A LANIO EBOOK
INNOVATING
IN THE FACE OF CHALLENGE
UNDERSTANDING ADAPTIVE CHALLENGES, CHANGE, AND INNOVATION
John Hwang
John Hwang is the owner and founder of Lanio, a company passionate
about innovation and helping visionaries achieve their goals. The Lanio
team loves working with those who dream big and enjoys helping
others build multi-disciplinary teams, establish an iterative culture
where success thrives and failures fail fast, and optimize their
organization to handle both adaptive challenges and technical
challenges at the same time.
This ebook excerpts John’s lecture series on innovating in the face of
challenge, which focuses on bringing awareness of adaptive challenges,
encouragement for experimentation, and inspiration for innovation.
UNDERSTANDING CHALLENGES
TECHNICAL
VS
ADAPTIVE
CHALLENGES
CHALLENGES
Adaptive and Technical
Every day you and your company face challenges, many
of which are resolvable by established solutions such as
policy change or technology. Perhaps these easy
solutions occasionally cause you to feel discomfort—
these challenges are too huge to have such a simple
solution. Sometimes there are challenges that demand
a significant cultural change and a quick software
update simply won’t cut it.
The key to innovation is understanding what type of
challenge we’re dealing with—will an established
solution help us overcome this challenge or do we need
to get a little more creative? Let’s unpack the two types
of challenges we face.
Technical Challenges
Technical challenges are those for which we presently
have the resources, skills, and expertise to engage
directly and solve. They are problems we can identify
and know how to solve because we have experienced
them before.
They are not necessarily easy to deal with, but can be
addressed through tactics such as policies, marketing,
or technology. The degree of success will vary
depending on the experience of the organization.
Adaptive Challenges
Compared to technical challenges, adaptive challenges
are not so clear-cut. They are challenges that we know
we must address, but don’t know how. Adaptive
challenges cannot be solved simply by saying that we
are going to put together a plan and execute it faithfully
or depend on luck.
Adaptive challenges are best addressed through
experimentation. Adaptive challenges require us to
address behavioral challenges as well as cultural
differences, and in many ways they require people—
especially their behaviors—to change, which is very
difficult to make happen.
Identifying Challenges
Technical challenges and adaptive challenges are very
different from each other; therefore, each should be
treated and addressed differently. The biggest failure
that leadership can make is treating adaptive
challenges as if they were technical challenges.
Here are some specific points on where technical and
adaptive challenges differ:
Technical challenges are easy to identify. Usually, they
are easy to see clearly because they are problems we
have dealt with before.
On the other hand, adaptive challenges are difficult to
identity and easy to deny. This is because they are often
problems that we have not encountered before and are
hard to recognize.
Solutions for Challenges
Technical challenges often lend themselves to quick
and easy (cut-and-dried) solutions. We can find
formulas to simply throw at the problems.
Adaptive challenges require changes in values, beliefs,
roles, relationships, and how we approach work. They
require much more than simply coming up with a plan
and executing it. It may take hours and hours of
conversation and convincing. These challenges are
mainly about creating relationships—sometimes not by
rational arguments, but by making emotional
connections. Overcoming adaptive challenges requires
trust.
Who’s the Solution Master?
Technical challenges can often be solved by an
authority or expert, or by instructing others to follow a
set of directions.
In adaptive challenges, people experiencing the
problem must do the work of solving. They have to deal
with the problem and it can become a messy and
frustrating process.
Number of Changes
Technical challenges require change in just one or a few
places, often contained within organizational
boundaries. Whereas adaptive challenges require
change in numerous places, which usually cross
organizational boundaries.
Receptiveness
People are generally receptive to technical solutions,
because they are familiar with technical challenges, and
they feel open to its solutions.
However, people often resist even acknowledging
adaptive challenges. They are skeptical of change and
anything new, so they often resist acknowledging that
there are adaptive challenges and that experimentation
is needed.
Pace
Solutions for technical challenges can often be
implemented quickly—even by edict. But “solutions” for
adaptive challenges take a long time to implement as
they require experimenting, discovering, and learning.
EXAMPLES
For a clearer understanding of the previously
mentioned terms, here we have two different cases that
could be addressed as if they were technical or
adaptive challenges.
Case 1: Lowering Blood Pressure
As technical challenge, a possible solution would be to
take medication. For the patient, this simply means
remembering to take that pill each day.
As an adaptive challenge, a possible solution would be
to convince the patient to change her lifestyle: eat
healthy, get more exercise, and (hopefully) lower stress.
This is not so easy nor is there a single way to do this,
so it requires a change in perspective, values,
relationships, support, and a lot of other things to make
this happen.
Case 2: Decreasing the Number of
Drunk Driving Incidents
As a technical challenge, a possible solution would be to
increase the penalty for drunk driving.
As an adaptive challenge, one might want to begin by
better understanding the situation. After studying
incidents of the past and asking questions, a possible
solution might be to raise public awareness of the
dangers and effects of drunk driving, targeting
teenagers in particular.
There are many problems we can treat as technical
challenges. However, as observed in these two
examples, cases in life are not always simple black-andwhite situations. They require us to approach with
experimentation and recognize them as potential
adaptive challenges with behavior- and value-changing
solutions.
UNDERSTANDING INNOVATION
INNOVATING
FOR
CHALLENGES
INNOVATION
Definition
Innovation is a term we use very freely today. It seems
that everyone has a different definition for this word
and uses it in their own way.
The typical definition of innovation is to start something
new or to produce new things or new concepts.
However, we will talk about innovation as a more
complex concept. At Lanio, innovation starts with a
person with an idea; it starts with a person who
imagines a solution and turns that idea into a
repeatable reality.
How to Arrive at Innovation
1. Person: It’s hard to make innovation happen without
a person to initiate it.
2. Idea: Innovation usually starts with someone who has
an idea; it could be a product, service, or perhaps a new
experience. However, an idea is just an idea. Ideas are
cheap and not innovation in themselves—this is just the
beginning.
3. Imagination: Once we have an idea, we can imagine
or visualize what that might look like in the context of
reality, and that is what we call imagination. But once
again, this is not yet innovation; it is just imagination.
4. Creativity: Visible creativity is when we make our
imagined thing into a physical reality by designing it or
putting it on paper. However, that itself is not
innovation. (Don’t worry; we’re getting close.)
5. Innovation: Innovation is our ability to repeat
creativity. So when we describe an organization as an
innovative organization, we are essentially describing a
company that has the ability to succeed not out of luck,
but has the ability to repeat and scale creativity. This is
what makes an organization innovative.
Requirements for Innovation
So we have defined innovation as repeatable, scalable
creativity. Now let’s look at the three main ingredients
to innovation: people, process, and culture.
To have innovation, we need a cross-functional and
diverse group of people who are capable of innovation
and the repeatable innovation process. For this, a
culture of experimentation is necessary. A culture open
to experimentation is important because it will also be
open and supportive of failure and perseverance.
Just having the idea is not good enough. Just having
people who are diverse is not good enough. In many
ways, for an organization to have repeatable creativity,
the process and the culture are just as important.
TYPES OF INNOVATION
PROCESS,
PRODUCT,
EXPERIENCE,
AND
BUSINESS
MODEL
TYPES OF
INNOVATION
Not all innovations are created equal. There are
different levels of innovation, four of them to be exact,
that need to be employed in our organizations.
Process Innovation
Another word for this type of innovation is incremental,
and perhaps they could even be called individual
innovations. These are things we do in order to move a
process that’s defined and improve it internally, to
make an organization more efficient in how they
process things or how they go about incrementally
moving or producing products. For example, it would
look like improving customer services or managing our
sales forces or claims.
Product/Service Innovation
This can also be considered a sustaining innovation.
Sustaining innovations are those innovations we use to
maintain our existing business model. For instance, we
may come up with a breakthrough or an amazing
product like the iPhone or Galaxy S; however, when we
come up with a reiteration of version one and create
version two, version three, and version four, we are
practicing sustaining innovation.
Customer Experience Innovation
Customer experience innovations are what we call
breakthrough or breakout innovations. These are the
innovations that let us leapfrog our competitors and
lead our industry. Apple is practicing this level of
innovation in many ways. They have not created or
invented any of the technologies they have from
scratch, but what they did was wrap the technology in a
compelling customer experience by design—from the
unboxing of the product to the apple store experience,
they’ve executed an amazing customer experience
innovation.
Business Model Innovation
The last level of innovation is one we also call disruptive
innovation, and this is the type of innovation Lanio
frequently practices. It refers to the ability to reinvent
your company over and over again, not only in
efficiency but also in how well your business is able to
compete with established companies.
Southwest is a good example. In 1970, Southwest was a
small airline that started as a small carrier going from
Texas to Arizona to California. They were a market that
Delta and all the major airlines neglected. However,
they built their whole infrastructure around major
hubs, allowing people to use their smaller flights to
reach regional airports. And then a disruptive
technology came into scene when Boeing invented a
more powerful engine, the 737. This allowed Southwest
to provide longer flights and expand their business
model. They were able to make a business model
innovation and dominate the market by using a
combination of unique customer experience,
innovations, and this fundamental disruptive
technology.
INNOVATION AND CHALLENGES
INNOVATING
IN THE FACE OF
CHALLENGE
MANAGING
CHALLENGE
The 80/20 Principle
So what does innovation have to do with adaptive or
technical challenges? First let us introduce to you the
80/20 principle. Google has a principle called “20
percent time.” This means that 20 percent, or one day
out of the week, of Google employee’s time is spent
exploring new innovations and working on new projects
that have been approved by their managers.
All innovations can be placed on a spectrum. On one
side we can place incremental innovations, while
disruptive innovations live on the opposite side. From
process innovations to business model innovations fall
in the middle.
The 80/20 principle applies to the spread. Process,
product, and customer experience innovations are
considered technical innovations and challenges. These
are things that we can improve incrementally by
releasing new products and polishing the efficiency and
design in customer experiences. Adaptive challenges
frame business model innovations in disruptive
technologies. They are the unknowns, which we can
only address by keeping an eye out and pursuing them.
So the best thing to do is not do 100 percent technical
response and only work on our existing businesses
models and processes. And we should not focus 100
percent of our time on only adaptive challenges as if we
would be creating a new company or reinventing our
existing company every year. What we really want to do
is spread it around, so we are constantly nurturing our
existing businesses while recognizing that 20 percent of
our time needs to be spent on adaptive challenges. In
short, we need a balanced portfolio of innovations that
addresses the whole spectrum.
Metrics and Accounting
Before we proceed to cover how to go on about
experimentation, let’s go over what should be
accounted for in technical and adaptive challenges. This
is important because depending on whether we are just
starting or are in the process of exploring, pursuing
validated learning, and implementing, we need to be
measuring different things.
Metrics for Technical Challenges
Metrics for technical challenges are typical left brain
material, such as revenue, margins, efficiencies,
productivity, and growth.
Metrics for Adaptive Challenges
When pursuing adaptive challenges, we must measure
by asking questions like: How many experiments are we
conducting? What assumptions are we validating or
invalidating? What are we learning? How much did we
learn? How many times can we pivot?
Pivoting
Why do we use the word pivot? When we encounter a
technical challenge, we implement a plan and go from
point A to point B—a straight shot. However, this is
almost never the case when we are working with
adaptive challenges and experimentation; we are
working with a constantly evolving world.
Here the journey is more like a sailboat moving in an
open ocean: a zigzag. This is because from the moment
we put forth a hypothesis, we are designing,
experimenting, and learning as we go, and at every
moment we might find a new reality, a new wind, that
either validates or invalidates our assumptions, taking
us left or right.
Experimenting
So essentially what we are trying to do when pivoting is
experiment in a loop, more specifically, this learning
loop:
Step 1. Hypothesis: start out with a set of hypothesis.
Step 2. Build: build and design an experiment to show
the hypothesis to be true or false.
Step 3. Measure: measure the hypothesis by conducting
the experiment and then examining results to see
whether the hypothesis is true or not.
Step 4. Learn: learn from the results.
Step 5. Repeat: document learnings, then go and pull
out another hypothesis and build another experiment.
Goals
The goal is to minimize the time that we need to go
through to conduct the experiments. Therefore, it is
advisable to conduct small, achievable experiments that
we can validate or invalidate.
The second goal is to go through this loop as many
times as possible as our budget and resources allow.
CONCLUSION
We have gone through much information regarding
technical and adaptive challenges, innovation, and how
they relate to each other. Here is a handy summary of
all that information:
80/20 Principle
Adaptive and technical challenges are polarities, but
both must be embraced (80/20). Even though they
seem like dichotomies and polarities, as they are not
able to be resolved using the same methods and are in
direct conflict with each other, we must recognize the
need to embrace both in the whole spectrum, using the
80/20 rule.
Innovating Everywhere
Innovation is required throughout the whole spectrum.
We need to realize that innovation is not required in
just one level, but all four. Innovation is something we
must follow up in every step of our organization,
something we should do from small process
(incremental) innovations to product/service
(sustaining) innovations, from customer experience
(breakthrough) innovations all the way to business
model (disruptive) innovations.
Repeatable Creativity
The main goal is repeatable creativity. It is not just
about having an amazing idea that luckily happens to
be implemented correctly the first time. We need to
recognize that innovation is a system; it’s a process and
works best when a group of people all move together
and collaborate to create repeatable creativity.
Embrace Failure
A culture that embraces failures and experimentation is
necessary. Our culture needs to allow for some level of
chaos to exist. We must recognize that we need to
make room so people can experiment and learn.
Accounting for Challenges
Adaptive challenge’s accounting is learning; Technical
challenge’s accounting is revenue, productivity,
efficiencies, growth, etc.
Experimentation
We must manage our experiments. Lastly, because
innovation is a process, all these experiments can and
must be managed. They are not just experiments that
happen without visibility, transparency, or metrics.
These are things that we can do on all levels; it is not
just limited to adaptive challenges.
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