Managing Core Incompetencies

Deborah Dougherty, of McGill University, noticed something strange about all this: The companies producing these failures have extraordinary advantages one would suppose would insure their success. Why do companies most likely to succeed so often fail when trying new ventures? Dougherty used an unusual research technique to find out.

Dougherty selected 4 large, well established companies and identified 16 ventures the firms had launched. Some of these projects were outstanding successes, but others were failures, and the rest achieved mixed results. Dougherty interviewed 80 managers closely involved with these projects in 1-2 hour meetings. She asked for the whole story, and then looked for patterns that emerged from her copious notes. Here's what she learned:

Three forces tend to interfere with people's efforts to develop new ventures.

1. A tendency to imagine that symbols are things. An I.Q. is really only a score on a test, but people think if it as a concrete thing, like blue eyes. In business we like the idea of a new product, and we massage it in our imaginations. But decisions based on our imaginings are not well founded.
2. An aversion to getting our hands dirty. If you think about the projects you've abandoned, you'll probably notice that actually building a sample came late, if at all.
3. An aversion to talking to customers. You may also notice that very few potential customers for these abandoned projects were able to influence development decisions. Too often, customer needs and desires are predicted, and when reactions fail to match expectations, we abandon projects.

These pressures display a devastating impact on the fragile germs of new ideas. They produce simple rules and habitual practices that are appropriate for routine functions, but choke the process of creating new ventures. Dougherty retells the story of developers of a new telecommunications service being given a sales goal before any customers had yet tried the product. The company didn't even know their market for the product, but sales goals were routine, so they had to have them, even if they ruined the project.

Rules can't be eliminated, they're too useful. But they can be managed, especially when they effect product development. Dougherty offers these suggestions to executives:

• Anchor ventures in "What we do well . . ." Use this phrase often and challenge people to identify these strengths and apply them to new ventures. This brings alive people's shared knowledge of the product, market, and technology connections the company enjoys and stimulates the capabilities to carry them forward.
• Encourage people to "constructively discredit" rules and habits when they interfere with development efforts. In their interviews with Professor Dougherty, fully 81% of the managers involved in successful projects mentioned violating rules to further their projects, while 77% of the managers involved with failing projects spoke of carefully following the rules.
• Create "communities of practice" in which people get their hands dirty using technology to fix customer problems.
• Get people talking to each other early in a project and maintain multiple viewpoints through all activities - defining the product, working with users, and figuring out manufacturing.
• Role model talking to customers yourself by contacting executives in client firms and passing on what you learn.

Using your head while avoiding getting your hands dirty or talking to customers, and following rules whether they make sense or not is the doorway into your Edsel room. Go another way.

Reference: Dougherty, Deborah (1995). Managing Your Core Incompetencies for Corporate Venturing. Entrepreneurship Theory and Practice, Spring, 1995, 113-135. www.businesspsych.org

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