Quick takes

Citation

Gorrell, C. (2003), "Quick takes", Strategy & Leadership, Vol. 31 No. 5. https://doi.org/10.1108/sl.2003.26131eae.002

Quick takes

Catherine GorrellCatherine Gorrell is President of Formac, Inc., Dallas-;based strategy consulting organization (formac@mindspring.com). She is a Contributing Editor of Strategy & Leadership.

These brief summaries highlight the key points and action steps to be found in the feature articles in this issue of Strategy & Leadership.

Page 4Management tools survey 2003: usage up as companies strive to make headway in tough timesDarrell Rigby

The annual Bain 2003 global survey of companies finds that last year managers used more tools than ever to make headway in tough times. On average, the companies surveyed used 16 tools in 2002.

The survey analysis reveals a dramatic increase in tool use during the past two years, with the heaviest reliance on tried and true "compass-setting" tools such as strategic planning, benchmarking, and mission and vision statements. Why are management tools in such heavy demand? A mixture of caution and optimism among the survey respondents may offer some clues. Senior executives voiced reservations about the short-term prospects for their own markets but also expressed strong confidence in their ability to manage during prolonged economic uncertainty. Surprisingly, given the pressure to control expenses, executive's choice of tools shows a clear bias toward growth over cost cutting. The message: moving ahead, not retrenching, is critical to control your destiny.

The resolve to turn the economic slump into advantage showed up in the types of tools companies adopted in 2002. Overwhelmingly, senior executives favored tools that help sharpen strategies and prepare managers for an increasingly hard road to growth. Proven disciplines like strategic planning and core competencies drew raves once again for helping companies stay on course. This year, these tools were joined in the satisfaction ratings by tools focused on defining markets and improving customers relationships – key activities as companies tried to eke out as much revenue from existing customers as possible. A total of 78 percent said they used CRM systems compared with 35 percent in 2000.

At the same time, executives discarded tools that might divert management attention or require big cash outlays, such as stock buybacks, corporate venturing, and merger integration teams.

A clear sign of the times in this year's survey was the soaring popularity of the corporate code of ethics. Given the rash of corporate scandals, it is not surprising that top executives at 78 percent of the surveyed companies said they have enacted a code of ethics to be their common standard for acceptable behavior.

In summary, there are four guidelines for getting results from the 2003 study. Use this practical advice when selecting which tools you will use in the coming year.

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  Tip #1: Get the facts. Every tool has strengths and weaknesses.

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  Tip #2: Champion enduring strategies, not fads. Promoting fleeting fads undermines confidence of employees.

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  Tip #3: Choose the best tools for your job. You will need a rational system for selecting, implementing and integrating the tools for your company. Prior to adopting a tool, determine whether it helps to discover unmet customer needs, builds distinctive capabilities, exploits competitor vulnerabilities, or develops breakthrough strategies.

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  Tip #4: Adapt tools to your business systems and culture (not vice versa).

Page 12Three keys to groundbreaking growth: a demand innovation strategy, nurturing practices, and a chief growth officerAdrian Slywotzky and Richard Wise

In the years to come, traditional product-centered strategies alone will be unable to create the kind of growth companies desire. The classic "product-focused growth strategies" included: invent a product, launch it, sell it like hell, go international, acquire and consolidate, cut costs, raise prices, and repeat ad infinitum. As most businesspeople realize, cracks have long been spreading in this traditional model of business growth. Today, using this approach will merely replace revenues and profits lost to commoditization and increased competition.

Presented in this article is an alternative platform for driving significant, sustained new growth. Begin with putting yourself in a new role: the chief growth officer (CGO). In this role, lead your team to have a new focus on demand innovation (as opposed to product innovation).

Part 1: Shifting to demand innovationDemand innovation focuses on using one's product position as a starting point from which to do new things for customers that solve their biggest problems and improve their overall performance. Embedded in the customer's use of your product are all kinds of hassles and inefficiencies as they buy it, use it, store it, maintain it, finance it, and eventually dispose of it. This broader web of activity represents tremendous economic activity, often 10 to 20 times greater in total value than the product market itself. Understanding and participating in this customer "value chain" is the key to demand innovation.

View your customers through an economic lens. Study their activities, costs, capital needs, information flows, and priorities. Look for bottlenecks, repetition, information gaps, and missed opportunities in their processes that you can help alleviate or eliminate. If you rethink how you view your customers using this approach, you will eventually make an important shift: from responding to their needs to anticipating them.

Making demand innovation profitable means improving both your customers' economics and capturing value for your company. Here success is rooted in putting to use a set of powerful hidden assets that your company may already have. Five types of hidden assets are described with guidelines for how to master the new discipline of demand innovation.

Part 2: Championing demand innovationFive principles are offered to guide managers through the challenges that arise for developing new-growth projects into major opportunities:

1. 1.

   Operational excellence: the challenge is to help Unit A find capital creation activities that can throw off the cash needed to support Unit B. This means making it clear to everyone in the organization where they fit in this model and emphasizing the importance of their role so that all can focus zealously on their parts.

2. 2.

   Build the issue of growth into everyone's every day's decisions. Use absolute- and relative-rates of growth as measures and incentives to hold operating managers accountable for their units' growth.

3. 3.

   Support, and then winnow maverick ideas.

4. 4.

   Run interference for growth initiatives.

5. 5.

   Structure the new-growth business differently from existing structures; new-generation opportunities are often fundamentally different from your core business.

Page 20Interview: Noel M. Tichy explains why the "virtuous teaching cycle" is integral to effective leadershipInterview by Robert J. Allio

Noel Tichy, who ran GE's Leadership Development Center, is currently director of the Global Leadership Program at the University of Michigan's Business School. His teaching model posits that CEO's must be intimately involved in teaching their teams' leaders.

What is the cycle of leadership? The basic premise is that companies are successful to the extent that they have leaders at all levels of the organization. Any institution that invests in the development of leaders at all levels is going to get ahead of its competition. It is a principal job of the leader to help develop the next generation of leaders. Unfortunately, many leading companies do not build good leadership pipelines because their leaders do not do the teaching of their own managers.

An essential element for a leader to develop the next generation is to present a teachable point of view about how he/she believes they should run the organization. Also needed is a clear idea of what you want to teach them: ideas, product services, distribution channels, customer segments, and values.

Who should not be teaching? Professors and consultant leadership trainers. They are the worst people to develop leaders. Instead it is best to have internal leaders – supplemented by outside CEOs – come to meetings to share best practices inside and outside the company. As a result, managers will experience the business as a learning/teaching organization.

Is there a difference between teaching organization and the learning organization? Yes, learning is necessary but not enough. Great teaching is where teachers simultaneously teach and learn from the people that work with them. This is simple to describe but difficult to execute.

What's the explanation for the dismal record that corporations have in managing a leadership program? Leadership is about focusing on human capital as the organization's most important asset. Unfortunately, many companies make only 10 percent of the investment they should make to develop leaders and most of it is spent in the wrong ways. A better approach is to make 80 percent of the development investment be on-the-job life experiences. The other 20 percent can potentially be leveraged with very high impact development experiences. If your managers sit around and read business school cases for three weeks, they are learning about 20 percent of what leaders could achieve if they engaged people in action learning on real projects. Developing leaders requires a rethinking of the leadership pipeline. Leader/teachers should look for those career points where they can leverage the 80 percent with high impact development, and then they have to build teaching into every single management process.

Do you have advice to offer to current leaders? Develop the next generation of leaders now because it is the depth of leadership that is critical to win the business game. Leadership development is not easy, and it plays havoc with your calendar. But it is very rewarding for the leaders who commit to it. And the great leaders become energized by the virtuous learning cycle.

Page 26Make alliances, not war, with crusading external stakeholdersChris Deri

Increasingly, the attitudes of consumers are being shaped by an array of advocacy organizations that research and campaign on various social and political causes. Collectively they are categorized as non-government organizations (NGOs). They are the key driver in the public's increasing demand that corporations act in a socially responsible way. This means not only offering products and services that do not pose new environmental or social risks but also doing business in a way that supports the livelihood of people in the producing nations and sustainability of our planet's eco-systems.

Why are NGOs so powerful with consumers? Because they are significantly more trusted overall than business, government or the press. NGOs have gained this high level of trust because they are effective in using idealistic appeals and powerful images to tap into consumer emotions. They have a clear focus and concentrate their resources and activities for results.

CEOs and corporate managers may approve or disapprove of the growing role of activist NGOs, but it is perilous to ignore their growing influence and ability to shape public perceptions of a company. A recent survey showed eight out of ten people in Europe and the USA were willing to pay more for a product/service from a company with a well-regarded labor and environmental record. Equally powerful is NGO's ability to damage a company's brand and market position. In aggregate the NGOs have become the fifth estate in global governance – the other four are the three branches of government (executive, judicial, legislative) and the media

How to successfully engage the NGOs? First, do not battle these groups as if they were a monolithic enemy. Instead, consider these seven guiding principles:

1. 1.

   Act and respond as one global brand, making certain that, for example, the environmental practices by a unit in Spain are consistent with the corporate position in the USA.

2. 2.

   Prepare for greater transparency. Reporting social and environmental impacts as well as financial information is a starting point for building greater trust and dialoge with the NGOs.

3. 3.

   Do not be forced into a "yes-or-no" public confrontation on any issue.

4. 4.

   Enlist and engage multiple partners and perspectives on business practices and strategies.

5. 5.

   Do not rely solely on industry-wide action, or hide behind it.

6. 6.

   Distinguish between an NGO's rhetoric and its actual objectives.

7. 7.

   Know when to stand your ground.

Page 34Pride: a strategic assetJon Katzenbach

Great companies that personify service or product excellence are also known for the pride their employees take in striving for increased effectiveness and success. It is an almost indefinable spirit that drives them to work harder and smarter, to overcome obstacles, and to push to a higher level.

What is this kind of spirit?Pride is the emotional expression of individual commitment. The ability to instill and harness pride within key segments of the workforce is a competitive factor of growing importance because increasingly, the major, long-term achievements of organizations depend upon hundreds or thousands of small, daily accomplishments of employees at the "front-line", where product is made, sales are achieved, and service is rendered. Pride is the emotional expression of having done a job well. At General Motors, a survey of 75 plant managers identified the top 20 front-line motivators. The primary motivator was pride.

What creates pride?It is not money. Monetary compensation is likely to produce mostly self-serving behavior and skin-deep organizational commitment. Not the type of institutional building behavior that is a pervasive characteristic of successful companies like Southwest Airlines or Microsoft.

Pride can be developed both individually and institutionally, as a capability practiced by managers at all levels. It is developed through their attitudes, approaches and disciplines. All managers can acquire the capability to be a pride-builder by following these techniques:

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  clarify exactly what matters and why it matters again and again;

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  stimulate people's memories of the feeling of pride;

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  celebrate the "steps" as much as the "landings";

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  develop and repeat your most compelling stories;

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  focus on "containers" that are never empty/never full;

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  start pride building in your own backyard (the best efforts to install pride are localized).

Conversely, know about the mistakes of "pride-eroders" and avoid these practices:

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  do not inadvertently break up a winning team;

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  rules cannot always be rules (create "self-discipline" around the leadership's intent, not mindless adherence to directives);

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  do not overload the system with too many metrics and scorecards – select one or two themes and one or two "leading edge" indicators.

What are the benefits?Pride can build organizational responsiveness, provide strategic advantage, and deliver higher levels of performance. Increasingly, employees must take the personal initiative to perform a very broard spectrum of rapidly changing tasks, guided by an understanding of their employer's and the customer's ever shifting priorities. Employees who interact directly with the customer need to develop the ability to shape and share information, to take initiative in conceiving better ways of doing things, and to connect the results of their work to the performance of the enterprise. More than any other motivator it is pride that fosters cooperation and collective effort as well as individual initiative.

For a company that seeks to lead in the twenty-first century, pride is a form of investment currency; one that is growing in importance. The challenge is to capture its value, deploy its power, and multiply its benefits throughout the organization.