the touch screen to be seen. worth breaking. value for you and your customers.
16 Think:Act 27 Think:Rebel Think:Rebel Think:Act 27 17
The new kid on the block doesn't have to follow
any of the rules established organizations have
Tech crunch written for themselves, argues Rebecca Henderson.
Berkshire Hathaway shied away The professor at Harvard Business School identi-
from tech, but Buffett changed
his mind – the company now fies rulekeeping as a competitive disadvantage for
holds $50 billion in Apple stock. incumbents: "They may invest heavily in the new
innovation, interpreting it as an incremental KEeP IT SIMPLE
extension of the existing technology or underesti- Warren Buffett is known
mating its impact on their embedded architectural for breaking with billionaire
W
knowledge. But new entrants to the industry may convention. The famously
frugal "Oracle of Omaha"
exploit its potential much more effectively, since admits to "eating like a
hy not just keep the rules we have if there's they are not handicapped by a legacy of embedded six-year-old" and always
so much risk in breaking them? According and partially irrelevant architectural knowledge." adheres to one rule: He
never pays more than $3.17
to Leonard Mlodinow, that's because we're "Disruption occurs when successful firms fail for his daily breakfast from
human. "The human species likes change because they continue to make the choices that McDonalds.
and is attracted to change." Mlodinow, a theoretical drove their success," says economist Joshua Gans,
physicist and science author, calls this human professor for strategic management at University
capacity "neophilia, the love of the new." He sees of Toronto and author of The Disruption Dilemma.
this "elastic thinking" as a unique feature of our So keeping the rules is effective – until it isn't. And
species: "Squirrels don't get bored if they do the you can only know in hindsight when the right
same thing all the time. They just keep doing it. time to break them was, or might have been. One
But humans do." of the most successful players in contemporary DON'T BUY
BREAKING THE RULES
BREAKING THE RULES
And according to history, it's also because
times are changing. Almost nothing seemed to
business, Warren Buffett, stuck to one of the most
simple rules ever: "Purchase, at a rational price, a A TICKEt To
change in the communist parts of Europe after
Josef Stalin's death in 1953: brutal, but steady
part interest in an easily-understandable business
whose earnings are virtually certain to be materi-
gOiNG BuST
On October 19, 1985,
dictatorships; lousy, but self-sustaining economies; ally higher five, 10 and 20 years from now." Buffett the first Blockbuster Video
a quasi-frozen superpower status. Until Mikhail publicly doubted his approach during the dotcom store opened its doors in
Gorbachev started thawing the icy fortress and the frenzy in 1999/2000 as others reached higher Dallas, Texas. At its peak in
2004, the company had over
whole Soviet empire melted. Could someone else, returns – but he didn't break his rule. This was the 9,000 stores located around
a leader like Vladimir Putin, have saved the empire right decision, of course; but who could have the world. And just six years
by sticking to the rules instead of breaking them? known that at the turn of the millennium? later, it went bankrupt, was
sold at auction and eventually
W
Unlikely: The pillars of its imperial power were
disappeared – replaced by a
brittle, or rotten, from within. And there is almost scrappy disruptor it had the
nothing in the world of politics or business as opportunity to purchase
difficult as changing the (dysfunctional) rules of a years earlier for a mere
$50 million: Netflix [see
(formerly) highly successful organization.
sticking
article p. 28]. Blockbuster
stood by the rules of the
This is where the manager's nightmare kicks in. video rental business it had
written, but by the time it
If the need for change collides with a company's realized its mistake, the
rules, change wins – and the company loses. The competition had already
problem here is not the change in itself: The R&D written it out. Its very last
franchise-owned store in
to the rules photo: marion curtis / starpix / rex / shutterstock
departments and the creativity of the workforce are Bend, Oregon is now more a
great sources for innovation and industry-changing destination for nostalgics
is effective–
revolutions. Xerox invented the PC and the mouse, than the start of a good night
curled up on the sofa.
photo giant Kodak was the first company in the
world to build and market digital cameras and
Sony was one of the first movers in the field of dig-
uNtil iT isn't
ital music players. But these inventions didn't fit
into the architecture of the companies, so their
potential could not be fully unleashed and some-
one grabbed the prize. In fact, in all three of these
cases, it was Apple.
18 Think:Act 27 Think:Rebel Think:Act 27 19
How tO
building oN
rules
build new
rules
1.
BUILDS a better
Experiment
The more you try, the
better you see what
works and what doesn't.
futUre
Unleashing your
people's creativity has a
better chance of
succeeding in turbulent
times than betting
the whole house on
one horse. in the world. Just like sticking to the same rule a
decade later accelerated its decline because the
same engineers had a deeply rooted aversion to the
W
2.
Building by doing
toylike PCs that attacked their beloved mainframe
machines and transformed the whole industry.
BREAKING THE RULES
BREAKING THE RULES
Perfection is a dream.
Reality changes too fast So those who make the rules should break them.
to ever achieve it. And the others, the ones who break the rules,
The "rough consensus
and running code" should make new ones. It seems like they all could
can get things done – meet somewhere in between, doesn't it? Leonard
lessons learned and reaking the rules is, of course, best done Mlodinow makes one recommendation: build new
rules built at the
same time. when you're like Alexander – young, bold, rules bottom-up while in the process of change. In
have nothing to lose and everything to gain. Take the traditional top-down method, people are
Steve Jobs, Bill Gates and Mark Zuckerberg. Other obedient and follow authority. But if work is orga-
Y
3.
Customer first
entrepreneurs acted less brilliantly. For example,
Travis Kalanick left Uber because of controversies
about his unethical behavior and Elon Musk's IcE
nized bottom-up, "all the individuals somehow
work together in a way where the whole is greater
than the sum of its parts." There's no need to burn
Don't try to produce
stuff. Produce benefits. Tesla might be on track to hit a financial wall: Breaker the company's rulebook, "but you really have to be
Focusing on customer Annoying traditional capital market participants The - 1ºC forecast able to face the change and go with it, not resist it."
benefit might – and for Cape Canaveral,
while still burning billions of cash each year seems Venkatesh Rao favors a slightly different
should – completely Florida on Jan. 28
rewrite your not to be the best survival strategy. 1986 was ignored solution. In his view, the guideline created by the
company's rulebook. with tragic Internet Engineering Task Force for software engi-
Even the most charismatic conquerors won't be consequences. neering can serve as a business rule, too: "rough
Despite warnings
photo: bettmann archive / getty images
successful in the long run without keeping some consensus and running code." You don't have to
5 4.
Sticky values
of the old rules – or building new ones. Alexander
the Great secured his impact by "remixing,"
that the O-ring
seals had not been
tested under 12°C,
the Challenger
agree on everything, as long as you head more or
less in the same direction, the results will be just
When everything flips, literally marrying Greek and Persian culture in 324 launch went ahead good enough. Business in the Age of Software will
there should be a BC. The offspring, Hellenism, ruled the Occident and it cost the lives generally lead to "pragmatic approaches prevailing
reason why people build for half a millennium and is still one of the strong of all seven crew over purist ones." Rules simply become too flexible
or buy your products. members. The
Clear and simple values est legacies of Western culture. Google's "don't be disaster shut down to be broken. But that won't work for every busi-
(such as Google's "don't evil" mantra served as a useful guideline for a com- the US Space ness. The best-known counterexample is, of course,
be evil" or Daimler's pany sailing towards uncharted territories, just like Shuttle program for rocket science. Landing a man on the moon
"the best or nothing") CoMmUnICATION IS KEY Ken Olsen's "do what's right" was partly responsi-
nearly three years
doesn't work with rough consensus – only with
are the best starting while new safety
point for a journey into The investigation that followed the 1986 ble for the rapid growth of the computer builder rules were strict protocols. The 1986 Challenger disaster
the unknown. Challenger disaster led to an overhaul of implemented.
NASA's safety and reporting policies, which Digital Equipment Corporation during the 1970s – proved with disastrous consequences what hap-
were largely blamed for the tragedy. because it attracted the best computer engineers pens if you overlook the rules to get things done.
T20 Think:Act 27 Think:Rebel Think:Act 27 21
AsSertiNg
your
positiOn
T he more a company relies on complexity and
perfection, the tougher it is to thrive in an
approximation-only atmosphere. One solution
is to find an equilibrium between breaking, keeping
PLAYLIST
rECoMmENDed FOR
RULEBReAKERS AND
rULEKEePERS
and building rules not by gathering everyone in the
middle, but by manning the extremes. This is a rather 1.
common strategy in family businesses when preparing Joshua Gans:
BREAKING THE RULES
BREAKING THE RULES
for generational change. The younger generation often The Disruption Dilemma.
The MIT Press, 2016.
gets a first leadership position in a "new" business
segment – working with new technologies and/or
developing new products. This way they are able to
find their own business and work style. Outside of the
52.
Rebecca Henderson:
Generational Innovation.
parental shadow, the offspring gains experience of how The Reconfiguration of
to rewrite the company’s rulebook – and how not to. Existing Systems and
the Failure of
In non-family businesses, similar strategies are less Established Firms.
HardPress Publishing,
widespread, but can nevertheless be the best solution 2013.
to renew a company, or parts of it. Take Nestlé's
Nespresso: In the early 1980s, the coffee capsule
brand was marketed within Nestlé's established coffee
division. It failed miserably. The B2C Nescafé managers
Q 3.
Leonard Mlodinow:
Elastic: Flexible Thinking
couldn't grasp the B2B system of selling machines and in a Constantly
Changing World.
capsules as a bundle. Office clients didn't like the price; Allen Lane, 2018.
hospitality clients didn't like the look and feel and then
problems in production and logistics came on top. Then,
6
4.
photo: jonathan bachman / reuters
in 1986, Nestlé established Nespresso as a separate,
Venkatesh Rao:
wholly Nestlé-owned company, its top management Breaking Smart: Seeking
was recruited externally and the brand philosophy was PREPAre tO MEeT rESIsTANCE Serendipity Through
Technology.
focused on selling convenience, not just coffee. To break the rules is to break with the status quo Online edition, 2015.
– and that may cause friction at first. The image of (breakingsmart.com)
This was of course still incompatible with the Ieshia Evans' arrest at a 2016 Black Lives Matter
protest in Baton Rouge remains an iconic
traditional Nescafé world – but it succeeded. inspiration for grace under pressure.22 Think:Act 27 Comment Comment Think:Act 27 23
Re-entRepreNeu ring
effects continued to keep patients in a state of misery. stands for the company's long-term history and the
atients were slowly losing hope and the possibility of
P assets it consolidated over time (know-how, experience,
recovering any sense of normalcy in their daily life was skills, brand, etc.). The "entrepreneuring" part is the
the
becoming a distant dream. spark that has the power to reignite what lies dormant
organizatioN
As a non-profit, DKF's role was to raise funds and in the "re" and unleash new energy in the company
create awareness, and not to address the problem of and take it to a new phase in its evolution. As they
medical innovation. But that's exactly what it did. It grow bigger, a lot of organizations relegate their
took upon itself the onus to solve an unsolvable entrepreneurial energy to history. That's a mistake.
problem by completely reimagining its role and Re-entrepreneuring is not a matter of thinking
reframing the problem. For Tom Oostrom, the manag- "outside the box" – it's about thinking with the box,
ing director of DKF, the puzzle to be pieced together applying the company's existing assets and qualities to
was as follows: His one clearly defined target was to
liberate kidney patients from clinic-based dialysis and
Most organizations believe that the time provide them with a portable dialysis device that
would give them more freedom. And he knew that the
"by seeing the
for being entrepreneurial is only during the technology existed to make a dialysis machine in the
world through
fresh eyEs…
size of a shoe box, which could dramatically improve
startup phase. They are woefully wrong.
the patients' quality of life through wearable dialysis
machines. But he could not get it financed, as existing
manufacturers of dialysis machines had little incen-
tive to innovate. If successful, this innovation would
disrupt their current business and choke existing
a compAny cAN
open itself up to
BREAKING THE RULES
EQUATION
HUMAN EQUATION
RULES
revenue streams. Major medical breakthroughs would
imply that health insurance companies would bear the
risks of costly medical research.
exciting
HUMAN THE
posSibilities."
BREAKING
The team took a step back and pondered over what
their original founding mission had been: to improve
the lives of kidney patients. And to achieve it, they had
to make this portable dialysis device a reality. Once a new purpose. It's about using the box itself as a
by Charles-Edouard Bouée they identified the end point as the wearable artificial stepping stone that will carry the company across a
kidney, they worked backwards from there, unbundled difficult time to a better time. By seeing the world
G
the "kidney" into its component parts and then figured through fresh eyes and giving employees the freedom
out who could help them find these components and to reimagine their business, a company can open itself
integrate them into the prototype. The foundation up to exciting possibilities. And once they do that, they
gathered key players of these fields and pooled their will realize that obsolescence is not something thrust
reat power brings great responsibility. If agility, boldness and the spunk to rely on their gut collective knowledge to crack this problem. But to upon them by fate. It's a choice. And they can very well
you are the CEO of a big company, you feeling while taking tough decisions. It's a fallacy to overcome this huge market failure that prevented choose to avoid it. 9
often wonder if you should choose think that the time for entrepreneurial thinking is only them from delivering a wearable dialysis device, the
between the opportunities that present when a company is starting up, or to believe that DKF also had to change its whole organization and
themselves but carry inherent risks with the possibility entrepreneurial thinking cannot coexist with the operating model. It started the Neokidney Foundation,
of a potential reward, or if you should take comfort in dominant mindset of an established organization. and that group formed a company, Neokidney, which
the known and continue to preserve the organization's That's the wrong approach. To understand why, let's is for-profit, with the clear goal of developing the
business as usual? A lot of CEOs, whether they admit it take a look at the incredible story of the Dutch Kidney portable device patients were missing. To cut a long charles-edouard boUéE
or not, end up taking comfort in the familiar, reason- Foundation (DKF). story short, the DKF managed to find a solution to a
ing to themselves: "My role is to preserve the organiza- problem that was in deadlock for 70 years, by going
Charles-Edouard Bouée is the global CEO of Roland Berger.
tion's advantages, not to take on new risks that might The Dutch Kidney Foundation is a health charity back to its original mission, reimagining its role and
He has written a number of groundbreaking books on modern
jeopardize the company." History is rife with examples whose key mandate was to collect funds, educate framing the problem it was tackling differently – in a
management and China – where he lived for over a decade.
of organizations that took this defensive approach, patients, lobby the government and raise awareness very entrepreneurial way. His books include Light Footprint Management, China's
photo: jan voth
only to be outwitted by smarter rivals. among scientists and other players about kidney This is what we call "re-entrepreneuring." The idea, Management Revolution and La chute de l'Empire humain. He
Then on the other extreme are the startups. disease. For nearly 30 years, DKF tried to improve the as we see it, takes inspiration from the French phrase is the editor (with Roland Berger Deputy CEO Stefan Schaible)
Entrepreneurs are admired because of the very quali- lives of patients suffering from this disease. But reculer pour mieux sauter: stepping back to go forward of Re-entrepreneuring: How Organizations Can Reignite Their
ties many executives abandon as they climb to the top: complex treatment protocols and debilitating side more strongly. In re-entrepreneuring, the "re" part Entrepreneurial Spirit (Bloomsbury, 2018).24 Think:Act 27 D i s ru p t i n g s l e e p
TIme SpENT SHIFTING CONSUMER
sLEePING ATtITUDEs
the
Global average: Average time people keep a mattress:
dream
WOMeN MEN 2007 2016
new hours HOURS
years YEARS
merchAnts
minUTES MINutes
Conventional logic would have doomed Casper's
business model to failure, but the US mattress
retailer has proven that when it comes to waking up
a tired industry, you have to set your own rules.
BREAKING THE RULES
by Michael Hann
illustrations by Katharina Gschwendtner
M anhattan, early September: It's a warm morning
and the mattress shop at 627 Broadway is empty.
That's not entirely surprising – given that it's
recommended to replace a mattress every seven to
10 years, a mattress store is unlikely ever to be
teeming with shoppers. What's more surprising is
idea for Casper was born when my co-founders and
I realized that everyone in our co-working space
was downing green juice and wearing fitness
trackers — but still falling asleep at their desks,"
says Parikh, now the company's COO. "It seemed
they were taking healthy eating and fitness
BOXING
cLEVeR
that Casper, the online retailer revolutionizing the seriously, but not sleep. So we set out to elevate The online mattress sector is
mattress business, exists at all – and that this is sleep as a pillar of wellness and improve how dependent on you not wanting a
just one of 18 stores that have opened so far out of people are getting their shut-eye." box spring mattress – only foam
mattresses will roll into boxes.
a planned 200. A Casper store is nothing like a It's a novelty for the customer,
normal mattress retailer: There are no strip-lit The genius of Casper was that the industry it but the method of delivery is
acres of beds with lengthy information sheets on launched into on April 22, 2014 was inefficient, also lucrative for Casper
because it can use a parcel
top of them. And when you lie on these mattresses, dominated by complacent big players and had low service to get the product
it's inside of miniature houses at the back of the levels of customer satisfaction. Casper's opportu- straight to the door. It's also
shop. Or you can make an appointment at The nity lay in those weaknesses. Mattress retailing ideal for what turned out to be
Casper's key demographic: city
Dreamery, where you book a 45-minute slot in a required large, expensive spaces for an item that dwellers. As anyone who's lived
private pod. It feels much more like a lifestyle was not sold in bulk and cost a great deal to deliver. up several flights of stairs
brand than a bedding company. Mattresses were sold at a massive markup, without knows, getting a box spring
mattress to the top without
Casper was the brainchild of five co-founders yielding great profits. "One of the things that made damaging it is a lot harder than
– Philip Krim (now its CEO), Neil Parikh, Luke it a bad industry was that if you looked at the stock carrying up a box.
Sherwin, Jeff Chapin and Gabe Flateman. "The prices on the few publicly traded firms,26 Think:Act 27 D i s ru p t i n g s l e e p
mattresSes
The number of models offered by
Casper, in comparisOn to the 100+
offered by othEr US mANufacturers.
they were for many years prior to Casper's launch
stalled or declining. "High cost, high margin, but
FROM a milLion
low profitability – that was the issue," says Len SNoRE, TO the aMount
Sherman, a Columbia Business School professor A DREAm of moNey
who has studied Casper. Casper's idea was simple:
Casper Made in Its
Casper's 100-day first 28 days
sell one single type of mattress over the internet, return policy is
certainly a practical of trading.
then roll them into boxes small enough to be
incentive to buy, but
delivered by UPS. But how to persuade people they what helped it thrive
wouldn't be cursed with something horrible, given was the intangible
they didn't have the chance to try it out first? Tell element of an "event"
surrounding the
them they could return the mattress within 100 purchase, which
days, which proved to be "an extremely important they built up with
part of our shopping experience," Parikh says. shrewd commercial milLion
nous. Casper
encouraged its
The sales figure
But no choice? Just one kind of mattress? Didn't customers to create Casper reached in 2015,
that go against every piece of received retail wis- "unboxing" videos its FIrst fulL yeaR
dom? Sherman remembers Philip Krim explaining
and post them to of operation.
YouTube. They also
the logic of no choice to him. "If you go to stay in a gave customers That FiguRe rose
quality hotel, you don't get a menu that asks if you Amazon vouchers in to $200 milLion
want a room with a hard mattress or a soft mat-
return for new in 2016.
customer referrals
tress. You assume you are paying a premium price – and people making
to get a high-quality mattress. I was a road warrior, videos would post
BREAKING THE RULES
their own referral
BREAKING THE RULES
traveling for three to five years, four days a week. I
codes. Something
can't count the number of hotels I slept in, and I apparently unforced
can't remember ever waking up, ever, and saying became a hugely
'Boy, that sucked.' That was his analogy: 'If hotels successful and
cheap advertising
can compete on the basis of offering a single high campaign.
quality product, so can I.'"
Casper assumed people wanted something
new from the mattress-buying experience, and they
were right. It sold out of inventory – 40 mattresses,
which its founders had expected to take six weeks doubled that in 2016. It raised enough venture he accepts the company was all about doing things allowed us to engage with our customers and
– on it first day of trading. It reached its first-year c apital funding to have the firm valued at $750 mil- differently. In short, "The mattress industry is no- c reate a community immediately upon launching."
target of $1.8 million in sales within 60 days, and lion, prompting a $1 billion takeover bid by the torious for sky-high markups and aggressive sales
then just kept growing. It ended up selling $100 mass market retailer Target, which was rejected tactics. With Casper, we saw an opportunity to Casper did silly, funny things – putting vintage
million in 2015, its first full year of operation, and – with Target investing instead. (Casper remains modernize the industry." books into the boxes of early customers; launching
private, so its full results are unknown.) But Sherman thinks the key rule Casper broke a chatbot to entertain people who couldn't sleep;
All that success came by doing the opposite of was spending a huge part of their startup funding using social media brilliantly, from encouraging
what anyone might have expected. "Casper is a on hiring the brand agency Red Antler. "Conven- customers to post "unboxing" videos on YouTube,
"The shopPiNg lAndscape great example of breaking the rules," Sherman says.
"They broke this rule about there being good and
tional wisdom says that the last thing a startup
should do is spend a lot of money worrying about
to a Twitter account with "sorry, I overslept" letters
for customers to use. "They took an industry that
is no loNger bad industries, and that you waste your time going
into bad industries. Point two, some products just
brand strategy and building emotional bonds. But
that's exactly what they did. They made a very dis-
was reviled and hated and made themselves into a
likeable, trustworthy company," Sherman says.
mono-chAnNel – aren't suited to an online purchase. The last thing tinctive brand image ... I would argue that the most After having broken the rules to break into the
cuStomers
you'd want to sell online is a mattress, but they clear difference between Casper and the 100-plus market, Casper is becoming more conventional –
are
proved it could be done. The third thing is the need online mattress sellers is that they took the time in addition to its own stores, it sells through Target
for personalization. A mattress is such a personal right from the get-go to develop a very, very strong in the US as well as Amazon: "The shopping land-
traversing between
product: It has to be right for you. And Casper brand image that had elements of approachability scape today is no longer mono-channel – custom-
concluded, no it didn't." and hipness and coolness. You can fill in the adjec- ers are traversing between online and offline
onliNe And offliNe worlds." Parikh takes a little issue with that assessment.
"Casper's growth strategy was not about breaking
the rules of business, but instead focusing on cre-
tives." There, he and Parikh are in agreement. "We
knew from very early on that we wanted to create
an identity unlike anything else in our industry,"
worlds," Parikh says. Now offering two designs of
mattress and other sleepwares, Casper is on its way
to being more than a mattress company and what
Neil Parikh, Co-founder and COO of Casper ating a superior customer experience," he says. But Parikh says. "Building our brand in the early stages its founders dreamed of: "the Nike of sleep." 28 Think:Act 27 fixing netflix Think:Act 27 29
chANGing
cHAnNEl
the
N etflix is such a big part of the
entertainment landscape now
that it's hard to remember that
only 20 years ago the media
leviathan was just one more
Silicon Valley startup. But what
realized that focusing on long-term retention no
longer made sense in today's fast-moving business
world. "I realized that rather than try to retain peo-
ple, I wanted to create a company that would be a
great place to be from," McCord recalls. "That was
really freeing. It's hard if you've spent 50 years
Netflix had was good timing, a smart strategy – and working on retention alongside 500 other compa-
Patty McCord. While Silicon Valley has always had nies that have spent 50 years working on retention.
Her unorthodox approach a reputation for being culturally freewheeling, And all of them now have huge groups of employ-
to human resources once many of the differences were superficial: using first ees that have gotten very good at being loyal but
names, no ties, more dogs. As chief talent officer don't really belong there anymore. And everybody
helped power up Netflix. of Netflix, McCord pushed for substantive changes knows it, but we can't break the false promise that
Now Patty McCord is aimed at fundamentally remaking the relation of
the employee to the company. Out: performance
we made to each other without drastic action."
This insight made hiring a lot easier. "When
broadcasting her message PATtY MCcORD reviews, personal expense reports and fixed weeks I'm interviewing, I'm looking at where they worked,
of paid vacation. In: paying top dollar for top per- what they did, who they worked with. 'Wow, you're
beyond Silicon Valley: After 14 years as
BREAKING THE RULES
chief talent officer formers, giving honest, immediate feedback – and an Apple man? That's pretty cool. What were you
To make an impact and be at Netflix during
which she wrote
a pink slip for anyone who is no longer necessary working on there? And then you went to Facebook?'
[see box p. 31]. I'm reading their resume to see where they're from,
proud of what we do, we the company's
famous "freedom In her new book Powerful: Building a Culture of what problems they solved. Not to see if I want to
and responsibility
have to be radically honest, deck," McCord
Freedom and Responsibility, McCord recounts her
role in developing the hard-driving culture that
have a beer with them." Instead the Netflix hiring
policy was about "maintaining our talent density,"
now works as
never stop learning and an independent helped the San José company grow from a handful as McCord puts it in Powerful.
speaker and of employees and a dream into a global giant.
trust the people around us. writer spreading Looking back now, she insists that it was more or Other insights followed that were equally freeing.
her philosophy
of honesty in less an accidental revolution. "I never invented McCord abolished formal expense and travel
the workplace. anything. My underlying philosophy was not so policies – employees were just told to try not to
by Bennett Voyles much about breaking the rules; it's about question- waste company money. Formal vacation time also
ing why we are doing something," she explains. went out of the window: just take the time off you
One of the key moments came early, when she feel is appropriate. The results of her experiments
were all positive, she says: less overhead for HR to
manage, fewer details for employees to worry
"My underlyiNg philosoPHy about – and more time to focus on growing the
company. But not everything McCord did was a
was not so much matter of subtraction. She and CEO Reed Hastings
wrote a 124-slide PowerPoint deck that summa-
about bReaking the rules; rized Netflix's talent management ideas, which has
since gone on to be downloaded over 13 million
It's about times. Facebook COO Sheryl Sandberg has called
questionINg
it "the most important document ever to come out
of Silicon Valley."
why
For McCord, the culture she helped build may
have had an ironic personal consequence: In 2012,
photo: thor swift
we are
Hastings, the CEO, let her go. As a Fast Company
profile put it, "She had played a good game, but the
doing something." team no longer needed her as a player." She says
walking away from Netflix after 14 yearsfixing netflix Think:Act 27 31
NETFLIX'S
TAKE ON CULTURE
No big happy family "We've people, Netflix options vested
got to dispel this myth that immediately – and they were
companies are families optional. Employees could
because we're setting people choose how much of their
up to be disappointed." compensation they wanted
It's better to come clean: in equity versus cash.
"When HR people start to
realize that their job is to No expense accounts
help match people with McCord abolished formal
the right company at the expense and travel policies.
right part of the journey The new policy: act in the
through their probably company's best interests.
six-year career path at the Result: People didn't
company, things work better abuse the system. "We
for everybody," she says. saw that we could treat
people like adults and they
No underpayment For key loved it," McCord writes.
talent, Netflix always paid
the top market rate. "In my No set vacation time
experience, if you focus Instead of scheduled leave,
intently on hiring the best employees were told to "take
BREAKING THE RULES
BREAKING THE RULES
people you can find and the time off they thought was
pay top dollar, you will appropriate, just discussing
THAt'S A WRaP almost always find that what they needed with
Former Chief they make up much more in their managers." The result:
Talent Officer Patty "People took a week or two
business growth than the
McCord (left) in the summer and time
was painful, but the company has turned out to be and sensitive," she says. "I say to them, 'Okay if you language of the business. Everyone needs to be difference in compensation."
worked with Netflix for the holidays and some
a good place to be away from too: She's since CEO Reed Hastings r eally think that the person who's running HR isn't able to read a profit and loss statement. They need No bonuses Netflix did not days here and there ... just
moved on to a career as an independent consultant (center) for 14 years. very smart, doesn't understand your business and to understand who their competition is. They need have a bonus system. "If as before," McCord writes.
She left in 2012
for startups and other companies that want to as the company isn't able to hold their own with the rest of your to understand the marketing cost of acquisition your employees are adults
who put the company first, No annual review "Why
learn the Netflix way. increasingly moved executives, then get a new one. But before you do per customer. They need to have a more than rudi-
a bonus won't make them do you do the annual
One of her prime goals is to encourage people away from DVD that, start by just demanding more.'" HR should mentary understanding of the technology that
distribution centers work harder or smarter," performance review? If
to embrace her doctrine of radical honesty by (right) in favor of a be seen as more than just a support function. It underpins their business," she says. The effort will McCord writes in Powerful. it really is about giving
avoiding such practices as anonymous surveys in business model that "should be able to weigh in on a business decision pay off not just for the HR executive, McCord feedback, it's too infrequent,
holds streaming No vesting period Unlike right? You need to give
favor of group meetings. "One of the reasons I hate with an equal weight. Because every business deci- insists, but the company. "Aligning HR's goals with
and original most startups, which used people feedback the moment
anonymous surveys is that they teach people you sion is going to involve an employee, somehow, the goals of the company, the way we did at Netflix, equity options that vested they're screwing up, not eight
photos: mct / getty images; patrick t. fallon / bloomberg via getty images
content at its core.
can only give honest feedback anonymously," she someway," McCord maintains. can help employees stop focusing on things that over time as a way to retain months later in writing."
photos: frederic neema / laif; martin e. klimek / zuma press / alamy
explains. Such group meetings also offer a great A good first step for the HR person to earn that don't matter," she noted.
opportunity to clarify your cultural priorities, she place at the table, she says, is to learn more about
adds. "You can say, 'No, actually, we're not going to the business itself. "HR people need to learn the Although McCord may have been among the
be bringing back the kiwi-flavored water. We all earliest adopters of this new doctrine of radical
know you were upset about that, but we're not. Any simplicity in HR, she doesn't think she is alone. "I
"HR should be able to
other questions?'" think there's a fundamental reexamination going
on right now of who it is that we work for. Are we
Beyond the culture of radical simplicity that she
continues to evangelize, McCord also suggests that weigh in on a representatives for the employees or are we repre-
sentatives for management? Are we gatekeepers?
human resource managers need to change their
approach. In the past, HR has often been a function business DecisioN with An Are we rule-makers? Are we protectors of the
employees? Or do we protect the company from
equal wEigHt."
that is a little out of step with the rest of the busi- bad employees?"All of that self-questioning can be
ness. "What I find when I talk to executives about put into a big basket and just tossed out the win-
Work different: Even in Silicon Valley, Netflix has
their HR people, they have a lot of preconceived dow. The real answer is simple: We work for our built a reputation with its pioneering HR model.
notions: A) They are not very smart. B) They're not customers – not just HR; everybody – that's why
good business people. C) They are people-people Patty McCord, Former chief talent officer at Netflix companies exist." 9You can also read
