Provoking the Future to Arrive—Constructive Disruption and Collective Genius

The judges are now sifting through some 140 entries for the Management 2.0 Challenge (first round of the HBR/McKinsey M-Prize). I'll be highlighting the lessons and stories from the entries over the next few weeks in the blog. A huge thanks to all who contributed—we're energized and amazed by the wealth of ideas, insight, and practical pathways to the organization of the future.

For all of the fervor around innovation, far too many organizations are hostile places for new ideas (not to mention the people that harbor them).

All too often, new ideas are cooked up in a hothouse environment—the executive inner sanctum, an invitation-only innovation offsite, a limited-access “war room”—and not shared widely until they’ve been sanctioned from on high. When they are offered up by some hardy soul in the trenches, they generally have just one place to go: up the chain of command. In other words, they get the hot lights of judgment before they get a chance to breathe.

That’s exactly the kind of environment Jim Lavoie worked in for thirty years. When he and his partner, Joe Marino, walked away from the software company they helped lead for twenty years with a small fortune, they vowed to devote their next act to creating an organization where great ideas and people would flourish. Rite-Solutions, the company they founded in January 2000, builds advanced, mission-critical software for the Navy, defense contractors, and first responders, as well as back-office systems for casinos and consumer gaming platforms. The Newport, RI-based company is a nimble competitor in a high-stakes (and highly-structured) industry. It has also become a laboratory for reinventing some of the most intractable (and corrosive) operating principles and practices of “modern” management.

“For my whole career I did it wrong,” says cofounder and CEO Lavoie. “The relationship I had with people was transactional—‘I pay you, you work. You behave, you stay.’ What I really wanted—what everybody wants—was a meaningful, emotional relationship. In the old world, your relevance to the organization was defined more by the level of your box in the pyramid than by your actual insight. How do you lead in the Web 2.0 world? It’s about making every employee feel relevant to the future of the company.”

At a Rite Solutions, you start to get the message you matter at 9am on your first day of work. That’s when the company throws you a birthday bash—complete with wrapped presents and cake. While you’re being feted by your new colleagues, your family gets a “welcome wagon” of flowers, gifts and a personal note delivered at home.

Similarly ingenious and purely homegrown rituals like the party seem to tumble forth from Lavoie and Marion, who are relentlessly creative, playful, often goofy, and utterly committed to inviting and supporting engaged contribution. New recruits fill out a “birth certificate,” which details their hobbies, travel experiences, family, schooling, curious facts and eccentricities, and becomes a colorful calling card both inside and beyond the organization.

On your second day at Rite-Solutions, the serious fun begins. You’re invited to play a real role in influencing the destiny of the company by joining your colleagues in a stock market-based game called “Mutual Fun.” Lavoie and Marino invented the game six years ago as a mechanism to “make our people feel relevant in a tangible way to the success of the business and tap their amazing intellectual bandwidth far beyond assigned ‘job tasks,’” says Lavoie. “We wanted to demonstrate that we trust them and entrust them with the future of the company.”

Imagine a typical stock market portfolio—but instead of buying and selling shares of stock and other financial instruments, players float, advance and develop portfolios of ideas. As Lavoie describes in his Management 2.0 entry, every person in the company gets an initial $10,000 in “opinion” money to invest in their colleagues’ “idea stocks.” After completing a profile (detailing expertise, experience, and interests), a player is launched as an “intellectual capitalist.” In addition to immediate investing privileges, any player can propose an idea—from a cost saving or efficiency measure (“Savings Bonds”) to an extension of the company’s current capabilities (“Bow Jones”) to a truly disruptive venture into a new business or technology (“SPAZDAQ”).

The creator fleshes out his or her proposal in an “Expect-Us” (rather than a prospectus), assigns it a ticker symbol, and floats it at a starting price of $10 (prices only go up, to avoid the dispiriting sensation of watching your creation dwindle down to mere pennies). Colleagues can make dollar investments in stocks, volunteer time (via “assists”—discrete activities to help move the idea forward), or express interest (in the threaded comments attached to every idea). An algorithm dynamically derives individual stock values (from the collective activity and investment around an idea), portfolio values (from an individual’s activity), and a player’s place on the leader board (from an individual’s own idea stock values and activity in assisting, investing, and discussing her co-workers ideas).

It’s a colorful, intuitive and immediately engaging platform—think Bloomberg terminal meets Monopoly board—designed to “provoke and align individual brilliance toward collective genius,” says Lavoie. “We knew as founders we didn’t have a monopoly on great ideas. Instead, we had this belief that good ideas and useful insights can come from anyone at any time. We think innovation is a 24-7 activity. We do everything we can to make it part of daily life here.”

Not only has Rite-Solutions’ innovation engine unleashed a torrent of individual creativity, real commercial innovation, and immeasurable goodwill among employees—it offers up important insights into how to turn every employee into an innovator and what it means to weave innovation into the fabric of organizational life.

*Don’t confuse extroversion with innovation
“Most people make innovation a contact sport,” says Lavoie. “Which automatically leaves out the introverts. In our old company when you had a good idea you had to go up in front of what we called the ‘murder board.’” Innovation offsites, jams, and “war rooms” have the same effect: the idea with the most theater that wins and the people with the most charisma suck all of the oxygen out of the room.

Mutual Fun gives nascent ideas—wherever they come from—room to breathe and takes them out of “the managerial disapproval loop.” He says, “the best thing for an idea is air and the more air you give it and the more people that breathe that idea, the better it will become.” It can also take the sting out of rejection when it’s the crowd that weighs in with interest and activity (or lack thereof). This process allows for what Lavoie calls “quiet genius” to emerge.

Take Rebecca Hosch, Lavoie’s longtime assistant. In helping her daughter with a school project, she came up with an idea for using the company’s bingo algorithm created for its casino clients to create a web-based educational tool. That idea, “Win/Play/Learn” (WPL), became a hot property on Mutual Fun and was ultimately licensed by toy-maker Hasbro, which has continued to work with Rite-Solutions on a variety of projects.

*Practice “constructive disruption”
Playing the innovation game has opened up every employee at Rite-Solutions to look at the company’s capabilities with fresh eyes, peer around corners, and make new connections. The point of Mutual Fun isn’t to take huge flyers or indulge in pet projects (“If you offer up a truly irrelevant idea,” says Lavoie, “175 people will not budge it.”) Rather, the platform supports a culture of what Lavoie calls “constructive disruption” inside the company. “We’re not trying to predict the future. We’re trying to provoke it to arrive. Most companies say, ‘this is what we do.’ We say, ‘what can we do with what we know or what we’ve done before that will be of value?’”

This ethos helps to continually open up the field of play at Rite-Solutions to new products, technologies, and directions. One example: one of the first ideas proposed in the company’s idea marketplace was a 3-D, video game-like environment to support emergency decision making for the company’s Navy and domestic security service clients. The product, called Rite-View (ticker: VIEW), was based on ideas and technology Lavoie and the leadership of the company would never have put together (and would never have invested in) without Mutual Fun. Today, Rite-View accounts for 30% of the company’s revenues.

Beyond blockbuster new products, the game generates entirely new directions for the company. Indeed, one of the most popular stocks of all-time on the market is Mutual Fun itself. Building and embedding increasingly clever incarnations of the innovation engine into other organizations (including a couple major universities, a handful of billion-dollar companies and defense industry clients) has become a major line of business for Rite-Solutions.

*Share the rewards
Truly promising Mutual Fun ideas become funded (with real money!) and volunteer-staffed projects inside the company. When any idea turns into a real cost savings or revenue producer, the creators share in a percentage of those gains.

To date, Rite-Solutions’ innovation games have generated more than 50 innovative product, service and process ideas, 15 of which have been successfully launched and account for 20% of the company’s total revenue. Lavoie and team have filed for 15 patents for innovations they believe have great value for company’s future. Again, the creators of those ideas get real credit: their names listed as inventors on the patent filing.

For his part, Lavoie asserts the rewards are all his. “How many times can I win?!” he asks with his affable laugh. Not only have he and Marino created a perpetual innovation machine with the game, they’ve cultivated an almost unshakable loyalty among their people (Rite-Solutions enjoys near zero turnover and constant peer referrals of the best and the brightest). “Being acknowledged as a part of an organization’s future is all it takes for an employee to grow deeper roots in it,” says Lavoie.