Dan McClure, Systems Innovation Choreographer at Innovation Ecosystem discusses with Sarah the differences between incremental improvement and true innovation and provides advice for companies on how to react sufficiently to today’s disruption.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host Sarah Nicastro. Today we are going to be talking about both the lure and the detriment that the idea of incremental improvement can cause your business. I'm excited to be joined today by Dan McClure who is the systems innovation choreographer at Innovation Ecosystem. Dan, welcome to the Future of Field Service Podcast.

Dan McClure: Sarah, it's great to be here.

Sarah Nicastro: It's great to have you. So before we get into the thick of it, why don't you tell our audience a little bit about yourself?

Dan McClure: Well, I have been somebody who has through good luck been thrown into burning buildings throughout my entire career. So I started my career in an industry that was going through massive deregulation, had a chance to spend time as an entrepreneur for a decade and then have gone from industry to industry really looking for the places where disruption was happening and there were opportunities to do what we've called system innovation, changing the way that they fundament organization works to create value in the world.

Sarah Nicastro: Okay. Now it's interesting that you would categorize being thrown into burning buildings as good luck, because I don't know that everyone would feel that way. Why do you say it that way? What do you think that that fact has enabled you to learn or to do?

Dan McClure: Well what's exciting about a burning building or more conventionally framed, a burning platform, is that you are in a position where there is not only a motivation for big change, but you've broken out of the status quo. There are pieces that are freed up that allow you to be really boldly creative. So if you're the type of person who says, "I don't want to simply repaint the house, but I want to imagine the house with an entirely new set of rooms," a burning building is not a bad place to start because you really get the chance to bring other people along on a big bold dream and do something that has a real impact in the world.

Sarah Nicastro: Yeah. That's really cool. So I read an article you wrote that said ... The quote said, "The hard truth is that complex systems problem can't be solved with piece meal inventions. They need to be addressed with far more ambitious systems solutions." So tell us a little bit what you mean by that quote and what the route of systems innovations is.

Dan McClure: So most organizations are in the habit of working. They have built up a set of system, they've built up a value proposition. They've built up a market place. That all work together to essentially deliver value to their customers and to their shareholders and to their employees. Everything works. And for those types of organizations, simply making an incremental change to make things a bit better makes them more profitable, more competitive. Sustains their role in the market place. The challenge is, if they need to make a bigger change, let's say a competitor comes in and offers a radically better proposition, or the fundamental basis for their marketplace disappears, then they can't make small changes to the way things work, because those won't be enough. They'll find themselves in perhaps three different categories of situations.

Dan McClure: They may find themselves commoditized. So they can continue to sell in their market, but they're not going to make any profit on it. They may hit a plateau where they really still have their market share but they're never going to grow any further than they are. They have essentially gone as far as they can and they're just waiting for something worse to happen. And the third thing, the worst that could happen, is they might find themselves completely obsolete. So this temptation to resort to small incremental innovation often leads to these dead ends or these areas where the future is really not very bright at all. And so moving beyond incremental change becomes the thing that they need to do. They need to create a new value proposition that's new and differentiated in the market.

Sarah Nicastro: So what I'm curious about and I recorded a podcast a while back with a gentleman who at the time worked at Cisco and the title of that podcast was weighing the decision of disruption. And it was this idea that Cisco's business in the area and region that he worked, was doing quite well. But they knew there was an opportunity to do things differently. And it was a tough choice to make because there wasn't this catastrophic burning building type issue. They weren't becoming obsolete. There wasn't that big of an issue. But there was a significant opportunity and I think Dan, that a lot of people in our audience are in similar situations where there's a big opportunity being presented by the market and the customers that these customers serve for more and for different than what they've historically provided. But maybe for a lot of organizations, the need for that change isn't so intense that it's a do or die type scenario which causes people to drag their feet. So how does a company know when it's the right time to look at more of a systems innovation approach then just sort of incremental improvement?

Dan McClure: I think the whole question of disruption and the way people react to disruption is interesting. Often times disruption is framed as opportunities early on. So you look at the marketplace and you say, "Ooh, there's a new opportunity, maybe we could be a fast follower, or maybe we could do this sometime in the future." There's a couple of problems with that. That optionality, that assumption that we can wait because things are going pretty well right now. You sighted that example of the gentleman from Cisco. The reality is their platform may well be burning, well in advance of the time they see smoke. And often times these disruptive changes are already well in flight before anybody realizes them.

Dan McClure: The other problem is, is that there's an assumption that if we delay, when we do see the disruption, we'll have the time to respond. And frequently once these changes start to happen, they happen incredibly quickly. So consider the classic case of Uber, which used to be the innovation example cited in every conference three or four years ago. But it took them only three years to outpace New York City taxi cabs as the primary provider of transportation service in New York City. If you look at other industries like healthcare, in the first six months of the pandemic, there was a 16,000% increase in digital health services. Once the lever tends to tip, it tends to tip very, very quickly. So this idea that we can wait, because we don't have a burning platform right now, is often, misses the true reality of the situation organizations are at.

Dan McClure: The other thing to remember is you don't simply get to claim market share by showing up. And so when these new market opportunities emerge, they're going to be fiercely competed for. And as a result, if your organization isn't making the kind of deep thoughtful creative changes to position you as a leader in that market, you're not going to be in a position to show up late in the game and say, "Okay, now I want my share."

Sarah Nicastro: Right. Okay, so that makes sense, but I think what I want to talk about is sort of what you refer to in some of your content as the lure of incremental improvement. So saying it makes sense. It makes sense. You need to be creative, you need to innovative. You need to stay ahead of disruption. It all sounds very good. But it's obviously harder than it sounds when we're talking about it. And I think part of that is this lure of incremental improvement. So let's talk a little bit about why that tendency is so so strong for organizations to sort of stay in their comfort zone, maintain or incrementally improve the status quo, et cetera.

Dan McClure: Yeah. I think it's interesting and you almost have to go down to a project level. So imagine you're a project leader and you have two ideas. One of them is an incremental change and the other one is a disruptive change. For the incremental change, you're going to be able to document pretty hard evidence of the types of improvement you see. So you may be able to reduce head count or you can project with reasonable certainty a 1% increase in market share. And as a result, that projects going to be very easy to sell. If you're the sponsor, the person with the budget, you're going to be able to say, "Well, I'm pretty sure I can get that type of project delivered." But that's got to have some pretty high degree of certainty of results. And then I you look for everybody else across the organization, it's just going to be a small change to the way they work, so they're going to have an easy time to adopt it. So all along the way, that project, that incremental project, is going to be easier to sell, lower risk to execute and easier to adopt. And that's a very attractive thing in an organization. Nobody wants to be the person who's spearheading a failed project.

Dan McClure: Now contrast that to a disruptive change which requires an entire system to change. Here we're saying, "We're going to imagine a much bigger opportunity and it's not even going to really be proven out by any evidence in the marketplace yet." So we're going to have to hypothesize over what we think the opportunity is. We're going to have to change lots of different pieces and put in new things that nobody's thought about before really carefully and therefore the risks are going to be higher. And finally, we're going to have to get everybody else onto an entirely new page. And so all those system changes are going to have to cascade across the organization. If you compare selling those two projects, it's a heck of a lot easier to sell that small incremental project. And at the same time, it's the big disruptive system change project that really offers the hope of getting past these big threats that we were talking about earlier.

Sarah Nicastro: Yeah. It's interesting because it makes me think about in a lot of the conversations that I have here, we talk a lot about, I mentioned before we started recording that some of the big disruptive change in our space is related to the idea of this journey to servitization or to outcomes based service. And we have a lot of conversations on this podcast about the fact that that level of change and evolution is not possible without buy-in from the top. And so that is just making me think about what you're saying which is the ultimate stakeholders that you're presenting these options to, if they're very comfort zone in status quo oriented, if they have certain motivations that maybe make them incredibly risk averse, if they are quite stuck in their ways for a number of different reasons, it's really hard for anyone that sees this opportunity within the business to bring it to the forefront. It just, they keep defaulting to the easier options that are being presented. And so it's just making me wonder your thoughts on the criticality of leadership who is willing to take risks and be creative and embrace a more innovative approach.

Dan McClure: So here's where I think sometimes the narrative is a little too simple. I certainly have been the person who's been going to a leader and then been slapped down hard, and that's not a pleasant experience. And I probably went out to the bar later that evening and had a beer and was complaining to my friends about what Luddite and risk-averse manager we had and da dah, da dah, da dah. The reality is, while that can be a concern, more often it's that people are pursing system innovation in the wrong way. They're asking their leadership to do things that don't make sense and as a result, what we really need is to figure out how to do system innovation well and then use that to go to management with a clear set of here's how we're going to approach this disruptive change.

Dan McClure: So let me give you a few examples of things that people do wrong when they go and talk to senior management. The first thing is they arrive and deliver a dead rat. So they walk through the door and they say, "The world is ending. Everything is going to go bad and we need to change something." And then they stop talking and they've delivered the dead rat, but they don't actually have a solution. And this is often way easier to do than actually coming up with a solution for a hard disruptive market change. If you were to imagine your newspaper co, a newspaper, and you've got print editions and this is your business, and certainly I'm sure lots of people ran into management offices saying the world is coming to an end. Much harder to come up with, and now what do we do? So that's the first thing is the system innovator, the person who's proposing these changes actually has to think through what it is they want to see.

Dan McClure: The second piece is they need to come in with a solution that is complete and compelling. So it's not enough to simply say, "We need to make this one little foray into some change. We need to add a mobile app." For a while there it was, we could become a digital company simply by adding a mobile app for example. I think servitization often becomes the same sort of silver bullet solution, is we'll simply add a bit more service onto our product, do what we've always done. And what the system innovator needs to do is if they're going to go to management, they need to come up with a big enough and powerful enough system change that it actually does create new differentiated value.

Dan McClure: And finally, they need to go with a strategy that basically manages the risk. You're asking an organization to take big leaps in faith, plow into areas of uncertainty and so you need a strategy that allows you to evolve this new market opportunity. Evolve this new disruptive system over time. And it can't be we're going to invest for four years, put millions of dollars into it and then see if it works at the end. There have to be early points of feedback, all the way along the way to show that this is all working. I think if you do that well, we'll find that a lot of those senior leaders that seemed like they might be anti-change, are very appreciative of the fact that they don't want their company to fail either and they have a real opportunity here. Here's something they can actually act on with faith.

Sarah Nicastro: So it just makes me think, what is it then that would drive someone within the organization to take that on, because it does sound daunting. So at the beginning when you've mentioned you've had the good luck of being in these burning buildings, I mean it sounds like you have looked at this through the lens of liking the challenge and seeing the opportunity and wanting to do this work of presenting a solution and seeing it through. What is it within a person that you think gives them the likelihood to want to spearhead systems innovation?

Dan McClure: So I think it's really fascinating that there are different types of roles within organizations, that we've clearly defined. We know what a manager's role is and what the skills are that go with that. So you need somebody who's organized, who has good attention to detail. We understand in many ways that executives are good about exercising control and being able to take bold moves, et cetera. When we look at systems innovation, there is an unnamed role that is I think far more common than people realize. But it's a type of person that we've labeled as a choreographer. And their focus is really ... Their passion is about new ideas. And not small new ideas like we've made a bit of change in the production line. But rather, this is a big bold idea that gets me excited. So at the risk of citing guys who have been launching themselves into space, the Elon Musks, the Richard Branson, the Jeff Bezos, are all these sort of excited by big idea people. Regardless of how you feel about them individually, you can certainly get the sense that there's a group of people that are excited about big ideas.

Dan McClure: The other aspects of that type of personality is they tend to look at big pictures rather than at the details. So when they look at an opportunity, they don't see the small things that stand in their way. They see the big connection of how all the piece fit together. And they're fostered in that by the ability to be generalists. So one of the phrases that I really dislike is the, "he's a jack of all trades, but a master or none." A generalist is basically a specialist in everything. A specialist in seeing across things. So they don't necessarily know the details of everything, but they see how a lot of things fit together. And when you combine this sort of passion for big ideas, the ability to see the big picture, a generalist background, along with a certain rebel attitude of what being willing to break thing apart, you end up with somebody who not only is able to accept that kind of challenge, but who fits actually very poorly in most other jobs and so they need to go find those types of challenges if they're going to be happy.

Sarah Nicastro: Okay. So here's my next question then. So if you think about, let's just take an example of an organization that manufactures something, has been around for 100 plus years and there is this disruption happening, but this tendency towards incremental improvement versus true innovation. Do you think that it's possible for somehow that organization to find this talent, motivation, inspiration, skill set among itself, or is there a benefit to seeking outside perspective or different roles, different talent if you're trying to make some progress in this area?

Dan McClure: So what's interesting about choreographers, because they don't have an official job title, often times there are choreographers wandering your hall and you're not even aware of it. So part of it is simply just being aware of the choreographers that you have. You probably have some that have been banging around, looking at the bit problems, excited about ideas, but haven't been recognized for their ability to do this. So part of it is just look at the groups that are within your organization. A second feature here though is, don't kill them off. So most organizations are actually well designed to identify choreographers and get rid of them because they disrupt the way things work.

Dan McClure: Christensen talked a lot about this, just there are people who within organizations will try to bring up new ideas and the organization is designed to stop them from doing that. So part of it is just removing the immune system to these types of people. But the reality is most of these individuals have very random resumes. So I've been talking about my own resume being a fruit salad of all these different things all tumbled together across multiple industries. If you're going to go out and look for choreographers, look for people who have the skill of dealing with big disruptive ideas, rather than somebody who's a specialist in your industry, who's had a particular job title, et cetera. You're really looking for a unique type of person rather than a particular career path.

Sarah Nicastro: Okay, that makes sense. Going back to the question that I brought up about knowing when is the time and recognizing disruption, and you point about often times it's well underway when you have that aha moment, but there're companies that are choosing to nurture disruption and to embrace it and to try and be ahead of the curve. And then there are those that are responding to disruption by force. So are there differences in approach that need to be taken with systems innovation for an organization that is sort of being more proactive versus reactive? Does that make sense?

Dan McClure: Yeah. I think, so the first thing I would observe here is, many of the things that companies do to check off the I'm an innovator check box, are really pretty ineffective and they're designed for either incremental or irrelevant innovation. So there was a period of time where every company wanted to have a hackathon and there were big company celebrations around here's all the ideas that came out of our hackathon. Those types of events very, very seldom produce substantial systemic change, because they're small ideas imagined in the moment without deep connection to where the company is or where it's going. Likewise, innovation labs, where a few privileged innovators are given a space to go off and test out new ideas et cetera, very seldom successful in actually scaling up ideas. And to go back to the idea of spin offs. Perhaps you create a spin off company that could go and test out an idea.

Dan McClure: The problem with all of these is they essentially isolate the change in a corner of the company. And what you really need for this type of disruptive deep change, the type that's going to allow you to capture a new market place is you need to be weaving change throughout the entire organization, which makes it a much more enterprise wide effort. And so it has to be technology, it has to be business, it has to be senior leadership. It has to be middle management. Middle management is often the biggest barrier to a lot of these changes. So when we look at a genuinely agile organization, it's somebody who's able to take all the pieces of their organization and engage them in these new ideas.

Sarah Nicastro: Okay. So can you tell me why it is that middle management is often the sticking point here?

Dan McClure: Yeah. So the phrase that you often hear is the frozen middle. So people on the ground are often choreographers, can have ideas, they see things that are new that are different. They are generally focusing on particular problems and challenges, and so they can get excited about those. Senior leaders see the big market challenges, the dangers, et cetera and often times they will bring in specific people who are charged with making all those new and different strategies go. Middle management is basically in the role of making the organization as it is work. And both their job security and the nature of their job, puts them in a position where they need to keep the status quo what it is and as a result they're going to be hesitant to raise up ideas from below and they're going to resist the types of deeper systemic change, even if it's coming from above.

Sarah Nicastro: So then how does an organization counterbalance that?

Dan McClure: So you really have to intentionally plan to do system change. And that's where we'll come back here to the concept of system innovation. System innovation basically says, I'm not simply changing a process or an output, like a feature or a product. But rather I'm changing the way everything works to achieve a new type of goal. And so the entire effort has to be around all those different types of change. And that means that you need a vision of what that whole change is going to be. But you also need the choreographers to work across the organization to make all those pieces of change happen. So you basically are designing your entire organization to be embracing this kind of change.

Sarah Nicastro: Okay. Now you said earlier that a lot of times companies put in place things that they think are fostering innovation that really aren't, so the examples of the hackathon or the innovation lab, et cetera. Is there any sort of self-reflection test or criteria a company can use to determine, do we think we're innovating, but we're really just continuing to promote incremental change maybe at a better than average pace? Do you know what I mean?

Dan McClure: Oh yeah, absolutely. So frankly, if they were promoting incremental change at a better than average pace, that would still be a positive outcome. Frequently what you see with these programs is really nothing is happening. So the first piece would be simply measuring what your actual outcomes are from these operations and whether it's a lab or a hackathon. Not how many things were generated this week in the hackathon, but rather for last year's hackathon how many of those things actually went into practice. So there could be just some discipline in classic lean fashion of how much did this change matter to me?

Dan McClure: I think more fundamentally though, as we've talked about just more, better incremental change is not going to be enough. And so the real question is, how do I know that I'm on the path for doing something deeper and more systemic. And there it really begins with understanding that there is a systemic change that you want to make and putting that front and center of everything and then starting to build in measures around how close am I to making this systemic change. It becomes really a case of refocusing yourself on that bigger, deeper change.

Sarah Nicastro: Okay. So talk to me about the role of agile in all of this and then also some of the misperceptions of what that means.

Dan McClure: So for a lot of folks, both the phrase systems and the phrase agile is tied to technology teams. And there are certainly uses of those terms. So if we're talking agile as far as agile software development, what that really is a more flexible business aware form of software delivery. It allows for less upfront design and allows you to deliver software in ways that you could learn as you go along. That's great stuff. You should be doing that no matter what. Agile applied to an enterprise level is really a much bigger change. And what you're really talking about there is the organization can exhibit agile practices. They can identify long term goals. They can adapt and change. They can respond to insights as they go along.

Dan McClure: All of these things are at really a different level than agile technology teams. And so while we've called them the same thing and they have some of the same principles, learn as you go along, have clear goals of where you're going et cetera, it's a very different type of journey for the organization and you shouldn't assume that you can simply take your agile scrum coach and throw them into the enterprise and you'll get the kind of results that you want. Because what you're really trying to do is a much different type of creation. You're creating a new system in the organization rather than creating a new piece of software.

Sarah Nicastro: Right. Now is there advice about how to adopt a more agile mindset and business mentality?

Dan McClure: So is an element at the senior level of beginning to recognize where you want to go from an opportunity perspective. So instead of focusing on scheduling the projects that you're going to do in the next year, understand the opportunities that you want to pursue. The advantage here is that once you've shifted to think about opportunities, you can continue to change the way you approach and pursue those, rather than simply saying, "I've now executed this project and it didn't really didn't make a difference whether I changed anything in the marketplace or not." So this shifting the executive focus to opportunities and where do you want to go. So what are these big new things you want to do?

Dan McClure: Then when you start to make change across the enterprise, you're going to want to do it in a vertical slice. So it's going to be very difficult to get the entire enterprise to change all at once. So instead, pick a layer of executive, middle management and folks on the ground who can all work together around a new idea. And that type of slice will allow executive sponsorship, middle management, operational control and hands on work on the ground to actually all work together around the change. And then move additional thin slices as you go through.

Sarah Nicastro: Now is there a typical slice that usually works well, or it just depends on the industry, the organization, et cetera?

Dan McClure: I would say it depends on the system you're trying to create. But the key thing here is to note that opportunities come from bolting many things together, multiple things together. So your thin slice won't necessarily be just the marketing operation. It may well be multiple pieces of very different things that all need to work together to create this new opportunity.

Sarah Nicastro: Yeah. And that sort of higher level orchestration, the elimination of silos, they change management of getting everyone bought into these concepts, I mean, that is the hard hard work. I mean, those are the things that come up time and time again in the conversations we have here about why regardless of what that opportunity is, it can be very, very hard to make progress. So yeah, this is great insight, Dan. I wanted to ask what are you favorite sources of insight or motivation related to innovation and considering how to make progress here?

Dan McClure: I think one of the things that's really exciting is, for a long time, if you were a system innovator, there was not a lot of language around what we did. So there was sort of very academic abstract systems thinking books that you could get. And then there was a lot of sort of management theory books about some details of ways that you might do bigger strategies. But there wasn't a lot about people who were actually doing system change. It's exciting in the last year and a half perhaps, to see the level of embrace of practical system change. And so I think one of the things you could do is simply look for examples of places here people have changed the way things work and look at how they did that. And I would strongly advise to look outside your particular field. It's often easy in your own domain to get trapped into the idea that's the hot new idea and think of that as the innovation. Whereas really the question is, is how do you make systems work differently? How do you make the organization work differently and bring together different pieces? And for that, being the generalist, looking outside your own particular domain, can provide a lot of inspiration.

Sarah Nicastro: Right. That makes sense. I mean the idea here is not following the latest trend to be able to orchestrate yourselves to deliver on that. It's this concept of re-engineering the way your business works to be able to recognize and deliver on opportunities. Whatever those are and as they change. I mean-

Dan McClure: And it's complex opportunities. It's not we were the first person to pick up X and then we were the first person to pick up Y. But rather, it's we re-imagined how this manufacturing business might go if we thoroughly integrated service to the product offering. Or we imagined how we could be more customized in the delivery of services to customers. And those aren't a series of one off type additions. They're really reshaping the way the organization works and creates value.

Sarah Nicastro: ... Right. Right. Okay, this is some wonderful food for thought. Do you have any closing thoughts or last words of wisdom before we wrap up for today?

Dan McClure: I don't know, if I was in an organization that was on the cusp of being a burning building, whether or not the flames have come out or not, I think if I was the choreographer, I would say rise to the challenge. See the big opportunities there and learn how to make big ideas acceptable to leadership. And for leadership I would say recognize that this big change that you want to do is going to require you to change things across the entire enterprise and you're going to need the support of choreographers within your organization to do that. So there's a real opportunity for everybody here to rise to exciting new challenges, and I think while it's exciting as all get out, it's also pretty exciting.

Sarah Nicastro: Yeah, I agree. It's a little bit of both. All right, well Dan, thank you so much for being here with us today. I appreciate it.

Dan McClure: Thank you very much.

Sarah Nicastro: Thank you. You can learn more by visiting us at futureoffieldservice.com. You can also find us on LinkedIn as well as Twitter at the Future of FS. The Future of Field Service podcast is published in partnership with IFS. You can learn more by visiting IFS.com. As always, thank you for listening.