Microsoft’s move this week to buy LinkedIn offers a profound lesson most analysts lack the stamina to catch. On the surface it appears to be another potentially brilliant move in the chess game CEO Satya Nadella has been playing since he took the helm of Microsoft in 2014. You can see a transformed Microsoft emerging when you consider the assets they now have in play: a purely cloud-based Office 365, the most popular VoIP solution (Skype), two of the most active online gaming communities (Minecraft and Xbox/Halo), etc. The company looks radically different from the company that used an installed operating system to muscle companies into adopting its work productivity software. Now with LinkedIn, it buys itself a chance to move itself up from last place in the five-way race that now defines tech (Amazon v. Google v. Apple v. Facebook v. Microsoft).

But the real lesson of the LinkedIn acquisition is an appreciation of how much effort it takes to engineer a transformation. The seeds of Microsoft’s current evolution were planted long before Nadella took over.

Thomas Edison said, “To have a great idea, have a lot of them.” Jeff Bezos, CEO of Amazon, advises that “Given a 10% chance of a 100-times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten.”

The innovation successes we see today are the cream of the crop, the few great successes that make it out of a long, wide funnel of ideas. In a recent McKinsey report, the firm describes going to clients they deem as truly innovative. When the client asks why McKinsey considers them innovative and the McKinsey team cites the three or four big LinkedIn/Skype/Minecraft-like moves, the client says, “But you missed the 38 other failures we had along the way.”

Driving strategic innovation is tough work.

We began working with Microsoft 15 years ago, running strategy sessions to help disparate teams produce a greater volume of more disruptive strategic ideas. We worked with product groups, sales teams, HR organizations, and customer service divisions. We worked throughout the US, Latin America, and Asia. Over the years we estimate we have touched maybe 2,000 people and through that effort produced maybe 20,000 growth ideas.

We’d love to claim some role in planting the seeds that seem to be flowering now, but the truth is that all of those Outthinker workshops and those 20,000 ideas represent but a drop in the bucket of what it took to produce the strategic moves we are now seeing emerge.

The strategic intensity you need to truly out-innovate your competition is probably 10X what you think you need. To win you need to play like Michael Jordan, seeking advantage through every muscle movement. Unfortunately, most companies watch from the sidelines.

Strategy is a conclusion to a conversation. You can dissect the strategic conversations happening throughout your company and assess whether they are producing the strategic intensity you need to fuel future greatness. I’m not talking about formal strategy conversations. A McKinsey study showed that 74% of strategic decisions are made outside of formal strategic efforts. I’m talking about hallway conversations, banter before the meetings, impromptu phone calls.

Do your conversations produce the seeds of breakthrough ideas?

Probably not.

We like to measure the patterns of conversations. We look at how much time a group spends on:

  • What future we want (Imagine)
  • What issues to address (Dissect)
  • What options are available (Expand)
  • How to turn “crazy” options into feasible ones (Analyze Crazy)
  • Which options will work (Analyze Realistic)
  • How to get buy-in for the resulting strategy (Sell)

Most strategic conversations squeeze out time for the kinds of conversations that create disruptive ideas. There is not time to generate options or analyze crazy ideas. If the conversations inside Amazon did not allow the discussion of seemingly crazy ideas, they would never have launched Amazon Web Services, now a $10b business that positions them as the leader in cloud services.

When you analyze the conversations of innovative teams and organizations, you see, and can actually measure, that the team creates space to expand and explore crazy ideas. They thereby open gateways in the conversation funnel that most companies unintentionally close to choke off innovation.

Typical percentage of time spent in conversation phases

MicrosoftLinkedInChart2

Do your strategic conversations sound like this?

We have this problem (Dissect).
Here’s an idea (Expand).
Will it work? Yes … let’s do it (Analyze Realistic)

If so, you are operating as most companies do. And you are choking off the potential to transform as Amazon did from a retailer into the cloud service leader. Or, as Microsoft is starting to do, from installed software company into a productivity leader. You need to start shifting the composition of your strategic conversations.

I don’t know if any of the ~20,000 ideas that our work helped produce made it into Microsoft’s current strategy. We can make no real, tangible claim to having influenced what is happening now. But we can attest that increasing strategic intensity, transforming the strategic conversations that plant the seeds for future success, is hard work. It takes volumes of ideas to yield just a few breakthroughs. But the alternative is to eventually run out of growth and have no work at all.

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