Wednesday, April 1, 2015

The Innovator's Dilemma ~ Employee Retention

Not so long ago I read The Innovator's Dilemma by Clayton M. Christensen.  It's a classic book on engineering and tech management.

The book basically discusses the dilemma that many tech and engineering companies go through.  Do you continue to work on your super profitable money maker when cheaper & less profitable challengers emerge?  Or should you move resources into the cheaper & less profitable space in case it becomes a hit?  If you move resources to the cheaper challenger, you could lose revenue/profit on your present big money maker or lose market share.  If the challenger becomes very successful and you're too late to the show, your company may lose out and go out of business.

The most recent tech example I could think of was Sun Microsystems.  In the 1990s Solaris was a giant and huge money maker.  When Linux emerged, it was a far cheaper and less profitable solution (and arguably a less feature rich and less useful solution).  So Sun had little incentive to invest resources into Linux.  Slowly but surely, Linux got better, took a hold of the market, began stealing market share, and Solaris profits went down.  Well ... the end of the story is well known.  At some point, Solaris wasn't really profitable and it was too late for Sun to catch up.

This is a dilemma that has tested tech and engineering management for decades.  The book highlights that many of the companies lose this battle due to internal management priorities.  It is natural that managers will desire to allocate resources (money, people, capital, etc.) towards their most profitable use.  When a "disruptive technology" emerges, that is often cheaper, less profitable, and less feature rich, it initially has much less market share and a much lower profit margin.  Managers are not likely to move resources in that direction ... until it is too late.

In the book, the authors say the corporate strategy solution to the Innovator's Dilemma is to create separate organizations to deal with the challenger technology.  May it be through an acquisition or a spin-out company or possibly investing in a startup competitor, let a separate organization deal with it and ensure that your primary money making division is left alone.   By creating a separate management hierarchy with different goals and different profit models and different everything, that separate entity can succeed or fail on its own.  If mixed into the current organization, it's simply too difficult to manage.  Managers will always want to prioritize resources back to the primary profit maker and new technology just isn't given the attention that's needed.

As I was reading the book, an analogy to this problem emerged in my head.  It related to employee retention at companies.  Employee retention in the tech arena is quite tough, as employees learn new skills or want to work on new projects or just want to move their career in a new direction.  With an ever changing technological landscape, it's natural that employees want to move on to new things to keep up with emerging technologies.

Their managers have to make a tough choice.

If you really need the employee to work on the project they're an expert in b/c it's super profitable or high priority, the employee may eventually decide the best way to try something new or different is to leave the company.

If you move the employee to work on a new project in the company to try and retain them, the current project where their skills/experience are needed suffers.

It's sort of like the Innovator's Dilemma.  Managers will naturally be biased to use their resources (in this case it's people) for their most profitable/important projects and/or goals.  Regardless of an employee's personal goals or interests, managers have their own goals to meet as well.  This action isn't malicious in anyway ... it's just natural.  As much as any manager wants to help an employee with their career goals, there will be natural (likely subconscious) bias involved.

So what's the solution?   How can we apply the Innovator's Dilemma solution to employee retention?  A separate organization or spin-out company certainly doesn't apply here.

However, a separated out internal transfer process is something that could work.

I remember not so long ago reading that Facebook  had an internal "internship" program for their full time employees.  Effectively, any full time employee could get a several month "internship" with another group if the group had an opening.

It was a healthy balance for Facebook's needs and helped with employee needs for retention.  The new group gets an engineer working right away instead of dealing with interviews, the engineer gets to see if they'll like it, the new group gets to see if the engineer works out, and there should be a backfill "internship" ready for the old group that just lost an engineer.  Facebook ends up retaining more employees than they would otherwise.

How did Facebook solve this with the "Innovator's Dilemma" solution?  To some extent they tried to remove management from the internal transfer process.  Because it's an "internship", their current management shouldn't be concerned that they are losing a person.  At worst they lose them for a few months.  In the time they lose them, another backfill internship may have trained up a replacement anyways.

Even for the Facebook example above, there are likely internal Facebook details that the article did not mention.  I don't want to suggest that their system is perfect.  However, there are steps that probably any organization can take to try and make things better and try to remove management from the process.  The idea that immediately came to mind is that every company can have a internal job posting site for potential internal transfers.  This is pretty common, but what this internal job posting site could do is list the contact information for the hiring manager.  Any employee with interest should be able to contact and talk to that hiring manager directly about the position and potential interview.  Any contact through their current management chain should just be skipped.

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