Answers in October >>
May 13th, 2007
At the beginning of April StrategyWorld pointed out Circuit City’s foolish strategy to fire experienced employees to cut costs.
Now it’s time to fire the decisionmakers who came up with this bright idea.
According to the Washington Post:
“…the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.
The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.”
Will they never learn?
Perhaps they need to attend our FAST strategy webinar… although I doubt anything can help this kind of blindness.
Speaking of ethics, how about Duke’s cheating scandal?
Listen to this:
A survey released last year by Rutgers University professor Don McCabe showed 56 percent of MBA students acknowledged cheating in 2005. In other fields, 47 percent of graduate students said they cheated.
Note: these were graduate students, not undergrads.
May 2nd, 2007
When I work with senior executives, they express a real conflict: they know strategy is important (strategy, like IT, does matter) but they have a growing sense that traditional approaches to strategy are simply not up to the challenge of coping with increasingly uncertain business environments. What to do?
EDITOR’s NOTE: see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”
My first piece of advice: throw out two basic tenets of business strategy. First, reject the notion that strategy is sequential – that detailed strategic blueprints need to be laid out before a company can proceed with operational implementation. Secondly, abandon the traditional strategy view that the relevant time frame for strategic planning is a five-year horizon.
My second piece of advice: implement a FAST approach to strategy. FAST in this case is an acronym for Focus, Accelerate, Strengthen and Tie it all together. This approach urges executives to move along parallel paths, operating on two very different time horizons: one horizon takes a five to ten year view of the business and the second horizon zooms in to a much more tactical six to twelve month view of the business. The one to five year horizon that is so loved by traditional business strategists actually receives very little attention in the FAST approach.
Focus is the key activity on the five to ten year horizon. This requires senior management to develop a common view on two key questions for their business. Five to ten years from now, what will the markets that we participate in look like? Then, what kind of business we will need to have in order to continue to create value in these markets? Unlike strategic approaches of the past, Focus does not require management to develop a detailed view of the future, but it does require management to develop a clear, high level view specific enough to help the company make important near-term choices.
To illustrate the high level nature of the view of the future, look at Microsoft. Back in the late 1970’s Bill Gates defined a Focus for Microsoft that could be summed up in two sentences. First, computing power is inexorably moving from centralized mainframes to desktop computers. Second, to be successful in the future, a computer company will need to “own” the desktop. Simple and succinct, yet specific enough that it helped Microsoft to answer the unexpected call it got from IBM to help IBM develop an operating system for a new desktop computer it was developing, rather than the twenty other calls it undoubtedly received on that same day. This Focus helped to guide the company for two decades. It only began to need retooling in the late 1990’s as the advent of the Internet set into motion fundamentally new forces.
On the six to twelve month horizon, Accelerate and Strengthen are the key requirements. By Accelerate, I mean identifying a few key operating initiatives that have the potential to significantly accelerate the movement of the company towards the long-term Focus. Once these initiatives are identified and agreed upon by senior management, the question is what can be done to help these initiatives increase their impact over the next six to twelve months? Management needs to set aggressive and measurable operating performance objectives for these initiatives over the next six to twelve months.
On the same time horizon, Strengthen also comes into play. Here, management needs to ask, what are the major organizational obstacles that are preventing us from moving even faster to achieve our operational objectives? Then the question becomes, what can be done over the next six to twelve months to “de-bottleneck” the organization and strengthen our organizational capabilities so that we can move even faster in the next six to twelve month cycle?
Tie it all together integrates these three streams of activities. The key to success with the FAST strategy is to frequently iterate back and forth across these two time horizons and refine efforts on all streams based on the results of efforts to date. The near-term operating initiatives will provide management with much more information regarding both the market place and the capabilities of the company. This should help to refine the longer-term Focus view. In turn, this refined Focus view will be helpful in selecting and shaping the next wave of near-term operating and organizational initiatives. Senior management must actively monitor progress on all three streams and play an active role in shaping initiatives and setting objectives.
The FAST strategy approach respects the need for both near-term performance and longer-term direction, learning and adaptation. It favors incrementalism but recognizes that, without direction, incrementalism will inevitably sub-optimize relative to longer-term opportunities. Properly focused, incrementalism provides significant advantages relative to more tempting “big bang” transformational initiatives:
Few companies today have adopted anything like a FAST strategy approach. You can use five questions to determine whether a company is pursuing this approach:
The FAST strategy approach provides a robust framework for incremental innovation. It offers a useful context for understanding how to create strategic advantage through sustained innovation in business practices enabled by IT capabilities. It also helps us to understand the deep business significance of the emergence of a much more flexible distributed service architecture. This new IT architecture will help businesses to accelerate their near-term operational initiatives even further. In doing so, it will provide a solid foundation for radical incrementalism.
EDITOR’s NOTE: For more on FAST Strategy, see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”
April 28th, 2007
“What if everything you learned about business strategy is WRONG?”
Why, then it’s time to sign-up for John Hagel’s webinar on FAST Strategy presented by StrategyWorld.org.
In this webinar John reveals why the basic principles of traditional strategy - the principles still taught at most business schools and company executive education programs - are wrong:
· WRONG: Develop a detailed strategy before moving to operational implementation
· WRONG: Focus on a one to five year time horizon to develop robust strategies.
· WRONG: Pursue a portfolio approach to business initiatives to cope with growing uncertainty.
· WRONG: Strategy is a specialized discipline that needs to be pursued by experts.
The alternative? FAST Strategy.
John shows us how some of the most successful companies in the world maintain their advantages, and we can begin to synthesize a new approach to strategy, an approach called FAST strategy.
This approach integrates four elements in an innovative way:
· Focus - building alignment around a long term, five to ten year destination.
· Accelerate - ensuring that the highest impact operational initiatives over the next six to twelve months receive a critical mass of resources
· Strengthen - designing organizational initiatives that can be implemented over a six to twelve month period to address key bottlenecks preventing the firm from moving even more rapidly.
· Tie it together - effectively integrating the first three elements in ways that speed up learning and enhance performance.
Here’s our pitch:
Some of the world’s most successful companies use John Hagel’s thinking to guide them as they navigate the turbulent waters of business competition. Don’t you think you owe it to yourself and your company to find out how they do it? For the price of a plane ticket, you can. And you don’t have to leave the comfort of your office. Mark your calendar, hold your calls, and join our webinar.
PS- space is limited, so please sign up and reserve your seat.
April 22nd, 2007
Lee Iacocca, former Republican?
That’s the verdict if you read the excerpt from his new book on leadership:
Where Have All the Leaders Gone?
Iacocca’s book describes the “Nine Cs of Leadership”:
- Curiosity
- Creativity
- Communication
- Character
- Courage
- Conviction
- Charisma
- Competence
- Common Sense
Wait, there’s more: the ability to deal with a Crisis
Maybe Iacocca ought to go buy Chrysler.
The book is written in his unmistakable voice:
He’s right. Much more here >>
April 14th, 2007
Here’s an interesting article from Knowledge@Wharton:
Short-Circuited: Cutting Jobs as Corporate Strategy
Apparently, Circuit City announced on March 28 that it cut 3,400 jobs, or 7% of its workforce, effective that day, because the salespeople were paid “well above the market-based salary range for their role.”
The folks at Wharton are not impressed:
“That’s the most cynical thing I’ve heard about in a long time,” says Peter Cappelli, management professor and director of the Center for Human Resources at Wharton. “I like to think I’m cynical, but sometimes it’s hard to keep up.”
Another risk is that a downsizing company can get rid of people whose knowledge and experience are vital. Wharton management professor Daniel A. Levinthal points out that Circuit City’s decision to cut 3,400 veteran sales people “sounds like a massive de-skilling” of the company. Since the people who will be hired to replace the laid-off workers probably will not know the merchandise as well as the workers who were dismissed, customers who want to know how to set up a high-definition TV or why one music player is better than another might not receive the best advice.
If this is the case, Circuit City might have a hard time differentiating itself from its competitors. “These new people will be order takers and have less knowledge [about the merchandise],” says Levinthal. “Circuit City would now be competing against e-commerce because it’s become similar to e-commerce and lost its differentiation as a bricks and mortar store.”
Say goodbye to Circuit City. They are stuck between Wal-Mart and Amazon.com, and this latest move will accelerate their demise.
At the core, this is a failure of imagination. But it may also represent the end of a whole slew of similar companies, in the retail industry (and not necessarily just in high tech).
So what might they have done? Suggestions?
Perhaps they should check to see if their leadership is paid “well above the market-based salary range for their role.”
1 comment April 5th, 2007
In 4 Sources of Advantage, authors Peter S. Cohan and Barry Unger tell us that technology leaders create success cycles by the way they perform four critical business processes – which they call “the four sources of advantage.”
The four processes are:
- Entrepreneurial leadership
- Open technology
- Boundaryless product development
- Disciplined resource allocation
So where does your company stand? If you’re seeking to accelerate your company’s, take this self-assessment and find out: [hint - A is good, B is bad]
Entrepreneurial leadership
1. Hiring
A. Hires engineers with strong technical skills and keen business sense; or
B. Hires engineers with strong technical skills and limited business sense.
2. Self-driven research
A. Gives engineers, say 10 per cent to 20 percent, of their time to work on projects they choose; or
B. Requires engineers to work exclusively on manager-directed projects.
3. Publishing
A. Allows engineers to publish current research in peer reviewed publications after appropriate patent disclosures have been made; or
B. Requires engineers to keep their research company confidential.
4. Peer recognition
A. Holds annual celebrations for engineers who develop innovative products; or
B. “Rewards” engineers who innovate by letting them keep their jobs.
5. Culture
A. Uses culture and supporting measurement and reward systems to emphasise how society benefits from its products; or
B. Uses culture and supporting measurement and reward systems to focus on enhancing shareholder value.
Open technology
6. Speed to market
A. Acquires companies or licenses technology to obtain rapid access to products its customers want to buy; or
B. Uses only internally developed technology to develop new products.
7. Customer perspective
A. Builds technologies that create customer value; or
B. Builds technologies that satisfy executive requirements.
Boundaryless product development
8. Cross-functional teams
A. Uses cross-functional teams of, say, engineering, manufacturing, sales, marketing, finance, and early
adopter customers, to design new products; or
B. Uses its engineering department to design new products.
9. Prototypes
A. Uses cross-functional team input to build new product prototypes; or
B. Manufactures product based solely on engineering blueprints.
10. Fast feedback
A. Redesigns prototypes using feedback from early adopter customers, manufacturing, and other functions; or
B. Redesigns products only after they’re out in the market.
Disciplined resource allocation
11. Timing discipline
A. Creates strong incentives to meet project milestones; or
B. Lets product development deadlines slide.
12. Expected value discipline
A. Validates development projects’ expected value (EV) via continuously updated market research and kills them if their EV goes negative; or
B. Once their budget has been set, sticks with development projects.
13. Learning discipline
A. Allocates resources and shares learning through control systems that measure competitive performance; or
B. Rewards those who tell the CEO what the CEO wants to hear and fires those who contradict the CEO.
14. Renewal discipline
A. Develops a deep bench of management talent; or
B. Dismisses ambitious managers to protect the CEO.
March 5th, 2007
Managers build their plans and strategies on the assumption that people in their firm are ready and willing to be team players, acting collectively to create or achieve something in the future.
The truth, however, is that these attitudes cannot be assumed to exist. In fact, they may even be relatively scarce. In many firms — perhaps even most — these preconditions for strategy may not exist.
It is hard to identify and create buy-in for what “we” (i.e., the firm) should do if there is no strong sense of “we” — a mutual commitment and sense of group loyalty and cohesiveness. Similarly, it can be meaningless if the members of the firm are not committed to go on a journey together into the future.
This was brought home to me when I was facilitating a strategy discussion in an industry that has a long tradition of hiring, celebrating and rewarding stars — individualistic, solo operators. As we discussed the investments and initiatives necessary to pull off the strategy identified by management, one of the ‘players’ in the room asked: “Why would I want to do this. What’s in it for me?”
It must be immediately recognized that having this thought is normal. The industry I was working with is only unusual in the (refreshing?) willingness of people in this business to actually say things like this out loud.
In other industries and professions, they just think it all the time, without actually saying it!
As we worked through the issues, it became increasingly clear that there were major differences among the people in the room, the key players in the company, whose participation and collaboration would be essential to pull off ANY strategy.
The issue was not the specifics of the proposed strategy. What came through clearly was that no commitment to each other — or to their joint future — existed.
The differences among them were based on what seemed to be some inherent personality characteristics, or at least some strongly-held preferences, on two key dimensions — their desire to be engaged in a joint, mutually-dependent enterprise (collaboration) and the time frame they wanted to apply to their decision-making (future-orientation).
On the first dimension, there were people who actively wanted to be part of a team, with joint accountabilities, responsibilities, and rewards. They wanted to be part of something.
However, not everyone in the room fit this category. Many others freely admitted that they were most comfortable (and would seek out) situations where they could be independent — judged on their own individual merits and accomplishments, without being tied to the performance of others.
The second dimension we explored was time-frame. Some people had an appetite for high-investment, future-oriented strategies. They were willing to defer (if necessary) some immediate gratification in order to invest — to get the chance to reap higher rewards in the future. Others are reluctant to invest, even in their own future. They prefer to focus on “winning today,” letting tomorrow take care of itself.
Combining these two dimensions led to the identification of four kinds of preferences that individuals (and companies) have.
Types 1 and 2 may be unwilling to invest or “bet on the future” for a variety of reasons, including risk aversion.
I call this group “The Human Race” since one of the rare things about Homo Sapiens that differentiates it (at least in scale) from other species is its ability to act collectively to build and develop. (It’s called civilization.)
Note, however, that Type 4 could also be a description of an Ant Community or Beehive, where individuals slave for the benefit of the community, suppressing and subsuming their own identity within the whole. (This interpretation is most likely to be applied, naturally, by those who do not place themselves in this category.)
| Capture Rewards for Short-Term Performance | Build For the Future | |
| Interdependent Team Players | Wolf Pack | Humans (or Ant Farm) |
| Independent Solos | Mountain Lions | Beavers |
I don’t have a precise metric to measure the differing orientations described here, but I have found two proxy questions to be useful.
On the issue of independence versus team-play, I ask people whether, in general, they would prefer rewards in their organization to be based (compared to the current arrangements) a little more on individual performance or a little more on joint rewards for joint performance.
I then ask whether, compared to the current arrangements, people would like their firm to invest more in its future, even if this meant they would have to accept less current income in the form of salaries and current bonuses.
These two (imprecise) questions tend to cause people to reflect on their true preferences. The underlying issue is not really about pay schemes, but phrasing the questions this way tends to crystallize the issues for many people.
In exploring these orientations, I frequently use secret voting machines which allow people to express their views while remaining anonymous.
I ask people in the group which of these four preferences best described their own, personal desired way of behaving. (At this point you may wish to pause and guess what percent of all your colleagues would place themselves, by preference, in each category.)
In this particular company where I first explored the model, all four groups were well represented, although only 10 to 20 percent put themselves in the “I want to be part of something bigger than me that is working to build for the future.”
Thirty to forty percent put themselves in the “solo-short-term” (Mountain Lion) category, with approximately twenty to thirty percent each of the “team-play short term” (Wolf Pack) and “solo builder” (Beaver) categories.
I don’t know if the fact that only 10 to 20 percent of key players wanting to be “team-play builders” strikes you as low, or matches your experience, but it leads to an interesting question: what do you think the chances are of melding people that describe themselves that way into an institution that has a differentiated reputation?
My own conclusion, then and now, is clear. An organization that had these proportions might succeed through individual, entrepreneurial activities, but it would be quite literally incapable of having a company strategy. For example, no common reputation or differentiation could be achieved in the competition either for clients or talent. Firm leaders that tried to develop and implement company strategies would be wasting their time.
In applying this model and conducting these votes numerous times in other firms, it has been revealing how much diversity is exposed among people who had previously thought of themselves of members of, and loyal to, their firm.
They may indeed, be loyal, but their desires and preferences differ so much on the key dimensions that, in many cases, no strategy can accommodate the diversity of preferences among the members of the group.
The mixture of preferences may place very severe limits on what an organization can achieve. While there may be some logic and merit in like-minded people banding together, (whether they be Mountain Lions, Wolves, Beavers or Humans) an organization made up of an unmanaged mix of such types is unlikely to function well.
If a majority of the key people really DON’T want to act collectively in building for the future, it is meaningless to develop plans as if they did.
In spite of this, very few people or organizations have frank and open discussions about this kind of thing. The preconditions for strategy are rarely surfaced and examined, possibly because the implications of discovering a disparity of preferences can be very scary and disruptive.
It is important to note that it is not required that a majority choose the “team-play building” preference.
A group of people who all identify themselves as preferring to operate as “independent short-term” players can succeed in many businesses. (See for example, the discussion of “Hunters and Farmers” in my 1993 book Managing the Professional Service Firm.) Many businesses can be, and are, constructed around “star players” rewarded for their short-term results.
Similarly, a Wolf Pack can achieve something that is called “strategy” and can align its recruiting, systems, rewards around a strategy of collaborative short-term actions, if that’s what everyone wants.
However, without a majority of key players committed to collaboration and investment in the future, it is unlikely that most of what is usually considered to be firm-level strategy can really be accomplished. Before discussing their plans, firms need to uncover whether their people really want to go on a journey — any journey — together.
Dealing with Diversity
If you were to conduct this poll in your organization (asking people either to place themselves in one of the four categories, or to estimate what percentage of their colleagues they would place in each group), what choices would you have if you found that you had a broad diversity of preferences?
I can think of the following (theoretical) options.
Is it possible to find different roles for people, so that individualists and short-term players can be accommodated by playing specific roles in the organization without compromising the commitment and determination of the majority?
This would clearly be very desirable if it were to prove practical. It would require the least disruption to the status quo.
Manufacturing corporations have different activities (such as sales, production, or finance) which may require different attributes, so the question arises as to whether other organizations, such as professional service firms, can also accommodate different orientations?
I believe that this may be possible, but not by allowing people of different orientations to play the same role in the organization. There may be differences between the desirable characteristics of those in sales and those in production, but I doubt that much variety can be acceptable within one of these groups.
If one sales person (or team) is taking a collaborative, building approach, is it acceptable for another to act in an independent, short-term fashion? If the answer is yes, it would be hard to see what is meant by saying the organization has a strategy!
The only way I’ve really seen “biodiversity” work in the real world is if different species are kept away from each other and do not compete for the same resources.
That means the wolf-pack is a completely separate department (preferably in a separate building) than the mountain lions who have their own “deal” (privileges, responsibilities, metrics). It is necessary to keep one group away from the others if they are to co-exist!
On my blog Passion, People & Principles, Brit Stickney wondered whether short-term individualists can be convinced to join the group effort. He asked:
How can we articulate to our colleagues that the team approach is in their individual best interest?
Even, or especially, if only, 10 to 20% of individuals want to be part of “something bigger” to build for the future, it is critical to be able to articulate to each team member why their role within the will help them individually. It may be possible to be persuasive that by relying on and working with others, they will be able to achieve their personal goals.
Personally, I’m not sure I share Brit’s hope in this area. Is it really possible to get short-term individualists to “do the right thing” for the company’s long-term bests interests either through persuasion, systems, or setting individual goals that further corporate goals?
I am increasingly skeptical that this traditional “managerial systems” approach can be made to work.
In my experience, the whole thing falls apart when we try to mush them all together and pretend that everyone is measured and rewarded on the same things, that everyone has the same performance standards and everyone plays the same role.
Ultimately, the hope that (too much) biodiversity can be accommodated may be impossible to achieve. I doubt that you can have a random, equal mixture of all types and make it work well.
The second choice for dealing with biodiversity is to try and affect people’s orientations. One way that MAY be possible to accomplish this is to craft a sufficiently compelling vision for the future, so that even those who do not start off with an initial preference for team play or investment are willing to “sign on.”
The potential success of this option will turn on one critical question. Are people’s orientations relatively fixed, based on underlying personalities and preferences? Or can they either change with time, or be made dependent upon specific circumstances?
The answer is important. If people’s orientation toward teamwork and time-horizon is context-specific (i.e., dependent upon the particular team and strategies being proposed), then there is hope that some process of building commitment to a strategy can successfully forge collective action even from those initially unwilling.
However, if there is a relatively sizable fixed component in people’s attitudes, then no strategic planning process can be successful. The choices will either be to abandon strategy, or to separate from those who do not wish to enter upon the journey together.
My own hypothesis is that the fixed component in many people’s personalities is relatively high. People really do differ as to how they want to live their lives. Solo operators rarely develop a preference for team play, and people who want immediate gratification rarely develop the patience to sacrifice even a portion of today for an uncertain future — especially if they have to make that investment in conjunction with (and be dependent on) others.
In this view, it is not the clarity or the glamor of the vision that affects people’s lack of buy-in to collective, future-oriented strategy, but their willingness to participate in strategy at all.
Another hypothesis that emerges from this is that it will be hard, if not impossible, to reconcile differences through pay schemes: it will be hard to change working behaviors based on deep personal preferences through the clever construction of incentive schemes.
If this is correct, people who do not match the basic orientation of the company should either be in or be out of your organization depending upon what it wants to accomplish. Companies, according to this point of view, must achieve a consistent philosophy by being careful about the kind of people they bring into their organization.
This alternative was phrased well by Brit Stickney:
First we must define what our “Super Bowl” is — what we wish to accomplish. Second, we should define what wins and losses are. And finally we should find the players that can help us (and want to) win games and reach the Super Bowl.
I think this way of framing the challenge is closer to the real problem that organizations face. But notice, Brit’s proposition suggests that organizations must “find the players that can help us (and want to) win games and reach the Super Bowl.” This suggests a degree of selectivity that many organizations fail to reach.
It is not easy, but it can be done. It is very encouraging, I have found, to discover how many people will, in fact, choose to accept a well-articulated philosophy, even if it is not the ideal one they might have chosen for themselves.
In spite of what I have argued above, the relatively “fixed” component of people’s collaborative and future-orientation is not COMPLETELY determinative.
If the firm is prepared to bring the issues of collaboration and future-orientation to the surface, and (through some open process) ask participants to commit themselves explicitly to a joint, building future, then significant degrees of buy-in can be obtained.
The consensus-building approach does not always work. As Antoine Henry de Frahan asked on my blog:
How would you manage a situation when the firm has been in existence for a long time and is finding it impossible to define a coherent strategy because there is no consensus on the partnership model in the first place? I see two options: business as usual (which actually means inertia) or split. Is there any third way?
If people truly differ in their orientations and objectives, it may become necessary to ask those who are not prepared to commit collaboratively to the joint venture to separate from the organization.
This is the strategy advocated by Jim Collins in his book Good to Great, where he asserts that one of the primary keys to success is “getting the right people on and off the bus,” a conclusion that I share.
This sounds tough, brutal, scary and risky, and it is all of those things. Notice, the argument is NOT that doing this is unconditionally necessary. Rather, the argument is that it must be done if an organization is going to be capable of having a strategy — any strategy.
The fourth alternative is, by far, the most common: avoidance of the issue, papering over the differences, ignoring the problem, or (worse and most common), complaining all the time that everybody wants different things, and nothing gets done.
This does not necessarily lead to disaster (particularly since it is so common). However, it will almost certainly prevent the organization from making any strategic shifts.
It is commonly observed that the biggest problem with developing strategy is implementation. It may be the case that the problem is more profound — that the members of the organization have insufficient commitment to each other — or their mutual future — to pull off ANY strategy.
In a world in which many organizations have been put together with mergers, acquisitions and extensive use of lateral hires, the underlying problem may grow in importance, rather than diminish.
March 5th, 2007
How do you deliver and sustain profitable growth?
That’s the key challenge shared by Procter & Gamble’s A.G. Lafley and GE’s Jeffrey Immelt.
Writes Fortune’s Geoff Colvin:
“To meet P&G’s growth targets, Lafley has to find about $7 billion of new revenue this year, equivalent to a company the size of Barry Diller’s IAC/Interactive. At GE, Immelt has to find about $15 billion of new revenue, equal to the size of Nike. And if they succeed, of course, they’ll have to turn around and find even more next year.”
So what’s the secret formula?
Both CEOs have “reformatted their companies’ fundamental approaches to cultivating change and innovation.”
Colvin finds out more in this insightful interview:
Immelt: “The initiative we’re driving now is organic growth. If that’s your initiative, it doesn’t make sense to be training people exactly the same way you trained them in the past. So we identified about 15 companies that had grown at three times the rate of GDP, and asked what they had in common. It was five things: external focus, decisiveness, inclusiveness, risk taking and domain expertise. So we reoriented the way we evaluate and train along those lines. We just recently added leadership, innovation and growth, which is basically oriented around teams. This is the first team training we’ve done in ten or 15 years.”
Lafley: “We made innovations in two areas. First was in the leadership training we felt we would need for the 21st century. We have an inspirational leadership program that is highly individualized for handpicked managers. They’re nominated by business leaders or functional leaders, and I pick them. A big chunk of it is about personal development. We also have a general-manager program, right before or right after you become a general manager. And then we have an executive-leadership program for individuals headed to be a president or a group president. It’s pretty intense.
“The other thing we pushed at - and Jeff and I talked about this - is, How do we get a global leadership team. Some 55 percent of our business today is outside the U.S., so my top leadership team for the first time in our history is now up to half non-Americans. We pushed really hard to get there. It makes for a very different discussion when we get together for our quarterly or semester meetings. I think we’re a lot more challenging of each other.”
Other insights:
Immelt on China: “China - we just got a big order from the Ministry of Rail. I got it on a Sunday - the whole ministry is working all day on a Sunday. I believe in quality of worklife and all that stuff, but that’s the competition.”
Lafley on Globalization: “Lafley: One of the challenges for the business community broadly is to articulate in a simple way the benefits of globalization and then face head-on the fact that there will be some disruption. When a company like GE or P&G has plants to shut down, we have a pretty enlightened program for handling retraining and early retirements, so employees have the best chance to have a good income and a good life. We do need to be a little more creative in that area because there are a lot of instances that doesn’t happen. But I don’t think it’s for lack of funding or because there aren’t opportunities somewhere in the economy. Our employment rate is still the envy of the world.”
Read the interview >>
February 20th, 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
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
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%)
Achieves Results (50%)
Cultivates a Culture of Growth (25%)
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.
1 comment January 1st, 2007
Here’s a report you’ll be interested in: The Globalization of White-Collar Work: The Facts and Fallout of Next-Generation Offshoring from Duke’s Fuqua School of Business and Booz Allen Hamilton.
The news? Apparently offshoring is no longer “all about moving jobs elsewhere; increasingly, it’s about sourcing talent everywhere.”
And: “…what used to be a tactical labor cost-saving exercise is now a strategic imperative of competing for talent globally. White-collar work can be performed where it makes the most sense and saves the most cents. More important, a looming shortage of technically trained talent, such as engineers and computer scientists, in advanced economies will require the ability to source and manage such talent globally.”
Here are the 5 main points:
1. Labor arbitrage is giving way to accessing talent as the primary driver of next-generation offshoring.
2. Offshoring high-skilled functions does not replace jobs onshore.
3. Companies look elsewhere because they can’t get it at home.
4. Where you offshore depends on what you offshore.
5. The obstacles to successful offshoring are increasingly internal and organizational.
The reports also says that higher skilled jobs (like R&D, Marketing, and Design) won’t go away because of this growing global talent shortage. Instead firms will compete globally for brain power, regardless of location.
Sorry, I don’t buy that. China’s working hard on educating the next generation of designers, and in India you’re going to see the next generation of innovation. (I’ll get John Hagel to talk about this soon.)
December 25th, 2006
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