Is your strategy impeding or promoting adaptive change?

State Bank now Walgreen'sChange, it’s what most business executives recognize as a constant threat. Unfortunately, many find themselves between a rock and a hard place. How might managers ably meet tomorrow’s change in environmental conditions?

Rather than react, plans that consider structure and processes matter. So too does understanding their organization as an integrated and dynamic whole.

Factors that create efficiency and make an organization and its team effective today appear less stable all too quickly.  The growing connectivity and access to information affects the pace and scale of  technology developments, consumer expectations and competition.

An organization’s survival depends on its ability to adapt and respond to external changes in its environment as well as introduce changes internally.

The connections between strategy, structure and processes not only prove defining for many organizations but also the source of pain or promise to its survival.

Participants in the Strategy discussion took a look in July 2017 at a few articles (posted at the end)  that focused on decision-making challenges that make organizations struggle to adapt.  Here’s some of what we discussed.

Choosing when and what to Change

People adapt to expected change by planning. A strategy clarifies expectations making both planning and adapting to change easier. Strategy when well communicated and understood articulates the underlying purpose that drives an organizations’ leadership to make a change. Strategy in this sense, is a choice of action affects the quality and effectiveness of changes and degree the changes stick.

Management theory differs from strategy, though it too creates expectations that make planning and adapting to change possible.  Management theory determines the organizations’ structure and processes.

Not every change that occurs is expected, and not every expectation gets realized. Both situations require adaptation but few organizations prove capable consistently of decision-making that continuously holds their competitive advantage.

Why one business proves more resilient, and/or adaptive than others continues to elude the best managers and leaders. Cause and effects are complicated to identify let alone sort out.

Nearly fifty years ago,Raymond Miles, Charles Snow, Anal Meyer and Henry J. Coleman, Jr –four management academics set out to understand the process business use to adapt. They looked for patterns in order to prescribe how existing managers might successfully meet tomorrow’s or different environmental conditions.  Their framework remains relevant and informative because it encourages management to see their organization as integrated and dynamic wholes.

For a small, or start-up business this perspective mirrors the intensity of collective singular focus on survival. Once secured, the collective focus naturally diffuses. Accommodating growth each functional role establishes separate priorities that over time compete rather than integrate their resources.

In 1978, existing descriptions of organizations’ ability to adapt were lacking. The authors of Organizational, Strategy structure and process  used their Organizational Behavior and Industrial Relations backgrounds to inform and then describe three categories of processes: entrepreneurial, engineering and administrative.

Miles et al break down basic decision making for managers into three categories: administrative, engineering and entrepreneurial. Organizations’ top management limits their choices of adaptive behavior to those they believe allow them effective direction and control of human resources. They observed that whatever theory of management executives endorsed factor significantly in their subsequent analysis of organizations’ ability to adapt to changes in the environment.

Their preliminary research uncovered a series of patterns relating management theory and organizational strategy and structure.  Fifty years later, these relationships remain evident though more patterns and interpretations and management theories have emerged. Note, this article predates the work of Michael Porter’s industrial economics inspired descriptive five forces theory of Competitive Strategy.

The evolution of expectations between managers and employees are three components of the patterns based on

  1.  a set of assumptions about human attitudes and behaviors,
  2. managerial policies and actions consistent with these assumptions, and
  3. expectations about employee performance if these policies and actions are implemented.

In light of the attention currently paid to organizational culture, their observations prove interesting, especially as nowhere in this article does the word even appear. That’s not to say they overlooked this concept. The authors merely draw the attention of management to individual behaviors and expectations with a prescriptive suggestion for their evolution from a traditional model to a human relations and a human resources model.

Perhaps culture issues playing out in many organizations reflect challenging dynamic patterns these authors identify as: Defenders, Analyzers, Prospectors and Reactors.

Here’s my crude descriptive summary

Defenders Analyzers Prospectors Reactors
Innovation Low Moderate High Low
Efficiency High moderate low low
Centralized Decision-making High Low
P&L autonomy Low High

As you can see, instead of finding a direct alignment between patterns of decision making associated with different management theories and the ability to adapt, the authors  found a mix of assumptions, policies and expectations.

Holding together a dominant coalition with mixed views concerning strategy and structure is not an easy task.

Miles et al found managers engaged in new product or service development struggled to function within planning, control and reward systems established for more stable operations.  Analyzer organizations must be successfully differentiated into its stable and changing areas and managed accordingly.  ….Numerous organizations either led or forced into a mixed strategy (multinational companies, certain forms of conglomerates, many organizations in high technology industries) and their struggles may well produce a new organizational type and demands for a supporting theory of management.

To meet tomorrow’s  environmental conditions successfully, manager’s must ably understand organizations as integrated and dynamic wholes.

A balance sheet view

I reached out to Shep Pryor, a Chicago Booth grad, co-author of The Private Equity Edge and faculty professor. I hoped his  fluency with company financial statements could  help reveal the presence of similar strategic choices about structure and process that Miles, et al described.
I asked him about examples in which the statements might reveal the effectiveness of a decision to enter a market or offer new products, and if they depends less on environmental conditions and more on strategic choices of internal structure and process?  At least that’s what my initial take on the prescriptive in the article.

Here’s Shep’s very cogent reply:

Whether a financial statement analysis, or perhaps a broader 10K, which adds additional content to the financial statements would enlighten the analyst on where the reporting company is in the spectrum described in the article.

First a comment on the article, and then maybe I can shed some light on an answer:

The article categorizes the adaptive capacity of companies more or less as follows:

Low Flexibility High Flexibility
High Stability Defender Analyzer
Low Stability Reactor Prospector

It goes further into its definition by stating that each company must bring some balance to bear on three main problems: entrepreneurial, engineering, and administrative. Finally, the authors point out that managerial theories (and their associated practices) held in high esteem by top management will enhance or confound the company’s ability to adapt.

The main points I [Shep] get from the article are:

  1. Each of the first three types of adaptive behavior may lead to business success but only if the management team’s theories and practices enable them to keep the three fundamental problems (entrepreneurial, engineering, administrative) under control.
  2. Being a Reactor is a default position for companies that lose their capability to maintain strength as one of the other types. Avoiding the position is crucial.
  3. Changing from one box of the matrix to another is a perilous enterprise.

What their commentary brings to mind as good examples:

  1. Ford motor is a Defender, but it is moving toward being a analyzer, as its market is invaded by different technology by such firms as Tesla.
  2. Sears was a defender with no hope of transforming, so it has become a reactor, and will soon become a memory.
  3. United was a Defender when Southwest was a Prospector. As the environment changed to favor Prospectors, Southwest gained dominance.
  4. Kodak Defended its vanishing market to the death, that is, to its own death.

What can you learn from a 10K?

  1. Defenders are likely to be company with higher levels of fixed assets. The more capital intensive a company is within its industry, the more operating leverage it has, and thus the more dependent it is on growth and stability. High sales can lead to colossal margins, while sales below breakeven cannibalize net worth. In the same industry, a company that is less capital intensive, will be able to maintain its margins despite variations in sales.
  2. If the MD&A of the 10k dwells on a variety of new product introductions and a lot of small acquisitions, the company is probably a Prospector.
  3. While companies are notorious for cloaking their true sectors in the 10k sector analysis, if there are disparate businesses highlighted in the sector analysis or the other commentary, it will be clear that the company is at least trying to be an Analyzer. For example, a successful company that makes truck axles and also sells ceremonial tea sets through a party plan is an Analyzer, while an unsuccessful company that does the same is a Reactor.

A little financial forensics can go a long way.

The Articles

Alignment of Strategies

http://smallbusiness.chron.com/alignment-strategies-4649.html

Organizational strategy, structure and process
The Academy of Management Review, July 1978

http://www.wiggo.com/mgmt8510/Readings/Readings5/miles1978amr.pdf


How aligned is your organization

https://hbr.org/2017/02/how-aligned-is-your-organization


OPTIONAL

If you need a focal point to think about the question, consider the activist investor LOEB’s stake in Nestle

Nestle: Third Point Daniel Loeb Activist Investor

https://nyti.ms/2tbczyS

Possibility, are you asking how or what?

Polarity, the idea of opposites, turns thoughts and possibilities around like  a pendulum  always moving from one extreme to the other. That is until the thought runs out of energy or momentum and stops. It rests until some force displaces it.

Recently, a client asked for help explaining the difference between planning for a transition and planning a transformation. Since Transformation seems to be one of the buzz words of the moment, I began to wonder what made the two thinking processes different, and what did they really mean. My polarity thinking friend suggested that transitions plan for certainty, or near certainty and transformation plan for uncertainty.  I disagreed.

I think of a transition as the pause between takes, what happens between two clearly defined states.  It’s when we assess, evaluate or figure out our position, how close or far. Transformation, that’s the feeling we have on arrival, we made it so now what.

In other words, if the client has a clear objective as in to take a specific distant hill, then transition plans incorporate the certainty that elevations will be changing on route and insures the team’s prepared for the journey. When it knows  what changes to expect along the way, then it’s transition ready. Transformation focuses on arrival, different conditions and challenges it doesn’t know, but can imagine arrival makes possible.  After all, isn’t that why the objective was to take the hill?  Wasn’t it about the advantage that being on top offers?

Put another way, imagine what you want to do is known, like traveling to another location.  Transitions focus on the journey, how long will it take, buying tickets or planning the route. Transformation planning asks how the change in location affects your current activities.  Transitions are more whole body time shifts, where as transformation puts your head in the future while the rest of your physical body remains grounded in the present.

November’s topic for the monthly strategy discussion focused on Transformation Readiness. Before I managed to summarize the conversation and post notes,news about the sale of Mariano’s to Kroger caught my eye. and then I also spotted  an interview with CEO, Bob Mariano on the Chicago Booth website.

If you are not familiar with Chicago, then let me explain that Mariano’s was a new entry into the grocery store business. By coincident, just as they had opened a few stores one of Chicago’s main competitors –Safeway decided to close all of its Dominick’s stores. This meant Mariano’s acquired 10 of the closed stores and their debt fueled expansion took off.  That’s when Kroger came calling.

Since I had already been thinking about  transformation questions , as in how do you get transformation ready, I thought it worth sharing these responses.  Take a peek, and let me know what you think, are the example transitions or evidence of transformation readiness?

Scenario A: I think that Mariano’s namesake, CEO and founder, Bob nailed it when he said:

“At Mariano’s, we tried to push further. We continue to push.  What I mean by push is to expose the customer to different and unique things and allow them the opportunity to tell you, ‘No, I don’t like that,’ or ‘Yes, I like that.’”

Scenario B: Or maybe you prefer the spin by CEO of Shazam when asked about the increasing gap between growth in the amount of information and its utilization. ” …How do you improve data intelligence?”

“That’s definitely the case [that there is a data knowledge gap] and for years we have been talking about data warehousing, or capturing that data, but turning information into data intelligence is a new journey for many companies…”

Or, how about the Gambling industry insiders view who characterizes difference between digitizing or converting your industry to the reality post conversion this way:

Advancements in technology has brought about a rapid digitization of gambling and almost every other industry. Some have managed to exploit these developments more than others and I think that the gambling industry is at the forefront of how well technology can be applied to a domain.

As an industry we must be open to change and pro-actively look at how we can exploit such technologies to provide a better and more entertaining experience to our customers. For example, the progress in Touch ID has enabled us to allow LeoVegas iPhone app customers to log in to the casino using only their fingerprint.

Are you wondering why distinguishing between transitions and transformations matter? Or, even better, how your business can take greater advantage of the widespread availability, access and flexibility that a fully digitized world creates?

Great, now you are thinking strategically.

Taking Aim at Corporate Leadership–

Jamie Dimon, Hugh McCall were just a few exemplary CEOs that were discussed this morning in our discussion around Leadership.  Their ability to deliver, tough minded interactions with their boards, zero tolerance for non-performers and vision for their organization suggested that we seem to recognize good leadership when we see it.  Characteristics or the actual qualities that define leadership, however prove more difficult to understand, identify or measure for impact.

lessons-from-ducks If you invoke the simple rule of followship, then you may end up in a precarious position.  Ducklings naturally follow their mothers and the mother duck in this example shields her offspring from danger but does she really lead?

Our perceptions of leaders and the realities of effective leadership are not always in synch. Robin Hood the hero captures our attention and appears to have attracted quite a following or at least that’s the legend as it’s often told.  Reality illustrates that he was far more enabling and was probably an amazingly talented lieutenant under King John who really had the skills and experiences to inspire and train and command a team. (See Suggested articles at the bottom of this post).

Likewise today’s army does an astonishing effective job of command and control style leadership by focusing on developing people by instilling the philosophy of Be Know and Do.  The trust within a unit and the capabilities of individual members are as critical as the leaders’ vision.  The clarity of rules for succession to command are both important and immediately visible.  Every individual is responsible for every one else on your team.  Effective units require individuals to be both emotionally committed to the task as well as each other.  The army exemplifies meritocracy and demonstrates what it means to instill the construct of success from the imperative that failure is just not an option. Which means every soldier needs to help the other soldiers excel.

How exactly does the US military achieve this level of functionality and effective leadership capability?  They also use scenario planning, simulation and constantly are challenging the relationship and perception of leadership.  But does it effectively translate into business settings, or other situations where the consequences from failure are not life threatening?

One take suggests that leadership gets people to do things they wouldn’t do under their own volition.  Leadership in this frame, inspires providing mutual psychic rewards to those leading as well as those being tasked to perform. In the context of the military it’s easier to imagine how the threat and danger elements are put to effective use, but the problem is translating them into everyday work situations.

Vision obviously matters and mercurial leaders like Steve Jobs or Richard Branson who changed the rules when they entered the business are rare. For those organizations that inherit leaders, or for whom a board replaces the leaders the embedded base may prove difficult if not impossible to move or motivate.  What are the basis or selection criteria that a board uses to choose its next leader?

Alan Mulally was brought into Ford and made big bets with expectations of long-term payoffs.  Not every leadership situation fits every leader.  Situations also change over time as is illustrated by Dov Charney who may have been great at building, growing and even scaling American Apparel until his behavior no longer suited a bigger organization.

In other words, context alone isn’t the only consideration, but boards misjudge the situation or their market or their issues ore than 80% of the time.  Which explains why the failure rate of placed leaders is so high.

when does situational vs. industry competency matter?  Not clear that many people posses capabilities in both.  The ability to adapt, flexibility and even the awareness of the rate or pace of change in an industry can be difficult to assess.  This is why succession planning and preparing your team with the discipline and transparency the military uses may prove invaluable, both as a motivator as well.

Take Aways:

Leadership to be effective must be situational:

  • offensive vs. Defensive
  • Political vs. independent
  • Short term vs. Long Term
  • Intrinsic rewards vs. monetary rewards.

The Be, Kind and Do paradigm useful and instills a discipline of Respect, Flexibility, collaboration, knowledge and courage.

We tell too many war stories that may or may not be enough on point. In Business, the importance of boards hiring, managing and changing leadership process increasingly critical.  Question is how effective are they at choosing the criteria that fits the situation the company faces?

Leadership traits are also complicated and thus vary by context, industry, “charter” etc, this variety of dimensions make it difficult to codify into one description.  This is why there are so many books on the topic!

Leadership–we need to change the paradigm, understand its situational dependence and clearly evident when they plant trees!

Situation specific, leaders good in one may not transfer/translate well in another.  Parameters worth considering include:  the business life cycle, rate of change in the industry, customers, type of business (e.g. retail, government contractor etc), growth or mature or crisis?

Under different conditions, different attributes matter.  need to assess the situation accurately in order to effectively make the call of what type is needed.

Never one set of attributes that make a leader, the context really matters!

Suggested Articles

The following links to articles were merely suggested as background reading to inspire participants thinking:

US Military’s leadership development strategy

Innovation –from the inside out

Innovation, in principle, is one sure path to organic business growth.  At the least, innovation may buy your organization  market advantage.  At its best, depending on how successful and deeply your innovation initiative cuts into your organization,  a  new growth engine/platform  may emerge and propel you into a  market leadership post.

Most businesses and their executives recognize  the value proposition innovation presents and are equally wise to the risks and potential waste of resources that naturally occur with pursuing the unknown.  Perhaps the risks weigh more heavily than the promise and so  few organizations take on breakthrough innovation as a strategy to organic growth. In June, after reviewing in advance the closest thing we could find to insider perspectives on the topic (see What we Read below), a group of strategy minded professionals sat to understand why innovation is the road not taken.

Seeding Innovation

More than the idea, success through innovation, whether incremental or radical, signifies a progressive, learning culture and mindset.   Organizations capable of  realizing returns on innovation posess the leadership capacity to commit time and resources sufficient to the task.  An ability to generate ideas or brainstorm is often not the barrier to innovation, nor is  creativity absent within their culture.  The challenge that stops innovation is leadership’s ability to fully support  both   emergent ideas and the  process related resources to further develop, test and/or pilot the ideas across a range of opportunities.  Conscious dedication of resources to experimentation, managing intangibles, such as the ambiguous  requirements that foster creativity are unnatural for a firm whose play book focuses on the usual,  practical financial management imperatives.  In other words, flexibly allocated resources does little to diminish risk, but it can increase inefficiency.  Getting leadership to understand and accept innovation’s  promise of a greater payback may help offset added risk  perceptions; but, the allure of predictable, repeatable performance that comes from persisting in current process, service and production is very comforting.  A  leadership team  that relies on traditional up front proof and projections drawn from historical certainty and experience  often are less successful at achieving growth through innovation.

More to the point,  potential or proven rewards established  in one setting rarely survive transplant  into another setting and thus fail to get the green light, as the known risks of existing business as usual prove far more palatable.

Booz-Allen global health practice authors of The missing link,  look at several opportunities available to middle management to acquire experience in managing the unknown risks, a topic we happened to discuss last month.  (check out Management 2.0–new learning requirements and Top 50 innovation companies). Open innovation, these authors suggest, necessitates more than one problem solving approach; and preferably encourages contributions from multiple levels of the organization.  This works particularly well when executive leadership awards  middle management  opportunity to develop critical thinking skills.

Principals of Strategyn, an innovation firm, explain innovation in problem solving terms akin to “mapping the job a customer is trying to get done.” May 2008 article for HBR  Their eight step approach helps firms discover opportunities for breakthrough products and servicesThrough insights, firms discover  how to source, refine,  even test and improve upon an idea. In breaking down the steps, and creating a process for innovation the authors put innovation on a level playing field with any other initiative.  This further paves the way for management to create and support  a conducive orientation around execution.

The Fast Company profile of  McDonald’s Denis Weil offered the most realistic view of what makes innovation possible within a highly centralized efficient organization.  The story outlines the intensive prototyping and testing behind a longer term strategy effort now in its final phase..the restaurant redesign in the US.  Separating  Weil’s innovation unit from central management headquarters is consistent with  McDonald’s efficiency across all aspects of its management.  The rigor and systematic approach Weil follows in testing and experimentation of his concepts perfects and works out all the bumps in the process before rolling out changes across the organization.

Finally  Tony Schwartz, writing for HBR, offers  six prescriptives on the culture of innovation. This last article  rounds out innovation’s challenges and focuses on what an organization needs to realize innovation.

In all cases, organizations and their leadership must  clearly understand their strengths, capabilities and be honest about their reflection mirrored by  the marketplace.

Certainly time, freedom and resources are critical to realizing any change –all ideas echoed in one form or another in the readings.  More powerfully,  an organization’s culture  will either make or break their opportunity to realize the benefits of innovation.  In many examples and  across multiple sectors, few cultures have the comfort, confidence and or strengths to ride the waves of uncertainty that is at the core of successful innovation.

Barriers to overcome

The barriers that often prevent any change from succeeding in an organization, or a wonderful strategy from being realized, are the same things that impede innovation success. In short they include:

1.  Culture–There’s no escaping culture.  Those who find innovation most challenging are often top down, practical organizations  who are risk averse, and  demand high level  accountability  on standard financial performance metrics.

2. Leadership –Innovation doesn’t stand a chance where the decision-process values competency and cash flow , ROI principles and uniformity–e.g. the story of the Peacock whose colorful style, creative agenda  was ultimately forced to wear the Penguin suit.

3. Pressures that eradicate  creative tensions between organization and operations management means also result in  lost opportunities to champion new and lasting solutions to system problems that naturally re-emerge due to growth.

Takeaways by participants

Can an outside consultant or an internal manager tasked with introducing innovation persuade leadership to commit to changes, aspects  that need  refocus or redefinition of their culture?  In spite of the obvious struggle to compete and the opportunity that innovation provides, the practical challenges often prevent a CEO from taking on the task.

  • The simple prescriptive are far from realistic.  Like change, innovation is very challenging to plan let alone create a date certain for success.
  • In every organization, people capable of innovation exist, the challenge is to give them the space and funding.
  • Companies known for innovation are more fun because when your ideas are heard and there’s a general openness or receptivity there’s greater freedom to think, and that is fun!
  • Of course, the financial services industry had so much fun, that we are all still recovering from it.
  • The choice isn’t limited to whether to undertake innovation internally vs outsource, either way your culture may sabotage the advantages.  For example, the appetite for technology start-ups that Google, Microsoft Cisco and other technology firms created by their respective growth strategies  also show the seemingly insurmountable challenge to satisfy the markets expectations of financial performance.
  • Align innovation around lead-users will naturally embed the opportunity for innovation into the organization as long as HR governance and policies encourage it.
  • Sounds simple enough–  hire and change the Innovation quota (IQ), just be sure you don’t hire for yesterday’s company but for tomorrow…therein lies the challenge.
  • The more innovation  associated to your core business the better off you are to engage in the activity internally, as McDonald’s long-term efforts to overcome their branding issue, which was comprehensive and changes critical to the future of the business.
  • Skunk works always an option, the more independence and freedom they have from the traditional organization the more likely they are to succeed.
  • When it comes to vision formation and innovation, the question for leadership is not  “which way should I go? ”  but, “Where do we want to end up? ” If you don’t know it doesn’t matter.

By no means did we exhaust this topic and in preparing the blog post I found the  innovation practice map shown below.  The Economist also had a post on this topic that I’m sorry we missed earlier entitled: The innovation Machine   in which I hope might inspire a little more active commentary.  Don’t be shy, All comments and ideas are welcome

Skunk Works practice map
Thoughts on R & D see: http://valueshepherd.com/commentary/archaeology_skunk_works/archaeology_skunk_works.htm

What we Read

The missing link in innovative research

http://www.strategy-business.com/article/00077?pg=all

Customer Centered Innovation Map (HBR May 2008)

http://www.jey-associates.com/pr/Customer-CenteredInnovationMap_R0805Hp2.pdf

Making over McDonald’s  (FastCompany  August 2010)

http://www.fastcompany.com/magazine/149/super-style-me.html

Six Secrets to Creating a Culture of Innovation, August 10, 2010—HBR Blog by Tony Schwartz,  http://s.hbr.org/cocWIA

Management 2.0–can you shift? Top 50 Overall Rank Company Innovation

In 2011, among 673 companies from 32 countries, Apple topped the list as most admired and respected by both industry peers and overall.  CNN’s Money magazine  survey used several criteria to compute an overall ranking and then shared on a single criterion those companies who made the top ten spots.  A composite summary appears below.  Surprisingly, no company ranked consistently across all criteria –not even Apple who ranked #1 only on innovation.

Top 50 Overall Rank Company Innovation Global Competi-tiveness People management Mangement Quality Long Term Invest-ment Quality of Products/Services Financial Soundness Social Res-ponsibility

25

Goldman Sachs Group

1

1

Apple

2

7

10

4

2

14

Walt Disney

6

3

3

7

10

3

2

Google

9

2

4

1

2

1

24

Nike

2

4

5

9

9

6

31

Nestle

3

3

7

8

9

7

8

7

Amazon. com

4

8

6

4

1

3

10

McDonald’s

1

1

2

12

IBM

8

49

Accenture

9

9

9

5

Procter & Gamble

9

15

3M

6

3

Berkshire Hathaway

4

Southwest Airlines

6

Coca-Cola

8

FedEx

9

Microsoft
N.A. Royal Dutch Shell

6

Nike, Google,Walt Disney and Amazon have similar rock star status.  But the failure of many of  the remaining companies to even make the top ten on other categories, or the inconsistency of the company rankings  is a bit confusing.

If analysts and directors evaluate companies using different criteria , which criteria should management prioritize?

The best case for management 2.0.

Imperfect an instrument as surveys of  directors, industry peers and analyst rankings of companies may be, the disconnects between perception and management is unsettling.

Perhaps, the problem is complexity itself. Siloed, hierarchical , central, command-control decision-making  styled organizations struggle to keep up.  As the world moves faster, successful business outcomes require simultaneous attention to multiple interdependent factors. Consistency in your approach across your markets may prove disastrous.

In compiling the chart above, I initially focused on three indicators:  people management aka Talent; overall management quality; and innovation.  The diversity of companies across these criteria rankings lend credence to the rallying cry to change existing talent and management approaches.  Traditional, internal organizational frameworks or operating design warrant alignment on more than these three factors.   Gary Hamel, long down this path, wrote The Future of management in 2007; and often describes traditional management practices as obsolete, calling for revolution within the ranks. More pertinent, values alignment do not seem to be a priority.  After all why would any organization undergo a major cultural transformation for the sake of upping this score?

Remember Total Quality Management, or the movement to adopt Six sigma cultures?   Though well-intentioned, both turned out to be somewhat of a passing fad, the impetus for effective and efficient operations did  lower bottom line costs, but the residual streamline approach undercut the very capability for resilience necessary to succeed in the current global, rapidly competitive environment.

More contemporary buzzwords rippling through the management literature continuously call for new adjustments, and a shift in style to accompany if not better accommodate technology changes. Simplifying access and transmission of multiple media, aka  web2.0. may indeed require a different management approach.  What  exactly are we describing?  Apart from branding , a series of  common threads unite the work of three thought leaders.

Ron Heifetz describes The Practice of Adaptive Leadership (2009), its associated risks, and why our attachment to authoritative leadership needs rebooting. Gary Hamel’s book, Leading the Revolution (2002) explored ways to reinvent business models in light of the dot-com technology bubble; his more recent title is The Future of Management (2007).  The monthly strategy discussion readings (links at the bottom of this post) also included the insights of Bob Thomas, author of Crucibles of Leadership (2008), from  Accenture’s Institute of High Performing Leadership.

All of these thought leaders describe  embracing unconventional thinking, full transparency, initiative, experimentation, learning from experience or basically creating adaptive cultures. Sounds a little like innovation doesn’t it?

What about the social media factor?

Coincident on the day the monthly strategy discussion met to review these authors theses on management,  the Chicago Booth Annual Management Conference keynote panel focused on the most visible evidence of these shifts– “The economics of Social Media.”  In 2011, it’s impossible to be in business and not be inundated with headlines about Linked In’s public offering,  Facebook’s 600 million and counting users, or Twitter’s 200 million strong.  Of course these are just a few of the applications business must evaluate, not so much to buy, but to watch, listen and learn to respond to many stakeholders associated with their enterprise.

The shift  of control over your brand and business between stakeholders and business leaders and managers is close to parity.  If web2.0, or social media is the people’s network where they can transact, share, express and discover–Business has to be present, flexible and responsive 24/7.  if you had doubts, now you know why Management 2.0 is critical to an organization’s survival.

Social media’s ubiquity challenges the most traditional organizations and their decision-making hierarchy.  Customer facing roles increase risk, especially if  individuals are scripted or their flexibility to act and access to information is  limited by the system.  The parameters around interaction, once  engineered to reduce costs and maximize returns, need adjusting and consider  indirect factors. Typically, an organization expects customer service to buffer or clean up  “messy” or “problem” concerns from the public.  The focus measure is efficiency–avg handle time and the number of calls/hour.  Management did not track the quality or effectiveness of the interaction in the unit performance report. The push for further labor savings resulted in outsourcing and offshoring these units, adoption of automated voice response systems or encouraging online users to check out the FAQ section of a website before contacting support.  Sure, customer satisfaction and customer relationship systems are  important, but the breadth of possible outbound responses remain tightly controlled.  In the same manner that marketing and PR  manage the company message and often write the release printed by limited media outlets.

Integrating Web2.0 and the interaction tracking within the operation exemplify internal innovations or managerial adaptation, right? Management learned to take advantage of technology to lower its delivery costs and use CRM systems to learn about the customer and track transaction behavior.  All signs of adaptation. But do they go far enough?

Back to the Future

Facebook launched in 2004 and quickly spread to all university campuses and entered some corporations, opening to any user in 2006 and quickly became the 7th most trafficked website.

In 2007, social media is not even mentioned in what   Businessweek described as attributes of the worlds most innovative companies:

The leaders of companies on this year’s BusinessWeek-BCG list of the World’s Most Innovative Companies recognize that developing breakthrough products, revamping operational processes, and coming up with new business models doesn’t happen overnight. Instead of relying on gimmicks or incremental line extensions, they’re working to build organizations that are capable of sustained innovation. They understand that requires taking risks and investing for the long-term. And they focus on the things that really matter, such as hiring the most talented employees and providing them with the environment they need to thrive.

…Getting people to step out of their comfort zones can do a lot to spark new ideas. But if they’re not paired with more fundamental changes, all those efforts will go nowhere. Fortunately, some companies have been waking up to that fact…. the proper care and feeding of employees in creative cultures takes much more than training. …best companies seem to be managing a balance of a few high-profile programs aimed at getting employees to think differently and more fundamental processes that make sure the work actually gets done.

Of the top 10 companies (Apple, Google, Toyota, GE, Microsoft, P&G, 3M, Walt Disney Co., IBM and Sony) 3M had dropped to 7 from 3rd in 2006, while Walt Disney had catapulted from 43 in 2006 to #8.  Surprised?

We compared these messages and found them to  echo some of the authors’ admonishment of the management 2.0 revolution.

Marching orders for Management 2.0 Advocates

Note: The original article citations are found below.

Gary  Hamel talks about inspiring and changing the environment, aggregating human capabilities toward the collective and mentions three big organizational challenges:

  1. Adaptability–how to build self-transforming organizations
  2. Innovation–mobilizing imagination
  3. Engagement–on both the emotional and intellectual so people bring all of their capabilities to their work.

Ron Heifetz talks about adaptive leadership means changing the way people do business in many places in the organization.  In other words, innovation isn’t just for marketing.  Leadership has to orchestrate the connections between the possible, or the abstract strategic imperative and the tactical or working level.  The question is not merely whether to  establish accountability; but how to  help all levels of the organization challenge and push the frontier of their current constructed environment and create room for experimentation, where people are free to make mistakes and learn.

Finally, Bob Thomas suggests that experience has to be turned into leadership capabilities and focus on the ability to learn lessons.  Provide the  imperative around durable processes in three facets of learning:

  1. Prepare — how do/could we frame the problem, understand how we learn and focus on accelerating the possibility to learn
  2. Deploy–activate our sense-making skills, emotional IQ, story telling, practice with  multiple decision-making and leadership styles to close the gap between theory and practice.  (Heifetz expresses the gap as the difference between knowing and abstraction).
  3. Renew–Points of view are teachable as well as adaptive.  Managers should build and exercise their own advice networks.

Sounds easy right? The 2007 article profiled GE, Disney, IBM and Boeing.  By 2011,  the companies rated by their industry peers and then overall only identified Google, Apple and only the Walt Disney company made the top 10 list.

Articles featured in the monthly Discussion

Ron Heifetz

1. Adaptive Leadership

 2. The Interview Adaptive Leadership

Gary Hamel

Can’t Innovate? It’s Management’s Fault (Really!)

Inventing Management 2.0

Bob Thomas

Turning Experience into Leadership