The Innovation Show

“Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” — John Kenneth Galbraith

In a 1994 study by Hollyn Johnson and Colleen Seifert, researchers led participants to believe that flammable materials caused a warehouse fire. Even after being informed that this was incorrect, participants continued to blame those materials when answering questions about the fire. This study highlights a fundamental issue: once we establish our beliefs, we resist changing them, even when presented with clear evidence to the contrary.

Motivated reasoning, where we give more weight to confirming evidence, compounds our resistance to change. Instead of updating our beliefs to fit new information, we adjust the facts to reinforce what we already believe. This cycle can be dangerous in organisations as they move from their initial flexible stages to more fixed and formal structures. In this week’s Thursday Thought, inspired by The Innovation Show series with Peter Compo and a forthcoming episode with Annie Duke, we explore how Henry Ford fell victim to his success, held captive by his crystallised strategy.

From Fluid Beginnings to Frozen Mindsets

“All living things, whether plants, animals, people or groups of people, exhibit patterns or cycles of development, moving from periods of vitality and growth to periods of decay and disintegration. The pattern of business growth and decline — and the behaviour of leaders — follows this same course.” — Lawrence M. Miller

In the early stages of an organisation’s development, the mindset remains dynamic and flexible, as individuals share and adapt ideas and practices rapidly. This phase requires loose discipline at the lower levels, allowing individuals the freedom to explore and innovate. For Henry Ford, a single principle guided this early phase: balancing cost and cost and throughput against style and features. The organisation emphasised both efficient production and the ability to adapt in the development and manufacturing of the Model T.

However, as success solidifies, the mindset often transitions from fluid to rigid. The initial flexibility crystallises, leading to high-level constraints, rigid plans, and an aversion to change. This shift can stifle innovation, as organisations become increasingly resistant to new information that challenges their established strategies. Leaders may cling to outdated beliefs, even when the market or environment has changed, leading to organisational stagnation.

The Ford Example: A Cautionary Tale

Ford Mindset Crystallises

“Businessmen go down with their businesses because they like the old way so well they cannot bring themselves to change. One sees them all about — men who do not know that yesterday is past, and who woke up this morning with last year’s ideas.” — Henry Ford

Ford’s early success was driven by a clear vision. He didn’t just say, okay, everybody; we want an automobile for the masses, that’s going to be cheap and wildly available. Neither did he say our strategy is to produce enormous numbers of inexpensive, practical cars for the average person and business. It was the constant adherence to the rule of never sacrificing, cost and throughput for style and options. That rule was ingrained in everything they did. This guiding principle allowed for innovation and adaptation, leading to the mass production of the Model T. However, as the company grew, Ford’s mindset became increasingly rigid. He shifted from encouraging low-level flexibility to imposing high-level constraints, focusing on high-volume, low-cost cars even as the market matured.

By the 1920s, consumer demand had shifted toward more style, features, and choices — options that competitors like GM and Chrysler were quick to provide. Ford’s rigid adherence to his original successful strategy prevented the company from adapting to these changes, ultimately leading to its decline. Ford’s success and rigid personality made him a prisoner of his own achievements. As the Model T’s success crystallised into an unyielding strategy, Ford lost the ability to engage in the low-level analytical reasoning that had once driven his innovation.

The Importance of Balancing Levels

The story of Ford illustrates the critical role that the concept of levels plays within organisations. In complex adaptive systems, including organisations, interactions occur at different levels: low (local) and high (global). At the low level, detailed processes and disciplined actions drive daily operations and generate the foundation for innovation. The high level is where patterns and innovations emerge because of these low-level interactions. For an organisation to innovate and adapt, there must be a proper relationship between these levels. Low-level discipline fosters and high-level goals guide the organisation.

With this model in mind, Ford’s story offers a clear example. Initially, Ford operated with a balanced approach: low-level discipline guided day-to-day operations, ensuring efficiency, while high-level freedom allowed for innovation and adaptability. This balance enabled Ford to revolutionise automobile production with the Model T. However, as Ford’s success grew, he became increasingly disconnected from the lower levels, focusing instead on rigid high-level outcomes. This shift disrupted the feedback loop between levels, leading to a disconnect between strategy and execution, which ultimately stifled innovation and adaptation.

This dynamic is not unique to Ford. Many successful organisations fall into the trap of prioritising high-level goals, such as revenue and market dominance, while neglecting the low-level processes that fuel innovation. The concept of levels shows that creativity and innovation don’t arise from simply alternating between discipline and free thinking. Instead, they emerge from rigorous, disciplined work at the local level that supports and enables high-level creativity. To sustain innovation, leaders must stay connected to both levels, ensuring that their organisations remain dynamic and adaptable.

Connecting the Past and Present: Lessons from Ford to Tesla

“The difficulty lies not so much in developing new ideas as in escaping from old ones.” — John Maynard Keynes

The concept of levels is equally relevant today, exemplified by the story of Tesla. When asked how Tesla succeeded where others failed, Elon Musk credited the company’s engineering focus. Like Ford in his early years, Musk emphasised the importance of being on the shop floor, solving problems directly rather than merely managing from afar. Tesla’s success has been driven by rigorous low-level discipline — attention to detail, constant iteration, and a relentless focus on engineering excellence. This low-level discipline has allowed Tesla to innovate at a high level, leading to industry-disrupting products.

However, as competition in the electric vehicle market intensifies, Tesla faces the same challenge that Ford once did: avoiding the trap of becoming a prisoner of its success. As Tesla grows and its strategies solidify, the risk increases that it will shift focus from low-level discipline to rigid high-level goals, potentially stifling the very innovation that made it successful. The challenge for Tesla — and any successful organisation — is to maintain a dynamic balance between the levels, ensuring that low-level processes continue to feed the high-level.

Part 2 of our 6-part series with Peter Compo on “The Emergent Approach to Strategy” is now live on YouTube and following soon on all other channels.

We have another strategy fest coming soon with Henry Mintzberg, after our Gary Hamel series.

All feedback is welcome.

Aidan

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Levels, Emergence and the Freedom/Discipline Duality was originally published in The Thursday Thought on Medium, where people are continuing the conversation by highlighting and responding to this story.