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Nathan Furr


Who Have the Skills to Drive Innovation?

Find the lunatics, experts, and connectors in your organization

Published: Thursday, January 28, 2016 - 16:19

Hackers and hipsters may be behind the innovative success of today’s startups, but established companies require different skill sets.

It’s becoming obvious to the startup world that entrepreneurial teams based on the corporation’s typical structure work poorly. The idea that a team should be made up of representatives from contributing divisions (such as marketing, sales, and engineering) is being replaced by the notion of bringing together a hacker, a hustler, and a hipster. The thinking is that the hacker creates rapid prototypes, the hustler engages customer feedback to capture users, and the hipster frames beautiful user interfaces and brings important connections to the team.

Although this team structure is well suited to startups working on a blank canvas, it ignores the unique challenges faced by companies with established products and services. Consider the case of Caterpillar in the development its 336E H hydraulic hybrid excavator.

When the right team asks the right questions

The Caterpillar excavator team had been under immense pressure in 2011 to develop a diesel-electric hybrid excavator. After spending millions of dollars to develop a best-in-class machine, a pivotal meeting with competitive hybrid excavator customers led the Caterpillar team to realize that their product was doomed to fail, just months before making the decision to scale up to production. Careers hung in the balance as leadership continued to push toward production on what could soon become (at worst) an expensive embarrassment, or (at best) a product which customers simply would not want.

A trusted engineer had approached Ken Gray, the company’s global product manager for large excavators, with a radical idea: Rather than going to production with the expensive and complex machinery to convert hydraulic energy into electric energy and back again, why not rethink the entire system to capture hydraulic energy directly and re-use it? At first it seemed like a crazy idea, especially because Caterpillar had been so deeply influenced by its proximity to the auto industry, which widely used a hydraulic-electric-hydraulic conversion process. As the team started to explore the concept in a sequestered location near the Illinois River, however, it began to seem more plausible.

Gray and a colleague provided an old prototype machine, some spare parts, and just enough budget to run a bare bones experiment in which a small, passionate team was given the opportunity to demonstrate that their idea would really work.

Ideas often arise out of the diversity of a team involved in addressing a question. If, during such discussions, someone from a completely different part of the business asks a critical question, radically new ideas can gain traction. In this case, rather than capturing and reusing excess energy from the hydraulic system, the critical question considered whether the diesel engine itself could run more efficiently. (i.e., “This hybrid stuff is cool, but is there a better speed to run the engine to help it use less fuel?”)

Success can rise like a phoenix

For years, development of excavators has hinged on one key assumption: the engine needs to run at 1,800 rpms to optimize the hydraulic flow, pressure, and efficiency necessary to operate the excavator. By considering whether the engine could run another way, the excavator team was prompted to explore alternatives, leading them to the discovery that running the engine near 1,500 rpm proved to be much more energy efficient, and decreased the hydraulic pressure in the excavator, too. This opened the way for the team to use a hydraulic accumulator system that Caterpillar had developed and then shelved more than a decade previously. In the end it was this old technology, brought into the project by a well-connected team member, that made the engine innovation possible.

In a very short period of time, with no budget, and working many nights and weekends, the team began to question their key assumptions. They resurrected and combined several technologies from the edges of Caterpillar to create the hydraulic hybrid excavator, which today accounts for nearly one third of the company’s large excavator sales and outperforms traditional excavators by more than 50 percent.

Lunatics, experts, and connectors

Although serendipity plays a role in everything, the team that produced the 336E H hydraulic hybrid excavator had a very purposeful structure that facilitated their success. Rather than hackers, hustlers, and hipsters, the hydraulic hybrid team was composed of lunatics, experts, and connectors. The experts provided the foundational understanding of the core technology and the Caterpillar customers. The lunatics questioned the key assumptions and discovered new technologies and approaches. Finally, the connectors brought the two groups together, as well as connecting them to willing customers and supportive leaders. Ultimately, it was the experts and lunatics that developed the hydraulic hybrid, but the connectors and experts who commercialized it.

Lessons from Caterpillar’s hydraulic experience

The Caterpillar experience matches our observations in other companies: in situations where you have established customers and knowledge, small teams composed of lunatics, experts, and connectors appear to succeed more frequently than teams composed according to the corporate divisional structure (or even the hackers, hustlers, and hipsters). Of course, every situation differs, but there are a few core lessons from the hydraulic hybrid experience:
• Innovation teams in established companies should be structured differently than execution teams and even startup teams: lunatics, experts, and connectors work best.
• Teams need expertise in the core area, but empowering team members to challenge the core assumptions lead to the insights that create the most value.
• Diversity of thought is an essential ingredient in finding creative solutions to difficult problems.

This article is republished courtesy of INSEAD Knowledge© INSEAD 2015


About The Author

Nathan Furr’s picture

Nathan Furr

Nathan Furr is an assistant professor of strategy at INSEAD, one of the world’s largest graduate business schools. Furr is a recognized expert in innovation, entrepreneurship, and value creation. His research focuses particularly on how new and established firms adapt to technology change and enter new markets. Furr co-authored the books The Innovator’s Method (Harvard Business Review Press, 2014), and Nail It then Scale It (NISI Publishing, 2013), and multiple articles in Harvard Business Review and Sloan Management Review. Furr also co-founded the International Business Model Competition. He earned his Ph.D. from the Stanford Technology Ventures Program.