Culture Change and First Principle Thinking

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“Begin at the beginning,” the King said, very gravely, “and go on till you come to the end: then stop.”  ― Lewis Carroll, Alice in Wonderland

Like many other things in Alice in Wonderland, this sounds like nonsense advice.  Yet it is amazing how many people, when confronted with a challenge or a problem, don’t go back to the beginning (the basics) but instead, look for the “conventional wisdom” or an analogy. “Oh, this is just like …, so the solution must be similar as well!”  As a result, very little new thinking happens and very few real breakthrough ideas come about. But this approach is easy and expedient!

Elon MuskElon Musk, the successful entrepreneur, inventor and investor ($9  billion net worth, co-founder of PayPal, driving force behind Tesla Motors and Space X) is a radical thinker in every sense of the word. Consciously avoiding “conventional wisdom”, he relies on a methodology he learned in a college physics class to help him find new ways of solving old problems. The methodology is called First Principle Thinking.

Here is an example of First Principle Thinking in action:

“First principles” is a physics way of looking at the world. What that really means is that you boil things down to the most fundamental truths and then reason up from there.

Someone could – and people do — say battery packs are really expensive and that’s just the way they will always be because that’s the way they have been in the past. They would say it’s going to cost $600 / KWhour. It’s not going to be much better than that in the future.

So, from first principles, we say: what are the material tesla-140218constituents of the batteries? What is the spot market value of the material constituents? It has carbon, nickel, aluminum, and some polymers for separation, and a steel can. Break that down on a materials basis, if we bought that on a London Metal Exchange, what would each of these things cost? Oh geez, it’s $80 / KWhour. Clearly, you need to think of clever ways to take those materials and combine them into the shape of a battery cell, and you can have batteries that are much cheaper than anyone realises. (from the article: Elon Musk’s Secret Weapon: A Beginner’s Guide to First Principles)

In this example, Musk talks about breaking down the battery pack into its foundational, material elements: carbon, nickel, aluminum, polymers, a casing. These are the essential ingredients of a battery pack, the fundamental truths of the problem. From there, everything else can be optimised and improved upon depending on the smarts of the people tackling the problem.

Culture Change: The Conventional Wisdom 

Change Management seems to result in lots of management and little change. What I’m really looking for is Change Leadership! ~ a very frustrated CEO

The “conventional wisdom” of culture change is that it takes 3-5 years to change a culture. This wisdom is based on a series of assumptions built up over the years through traditional approaches and thinking. In my experience, many of these assumptions (fiction disguised as truth) are false:

  • There is a clear relationship between culture and performance. While this is often assumed to be the case, and we all intuitively believe that culture impacts performance, most of the academic studies are based on correlations, not direct cause and effect. A lot more work needs to be done here.
  • Culture is the problem to be fixed. The problem may not have anything to do with culture. It may be a flawed strategic assumption in the business model, it may be a pricing issue. Before you launch off on culture change, make certain that is the root of the problem.
  • Culture can be changed. There is a large body of evidence that says large-scale culture change is extremely difficult, risky and more often than not doesn’t really work. You should think about smaller and focused changes that might have a higher probability of success.
  • The benefits outweigh the cost. Very few (almost none) of the culture change consulting firms are willing to work on a ‘no gain, no fee’  basis. Identifying and measuring the actual financial and organisational benefits expected must be done early on and takes considerable skill and attention. There are very few examples of tangible ROI gains from culture change programs.
  • Culture change does more good than harm. All change efforts, but especially culture change programs, produce collateral damage of one kind or another that is often not anticipated and may create additional problems.
  • Culture change is a logical decision. The big assumption here is that employees will change their working habits if it makes logical, business sense. Human change is emotionally driven and you are messing with social dynamics, not reprogramming machines.
  • Culture change is another business project. If anything, culture change is a major leadership activity, not a management project and the CEO and senior team must be prepared to spend 40-60% of their time on leading, imbedding and sustaining the new culture.
  • Culture change is about values. All experience points to the fact that internal policies and procedures drive culture as much, or more, than employee-held values and leadership styles. Be ready to rethink, lean and streamline everything you do so that your internal processes drive the desired behaviours.

My next blog will deal with how to apply First Principle Thinking to Culture Change.

Posted by:

John R Childress
Senior Advisor on Corporate Culture, Leadership and Strategy Execution
Author of LEVERAGE: The CEO’s Guide to Corporate Culture
Visiting Professor, IE Business School, Madrid

email: john@johnrchildress.com

PS: John also writes thriller novels

 

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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