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THE HUMAN QUALITIES ESSENTIAL TO LEADERSHIP EXCELLENCE

HOW LEADERS AND EXECUTIVES CAN IMPROVE THEIR TEAM/ GROUP DYNAMICS

DR MARIA KATSAROU-MAKIN is the founder of the Leadership Psychology Institute and has over 20 years of experience in organizational development and executive coaching. She is a Chartered Psychologist and has done extensive work and research in team dynamics.

“This concise and thoughtful volume masterfully demonstrates the power of the leader who shows up mindfully, with clarity, calmness, compassion and courage. It condenses a huge body of wisdom into an original and accessible framework, with tools and practical advice to improve both leadership skill and life fulfilment.” MEGAN REITZ Professor of Leadership and Dialogue at Hult International Business School

“This is an immensely valuable book for anyone who would like to understand what good leadership behaviours look like and would like to improve their own leadership.”

“Sally-Anne’s book captures an important nuance of leadership through storytelling and blends her experience with a wealth of practical guidance.”

PAUL (PABLO) ETTINGER Chairman of TALENTBANQ and one of the founding team of Caffe Nero

LARISSA HARRISON Global HR Director

“…an intellectual tour de force through many of the primary sources, theories and research about effective teams…[the author] even sensitively examines the dark side of teams and frequent pathology. It is guaranteed to spark ideas about how to lead and infect your teams” RICHARD BOYATZIS

PhD, Distinguished University Professor, Case Western Reserve University, and co-author of bestselling Primal Leadership Available through all good book retailers

Available through all good book retailers Print edition: ISBN 978-1-912555-75-8 | E-book edition: ISBN 978-1-911671-26-8 Published by LID Publishing (www.lidpublishing.com)

Print edition: ISBN 978-1-911687-46-7 | E-book edition: ISBN 978-1-911687-47-4 Published by LID Publishing (www.lidpublishing.com)

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PATRICK WOODMAN EDITOR’S LETTER

Sparking success

“T

he global economy is limping along, not sprinting.” Such was the gloomy assessment of the International Monetary Fund (IMF) in its World Economic Outlook of October 2023. The recovery from Covid-19 and the invasion of Ukraine remains “slow and uneven”; economic activity still falls short of its pre-pandemic path. The IMF forecasts global growth slowing from 3.5% in 2022 to 3% in 2023 and 2.9% in 2024. (They are forecasts that will hardly be improved by the latest, tragic wave of violence in the Middle East, especially if fears of a broader conflict are realized.) Changing the trajectory of growth is, of course, a central focus for policymakers and politicians around the world. But it is also a perennial priority for leaders tasked with steering their organizations through the circumstances identified by the IMF – and whatever the economists say, leaders know there are still opportunities out there. Trends are there to be beaten; odds are there to be defied. When challenges mount, brilliant leaders find new ways to win. So as enter 2024, the question at the heart of this issue of Dialogue is simple. How can leaders ignite growth? One of the clearest answers to emerge is: through their people. When employees are engaged and striving to deliver shared goals, the energy in an organization is tangible, the momentum for growth irresistible. The converse is equally true. As Vishal Patel reflects (p11), when a business opts for convenience, it is doomed to irrelevance. We instinctively know the difference, yet it has been hard to quantify. That is changing. It is now possible to measure human capital accurately – and the evidence shows that it’s a powerful catalyst for growth, writes Dan Ariely (p16). It may be a cliché, but it’s true: people are an organization’s most valuable asset. Are leaders making the most of those assets? Human capital is unique in how it can be nurtured, which is why personal development should be high on the agenda for every leader seeking to spark growth. One of the biggest

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challenges is how to keep developing; as Whitney Johnson and Amy Humble explain, the plateau of high performance is often followed by a precipice (p20). The only option is to jump – and start a new phase of growth. Elsewhere in our Focus section, Jamie Jones explains how leaders can build their innovation muscle and create the organizational conditions for innovation to flourish (p24), while Bruce Whitfield shares success stories from innovative businesses in South Africa (p28). Jennifer Sundberg and Pippa Begg emphasize the importance of collective intelligence (p32); great teamwork trumps individual brilliance every time. That makes inclusion essential, as Frances Frei and Anne Morriss write (p36). “Whatever problem you’re trying to move fast and fix, you’re going to get better and faster solutions with an inclusive team of complex humans who are contributing to their capacity.” Of course, growth is not the goal for everyone. As Alex Hill explains in his article on Centennials – great organizations that have endured for more than 100 years – some businesses aim to get better, not bigger (p46). The key? Combining a stable core with a disruptive edge. For others, the goal is simpler: survival. Alain Liebaert shares what he has learned about leading through disruption – and how his business stayed profitable (p76). Finally, we welcome guest finance columnist Joe Perfetti as Phil Young lays down his pen after many years in the post. Phil stands as a Dialogue great, and we wish him all the best for the future. Enjoy the issue.

Trends are there to be beaten; odds are there to be defied. When challenges mount, brilliant leaders find new ways to win

Patrick Woodman is editor of Dialogue

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Q1 2024

Dialogue is brought to you by: LID Business Media Editor Patrick Woodman patrick.woodman@lidbusinessmedia.com Art director Kate Harkus Chief subeditor Luisa Cheshire Editor-at-large Ben Walker Assistant editor Kirsten Levermore Publisher Martin Liu Associate publisher Alec Egan For advertising sales: alec.egan@lidbusinessmedia.com Duke Corporate Education Chief marketing officer Christine Robers Publisher Published in the United Kingdom by LID Business Media Ltd, LABS House (5.12), 15-19 Bloomsbury Way, London WC1A 2TH

Inside... AGENDA

Editor’s letter Patrick Woodman on sparking success

Contributors Featured authors

Dialogue Digest The issue’s key themes and topics at a glance

Good business Sharmla Chetty on female entrepreneurs

Upfront Vishal Patel on why courage trumps convenience

Disclaimer Copyright 2023 by Duke Corporate Education and LID Business Media Ltd. All rights reserved. Material may not be reproduced without permission of the publisher. While we take care to ensure that editorial is accurate, independent, objective and relevant for the readers, Dialogue accepts no liability for reader dissatisfaction rising from the content of this publication. The opinions expressed or advice given are the views of individual authors and do not necessarily represent the views of Dialogue. This journal is also supported by Knowledge Partners, including Duke Corporate Education as Lead Knowledge Partner. Whenever an author is related to a Knowledge Partner it will be noted as such. Dialogue takes every effort to credit photographers but we cannot guarantee every published use of an image will have the contributor’s name. If you believe we have omitted a credit for your image, please email the editor. Cover image Shutterstock ISSN 2053-4361 Printed by Paragon www.paragon.world

LEADERSHIP

Built to last Businesses’ lifespans are getting shorter. Follow these 12 habits to create great, enduring organizations

Core strength Get middle management out of its current crisis by recognizing its impact – and rethinking the role

The big interview Roongrote Rangsiyopash, president and chief executive, Siam Cement Group (SCG)

Dialogue is the official journal of Duke Corporate Education

Leadership excellence A transformative partnership between Implats and Duke Corporate Education is helping the mining giant move into new territory

You should never pretend that everything is business as usual when it isn’t Roongrote Rangsiyopash

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@DialogueTweets

The mastery paradox Make a leap to revitalize personal growth

Strong ideas Steps to build your organization’s innovation muscle

Defy the odds The South African firms that innovated and thrived Staying alive Revive a dying business via collective intelligence

Move fast and fix things To solve tough problems, build inclusive teams

News nation Will Gabon establish democratic rule after a military coup?

Review The Diary of a CEO by Steven Bartlett

Big ideas Perry Timms on craftsmanship

Last word Sanyin Siang on leading through emotions

INNOVATION

FINANCE

MARKETING

STRATEGY

Vivek Wadhwa on innovation India is poised to build an AI that works for the world

The fifth phase A new era of business transformation is under way

Rebuild required Why the global operating system needs a complete overhaul

Joe Perfetti on finance Accounting reflects; finance projects

Dynamic process transformation Business processes are doomed to worsen over time – but they can be a source of competitive advantage

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Giles Lury on marketing Personal experience can be a rich source of ideas for brands, but beware the sample of one

When a leader or founder has success early on, they can develop an infallibility complex Giles Lury, p71

Mission impossible? The rush to define integrated reporting rules for ESG may have unintended consequences

Dialogue Review

INSIGHT

FOCUS Ignite growth The human catalyst How to boost your Human Capital Factor

@dialoguereview

The CMO Survey Six trends emerging from the latest influential survey of chief marketing officers

Rita Gunther McGrath on strategy Sometimes the answers are under your nose

Go against the flow How to stay profitable in a disrupted market

Embed sustainability As ESG transforms the strategic context, a new leadership mindset is required

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THE POWER OF BUSINESS

FOR THE COMMON GOOD OF SOCIETY

“Sakurada reminds us of what is required to build something both lasting and significant.” – ALEXANDER C. KARP Co-founder and CEO of Palantir Technologies Inc.

“Drawing on thought-provoking lessons in collaboration, confidence and creativity, Bushido Capitalism is essential reading for post-pandemic leaders.” – DANIEL PINK New York Times bestselling author of When, Drive, and A Whole New Mind. Available through all good book retailers Print edition: ISBN 978-1-911671-58-9 | E-book edition: ISBN 978-1-911671-59-6 Published by LID Publishing (www.lidpublishing.com)

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Contributors Dan Ariely

Frances Frei

The James B Duke professor of psychology and behavioral economics at Duke University is dedicated to helping people live more sensible – if not rational – lives. As well as appointments at Duke’s Fuqua School of Business, the Center for Cognitive Neuroscience, the Department of Economics, and the School of Medicine, Ariely is a founding member of the Center for Advanced Hindsight, and a bestselling author. Focus p16

A professor of technology and operations management at Harvard Business School who served as Uber’s first senior vice president of leadership and strategy, helping the company navigate its crisis in leadership and culture. Frei is co-host with Anne Morriss of the TED podcast Fixable, which helps listeners solve their toughest work problems; they have been recognized by Thinkers50 as among the world’s most influential business thinkers.

Anne Morriss An entrepreneur, leadership coach and founder of the Leadership Consortium, a first-of-its-kind leadership accelerator that works to help emerging leaders thrive. Morriss is the bestselling author, with Frances Frei, of books including Unleashed: The Unapologetic Leader’s Guide to Empowering Everyone and You, and most recently Move Fast & Fix Things: The Trusted Leader’s Guide to Solving Hard Problems (Harvard Business Press). Focus p36 Amy Humble

Jamie Jones The director of Duke Innovation & Entrepreneurship and an associate professor of the practice at the Fuqua School of Business, where she teaches courses on creativity, innovation, and developing and launching new ventures. Jones is the co-founder of Impact Engine, an investment firm bringing capital to markets where financial returns are linked to positive impacts. Focus p24

The co-founder, president and chief strategy officer at Disruption Advisors, Humble is an expert executive coach and organizational visionary. She oversees the strategic direction of Disruption Advisors and provides executive leadership and performance coaching, as well as consulting on issues including culture, organizational design and talent development. Focus p20

Whitney Johnson One of the world’s top ten business thinkers as ranked by Thinkers50, and the co-founder and CEO of Disruption Advisors. Johnson previously worked at Fortune 100 companies and cofounded the Disruptive Innovation Fund with Clayton Christensen. Her latest book is Smart Growth: How to grow your people to grow your company. Focus p20

Join the Dialogue Dialoguereview.com @DialogueTweets Dialogue Review

Direct comments, queries and suggestions to media@lidbusinessmedia.com

Get Dialogue on the go. Available through Apple App Store, Google Play and Amazon Kindle Fire. Search Dialogue

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THE ISSUE AT A GLANCE

Dialogue Digest A quick look at the key themes and topics covered in this issue

Better together

The Silicon Valley motto, “move fast and break things” is based on a false premise, write Frances Frei and Anne Morriss (p36). Jennifer Sundberg and Pippa Begg, meanwhile, explain why collective intelligence, is critical for organizational renewal and reinvention (p32).

People power

Innovation edge

Human capital can no longer be dismissed as intangible. It can be measured – and it’s clear that it makes a significant difference to business performance, writes Dan Ariely (p16). Maximizing employee goodwill and utility alignment is key. Whitney Johnson and Amy Humble, meanwhile, explain the paradoxical perils of mastery, and spell out why re-igniting personal growth starts with a leap (p20).

If leaders want to build their innovation muscle, then curiosity is key, writes Jamie Jones of the Fuqua School of Business (p24). Bruce Whitfield shares lessons from South African businesses that have found ways to thrive despite tough economic conditions (p28).

Images Shutterstock

Lasting impact

Could your organization endure for 100 years or more? Alex Hill shares what he’s discovered about how ‘Centennials’ endure and excel (p46). Alain Liebaert shares lessons from his own experience leading a 100-year-old business through decline, remaining profitable in a radically changed marketplace (p76). And Bill Schaninger, Bryan Hancock and Emily Field argue that organizations need to rethink the role of middle management to unlock growth (p50).

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GOOD BUSINESS SHARMLA CHETTY

A different eye on business The march of female entrepreneurs can reshape the world

wenty years ago, Volvo asked an all-female group to design a car. The result was dubbed Your Concept Car, or YCC: a gullwing hybrid coupe that comprised several ingenious innovations. The designers observed that the only time they ever lifted the hood of a car was to replace the wiper fluid, a needless hassle – so on the YCC, the fluid was filled next to the fuel. Both inputs used a ball valve, removing the need for caps – which the designers, to a woman, considered an annoyance. The team made more changes to traditional car design. They observed that, on many journeys, cars’ rear seats went unused. They redesigned them as cinema-style flip seats, which could be lowered when required, creating a large rear storage space that the driver could access easily from the gullwing door, without opening the tailgate. The gearshift was located on the steering column and the parking brake electronically integrated into the control panel, thus freeing up space for a notebook computer, phone and – yes – a handbag, next to the driving seat. Seat pads, carpets and detailing came in eight colorways and could be swapped at will when dirty, or simply for a change. The exterior was finished in a Teflon-style coating, which repelled dirt and cleaned effortlessly. The YCC was fitted with run-flat tires, thus avoiding the need to jack up the car on the highway to fix a puncture. On a key press, the nearest door or tailgate opened, so the car could be entered while the driver was carrying things. The changes to convention were, like all great innovations, obvious once someone had suggested them. Yet it took a deliberately-convened group of women to do it. “The hallmark of a good idea is that people ask why this hasn’t been done before,” Tatiana Butovitsch Temm, YCC communications manager, remarked at the time. Imagine what the world might look like if more businesses were launched, and led, by

Imagine what the world might look like if more businesses were launched, and led, by women

Sharmla Chetty is chief executive of Duke Corporate Education

women. Indeed, we might find out in a few years. In 2022, almost half (47%) of US entrepreneurs starting businesses were women, according to HR platform Gusto, compared with just 29% before the pandemic, a huge shift. In the UK, in the same year, women created a record number of new companies. The numbers are inspiring. Women are renowned for creating products or services that meet specific or unmet needs in their community. As the YCC shows, they bring different perspectives, leadership styles and experiences that can drive innovation and growth in a range of industries. When Volvo polled its customers on the YCC innovations, it found them popular with women – and men. “If you meet the expectations of women, you exceed the expectations of men,” Marti Barletta, a US expert on female consumers, said at the outset of the project. Diversity in design – as in so many other strands of business – is a passport to commercial success and customer value. There is work still to be done to dismantle the barriers facing women entrepreneurs, from accessing funding to overcoming gender bias. Yet their rise is an exciting trend that has the potential to reshape the world around us; not only because they will make different design choices, but because as more women choose entrepreneurship, even more will be inspired to follow in their footsteps. There are many solutions out there waiting to be found. Just as a team of women reshaped the car, a new generation of female entrepreneurs can reimagine myriad other products for better living.

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SPEED UP YOUR TIME TO VALUE CREATION WITH BIG DATA AND AI 3

“Richard Benjamins draws on his years of experience in the data journey to offer very practical advice for any company serious about becoming data-driven. This is a book you must read if you want to avoid the typical mistakes in this sort of transformation” – DAVID DEL VAL, CEO of Telefonica R&D

“So many talk abstractly about Big Data and AI in large organizations. If you are interested in the nuts and bolts of being data-driven; if you care about success and all the things that really matter, read this book!” – VIKTOR MAYER-SCHONBERGER, co-author of the bestselling Big Data

The author RICHARD BENJAMINS is Chief AI & Data Strategist at Telefonica. He was named one of the 100 most influential people in data-driven business (DataIQ 100, 2018) and serves as an expert to the European Parliament’s AI Observatory (EPAIO).

Available through all good book retailers Print edition: ISBN 978-1-912555-88-8 | E-book edition: ISBN 978-1-911671-31-2 Published by LID Publishing (www.lidpublishing.com)

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UPFRONT VISHAL PATEL

The future favors the brave The polycrisis demands courage from the comfortable

“W

e choose to go to the Moon in this decade and do the other things,” said John F Kennedy to Congress in 1962, “not because they are easy, but because they are hard.” Neil Armstrong took the giant leap for mankind just seven years later. Today, the race for space exploration is led by the private sector – witness the efforts of Space X and Blue Origin. The courage to effect human advancement has always been, and still is, inside companies. Yet the evidence is that the pioneers are becoming rarer: not through lack of ability, but through lack of will. When Professor Sim Sitkin researched courage in organizations, he discovered a troubling truth. The very organizations that were best placed to be brave were least likely to be so. “A stretch goal is defined as a seemingly impossible goal under current conditions,” says Sitkin, Michael W Krzyzewski university distinguished professor in leadership at the Fuqua School of Business. “What our research has shown is the paradox of stretch goals: the organizations and individuals who are in the best position to pursue stretch goals tend to be very conservative and risk-averse, and don’t pursue them – while those in weak positions pursue stretch goals when they shouldn’t.” Sitkin’s extraordinary paradox upends the logic on which the business world was built. The private sector is born of courage. The heartbeat of enterprise is

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the causality of risk and reward. Yet as organizations develop a competitive edge, they become less willing to exploit it, preferring to hold what they have. “They tend to be cautious because they are doing okay,” says Sitkin. Conversely, companies and individuals who are struggling take the moonshot, because they have less to lose. “Those who are in the weakest position try for it,” says Sitkin. “And they almost always fail.”

The very organizations that were best placed to be brave were least likely to be so

Why does this matter? What is fundamentally wrong with leading successful organizations with convenience in mind, taking the path of least resistance inside a reliably profitable comfort zone? The answer comes from context: our planet is in polycrisis. The solutions to society’s biggest problems – climate change; social division; geopolitical belligerence – will remain concealed, unless courage is cultivated by those with the capacity to change the world. Ken Frazier, executive chair and former chief executive of healthcare major Merck, underlines the transformative role business can play in society. He chairs OneTen, an organization that asks employers to recruit for skills and talent rather than university degrees, as a route out of persistent inequality. Almost threequarters of African Americans lack a university degree, effectively locking them out of many jobs. “If you want to have a real equalizer in our society, it is giving people access to family-sustaining wages,” Frazier says. “Following George Floyd… CEOs came together and said, ‘What can businesses do to address the inequity that exists in our society?’” This column has noted before that companies are now more trusted than governments or media. This trust premium gives them the latitude to make the change – if only they are bold enough to do so. Yet leaders running comfortable companies are too often reluctant to take a chance; to bet on something unusual; to do, as the Oxford English Dictionary defines courage, “something that frightens them”. Successful companies are best placed to make the gambits that can change the world. Whether it is hiring outside their normal recruitment criteria, as Frazier suggests, or amplifying their sustainability efforts when their company is already ‘green enough’, the courageous will be rewarded with the future. Those that continue to conform to Sitkin’s paradox will be granted only short-term convenience – and long-term irrelevance. Vishal Patel is president of global markets at Duke Corporate Education

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THIS ISSUE’S FOCUS

Ignite growth

fter all the disruptions of the pandemic and its economic aftershocks, it’s time for leaders to step up and ignite the next level of growth – for their organizations, their teams and for themselves. In this issue of Dialogue we explore the leadership strategies for those objectives. What are we learning about the role of human capital in driving organizational performance? How can leaders re-energize their own personal development and escape the risks of stagnation as they achieve mastery in their field? How can leaders challenge themselves to generate better ideas and create the organizational conditions for innovation? Why is collective intelligence, not individual brilliance, the key to organizational reinvention? How do high-performance businesses thrive in dysfunctional environments? And how can leaders create truly inclusive teams to tap into the strength that is created when people bring different perspectives to work? Read on

Articles 16 The human catalyst 20 The danger of the growth precipice 24 Build your innovation muscle 28 The upside of down 32 How to revive your business 36 Move fast together

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FOCUS THE FUNDAMENTALS OF GROWTH

efficient and agile. But, because analysts have struggled to measure it, it is challenging to consider as an input for investment decisions. Irrational Capital is trying to change that with a new metric: the Human Capital Factor™ (HCF).

The Human Capital Factor Irrational Capital mines a plethora of disperse data to create the HCF. Sources include company survey data and publicly available assessments, including reviews on recruitment sites, such as Glassdoor. Some sources are relatively nascent. For example, Glassdoor is a household name now, but only came into existence in 2007. Yet it has been possible to back-test the performance of companies with a high-HCF versus the market benchmark. The results are illuminating. To analyze the HCF, JP Morgan used the MSCI USA Index, which comprises more than 600 stocks. It formed and tested two share portfolios for the years between 2009 and 2020. As of 31 December in each year, it placed a concentrated portfolio of 30 stocks with the highest HCF scores in the long-HCF portfolio. The 30 stocks with the lowest HCF scores were assigned to the short-HCF portfolio. The portfolios were weighted and regularly rebalanced, to ensure a fair comparison. The results tell a clear story. The high-HCF portfolio achieved an annualized return of +20.9%, compared to just +13.3% for the MSCI overall. When the high-HCF portfolio was rebalanced to make it ‘sector-neutral’ – reflecting the sectoral composition of the MSCI benchmark – the difference remained profound. The sector-neutral high-HCF portfolio showed an annualized return of +19.2%, substantially higher than the Index benchmark (see graphic 1, left).

The human catalyst A strong Human Capital Factor ignites growth Writing Dan Ariely

Heavy hitters

“I

only want to invest in fundamentals.” Such is a common statement from financiers. Yet these self-proclaimed ‘fundamental investors’ are people who regularly ignore a key aspect of a successful business. The term ‘fundamental’ is used to describe financiers who back companies only when the hard financial data available to them looks positive. While the approach might sound sensible, it is limited – because the available data is insufficient and inadequate. One of the fundamental predictors of growth that goes largely unquantified is human capital – the people power within a firm that drives it forward. Human capital is a sort of free energy for businesses. When harnessed, it acts like a perpetual motion machine, igniting growth by making companies more innovative, creative, productive,

1 Human highs Annualized return (%) on portfolios Long HCF

20.9 Long HCF Sector-Neutral

19.2 MSCI USA Benchmark

13.3 Short HCF

13.2

One fascinating element of HCF is the way it cuts across all branches of the economy. When we set about quantifying HCF, we’d expected it to be a major factor in the so-called knowledge economy – capital-light firms such as Google and Meta. We had anticipated it to be a less important factor in sectors like manufacturing. The surprise was that HCF is as vital for capital-heavy industries as for capital-light sectors. Why is this? One example might shed some light. I met Joe, an engineer who worked at a pipe company. The company is unable to use oil as a lubricant when manufacturing its pipes, so it uses molten glass. The raw glass was sourced from recycled car windshields from a major car maker. The pipe-maker had a problem: a greater proportion than expected of its pipes were cracking and failing, and nobody knew why. Out of an interest in and devotion to his job – not because he

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FOCUS THE FUNDAMENTALS OF GROWTH

had been asked – Joe took it upon himself to do some detective work. After about two years of self-driven investigation, Joe solved the problem. Car companies were incorporating metal into their windshield glass so the windshields could doubleup as integrated radio antennae. The ratio of metal to glass was tiny, but sufficient to make the pipes inordinately prone to cracking. Mystery solved. One man’s personal mission to solve a critical problem led to huge productivity gains for his company. Its high HCF was evident.

The happiness paradox Many would assume that the pipe-maker detective, Joe, was self-motivated because he was ‘happy’ in his job. Yet the idea of happiness is over-egged and frequently misused in business. Most humans derive happiness from leisure, not work. Many of us would be truly happy in the moment we found ourselves sitting on a tropical beach, cooled by a pleasant breeze, sipping on a well-mixed mojito. Happy, but unproductive. Rather, a high HCF comes from a combination of task satisfaction, feeling appreciated, psychological safety, and the degree to which companies provide the conditions where employees can align their own utility with that of the company and its stakeholders. This combination is more related to meaning than happiness. Task satisfaction is the reward one gets from completing a challenge: say, running a marathon, rather than an undemanding leisure activity, such as drinking a cocktail. Psychological safety, meanwhile, is usually derived from a healthy company culture. It gives employees the confidence to challenge decisions, the agency to influence the direction of their company. Joe expended excess time and energy on an investigation because he wanted to do it. He had intrinsic motivation – and he enjoyed the psychological safety of knowing that he would be listened to when he challenged the use of materials from a longstanding supplier. Psychological safety is also an antidote to groupthink, a strong predictor of inertia and restricted growth. Rather than being a function of momentary happiness, it gives employees the internal strength to express their real feelings and ideas, and even their dissatisfaction with some aspects of the company. When Joe investigated the supply chain and found the weak point, it was not easy news to share, but, because of a high HCF at his company, he felt empowered to do something about it. His company appreciated his efforts and, by

2 Happy capital

Intrinsic motivation is an invisible fuel for growth that can be nurtured in all workers, provided the conditions are right

Harbor Capital’s exchange traded fund NYSE:HAPI selects the 150 top Human Capital Factor companies from the largest 500 US companies. HAPI has delivered outperformance of the S&P benchmark while having the same level of risk. HAPI

S&P 500 benchmark

Morningstar US

40 30 20 10 0 -10 -20

2015 2016 2017 2018 2019 2020 2021 2022 2023

Large cap category average Calculation benchmark: S&P 500 TR USD

changing a policy based on his evidence, benefited commercially from them.

The motivation formula Intrinsic motivation is like a perpetual motion machine for companies, an invisible, free fuel for growth that can be nurtured in all workers, provided the conditions are right. Remember the last time you visited a large, branded store and the sales assistant went out of his way to help you? He might have checked the stockroom when the product you wanted was absent from the shelves. He might have called other local branches to check whether it was in stock nearby. That experience is likely to have added to your loyalty with that chain; it added indirect value to the company by making it less likely that you will choose its competitors in future. It also potentially added direct value – by making it more likely that the chain would make another sale. When we think about it, it is easy to visualize equivalent examples, where employees across the board have added value through their own acts, in every sector of the economy. So, what drives intrinsic motivation? When we explored the factors that contribute, some key findings emerged. It transpires that absolute benefits tend to have only a marginal effect at best: for example, the level of one’s salary is a lesser factor than fairness in the salary structure; the 18

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3 Utility alignment

Value neutral

Aligned effort GOOD WILL

Self interest

Value creation

UTILITY ALIGNMENT

Value destruction

Value neutral

Disengaged

Superficial

scale of one’s retirement benefits is also a lesser factor than the degree to which those benefits are seen to be distributed equitably. Other factors, such as low levels of bureaucracy and a general feeling of being appreciated by one’s colleagues, are better predictors of intrinsic motivation than financial rewards. Together they drive a key pillar of high HCF – goodwill. Goodwill is the range between the minimum effort required by an employee to keep her job and the maximum effort possible by that employee if she is fully engaged in her role. The most illustrative study on the factors behind goodwill (Bareket-Bojmel, Hochman and Ariely, 2017) reveals that non-monetary appreciation, such as verbal or written praise, led to productivity increases in the study group – microchip production workers. By contrast, gold did not glitter: monetary bonuses led to a long-term decline in productivity.

Factors such as low levels of bureaucracy are better predictors of intrinsic motivation than financial rewards

Image Shutterstock

The fundamentals of HCF Dan Ariely is James B Duke professor of psychology and behavioral economics at Duke University, and co-founder of Irrational Capital

Goodwill is imperative for a high HCF, yet it is just one of two key building blocks. The other is utility alignment – the willingness of employees to execute tasks that are aimed at the wider benefit of the company. An employee with high levels of goodwill will not achieve her full potential if she is unaligned with the goals of the company (see graphic 3, above). Let us return to our branded

Human Capital Factor is a registered trademark of Irrational Capital

store by way of an example. Imagine the chain employs several beauticians to sell its makeup. The beauticians offer free makeup consultations for customers. Their hope is that at the end of each makeover, they will sell the makeup they used. One day, a beautician notices that the customer could benefit from a face cream that is manufactured by the company, but is unavailable at the makeup counter. It is stocked elsewhere in the store, in the skincare department. The beautician asks the customer to wait and visits another corner of the store to bring the product in question to the customer. Because the product is stocked by a different department, the beautician gains no commission from the sale. Indeed, if the customer buys the other product they likely spend less on makeup. While the beautician makes no financial gain from the sale, it is nevertheless beneficial for the company and its customer. The beautician recognizes this and acts accordingly. This is what utility alignment is all about. As graphic 3 shows, when either goodwill or utility alignment are lacking, value is neutral. Where both are lacking, value is destroyed. Yet, when both goodwill and utility alignment are present simultaneously, a lot of value is created. The workforces of companies with high HCF are clustered in this quadrant.

The future bottom line Traditional accounting considers human capital an ‘intangible’ – something that cannot be measured. Yet Irrational Capital is putting a dent in this traditional practice. Not only can it be measured, it can also be invested in. Through Harbor Capital we offer three exchange traded funds that comprise high-HCF stocks: HAPI, HAPY and HAPS. The main point is that human capital is not an ethereal factor. It is real and calculable. As we have shown, it is possible to quantify HCF and demonstrate its effect on company performance and value over time. The data that informs the quantification – both public and private – has only become available in the last few years; it is continually being expanded and should become rapidly richer and more extensive. As it relates to measuring and reporting human capital, traditional accounting is somewhat limited. The Human Capital Factor is the opposite of intangible. It is demonstrating the ability to make a former intangible tangible; something you can reach out and touch – and invest upon. One day, companies might start reporting on their human capital in their financial statements – and so-called fundamental investors might at last recognize the true fundamentals of business success.

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FOCUS THE MASTERY PARADOX

The danger of the growth precipice When you’re at the top of your game, the risk of sharply declining performance is – counter-intuitively – at its greatest. Are you ready to make the leap into a new phase of growth? Writing Whitney Johnson & Amy Humble

re you trapped on the alluring but perilous plateau of Mastery? On the S Curve™, our model of human growth, the high, flat end of the S represents Mastery. Here, we have reached our objective, and ease displaces effort. Mastery is great in theory: employers love their people to be fully qualified, even over-qualified, for their roles. They often hire and promote that way. Employees also like Mastery – for a while. It’s comfortable and there are few real challenges. The problem is we don’t work optimally in Mastery for very long. Mastery is a plateau that becomes a precipice. We’ve exhausted the growth experience available on our S Curve, and we stagnate. We start phoning it in. Mastery is where an employee who is very, very good at what they do begins to feel like they can’t do it anymore. Their job is simply too boring. There’s no feeling of being stretched and little sense of accomplishment. They need a new S Curve to climb.

As leaders bask in the glow of their mastery, they risk becoming prisoners of their own success

The S Curve and the perils of Mastery Each new skill learned or challenge faced is its own S Curve. We start at the relatively flat Launch Point

each time we begin something new, then move to the steep-sided Sweet Spot as we gain momentum and knowledge, and end in the flat plateau of Mastery when we’ve reached our objective. Mastery is appealing. It offers a sense of security, a safe haven where one’s competence is unquestioned because we are masters at our craft. But herein lies the paradox: as leaders bask in the glow of their Mastery, they risk becoming prisoners of their own success. The sheer reality of being at the top can stifle their future growth and potential. It’s akin to mountaineering, where the summit is the goal – the high end of the climbing S Curve. But it’s rarely safe to stay at a summit for long. The world’s highest and most demanding mounts boast altitudes of 26,000 ft or more above sea level. Their peaks are death zones: stopping for long can be fatal, as oxygen levels at such altitudes are insufficient to sustain human life for an extended period of time. Mountaineers who reach the peak of the tallest mountains are at a high risk of anoxia, an absence of oxygen reaching the body’s tissues. Similarly, Mastery can be its own death zone for growth, particularly when we perceive our current peak to be the highest one possible for us. There isn’t enough growth at this point to sustain us for long. Learning – or rather, the brain activity and chemicals associated with learning – is the oxygen of human growth. Our brains are complex and malleable supercomputers that, due to neuroplasticity, physically change when we learn. Each time we run a hypothesis as a part of our brains’ highly attuned prediction models, new synapses form between neurons that were not previously connected. Our brains run these predictive models constantly, making an incredible number of predictions each day, building or strengthening neural connections, and ultimately impacting our conscious and subconscious actions. But these predictions don’t just impact our actions. They also impact our feelings and drive, because of the influence of dopamine, the feel-good chemical responsible for making us feel motivated. When we predict something correctly, we are rewarded with a small dopamine spike. It feels good, and we want to get it right again. We learn to take the actions that deliver dopamine, strengthening those neural pathways. Our brain creates new synapses, new pathways, and we learn. We grow. At the high end of the S Curve, in Mastery, our actions become automatic. Our competence is high, but our brain rewards are low. We don’t get the dopamine spike that we once had, because we are no longer uncertain. We know our predictive model is accurate, so we are no longer rewarded when we guess correctly. We are no longer creating new synapses, but rather are taking the welldeveloped pathways we’ve created. We’re becoming

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Image Shutterstock

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anoxic; our interest and engagement are dying due to lack of learning and growth. Disengagement results, and productivity declines. We struggle to force ourselves to do things we once did easily and well, or we do them without focus or care.

The S Curve of learning – leaping the precipice Growth

The performance precipice The impact of plateaued growth on executive performance is illustrated by a study titled ‘The CEO Life Cycle’ published in the Harvard Business Review, November-December 2019. Researchers at Spencer Stuart tracked the year-by-year financial performance of more than 700 S&P chief executives and demonstrated five distinct phases of job performance, starting with the “honeymoon” and concluding with the “golden years”. Those chief executives who last to year 11, when the golden years typically begin, must first survive the death zone of success. The peak of a chief executive’s S Curve is around year six. It is “often followed by a time of prolonged stagnation and mediocre results”. Many CEOs quit or are fired in this stage; they only reach the golden years if they deliberately and repeatedly reinvent themselves on new S Curves. “CEOs who survive the complacency trap typically go on to experience some of their best value-creating years,” write the study’s authors. This is why top-performing employees are often the biggest flight risk. It’s why the quality of their work may decline after years of high performance. They don’t just want a new job; they need one. Employees who cannot see new learning opportunities for themselves within an organization will look externally for them – and when they find one, they will leave. Employees and their managers should regularly meet to talk about the employees’ perceptions of their own growth and their future potential. Good

Sweet spot Mastery Launch point

New launch point

Time Source: Disruption Advisors

If you feel you are on a plateau that is becoming a precipice, talk to your manager about a new S Curve to climb

leaders should proactively hold these discussions and be prepared with new in-house opportunities for the employees they most want to retain. Valuable human resources need to know that their growth is a high organizational priority. Fortunately, once-valuable employees who are in decline can be valuable again. If you feel that you are on a plateau that’s becoming a precipice, you may want to talk to your manager about a new S Curve to climb within your organization before you decide to jump to a new one. If you manage others, to retain and revitalize valuable human resources, you should be prepared to provide employees with in-house opportunities that align with their aspirations and the organization’s needs. These opportunities can range from new projects and responsibilities, to mentorship programs. The key is to offer employees a new S Curve to climb within the organization, rekindling their passion and motivation.

Understanding your experience of Mastery Each of the 10 tips for intentionally jumping off the edge of the growth precipice require you to first understand your own experience with Mastery. To explore this, consider the following questions. 1 Have you ever anticipated the appeal of Mastery in your career, only to find it transforming into a plateau that holds no appeal? What signs did you notice, and how did it impact your work?

2 Do you agree with the comparison between reaching the summit in mountaineering and achieving Mastery in your profession? How might staying too long in the ‘death zone’ affect your growth and motivation? 3 Have you considered the impact of neuroplasticity on your own growth and satisfaction at work? How can understanding this concept help you stay engaged and continue to evolve?

4 Are you aware of the ‘CEO Life Cycle’? How might its principles apply to your own career trajectory, regardless of your current position? 5 As a leader or manager, do you actively seek out opportunities to provide your top-performing employees with new S Curves within your organization? How might this approach benefit both your team and the organization as a whole?

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THE BRIEFING

At the end of every S Curve there is a growth cliff precipice that leads straight down into the unknown. The question you must ask yourself is: Am I going to walk off this cliff edge, disoriented from a lack of oxygen, or am I intentionally going to sprint to the precipice and jump toward the bottom of the next mountain?

Plateau and precipice When we are learning a new skill or tackling a new challenge, we enjoy a positive cycle of physiological rewards as we progress. But when we attain Mastery, that ceases: what was once satisfyingly stretching becomes mundane. Our interest and engagement wane; our performance declines. The growth plateau can become a precipice.

Making the leap Now that you know the science of growth and the dangers of staying at the peak too long, how can you intentionally jump off the Mastery precipice?

Making the leap It is possible to escape the ‘death zone’ of plateaued growth and worsening performance by intentionally making the jump to start a new phase of growth. Start by recognizing the importance of change. Stay alert for signs of complacency, ramp up your curiosity and learn to appreciate the art of reinvention.

Understand the importance of change, and the risk of not changing Recognize that Mastery in your current role can turn into a plateau over time. Be open to change and new challenges as they arise in your career journey.

Proactively assess your current growth capacity Regularly assess your own growth and potential. Don’t wait for your manager to initiate discussions about your development. Take charge by actively evaluating your progress.

possibility of embarking on a new S Curve within your current organization with your manager. Internal opportunities may be more abundant than you think.

Deliberately and clearly communicate Initiate conversations with your manager about your perceptions of your growth and potential. Effective leaders proactively engage in discussions about employee development. Be an active participant in these conversations.

Appreciate the art of reinvention Understand that reinventing yourself on new S Curves can lead to some of your most valuable and fulfilling years in your career. Appreciate that change is an opportunity for growth.

Stay alert for signs of complacency Be vigilant for signs of complacency, such as boredom and a lack of motivation. Recognize that these feelings can indicate that you’ve reached the Mastery plateau and need to venture into new territory.

Take ownership of your growth and development Remember that the responsibility for your own growth ultimately lies with you. Seek out opportunities, set goals, and actively engage in your own career progression. Don’t rely solely on others to drive your development.

Amp up your curiosity The person who wins is the person who is curious. Wonder about what you don’t know.

New beginnings

Seek new learning opportunities Actively seek out opportunities within your organization to take on new projects or responsibilities that challenge you and contribute to your personal and professional growth.

Whitney Johnson is the author of Smart Growth: How to grow your people to grow your company, and CEO and co-founder of Disruption Advisors. Amy Humble is president and co-founder of Disruption Advisors

Harness the power of neuroplasticity Understand that the brain thrives on growth and learning. Challenge yourself to stimulate neuroplasticity and reward your brain with the release of dopamine as you achieve new milestones.

Explore new opportunities within your current organization Before hastily considering a move to a new job, discuss the

Every S Curve, every new learning and growth journey, has a beginning, middle and end. We will all reach Mastery in our roles at some point or another. It is a desirable destination – but it should not be the journey’s end. The plateau of Mastery, when not recognized and addressed, can lead to stagnation and declining engagement. By contrast, those who can successfully navigate Mastery and intentionally leap to a new S Curve will ensure that their career remains dynamic, engaging, and filled with opportunities for personal and professional growth. If you understand the science of growth, embrace reinvention, and foster opportunities for your team members to embark on their own new S Curves, you can help them escape the death zone too – ensuring sustained success for yourself and your organization.

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FOCUS POWERFUL IDEAS

Build your innovation muscle A challenging economy can be the catalyst for game-changing new products and services. Does your business have the courage to innovate? Writing Jamie Jones

nnovation is not just an opportunistic pathway to growth. In times of economic uncertainty and market volatility, it is a necessity. But to succeed, companies seeking to catalyze organic growth will need to ensure their people and organization are prepared to innovate. Are you and your organization equipped with the right mindset, skills and processes to win? Examples of innovation rising from the ashes of economic downturns are abundant. The recession of the 1970s, characterized by rising labor costs, witnessed the birth of transformative solutions, such as automatic teller machines (ATMs) and consumer bar code scanners. Fast-forward to the recession of the late 2000s, a period marred by financial upheaval and widespread uncertainty. It led to the emergence of freelance and gig economy platforms like Upwork and TaskRabbit that

Societal conditioning often discourages questioning, which can be seen as rebellious or defiant

provided individuals with avenues to earn income during precarious times, and startup crowdfunding platforms, which offered sources of investment when traditional funding seemed scarce. As we find ourselves, once again, staring down the barrel of substantial economic uncertainty, companies that fail to innovate risk being left behind. Being prepared to excel through today’s macroeconomic shifts requires both organizational and individual readiness. The journey toward innovation begins with recognizing that innovation is not a solitary pursuit, but a collective effort that thrives in an ecosystem designed to support it. As a leader, your role is to foster innovation by enabling individuals to build their innovation muscle, and by sculpting an organizational structure that nurtures and amplifies innovative endeavors. The good news is that every member of your team has an innate capacity for innovation that you can unlock through training and practice. The path to a good idea is to have more ideas, which in turn requires creativity. Creativity is fueled by a set of competencies and behaviors that are proven to generate novel ideas: curiosity and questioning, observing, and associating. Nurturing these intertwined abilities can help individuals and teams produce more innovative ideas, but only if care is taken to develop the innovation muscles and overcome psychological and behavioral inhibitors.

Curiosity and questioning Our desire to learn fuels exploration and understanding, which we often achieve through the act of questioning. Curiosity prompts individuals and teams to question the status quo, challenge assumptions, and explore new possibilities. Questioning the status quo leads to exploration and the discovery of new perspectives and ideas. Through asking questions, people seek to understand the world around them more deeply, thereby spurring new insights – although they often generate even more questions. As humans, we are born questioners, as anyone who has spent time with a four-year-old will know. (Why is the sky blue? Where do babies come from? Where do we go when we die?) Asking questions is how we learn and nurture our curiosity. However, our questioning of the world around us declines rapidly after the age of four. Societal conditioning often discourages questioning, which can be seen as rebellious or defiant. Questioning can make others uncomfortable and, in our desire to be liked, we limit our questions to areas that are less likely to challenge assumptions and norms. Who has not felt the ire of a colleague or boss when you ask, “Why are we doing this [business practice]?”

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Observation

Images Shutterstock

Yet robust, even childlike, questioning can lead to new innovations. For example, Edwin Land was asked by his daughter in 1943 why she couldn’t see the photographs they were taking right away. That question led to the invention of the Polaroid camera. Here are some exercises to build your questioning muscle and reinvigorate your curiosity:

Observation can be a powerful tool for identifying opportunities for innovation. Through observation, you see how others interact with the world – from points of joy, to challenges they face – which may spark new ideas, whether for understanding problems or developing solutions. Additionally, observation (often combined with questioning) can help you fully understand not only what a person is doing, but also the underlying emotion and reason behind their action. This level of empathy can be a catalyst for creative new ideas, but only if you go beyond merely seeing, and delve into understanding “why?” Building our observation muscle is harder than it seems. Our brains do not process all the information that we see – we would be overwhelmed by the flood of data. Instead,

Commit to posing one “why” or “what if” query in meetings this week. Continue this practice until it is ingrained in your behavior patterns. Listen for a colleague to say, “It is what it is,” or “That’s how we’ve always done it.” These statements are signs that the status quo is not being challenged. When you hear these sentiments, stop and unpack what’s being said by asking questions. “What could change? What could be improved?” 25

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information is filtered out at the unconscious level, allowing us to apply our brain power to the things that matter. To overcome that unconscious filtering and harness the power of observation, we need to shift from passive engagement with the environment to intentionally examining it, and take in new information by questioning rather than just accepting what we see. The classic example of innovation stemming from observation is the invention of Velcro, which originated when George de Mestral observed burs sticking to his clothing during a walk. However, a lesser-known example is when the team at Buffalo Bicycles (founded by Sram Corporation, but now a subsidiary of World Bicycle Relief), noticed individuals in rural Africa adapting their bikes to become mechanical tools for grinding grain. Rather than dismiss what they saw, or be frustrated that users were modifying their expertly-built bikes, the team decided to explore their observation more deeply. They sought to understand how they might adapt their bikes, including by producing add-ons, to empower users and better enable them to use the bikes for the new job that the team had observed. Exercises for building your observation muscle and being stimulated by the world around you:

Observation can be a powerful tool for identifying opportunities for innovation

Associating Associating is the art of connecting seemingly unrelated ideas, and it serves as the bridge between observation and ideation. It is the brain’s innate tendency to recognize patterns across diverse data that allows for the synthesis of disparate information to generate novel concepts. This is the kindling for the innovation fire: broad and diverse knowledge and experiences, which our brains can subconsciously connect. Of course, individually, we are limited in how many diverse experiences we can collect. This limitation points to the value of assembling a diverse team that brings variety in discipline, skills, geography, perspectives and experience, thereby enabling fresh associations – and driving innovation. Associating happens subconsciously, which means our high-stimulus environment is a distraction from the work our brains need to be doing to make us successful innovators. Exercises for building your associating muscle and finding patterns in the disparate: hink of a problem you are currently trying T to solve, and identify where an unrelated experience created the outcome you are seeking. For example, if you are seeking ideas to build connection among your team, think about what you can learn from how a sports coach creates a sense of team when assembling a new set of players each season. Grab two random items in your office and brainstorm ten new products you might create by combining the two items. Don’t censor your ideas – let them flow without judgment and see what emerges.

or the next week, be on the lookout for F workarounds. Workarounds are where individuals have created their own hackedtogether solutions because existing offerings did not meet their needs, and they cared enough to piecemeal a solution together. In the wild that might be where duct tape has been applied; in the business context it may be a self-created spreadsheet solution. Workarounds are research gold mines and regularly point to opportunities for innovation.

THE BRIEFING

ake a lunch break, sit inside a fast-food T restaurant (or another high-traffic area), put down your phone, and observe how people interact with their environment. Make a note of three points of frustration, three things that created surprise or joy, and three ways a process could be improved.

Born of uncertainty

Get ready to innovate

History shows that challenging economic circumstances can catalyze the adoption of significant innovations that have lasting impact. Organizations seeking to innovate amid today’s uncertainties need to recognize that innovation is not a solitary pursuit but a collective effort – and leaders have a vital role to play in nurturing innovative endeavors.

Build your innovation muscle by developing curiosity and questioning, observation, and association skills. Identify which ideas are ‘good’ ideas – and worth investing resources in – through demand tests that are designed to derive revealed preferences. Develop a culture of innovation that prioritizes long-term goals and provides a safe space for ideas to flourish.

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Experimenting and testing The route to a great idea is to have a lot of ideas – and building your questioning, observing and associating muscles is a great way to generate copious ideas. However, not all ideas are created equal. How do you know which ideas are ‘good’ ideas? The answer is experimentation. It will help you and your team decide where to place your investment bets. Experiments are a way of testing a hypothesis. Every idea we have is nothing more than a hypothesis – a belief about the world and what others may find useful or valuable. Carefully designed experiments offer a way of testing to see if our version of the world is congruent with reality, giving us valuable information about which ideas merit continued exploration, and which should fall to the cutting room floor. Human evolution has not helped when it comes to picking good ideas, because our ‘lizard brain,’ which is responsible for primal survival instincts, drives us to select ideas that feel less risky. Such ideas are rarely the most interesting or novel. Testing provides a way to take ourselves and our lizard brains out of the equation and let evidence drive our decisions. To facilitate an understanding of which ideas are creating real value for the customer, focus on quick, cost-effective experiments that assess authentic demand from prospective users. By swiftly testing assumptions with real customers, you can identify potential pitfalls and recalibrate strategies, thereby minimizing risk. (See box-out, right, on ideas for demand testing.) Note, however, that the person who generates an idea is not the only biased actor that needs to be taken into account. Potential users are equally biased. As humans, we desire to be liked and want to avoid hurting others’ feelings – which means we lie. We profess interest and positively reinforce ideas that are put before us, even when we have no genuine interest in the proposed solution. This behavior is typically unintentional, and may seem harmless – but it results in the pursuit of ideas that no one actually cares about. It is all too easy for would-be innovators to be sent down dead ends. This is why using testing to derive revealed preference, not stated preference, is the right way to find genuinely high-potential ideas.

Three ideas for demand testing Use online advertisements to demand test Create an online advertisement for your new product idea and market it to your target audience. Measure the click-through rates. Level-up: direct the ad to a basic landing page that includes more about the product and a call to action, such as a sign-up mechanism for notifications when the product is available.

Every idea we have is nothing more than a hypothesis – a belief about the world and what others may find useful or valuable

The courage to innovate Innovation is not a solitary pursuit. It thrives when individuals come together within an organization that actively supports it. Establishing clear innovation goals, aligning these objectives with the company’s overarching strategy, and fostering diverse, flexible teams are essential ingredients in this recipe. The process should anticipate

Jamie Jones is director for Duke Innovation & Entrepreneurship and an associate professor of the practice at the Fuqua School of Business, Duke University

Use Amazon Mechanical Turk (MTurk) to assess interest MTurk allows you to quickly reach your target customer segment for feedback on multiple product ideas. Summarize your solution and what it does for the customer (both text and graphics work) and get feedback from hundreds of individuals that fit your identified user demographics in a matter of days or weeks. Be the machine If your solution depends on new technology, look for ways you can test your idea by substituting human power for machines – as IBM did when exploring the idea of using voice-to-text in the office environment. To demonstrate the technology, an office worker was asked to don a headset and speak in front of their screen, where the text magically appeared. However, the computer was not generating the text: IBM had someone hidden in the back room on a connected computer, frantically typing to make the words appear.

and eliminate barriers, opening channels for innovation to flow freely within an organization’s traditional forms. Creating a culture of innovation necessitates investment at both the individual and organizational levels. Leadership engagement plays a pivotal role in this regard, because leaders serve as beacons of experimentation and learning throughout the organization. A culture that acknowledges failure as a valuable learning experience and recognizes innovative contributions through rewards can embolden teams to pursue transformative ideas. Innovation can be a catalyst for sustainable growth. But for an organization to fully embrace innovation, leaders need to prioritize long-term investments over short-term gains, and create a safe space for ideas to flourish. Do you have the courage to build an organization that innovates?

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Global crises and new opportunities

The upside of down High-functioning businesses can thrive even in dysfunctional environments – as success stories from South Africa show Writing Bruce Whitfield

“I

t’s tough to make predictions, especially about the future,” quipped the mid-20th century American baseball star Yogi Berra. Uncertainty is an inherent aspect of the human condition – and the more we attempt to control outcomes, the more we come to realize that truth. As Nassim Nicholas Taleb wrote in his bestseller from the era of the global financial crisis, Fooled by Randomness: “No matter how sophisticated our choices, how adept we are at manipulating the odds, randomness will always have the final say.” There is no doubt that an unpredictable and rapidly changing global environment has made the task of managing companies and the people that work in them increasingly complex. Leaders are required to make decisions based on imperfect information every day and, despite our increasing use of data and analytics, that is not going to change. What is changing is the volume and velocity of information you need to process in order to chart a course in a world where multiple crises have not only exposed serious fault lines in many economies, but have aggravated numerous global structural problems.

Leaders are required to make decisions based on imperfect information

Had someone told you at the beginning of 2020 that the world was on the brink of a global pandemic that would lead to governments confining entire populations to their homes to limit the strain public healthcare systems; that wealthier nations would deliver the biggest stimulus packages in history as millions lost their jobs, causing government debt levels to balloon to a record $307 trillion according to the Institute of International Finance; and that this would coincide with a breakdown in global supply chains, resulting in the biggest inflation shock since the 1970s; you might have questioned their judgment. Had they then added that Russia would invade Ukraine, causing further rises in global food and energy prices, exacerbating the worst cost-of-living crisis in generations, you would have been perfectly within your rights to recommend they go for a long lie-down in a dimly lit room with a damp cloth on their foreheads. On top of this, there are significant shifts in global power dynamics which are causing anxiety in the boardrooms of many highly developed economies. Emboldened by the rapid growth of their economies over the past two decades, the so-called Brics countries – Brazil, Russia, India, China and South Africa – are leading the most concerted effort since the Cold War to challenge the US-led multilateralism that has defined the rules of international engagement since the end of World War II. Thanks to sustained growth in many emerging economies, led until recently by China and now increasingly by a resurgent India, Brics countries now account for 32% of global GDP, against the G7’s 30%. Whether Brics will ever evolve to anything more than a select members club of disparate nations that occasionally collaborate (but only when it serves their narrow self-interest) remains unclear. But their increased economic heft is undeniable – and their ongoing growth presents huge new opportunities for those who are open to them. It’s good to be prepared for multiple eventualities, and taking lessons from one of the most hostile business environments on Earth may help you in that process. I have spent the last 20 years studying top-performing companies in South Africa and have distilled the key lessons in two books since 2020: The Upside of Down and Genius: How to Thrive at the Edge of Chaos. The South African economy has been in steady decline over the past 15 years. The country was headed for trouble before the onset of the global financial crisis: the Mandela magic was fading and, after 14 years of steady expansion, that crisis coincided with a series of disastrous domestic events. The country’s ongoing electricity crisis began at that time, as did

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an extended period of political upheaval which has seen many key state institutions hollowed out. During that time, GDP per capita shrank by an average of 0.34% a year. However, the profits of the country’s top 40 companies rose at an average of 7.6% a year, leading to a doubling of the valuation of shares listed on the Johannesburg Stock Exchange, despite a near halving in the number of listings (due mostly to private equity activity and some corporate consolidation). Why that apparent contradiction? How is it possible for so many high- functioning businesses to thrive in a largely dysfunctional environment? It is largely down to a key leadership characteristic: sagacity, which is the quality of having keen discernment, sound judgment and the ability to make wise decisions based on experience and understanding. While Yogi Berra was right about our inability to predict the future, I have seen first-hand that leaders can chart a prosperous course in uncertain times. There are few things that focus the mind more sharply than operating in an unpredictable environment. Here are some of the behaviors that make the difference.

Strategic opportunism Succeeding amid endemic unpredictability takes what former Harvard professor Daniel Isenberg defined as “strategic opportunism”. For organizations to survive the turbulence that is coming, they must remain open to seizing unexpected opportunities that align with their long-term goals and objectives, even if these were not part of the original plan. It involves flexibility in decision-making and the ability to adapt to changing circumstances in order to gain competitive advantage where rivals might be reluctant to act. This requires leaders to be optimistic about the future. That doesn’t mean having an unwavering sunny disposition – rather, the firm belief that the future will be better than the present and they are in a position to drive positive outcomes. In a world awash with conflicting and often weaponized

THE BRIEFING

information, the most effective leaders sift through the clutter and assess what to eliminate, choosing to focus on the things they can influence and navigating the rest.

Opposite Capitec has thrived by serving customers that were widely seen by the banking industry as unbankable

Escaping the waiting place

While Yogi Berra was right about our inability to predict the future, leaders can chart a prosperous course in uncertain times

“If it’s not Armageddon, you must be building,” says Adrian Gore, the founder and CEO of Discovery Holdings, an insurance company started in 1992 as a provider of innovative private health cover. Today its shared-value insurance model, which incentivizes its clients to live healthier lives, is present in more than 30 countries, covering 40 million lives, in partnership with some of the worlds’ biggest insurers, including AIA in Asia, Ping An in China, Generali in Europe, Sumitomo Corp in Japan, Manulife in Canada, and its wholly owned subsidiary, Vitality Health & Life, in the UK. Gore is an unexpected proponent of the lessons from Dr Suess’s 1990 New York Times bestseller, Oh, the Places You’ll Go! The book’s main protagonist recognizes he cannot be constrained by the indecision he witnesses in those trapped in the dreaded “waiting place”, where they languish, looking for signals about where to go and what to do next. Gore is adamant that all the problems that companies (and indeed countries) face can be resolved by ensuring the right people in the right teams make the right decisions, and execute on their agreed strategies quickly and efficiently.

Optimism and openness “Most people miss opportunities because they come dressed in overalls and look like work,” quipped inventor Thomas Edison. He showed the power of persistence in the continuous and relentless improvement of his ideas – and it takes a particular brand of optimism to not give up when the going gets tough. There is a wonderful simplicity to the approach taken by Piet Mouton, the chief executive of investment firm PSG, which has a 30-year track record of superlative capital allocation, when he says: “Negative people never build anything.”

Crises and opportunities

Leadership for growth

Leaders face both global crises and new opportunities. The pandemic caused far-reaching changes to how we work and caused government debt to soar, while supply-chain breakdowns contributed to the biggest inflation shock since the 1970s. The invasion of Ukraine added to the pressure on energy and food prices. The balance of global economic power is shifting. How can leaders navigate this dynamic landscape?

The stratagems adopted by South African companies to drive growth despite challenging circumstances can be applied elsewhere. To prosper in fast-changing situations, deploy strategic opportunism. Escape the ‘waiting place’ with a bias toward action. Be optimistic and open to new ideas. Be quick to seize the opportunities created by a changing world. Have the courage to think differently from the crowd.

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simultaneously, the firm was ready for the growth which made it a dominant global player, eventually being subsumed in Anheuser-Busch Inbev. (It was, at the time, the biggest corporate takeover on the London Stock Exchange.) SABMiller’s biggest strength was that it never descended into self-pity or complacency: instead it prepared itself for a once-in-a-lifetime opportunity, which it exploited with precision.

Resist the retreat into survival mode

Growth demands optimism and an openness to new ways of doing things. PSG’s most successful investment is Capitec, which remains the fastest-growing retail bank in Africa more than two decades since it was founded to serve a mass market deemed by established legacy banks as ‘unbankable’. (See Dialogue Q2, 2023, for our interview with Capitec chief executive Gerrie Fourie.) Through its creative approach to that segment of the market, Capitec has built a highly profitable base of 20 million retail customers.

Images Shutterstock; Discovery Holdings; Capitec

Seize the opportunities created by a changing world For those operating in developed economies, it sometimes seems that there are fewer gamechanging opportunities than in the fast-changing world of the Brics and other developing markets. But as the boom in technology has shown us over the past two decades, the worlds’ best opportunities are often hidden in plain sight. As economic power shifts steadily, those open to opportunities will spot them quicker than others. Long before it became the second biggest brewer in the world, SABMiller, trapped in its home market due to global sanctions against apartheid South Africa, knew two things about the future. First, that the race-based ideology that excluded black South Africans from opportunities in their own country would come to an end; and second, that countries in Eastern Europe which had remarkable but neglected heritage beer brands would open up to investment with the fall of communism. It spent a decade refining systems, processes and people to capitalize on what it knew would be a once-in-a-lifetime opportunity for extraordinary growth. When both of its key scenarios occurred

If it’s not Armageddon, you must be building Adrian Gore, founder and CEO, Discovery Holdings, insurance company

Bruce Whitfield is a financial journalist, author, speaker, writer podcaster and Duke CE faculty member

“It’s much easier to find opportunities when times are tough,” Investec co-founder Stephen Koseff told me. “If it’s in your patch and someone gets into trouble, it can provide an opportunity.” But, beset by their own challenges, few companies have the confidence to seize those opportunities. Investec grew from a small Johannesburg financial services firm to a top-ten wealth manager in the City of London in just over a decade, by doing multiple strategic acquisitions (some admittedly more successful than others). Koseff operated on the basis that deals were cheaper to do when times were tough and there were fewer competitors for assets. Most companies make the mistake of parking long-term strategy in times of uncertainty. They are so busy coping with the immediate threats that appear from every angle that they go into survival mode. This is where strong teams are critical. I once asked South African businessman Laurie Dippenaar his greatest learning from three decades of growing Africa’s most valuable banking group, FirstRand. Famous for his ability to simplify complex concepts, Dippenaar explained: “When we had to make a big decision, we got our most talented people around the table, and whoever brought the best facts to the table and argued those with conviction would carry the day. Once we agreed on a course of action it was everyone’s job to implement the decision in their own departments.” It is also leaders’ job to identify opportunities, even while growth in many economies remains uncertain. Inaction in difficult times is tantamount to going backwards. The challenge today is to find innovative and creative ways to lead in a decade where the average cost of capital will be higher than the 10 years previously, where workers are rattled by the threats of disruption driven by new technologies such as AI, and the relative post-war peace and stability enjoyed by the baby-boomer generation is by no means guaranteed. By learning some lessons from those able to grow in deep dysfunction, today’s leaders need to cast the net wider in terms of finding new growth opportunities. It all begins with having the courage to think differently from the crowd.

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FOCUS SMARTER TOGETHER

How to revive your business Your business is dying – but it can be saved. Renewal demands a collective effort Writing Jennifer Sundberg & Pippa Begg

few months ago, the Smiths Group chair and former 3M chief executive Sir George Buckley set us a challenge. “The core of every business is dying, yours included. You have to find a way to replace that dying core. What are you doing about it?” he asked us. His question has been ringing in our ears ever since. But it’s not an easy one to answer. You can’t replace a dying core with a few extra percentage points of margin. Innovation is the only option. Innovation requires perception, imagination, insight and judgment. But innovating fast enough to keep up with the pace and complexity of change, while replacing a decaying core, requires you to do all of these things all the time, in every corner of your business. It’s not something you can do by yourself. Even if you are the smartest person in the room, others will have ideas and see opportunities that you don’t. Amazon Prime was a visionary idea, but it didn’t come from Jeff Bezos. The iPhone changed

the world, but Steve Jobs initially hated it. Berkshire Hathaway made a fortune by investing in Apple, but the bet went against CEO Warren Buffett’s better judgment. In all cases, it wasn’t the genius boss but an employee who had a great idea, developed their reasoning, and convinced him to do something with it. Nor is innovation something you can achieve simply by asking people to do it. If it were as easy as that, catchy slogans on the office wall and rousing town hall speeches would stimulate all the lightbulb moments you needed. Smart leaders have long recognized that if they want their organization to thrive, they need to empower their people to think for themselves. It sounds great in principle, but in practice, many leaders remain quietly skeptical. After all, it’s the leader who bears ultimate responsibility for the consequences. To empower people you might not have met without abdicating responsibility for their actions, you need to be sure that they’ll apply their brains to the right problems, and that they’ll do so transparently and with rigor. So how do you do that? What we’ve seen in 15 years working with thousands of organizations, from Fortune 500s to non-governmental organizations, is that the most successful ones equip everyone with the skills, tools and confidence to produce breakthrough thinking that turns into decisive action. Rather than passively trust that things will work out, they actively build their ability to think as individuals and together. In other words, they create the conditions for collective intelligence. And this comes down to three things: critical thinking, great communication and a common focus on what matters.

How do you get everyone thinking?

Critical thinking, great communication and a common focus are key to collective intelligence

In Gainesville, Florida, in 1965, Dewayne Douglas suspected something strange was happening to the college football team he coached, the Florida Gators. No matter how much water players drank, they almost never needed the bathroom during the half-time break. He knew they were sweating, but surely not that much. Why weren’t they urinating more? Douglas couldn’t let this question go, so he asked a kidney specialist at the University of Florida, Dr Robert Cade. Cade conducted a series of experiments that revealed players were losing electrolytes as well as water. Their bodies were clinging onto every last drop of water to prevent the loss of more electrolytes. They had to sweat to keep cool, but trips to the bathroom could wait. All of this was affecting the players’ health – and their performance. Cade’s methodical efforts to solve this problem, sparked by Douglas’s initial curiosity, resulted in

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FOCUS SMARTER TOGETHER

the hugely successful sports drink Gatorade. It kickstarted a multibillion-dollar industry. Questions are the spark and the fuel of creativity, critical thinking and reasoning. But while we all start off as prodigious questioners, we ask fewer questions as we grow up. “There is what I call an answer orientation that permeates education, professional life and society at large,” explains Dr Lani Watson, a University of Oxford academic who researches questions and questioning. Because we value answers, we lose our ability to ask questions, which in turn reduces our capacity for creativity and critical thinking. The good news is this is something we can all relearn. And the simple, obvious questions – like ‘Why?’, ‘So what?’ and ‘Now what?’ – are often the most powerful. It’s about making it normal to ask them – and keeping on asking them until you get a complete answer. To do this, we have to make questioning an easy, yet unavoidable, part of people’s working lives. Fortunately, our daily routines are full of opportunities to do so – in the rituals that every business is run on, like stand-ups, one-to-ones and quarterly business reviews. You can embed the right questions into these activities by framing reports around them and getting people to answer them in pre-reads. You can also package questions up into set plays to cut to insight more quickly. Before long, asking the right questions becomes something that people do every day. And the discipline of asking questions becomes part of the organization’s culture.

Like grapes withering on a neglected vine, great ideas can die if not well communicated

insights can die if they’re not communicated well. To help convert great thinking into action, you need people to express themselves with clarity and impact. Unfortunately, that’s rare even at the highest levels of business. When we first met Sir Sandy Crombie, a veteran director whose firm had just brought us in to revamp their board deck, he pointed to his face and said, “This is not the face of a very old man. This is just the face of a man who has plowed through 5,500 pages in the last two days.” Having spoken to hundreds of others in his shoes and waded through the documents he was referring to, we could feel his pain. It’s a problem that Winston Churchill, no less, tried to solve in 1940 when he penned a memo to British civil servants. “To do our work, we all have to read a mass of papers. Nearly all of them are far too long. This wastes time, while energy has to be spent in looking for the essential points… I ask my colleagues and their staffs to see to it that their reports are shorter.” The fact that he sent similar messages a few months later, and then again in 1951, suggests it didn’t work. The problem is that most of us learn bad communication habits, disguised as best practice, from an early age. In our work with boards and executive teams, we’ve identified four particular offenders.

Think the best way to make your case is with a snazzy slide deck? Wrong. Narrative reports are the best way to crystallize your thinking and get others to buy into it. Bezos went so far as to ban slides and bullet points at Amazon in favor of narrative memos, because he recognized that presentations prioritize style over substance. Writing forces people to think harder.

What happens when good thinking meets bad communication? Like grapes withering on a neglected vine, great ideas and

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THE BRIEFING

Think that good arguments first set the scene, then lay out the case and get to the conclusion at the end? That’s fine for essays; less so for timepoor colleagues. Put your bottom line up front or your reader may never reach it.

Think clever professionals use clever language? No. Short, simple words and sentences are more readable and impress more than long-winded jargon-fests.

In a fast-moving environment where technology is constantly smashing boundaries, today’s core business is already dying. It can only be replaced through innovation. Succeeding does not rely on individual brilliance, but on collective intelligence.

Building collective intelligence Collective intelligence means getting everyone thinking, by asking more powerful questions. It takes great communication – based on narratives that demand better, clearer reasoning. And it requires a shared focus on the right priorities, from senior leaders through all levels of the organization.

Think data speaks for itself? If your data isn’t answering a question, it’s just more noise.

Getting people to unlearn these bad communication habits involves more than just telling them to do it, training or role-modeling, as Churchill showed. As with asking the right questions, the key is to make it difficult for them not to do it well. AI has a major role to play here. It cannot do an executive’s thinking for them, but it can act as a critical friend and skillful editor, providing the nudges and guide-rails that will help them do it better.

Sir Mick Davis, who we’ve worked with since his days running a Fortune 500 mining group, applied this approach to the acute challenge of growing an extractive business. “In our industry, the value of your asset goes down the minute you take something out of the ground,” he told us. Davis introduced a question into the annual planning cycle which triggered a new way of thinking and a host of innovative ideas. “We asked each business how they planned to increase their net present value over the coming year. We wanted people to see value creation as an incremental set of improvements that you do every day. It could be anything – a smarter way of managing your fleet, or utilizing reagents in metallurgical processes. What mattered was that they knew they had to think about it.” Change the question, change the focus.

How do you make sure brainpower is focused on what matters?

Images Shutterstock

The dying core

“The main thing is to make sure that the main thing stays the main thing,” was a favorite saying of Jim Barksdale, Netscape’s chief executive, in the 1990s. Unfortunately, Netscape’s ‘main thing’ turned out to be the wrong thing. After a failed push into the enterprise market, the company lost ground to Microsoft and was discontinued in 2007. Focus is essential for any business. Without it, you become a ship of busy fools rowing in different directions. But as Netscape’s experience shows, focus can easily turn into tunnel vision. You need to be able to switch to a new main thing when required. This is easier said than done – and Netscape’s contemporary Nokia showed how tough it is. The Finnish mobile giant was famously blindsided by the smartphone, but its story is not one of myopia. “In ten years’ time I would like Nokia to be dubbed as the company that brought mobility and the internet together,” its chief executive Jorma Ollila told The Economist in 2000. Yet despite saying this repeatedly, he wasn’t able to turn the ship around fast enough. Changing organizational focus begins with changing the questions that people ask. If you were asking ‘How can we cut costs?’ and now you want to ask ‘How can we delight our customers?’, put that question into all board papers, dashboards and management decks. Make it a priority for managers, who then make it a priority for their reports, and so on.

Bringing it together

Jennifer Sundberg & Pippa Begg are co-CEOs of Board Intelligence and authors of Collective Intelligence: How to build a business that’s smarter than you (LID Publishing)

Collective intelligence isn’t about hiring individually brilliant minds. It’s about creating the conditions for your entire organization to think well. By baking questions into everyday work, you help people generate sharper insights and ideas. By building better rules into your internal communication, you help that thinking to travel. And by setting big picture questions that cascade through the business, you keep people’s thinking focused on the right things. Empowering people to think for themselves like this takes some getting used to, particularly when you reached your position precisely because you were the smartest person in the room. But when change is constant, and consistent growth requires something extraordinary, the single smartest thing you can do as a leader is to build a business that is smarter than you are.

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LEADERSHIP GROWTH THROUGH INCLUSION

Move fast together Leaders can only move quickly to fix the problems they face through truly inclusive teams Writing Frances Frei & Anne Morriss

peed has gotten a bad name in business, much of it deserved. When Meta (née Facebook) printed “Move fast and break things” on cheerful company posters, it became the most visible convert of a widely held belief that we can either make progress or take care of people, one or the other. A certain amount of wreckage is the price we have to pay for inventing the future. We’ve spent much of the last decade helping companies clean up that wreckage. One of the main lessons from our work is that the trade-off at the heart of this worldview is false. The most effective leaders solve problems at an accelerated pace, while also taking responsibility for the success and well-being of their customers, employees, and shareholders. They move fast and fix things.

Inclusion makes us smarter, more innovative, and more profitable. No other organizational upgrade can compete with those returns

The change leader’s playbook Effective change leaders invest as much time and energy into building trust – and, yes, sometimes

rebuilding it – as they do into building speed. Speed unleashes your organization’s energy and reveals where you’re going. Trust convinces your stakeholders to come along for the ride. We have found that the more trust leaders earn, the faster they are able to change things in truly enduring ways. Trust is the cultural architecture on which an accelerated pace is built. Trust also makes it possible to build teams that are truly inclusive, an advantage that help leaders win. In all the flux and churn of the diversity, equity and inclusion (DEI) debate, this is the part of the story that sometimes gets muddled. Among

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people to thrive, not in spite of their differences as complex, multidimensional humans, but precisely because of those differences. When team members can bring their individual differences to work, the team is more capable of meeting stakeholder needs – and less prone to making unforced errors. Inclusion creates a flywheel of trust that allows you to do everything else faster and better. This doesn’t mean inclusion is easy to pull off. The inconvenient truth is that building an inclusive team or organization takes effort. You can’t throw a diverse group of people together and hope for the best. In fact, this often makes things worse. Diverse

other payoffs, inclusion makes us smarter, more innovative, and more profitable. Inclusion increases our collective access to knowledge, which enables us to see our competitive landscape more clearly. Inclusion delivers all of this (and more!) without hiring lots of new people or investing in expensive technology. No other organizational upgrade you’re contemplating can compete with those kinds of returns.

Placing a true value on difference Inclusion is the act of creating conditions for other 37

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LEADERSHIP GROWTH THROUGH INCLUSION

teams reliably underperform homogenous teams unless you first do the work to make those teams inclusive. That’s the bad news. The good news is that when you do that work, inclusive teams end up, to use a technical term, thumping everyone else. They may move more slowly in the short term, but they make up the speed over time and produce consistently better outcomes. (See Henrik Bresman and Amy Edmondson’s article, “Research: To Excel, Diverse Teams Need Psychological Safety,” Harvard Business Review, 2022.) Kevin Nolan, chief executive of GE Appliances, put it this way as he reflected on his own campaign to build a company that could compete and win on inclusion: “Diversity is uncomfortable. I think it’s been sold in corporate trainings like it’s going to be nirvana. It’s not. It’s going to be more uncomfortable. But you’re going to get better results.” In our experience, Nolan is right, which is why organizations need a very clear ‘why’ to push through the discomfort.

We are all better off in inclusive spaces where we can bring a more authentic version of ourselves to work. We feel better, build more trust, and contribute more

Everybody wins It’s not just underrepresented employees who benefit from getting inclusion right. We are all better off in inclusive spaces where we can bring a more authentic version of ourselves to work. We feel better, build more trust, and are more likely to contribute our unique stores of knowledge, information and experience. That last one – the unique contribution part – turns out to be a big deal. Getting people to share what they know that other people don’t know is a key driver of performance. This pattern is explained by something called the common information effect, which sounds benign and technical but should be entering the story accompanied by scary music and other clues to its pernicious effects. The common information effect works like this. As human beings, we tend to focus on the things we have in common with other people. We seek out and affirm the knowledge we share, as it signals our value and kinship with the group. In diverse teams, by definition, this instinct limits the amount

THE BRIEFING

of information that’s available for collective decision-making. Diverse teams simply have less shared knowledge to work with, which explains the performance gap we mentioned earlier. Diverse teams often underperform homogenous teams if we let the common information effect run its course. But here’s what makes inclusion so critical to your performance: it cancels the common information effect. Inclusion gives us access to everyone’s unique information, not just the information we happen to share. When we build teams that are both diverse and inclusive, teams that value everyone’s unique, multidimensional selves, we get to expand the amount of information the team can access. This is why the distinction between diversity and inclusion is so meaningful. In our experience, many teams working toward inclusion are getting stuck at the diversity stage – recruiting difference without managing it effectively – and generating frustration and cynicism about their own DEI efforts along the way. They’re effectively stopping in the middle of the change journey and declaring failure prematurely. We advocate a practical, move-fast-and-fix-things approach to inclusion, which starts by getting in touch with the systemic value of this effort. Inclusion is not just about taking care of a subset of your employees – the Xs on a team filled with Ys – although that’s an important part of it (particularly if those Xs are disengaged and undervalued). This work is about everybody else, too. When Intel chief executive Pat Gelsinger was asked why his company was investing in DEI, he had a fast answer: “Diversity, equity and inclusion accelerate innovation, attract top talent, deepen employee engagement and improve the bottom line.” In our experience, that kind of clarity, particularly at the top of an organization, can be enormously helpful in accelerating inclusion – and the competitive advantage it enables.

The Inclusion Dial A culture of inclusion has four levels: safe,

Move fast and…

Fix things together

“Move fast and break things,” the de facto slogan for tech-driven high-growth businesses, implies that a certain amount of wreckage is the price of inventing the future. It is based on a false trade-off. The most effective leaders actually solve problems at an accelerated pace: they move fast and fix things, driving growth while simultaneously taking responsibility for the interests of customers, employees and shareholders.

Teams can problem solve better when they draw on diverse ideas and perspectives. But that is only possible if they are truly inclusive: otherwise, the common information effect means that diverse teams can actually be hindered by the reduced amount of information they share. Leaders need to move the Inclusion Dial: from a baseline of Safety and Welcome, to Celebrating and ultimately Championing difference.

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The Inclusion Dial

ME CO EL

CELE BRA TE

D CH

SAF E

NED PIO AM

welcome, celebrated and championed. Since we’re wildly competitive and grew up on gameshows, we cannot resist using a picture of an oversized dial to show you how all this works (see graphic above). We think about these distinctions in the following way. Safe People feel physically, emotionally and psychologically safe in the workplace, regardless of who they are.

Whatever problem you’re trying to move fast and fix, you’re going to get better and faster solutions with an inclusive team

Welcome People feel welcome in the workplace throughout the entire HR life cycle, regardless of who they are; they can bring an authentic version of themselves to shared workspaces without penalty. Celebrated People feel celebrated in the workplace because of who they are; they are rewarded for contributing their unique information, ideas, and perspectives to advance the organization’s goals.

Images Shutterstock

Championed A culture of inclusion permeates the organization; inclusion is seen as an ethical and competitive imperative, and there is minimal variability in the experience of belonging across individuals, teams, and functions. As an organization moves up the Inclusion Dial, its ambitions grow from ensuring that people are safe and welcome in spite of their differences, to ensuring they’re valued – celebrated and championed – because of their uniqueness. Again, this is good for everyone. When you’re high up on the Inclusion Dial, the common information effect doesn’t stand a chance.

Frances Frei and Anne Morriss are the authors of Move Fast and Fix Things: The Trusted Leader’s Guide to Solving Hard Problems

The dial’s levels are progressive in the sense that you can’t skip over one level to get to the next. For example, Frances was once invited to give a talk in a country with laws that are quite hostile to LGBTQ+ identities. When she declined, citing safety concerns, she was assured that the red carpet would be rolled out in spite of who she is. But her hosts could have thrown her a parade and given speeches in her honor, and she still wouldn’t have gotten on that plane. No amount of welcome can make up for the absence of safety. A key objective of DEI work is to move everyone on the team up the Inclusion Dial, starting with the essential work of ensuring that your people, at a minimum, feel safe on the job by the standards of your shared profession. Then work on how to move people from safe to welcome, from welcome to celebrated, and ultimately from celebrated to championed. One operating note: it’s important to move people up the Inclusion Dial without moving anyone else down. For example, as some organizational cultures have become more inclusive of women, some men in those same cultures have become more afraid of the cost of inadvertently doing or saying the wrong things. You can avoid these kinds of unintended effects by adhering to the principle that sustainable solutions to inclusion must make everyone better off.

Make new friends People often ask us about the right timing for inclusive change, and our answer is almost always the same: How about now? In our experience, the absence of inclusion is an organizational problem that deserves a more urgent response, a metabolic rate that honors the frustration and mediocrity and – in many cases – the real pain of the status quo. Your leadership mandate is to make new friends with people who don’t already think like you do: people with different perspectives, different assumptions, different experiences of moving through the world. Whatever problem you’re trying to move fast and fix, you’re going to get better and faster solutions with an inclusive team of complex humans who are contributing to their capacity. Mark Zuckerberg himself seems to have belatedly come around to this worldview. In 2022, a decade after trumpeting his “move fast and break things” philosophy, he announced that Meta would be moving fast together, operating with urgency while also “taking care of our company and each other.” We applaud this shift and are encouraged by it. It’s a problem he should have moved much faster to fix.

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INTERVIEW ROONGROTE RANGSIYOPASH

Future foundations Roongrote Rangsiyopash epitomizes the modern leader Writing Vishal Patel

t was 1997 when it became clear that the numbers didn’t add up at SCG’s ceramic tile plant in Tennessee. “The company’s total sales were around $120 million and we had $140 million in loans – that was a big amount that we could not pay,” recalls Roongrote Rangsiyopash, president and CEO of Siam Cement Group (SCG). “I had to go back to Thailand to get some financial help from the parent company so that I could refinance.” At the same time, though, the board was contemplating a strategic exit from the ceramics business in the US. “There were too many of these things going on,” says Rangsiyopash. “It wasn’t easy managing our financials in parallel with managing the huge amount of debt, and selling the company all at the same time.” Eventually, the sale was made. “It took us about three years before we finally sold

I think the first lesson, if you want to survive a crisis, is to up your game and fight

the company to our partner from Italy,” recalls Rangsiyopash. It is a tale of success through crisis, delivered by a young man with limited experience in turning companies around.

Lessons in real life Just ten years earlier, in 1987, Rangsiyopash had joined SCG Group as an engineer. He later worked in sales – “which I enjoyed very much” – before the conglomerate put him through an MBA scholarship in the US. During his time there, Rangsiyopash did fieldwork at the Tennessee ceramics firm. “I was only 31 at the time and working seven days a week,” he says. “Our plant couldn’t compete on cost, so we decided to double our production capacity to bring unit costs down. That was a

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mistake, because you never make a company competitive by doubling capacity. You make a company competitive and then you would double the capacity. That was my first lesson – but I had no choice because, by the time I arrived, the company had already expanded, and I was assigned to manage everything.” Initially, Rangsiyopash was able to secure the bank pledge to renew the $140 million loan, provided he and existing management remained at the helm. But that was in 1997 at the start of Asia’s financial crisis, which caused the bank to renege. “The board of the bank decided against the recommendation,” recalls Rangsiyopash. “All loans to Asian companies were recalled. So that was the beginning of our restructure. We had no choice. I had nowhere else to go.” Faced with both a deep internal and external crisis, Rangsiyopash felt isolated, underprepared. “All I had was the MBA texts I had learned as a student – ‘How to Get Out of Chapter 11’”, he recalls. “But real life is very different from what you read in a book. It’s very different living day-to-day. And you get angry because there are lots of things you cannot control. In the first moment, you think ‘I’m okay for two years, I have the renewal of the loan.’ Then in the next moment, you discover, ‘I am going to have to find refinancing.’ Those were moments and situations which are not taught in MBA classes.” What Rangsiyopash learned from the repercussions of the Asian financial crisis – and how he overcame them – offers lessons for leaders facing multiple external threats. After the brutal period of refinancing, he evolved from a defensive posture, through a turnaround position, and into one of a growth mindset. He ascended to chief executive in 2016. By 2020, the company’s revenue had reached almost US$11.5 billion, with a workforce of more than 53,000 people. “I think the first lesson, if you want to survive a crisis, is to up your game and fight,” he tells Dialogue. “If you lack passion, you won’t be able to overcome a crisis.” His ability to connect and communicate with people is key: “You must ensure people understand the situation, understand all the ramifications, and understand the path we have decided to take.” He recalls the torment of the recent pandemic and what it took to guide SCG through a period when the world had shut up shop. Rangsiyopash decided to focus less on the construction crunch and more on his people. “There are some crises where you simply don’t know how you are going to get out,” he says. “With Covid, all you knew was that people were going to die.” When crisis causes fear, the terror that ensues can double the jeopardy, rendering a dangerous

The most important part of a CEO’s job is to preserve the human spirit

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situation a lethal one. “Imagine you go to the theater and there is a fire,” says Rangsiyopash. “If everyone leaves that theater in an orderly manner, they will be okay. But if people are afraid, people will die from the chaotic panic where they trample each other.” Is that paradox at the heart of leading in crisis? “Yes,” he says. “The most important part of a CEO’s job is to preserve the positive human spirit.” Does that positivity, that inner calm, start with the person at the top? “You should never pretend that everything is business as usual when it isn’t,” says Rangsiyopash. “You must explain that it is a crisis. But you must also have hope – a little more hope than the rest of your people.”

Images SCG

Building the future SCG operates in a world where environmental threat is rapidly becoming a commercial threat. Environmental, social and governance (ESG) measurement, he says, is becoming a core metric for the company. It seeks to operate as a positive force when global resources are under pressure. “When King Rama VI founded SCG 110 years ago, the original idea was to develop a better society,” he says. “That was the original idea – not cement, but the modernization of Thailand.” Navigating a path towards net zero, he suggests, is the contemporary incarnation of that societal goal. SCG is the first company in Thailand to have been included in the prestigious Dow Jones Sustainability Index. It has remained in the index every year since 2004. Yet I sense this is insufficient for Rangsiyopash. “Net zero is a pressure, but we must become part of the solution,” he says. In the fall of 2021 Rangsiyopash attended COP26 in Scotland. The impact on SCG was immediate. “COP was a good experience,” he says. “Straight after it, we announced our ESG pathway. That is now our bible in terms of our path towards net zero. “ESG is going to become a key part of our business”, he adds. “You look at sales, you look at profit, you look at your market cap. In the next five to ten years, our ESG scorecard will be even more important.” SCG is moving in the right direction, he believes. “I’m pleased with the progress our group has made toward decarbonization and net zero transformation,” he says. “We have come a long way.” Climate change will remain the greatest human challenge of our time, he believes, yet it is far from the only challenge we face. Geopolitical threats – for example the war in Ukraine and tensions between China and the US – and the march of technology conspire to render black swan events not isolated, but convergent. “I was listening to President Biden a week ago,” recalls Rangsiyopash. “He said that one thing is very

CV Roongrote Rangsiyopash 2016 President and chief executive Siam Cement Group 2014 Executive vice president Siam Cement Group 2011 President SCG Paper

Vishal Patel is president of global markets at Duke Corporate Education

important: how to govern AI. I don’t know how that became the number one priority for the US President. But if that is correct, then that should be on the top of the list for SCG as well.” Rangsiyopash is now an elder statesman of the industrial space, a learned leader and visionary. He will step down at the end of 2023, after a lifetime of service to Thai industry. As his valedictory has grown closer, he has developed a profound spirituality. “I’ve started to learn much more about religion,” he reveals. “I started studying Buddhism 13 years ago, and it made immediate sense to me. I enjoy it and try to study as much as time allows.” Were he not at SCG, he says, he could imagine himself as a “full-time student of religion”. He is clear, too, about the need to balance work with other activities, allowing one element to complement the other. “In the old days, I didn’t need to recharge a lot,” he says. “But once you get older, you must recharge. Listening to music, playing golf, just enjoying exercise, doing different things from your day-to-day routine.” And it’s working. Rangsiyopash retains a palpable energy in his final months at SCG. I ask him how the role of chief executive has changed compared to five or ten years ago. “Leaders today have to be more aware,” he says. “Whether it is energy costs, the freight situation, the way the war in Ukraine is changing the dynamic of supply and demand – unless you are a tiny local company, you must pay close attention to what is happening in the world.” Chief executives also need to be relentlessly focused on the future. Take the forthcoming leadership handover. “This transition is a result of the succession plan that we started about eight years ago, just prior to my appointment as the CEO of SCG”, he explains. Chief executives should take ownership of the succession plan for all key senior executives. “Planning should start at the point when he or she assumes the CEO position.” His role has evolved again in his final months in post. “For the past eight years, my focus has been on how to make the company better, grow faster, more competitive and more innovative,” he explains. “Now, my focus has shifted onto how we give room for the new management.” He leaves with a sense of confidence about SCG’s trajectory and its ability to meet challenges like net zero. “I believe that our group is on the right path,” he says. “The new CEO and his management team are well equipped to take our group toward the transition and transformation that are required for a prosperous future.” Great leaders shape their companies’ destinies. “CEOs must pay heed to the future,” says Rangsiyopash. “Of course, we cannot predict it. But we must try to see its possibilities.”

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LID 30TH ANNIVERSARY

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AD_Dia

2022 13:08

SHARING HARING KNOWLEDGE IN LEADERSHIP AND MANAGEMENT FOR 30 YEARS

www.lidpublishing.com

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LEADERSHIP THE 100-YEAR ORGANIZATION

Our findings surprised us – and everyone we met. The Centennials don’t focus on growth, cost and being secretive, like most organizations. Instead, they try to get better, not bigger. They are intentionally inefficient, and they share their stories with the world. They’re “radically traditional”, as the Royal College of Art puts it. They build a stable core – built on purpose, stewardship and openness – and a disruptive edge, which is maintained via experts, nervousness and accidents. That combination is what keeps them ahead.

Stable core

Built to last Businesses’ lifespans are getting shorter – but 12 habits can help leaders buck the trend and create great, enduring organizations Writing Alex Hill

tartups rarely survive their second birthday. Even established UK and US firms now only live for 15 years. How can your organization buck this trend? This question ignited a 13-year study to try to understand why so many businesses are dying, the beliefs and behaviors behind the high failure rate, and how we could do things differently. To do this, we first identified seven ‘Centennials’ who have outperformed their peers and endured for over 100 years. In sport, we looked at the New Zealand All Blacks rugby team and British Cycling; in education, Eton College; in science, NASA; and in the arts, we looked at the Royal Academy of Music, the Royal College of Art and the Royal Shakespeare Company. We spent five years working with those organizations to see how they worked from the inside, before exploring their beliefs and behaviors with 500 business leaders. Finally, we analyzed the neuroscience and psychology behind what we had established were the wrong behaviors for longevity, to see how we could break them.

The Centennials build a stable core and a disruptive edge. That combination is what keeps them ahead

For long-term success, the first question to ask is: “What is our North Star? What are the beliefs and behaviors we want to shape in society over the next 20 or 30 years?” If you don’t do this, at some point, all your money and talent will start to go elsewhere. Take the computer science industry. It’s struggling to attract the talent it needs – particularly women – as it tries to continue to change the world. As a result, we live in world that is often designed by men, for men; where, for example, Alexa can struggle to understand female voices, mobile phones are often too big for women to hold, and AI has helped develop medicines and cars that are often more dangerous for women to use. This is not only a huge problem for society, it’s a huge problem for the companies involved: if they aren’t able to attract more women in future, they won’t survive. But it wasn’t always like this. Some of the first computer scientists, at Bletchley Park in the 1940s and NASA in the 1960s, were female. By 1985, half of the computer science graduates in the US were women. But in the mid-80s, everything changed. Personal computers came out and were targeted at boys. Parents put them in their sons’ bedrooms, where their daughters couldn’t get to them. The industry produced games that were made for boys, films that were made about boys, and helped set up school clubs – for boys. As a result, between 1985 and 1990, the number of female computer science graduates more than halved, falling from 15,000 to 7,000 each year. The situation hasn’t really improved since. This type of talent imbalance is not unique to the computer industry. It’s the sort of problem that can arise for any industry, or company, if it takes a short-term view and ignores its long-term purpose. Just look at the S&P 500, the index of the most valuable companies in the US. Over the last 50 years, indexed firms have become better and better at making short-term profit. Their collective market value has increased 14-fold; shareholders have profited handsomely. But, by focusing on the shortterm and ignoring long-term purpose, businesses

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LEADERSHIP THE 100-YEAR ORGANIZATION

have failed to attract the next generation of money and talent. The result? The average lifespan of S&P 500 companies – their tenure on the index – has fallen to just 15 years. Some would argue this is a good thing. When a company fails, they say, its resources can be reallocated to a better firm. However, this ignores the friction and wastage that corporate death involves. The long-term success of any economy or society depends on the stability of its core institutions – and the long-term challenges that societies face (such as education, health, immigration and climate change) are less likely to be addressed if everyone is solely focused on the here and now. A recent McKinsey study, for example, showed that if more US companies took a long-term view, they would have performed better for longer – while US GDP would have increased by over $1 trillion and there would have been five million more jobs in the last 15 years. Three things stand out in how the Centennials maintain a stable core.

The long-term success of any economy or society depends on the stability of its core institutions

Openness With purpose and stewardship in place, the final step is to check that you’re also being open. If you want to perform at your best, you need to perform in public – so the Centennials ask ‘strangers’ to watch them and help them find new ways to improve. Show others what you’re doing, and why, so they can trust you and support you. For example, when Pixar first started out, it had a choice. It was in a race to make the first computeranimated film, and Pixar’s leaders knew they could either hold their cards close to their chest and keep their secrets, or share their discoveries with the world. They chose the latter and found that, as a result, more money and talent came to them.

Purpose The Centennials know they need to take a long-term view if they want to survive. They clearly articulate their ‘North Star’ to embody the beliefs and behaviors they want to create in society, and analyze everything they do to ensure it serves that purpose. As a result, they are confident that money and talent will be there when they need it in the future. Just look at NASA: astronaut applications have quadrupled in the last 20 years, from 3,000 to 12,000. And of the 20 astronauts it has taken on in the last ten years – twelve in 2017 and eight in 2013 – half have been women.

Disruptive edge When you know the core is stable, then you need to look at your edge. It doesn’t matter how stable you are: if you don’t keep moving forward, you’ll die. 3M, for example, developed a ‘vitality index’ to help it work out if it is moving forward and how likely it is to survive. It measures the percentage of this year’s sales that come from products developed in the last two years. 3M sets targets for each market, depending on how quickly it moves. In

Stewardship Once you know your long-term purpose, the next step is to check you’ve got the right stewards. These are the ‘parents’ of the organization, who set the tone and make sure the right beliefs and behaviors are passed on from one generation to the next.

THE BRIEFING

Typically, they’re around a quarter of the people in the organization, evenly spread from the top to the bottom and across all of its communities. For every long-serving chief executive at the New Zealand All Blacks, for example, there will be a long-serving coach, and probably a long-serving captain or other leader among the players. Stewards normally work in the organization for at least four years before they are appointed into these key roles, and stay in post for at least ten years. There is often a two-year handover between stewards – a new leader might be announced two years before they take over, or the old one could stay on in a non-executive role. Think of how previous chief executives or chairs at Apple, Amazon and Google have stayed on after a new post-holder was appointed.

The costs of the short term

Leading for the long term

In recent decades, business thinking has been dominated by the prioritization of short-term goals. Businesses have become more and more efficient and have delivered significant profits. Yet, at the same time, their average life-spans have crumbled, and many organizations now find themselves wrestling with problems caused by previous short-term decisions.

A study of Centennials – organizations that have lasted 100 years or more and have attained excellence in their fields – reveals the ingredients of enduring success. Centennials combine a stable core, based on clear purpose, stewardship and openness, with a disruptive edge, which ensures they keep moving forward with an emphasis on getting better, not bigger.

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mobile phones, for example, the target would be 100%, as most people change their phone every two years. For computers it would be 50%, as these are changed every four years. 3M has built a clear understanding of how quickly it needs to move forward to survive. Blackberry’s collapse shows how quickly things can go wrong if you don’t move forward. In the four years after the launch of Apple’s iPhone, Blackberry’s sales went up six-fold. It dismissed the threat posed by Apple and Samsung, and celebrated rising sales of its old products in new markets, such as India and the Middle East, where network speeds were slower and people couldn’t afford to buy an iPhone. But it didn’t realize that its vitality index was falling. After four years, when its old products died, its sales fell by 90% – from $20 billion to $2 billion – in less than five years. This may seem like a freak event, but it’s not. Many companies have their best year ever right before they go under: think of Chrysler, General Motors, Kodak, Hewlett-Packard, Lucent, Nokia, Motorola and Texaco. As sales grow, their vitality index declines. The Centennials, by contrast, take a very different approach. They know they need to keep moving forward so they are continually disrupting themselves and making changes. There are three key aspects. Experts Centennials excel at making themselves porous. To steer away from confirmation bias, to keep new ideas ﬂowing, and to pinpoint best practice and approaches, they turn to disruptive outsiders and experts who question and challenge everything. They find the best people they can and ask them to come on board part-time: that makes it easier to say ‘yes’, and allows the experts to keep working in other fields, drawing on fresh ideas. Alternatively, experts are employed full-time – and deployed across at least three projects at once, to maximize their impact.

The 12 habits to help you become radically traditional Ask yourself these 12 questions to identify how you can become ‘radically traditional’ and sustain your success. Stable purpose Q1 Do we positively shape society’s beliefs and behaviors? Q2 Do we engage and develop the next generation of talent? Stable stewardship Q3 Do we have the right stewards in place to keep us on track? Q4 Do we carefully manage stewardship handovers so we always stay on track? Stable openness Q5 Do we perform in public to encourage everyone to perform at their best? Q6 Do we share our stories so others trust us and want to work with us?

five. And if rapid growth is essential, they set up spin-offs.

Accidents Centennials make time for serendipity: they encourage happy accidents by promoting happenstance connections. To do this, they get people to work on at least two different projects, across different teams, to increase their exposure to others, and change teams regularly. They place cafes and meeting rooms in central areas so people bump into each other.

Many companies have their bestever year right before they go under

Nervousness For most enterprises, growth is the reason they exist. For Centennials, it is something to be cautious – even nervous – about. While they know they need to be big enough to create impact and to be financially stable, they worry that growth often occurs at the expense of standards, can distract from core purpose, and can lead to a loss of control. The emphasis is on getting better, not bigger. They often limit the size of the organization and its sites, typically with 150 people per site at most, while limiting management layers to fewer than

Images Shutterstock

Disruptive experts Q7 Do we find brilliant people and ask them to work with us part-time? Q8 Do we recruit and retain the world’s best talent? Disruptive nervousness Q9 Do we always focus on getting better, not bigger? Q10 Do we constantly X-ray everything we do? Disruptive accidents Q11 Do we encourage chance encounters? Q12 Do we eat, drink and hang out together?

Alex Hill is professor of operations management at Kingston University, a Duke CE educator, and author of Centennials: The 12 Habits of Great, Enduring Organisations

Failure, recovery and sustained success The approaches developed by the Centennials do not exclude the possibility of mistakes and shocks. All the organizations we worked with have had a major failure at some point in their 100-year-plus existence. But the response has always been the same: go back to the core to check it’s stable and on track, and then start to look at the edge. So ask yourself: Have we strayed from our purpose, do we have the right stewards in place, and does society trust us? And then: How can we bring in better experts, how can we become better, and how can we create more accidents? For sustained success, the lessons of these 100-year organizations is clear. First, make sure a stable core is in place – and then work on your disruptive edge.

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LEADERSHIP CORE STRENGTH

Solving the middle management crisis Middle managers have been misunderstood and misused for decades. It’s time to recognize their impact – and rethink their role Writing Bill Schaninger, Bryan Hancock & Emily Field

istorically, middle managers have held a critical role within organizations, acting as the connection between leadership and frontline workers. But ask today’s senior leaders their opinion of the contribution made by middle managers, and the answers are unlikely to be entirely positive. What happened? Perspectives on middle managers hit a tipping point in the early 1990s when the ‘bloat’ experienced by many corporations was attributed to middle managers. Ever since, this line of thinking has remained common. It has stunted the growth of middle managers and left organizations with a middle layer of ‘permafrost’ – managers who have refused to evolve – or, in some cases, no middle layer at all. When the pandemic hit, this mindset was suddenly challenged. The rapid transition to remote and hybrid work proved to leaders that middle managers provide an essential connection to the front line – and made people management more important than ever. Middle managers can add tremendous bottom-line value to an organization, and they are one of the biggest

Senior leaders would do well to remember that people leave managers, not companies

factors affecting the wellbeing and experience of frontline workers – but they need tools, training and autonomy to perform their role effectively. Business leaders need to ensure middle managers can make a positive difference and realize growth in today’s evolving business environment.

The making of a crisis The current condition of middle managers is the end-product of organizational change, productivity increases, remote work and talent management – or lack thereof. Over recent years we have seen ‘flatter, faster’ companies rapidly scaling, only to realize 50

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tasks other than managing their teams. This mix of administrative and individual contributor work with increasing people management expectations has left more than 40% of middle managers with feelings of burnout – more than any other job level. It’s no wonder many have rethought their relationship with work: their disconnected duties are overwhelming the true value they can provide.

that no one was responsible for leadership and coaching. Fast-growing companies didn’t consider what managers needed, or how to construct the role. Meanwhile, companies with betterdeveloped structures in place were built more like bureaucracies than smart talent-management shops. The result? An overworked yet underutilized group of employees who are typically tasked with catch-all assignments that no one else is willing, able or available to do. In essence, today’s middle managers are being put to the wrong use. They don’t have time to manage their people. Our research shows they spend, on average, three-quarters of their time on

A pivotal role Middle managers handle a full range of leadership and coaching responsibilities which often go unnoticed. They serve as the critical link between workers on the front line and senior leaders who 51

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LEADERSHIP CORE STRENGTH

are shaping and guiding strategy. They are vital for continuously coaching team members, and must also connect the higher-level strategy and purpose with teams’ day-to-day work. Making this connection is not easy. There’s an enormous gulf between executives and frontline workers when it comes to purpose: 85% of executives feel their work holds purpose, while only 15% of the front line feel the same. Middle managers’ position at the center of the organization also makes them vital people connectors. Their role requires they build a network across teams to solve problems brought to them by senior leaders. From this vantage point, middle managers can see how strategy reaches those at ground level, allowing them to share insights with senior leaders to guide changes throughout the year. All the while, it also informs their ability to evaluate employee performance, provide feedback, and effectively motivate – which in turn impacts an organization’s ability to retain top talent. There is a lot of value at stake in the middle manager role. Senior leaders would do well to remember that people leave managers, not companies. According to a Gallup survey, around half of US workers have left a previous job because of a poor manager. Yet the reverse is also true: people stay with organizations when they feel valued by their managers.

Senior leaders must resist the urge to exert control from the top. Instead, they should trust their managers

How to deploy middle managers effectively Senior leaders may acknowledge how important middle managers are to their business, but without investing in managers’ success, organizations are bound to miss out on their value and are guaranteed to lose them in the long run. To meet the demands of the new world of work, senior leaders should rethink and reshape the role. A McKinsey survey of more than 700 middle managers shows that almost half in the US, and 42% globally, said they disagreed that, or were unsure whether, their organization had set them up to manage people. How can middle managers excel? We must reinvent the role. Tomorrow’s managers should bear little resemblance to what they are right now. Instead, they should connect people, play a role in recruitment and retention, ensure they’re equipped for their work, and bring out the best in their team. This will require a complete overhaul, but doing so has a tremendous impact on the business. McKinsey research found that when it comes to deploying 11 key management behaviors, top-quartile organizations realize from three to twenty-one times great total shareholder return over five years. These five actions can help make it happen.

Axe the administrative work Managers spend, on average, a day of work each week on administrative tasks. The tasks that fall into their lap actively hinder great managers from being coaches, connectors and navigators: 30% of middle managers say unsustainable work demands are getting in the way of fulfilling their true potential as leaders. To get real business value from middle managers, senior leaders must remove these tasks from managers’ plates and allow them to prioritize their people. Taking away administrative work that can be automated, moved to someone else or done away with entirely offers managers more time and energy to spend with team members. Create career paths for top performers Being a great manager takes specific skills – and there is more than one way to use them. Modern organizations need to reflect this in how they build career paths for their middle managers. Unfortunately, many companies do not offer the necessary training to sharpen their managers’ skills or explore new responsibilities within the role. Middle managers understand the importance of training for their employees and themselves, but often have trouble getting buy-in and budget from senior executives focused on the short-term bottom line. To help, senior leaders should ask themselves a few key questions. Are my managers getting coaching? Are they getting support for their mental health and burnout? Can they follow the career path best suited to them? If the answer to any of these questions is no, it is time to make some changes. Walmart is one company that has recognized the importance of training and career paths. Through Walmart Academy, the business provides

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classroom training and on-the-job coaching to its associates, with the goal of moving them into supervisory and management positions. The company, which is the world’s largest private employer, has also invested more than $1 billion to offer employees free training in technology, health and wellness – the idea being to anticipate the future skills the company will need. Walmart has also started a College2Career program, where recent college graduates receive classroom and hands-on training. Upon completion of the program, the participants can apply for a job as an “emerging coach” at a starting annual salary of $65,000. From there, they can move on to become store managers, and command six-figure salaries, in just a few years. Training has the power to build better managers – if companies and their leaders are willing to invest.

Middle managers are the best conduit to deliver purpose to junior employees

Make management more attractive In line with the new reward philosophy, middle management shouldn’t be viewed as a way station to senior positions. It should be seen be an attractive and lucrative career itself. One way to make that clear is by placing the most qualified and valued people into these middle management roles – then training and rewarding them. That means recognizing that middle managers are the best conduit to deliver purpose to junior employees. Senior leaders should communicate a clear and compelling purpose statement that will resonate with their managers, who can tailor it to their employees. Leaders should listen to managers’ feedback about whether it’s making an impact, too. Treating employees as people with unique and full lives is key to making middle management more attractive. Legendary hospitality company Ritz-Carlton has realized this, capturing its philosophy in its motto: “We are ladies and gentlemen serving ladies and gentlemen.” That means getting to know people on an individual level – and who better than middle managers to do that? Yael Ron, general manager for Ritz-Carlton in San Francisco, told Forbes in 2020 that the most important factor in providing excellent customer service is to “ensure you support your team members with their dreams of growth. Understand that believing in each of them, and taking part in their journey of development, is what matters.” The more senior leaders take care to understand workers’ individual purpose and values, the more they enable them to achieve the company’s overall purpose.

Offer freedom, flexibility, and trust Trust is a word that middle managers use a lot. They want their bosses to trust them to get things done and make changes in their own way, in turn gaining the trust and respect of their team. Too often, however, managers don’t feel trusted by those above them. Senior leaders must resist the urge to exert control from the top. Instead, they should trust their managers to build department-specific strategies and practices. This relationship is a two-way street. Some managers are like faucets – they hear an edict from senior leadership and relay it in full, neglecting to tailor the message so it’s relevant for their teams. The best managers are like sieves. They filter through directives and apply them to their teams in a way that makes sense. In this sense, trust should be given, and earned. The result will be a healthier, more collaborative environment at every level of organizations.

Promote and reward within middle management

Images Shutterstock

grill operator, with a higher salary and more responsibilities, and eventually progress to call themselves “Elvis of the Grill”. While some who achieve this level take on more responsibilities, the goal is to keep them doing what they do best. The lesson for senior leaders is that promotion is not the only way to reward middle managers. Salary increases, more autonomy and honorifics that recognize accomplishments can be just as effective.

Great middle managers are at home in the center of the action. However, many senior leaders see promotion out of the manager role as the only way to reward a job well done – neglecting these employees’ natural abilities and moving them into a role they may or may not enjoy. In contrast, middle managers actually most often say they want their work to be rewarded with additional autonomy and responsibility, followed by bonuses and raises. At Waffle House, new grill operators start by learning how to make each dish to the chain’s exacting standards. With experience and training, these employees can rise to the level of master

What’s next?

Bill Schaninger is senior partner emeritus, and Bryan Hancock and Emily Field are partners, at McKinsey. They are authors of Power to the Middle: Why Managers Hold the Keys to the Future of Work

Senior leaders are in the eye of the storm of automation, hybrid work and stiff competition for talent. Taking direct action to foster a new generation of strong, confident managers may be the ideal strategy to weather this environment and come out on the other side even stronger. Executives can change the way things run. By redefining the role of middle managers, they can get the most from their teams – and realize the growth they’ve been missing.

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LEADERSHIP IMPLATS

Unlocking A transformative partnership between Implats and Duke Corporate Education is helping the mining giant move into new territory Writing Nishen Munnisunker

n the ever-evolving landscape of corporate leadership, organizations often find themselves seeking innovative ways to develop and nurture their talent. One such company is Impala Platinum Holdings Limited, or Implats – one of the largest platinum group metals producers globally and a prominent player in the mining industry, employing over 70,000 people at operations in South Africa, Zimbabwe and Canada. Implats recognized as a business imperative the need to cultivate effective leadership within its ranks. To embark on this transformative journey, Implats turned to Duke Corporate Education to craft tailor-made leadership development programs. This collaboration has not only bridged crucial leadership gaps, but has also redefined the organizational mindset, ultimately reflecting on Implats’ bottom line.

A business can only thrive when its entire workforce is equipped with leadership acumen

The genesis of a remarkable partnership

Opposite page Staff at Implats’ Rustenburg platinum mines

“Implats has always recognized the importance of strong leadership,” says the company’s visionary

group executive for people, Lee-Ann Samuel. “But we knew that we were moving into new territory, and that demanded a new approach to how we develop leaders.” Understanding that leadership development is not one-size-fits-all, Implats made a strategic decision in August 2020 to seek expert guidance. In a rapidly changing industry landscape, staying ahead requires leaders who are agile, innovative and equipped with the right skills to navigate challenges effectively. In their pursuit of excellence, Implats partnered with Duke CE, entrusting it with the task of designing custom leadership programs aimed to address its specific needs. The foundations were laid with a rigorous process of consultation among the company’s Organizational Effectiveness team, spearheaded by Samuel working closely with Duke CE’s experts. The outcome was the creation of two distinctive programs: the Middle Management Program (MMP) and the Senior Management Program (SMP). Each was meticulously tailored to address leadership gaps at their respective levels.

Visionary people development At the core of Implats’ journey toward sustainable success has been its commitment to nurturing and developing people within the organization, says Samuel. “It’s the cornerstone of business excellence,” she reflects. “That’s why I’m such a firm advocate for placing people at the forefront of any strategic agenda.” Samuel clearly understands that a motivated, skilled and engaged workforce is the driving force behind an organization’s triumphs. One of her core principles is that leadership development should not be confined to a select few individuals in senior positions. She champions a holistic approach where leadership qualities and skills are cultivated across all levels of the organization. “A business can only thrive when its entire workforce is equipped with the leadership acumen needed to adapt to challenges, make informed decisions, and innovate proactively.” This emphasis on leadership development at all levels is not a mere platitude: it’s a strategy that is deeply ingrained in Implats’ corporate culture. It is allied with the understanding that employees who feel valued, heard and well-supported are more likely to go the extra mile. That is why Implats has taken substantial steps to ensure that the well-being and growth of its employees are at the forefront of its business strategy. Initiatives like mentorship programs, skills development and employee wellness programs have been rolled out to create a nurturing and supportive work environment. The vision set out by Samuel goes well beyond the leadership development arena. It extends to

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LEADERSHIP IMPLATS

creating a diverse and inclusive workplace. “We know that diverse and inclusive teams bring diverse perspectives, which in turn foster innovation and enable organizations to adapt more effectively to a changing business landscape,” she points out. Under her leadership, Implats has made significant strides in promoting diversity and inclusion, with initiatives to increase the representation of women and other underrepresented groups in leadership positions. Moreover, Samuel understands that in today’s world, digital transformation is not just an option but a necessity. Implats’ collaboration with Duke CE during the Covid-19 pandemic to transition its leadership programs to a digital platform is a testament to her forward-thinking approach. “Staying agile and leveraging technology to enable learning and development is key, especially in a rapidly evolving industry like mining,” says Samuel. These views about leadership development and the centrality of people in an organization’s success are not just theoretical concepts. They are the guiding principles behind Implats strategic initiatives. Under her leadership, Implats has embraced a culture of continuous learning, adaptability and inclusivity. It’s a culture that views employees not just as resources, but as the lifeblood of the organization, capable of driving it to greater heights. That approach has not only propelled Impala Platinum Holdings towards business success, but has also set a shining example for other organizations. Samuels’ vision of developing leaders at all levels, fostering diversity and inclusion, and leveraging technology for growth is a testament to the power of placing people at the heart of business strategy. In a world where the future is uncertain, this philosophy provides a solid foundation for organizations to thrive, evolve, and conquer the challenges of tomorrow.

Staying agile and leveraging technology to enable learning and development is key Lee-Ann Samuel Group executive for people, Implats

Despite their differences, the two programs shared some common characteristics. One key aspect was their holistic approach. Both programs blended theoretical knowledge with practical elements, including digital simulations and action learning projects. These hands-on experiences allowed participants to apply their learning directly to real-world scenarios. One of the most notable outcomes was an emphasis on customer-centered innovation. Participants learned to infuse innovation back into the organization, driving growth and competitiveness. One key project that stands out was ‘Data Mining to Improve Safety’, in which the project team suggested a model for using data to reduce fatal incidents in the company’s mines. Another suggested strategic alternatives for Implats’ sustainability agenda, which company executives are exploring. And the ‘Points-Based Wellness Program’ project centered on the human aspect of business. Across both the middle and senior management programs, these action learning projects extended into all facets of Implats, driving holistic impact. One other experience that was common to both programs was that they were affected by unforeseen circumstances in 2020. The Covid-19 pandemic posed a unique challenge to the execution of both programs. Amid lockdowns and travel restrictions, Duke CE and Implats pivoted swiftly to a digital platform, using Zoom as their primary mode of delivery. As the world grappled with the sudden disruption of emergency health measures, this pivot was a textbook example of adaptability and resilience from both organizations.

A new mindset for leadership The impact of these programs has not been limited to skills development alone. “They have

Designing for excellence The two programs developed by Duke CE for Implats had distinct approaches tailored to deliver the requirements for each tier of the company’s management. The MMP, designed for middle management, aimed to equip leaders with the skills and mindset needed to excel in their roles. It addressed areas such as effective communication, decision-making and team collaboration. On the other hand, the SMP was crafted to empower senior leaders to navigate complex challenges, foster innovation and steer the organization toward sustained success. It focused on strategic leadership, critical thinking, change management and envisioning a world beyond the one we know. 56

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helped spark a real and profound mindset shift within Implats,” says Samuel. Participants have emerged from the programs with a new outlook on leadership: one characterized by agility, innovation, and a deep commitment to excellence for their organization – and even for their families and communities. “This was a session that touched my heart,” said one participant after a particularly powerful session. “It provoked a sense of deep selfintrospection in me. I will intentionally embark on a journey to look after myself better, to foster good interpersonal skills, and to be there for my family.” “Great journey!” said another participant. Their experiences on the Duke CE program had helped them to become “much more self-aware and understand better what I need to do as a leader and colleague”, they added. Powerful as participant testimony may be, ultimately, as Duke CE well knows, the true measure of any organization’s leadership development program lies in its impact on the bottom line. In Implats’ case, the results have been impressive. The newly cultivated leadership mindset has translated into tangible benefits across various facets of the business. Four areas stand out.

Above Members of Implatsʼ Rustenburg operations team assess a computer model of the reef and underground shaft infrastructure Opposite page Mineplanning analysts

Enhanced decision-making With leaders at all levels in the organization who are better equipped to make informed decisions, Implats has experienced improved operational efficiency and reduced risks.

Innovation and adaptation The emphasis on innovation has made Implats more adaptable to industry changes and customer demands, resulting in increased competitiveness.

A continuously evolving partnership

Employee engagement Empowered leaders have the ability to engage and motivate their teams effectively, leading to higher employee morale and productivity.

4 Images Implats; All Things Nice Photography

Implats has become a key sponsor of Duke CE’s events, aligning with its values such as gender equality and diversity, as exemplified by its support for Duke CE’s global women’s events. Its executives have actively participated in these events, sharing their deep insights and contributing to meaningful discussions as panelists and guest speakers. The partnership has also continued to expand its horizons and address additional learning needs, recognizing that leadership development is just one facet of organizational growth. Two custom programs, Demystifying Finance and Project Fundamentals, have now been designed in consultation with specialists from Implats. These programs have been tailored to bridge specific gaps in financial literacy and project management, with truly flexible delivery via both in-person and virtual options that accommodate operational requirements.

Long-term sustainability The focus on strategic leadership has positioned Implats for long-term sustainability and growth in a volatile industry and has allowed the leadership team to evolve its approach to integrating ESG practices into the business value chain.

A deepening partnership By the start of October 2023, 392 participants had gone through the MMP, and 121 had completed the SMP. Their success has laid the foundation for a deeper and more strategic partnership between Implats and Duke CE – one that extends beyond leadership development, reflecting a shared commitment to corporate values and thought leadership.

Nishen Munnisunker is managing director at Duke Corporate Education in South Africa

The partnership between Implats and Duke CE continues to evolve in sync with the company’s changing needs. As the mining industry faces new challenges and opportunities, Implats can rest assured that it has a steadfast partner in Duke CE, one that is committed to driving excellence in leadership and organizational performance. Ultimately, the partnership stands as a shining example of how customized leadership development programs can transform an organization. By addressing specific leadership gaps, fostering innovation, and nurturing a new mindset among its leaders, Implats has not only enhanced its bottom line but also positioned itself for sustained success in a dynamic industry. The partnership underscores the importance of investing in leadership development as a strategic imperative for any organization that aspires to thrive in today’s fast-paced business environment. As Implats and Duke CE continue to collaborate and innovate, we hope they serve as an inspiration for others on the journey toward unlocking leadership excellence.

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TRANSFORMING BANKS IN A NEW ECONOMIC LANDSCAPE Traditional banks have a future. But they must accept that they have a different future. If bank leaders fail to make radical changes, they will perish. The time for those changes is now. In the face of fast-moving, low-cost disruptors, bank leaders must acquire the ability to balance the short- and longterm, to reconcile equally the need to exploit existing markets and experiment with new ones – banks and their leaders must become ambidextrous.

IGNACIO GARCIA ALVES is the Global CEO, PHILIPPE DE BACKER is Managing Partner and Global Practice Leader of Financial Services, and JUAN GONZALEZ is a Partner at ARTHUR D. LITTLE, one of the world’s leading management consulting firms.

Available through all good book retailers Print edition: ISBN 978-1-911671-48-0 | E-book edition: ISBN 978-1-911671-49-7 Published by LID Publishing (www.lidpublishing.com)

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24/10/2023 16:19 20/10/2021 17:25

VIVEK WADHWA ON INNOVATION

India’s next moonshot The entrepreneurial state can build an AI that works for the world

hat you hear is the sound of humble pie being consumed. Just eight months after OpenAI boss Sam Altman suggested to the world that India was incapable of building a rival to ChatGPT, the world’s most populous nation made a perfect landing on the south pole of the Moon. The instant Chandrayaan-3 touched down, the West recalibrated. If India could join China and the US in the elite club of lunar rovers, were there any limits on where else it could go? For his part, and to his credit, Altman staged something of a thrust reversal, rolling back on his initial comments. “The right question is what a startup can do that’s never been done before, that will contribute a new thing to the world?” he wrote on social media. “I have no doubt Indian startups can and will do that.” He is right about that. And one thing that has not been done before is the creation of an AI that is a genuine public good. The existing models are driven by companies, largely in Silicon Valley, that are designed to maximize long-term profit, not enduring social benefit. India has form on creating world-leading tech for public advantage. Its Unified Payments Interface (UPI) peer-to-peer digital payments system is a government-run system that protects India from market distortion by Big Tech, which wants to control the world’s wallet. UPI has 300 million users. It is one of the most successful payment systems in the world. It is perhaps the best modern-day example of the entrepreneurial state delivering on a grand scale. So, what’s next? The advent of AI will fundamentally change society and affect almost every human life. Yet existing AI products are dominated by Big Tech, whose priority is itself. Building on the work it has done with massive government-backed tech projects like UPI, India

The prospect of India winning the AI race – to the benefit of the world – is no pipe dream

has the credentials to create a ChatGPT competitor that works better for the world, run for public service, not profits. It also has the opportunity. The code for large language models, such as ChatGPT, is an open book. It is in the wild: unrestrainable and potentially available to all who want it. India should capture it and improve it, using its legion of world-class programmers to create an AI that is public- and community-driven. When India landed on the south pole of the Moon, Earth noticed. Suddenly, there was a counterbalance to the technological dominance of the US. When India created an industry standard for the Subcontinent with UPI, Big Tech had to fall into line with it, rather than vice versa – which is what happens in America. The march of AI is a challenge for the world. It threatens even greater dominance by a handful of companies based in Silicon Valley. But Big Tech is worried that its position could be undermined. The millions of dollars it spends lobbying governments to create regulation that prevents innovative startups from challenging its hegemony is testament to that. India has a track record of hitting the bully back – and prevailing. The prospect of India winning the AI race – to the benefit of the world – is no pipe dream. Its entrepreneurial state is in rude health. And, as Chandrayaan-3 proved, when India shoots for the moon, it rarely misses.

Vivek Wadhwa is author of The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent

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23/10/2023 16:36

INNOVATION REIMAGINE YOUR BUSINESS

The fifth phase A new chapter of business transformation is under way. We are entering the AI era Writing Mark Powell

he potential impact of generative AI on business is grabbing all the headlines, but it is not the whole of the AI story. I have been a business and strategy consultant for over 30 years and for the past ten, I have been focused on the application of data and analytics. In recent years, the use of data analytics to drive business transformation has been revolutionized by various forms of AI. I don’t use the word ‘revolution’ lightly. I believe that AI represents a technological breakthrough comparable to the development of the internet. We are only just beginning to see a glimpse of all the disruptions it will enable but one of those, I am certain, is a radical disruption of management consultancy itself. From this moment, all our efforts to improve process management and drive ever-greater business efficiencies will look outdated. We now have the power to genuinely transform our businesses: to reimagine the fundamentals of our operations and find previously unthought-of business opportunities. The reason for this is both complex and simple. We have access to unimaginable amounts of new data about consumer behavior and market trends – and AI-driven technologies are making it possible to explore and manipulate this data in

AI represents a technological breakthrough comparable to the development of the internet

ways no human or machine previously could. That addresses one of the great problems of recent years, when a lot of people fell for the notion that “data is the new oil”. They wasted a great deal of money accumulating vast data lakes, in which many of them drowned. The problem has been twofold: the mistaken assumption that all data is valuable, and the fact that, until the advent of AI, there was too much data for humans to handle. Data warehouses filled up with massive volumes of data that might or might not have had value. Business leaders failed to decide what answers they wanted from data; data experts focused on the technical aspects of managing data, and were not consulted about where valuable insights might be found. The old approach can be described as ‘data up’. The new approach must be ‘value down’.

From scientific management to big data In my latest book, The Fifth Phase, I argue that we have entered a new stage of business transformation. Management consultants like me have been trying to make businesses more effective for over a century. We can put a date on when that started: 1911, with the publication of Frederick Winslow Taylor’s The Principles of Scientific Management. Taylor’s ideas used the scientific method to improve new industrial processes, which had developed largely by rule of thumb. In every instance, Taylor would use observation and measurement to calculate the “one best way” of carrying out a task. The aim, of course, was to improve the efficiency of these industrial processes – and, in general, it worked. With the arrival of readily-available and affordable computing power in the latter half of the 20th century, business moved on to the second phase of transformation, which I have called Taylorism with computers: Material Requirements Planning (MRP) and its more sophisticated successor, Manufacturing Resource Planning (sometimes referred to as MRP II, but often still as MRP). The laudable aim was to ensure that manufacturers had exactly the right inventory needed, at exactly the right time, to produce the precise amount of goods they had sold. Then, as new software allowed businesses to computerize key functions, Gartner coined the term Enterprise Resource Planning (ERP) to reflect the new enterprise-wide scope of these systems. The third phase of business transformation was characterized by various movements aimed at further improving the efficiency of existing processes, including Total Quality Management, Lean Manufacturing, Six Sigma and Lean Six Sigma. The central philosophy of all these approaches was to take an existing business and

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make it more streamlined and efficient. They did not contemplate reimagining those businesses and finding ways they could be radically better – or completely different. Around the turn of the millennium, the development of the internet and mobile telephony began to change everything. There wasn’t much point in being the most efficient dinosaur on the planet when the future was being won by techdriven disrupters. This was the start of the fourth phase: big data. The belief (or hope) was that the way to find exciting new business opportunities was to accumulate data – any data. Companies boasted that they would be ‘data driven’, without explaining exactly what this meant. I fear that this phase will go down in history, in general, as a waste of time and money.

Image Shutterstock

Insight-led and data-enabled The fifth phase of business transformation will be insight-led and data-enabled. Data experts and business leaders will work together to decide which insights have the power to potentially revolutionize their business and will test packets of data to see if they have the potential to deliver the desired insight, using hugely powerful AI tools. For example, it is now possible to use machine-learning

Dr Mark Powell is author of The Fifth Phase: An insight-driven approach to business transformation (LID Publishing, 2023)

methodologies and natural language processing to analyze huge volumes of near real-time socialmedia interactions to discover what consumers are talking about and what most interests them. It is possible to create virtual representations of our core business models and play with a truly astonishing number of variables, using market data, to see which optimizations produce the most profitable results. And it is possible to model incredibly complex chemical and biological processes. The US company Biovista is using AI to plot the known pharmacology of some 50 million chemicals against every possible clinical outcome. This could revolutionize drug development and other aspects of medical care. It has already revealed ways that existing drugs could potentially be used to treat entirely unexpected disease, and led to the development of entirely new drugs. An analysis of this complexity was impossible prior to AI. The fifth phase offers us the power to reimagine our markets and our businesses. We need to stop seeing data as the province of IT, and start seeing CIOs and data analysts not as service providers, but as essential partners in devising radical new business strategies. ‘Process management’ will never be the same again.

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23/10/2023 16:37

INNOVATION A NEW GLOBAL OPERATING SYSTEM

Five Cs for a better future We need a new global operating system for a future being shaped by powerful forces Writing Olaf Groth, Terence Tse, Mark Esposito & Dan Zehr

s humanity heading for disaster? The world faces multiple problems and crises – and unless we seriously rethink our path forward, the consequences could be calamitous. We need to start by recognizing that our current global

‘operating system’ (OS) is no longer fit for purpose – in fact, it created the turbulence and uncertainty we presently face. A mere update cannot restore the widespread faith and acceptance necessary for true progress. What is needed is a re-architected OS for the globe – one that solves the problems which undermine the core of the current version, and steers us away from the cliff toward which we’re headed. The process of designing this new OS will be iterative and unpredictable. Much will have to be designed on the fly, as new circumstances emerge. Yet by observing what we see as five extraordinary forces that have radically altered our lives, we can navigate in the right directions. Understanding how these five tectonic shifts are unfolding should give us plenty of hints for designing a much needed – a much better – global OS. However we react to our current crises, these five Cs are set to dictate the future.

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Covid and pandemic management The first C hints at what could emerge from the collision of our complex and interconnected societies, living conditions and global systems. Even though the Covid-19 crisis is seemingly over, it has bequeathed a long list of ever-lasting ramifications, ranging from internationally co-ordinated crisis management (including arrangements that could help manage the next pandemic), to remote working arrangements, to changes in our day-today personal habits. Monitoring and identifying the ongoing consequences of Covid gives us a forward view as to how our lives will change and evolve.

own genetic codes and brain functions – the more enticing a target we become for cyberattack. We will constantly need to protect new flanks of deeper vulnerability. Climate change Climate change represents the single most urgent existential threat to humanity. The freaky weather conditions that are becoming commonplace – from record high temperatures in Europe, to heavy rainfall and massive floods in China – are perhaps the most visible indicators of the broader social, environmental and economic disruptions to come. Sadly, despite all the dialogues and conferences on the climate, we have yet to develop the realtime impact awareness, the political will, and the cooperation necessary to produce solutions at the global systems level. This is a problem that governments cannot tackle alone. They must be joined by businesses and individuals if we are to keep climate conditions from deteriorating further.

The cognitive economy We are seeing the emergence of a new era shaped by digital and biological technologies that cut across infrastructure and environment. Such cognitive tools are on track to substitute human decisions and tasks, spinning out ever more data and insights to fuel the thinking and learning machines that will become the engines of our societal and economic processes, contracts, and business models. This goes far beyond the latest craze in generative AI. We are standing at the cusp of creating a new economic paradigm that is shaped and powered by Web3-based technologies, including blockchain and tokenization. We are witnessing the use of ever-more sophisticated sensors, as well as brain-computer interfacing devices that open up incredible possibilities. As these technologies become ever more influential, we need to design a new system that distributes the benefits of the cognitive economy to everyone, not just to a few technology giants. To see how the future unfolds is to understand how technologies work – especially when they are operating in combination. Cybersecurity Most people marked 24 February 2022 as the date that Russia invaded Ukraine. However, the first shot was actually fired the day before, in the form of ‘wiper’ malware that was aimed at Ukrainian government ministries and financial institutions. Interestingly, this was not first detected by intelligence agencies, but by Microsoft, 5,500 miles away in Seattle – underlining the role that tech giants play in our lives. As digital technologies continue to make inroads into every aspect of our lives, cyberattacks will likely go beyond infrastructure – and cybersecurity will be even more important when the internet and other digital systems reach into our bodies. The more we digitize our personal, societal, and business existence – including our

China Until very recently, China was poised to overtake the US as both a technology and economic superpower. Yet its economy is now struggling, due to varied factors including the war in Ukraine, tensions with the West and the Communist government becoming more hardline, vowing to eliminate private businesses and ownership. There is also a debt crisis brewing among the country’s largest property developers; a full credit crunch could rock the fundamentals of China’s banking system. The result could be a significantly weakened China, led by an unpredictable government. The decisions and actions it takes in the years to come will impact the lives of everyone on Earth – because no global systems re-design will work without a constructive China at the table. Tracking, understanding and forecasting China’s developments is key to see how the world’s future is being shaped.

The need for design activists

Olaf Groth, Terence Tse and Mark Esposito are the authors of The Great Remobilization: Strategies and Designs for a Smarter Global Future. Dan Zehr is a research partner

In our book, The Great Remobilization: Strategies and Designs for a Smarter Global Future, we argue that what we need right now is for more and more of us to become design activists: leaders who are willing to tear down that which is not working, gather the pieces that do work, and rebuild global systems for a better world. That goal requires us to develop stronger foresight, and hone the ability to understand the second and third effects of decisions and actions, not just the first. Looking through the lens of these five Cs is the first step towards acquiring those capabilities.

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MAKE MANAGEMENT YOUR COMPETITIVE ADVANTAGE Better is the yardstick for management with agile, people-centric and dynamic features. As such, it turns management into a competitive advantage – one of the few advantages left in a time where they dissolve faster than ever before. Better Management gets work done, creates value; it is unique and hard to copy, it prevents short cuts and is deeply rooted in culture. That’s why it deserves the attention of every manager.

“Better management is badly needed. We learn about it daily from the media. Failures in management are often attributed to managers. Lukas Michel makes the case that theory and practice need an upgrade and offers six principles for the fix.” MICHAEL KÜHNER, CEO, Strametz & Associates

“Lukas Michel’s new book Better Management provides every leader with compelling insights and tools and serves as a time-tested and validated blueprint that will help to shift an organization from activity-based leadership to true and sustainable organizational effectiveness.” MARK W BELICZKY, President and CEO, ProHome Holdings, LLC

Available through all good book retailers Print edition: ISBN 978-1-911687-26-9 | E-book edition: ISBN 978-1-911687-27-6 Published by LID Publishing (www.lidpublishing.com)

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24/10/2023 16:20 24/10/2022 13:24

JOE PERFETTI ON FINANCE

Accounting reflects, finance projects Finance leaders know that history is an imperfect guide

hen delivering executive education sessions to senior executives, I often start with a simple question. What is the difference between finance and accounting? I’ll get varied answers from different groups, but typical responses are as follows. I’m often told that accounting is beancounting. It deals with actual results. It is frequently described as ‘just bookkeeping’. Accounting deals with numbers rather than decisions. It is static not dynamic. When I probe further and ask for terms that come to mind, examples will include ‘tactical’, ‘GAAP’, ‘inventory’, ‘financial statements’, and ‘tracking cash’. Finance, I’m often told, is about decision-making. Sure, it’s also about numbers. But it deals with risk and valuecreation. Terms often associated with finance include ‘strategic’, ‘ROI’, ‘discount rates’, ‘PP&E’, and ‘investments’. These analyses are too narrow. The truth is temporal: accounting is about the past; finance, the future. Accountants focus on what happened last month, last quarter, last year. It is scorekeeping. And we love to keep score and focus on results. Finance considers what you are going to do next month, next quarter, next year. Value says that a company is worth the sum of its future cash flows, not its historical cash flows. What you did last year is far less important than what you’re going to do next year. We look at the past to give us an understanding of what could happen in the future. Yet the past rarely repeats itself exactly. Whatever comfort accounting

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records might give leaders, history is an imperfect guide. You cannot drive a car by looking through its rearview mirror. Because accountants tend to look backwards, they trade on certainty. And because finance looks forward, it deals in uncertainty. In forecasting, we consider likely outcomes, probabilities of success, and possible scenarios. Thus, finance’s core currency is the calculation of risk. In 2021, AbbVie had one of the bestselling drugs in the world. Its anti-inflammatory drug Humira had

Because finance looks forward, it deals in uncertainty. Thus, finance’s core currency is the calculation of risk

approximately $21.2 billion of sales. By 2026, Humira sales are expected to drop to approximately $5.6 billion annually: its patent will expire, allowing competitors into the market. Investors are thus reluctant to celebrate AbbVie’s success in 2021; they worry about how AbbVie is going to replace $15 billion of expected sales loss due to its expiring patent. Retrospective scorekeeping tells the wrong story about AbbVie’s prospective performance. It obscures the real financial challenges facing the company. In contrast, chipmaker Nvidia reached a $1 trillion valuation in 2023. Looking at its 2022 results, you would struggle to grasp this valuation. In 2022, Nvidia reported revenue of approximately $26 billion and operating profit of approximately $9 billion. Impressive results – yet hardly worthy of a $1 trillion evaluation. Yet by 2027, Nvidia is expected to report $109 billion in revenue and $59 billion of operating profit. It is that staggering growth that is leading to its breathtaking valuation. Artificial intelligence is booming, and most AI is being processed in the cloud. Nvidia’s chips are well-suited to processing AI – data centers cannot get enough of them. Of course, no forecast is guaranteed, but the widespread expectation that Nvidia’s sales will grow exponentially has triggered huge financial success, leading to that $1 trillion evaluation. The British novelist LP Hartley once noted that, “The past is a foreign country; they do things differently there.” He was right about that. History is known, but it is asymmetric to the present, and alien to the future. As a leader, it is important that you keep a foot in both lands – the known past, and the unknown outlook. Businesses always keep score – that is why accounting is a very important discipline. Yet value comes not from what has been, but from what will be. The secret to financial leadership is to future-gaze – and be proved more right than you are wrong. You can never, though, be certain. Professor Joe Perfetti is innovation fellow at Duke Corporate Education

30/10/2023 15:39

FINANCE DYNAMIC PROCESS TRANSFORMATION

The only constant Business processes are doomed to worsen over time, but an ongoing focus on transformation can be a source of enduring competitive advantage Writing Tony Saldanha & Filippo Passerini

become the number one priority for directors and CEOs, there’s every reason for CFOs to develop their muscles still further in this area. Business transformation should be cemented at the top of the agenda for many leaders. It has become clear in recent years that if companies want to preserve enduring competitive advantage, they need to evolve from episodic to dynamic business process transformation. It means designing additional elements of agility and innovative operating models into business processes. This is what we call Dynamic Process Transformation.

Products and processes Let’s back up a bit for context on the need for Dynamic Process Transformation. All organizations constantly sense and respond to changing needs; some are simply better at it than others. Shell did not start off in the energy industry in 1833; its origins are in trading seashells. Nintendo began in 1889 as a playing card company, but, like Shell, it evolved over the decades. Companies evolve to consistently win in the marketplace in two ways – by creating winning products in line with shifting

here’s a good reason why many chief financial officers end up becoming chief executives. The overlap between the two roles on skills related to strategy, leadership and operational excellence is perfect. What’s more, as digital and business transformation has 66

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customer needs, and by improving their operations to get their products to customers more effectively. There is a way to create enduring competitive advantage by revolutionizing business operations. It involves solving the challenge of creating unbeatable, constantly evolving business processes. Some of you may challenge that assertion right away. Isn’t a winning product much more important? After all, even if the Microsoft Zune MP3 player (remember that?) had been supported with the most effective business operation in the world, it would never have come close to the success of Apple’s iPod. That is fair – and we would say this isn’t a case of either/or. Winning organizations evolve both products and business operations. Unfortunately, innovating on products tends to be sexier than transforming business operations. The former gets a disproportionate share of attention. We need to correct that – it is time to give transformational business operations their due. Recent studies have demonstrated that companies with more resilient operating models deliver 30% greater shareholder returns than their peers.

episodically fit via periodic transformation programs, but by being continuously fit, via Dynamic Process Transformation.

Dynamic Process Transformation

Business processes grow more complex, rigid and siloed over time – and that sets up a dangerous sequence of events

How processes worsen over time The issue with the business processes of every company – in product development, production, manufacturing, sales, finance, information technology, human resources, and so on – is that they quickly become obsolete due to ongoing changes in the marketplace, technology or capabilities. These business processes grow more complex, rigid and siloed over time – and that sets up a dangerous sequence of events.

Three drivers of change To ensure that their business operations are not reactive, sporadic and siloed, chief financial officers are required to focus on three drivers of change.

Open market rules Each business process must be run as a separate business, instead of via a monolithic structure where mandates come down from on high

Business processes become obsolete One-off transformation programs are kick-started to re-engineer, standardize, or automate processes. However, these rely on having the right prime mover to sense and sponsor this change Business transformation programs, even if initiated, fail to deliver 70% of the time Meanwhile, if an economic crisis, industry disruption, or global crisis occurs (e.g., the Covid-19 pandemic), the company is caught flatfooted by competitors who have already evolved their operations.

Image Shutterstock

To foster lasting evolution in internal operations, companies need a mechanism to prevent business processes from becoming stagnant in the first place. You need a dynamic, living model for constant process evolution and optimization. Dynamic Process Transformation gets to the root causes of the recurring obsolescence of business processes. First, even the best business process design can become stale if it doesn’t constantly compare itself with the most disruptive new ideas across companies and, more importantly, across industries. Second, functional business processes tend to be optimized within their silos. That is a problem, because it leads to sub-optimization at the holistic end-to-end level. Finally, unless there is a disciplined methodology to drive this constant re-optimization to every person in the operations, it leads to episodic business transformation. These three root causes of obsolescence are important to note, because these are also the three drivers of change for dynamic processes.

Unified accountability Outcomes must be clear and consistent across the company, instead of being siloed within departments

A dynamic operating engine The final driver is a methodology to convert the constantly changing business process goals into tactical day-today employee actions.

Sound familiar? It should. We have seen this occur in all types of organizations – big multinationals, small and medium-sized enterprises, government agencies and non-profits. This is inevitable, since it reflects the longestablished business rule that ‘organizations are organisms.’ Our task as leaders is to prepare for the “survival of the fittest”, not just by getting

Tony Saldanha and Filippo Passerini are the authors of Revolutionizing Business Operations: How to Build Dynamic Processes for Enduring Competitive Advantage (Berrett-Koehler, 2023)

The strategic risk of being caught flat-footed on process transformation became glaringly obvious during the Covid-19 pandemic. As supply chain problems became widespread, for example, it was abundantly clear that companies with siloed process operations struggled longer and harder with their operations than competitors who had dynamic business processes. Adopt a dynamic approach to business process transformation and leaders can set up a positive spiral of agility, efficiency and effectiveness.

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25/10/2023 10:33

FINANCE ESG REPORTING

back of half-baked ideas for which the research is divided – could detrimentally affect the efficiency of capital allocation. There are four fundamental issues that leaders should consider carefully.

Who are the stakeholders? Creating any information system requires identification of its users and a good understanding of their objective functions. When it comes to ESG causes, neither the users, nor their objective functions are well defined. We are simultaneously talking about concerns such as shareholder value, lenders’ security, racial diversity, gender diversity, biodiversity, corporate governance, wealth disparity, air, water and soil pollution, workers welfare, local needs and tax compliances. A summary metric can be created only if the objective functions of different stakeholders point in the same direction. Increasing revenues while decreasing costs, for example, leads to higher profits, which benefits both lenders and equity shareholders. But in the ESG context, the objective functions of different stakeholders not only differ, but often conflict with each other. If a company could create shareholder wealth by simply doubling its employee wages, while somehow producing drinking-quality water, then it would have already done it. But the reality is that companies are often playing a zero-sum game when managing different stakeholder objectives. So how can the same summary metric satisfy all stakeholders?

Beware the rush As standard-setting bodies seek to create integrated reporting systems, is there a risk of undermining the aims of the ESG movement? Writing Anup Srivastava

will start by making clear that I truly support ESG – environmental, social and governance – causes. I see the damaging impact of global warming around the world. I believe in the need for reducing our collective carbon footprint. I believe that businesses should be responsible social actors. But reporting on ESG is not like reporting on a company’s financial position. I have deep reservations about the rush to create a so-called integrated reporting system for ESG. Today, businesses are knee-deep in an alphabet soup of self-appointed standard-setting agencies that are all working to establish such systems. These agencies make utopian claims: that they can create a summary metric that will be simple to understand, verifiable, and decision-relevant, simultaneously serving the needs of a variety of stakeholders. I am highly skeptical about those aims, the feasibility of these groups’ work and the frantic speed at which they are proceeding. I believe that such a system – hastily built on the

We need to be careful that laudable goals are not undermined

Different organizations need different information systems A good information system takes into account not only the needs of its audience, but also the characteristics of the organization producing that information, such as industry, production function, business model, and life cycle. But the emerging models for integrated reporting pay no heed to company context. It makes no sense to demand the same carbon footprint reporting from a steel maker as from a software maker.

Accountants’ expertise in ESG matters The personnel at the agencies working on ESG reporting come mostly from an accounting or related background. Accountants are, at best, trained in basic economics and some business concepts. They have little understanding of the technicalities of production process, supply chain systems and human issues – which are the ground on which ESG initiatives stand or fall. Do these accountants know ESG matters better than specialized agencies like (to take two examples from the US) the Occupational Safety and Health Administration, focused on worker welfare, or the Environmental Protection Agency, which has specialism in

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give a new excuse to fund managers to justify underperformance. The cost could be the misallocation of capital: good, productive, businesses could miss out on the investment that they might otherwise receive. The end result would be to leave us all worse off.

Image Shutterstock

emissions standards? Such agencies employ an army of PhDs with specialized knowledge. The problem this creates is that accountants tend to take the easy path. To create systems based on what can be easily-measured and verified, they tend to shy away from difficult-to-measure but meatier concepts. For example, accountants have thrown up their hands when it comes to intangibles – such as human capital – because they cannot measure or verify them. Auditors perpetuate these limitations, because they only focus on reducing their litigation costs, rather than on producing something that is decision-relevant to the society. The errors introduced by accountants’ ignorance of these meatier matters can be judged by observing two summary metrics – earnings and book values – for modern, knowledge-based corporations. Both have lost relevance for equity investors’ decision-making. Loss-making firms are valued at billions of dollars. Almost every financial valuer now undoes accrual accounting to revert to cash flows. Book values are so far removed from market valuations that they are best ignored: contrast Apple’s $3 trillion valuation with its book value of $50 billion.

What can executives do?

Justification for the underperformance of fund managers On average, adjusted for costs and risks, most fund managers now underperform the markets. Some might now claim to be maximizing some esoteric ESG metric and not chasing shareholder value. I believe that ESG-based systems would

Anup Srivastava is Canada Research Chair in accounting, decision-making and capital markets, and full professor at Haskayne School of Business, University of Calgary

In summary, I believe that we need a more patient and thoughtful discussion before proceeding further down the road of ESG reporting. But of course, executives are already under significant pressure to travel that road. What can they do? First, be thoughtful before committing to a reporting system; avoid pandering to the demands of just one standard-setter, or a small set of stakeholders. Spend time understanding your full set of stakeholders and their information requirements in the round: establish what information they want, in what form, and how frequently. Some may want a mere statement of commitment once a year, some may demand quantified performance metrics once a month, while still others may demand prompt reporting of any change, and nothing else – so consider preparing alternative reports that individually meet those stakeholders’ requirements. But be careful in labeling anything an integrated report or a summary metric – because there aren’t any. With ever-increasing resources flooding into ESG projects, we need to be careful that laudable goals are not undermined by misguided efforts to achieve the impossible when it comes to reporting.

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25/10/2023 16:45

The Future of Luxury Fashion THE NEW GUIDING PRINCIPLES FOR CHANGE AND GROWTH

PHILIP KOTLER is known around the world as the “father of modern marketing” and has been a Professor at the Kellogg School of Management at Northwestern University for the past 50 years. He is the author of over 80 business and marketing books. GIUSEPPE STIGLIANO is the Global CEO of Spring Studios, a leading communications agency in fashion, beauty, lifestyle and luxury. Prior to that, he was CEO of Wunderman Thompson Italy. RICCARDO POZZOLI is an entrepreneur, advisor and investor, who has founded and advised a dozen startups in the past ten years, innovating within the fashion, media and food industries.

A HANDBOOK OF NEW RULES BY THE GURU OF MARKETING – PHILIP KOTLER – AND TWO LEADING PRACTITIONERS. Original contributions and insights from fashion leaders, including Domenico De Sole

(President of Tom Ford International), Leo Rongone (CEO of Bottega Veneta), Alfonso Dolce (CEO of Dolce&Gabbana), Remo Ruffini (CEO of Moncler), Jonathan Akeroyd (CEO of Versace) and Francesca Bellettini (CEO of Yves Saint Laurent).

Available through all good book retailers Print edition: ISBN 978-1-911687-08-5 | E-book edition: ISBN 978-1-911687-09-2 Published by LID Publishing (www.lidpublishing.com)

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24/10/2023 16:20 28/04/2022 13:58

GILES LURY ON MARKETING

Sample of one Personal experience can be a rich source of ideas for great brands – but beware over-reliance on one person’s insights

hen I was working for a market research agency, many years ago, my mother would occasionally ask me what I had been researching recently and what the results were. More often than not, when I had explained my latest project and its outcome, she would look at me with an expression of disbelief. “Why did they waste their money doing that when they could have just asked me?” We talked about starting an agency of our own called SOO, or Sample of One. It became a running joke. I was reminded of our idea when looking into the origins of many of the latest generation of brands over the last year or so – the digitally savvy, 24/7, tech- and content-based brands making our lives friction-free and more fun. My research showed that about half of these next generation brands have been based on solving a (first-world) problem – typically a problem that founders had experienced personally. In effect, they are based on sample-of-one research. Uber was created after its founders got caught in the rain and were unable to hail a taxi. What3words was founded when Chris Sheldrick, then working as an events organizer, found that bands and their musical equipment kept turning up in the wrong place. Instinct told Sheldrick he was onto something. Not for these founders the traditional best practice of the often slow and

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research-intensive ‘stages and gates’ approach to identify, refine and quantify the opportunity of their innovation. Instead, they relied on their passion, engaging presentations and an ability to persuade friends, family and angel investors that there was a business just waiting to be unleashed. There are many success stories of these types of brands, including the so-called unicorns that are now valued at more

When a leader or founder has success early on, they can develop an infallibility complex

than $1 billion. Perhaps as a result of their stories spreading, I’ve spoken to numerous innovation and marketing directors in more established companies who lament that their own brands aren’t equally agile. They ask what they could do to act more like these disruptive challengers. One answer would be to truly empower someone to ‘go for it’ – but that’s an unlikely solution, given the pressures that come with having shareholders, investors, and an existing business to look after. Established brands just aren’t willing or able to take the risks of a startup. However, while there are undoubted benefits of speed and agility in a sample of one, there are dangers too. Countless brands are launched on the back of personal experiences and beliefs, but the majority of these fail or don’t grow into large businesses. One issue is that the potential – the carrot – is exaggerated: every success gets lots of media attention, but the failures often get little, if any. That isn’t the only problem. Sampleof-one thinking can cause problems even for businesses that are at least initially successful, particularly when they are built on the back of one person’s idea. When a leader or founder has success early on, they can develop an infallibility complex, believing that they are always going to be right. They dominate all the key decisions and shape the culture in their own image, or in a way that is designed to serve them and feed their egos. This can work in the short-term if they continue to make good calls – but often they don’t. In addition, early successes and the hope of ‘getting in early’ can encourage the development of less-than-ideal cultures, including a reliance on incredibly long working hours. Employees may tolerate that at first, but over time – as numerous companies have discovered – the result is likely to be increasing problems with recruitment and retention. A successful SOO can be an enormous benefit, but an infallibility complex can be a recipe for disaster. Giles Lury is a senior director at brand consultancy The Value Engineers

23/10/2023 16:39

MARKETING THE CMO SURVEY

The CMO Survey, sponsored by Deloitte, the American Marketing Association, and Duke University’s Fuqua School of Business. They show that marketer optimism has risen, despite the ongoing economic challenges – and that AI and digital transformation could be key to marketing success over the coming year. Here are six key insights from the survey.

Transforming marketing Recession fears have faded but with modest growth forecast for the US economy in the year ahead, can AI and digital transformation help marketers raise their game? Writing Patrick Woodman

Marketer optimism has risen while marketing spend dampens As recession concerns have faded, marketers’ optimism about the US economy has increased to 66.7 on a 100-point scale, up from 57.7 a year ago. Almost half (49%) of marketers report that they are more optimistic about the economy than they were last quarter, up from 30.1% in the spring 2023 survey. Yet inflation and its attendant uncertainty continues to have a dampening effect on marketing spending, particularly for B2B products. Overall, marketing budget as a percentage of company budget dropped to 10.6% from 12.3% in the spring 2023 survey.

Marketing performance strengthens Christine Moorman, professor at Duke University’s Fuqua School of Business and the director of The CMO Survey, notes that “marketing optimism may, in part, be buoyed by marketing performance, which remains strong relative to the pandemic”. Reported profit growth has strengthened to 8%, from 5.6% last year. Company sales growth, while slowing, remains positive at 10.8% and well above its pandemic low of 2.6%. Customer retention, customer acquisition, and brand value also increased, with brand value increasing dramatically from 6.3% growth last year to 9.7%.

Diversity, equity and inclusion (DEI) in marketing drops off One of the most striking findings of the most recent edition of The CMO Survey is how DEI initiatives have decelerated. Marketing leaders report growth in DEI spend slowing to 2.3% this year, down from 10.7% just a year ago. Fewer marketers expect DEI to be a marketing priority over the next five years: less than half (41.4%) believe it will be prioritized, compared to 58.7% in August 2021. “One reason for this is that DEI marketing investments are viewed as having weak returns,” says Moorman. Marketers report that the effects of DEI marketing investments are weaker than a year ago across multiple metrics, including stock returns (rated 1.8 on a scale from 1, ‘not at all’,

ne year ago, we asked how marketing might fare if the US economy plunged into recession (Christine Moorman, ‘The drive for value’, Dialogue Q1 2023). That scenario has been avoided, with the economy tracking toward growth of 2.1% in 2023 – yet it has not all been smooth sailing. Inflation, and consequent high interest rates, have had a major impact on many businesses, as well as on households. How, then, have marketers responded? And with the Federal Reserve forecasting weaker growth of 1.5% in the US economy in 2024, what might we anticipate for marketing in the year ahead? Some light is shed on those questions by the results of the Fall 2023 edition of 72

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to 7, ‘a great deal’); sales growth (2.5); customer retention (2.7); customer acquisition (2.8); employee attraction (3.5); and employee retention (3.5).

How are companies using AI in their marketing activities?

Brand activism shifts toward hot-button issues While marketing spend on DEI has slowed, it is clear that marketers have engaged with a number of hot-button issues. The top three social issues that brands act for or against are LGBTQ+ equality (59.0%), Covid-19 safeguards (58.3%), and racial equality (53.2%). The largest increases in actions related to abortion (+580% since 2021), firearms (+227%), and climate-related issues (+70%). Those increases reflect how debate around these contested societal issues has intensified in the last few years. (See ‘Leading through division’, Dialogue, Q4 2023.)

Content personalization

52.8% Content creation

49.2% Improving marketing ROI by optimizing marketing content and timing

36.6% Programmatic advertising and media buying

35.0% Predictive analytics for customer insights

32.9% Targeting decisions

AI in marketing is young, but pays off While artificial intelligence (AI) has been around for some years, survey results show that it has only recently reached marketing use cases: 94.1% of marketers report have begun to leverage this technology in the past three years, and 60.4% for less than one year. The top uses of AI in marketing are content personalization and content creation, including for blogs and website content, social media and email marketing. It is much less widely used to improve marketing ROI by optimizing the content and timing of digital marketing, for programmatic advertising and media buying, for predictive analytics to generate customer insights, and for targeting decisions – roughly one third of marketing organizations use AI for these purposes. The approach adopted to implementing AI to date has had positive results, points out Moorman: “Marketing leaders report that sales productivity has improved by 6.2% and customer satisfaction by 7.0%, while marketing overhead costs have decreased by 7.2%.”

31.7%

Senior marketing leaders continue to drive 70% of transformations – and their continued leadership is likely to be essential if businesses are to accelerate their progress on digital transformation.

Patrick Woodman is editor of Dialogue

About The CMO Survey The CMO Survey has been collecting and disseminating the opinions of marketing leaders since 2008, in order to predict the future of markets, track marketing excellence and improve the value of marketing in organizations and society. Conducted twice yearly, the survey is sponsored by Deloitte LLP, Duke University’s Fuqua School of Business, and the American Marketing Association. Fieldwork for the 31st round of the Survey was conducted in July-August 2023 among 316 marketing leaders at for-profit US firms, 96% of whom hold positions at VP level or higher. Complete reports, including industry benchmarks, can be found at https://cmosurvey.org

Images Shutterstock

With weak economic growth forecast for 2024, marketers will inevitably be under pressure to deliver improved results, despite companies’ falling marketing spend. The effective use of AI and accelerating digital transformation could be key to delivering the performance that organizations will need to thrive in an uncertain climate in the year ahead.

Digital marketing transformations progress slowly The results show that US businesses are making progress in their digital marketing transformations. Fewer companies remain in the nascent phase – the early steps of designing and visualizing a transformation (down from 27.1% to 8.8%). More companies are in the emerging phase, where they are building non-integrated digital elements (up from 52% to 54.2%), the integrated phase (up from 13.9% to 24.2%), and in the most-advanced institutionalized phase, where digital investments are leveraged to drive and evaluate marketing decisions (up from 7% to 12.8%). Yet this leaves considerable opportunity for progress. 73

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SHAPING THE WORKPLACE OF THE FUTURE “[Simone Fenton-Jarvis] uses a wealth of personal experience and the latest psychology insights to rethink the purpose of the workplace and how we can create spaces that allow us to bring our best to every visit.” ANTONY WILTSHIRE Director of Workplace, UK&I, Edelman

“If you want to truly understand what it means to bring your full self to work, how the brain is both rational and emotional, what good leadership looks like, how to detect a supportive workplace culture and what roles space and technology play, this book is for you.” DR KERSTIN SAILER Professor in the Sociology of Architecture, The Bartlett School of Architecture, University College London

Available through all good book retailers Print edition: ISBN 978-1-911671-62-6 | E-book edition: ISBN 978-1-911671-63-3 Published by LID Publishing (www.lidpublishing.com) (www.lidpublishing.com (www.lidpublishing.com www.lidpublishing.com))

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24/10/2023 16:21 20/10/2021 17:26

RITA GUNTHER MCGRATH ON STRATEGY

Solutions, right under your nose Sometimes the best answers are so obvious you overlook them

re you struggling to find a creative solution to a stubborn problem? Often, the answer you seek resides outside your own field. These five ideas might help.

Let curiosity guide you Born in 1907 in a small Swiss town, George de Mestral was an inventor from an early age. On a 1941 hunting trip, he noticed that his trousers were covered in hard-to-remove burs from a burdock plant. Fascinated, he studied them under a microscope, observing how hundreds of tiny hooks stuck to each other. After years of trial and error, his eventual invention was patented – the company he founded to take it to market was called ‘Velcro’.

If you find something annoying, perhaps others will too Sir James Dyson has built a career around using his own frustrations to inspire inventions that solve prosaic household problems. A quest that took him years was inspired by vacuum cleaners which used bags to capture dirt. The bags not only had to be regularly changed but, as they filled, they hindered the effectiveness of the vacuum. His ‘aha!’ moment came when he visited a sawmill. The mill used what are called cyclonic separators – essentially, controlled tornadoes – to suck up dust. Sir James was inspired – and spent years figuring out how to shrink a huge industrial separator into a household-sized device. Voilà, the bagless vacuum was born.

If they can do it, why can’t we? Great Ormond Street Hospital for Children in London, England, found

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that the transition between surgery and intensive care units was a high-risk element in patient care. There are several threats – porting a fragile small person is inherently risky; critical health data can be mis-transferred; technology can be poorly reconfigured. After a long day, two tired surgeons, Dr Allan Goldman and Professor Martin Elliott, sat down for a rest and, coincidentally, Formula 1 appeared on the television. They watched the pit crews seamlessly, safely manage each pitstop in an average 2.5 seconds. The medics

Key to problem-solving is opening your eyes and broadening your mind: often answers stare us in the face

asked: “If they can do it, why can’t we?” They launched a groundbreaking effort to bring the learning from Formula 1 into their children’s hospital.

Hang on, that’s just a different version of the same problem! Born in 1907 in the UK, Owen Finlay Maclaren became an aeronautical engineer and test pilot. Maclaren invented the undercarriage for the famous World War II fighter plane – the Supermarine Spitfire. His design afforded the aircraft great maneuverability: it allowed the plane to be steered and swiveled easily on the ground, yet it could still fold away neatly when the plane was in the air. A visit from Maclaren’s baby granddaughter was pivotal. Baby buggies at the time were heavy contraptions; their wheels didn’t turn, and they commanded all the maneuverability of a garden dumpster. That’s when Maclaren had his ‘aha!’ moment – he could use the principles from the Spitfire’s undercarriage to make a foldable, portable stroller. The modern baby buggy came to be.

It actually is rocket science Perhaps the mother of all sources of cross-industry inventiveness came from the space program, which pioneered technological innovations that were devised to get people into space, but which ended up solving prosaic problems here on Earth. Memory foam mattresses had their origins in materials designed to provide crash protection for astronauts. Solar panels, devised to capture energy in space, are now a key element of the cleanenergy revolution. Even smoke detectors have their intellectual history in detectors used on Skylab.

The truth is out there Key to problem-solving is opening your eyes and broadening your mind: many problems have been solved before. Answers need not be devised – they can be discovered. Sometimes, they stare us in the face. Rita Gunther McGrath is professor of management at Columbia Business School

26/10/2023 10:36

STRATEGY GO AGAINST THE FLOW

Mastering decline Fundamental shifts in the strategic environment present leaders with deep challenges. How can businesses navigate a shrinking market? Writing Alain Liebaert

he textiles industry in the western world has all but collapsed. I have experienced its decline first hand, as chief executive for over 30 years of Liebaert Textiles, the company founded in 1887 by my great-grandfather Marcel. Our firm was very successful for over a century, but things changed drastically from the 1990s onwards: our sales dropped by 70% between 2002 and 2022. In our native Belgium, there were 1,000 textiles factories in the 1960s; now, only around a fifth remain. Yet we survived – and stayed profitable, year after year, through the decades of decline. The story of how we navigated through these challenging years highlights the need for businesses to reinvent themselves on a day-to-day basis, especially when market conditions are tough. In my experience, six areas are key.

Being honest and transparent with personnel is crucial, especially when it comes to hard choices

Focus on the human factor Your employees are the lifeblood of your organization, so how you treat them is crucial. You may have to make difficult decisions, like job cuts, to ensure the company survives – but treating people with respect is non-negotiable. When your business is in a fight for its life, you need your people on your side. Being honest and transparent with them is crucial, even – especially – when it comes to hard choices.

It is equally important to build a diverse team that is inclusive of different genders, races and religions, as this strengthens your resilience. I advise favoring internal promotion. There are no longer any technical schools dedicated to textiles, so we have to hire people with no experience in our trade. We lose two years training them, then only 10% stay in the company for more than five years: it is hugely costly. But when one of our workers takes on a new position in the company, we know their abilities and they know our products. The only thing we have to invest is time. This approach has had an overwhelming success rate. Do not neglect your other stakeholders either. Take good care of your suppliers, as they might become more important than customers in the future. But be wary of lawyers and consultants: if you know your business well, there is very little they can bring to the table in a declining business.

Master your art Too many managers focus on either finances or sales and marketing, and forget the importance of thoroughly understanding their whole production process. Knowing your cost price structure and your margins is paramount. When I entered our company in 1987, my first task was to salvage our business from bankruptcy. Sales were good, but we had been making huge losses for years. It took me a couple of months to analyze the whole production process and calculate precise costs and margins for every product. I came to the horrifying conclusion that over 50% of our sales were sold below cost! We had to put in place a whole new sales strategy, based on higher margins and profitable customers. It was key to saving the company. You should also seek to benchmark your company against your competitors on a regular basis. Avoid fighting losing battles: if, in a certain field, you cannot beat them, don’t be afraid to join them – or throw in the towel. I also advise a skeptical approach to diversification. Some wise advisers will tell you that this is the solution to all your troubles, but it takes a lot of trial and error – and you could easily run out of time and money. I have tried to diversify for 20 years, conducting extensive studies into possible relocation to Asia, and investing in projects both inside and outside the textiles industry. They had various degrees of success, but we never found a Holy Grail that could fill the gap left by our melting turnover.

Build a multi-tool organization A ship in a storm needs a good captain; your team expects and deserves one. I favor a very flexible structure, with a lot of independence between team members – but don’t forget to have a good control toolbox to guide people. 76

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Know what you are worth

Promoting horizontal flexibility is paramount – that is, team members should do different jobs and become interchangeable. Good, flexible generalists have the edge over one-dimensional specialists. In our company, hiring is based almost solely on personality and willingness to learn. Through our training program and emphasis on horizontal flexibility, our workers and managers learn different jobs, which enhances their motivation and allows us to use our workforce more efficiently. If you have to restructure your company, start at the top and do it when you still have cash available, as it is an expensive process. Communicate, be as transparent as you can, be patient (but don’t waste time), and move on with a positive message once the downsizing is over.

It is an absolute necessity to know the value of your company, and to do that evaluation yourself. In a declining market, the value of your company will be a mix of an asset-based evaluation and an EBITDA multiple. It is also handy to have a worstcase valuation that tells you the remaining value of your company in case of complete closure. When it comes to managing the finances, there are endless pitfalls. Check everything thoroughly: from inventories to your customers’ payment capacity, your suppliers’ viability, and so on.

Know your environment

Cash is king This fundamental truth is as relevant as ever. If you have to count on banks to bail you out, you might as well call it quits right now, especially when interest rates are sky high. To protect cashflow, always try to keep your production processes up to date, but only invest in assets that will bring you money in the short term. We aim for payback in no more than five years.

Alain Liebaert is chief executive of Liebaert Textiles, and author of Mastering decline: Stories and lessons from a company making profit against the odds (LID Publishing)

Finally, understanding the complex web of laws, rules and regulations that confront your business can be invaluable. Don’t leave this in the hands of third parties. Doing your own homework will give you precious independence and might save the day when you’re confronted by a legal issue. Liebaert Textiles has defied the odds. We have traded exuberant growth for corporate efficiency and adapted to changed circumstances. Fortunately, new opportunities are around the corner. We are better prepared than ever to seize them.

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STRATEGY ESG

Developing this new leadership mindset and skillset requires thinking from business leaders at all levels. A recent study from the UN Global Compact and Russell Reynolds Associates, Leadership for the Decade of Action, found that 92% of business leaders believe integration of sustainability issues is critical to business success but only 4% of C-suite role specifications demand sustainability experience or mindsets. As they look to translate strategy into reality, how can today’s business leaders learn to act differently to earlier generations?

The new agenda

For the future of humankind A fundamental strategic shift demands a new leadership mindset and skillset Writing Matt Gitsham

n little over the space of a decade, business leaders’ roles have shifted dramatically. A few years ago, leaders may have ‘kept their heads down’ to focus on business, leaving political leaders to tackle societal challenges – but these days, business, civic and political leaders must work in partnership. Business leaders must engage with major challenges such as climate change and other environmental, social and governance (ESG) issues through their core business, and recognize that addressing societal challenges is essential to creating value. Leaders need to have a nuanced understanding of major societal forces and know where, and how, to act for the good of their organization and the wider world.

We held conversations with chief executives and senior leaders at more than 30 organizations recognized as leading on sustainability and global challenges. We explored two things. What experiences do senior leaders credit for helping to shape their mindsets and develop their skills? Second, what lessons can be learned from innovations in leadership development as organizations they pursue these new kinds of leadership skills and mindsets? Our research found three key areas that business leaders need to address if they are to embed sustainability in their organizations.

A new leadership mindset Today’s business leaders need to see addressing social challenges as at the heart of their job description. They are leaders in society as much as leaders of their businesses. Rather than seeing a trade-off between doing good and making money, business leaders need to aim to achieve each through the other.

A new skillset for leading change inside the organization Chief executives see their new role as influencing change in their organizations to open up space for others to behave differently.

Leaders need to have a nuanced understanding of major societal forces

A new skillset for leading change outside the organization Chief executives now see it as their role to lead their organization’s wider ecosystem, proactively leading change in consumer and supplier behavior, industry norms and government policy. From these findings emerge some key takeaways for business leaders. Firstly, they must develop a nuanced understanding of the major societal forces shaping our world. The new horizon to their role has required leaders to develop skills in areas that historically have not been a conventional part of the business leader’s repertoire: contributing to public debate with an informed point of view, relating well with multiple constituencies, engaging in dialogue to understand

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and empathize with groups and communities with perspectives contrary to one’s own, and engaging in multi-stakeholder collaboration with unconventional partners. Mark Foster, former group chief executive at Accenture, summed up how his thinking about his role had changed as a journey of “understanding that there was a world out there, above and beyond the piece of business you’re in”. However, more is required than just taking in lectures on global trends.

Image Shutterstock

First-hand experiences Our research suggests that first-hand experiences are at the heart of what it takes for business leaders to build the emotional connection and commitment to put the ESG agenda front and center in their work. While each story was unique, a few key themes emerged when analyzing leaders’ accounts of what had helped shape their mindsets and skills. For some it was formative experiences in their upbringing, at university or at business school. For others it was influential mentors or participation in professional networks focused on ESG issues; first-hand experiences such as engaging with people living in poverty; personal experience of ESG challenges such as the impacts of climate change; or first-hand experiences of the changing interests of key partners and stakeholders. Many leaders described these moments vividly. Paul Walsh, chief executive of Diageo, talked about the powerful impact of being exposed to the realities of people’s lives in waterstressed parts of the world where Diageo does business. Neville Isdell, the former chief executive of The Coca-Cola Company, credited an influential sociology professor, his involvement in student activism and his training as a social worker in Cape Town’s shanty towns in the polarized atmosphere of 1960s South Africa. Those experiences were a potent combination that shaped the positions he took as CEO on issues like human rights, climate change and water scarcity. Mark Foster told us that as Accenture’s chief executive he had tried to give a week a year to Accenture Development Partnerships, “for them to send me somewhere and engage with their programs”. That

Matt Gitsham is professor of business and sustainable development at Hult International Business School

was both a powerful signal to the organization of his priorities, and a way to access the first-hand experiences that are at the heart of what it takes for business leaders to build an emotional connection and deep commitment. Building such experiences into leadership development programs gives senior executives the chance to develop relationships with people who are confronted by some of the world’s most pressing challenges, and with people and organizations working to help address these challenges, including key organizational stakeholders. There are hopeful signs that at least some senior executives have recognized the business, environmental and societal imperatives for change, and have started to shift their mindsets and practices. But there are still too many leaders who are stuck in past perspectives. For the sake of humankind, business leaders need to accelerate their ESG transitions, before it’s too late.

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NEWS NATION

Gabon A military coup at the end of August 2023 brought the decades-long rule of the Bongo family to an end. Can the small West African nation establish democratic rule – and diversify its economy to reduce poverty?

Fact file Land area 267,667 sq km (103,346 sq mi) Population 2.4 million Capital Libreville (pop. 870,000 million) GDP US$21 billion (2022) Economic record +3.0% (2022) Economic forecast +2.8% (2024-2025, Fitch, Aug. 2023) GNI per capita $14,880 (1022) Currency Central African CFA franc 1 CFA = 0.0016 USD (October 2023) Unemployment 28.8% (2021) Life expectancy Women 71.8 Men 68.3 Official language French

THE OIL CURSE

Level of per capita income compared to most subSaharan African nations

50%

The share of national GDP from oil. It accounts for 80% of exports

181,000

Barrels of crude oil produced daily. Gabon is the 8thlargest oil producer in sub-Saharan Africa

38.4%

The estimated unemployment rate among people aged 15-24

43.5%

Share of the population living below the poverty line

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When the people are crushed by their leaders… it’s the army that gives them back their dignity General Brice Oligui Nguema, inaugurated as interim president on 4 September 2023

FOREST RICHES

MILITARY COUP

Gabon was the first country to be paid for protecting its forest, under the Central African Forest Initiative

Years the Bongo family ruled Gabon. Ali Bongo Ondimba had been president since 2009; his father Omar Bongo took power in 1967

88%

Area of Gabon’s territory covered by forest

12,000

Images Shutterstock

Hectares of forest lost between 2010-2020 – less than 0.1% of the total annually

The US government is pausing certain foreign assistance programs benefiting the government of Gabon while we evaluate the unconstitutional intervention by members of the country’s military Antony Blinken, US Secretary of State, 26 September 2023

Members of the new parliament appointed by the military in October 2023, including both opposition figures and former supporters of President Bongo

June 2024

Date by which the military leadership says democratic elections will be held

Successful coups in West and Central Africa since 2020

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REVIEW THE DIARY OF A CEO

How to be the next CEO A 31-year-old millionaire entrepreneur shares his 33 laws for leading in the next 100 years

a legacy. The fact that Bartlett’s book is named after the podcast may be good for search engine optimization, but it rather creates the expectation that it will be another such compendium of disparate recounted insights from other people; “So-and-so said this to me in episode 54.” But I am delighted to report that this book is different; unlike the podcast that shares the expertise of others, the book’s core insights come from Bartlett’s own observations and learnings.

The four pillars

Writing Kirsten Levermore

Four pillars, 33 lessons, 368 pages. Many numbers, many models; the structure of this book is complicated. Bartlett has drawn 33 lessons from his experience, research and interviews with podcast guests and organized them into four pillars: the self, the story, the philosophy and the team. It is a structure that makes the book easy to consult with specific questions – but tough to know where to start. (Even worse, the audiobook lacks pillar titles or headings to help readers navigate the content.) However, prospective readers shouldn’t be discouraged. Bartlett brings sharp vision, clear thinking and an appreciation of history, experience and human nature to the book, and they help make sure that his 33 laws are relatable, digestible and actionable. His voice is authentic, and his beliefs are backed up with evidence, including cited neuroscientific research (which this reviewer – a former neuroscientist – found most appealing).

Leading in times of innovation

teven Bartlett’s story is the stuff of legend. From a teenager with a laptop in Manchester, UK, who shoplifted to eat, he became the founder and chief executive of one of the world’s most successful digital marketing agencies, Social Chain: a company he founded at 22-years-old and took public just five years later. Bartlett is also a notable investor, adviser to bigname brands like Uber, Apple and Amazon, and host of top podcast, ‘The Diary of a CEO’. It was the 700 hours of this podcast that inspired Bartlett’s latest project, the similarly titled book, The Diary of a CEO: The 33 Laws of Business and Life. Many ‘lessons’ books are compendiums of clippings from different leaders, compiled by typically older, white business-people narrating

Bartlett brings sharp vision, clear thinking and an appreciation of history, experience and human nature to the book

What truly sets this book apart is that it is written with the aim that the “laws” could guide leaders over the next 100 years. In this way, Bartlett attempts to be more like Roman emperor Marcus Aurelius than Nike chief executive Phil Knight. He largely succeeds. For example, Bartlett focuses on ways to sell ideas that people don’t yet understand (start by finding a shared perspective), and how to identify the next valuable technological innovation (if it scares influential people in the field, it’s going to be big). One particularly impactful example of a lesson that will stand the test of time comes in a story in the book’s first pillar. Bartlett recalls the first time he, at 19 years old, pitched his social media agency to an unnamed fashion house back in 2012. “I was berated, mocked and dismissed. The marketing director I was pitching to was visibly terrified… He ended the meeting midway through my presentation, and needless to say, he never called

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The Diary of a CEO – podcast episodes not to miss 1 Mustafa Suleyman, co-founder, Google DeepMind 2 Molly Bloom, the “Poker Princess” 3 Bozoma Saint John, former chief marketing officer, Netflix, Uber and Apple 4 Ramit Sethi, financial advisor and author of ‘I Will Teach You To Be Rich’

me back.” The fashion house declared bankruptcy a few years later, and Bartlett learned his fifth law: you must lean in to bizarre behavior. You must risk the ordinary to be extraordinary. As Bartlett argues, his tools and laws will become even more important as innovation cycles accelerate in the coming years.

author) and failing miserably in it. This attitude is not for everyone, but readers of this book are probably already hooked on Bartlett’s content, and are used to it. If Bartlett’s frankness is evident, so is his earnestness: the reader truly feels that the author wants them to succeed and that there is plenty of brilliance to go around. It is this facet of selflessness that draws the reader in. “Steven says” has become a common phrase among the young London entrepreneur set. There is little condescension here, and the lack of sugar-coating adds a clarity that will appeal to the most driven and ambitious readers. Could the book have instead been 33 social media posts or a podcast sub-series? Yes. Readers can achieve the same effect by listening to the audiobook on the commute, absorbing lessons as bite-size meditations on becoming a CEO of the future – which ardent readers of the The Diary of a CEO are likely to be. Kirsten Levermore is deputy editor of Dialogue

Image Shutterstock

Frank and reﬂective Bartlett’s written voice echoes his on-air appearances: no-nonsense and frank. He is the mentor who will chastise you for weaknesses and drive you to build your strengths. In an anecdote early in the book, Bartlett acerbically recalls a 21-year-old employee leaving his company to take a senior-level job (“I didn’t believe him,” says the

The Diary of a CEO: The 33 Laws of Business & Life Steven Bartlett (Ebury Edge)

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REVIEW BOUNDED RATIONALITY

Within limits Rethinking the tenets of economic orthodoxy could help improve customer choices Writing Tom Sykes

o you know what you want in life? Chances are that you’ve got no idea. Even if you do, it’s likely that you don’t consistently make decisions that get you closer to your goal. This is not because you are especially flawed, say Sanjit Dhami and Cass Sunstein, but because humanity is cursed with limitations on our ability to be rational. Yet economic orthodoxy asserts

that the individual is best placed to decide what is best for them. Bounded Rationality challenges that orthodoxy. It is a forensic dissection, beginning with the theoretical underpinnings of classical economics: the Bayesian Rationality Approach. It states that humans have “complete preferences” that don’t change, and that we possess infinite computational power and memory, as well as access to all information that exists about a given decision. This is plainly fanciful, but the authors don’t just dismiss it out of hand: they challenge it empirically, with comprehensive analysis and (sometimes painfully dry) proofs. Dhami and Sunstein show that our ability to make the right decision is impacted by our emotions, how a question is framed, and whether it affects us now or in the future. We are biased in all sorts of ways – and even if we weren’t, we often

lack key information. They conclude by proposing a form of libertarian paternalism that recognizes we could all benefit from nudges, better information and reality checks to make better – or at least better-informed – decisions. Product and strategy leaders in particular will find Bounded Rationality a worthwhile, albeit taxing, read. The book challenges accepted truths about human decision-making, and provides a useful framework for treading the line between coddling and enabling customers to make decisions that better align to their goals. Tom Sykes is a senior strategy professional and non-executive director

Bounded Rationality: Heuristics, Judgment, and Public Policy Sanjit Dhami & Cass R Sunstein (MIT Press)

BIG IDEAS PERRY TIMMS

The rebirth of craftmanship In a turbulent world dominated by technology and automation, the concept of craftsmanship may seem like a relic of the past. However, Richard Sennett’s groundbreaking book The Craftsman from 2008 remains a vital, highly-relevant reminder that the pursuit of excellence and the development of skills are as relevant today as they ever were. Sennett explains how the principles of craftsmanship offer valuable lessons to individuals, businesses and institutions. Craftsmanship is more than just mastering a craft; it’s a mindset and approach that emphasizes the importance of learning, practice and dedication. There are several takeaways. The first is that craftsmanship is rooted in the joy of mastery. In a

world driven by quick fixes and instant gratification, there’s immense satisfaction in honing one’s skills over time. Leaders should seek opportunities to develop and refine their abilities, understanding that the journey of mastery itself is rewarding. The second is the value of practice. In an era when people seek life hacks, Sennett encourages us to appreciate the significance of continuous, deliberate practice. The commitment to improvement can foster innovation, quality and resilience. The third takeaway is to embrace mistakes. Embracing errors, analyzing and learning from them can lead to remarkable improvements. This mindset shift can benefit organizations by promoting a culture of innovation.

Fourth, focus on the role of community. Craftsmanship isn’t solitary; it often involves a community of practitioners. Sennett emphasizes the value of collaboration, knowledge-sharing and mentorship. Businesses can gain from fostering a collaborative environment. The fifth insight is the value of longterm thinking. In a world where shortterm gains often overshadow long-term benefits, craftsmanship encourages us to think beyond immediate results and invest in sustained excellence. Sennett’s work reminds us that craftsmanship is not a relic of the past, but a timeless philosophy that can shape a brighter future. Perry Timms is founder and chief energy officer of PTHR, a consultancy aiming to create better business for a better world. He is a TEDx speaker, top-selling author, and number one on HR Magazine’s 2022 Most Influential Thinkers list

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PIERS CAIN ON BOOKS

Go large Big projects have a miserable track record, but they are essential to economic growth and business success. A new book offers ways to improve their delivery

hy do so many big projects, such as the California High Speed Rail or HS2 in England, go massively over cost, run decades overdue and become political footballs? The statistics are staggering: 99.5% are over budget, over schedule, under-deliver on benefits, or some combination of these. What can we do about it? In How Big Things Get Done, Bent Flyvbjerg and Dan Gardner suggest some

The longer a project takes to execute, the bigger the chance of it being disrupted by external factors

answers. Flyvbjerg, a professor at Oxford and Copenhagen, provides the academic rigor, while Gardner, a journalist and bestselling author, has made this book a page turner. A big project, they write, is one that is crucial to you. That could include refurbishing your house – though the cases analyzed here are generally massive infrastructure projects. A big cause of problems is that politicians, planners and contractors conspire to underestimate costs, underestimate delivery times and exaggerate benefits. Their calculation is that once enough money has been spent, a project becomes ‘too big to fail’. When it comes to personal projects, this issue is replaced by a lack of rigor in thinking things through. Some recommendations are specific to mega-projects. One is to tap into the value of building using modular units (such as farms of solar panels) rather than ‘one big thing’ (bespoke nuclear power stations). Modular units offer economies of scale, the ability to learn and perfect the approach, and the possibility of generating income as the project progresses, since they come on-stream much earlier. Flyvbjerg and Gardner also champion the rigorous use of statistical analysis to budget better and manage risk. Some of their lessons are widely applicable. First, define the outcome you wish to achieve and don’t lose sight of it. If you want more bedrooms for your children, a home extension might be the

solution – but account for project costs and disruption and you might find it would be better to move house. Second, the longer a project takes to execute, the bigger the chance of it being disrupted by external factors. For example, Covid-19 affected almost every project, but its impact was far less on projects that were in the planning stage. So, be generous in allocating time and effort to planning, budgeting, testing alternatives and mitigating risks – but aim to execute as quickly as possible to reduce the window of unforeseeable risk. This is the opposite of what usually happens. Third, don’t focus on what is unique about your project, but what it has in common with similar projects. Counterintuitively, a budget based on the average cost and overrun for similar projects is more reliable than detailed costing based on your individual case. Flyvbjerg and Gardner emphasize the importance of knowledge and experience. That might be embedded in a project team that has worked on similar projects before, and that knows and respects each other’s strengths. Or it could lie in objects: standardized, widely-used components have years of testing, refinement and skill embedded within them. Avoid unique, untested solutions. Employ people who have done it before. An experienced leader is crucial. The authors’ rules of thumb are quite simple, and most are relatively straightforward to apply. But they are not a magic bullet. In the near future, we will need to execute an unprecedented number of large-scale projects, not least to achieve net zero. It really matters that we get better at running big projects. Piers Cain is a management consultant

How Big Things Get Done Bent Flyvbjerg and Dan Gardner (Macmillan)

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THE LAST WORD SANYIN SIANG

Leading emotions To engage people more deeply, tap into the power of the senses

To remind us of the mission The CEO of a company that was focused on curing cancer asked everyone for a picture of someone they love who was a cancer survivor or victim. He had those pictures enlarged and hung throughout the offices as a daily reminder of the purpose of their work. To evoke a feeling If you want your team to feel energized, could you have them share their pumpup songs and compile them in a playlist that you put on before every brainstorming meeting?

hen Duke University’s famed Coach K was turning around the 2008 Olympic USA men’s basketball team, he asked the players: Do you have a fight song? Fight songs – rousing team anthems – are common in North American sports. Yet the players were at first puzzled. Coach K explained. “Yes, you do,” he said: it’s “The Star-Spangled Banner”. He wanted to help this group of NBA players – an elite line-up of highly skilled, highly successful professionals – to remember their love for their country and come together as a squad, to win for Team USA rather than for personal glory. To that end, Coach K would play the Marvin Gaye version of the national anthem before every practice. It became Team USA’s fight song – and that group of superstar individuals came together to win gold. Coach K leveraged the power of music to evoke an emotion that aligned with the cultural values of the team. As we reflect on this story, we remember that we lead human beings, not functions – and human beings have emotions, souls and brains. Today, we have to be more human than ever and enable our teams to bring all of themselves to work. How could we ever expect those deeply human parts to be left at home? As leaders, we need to think about emotions and what drives them. It’s not about ‘being emotional’, but about leveraging emotions as a tool – which means thinking about our senses and how we respond to sensory experiences. This is an oft-neglected dimension of communication. Most often, we focus our communication on words. We pay attention to how those words are said and what those words look like on the page. But are we paying attention to what can be felt and how we can use the power of human senses to evoke those feelings? Are we leading through our senses? Leaders can leverage visual and audio reminders in several ways.

As leaders we have to use every tool at our disposal to drive home the things that are meaningful for our organizations

To reinforce a strategic approach or ethos A few years ago, I visited Mellody Hobson, then president – now co-CEO – of Ariel Investments at her company’s headquarters. The first thing I noticed in that office was the presence of tortoises: in pictures, in sculptures, even in a pin that Hobson wore. When I asked her about their meaning, she said, “Slow and steady wins the race – that is our motto for Ariel Investments.” The tortoises symbolized how the company would be intentional and strategic in building wealth for its clients. As leaders we have to use every tool at our disposal to drive home the things we stand for, and the things that are meaningful for us and our organizations. We know our senses take us on an emotional journey. What are the non-traditional tools we could be bringing into play? Think beyond just words, and consider how you are leveraging what is heard and what is seen to tap into that which is most important.

Sanyin Siang is a Pratt School of Engineering professor and leads the Fuqua/ Coach K Center on Leadership & Ethics at Duke University

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THE HUMAN QUALITIES ESSENTIAL TO LEADERSHIP EXCELLENCE

HOW LEADERS AND EXECUTIVES CAN IMPROVE THEIR TEAM/ GROUP DYNAMICS

“This is an immensely valuable book for anyone who would like to understand what good leadership behaviours look like and would like to improve their own leadership.”

“Sally-Anne’s book captures an important nuance of leadership through storytelling and blends her experience with a wealth of practical guidance.”

PAUL (PABLO) ETTINGER Chairman of TALENTBANQ and one of the founding team of Caffe Nero

LARISSA HARRISON Global HR Director

PhD, Distinguished University Professor, Case Western Reserve University, and co-author of bestselling Primal Leadership Available through all good book retailers

Available through all good book retailers Print edition: ISBN 978-1-912555-75-8 | E-book edition: ISBN 978-1-911671-26-8 Published by LID Publishing (www.lidpublishing.com)

Print edition: ISBN 978-1-911687-46-7 | E-book edition: ISBN 978-1-911687-47-4 Published by LID Publishing (www.lidpublishing.com)

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24/10/2023 15:27

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25/10/2023 16:48 25/04/2022 16:35

LL SMOAOKS: B

IDE

Q1 2024

Dan Ariely The human capital factor

Frances Frei & Anne Morriss Move fast, together

The New Business Context for Leaders

Plateau and precipice The paradox of mastery

Centennials How great organizations endure

Q1 2024

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Ignite growth

Leadership strategies to spark organizational success

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25/10/2023 11:29