John Kotter on organizational design

A review of John Kotter’s new book Accelerate: Building Strategic Agility for a Faster-Moving World in HBS Working Knowledge offers both a summary of the book’s key principles and an excerpt from the book itself. The concept builds on Kotter’s earlier work that focused on adding speed and agility to large businesses, and advocates for creating an organization that has “two operating systems” – one for everyday business and a smaller, agile system that “sits alongside to focus on the opportunities and demands of the future.”

Under a dual operating system, all processes and activities that involve what a company already knows how to do stay on the regular, hierarchical side of the company. High-stakes initiatives that involve change, speed, innovation or agility, go to the new agile network.

Reviewer Kim Girard continues, emphasizing that Kotter is not looking to abandon the traditional hierarchical model, but enhance it:

A dual operating system is a nod to what Kotter believes is some of the most interesting management thinking of the past few decades, from Michael Porter’s “wakeup call telling us that organizations need to pay attention to strategy much more explicitly and frequently,” to Clayton Christensen’s insights about how poorly companies handle the technological discontinuities inherent in a faster moving world. Kotter also credits recent work by Nobel Laureate Daniel Kahneman, who describes the brain as two coordinated systems, one more emotional, the other more rational.

 

In a typical organization—from the federal government to a pharmaceutical giant—a hierarchical operational structure meets daily demands through clear reporting relationships and responsibilities, Kotter writes. This structure minimizes risk, keeping people in boxes and silos, sorting work into departments, product divisions, and regions. Trouble is, managers in hierarchical organizations don’t promote or reward risk and innovation—they rely on routine, and turn to the same trusted people to run key initiatives.

Girard goes on to discuss Kotter’s 5 key principles for the dual operating systems, which ensure that the system works as envisioned (an “enhanced heirarcy” that focuses on leadership and innovation) and 8 accelerators that help managment tackle big opportunities for change. The accelerators are strikingly familiar, as many seem to have been adapted from Charles Duhigg’s The Power of Habit. Overall, an interesting approach to organizational design.

The Power of Habit – afterword and appendix

I found the afterword and appendix to actually contain some of the most powerful, straightforward stuff in Duhigg’s book (though you may need to read the entire thing for this to be the case).

The afterword includes follow-up stories with some readers who had written in with thier experience using Duhigg’s guidance to lose weight, quit smoking, stop procrastination and improve teaching. One of the things that struck me the most in this chapter was the discussion of setbacks, and the importance of developing a plan for dealing with them. Duhigg says that “if you plan for failure, and then plan for recovery – you’re more likely to snap back faster.”

The Appendix provides a practical guide to using all the ideas in the book. Duhigg is careful to warn that even with a common habit, such as overeating, the cues, cravings, rewards, etc may be different for each person – which is why he created the book as a framework rather than a prescription. His framework is:

1) Identify the routine – the habit loop of cue, routine and reward seems simple enough, but figuring out the cue can be more difficult than you might expect. The routine itself, however, should be simple to identify.

2) Experiment with rewards – the reason for experimenting with rewards is actually to help to figure out what craving the routine is satisfying. As you test each reward, look for patterns by jotting down the first three things that come to mind once you have completed your routine with the new reward. Then, set an alarm for 15 minutes and when it goes off ask whether you still have the craving for the routine. The rationale behind these steps is described in the book, and reviewing the notes on how you felt immediately after the replacement rewards as well as 15 minutes later will help identify exactly what craving this routine has been satisfying.

3) Isolate the cue – Duhigg shares scientific evidence that almost all habitual cues fall into one of five categories: location, time, emotional state, other people or immediately preceding action. So when he felt a craving for the routine he wanted to change, he wrote down answers to the questions: Where are you? What time is it? What’s your emotional state? Who else is around? What action preceded the urge?

4) Have a plan – Once the cue is identified and you already know the routine you want to change and a suitable replacement reward, all the elements are in place to create a better routine. The plan is crucial for dealing with setbacks, and gettting back on track.

 

When companies predict (and manipulate) habits

Chapter 7 in Duhigg’s book begins by talking about Target, and how they infamously used their analytics to identify pregnant women before they had told their families. The seemingly incongruous example paired this time is the Outkast song Hey Ya, which software had predicted would be a huge hit.

In both cases, the initial result was failure. The Outkast song was too different from what listeners were used to, and the Target targeting through coupons was too creepy.

Duhigg shares the secret recipe for creating habits from an old U.S. government study when they were trying to get Americans to eat more offal: people will try something new when it is surrounded by what is familiar.

So Hey Ya was played in between mega hits, and Target started putting the baby coupons next to unrelated common consumer items, and both succeeded.

The power of a crisis to instigate habit change

Chapter 6 of Duhigg’s book talks about the role crisis can play in instigating habit change. But first he explains the research of Nelson and Winter, who wrote about institutional habits as truces between warring factions within organizations. Duhigg says “There are no organizations without institutional habits. There are only places where they are deliberately designed, and places where they are created without forethought, so they often grow from rivalries or fear.”

Duhigg uses the examples of rampant medical errors and a major transit safety incident, which underscores his point: “Sometimes one priority – or one department or one person or one goal – needs to overshadow everything else, though it might be unpopular or threaten the balance of power that keeps trains running on time.”

Crisis brings this into sharp focus. Crisis brings a turmoil in which habits are more malleable and the sense that something must be done. It is easier to institute change and form new habits and routines in a crisis our its immediate aftermath.

While Duhigg emphasizes this for organizational leaders, it seems relevant to the individual as well. When we feel we are in crisis, out is easy to say “I can’t take on new changes during this time of chaos.” But maybe that’s actually the best time to make a change because we see the need and are open to it.

Making willpower a habit

The fifth chapter in Charles Duhigg’s The Power of Habit is about Starbucks, and features the success story of one of its employees. Starbucks has focused on developing the habit of willpower in its employees and in doing so has “…succeeded in teaching the kind of life skills that schools, families and communities have failed to provide,” says Duhigg, before he goes into the research, discussing the marshmallow study and several variants. 

Willpower has been shown to be a finite resource, says one of the scientists:

Willpower isn’t just a skill. It’s a muscle, like the muscles in your arms or legs, and it gets tired as it works harder, so there’s less power left over for other things

Studies showed that willpower exercised in one area often translated into other areas – whether subjects were asked to go to the gym, begin money management, or practice study habits, they got better at regulating their impulses and distracting themselves from their temptations. A study of orthopedic patients who were asked to write action plans for their physical activity recovered at a greater rate than those simply given instructions – researchers found that it was the plan for dealing with key inflection points of pain  that helped them through.

Starbucks used this to design a training system for employees. Employees were introduced to the situation where an inflection point – like an angry customer – could cause a breakdown, and a framework for how the company suggests dealing with the situation. The employee then filled in the answer, and role played so that their response became automatic. The angry customer “inflection point” becomes the cue in the habit loop, and the reward should be grateful customers, praise from the manager, etc.

The other thing Duhigg emphasizes in this is the sense of agency that Starbucks gives employees. When people feel like they are in control, when they feel like it is their choice to exercise willpower (rather than having someone brusquely demand that they exercise willpower), they don’t need to use as much willpower and their energy and attention for other tasks dramatically increase. 

The Power of Habit: The Craving Brain

The second chapter in The Power of Habit starts out talking about Pepsodent toothpaste, and how Claude Hopkins was credited as a genius marketer for making the product a staple at a time when very few Americans brushed their teeth at all. Hopkins created ads that said “run your tongue across your teeth – you’ll feel a film that makes your teeth look ‘off color’ and invites decay.” This created a simple and obvious cue, and provided a simple routine that people could follow with a reward that they valued (beauty). Duhigg then stops and says that while this two-step process of finding a cue and promising a reward seems to be a simple, effective recipe, Hopkins did not know that there was a third step that was really driving consumer behavior.

Duhigg then brings up a discussion of how Proctor and Gamble struggled in its initial attempts to market Febreze. While testing showed that consumers loved the product and its results, after some time it ended up sitting in the back of their closets. Consumers who had obvious pet odors in their house were not using it, because they had become habituated to the smells and did not notice them. There was a struggle for the marketers of Febreze – how do you build a habit when there is no cue to trigger use of the product, and those who need it most don’t appreciate the reward?

The solution is, of course, that missing third step that Duhigg mentioned earlier – creating a craving. Duhigg shares studies on the brainwaves of monkeys that show that once a routine becomes habit, the brain starts anticipating the reward even before it comes. Going back and looking at consumers who used Febreze, the marketers found that those who used it at the end of the cleaning cycle were basically using the spritz as a signal of accomplishment for having made a bed, cleaned a room, etc. The marketers further noted that making things scentless was not most people’s desire – instead they wanted a nice clean fresh scent. So they went back and added some scent to the product, marketed Febreze as the final step in the cleaning process, and watched as Febreze finally started selling. Consumers felt like their house wasn’t really clean without that fresh scent at the end.

Duhigg then returns to the Pepsodent example and explains that the difference between Pepsodent and other toothpastes wasn’t the ability to remove the natural film that develops on the teeth, but a citrus ingredient that made the mouth tingle. It was that tingle that consumers respond to, and even though it has nothing to do with cleaning the teeth, you will find it in all toothpastes on the market today because consumers unconsciously associate that feeling with an idea that the product is working.

The Power of Habit – The Habit Loop

Chapter 1 in Duhigg’s book is The Habit Loop: How Habits Work. It starts with the case of EP, who in 1993 lost a portion of his brain to viral encephalitis. EP was not able to recall anything recent, but his long-term memory seemed to be unaffected. His wife was told she would need to keep a close eye on him, as he would not remember that he had amnesia and his home would seem unfamiliar. However, researchers found that he would regularly take walks and find his way home without any problems, despite not being able to verbalize how to do so: “…the visitor asked Eugene where he lived. ‘I don’t know, exactly,’ he said. Then he walked up his sidewalk, opened his front door…”

Researchers hypothesized that this ability to form habits had somethign to do with the basal ganglia, and studies on rats seemed to show that the basal ganglia was central to recalling patterns and acting on them. The brain essentially looks for cues at the beginning of a routine task, then when it recognizes a cue it goes on a sort of auto-pilot as the routine takes over, and finally there is a reward once the task is completed successfully. This cue-routine-reward process is what Duhigg calls The Habit Loop.

The reason the habit loop is important is precisely because the brain shuts down during the routine. So once a habit is formed, unless you deliberately fight it, the pattern will unfold automatically.

Research shows that these routines and habits never really go away – even if we replace them with something else for a long period of time. This can be positive, like the way you never forget how to ride a bicycle. But it also highlights the difficulty of breaking bad habits when repeatedly exposed to the same old cues. The key, then, is to be very conscious of the cues and rewards if we want to change routines.