Transcript presentation

Stuck!
Doing New Things in Old
Organizations &
The Challenge of Climate Change
November 6th, 2008
Rebecca Henderson, MIT
Doing new things in
old organizations is hard
Performance
Maturity
Discontinuity
Takeoff
Ferment
Time
Discontinuities are challenging
because:
• They challenge the way the firm creates value:
– New technologies
– New customers & new markets
• They challenge the way the firm captures value:
– New business models, new complementary assets
• They require the ability to balance the tension between
“entrepreneurial energy” and “coordination”
Or:
• “I see”, he said, “you’re suggesting that we invest millions of
dollars in a market that may or may not exist but that is certainly
smaller than our existing market, to develop a product that
customers may or may not want, using a business model that will
almost certainly give us lower margins than our existing product
lines. You’re warning us that we’ll run into serious organizational
problems as we make this investment, and our current business
is screaming for resources. Tell me again just why we should
make this investment?”
-Divisional Manager, Telecommunications Equipment Provider
But wait! It get’s worse!
Is this your life?
Overload is much more toxic than we
think…
Productivity
falls
Overload
Early stage
work
neglected
No time for
maintenance/
training
Performance
degrades
And the ways we typically respond
usually make things worse…
Overload
Productivity
falls
My people
need help
Add process,
Early stage
work
neglected
Performance
degrades
No time for
maintenance/
training
check points
No time for
No
strategy
decisions
Doing new things in
old organizations is hard
Performance
Maturity
Discontinuity
Takeoff
Ferment
Time
What can be done?
Firms that successfully manage
transitions:
• Get the strategy “right”
– Create real value through linking great technologies to real
customer & consumer needs
– Capture the value through a deep understanding of potential
business models and competitive realities
• Keep the organization from getting in the way
– Build the “ambidextrous organization”: actively embrace both
“entrepreneurial energy” and “coordination”
• Don’t tolerate overload
– Manage capacity
– Make real decisions
Or:
• Hold a common passion about the importance of making the
transition
• Tell the truth
• Actively balance long and short term decisions
• Encourage “high conflict, high respect” conversation and
decisions
• Manage with judgment and respect: motivate behavior through
the use of “relational contracts” rather than a reliance on short
term, quantitative metrics
For example:
Dealing with “Worse Before Better”
Performance
Time
What does this have to do with
climate change?
Since 1950 the economy has grown
even faster than the population…
70
60
50
40
30
20
10
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
GWP Trillions '05 $
Population Bn
Fueled largely by fossil fuels
70
10000
9000
60
8000
50
7000
40
6000
5000
30
4000
20
3000
2000
10
1000
0
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
GWP Trillions '05 $
Total Ffuel Mton Oil
Renewables are still a small share of
total energy supply…
Oil
Gas
Coal
Hydro
Biomass
Renew
Nuclear
In consequence, carbon emissions
have greatly increased
9
10000
8
9000
7
8000
7000
6
6000
5
5000
4
4000
3
3000
2
2000
1
1000
0
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Emiss. Bn tons Co2
Total Ffuel Mton Oil
Driving up CO2 concentrations in the
atmosphere…
390
380
370
360
350
340
330
320
310
300
290
280
9
8
7
6
5
4
3
2
1
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
CO2 ppm
Emiss. Bn tons Co2
Global average temperatures have
also increased
14.8
390
380
370
360
350
340
330
320
310
300
290
280
14.6
14.4
14.2
14
13.8
13.6
13.4
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Temp. C
CO2 ppm
What will happen next?
Another 3 billion people will
join us on the planet by
2050
They will want energy…
Source: World energy outlook, 2006
Really quite a lot of energy
• In 2002, the world used 13.5 TW
– 1 TW is 1 trillion watts
– Or about 20,000 50 MW power plants
• By 2050, we will need:
– Perhaps somewhere between 28-35 TW
– 45 TW @ European rates of energy use
– 102 TW @ US rates
• We need around 14.5-21.5 new TW
We could burn fossil fuels
• There’s lots and lots of coal
• But if we increase the CO2 in the atmosphere, the odds of our
having very nasty effects on the climate increase quite
dramatically
• At 450 ppm – the commonly accepted “aggressive target” for
stabilization
– There is a 50% chance of global average temperatures rising by
more than 2° C,
– And a 33% chance of their rising by more than 3° C.
• At 550 ppm – a more likely level – the odds go up even further
• This implies “rolling the dice” on a range of fronts…
We could:
• Dam all the remaining rivers
– 0.7-2.0 TW
• Saturate the planet with windmills
– 2.1 TW
• Use all the available land for biomass
– 7-10 TW
• Build a new nuclear plant every two days for the next 45 years
– 8 TW
Source: Prof. Dan Nocera, Dadelus, 2007
In the short run we need:
• Everything we can feasibly get our hands on:
– Biomass, Wind, Nuclear, Solar…
• Massive reductions in demand
In the long term we need:
• Aggressive research in solar power
– More solar energy strikes the surface of the earth in one hour than
humans use in a year
• A massive transformation of the economy
– Very significant reductions in demand
• How do we take 80% of the carbon out of the economy within 50
years?
Can we do it?
Performance
Maturity
Discontinuity
Takeoff
Ferment
Time
We need to:
• Get the strategy “right”
– Create real value through linking great technologies to real
customer & consumer needs
– Capture the value through a deep understanding of potential
business models and competitive realities
• Keep the organization from getting in the way
– Build the “ambidextrous organization”: actively embrace both
“entrepreneurial energy” and “coordination”
• Don’t tolerate overload
– Manage capacity
– Make real decisions
Or:
• Hold a common passion about the importance of making the
transition
• Tell the truth
• Actively balance long and short term decisions
• Encourage “high conflict, high respect” conversation and
decisions
• Manage with judgment and respect: motivate behavior through
the use of “relational contracts” rather than a reliance on short
term, quantitative metrics
I look forward to working
together!