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by
Safi Bahcall
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November 9 - December 28, 2021
we’ll see how small changes in structure, rather than culture, can transform the behavior of groups, the same way a small change in temperature can transform rigid ice to flowing water.
The most important breakthroughs come from loonshots, widely dismissed ideas whose champions are often written off as crazy. 2. Large groups of people are needed to translate those breakthroughs into technologies that win wars, products that save lives, or strategies that change industries. 3. Applying the science of phase transitions to the behavior of teams, companies, or any group with a mission provides practical rules for nurturing loonshots faster and better.
In physics, you identify clues that reveal fundamental truths. You use those clues to build models that help explain the world around you. And that’s what we will do in this book. We will see why structure may matter more than culture.
The pattern of sudden changes in the behavior of teams and companies—of the same people suddenly behaving in very different ways—is a mystery in business and social science. Entrepreneurs, for example, often say that big companies fail because big-corporate types are conservative and risk-averse. The most exciting ideas come from small companies, because—we tell ourselves—we are the truly passionate risk-takers. But put that big-corporate type in a startup, and the tie will come off and he’ll be pounding the table supporting some wild idea. The same person can act like a project-killing
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All phase transitions are the result of two competing forces, like the tug-of-war between binding and entropy in water. When people organize into a team, a company, or any kind of group with a mission they also create two competing forces—two forms of incentives. We can think of the two competing incentives, loosely, as stake and rank. When groups are small, for example, everyone’s stake in the outcome of the group project is high. At a small biotech, if the drug works, everyone will be a hero and a millionaire. If it fails, everyone will be looking for a job. The perks of rank—job titles or
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Imagine bringing that bathtub to the brink of freezing. A little bit one way or the other and the whole thing freezes or liquefies. But right on the cusp, blocks of ice coexist with pockets of liquid. The coexistence of two phases, on the edge of a phase transition, is called phase separation. The phases break apart—but stay connected. The connection between the two phases takes the form of a balanced cycling back and forth: Molecules in ice patches melt into adjacent pools of liquid. Molecules of liquid swimming by an ice patch lock onto a surface and freeze. That cycling, in which neither
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People responsible for developing high-risk, early-stage ideas (call them “artists”) need to be sheltered from the “soldiers” responsible for the already-successful, steady-growth part of an organization. Early-stage projects are fragile.
Efficiency systems such as Six Sigma or Total Quality Management might help franchise projects, but they will suffocate artists.
Maintaining balance so that neither phase overwhelms the other requires something that sounds soft and fuzzy but is very real and often overlooked. Artists working on loonshots and soldiers working on franchises have to feel equally loved.
overcoming the urge to defend and dismiss when attacked and instead investigating failure with an open mind.*
LSC means not only listening for the Suck and acknowledging receipt but also probing beneath the surface, with genuine curiosity, why something isn’t working, why people are not buying. It’s hard to hear that no one likes your baby. It’s even harder to keep asking why.
Moses Trap: When ideas advance only at the pleasure of a holy leader—rather than the balanced exchange of ideas and feedback between soldiers in the field and creatives at the bench selecting loonshots on merit—that is exactly when teams and companies get trapped. The leader raises his staff and parts the seas to make way for the chosen loonshot. The dangerous virtuous cycle spins faster and faster: loonshot feeds franchise feeds bigger, faster, more. The all-powerful leader begins acting for love of loonshots rather than strength of strategy. And then the wheel turns one too many times.
Moses Trap: When ideas advance only at the pleasure of a holy leader, who acts for love of loonshots rather than strength of strategy
you will gain much more from analyzing the process by which you arrived at the decision to invest. What’s on your diligence list? How do you go through that list? Did something distract you or cause you to overlook or ignore that item on the list? What should you change about what’s on your list or how you conduct your analyses or how you draw your conclusions—the process behind the decision to invest—to ensure that mistake won’t happen again? That’s system mindset.
1. Separate the phases • Separate your artists and soldiers • Tailor the tools to the phase • Watch your blind side: nurture both types of loonshots (product and strategy) 2. Create dynamic equilibrium • Love your artists and soldiers equally • Manage the transfer, not the technology: be a gardener, not a Moses • Appoint, and train, project champions to bridge the divide 3. Spread a system mindset • Keep asking why the organization made the choices that it did • Keep asking how the decision-making process can be improved • Identify teams with outcome mindsets, and help them adopt system
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As a group grows, the balance of incentives shifts from encouraging individuals to focus on collective goals to encouraging a focus on careers and promotion. When the size of the group exceeds a critical threshold, career interests triumph. That’s when teams will begin to dismiss loonshots and only franchise projects—the next movie sequel, the next statin, the next turn of the franchise wheel—will survive.
If companies create review systems that guard against politics, invest in developing their employees’ skills, and do a good job in matching employees with projects that allow their skills to shine—those companies will increase their likelihood of nurturing loonshots.
Employees who are not stretched by their assigned projects have little to gain from spending more time on them.
Wider spans (15 or more direct reports per manager) encourage looser controls, greater independence, and more trial-and-error experiments. Which also leads to more failed experiments. Narrower spans (five or fewer per manager) allow tighter controls, more redundancy checks, and precise metrics. Which leads to fewer failures. There’s no right answer averaged across a company: we tailor the tools to the phase. When we assemble planes we want tight controls and narrow spans. When we invent futuristic technologies for those planes, we want more experiments and wider spans.