Global Advisors | Quantified Strategy Consulting

Strategy Tools: Growth, Profit or Returns?

Strategy Tools: Growth, Profit or Returns?

By Stuart Graham and Marc Wilson

Stuart is a manager and Marc is a partner at Global Advisors.
Both are based in Johannesburg, South Africa.

Growth, profit or returns? It’s all three, however we find that the relationship between these and shareholder value creation is poorly understood – if at all.

All three measures become critical to the way forward as companies navigate the Covid-19 crisis.

After ensuring business survival, navigating through the Covid-19 crisis requires returns on invested capital AND growth to deliver shareholder returns. S&P 500 companies averaged 13% RONA and 5% revenue growth (CAGR) through the financial crisis (2008-2012) .

Monolithic survival approaches may starve compensating growth opportunities – a portfolio approach is required.

Key insights

Returns are not enough – companies must also grow to create value.

Profits and cash flows cannot increase indefinitely through cost-reduction, efficiency, business mix, etc – top-line growth is critical.

Returns must be above costs of capital to be value accretive.

S&P 500 companies averaged 13% ROIC and 5% revenue growth (CAGR) through the financial crisis (2008-2012).

Margins and revenue growth, or even profit growth in themselves don’t answer that question of whether shareholder value was created or destroyed. There are many examples of where growth and high margins actually destroy value.

Company valuations reflect an aggregate of their business portfolio – rebalancing segments based on their growth and return profiles can lift company value.

Growth requires investment – at the very least in the working capital required to support revenue growth.

Measuring RONA or ROIC and Revenue growth shows whether business activity is value accretive or destructive.

You can use the Global Advisors Market Cap (valuation) framework to map your business – and agree action to deliver improved shareholder returns.

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Try This Single Productivity Hack To Save You Time

Try This Single Productivity Hack To Save You Time

By Raj Jan

How to Maximize Your Time in a Busy World<

Photo: Getty Images. Illustration: Chloe Krammel

Stop doing things that offer the lowest return on time investment.

Time is a constant that cannot be changed.

It is the only commodity no one can give or take away. We all have the same amount of it, and no matter what, while you live, it is always there. When you are running multiple businesses, how you use your time can be the single deciding factor on whether you succeed or struggle.

My entire mindset around time shifted when I realized, I could still get a theoretical “A” on my business if I hired someone to execute tasks at 90 percent capacity, versus me doing it all at 100 percent. I knew I needed to maximize my time as much as possible without compromising the value I wanted in my business.

In order to become highly productive, I worked through a process to unveil how to truly maximize my time and still get the results I wanted. Here are three steps I took to become highly productive without wasting any time.

1. Become aware of what you are doing every day.

You will be surprised where your time goes when you actually start to track it. You must begin to realize that, even if you are salaried, everyone has a quantifiable hourly wage. Shift your mindset to look at each hour of the day, in and out of the office, as though it is that value.

I began a weekly process with my assistant where I took note of everything that I did in an Excel file. This included everything from taking out the trash to buying groceries, having meetings, or traveling for a keynote. Every minute of the day was tracked. At the end of the week, she would send me an analysis of what I had spent the most time on.

This may sound extreme, but spending a few minutes each day punching in time markers is well worth it to discover what is consuming your time, versus where you should be spending it.

2. Categorize your time correctly.

Actions can be broken down into four categories: incompetent, competent, excellent, and unique:

  • Incompetent: Things you cannot and should not do. For me, this is graphic design. I have no natural skill in it, nor a deep interest in growing it. Spending hours designing a logo or building a product pamphlet is not where my time should be spent.
  • Competent: The tasks you can do, but so can pretty much anyone else. For me, this looked like scheduling people on my podcast or fielding customer inquiries.
  • Excellent: Tasks you do very well, but if outsourced appropriately, could be done by someone else. I am great at building businesses, running finances, and trending markets, but I can also hire someone else to do them, like a CFO or CMO.
  • Unique: The actions only you can do. For me, it is generating compelling ideas to be shared through words, both spoken and written.

Take the timesheet you have, and based on these four categories, review where the majority of your hours are spent. The goal is to move over time to a point where the majority of your day is spent in the unique category, doing things only you can do. If you are living day-in and day-out doing incompetent or competent tasks, you need to shift the focus of where your time lies.

3. Delegate as much as possible.

In order to grow, you must delegate. Find the things that take up the most time and offer the lowest return on time investment and offload them. In the beginning, this could be small things, like outsourcing the daily tasks of home and health maintenance such as grocery shopping or cleaning. I began by hiring a virtual assistant from the Philippines to complete simple tasks such as checking emails and supporting customers’ feedback.

This not only opens your time to work on the excellent and unique functions of your business, but also builds the trust muscle you will need as your business grows. In order to delegate, you must have a sense of trust that the people you pass things off to will be able to provide the “A” results you want in your business.

Don’t let time control you; control it by managing and delegating. Your business will thank you for it.

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Term: Moral Hazard

What Is a Moral Hazard?

Moral hazard is the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity. In addition, moral hazard also may mean a party has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles. Moral hazards can be present at any time two parties come into agreement with one another. Each party in a contract may have the opportunity to gain from acting contrary to the principles laid out by the agreement.

Any time a party in an agreement does not have to suffer the potential consequences of a risk, the likelihood of a moral hazard increases.

Key Takeaways:

  • Moral hazard can exist when a party to a contract can take risks without having to suffer consequences.
  • Moral hazard is common in the lending and insurance industries but also can exist in employee-employer relationships.
  • Leading up to the 2008 financial crisis, the willingness of some homeowners to walk away from a mortgage was a previously unforeseen moral hazard.

Understanding Moral Hazard

A moral hazard occurs when one party in a transaction has the opportunity to assume additional risks that negatively affect the other party. The decision is based not on what is considered right, but what provides the highest level of benefit, hence the reference to morality. This can apply to activities within the financial industry, such as with the contract between a borrower or lender, as well as the insurance industry. For example, when a property owner obtains insurance on a property, the contract is based on the idea that the property owner will avoid situations that may damage the property. The moral hazard exists that the property owner, because of the availability of the insurance, may be less inclined to protect the property, since the payment from an insurance company lessens the burden on the property owner in the case of a disaster.

Moral hazard can exist in employer-employee relationships, as well. If an employee has a company car for which he does not have to pay for repairs or maintenance, the employee might be less likely to be careful and more likely to take risks with the vehicle.

When moral hazards in investing lead to financial crises, the demand for stricter government regulations often increases.

An Example of Moral Hazard

Prior to the financial crisis of 2008, when the housing bubble burst, certain actions on the parts of lenders could qualify as moral hazard. For example, a mortgage broker working for an originating lender may have been encouraged through the use of incentives, such as commissions, to originate as many loans as possible regardless of the financial means of the borrower. Since the loans were intended to be sold to investors, shifting the risk away from the lending institution, the mortgage broker and originating lender experienced financial gains from the increased risk while the burden of the aforementioned risk would ultimately fall on the investors.

Borrowers who began struggling to make their mortgage payments also experienced moral hazards when determining whether to attempt to meet the financial obligation or walk away from loans that were becoming more difficult to repay. As property values decreased, borrowers were ending up deeper underwater on their loans. The homes were worth less than the amount owed on the associated mortgages. Some homeowners may have seen this as an incentive to walk away, as their financial burden would be lessened by abandoning a property.

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The urgent need for sophisticated leadership

By Blair Sheppard and Susannah Anfield

Illustration by rudall30

The pandemic has highlighted a series of paradoxes inherent to the work of leaders. What comes next will depend on how well they face up to them.

In the 2019 PwC Global Crisis Survey, 69 percent of respondents said they expected a global crisis in the next five years, most likely due to a financial meltdown or technology failure. Little did they know how prescient they were. Just nine months after the survey was released, an entirely different and unexpected medical and public health crisis — COVID-19 — has fundamentally altered the world. If driving change in the uncertain and turbulent environment that existed at the beginning of 2020 was a complex challenge, the degree of difficulty has now been ramped up significantly.

As we recently noted in these pages, five global forces — asymmetry of wealth, disruption, age disparities, polarization, and loss of trust — which together we’ve termed ADAPT, were already changing the way millions of people live and work. The pandemic has sharply accelerated these forces. As a result, organizations have even less time than they thought to reconfigure themselves so that they can maintain their viability in a vastly changed world. In our forthcoming book, we predict that humanity has “ten years to midnight.” But with events moving so quickly, it seems there may be even less time until the fateful hour. The good news is that by recognizing the challenges confronting society, internalizing the lessons of the pandemic, and deploying the tools and technologies at hand, we can chart a new, more adaptive course. But doing so is going to place a fresh set of demands and intense pressures on leaders.

Around the world, leaders, already stretched in all directions, have never faced so many dilemmas to navigate and contradictions to reconcile. Beyond dealing with the familiar aspects of their business, they now have to cope with the most fundamental of issues: health, well-being, safety, and financial viability. And the trade-offs are excruciating. Answers appear to conflict with each other, leading to decisions that have every likelihood of being wrong. Many companies may feel like they must return to business as normal in order for their industries, communities, and economies to survive; but the very act of returning to familiar ways of working could inhibit the ability of all these entities to succeed in the future. The speed of decision making has picked up. Decisive, or seemingly prudent, moves taken a month ago — even a week ago — can quickly become redundant, or worse, appear reckless. In a world of endless todays, medium- and long-term planning feels futile, and the scope of short-term planning is reduced to a matter of hours. Yet it is exactly in such times that people look to leaders to provide stability, hope, and a path forward. Crises like the one we’re experiencing are a crucible from which the true capabilities of leaders emerge and reputations are forged.

As we first noted in 2018, in our analysis of the Six paradoxes of leadership, successful leaders today must embody and negotiate a set of apparent contradictions in order to thrive in a rapidly changing world. They must have the confidence to project a clear strategy, and the humility to correct course and recognize the need for change. They must also be as adroit at surveying the landscape from 30,000 feet as they are at making sure operations function well on the ground. They must remain rooted in the traditions that made their organizations successful while continuously embracing innovation. They should consider what they need their workforce to achieve, and then effectively use enabling technology to help do it. They have to think globally while acting locally. And they must demonstrate the ability to negotiate differing viewpoints toward a consensus while maintaining their integrity. As the world seeks systematically to repair and reconfigure from the collective trauma and damage being suffered due to COVID-19 — and to prepare itself to be resilient in future crises — there is an urgent need for leaders to understand, accept, and embrace these paradoxes.

Repair: The need to act quickly and intelligently

The first step in recovery is to repair what has been broken. In order to react quickly and intelligently, leaders must have the confidence to make decisions and act in an uncertain world, and the humility to consult widely, recognize when they are wrong, and adjust course. They must be Humble Heroes, the first type of paradoxical leadership we’ll discuss.

As COVID-19 spread and community transmission took hold across the world, decisive action was required of global leaders. In China and New Zealand, Germany and South Africa, and in all corners of the world beyond, enormous pressure was placed on national leaders to act in the best interests of their countries and every one of their citizens. Each move by government was made under a harsh spotlight, at a time when little was known about how to contain or combat the virus. Acting required courage and self-belief to move decisively despite the burden of knowing that there would be a devastating cost if a wrong decision were made. In the pandemic’s early days, decisions needed to be taken with a huge amount of empathy and humility, and with a willingness to own the outcome despite the lack of a clear road forward. Through careful consultation with doctors, economists, epidemiologists, technologists, and public health experts, the potential outcomes of any of the options available would become clearer. In the face of such uncertainty, it is easy for leaders to grow overwhelmed, freeze, and struggle to make clear decisions and communicate them effectively. It is also difficult to make adjustments when conditions change.

As policies were rolled out, it was crucial for leaders to rally people to change their behaviors and take collective action. Relatively soon after the virus’s arrival in the U.S., when only one player had tested positive, Adam Silver, commissioner of the National Basketball Association, consulted with owners, players, and public health authorities — and moved quickly. The league decided on March 11 to suspend the 2019–20 season. “It was really a moment for us to step back, take a breath, ensure that everyone in the NBA community was safe and healthy and doing everything they needed to do to take care of their families,” Silver said. The move set the tone and precedent for other sports to follow (and made increasing sense given the rapid outbreak that ensued). Silver remained at all times transparent about the fact that he didn’t know if his decision was right, but that it was the best choice he had in the moment. On July 30, the NBA restarted its truncated season in Florida.

To limit and repair the damage from COVID-19, leaders had to understand the big picture — the nature of the pandemic, its global implications, the possibility of a range of outcomes — while mastering the granular details of stabilizing company operations, getting supply chains working again, and ensuring that team members were able to work remotely. In other words, they had to be really good Strategic Executors, another category of paradoxical leadership.

As COVID-19 caused societies to lock down, the impact on many businesses and sectors was immediate and devastating. CEOs had to balance the impact of their decisions on the immediate safety of their employees with the long-term consequences for the sustainability and relevance of their business. Some acted in a way that has protected their future viability, while others struggled to act quickly and damaged their organizations’ reputation in the process. In a time of crisis, it is easy to get stuck in the problems of the day, to focus on preserving existing holdings, and to do the next most obvious task to try to survive. But those who did so missed the opportunity to be agile, to position themselves for the future, or to remain connected to employees and customers who needed inspiration and hope. Equally, those who spent too much time focusing on the long term, trying to predict where the world was going and strategizing without making a move, might soon find their balance sheet in tatters and supply chains disrupted. Having failed to deal with the crisis at hand, they could face devastating consequences to their business — even if they have a crystal-clear vision for the future.

At the level of the nation-state, few leaders managed the tensions between strategy and execution as well as Jacinda Ardern, prime minister of New Zealand. After the country reported its first COVID-19 case on February 28, Ardern laid out an ambitious vision in a relatable way, encouraging all 5 million New Zealanders to be part of the response to the virus. One aspect of her strategic approach included a four-level alert system, which was implemented early in the outbreak and comprehensively and competently executed throughout its duration. On June 8, New Zealand lifted all restrictions and declared itself virus-free.

The response to the pandemic called for a great deal of improvisation on the fly — whether it was through hospitals devising new treatment protocols or companies figuring out how to develop remote adaptions of in-person services. In many instances, companies with long legacies of operational excellence were among those that were best able to quickly develop products and services to meet the new needs. And they were able to do so while maintaining their core purpose — even if their main business shut down. Time and again, we saw these Traditioned Innovators rise to the fore.

In Italy, for example, high-end seamstresses facing a sudden drop in demand for couture repurposed their capabilities to start making personal protective equipment for local hospitals. They accomplished this improvisational adjustment to meet an acute need at a time when face masks ordered from overseas were getting stuck at the borders. This pivot from the industry was impressive, as described by Claudio Marenzi, former president of the Italian textiles umbrella organization Confindustria Moda. Similarly, to deal with a sudden nationwide shortage of ventilators in the U.S., General Motors, which has a century-long tradition of engineering innovation but had never made complex medical equipment, came up with a design in a matter of weeks, worked with its supply chain, and trained employees to mass-produce thousands of the lifesaving ventilators.

These organizations relied on trust that they had already earned. They drew from that trust and, by innovating at speed and remaining true to their core, provided leadership at a time when society needed it. As we continue to grapple with the crisis, it is more important than ever for organizations to be relevant and purposeful. At the beginning of 2019, Pfizer chair and CEO Albert Bourla rolled out a new approach to R&D, which seeks to disrupt the typical ways of testing new drugs while staying focused on the company’s stated purpose of finding “breakthroughs that change patients’ lives.” The resulting ability to increase the speed with which new formulations can win FDA approvals has put the firm in a good position to drive the search for a desperately needed vaccine for COVID-19. Leaders will only be able to survive — and help reconfigure the world — if they are able to innovate in an authentic and organic way.

Rethink: Design the present with the future in mind

As organizations adjusted to new realities, technology played an important role. In many cases, technology platforms that already exerted immense influence on society saw their power, reach, and value grow rapidly. (The stocks of Amazon and Netflix were up 30 percent through the first four months of 2020, while Zoom’s has doubled.) But there are instances in which technology does not contribute equitably to society. When considering how best to leverage technology for the good of humanity, leaders must be able to bridge the gap between the raw power of tech and the needs of people — and be as fluent with emotional intelligence as they are with artificial intelligence.

Nowhere is society’s need for such Technology-savvy Humanists more obvious than in the vast education complex, which touches the lives of billions of people daily. COVID-19 has forced schools, colleges, and universities to rapidly and completely shutter their physical infrastructure, requiring that young people be educated from home. We do not yet know the consequences of this abrupt transition, but, in many cases, students have been left without the structure, discipline, and mental and emotional support they need and would otherwise find at school. Though it is possible to provide content electronically and conduct assessments virtually to test knowledge, technology alone can’t deliver the full value of an education. Without the opportunity to build relationships, encounter challenges, have robust dialogues, and learn within a pedagogical system that supports the human needs upon which educational outcomes depend, students lose a great deal. We should take care to ensure these human needs are not subjugated to those made expedient by technology.

Those educational institutions that had already integrated technology into their teaching methods were better able to manage the shift to virtual classrooms while also maintaining student collaboration and supporting continuous connection between teachers and students. And many others have stepped up during the crisis. In a recent blog post, Fiona Cottam, principal at the Hartland International School, in Dubai, described how her teachers were quickly trained on Microsoft Teams to deliver their curriculum through virtual classrooms and became experts in Twitter as a way to access resources from other educators and to establish the very human support networks they needed to deliver the best experience for pupils and their families. There has never been a more important time for leaders in education to step up and navigate the path between technology and pedagogy.

Reconfigure: Organizing for the future

As society comes to terms with the enormity of the shared experiences that the pandemic has created, we have an opportunity to shape the world in a new way. As individuals and families, we have had to learn how to be self-sufficient and resilient. Local communities have rallied to protect the vulnerable and support small businesses at risk. At the corporate level, firms have been forced to think about their workforces on a local basis, as individual countries managed the virus in different ways — and on different time lines. The disruption of global supply chains has led many businesses to reconfigure them within national borders. Leaders at all levels have been scrambling to protect their communities. In many instances, the result has been an increase in nationalism, which is accelerating the polarization and asymmetry already present in the global system. More than ever, we need leaders who understand global forces, market structures, and societal needs, and who are also capable of expressing genuine care for and understanding of their local community. We need Globally-minded Localists.

As society comes to terms with the enormity of the shared experiences that the pandemic has created, we have an opportunity to shape the world in a new way.

The most salient lesson from this virus is that it knows no borders and requires no invitation to overwhelm a country. Ultimately, nobody will be safe from infection until nearly everyone has been immunized. And the development, manufacturing, and distribution of therapeutics and vaccines will require unprecedented global cooperation. At the same time, the immense variation of cultures, behaviors, and healthcare systems around the world will require the virus to be fought and defeated at the local level.

We need leaders who can manage the tension between the need to develop solutions and protocols at the global level and the reality that they then must be implemented locally. Jack Ma, the billionaire entrepreneur and founder of the tech giant Alibaba, has been the driving force behind an ambitious operation to ship medical supplies to more than 150 countries. While following China’s diplomatic rules and ensuring his country is served first, Jack Ma has through his foundation also made a significant impact on getting essential medical equipment to where it is needed.

When the effects of the pandemic begin to settle across the world, the imperative to redesign organizations that can thrive will also present an opportunity to reconsider how they operate. Achieving a successful organizational redesign requires leaders who are sufficiently savvy to influence a broader set of stakeholders while also building essential levels of trust. In order to make changes that are both meaningful and sticky, we need a cadre of High-integrity Politicians.

Climate and sustainability are among the arenas in which ideals and politics come together. The tone of the discussion is being set by many business leaders, including Larry Fink, the CEO of asset manager BlackRock, who is resolutely incorporating climate risk into investing decisions and urging corporate leaders to reassess core assumptions about modern finance. In fact, a silver lining to the cloud cast by the coronavirus could be an increasing demand of our leaders to drive society to a more sustainable future. At a time when there is disagreement about basic facts and science, forging any sort of different path requires leadership rooted in trust. It also requires a level of inclusivity that has not often been sought in massive systemic change — an inclusivity capable of bringing in diverse and sometimes conflicting viewpoints and navigating through them so that the outcome is better than any individual proposal.

German chancellor Angela Merkel, a chemist by training, has guided her country through the worst of the pandemic and kept her reputation intact. She has successfully marshaled her scientific background and highly analytical approach to build powerful levels of trust. As a result, Germany has maintained a comparatively high level of social and economic stability while effectively combating the virus. Supported by its highly developed pharmaceutical industry, the country was able to carry out around 500,000 COVID-19 tests a week by early April; at the same time, the U.K. was only managing to test around 7,000 people. These efforts allowed Merkel to announce the easing of lockdown measures later in the month, far earlier than many other European countries.

The six paradoxes of leadership are a lot for any individual to take on. We already expect a great deal from our leaders. They must have a mastery of business, understand complex systems, and communicate effectively. And the recognition of these paradoxes adds several layers of complication to the mix. It would be incredibly rare to find someone who embodies all of them. Leaders are human, after all — flawed, complex, and prone to failure and disappointment. But because of their humanity, they are also capable of learning and evolving at great speed.

So, consider your own leadership: Where do your strengths lie? Just as important, what are your weaknesses? Are you already embodying some of these contradictions? Though not all skills are determined and developed by motivation, people tend not to pay as much attention to the areas in which they don’t possess talent, or, worse still, don’t respect those who do. To truly balance paradoxes, leaders need to learn to respect and work successfully with those who care about the things they do not.

When considering these six paradoxes, it is important to note that no single contradiction is more important than the others. In fact, they are most effective when they work in concert, as a system. And just as we may not be able to find all the elements of this kind of leadership in ourselves, we can commit to working on them. It’s important that we do so. For as difficult as COVID-19 has been, it will certainly not be the last crisis we face.

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New Study Shows How Employees Can Drastically Improve Their Productivity

New Study Shows How Employees Can Drastically Improve Their Productivity

By Marcel Schwantes

CREDIT: Getty Images

Leaders must first shake up the decision-making hierarchy to make this strategy pay off.

A recent report from Harvard Business Review has shown the power of putting data analytics in the hands of workers in frontline jobs, but it also reveals that leaders must drive a culture change and shake up the decision-making hierarchy to make this strategy pay off.

The report, commissioned by ThoughtSpot and released last month, concludes that putting data in the hands of frontline workers — such as store managers, sales teams, sales clerks, nurses, and others — can significantly improve both their productivity and quality of work.

Of the 464 business executives surveyed, an overwhelming 87 percent said their organizations will be more successful when frontline workers have access to data and tools to help them make decisions in the moment. But only one-fifth of respondents said their workers are empowered to make those decisions today.

The HBR report makes a strong case for democratizing access to data and describes the key steps executives believe are important for doing so successfully. Here are the five main takeaways from the report:

Empowering frontline workers yields better results

Respondents believed strongly that both productivity and quality of work increase significantly when frontline workers can make data-driven decisions of their own accord. Nearly half of those classified in the report as “leaders” (those organizations whose frontline workers are both empowered and digitally well equipped) said they have grown revenue by 10 percent or more in the past year, with 16 percent growing it by 30 percent or more.

The gains were especially apparent in the following areas: customer engagement and satisfaction (named by 65 percent of respondents), productivity and efficiency (62 percent of respondents), employee engagement and satisfaction (49 percent of respondents), and product/service quality (45 percent of respondents).

Few organizations are getting it right today

Just one-fifth of the executives surveyed said their workers on the frontlines have both the authority and tools to make data-driven decisions today — and 43 percent admitted that their workers had neither. The executives at those companies, identified as “laggards” (those whose employees are neither empowered nor well equipped), were 10 times less likely than leaders to empower frontline workers with data.

Meanwhile, 86 percent of executives agreed that their workers need better technology and insights to make good decisions in the moment, and only 24 percent felt they currently have a truly empowered frontline workforce today.

Workers need the right tools for data empowerment

Armed with the right information, frontline workers can resolve more issues on the spot without the intervention of a supervisor. They can also convey the voice of the client back to their managers and R&D teams as quickly as possible.

That means giving them the right digital tools to analyze data and share their findings and insights with the rest of the organization. Communication and collaboration tools, along with self-service analytics, top the list of technologies that survey respondents believe their frontline workers will be using over the next two years to achieve this, with both named by more than 50 percent.

Managing change is critical

Close to half the executives (44 percent) cited poor change management and adoption processes as a top barrier to making good decisions in the moment — more than any other factor. That means company leaders must do a better job of training employees to interpret information and apply the insights they have.

Merely having access to data doesn’t generate value. Workers must know how to evaluate what they’re seeing and act on it appropriately. Nearly a third of executives (31 percent) cited not knowing how to apply insights from data as a top barrier to progress, second only to poor change management.

Technology and culture are two sides of the same coin

At organizations classed as leaders, executives said their employees don’t just have the ability to act on data; they’re also positively encouraged to do so. That requires moving from a hierarchical to a more distributed way of working, where more decision-making is pushed to the edges.

Leaders are more than twice as likely as laggards to say a data-driven culture is a critical part of their organization’s corporate strategy. Frontline “champions” — those who advocate for more power for frontline workers — should enlist company leaders to drive this change, which the report says will be a significant shift for everyone.

Most enterprises understand that data is their key asset for competitiveness and innovation, reflected in the substantial investments being made. But the power of data is still not being evenly distributed within organizations.

Empowering customer service staff, sales teams, and other frontline workers to use data in their everyday jobs can lead to significant gains for the business, but companies need the right structure and culture in place for this to flourish — and that responsibility starts with the top.

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Term: Long Tail

What Is the Long Tail?

The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The term was first coined in 2004 by Chris Anderson, who argued that products in low demand or with low sales volume can collectively make up market share that rivals or exceeds the relatively few current bestsellers and blockbusters but only if the store or distribution channel is large enough.

Long-tail may also refer to a type of liability in the insurance industry or to tail risk found in investment portfolios. This definition deals with the business strategy use of the term.

Understanding the Long Tail Strategy

Chris Anderson is a British-American writer and editor most notably known for his work at Wired Magazine. In 2004, Anderson coined the phrase “long tail” after writing about the concept in Wired Magazine where he was editor-in-chief. In 2006, Anderson also wrote a book titled “The Long Tail: Why the Future of Business Is Selling Less of More.”

The long tail concept considers less popular goods that are in lower demand. Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets. This theory is supported by the growing number of online marketplaces that alleviate the competition for shelf space and allow an unmeasurable number of products to be sold, specifically through the Internet.

Anderson’s research shows the demand overall for these less popular goods as a comprehensive whole could rival the demand for mainstream goods. While mainstream products achieve a greater number of hits through leading distribution channels and shelf space, their initial costs are high, which drags on their profitability. In comparison, long tail goods have remained in the market over long periods of time and are still sold through off-market channels. These goods have low distribution and production costs, yet are readily available for sale.

Key Takeaways

  • The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items.
  • The term was first coined in 2004 by researcher Chris Anderson.
  • Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets.
  • The strategy theorizes that consumers are shifting from mass-market buying to more niche or artisan buying.

Long Tail Probability and Profitability

The long tail of distribution represents a period in time when sales for less common products can return a profit due to reduced marketing and distribution costs. Overall, long tail occurs when sales are made for goods not commonly sold. These goods can return a profit through reduced marketing and distribution costs.

The long tail also serves as a statistical property that states a larger share of population rests within the long tail of a probability distribution as opposed to the concentrated tail that represents a high level of hits from the traditional mainstream products highly stocked by mainstream retail stores.

The head and long tail graph depicted by Anderson in his research represents this complete buying pattern. The concept overall suggests the U.S. economy is likely to shift from one of mass-market buying to an economy of niche buying all through the 21st century.

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Six Steps To Reset Goals When Crisis Upends Your Plans 

By Morey Stettner

There’s a dirty little secret about setting a goal: It’s subject to change. That’s especially true during a crisis.

You can set ambitious targets and motivate your team to believe they can hit them. But even with everyone’s buy-in, shocks beyond your control can intrude.

Many executives already threw out their long-term goals due to the coronavirus shutdown. The challenge is plotting a new direction in setting a goal amid so much uncertainty.

Should leaders even try to set a new goal in such a volatile environment? Or is it better to sit tight and wait for more clarity?

“This is a time when some goals have to be abandoned,” said Dan Markovitz, author of “The Conclusion Trap.” “You still need to have a directional goal for the next year,” but the path to get there may take significant detours.

Follow these steps to set new goals in a crisis:

Reassess Goals More Often

In an ideal world, you announce bold objectives along with a deadline to achieve them. Then you stick with them even if unexpected obstacles arise, demonstrating perseverance amid adversity. But the massive disruption caused by the pandemic requires new thinking.

“Now you want to increase your cadence for learning and evolution,” said Markovitz, a San Francisco-based management consultant. “Because there’s new information we’re learning every one or two weeks, reevaluate goals more frequently. Think in terms of here’s what we’re doing for the next two weeks instead of here’s what we’re doing for the next year.”

Pool Knowledge When Setting A Goal

Involve all team members in shared learning. Revise your goals based on everyone’s input and experience grappling with the coronavirus threat. Avoid walling yourself off from the workforce and making decisions in isolation.

“Engage your employees more in assessing the strategy and tweaking it as necessary,” Markovitz said. “They’ll have more ownership of the new goals if they’re participating in shaping them.”

Make Smaller Bets To Set A New Goal

Some leaders favor all-or-nothing targets. But wagering too much time, effort or intellectual capital on one lofty, all-encompassing target can backfire.

“It’s important now to consider how to mitigate risk by placing smaller bets,” Markovitz said. “Escape the tyranny of ‘either-or.’ Embrace ‘and-both’ thinking” where you set more flexible goals.

For example, establish sourcing goals that involve both foreign and domestic suppliers rather than putting too much emphasis on just one of them.

Think In Tiers

Confronting high uncertainty makes it harder to set targets so that they’re tough but attainable. So set different tiers to reflect different outcomes.

“Look at the worst-case scenario, the best-case scenario with a quick recovery and what might happen in between the two extremes,” said Dave Luter, a senior consultant at netlogx, a consulting firm in Indianapolis. “Then plan your goals within these three scenarios.”

Keep Adapting When Setting A Goal

Share your rationale for arriving at a particular goal. Educate employees and other stakeholders about the data you’re using, the assumptions you’re making and the expectations you’re setting. That way, you’re on safer ground if you attempt to modify your goals later.

“You have to update goals as guidance changes,” Luter said.

Stay In The Game

It’s tempting to suspend all objectives as you wait out a crisis. But standing on the sidelines and delaying key planning and decision-making poses risks as well.

“It’s a mistake not to set goals,” Luter said. “Everybody has to understand you have goals in place, even if you can’t control outcomes. You need to show all parties that you have confidence and a plan going forward. That will give them confidence.”

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3 Ways to Get the Best Performance Out of Your Employees

3 Ways to Get the Best Performance Out of Your Employees

By Marcel Schwantes

3 Sure Ways to Get the Best Performance Out of Your Employees

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It all starts with good leadership.

No person could have foreseen the challenges that we are experiencing on a global scale stemming from the pandemic.

As leaders help navigate through unsteady waters and deal with their own uncertainties, one thing remains unchanged: People rely on them for support and to keep their hearts and minds engaged in their work.

For insight on how some of the best are doing it, I reached out to four leaders to uncover the ways they have been able to get the best out of their people amid the pandemic.

1. Don’t lose sight of your company’s culture

Michael Kirban, CEO and co-founder of All Market, which owns beverage brands Runa, and Ever & Ever, says moving to an indefinite work-from-home lifestyle was a major adjustment both personally and for his team. As a company that’s built on interpersonal relationships and has a strong familial atmosphere, Kirban has made an effort to not lose sight of company culture.

“It’s just as important to stay connected and find ways to do the things that were so endemic to your culture in real life,” he said, “like doing a weekly happy hour on Zoom or having employees host live-streamed yoga classes.”

Kirban also found new ways to connect with and engage his customers and communities, especially for the long-term health of his business. “We quickly shifted our content strategy to focus on ways to add value to our customers at home through our social channels, partnering with fitness studios to stream workout content and developing new recipes to inspire more creative smoothie making,” shared Kirban.

“All in all, despite the uncertainty, we’ve made it a priority to continue to be customer-centric, maintain our connected culture, and remain committed to providing better-for-you products to those who need them,” he said.

2. Be authentic and transparent with your employees

This crisis has made companies really consider how effectively they are communicating with their employees. It’s important for leadership teams to update employees in real time as much as possible and maintain a consistent dialogue with their teams at every level of the organization.

Chad Jensen, president of TCC, one of the nation’s largest authorized Verizon retailers with over 900 locations nationwide, believes the pandemic has ultimately motivated leaders in companies to identify how they can improve their employees’ experiences during such an unprecedented time. Effective communication, starting at the top, also defines new organizational goals in this new normal.

“As we navigate this new landscape, we have made it a priority to be transparent with our team, providing them with frequent, honest updates during our weekly all-company videoconference calls,” said Jensen. “These virtual calls help us stay connected with our TCC family, even more so than we were before!”

3. Acknowledge the past. Build for the future

This crisis has taught us that unexpected obstacles can arise at any time and completely disrupt organizational structure long-term.

According to Aman Brar, CEO of the industry-leading talent acquisition suite Jobvite, a return to what was previously considered a normal workforce may not be in our future. Therefore, establishing new starting lines is vital to ensure enterprises are ready for life after the crisis.

“As leaders, it’s our job to ensure our teams are being taken care of professionally, mentally, and emotionally during this difficult time,” said Brar. “To do this, it’s important to reestablish trust by acknowledging that this crisis has impacted all of us, yet still proactively preparing for the future.”

Brar added that this may include implementing new remote work protocols, adopting technology that helps team members adapt to work environments more seamlessly, and communicating major changes to ensure organizational buy-in and support.

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Term: Knuckle-Buster

What is a Knuckle-Buster

Knuckle-buster is a slang term for a manual credit card imprinter, a device merchants used to record credit card transactions before the advent of electronic point-of-sale terminals.

BREAKING DOWN Knuckle-Buster

A knuckle-buster is a colloquial term used to describe early manual credit card imprinting devices. Also sometimes known as zip-zap machines, the imprinters became known as knuckle-busters because frequent users of these devices would often skin their knuckles and develop calluses as a result of repeated use.

Knuckle-busters were ubiquitous for retailers and businesses from the the beginnings of the credit card industry until electronic point-of-sale terminals began to become popular in the 1980’s.

The device works by placing the customer’s credit card into a bed in the machine, then layering carbon paper forms over the card. By sliding a bar back and forth over the paper to create an impression from the embossed card data, multiple copies of the transaction are created. Customers sign these paper forms to authenticate the transactions. Copies of these forms would serve as customer receipts, and the the remaining copies would then be used by the business and its bank and credit card company to process and record the transactions.

Some manual imprinters would come equipped include a plate with the merchant’s name, address, and other identifying information. Other merchants would purchase carbon transaction forms pre-printed with their business information.

The Effect of Technological Advancements on Knuckle-Busters

Electronic point-of-sale terminals began to become available in 1979, and provided many advantages over knuckle-busters. For one thing, terminals offered faster verification and approval for transactions on a credit card account. They also tended to be easier on the knuckles of all involved parties.

Carbon copies also tend to be fragile records, and transaction receipts could frequently become illegible, especially over time.

Nevertheless, knuckle-busters remain an advantageous backup plan for businesses that would like to continue to run transactions when electricity or computer networks become unavailable. They also remain useful for merchants, such as fair vendors, who require a portable method of recording transactions.

Even so, the ongoing utility of knuckle-busters is compromised by a number of factors. The availability of carbon forms is diminishing, making forms more expensive and inaccessible, and employees are often not trained in the use of manual imprinters even whey they are available. For merchants, manual entry of credit card transactions is more time-consuming, and each entry is at risk of not being authenticated. Additionally, credit card companies more and more frequently issue cards which are not embossed with customer data, making the knuckle-buster entirely useless in capturing customer data even when running a manual transaction.

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Quote: Peter Drucker

Quote: Peter Drucker

“The most important thing in communication is hearing what isn’t said.” – Peter Drucker

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4 traits of highly authentic leaders

4 traits of highly authentic leaders

By Amy Kan

Professional coach Amy Kan says, “When you lead authentically you are effortlessly powerful.”

COVID-19 and the murder of George Floyd created an unprecedented pivotal cultural moment. These two events are affecting, and causing us to reflect on, nearly every part of our lives and will shape our future going forward. When it comes to our work lives, the changes are multi-faceted, from rethinking office logistics and protocols to overhauling policy and products. They are tangible, and they are cultural. This moment calls for great, authentic leadership.

The concept of bringing your whole self to work is nothing new, but that does not get to the depth of what it means to be an authentic leader. Bill George, in his book, Authentic Leadership, cites five qualities of an authentic leader that include understanding your purpose, adhering to your values, leading from the heart, establishing strong connections, and practicing self-discipline. In a subsequent book, Finding Your True North, he adds learning from your experiences.

When I talk about authentic leadership with my coaching clients, who are mostly high-potential women in the middle stages of their careers, we talk about embracing their true, best selves. Discovering their strengths and stepping into them. Learning about their blind spots and addressing them. We explore who they want to be as a leader and what feels right. Because it is hard, and really stressful, to try to be someone you are not. It’s like swimming upstream—all the time. When you lead authentically, however, you are effortlessly powerful.

Of course, authentic leadership is rarely taught. Many of us learn to lead by example. It isn’t enough, though, to adopt the style of the leaders above you just because they’re in the positions you aspire to. If the shoe doesn’t fit, wearing it is going to hurt. Instead, seek out leaders who inspire you, whether you work with them (or even know them) or not. Do some research. What do they do that feels right to you? What leadership strategies do they follow? Once you have some ideas, try them out. See how it feels to adopt one or two. Give it some time and see if it feels natural to you, or whether it feels forced. What do you notice about the people around you as you experiment? How do they respond? Don’t just look to any leader—look to the right leader for you.

Aligned with core values

Living in line with your values is key to being authentic. Values should guide your choices and decisions, so knowing what they are is critical. Make a list of all the values you care about and rank them in order of importance to you. Think about these values in the context of leadership. For example, if you rated family as a core value, how does that show up for you in the workplace? As a leader, are you aware of and understanding of the family responsibilities of the people you manage? As a CEO, are the company policies family-friendly? Do you know the names of your employees’ spouses and children? Do you ask about them? If you realize that your behavior as a leader is not aligned with your core values, reevaluate how to incorporate them. Misalignment is a key indicator that you are not being authentic.

Driven by purpose

If your values guide you, then it is your purpose that drives you. What do you want to accomplish in your life? How do you want to be remembered? Having a sense of purpose, of why you do what you do, can keep you on the right track. As an authentic leader, your purpose can provide clarity to you and to those who follow you. In our current reality, when we may be swamped or overwhelmed by uncertainty, employees need leaders with purpose who help provide meaning to the work they do. Purpose provides inspiration and motivation.

Centered on people

To be authentic, you need to do more than acknowledge your feelings; you need to act upon them. Leading from the heart couldn’t be more important right now. As a leader, you are responsible not just for revenue, budgets, or products, but most importantly for people. People who are your customers, your suppliers, and your employees. In his book, Everybody Matters (coauthored by Raj Sisodia,), Bob Chapman, the CEO of Barry-Wehmiller, writes of his company’s, guiding principle, “We measure success by the way we touch the lives of people.” What if that guided you? How are you touching the lives of the people you lead? Are you showing compassion in these most challenging times? Are you open to learning from your employees and hearing their perspectives, of considering their input? Are you ensuring their health and wellness? Now, more than ever is the time to put people first.

Based on continual growth

A growth mindset is one in which you are always learning from experiences, and it is something all authentic leaders have in common. They can draw on their past experiences, recognize, acknowledge and learn from their mistakes, and learn from others. They are willing to make changes based on what they learn and shift strategies and policies. Take a look at what is happening in this country. Big changes are afoot regarding police reform, justice reform, health and safety policies, and the country slowly reckoning with its past. Authentic leaders are listening, learning, and taking action: righting wrongs, learning from experts, changing policies and products, creating, and participating in conversations.

With the massive changes taking place in this country, I envision a surge in authentic leadership as there will be little tolerance for anything but. Heed the call to lead with purpose, be guided by your values, learn from your mistakes, and keep growing. Lead from the heart, be compassionate, and put people first. Be an authentic leader, whatever that looks like for you.

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Can’t Find a Mentor? Try This Instead

Can’t Find a Mentor? Try This Instead

By Jessica Stillman

Can't Find a Mentor? Try This Instead

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How to get guidance if you don’t have someone to help.

Mark Zuckerberg credits Steve Jobs with mentoring him through the intense pressure to sell Facebook in its early days. Bill Gates calls Warren Buffett his mentor. Eric Schmidt provided “adult supervision” for Larry Page and Sergey Brin during Google’s early years.

If even these icons need mentors, having an experienced sounding board to bounce problems and ideas off of is even more important for everyday entrepreneurs. Study after study shows that having a mentor hugely increases the chances your business will be successful.

But while the case for having a mentor is rock solid, the realities of actually finding one can be complicated, especially for those from less advantaged backgrounds. Plus, being cooped up at home thanks to the current crisis is making it even harder than usual to make new connections.

So what do you do if you recognize the value of having a great mentor but, for the moment at least, can’t find one? On her Cup of Jo blog recently, successful long-time blogger Joanna Goddard offered an out-of-the box suggestion: imagine your mentors instead.

DIY Mentoring

This might sound crazy, but Goddard insists it worked for her. “I’ve had a few amazing mentors in my life, but I haven’t actually met any of them,” she writes. How is that possible?

“When I started Cup of Jo in 2007, blogging felt like the Wild West. Since blogging was still new, I didn’t have people in whose footsteps I could follow; my peers and I were just figuring things out as we went,” Goddard explains. “So, to help ground myself, I made a list on my computer’s desktop of people who I could consider mentors from afar, including magazine editor Pilar Guzmán, author Anne Lamott, force of nature Michelle Obama, and neck-hater and all-around genius Nora Ephron.”

Having assembled this DIY board of mentors, Goddard proceeded to (imaginatively) consult them. “Whenever I felt lost or confused about next steps, I’d think ‘what would Anne Lamott do?’ or ‘what might Michelle Obama think?'” she writes.

This sort of imagined advice will never be as tactical and detailed as real, live mentorship. Your imagined role models can’t pick up the phone and make an important introduction for you. I don’t think Goddard would argue that imagined mentors equal real-life ones. But if circumstance has kept you from finding in-person support, Goddard swears her trick can make a real difference.

“Sometimes I’d feel disoriented because other bloggers would be forging different paths – taking gorgeous daily outfit photos or doing advanced beauty tutorials – and I wasn’t good at that. Was I falling behind? Was I not succeeding? But I’d remind myself: Nora Ephron just was herself and it worked out. I’ll keep moving forward,” she offers as an example.

Broaden your definition of mentoring.

The lesson here isn’t to give up on finding someone more experienced to guide you. Instead, it’s to adopt the broadest definition of mentorship possible right now. If you fetishize a particular kind of close, personal mentorship, the danger is you may ignore other opportunities to learn from those you admire.

You might not think that pinning a quote from your entrepreneurial role model to your desk or closely observing a brilliant but standoffish colleague counts as mentorship. Goddard insists it does. Don’t miss out on opportunities to learn and improve now because you’re waiting for the perfect mentor to appear.

Or as Goddard sums it up: “Secretly pinpoint people you respect and admire, note their career moves and philosophies, and consider yourself mentored.”

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Term: Kin

What Is Kin?

While standalone cryptocurrencies like bitcoin have paved the way for the industry, more existing companies are venturing into the digital currency space with their own offerings. One of those companies is Kik, the popular messenger service. Kik’s cryptocurrency is called Kin.

As with many other company-specific digital currencies, Kin has special uses within the Kik messenger platform. Users are able to earn Kin for making contributions to the broader Kik community; they can also spend Kin on various goods and services within the Kik platform.

Kin Explained

Kin was first launched in September of 2017. It was launched via an ICO that raised roughly $100 million in investor funds over a period of about two weeks. Upon its launch, the founders of Kin described the Kin Ecosystem as “designed specifically to bring people together in a new shared economy,” with the cryptocurrency itself acting as a “foundation for a decentralized ecosystem of digital services.”

While most companies that launch their own cryptocurrency have a ready-made user base, Kik had an important advantage over its competitors in this regard. Kik already enjoyed millions of active users through its messaging platform. As such, the platform could drive mainstream consumer adoption of the Kin cryptocurrency. The Kik app was also able to house many of the traditionally third-party services and features for the currency, including the Kin wallet.

Kin Rewards Engine

Perhaps even more notable about the launch of Kin has been the Kin Rewards Engine. Through this mechanism, “Kin will be introduced into circulation as a daily reward, to be distributed among stakeholders by an algorithm that reflects each community’s contribution to the overall ecosystem.”

This is one of many ways that the makers of Kin have worked to incentivize the use of the cryptocurrency by the broader Kik community. Apps are still able to offer Kin to consumers in exchange for watching advertisements and providing feedback, as most cryptocurrencies operating in a similar fashion already do.

Besides this, though, consumers are able to engage in a much wider variety of activities in exchange for Kin tokens. The Kin development team assumes that consumers don’t enjoy having to watch ads in order to be rewarded in cryptocurrency, no matter how much they might like the reward. For that reason, it’s possible for Kik users to amass Kin tokens without ever having to watch advertisements.

Kik CEO and founder Ted Livingston has suggested that the Kin token is an opportunity to distribute value amongst developers. The idea is that Kik will give away value, incentivizing developers to “build an open and decentralized ecosystem of apps” on the Kik platform.

The Kin Foundation is a “manifestation of a not-for-profit governance organization that will ultimately be decentralized and autonomous,” helping to steer the development of the broader ecosystem, according to ETHnews. The ecosystem will not be based around advertising, as many social media platforms are, but rather on users being able to provide value to themselves and one another, and on those users then being rewarded for that contribution.

Besides being a digital currency, the Kin website describes the token as “different from other digital currencies because it is a cryptocurrency.” Kin is similar to bitcoin in that it makes use of the public blockchain and has monetary value. The fact that Kin is part of a blockchain allows its developers to control the creation and flow of tokens to prevent a surge. Blockchain support also allows a token to be guaranteed over the long term.

While many cryptocurrencies reward powerful mining operations and encourage users to stockpile tokens, Kin’s setup prompts Kik users to earn and spend their currency within the platform. Kin is seamlessly integrated into apps, with Kin-supported apps in the Kik platform set apart with a small “K” icon. Those icons link apps with the Kin Marketplace, where users can find many different opportunities to both earn and spend their tokens.

This is also the hub where developers are able to create and distribute content for Kin rewards. In these ways, Kik’s developers have worked to integrate the cryptocurrency into the app experience, assuring that customers do not have to go out of their way in order to become involved in the Kin economy.

Although Kin was only officially launched late in 2017, it comes on the heels of a large experimental campaign. Over a period of close to three years, Kik ran a project called Kik Points. This was very similar to Kin in that it offered Kik users the chance to earn and spend points within the app itself. At its highest levels, Kik Points reached transaction volumes equal to three times more than bitcoin. If Kin is able to achieve the same levels of interest and activity, the results could be phenomenal.

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3 questions leaders need to ask to prepare for the future of work after COVID-19

3 questions leaders need to ask to prepare for the future of work after COVID-19

By Diana Vienne

It’s time to rethink our working norms so that we can build a flexible, resilient workforce.

Recently, I had an in-person meeting with a colleague who lives locally. It was the first time I had met with a professional colleague in person since early March. The meeting went longer than planned, and, in addition to our agenda, we chatted a bit about our personal lives. We had so many ideas. I left the meeting inspired, energized, and full of new purpose. Even though I am an introvert, the in-person collaboration created a spark that I had been missing.

The world has proven that individual work can be tackled successfully from remote settings. Workers can maintain flexibility with the support of technology and empathetic leadership. This is a great accomplishment for the corporate world. However, we cannot take for granted the importance of in-person connections to drive ideation, performance, and success.

Right now, many organizations are actively planning for “reentry.” They are not only considering when employees will return to the physical office but how many, if any, will return at all. Companies are evaluating what it will take to enable more consistent remote working for the long term. They are considering the value and purpose of in-person collaboration and how to organize the workplace to meet these needs.

In this moment, leaders have a unique opportunity to reimagine what the future of work will look like and to operationalize it. For our mindsets to move from survive (I need to do what it takes to get through this) to thrive (I am ready to challenge myself, innovate, and exceed expectations), organizations must move out of crisis-management mode, through reintegration, and into a steady state for the future.

To begin to motivate ourselves and others in our organizations to move through this progression, we must create an environment that allows employees to feel inspired, energized, and innovative. As leaders, we must be prepared for a long journey to build a work culture that supports both in-person collaboration and remote working. And, it starts with asking some hard questions about the reentry strategy.

Why, and in what ways, do we need to work together?

Think ahead about how you will embrace employees who need to return to the office, as well as those who would prefer, or need, to work remotely. Consider:

  • What is the value of congregating in a physical space?
  • In what situations is it still necessary to work in the same room all day, side by side?
  • When should people gather for intentional collaboration purposes?
  • How productive/effective are we at working virtually?
  • How can we assess the positive and negative impacts of a remote work environment on the long-term?
  • Nurturing the spirit of innovation—in-person and virtually

If your organization is considering having employees in the office, it likely won’t be nine-to-five, five days a week. Individual work can be tackled from home. Changing your physical space by turning your cubicles into collaboration spaces can create a new vibe for the office that focuses in-person meetings on energizing others through collaborations and ideas. Of course, for now, these spaces will need to be socially distanced, but as we are learning, there are many ways to create a feeling of togetherness, despite physical gaps.

If you won’t be back in the office soon, to maximize connections and creativity with your virtual team, you can create interactive multiday virtual summit experiences that change the game on a typical workday. You can send employees tools for the meeting, care packages, and other items that are geared toward connection and creativity.

What do we need to enable hybrid collaboration across teams?

The future of work must enable the spark of innovation and creativity that is brought about by inspiration and collaboration. Being together—in person, with others—brings that spark, and the new thinking and innovation that companies need to move forward. Consider what tools, training, and technology will be required to make sure that people in the organization can collaborate in a hybrid model. For example, you can continue to drive engagement and connection by reallocating your rent money for small team, multiday retreats that combine fun, inspiration, and great thinking.

Be sensitive to the impact of isolation. In his book Together, Vivek H. Murthy, MD, explores the crisis of loneliness that many of us are feeling. He reflects on the roots of connectivity and their importance to human existence. Dr. Murthy states, “Beyond basic survival, connection increased the rate of human innovation and empowered the tribe’s creativity.”

Working remotely can contribute to loneliness and other mental health concerns. This feeling of isolation will have a long-term impact on work outputs–which is why a hybrid solution is so important. Combining virtual and in-person interactions is critical to maintaining the highest level of motivation and morale.

How can we reimagine the way we work to ignite energy and performance?

Enabling new ways of working will require significant mindset shifts regarding work-life balance, setting boundaries, effectiveness, and collaboration.

Leaders must take a close look at the behaviors for which they are coaching and rewarding. As you take a look at how work gets done in the future, you may need to reconsider how to measure today’s drivers of success and productivity, including output value, emotionalintelligence, resilience, and agility.

As we continue to hover on this bridge between what was and what will be, organizational leaders have a tremendous opportunity. It’s time to rethink our working norms so that we can build a flexible, resilient workforce that is equipped with the physical space, tools, mindsets, and organizational support to move from survive to thrive.

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How Can You Spot a True Leader? Look for 4 Rare Signs

How Can You Spot a True Leader? Look for 4 Rare Signs

By Marcel Schwantes

How Can You Be Sure Someone Has Real Leadership Potential? Watch for 4 Rare Signs

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True leaders lead by serving others first.

Whether or not you subscribe to the notion that “everything rises and falls on leadership,” no company can truly grow without growing leaders first.

To grow leaders who will then grow companies, the focus should be on raising up people-centered leaders who aspire to lead by serving others first. From there, everything else follows to exceptional results.

Having spoken to scores of successful leaders who put humans first, I can attest that the journey toward great leadership is one of mindset and continuous personal development.

To illustrate, four executives recently shared some key principles and practices that lead to good human leadership that produces results.

1. Be human, not higher up

For Monte Williams, the founder of ALEU-The Leadership Development Company, whose mission is to help people lead themselves more effectively so they can add the most value to their environment, it’s paramount that leaders demonstrate the courage to be human, not higher up.

“When leaders invest the time to understand their employees as people first, and then apply that understanding to the context of their business, they create a team more deeply connected to the purpose of the organization,” says Williams. He maintains that as a leader, it is imperative that you create the time to relate to your team on a human level.

Williams adds, “The sense of human connectedness is what drives the most innovative solutions to the business’s most complex challenges. As leaders, we become master facilitators of this process when we connect to our teams as humans and not higher-ups.”

2. Lead with a learning mindset

Paul Jarman, CEO of unified cloud customer experience provider NICE inContact, approaches everything with a learning-first mentality. “When you keep your mind open and give everyone in your organization a voice, every interaction is an opportunity for growth — personally and professionally,” shares Jarman.

Once an organization has reached a certain level of maturity, it can be tempting for leaders to avoid reinventing the wheel. By challenging yourself to keep learning, Jarman says, you’re less likely to accept “the way things have always been done.”

3. Leverage empathy to improve communication

Most leaders can agree that business ultimately comes down to one thing — relationships. And one key trait that helps nurture those relationships is empathy. Will Bartholomew, CEO and founder of D1 Training, an athletic-based fitness franchise, relies heavily on the encouragement of empathy to drive the performance of his employees.

“Your teams spend at least 40 hours every single week together, so there are bound to be occasional disagreements. However, when you encourage an empathetic environment, you’re promoting an understanding of other viewpoints, which will mitigate disagreements and help your team come to resolutions quicker,” shares Bartholomew.

Empathy also leads to overcommunicating in the best way during a pandemic, where employees feel comfortable enough to voice feedback and ask for criticism to improve. Now, Bartholomew always makes a point of overcommunicating and encourages others to do as well — it has helped everyone understand one another more clearly.

4. Be intentional about developing relationships

Building relationships doesn’t have to be difficult. Rashada Whitehead, head of culture, diversity, and inclusion at Grant Thornton, notes, “The simple practice of saying good morning to team members, the ability to call someone by name, or connecting back to a moment or story that matters demonstrates that people and relationships are a priority beyond a profit.”

What this comes down to is fairly simple. It means taking an interest in those you lead at the human level and not treating them like just employees whose sole purpose is to complete tasks for you.

Good leaders open up the room for discussion, healthy debate, and the exchange of ideas to get to know team members on a deeper level. They ask for people’s opinions to help them get to know those who might not otherwise approach them. This helps to build trust among employees and bolsters employee retention.

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Term: Guanxi

What Is Guanxi?

Guanxi (pronounced gwon-she) is a Chinese term meaning “networks” or “connections” that open doors for new business and facilitate deals. A person who has a lot of guanxi will be in a better position to generate business than someone who lacks it.

Generally an acknowledged fact, it is particularly true in China that the wheels of business are lubricated with guanxi.

How Guanxi Works

Guanxi is perhaps best understood by the old axiom, “it’s not what you know, but who you know that’s important.” Guanxi in the West comes in many forms—alumni networks, fraternity or sorority houses, past and present places of employment, clubs, churches, families, and friends.

In social sciences, guanxi is similar to some concepts understood in network theory, such as the idea of information or connection brokerage by well-positioned individuals in a social network, or their social capital.

The odds of gaining access to a business opportunity and then winning that opportunity are higher when you work your connections. If you are bidding for a contract in competition with others and you know someone on the other side of the deal, naturally you will try to utilize this contact to your advantage.

If you are a Wall Street executive with guanxi in Washington, you will certainly make a few phone calls to make sure lawmakers remain neutered and regulators stay off your back. If you are a CEO who wants to make an acquisition, you will tap your guanxi at the golf club to find a quicker route to your objective.

Key Takeaways

  • Guanxi is a Chinese term describing an individual’s ability to connect or network for productive business purposes.
  • Guanxi is perhaps best encapsulated by the axiom, “it’s not what you know, but who you know.”
  • Abusing guanxi through aggressive or dishonest business practices can jeopardize one’s reputation or present opportunities for corruption.

Staying Above Board with Guanxi

Depending on where you do business and how aggressive you are, using your guanxi can be innocuous or hazardous. It is commonly accepted as a way of conducting business affairs in the West, but you must be mindful of conflict of interests, whether governed by law or a company code of ethics and very serious cases that involve the Foreign Corrupt Practices Act (FCPA) if you do deals abroad.

In China, where the art of guanxi is practiced in high form, calling upon connections is the norm to get things moving. However, even there, one can go too far. Business leaders with guanxi in the government have engaged in illegal activity with dire consequences. Abusing guanxi is a bad idea in all but a few places on earth.

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How Leaders Delude Themselves About Disruption

How Leaders Delude Themselves About Disruption

By Scott D. Anthony and Michael Putz

We’ve known for decades what causes disruption. So why are companies still allowing themselves to be vulnerable? The answer starts at the top.

Ever since the 1997 publication ofThe Innovator’s Dilemma, researchers, management experts, and businesspeople have discussed, dissected, and debated Clayton Christensen’s Theory of Disruptive Innovation. By now, the arc of disruption is well established: We know how disrupters enter the market, and we know how incumbents typically bungle their responses to such seemingly insignificant competition. Numerous books and articles have offered to solve the dilemma of disruption, including Christensen’s ownThe Innovator’s Solution (a 2003 book coauthored with Michael Raynor), which suggests that leaders who understand how disruption transpires can inoculate themselves against the threats and seize the opportunities.

Yet, despite so much insight and advice, the dilemma persists: 63% of companies are currently experiencing disruption, and 44% are highly susceptible to it, according to research by Accenture. And in a thorough analysis of more than 1,500 publicly listed companies, growth strategy consultancy Innosight found that only 52 of them, about 3% of the sample set, had made material progress in strategically transforming their organizations. The default positions, it seems, are to squeeze extra points from profit margins, search for companies to acquire, or simply pay lip service to innovation by setting up token incubators or having executives wear jeans and the occasional hoodie.

Why are companies still so vulnerable to disruptive threats? Our view is that it isn’t about not having the right playbook. The problem is that well-intentioned leaders often delude themselves by downplaying disruptive threats or overestimating the difficulty of response. In simple terms, leaders lie to themselves. This means that dealing with disruption is not just an innovation challenge; it is a leadership challenge. This article explains these delusions about disruption and offers ways to help leaders avoid self-sabotage.

Cautionary Tales Persist

“Christensen and Raynor have done a superb job of creating a framework for helping to understand industry dynamics and for planning your own growth alternatives.” This quote appeared on the back jacket ofThe Innovator’s Solution, attributed to Pekka Ala-Pietilä, then president of Nokia. The Finnish company had much to be proud of back then. It was on the brink of taking over the booming cellphone market. Over the next few years, the company would grow into a seemingly unstoppable force. Its stock price surged. Then, in November 2007,Forbes ran a prophetic cover with the headline, “Nokia: One Billion Customers — Can Anyone Catch the Cell Phone King?”

Well, yes.

Despite having dominant market share, despite having the resources and capabilities to transition to the smartphone era, and despite having a leader who endorsed and presumably understood Christensen’s groundbreaking theories on disruption (though Ala-Pietilä, admittedly, left the company in 2005), Nokia stumbled. Apple famously entered the market mid-2007. Google formed the Open Handset Alliance, powered by the Android operating system, later that year. Nokia shares began to slide. In 2013, CEO Stephen Elop sold Nokia’s ailing cellphone business to Microsoft for roughly $7 billion. A year later, Microsoft took a roughly $7 billion write-down on the transaction, suggesting the business was worthless.

Nokia’s fall is just one of many cautionary tales: Eastman Kodak, Blockbuster, and Toys R Us were all destroyed by disruption. Some of today’s great companies look to be similarly snared in their own innovator’s dilemma. FedEx started in classic disruptive fashion but today is under threat from Amazon, which could hollow out a significant portion of FedEx’s core business by picking off high-value lines between hubs, leaving FedEx (and UPS) with small, unprofitable routes. Or consider Netflix. The disruption poster child could be disrupted itself by Amazon, Apple, AT&T, or Disney. Netflix lacks the diverse portfolio these businesses have, and it may be overly focused on mainstream customers while ignoring the needs of less profitable ones, like all of those young people who prefer creating and sharing short-form videos on platforms such as YouTube and TikTok instead of watching shows likeThe Crown. New habit formation is often an early warning sign of disruptive change. For all its innovation prowess, why hasn’t Netflix visibly pursued growth opportunities beyond video streaming and long-form content creation?

And why, after so many years since Christensen presented his original theory and so many cautionary tales, do leaders continue to miss the warning signs? Our view is that the disruptive playbook’s leadership section is incomplete. Leaders must learn how to build the individual and organizational capability to confront powerful self-deceptions that inhibit successfully dealing with disruption.

Four Lies Leaders Tell Themselves

Powerful deceptions hinder a leader’s ability to respond to disruptive threats and seize disruptive opportunities. Christensen’s original research highlighted one such deception, noting how, ironically, listening to your best customers drives the innovator’s dilemma. Companies typically focus on satisfying their best customers (usually their most profitable ones) by providing better versions of current solutions while ignoring their worst customers, the ones most likely to flock to cheaper or more convenient disruptive solutions. Of course, that deception is now well known. But other, less obvious lies that leaders tell themselves play a critical role in determining a company’s long-term fate. Let’s explore four of them.

Lie No. 1: “We’re safe.” It is easy to be in the middle of a disruptive storm and take comfort in data suggesting everything is fine. This is because data lags disruptive change. CEOs look at their dashboards and think they are OK, but they forget that they are looking in a rearview mirror. BlackBerry is a good example. On April 1, 2008, its co-CEO, Jim Balsillie, gave an astonishing interview on a Canadian chat show. He dismissed the iPhone, didn’t mention Android, and smugly said, “I don’t look up too much or down too much. The great fun is doing what you do every day. I’m sort of a poster child for not sort of doing anything but what we do every day. … We’re a very poorly diversified portfolio. It either goes to the moon or crashes to the earth.”

It’s easy in hindsight to laugh at the quote and especially at Balsillie’s hubris. But consider BlackBerry’s performance at the time and over the next few years that followed. When Balsillie gave the interview, BlackBerry (then called Research in Motion) had just reported revenues double those in the previous fiscal year, to roughly $6 billion. Over the next three years, revenues tripled, reaching a peak of close to $20 billion. Then, of course, came the crash, and now BlackBerry’s revenues are below $1 billion. Today’s data reflects yesterday’s reality.

Ironically, leaders can be adept at spotting disruption in other industries and yet be blind to what’s going on right in front of their eyes. Years ago, Innosight and Harvard Business School (HBS) held an event to discuss disruption with organizations that included Hallmark, Intel, Kodak, and the U.S. Department of Defense. Participants were given 20-page case studies highlighting potentially disruptive developments related to their industries. Kodak’s case focused on digital imaging, for example, while Hallmark’s focused on online greeting cards. But by and large, the cases depicted similar disruptive scenarios. “I thought this was going to be the most boring event ever,” admits Clark Gilbert, an HBS professor at the time and now president of BYU-Pathway Worldwide. “We basically had written five versions of the same case.” But something surprising transpired. While discussing the cases, it quickly became clear that while executives easily saw disruption in other industries, they missed the forces at work in their own. “It was remarkable,” says Gilbert. “None of the companies could see their own problem.”

When company leaders finally see the problem, it is usually too late. Leaders must have the “courage to choose” before they face the proverbial burning platform. Once the platform is on fire, choices substantially narrow. Mark Bertolini of Aetna provides a good example of a leader who didn’t wait that long to act. When he became CEO in late 2010, there was no burning platform. The health insurer had just reported record revenues and record earnings. It would have been easy for Bertolini to execute yesterday’s strategy for five years and ride off into the sunset. Instead, Bertolini made the courageous decision to dramatically reconfigure the business, which ultimately resulted in Aetna’s game-changing merger with CVS Health in early 2018, a first-of-its-kind combination of retail pharmacy and insurance capabilities. The combination creates the potential for more affordable access to urgent and primary care. The increasing collaborations could break down the traditional health care silos — payer, provider, pharmacy, medical devices — and may signal the beginning of broader health care disruption.

Lie No. 2: “It’s too risky.” There is a perception that making bold investments in innovation carries systemic risks and that it is safer to stay the course. Consider a large European industrial company Innosight advised. The company was seeking to set a bold new direction and achieve ambitious performance targets. Its leadership identified an opportunity to drive step-change growth by, for the first time in its history, bypassing traditional distributors to deliver highly customized products directly to end consumers. The strategy would require substantial commitment, but it also promised substantial returns, including the ability to spur growth, combat commoditization, and increase margins. Despite consensus and a serious commitment among the executive leadership team to the strategy, the outgoing and incoming board chairs decided — in the bathroom during a break — to significantly reduce the scope of the ambition, perceiving that leveraging digital technologies and bypassing traditional distributors was too risky and not in the company’s short- and medium-term interests. The ambitious plan was scrapped after that bathroom break. Both the CEO and CFO departed soon thereafter, leaving a demoralized management team with no clear view for the future except the status quo.

The fear of messing up what has been a proven strategy is powerful, but the reality is that making bold investments in innovation doesn’t carry systemic risks. New Coke, Apple’s Newton, Microsoft’s Zune music player, Amazon’s Fire Phone, and Google’s augmented reality glasses are all examples of big companies that made big bets that led to big write-offs. But while none of these failures was good, of course, none sank their companies, either.

“Big moves look like they are really risky. By and large, they are not,” declared a Fortune 500 CEO at a 2019 Innosight event. “Because what you lose when you invest a ton of money is the money you invested. It is capped. When you win, you usually create not only an annuity but a new ecosystem that gives you the opportunity to win in new areas.”

What carries systemic risk is not making bold investments in innovation. In the face of disruptive change, company leaders consistently invest too little, too slowly, in doing something different. Companies increase risk by not taking risk. Walmart executives knew for years they had to embrace online retail, and yet from 1998 to 2015, the company kept redirecting or scuttling significant investments to compete with Amazon and other e-retailers. It spun off in 2000 and brought it back in July 2001. It didn’t allow third-party sellers until 2009 and then for years had just six sellers on its website. It invested in an e-commerce site in China in 2011, took a 100% share in 2015, and sold it off in 2016. Its acquisition of in 2016 has promise, but Walmart should have bet boldly years earlier when the capital investment required would have been much lower and the tolerance for losses (necessary to catch Amazon) higher.

Ironically, such late-breaking attempts to catch up on innovation after being too slow are often, wrongly, seen as proof that they offer systemic risk — Walmart is “betting the store” on its web strategy. But that wrongly characterizes what is actually happening. Walmart was very, very late to the party and is now innovating to control the damage. Late-breaking catch-up innovation with a burning (or smoking) platform is not the same as making bold bets early on.

Lie No. 3: “My shareholders won’t let me.” This deception shows up in various guises. It might be “The activists will pounce on me,” or “My shareholders won’t like it,” or “The market just cares about short-term results.” This type of lie — more like an excuse — leads to self-harm. A compelling stream of research by McKinsey shows that companies that take a long-term perspective outperform those that don’t. So, paradoxically, those that focus on short-term returns generate lower short-term returns. Indeed, many leaders hide behind the “maximize shareholder value” maxim without understanding exactly what it means. As Michael Mauboussin and Alfred Rappaport, prominent financial experts and coauthors ofExpectations Investing, once noted:

Maximizing shareholder value means focusing on cash flow, not earnings. It means managing for the long term, not for the short term. And it means that managers must take risk into account as they evaluate choices. Executives who manage for value allocate corporate resources with the aim of maximizing the present value of risk-adjusted, long-term cash flows. They recognize that to create value, a company must generate a return on its invested capital that covers all of its costs over time, including the cost of capital. These executives are not fixated on the short-term stock price but rather on building enduring long-term value that ultimately shows up in a higher stock price.

Further, there are clear examples demonstrating that you can actively sell your shareholders on a new story, as long as it is indeed a convincing story and you demonstrate early success. But that doesn’t make it easy. Aetna’s Bertolini recalled a tense meeting early on in the company’s strategic transformation where he fielded questions from investment banking analysts: “I walked into a room of analysts and I said, ‘You either think of me as stupid or that I’m lying to you, neither of which makes me want to spend more time with you.’ I have had shareholders who have said to me, ‘Why don’t you double your dividends?’ Well, I want to invest in the company. So I said that one of my largest shareholders should get the hell out of my stock.” In 2018,Harvard Business Review identified Bertolini as one of the 50 best-performing CEOs in the world and the highest-performing CEO in the health insurance industry. Bertolini’s decision to stand firm in the face of criticism helped drive Aetna’s successful transformation.

Lie No. 4: “My people aren’t up to the task.” Leaders often use their own people as an excuse not to take action. It’s a convenient lie that puts the burden of inaction on others — or worse, requires leaders to take dramatic action that may not be required. For example, in 2018, Biogen CEO Michel Vounatsos told a group of CEOs that transforming his company had required turning over a staggering 80% of his top leadership team. “People resist change,” he said. “You need to find the leaders in the room who will be the ambassadors to the future.” Vounatsos’s strategy underlines a popular perception that changing a company requires changing the staff. It is too early to tell whether Vounatsos’s method will pay off, but there is an obvious risk of destroying a significant amount of institutional knowledge. The difficulty and pain of the “rip and replace” strategy is perhaps one reason why only 3% of companies researched by Innosight were embarking on significant strategic transformations.

As a counterexample, DBS, the largest bank in Southeast Asia, went from a stodgy regulated bank to an innovative digital powerhouse without dramatically changing its workforce. Soon after becoming CEO in 2009, Piyush Gupta set a challenge: Given increasing technological change, DBS had to function like a 27,000-person startup. That meant embracing new behaviors, such as agile development, customer obsession, and experimentation. DBS’s culture change effort rested on the fundamental belief that its staff had the inherent capabilities to become innovators but lacked the tools and support to realize them. Under the leadership of Paul Cobban, chief data and transformation officer, the bank redesigned its offices, changed its meeting styles to encourage equal participation and greater collaboration, and introduced a new innovation team with an unusual mandate: Under absolutely no circumstances should the innovation team innovate. Instead, the team’s mission is to enable the broader community to incorporate the behaviors that enable successful innovation.

Transform Thyself

To see these lies for what they are and successfully transform their organizations, leaders first need to transform themselves. Successfully responding to disruption requires executives to simultaneously reinvent today’s business while creating tomorrow’s business. More specifically, they have to find new ways to solve customer problems while at the same time scoping out new growth opportunities. The challenge isn’t just that these missions are in conflict and involve periods of chaos and uncertainty; it also is that they require fundamentally different mindsets and approaches.

Research by longtime Harvard professor Robert Kegan found that most leaders lack the cognitive flexibility required to “toggle” between being disciplined and entrepreneurial. Kegan terms this flexibility self-transforming, where leaders have the ability to “step back from and reflect on the limits of our own ideology or personal authority; see that any one system or self-organization is in some way partial or incomplete; be friendlier toward contradiction and opposites; [and] seek to hold on to multiple systems rather than project all except one onto the other.” Unfortunately, other research suggests that no more than 5% of high-performing managers have achieved this level of leadership.

It’s not surprising that so many leaders lack this capability. Most grew up in a world that was either disciplined or entrepreneurial but rarely both and almost never both at the same time. And leadership development (with rare exceptions) hasn’t caught up with this emerging need. To transform themselves, leaders must focus more on mindsets, awareness, and inner capacities to combat basic biases that make it hard to make decisions in uncertainty and toggle between different frames. There are no quick fixes here. But research increasingly suggests the best starting point is to embrace what broadly goes under the term mindfulness.

To some, the word might sound squishy and New Agey, but meditation and related practices that use breathing to tune into thoughts and sensations have widely documented health benefits, such as boosting energy and lowering stress. More critical, and for our purposes here, mindfulness boosts awareness, increasing a person’s ability to step back, pause, and become aware of not just habitual thought patterns, but also emotional reactions. As Potential Project managing director Rasmus Hougaard has noted, mindfulness is not about just doing more but also seeing more clearly what is the right thing to do and what is just a distraction.

Mindful leaders can, for example, “see” their reactivity, giving them the tools to identify and overcome the deceptions of disruption. A mindful leader is better at toggling between different mindsets: a disciplined focus on transforming today’s business and more entrepreneurial thinking to create tomorrow’s business. Mindfulness is a powerful, scientifically validated tool for improving self-awareness, which is a critical and underappreciated tool for senior leaders confronting the challenges of disruptive change.

Some leaders who have successfully managed transformative change have touted the value of mindfulness. Aetna’s Bertolini was an early advocate of advancing meditation programs at his company, and in 2014, the company hired a chief mindfulness officer. Bertolini credits mindfulness for easing chronic pain he suffered after a skiing accident and when recovering from a rare form of cancer. He says it also improves his ability to process information and make sharp strategic decisions: “With so many things going on, whether in a small or large organization, you can get frozen by attempting to process it all instead of being present, listening, and focusing on what really matters.”

Another example of the power of mindfulness comes from Pierre Wack, who advanced and popularized the idea of scenario planning while working at Royal Dutch Shell in the 1970s and 1980s. Wack was influenced by Russian guru Georges Gurdjieff and practiced meditation in India. Successful scenario planning, Wack noted, requires “being in the right state of focus to put your finger unerringly on the key facts or insights that unlock or open understanding.” He noted that the value of scenario planning is not about developing specific plans that will actually be implemented or getting to the “right” scenario but about helping leadership understand that the future can be dramatically different from the present, while fostering a deeper understanding of the forces driving potential changes and uncertainties. The approach, he said, gives managers something “very precious: the ability to reperceive reality.”

By sharpening his ability to toggle between present reality and future possibility, Wack and his team transformed scenario planning from a passive manipulation of data into an active tool to stretch thinking and advance discussions. This helped Shell to see what others missed and weather oil shocks in the 1970s and 1980s significantly better than its competitors.

Transform Thy Organization

Of course, it is not enough to transform just the person at the top. Too often you see a single-shot transformational leader. That is, a leader seems to transform an organization, but then the organization backslides when the leader departs. For example, A.G. Lafley drove substantial change at Procter & Gamble as CEO from 2000 to 2009, but the company stumbled so badly when he stepped down that he was asked to return. Lou Gerstner was an icon for transformation during his time at IBM, but by the time Sam Palmisano turned the CEO reins over to Ginni Rometty, IBM had missed the cloud computing revolution and its touted Watson platform was struggling to deliver results commensurate with its hype. Tim Cook has been a strong steward at Apple, boosting growth and strengthening its services business, but he simply hasn’t matched the disruptive magic of Steve Jobs. Single-shot leaders might have the personal ability to toggle between different mindsets, but they seem to struggle to codify core elements of their unique approach and institutionalize them.

Kegan and coauthor Lisa Laskow Lahey noted inAn Everyone Culture that you can create a deliberately developmental organization (DDO) that consciously upgrades an entire organization’s capacity to grapple with disruption. Bridgewater, the world’s largest hedge fund, is a good example. It seeks to base the organization not on founder Ray Dalio’s charisma or his intuition but rather on decision rules, which Dalio calls principles, hardwired into its systems. Some of the fundamental principles include radical transparency, where the goal is to review people “accurately, not kindly”; recognizing that internal exploration and struggle is important (“pain + reflection = progress”); and sharing and supporting project work with complete transparency. Bridgewater gives employee feedback not just to boost short-term performance but to enhance long-term capacity. It consciously helps its employees develop reflective muscles to understand defensive routines and blind spots and to improve their ability to acquire, process, and make sense of multiple forms of data. This commitment to developing everyone’s “sense-making” capacity as a mission-critical component of long-term performance sets DDOs like Bridgewater apart.

Two final examples worth mentioning for their transformative efforts are SAP and Johnson & Johnson, which are helping staff develop creatively, emotionally, and mentally to tackle larger challenges such as disruption. SAP has trained more than 10,000 of its employees to use meditation to improve self-perception, regulate emotions, and increase resilience and empathy. Participants report double-digit increases in their personal sense of meaning, their ability to focus, their level of mental clarity, and their creative abilities. For its part, Johnson & Johnson has long focused on employee well-being. Recent efforts center on energy and performance, with a stated goal to help employees achieve “full engagement in work and life.” Participants answer diagnostic questions such as, “Are you present in the moment, focused, and fully aware?” and peer reviewers assess whether “their self-image is keeping them from being the person they wish to be.” Leaders serve as active role models for building these capabilities. CEO Alex Gorsky, for example, has long worn a fitness tracker and speaks publicly about the link between mental well-being and productivity.

In the first two decades of the 21st century, scholars and practitioners fine-tuned the technical solution to the dilemma of disruption. It is high time for that community to more fully define a human solution — one that starts with senior leadership and carries through an entire organization. If you want to defeat the dilemma of disruption, you must start by defeating delusions about disruption. That challenge starts at the top.

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