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Leapfrogging

Berrett-Koehler Publishers, Inc.

Chapter One

I doubt whether the world holds for any one a more soul-stirring surprise than the first adventure with ice cream. —Heywood Broun

Chapter One Key Messages

1. We're wired to appreciate positive surprise.

2. Business breakthroughs deliver surprise.

3. Breakthroughs go far beyond products and services.

4. Breakthroughs aren't just for business.

This may sound a little over the top, but breakthroughs are a bit like pornography. Allow me to explain what I mean. The late Supreme Court Justice Potter Stewart was once asked to rule on what made something obscene. In his decision, he wrote a simple one-line answer, "I know it when I see it." Business breakthroughs often have this same unmistakable yet simultaneously indefinable quality. They're not always easy to predict or describe before they happen—but you recognize them when you see them.

Think about the first time you picked up an iPod, iPhone, or iPad and experienced the touch screen as an extension of your fingertips. Reflect back on the first time you played the Nintendo Wii, drove a Toyota Prius, used Purell hand sanitizer, discovered the trendy design of Method soap, visited Starbucks, or saw Cirque du Soleil. The list of the usual suspects of breakthroughs could go on and on. Though these things are all quite different from one another, they tend to produce similar feelings of positive surprise—with a hint of delight, wonder, and intrigue—when we first encounter them.

My first personal experience with what I felt was a real breakthrough came when I was seven years old and I poured a packet of Pop Rocks into my mouth. I'll never forget that tingling, crackling sensation all over my tongue. It was so new, so delightfully unexpected. Candy just wasn't supposed to do something like that! I also remember when I first signed up for Netflix and realized that I would never again have to schlep to the video store or pay a late fee (like the painful $18 penalty I once had to fork over to Blockbuster because my kids left Chitty Chitty Bang Bang under the couch). I had come to blindly accept the fact that a standard $3 movie rental really equated to about $10. What an incredible relief it was to be saved from my passive acceptance of the late-fee factor.

And that's what breakthroughs are all about. Seemingly out of nowhere, we experience a strong dose of remarkable newness that adds value—fun, happiness, time savings, financial savings, and so on—to our lives. Most people view business breakthroughs as stemming from new technologies or products. Sure, innovative products are often the most celebrated examples, but in today's world, more and more breakthroughs have less and less to do with high-tech wizardry. And breakthroughs can happen within specific business functions too, such as finance departments, HR organizations, sales forces, or anywhere else for that matter. Regardless of what a specific business breakthrough is or does, it usually challenges our assumptions and revises our sense of what we thought was possible. And, as a result, it surprises.

Perhaps my experiences don't match yours. Maybe you never tried Pop Rocks when you were a kid or, if you did, you didn't like them as much as I did. And perhaps you don't have a Netflix subscription. But my guess is that you can point to something at some point that gave you that feeling of freshness and wonder—and that something is our starting point. The surprising nature of breakthroughs transcends industries and different-sized organizations. And I've included some pretty diverse examples in this chapter to make this point.

Business Breakthroughs Can Come from Anywhere

In 1987, Niall Fitzgerald became Director of Foods & Detergents at Unilever. One of Niall's philosophies was that management and leadership were two different animals. "Good management brings a degree of order and consistency. But the leader must allow some chaos—even create chaos to liberate the risk taker," he once said. And liberate the risk taker he did. The same year that he took the head job, he sponsored a new team to do something radically different in the world of food at the time: sell ice cream to adults.

Back then, ice cream was kids' stuff. Aside from enjoying a sundae or a cone now and then with their children, most adult consumers barely gave the frozen treat a second thought. Unilever had been trying to figure out a way to change these ideas and break into the grownup market for more than a decade. But it wasn't until Fitzgerald showed up and got a little risky—or should I say, risqué—that things took a turn for the better.

Set upon an artfully designed stick, Unilever's Magnum ice cream bars touted high-end, sensual indulgence—rich cream, thick chocolate, and premium packaging. Its titillating advertisements reinforced this racy image. (Many of them would probably be banned from running in the United States; check out the "Magnum Five Senses" video on YouTube to see what I mean.) On first blush, it would have been easy to think Magnum's excess would have gone the way of Krispy Kreme's boom-to-bust doughnuts. But under Niall's leadership, the brand grew and expanded across Europe, and it has recently been introduced into the United States. Even without a significant presence in the enormous American market, Magnum sells enough bars in a year to treat about one-seventh of the world's population to its creamy indulgence—yes, that's a billion ice cream bars per year.

Magnum's incredible success is tied to several surprising things. First, linking ice cream to adult themes was nothing short of scandalous in the late 1980s. One of Magnum's first ad campaigns invited consumers to have a "Magnum affair." This brash, unapologetically adult-oriented strategy paid immediate dividends. People were naturally tempted to take Magnum up on its offer. Second, while most ice cream companies tend to focus on reducing costs and expanding distribution, Magnum went in the opposite direction. Instead of cutting prices and going after new markets, the company put out limited-edition flavors like its "Seven Sins" and "Five Senses" bars. In so doing, it managed to do what would have seemed impossible several decades earlier. It made ice cream on a stick a luxury item. Indeed, Magnum's entire brand image and everything it does encourage us to give in to the impulse to treat ourselves to "indulgent pleasure"—something any of us who have paid five bucks for a Starbucks latte can relate to. Today, offering adults a temporary escape through fine chocolate, a cup of gourmet coffee, and, of course, ice cream is a fairly common occurrence. Back when Niall first launched Magnum, though, it was a surprising concept that challenged assumptions.

Unilever's Magnum is a great example of how to shift mindsets through new products and marketing. But business breakthroughs today aren't limited to these things. Many leaders in large corporations tell me that they want big breakthroughs, but then they assign the task to their R&D and product development groups. People in HR, Legal, Accounting, Supply Chain, Sales, and other functions often feel left out of the equation. The good news is that business breakthroughs are agnostic. Here's an example from the corner of a company that most of us might think would be the last place we'd find a breakthrough—in DuPont's legal department.

It's probably not surprising that a team of lawyers could benefit from a breakthrough, but what this group achieved would be the envy of any business function. With 60,000 employees in ninety different countries, not to mention a huge variety of products in everything from agriculture to electronics to clothing, the volume of legal work needed to keep DuPont's operation going is utterly staggering. Patent law, tax law, employment law, contracts, antitrust, intellectual property, class action defense—a company like DuPont simply cannot survive without lawyers, lots and lots of lawyers.

By the early 1990s, the company's then-Associate General Counsel, Thomas Sager, knew that things had gotten out of hand. At that time, more than 350 law firms were working on DuPont's dime. The sheer number of lawyers and their lack of coordination weren't the only problems Sager identified. There was also a troubling disconnect between the company's interests and the interests of its legal advocates. For the law firms, everything was about billable hours. That meant, no matter what, the firms wanted to fight cases to the bitter end. If one of DuPont's products or the way the company was doing business were truly causing harm, Sager reasoned it would be more profitable to change that product or that business practice rather than litigate the matter for years and years. But the law firms working for DuPont would never recommend such a thing because it would mean less revenue for them.

Sager knew that he had a mammoth project on his hands. He also knew that he wanted to do more than just cut costs—he could run his function like most other corporate legal departments, or he could create a new model that would push him outside of his comfort zone, a model that would ensure that his department became a core contributor to the strategic operations of the business and even influence the operating models of the dozens of firms working for DuPont. If he was truly going to help the company, nibbling around the edges of the challenges facing his legal department wasn't going to be enough. This was going to have to be a big time, paradigm-warping effort.

The first thing Sager did was slash the number of law firms working for DuPont. By the mid-1990s, DuPont was using fewer than fifty law firms and that number is now down to thirty-seven. But culling firms wasn't Sager's only goal. He wanted the ones that remained to be strategic partners, not independent rivals. DuPont Legal's "Knowledge Management Program" now encourages the firms to share information and practices with one another. "We created a mix of large, small, and medium firms so as to deal with the complexity of cases," Sager said. "We then trained them to work together."

But here was Sager's most surprising accomplishment. He challenged a fundamental assumption of the profession by asking a simple yet revolutionary question: What if instead of paying fees by the hour—which encourages long, drawn-out cases—firms were paid more to solve problems faster? The traditional billable hours system was simply not workable, so Sager tore it down and built up an entirely new model. A system of incentives now encourages attorneys to find the best ways to resolve issues as cheaply and effectively as possible. This "Early Case Assessment" approach allows DuPont's lawyers to put their efforts into cases they believe are winnable. Early Case Assessment also benefits the company as a whole. Legal troubles can be symptoms of actual problems in the way a business is operating. If you keep getting sued, maybe there's something wrong with you, not the people suing. Sager's new model lets DuPont's lawyers identify these problems instead of fighting to minimize them or cover them up. "DuPont Legal works almost like business," Sager said. "We bring value to the company."

Sager's reinvention of the legal department has saved the company millions of dollars. It has also done something perhaps equally valuable: It has remade the entire legal culture at DuPont and its partner firms. Innovation, flexibility, and long-term mutual success are now the main objectives. And this new focus is reflected not only in how the company conducts its business but also in whom it hires to do it. Corporate law has a long reputation for being an old boys' club or, more accurately, an old white boys' club. Sager and the DuPont Legal team set out to change this. When selecting which law firms to retain as partners, they made diversity a priority. DuPont Legal currently sponsors mentoring, scholarship, and job fair programs to bring in more women and minority associates. This push for a more diverse workforce isn't just a feel-good operation or a way to burnish DuPont's corporate image. It's a strategic move, another way to foster innovation by rewarding fresh ideas and new approaches. As Sager said during a recent interview, "DuPont has been in existence for [over 200] years and now faces a new era of intense global competition. The business need for diversity—diversity of background, perspective and experience—is critical if we are to be successful and thrive for another 200 years."

Questions to Consider

* What is an example of a breakthrough within your own industry?

* What old assumptions or barriers did this breakthrough challenge or overcome?

* What impact did it have?

Breakthroughs Aren't Just for Business

Although Unilever and DuPont are examples from the business world, breakthroughs are just as relevant and important to social, educational, health-care, political, and other organizations. Take, for example, the world of education. When it comes to public education in America, ideas are never in short supply. Scholars, activists, and politicians are constantly churning out opinions on how to fix our schools—smaller class size, more instructional aides, English-only instruction, bilingual instruction, more standardized tests, fewer standardized tests, magnet schools, mentors, merit-based teacher pay. The list of initiatives is endless. And yet, year after year, across the country, the results couldn't be more clear: Our schools continue to fail. Recent studies have shown that even most charter schools, the latest fad in education, are not faring much better on average than their government-run counterparts.

Thank goodness people like Dave Levin and Mike Feinberg, founders of the Knowledge Is Power Program (KIPP) Academies, haven't been discouraged given this seemingly futile context. As former teachers with the Teach for America program, they completed their service and then immediately embraced a blindingly obvious opportunity to which they've now dedicated their lives: to create a school that truly works. Well, they did that, and more. Today, KIPP represents a network of almost 100 public charter schools serving more than 27,000 students that have collectively challenged the conventions of public education in the United States: ten-hour days, school on Saturdays, teachers who eagerly give their home phone numbers to students, and a contract outlining shared goals and commitments that must be signed by students and their parents before admittance. If this type of approach for a public school isn't surprising, I'm not sure what would be.

The foundation of KIPP rests on Levin and Feinberg's pointed rejection of the idea that some ingenious new program from an administrator or lawmaker will magically transform the system. They paint a simple slogan in the hallways of their schools to show this: "There are no shortcuts."

Put simply, Levin and Feinberg went old school—as in Thomas Edison old school. Indeed, Edison, who said, "Genius is one percent inspiration and ninety-nine percent perspiration," would appreciate the KIPP approach to learning. School starts at 7:30 AM and goes until 5:00 PM. Then comes the homework, usually about two hours per night. The labor doesn't end on the weekend or over the summer either. Kids attend school two Saturdays a month and three weeks into the traditional summer break as well.

All this time and effort grow out of one very basic philosophy: The business of educators is to educate and the business of students is to learn. This concept might seem head-slappingly self-evident, but it's not at all easy to live up to. It means that if students do not grasp a subject, their teacher must work with them until they do. If they have to stay for an extra hour after school or talk it through on the phone until ten o'clock at night, so be it.

Think about something else inherent in that philosophy: There are no excuses. Every child, given the proper time and instruction, can excel. That's an incredibly powerful, even revolutionary, idea. And Levin and Feinberg have proven that it works. Nearly every KIPP school in the county is in an inner-city neighborhood. They do not require an entrance exam. More than nine out of ten KIPP students are Hispanic or African American. Seven out of ten of them live below the poverty line. Most enter the program performing well below grade level. Typically, less than 10 percent of children with such backgrounds go on to finish college. KIPP students boast a 90 percent graduation rate—not from high school, from college!

So, now that we've seen a breakthrough in action in education, let's move to the nonprofit world. Think of the toughest, most intractable social problems in America. Homelessness is probably at or near the top of any list. HIV and AIDS are probably right up there too, as is substance abuse. Helping people who face any one of these challenges is an incredibly worthy cause for a nonprofit organization.

But how about taking on all three? How about an organization that serves homeless people suffering from HIV and drug addiction? Just imagine the amount of work and dedication that would take, not to mention money. Now try to imagine doing all of that and turning a "profit" too. I put the word profit in quotation marks because New York-based Housing Works, which manages to do everything I just described, is technically a charity operation. But it acts an awful lot like a business. And a very successful one, at that.

(Continues...)

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Excerpted from Leapfrogging by Soren Kaplan Copyright © 2012 by Soren Kaplan. Excerpted by permission of Berrett-Koehler Publishers, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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