In Milestone Two, you recommended a strategic plan to the organization from the course scenario for the IoT innovation project.

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was applied by Whirlpool and then provide a theoretical rationale and guidelines for application by any firm seeking to improve its organic growth rate.

The work systems change model focuses on aligning the systems within which the work of innovation is done. This goal is achieved through the redesign of work systems to elicit the behaviors that bring innovation narratives to life. This approach to change is purposeful and iterative, starting with a desired end state that is captured in a narrative that can communicate and inspire.

How Whirlpool Changed the Work of Innovation3

When then Chairman and CEO of the company, David Whitwam, looked ahead in 1999, he anticipated a possible stalemate in the major appli- ance industry, with shrinking differentiation, downward price pressures, and anemic organic growth. To address the underlying “ocean-of-white” syndrome (the mass of confusingly similar boxes confronting a prospective buyer enter- ing an appliance store), he and his leadership team committed to escaping this “commodity trap” by developing a new set of capabilities for continuously innovating Whirlpool products. He began the change process with the expec- tation it would take at least five years and require a change to “every job and every process.”

The Whirlpool innovation model had historically relied upon engineering and marketing to generate and evaluate their new product concepts and feature innovations. To overcome this siloed approach, Whitwam aimed to equip as many employees as possible with the tools for identifying latent customer needs and emerging technologies, and then combine them into innovative new offerings. Ideas were solicited from all of Whirlpool’s 61,000 employees so that innovation would “generate from everywhere and everyone.” This was a central feature of the narrative they wanted to achieve.

Whirlpool created a set of metrics that were distributed around the com- pany and included an emphasis on the innovation goal of a $1 billion addition to revenue within three years. Every employee’s annual performance review was tied to short- and long-term success at meeting these goals and to the quality of the business plans and implementation work that went with them.

For senior leaders, the financial incentives were high; a third of their pay was directly linked to what came out of the innovation pipeline. For rank-and-file employees, the rewards were team based and designed to be mostly intrinsic. “The reward,” Whirlpool explained, “is recognition by your peers.” Learning Officer Nancy Snyder explained that Whirlpool employees were excited by the challenge: “We had no idea how motivating this would be . . . People at the bot- tom were saying, ‘Finally someone gets it!’” The desired narrative was starting to take hold.

But having a lot of fresh ideas was only the start. As Snyder put it,

Changing the Work of Innovation: A Systems Approach 43

Our CEO would go out and talk to thousands of people and say “we are going to have innovation from everywhere and everyone. If you have a concept, put it for- ward.” But we didn’t have the systems in place to react to this.

To develop these capabilities, Whirlpool trained nearly 600 “I-mentors” (the “I” stands for innovation), who Snyder described as being

like Six Sigma black belts. They have real jobs, but they also had special training in how to facilitate innovation projects and help people with their idea. It’s very likely that in your location or the department next to you there’s an I-mentor who you can talk to.

These I-mentors trained other employees, ensured the quality of projects, and accelerated the progress of project implementation. By creating this special function. Whirlpool enhanced the I-mentors skills through training. Today, all employees are expected to complete innovation training and to be certified at the basic level of proficiency in innovation. Whirlpool also built a knowledge man- agement system designed to capture innovation ideas and interests so that employees with similar interests could find one another.

A persistent barrier to innovation was Whirlpool’s extremely conservative budget control process that helped control costs but tended to place a stranglehold on new ideas. To fund innovation, Whirlpool needed to change this overly bureau- cratic process. As with most organizations of that era, budgeting was done annu- ally, and once the process was completed, the budget was locked in. This meant that if someone came up with a great idea, there was no money to fund it. To create flexible funding, Whitwam initially had each region set up a seed fund for innovation and told the senior team that they had to fund all of the ideas that came forward, with no exceptions. If they turned someone down, the CEO told employees to come directly to him. This “end run” created an informal organiza- tion structure, alongside the formal organization structure.

As Whitwam accelerated these changes, resistance came from Whirlpool’s senior leadership, so he decided to put executives through an innovation champi- ons program and assigned senior leaders as sponsors for innovation projects. The company also set up I-Boards throughout the company with responsibility for nurturing and funding innovation ideas. Finally, innovation seed funds were freed from the traditional budget cycle, and Whirlpool placed authority over this funding in the hands of those lower down the organizational ladder.

In just two years, Whirlpool’s “innovation pipeline” went from $1.3 bil- lion to $3.3 billion. By 2005, seven years after launch, Whirlpool’s share price was at an all-time high, and the company was posting record results. Roughly $3.6 billion of the $19 billion in revenue in 2011 came from their innovation areas. This has been an enduring change. In 2018, Whirlpool’s annual report announced the launching of 100 new products, and in early 2019, the company

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reported 16 International Forum Design awards and five Consumer Electronic Show awards.

Although he may not have fully appreciated the underlying changes to the innovation practices he set in motion throughout Whirlpool, Whitwam’s evolving approach led him to deploy each of the elements of the work systems change model.

The Work Systems Change Model

Change models abound4 and vary widely in their focus. Some focus on individual-level change, some on team change, and some on organizational change overall or even community or societal change. Some focus on the change agent, some on the target of change (i.e., the people who will be asked to change how they do what they do), and some on the sponsor or the leader of change. Some focus on an organizational imperative such as improving market position, efficiency, or innovation prowess. Some view change as purposeful and others as improvisational. Some advocate visioning and others clearly do not.

The work systems approach is broadly consonant with the findings of Robertson, Roberts, and Porras.5 Their meta-study led them to recommend that “change agents should focus on systematic changes in work settings as the starting point in change efforts, and individual behavior change as a key mediator associ- ated with organizational outcome change.” They defined “work settings” broadly to include organizing arrangements (such as structures and rewards), social fac- tors (such as patterns of interaction), technology (such as workflow design and job design), and physical setting (such as characteristics of the physical space in which the organizational activity occurred).

The work systems approach is also compatible with systems theory,6 which holds that all systems involve a web of interrelating elements. Other characteris- tics of system theory include holistic thinking; the interaction and mutual influ- ence of part and whole; the common process of input, throughput, and output; and interactions of the system with the environment. The notions of thinking of a system as a whole along with the power of the combined influence of the com- ponents are especially pertinent to the work of innovation.

The work systems model draws on sociotechnical theory, which in turn rests on systems theory. Sociotechnical theory distinguishes the technological sys- tem from the social structure and considers different types of technological sys- tems and their relationship to the social life of work groups.7 Sociotechnical interventions “typically involve the restructuring of work methods, rearrange- ment of technology, or the redesign of social structures” in the service of joint optimization of the relationship between human (social) systems and technology, to increase output, better satisfy employee needs, and enable organizational adap- tation to change.8

The complexity of sociotechnical theory makes crisp, concrete definitions of key variables elusive.9 For example, what do concepts such as “technology” and

Changing the Work of Innovation: A Systems Approach 45

“social system” mean? How do technical and social systems interact? What is the connection (if any) between organizational effectiveness and the consonance of the technical and social systems?10 What’s a practitioner supposed to do? How should he or she approach change?

Systems theory combined with sociotechnical theory provides broad guid- ance on designing systems to produce desired behaviors:

• Think system and subsystem. Don’t presume that changing one part of a com- plicated system will change how the system (and those in it) will respond.

• Concentrate on both the technical hardware and the human software. Behav- ior at work has multiple influences.

• Attend to the interaction of subsystems and influences acting upon people at work. Seek consonance among these influences and avoid conflict between system components.

This guidance seems relevant and useful but has been underutilized to guide organizational changes. Among the reasons for the absence of applications are the following:

• The language can be arcane to the point of being impenetrable;

• A checklist of concrete action steps is lacking to guide specific activities;

• The focus on manufacturing has limited the experience base; and

• Sociotechnical thinking has influenced subsequent generations of change models and been partially replaced by them.11

The Work Systems Model12 makes the systems and sociotechnical approaches more applicable by practicing managers and executives, and by pro- viding concrete language and clear action steps.

The essence of the work systems change model is captured in two basic tenets: first focus on the behaviors you want from people by generating an innova- tion narrative, and then foster those behaviors by aligning the work systems that involve people’s work environment. These tenets are embedded within a four- stage change process that starts with a situation assessment and the choice of per- formance objectives for improvement and ends with the implementation of the change program. This is an iterative and on-going process as shown in Figure 1, where the monitoring of improvement against key performance indicators (KPIs) is used to learn what has “worked” versus what has not achieved the change that was expected or desired. This process is not a “one and done” undertaking, but a multiyear learning and improvement journey.

The starting and ending stages of this change process, of setting the strategy direction and objectives, and then measuring progress toward these objectives will be very familiar. The two middle stages make this process very different from more familiar strategy making and change processes. These two stages require

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surfacing the prevailing narrative, developing a desired narrative, and then decid- ing which aspects of the organizational environment the leadership needs to pull to change the work environment and realize the desired narrative. These two middle stages are elaborated next and then applied to the specific challenge of improving the work of innovation to increase the organic growth rate relative to rivals. In Figure 1, the stylized flow chart in the top panel describes the four stages of the generic change process, and the panel below highlights how they are adapted to improving innovation activities to achieve faster organic growth.

Stage Two: Developing the Desired Narrative

Change processes should offer a desired end state of change. Lack of a clear direction leads to false starts and wasted resources. What is the desired future narrative? Can leaders even specify how it would look? Would they know it if they saw it? Can they portray the destination, so those who will have to pro- duce it and live it can see it? Absent such clarity, key choices are unrecognized, communication is frustratingly vague, inspiration is scarce, and action planning faulty. How can one design an organization (or a change effort to produce it) without knowing the behaviors it should produce?

The narrative of the desired future state should be no less specific and tex- tured than the current organizational narrative. People work using information, technology, and protocols. They interact with others in person, telephonically, and digitally. What do they do and say and with and to whom? The future narra- tive (or portfolio of narratives) should present a detailed embodiment of the sto- ries of innovation that organizational leaders want to tell. These stories or narratives serve not as scripts to be followed but rather as realities to be created; realities that become more or less likely to occur based on the stimuli from the overall work environment.

Figure 1. The work systems change model in action.

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Merely listing the attributes of a desired system seems mechanical and incomplete when compared with a story (or stories) portraying the living reality of today or the reality desired for tomorrow. Thus, the approach advocated here draws on the ability of narratives to deliver focus, meaning, and inspiration. Stories that are rich in detail, animated by human interaction, and fueled by emo- tions convey how things actually work (or not). They offer a vision in operation, the future realized. In this case, the story is a narrative about a desired future. The work systems approach has the leaders constructing two narratives: one to develop detailed understanding of the current state, and another to outline a vision of the desired state.13

Stage Three: The System of Work to Be Changed

Once the narrative of the desired future has been envisioned—capturing how people should behave—the work systems change model pulls a combina- tion of eight organizational levers to realize that narrative. The aim is to create a work environment where the desired behaviors can fit and flourish. The organi- zation of work entails the arrangement of tasks and resources (including people) to convert individual effort and energy into a desired outcome, such as superior innovation outcomes. The eight levers shaping the work environment are shown in Table 1.14

The work systems change model helps leadership teams find the best moves to embed the desired behaviors within the organization. The eight levers define the work environment that organizational members adapt to over time. Changing multiple levers in a coherent, coordinated fashion changes the environment sur- rounding people as they go about their daily work. People then adapt, changing their behavior to fit the new environment.

Table 1. The Eight Levers of Environment at Work.

lever Definition

1. Organization Structure (vertical chain of command and horizontal means of interconnection); the organizational chart; also task forces, project groups, and committees

2. Workplace design Layout of physical and virtual space; also available work tools and technology

3. Task Work processes, protocols, and pathways

4. People Selection, skills, learning, and orientation of the focal organizational, business unit, department, or work unit members

5. Rewards Rewards and punishments of every sort germane to the desired behavior or scene; compensation; intrinsic and extrinsic rewards

6. Measurement Metrics; scorecard of performance

7. Information distribution

Who knows what, when, and how (means and manner of being informed—for example, push or pull)

8. Decision allocation Who participates when, in what way, in which decisions

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The work systems change model serves as a framework for assembling diverse streams of research into a coherent mid-range theory. Consider the work by Ancona and Bresman15 on “how to build teams that lead, innovate, and suc- ceed.” The narrative for these teams is that of a self-conscious, rapidly moving, highly disciplined, and psychologically safe group focusing both on its own pro- cesses and the evolving nature of its various key stakeholders. One can read their work as clarifying the nature of a team narrative. The implications fall comfort- ably under the eight levers of the work systems model:

• Organization—Access to top management, along with flexible membership and leadership. This lever includes structural factors such as task forces, proj- ect teams, and committees.

• Workplace Design—Resources to enable easy team member access to one another, including face-to-face meetings, remote working capabilities, and platforms such as Slack for sharing and collaborating within teams and across functions.

• Task—Detailed work processes, protocols, and practices, including timelines and technology maps.

• People—Careful selection of talent based on competencies and process skills (e.g., stakeholder mapping), as well as key stakeholder ties and training in group processes, including leadership, crucial conversations, feedback, nego- tiation, norm setting, and debriefing.

• Rewards—Recognition and financial incentives, including promotion, and task-related developmental assignments.

• Measurement—Clear outcomes and benchmarks based on input, throughput, and outcome metrics in a dashboard.

• Information Distribution—Ready access to information and expertise (external), and easy, comprehensive information sharing capabilities within the group.

• Decision Allocation—Encouragement to roam broadly in pursuit of information and resources, construction of precise group charters, regular member role clarification, and clear, participative decision processes.

A validation of the applicability of the work systems model is the mapping of the Whirlpool change program onto the eight levers of change as shown in Table 2. The work systems model helps explain Whirlpool’s innovation success, but can that usefulness be generalized beyond the Whirlpool case?

Applying the Work Systems Change Model to Innovation

Declaring an intention to become a faster growing organization may be a sensible aspiration, but says little about what people should do or how they should act. Realizing the aspiration takes clear leadership commitment to an objective of faster organic growth (backed up with allocations of innovation

Changing the Work of Innovation: A Systems Approach 49

resources and a clear pathway into the market), the development of a growth- enabling narrative that communicates a clear vision of success, and the design of a work system to foster the desired behaviors.

Passing or fluctuating focus will yield episodic or sporadic innovation. No leader should, however, confuse “making innovation routine” with routinizing innovation. Routinizing innovation does not work. Strict application of standard lean or Six Sigma processes to innovation constrains and eventually reduces innovation.16 To make innovation routine, on the contrary, means developing the organization as innovation incubator and embedding a supportive work sys- tem within the DNA of the organization. The next sections follow the stages of the process map in Figure 1 for applying the work system change model.

Stage One: Set Performance Objectives that Will Close the Growth Gap

Innovation is a means to an end, which is to improve long-run top-line and earnings growth. This growth objective has been widely adopted, because it is a strong contributor to increasing shareholder equity. The target for growth in revenue and operating profits emerges from an iterative and often emotional dialogue. The negotiations begin with the leadership team setting growth targets that will achieve stakeholder goals. Shareholders’17 insistence on getting a supe- rior rate of return requires growing the firm faster than rivals. This growth in revenue and profits can come from some combination of inorganic growth (from acquisitions and external ventures) and organic growth achieved with the firm’s innovation capability and work system. We will follow the approach of previ- ous research and concentrate our attention on organic revenue growth. This will

Table 2. How Whirlpool Deployed the Change Levers.

lever Whirlpool example

1. Organization Senior leaders assigned as sponsors, I-boards to fund ideas, seed funds

2. Workplace design Online resource “Innovation E-Space” to develop a business idea, attract mentors, win resources

3. Task Revised budgeting process, criteria for innovation projects, process for innovative ideas

4. People 600 I-Mentors trained, facilitated innovation projects, 61,000 employees trained, proficiency certification

5. Rewards 10%-20% of capital budget devoted to innovation projects, one third executive pay tied to innovation pipeline profits, annual performance reviews

6. Measurement New metrics, annual innovation revenue goals, tracking each idea through innovation pipeline

7. Information distribution Support of Innovation E-Space

8. Decision allocation Budget authority to I-boards, open channel to CEO for approval, access to mentors throughout company

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serve as the dependent variable in the research we conducted to find the most effective determinants of the innovation work system.

A pertinent question is whether the usual measure of “rate of organic growth relative to competitors in the past five years” is an adequate indicator of future growth potential. There are many reasons why past superior growth per- formance is difficult to sustain, which reduces its value as the sole basis of the dependent variable. Penrose18 argued that since resources are rate limiting, past growth does not assure future growth because of the drag from adjustment costs. Other reasons have since been proposed: the “incumbent’s curse,” whereby suc- cess breeds arrogance and complacency; the commitments and priorities of the leadership team change, due to a pressing need for short-term profits and cash flow, and/or a change in ownership following an acquisition; and the continuing risk of new competitors entering, current competitors leapfrogging, or a disruptive change in technology causes a loss of competitive advantage. More generally, because the dynamic capabilities needed to enable continuous adaptation are hard to routinize, they are also easier to forget than ordinary capabilities and tend to dissipate over time.

Stage Two: Surface the Current Innovation Narrative and Develop the Desired Narrative

An innovation narrative is a story told about innovation and how it occurs (or doesn’t) within an organization. It illustrates the governing beliefs in operation, manifesting how well or poorly the firm is able to innovate and helps …