Rethinking The Leadership Agenda|
by Rowan Gibson
What does it take to be a successful leader in today’s confusing, high pressure business environment? That’s the multi million dollar question. Get the answer right and you could earn yourself a place in the business Hall of Fame. Get it wrong and you’re out on the street.
Never before have we seen so many top executives being fired by their own boards of directors. A recent study of CEO succession at the world’s largest companies revealed that the forced departure of chief executive officers due to deficient performance reached an all-time high in 2002, rising a staggering 70 percent (!) over 2001.
The reason is obvious. With capital markets now pulling the strings in business, senior executives either find the right strategies for growing shareholder value or they find themselves out of a job. According to management consulting firm Booz Allen Hamilton’s Strategy + Business magazine: “Aggressive shareholder capitalism has become the defining characteristic of business in the 21st century.”
This is creating an unprecedented challenge for senior executives. On the one hand, they live in the age of ‘deliver-or-depart leadership’. An age that mercilessly demands results, not excuses. Yet, on the other hand - if they’re honest - they’d admit that the incredible volatility and ambiguity of our times is making it harder and harder to know how to lead. The business world is getting more complex and more chaotic by the nanosecond and none of the old rules or assumptions seem to apply. When futurist Alvin Toffler predicted in the 1970s that this current era would resemble “a kaleidoscope run wild,” he was, with hindsight, making an understatement.
Therefore, it’s time to rethink leadership. We cannot expect the kind of leadership that worked in the past to work in the future. While the Winston Churchill- or Charles de Gaulle-models were effective for their time, today’s leaders need to transition from commanding and controlling the ‘troops’ to creating inspiring, high performance and highly adaptive corporate cultures. All over the world, teams of senior executives need to tackle a tough new leadership learning curve and take on a radically different set of competencies. In fact, they need to consider a whole new leadership agenda.
Routinely consider the unthinkable
Leaders need to be able to routinely consider the unthinkable - to radically rethink everything about the company and the business they are in, even when things appear to be going well. Management guru Peter Drucker was not exaggerating when he wrote: “Every organization has to prepare for the abandonment of everything it does.”
This is not to say that everything the company ever did must be abandoned or ignored. The past can deliver some valuable lessons and skills. But a company’s history is increasingly proving to be an unreliable reference for considering its future sustainability. Current economic realities have already demonstrated the potential to render conventional business models, processes and paradigms irrelevant or obsolete in a very short space of time. “This company will be going strong 100 and even 500 years from now,” said C. Jay Parkinson, president of Anaconda Mines – just three years before Anaconda was bankrupt.
The bottom-line message here is that linear thinking is useless in a non-linear world. The things that got the company and its present leaders to where they are today are seldom going to be the things that will keep them there.
Trouble is, most leaders have a lot invested in the past and have been promoted numerous times for having done incredibly well at yesterday’s activities. Failure often results from being overly committed to outdated strategies and ideas. “Anyone who believes that anything they have done in the last 20 years makes any sense at all compared to the next 20 years should not even be in a position of leadership,” argues management guru Tom Peters.
So successful leadership in the future will be based on the willingness to rethink, to abandon, to let go of the past in order to create the future. Joseph Schumpeter’s “winds of creative destruction” are not going to abate or go away. Instead of hiding from the wind, leaders need to walk out into the storm and eagerly embrace the change – however painful or unthinkable that change may be. Whether products, technologies or leadership styles, the old must be destroyed in order to make way for the new. Word processors demolished the typewriter industry – just ask Smith-Corona; but the pain ushered in the personal computer era.
Derek Wanless of the UK’s NatWest bank, said of his senior team, ‘We are here to think the unthinkable. Would the Group be better off broken up? Could the business operate better separately than under the Group banner?’ These are the kind of questions and scenarios that leaders need to be considering on a regular basis.
There is a perpetual need to challenge the status quo and rethink the future of any business corporation. Not just to avoid potential crises, but to take advantage of exciting new opportunities which will be created by discontinuous change. This calls upon leaders to continually rethink their basic assumptions about the future, and about their markets, their products, their services, their technologies and their customers. Then they must harness the forces of discontinuous change to shape their own future, before the future shapes them.
The leader’s most important job - if we think back to leadership legends like Thomas J. Watson Sr. of IBM - used to be to build the company’s future by carving out a long-term strategy and then systematically organizing its implementation. That model has been turned upside-down.
Today, the leader’s most important job is not to build, but to destroy – to constantly destroy the past in order to create the future.
Don’t run the company by the numbers
Leaders may be judged by the numbers they deliver, but that’s not the way they should run the company. The price of the company’s stock or the increase in its quarterly earnings will never be a true measure of the company’s future success. The conglomerate ITT Corporation had a string of 58 consecutive increases in quarterly earnings before that string came to an abrupt end in 1974. Not to mention Enron Corp.’s soaring share prices – before it crashed. Strategist Al Ries says, “A company being run by the numbers is a company being run into the ground.” In every big company – especially in the U.S., but increasingly in Europe and Asia – the chief executives are under intense pressure to drive up financial performance on a quarter-to-quarter basis (which is impossible to carry off in reality, because business and economics don’t actually work that way). At the height of the financial fiascoes at Enron and a string of other companies around the world, Fortune magazine published an article entitled “Dirty Rotten Numbers”, which stated: “So much focus has been placed on levitating companies’ stock prices, that many executives will do almost anything – legal or otherwise – to make it happen,”
Instead of creating genuine growth by developing a meaningful and sustainable strategy for wealth creation, many leaders have been doing everything they can to create an illusion of growth. They have been busy wringing out inefficiencies in their business processes and bending the accounting rules to make their numbers look good. But nobody can hide forever behind an accounting facade. That’s one of the reasons for the dismal stock price performance of so many companies today and the forced dismissal of their leaders. The grueling bankruptcy boom of the last few years has revealed this phenomenon for what it has always been – a poor excuse for not having a real strategy.
Not that the numbers are unimportant; they serve as a reality check to see if the company’s strategy is on target. But they provide a very weak basis for actually making long-term strategic decisions. How often has a company invested in a loss-making venture that has eventually rescued its business? And how often has a company missed the strategic boat by not investing in a risky, innovative activity because it looked as if it would produce poor numbers on the shorter term?
Today’s general business culture might be fanatically obsessed with financial results, but the leader’s focus should never be purely on cutting staff or restructuring to boost next year’s earnings and maximize shareholder value. Rather, it should be on creating a brilliant and differentiated competitive strategy for the company and its brands.
Focus on the CORE strategy
What is the most crucial issue on the leader’s agenda? It’s not restructuring or balanced scorecard or cost-cutting, or any of the other silver bullets and platitudes which are so common in corporate boardrooms today. The only way to succeed on the longer term is to have a meaningful and differentiated core strategy that continues to drive the business, in good times and bad; something the company can stand for - and stand out with - in a cluttered competitive environment.
An example is the information technology industry where Dell and IBM are profiting, while most of the others in the computer business are facing losses. The market has polarized, with Dell at the low-priced commodity end and IBM at the high end, leaving every other computer company – Hewlett-Packard, Sun Microsystems, Gateway – caught in the middle. Dell’s core strategy is to make computers cheap and plentiful; IBM’s is to make high-end, super-cool new technology that offers its customers a strategic advantage over all the laggards buying the commodity bulk stuff from Dell. But what’s H-P’s core strategy? Or Sun’s? Or Gateway’s? This scenario is playing out in other industries, too, whether we look at food, fashion or travel. Sooner or later, if you are not focused and positioned clearly in the customer’s mind, you are going to be in trouble.
It is leaders – not the marketing department – who are responsible for creating or defining their company’s core strategy. Then they have to articulate it inside and outside the company, live it every day, and ensure that it is constantly reviewed and renewed in terms of its relevance to the company’s constituencies and to the changing world. This is not about empty, me-too mission and vision statements. It’s about a meaningful big idea at the heart of a company. Like Dell’s core strategy, to “make technology more affordable for the world,” or Charles Schwab’s core idea: “the customer is smart;” or Ikea’s, to “democratize design.”
A great core strategy looks at a product or service category, the industry competition and the wider context of discontinuous change, and says, ‘What can we do for customers that is fundamentally different from what the competition is doing?”
Unfortunately, a lot of today’s leaders are more concerned with the peripheral issues than with the core strategy of the company. There seems to be a vacuum at the heart of the organization. There is nothing to integrate all of the company’s internal and external activities and give them a coherent meaning.
But didn’t we say that the leader should rethink everything on a regular basis? What about the company’s core strategy? Is there any room for long-term continuity in a rapidly changing world? Yes. Examples like Dell, Schwab and Ikea show that a great core strategy can have a lot of mileage – even in a turbulent and fickle environment. However, it requires engaged leaders who constantly review and refresh that strategy, perpetually rethinking the way it is implemented in the market. Meg Whitman, president and CEO of eBay, holds strategy meetings not once or twice a year – but several times each week.
Create a community of friends
The company’s social architecture – it’s culture – needs rethinking. Instead of the classic internal/external thinking, a company’s social architecture should extend way beyond its borders (there shouldn’t be any borders) to seamlessly embrace all of its constituencies – employees, suppliers, partners, dealers and customers. In fact, this social architecture should be designed from the customer experience backwards, in a way that effectively brings the company’s core strategy to life. Start with the customer and everything else falls into place.
The “community of friends” concept entails building – around the core idea – a culture in which the company makes friends with customers, dealers, employees, partners and suppliers. Leaders themselves can only interact face-to-face with a handful of people each day. The only way to effectively communicate to the whole community is through the corporate culture – think of Apple Computer, Southwest Airlines, Harley-Davidson, Walmart, e-Bay. The idea is to create an adventurous, high-performance culture that emphasizes creativity, courage and connections, and one that can both embrace change and encourage leadership at every level, not just from the top. Also, leaders have to love talent, surround themselves with it and passionately nurture it. Feargal Quinn, founder and CEO of Ireland’s phenomenally successful Superquinn supermarket chain, renamed his Human Resources department the “Talent Department” to make this point. The culture should also combine a good ‘leadership mix’ between older, experienced professionals and young, forward-looking adventurers (why do so many boardrooms look like retirement homes?); between men and women (in Norway, by law, boards have to have at least 40 percent women); and between people from different cultures (essential for succeeding at a global level).
Today’s leaders can be charismatic, but they should avoid being autocratic. Long before the U.S. market began to soften, Coca-Cola Co. was experiencing problems in the marketplace. CEO at the time, the charismatic Roberto Goizueta, had spent years centralizing decision-making in Coca-Cola’s tower in Atlanta, a move which dramatically reduced the company’s agility. In contrast, Dell’s CEO Michael Dell is incredibly charismatic, but he runs the company in a tight partnership with Kevin Rollins, president and chief operating officer. The sliding doors between their two offices – which remain open all the time – give the company two sets of eyes on issues.
Finally, leaders have to listen – to colleagues, customers, suppliers, partners and dealers and to their competition. They need to set up a feedback system that is not just company-wide but that goes way beyond the company to embrace its entire community of friends. In turn, the goal for every leader must be to listen to the organization’s constituencies with open-minded humility – to understand the driving forces that can be harnessed to create the company’s future. And to understand the personal changes that he or she may need to make in order to successfully lead the organization through these highly transitional times.
Rowan Gibson is founder and chairman of a company which helps organisations to rethink core strategies, and author of the international bestseller Rethinking the Future.
Copyright Rowan Gibson. All Rights Reserved.
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