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Article Excerpt
If we get the right people in the right job, we've won the game.--Jack Welch (1).
Many studies have shown that in spite of the innumerable changes in New Business Development (NBD) thinking in the last 50 years, and in spite of all of the NBD stage-gate processes that have been put in place, the overall odds of success at the commercial launch stage have remained essentially unchanged (2-4). Only 1 in 125 small projects (typically involving one to three person-years of effort) or issued patents succeeds commercially. When a project reaches the stage of major development, including pilot plants and large R&D and commercialization teams, or advanced venture capital investments of time and money, the odds of success typically remain no greater than 1 in 4. Only 60% of new product launches succeed (4).
Even as the use of stage-gate NBD processes within major corporations has grown to now exceed 75%, the average percentage of products new to the company in the preceding five years has declined from 32% to 28% in the last ten years (5, 6). At the very least, traditional linear stage-gate NBD processes are not working well enough. Could the "cure" (standard linear stage-gate NBD processes) be even worse than the disease?
Dow Polyolefins and Elastomers in 1991
In 1991 and before, The Dow Chemical Company's overall odds of success for new product development were only 47% from launch vs. the norm of 60%, where success is defined as yielding economic profit. This was also true for the then-Polyethylene Business, which at the time was being considered for merger or sale. Profitability was declining, not only because the business was in the trough of the supply-demand cycle, but more ominously because competitors had caught up. There had been no major new polymer developments in over five years. Consultants hired at the time advised top management to sell the business. Even top researchers and R&D management at the time said "patents don't matter," and many PO&E business leaders at the rime said the business was nothing more than "three yards and a cloud of dust," implying a low profitability game going forward.
This was the situation that one of the authors, Kurt Swogger, inherited in 1991 when he became the R&D director for the Polyethylene Business. In short, it was innovate or die. The time from first invention to first sales was typically 7-15 years in Dow. Any new initiatives to save the business had to achieve significant sales in less than nine years. The target was set to achieve one billion pounds of new polyolefin product sales in the year 2000, which would be 11 years from the first invention and nine years from the decision to do something, easily more than twice as fast as in the past. (What was actually achieved was 998 million pounds sold in the year 2000.)
The approaches that evolved in the Polyethylene Business (later renamed as the Polyolefins and Elastomers Business, PO&E) were: 1) a technology approach called Insite[TM] Technology, which took advantage of inventions in catalysis, process and materials science, and 2) a development philosophy called Speed Based Development, or Speed, that allowed for very rapid product development cycle times (7-9). A key part of Speed involves selecting the right personality types for specific job roles. The thinking behind personnel selection grew out of the authors' earlier experiences with trying to intuitively match varying personality types with job roles, resulting in both successes as well as some puzzling failures. This raised our interest in understanding more about the genetic nature of personality, a concept just emerging from academia in the early 1990s (7).
Research from the University of Minnesota showed that at least 50% and more likely 80% of a person's core adult personality is determined by genetics (10). This is true for personality traits measured by virtually all valid psychometric profiling instruments including the Myers-Briggs Type Indicator[R] or MBTI[R] (11). Extroversion and introversion, as well as creativity and innovativeness, are examples of personality traits determined to a large extent by genetics (see "Genetic Nature of Creativity," below).
In the early 1990s, Dow's PO&E management was also influenced by the work conducted over an earlier ten-year period in a different part of Dow by one of the authors (Stevens), which found that certain types of creative personalities involved in the early stages of NBD were able to identify projects that out-earned others. These creative types were referred to by the authors as Rainmakers or Starters. The individuals in the top third of a Rainmaker Index[SM] identified NBD projects that later went on to out-earn those identified by individuals in the bottom third of the Index by a factor of 95 times--a 9,500% improvement (8). Rainmakers are excellent at starting new product initiatives, while those who were of a more practical mindset were far better at finishing projects and getting them to the customer.
These findings were reported by Stevens in the early 1990s to PO&E R&D top management. Later, these results would become a key part of the thinking of many executives within the PO&E group. Starting around 1992, the PO&E R&D leadership actively sought to raise the creativity of the overall R&D leadership culture by bringing in many more inherently creative individuals, or mavericks, often from other parts of Dow. They also used reorganizations and downturns in the business as opportunities to move out many of the less creative leaders.
Initially, top PO&E R&D management identified new creative leaders through excellent people-watching skills, interviews with the candidates and others who knew them, as well as trial and error in matching peoples' aptitude to the job role. If it appeared that they had the wrong personality for a job, they would make a correction within just 3-6 months. In 2002, PO&E R&D leadership learned how to fit the right personalities with the right job roles even faster by augmenting the earlier methods with personality measuring tools (like the MBTI instrument) (8,9).
Five Steps to More Effective NBD
These results helped to create the approach used by PO&E R&D to transform its culture. The five-step people selection part of Speed that emerged from this journey is diagrammed schematically in Figure 1. This is the process that PO&E followed on an intuitive and qualitative basis initially. In 2002, after the authors compared their thinking, PO&E began using a more scientific and rigorous approach both for measuring personalities, and training and coaching its Business Opportunity Analysts (BOAs). A retrospective study using Stevens' techniques quantified what had been done qualitatively before (with the same underlying concept) and suggested even quicker ways to achieve the same or better results (8, 9). Continuing study and research helped refine the approach and will be reported in the second article of this series.
1. Raise leadership group's creativity The first question involves whether or not R&D leadership is innovative enough. PO&E R&D management identified two main personality types: Starters, later characterized via the MBTI instrument as NTPs (people with MBTI-based preferences for intuition, thinking and perceiving), and Finishers characterized as STJs (people with sensory, thinking and judging preferences).
The Starter personality types are creative, intuitive, visionary, and curious. They continually challenge the status-quo, and tend to be difficult to manage as well as difficult to follow when in leadership roles. They also tend to be unfocused, bubbling over with ideas. They tend to dislike details, agendas, may be viewed as impractical, and are often procrastinators. They typically score above 122 on the MBTI-based Starter Index, and often have NTP (intuitive, thinking, perceiving) preferences on the MBTI instrument. These people, when properly directed, can open up new markets and create new breakthrough processes. There is a very high correlation between the MBTI-based Creativity Index, and the Starter Index.
In contrast, the Finisher personality types are far more pragmatic, better focused, more respectful of authority, and more task-oriented. They like details, agendas, and are far steadier, consistent workers. They typically have scores below 122 on the Starter Index, and often have STJ (sensory, thinking, judging) preferences on the MBTI instrument. They are the people who get the job done. They capture the cash as they exploit the developed opportunity. Both Starters and Finishers are clearly needed in NBD groups.
Because individual personality is determined to a large extent by genetics, we believe it must follow that organizational cultures are also determined to a large extent by genetics, when organizational culture is defined as the collective mindset of the leadership in that organization.
In the case of PO&E R&D, we measured the personalities of all the top leaders in both managerial and technical positions (at a group leader level and up) with the MBTI instrument to determine the overall organizational culture. In 1991, we found that the PO&E's R&D leadership culture was well below the national norm for creativity (Figure 2). In short, it lacked the will to innovate.
[FIGURE 1 OMITTED]
Recognizing this, management consciously decided to raise the level of creativity by bringing in more Starter types. Between 1991 and 2001, the group averages for both the Creativity Index and Starter Index were significantly increased within PO&E leadership. This is the only instance the authors are aware of in which an organizational culture has been made more creative this quickly in a measurable and lasting manner. The results are shown in Figure 2.
In contrast, traditional creativity-boosting...
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