The
disruptive competence
The journey to a sustainable business, from matter to meaning
Fabiaan Van Vrekhem Compact Publishing
The disruptive competence The journey to a sustainable business, from matter to meaning. June 2015 Original title: De disruptieve competentie. De reis naar duurzaam ondernemen, van materie naar zingeving Fabiaan Van Vrekhem, Managing Partner at Accord Group Belgium. Accord Group is an executive management consulting company specialized in building resilient organizations where people, work & strategy are balanced with the purpose to create value by focusing on the essence. www.accordgroup.be Practice Leader Leadership Services at AltoPartners, an international network of executive search organizations. www.AltoPartners.com Co-founder of Valpeo - Valuing People and Organisations. An Internet platform to enhance the self-reliance of organizations and consultants. www.valpeo.com Rijvisschestraat 118, B 3, 9052 Gent, Belgium Esplanade 1 B78, Buro & Design Center, 1020 Brussels, Belgium +32 9 221 53 10 info@accordgroup.be http://www.accordgroup.be Published by Compact Publishing De Eendracht 26, 2920 Kalmthout hans@compactpublishing.be www.compactpublishing.be Copyright © Compact Publishing, Valpeo Editorial Support: Geert Degrande Final Edit: Brenda De Windt en Geert Degrande Design: M-idea, www.m-idea.be Translation: DESTHEMA, www.desthema.com ISBN 978 94 91803 154 All rights reserved. No part of this publication may be reproduced, stored in a digital database or published, in print, as a copy, on microfilm or by any other means, without the publisher’s prior written consent.
Table of Contents PREFACE 06 INTRODUCTION 12 1 DRIVES AS A BASIS FOR ENTREPRENEURSHIP
19
2 HOW ENTREPRENEURS CREATE VALUE
25
Dimension 1: Quality 33 Dimension 2: Service 39 Dimension 3: Positioning 45 Dimension 4: Differentiation 57 Dimension 5: Identity 69 Dimension 6: Societal Contribution 78 Dimension 7: Societal Progress 85 Conclusion 89 3 THE ESSENCE OF BUSINESS 97 4 COMPLEXITY AND STRATEGY
103
5 COMPLEXITY AND ORGANIZATIONAL DEVELOPMENT
111
Organizational Design 114 Remuneration 119 Culture 127 The Role of Systems 129 6 COMPLEXITY AND THE EMPLOYEE 131 Internal Talent Development Hiring for Today or for the Future 7 COMPLEXITY AND CONSULTANCY
132 135 141
8 COMPLEXITY AND DEMOCRACY
145
CONCLUSION 149 Reference List
150
Introduction üü The future you see is the future you get. Robert G. Allen, American businessman and politician.
The Internet has fundamentally changed the use of time and space. Quicker access to more consumers and excess supply of information that is accessible to nearly everyone has thoroughly changed the context in which the business sector operates. While organizations could previously expand their market position over time, they now have to operate in a context in which complexity and changes occur at constantly increasing rates. That’s becoming the norm. Tomorrow is different from yesterday. Disruptive business models destroy traditions and shake entire sectors to their very foundations. Globalization leads to consolidation in a fragmented market in which competition pops up at the most unexpected times and from all corners of the world. Innovation is unpredictable and management books that attempt to explain strategies in great detail are out of date before they are released. You can download a new app every day or every hour. Little stands out. Everything disappears, except those approaches that are disruptive, because with a single click, they can dramatically influence or wipe an entire societal group off the map. Uber is an example of this. Nobody was exactly sitting around waiting for this. No one saw it coming and suddenly there it was. “Uber is evolving the way the world moves” 1 is the first sentence of the company’s mission statement on its website. Apparently not a lot was needed for this, just a deliberate mission, an app to implement this mission and a team of professionals to make it all happen. In one fell swoop; the taxi sector—one of the most conventional sectors—was stood on its head. Only the fear of change can still put the brakes on the transformation of this sector. And to assure stability, politicians and interest groups will be trying to hold back the inevitable changes, at least to some extent. But ultimately the consumer will win, just as we’ve seen with so many other innovations. Personal comfort is paramount in this new world. Why would you still send a fax if you can send e-mails? Why would you still buy CDs now that Spotify 2 exists? Even if it’s a fact that trends always go hand in hand with countertrends. At a time when the entire toy industry is promoting tablets for children, there is an increasing demand for wooden toys. And now just when vinyl records were con1 Uber. https://www.uber.com/about 2 Spotify: Music for Everyone. http://www.spotify.com
12 From matter to meaning
sidered industrial heritage, they are undergoing a renaissance. What’s more—and this too is a phenomenon that we must not lose sight of— these are the same consumers who turn to politicians and interest groups for protection when they feel threatened or wronged and don’t want to accept the change in their environment. In his or her life, each individual plays multiple roles, consciously or unconsciously, from which he or she consequently makes judgments. Depending on the role, which the individual is occupying at any given moment, the context that the respective man or woman perceives also gets a different significance. The taxi driver as consumer regularly chooses the solution that is best for him or her. So he or she might like to use the services offered by Uber but as taxi driver will opt for his or her daily bread. In other words, in the same reality, depending on the role they are playing at that moment and how they experience that context, they either go for the innovation or for resistance to it. Who could have predicted five years ago that we would also be buying high-volumes of products like shoes via the Internet or that we would be able to watch any film or TV series anywhere and at any time of day? Nevertheless, the quantum leap made by Zalando 3 and Netflix 4 is undeniable. Moreover, businesses have long extended beyond the geographical boundaries of politics. First of all, politics are still organized nationally, while companies and industries are organized internationally. It’s the latter that increasingly determines how the maps of the world are placed on the table. We are experiencing a tremendous shift of power, so much so that sooner rather than later, governments will be compelled to seek greater political integration in order to ensure societal stability. Isn’t it precisely because Europe hasn’t implemented the necessary structural reforms quickly, that at the end of 2014, the old continent was still facing a severe crisis, while the much more integrated and globalized US had already succeeded in bringing the 2014 economy back to nearly normal levels? A government that uses the tax system as a means for achieving income redistribution loses its impact—if no international agreements exist—when companies are active beyond geographical boundaries, and when beyond those boundaries they pursue profit maximization and tax minimization. These dualities of every society create a fast-changing environment and, therefore, also increase demands on politicians. Rendering public services as such is no longer sufficient. To keep society viable, the mere rendering of services must make way for developing new views on society and on the way in which individuals and organizations must be supported and restricted in their development. In 3 Zalando: Shoes and Fashion Online. http://www.zalando.com 4 Netflix. http://www.netflix.com
Introduction
13
1 DRIVES AS A BASIS FOR ENTREPRENEURSHIP
19
Drives as a basis for entrepreneurship
üü Men (people) are rarely aware of the real reasons which motivate their actions. Edward L. Bernays, the “father of public relations”
Let’s consider the first element substantially influencing the development of an organization: the individual’s value drivers. These personal motivations will be significant for the entrepreneurship’s intensity, regardless if it is for a private or governmental initiative. Within our society’s ecosystem, these drives play a crucial role. Therefore, In order to understand entrepreneurship’s intensity, we first need to understand why people make judgments and decisions. Are we doing this because of our constant search for a sense of balance as Ken Element Or, as the author points out, do peoRobinson 13 states in his book The Element? ple use their energy to find this balance? The observations we make with our five senses, as well as the emotions associated with them, inspire us to take action. Our ultimate purpose is to find our inner balance; and it is this ultimate striving for a sense of balance that makes us feel good. The competing values model 14 gives a very good idea of how people use their energy to find balance, as well as the role they aspire to play. The model below shows the way individuals express their values in a group, and, therefore, within the context of an organization.
13 Robinson, K., Aronica, L. (2009). The Element: How finding your passion changes everything 14 Cameron, K., Quinn, R., DeGraff, J., Thakor A. (2006). Competing Values Leadership: Creating Value in Organizations. Cheltenham: Edward Elgar Publishing Limited
20 From matter to meaning
2 HOW ENTREPRENEURS CREATE VALUE
25
How entrepreneurs create value
üü Life is really simple, but we insist on making it complicated. Confucius, Chinese teacher, editor, politician, and philosopher
Our behavior is the result of our perception of our environment and the meaning we give to it every day. As all our decisions affect our society’s ecosystem, this is how our behavior will create a dynamic in the environment. In other words, more than the motivations that drive our actions, the meaning we give to our environment defines our behavior. This meaning will influence society and the development of the organizations in which we operate. ‘Meaning-making’ 16 is described as the way in which people give meaning to knowledge, experience, relationships, and themselves. How do we do this? One of the most well-known social scientists working on this subject is Peter Senge. In his book The Fifth Discipline, Discipline 17 he indicates that people use mental models that comprise deep-rooted assumptions, generalizations, or even pictures of how they understand the world, and how they take action. In his book The Evolving Self 18 Robert Kegan explores human life problems from the perspective of a single process which he calls meaning-making, the activity of making sense of experience through discovering and resolving problems. He indicates that making meaning is not something that people do consciously; it is an integral part of them. The way of making meaning is inherently present in the individual, and according to Kegan evolves during our whole life. It starts in early childhood, and through a series of evolutionary steps becomes more and more complex. As a result, a balance emerges between the ‘I’ and ‘the other’ (in psychological terms), between subject and object (in philosophical terms), and between organism and environment (in biological terms). Every evolutionary step is an expression of making meaning, but will also set new boundaries. According to Kegan, every evolutionary step also provides new solutions for 16 Ignelzi, M. (2000). Meaning-Making in the Learning and Teaching Process. 17 Senge, P. (2006). The Fifth Discipline: The Art & Practice of The Learning Organization. United States: Currency 18 Kegan, R. (1982). The Evolving Self: Problem and Process in Human Development. Cambridge, Massaschusetts: Harvard University Press
26 From matter to meaning
Fig. 11
The context of the producer, service-provider versus the context of the customer. The evolution of the context in time. For example, the physical context versus the symbolic context. The context in different areas.
Context in this complexity dimension is experienced consciously, and is added to the mental image as the fourth dimension. Context is the total environment in which something gets meaning. The best description of context is the following: 44 “Context is a set of limitations that have an influence on the system during the execution of a task.” By subconsciously giving meaning to something—as in the previous dimension— all other possible meanings will be automatically excluded in the following decision-making process. Becoming aware of context, therefore, means becoming aware of the impacting obstructions in order to reflect upon them to do somesomething with them or in order to try to bridge or utilize these obstructions. Organizations in this fourth dimension quickly end up with what is seen as valuable to the customer and with the context he or she considers. What is so valuable to a customer that he or she will move to a purchase based on the quality of the offer and the perception he or she has of it in a certain context?
44 Bazire, M., Brezillon, P. Understanding context before using it. Laboratoire Cognition & Usages
58 From matter to meaning
102 From matter to meaning
4 COMPLEXITY AND STRATEGY
103
Complexity and strategy üü If a man knows not to which port he sails, no wind is favorable. Seneca, a Roman Stoic philosopher, statesman, dramatist,
The different stages of complexity from which an organization can be shaped have been described above. However, it is important to return to the creation of value that takes place at every level, because this indicates the value society attaches to each of these levels. The more an organization succeeds in adding dimensions to its product, it will create a customer willingness to pay a higher price for it for the simple reason that the value proposition has increased as well. Below an example from the coffee market. (figure 18) Of course, there is not only a vertical evolution. Within every dimension there is also an evolution possible where people are prepared to pay an increased price for the mastery that is shown in that level. The choice about the dimension from which an organization wants to shape its activities is determined by the leader’s level of consciousness. It is also important to realize that more dimensions lead to more value. • More dimensions create more value. • More dimensions lead to a longer realization time. • More dimensions also require a higher willingness to invest. Innovation starts with asking the right questions. When the right question is asked, the answer is generally self-evident. The image emerges automatically. The more complex the image, the simpler the solution finally will be, but the more time it will require before its realization becomes visible. When more dimensions are taken into account, individual needs are addressed in a broader way because this process implies a slow crossover from physically visible output to the fulfilling of drives. Sometimes invoicing to the client stops and is replaced by the revenue from all those who want to use the created ecosystem as a market. Take, for example, LinkedIn. It is not the user who pays, but those who want to use LinkedIn as a market.
104 From matter to meaning
Fig. 18
Complexity and strategy
105
CONTEXT MANAGEMENT
CONTEXT CREATION
HIGH
COMPLEXITY
quality
service
positioning
commodity
differentiation
reputation
societal contribution
societal progress
goods
services
new experiences
COFF
T I ME
2
20
-
46
60
level of value creation
lifestyle
EE
Fairtrade
price / kg
1
10
-
23
30
multiplicator
Mental models bring structure to the current chaos. But how do these models get formed? What is their impact on our way of venturing into the business world? How do they infl uence society? This book gives answers by returning to the essence. How do managers adapt their strategy to the permanent changes in their environment? How do they create value? Why do we look for experience, and why do we wonder less if people are able to translate a certain complexity to concrete output, service, methods, concepts, and societal interests? What are the seven complexity dimensions, determining organizational and individual development? How do these dimensions explain why one organization deals successfully with change while another systematically become a victim of it? The answers in this book offer an innovative, yet pragmatic, insight into strategic, organizational, and talent development.
“The thesis developed in this book provides powerful insights about what the “real contribution or value-added work” is from each level of an organization, in order to compete in open systems (e.g., marketplaces, geopolitics, etc.). It describes simply, but elegantly what the “magic sauce” is to ensure continuous growth and sustainability. When fully developed, this new line of thinking should fundamentally transform the fields of strategy, business development, and marketing into more of a science than an art.” Dr. Gerald A. Kraines, Chairman and CEO of Levinson & Co, The Levinson Institute, and SONARIO Faculty Member at the Harvard Medical School
About the author Fabiaan Van Vrekhem since 2005 heads the executive management consultancy organisation Accord Group Belgium specializing in suppor ting top management. Since 2014 the author is Practice Leader Leadership Services with AltoPartners, an international network of executive search organizations. In 2015 he launched www.valpeo.com, a platform to increase the self-reliance of consultants and organizations based on the principles described within.
www.compactpublishing.be
ISBN 9789491803154