Posts filed under 'Leadership'
Like many young Ph.D. students, while I studied at UCLA, I was deeply impressed with my own intelligence, wisdom and profound insights into the human condition. I consistently amazed myself with my ability to judge others and see what they were doing wrong.
Dr. Fred Case was both my dissertation adviser and boss. My dissertation was connected with a consulting project with that involved the city government of Los Angeles. At the time, Case was not only a professor at UCLA, but also head of the Los Angeles City Planning Commission. At this point in my career, he was clearly the most important person in my professional life. He had done amazing work to help the city become a better place, and also was doing a lot to help me.
Although he was generally upbeat, one day Case seemed annoyed. “Marshall, what is the problem with you?” he growled. “I’m getting feedback from some people at City Hall that you are coming across as negative, angry and judgmental. What’s going on?”
“You can’t believe how inefficient the city government is,” I ranted. I then gave several examples of how taxpayers’ money was not being used in the way I thought it should. I was convinced that the city could be a much better place if the leaders would just listen to me.
“What a stunning breakthrough,” Case sarcastically remarked. “You, Marshall Goldsmith, have discovered that our city government is inefficient. I hate to tell you this, Marshall, but my barber down on the corner figured this out several years ago. What else is bothering you?”
Undeterred by this temporary setback, I angrily proceeded to point out several minor examples of behavior that could be classified as favoritism toward rich political benefactors.
Case was now laughing. “Stunning breakthrough number two,” he said. “Your profound investigative skills have led to the discovery that politicians may give more attention to their major campaign contributors than to people who support their opponents. I’m sorry to report that my barber has also known this for years. I’m afraid that we can’t give you a Ph.D. for this level of insight.”
As he looked at me, his face showed the wisdom that can only come from years of experience. “I know that you think that I may be old and behind the times,” he said, “but I’ve been working down there at City Hall for years. Did it ever dawn on you that even though I may be slow, perhaps even I have figured some of this stuff out?”
Then he delivered the advice I will never forget: “Marshall, you are becoming a pain in the butt. You are not helping the people who are supposed to be your clients. You are not helping me, and you are not helping yourself. I am going to give you two options: Option A: Continue to be angry, negative and judgmental. If you chose this option, you will be fired, you probably will never graduate, and you may have wasted the last four years of your life. Option B: Start having some fun. Keep trying to make a constructive difference, but do it in a way that is positive for you and the people around you.
“My advice is this: You are young. Life is short. Start having fun. What option are you going to choose, son?”
I finally laughed and replied, “Dr. Case, I think it is time for me to start having some fun!”
He smiled knowingly and said, “You are a wise young man.”
Most of my life is spent working with leaders in huge organizations. It doesn’t take a genius to figure out that things are not always as efficient as they could be. Almost every employee has made this discovery. It also doesn’t take a genius to learn that people are occasionally more interested in their own advancement than the welfare of the company. Most employees have already figured this out as well.
I learned a great lesson from Case. Real leaders are not people who can point out what is wrong. Almost anyone can do that. Real leaders are people who can make things better.
Case’s coaching didn’t just help me get a Ph.D. and become a better consultant. He helped me have a better life, and his advice can help you too. First, think about your own behavior at work. Are you communicating a sense of joy and enthusiasm to the people around you, or are you spending too much time in the role of angry, judgmental critic? Second, do you have any co-workers who are acting like I did? Are you just getting annoyed with them, or are you trying to help them in same way that Case helped me? If you haven’t been trying to help them, why not give it a shot? Perhaps they’ll write a story about you someday.
Editor’s note: Marshall Goldsmith’s latest book has been the #1 business bestseller over the past month, as tracked by the New York Times, Wall Street Journal, and USA Today.
February 18th, 2007
One Billion New Automobiles!
Bill Jackson and Vikas Sehgal from Booz Allen Hamilton warn executives in the ailing auto industry about emerging trends which will change their future:
1) Social mobility: for the first time residents of remote villages in India and China will be able to reach urban centers in a half-day’s travel
2) Environmental Impact: Manufacturers in India and China will likely develop indigenous technologies at lower cost, making the cars more affordable but still meeting emission norms (they will lag behind Western emission standards by a couple of years, but this will be a competitive advantage!).
3) The Expanding Lower-End Market: The requirements in China and India are far different from the West. Take the $4,500 Maruti Alto, for example.
4) The Learning Model in Emerging Markets: The basic vehicle model of the emerging economies could be adapted for other nations, offering fuel efficiency and unprecedented low prices, with a few extra tweaks like the additional safety features that established markets require. China and India are honing their products in the Middle East, Africa, and Eastern Europe.
Jackson and Sehgal warn:
“Recent history suggests that many Western automakers will fail to respond effectively. U.S. manufacturers have focused on large cars and trucks, and European car companies have focused on performance. Both groups have thus missed opportunities to develop economical cars with high fuel efficiency and the selling point of reducing dependence on foreign oil.
“If all the current automotive trends accelerate, many companies will see their value chains overhauled, not just in the auto industry but in every sector. Nations around the world will suffer the consequences of increased pollution and greater global competition for fuel. And the automobile as a product will be transformed. Those manufacturers and suppliers that start planning now for a new wave of upstart competition will be the most likely to thrive in the next automotive environment.”
What will Ford and Chrysler do?
Download the article here >>
For those of you who think this is simply an issue for the auto industry, think again. The $100 PC is here, Dell.
February 16th, 2007
Joe Nocera of the The NY Times recently visited the annual Corporate Social Responsibility conference and came away dazzled by the paradoxes. The contradictions would have been hard to miss. For example, what must Joe have wondered as he spoke to Exxon Mobil’s and Chevron’s corporate social responsibility representative the week following the Stern Report catalogue of the catastrophic risks of continuing to treat environmental damage as an externality. Ditto for Pfizer’s ‘do-gooder’ who, as a person undoubtedly seeks to better human kind and cannot be held individually accountable for his company’s maniacal focus on bottom line practices such as kick-back like rewards for doctors who push Pfizer products, research and development trials conducted without objective oversight, campaign funding to politicians who support extending legalized monopoly, product development efforts aimed at minor improvements over fundamental innovation, and marketing campaigns that draw attention away from health risks while misleading consumers about the actual costs of new drugs.
Ditto for Ford Motor Company — whose advertising mantras for years and years (e.g. “No Boundaries”) use the imagery of pristine environmental experiences to push gas guzzling SUVs. Or, how about General Electric? Having fouled the Hudson River for decades, GE poured tens millions of dollars into delaying court-ordered cleanup and miselading the public about it’s actions because, from a shareholder point of view, the costs incurred in delay outweighed the costs of the clean up. McDonalds? The same week it’s representative chatted about the company’s sense of social responsibilty at the NY City confab, McDonalds was also funding the effort to fight a NY City ordinance banning transfats.
The list could go on. Joe could not avoid the paradoxes. When, for example, the McDonald’s rep claimed corporate social responsibility is “core to the way we do business”, Joe noted: “You could wonder about that.”
Nocera picked up this theme again in his conclusion. Having ceaselessly breathed in paradox and contradiction, Joe opined that for companies to become substantively responsible — as opposed to PR-oriented “responsible” — would demand all responsible values become core to those companies’ business models.
Hurrah for Joe! He is dead on correct. Now, Joe, go back, re-read and re-think this declarative statement you make earlier in the article:
“Do shareholders come first — above other stakeholders (another favorite buzzword at the conference… encompassing customers, employees, activists and so on)? Of course.”
Joe, Joe, Joe. There can never — never — be fundamental change to the core business models if shareholders come first and their concerns are the trump card of any discussion. Never.
But, Joe, listen up carefully. This last comment does not reflect today’s either/or orthodoxy. The orthodoxy embedded in your all-too-facile “of course”. The orthodoxy that insists that either the shareholder comes first. Or the shareholder comes last.
No. The shareholder cannot come last. We saw a long run of the poor consequences from the 1950s through the 1980s of what happens when the shareholder came last. We must pursue shareholder value. We must celebrate shareholder value.
But we must not make shareholder value the trump card of all human affairs conducted by business — especially if we, as I think we should, choose capitalism as an essential philosophy for the well being of the planet.
Joe, if you are to help us change the core business models then you’ve got to erase your robocall “Of course” about the primacy of shareholder value. You’ve got to think again and somehow, some way discover the more profound declaration that the shareholder, like other core constituencies, must abide in equivalency of importance. The shareholder does not come first. Nor does the customer come first. Nor does the employee come first.
The shareholder does not come last. Nor does the customer come last. Nor does the employee come last.
Sustainable and ethical corporations must shift their core business models to this formulation: “Shareholders provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who….. and on and on.”
That is an ethical and sustainable scorecard. And it reflects this unprecedented and undeniable fact of the 21st century human condition: we live in a world of markets, networks, organizations, friends and families in which our organizations are the new communities that determine the fate of our planet. Our primary ethical challenge can only be met when organizations reintegrate our legitimate concern for value with our equally legitimate concern for other values. Failing this, our most dominant organizations — for-profit enterprises — will continue putting value first and, thereby, continue propelling our global society toward social, environmental, political and economic disasters.
Joe, consider only this illogical aspect of your all-too-easy-and-orthodox “of course”: Who are these shareholders who come first? I’m imagining you are a shareholder. But, let me ask this, are you a customer? Are you an employee?
Put differently, does Joe Nocera the human being come first? Or, do your concerns only matter to the extent that you happen to own stock in one more enterprises?
Should we put one of our dominant shared roles (investor) above the other dominant shared roles of our new age of human kind (employee, customer, family member, friend)? And where does that leave the extraordinary number of folks on this planet who are not investors?
Joe, if we wish to take your constructive insight about changing core business models as an essential condition to the fate of this planet, then we must move beyond either/or-ism to both/and. We must not elevate any role to trump card status while also avoiding subordinating any role as a last concern.
We must learn to practice the new golden rule: “As employees do unto others as customers, investors, family members and friends what we would have them do as employees to us as customers, investors, family members and friends.”
When the employees and executives of Chevron, Exxon Mobil, Pfizer, Ford, General Electric and McDonalds begin practicing this golden rule in earnest, we’ll all witness social responsibility (as well as environmental, medical, legal, political, technical, family, spiritual and economic responsibility) blended into the daily lives of those who make, sell, distribute and service the many good things we depend on for leading our lives.
We will experience and have good things to have that are truly ‘good’.
February 14th, 2007
The management shuffle announced by
Yahoo recently is only the latest evidence of
strategy decay that pervades the leading ranks of the Internet business world. Yahoo says it made the changes to allow the company to move faster.Fine, but in what direction do they want to move? What does Yahoo! want to be when it grows up? And what does that imply for what it will choose not to do?
In our celebrity culture, we love to focus on people. Decker gained, Rosensweig is out, Braun is out, Semel’s still there, Yang’s mentioned, but where’s Filo and who the Hell is going to head up the audience group (and why can’t Yahoo find anyone internally to take this on)?
People matter, of course, but in this context strategy matters even more. Faster movement is dangerous if you have no sense of direction. It just means you do more things more quickly, spreading that peanut butter even more thinly. To paraphrase an old quote by Casey Stengel: “if you don’t know where you are going, you will never get there.”
And let’s not just single out Yahoo. I have a growing sense that all the major Internet players – Google, MSN, Amazon, Ebay and AOL – have lost their sense of direction and differentiation. Rather than carving out and rapidly enhancing areas of distinctive advantage, these major players appear to be leaping like lemmings into the red ocean.
Here are some of the red flags that give me cause for concern:
- Rather than helping people to connect more effectively with resources across the Web, they all seem increasingly focused on aggregating their own resources.
- They are becoming more and more obsessed with advertising revenue and risk losing focus on what is required to add more value to users. Advertising revenue is a dangerous narcotic – it shifts you more and more into a vendor mindset rather than a user mindset.
- They are investing large sums of money on infrastructure, further diverting time and attention away from development of new services for users (infrastructure services like Amazon’s EC2 and S3 are a very different business).
- They seem to be looking more and more at each other and trying to replicate each other’s services rather than focusing on the user and trying to be truly innovative in terms of new services.
Now, this growing homogenization of the leadership ranks might be understandable if the Internet were a maturing business arena. Given the rapid and sustained pace of innovation in the underlying technology, the rapid growth of usage, the continuing shift of spending to the Internet and the proliferation of new businesses created on the Internet, I find it hard to characterize this space as “maturing” – my sense is that it is still in its infancy.
Some observers have even begun to hail the emergence of “Internet conglomerates” as the wave of the future. Looking from the outside in, one can make explicit the assumptions that seem to be driving the investments, business initiatives and strategies of these leaders. These assumptions seem to converge on this view of the future: leading companies will be vertically integrated and horizontally integrated, offering a broad range of their own resources to users who will “settle” into their spaces. Certainly, the strategies of these companies seem to assume that Internet conglomerates are the wave of the future. Is this really the way the Internet will evolve as a business platform?
As I have written in Harvard Business Review, I believe that a quite different future will unfold, marked by a distinctive process of unbundling and re-bundling of firms. This perspective suggests that all the Internet leaders confront the same difficult choices that more traditional companies also face. Over time, will these companies choose to be customer relationship businesses, product innovation and commercialization businesses or infrastructure management businesses? None of the Internet leaders appear prepared to confront these choices yet.
Of course, there’s another interpretation of the initiatives pursued by the Internet leaders. They may be explicitly avoiding any view of the future and instead spreading their bets across many initiatives in the hope that some of these bets will pay off while others will prove to be dead-ends. Nick Carr refers to this as the spaghetti strategy – “throw a lot of stuff against the wall and see what sticks.”
As uncertainty increases, this has become the preferred “strategy” of many companies, not just in the Internet sphere. While strategy used to be viewed as the discipline of making choices, this approach proudly rejects the need to make any choices. It is a particularly seductive approach for large companies with lots of resources.
And yet this approach stands in sharp contrast to the strategies that enabled the Internet leaders to carve out their leadership positions in the first place. Unlike the thousands of other dot.com start-ups that embraced hustle as strategy and speed without direction, the founders of these companies started with a very clear, even though high-level, long-term destination in mind. It helped them to make difficult choices in the near-term and to launch waves of initiatives that cumulatively built very large and successful businesses. It has stood them very well in the first decade of their business.
In my own work, I use a FAST strategy methodology. It emphasizes the need to have a clear, but high-level view of a long-term destination while in parallel focusing on a limited number of high impact initiatives in the operations and organization that can accelerate movement towards this destination. What the Internet leaders seem to have lost is any distinctive long-term view of what kind of business they will need to build to remain successful in a rapidly evolving business landscape.
People can be moved in and out of executive positions. Large, high visibility acquisitions can be announced. “Strategic” relationships across leading companies can be negotiated. But without a clear and differentiated sense of long-term direction, all of these initiatives will make for good newspaper copy, but count for little in terms of sustained value creation.
February 2nd, 2007
StrategyWorld.org is proud to announce that Marshall Goldsmith’s latest book, What Got You Here Won’t Get You There: How Successful People Become Even More Successful, is the #1 best selling business book in the United States (as ranked by both the Wall Street Journal and USA Today).
Congratulations, Marshall! We’re going to have some excerpts from the book here shortly, so stay tuned.
January 31st, 2007
Back in 1999, Peter Drucker wrote about “The Real Meaning of the Merger Boom.” In a punchy essay for the Conference Board’s Annual Report, the guru for all gurus proclaimed, “there is no merger boom today.” End of story.
In fact, he made clear that “in total dollar volume,” it was a zero sum game. De-mergers, unnoticed, were equal to the mergers. Moreover, “the majority of today’s mergers are defensive, the majority of yesterday’s were offensive.” If anything, this has simply become more the case in 2006 and 2007. For example, the major auto companies, so enamored of mergers for a while, have now taken to joint ventures. Many, many mergers today are consolidation plays, tactical efforts to hang on in dying businesses, pulling together wounded enterprises that think they can afford heart surgery when they are large enough to pay the bill.
Drucker could have gone on to point out that history is littered with mergers that subtracted value for shareholders and society. Even the wave of industry consolidations that have taken place from 2000-2007 may in the end prove strategically short-sighted –investments in dying industries without regard to tomorrow.
“The truly important developments in corporate and economic structure today are not the mergers and de-mergers. They are, largely unnoticed or at least unreported, new and different ways of corporate structure, corporate growth, and corporate strategy….the real boom has been in alliances of all kinds, such as partnerships, a big business buying a minority stake in a small one, cooperative agreements in research or marketing, joint ventures, and, often, ‘handshake agreements’ with few formal and legally binding controls behind them.”
Drucker spotted the real boom – alliances. But an utter fascination with the doings of Wall Street, even in our highest political councils, has distracted all of us, riveting us on merger headlines and concealing from us this deep enduring trend of our time.
The most adroit of a new breed of global chief executive gets it. Such is Carlos Ghosn who turned around Japan’s Nissan Auto, peeling away layers of fat instead of adding extraneous divisions. He went from massive losses to $7 billion in profits and wiped out $23 billion of debt. Nissan’s 11% operating profit margin has made it the most profitable of the world’s big automakers (See Economist, February 26, 2005, p. 66). Now to head Renault as well, Ghosn has said that the power of the alliance between them lies “in its respect for the identities of the two companies, and on the other, in the necessity of developing synergies.” If Nissan had been fused with Renault, failure would have followed.
We ourselves are very aware of the negatives that crop up with mergers. It was only a short time after Allegheny Airlines absorbed PSA and Piedmont Airlines (both better companies than it incidentally) that the combined market value of the three added up to less than the value of each of the components prior to their homogenization. This unhappy trinity, once known as Agony Airlines to wags in the Northeast, has since become the teetering bankrupt U.S. Airways, affectionately called UseLess Airways by its passengers. After many false re-starts, it is hoped that America West’s management, which took over U.S. Air, can run the new combined airline to better effect.
As well, one can not overestimate the size of the merger friction costs imposed by investment bankers, lawyers, and accountants who created and distorted this and other stillborn combinations. Reduced friction costs for continuing operations have traditionally been the excuse for bloated business combinations and expensive asset bases, but this does not at all account for the absolutely horrendous sunk costs imposed by middlemen in the merger/de-merger process. In fact, the mechanics of mergering themselves often distort the shape of the resulting enterprise, creating a lumbering creature nobody envisioned. But the financial and strategic costs that lard the merger process are well obscured by the middlemen and their sales people who make such a good living off of such transactions.
There are broad conceptual reasons as well why a collaborative model free of hierarchy and legalistic strictures is productive of much more economic value. With increasing amounts of the work to be done by corporations in advanced economies consisting of knowledge and professional services chores involving far different workflows, the fuel for business activity consists of pockets of intelligence that are broadly distributed throughout the world, often outside the corporation. One cannot accumulate the human resources one needs to play on a global scale within one’s walls. Organizations need to tap into a multitude of other organizations. And they need to avail themselves of workers strewn about the globe—some in outsourcing companies and others entirely on their own.
Charles Handy finds that “many organizations have more people working outside them than they have inside them.” Furthermore, “only about half the working population is working inside an organization.” The successful company, with perhaps only 20% of its workforce on its own payrolls, has to learn to virtually coordinate companies and independent workers who are bound to it by no more than a handshake. Handy chats about this brave new world in “The Future of Work in a Changing World” in an interview with Aurora Online.
For the past 10 years the goal of our own staff has been to divine the rules of the road for the still emerging collaborative enterprise. In every way, they fly in the face of all the dogmas we laid out for the corporation in the 20th century. For this reason, the postulates of collaboration are usually counter-intuitive. Consider here just two examples:
Rule 1: At best the chief executive should be a fish out of water. Take a look at Nissan. Carlos Ghosn was born in Brazil in a Lebanese immigrant family, then had a French education first in Lebanon and later at the Ecole Polytechnique where he studied engineering. For openers he turned around Michelin, the tire company, in Brazil to begin with, then in America. He went on to become a cost-cutter at Renault. Louis Schweitzer, the very original business mind who headed up Renault, posted him to Nissan with little in-France business experience and not even a smidgeon of Japanese grounding in his system. But he was effective because he could bring a pan-global outsider’s objectivity to Nissan. He succeeded in part because he was an alien from outer space. He was the stranger who could see what makes the natives tick and who had no sentimental ties to sever as he cleaned house.
Rule 2: The best alliances are very, very unlikely. For instance, Kirin Beer, once the IBM of the Japanese beer business, came to George Rathmann of Amgen as he was getting ready to ramp up production of Epogen. It contributed its fermentation production techniques to the biotech company, as well as a slug of capital. Rathmann has since acknowledged that its role was central to the growth of Amgen into a multi-billion dollar company. Most likely, a start up will find that the process knowledge it really needs lies 10,000 miles away in a dramatically different industry and in a vastly different culture. But, of course, the Japanese bring special skills and excellence to manufacturing which is why, as we used to say, that the American dream got interrupted by the Japanese clock radio.
Alliances are best, then, if they overcome all the inbreeding tendencies of conventional businessmen. The dynamics of mergerdom tend to preclude such unlikely alliances.
What’s at issue here is how to devise an organizational model that encourages rapid, insistent global learning by an organization. As we have said elsewhere in “Better Learning Networks,” (see item #187) researchers at the Santa Fe Institute have come to understand that there is an optimal coupling within an organization that encourages learning. It is simply too hard for knowledge to interpenetrate an organization where the bonds are made of steel rather than nervous tissue.
Those who think about software systems have come up with the same insight in respect to information systems. Ubiquity interviewed us about collaboration a while back. There we reference an article by John Seely Brown and John Hagel called “The Joy of Flex” in which they said, “”Loose coupling makes it easier to improvise without worrying about disruptions elsewhere in the system.” While hardwired systems afford short-term cost advantages, they are costly in the end, since they cannot accommodate the disruptions imposed by global realities. Likewise, we would contend, merged companies achieve a rigidity that is antagonistic to agile behavior.
If alliances are the fluid organizational form that should dominate our business activity, many head-in-the-sand executives don’t know it. Squabblers debate about the value of strategic alliances and how to make them work. This is all rather academic. Alliances are very much a fact of life in our lean business society, and so the only option for the business generalissimo is to saddle up the horse and see if he can ride this new kind of stallion.
Well, the future is always a bit uncomfortable until it is past.
January 29th, 2007
Now that Bob Nardelli is out at the Home Depot the armchair quarterbacks and hindsight pundits are full of theories about “the fatal flaws” and the “mental errors” that caused his sour (albeit lucrative) exit.I think they all (so far) have missed the most significant factor. It wasn’t primarily that Nardelli’s “political” skills were lacking or that his strategy was wrong ( or even the curse of Six Sigma). In fact at the root of his predicament was something that most people would call a strength not a weakness. (And it’s a strength you, Bob, and I probably share).
The big reason Nardelli was, from the beginning, never going to win at Home Depot was that he recognizes the need for change very quickly and acts on it.
I know that seems contradictory so let me explain.
In the late 1990s I spent almost five years writing and researching the reasons that companies move too slow. One of the biggest obstacles I had to address was the powerful urge to hold on to the status quo and the incredible unwillingness among many people to let go.
As a result I, along with a lot of other executives, worked on strategies to open up when hearing new ideas and to embrace change more quickly. From what I’ve read Nardelli had done much the same during his tenure at GE.
But as the experts explain, “good things often have unintended (negative) consequences.”
What unintended consequence comes from learning to recognize the need for change quickly and act without delay? It’s often a huge blind spot.
Many early adapters and fast acting managers have a hard time imagining that others do not see what they see and they therefore radically misinterpret or underestimate what it will take to get the majority of their associates to buy-in.
From the beginning there were signs that Nardelli didn’t have enough buy-in at the Home Depot. People in the stores were whispering, “Nardelli has no retail background” and “The board is paying him too much money.” “He doesn’t get it,” senior executives grumbled, “Everything he’s doing is counter-culture.” Even Wall Street didn’t buy-in. “The market’s getting saturated,” one expert wrote. “I wouldn’t be in a rush to buy it [Home Depot’s stock].” (This was at a time that Nardelli’s turnaround efforts were barely off the drawing board.)
Now as someone who embraced change and acted quickly in the past Nardelli saw these people sitting on their hands and making negative comments and decided that was proof positive that they were the wrong people for the new situation.
And he was partly right. About 20 percent of the average company won’t ever pitch in and try new ideas or innovations.
But that leaves a large group of people who may be right for the job but who stay on the fence longer that the leaders expect. They look like immovable resisters, but they’re not. They are simply more average folks, people who need to see that the change is safe and likely to succeed before they will give a strategy their buy-in.
This is the critical lesson I’ve learned in the last three years as I’ve been researching the art of execution. Not enough buy-in one of the four big reasons why half of all the best laid plans fail. But it’s not callousness or stupidity that causes executives to underestimate the challenge and assume the worst. It’s that many of us have the eyes of the early adapter. We’ve opened our minds to what we see as an obvious need for change. And we assume that resistance is irrational (or sinister). We lose good people and take a big step back. In the end that causes us to miss our announced milestones and disappoint our stakeholders.
So now we have an opportunity to learn from the mistakes of another (a great way to gain experience for cheap). Here’s the lesson: Every well thought out strategy need an equally well thought out plan to get enough buy-in. That plan starts with realizing that everyone isn’t like us. Many are slower to buy-in. But if they see the path is safe and likely to succeed they will (also) follow through.
January 8th, 2007
Senior executives need simple, but very powerful frameworks that help them to think strategically, and to align people in the organization through the use of a common strategic language.
The three box thinking model is an example of a framework that I use to facilitate strategic thinking and alignment.
Actions companies take belong in one of three boxes:
Box 1 — manage the present;
Box 2 — selectively abandon the past; and
Box 3 — create the future.
Box 1 is about improving current businesses. Box 2 and Box 3 are about breakout performance and growth.
Many organizations restrict their strategic thinking to Box 1. This tendency has been particularly acute in the past two to three years, as most leaders have emphasized reducing costs and improving margins in their current businesses.
But strategy cannot be just about what an organization needs to do to secure profits for the next year. Strategy must encompass Box 2 and Box 3. It must be about what a company needs to do to sustain leadership for the next ten years. In fact, the central task of an organization’s leaders is to balance managing the present with creating the future. Examples of successful Box 2 and Box 3 initiatives include: Dell’s direct model in the PC industry, Wal-Mart’s transformation of the discount retailing industry, Apple’s introduction of iPod, and Southwest Airlines’ revolution in the airline industry.
Organizations that operate within a short timeframe base their actions on the assumption that their industry is stable and static. But it takes years for large organizations to change directions. If you take this into account, change is rapid and nonlinear. For instance, nanotechnology and genetic engineering are revolutionizing the pharmaceutical and semiconductor industries. Globalization is opening doors to emerging economies, such as India and China, and billions of customers with vast unmet needs. Once-distinct industries, such as mass-media entertainment, telephony, and computing, are converging. Rapidly escalating concerns about security and the environment are creating unforeseen markets. And other, more subtle changes are important as well, such as the trend toward more empowered customers, the aging population in the developed world, and the rising middle class in the developing world.
As a result of these forces, companies find their strategies need almost constant reinvention because the old assumptions are no longer valid, or the previous strategy has been imitated and commoditized by competitors, or changes in the industry environment offer unanticipated opportunities. The only way to stay ahead is to innovate.
Part of the job of executives is to make money with the current strategy. That is the challenge in Box 1. Part of their job is to make up for the decay and commoditization of strategy. That is the challenge in Box 2 and Box 3.
Too many companies ignore these two boxes until it is too late.
January 4th, 2007
This past year U.S. News teamed with the Center for Public Leadership at Harvard’s John F. Kennedy School of Government to evaluate the state of leadership.
The results were dismal:
More than half of Americans—56 percent—say they’re not proud of the country’s leaders. Two thirds and more say the country is in a leadership crisis. Nearly three quarters say the nation will decline without better leadership.
Eighty-three percent of Americans said corporate leaders are more concerned with the bottom line than with running their companies well, 93 percent say political leaders spend too much time attacking their opponents, and only 39 percent say leaders have high ethical standards.
What’s new you ask? Well, the study, led by Warren Bennis and David Gergen, also dug up a few authentic leaders — rating the nominees from to 1 to 5 based on how well they met the following criteria:
Sets Direction (25%)
- By building a shared sense of purpose
- By setting out to make a positive social impact
- By implementing innovative strategies
Achieves Results (50%)
- Of significant breadth or depth
- That have a positive social impact
- That are sustainable
- That exceed expectations
Cultivates a Culture of Growth (25%)
- By communicating and embodying positive core values
- By inspiring others to lead
Unfortunately, not many business leaders made the cut.
No mention of Branson, Gates, or Jobs.
Business leaders making the grade include Warren Buffet, A.G. Lafley, and Marilyn Carlson Nelson.
Read all about it >>
January 1st, 2007
What do Michael Porter, Bono, and The Gap have in common?
They’re all related to “The Competitive Advantage of Corporate Philanthropy.” The HBR article, by Michael Porter and Mark Kramer, proposes a fundamentally new way to look at the relationship between business and society that does not treat corporate growth and social welfare as a zero-sum game.
They introduce a framework that individual companies can use to identify the social consequences of their actions; to discover opportunities to benefit society and themselves by strengthening the competitive context in which they operate; to determine which CSR initiatives they should address; and to find the most effective ways of doing so.
Perceiving social responsibility as an opportunity rather than as damage control or a PR campaign requires dramatically different thinking—a mind-set, the authors warn, that will become increasingly important to competitive success.
The framework identifies three ways in which social issues should be prioritized:
- Generic: Social issues that are not significantly affected by a company’s operations nor materially affect its long-term competitiveness.
- Value Chain: Social issues that are significantly affected by a company’s activities in the ordinary course of business.
- Competitive Context: Social issues in the external environment that significantly affect the underlying drivers of a company’s competitiveness in the locations where it operates.
Case studies? Porter gives us a few examples: Whole Foods, Microsoft, GE, Volvo etc. Some of his examples are weak (ExxonMobil building roads is not exactly CSR, or is it?)
What’s truly great about this article is the diagram mapping the societal impact of the value chain ( pp.86-87). In it, Porter shows us how companies can start analyzing it’s “inside-out” linkages to see where it can do the most good — for society and itself.
Which brings us to The Gap. Duke grad-student Jeremy MacNealey writes:
“The apparel retailer has struggled mightily over the past few years, but we learned that the company may have found new hope from the most unlikely of sources — its charitable efforts. Teaming up with (Product) Red and launching a new apparel line called Gap (Product) Red, it has seen an overwhelming response by consumers to the edgier and more premium product. The response by the public has been so strong that the company is now planning to apply a similar look throughout the Gap brand. It just may be that the long-awaited turnaround that investors have anticipated will actually come about in part as a result of Gap’s charitable efforts.”
More about Product Red here >>
December 30th, 2006
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