Harvard Business Professor and best-selling author Gary Pisano discusses The DNA of sustained innovation and how great companies like Apple, Pfizer, Microsoft, Johnson & Johnson and Google create a culture of sustainable innovation and how you can too.
Book: Creative Construction: The DNA of Sustained Innovation
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You have a thought about the date and they did the Harvard business school well at this very moment. Yes. And how much is it per year is only $72,000 per year. Well, at this very moment I’ve decided that I don’t want to go to Harvard. We up to save you some money. I’ve got to work on my Italian voice will. Anyway, Andrew, on today’s show, we decided to invite the Harvard business school professor and bestselling author, Gary Pisano, on to today’s show to discuss the DNA of sustained innovation. So will this be $72,000 hey, just just get off the price thing for just a moment here on today’s show, professor Paisano teaches how great companies like Pfizer, Microsoft, Johnson, and Johnson and Google create a culture of sustained innovation and how you can too. And Andrew, check this out. You see Gary Pisano, the Harvard business professor is going to join us on today’s podcast for the low, low price of free.
On today’s show, I realize you are used to listening to a brofessor on a daily basis. But this guy is more of a pro fessor Aka this guy is from Harvard Business School, the Harvard Business School. He has a brain that my mind cannot possibly contain. I am super excited to have this guy on the show. Mr Gary, welcome on to the thrive time show. How are you sir? I’m doing great. Thanks for having me on the show. I’m very excited to be here. I love that intro by the way. Why Bet Shit that by, by the way, a Colton Dixon who was a top 40 recording artist Juan on Atlantic records recorded that forest. So big shout out to uh, Colton Dixon. Now, Gary, I want to ask you, um, what if the listeners out there that are not familiar with your background, can you share about your relationship with Harvard business school and, and what you do there? Sure.
Yeah, I’ve been there 31 years. Uh, I’m a professor in a group called technology and operations management. Uh, and I’m also a senior associate dean for our call, our faculty, uh, development process, which is promotions and tenure. It’s not always an easy role to have, but uh, uh, it’s an important one and I enjoy doing it. I, this is probably a question I shouldn’t ask in a podcast, but what the heck, I can edit it out if I have to ask him if I ever came to Boston because I’m a, I’m a huge patriots fan. I do come to Boston. Would you
give me a tour of Harvard? Sure, absolutely. It’s a beautiful campus and I’d love to give you a tour. I loved every time we have visitors from out of town. You know, friends who come and especially folks from, not from the area, from outside the country who come, they all want to see Harvard, they want to see the business school campus. And I just love giving them tours and I see things that like I walk into our library, our Baker Library, this gorgeous reading room. And I’m like, why don’t I spend more time here? Why don’t I go into this library board? It’s gorgeous. So I lead more than happy to give you a tour. My only little Harvard connection than I have here is years ago there was a gentleman who was the CFO of Helmerich and Payne, the big oil and gas company. And he said, Clay Clark, do you know that Harvard puts out these case studies?
You know, the Harvard Business Review puts out these case studies, you know, like the, the service profit chain, the value profit chain, these books you can buy them. And I said, I did not. And buying those consistently has changed my life. So I want to ask you this before you became a Harvard business professor, a lot of our listeners out there, but they want to know what was your childhood like to take us back to the very bottom, the very beginning. How did your, uh, how, how did you, how were you raised and how did that impact who you are today? That’s a great question. I, so I was born in, uh, outside of New York and in Pelham, which is right outside the city, right outside the Bronx. And I really had a great childhood, I have to say, you know, I hit the Jackpot. I just wonderful mom and dad and I was, uh, there were five of us.
I was the youngest out of five. Awesome. Yeah. And it was a fantastic family. Uh, we had lots of relatives around and great neighborhood. I’d go out and play ball on the street and play baseball every day. My friends are football and, um, I wasn’t as a youngster, I wasn’t a particularly good student by the way. So, but I was, but I had fun. I enjoyed. I just had a terrific, a terrific time. I didn’t start becoming a good student til I was in high school, but I think it, and I guess the influence my, my parents for us education was really important. So all five of us went on to go to university. I think all my brothers and sisters, we all went on to do graduate work as well. My brother did a phd in physics and so education was really important. Um, and I think that kind of got ingrained with me early on, this idea of, of, you know, uh, maybe that’s what led to be becoming a professor.
And I used to love to, funny enough, I used to love to invent things. I think I was a bit of a frustrated engineer and as kid or at least try to advance them, I called them on paper. So I always wanted to admit Biggs actually. Uh, and so, uh, I guess maybe that’s why I ended up studying innovation. I couldn’t do, I couldn’t actually invent things. So I decided to study people who do invent them. I want to give you one book recommendation before we get into your book, because this book, you’ll probably love this book if you read the book called the inventors handbook. No, I haven’t talked. What is it? Check this out. It’s called the inventors handbook. In years ago, um, my company fears and Clark got hired by a company called Kanbar properties. Well, Maurice Kanbar invented skyy vodka in the model, the modern needle protector, you know, that we use now to protect nurses, that kind
of thing from needle sticks. He also invented the modern traffic light and he’s worth an estimated that it’s 1.2 billion or something, but he bought one third of downtown Tulsa, Oklahoma, where we’re broadcasting from all in one day. So he hired me after he sold skyy vodka to real too, to lease out his commercial real estate, all these skyscrapers. And I read his book and it’s a book that you would love because it explains his a process or we have a lot of Canadian listeners, the process of inventions. I PR, it’s super practical, but I know that you would love that book. Now I want, I want to ask you this though. When did you decide you wanted to become a professor at Harvard? Because it’s gotta be, I mean that, that has got to be a dream come true.
It’s wonderful and I feel really blessed to be there, but it wasn’t part of some grand plan for the be kidding. I saw it. It’s actually quite funny how I wound up doing this and I think maybe many careers are like, like the, so I was an undergraduate studying economics. I didn’t particularly like economics. I actually was torn between studying architecture, uh, and economics. But at the last minute I chose, uh, it was more convenience, uh, an advisor randomly in economics because frankly, I just had to, is one day I had to do it. Um, and um, he turned out to be really the, if you will, the godfather of the study of the economics of innovation of a professor, uh, named Richard Nelson. He’s who, who, uh, it was wonderful. He’s, he’s just a terrific, terrific guy. Still very active actually as a researcher, but he, so, you know, I, I started to get to learn about the whole economics of innovation.
And then I spent a year over in, uh, uh, England as an undergraduate at the University of Sussex as a researcher. And then I fell in love with the idea of actually doing research and becoming a researcher. I had never thought about being an academic when I went to college, when I went to Yale as an undergraduate. I want it to be a lawyer. And I actually find, you may laugh at this, I want to be a criminal lawyer. I loved really idea of criminal law. I don’t know why. I used to read books about f Lee Baily when I was growing up and I was, I was obsessed with cases and I, I used to do a lot of theater and so I thought like, being a trial lawyer would be like being an actor. I watch too much TV. Um, uh, you know, I used to watch Perry Mason and some of these others.
My Dad, my dad is a young kid. My Dad made me watch Perry Mason. I say made me, I didn’t want to watch it. But then after about two or three episodes, you know, when you’re 10 or 11 you can’t remember all the details, but after awhile I just remember not wanting to watch it. But then I got into it and I got excited about it and it was like, Oh yes, I want to watch Perry Mason with my dad. Cause it just, it was a great show.
Yeah it was. And there’s another one, I can’t remember the name of it, but that’s what I want it to be. I wanted to be a criminal lawyer. Then you go to Yale and, and you know, I said, well I’ll major in economics. What I thought architecture is a little undecided. But then I had this experience over in England working and I, I didn’t go there because I want it to be a research. I wanted to go, I wanted to spend some time in England as a undergraduate and maybe have some fun and I had fun. But I also worked in a research unit, began to do academic research. That was a research group that was focused on, um, looking at the economics of innovation. And the project I worked on was about the impact of innovation on trade patterns and economic performance. And I just started to get really intrigued and I really like started to love this idea of doing research, like economic research. And so that led me to go to graduate school. Uh, and, and the these days you have to understand the whole field of the economics of innovation was in it. It was tiny, it was not mainstream. Most economics departments didn’t do it. It’s hot now. It’s big now. But then this was in the early eighties.
You are, you are a weird guy. At that time
I was, I was, I always kind of want to get flow cause even my colleagues or my friends at Yale, when they were graduating, they were all going to jobs on Wall Street or going to law school. And they’re like, what are you going to do? And I said I’m going to go to graduate school. And they’re like, in economic, I’m going to do a phd and you in just a second omics. And it was like, you’re crazy. That’s like joining the priesthood. You can go make a lot of money. Did you go to Wall Street or go to work for a consulting firm? But that didn’t appeal to me, so I was weird. Um, but I wasn’t sure I wanted to be an academic. I thought I just want to go study this, let me go do a phd. And I figured after that I’ll go do something else.
I’ll go join a business. I thought about maybe I’d start a company or I’d go to work for a consulting firm or go to maybe then I’d go to Wall Street, you know. Um, and then I, I, um, I, I, you know, the way this works is you, your advisor writes letters and you see what interviews you get. And I, and I got like really good interviews. I got interviews with all the top schools. Your advisors writing letters for you, is that, yeah, that’s what they do. They write letters of introduction and they write letters of recommendation. You kind of apply, that’s how you apply. So he says, you know, you’re going to go on the job market, I’m going to write letters to people I know to introduce you and to write recommendations and get other. And then schools contact you would say if they’re interested and they ask you for other letters, they ask you to send your materials from your thesis and they invite you out to give seminars.
And I, I did this and I didn’t think anybody would, you know, give me an offer. But then I got several good offers including one from Harvard. So I thought, wow, that, and I didn’t think I was getting a job at Harvard. I still remember the day I did the interview at Harvard. I said, well, that it looks like I’m not going to be moving to Boston. And then they made me an offer. Um, and so I went to Harvard, I joined this was 1988 and I thought, well, they’re going to fire me after a few years. Clearly, you know, not many people make it all the way through. Um, so I just assumed at some point then I’d have to, then I’d go do something else, but that was 31 years ago. Then I got tenure. Uh, and then, uh, you know, periodically thought, well, what else do I want to do? You know, maybe I don’t want to spend my whole life at this place. Uh, but you know, I’ve actually, I just loved the place and I love the work and again, it’s 31 years and, um, I, I’m not tired of it. Um, you love and I love it.
Yeah. And that, and that comes across in your work and I really want to dive into your, your new book because I know it’s something you’re passionate about and that’s what, that’s what drew us to, to want to have you on the show here, but I want to make sure I don’t, uh, we, we take very detailed show notes so that listeners can go look at the transcripts and that sort of thing. And you said, did you say Richard Nelson? Right. Richard Nelson is the godfather of economics.
Know The godfather of the economics of innovation. I mean, he’s one of them. I mean he’s, I would say he’s one of the, the, the, he, he’s, uh, he was at Yale. Uh, he then moved to Columbia. Uh, he’s emeritus now at Columbia, but Dick Nelson was really the first, I think in my mind, one of the first to really peek into, try to think about, um, innovation as an economic process and take seriously how do you build technological change into economic models of economic behavior and industry structure. Uh, and I, I’d consider at least one of the godfathers of the, again, the economics of innovation, not of economics in general, but at the economics of innovation. He, he’s been around for a long, a long time and still is active, still writes today. Uh, I think he’s close to 90, and his is still sharp and I still send him my academic papers and I value his feedback.
So he had a profound influence on me. He’s also one of the nicest human beings. I mean, here he is a, I didn’t realize when I was an undergraduate at Yale, he was pretty famous. I walked into his office one day because I needed my schedule side. That’s what I thought was the extent of it. And uh, he, there I am a 19 year old undergraduate are 20 years old. Like my sophomore year, he invites me to his office and spends an hour with me talking to me about what I want to do. Uh, what my goals were, what did I think about economics and, you know, he just wanted to know about my family and my life and I didn’t actually realize I chill, you know, a little while later that this guy was a big deal. Right? So he also I think had a big influence on tours or how you’re supposed to be as a professor, what you’re there to serve and serve your students. And he’s a, he’s a guy I just really deeply to this day, still deeply admire and I’m very grateful for, for he kind of set me on this path.
Now my final two questions before we get into your book and before I begin to really interrogate you about your book here is, um, just uh, today, uh, James White, the running back for the New England patriots. He, uh, did a little shout out for one of my companies, elephant in the room on Twitter and Facebook, you know, a kind of endorsing what we’re working on. And then yesterday we interviewed a lady who runs a company called uh oh, it’s express what is it is um, I’m a bad person. Andrew, do you do Andrea, you’re taking the show notes here. What was, is it executive express? He, Andrea will tell me it’s a Boston based courier service and uh, she was on the show and I, and I, you know, you pick up on the bus stony and accent there, but you, people at Harvard, I’ve interviewed Mr. Clayton Christiansen and now yourself, you guys seem to be impervious to the Bostonian accent. Do you ever let loose and say, I want to freak it Hoagie, I mean, do you ever get, ever occasionally say, I swear, I mean, do you ever said that? Is wicked awesome at Harvard. Do you ever do that?
Well, yeah. It’s very funny because being born in New York, and it was only later, I lived in New York, July was 11 and then I moved to Boston, but then I lived in Connecticut and then I lived in California. And then I’ve lived in Europe for some time. So I, you know, in some sense I’ve got this more neutralized accident, but it’s very funny. So people will say to me, I know you were born in New York, you say some words just like a New Yorker. And I’m like, really? They’ll say, yeah, well you say coffee. And he’d say coffee and, and I, it pops out. But others have said to me, I was at an airport one time and somebody asked me about Boston and I realized, well, wait it, how do you know I’m on the Boston flight? I’m not near that part. Like I’m not at the Boston gate or anything. And they said, I could tell by your accent, because at first I thought, I must be wearing a red sox hat are patriots at or something. And I’m like, really? So some people think I have a Boston accent. I think it’s, some words come out. Some of the expressions, I’m sure I say wicked. I’m sure
I started at Harvard. People do say that. It’s wicked awesome economics right there. Right, right. Yeah.
Right. Yes. I think we’re allowed to say that.
Okay, nice. Now. Okay. I just want to know them a bit of the behind the scenes now. My final question, and by the way that’s expressed in trucking and courier, the Boston based company, Michelle [inaudible], who we interviewed there, um, I want to get into this, the atmosphere of the aura of Harvard. I’ve never been there. I’m a good friend of mine, Doug fears for the listeners out there that Google search, this Doug fears f. E. A. R. S. I later partnered with his son doing the real estate business. Uh, Doug was the CFO of a company of a company called Helmerich and Payne and he later in life, I think he was like, maybe I’m 38 I think it was like 35 at the time there. Gary, when he decided to go back to Harvard business school, you know, he decided to stop everything and go back and then became the CFO. Why is, talk to us about the aura of Harvard and, and, and did the atmosphere the on beyond just just walk us through what does it feel like to be on the campus and why would somebody, why is it so important to have a degree from Harvard? Why is it such a prestigious thing?
Um, so I think we, uh, you know, Harvard in general, the university is a great, I do it, it is a great university. It’s not just a name. I mean there’s dedicated, the faculty are dedicated, the students are great, the staff are great. And I can speak for the war on the business school campus, which is on, you know, one side of the river. But I think it applies to, you know, the rest of the university. I mean, first of all, I find, I find the business school campus just, um, it’s, it’s a surprisingly tranquil in comforting place. It’s beautiful. I mean, our grounds are beautiful, which matters. You walk into an environment that’s really comfortable, the facilities are great. And to me it feels a lot like home and yet it’s, it’s uh, it’s also intense. I mean we have 2000, about 2000 MBA students on campus at any point in time.
There’s 200 executives, there’s doctoral students and you know, there’s this buzz of activity, but it’s also surprisingly tranquil. Um, uh, you know, you can walk through it at night and, and it’s, it’s quiet or on a weekend. It’s, it’s, it’s pretty quiet. And, and so I, I find it to be, there is something about the place that is, I know when companies come on campus for executive programs, sometimes we can do programs on, at their, at their company, but sometimes they come on campus and they just tell us like when they’re on campus, they just feel like there’s something about the place that makes them feel more serious about what they’re doing. More focused. And Yeah, I think that there is something to it. There’s the physical architecture that is, that is, that is comforting but, but keeps you really focused and it’s, it’s high energy.
And I think over time we’ve just done a great job with the, with the campus, but I find myself kind of awed by the place too, after 31 years and, you know, walk across other departments at Harvard, I’ll walk across the river and walk through Harvard Yard and kind of see the undergraduates. And there’s so much excitement. And again, these are really, really smart, really smart kids and men and, and our MBA students are really smart and they’re really good people. You know, I know people always like to criticize MBA students and they’re this or that. But by in large, our MBA students are terrific people and they care a lot about society. And I’ve just enjoyed their interactions there. They’re good people and, and they work really hard and, and they’re very ambitious for sure, but they’re there. They’re great folks to be around. So, um, you know, it’s a, and art, the business school campus is massive for, as a business, we have the largest business school campus, I think of any business school where over there on the other side of the river, we have a large tract of land.
We have tons of buildings and I think that also adds a sense of community, the business school as a community. Um, and that because we were so kind of self contained there, we have a lot of on campus housing, we have, you know, a lot of classrooms and our faculty office were all there and I think a lot of the culture at Harvard is for faculty to be there, come into the office. There’s comfortable places to work. So there’s, there’s a sense of community. I go into the office on days, rare days where I don’t have any meetings but I still go into the office cause I like, I like being there, like seeing my colleagues. I like being around the place. It, it, it does motivate me.
Well, I’m going to, I’m going to give them a fun factoid out there for the listeners. We’re going to get into your book. Um, Harvard’s endowment, which is something that I, for some reason I decided to track that years ago, Gary Pisano, I decided to just to like, it occurred to me, Oh wow. Things are going well at Harvard. People that have a degree from Harvard go on to do big things and a lot of times they want to give back. I believe right now, according to Forbes, the endowment of Harvard is north of $25 billion with a B. I don’t track it. So I think I know it’s up here. Blows my mind. So I just, I say all this because I want the listeners to know that Harvard is perhaps one of the top schools in the world. And I know you’re a humble guy, but I’m going to brag on you for a minute. There’s a lot of Gary’s out there, but you are the Gary from the Harvard and I am excited to hear about your book. I know you’ve poured your heart into it and I want to talk about this, this newest book, the creation construction, the create an instruction, the creative construction, it’s creative construction, the DNA of sustained innovation. Think about that. Creative construction, the DNA of sustained innovation. What inspired you to first write this book?
I mean, I think it partly, um, with some frustration, to be perfectly honest with a lot of the books and writings I’d seen on innovation, I think they were tending to say a lot of the same things. And what they were saying didn’t really square with what I was seeing in the work I do in practice. What were they saying? They tend to say, look, big companies can’t innovate and you got to act like a small company. And if you’re big, you’re doomed and you want to create a culture. Everybody’s kind of, uh, you know, tolerance for failure and, and, and, you know, you have to be willing to experiment and all, and everybody has to be engaged and they all sorta, we’re saying the same thing but in different fashions. And a lot of that was true, but I, but it didn’t square with, I’ve done work for some of the largest companies in the world. I’ve consulted for some of the largest companies world. And I’ve also been involved with startups. I’ve been, uh, uh, a cofounder of a company I’ve served on the boards of startups. So I’ve seen the full,
I know you’re not going to name drop big companies you’ve worked for, but I’m going to have to pull it out of you because there’s listeners out there, all of our listeners are going, I don’t know what he’s talking about. I need a big name here. And can you mention it? Maybe a bigger company you’ve worked with?
Sure. It was. So, I’m very, so I’ll just say I’m tend to be very discreet about who I work with, just kind of part of my policy. However, maybe an industry Harvard also has disclosure policies. So in the front of the book, I actually disclose any companies that I happened to work with that I mentioned in the book just to be above board. So if you go through a list of the companies at the beginning of the book, Johnson and Johnson, I’ve done a lot of work for Johnson and Johnson, Becton Dickinson, uh, Microsoft. Um, I’m going by memory now
knows what he’s wicked talking about. He knows what he’s talking about.
And I, and I say that, you know, Harvard is always encouraged us as fact that the business school, they said if you’re an academic but we’re a professional school, you have to be close to practice. So they encourage us to do a certain amount of consulting. And I, and I do and I learned a lot from that and, and, and, but I also do academic research. I do the kind of work that gets published in journals and I’ve done that over my career. And what I was seeing, and I was actually seeing this at other people’s research as well, wasn’t squaring with what the kind of storyline on innovation was becoming. So I sent this, this was bothering me. And sometimes when things bother me, it’s like I have to write something. But the second thing is, and it was related was I saw a lot of bigger companies who want it to be innovative and really getting nowhere.
They were really struggling. And a lot of the consulting I was asked to do for companies was help us get started. And they really had no place to get started and they didn’t have a comprehensive guide. And so I thought about, we need a book that can, first of all tell big companies, look, you can be, you can be innovative, don’t give up. I had seen too many big companies say, no, no, no, we’re, we’re big. Everything we read says we’re big. We can’t be innovative, therefore we’re not going to be. So then it becomes a self fulfilling, but then those who wanted to, they were kind of lost where to start and they would grab little tools like things they had read about. Like somebody would say, oh, open innovation. We’re going to open innovation. And that’s like a part of it, but it’s not, that’s, you know, they needed something more comprehensive.
So I wrote a book that really could become a primer and a guide for companies who said, okay, from start to beginning, what do we do? Soup to nuts, a comprehensive framework that included everything about innovation that you would have to consider and tackle if you were going to transform your organization. I’d love for you to share about the relationship between innovation and profitability for companies like apple and Google. I mean, you know, look, it’s, I think it’s really simple. Innovation drives profitability. If you want to know why apple and Google are profitable, it’s because they’ve been really innovative and, and, and part of it, the reason innovation is profitable is it’s again, a little the dilemma. It’s really hard to do. So it’s hard to innovate and then it’s hard to build an organization like apple that’s capable of continually sustaining innovation, keep doing it.
And that’s what makes it such a valuable capability to have and makes these organization’s different and, and unique. But as a result, they can be, you know, they can earn profits that others can’t. And I think it’s the lesson or the street, you know, in my mind, the message I have for companies is, look, it’s a competitive world. You have to be innovative. And regardless of the business you’re in, it’s not just high tech companies or pharmaceutical companies, but you could be in a really simple business. You could make, you could make paper cups for that are used in coffee shops, right? And you think, well what innovation is there? But there’s could be innovation in how you manufacture your supply chain business model innovation, how you sell. So really I want to companies to think more broadly about innovation than just it’s you know, high tech, Gee Whiz, latest, you know, technical, a widget but could actually be changing how your organization works.
So and regardless of who you are, you’ve got to be innovative. Even if you’re a company who competes on the basis of low cost. So if you think about a company like Walmart, they compete very much in the basis of low costs, but they are a very innovative company. They created a whole new, I mean they really innovated a new business model if you will, for large retails some years ago, but I mean more than 20 years ago. And they innovated a lot of things in their supply chain and, and, and fulfillment, which enabled them to have low costs. Amazon in some way is a low cost provider. They focus a lot on cost. But I think, I don’t think any of us would say they’re not a very innovative company. They do a lot of innovation that we can’t see innovation in their warehousing and their supply chain in their logistics and their web infrastructure. So innovation is really something for every company to take seriously. Now you broke your book, creative construction, the DNA of sustained innovation. You broken up into three parts. I’d love for you to break down part one of your book creating an innovation strategy. What is that all about?
So a strategy, uh, you know, innovation strategy is about the choices you make about the types of innovation that are going to be important for you to focus on. And the reason innovation strategies important. So a lot of times in organizations people could all agree, oh, innovations a good thing, it’s important we need to do it. And it’s like one of those, you know, innovation is a good word. It’s hard to be against it. And as I like to say, no one ever comes out and says they should be the opposite and nobody ever says we should be a nerd, which is the opposite of innovation. Everybody says let’s be innovative. And it’s great. Okay, we all agree on that. But then that word means a lot of different things and there’s different types of innovation. And the problem is if you don’t have a strategy about what types of innovation are important to the organization,
ab then everybody kind of goes off in their own direction. Well meaning people saying, well, this is important. I’m going to do innovation from my point of view. And you do it from your point of view. And we all tried to do everything. And then when everything’s important, nothing’s important and when nothing’s important, nothing gets done. And I saw a lot of companies sort of struggle with that. So the idea of an innovation strategy is to step back and say, wait a minute, let’s think about the kinds of innovation that might be important for our company. How do those lead to competitive advantage? How do those lead to value creation for customers? What’s important, what’s less important? And then how do we allocate our resources to those? So we’re not trying to spread our money into everything, but we focus on a few of the most important things.
I think there’s somebody out there, uh, Gary that’s listening to a show and they own a lot of our listeners, you know, 65% crude a Forbes right now they’re saying, uh, somewhere between 50 and 60% of all new jobs that are being created are created by small business owners. You know, people with a business with less than 50 people and they’re saying, ah, you know, I had my office meeting last Tuesday and I talked about innovation. I did, by the way, they didn’t read your book yet, you know, so they did. They were talking about innovation and they have a guy in their office who shows up to the meeting and he says, here was my new idea, Gary. I’m going to put a fat head poster on the wall of the word innovation. And you’re going, I don’t know if that’s the idea. We’re looking for here, you know, so a lot of times you can stimulate the wrong kind of ideas. What would you say to the small business owner out there who feels like, you know, every time I ask for ideas for my team, they don’t make any sense. They they’re not helpful. Cause I believe in innovation. You believe in innovation, help somebody bridge the gap. [inaudible] how can we dial in this idea of having innovative initiatives that don’t actually fail?
Yeah. Great. So the first thing is really happy. You do have to start with strategy. So to avoid the kind of, you know, somebody brings this poster, it says that’s innovative or were it’s like okay folks, let’s sort of sit down and think about what kinds of innovation I provide a framework in the book, help organizations sort at least some categories, but say what are the types of innovation that might be important. So when we say innovation, what’s important? Let’s think about our customers. Let’s think about how we create value so we can kind of get it defined into a few kind of categories. And then think about these are the most important ones for us to do and, and educate the organization on. And if you’re a smaller organization, it’s easier to educate fewer people to get the message across to focus on, okay, these are the, these are the things that if we do well from an innovation point of view, we could actually create value for customers, which will actually allow us to charge higher prices, which will allow us to make more money.
And they can start to see the path and, and they have to kind of buy into that. And that’s what innovation. So I think that’s the kind of first thing is let’s get folks aligned with what we mean by this. The second thing though is then how do we make it happen? Right? So a lot of innovation issues a fail because they don’t have a strategy. But if you have a strategy that’s necessary, but it’s not sufficient because then you actually have to build the systems for innovation. So how do we go about getting ideas? It’s like how do we search for ideas? Who are we going to talk to? And, you know, I’ll ask companies a lot, where do you get ideas for innovation from? And they say, oh, we get them from everywhere. You know, we’re, we’re, our eyes are wide open. But if you look carefully, it turns out no, that’s not true.
They look, they talked to some customers more than others, they talked to some suppliers, they’re focused on some uh, you know, key opinion leaders, whatever it is. And they have a narrow range of sources of ideas. And so then it’s like, wait a minute, if you’re going to innovate and some of these new areas, you need to find new people to talk to you and you need to open up. So you kind of work the system in terms of how do we make this more innovations always uncertain. But you’ve got to create a system that increases your odds of kind of finding the right ideas and how do we test ideas and what’s, you know, there’s a process there and how do we select ideas? What are the criteria? Because if we’re doing this well, we’re going to have more ideas and more concepts than we can fund.
And that’s a good thing. But now you need a method for selecting. So he had a bill of system. And then the third part, and you have to look at your people, is what are our behaviors? What’s our culture? Are we an organization where it was somebody raises a kind of a crazy idea. People say, Oh, you’re stupid. That’ll never work. You know, and we which case you’re going to learn very quickly. I’m never going to raise my hand. Or is this a culture where we, we kind of are, you know, we feel free to explore and to experiment and we’re disciplined and so it’s behavior. And I think, you know, all three of those are important and this is the challenge of innovation. It’s not like you can do one of them and you’re, you say, well we are a third of the way there.
It’s like if you do, if you’re missing one of them is zero. If you’ve got a great strategy and a great set of systems, but you don’t have an innovative culture, forget it. You’re not going to be innovative. If you focus on, you say we have a great innovative culture, but you don’t have a strategy and you don’t have a systems, you’re not going to be innovative. You’ve got to do all three. And each one of these is really challenging. So one thing I’m clear about in the book is, look, this is not, this is not easy. And what I hope the book does is it makes this tough journey a little easier, but it’s, I’m never, it’s never going to be easy.
No. Port three of your book, you talk about building the culture. I love for you to share with our listeners about the cultures. I’m going to give you example. I don’t expect you to do just a ton of research on me before being on the show because I know so many people have reached out to you to have you on the shows. I have you on their shows and podcasts. But, um, our, our brand we coach or 160 brands are our business coaching service. We coach 160 real companies. And, uh, that total revenue, the average business is about $5 million of revenue. So we were, we’re coaching about $800 million of business in a real small business owners out there helping these people grow. And I hear this all the time, people are speaking about our culture. We got to built the culture. We’ve got to improve the culture.
Gary Pisano, we got to get the culture. So we’re doing trust. Falls were to zip lining, you know, their zip lining. They’re going to these camps, Gary, where the we trust and we say, cut, catch me Gary. But you know, the guy you’re catching weighs 270 pounds. He kind of moves out of the way and you’re like, oh, I thought you were going to catch me. You know, we’ll come back from this highly caffeinated camp of, of culture building, disgruntled, disheveled, frustrated. They send people to Tony Robbins seminars. They haven’t watched ted talks. They’re 21 laws of leadership, 47 rules for this, seven rules of dysfunctional whatever. And then they’re there and there’s no culture building. So talk to me about the real brass tacks of building the culture part three of your book. How do we do that?
Yeah, yeah. No, Emma you’ve described is so typical and it becomes superficial. And let’s think about your building a culture. What is it? Culture, first of all. So culture is a set of values that are shared, but they’re expressed at the behavior. So you can observe, it’s hard to observe values, but you could observe behaviors, right? So that’s the thing to focus on. What are the behaviors? And you’ve got to target the behaviors you want to change. And you gotta be specific about it. Now the first thing is how do you create it? You as the leader, you own it. You’re the CEO at, okay, what size business you are in. It could be a small business with five people. It could be, it could be GE. Uh, it, it, oh, or Amazon or apple. I think the CEO or the leadership, the very top leadership odes culture doesn’t mean HR can’t be helpful.
It doesn’t mean consultants can’t be helpful, but I don’t think you announced source it. You have to sort of think of yourself as like the chief cultural architect and start to define really clearly what are the behaviors that we want to see. And I think he used a series of, uh, and I, and I think it’s creating an innovative culture. And I talk about this in the book and some of the surprises we, maybe we’ll chat about it later, but it’s, there’s a tough side of innovative cultures. They’re not all fun and games. So it’s actually been really clear about what it is you, you want and what the balance is. But then it’s like you have to prepare the organization. I mean, it’s this idea that culture is going to be all fun. It’s all gonna be trust. No, that’s not it. There’s some really tough things we’re going to have to do here and it’s not going to be palatable to everyone.
So just if you prepare the organization that the cultural transformation you’re going to go through is not a walk in the park. You, you have, you have, uh, you have, uh, an opportunity. I think it’s really critical though. You, you’ve got to, you’ve got to start recruiting disciples. There’s a lot about the way cultures get created and spread it organizations and the way religions do it, religion, Jews, symbols, they use disciples and they use systems and rules. And that’s similar to what, how it works in corporations and organizations, which is you’ve got to have your stories. You’ve got to be able to sort of inspire people through the stories you tell them about things you’ve experienced, what the company’s experienced. And if you’re small, you can get a lot of miles with that. As you get bigger, it gets hard to have that personal context.
So then you need disciples, you need people who you bring in who have the same values and share the same kind of mindset about what’s important and or you train them. So a lot of training is, is around indoctrination and, and, and that’s what a lot of leadership training is in companies to get people aligned around the common set of values. Now I think as a leader so that you have to make tough choices. If you have people who don’t share that mindset and don’t share those cultural values of what you’re trying to achieve, they can be, they can be really toxic to it. So then you have to make tough decisions. So you’ve got to get the right disciples on board and then you actually have to have to embed it in your system. Do you have to look and say wait a minute, door to our systems work the right way to encourage the kind of behaviors that we want. And I think those are some of the concrete things you can do to build any culture and, but they’re particularly important for building an innovative culture.
I think somebody out there is saying, Gary, you know, Gary, I will I buy what you’re selling. I’m going to get this book. Andrew, by the way, have you found the, Andrew, if you found the book on Amazon or maybe have you found the book on Amazon? Have you, have you been able to, to look it up there and uh, find a book? Yep. Got It right here. Are you going to buy that book, Andrew? I’m going to buy it, right? Buy and Gary’s book, Gary, we’re buying your book on Amazon right now. Pick up the book and you got to leave a review based upon today’s interview. We got, we got to do that. What, what kind of person would interview a man and not bias book? What a terrible person I would be if I didn’t buy the book. So we’re buying the book, but there’s somebody out there who goes, I want to hold my team accountable, you know, for this culture.
And there’s somebody who’s kind of toxic. But frankly, I need them for right now. You know what I mean? It’s like I now at Harvard, uh, and I could be incorrect, but Harvard, I think a lot of professors want to be at Harvard. I think Harvard can be pretty selective about, uh, you clearly are not a good fit, you know? But I think La, a smaller business with like five employees, you know, they’re trying to convince people to work for them. What is the balance and when do you know it’s time to, to punt somebody who’s not a cultural fit in a small business.
Yeah, no. Great. So that’s a great dilemma, right? And sometimes, you know, reality sets in and, but, but I too think, um, the costs of hiring somebody who’s not a good cultural fit, it can be, um, it, it’s, it can be really devastating. And so I would think, I mean, we’ve actually had case, I’ve written cases about this where you’ve got somebody who’s a superstar say a technically and the investors all want them and they say we were going to back your company because this person, but they’re totally toxic. And what do you do about it? Um, I think you can’t tolerate, I think at the end of the day, the company is worse off even though in the short term it feels painful not to have those people. And so I think you have to be, because if they’re there, they will drive out other people or they’ll prevent you from getting the kind of people you want.
So you have to have, I think you have to be really disciplined about it. And one of the things I talk about in the book around culture, I what I was hoping, I think one of the big surprises of what I write about in cultures, I think the whole concept of innovative culture has been a little miscast as it’s kind of all fun and games, right? That, you know, it’s all about tolerance for failure. And it’s all about, uh, you know, discipline, you know, willingness to experiment and, and everybody should speak up and everybody collaborates and they’re flat and everybody’s empowered and the, and all of that is true. But what baffled me was that those are all things that people would seem to want to embrace. And yet, why aren’t there more innovative cultures if this is all there is to it? And what I found in my work and, and again, it’s part of my practical experience is that innovative companies actually have more, their cultures are more complex than that.
So while there’s a huge tolerance for failure, there’s this intolerance from competence. So they’re taught, but it’s like, okay, you’re free to fail. We want to encourage you to take thoughtful risks and they may not work out, but we’re not going to tolerate, say, sloppy designs or sloppy work or not, you know, putting in the effort to work without pants and you go, I didn’t know. I didn’t know idea. Exactly. I mean, people don’t have a lot of tolerance for completing competence. They exactly, and yes, you can experiment, but we’re going to be disciplined about it. So we’re going to experiment with, and so it’s the balance and you know, collaboration is great, but we’re going to have personal accountability. And what I found is that this other side of the coin is sometimes more difficult. You know, the discipline, the intolerance and competence, the personal accountability, candor, I mean candor’s great, but actually you have to be willing to take it.
You have to have a tough skin. You’re in an environment where nobody likes anything slide. And, and, and, and so these are sometimes tough places to work. I mean, I don’t think you should go into, uh, a culture of innovation thinking that it’s all fun and games. It’s not, it’s not a walk in the park. It’s more like climbing Mount Everest. And so, and I think there’s real leadership challenges there of getting people who can manage that tension and the difference and help maintain the balance. Because you may have, you know, where do you draw the line? I mean, you tried something, it didn’t work out. Was it because it was a thoughtful risk or you just incompetent? I don’t want to fire you the first time something goes wrong that would, that would certainly create fear through the organization. But on the other hand, if I keep tolerating the fact that we, you keep failing, you keep failing, you’re not learning, then it’s a problem.
And, and so I think that’s what makes, I think innovative cultures are phenomenally interesting because there’s this delicate balance. And I think as leaders, you’ve got to be able to kind of trip, you know, balance it out. If you see things going too far, which is okay, people are giving, people are being really candid and their feedback, you’re speaking, upgrade, they’re being really unvarnished candor. But you know, I use the term brutally frank, but are they being just brutal because that’s no good if I’m just being nasty to you, that’s not helpful. So again, but where do we draw the line? We see people getting passionate about debating ideas and the red in the face and we’d love that passion. But now have we gone too far as somebody feeling uncomfortable was interesting.
This is interesting because you’re, you’re bringing up these situations being red in the face. What happens when you have a culture of people get red in the face, they just let it go. The unbridled passion. What happens if there’s no, if they can’t, if somebody’s out there listening right now is just hardcore about candid, brutal candor at all times law. What happens if there’s no
you gotta be Bell? Cause then it could be become like, so like it could be. So here’s how I draw the line. If they’re getting red in the face about technical issues. And I talk about this in the book, these two engineers at a company I was sitting in on the meeting and it’s a company that makes a large semiconductor testers and the cooling systems are complex and they are just going at it literally right in the face about thermo coefficients and all sorts of aspects of the design. But it was never personal. It was never, you’re a bad engineer. Yeah it was. I don’t, I think you’re calculating this wrong because of this. And it was very complicated discussion, but they were there. If, if you’re getting people red in the face about the technical issue in some way, I’m okay once it gets into I’m red in the face cause I’m, I’m, I’m kicked off at you, which you personally, you are not a good engineer.
You are not a good leader. You’re being irresponsible. That’s where you got to blow the whistle and stop it because that, that’s going to become dysfunctional. And you know, and again, so you have to sort of get that balance. It’s also like there’s a time for debate and have it out. But then it’s like, okay, somebody’s got to make a decision and not everybody’s going to be happy. Tough decisions never make anybody happy. So that’s where the accountability comes in. And you need folks in an organization who are, who are kind of fearless in the sense that they’re willing to take that through and say, look, I’m gonna make this decision. I own this decision. I’m going to make this decision. I’m accountable for better, for worse, how this comes out. I’m not going to blame anybody else. Yep. And I’ve listened to it all and then goes back and explains it to the folks.
So you have to also get people comfortable with the decision you’re, you’re making. And this is pretty tough stuff. So if it goes back to what you said before, if you have somebody in the organization who is, is kind of, you know, extremely competent, but they’re toxic. So let’s say somebody who is, you know, technically brilliant, but they do go into the room and they say, Oh, oh clay, you’re stupid. You know, what are you talking about? Where’d you get your engineering degree? You know, boy, that’s going to be a crappy place to work, right? Right. Sorry, you’re not going to want to work there. And, and people are gonna say, I, I’m being bullied. I know we’d likes that. So it’s like drawing the line. But if that person is, is kind of tough and says, clay, I think your data is wrong for this reason.
I think there’s a better way to do it. And here’s why I think my way is better. And then your board is, no, I think my way is better for this reason. And we’re having that debate and matter how red in the face you’re getting, I’m okay with it. But once it goes into, I think you’re stupid. Um, I think you’re, you’re, you’re not well trained. I think you’re in co get starts crossing that line. I thought about the idea, now it’s a problem. And that’s where you as the leader, you gotta be there. You got to watch it and you’ve got to set the tone and you’ve got to model the behavior you want. And you’ve got a call out behaviors that are not appropriate. You’ve got to step in and say, timeout. We’re getting a little too far here. This is getting personal. That’s not what we’re about, and so this is hard leadership work. It’s just this is hard.
You are, I believe you’ve, you said you’ve been at Harvard for 31 years of my 31 years. Yeah, and you’re looking, you’re looking young all the time. I don’t know if you’re drinking on that fish oil. I was Google searching. I’m not sure. Again, every photo, photo shopped or what, but you’re looking, you’re looking good. You’re probably doing a lot of fish oil, but if you can remember back to 1988 when you started Larry Bird. Remember Larry Bird? Yes, I do. And Larry Berg listeners out there that aren’t familiar with Larry Bird. I read his book drive and Larry Bird was a guy who when he played basketball, I don’t think people realize his super power, but he was six foot nine someone say six 10 he was on the Celtics. But Larry was somebody in my mind who knew how to create a winning culture. He knew, he talked about, he talks about this in his book, Gary, but he talks about he could score all the time.
You know, Larry knew he could score whenever he wanted pretty much, but he also knew that like if Robert Parish, the center didn’t score occasionally he wasn’t going to want to play defense. And if Kevin Mchale didn’t get a few touches, he wasn’t going to want to play defense either. And if Danny Ainge didn’t get a chance to shoot, he didn’t want to play defense, you know? And so he knew. And so I think if you’re a good point guard and the game of basketball, you know how to distribute the ball or another Boston sports reference. I mean, Tom Brady, I’ve cheered for the Patriots now since bill Bellacheck has been there, what, 19 years. And Tom, it’s so fun to watch him, how he throws the balls to randos. I’ve never heard of every year there’s some guy I’ve never heard of and Tom knows how to keep the team engaged.
And I think that’s one thing your book’s going to teach people out there is how to keep your team engaged, how to create that, that, that culture. And I know the listeners are out there are very curious about this. I’m going to ask him, I fund my final two questions. I have a here for you. Is your, you come across as a very intentional, very, very proactive guy who you manage, you manage a busy schedule, um, of obligations and things. You signed up for it Harvard, but you also do independent consulting and you find time to write a book. How do you personally organize the first four hours of your day? What time do you typically wake up?
So it depends on, that’s partly not under my control. I have, you know, I have young kids, I’ve got a three year old, so she partly decides what’s, I went night, we wake up. If she comes about to get to the room at 5:00 AM guess what you’re off. We were waking up at five. So, uh, Eh, you know, so, uh, it’s partly not fully under my control, but what I like to do, ideally, if she’s going to sleep till seven, let’s say, and I’ve got a seven year old, believes he started to sleep. Uh, he started to sleep a little bit, uh, later. Uh, if I actually now we’re getting to the opposite problem with him on a school board and you got to, got to wake him up. Um, but, uh, you know, I like to get up at six. That’s Sorta my target time to wake up in the morning.
Um, um, and that if the kids aren’t up yet, um, my wife and I like to get up so we can enjoy a little bit of quiet time together. Uh, and so have a, I have a, I’m passionate about lots of things. It food and I have a beautiful cup of Chito machines, so I make a really spectacular Cappuccino in the boarding. That’s, that’s the height. That could be the highlights. I’m a slow move, right? I, you know, I’m not, I work out, but you’re not gonna see me running the streets of Concord, Massachusetts at five, at six in the morning, but that my cup Chino. And so there’s a little bit of downtime, right? That’s uh, and then, um, it really depends on the day. Um, I do like to, if I’m around in the morning and I’d have to leave early, um, I like to work at home in the morning, avoid the trap, get the kids off to school or be involved with that process and I can take them off and drop them off.
I love that. It’s a highlight. I mean it’s really just love being able to do that. Um, and because I know these years go by fast, but then I, if I can in the morning is a time where I like to write. So I love writing. Um, and, and give it all the obligations I have. It’s hard to find time to write, but I do find ride is the morning’s a good time. Cause you do it first. You feel really good about it. So if I get a few hours of writing it in the morning, uh, that’s terrific. Uh, some mornings I have my, I do taekwondo, my wife and I built two ky Quando so we’ll go see our taekwondo instructor, uh, sometimes in the morning, uh, and, but then there’s mornings where I teach, so then I have to leave. Then I leave very early so I could beat the traffic in. And then I spent a lot of time in the morning preparing to teach. It’s either reviewing the case, reviewing my notes, just being there, getting my mindset into it. And that’s a fee that could be a few hours and I’d like to do that in the morning before I teach. So it varies a little bit day by day and season and what’s going on. But, uh, I, I find I like to be a, you know, can be most kind of intellectually productive. I think in the morning,
no, Andrew, we just bought a copy of the book here. We just, we just did, it’s being shipped to us right now. We have Amazon prime. We bought a copy of creative construction, the DNA of sustained innovation. How much did we spend on the book? Do you know what you spent on the book thing? Pull it, pull it back. You got to look at this. Look it up. I want to be, I want to be accountable here. I want to make sure we’re hyping this up. Kerry, I want to, I want to clarify how much did we spend on them on the book here? It was a total of $17 and 12 cents. Great. So I’m sure Gary just made 17 cents cause I know how publishing works. Great Job Gary. So when Lee, one more Cappuccino for you or one 10th of a Cappuccino. But I want to ask you this.
For the people out there, a lot of people are buying a, who’s spending $17 a week on hoagies. You know Gary, it’s like the live in the Boston area to late night. They go, I’m on a diet, but I’ll go ahead and have a Hoagie. I’ll have a, you know, people were out there buying things they shouldn’t buy. They’re going to local stores, convenient stores, you know, they say, do you want anything else? And they say, I think I don’t need it, but I’ll go ahead and pound this candy bar. So the listeners out there are going to have to go without a few things to buy the $17 books and they might have to go without a two Starbucks drinks or three. They might have to not buy a regrettable corn dog. They might not have to build that. They might have to go with that a Hoagie. So p two people out, they’re going to have to make a sacrifice to buy this book. They could change their business, my friend. So I give you the floor. Why should everybody in your humble opinion pick up a copy of this book that you have slaved over and worked on for a long time?
Yes. And by the way, compare it to the, to the, to the corn dog. That’s where you got, that’s a tough one because I love corn dogs. Maybe other ones. It’s the, I buy the book with a corn dog versus my book. I don’t know. I’m, I’m probably be no, but I really hope, uh, and I really think what I tried to accomplish, and I hope that the book does, is will really change the way you think about innovation, that you come prove the book and it just, you suddenly say never again, like think about innovation the same way this is really important to your business. I think, again, regardless of who you are, you know, I think this can, this could help transform your business and that’s probably worth giving up. It’s probably even worth giving up a corn dog, uh, uh, for a, a corn dog or two because I think it really can transform the way you think about innovation, which can, I think for every business today can transform your business.
Gary, I appreciate your time more than you could possibly or no, I know you’re a busy guy. You have so much on your schedule and I just want to say thank you on behalf of our half a million loyal, loyal listeners out there and I hope that everybody goes up there and picks up your book today. Again, thank you my friend.
Well, no, thank you. It’s my pleasure to be on the show and I really appreciate, uh, all your enthusiasm for the book and all these great questions. It was really a, it was really, you made this very fun. Thank you.
How you take care of Fred in a competitive world, you have to stand out. What is going to be your purple cow? What’s your no brainer offer that makes people stop and say, Whoa, Whoa, that’s a great deal. Again, what’s that no brainer offer? What’s that thing you’re going to do that makes the world say, Whoa, by default you and I are both forgettable. So we have to invest the time needed to think about how we’re going to stand out in this cluttered world of commerce. You have to affect people’s purchasing behavior and the best way to do that is by standing out. Oh yes and yes, we now have a bonus action item today. Take a hard look at your staff. Does each person add value to your business or is now the time to make the tough call and to let somebody go? You might feel terrible in the short term, the long term. Your Business will thank you. My name is Clay Clark and I like to end each and every show with a boom, and now that he further into, let’s do it, three, two, one, boom.