Notes on Discernment – New Practice for the C-Suite

By: Kevin McDermott

Executives and management leaders need to adopt a new style of engagement with their people and ideas if they are to produce the change their organisations need. Kevin McDermott of Collective Intelligence believes this new ‘discernment’ mindset could alter our expectation of what senior managers do in the 21st Century corporation.

Giving birth to ideas, and raising them up to be businesses, is a hard work of imagination. Imagination, for me, means inhabiting an idea. I’ve always described that as discernment. Can senior executives be expected to do discernment? If they can’t then sustainable innovation won’t happen.

Discernment is a term borrowed from philosophers who use it to mean the process of wrestling with complex moral ideas to make them intelligible to one’s self. My experience as someone whose career has moved steadily toward explicit involvement in shaping new ideas into businesses, and away from conventional conceptions of communications, is that the test of fully inhabiting a new idea is the ability to express it.

In the last century it was enough to be better, faster, cheaper; that’s what management teams were rewarded for and that’s how the dominant economies got that way. A consequence was that for 100 years our organizational culture dictated that the higher one went in authority the further removed from the actual work of that organization one became. The degree of this removal was in direct proportion to the size of the organization.

For instance, at the point an organization went multinational it began to feel more like a functioning abstraction than a business that made things. For the person sitting in the corner office the management of this abstraction was a collection of concept- and numbers-driven activities. It was a great intellectual challenge but it unhooked the senior ranks from direct involvement in the innovation process.

When an organization is young the expectation that senior leadership will do more than manage is taken for granted. As the organization matures the directness of that involvement typically lessens. Senior leadership is in touch with new ideas largely through the reports of subordinates.
“I’ve seen it happen,” says my colleague Jonathan Teo of Benchmark Capital, a Silicon Valley VC that invests in early-stage technology companies. “It seems that as soon as the engineering team grows beyond 30 the senior team starts to be removed from the idea flow.” In part for that reason, says Amy Radin, “startup companies are interesting to me but established companies trying to change course are fascinating.”

Radin is a force in the invention of consumer products in U.S. financial services, first as chief innovation officer at Citigroup and now at E*TRADE Financial Corporation. She argues for innovation as a business discipline, like marketing or risk management, with its own book of best practice. Genuinely disruptive innovation is hard to do inside well-established management structures, she contends, which are built to reward immediate results. Practitioners must at once be deeply collaborative and at the same time apart from near-term P&Ls. Striking that balance is crucially dependent on the visible involvement of the senior team. From that perspective, she views immersion of C-level managers in the communication of ideas as central to shaping a culture of innovation.

“It’s very hard to compel innovation to happen,” Radin observes, “especially in a mature organization where there are habits and norms. You’ve got to hang your heart and soul on it or you undermine the likelihood that execution will happen.”

Certainly large organizations acknowledge the need to embrace change, move faster, live by their wits and open themselves to new thinking; it would be horrible PR to acknowledge otherwise. But a senior executive’s job, especially in a public company, is still about making the numbers and managing investor perception. Sure, a crisis might alter that dynamic for a time. But large organizations, after an emergency or some similar impulse to urgency, generally revert to the mean; ask anyone who’s ever worked in one.

How to inhabit a new idea

The uncertainty with which we live now—and with which we’re likely to contend for a very long time—necessarily makes senior people intensely focused on cost cutting and revenue enhancement. But the risk in this frame of mind is that at any given moment it can make investment in the future seem like something that will just have to wait.

As Scott Thomas of Strategy&’s Katzenbach Center put it to me recently, “the mindset is, everything is transitory”.

Uncertainty is always with us. But that should not be license to leave the expression of new ideas uncertain, allusive, non-specific. That’s where discernment is decisive. Let me give two examples of what it looks like in practice, each in their own way about the struggle to fully inhabit a big idea.

In the early days of my business I took on a web-strategy project for a financial-services startup. The engagement was pretty simply scoped. The partners in the new firm wished to carve a new place in the market for advice to “family offices”—i.e., the managers of personal wealth in life and after death. On the first day of our work together I asked the partners a basic question as we sat around a table: What business are you in? Two days later they were still arguing.

Keeping the focus on the neutral work of developing content for the website we built consensus by getting the founders to speak in specific ways that big-picture brainstorming had elided. The work finally articulated a vision for the new firm that previously eluded the partners. This not only accelerated its early-stage growth but led to the shedding of a nascent business in insurance and investment brokerage that would have undermined the company’s positioning of itself as a neutral advisor.

Here’s another, less painful example of the struggle for discernment in the cause of a new idea.

A few years ago I was part of the leadership team for a scenario-planning project. Our deliverable was to help bring coherence to the work of cabinet-level agencies in the US federal government, especially in their interactions with counterparts in other countries. The problem we were solving was that in the federal government, a profoundly large institution obviously, foreign policy is to a surprising degree delegated to multiple agencies in an insufficiently coordinated way. Making the problem more complicated, each time the American presidency changes hands policy moves in new directions. In such a changeable and radically decentralized environment the professionals and experts in the bureaucracy had a hard job of making long-term impact.

Project Horizon was conceived as a multi-agency scenario-planning engagement. It brought together the most senior professionals inside the federal government with experts from a range of disciplines beyond Washington, and it was exactly the seniority of this group that was the lever of our success. Over the course of three days we led the group through a process of imaginatively inhabiting a range of “alternative futures”, and pushed them hard to express what these futures would mean for the things government does and the way it does them. That work produced a shared set of strategic touchstones for the next 20 years that delivered tactical supports for durable international policy. It would not have had anything approaching this impact without the active, visible participation of senior people. In many ways the most gratifying outcome was the awareness among the participants of how exhilarating it was to immerse themselves in the discernment process, turning insights into big tactical moves.

Both these cases exhibit the premium on the burden of rigor in explaining ourselves. Neither would have been successful without the direct, sustained participation of the most senior people struggling to put their vision plainly.

“Innovation is not a problem you can solve by analysis,” observes Scott Anthony, Managing Director of Innosight Ventures. “You can only learn by doing.”

Ideas into financial models

Not too long ago I was talking about these ideas with a director at a strategy-consulting firm. He was in general agreement but then asked a good question: How do you get already overburdened senior executives to take on still another role—a role, moreover, that’s never been a core competency of senior leaders or a path to the chief executive’s job?

My answer is that by becoming deeply involved in the expression of new ideas senior executives become active players in the invention process. They bring to that process a decisive commercial impulse in the shaping of new ideas—an impulse lacking when expression is reduced to “messaging”. They bring explicit strategic ambition to knowledge transfer and turn ideas into financial models.

By Kevin McDermott