This book is the fruit of a mutually exploring and informing conversation that has lasted several years, kept going by our shared passion for the topic. Some people argue over baseball, others over astrophysics; this book’s authors are hooked on managing – a strange hobby perhaps. Admittedly, we are an odd couple. Spender is a retired business school professor who had earlier careers as a nuclear engineer and consultant, Strong is a full-time management consultant with a new family. For more than forty years Spender has been working on ideas in the relatively recent field of knowledge management. In an earlier era Strong founded and helped manage an information technology services firm that did over $250 million worth of business before it was sold. Strong has been looking to underpin his intuitions about management practice with robust theory. Spender has lately been questioning the theories current in business schools, finding them increasingly rigorous but of declining relevance to real-world managers.

Our book is intended to offer actionable advice to managers on how to develop and execute superior strategies, and to do so more effectively and efficiently. We believe we offer managers techniques that will allow them to make better decisions under uncertainty, engage employees more fully, and deliver better results more quickly. Our conceit is that when leaders are able to harness the imagination of employees to the purposes of the firm, the result is valuable business model innovation. Our book shows managers how to make this rewarding connection.

In Chapter 3, Strategic conversations in the wild, we documented seven different types of strategic conversation as they are currently practiced. But we’ve waited to fully describe the last one: innovation communities. Of all of the different types of strategic conversations – innovation days, competitions, challenges, sensing and operationalizing platforms, T-shaped, strategy reviews, chaordic – innovation communities may be the most potent at both engaging employees in strategy and business model innovation and in creating connections with senior management so that the ideas are implemented.

Recall that we defined innovation communities as:

Innovation team members can be from anywhere in the organization – participation in the most successful teams tends to span the hierarchy. Whatever their source, membership in successful innovation communities is determined by who is taking a leadership role on the issues, people who have the knowledge, energy, and skill to successfully pursue solutions, not by the hierarchy.

This type of strategic conversation is so powerful precisely because the connection between senior management and the team is so close. As we’ll see from the cases presented in this chapter, innovation communities can be an outgrowth from other types of strategic conversations – such as innovation days or competitions. One can say that innovation communities are where big ideas go to become deeply embedded in the business model.

Business model innovation isn’t chemistry. Add two parts management attention, five parts employee participation, and three parts customer involvement today, repeat the next day – and the results are likely to be different. One day you make millions from pet rocks. The next day you flop with New Coke. A few months later you reintroduce the old formula and make many more millions with Coke Classic. Who knew?

As maddening as it may be, entrepreneurs depend on this type of uncertainty. Economist Frank Knight famously stated that without uncertainty, there would be no opportunity to make a profit. No uncertainty, no entrepreneurs (or entrepreneurial workforce). Perfect markets (in which economists argue there could be no profits) rely upon perfect information. Not to worry, entrepreneurs, there is no such thing. Markets are not perfect, and uncertainty abounds. But uncertainty often makes measuring the inputs, outputs, and, most importantly, outcomes of strategic conversations more art than science. Given this fundamental difficulty, what managerial measures are appropriate? Is it enough to believe in the irrefutable benefits of strategic conversations – perhaps based on a book you’ve been reading – and throw up one’s hands and say it’s not worth the effort to measure what is most likely un-measurable?

Almost every modern organization finds itself playing on a global stage, even if it never intended to. Today, as perhaps never before, it’s critical to pay attention to the outside world because the speed of change has accelerated, bringing new threats and opportunities at an often bewildering pace. To be able to avoid danger and seize advantage in this sped-up environment, good ideas for bolstering and evolving the business model can and should come from everywhere, including players outside the firm.

On the surface, the two companies couldn’t be more dissimilar. To get to Rite-Solutions headquarters, you turn off the strip malls of Route 114 in Middletown, Rhode Island onto a nondescript side road named Corporate Place. The building is in a business park like thousands across America, definitely not a candidate for a write-up in Architectural Digest. There is even something generic about the company’s name. Its CEO and co-founder, Jim Lavoie, dresses business casual. By way of contrast, Kirshenbaum Bond Senecal’s (KBS+) headquarters occupies a spacious loft in Manhattan’s ultra-hip Tribeca neighborhood. KBS+’s Chairwoman and CEO Lori Senecal is as sophisticated as her surroundings and reputedly dresses in one color, black. Rite-Solutions’ 200 employees design mission-critical software for the Department of Defense and gaming industry. KBS+’s 500 employees help market premier brands like BMW and Puma.

Despite their differences, both companies evolved convergently (as biologists would put it) to adopt a common philosophy that allows them to capture lightening in a bottle. They both believe that success depends upon harnessing the genius of their employees to shape their organizations’ future. Senecal works to ensure that every employee “at all levels of the company adopts a growth mentality and essentially is a creative entrepreneur.” If anything, Lavoie’s vision is even more radical. Rite-Solutions is an employee-owned company that eschews the notion of hierarchy entirely; every employee in every function has an equal opportunity to contribute to shaping the business’ strategy.