Creative change in a century-old company: A video case study

We invite you to watch an insightful 60-minute video of Stanford professor Haim Mendelson talking with Dr. Leonard Lane of the Fung Group. The Fung Group traces its origins back more than 100 years, and has successfully embraced changes of many shapes and kinds.

As you listen to their conversation on business model innovations across time, consider how these three concepts might work in tandem:

(1) Aims in view/goal tuning (Innovating Minds, pages 212 – 231).

How does the Fung Group’s three-year (non-rolling) plan allow for a longer-term view and provide for crucial “temporal slack,” with room to experiment and gather feedback?

(2) Motivating exploration and purposefully learning to vary (Innovating Minds, pages 146 – 159).

How does the Fung Group’s new “Explorium” facilitate prototyping and making/finding?

(3) Absorptive capacity (Innovating Minds, pages 181 – 188).

How does the Fung Group’s “70/30 rule” have implications for learning, experimentation, and how they extend what they know—and can do?

Guinness beer, “absorptive capacity,” and innovation

In its everyday sense, to absorb something refers to our ability to take it in or soak it up or learn it well. But how do organizations absorb new knowledge or skills?

In Innovating Minds (p. 183), we explore what has been called the “absorptive capacity” of an organization. Absorptive capacity refers to:

“the ways in which teams and organizations evaluate, receive, and integrate new ‘external knowledge.’ [It] depends on their dynamic ability to recognize the value of new external information, assimilate it, and apply it. This capacity of an organization to productively absorb new information . . . applies not only to concepts but also to skills and meta-skills or ‘skills of skills,’ such as learning to learn. Appreciating the potential value of new information is something that may not come easily or automatically and needs to be fostered.”

So what’s this all got to do with Guinness beer and innovation?

Let’s travel back in time—to October 1899—in Dublin Ireland. The Guinness Brewery has just hired the young William Gosset, fresh out of New College, Oxford. Gosset’s stellar academic performance in math and chemistry has brought him to the attention of the company and he is recruited as a junior brewer. He will be joining four other recent recruits—all selected to spearhead a newly launched “scientific” approach to brewing.

Gossett soon is confronted with the very practical problem of what to make of the results of their many experiments with samples of malt and hops and plots of barley. Because of financial and other constraints, all of their experiments are based on very small sample sizes. It’s difficult to reach firm conclusions with such small samples because the numbers bounce around so much from one sample to the next.

He begins to see that standard practices won’t work and writes an internal company report suggesting a way forward. The report is well received.

But he and the company’s leadership realize that they need greater expertise and exposure to the very latest statistical methodology—that is only available outside the company. With this in mind, the company grants Gosset a one-year leave to go to England to study at University College London (UCL) with the pioneering statistician Karl Pearson.

Once at UCL, and working collaboratively with Pearson, Gosset recognizes that his small sample problems will require their own unique approach. This heralds the development of foundational insights that allow sound inferences to be drawn even from small sample sizes and a publication leading to what is now known as Student’s t-test. (If you have ever encountered this statistical test to compare two means, “Student” is a pseudonym adopted by William Gosset—see below.)

The fact that the company directly encouraged Gosset to leave Dublin to acquire deeper knowledge underscores that the organization understood the value of purposefully “absorbing” new knowledge and meta-skills into their idea landscapes. The company realized it needed to reach beyond its considerable internal expertise to draw on the insights and novel methods of others—extending its absorptive capacity.


—> For further background see:

Phillip J. Boland (2011). William Sealy Gosset — An Inspiring ‘Student’,’ Proceedings of the 58th World Statistical Congress (Session STS028), pages 2650-2655.