The X-team

High-performing, innovative teams that take on a strategic leadership role are an essential part of success for every organisation.

by Deborah Ancona, MIT, and Henrik Bresman, INSEAD
Last Updated: 23 Jul 2013

The life of Nikola Tesla provides proof that being a brilliant inventor, physicist and engineer is not enough to succeed. Born in Croatia in 1856, Tesla moved to the US in the 1880s. His original ideas are the bases of such everyday necessities as electricity and the radio. Yet, he didn't really receive the recognition he deserved in his lifetime: he worked alone and had a reputation for eccentricity.

Google's co-founder Larry Page promised himself that he would not repeat Tesla's mistakes. A committed inventor (and keenly aware of Tesla's fate), Page saw his ideas become reality in the search engine he helped establish. Rather than working alone, Page employed a team of people to help move from ideas to reality, drawing on the capacity and passion of others. Their ideas, passion and capacity to lead are harnessed not only in the area of technology, but in marketing, sales, finance, general management, and all other areas in which today's firms must excel to succeed. This is about beating the competition by being faster with getting ideas to market. Google has no product development plans: all innovation comes from the people at the frontline.

The need to be innovative is essential for companies today. In the wake of advances in technology, entry barriers have come down and best practice spreads quickly. In the past, firms could grow by coasting along in expanding markets, but this is increasingly rare. In most cases, innovation is the only viable growth strategy, but this innovation doesn't come from the executive office. It comes from the people on the frontline. Managers need to encourage their smartest people to work together. So far, so obvious. But it gets more difficult when one starts to search for a prototype for the innovative team that will push through its ideas to the market.

We argue that a central component of success in driving an innovative culture is the practice of developing leaders at all levels of an organisation - which we refer to as 'distributed leadership'. The more an organisation disperses freedom and responsibility throughout its structure, the more effective it is likely to be. This does not mean that executive leadership is unimportant - certainly, if there is no effective leadership at the top, the organisation will not function well. But effective executive leadership alone isn't sufficient for success.

Furthermore, this model views each specific leader as 'incomplete' - in the sense that they need to work with others to harness the necessary expertise, vision and commitment. This is particularly true when it comes to innovation. As critical knowledge simultaneously becomes more advanced and more spread out, no one individual possesses all that is needed to integrate the required array of capabilities and to pull off successful innovation.

The idea that high-performing organisations will increasingly have to depend on high-performing teams is not new. There are plenty of anecdotes about teams that have saved their companies, but such stories do not provide general patterns from which we can learn. Organisations differ and what works in one firm is unlikely to work in exactly that way in another firm. In fact, many teams that seem to do everything right end up failing.

In our research, we discovered common factors that lie behind some of the most innovative teams. We call them X-teams, meaning that they have managed to be both externally and internally focused. They are able to lobby senior managers and persuade them of the importance of their work; and they pull in new ideas and feedback from within and without.

In contrast, most managers are drilled in team-building sessions and training guides that suggest that effective performance depends on what goes on inside the team. The camera lens sits on the team boundary and looks inward. The problem is that too many teams think they have to focus entirely inwards in order to meet the objectives set from day one. This inward orientation comes most naturally to us. Teams by their very nature seem to create anxiety in individual members and therefore a focus on the team itself: can we get the job done with these people? Will we get along? How will we coordinate our efforts? Can we finish the work on time?

These are questions that haunt all of us as we enter teams. To deal with this anxiety and these questions, team leaders and members try to find areas of agreement, ways to coordinate, goals to achieve, and a sense of camaraderie, accomplishment and hope early in the process. That's how team members find an identity and a sense of belonging, as well as a direction that calms their anxiety and focuses their activity.

Good internal team functioning is important for success. The problem is that it isn't enough and an exclusively internal focus can be dangerous for teams and their goals. An inward focus, then, is only half the story when it comes to high-functioning, successful teams. The crucial other half is about the external work of teams. This is the half that stresses managing upward and outward, outside the team's boundary as well as inside it. This is the half that looks at the role of the team not solely as a setting for teamwork but also as an agent for innovation and a vehicle for organisational leadership in action. For this role, people need to monitor, market and manage across the team boundary, as well as engage members and build strong ties and processes within the team.

Consider the Netgen team at Microsoft. This small team was formed in early 2000 when Tammy Savage, a manager in business strategy, realised that Microsoft didn't really know what technologies it needed to develop for 13-to-24-year-olds (the 'Netgeners' or internet generation). So she established a team to get to know these customers better and develop software to meet their needs. But selling the idea to top management and getting the resources was not easy. The ideas were too vague and it was not clear what the actual product would be. The team realised it had to make some changes to both its product ideas and its pitch. By the next meeting, the team had data about what features Netgeners might like and how Microsoft could benefit from this approach.

The first thing the Netgen team did was to bring together a group of college students and ask them to work on a business plan. The team wasn't interested in the plan itself, but rather in seeing how the students used technology as they worked together. After a few weeks, team members understood a lot more about how Netgeners used technology and what they wanted it to do for them. And so began the development and production of 'threedegrees', an instant messenger product that allows groups of people to work together online, whether by listening to music or creating a joint photo album.

Team members contacted anyone who might be able to help or provide expertise. They borrowed ideas from others, but invented their own unique form of creative development. They looked at their competitors' products and kept top management informed of their progress. They shopped for the best technologies within Microsoft and, when necessary, developed some of their own. They worked through many technical glitches and internal disagreements, and they always kept going back to the customer - the real Netgeners - to test their ideas. Finally, they produced the code and moved it into MSN Messenger.

This case illustrates that a small group can create change in a large company by producing innovative software ideas and technology, and focusing on learning about customer needs and integrating them into product design. The case of the Netgen team helps us to see what drives successful X-teams. We have identified three distinguishing characteristics: external activity, extreme execution and flexible phases.

Looking externally, X-teams seek out information about the customer, the technology, the market, and the competition. They figure out the direction top management is moving in and work to either change that direction or link to it. They learn from other teams and adapt to new information. They work hard to coordinate with others and get support from upper levels, and they have effective dialogue with many people outside the team. Netgen, for example, sought top management support and funding, spent time understanding customer needs before designing its product and looked around the organisation for pockets of expertise.

X-teams develop internal processes that enable members to coordinate their work and execute effectively. Various members of the Netgen team gave presentations to top management, and then team members discussed the feedback they received about those presentations. Team members learned from their external forays and changed their plans accordingly. This fine-tuned internal process is also shown in Netgen's ability to obtain large amounts of information about the customer and translate it into software features.

Finally, X-teams move well from one phase to another to move a project forward. Such 'flexible phases' include what we term exploration, exploitation and exportation. Netgen team members first engaged in 'exploration' - learning about customer needs, top management expectations and their own passions about what they wanted to create. Then they moved on to 'exploitation' - developing the software that customers wanted and competitors did not yet have. Finally, they engaged in 'exportation' - transferring their product to another part of Microsoft and learning from their experiences.

Netgen changed its process over time to keep the product moving along and to deal with the demands that different phases of a task presented. Together, those three elements - external activity, extreme execution and flexible phases - form the principles by which X-teams guide themselves. But how are they able to actually carry out those principles and what kind of structure supports such teams?

The answers lie largely in what we have come to call the three 'X-factors'. The first factor is 'extensive ties' to useful outsiders, who enable teams to go beyond their boundaries, coordinate their activities and adapt over time. For example, Netgen made use of its ties to other people inside and outside Microsoft, and developed new ties along the way. Second, 'expandable tiers' allow teams such as Netgen to structure themselves. Savage and a few fellow managers composed the core that led the team, a number of other members carried out the work, and more members dropped in for short periods to work on specific pieces of work. Finally, 'exchangeable membership' allows a team to include members who come in and out of the team as needed and to rotate leadership.

These new, externally oriented, adaptive X-teams consistently outperform traditional teams across a wide variety of functions and industries. One such team in the oil business has done an exceptional job of disseminating information about an innovative method of oil exploration throughout its organisation. X-teams in sales have brought in more revenue to a telecommunications company. Drug development X-teams have been more adept at getting external technologies into their companies. Product development X-teams in the computer industry have been more innovative and have outperformed more traditional teams on time and budget metrics. Consulting X-teams have been better able to serve client needs.

Companies will need to build a culture that encourages X-teams to grow if they want to see them increase in number. They can help by providing strategic direction: for example, at consumer goods giant Procter & Gamble, management helps its teams work out where to scout for new ideas. It points them toward the top 10 needs of the consumer - a list that is reassessed yearly. These needs are then broken down into scientific problems to be solved and spelled out in 'technology briefs'. Second, so-called 'adjacencies' (new products that build on existing brand assets) are identified; for example, tooth-whitening products are adjacencies to P&G's Crest brand. Finally, management uses 'technology game boards' to identify possible bridges between a technology and multiple brands by investigating whether a potential external technology acquisition can help more than one family of products.

It's important for managers to avoid the temptation to pile too much work on the shoulders of its team members. If top management does not protect would-be frontline leaders from overload, they run a very high risk of failing, creating cynicism and burnout instead of a culture in which X-teams can thrive.

Top management can help X-teams tap into external networks by building up a wide range of connections. Breakthrough innovation is increasingly done in small and mid-sized entrepreneurial firms that tend to view technologies and markets with fresh eyes, and even many individual inventors have great new ideas that they are eager to license. This new ecology constitutes a web of innovation opportunities and some have referred to it as a new paradigm of 'open innovation'. X-teams are supremely placed as vehicles to capitalise on the opportunities offered by this era of open innovation. P&G builds proprietary networks by employing technology entrepreneurs around the world whose job is to scout for opportunities and to develop supplier contacts.

Top-level leaders also need to pay close attention to the signals they send; people below them watch their behaviour to see if they live up to their professed ideals. Signals are also sent through promotions, measurement systems and resource allocation. If only those managers who report great financial results are promoted, then the message will go out that playing it safe and focusing on the numbers is the way up.

Leaders need to consistently communicate the value of distributed leadership and X-teams, and they can signal changes in a culture by highlighting new role models or behaviours. The key idea is that stories of leadership throughout the firm will encourage distributed leadership in a way that self- promotion at the top simply will not accomplish. In so doing, bosses will help to make their organisations more capable of harnessing the brainpower that sits within.

FURTHER READING

X-teams: how to build teams that lead, innovate and succeed, D Ancona, H Bresman, Harvard Business School Press, June 2007

In Praise of the Incomplete Leader, D Ancona, T Malone, W Orlikowski, P Senge, Harvard Business Review, February 2007

Making the Most of a Slim Chance, SD Anthony, Strategy and Innovation, July-August 2005

Connect and Develop, L Huston, N Sakkab, Harvard Business Review, March 2006

The Search: how Google and its rivals rewrote the rules of business and transformed our culture, J Battelle, Penguin, 2005

Deborah Ancona is the Seley distinguished professor of management at MIT Sloan School of Management and Henrik Bresman is assistant professor of organisational behaviour at INSEAD

THE RAZR TEAM

By the late 1990s, Motorola had lost its way. The former mobile phone industry trailblazer was lagging behind more nimble Scandinavian companies, such as Ericsson and Nokia, and even Korean firms. The problem was that, like many of its successful peers, Motorola had grown into a giant and had become, as Yankee Group director John Jackson puts it, "the stodgy, engineering-driven, mid-western company that was Motorola". Meanwhile, the competition had become smarter and more aggressive. Motorola's future looked bleak.

Along came the Razr team, established in order to produce a phone that would surpass anything that had gone before, a veritable 'razor' of a phone. In addition to the technical challenge, the team faced a competitive climate in which so-called smartphones - offering a multitude of functions such as email and internet browsing - were all the rage.

The challenge of bucking industry trends was matched by what the team was up against at Motorola itself. Razr found that the team's great ideas, vision and engineering brilliance were not enough. It had to find a way to get the resources it needed to push through an unorthodox and expensive project in an orthodox and cash-strapped organisation. The team engaged in ambassadorial activity: it looked outward, by lobbying R&D managers, marketing executives and the CEO himself, and by relentlessly communicating its vision.

Razr also faced a technical challenge. A complex design requires complicated technological footwork, so it engaged in scouting. Team members looked at what other teams had done before them; they looked at not only what had worked, but also at what had been discarded. The team solved a number of technological challenges - such as mounting a camera on a tiny phone - by repackaging existing technologies developed by other teams. Furthermore, by scouting the market, they became convinced that simple functionality and cool design was a niche waiting to be filled.

Finally, Razr had to engage in task coordination. Finding a home in the system of manufacturing and marketing set up for very different kinds of phones was not an easy feat. But by working with other teams, figuring out the interdependencies and making some compromises, Razr pulled it off. The design became the best-selling clamshell cellphone in the world and has been credited with turning Motorola around at a crucial time in the company's history.

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