THE NEW BUSINESS CONTEXT FOR LEADERS
Meet the king of code The innovation paradox SHELIE GUSTAFSON DIALOGUEREVIEW.COM
THE NEW BUSINESS CONTEXT FOR LEADERS
Inclusion and inspiration at Jacobs
THE INCLUSION IMPERATIVE
The inclusion imperative Ori Brafman on amplifying employeesâ€™ voices
Catalysts for change
A vision of the future
Lessons from the crash
How you can stand out
Why small is beautiful
THE VOICES BEHIND THE
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Digest 14 FOCUS
T H E I N C LU S I O N I M P E R AT I V E
Listen, amplify, include and adapt Inspiring, including, and innovating
Defeating zombie leaders Inclusion and agility
Making inclusion real
Patrick Woodman on backseat drivers
Papua New Guinea
Spark What you need to know
Great minds Michael Chavez on bionic bigotry
Reviews Books and apps recommended for you
Michael Canning on creativity
Ben Walker meets Bhavin Turakhia
Sanyin Siang on belonging
The big interview
Q2 2020 Dialogue
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In depth LEADERSHIP & PEOPLE
I N N O VAT I O N & TECHNOLOGY
Kate Cooper: The leadership column Nurse leadership
Vivek Wadhwa: The innovation column The innovation paradox
Getting 70/20/10 right
The future of healthcare
FINANCE & AC C O U N TA N C Y
MARKETING & SALES
Phil Young: The finance column
Giles Lury: The marketing column
Learning from the financial crisis
S T R AT E G Y & O P E R AT I O N S
Rita Gunther McGrath: The strategy column
The four delusions of leadership
Strategistsâ€™ forgotten discipline
Q2 2020 Dialogue
A multiple New York Times best-selling author specializing in organizational culture, Ori Brafman has advised all branches of the US military, the US government, Fortune 500 companies and nonprofit organizations. He is a distinguished teaching fellow at UC Berkeley’s Haas School of Business, founder of Starfish Leadership, and co-founder of the Fully Charged Institute.
The director of Vercida Consulting, Dan Robertson has a particular expertise in the science and application of inclusive leadership. He is an expert facilitator and inspirational conference speaker on inclusion. Robertson chairs the Lord Mayor of London’s ‘Power of Inclusion’ programme, and was named as one of the 50 most influential D&I leaders globally in 2019.
Dialogue Q2 2020
Shelie Gustafson is chief human resources oﬃcer at Jacobs. She held the same role at CH2M, where she also held a variety of global HR roles. With experience in the technology, financial services, and oil and gas sectors, Gustafson is passionate about maximizing business success through people and fostering inclusive cultures. She was previously an adjunct professor at the University of Denver.
Dr Elsbeth Johnson is a senior lecturer at MIT’s Sloan School of Management and a visiting fellow at the London School of Economics. She is founder of the consulting firm, SystemShift, which works on issues of leadership, strategy and change. She is the author of Step Up, Step Back: How to Really Deliver Strategic Change in Your Organization.
Sanyin Siang defines her mission in life as enabling greatness in others – as an educator, coach, mentor, and mother. At Duke University, she leads the Coach K Center on Leadership & Ethics (COLE) at the Fuqua School of Business. She is recognized as the world’s top executive coach by Thinkers50, and was named as a LinkedIn Top Voices Influencer in 2017 and 2018. She is author of The Launch Book (LID, 2017).
SVEIN HARALD Ø YGARD
Svein Harald Øygard is the Norwegian economist who was appointed interim governor of Iceland’s Central Bank in 2009, just after the 2008 financial crisis, becoming the first non-national to head an independent central bank. He was formerly Norway’s deputy minister of finance, and has worked at McKinsey for 22 years. Øygard is author of In the Combat Zone of Finance.
I recently learned to drive. Yes: in my late 30s, a happy devotee of London’s public transport and cycle networks, I have had to accept that automated vehicles aren’t going to arrive on the market quite in time for me to avoid the need for a driving licence. Passing the test has exposed me to the full ‘backseat driver’ experience. Most drivers will tell you that the last thing they want is someone passing judgment on their performance, oﬀering dissent on every critical decision and distracting from the task at hand. One driver is quite enough. But can the same be said for those at the wheel in today’s organizations? Businesses today find that the old rules of the road have broken down. The road itself has radically changed, smooth tarmac replaced by a bumpy, unmarked dirt track: technological disruption and hyper-competitive markets mean that things can change in an instant. There’s more happening than one person can process. The chances of avoiding a crash are dramatically boosted by having a second pair of eyes on the road, and a second opinion on the twists and turns that lie ahead. That, in essence, is the argument for inclusion, the subject of this issue’s Focus section. As Ori Brafman makes clear in our cover feature (page 16), inclusion shouldn’t be seen as a ‘nice to have’, or even an ethical obligation, the little sibling of diversity. It’s an essential condition for business success in the turbulent 21st century. Organizations need everyone to engage with the challenges the business faces; leaders have to create the conditions for people to express their views with confidence that their ideas will be heard, acknowledged, and valued. As Dan Robertson explains, leaders have a particular obligation to ensure their behaviour doesn’t undermine psychological safety (page 30).
One firm in the process of transforming its culture on the basis of inclusion is Jacobs: dive into our feature from its chief HR oﬃcer, Shelie Gustafson, on page 20. We take a wider look at the inclusion practices of a number of organizations around the world on page 24, examining how businesses are going beyond diversity to create inclusive cultures – a theme picked up by Sharmla Chetty in her insightful guide for leaders (page 28). Elsewhere, be sure to read our interview with the serial entrepreneur, Bhavin Turakhia (page 34), for insights on the makings of a tech disruptor. Joe Perfetti looks at the innovation paradox facing market incumbents in the face of disruptive threats, and oﬀers a guide to breaking free (page 48). For fans of new technology, we have David Rose and Hari Nair’s guide to augmented reality (AR) and how firms can experiment to explore AR’s potential (page 54). Meanwhile, Elsbeth Johnson examines the four delusions that often aﬄict leaders as they try to implement change – from misguided belief in their own star power, to focusing on the wrong things for embedding lasting change. Make sure you’re not falling foul with her analysis (page 72). I’m also delighted to welcome our new Last Word columnist, the renowned coach and educator Sanyin Siang, who oﬀers a fascinating take on the notion of ‘belonging’ (page 86). In a globally mobile world, it might just be ‘outsiders’ who are best placed to create inclusion and inspire people to bring their full selves to work. Forget robot-driven cars: that’s a vision of the future we can all believe in. Enjoy the issue. Patrick Woodman is editor of Dialogue
Q2 2020 Dialogue
W H AT YO U N E E D TO K N O W
Putting purpose back into business A new book from Michael Chavez and Sudhanshu Palsule, Rehumanizing Leadership, offers an antidote to the linear and fragmented leadership models of the industrial age How human is your leadership? That’s the question posed by Rehumanizing Leadership, the latest book from Duke Corporate Education’s chief executive Michael Chavez and the highly regarded leadership coach Sudhanshu Palsule. Launched in February, the book argues that the rehumanization of leadership has become one of the most pressing issues of the 21st century. While digital technology is transforming the world into an interconnected whole, there is an increasing trend for building walls of protectionism – sometimes
Commenting on the book, Daniel H Pink, author of When and Drive, said: “Human beings crave purpose. And what’s true in our personal lives can be equally true in our businesses. That’s why this book is so urgent and important. Rehumanizing Leadership makes a powerful and compelling case for improving performance by infusing organizations with greater empathy and meaning.” literally. The book provides simple practical tools and the mindset needed to lead organizations into the 21st century.
— Rehumanizing Leadership is out now (LID Publishing). Dialogue readers can join a live webinar with the authors on 2 April 2020: www.rehumanizingleadership.com
Employee experience takes centre stage Lessons from the evolution of customer experience can help improve the employee experience, according to new research More than 800 HR leaders gathered in Nice, France, in late 2019 for the fourth annual HR Congress. A packed two-day schedule saw 24 speakers cover topics ranging from technology and analytics to learning and talent, alongside workshops delivered by experts including the father of modern HR, Dave Ulrich, and organizational psychologist Adrian Furnham. One standout moment came from employee experience (EX) consultancy TI People, whose founder and chief executive Volker Jacobs presented the results of a two-year study of EX in over 500 companies. Improving EX is increasingly important, he said: “It has now permeated the whole business, Dialogue Q2 2020
Three out of four CEOs agree employee experience is a priority Volker Jacobs, TI People
with three out of four chief executives agreeing it is a priority.” Despite this, only 12% of leaders have an EX roadmap in place. Jacobs advised HR to look to the evolution of customer experience for inspiration: “While customer experience has rapidly become the face of marketing, sales and customer service, EX is still relatively new to HR.” Ellie Terry, global communications and EX director for companies such as N26 and Liberty Latin America, agreed: “Our employees should be treated like our ‘internal customers’.” It is going to be vital for HR to assume responsibility for shaping human-centred employee experiences, she added.
GREAT MINDS WITH MICHAEL CHAVEZ
Inclusivity must reach beyond flesh and blood
T R I B U T E S PA I D T O C L AY T O N CHRISTENSEN
Shutterstock; Missy Meyer; World Economic Forum
Professor dubbed the most influential business thinker in the world passes away Figures from across the global business community have paid tribute to Clayton Christensen, the prominent academic and consultant, who passed away on 23 January 2020 aged 67. Christensen became a full professor at Harvard Business School in 1998. Famed for his 1997 book, The Innovator’s Dilemma, he also founded consulting firm Innosight in 2000. In 2011, Thinkers 50 named him the most influential business thinker in the world. His ideas have informed the work of many Dialogue writers, including Rita Gunther McGrath and Hari Nair in the Q4 2019 issue. Christensen famously stood at six-foot-eight. Richard Straub and Angelica Kohlmann of the Drucker Forum said: “He was a towering figure – intellectually, morally and physically. We had the enormous privilege to have him as a supporter, mentor and friend of the Drucker Forum... we all stood on Clay’s shoulders.” Christensen is survived by his wife and children.
Bionic bigotry harms us all Are you prejudiced towards your own race? Some 99% of Dialogue readers would answer ‘no’ to that question. They might resent even being asked.Yet the true answer is ‘yes’. Human beings – almost all of us – are biased towards the human race. How do we view robots? Most of us are prejudiced against them. A report from the Centre for the Governance of AI suggests that 82% of Americans are concerned about where AI will lead. EU surveys reveal similar misgivings. As the Fourth Industrial Revolution unfolds – with its promises of unfathomable computational capability – business and social observers are highlighting some very old, human fears, such as loss of jobs and status, a widening of the wealth gap and social dislocation. Yet, like all prejudices, the discomfort is irrational. I recently met the Great Mind that is Dr David Hanson Jr, founder of Hanson Robotics Limited. Our conversations persuaded me that not only can robots make us more human, they have the potential to make us increasingly purpose-oriented and creative. “AI and robotics are a way to enhance the quality of life for a more diverse group of people,” said Hanson, who oﬀers a unique perspective as one of the creators of Sophia the Robot, the world’s most human android. “We want to inspire people to create a human bridge to our AI so we can all evolve.” How might this work? As robots take over rote, ‘algorithmic’ tasks, humans must specialize more on those capabilities that are ‘robot-proof’ – such as creativity, purpose, imagination and curiosity-based problem exploration. However, as we focus on these uniquely human capabilities and traits, we will do so through ever-increasing levels of interaction with robots and AI. Yet the evidence thus far is that humans don’t much like being around
robots. We can live happily enough with Siri and Alexa, because they are sympathetic voices that emanate from innocuous black boxes. But talking to Sophia is a quite diﬀerent experience: interacting first-hand with her is thrilling, but jarring. A humanoid robot infringes upon our identities precisely because of their humanlike look and actions. Yet, according to Hanson, this is exactly the point: we as humans must learn to interact with humanoid characters as a new form of inclusion. Robots challenge our built-in biases. Through inventions like Sophia, Hanson is bringing these prejudices to the surface, flushing them out. This catharsis is critical to any organization that will use robots in the coming years. The more robots begin to resemble humans, the more we have to consider them in our inclusive thinking. Although we cannot – at least yet – harm robots by excluding them, Hanson asserts that we are harming ourselves by doing so. Limiting our interactions with AI restricts our human capabilities. We can counteract our modernday Luddism with better tools and policies. We have leadership practices that force us to think about building team collaboration with those who are diﬀerent to us, be they man, woman or machine. Through his work, Hanson is forcing us to think about how we might incorporate robots into our companies. If this sounds like a work of science fiction, it soon won’t. Great Minds like Hanson are forcing us to start taking inclusivity for robots seriously. If humans continue to set themselves against machines, we will limit our own power. And today’s backlash against AI will seem like a mere flesh wound compared to what’s to come. — Michael Chavez is chief executive of Duke Corporate Education. A version of this column originally appeared on Forbes.com Q2 2020 Dialogue
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Swift, dramatic change across markets today is making it increasingly difficult for organizations and their people to keep pace. Business models that worked well in the past are at a breaking point, and incremental adjustments will not suffice. Speed, complexity and digitization are creating greater uncertainty, competition and risk, but are also creating greater opportunities for agile organizations prepared to proactively shape the market. Capturing value today while also looking for the next advantage demands agility. Agile leaders are the greatest levers for the future success of an organization.
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Harnessing our imagination holds the key to success
Three strategies to boost creativity Michael Canning is global head of new businesses at Duke Corporate Education
By blending an experience in a new context, you achieve something radically different
In The Origins of Creativity, Pulitzer Prize-winning biologist EO Wilson says, “Creativity is the unique and defining trait of our species.” This will certainly be the case in the business world in the 2020s. As the rate of change accelerates, problems will tend to be emergent – with robots taking on more of the routine tasks in every job. Theoretical neuroscientist Dr Vivienne Ming describes the role of tomorrow’s leader as “creative, adaptive problemsolver/explorer”. AI in robotics is already replacing lower-level roles in agriculture, transportation and natural resources. Its sights are now trained on cognitive labour. Automated systems will soon outperform or displace humans in medical diagnostics, journalism, financial advice, and a raft of other industries. Thus, as Ming points out, “any job with a routine set of tasks; or whose primary task is advising” will be in harm’s way. The need for creativity is growing as both an attacking strategy for business and defensive strategy for leaders. The good news is that our brains are naturally creative. In their book The Runaway Species: How Human Creativity Remakes the World, composer Anthony Brandt and neuroscientist David Eagleman provide fresh perspective, pointing to the importance of possibilities. For all the recent advocacy of mindfulness, the truth is that humans spend very little time living in the here and now. “This is probably the thing that makes our species really special,” says Eagleman. “A genetic tweak leading to the expansion of the human brain. As part of the expansion of the cortex, which is the wrinkly bit on the outside, we are able to generate these what-if scenarios, imagine things that haven’t yet happened.” So, how can we turbocharge this wiring? Many assume that so-called ‘creative minds’ use highly nuanced methods to reframe or refashion the world around them. Yet Brandt and Eagleman propose a rather simpler thesis. It divides the creativity aspect of cognitive function into three basic strategies: bending, breaking and blending.
Bending is about creating variations, using shape, size, material and more to create new solutions. You take a source and twist it out of shape, transforming it to create new possibilities. The authors share examples from nature: for example, how a flapping-wing bird inspired the invention of a fixed-wing aircraft. In breaking, something is taken apart and a new thing assembled from its parts. In the 1950s, when scientists were eager to determine the sequence of amino acids making up the insulin molecule, the molecule was so large that the task was near impossible. Frederick Sanger’s solution was to chop insulin molecules into more manageable pieces and then sequence the shorter segments. Thanks to Sanger’s ‘jigsaw’ method, the building blocks of insulin were sequenced, winning him the Nobel Prize in 1958. His technique is still used to figure out the structure of proteins. Blending is about pulling things from various domains; where you have something that’s designed in one field and ask what it would be like in a new context. As Brandt points out, a well-known example is the Apple Store. In trying to create a premium hotel experience, Apple asked: “What would a high-end concierge be like in a consumer electronic store?” And that became the Genius Bar. By blending an experience into a new context, you achieve something that’s radically diﬀerent. These examples might seem grand. Yet they are illustrative of a simpler process we can all begin to practise in our own settings. Think of your next creative act. Now bend, break and blend what you know to solve the problem. Ask: “Could the existing idea be varied in some way?” “What if I took this apart and reconfigured the pieces?” “Could I combine this with something else to give us more capacity?” We have the creative capacity to be “creative, adaptable problem-solvers” of the future. We just need to jump-start our imagination – our species defining characteristic – back into action. Brandt and Eagleman provide a useful framework from which to begin. Q2 2020 Dialogue
The inclusion imperative
In the face of rapid change and widespread disruption, the organizations which thrive will be those where leaders successfully maximize the contributions made by all of their people. That means fully engaging people in shaping the future: it means unleashing their creativity, listening to their ideas, and learning from their varied experiences. It means being inclusive. The concept of ‘inclusion’ has often played second fiddle to ‘diversity’, but this issue’s Focus brings it to the fore. It homes in on practical insights into how leaders can create more inclusive cultures. How do leaders amplify employees’ voices? How can they build psychological safety? And why should inclusion be seen as a key component of decisionmaking speed and agility?
The inclusion imperative 20
Inspiration, inclusion and innovation 24
Making inclusion a reality 28
Diversity alone is not enough 30
Promoting psychological safety 32
Three moments that matter
Dialogue Q2 2020
The inclusion imperative It’s time for leaders to start listening and create an inclusive culture in their organizations
Ori Brafman ILLUSTRATION
At most large organizations, diversity and inclusion have become interlinked imperatives. While both sides of the coin are important, we shouldn’t necessarily lump them together. Diversity is a payroll issue: it’s about who is in the room during meetings, or who holds leadership positions. It’s about getting the right people into the right roles to bring a broad set of views and perspectives to the organization’s decision-making process. Inclusion, on the other hand, is a cultural issue: it’s about creating a culture where people feel a sense of belonging to one another and to the organization’s mission. Companies feel pressure to go beyond check-the-box diversity initiatives and invest in inclusion, but to what end? To understand the importance of inclusion, we need to take a broader perspective on the uncertainties and unknowns that companies face every day.
In my work with the US military, I’ve learned that one of the most common questions keeping army generals up at night is: “Who will our next opponent be?” Without a definitive answer, many then ask themselves: “How do we prepare for an unknown future?” People in corporate leadership positions face similar questions. The military recognizes that, to prepare for the unknown, it must begin by developing
Listening is a concept that many of us find difficult, but shouldn’t
agile leaders – people who not only understand their roles and can execute on tasks, but operate with a high level of flexibility and adaptability in a rapidly changing environment, innovating in the moment and acting improvisationally as situations demand. But can you really train individuals to be agile? Picture for a moment a manager named Alaine. She is organized, mission-driven, and keeps her team task-oriented. When Alaine worked in insurance in the 1990s and 2000s, she was a consistent high performer and her team set company sales records. But over the past few years, she and her team haven’t been responding well to the shifting market, so Alaine’s boss sends her to a half-day session on agile leadership. Do you think it helps? The obvious answer is no: Alaine’s strengths are in planning and executing, not in thinking on her feet. But what if she’d attended a two-day programme? Would that have worked any better? A five-day programme? Two weeks? Agility is not easily taught, and it’s certainly not easily acquired. Q2 2020 Dialogue
In fact, rather than addressing Alaine’s agility issue as an individual problem, her boss should think about it as a collective one. Rather than viewing your team or organization merely as a body of people with a collective purpose, think of it as a collection of individuals who belong to a variety of agile networks, both internal and external. Depending on the situation you’re facing, any number of unlikely individuals within the network may have useful perspectives, or even the answer you need. The leadership problem then becomes how to give people a voice to share their valuable insights. This is where inclusion comes in. How can you help each individual connect their eﬀorts with meaning and purpose, to encourage them to take an active role in the organization’s success? When an individual oﬀers her unique perspective to help solve a problem or achieve a goal, are you able to listen to that message, amplify it throughout the organization, and include the entire network in the process of adapting for growth and change?
Inclusion against infection
Rather than addressing agility as an individual problem, think about it as a collective one Dialogue Q2 2020
Inclusion helps us eﬀectively communicate our message and solve our toughest and most significant challenges. Consider an example from the healthcare field. Methicillin-resistant Staphylococcus aureus, or MRSA, is a virulent pathogen that is immune to most antibiotics, and the best place to pick it up is in hospital. It can live harmlessly on the skin and up to six weeks on environmental surfaces, and is easily transmitted through contact with items like a physician’s tie, white coat, or stethoscope. If the bug enters your body, it can cause debilitating illness, excruciating suﬀering and even death. MRSA is among the world’s most alarming public health threats. Despite being preventable by infection-control protocols, it is rampant in healthcare facilities. The medical field has understood for more than 150 years the best way to stop the spread of infectious disease: washing hands. Yet studies of hand hygiene show abysmal compliance rates with hand-washing procedures – just 29-48% – meaning that most encounters between healthcare providers and patients carry a high risk of MRSA transmission. While MRSA infection rates are soaring across the US, they’re declining sharply at the Department of Veterans Aﬀairs Pittsburgh Healthcare System (VAPHS). Why? Because of inclusion. Cheryl Squier, head infection-control nurse at VAPHS, says “widespread ownership” of the struggle with MRSA gave birth to real culture change. In the past, she says, the typical mindset was, “That’s your department, you take care of it.” Today, “MRSA is viewed as everyone’s problem”, and staﬀ at all levels are stepping up to tackle it. They include one housekeeping staﬀ member who surprised doctors with his
knowledge that bleach, not alcohol, is needed to kill Clostridium diﬃcile, another virulent antibiotic-resistant bug: he was later selected to conduct one of the regular MRSA briefings for 15-20 staﬀ members, including leading physicians, where he reported that his unit had zero MRSA infections. A pre-med student holds weekly chats with patients to elicit their ideas on how to fight MRSA: past suggestions include having patients share their stories, giving each patient hand-sanitizer and instructions for use upon admission, and getting patients to share knowledge about hand hygiene when they play bingo, gather in smoking areas, or watch football together. One nurse, wanting to make germs visible, searched online and found Glo Germ, a product that is normally invisible but glows under ultraviolet light. She applied it to the pens people used to sign in to a meeting: later in the day, under ultraviolet light, participants were astounded to see how the powder had spread to their hands, heads, glasses, watches, plates, cups, and clothing. It was dramatic evidence of fast, relentless, silent transmission. And an MRSA coordinator organized floor-wide events designed for casual, non-hierarchical interactions among individuals with diverse functions. Experiences were shared, victories celebrated, disappointments met with resolve, and new ideas generated. This inclusive approach not only encouraged staﬀ members to identify successful MRSAprevention practices, it stimulated them to selforganize to share ideas, practices, and results. How can companies build their own culture of inclusion to solve the challenges they face?
The Agility Loop
The Agility Loop is a continuous four-step process for ensuring that leaders at every level maintain a pulse on the implementation and utilization of inclusion practices. It begins with a concept many of us find diﬃcult, but shouldn’t: listening. STEP 1
LISTEN We’ve all had that boss. He bloviates, pontificates, and rarely empowers those around him as they struggle to get on board with his message. He has diﬃculty opening lines of communication, lets the best ideas go unnoticed, and is never quite able to put together an agile team. Leaders must understand that listening is an art, a skill, and, when done well, can even be a fully functioning system with the power to create a team ethos, build trust within the organization, and deliver
Inclusion should not be dismissed as just another ‘feel-good’ movement
individual and collective successes. So how do we listen – not only as individuals, but as teams and organizations? Opportunities to listen are all around us: from personal interactions to structured and unstructured meetings, walking down oﬃce hallways, even in the elevator. The more we seek these opportunities and capitalize on them, the more we nurture the instinct to listen. Leaders can set an example for their teams by making a daily practice of listening, thus both becoming better individual listeners and building a stronger system for listening throughout the organization. Listen in order to learn: some of what you hear can, and should, surprise you. Listen to understand the organization and identify opportunities and vulnerabilities. Listen to make it clear to those who follow that you value their insights, judgments, and advice. Listen because the weakest signals are often the first indicators of success or failure. Discover eﬃcient, realistic ways to listen to people at every level, so that you better understand the problems they are facing; recognize their ideas for potential solutions and give them their own opportunities to lead. STEP 2
like. It boosts morale and engagement, while furthering the mission of the team and the organization. STEP 3
INCLUDE Leaders should emphasize inclusion rather than consolidate power. Those who prioritize inclusion achieve greater success, at both the individual and organizational levels. Inclusion leads to greater knowledge about the nature of the problems we face and how we might solve them. The more information we harvest from all corners of our organizations, the more inclusion we can generate; the more inclusion we build, the more likely we are to solve our problems. And solutions are far more likely to endure when we support them with inclusion. So include to empower. Go wide and deep in including members of the team and organization in sharing knowledge, establishing a common understanding of problems, and encouraging ownership of solutions. Include to inspire loyalty: inclusion should not be dismissed as just another ‘feel-good’ movement urging us to share power and control for the sake of fairness. Include to gain competitive advantage. As we work to grow and sustain our success in a hypercompetitive, information-supercharged environment, inclusion is the way of the future. STEP 4
OBSERVE AND ADAPT
Good leaders share credit and accept blame. They don’t simply proclaim an interest in initiative and innovation: they articulate how much risk they are willing to take to enable it. They define expectations, mapping the road they expect their team members to travel. Even more important, good leaders champion, or amplify, successes of all shapes and sizes within the organization. Amplify the best ideas, best recommendations, and best practices: the positive examples instead of the inevitable failures. Doing so helps establish expectations and reinforces the organization’s mission. Amplify in a manner that encourages teamwork at every level. The best leaders establish a drumbeat of emphasis on values within their organization. Amplifying does more than just provide a teaching moment about what success looks
Finally, leaders should constantly make note of the team’s eﬀorts and make incremental changes to continually improve. Agility is, by definition, the ability to adapt quickly and easily over time. That ability is at the heart of why inclusion is an imperative for today’s organizations. Too many people today feel marginalized and unheard in their lives. Leaders simply can’t aﬀord for people to go unheard in their organizations, because ultimately, inclusion is about winning and losing. Only inclusive organizations have what it takes to win in a fastchanging world: the ability to listen, amplify, include and adapt. Failure to embrace inclusion would be the defining leadership failure of the 21st century. — Ori Brafman is a New York Times bestselling author specializing in organizational culture and inclusion Q2 2020 Dialogue
Inspiration, inclusion and innovation Culture has been at the heart of far-reaching business transformation at Jacobs, writes Shelie Gustafson
Transformation starts with culture. This has been the reality for us at Jacobs on our journey to evolve from an engineering and construction firm to a technology-forward solutions provider. The journey started when Steve Demetriou was hired as the Jacobs chair and chief executive. It didn’t take long for Demetriou and other executives to recognize that a transformation was critical if the company was to grow and compete in a rapidly changing global arena. “When I joined Jacobs in 2015, I worked with our leadership team to redefine our strategy. There was a lack of growth and challenges associated with mergers and acquisitions, and it was time for a change,” says Demetriou. “We set a foundation around three constructs as we moved forward with our new strategy in 2016: build a high-performance culture; transform the core; and grow profitably.” As a professional services organization, revenue at Jacobs is generated largely by talent, with 52,000 people in 40 countries. We needed to transform from the inside out, with culture at the core of our strategy. The initial strategy set in motion our acquisition of CH2M at the end of 2017, followed by the divestiture of our energy, chemicals and resources business, and by additional acquisitions in 2019 – all of which increased the intensity of the required cultural transformation.
Inspiration, inclusion and innovation were the three pillars of Jacobs’ culture transformation Dialogue Q2 2020
The approach to culture change
“The CH2M acquisition was a pivotal point. We all know that most mergers and acquisitions don’t live up to their stated objectives, and usually this is because of a failure to align the two organizational cultures,” says Ben Almond, now vice-president of Canada operations for Jacobs – and, as a CH2M employee, a member of the integration team. “Many employees had spent their entire careers with CH2M, and there was also the shift from an employee-owned to a
Helping individuals be their best selves, with the team capitalizing on their uniqueness, is a game changer
publicly traded company.” Demetriou and his team committed to leading the CH2M integration diﬀerently. Culture change was core to the successful integration of the two companies. As one of the key workstreams of the integration management oﬃce, executive sponsors from both companies came together to lead the eﬀort. Inspiration, inclusion and innovation were identified as the three pillars of Jacobs’ culture transformation. Research shows that innovation comes from people with diﬀerent experiences, backgrounds and thought processes. Just putting a group of people in a room isn’t enough: how they work and think together makes the diﬀerence. Inclusion unifies and is the activator of Jacobs’ diversity, which is why we put the ‘I’ before ‘D’ – inclusion and diversity. We must be exceptional at creating an environment where all employees feel valued, have a sense of belonging and can be their best. Helping individuals be their best selves, with the team capitalizing on their uniqueness, is a game changer. Inclusion at Jacobs is a way of living and working together. We call it TogetherBeyond, and we take a holistic approach in making employees part of our inclusion journey. It started at the top with the senior leadership team; we then pulled numerous levers to accelerate the transformation, including empowering eight employee network groups, providing training for all employees, and reviewing policies, practices and programmes
Above Presenters at the 2019 Jacobs Women’s Network global summit, Dallas, Texas; Left Participants at the London Pride event, 2019
to ensure they supported our culture transformation.
Leading by example
Executive development is a key driver in aligning our cultural aspirations, so we partnered with Duke Corporate Education to develop a culture alignment programme around inspiration, inclusion and innovation for vice-presidents and above. We quickly realized that we needed to bring in high potentials too, and we are ultimately expanding the programme to include all people leaders. For Imad Feghali, vice-president and regional director of Middle East operations for people and places solutions, one of the most important takeaways was the idea of the ‘leadership shadow’. “The way it was described and discussed was very important,” he explains. “It’s not what you think people see: it is how people actually see you when you are not around. The programme
sent a very strong message that we need to be careful and aware of how we behave. “Over time, we have been able to connect with leaders in a way that feels diﬀerent to probably any programme they previously experienced,” says Almond, who was brought in from the business to help develop the initiative. Demetriou agrees. “This training is a major factor in driving culture change; the messages that we are sending around inspiration, inclusion and innovation are proving extremely important for overall employee engagement.”
Brand and values
In late 2018, we also embarked on creating a new brand – one that would reflect our culture, engage our employees and resonate with our clients, communities and shareholders. Launched internally and externally in late 2019, our tagline and purpose statement create a ‘north star’ for where we are headed: “Challenging today, reinventing tomorrow, to create a more connected sustainable world.” At the same time, we restated our company values to bring to life our expectations of every employee. They are: we do things right; we challenge the accepted; we aim higher; we live inclusion. ‘We live inclusion’ is defined as putting people at the heart of our business. We have an unparalleled focus on inclusion with a diverse team of visionaries, thinkers and doers. We embrace all perspectives, collaborating to make a positive impact. Restating our values has had a Q2 2020 Dialogue
amended our parental leave policies in the US, based on employee feedback.” Jacobs’ aperture of inclusion is broad. It includes diversity in its broadest sense: race, gender, age and tenure, disabilities, veterans, geography, sexual preferences, religion, backgrounds and perspectives. The intent is to create an environment where all employees, join, stay and thrive. In the past year, Jacobs has continued to push the envelope around three areas: culture-building and engagement, leadership commitment and accountability, and talent development.
The company values speak to me now more than ever Sindhu Avalokita, director of finance and project controls
Dialogue Q2 2020
significant impact on how people view inclusion. “We had discussions about it in the past,” says Isaac Henderson, executive advisor for advancing national security. “But now that it is embedded in our values, inclusion has become much more real and tangible.” “The company values speak to me now more than ever,” adds Sindhu Avalokita, director of finance and project controls. “Regardless of function, market or business group, you can immediately relate to these simple yet powerful values. Recently, in a project-controls meeting with some 60 colleagues, I was able to very easily link the priorities to our values in a way that was relatable to all of us and that each team member could connect with immediately.” Town halls have been one of several channels used to reinforce these messages. Many companies ‘do a town hall’ once or twice a year. At Jacobs, town hall meetings happen weekly around the world, delivered by the entire senior leadership team. Demetriou uses this forum to communicate what inclusivity means at Jacobs. “It is an opportunity for two-way dialogue as we hear from our people what is on their minds – and then make adjustments,” he says. “One of many examples of impact is how we have
Culture-building and engagement
Jacobs has eight active employee networks where all employees can find a connection: the Women’s Network; Harambee, a black employee network; Enlace, a Hispanic employee network; VETNET, for active service personnel and veterans from all nations; OneWorld, for global cultures; PRISM, for LGBTI+ employees; Careers, for those early in their career, mid-career and late career; and ACE, for those with physical, mental, cognitive and mobility impairments. As part of the ‘inside out’ approach to shaping our culture, these networks are empowered to drive actions that will have a positive impact for employees and the company. A simple yet powerful example is Steve Demetriou’s executive sponsorship of the Women’s Network. “They approached me within a week and said ‘you want to walk the talk? Then change your title from chairman to chair’”, Demetriou explains. “Within a few hours, the title change was done, and I had new business cards printed out. That’s not the end-all, but it does send a powerful message. This isn’t just a lot of talk; everything counts.” Avalokita agrees: “Members of the c-suite that I have interacted with have been amazing role models. It is not just words. They are actually living and displaying this behaviour.” Imad Feghali is also an executive sponsor of the Women’s Network in the Middle East. Changes have been made in recruiting and HR processes in his region, the UAE, based on input from the Women’s Network. They led to a 27% increase in female recruitment over the past year: women now represent 35% of senior leaders on Feghali’s executive team, up from 10%. “We used to blame low female representation on the country,” he explains. “This is one of many examples of how empowering the networks has generated inclusive behaviour.” The talent acquisition team and the Women’s Network were given an award for this initiative in the UAE, and the process is now being rolled out more broadly. Reflecting Jacobs’ eﬀorts to create unity
Employees will have five or more careers in their lifetime: there’s no reason they can’t all be at Jacobs
Above Attendees at the 2019 Jacobs Women’s Network global summit; Facing page Jacobs employees at work in London and Auckland
amongst all employees, the networks collaborate on many projects. Every two years, a joint network summit brings together representatives of all the networks globally, to collaborate on solving business problems, connecting with clients and fostering employee development. Henderson says: “Through the employee networks, I have communicated with colleagues from a variety of disciplines that otherwise I wouldn’t be in touch with. This has led to greater innovation and improved processes.” Another significant initiative was the internal ‘conscious inclusion’ training, rolled out in 2019 for all employees. Oﬀered both in-person and online, the programme helps employees understand their part in creating an inclusive environment. The goal is 100% participation: we are already at 97%, and rising. Our achievements have also been recognized externally. As one example, PRISM celebrated Jacobs taking top honours in the Human Rights Campaign Foundation’s Corporate Equality Index, in both 2019 and 2020, marking Jacobs as a ‘Best Place to Work for LGBTQI+ Equality’.
2 All senior vicepresidents and above have compensation tied to culture objectives
Leadership commitment and accountability
For Jacobs, leadership is the diﬀerentiator when it comes to moving the needle on inclusion. Demetriou is one of 60 chief executives who pledged to advance more women into all levels of leadership as part of the Catalyst CEO Champions For Change initiative. Since joining, Jacobs appointed the first female executive vice-president in the company’s history; five of our eight executive leadership team members are now women. We were honoured by the 2020 Women on Boards initiative for our commitment that at least 20% of our board of directors will be women. To date, we have achieved executive team diversity of
63% and board diversity of 45%. These results are reflective of specific, actionable work to make changes. More broadly, each member of our senior leadership team has signed our ‘Inclusion & Diversity Accountability and Commitment Statement’, committing to aim higher, challenge what’s accepted, and hold themselves accountable for creating a company where every employee is empowered to thrive, knowing their individual value is recognized. To reinforce this commitment, all senior vice-presidents and above have compensation tied to critical culture objectives with a requirement that at least one objective supports inclusion and diversity.
Jacobs’ recruitment approach leverages our network of employees: 30% of our hires globally come from employee referrals. We are increasing our eﬀorts to attract interns and new college graduates, with a goal to increase the number we hire by 30% in 2020. Once they join Jacobs, we want them to stay, so we have launched E3: a new programme designed to ‘engage, excel and elevate’ every employee, driving performance while engaging employees and providing opportunities. We know employees will have five or more careers in their lifetime: there is no reason a person can’t have them all at Jacobs.
Between October 2015 and January 2020, Jacobs has delivered a total shareholder return 165% above the S&P 500, which was up 86% during the same period. To a great extent, our success is the result of our cultural transformation and a growing sense of inclusion in the Jacobs team. For Steve Demetriou, sport – especially basketball – oﬀers valuable lessons for the workplace. “Basketball is a classic team sport,” he says. “It is really the combination of putting complementary talent together. Bringing diﬀerent skills, capabilities and instincts drives success, versus just having the best players. Business is a combination of clearly having the top talent, and ensuring it is complementary and that the chemistry exists.” It has been exhilarating to be part of a journey that has led to the creation of such a team. — Shelie Gustafson is chief human resources officer and a member of the Jacobs executive leadership team Q2 2020 Dialogue
Making inclusion a reality How are organizations around the world creating more inclusive cultures? Kevin Anselmo and Patrick Woodman report
The business case for diversity and inclusion is now indisputable. According to PwC, 85% of companies with a formal diversity and inclusion strategy reported an improved bottom line. McKinsey has shown that firms in the top quartile for gender and ethnic diversity are likely to financially outperform industry medians. The argument for action has been won, and organizations have made significant strides in trying to improve diversity: by many measures, progress is being made. But have enough organizations become truly inclusive? Leaders cannot settle for an environment where people do not feel welcome, where their voices are not heard and their skills are not fully leveraged. We spoke to a range of leaders around the world, spanning many diﬀerent roles and industries, and asked: how can leaders create genuinely inclusive cultures? Their insights point to some of the ways organizations can create environments where everyone can thrive.
A systemic approach to inclusion
Claudia Bidwell, global head of people and organization development at Implenia, is forthright about the wrong way to approach inclusion. “I don’t believe in this idea of, ‘Let’s have an inclusion initiative, throw it out there, and then everybody’s going to be inclusive.’ In my experience, that doesn’t work,” she says. Instead, inclusion needs culture, strategy and organization to be in sync. “You can have a Dialogue Q2 2020
great strategy, but if there is a toxic culture, or a dysfunctional organization, it’s not going to work. Equally, if there is a great culture, but no business strategy in place, it won’t work. It’s a triangle – each part has to work together.” In Bidwell’s view, inclusion needs to be approached as a change management and organizational development journey, with openness and honesty about the commitment required from senior management, the changes needed, and costs – and a comprehensive plan at individual, team and organizational levels. Senior leaders also need to model inclusive behaviours, which further need to be reinforced by performance management and key business processes throughout the organization. Bidwell describes how, in a previous role, one annual meeting of her company’s 150 most senior leaders had focused on creating a more empowered culture. Each leader had participated in a comprehensive 360-degree feedback exercise, exploring the culture that they were creating in their respective teams, and thus the organization. Executive committee members shared their actual survey results and frankly discussed their reactions. “This was incredibly powerful. It wasn’t one-oﬀ either. We had done lots of work in the build-up and did more following this – it was part of a holistic and systemic approach.”
Improving female inclusion
Shutterstock; IKEA; Swiss RE; AET Tankers
One of the major focuses of the diversity and inclusion agenda has been the position of women. For some sectors, including technology, this is particularly challenging. “Traditionally, women aren’t as prone to going into IT as men,” says Denise Reed Lamoreaux, global chief diversity oﬃcer at Atos, a multinational information technology service and consulting company. Since she assumed her role in 2018, Atos has established four inclusion pillars: gender, generations, accessibility/
You can be diverse – but that doesn’t mean you’re inclusive and that people feel like they belong Denise Reed Lamoreaux, Atos
Right and below Ikea’s values include togetherness
disability, and culture. Atos recognized a need to change the way its vacancies were advertised, so it partnered with the augmented writing platform, Textio, to assess the language used in job ads for inclusivity and gender neutrality. The initial score was 23, a result that reflected a masculine bias. Within two months, the firm had reworded many of its adverts in the pilot group, resulting in a score of 76, within the genderneutral range. A year on, scores hover around 87, a mark that is considered outstanding. “This has made an enormous impact for us in every aspect of recruiting,” says Reed Lamoreaux. “We have taught people how to think more inclusively.” Atos’s approach has also included contests, social media campaigns focused on female recruitment, and widespread inclusion training. It has helped to move the needle on several key metrics between 2018 and 2019. The female percentage of identified top talents doubled, from 15 to 32%; the share of the top 1% of roles held by women rose from 13 to 16%; and across the firm’s global employee base, women’s representation grew from 29 to 34%. Those numbers, however, are only part of the story. “You can be diverse – you can have all the right numbers – but that doesn’t mean you’re inclusive and that people feel like they belong,” says Reed Lamoreaux. “It is key to involve the business at every level. It is not just HR – everyone in the company is responsible.”
You can have a great strategy, but if there is a toxic culture, or a dysfunctional organization, it’s not going to work Claudia Bidwell, Implenia
Swiss Re is one of the world’s leading providers of reinsurance, insurance and other forms of Q2 2020 Dialogue
The nature of risk is always changing, so we need a diverse set of viewpoints to understand the shifts Nilesh Iyer, Swiss Re
insurance-based risk transfer. Clients expect the company to help them mitigate risk - something that Nilesh Iyer, a senior vice-president based in Bangalore, believes is impossible to do eﬀectively without a culture of inclusion. “The nature of risk is always changing, so we need a diverse set of viewpoints to understand the shifts,” he says. “Inclusion, especially appreciating diverse perspectives, has long been a core value for us.” A diversity and inclusion council was formed in 2018 in the firm’s Bangalore oﬃce after a period of significant headcount growth, as it recognized the need to ensure a culture of inclusion and excellence. Swiss Re has become a signatory of the United Nations Global Compact and, says Iyer, is deeply committed to the UN Sustainable Development Goals, with a focus on achieving gender balance in leadership roles. The company promoted LGBTI+ awareness ahead of India’s 2018 Supreme Court ruling in favour of decriminalizing homosexuality, and has also worked to promote employee mental health. “These are all focused on trying to bring together as many diﬀerent fresh perspectives as possible so that we can be more holistic in our decision-making,” says Iyer. “Each fresh perspective brings an element of knowledge, and makes us more eﬀective.” The value of inclusiveness has been underlined by the firm’s research and thought leadership group, Swiss Re Institute. It estimates that a 26% increase in global GDP in a scenario of labour market gender parity would yield an additional $2.1 trillion in global insurance premiums by 2029.
Inclusion and hierarchical cultures
How does inclusion fit with management hierarchies? Thokozile Lewanika-Mpupuni, group head of leadership, learning and talent at Johannesburg-headquartered financial services firm Absa Group Limited, says that inclusion challenges traditional notions of hierarchy. “Hierarchy is still relevant for managing others and providing accountability. But we increasingly use flatter structures and peerbased working relationships to ensure the best ideas are heard in the right decision-making forums.” Making this a reality in contexts that are traditionally hierarchical can be challenging. Lewanika-Mpupuni suggests three steps.
Dialogue Q2 2020
First, leaders need to create channels and organizational practices that encourage ideas to flow across the business. Secondly, people should be encouraged and enabled to work from a position of their passions, not just their capabilities: “You can be very good at something and hate it. While you can still do a good job at it, your full potential and contribution are not being realized.” Finally, employees should be managed beyond the minimum expectations set out in their job description: ideas for the wider business should be encouraged and recognized. “People who have worked for 30 years are co-discovering this new world of work with new hires,” says Lewanika-Mpupuni. This can be hard to accept for leaders who rely on hierarchical and authoritative leadership styles. Lewanika-Mpupuni advocates “co-leadership”, with team leaders ensuring that problem-solving and decision-making happens through their teams. The traditional leader becomes a process facilitator.
Left AET Tankers has a multinational, multi-generational workforce; Below Swiss Re’s office, Bangalore, in Pride Week 2019
“The definition of inclusion at AET Tankers is being mindful of diﬀerences – not just the visible ones, but styles, perspectives and ways of working too. The key is building trust,” says Linda Murray, global director, human resources and facilities, at the Singapore-based shipping company. She has played a central role in developing the firm’s inclusion strategy. Many of AET Tankers’ leaders began as cadets, working their way up to management. Shipping runs in the blood. But as Murray points out, there are big diﬀerences between the leadership styles needed on a ship and on shore. With a multi-generational workforce consisting of 44% women and 18 nationalities, understanding diﬀerence is imperative to working together. “The whole organization went through a programme to help us understand the behaviours needed to nurture trust, one of our cultural beliefs, in diﬀerent working environments,” says Murray. “At sea or ashore, it’s crucial our employees truly understand each other.” Unconscious bias training has helped increase leaders’ self-awareness, but training alone is not enough. Murray highlights the importance of inclusive HR processes: the firm’s talent development committee brings together a broad group to input on selection and recruitment, promotions, and development. Next on the agenda is a scorecard to provide hard metrics on inclusion. “We’ve worked hard to celebrate and support the diversity of talent across our teams worldwide, and as a business we have benefited greatly – culturally and operationally,” says Murray. “We’ve been able to attract diverse talent by making diversity and inclusion a key tenet of our cultural beliefs and engendering a work culture which respects every individual equally.”
An inclusive vision
For some organizations, inclusion is inherent in their purpose and vision. Simona Scarpaleggia, the former chief executive of Ikea Switzerland, who now heads the company’s ‘The Future of Our Work’ initiative, points to Ikea’s vision: “To create a better everyday life for the many
You can be very good at something and hate it Thokozile LewanikaMpupuni, Absa Group Limited
people.” She points out: “If you refer to ‘the many people’, you cannot do it without being inclusive.” Scarpaleggia explains the firm’s inclusion model, which has four pillars: a values-driven culture, competence, emotional intelligence, and inclusive systems. Ikea’s values include ‘togetherness’ and ‘diﬀerent with a meaning’, providing the basis for the company’s approach to inclusion. The competence pillar defines the behaviours needed, while emotional intelligence addresses “how we humans listen to each other”. Company processes are covered under the fourth pillar, covering everything from recruitment to succession, talent identification and development, and reward and recognition. Under its recently launched equality plan, Ikea aims “to become a world leader in equality”, touching both employees and customers. Scarpaleggia holds to the adage that what gets measured, gets managed. Ikea starts by measuring workforce diversity: “You need to make sure that you have diversity first,” she says. Additional measures are based on employee surveys, providing data on things like how comfortable people feel in having conversations with their manager and colleagues. The results are part of leaders’ development discussions, alongside business results. Looking to the future, Scarpaleggia believes that pyramidal organizational structures will increasingly be replaced by a “pomegranate” model, where “there are diﬀerent groups that interact and deliver their work on a project before they aggregate in a diﬀerent constellation for a new project”. That dynamic will create exciting work and rewarding opportunities – but businesses and governments alike will have a responsibility to ensure inclusivity in who can access those opportunities. Scrapaleggia rejects gloomy and fatalistic views about how the fourth industrial revolution will aﬀect work, and says the future will be what we make it: leaders should see this moment of change as “an opportunity to create a more inclusive world”. There’s everything to play for. — Kevin Anselmo is founder of Experiential Communications — Patrick Woodman is editor of Dialogue Q2 2020 Dialogue
Diversity alone is insufficient Great leaders create inclusive teams and innovative organizations. Sharmla Chetty explains how
An inclusive culture helps improve financial performance and innovation to drive future growth Dialogue Q2 2020
It was a tale of two beaches. While growing up in South Africa, I longed for the right to sunbathe on the beautiful, soft beaches along the breathtaking KwaZulu-Natal coast. But this was the Apartheid era. The lusher shorelines were reserved for white people. The racist regime excluded me as a non-white, and sequestered our communities to rockier beaches with steep dunes, distant from the bathing spots. My formative years taught me much about the horror of exclusion and gave me a lifelong purpose to include – and to promote inclusivity. Just as whole nations have thrived from harnessing the value of everyone within them, so too must organizations. Yet still too few know how to do so. Inclusion has become conflated with diversity, as if diversity alone is suﬃcient. Diversity is a prerequisite for inclusion, yet it does not guarantee it. Business leaders need to work at inclusion, by driving change and making proactive steps to bring people in. They must create a diverse, inclusive culture that helps
improve financial performance and innovation to drive the future growth of their organizations. Globalization brings an influx of information from an increasingly diverse workforce. In this fast-changing environment, every situation and context brings its own set of challenges. Leaders must navigate dilemmas and reconcile competing expectations – and learn from diﬀerent perspectives. What are the measures leaders should take? Six key lessons stand out.
Lesson 1 Extol the benefits and measure success Diverse, inclusive teams are more productive and more profitable. That’s proven. Leaders have a duty to remind people of the fact. Why? Because humans’ instinct is to recruit in their own image and to surround themselves with people like them. Homogeneity is such a powerful urge that it is still fairly common to find executive teams comprising men who attended the same schools. Yet diverse, inclusive teams bring new ideas to a business. If you look the same, and behave
Recruitment strategies must be framed with increasing diversity as a core goal. Don’t filter out new outlooks and fresh ideas
the same, how are you going to innovate? As the world globalizes, growth is becoming more diﬃcult to achieve, so you need people with multiple viewpoints to craft solutions. Leaders should strive to create an atmosphere where multiple voices are heard, and their opinions are valued and considered: you can’t sell to a market you don’t understand. Track your progress – perform ongoing reviews of diversity and inclusion data to assess the eﬀectiveness of changes you make.
Lesson 2 Avoid rigid recruitment Recruitment strategies must be framed with increasing diversity as a core goal. Shifts in age profiles, education, and migration flows – along with expectations of equality of opportunity and work/life balance – are key factors in a changing candidate base. Overly prescriptive job specifications filter out new outlooks and fresh ideas. If you advertise for precise, detailed job specifications you will narrow down your candidate field to mimic exactly the people you already have in your business. This is the opposite of what you want: echo chambers and confirmation bias militate against eﬀective problem-solving. Diversity drives creativity, energy, curiosity and innovation at work. Organizations that continue to recruit in a linear, systematic way will lose the war for talent and will be defeated in the global contest for ideas.
Lesson 3 Rewire the system to rewire behaviour
Diversity of markets, customers, ideas, and talent is driving the need for inclusion as a new leadership capability. Take proactive steps to find people who make you perceive problems in a diﬀerent way. Unlearning what you ‘know’ and reframing challenges so they can be tackled diﬀerently is imperative. How do you find such people? Ask them how they have failed in their business life. Then explore their responses to those failures. Remember that you are not looking for someone who can give the perfect answer to every tricky question. Smoothly successful people can be unagile. If you have never failed you have never been able to pivot quickly and rapidly change direction. Seek key skills you need for what’s next: admitting mistakes; learning from criticism and diﬀerent points of view; acknowledging and seeking the contributions of others to overcome one’s limitations; putting personal interests aside to achieve what needs to be done; and acting on convictions and principles, even when it requires personal risk-taking.
Lesson 4 Set the challenge and build momentum Only a plumber can fix a pipe. Those that have
never fixed a leak typically have zero confidence that they can do so. People can be shy; many great people are introverts. Giving people executive roles is key to unlocking this reticence. The self-assurance required to take on and solve problems is chiefly experiential. Work with people on projects, give them a leading role, let them experience the feeling of executing a job. This will give them the confidence to tackle problems and become innovators. Briefing a job is insuﬃcient: to understand a job you have to do it. Leaders have a key role here: become a teammate, a project partner. Collaborate with colleagues. Demonstrate confidence in direct reports by holding them responsible for performance they can control. Get them to lead a project, but stand beside them. Show them that you can win together – we don’t need to win alone.
Lesson 5 Drive out fear Make the environment safe. It’s crucial that everyone in your organization has a voice – and uses that voice. Fear has a debilitating eﬀect on ideas and creativity. Be transparent about values. Identify those that are creating a fearful atmosphere. People are not always conscious of their behaviour, or aware of its impact. Draw the venom, seek it out. By proactively combating behaviours that create a fearful culture, you will bring many more people, and their ideas, into your organization. Look for silent messages, body language, tone. Listen to non-verbal clues from individuals. They might be scared, and if they are, they probably won’t tell you. Your goal is a cultural reset, where diverse teams are driven by opportunity and a change mindset, not by fear.
Lesson 6 Know leaders matter Ignoring the conversation about diversity, equity, and inclusion is no longer an option for leaders. It’s time to make the commitment and start having hard conversations to deeply change our workplace cultures. There is a clear correlation between inclusivity and success. But it’s not an immutable law. You can have a diverse workforce that fails to perform. You can have an inclusive culture that is unproductive. That doesn’t mean inclusivity doesn’t contribute to business performance – it does. But you still need to appoint the right leaders to farm the ideas and execute the projects. Great leaders convene diverse, inclusive teams. They create innovative organizations – and reap the rewards for everyone within them. — Sharmla Chetty is president of global markets at Duke Corporate Education Q2 2020 Dialogue
Promoting psychological safety ‘Zombie’ leaders destroy trust and fatally undermine inclusion, writes Dan Robertson
Over the last decade there has been an important shift in discussions about organizational diversity. For many businesses, diversity – defined as the social and cognitive diﬀerences which individuals hold – is no longer the end goal. Instead, the aim is to create workplace cultures that promote inclusion and belonging. At Vercida Consulting, we define inclusion as the extent to which organizational cultures “respect, involve and leverage diverse talent for greater organizational good”. It is a point that is echoed by a growing number of enlightened leaders, like Rebekah Bastian, vice-president of culture and community at online real-estate firm Zillow Group, who states that it is not enough to have diverse people around the table: inclusion and belonging mean that we need to “amplify everyone’s voices, clear barriers… and appreciate each other for our unique backgrounds”. This new emphasis demands a shift from leaders, to create a sense of psychological safety among their people.
Taking risks and being vulnerable
Toxic behaviours have a corrosive effect on team relationships and destroy trust Dialogue Q2 2020
Google’s two-year Project Aristotle research programme aimed to answer one simple question: what factors lead to high-performing teams? Of the five key factors identified, psychological safety was the most important. It is defined as the feeling among team members that they are safe to take risks and be vulnerable in front of each other: the confidence that admitting mistakes, asking questions or oﬀering new ideas will not lead to ridicule or be taken as a sign of ignorance, incompetence, negativity or disruptiveness. Nor will they be career-limiting. People will not be rejected for being diﬀerent. Underpinning all of this is trust between colleagues and leaders. As Paul Santagata, head of industry at Google, puts it: “There’s no team without trust.” Yet many leaders are blind to how their behaviour undermines trust.
How leaders break psychological safety
Many leaders break psychological safety through their everyday behaviours and interactions with
colleagues. During one inclusive leadership programme I facilitated a few years ago for a large financial institution, I was told of a leader who had a tendency to play one colleague oﬀ against the other, and who would engage in public criticism. In another case, we found that the chief executive of a UK-based charity had a reputation for having team favourites, and for only sharing information with in-group members. These negative – indeed toxic – behaviours are more common than we might hope, and can be found in every business sector. Their impact cannot be over-stressed. Over time, they have a corrosive eﬀect on team relationships and destroy trust, the foundation of psychological safety. In some instances the impacts are also damaging to the company’s brand and wider reputation. One example is that of Ray Kelvin, the founder and former chief executive of global fashion firm Ted Baker, who resigned in 2019 after more than 300 former and current employees signed a petition citing widespread inappropriate behaviour, such as ‘forced hugs’. According to the New York Times, Kelvin’s behaviour was well known among employees and management, but the company’s HR department ignored complaints. Such behaviour breaks all the rules of psychological safety. In its place, a culture of fear and vulnerability can develop, or what I call ‘zombie leadership’. Zombie leaders have many traits: claiming to hire for diversity, but having a real preference for sameness; having zero, or limited, insight into how organizational outsiders experience work; and turning a blind eye to, or colluding with, behaviours that don’t align to the firm’s stated values, as seems to have happened at Ted Baker. Such behaviours are fatal to inclusion.
How leaders can facilitate psychological safety Promoting psychological safety requires leaders to move beyond traditional forms of leadership, and to adopt the principles of inclusive leadership. Our research has identified key competencies and behaviours.
Many leaders are blind to how their behaviour undermines trust within their team
Collaboration One of our clients has stripped away individual incentives, as he feels they promote individualistic and selfish behaviours that do not align with the business’s values. Rewards are now team-based, encouraging ideas-sharing and cross-team support. Speaking up for others Tim Cook, the Apple chief executive, is a shining example. He spoke up for immigrants at a time of political controversy and has encouraged other business leaders to speak out when they see something inconsistent with their company’s values. Similarly, Merck chief executive Kenneth Frazier resigned from a presidential business council following President Trump’s response to the 2017 neo-Nazi rally in Charlottesville, US. It may seem that these business leaders are engaging in politics, but in fact they are demonstrating a clear understanding of the potentially harmful impact of politicians’ remarks on their companies’ diverse employees. By speaking out, leaders can send a message of respect and support to all their employees.
Insight and curiosity Whatever their background, it is imperative for every leader to broaden their knowledge and build their capacity to understand others. I know of one leader in a large energy company who makes an eﬀort to attend diversity events with the aim of building her insights into how diverse groups experience life within her company, and beyond. A workplace culture that promotes psychological safety allows individuals to show up every day as their unique selves, with pride in who they are, without fear of judgment, intimidation or the loss of opportunity. Those are the conditions needed for individuals, and their organizations, to thrive. By promoting collaboration, speaking up for others, and showing insight and curiosity, leaders can make the shift that is needed to create psychological safety, and create truly inclusive places to work. — Dan Robertson is director of Vercida Consulting, a global inclusion management firm Q2 2020 Dialogue
Three moments that matter for inclusion Inclusion is critical to agile decision-making. Camelia Ram outlines how leaders can give their people a sense of agency
Diversity and inclusion are intrinsic to eﬀective decision-making practices in the face of uncertainty. In a world of relentless change, individuals at all levels in an organization must develop the confidence to make decisions at pace with little or no information on potential outcomes. This requires three shifts: in how choices are framed, information is gathered, and outcomes are evaluated. Firstly, in order to frame the choice to be made under uncertainty, it is
more important to ask questions than seek answers. Asking questions allows diﬀerent ideas to be configured in ways that foster new ones. The second shift is from gathering information in order to predict the future, to gathering information to create the future through iteration. Making many small decisions in pursuit of making an idea better requires openness to radically diﬀerent ways of doing things and a willingness to change our mind. And the third shift is to move
from optimizing outcomes for complex choices, to being able to sustain the adverse consequences of multiple smaller choices. These three shifts imply that making decisions at pace under uncertainty encourages us to behave in a manner that invites curiosity, imagination and experimentation. In other words, being agile requires us to adopt an inclusive mindset. What are some of the practical ways in which organizations can achieve these shifts?
Leaders must create the conditions for others to express their views
FO S T E R I N G S PAC E TO A S K THE TOUGH QUESTIONS
Tough questions ask how we could be wrong. A scientific approach is designed to ask the tough questions by seeking evidence to prove a hypothesis wrong, and it can be applied eﬀectively in business. For example, Amazon’s approach to new product development confronts teams with a potential end-result for reaction. A press release announcing the finished product is shared with the team. It describes the customer’s problem, how current solutions are failing, and why the new product will address this problem. It provides an eﬀective, non-threatening way for the team to reflect on what is being built. When asking tough questions, leaders must create the conditions for others to express their Dialogue Q2 2020
views. This may entail being intentionally quiet, pausing for a couple of seconds after asking questions, and regularly asking for feedback. It signals a desire to learn and an acknowledgment that the leader does not have all the answers. This may be uncomfortable, but it generates commitment and engages others to act on issues. Take Salesforce’s internal “Airing of Grievances” tool, where a live stream discussion has been used to help the chief executive engage with issues facing the company’s engineers. The CEO’s decision to engage with uncomfortable topics encouraged the wider leadership team to ask questions about what was going on in the business, instead of shutting down discussion.
C R E AT I N G T H E F U T U R E , NOT PREDICTING IT Uncertainty means that there are multiple possible outcomes from our decisions: the likelihood of each cannot necessarily be predicted. That makes it necessary to explore choices in terms of the possibilities they oﬀer,
Stable environments lend themselves to optimization, but unstable, unpredictable environments require a shift to prudent use of available resources and an ability to withstand losses. From a human resource perspective, teams comprising multiple and diverse strengths, bound by a singular purpose, are vital to help manage risk. The value of psychological safety in driving creativity is well-documented. Knowing that expressing ideas, questions, concerns, or admitting mistakes will not result in punishment or humiliation fosters willingness to reframe, imagine, improve, and rethink. Beyond Google’s well-known study on the topic, US multinational technology conglomerate Cisco has also found that encouraging people to play to their strengths and having shared values contributes to the sense of safety required to innovate and deliver.
Questions for leaders
Leaders can reflect on the degree to which their decision-making practices enable or inhibit inclusivity through questions that ‘zoom in’ on the small moments that matter: How do we create space to deliberately prove ourselves wrong? What kinds of questions do we ask to
while being able to face the consequences of unpredictable conditions. This requires a shift from a programmatic planning approach to an iterative approach based on making the next best move with the information available. The Atherton twins, acrobats in Cirque du Soleil, have explained how an open mind to creating their act has led to refinements from unexpected sources. Andrew and Kevin Atherton train in a gym that is surrounded by Cirque du Soleil staﬀ in the casting, contracts and medical teams. The twins are exposed while trying new stunts: their colleagues observe what they are doing and oﬀer suggestions on how to make it better. This often means that the act evolves in unpredictable directions: the twins estimate that just 2% of what they try makes it to the stage.
BUILDING RESILIENCE THROUGH PSYCHOLOGICAL SAFETY AND DIVERSITY
explore how we could be wrong? With whom do we explore those questions? To what extent do we listen to understand, versus listen to respond? How do we engage with the future through possibilities or limitations? How do we encourage improvement of ideas versus blaming or punishing ideas that do not work at first? Do we know the strengths of our team
members? How do we reinforce them? Many treat inclusivity as a worthy business objective, but in today’s uncertain, unpredictable world it is far more that that: it is essential to eﬀective decision-making. — Camelia Ram holds a PhD in operational research from the London School of Economics Q2 2020 Dialogue
King of code
Billionaire entrepreneur Bhavin Turakhia uses tech to change the world WRITING
Ben Walker PHOTOGRAPHY
“Each of us has a moral obligation to make an impact that is proportionate to our potential,” says tech mogul Bhavin Turakhia. He is well on track to reach his own benchmark. The Indian was a billionaire before his fortieth birthday, which he celebrated this Christmas. He was crowned Young Global Leader by the Global Economic Forum in 2011, and Entrepreneur magazine’s Entrepreneur of the Year in Innovation and Technology in 2016. Forbes lists him among the top 100 wealthiest people in India. What got him here? Turakhia exhibited a passion – and a rare talent – for the sciences from a tender age. He caught the maths bug as a young boy and rapidly turned his hand to computing. By his mid-teens he was teaching other pupils – and his own teacher – advanced coding
techniques. “It was five years before the internet came to India. The school had monochrome terminals with 5¼-inch floppy disks – and it was love at first sight,” recalls the Mumbaikar. “I couldn’t aﬀord a computer back home, but I’d spend all breaks and three hours after school every day to try out diﬀerent programming techniques.”His father – a figure he credits with being “instrumental in my success” – bought him 20 or 30 programming books. He would read one, learn the tasks and lessons within it, then move on to the next. It was a labour of love. Then, as now, successful entrepreneurs tended to be fully educated, with commercial experience, and middle-aged. But Turakhia’s youthful graft, he says, “in some way made up for the age and experience gap”. He cofounded
People were willing to trust young people more than grey-haired folks, so that boded well
his first company aged 17 with his brother. “In conventional industries most people would have ignored a 16- or 17-year-old boy with a business idea.” But Turakhia and talented peers in his generation were riding the crest of a demographic wave: “Because the tech industry was starting out in India at that time, people were willing to trust young people more than grey-haired folks, so that boded well for the sector I was in.” Turakhia grew up with, and ahead of, the industry. Technically astute and assured by early adulthood, he rapidly learned to apply his skills and became a great innovator. “I was a maths and science geek, and computer science is a natural progression from that,” he says. “It is logic-driven – creating algorithms is a problemsolving type of endeavour. I saw the great beauty in assessing a problem, writing a program, and seeing the solutions.”
Payments with purpose
His most successful ventures have channelled that youthful enthusiasm into products that change lives. CodeChef, the competitive coding platform, has gamified programming, pitting youngster against youngster, harnessing the power of competition to both elevate general standards and unearth exceptional talent. “Humans are genetically wired to compete,” says Turakhia. “It’s why we love video games so much.” He is setting his sights on cash – an anachronism that, in his view, should be targeted for extinction. “Payments are just broken,” he says. “The fact that cash still exists Dialogue Q2 2020
is an anomaly. Most of the existing platforms – from financial institutions and banking institutions – are antiquated.” Turakhia is unimpressed with the incremental advancements seen in digital banking, apps and the like, and says that payments should be integrated into life such that they become unconscious. “Compare the digitization of communication with the digitization of payments,” he says. “Communication immediately became faster and cheaper. Payments didn’t. Electronic payments are slower because, technically, you actually get the money 48 hours later. And transactions are more expensive than cash, because retailers have to pay money to the operator as commission. And nor are they ubiquitous. Okay, overall, they are better. But they are not 10x better – and traditionally you need a 10x advantage to replace an incumbent system.” His payment platform Zeta is disrupting traditional banking stacks, oﬀering seamless banking systems – “invisible” payments, as Turakhia calls them. “We want for the first time to deliver a democratized banking experience that delivers a 10x advantage compared to the status quo,” he adds. The technology has been adopted by Sodexo and other major players. Turakhia argues that, with the assistance of governments’ public sector investments, digital banking will become a powerful force for economic inclusion. In some countries in the developing world, cashlessness is the norm, with digital platforms enabling economic activity for those who would have been severely restricted
over, the platform publishes the results so that everyone can learn from them. He is sceptical of schools’ ability to make the great lift in human talent that people and countries need to compete in the global race. His autodidacticism is strong. “I think that’s the best way,” he says. “Traditional classrooms have their place. But the pace of learning tends to be set at the level at which the average population can consume information. Lots of tech entrepreneurs, in India particularly, have grown up on CodeChef. I think in terms of having that impact, we’ve done more with CodeChef than some of my other platforms.”
A company that can multiply its intellect and knowledge on a continuous basis can scale infinitely
by legacy cash-based systems. But, Turakhia says: “The vast majority of the world still lacks access to banking services. The moment that we stop thinking about payments and every single person on the planet has access to financial networks and services – the confluence of those two things will denote when we have arrived where we need to be.” Turakhia talks about “payments with purpose”– he believes that fostering worldwide access to fintech will help level the socioeconomic playing field by breaking down the barriers between the banked and the unbanked. “Access to technology is the great leveller,” he says. Financial inclusion has three facets, he argues. Access to the technology is the first, he says. The second is regulation via an enabling public sector that “empowers fintech companies and provides them with the capability to reach out to underserved populations and do meaningful business with them”. The third, adds Turakhia, is “credit and risk assessment”. Innovation in this third facet is critical, he says. “How can we create stylized platforms that enable us to get enough access to personal information from people that will allow us to assess their risk, so we can oﬀer the credit, and they can participate?” What drives Turakhia? It’s certainly not money, at least not anymore. He has more than enough. Rather, he’s clearly passionate about using his inventions to change the way the world works, and to improve the human condition. CodeChef, which has millions of users, stages programming contests. Once the contests are
Turakhia’s belief in bottom-up learning extends to his companies. The leadership team sets company objectives, but then each executive sets his or her own initiatives, and measures the success of those self-generated initiatives against what they originally set out to achieve. This allows the company to diversify and grow, independent of its founder. “A company that relies on my intelligence and knowledge will only scale so far,” says Turakhia. “But a company that can multiply its intellect and knowledge on a continuous basis can scale infinitely.” Hiring people who have the talent to create their own initiatives is key, says Turakhia. “I have found that the vast majority of small businesses find it very hard to grow beyond that glass ceiling of about 50 employees,” he says. “Getting 10x or 100x really depends on finding the talent to replace the entrepreneur.” What framework does he use to make the right hires? “I think you have to hire above the mean,” he says. “You need to somehow objectively score everyone in the team or project you are hiring for, and take the average score. Then you have to figure out whether the person coming on board is higher than the average of the team score. If they are lower, then they are deductive to the mean score, and you need to keep pushing the average upwards, not downwards.” He recruits for three key personal qualities, he says – “smart”; “gets things done”; and “humility-slash-niceness”. And he won’t hire anyone he doesn’t think he can learn from. “If you walk away from interviewing someone and you think you can learn from the individual, then that’s a very positive thumbs-up sign,” he says. “They are going to contribute to your organizational knowledge in some form.” It is this search for lifelong learning, more than anything else, that defines Turakhia and has driven what he has achieved in the world. “I’ve always learned on my own,” he says. “Schools teach us. But they don’t teach us to teach ourselves.” — Ben Walker is editor-at-large of Dialogue Q2 2020 Dialogue
The corner office is going out of fashion
Welcome to the age of hot-desking CEOs Kate Cooper is head of research, policy and standards at the Institute of Leadership & Management
Perhaps the most powerful consequence of chief executives hot-desking is increased access to organizational intelligence
There used to be books dedicated to its acquisition. In the interregnum between the arrival of open-plan oﬃces and the advent of flexible working, the corner oﬃce became ever more desirable. It was a chamber that oﬀered limitable interaction and temporary privacy. And it conferred status upon its resident. Yet perhaps the race to the corner will soon become passé? Earlier this year, the MSC Software boss Paolo Guglielmini told the BBC that he’d abandoned his oﬃce – to sit among his employees. MSC designs simulation programs for use in industry. It has more than 1,000 staﬀ spread across the globe. Yet regardless of which oﬃce he visits, Guglielmini sits at a small, basic desk in the same section of the oﬃce as his employees, within immediate reach, like any other member of staﬀ. “I really don’t miss having an oﬃce,” he told the BBC. “For me, it’s perfectly normal to have a desk that is minimum size. Speed is super-important: the speed at which you become aware of a situation, of an idea, [or receive] insights… and the speed at which you actually execute on it is decisive. And I find the fact of being with our teams is actually motivating for everyone. It makes the work-day more fun for me, and hopefully it makes the interaction a little more interesting – and more motivating – for them.” Hot-desking chief executives are by no means the norm, at least not yet. But Guglielmini is not alone. Michael Corbat – chief executive of finance giant Citigroup – abandoned his well-appointed executive oﬃce in favour of working within the firm’s open-plan oﬃce as early as 2017. One personal quality that unites these peripatetic chief executives is confidence. This self-assurance is expressed in two crucial ways. The first way is through their personal conduct – they are happy to be themselves. This authenticity is an asset. It enhances their personal presentation and, by acting a social leveller, helps them appeal to, and engage with, their teams.
The second way in which hot-desking leaders express confidence is through transparency. There has to be an openness about how they relate to and deal with their employees. If you’re in an open-plan oﬃce, your conversations with people – whether in person or over the phone – will inevitably be overheard by anyone within earshot. The geographical proximity between leader and worker matters. As does the lack of material barrier. The greater informality can help break down hierarchies. That workers are physically at the ear of the chief executive should facilitate the transmission of ideas from all parts of the business. But perhaps the most powerful consequence of chief executives hotdesking is the increased access to organizational intelligence. Not only will workers around the leader be able to hear all of her conversations – she will be able to hear all of theirs, too. Leaders will develop a sense of what’s occurring, as it unfolds. By default, they are likely to be fully upto-date, most of the time. Leaders will see connections between what’s happening in various parts of the oﬃce that those involved won’t necessarily be able to see. The benefits for strategic insights are manifold. While the hot-desking chief executive remains rare, the ideas are not new. Businessman Robert Townsend advocated no desk for the chief executive in his 1971 book Up the Organization; the brilliant management thinker Tom Peters later immortalized this suggestion as ‘management by walking around’. The corner oﬃce obviously still holds a certain allure; sitting among staﬀ is a diﬃcult and challenging way to present yourself as a leader. Yet done well, chief executive hot-desking is a potent option for leaders seeking to integrate themselves into their organization and become part of what is really going on. It’s time to start breaking down barriers. Q2 2020 Dialogue
Nurse leadership in the 2020s Nurse leaders are critical stabilizers and catalysts in the fast-changing healthcare sector, write Cindy Campbell, Mike Canning and Mara Green
Today’s healthcare sector is being transformed by dramatic shifts that show no signs of slowing. Indeed, they are set to accelerate, challenging current assumptions and models – from where care is provided, to who will deliver it and how; and ultimately to how we will pay for it. In the US and elsewhere, the government’s role continues to expand, increasing paperwork and regulatory compliance requirements. Services and procedures continue to move toward outpatient settings, with nearly 60% of outpatient surgeries expected to take place in ambulatory service centers (ASCs) by 2020, according to the industry specialists, Becker’s ASC Review. Scientific and technological advances are improving the prediction of disease susceptibility, providing earlier detection, and allowing for tailored therapies – creating a greater need for health teams to work more collaboratively. Patients are taking a greater role as consumers, making their own healthcare decisions and shopping for the best value. Improving quality and the patient experience, while also lowering costs, is leading to a growing trend of linking Dialogue Q2 2020
reimbursements to patient outcomes. These important shifts are coupled with challenges relating to a critical group of staﬀ in the healthcare sector: nurses. There is a growing shortage of nurses at a time when need is growing, driven by the expanded requirements of an ageing population and the large number of nurses reaching retirement age. Those reaching retirement are being replaced by novice-level nurses fresh from universities. In a world of increasing change and complexity, this entrylevel experience base represents an experience gap, which demands more floor-level guidance and mentoring from nurse leaders. These intersecting trends are creating a perfect storm, exponentially changing and accelerating the demands placed on nurses, and making the role of those who lead them – nurse leaders – more critical and expansive than ever before.
Like many other professions, these new demands mean that nurse leaders need to become more ‘T-Shaped’ (see graphic, page 42). T-shaped
The role of nurse leaders is more critical and expansive than ever before
leadership is a phrase that was first coined by Tim Brown, chief executive at IDEO, a firm known for its human-centred innovation work. It describes two diﬀerent trends that are simultaneously aﬀecting the skills and knowledge needed by professionals. The vertical foundation, or core, of the ‘T’ represents the depth of skill and technical specialization that these leaders bring to their role. The horizontal top of the ‘T’ refers to broader knowledge, skills and propensities – such as curiosity and willingness to learn, a broader understanding of the ‘business’ of healthcare, and the relational skills needed to collaborate and engage teams. Clearly, being technically sound is essential to nurse leaders, given what’s at stake in providing care to patients. However, the challenges presented by the new healthcare landscape mean that the real diﬀerentiation lies in nurse leaders also being better coaches and teachers, better negotiators and problem solvers, real change agents, and better business managers – all while maintaining both their own resilience, and that of those around them.
In the environment that is emerging in healthcare, nurse leaders need to make sense of and adapt to change – and help their teams to adapt – at a much faster rate. The point is underscored by Jennifer Baughman, a nurse and nurse leader with 27 years’ experience: “For nurse leaders, the task is to not only keep pace as an individual, but to guide and bring others along through the disruption.” Julie DeLoia, chief academic oﬃcer at Dignity Health Global Education (DHGE), points out: “Nurse leadership positions are critical but often diﬃcult to fill. Frequently, these positions are filled by skilled registered nurses who bring strong clinical skills, have a fair understanding of the role, and are good with patients, but who haven’t had an opportunity to practise leading or to participate in structured leadership development.” Providing such opportunities is critical because nurse leaders are uniquely situated: they are required to act as multipliers, having a positive eﬀect and bringing out the best of others. They must balance the tensions inherent Q2 2020 Dialogue
in managing costs, quality, and resources, while relentlessly focusing on delivering positive experiences for patients and their teams.
A new approach for developing nurse leaders
DHGE and Duke Corporate Education (Duke CE) set out to meet the challenge of how to develop more nurse leaders, faster, using a learning experience that is simultaneously engaging and collaborative, and scalable. The course combines Duke CE’s cutting-edge university research on leadership and real-world experience of working with leaders across industries, with best practices, practical experience and insight from some of the best nurse leaders. The course is made with nurse leaders, for nurse leaders. Designed for both new nurse leaders, who are still learning their managerial role, and for existing nurse leaders looking to further develop their leadership abilities, the course oﬀers a unique combination of evidence-based content, personal insight assessments, rolespecific examples and scenarios, and application exercises and discussions. Dialogue Q2 2020
The goal is to help participants develop the mindset, skills, and confidence to become transformational nurse leaders. Annemarie Roque, a recent graduate of the course, says: “The course is good for more experienced leaders and new leaders because everybody is sharing and learning from each other’s experience.” The curriculum acts as a refresher for some, while for others, it helps accelerate the transition from nurse to nurse leader. Rhonda Mason, chief nursing executive at a critical care hospital in Arizona, took the course alongside 12 nurse leaders on her team. At the conclusion of the course, she said: “The practices and models were familiar, but it helped me and newer leaders look at the theory. The course gave the ‘why’ – and I think that’s the piece that was beneficial to my team, myself included.” The course transcends levels and works to enhance nurse leaders’ capabilities, resilience, and overall eﬀectiveness in meeting the challenges of the rapidly evolving healthcare
The course gave me the ‘why’ – and I think that’s the piece that was beneficial Rhonda Mason, chief nursing executive
environment. It helps nurse leaders to better lead healthcare teams to deliver improved patient outcomes.
Challenges in four dimensions
The course content addresses the key challenges that nurse leaders face in four important dimensions: Leading Self, Leading Others, Leading Change, and Leading Organization. Within each module, units explore a variety of topics crucial for today’s leaders: from considering their style and the type of leader they want to be, to coaching others and having performance conversations; from helping people navigate change and build a team, to managing a budget and staying regulation-ready. Mason adds: “There wasn’t a single module that I went through that I didn’t pick up something or refresh something in my mind.” Not only was the content relevant, but participants were surprised at the depth and breadth that the course covers over its 16-week timespan. The course utilizes an innovative modularized delivery approach that oﬀers flexibility in both time and location, and does not require time away from work. It is driven by distance-based learning content and activities that are flexible and easy to consume for nurses with hectic schedules: content can be accessed while travelling, from home, and on multiple devices. Each unit contains a series of provocative and practical video lessons, interactive application exercises, and discussions that provide an opportunity for participants to share their experiences, learn from peers, and create a connected community of nurse leaders that speak the same language and can accelerate their shared transformation. A recent graduate said: “The discussion gave me the opportunity to share and learn from peers. There were so many good ideas and connections that will be resources in the future.” The experience is managed by a course facilitator, either a nurse leadership professor or a former chief nurse executive, who drives conversation across the application exercises and discussions, and provides real-time feedback. Their involvement helps participants quickly and eﬀectively move from learning, to doing. Past participants in the programme have stressed that they found the Certificate in Nurse Leadership from DHGE and Duke CE distinctive from other programmes on the market. Nurses are busy people with increasing demands on their time in the workplace and in their personal lives. This course makes it convenient to do the learning, but also builds a community of support that accelerates application and insights from
NURSE LEADERSHIP Leading Change
real-world situations. We have already had several members from the same healthcare system or hospital take the course together, an approach that can confer additional benefits. In one cohort, we had a chief nurse executive and several members of her team; we have also had a couple of supervisors taking the course with their nurse leaders. In each instance, the individuals were speaking a common language and providing local support during the application and implementation of the assignments, which significantly increased impact in the workplace. “There is no question that exponential change in the healthcare sector will disrupt what care is possible, and where and how it is delivered. Nurse leaders are one of the greatest leverage points on the front line of making this change happen while improving care and outcomes for patients,” says Michael Chavez, Duke CE’s chief executive. The challenges across the healthcare sector are daunting. It has been truly gratifying to build a course that develops a common language, a consistent set of frameworks and tools, and a supportive community that helps nurse leaders better navigate the continuously evolving terrain of healthcare and optimize patient care and outcomes. We hope this small but smart step will make a diﬀerence. Let’s face it, our own lives may depend on it. — Cindy Campbell is an instructional designer and member of Duke CE’s educator network; Mara Green is director, new commercial models; and Mike Canning is global managing director of innovation and new commercial models, at Duke CE. — Find out more about the Nurse Leadership Program at: bit.ly/DCENL20 Q2 2020 Dialogue
Getting 70/20/10 right It is one of the most misused concepts in learning and development. Byron Hanson makes the case for a rethink
The ‘70/20/10’ concept is one of the most common concepts in employee development – and one of the most widely misunderstood. It captures the idea that eﬀective workplace development includes diﬀerent elements: the 70% denotes learning through experience on the job; the 20% represents learning through others; and the 10% represents development through programmes, courses or content. The model can be useful both for employees and HR departments, not least because it places emphasis on the value of learning through doing and dialogue, not just learning by knowing and understanding. However, I’ve seen many organizations run into problems in how the concept is translated into action, and how it can be leveraged to embed learning. It’s time for a few clarifications.
The time flaw
First, the 70/20/10 percentages do not relate to the actual time spent on development. In originally framing the concept, researchers asked employees how they had learned something related to their work: 70% of the time, respondents said it had been by doing it on the job, and so on. The model emerged not as a description of time spent, but of the percentage chance of a development activity sticking. Yet employees are often instructed to base their development time around the 70/20/10 categories. This makes no sense. What if an up-and-coming manager wants to do an advanced qualification that requires weeks, or months, of coursework? How does that fit in the 10% time allotted? It may take pressure oﬀ HR departments and budgets to tell employees that most of their learning has to be “on the job”, but it is not an answer.
The ‘bucket’ problem
Another problem is the desire of many organizations to turn 70/20/10 into three buckets for development activities. I was recently working with one of the larger resource companies in Australia, and was shown their employee appraisal system. In the development section, employees had to list their planned development activities and objectives, using the three categories. Courses went into the 10% bucket; feedback, coaching or mentoring went into the 20% bucket; and finally, there was a list of all the things the employee would do at work. Each of the buckets had to have something. These buckets may be good for HR systems, but the assumption that employee development can be separated out into distinct and potentially unaligned categories is faulty. Take Dialogue Q2 2020
Vanessa, a senior leader in that company. She had been identified as a high potential candidate for more senior roles. Her development plan consisted of a two-day course on executive presence and communication skills, mentoring from a senior female executive, and a stretch assignment working on a process improvement project. Each of these could be useful, but they can only be properly leveraged if the learning is integrated.
The 70/20/10 funnel
Employee development goals are more likely to be achieved when 70/20/10 is used as an integrated model. I describe this as a learning funnel. I like to use the model to set out areas of inquiry, beginning with the 10% and moving through to the 70%. This flow ensures that development activities are aligned. So, before Vanessa does any development, it would be good to review what she is ‘missing’ in terms of her ability to do a more senior job. This may show she has nothing to learn externally, and the course she was going to take might be useless. But if she did take the course, its insights would be a natural agenda item for time spent in the 20% category. Vanessa’s mentor could bring a more aligned perspective and help extrapolate from new knowledge. Finally, the process improvement project would only be useful as a learning activity if Vanessa could use it to fill any skill gaps identified; otherwise, it may not stretch her as needed. If learning across the 70/20/10 categories is not integrated and aligned, the likeliness of embedding learning diminishes.
Unleashing the social system
A final critical point is that learning is social. If you want learning to stick, you must make it a team sport. We learn with others, not in isolation, yet 70/20/10 is typically represented as an individual development tool. My research in embedded learning suggests we need to unleash the social system in organizations to fully leverage the 70/20/10 concept. The social system comprises the relationships and connections with critical stakeholders who leaders engage with in order to achieve objectives and get work done; it is made up of local ‘tribes’, the groups a leader works with. Embedding learning means consciously engaging with the social system in three ways.
Context and meaning-making. I can’t apply new learning on the job unless I am clear about what it will mean for people around me and how my learning will play out in our context.
Application. If I do something new, I need to let those around me know what to expect and how it will impact their world.
THE 70/20/10 FUNNEL
THE W H AT A N D H O W
What new external knowledge or content do I need to understand or learn to be better at this?
Who can give me feedback or coaching on how I can get better at this?
Feedback. I won’t know if I am improving if I don’t receive fast and frequent feedback from my local tribe. How leaders engage their social system to embed learning is shifting. Recent research from Duke Corporate Education has noted that the arrival of learning platforms with social hub functionality has not only made content more accessible, but has provided new mechanisms for leaders to connect, beyond traditional face-toface interactions. This can make social learning and engagement more eﬃcient: used well, these systems allow leaders to engage stakeholders faster and more frequently, helping to create connection in the moment, with real-time feedback on performance improvements. Understanding that learning is social means that 70/20/10 cannot be done alone. Helping employees recognize how the social system can be leveraged is the critical missing link in ensuring that investment in development delivers improved competence at work.
THE WHERE AND WHEN
Where in the workplace can I apply and practise this?
Helping employees recognize how the social system can be leveraged is the critical missing link
— Byron Hanson, PhD, is director of Like Minds Advisory and a former managing director of Duke Corporate Education Q2 2020 Dialogue
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Competition is out of fashion in the Valley
The strange death of the market Vivek Wadhwa is distinguished fellow at Carnegie Mellon University’s College of Engineering and author of Your Happiness Was Hacked
Platforms are like shopping malls. It all works fine until one mall becomes so powerful it wipes out every other mall in a 20-mile radius
Competition is for losers. So says PayPal co-founder Peter Thiel. Thiel implies that 18th-century Scottish economist Adam Smith was wrong: that rather than being the foundation of capitalism, competition is its antithesis, because “capitalism is premised on the accumulation of capital, but under perfect competition, all profits get competed away”. Thiel’s views are popular in Silicon Valley. Big Tech likes monopolies. To channel Thiel, why share the pie when you can eat it all by yourself? This murder of capitalism is happening in plain sight. Big Tech is creating fields of play where they are the only entrant, and therefore the sure-fire winner. Platforms like Amazon and iTunes shackle users to a single market owned by a solitary proprietor. Platforms work like a shopping mall. Think of the way your local mall works – the owner takes care of the mundane dayto-day stuﬀ like maintenance and upkeep of the facilities, so tenants can focus on the serious business of selling their goods. Renters benefit from the passing trade of customers who came in for something else, and the owner gains invaluable intelligence about his tenants’ sales. It all works just fine – until that mall becomes so popular and powerful that it wipes out every other mall in a 20-mile radius. Now the owner can supercharge his rents and cut back on his service. The tenants have little choice but to accept the new conditions if they want to sell their product. It gets worse. The market intelligence gained by the mall-owner becomes a brutally anticompetitive tool if he then goes into production himself. He learns about the products that sell the best and command the highest margins, then emulates them. This is the model Amazon has adopted with its Basics range in the US and other territories. The tech giants’ onward march has completely outpaced their notional political masters. Monopolists are prone
to argue that the regulator provides their competition. Yet US lawmakers neither understand the technology nor grasp the sector’s underlying market dynamics. Such weak competition is no competition at all. There are some glimpses of light. India is taking steps to limit monopolistic practices. Its new e-commerce laws will inhibit Amazon’s ability to import its emulation model into the subcontinent. Preventing this closed shop – where landlord and salesman are one and the same – is at the heart of India’s regulatory fightback. “The idea,” says antitrust lawyer Lina Khan, “is you can either run the marketplace or sell your goods on the marketplace – not both.” The Indian model might indicate the way forward. When Smith extolled the virtues of capitalism, he never envisaged a single operator capturing market share on the scale that Amazon has in the US. The online retailer – once, forgettably, a bookseller – now commands almost half of all e-commerce revenue in America. It has used its success in one industry to dominate another, willing to forgo profits and use its advantages in shipping and warehouse infrastructure to kill oﬀ the competition. As Khan wrote in the Yale Law Journal, Amazon’s practices resemble those of the all-powerful railway barons of old. Independent businesses that use Amazon’s ‘track’ are becoming dependent – almost parasitic – on their biggest competitor. It remains rare for the world’s greatest economy to be behind the curve in the protection of capitalist principles. Yet that is the sad truth with Big Tech. US policymakers need to go back to school and learn about the industry they are charged with regulating. They have a job to restore American capitalism before it crumbles on the altar of Big Tech. Smith called competition the invisible hand that makes capitalism work. His dream is being undone by the dead hand of monopoly. Q2 2020 Dialogue
Dialogue Q2 2020
The innovation paradox Too many big businesses are stuck in a low-risk, low-innovation cycle – but they have all they need to break free. Joe Perfetti explains
You’d think that large and successful companies would be quick to adapt and pivot. You would be wrong
We live in a world of disruption. The average time a company will stay on the S&P 500 stock market index is expected to drop to about 12 years by 2025, according to management consulting firm Innosight. Business models are under threat and the pace of change is accelerating. You’d think that large and successful companies would be quick to adapt and pivot. You would be wrong. Large public companies have become risk averse. They focus on quarterly results and are severely penalized by financial markets if they miss sales or earnings targets. Predictability is rewarded and uncertainty is penalized. Analysts ask: if you cannot meet a quarterly target, why should I believe you will be able to meet your three- or five-year targets? This short-term trap stifles innovation. Senior leaders start rewarding certainty and stop funding uncertainty. Self-disruption is looked at as cannibalization that leads to missed targets in the core businesses. ‘ROI’ becomes ‘restriction on investment’ as leaders demand more and more evidence to justify new initiatives and prove they will make money quickly, without risk. Every budget is scrutinized for variance and uncertainty, the financial enemy. As a result, large incumbent companies have diﬃculty investing in the edge businesses of tomorrow and often wait to see how markets settle before moving to take advantage of opportunities. In other words, they create a selffulfilling prophecy: they will be disrupted by the ever-evolving market. Successful incumbents face another challenge: hubris. They are successful and do not want to change what is working. The philosophy can be summarized by the old adage, “if it ain’t broke – don’t fix it.” As a result, leaders become more hesitant to abandon tried-and-true practices and business models, ceding ground to upstart competitors. Q2 2020 Dialogue
Large companies start looking for reward without the risk. They are searching for a unicorn
Yet these companies still have tremendous advantages, should they choose to apply them to new market opportunities. They have established brands. They know how to scale businesses. They can take advantage of existing infrastructure and they have the financial resources to invest, fail and learn without jeopardizing their survival. Start-ups are the opposite. By definition, they live in an uncertain world. They can act and adapt quickly to respond to customer needs, unburdened by the baggage of legacy systems. They can build a minimum viable product and take risks that large companies would be unwilling to contemplate. A start-up is often betting the company on an innovation: failure can lead to financial distress. Yet these start-ups often lack the resources to succeed. They do not have the brand recognition, the access to ecosystems or the scale to deliver. They often lack the credibility to sign large contracts and become core parts of a customer’s business processes and supply chains. Start-up entrepreneurs may see the future more clearly than others, but the road to success is far more challenging. This is the heart of the innovation paradox. It is a cold irony that turns risk and reward on its head. Typically, to get more reward, you have to take more risk. Large companies start looking for the opposite – reward without the risk. They are searching for a unicorn.
Finding ways to say yes
Dialogue Q2 2020
To build more sustainable businesses, leaders must break the cycle that traps their organizations in a low-innovation, low-risk status quo. At a Harvard forum in 2019, Brett Biggs, the chief financial oﬃcer (CFO) of Walmart, explained that he and his peers are often seen as ‘Dr No’ – “no” is their default answer to every request. Biggs argued that CFOs have to earn the right to say no, by looking for more ways to say yes. When Walmart first considered getting into the home delivery grocery business, Biggs immediately said yes to the team that wanted to implement the new business model. It was an obvious move – so obvious that detailed analysis, of the sort that would typically be required, would only slow down a decision that was inevitable. Why establish arbitrary barriers to slow down the process? But this choice did not come without consequences. Walmart needed to make heavy investments in its new model and had to explain the changes to Wall Street, since earnings targets would be missed in the short term and cash flow would drop. The dividend would also suﬀer temporarily. The response from Wall Street? Analysts and investors said they understood what Walmart
needed to do; they agreed it was a good choice for the future. Despite that, the share price still dropped, from approximately $80 per share to around $60. The company’s investors paid a short-term price. But by December 2019, Walmart’s stock was trading above $120 per share, as the company’s results showed the benefit of the investments made in 2015-2017. Reed Hastings faced a similar challenge at Netflix. He told the market he was pivoting from DVDs to streaming and would need to invest heavily in the new model. Analysts put a sell on the company and the stock’s value plunged to single digits in 2012 – yet today, Netflix is one of the dominant streaming companies globally, with a share price above $315.
Change the timeline
Valuing a stock is about understanding future cash flow. If I add up all the cash a firm will generate in the future and adjust for risk, I get the share price of the firm. The first change that a large organization needs to make when considering innovation is to adjust the timescale for measurement. Quarterly earnings targets are a trap. Equity analysts look at quarterly numbers for clues about the future, but if they believe you are short-changing the future to boost results, they will still put a sell rating on your company. Think about it this way. Walmart had net income of about $3.2 billion in the October 2019 quarter. Its market capitalization – the value of its equity, based on adding up all of its risk-adjusted future cash earnings – was about $344 billion at the end of 2019. So, three months of earnings represents about 0.9% of the company’s value. If Walmart took $1 billion of earnings and invested it in innovation, it would be putting aside 0.3% of the company’s value. If it put $100 million into innovation, it would be a rounding error. Value is not just what you earn now, but the impact of what is spent now, over time. Transparency about investments, and believable communication about their future impact, is critical. Google focused on this when it created Alphabet. It helped investors see that it had a very stable
core business as it segregated out its risky, innovative bets in a way that was more transparent. For incumbents – to paraphrase Franklin D. Roosevelt– the only thing to fear is fear itself. Embrace reinvention, set aside a small portion of earnings for investment in edge businesses, and change your timescale of measurement to go beyond a quarter.
Create and acquire options
At Google, there is a sign on the wall with the maxim “fail well”. Incumbents must learn from that. Early investments must not be held to the same strict ROI standards that would be used for incremental investments in the core business. We can look to venture capital and private equity to understand how early stage investments should be treated. Start by looking at attractive markets and use design-thinking principles to understand the customer. Think about early investments not in terms of financial success or failure, but as a way of purchasing information. Apply option theory to decisions: remember that to price an option, you do not need to know the return on investment. Option pricing is based on uncertainty. When investing in uncertain projects, evaluate the projects as options. The advantage that an incumbent has with a business option is that when it looks like a success, larger investments can follow. When an option becomes a failure, not only does it not kill the company, but it becomes an opportunity to learn – to fail well.
Don’t hug the business to death
According to a McKinsey survey published in June 2019, 57% of executives felt that politics slowed down the growth of in-house start-ups, and 90% agreed that they had to get input from stakeholders across corporate groups in making decisions. The politics of innovation have to be managed closely. Some incumbent leaders may look at an innovation as a threat to results in the existing core business. New ventures need strong executive sponsorship – but they also need the freedom to operate in such a way that innovation is not stifled.
Embrace reinvention and set aside a small portion of earnings for investment in edge businesses
To increase the probability of success and leverage the benefits held by incumbents, leaders must consider the following.
The chief executive’s support of innovations and new ventures. Initiatives must be viewed as a priority for the organization.
Strong executive sponsorship. Sponsors can help navigate the politics, marshal resources, and remove barriers to execution.
Manage early stage innovation investments as a portfolio, not an individual project. Cues can be taken from venture capital and private equity. Investing in one project can be uncertain, but a portfolio distributes the risk.
Partner with accelerators. Look for partners, like Boston Consulting Group’s Digital Venture business, which have experience in accelerating corporate start-ups, and/or companies such as Plug and Play, which can link large corporations to entrepreneurial ecosystems.
Reconsider early stage metrics. Focus on the customer need and market opportunity. Allow early stage investments to be viewed as test-and-learn experiments that acquire knowledge and accumulate options, rather than focusing on short-term payback or cash-flow generation: return on investment and breakeven will be uncertain and unproveable.
Redefine the notion of failure within the organization. A good decision that has a poor result can be looked at more positively as an experiment. Fail fast and cheap, but – more importantly – fail well by learning and applying new knowledge to future decisions.
Investing in stages. Develop options to flexibly ‘stage gate’ choices to proceed. If results are poor, stop; if results are good, continue with ever-larger investments.
Allow innovations to self-disrupt your business. Manage the incentives of both core and edge businesses so that innovations are not at odds with the goals of the legacy business.
Use the core business’s network and ecosystem. Accelerate innovation by leveraging the company’s resources.
Communicate the business plan with investors transparently. Provide context for the initiative and credibly explain the longerterm value and benefits that are likely to be achieved. For business, the only constant is change: we must continue to innovate to remain relevant. Doing so is becoming ever more challenging. Large organizations must use their extensive resources and substantial strengths to escape the innovation paradox and build edge businesses that become the core of the future. Risk is not mitigated by doing more of the same – only by leveraging core strengths to create new opportunities. — Joe Perfetti teaches equity analysis at the University of Maryland and is an innovation fellow with Duke CE Q2 2020 Dialogue
The future of healthcare Tim Jones and Jonathan Besser report on the technology and talent challenges facing healthcare leaders around the world
Propelled by innovation in technology, the healthcare sector is undergoing major changes. In the US, Amazon is embedding itself in the prescribed-drug supply chain, while in the UK, Alexa is answering patient questions on behalf of the National Health Service. Apple is consolidating health records covering a wide range of clinical and personal information, and increasing numbers of people are using the Apple Watch to track their vital signs, 24/7. To assess the leadership implications of these technological changes and the ongoing talent challenges faced by the sector, Future Agenda and Duke Corporate Education led a series of expert discussions with regulators, researchers, doctors, care providers and leaders from businesses, charities and NGOs. Our research identified 16 future shifts that could drive substantial change across multiple systems (albeit that not all are universal), and six macro trends which are the most significant influences on the future of healthcare.
Macro trends shaping the future of healthcare
The power of data Exponential growth in health data will provide multiple benefits for diagnosis, integration and personalization of care. As diverse healthcare players share more and better patient data, multiple eﬃciencies will be created. Urbanization and health More than half of today’s global population live in cities; the UN forecasts that the proportion will reach 68% by 2050. Urban life brings a range of social and environmental pressures aﬀecting human health, including obesity, limited physical activity, and increased risks of contagion. The West vs the rest The eastward shift in economic influence and innovation prowess changes the balance of power in health. Asia increasingly sets both standards and prices, forcing a change in many Western models. Prevention and wellness More advanced, personalized diagnostics are aligning with growing societal and political pressure to drive a shift to proactive prevention, in preference to the expensive cure of disease. Increasing patient centricity The step-change under way in individuals’ health data is enabling care to be transformed. It is becoming more personalized, and more eﬀective.
2 3 The greatest issues facing healthcare leaders are not financial but human-centred Dialogue Q2 2020
Flexible organizations New organizational forms – flatter, collaborative and virtual – are increasingly dominant. New technology and a mobile workforce enable this shift.
Assessing the challenges ahead
These trends create interlinking priorities for leaders. The ever-increasing impact of technology is connecting with changes in external markets and patient expectations. Leaders will need to consider the implications carefully to ensure that healthcare can deliver for individuals, customers and communities alike.
The leadership implications of continuing technological development New technology continues to be transformative, but the greatest issues facing leaders are not technological, operational or financial: they are human-centred. The challenges arising from the intersection of data, technology and fastdeveloping trends are particularly acute. Key questions for leaders include: What are the data-driven disruptors facing us? How do understand, predict and capitalize upon current and future disruptors? How can we capitalize upon new data in a thoughtful and trustworthy manner which empowers customers and employees, and respects sensitivities around data transparency, storage and management? How can we use our expert organizational and individual knowledge to drive and lead innovation for the greater good? How can we capitalize on technological advances to create a workplace of the future, that attracts and retains the best and the brightest? How can data and technology be combined with empathy and an understanding of the issues presented by a changing context, such as urbanization and climate change? How can we use data and technological advances to support and drive the development of wellness and prevention? Are we wellpositioned to enable this?
Talent and changing markets: leading in the new normal People with the mindset, ability and resilience to thrive in the evolving global healthcare industry
H E A LT H D ATA M A R K ET PLAC ES
B IG TECH H EALTH
AI & U NS T R U C T U R ED DATA
WORKFORCE AU TOMATION
M ENTA L HEA LT H
T HE POWER OF DATA
DEEPER COLLABORATION FL EXIB L E OR GANIZATIONS
I M PAC T OF C LI M AT E C HA NG E U R BA NI Z AT I ON & HEA LT H
KEY H E A LT H C A R E TRENDS 2020-2030
TRUST & TRA NSPA REN CY
INCR EASING PATIENT CENTR ICIT Y PATIENT AU TON OMY
R I S I NG U S C OS T S
T HE WES T V S T HE R ES T C HI NA TA K I NG T HE LEA D
PR EV ENT I ON & WELLNES S
INDIVIDUALIZED MEDICIN E
ASIA SETTING T HE S TA NDA R DS
ELECTIVE PR EVENTION
Forwardlooking healthcare leaders need to ensure their organizations are more agile
P R O AC T I V E WELLBEI NG
A F FO R D A B L E HEA LT HC A R E
are at a premium. They need to be identified, developed, and encouraged to shape the future. This requires a rational, consistent process that clearly engages with each individual’s intelligence and their ability to learn and develop. Two other elements are also important: the heart and the hands. Organizations need to appeal both to a person’s passions and intrinsic motivation, and ensure they have the ability to take what they know and control and shape it. An environment that delivers these elements simultaneously, and succeeds in doing so across cultures, is indispensable for success. Start by asking: Do we as leaders understand how our employees and purchasers are changing currently and into the future? If we don’t understand them, how do we lead them and our organizations? How do we meet the need to work with increasing agility using technology? How do we learn to understand the needs, leaders and customers of emergent and
emerging markets? What can we do to address the shifting focus of both buyers and organizations as they shift East? How do we attract and retain talent that understands Asian markets? Forward-looking healthcare leaders need to shape a brighter future, ensuring their organizations are more agile, adaptive and able to accelerate. Leaders will need to demonstrate flexibility and mastery across a range of areas: from strategic orientation, to customer and patient centricity, operational excellence, and the skills and mindset needed to lead worldclass performance. Above all, leaders must develop real clarity about the implications of these trends. The future of healthcare will be shaped by leaders’ curiosity, compassion and courage, and their ability to develop connections with the people and communities they serve. — Tim Jones is programme director for Future Agenda. Jonathan Besser is a managing director for Duke CE — Download the full report at bit.ly/DukeCEFoH Q2 2020 Dialogue
The next technology disruption How we view the world is about to change. David Rose and Hari Nair explain
The human eye can discern 10 million diﬀerent colours and is the body’s fastest muscle – the average blink lasts just 100 milliseconds. For all of its wonders, however, the human eye hasn’t evolved significantly in millennia. Our ancestors perceived the world much as we do. That’s about to change in a radical way with the arrival of augmented reality (AR) technology and what we dub ‘SuperSight’.
A vision of the future
Every wireless carrier is racing to ‘own’ and personalize the photons that hit your eyes Dialogue Q2 2020
Imagine this. You’re walking through New York on a gloomy December morning, wearing your Apple AR glasses. These stylish spectacles have built-in GPUs (graphical processing units) that customize or ‘curate’ everything in your field of view, in real-time. Trash is replaced with images you prefer – flowers, perhaps. Instead of street advertising, you see videos of friends speaking in Chinese to help prepare for an upcoming trip. The bleak sky is brightened up with hints of summer sun. Tinder’s AR functionality ‘edits out’ any recent dates that didn’t work out: you pass that guy who dumped you last week and see only a ghostlike figure. Because you recently downloaded a Gucci fashion app, your glasses highlight on-trend outfits; you bookmark them with a quick eyebrow raise. Ratings for stores pop up with avatars of friends who recently shopped there. Your glasses know your food preferences, so healthy places are highlighted while burger joints are blurred. Later, you go for a run: your glasses show a small pack of zombies chasing you, helping you keep up the pace. Don’t mistake this for sci-fi fantasy. Every smartphone maker, social media giant, game studio and wireless carrier is racing to ‘own’ and personalize the photons that hit your eyes. One research analyst pegs computer vision as a $30 billion market by 2025. For the first time in history, we’re about to have a super-human
ability to experience reality as we want it – or at least, as the companies that are subsidizing our glasses want it.
The emerging market
A whole ecosystem of software companies is emerging to create compelling AR applications and new business models. Incumbents are investing huge amounts alongside new entrants like AR goggle-maker Magic Leap, which raised $2.3 billion on the promise of mixed reality experiences. Where the military used to pay millions of dollars for pilots’ heads-up display helmets, Microsoft now sells its HoloLens developer kit for $3,500. Aﬀordable cloud-connected glasses are being rolled out by Snap, Bose, and others. Amazon has launched the Alexa Echo Frames, which connect to a phone to read messages, provide calendar cues and give directions, for $179.99. This is just the beginning, with sophisticated coaching services adapting to your context, activity and mood in the near future. New business models are likely to dominate: our magic glasses may be free, as long as we tolerate next-generation ads.
Four easy places to start generating value
As with any new platform, there are abundant opportunities to use spatial computing. Companies should create future optionality in
Left Hari Nair; Above David Rose
Employees want to be challenged and prepared to perform. AR provides aﬀordable and compelling ways to rehearse both soft and hard skill challenges.
Improve collaboration for product development teams with spatial telepresence tools.
AR provides affordable and compelling ways to rehearse soft and hard skill challenges
the AR space by conducting ‘stepping stone’ experiments: disciplined attempts to find market footholds. There are four paths to create useful experiences.
Generate incremental product sales with a virtual try-on experience.
Furniture-makers Wayfair and Ikea increased conversion rates by five to ten times when they enabled customers to see home decor items in the context of their homes. We achieved the same at Warby Parker with our ‘virtual tryon’ app that uses a phone camera to read the topology of a customer’s face and show a live selfie with stylish glasses. If you sell a 3D product or service, you have the 3D models needed to prototype this experience; use tools like Vuforia or Torch.app to get started quickly.
Decrease the burden of support costs with a 3D customer-support app.
Where companies today leverage YouTube to explain how to install or repair their complex products, AR allows for exploded views, assembly animations, time-lapse visualizations, and detailed 3D views. AR tools can help consumers solve simple breakdowns.
Increase employee retention and engagement with immersive training.
The most expensive asset in any innovative company is people. We spend too much time in blind meetings without shared views, harming understanding of product issues. AR can provide great collaborative experiences while cutting the time, expense and carbon emissions created by travel for meetings. These four use-cases are a fast way to start making a meaningful diﬀerence across the enterprise. There are many other applications, of course, but these may take more time and investment. One approach is applying the ‘jobs to be done’ framework: look for pain points that are frequent, important, and where the alternatives are not ideal. These could be great starting points for an AR-enabled solution. Through our Supersight.org open innovation initiative, we are part of an ecosystem of people who are committed to using this framework to solve consumer pain points. Some of today’s opportunities may appear niche, but there is significant value in building early traction in this space while keeping the investments small. Big market opportunities are set to follow, as a range of new AR and AI-enabled devices hit the market. Leaders can get ahead of the curve by focusing on customers’ pain points and the jobs to be done that AR technology will help us solve. — David Rose is a faculty member at MIT, and a futurist at EPAM Continuum. Hari Nair is a fellow of the Advanced Leadership Initiative at Harvard University, a Duke CE educator, and collaborates with Rose on the SuperSight initiative Q2 2020 Dialogue
We are a team of architects, designers and creative thinkers
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Not every company’s costs are led by their revenues
Some firms play chicken on expenses Phil Young PhD is an MBA professor and corporate education consultant and instructor
Firms that rigidly base their operating expense budgets on forecasted revenues may not be able to react when sales are slowing
Ask a business manager how each year’s operating budget is set. Chances are they will tell you that it is based on the revenue forecast: “We help the finance staﬀ forecast next year’s revenue – and then they tell us how much we get to spend.” Of course there are occasional complaints – particularly from sales and marketing managers – that if they had more money to spend, they could sell more. But prudent financial management means paying close attention to the bottom line. An excessive ‘E to R’ (expense to revenue) ratio is a good way to erode profitability. But what if the whole idea was not to earn or be overly concerned with profit? What if a company’s focus was primarily on sales and brand-building? Then perhaps an argument could be made for considering the causal relationship between expenses and (anticipated) revenue, rather than a preset ratio between (forecasted) revenue and allowable expenses. In a sense, these two financial approaches have something of a chicken-and-egg relationship. Which metric should lead and which one should follow: forecasted revenue or expenses? As a possible answer to this question, consider the example of markets in which there are two types of companies: established leaders and ‘disruptors’. The valuation of established leaders is based on their ability to produce steady and predictable growth in earnings and stable dividend payouts. Hence, their financial managers want to avoid the loss-making consequences of overspending by keeping expenses within some established proportion of forecasted revenue. The financial management of established companies is largely revenue-led. On the other hand, disrupting companies use the expense-led approach, because they know that their valuation (either pre- or post-IPO) is based primarily on their ability to ramp up revenue and establish their brand. They typically use
technology and novel business models to generate impressive top-line growth. But this approach can cost much more than can be covered by revenue, particularly at the start. Spending money first is how they expect to increase their revenue and build their brands. The key is for them to raise enough venture capital to fund their expenses as they grow. For disruptors and their investors, steady earnings growth and dividends are concerns for a later time. Regardless of which metric comes first in the financial management of a company, there are potential pitfalls. Companies that rigidly base their operating expense budgets on forecasted revenues may not be able to react quickly and eﬀectively when their sales are slowing. To avoid this, they must be agile enough to adjust their way of doing business. This could involve taking on more of the expense-led approach that may be used by the very companies that are disrupting them. For disruptors who use the expenseled approach, the obvious pitfall is that a business can only go so far in making successive quarterly or annual losses. The key is that the goal of a disruptor is not to make a profit but to show enough revenue, brand strength and profit potential to conduct an IPO or be bought by another company. One high-profile current example of the pitfalls of the expense-led approach is WeWork. Its revenue went from $886 million in 2017 to $1.8 billion in 2018. Yet during that period its losses were almost equal to its revenue. In early 2019 it filed for an IPO – but in doing so, it made its actual financial situation much more transparent. Ultimately, WeWork needed to be saved from bankruptcy by a $9.5 billion bailout from venture capital firm SoftBank towards the end of 2019. Care to guess which financial management approach is now being used at WeWork? Here’s a clue: expenses aren’t leading the show any more. Q2 2020 Dialogue
Learning from the financial crisis Iceland’s experience in the 2008 crash offers lessons for leaders today, says Svein Harald Øygard
In the early 2000s, the growth of Icelandic banks looked like an astounding success. For proponents of a free market and a small state, Iceland was the dream banking location. The market was open. EU/EEA rules provided market access. Capital flows were unconstrained. Regulations were lax. The regulator was largely absent. Everyone trusted in self-regulation by the banks and markets. The rating agencies were all there – with the Icelandic banks often well-paying customers.
The ups and downs of the ratings, credit default swaps and share prices of the banks were closely monitored. Leading international auditing houses reviewed the accounts, never flagging any concerns. Yet in the space of just a few weeks, it all came crashing down. The system failed on the most basic level. The banks flouted even the most basic principles of prudent banking practices. Iceland’s Financial Supervisory Authority, the FME, failed to spot the most basic systemic risks: either risks were not
No case provides a better illustration of macroeconomic extremes than the Icelandic experience
underlying imbalances. For instance, signs of fatigue were visible in 2004 and 2005, but they did not become a problem at that point. By 2008, however, many countries had large imbalances and deficits. The result was a long and intense downturn that aﬀected whole economies.
Are the warning lights flashing again?
The pork cycle
In 1934, the Hungarian economist Nicholas Kaldor coined the name of a particular economic phenomenon, the pork cycle – sometimes also called the hog cycle or the cattle cycle. It works like this. In good times, when prices are high, farmers oﬀer more pork. The price falls. Then, they farm less pork; the price rises. The same mechanisms aﬀect the global economy. “The market is unable to have stable expectations for the future,” says Harald Magnus Andreassen, the chief economist of SpareBank 1, the largest regional banking group in Norway. An investment cycle arises as businesses increase investment in pursuit of attractive market opportunities. Demand is rising; the sentiment is positive. Banks provide more loans. Equity prices rise, especially for companies producing materials, energy and investment goods. Eventually, the cycle is broken by its own internal logic. “The ups are often not sustainable. The debt becomes too high, some deficits too large, the investments excessive and the pricing aggressive,” says Andreassen. He makes the point that pure equity bubbles are often not that serious for the broader economy, unless they coincide with
Risk is essential
As 2008 showed, macroeconomic shocks can topple banks and companies, even those that are perceived to be highly successful, or tear down investment portfolios built over decades. Even so, companies need to take risks, just as investors need to be in the market, in order not to lose out through the investment cycle. But leaders and managers must understand the macro risks facing their businesses. No case provides a better illustration of macroeconomic extremes than the Icelandic experience. It oﬀers us the chance to see what can happen to an economy, both on the way up and on the way down. Let us hope it remains a unique learning opportunity. — Svein Harald Øygard is a former head of the Central Bank of Iceland. He is author of In the Combat Zone of Finance (LID Publishing, 2020) Q2 2020 Dialogue
flagged, or if they were, the authorities did not act upon them. Most of those involved wanted the banks to continue their excessive growth and did what was needed for that to happen. When the tower started to tumble in mid2008, it was too late to avert a total collapse. Iceland’s failure to build trust and alliances over the previous years not only limited the measures available to policymakers, but led regulators and authorities in other countries to cut funding, limit the transfer of funds and seize assets. Simply put, before the collapse, everyone believed that all that could go well would go well. After the crash, they believed that all that could go badly would go badly. Before the collapse, no policy tools were used. After the crash, a huge range of tools was put into use. How could this happen – and what can business leaders today learn about the macroeconomic risks that might lie ahead?
How does today’s position compare with 2008? In general, investment levels are high. In fact, they have only been as high as today, relative to the trend level, twice since 1985: right before the downturns in 1990 and 2008. Yet in many places, unemployment is low. In the US, it has been falling since 2010, and today is at its lowest level since 1980. Corporate debt is another important indicator to watch. The corporate debt-toGDP ratio varies in the US over the course of the economic cycle by about seven percentage points: when times are good, companies invest and raise debt, so overall debt levels grow; as the cycle turns, they slash investments and reduce their debt, thereby shrinking or even stalling the capacity for further growth. Shortages occur, prices rise, and the new cycle starts. The start of 2020 has seen debt levels at an all-time high. “We are approaching the end of the cycle,” says Andreassen. “The market is expensive, and the economy is stretched.” That sense may also be reflected in stock indexes. When stock valuations creep up, it is time to sharpen the senses. No major fall in the value of shares in the last 30 years has occurred without valuations first reaching peak levels. When falls do happen, leaders need to look at other indicators. Positive leading indicators – manufacturing activity, retail sales, start-up levels, and so forth – and spare capacity can point to further growth. On the other hand, if leading indicators point downwards and there is little available capacity, then organizations should be on high alert.
The rise and rise of peer-to-peer lending Innovative collaborations and customer focus will drive continued growth in this young industry. Inês Maia looks to the future
Over the last 15 years, peer-to-peer (P2P) The sector has shown a unique willingness lending has enjoyed a meteoric rise. In the wake to embrace regulation. Rather than viewing of the financial crash of the late 2000s, it has regulation as a straitjacket on growth, platforms firmly established itself in the mainstream of have taken a long-term view and recognized financial services. that regulation further legitimizes the industry The concept is a simple one: those looking in the eyes of consumers and investors. With to make a return on an investment lend their that mindset, the industry has also developed money directly to consumers or businesses self-regulating structures. In the UK, not only seeking a loan. It eﬀectively cuts out the is P2P fully regulated by the Financial Conduct middleman, such as a bank, which creates Authority, but platforms have founded the Peera significant eﬃciency. This translates into to-Peer Finance Association: its members must favourable yields – often of 5-10% – for the adhere to a strict set of operating principles. investor, and competitive loan rates for the borrower. The platform simply acts as a facilitator Are challengers replacing traditional finance in the transaction. providers? In 2018, the sector’s total lending volume Investment and high-street banks have been topped £6 billion in the UK alone, a growth around for centuries and are clearly still the of 20% on the year before. More than £16 dominant force among financial services billion in loans has been facilitated by P2P providers. But challengers have made significant platforms in the UK, and strides in closing the gap. every indicator suggests They have been more agile Challenger banks, that this is set to continue in capitalizing on market growing exponentially. trends, and faster to fintech companies, and Unsurprisingly, mainstream integrate new technologies. peer-to-peer lenders are banks are starting to sit up The result is that helping shape a marketplace and take notice. But how today’s borrowers can be where the only constant is has this relatively young robustly credit checked, industry enjoyed such rapid approved for a loan, and customer-driven change growth – and what lies in receive their money in an store for the future? instant. Investors are able to lend money with the click of a mouse, from The rise of P2P the comfort of an armchair, without jumping P2P lending in its current form was born in 2005, through bureaucratic hoops. In a world of when the first platform of its kind opened for automation and AI, customers expect simplicity, business in the UK. It was initially something convenience, and expedience, and fintech of a niche product: only in the years after the delivers. financial crash of 2007-2008 did an increasing P2P platforms are also incredibly eﬃcient. number of platforms enter the fray. The credit Although the concept of lenders and borrowers crunch, coupled with the diminished reputation is not dissimilar to the depositors and debtors of banks and other traditional lenders, left a you’d associate with banks, in the former case, vacuum for a more consumer-friendly form of pounds or dollars are matched on a one-tofinance. Thanks to its combination of an eﬃcient one basis, without the middleman absorbing business model, a simple customer journey, a considerable margin. Eﬃciencies are passed and a high degree of innovation, P2P lending directly to the customer. This approach also has filled the void. It now caters for a range of reduces market risk, as there is zero leverage, lending and investment opportunities, including which is inherent with fractional reserve consumer loans, business loans, invoice finance, banking. Challenger banks, fintech companies, property lending, retail finance, and more. and peer-to-peer lenders are helping to shape Dialogue Q2 2020
a marketplace where the only constant is customer-driven change. Whether banks, building societies, and other brick-and-mortar institutions are able to respond or not, the direction of travel is overwhelmingly positive for society.
As well as being able to seize market share and carve out new markets, disruptors can also collaborate with existing market leaders to develop better products. It is likely that partnerships which leverage the strengths of each platform or company will play a key role in the development of financial services, including P2P lending, in the near future. For example, a peer-to-peer firm might oﬀer eﬃcient, seamless technological integration. Another financial services provider may oﬀer greater reach, a larger customer base, or a diﬀerent set of technologies. Dovetailing their approaches is the basis for a mutually beneficial collaborative relationship. Those who are able to work imaginatively to build partnerships, and
can incorporate the rapid advances of AI into their processes and products, will be best placed to steal a march. For many fintech sectors, one of the biggest challenges is raising awareness of the products they oﬀer, and their benefits. P2P may be an established force in the financial services fraternity, but the average consumer might still never have heard of it. Clearing this hurdle will be key to unlocking even greater levels of growth. In the years ahead, consumers and businesses will continue to search for better ways to obtain credit. Investors are increasingly seeking a middle ground between the volatility of stocks and shares, and the typically poor returns on savings products. The convergence of these trends points to a bright future for peer-to-peer lending. Provided that platforms stay true to the principle that has made them successful to date – being fair to the customer in all they do – there is every reason to believe the sector will become a true powerhouse in the years to come. — Inês Maia is head of risk at the peer-to-peer lending platform Lending Works Q2 2020 Dialogue
THE MAN WHO IS ROCKING
HOLLYWOOD, FOOTBALL AND BUSINESS…
The new paperback edition of the success secrets behind Asia’s richest man.
Marketers need a fresh take on Porter’s strategy classic
The new five forces
Giles Lury is director at The Value Engineers and author of Inspiring Innovation: 75 Marketing Tales to Help You Find the Next Big Thing
My take on the five forces starts with stealing share – an evolution of rivalry in market
US business professor Michael Porter first wrote about his Five Forces over 40 years ago. His framework remains a classic of strategic planning; but given the changes in the business world in the decades since, isn’t it time it was updated? Porter drew on industrial organization economics to provide a tool for analysing a company or brand’s competitive environment, assessing its intensity and, therefore, its attractiveness. His insight was that organizations needed to look beyond their direct competitors and consider five other forces, which he contended made up a complete picture of the competitive environment. In Porter’s original, rivalry in market is concerned with the number and strength of your competitors: how diﬀerentiated is your oﬀer? Supplier power looks at your suppliers and how they can influence your production capability and pricing. How easy and expensive would it be for you to switch suppliers? Buyer power is the opposite, an assessment of demand and how easy it is for buyers to drive down your prices. Do your customers have like-forlike alternatives they could switch to? How easily, and at what cost? Substitute threat refers to the possibility of your customers finding a diﬀerent way of doing what you do; the fifth force, new entry threat, recognizes that you are aﬀected by the ability of other organizations to enter your market. How easy is it for someone to get a foothold in your market, and how high are the barriers to entry? Forty years on, much has changed in the business world. My take on the five forces starts with stealing share – an evolution of rivalry in market, recognizing that today’s reality is hyper-competition. The number and variety of competitors have grown exponentially in many markets, and what’s more, some are ‘frenemies’: friends and enemies in one, both competitors and partners. It’s no longer
good enough to merely build market share: you have to also stimulate category growth, to ensure your standing in retailers’ eyes. Supplier power has also evolved. I dub the new force middlemen with muscle. The importance of intermediaries has soared, through comparison sites, the new category-killer giants like Amazon, and the increased role of procurement, which has become the third player in many supplier/purchaser relationships. Buyer power is still an important force, but what is driving choice is changing. We live in the era of conscientious consumerism. In a world of economic uncertainty and possible environmental catastrophe, people – and organizations – are buying brands that share their values. Token gestures aren’t enough; brand missions are evolving into brand purposes. When it comes to the original new entrant and substitute threats, we see one of the biggest changes in competitive strategy today: so I have amalgamated those categories under the heading new world disruptors. Recent years have seen huge impact on so many markets. Disruption, redefinition, replacement and, in some cases, augmentation have often come in the form of technology that has facilitated completely new ways of doing things. Think what mobile phones have done to landlines, calendars, alarm clocks, cameras, and console-based gaming. The internet has given birth to opportunities for new directto-consumer brands and internet-based alternatives to traditional businesses. My fifth force is the battle for talent. The most valuable assets for many organizations are their people. Finding, attracting and inspiring people – thus retaining them – can be a true source of competitive advantage. It is a force that every organization must consider. Porter’s five forces are a classic – but for today’s marketers, it’s time for fresh thinking. May the forces be with you. Q2 2020 Dialogue
Distinctively different Brand distinction inspires change. John Davis explains how you can stand out
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Your organization’s strategic heritage is comprised of the unique traditions and practices that distinguish you from your competitors, influencing your approach to creating value in society. This is true for mature companies as well as start-ups: the latter’s strategic heritage comprises the collective experiences of the founding employees. Authenticity is at the heart of strategic heritage. If your organization has historically been risk averse, then bold innovation would be inauthentic and could actually disrupt your business, dilute your brand reputation and reduce brand value. As organizations grow, each generation of talent inherits the practices of those that came before, influencing decision-making. Most of us will recognize such inheritance through the internal dialogues that animate an organization’s social fabric. The phrase “this is how we do things around here” is a common example, guiding us as to whether current ideas are consistent with historical practices. A word of caution, though: paying respect to the past is diﬀerent from mindless, rigid adherence to tradition. There will be situations when norms have to be challenged to stimulate new thinking.
Turning midlife from a time of crisis to contribution. Creating yoga pants from pollution. A transformation from colonial backwater to global leader. And ‘winning’ at the Olympics without being an athlete. What do these achievements have in common? Brand distinction. ‘Distinction’ is the acknowledgement by stakeholders that your brand is meaningfully diﬀerent. Distinction can capture the collective imagination. It is important for organizations and products alike, because it drives added value. Developing your organization’s distinctiveness is essential to becoming a reputable brand, but no amount of marketing wizardry can convince target stakeholders that a brand is truly unique if it doesn’t authentically have all the elements in place. Only when the market recognizes true diﬀerence can a brand claim it has achieved distinction. There are four elements in distinction: strategic heritage, strategic environment, strategic goals, and strategic positioning (see graphic on p66). Focusing on these four elements will help your organization build and maintain a distinctive position in the marketplace, and resist the inevitable shift away from specialty and towards commodity, which occurs as markets mature and competitors multiply.
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THE FOUR ELEMENTS OF DISTINCTION
It is clear we need ‘midlife wisdom schools’ to help those aged 35-75 repurpose their mastery Dialogue Q2 2020
For a start-up, the core need is to apply the wisdom of past experiences to your ambitions for the new venture. One fascinating example of strategic heritage is the Modern Elder Academy (MEA). MEA was founded by Chip Conley in 2018, while he was working on his book, Wisdom at Work: The Making of a Modern Elder. It is “an academy dedicated to navigating midlife transitions”, and was inspired by Conley’s realization that while rites of passage accompany many transitions in life, such as graduation, there are no clear events to mark midlife. MEA was founded as a school to “grow whole, not old”, oﬀering workshops in which participants focus on rejuvenating their work, their ambitions, their lives and their ways to contribute to the world. Its strategic heritage is rooted in Conley’s own career and life journey, including his prior entrepreneurial venture, Joie de Vivre Hotels, and the senior strategic roles he later held at Airbnb. Those collective experiences imbued Conley with the wisdom needed to help others as they navigate toward a more meaningful future, and MEA is fast becoming an inspiring rite of passage for those in midlife. Conley says: “In a world where people are living longer, power is moving younger, and the world is changing faster, it’s clear we need ‘midlife wisdom schools’ to help those aged 35-75 imagine how they can repurpose their mastery.” It is a unique, distinctive vision. Strategic heritage questions: 1 What factors would stakeholders identify as unique to your organization? 2 What are your historical decision-making tendencies? 3 What internal core capabilities make the organization special?
Climate crisis. Gender violence. Polarized politics. Poverty. Tariﬀs. These are significant, even existential, threats. Economic growth, digital innovation, a growing global middle class, renewable energy: each are windows of opportunity. Both threats and opportunities aﬀect the world around us and the strategic environment in which we operate. By becoming a student of context and listening for the signals that influence markets and society, you will be better prepared to manoeuvre your brand as it is buﬀeted by the inevitable but unpredictable winds of change; and you will strengthen your ability to overcome the forces that will otherwise weaken your distinctiveness. One firm that exemplifies how organizations can develop distinction by listening to signals in the strategic environment and identifying ways to solve intractable problems is LanzaTech, a biotech company that “recycles carbon today for a cleaner tomorrow”. Trees and plants recycle carbon naturally, but the depletion of forest ecosystems worldwide, coupled with increasing carbon emissions, means nature is unable to keep up with rising demands to recycle carbon. The result is the acceleration of environmental damage that we are witnessing everywhere. LanzaTech addresses both existential threats and important opportunities by developing technologies that mimic what trees do, keeping carbon in a closed-loop material cycle and helping to produce low carbon products, resulting in improved air quality. What does that mean? One surprising answer: yoga pants derived from steel mill pollution. Ethanol from gasified garbage is another. LanzaTech provides a powerful example of how strategic environment can be used to drive distinction. Strategic environment questions: 1 What are the meta-trends impacting the world? 2 What will happen – to you, your business, society, the planet – if these trends go unchecked? 3 How can your distinctive capabilities be deployed to address these challenges, producing both meaningful and measurable improvement? What external expertise is needed to help?
Since distinction is about being outstanding by standing out and not merely blending in, your strategic goals must reflect a similar level of ambition, serving as aspirational calls to action to elevate your standing and contribution to society. They
Incremental expectations won’t energize people nearly as well as a sense of daring
should stretch your capabilities and may even sound a bit hyperbolic, yet they must also be measurable. They are certainly not about what’s easily achievable: incremental expectations won’t energize people nearly as well as a sense of daring. They should electrify people’s imaginations, serving as a mechanism to rally their collective energies in solving how goals can be achieved. In eﬀect, strategic goals frame your ‘moonshot’. They succinctly describe what future brand-building outcomes look like if you are successful. Strategic goals can also reinforce a sense of purpose in an organization and stimulate profound changes by focusing people’s attention around a cause and not just a financial result, inspiring and galvanizing eﬀort in a way that drives the brand planning eﬀort. One example comes from the history of Singapore. Singapore’s independence began in 1965, after the country was expelled from Malaysia. Lacking natural resources, the country was in a precarious position, as standards of living were low and survival was not guaranteed. Led by founding Prime Minister Lee Kuan Yew, the country embarked on a journey of what has now become perpetual renewal. Focus was placed on attracting business interests from overseas, strengthening the education system, and providing a safe, stable and secure society for inhabitants. This included a strong legal system based on English common law. Fast forward 55 years and Singapore is admired for its remarkable transformation from relative obscurity to widespread recognition as being among the very best places to live in the world. Animated by a desire to never fall behind, encapsulated by the local term ‘kiasu’– a sort of ‘fear of missing out’ – the country has been at, or very near, the top of numerous global rankings, including education, healthcare, business, standard of living, crime rates, a global smart cities index, competitiveness, and global IT. Even Singapore’s Changi Airport is ranked number one in the world, widely heralded as a destination in its own right. These successes, nurtured in a tiny country with no natural resources, reflect the government’s willingness to invest with surgical precision in the factors that shape a healthy society – and combine to create Singapore’s distinction. Brand Finance’s Nation Brands 2019 report rated Singapore as the world’s strongest nation brand, the only country scoring above 90 out of 100 in their methodology. Strategic goals questions: 1 Are your goals bold, stretching your organization, even at the risk of not achieving them? 2 Do your goals excite people and help them understand why their contribution matters? 3 What does success look like if you achieve your goals? Consider the short term, one-two years;
medium term, three-five years; and long term, six years and beyond.
Market perceptions have a direct influence on whether your value creation process has been successful. Positioning is a vital part of the planning eﬀort because it directly influences those perceptions. When you own a unique and positive place in the stakeholder’s mind, then you know the market sees your position as distinctive. Samsung’s transformation from local trading company to global brand powerhouse is well known. The company sought to raise its brand visibility to drive sales, so it became a local sponsor of the 1988 Seoul Olympics. Following the 1997 Asian financial crisis, Samsung invested more in research and development, placing greater emphasis on design and innovation, while also increasing its Olympics investment, becoming a TOP (The Olympic Partners) sponsor. The relationship has helped Samsung solidify its reputation as one of the world’s leading brands. The focus of Samsung’s Olympic sponsorship planning shifted over time. Initially based on driving short-term sales, it evolved to leveraging the Olympics as a strategic positioning platform. The company’s brand value has increased from $3.1 billion in 1999, to $61 billion in 2019, and it is ranked sixth in the world in Interbrand’s evaluation of the top 100 global brands. The Olympics are not the sole reason for this growth, but as Samsung has said, “Investing in the Olympic Games means unlimited growth potential.” Strategic positioning questions: 1 Does your positioning signal to stakeholders how you add unique value to them? 2 Have you identified the brand-building activities for developing your distinction? 3 Is your positioning aligned with the organization’s strategic and financial goals?
Brand distinction does not arise because of inventive marketing wordplay. Superficial thinking is quickly recognized by the market and justifiably discarded as inauthentic and meaningless. The quest for brand distinction, by contrast, can invigorate people to make a meaningful contribution. The challenge is transforming anxiety – born from the uncertainty of whether your distinction aims are possible – into a catalysing energy. To ignite people’s imaginations and to draw them together in the pursuit of something bold, strive for distinction. — John Davis is regional managing director, North America, at Duke Corporate Education Q2 2020 Dialogue
The five new rules of ethical marketing Sustainable and principled business practices make marketing more effective WRITING
Sarah Duncan ILLUSTRATION
Ever-increasing numbers of conscious consumers are forcing a change in the way that marketing departments behave. The old days of creating consumer demand and fuelling consumerism are ending. Companies are now required to be more accountable and responsible in their marketing, both reflecting ethical behaviour in general and disclosing specific details like product origin, supply chain, life span and disposal. Challenging as this can be, the good news is that when a company does behave ethically, its marketing has extra credence and authenticity. Rather than scrabbling around for gimmicks and clichés to sell more, businesses can focus on the genuinely interesting things they are doing: the marketing eﬀorts of an ethical business are self-defining, unforced and, therefore, genuinely engaging. There are five rules to follow. RULE 1
Become a better business
The first rule is simple, but it’s also the hard bit. You need to thoroughly, and honestly, review your organization and establish a plan to become a better and more sustainable business, to the benefit of the environment and society. It is widely accepted that companies have responsibilities beyond simply making profit, but there are many in the c-suite who would still prefer to ignore the moral debate, so it’s Dialogue Q2 2020
important at the very start to make both the ethical and the financial point. The case for adopting more sustainable business practices is strong, including driving long-term revenue, reducing costs and managing risk – as well as better marketing. Businesses perceived as socially responsible are rewarded with more satisfied and loyal customers, while employees are attracted to purpose-led organizations. Companies can rarely become perfectly ethical overnight, but all businesses can start on the journey. RULE 2
Challenge conventional behaviours
A new ethical approach to marketing means challenging many of your existing habits and behaviours. Start by reconceiving of your customers: they’re not ‘consumers with lifestyles’, they’re people, with lives. The mindset may need to change around products, too: shift from cradle-to-grave products to services. Source locally where possible, or ‘glocally’, rather than globally, and tailor your services regionally rather than having a onesize-fits-all approach. Then there are specific marketing and communications behaviours. Out goes the conventional emphasis on product endbenefits, paid advertising, selling, and oneway communication. In comes a focus on purpose, word-of-mouth recommendations, educating and empowering people, and creating community. Of course, this is all built upon change in corporate behaviour: from secretive to transparent, reactive to proactive, independent and autonomous to interdependent and allied with stakeholders, and competitive to cooperative. As author CS Lewis put it: “You can’t go back and change the beginning, but you can start where you are and change the ending.”
Is it too little? Is this claim insignificant in the grand scheme of things? Will it simply highlight bigger areas of the business that are currently unethical? An example would be companies proudly reporting they had removed plastic straws from their business, while ignoring all the other single-use plastics they use. Is it too triumphant? Is this an isolated claim that we are making an overly big fuss about? Could this provoke negative customer feedback because it feels incongruent with other, unethical, parts of the business? For example: companies trumpeting their charitable giving, while continuing to follow unethical practices elsewhere in the organization or supply chain. Is it too late? Have our competitors been doing this for ages? Does this simply highlight how late we are to the party? For example: companies claiming to care deeply about customers’ data and requesting that they re-subscribe for unique oﬀers, ‘coincidentally’ in the very month that new data protection laws come into eﬀect. RULE 5
Embrace storydoing and data-telling
In his book, Authentic Marketing, Larry Weber highlights the importance of bringing out the human side of your brand to forge deeper connections with customers. He talks of ‘storydoing’, moving your organization from telling stories to being an active part of them, and ‘data-telling’: showing what you are doing to solve problems and make the world a better place. It is important to have clear and realistic objectives that your company can accomplish in a certain time period. Track and measure how you are doing: quantifiable data is important to validate your progress, and should be included in the narrative. Use it to create powerful visuals, charts, graphs and marketing claims.
Do not greenwash
Greenwashing is seeking to make people believe that your company is doing more to protect the environment than it really is. It is a huge mistake. Your company doesn’t have to be perfect, but you absolutely do need to be honest. False claims will be exposed, and all-important trust will be lost overnight. Be proud of your positive actions, but be up front about what you need to work on. Be specific: tell customers what you plan to do, and when. RULE 4
Avoid too little, too triumphant, too late
Many companies come unstuck when they fail to understand their place in the bigger picture. When planning campaigns and content, ask the following:
Change for good
Ethical marketing oﬀers the opportunity to create deeper and more authentic connections with your customers – but there can be no faking it. If you want its benefits, you need to honestly evaluate your business’s ethical credentials, and implement a robust improvement plan that resonates with your stakeholders – customers, employees, shareholders and partners. Stick to the truth in your communications, both internally and externally; be honest, be human, and use verifiable data to support the progress you are making. It might not be easy, but it will make you a better business: for society, the planet, and for your bottom line. — Sarah Duncan is a business development consultant, trainer, and author of The Ethical Business Book (LID Publishing, 2019), ethicalbusinessblog.com Q2 2020 Dialogue
RITA GUNTHER MCGRATH
Accounting for innovation requires a dedicated set of metrics
Rewrite the rules of ideas Rita Gunther McGrath is professor of management at Columbia Business School
Sometimes innovation is what happens while you are busy making other plans
I recently had a familiar conversation – again – with a fellow student of the innovation process. “It’s always the CFO,” he said in discouragement, “being so risk-averse that they become a real roadblock to the whole innovation and growth process.” Such programmes are inherently uncertain. But there are ways of mitigating the internal civil war that often aﬄicts the dialogue between those entrusted with fiscal responsibility and those trying to drive their organization into new areas of opportunity. A great place to begin is with an openminded discussion about what metrics are suitable – and by definition which are not – for the management of uncertain projects. As a general rule, the measures that feel comfortable for finance types are pretty useless. The net present value rule, for instance, assumes that you can predict anything about future flows of revenue and costs. It further assumes that you’ll take every project you invest in to market. Neither is true. In a new opportunity area, nobody knows what the future will hold. And you might decide to stop a project long before it reaches anything like maturity. Furthermore, the project might have generated transferable ideas or other benefits for your business, even if it doesn’t make its way to commercialization. A better measure is to consider the value of a new programme in terms of the option value it creates for your organization. Real, as opposed to financial, options, are small or at least staged investments that your organization makes that buy you the right – but not the obligation – to make choices in the future, when you have more information available. It is analogous to taking out a financial option in which you can choose to exercise it or not, depending on how the markets unfold. With a real option, however, the valuable optionality is created by how the projects are managed, rather than by what the market ends up doing. The ability to stop – to decide not to move forward – is
critical to option value because it gives you the choice to limit your losses. In eﬀect, if you thought of a range of possible outcomes, you’re eliminating the negative portion of the range by allowing a project to cease. A further complication is that most corporations of any size will be managing not just one or two options as a start-up might, but many options in a portfolio. And as innovation has become more of an imperative, getting better at managing those portfolios is critical for a successful innovation programme. One way to consider how to manage these is to think in terms of levels of uncertainty. Innovations that make the core business better are much more predictable than innovations that represent an entirely new opportunity space. By mapping projects against the levels of uncertainty in a portfolio, one can see if the investments being made align with the firm’s strategy. Moreover, it gives strategists – and their finance colleagues – permission to stop projects if new, unfavourable information has emerged. A fascinating example of this is Dyson’s recent decision to discontinue its electric car project. It had begun with high hopes, but subsequent entry by larger carmakers and their intended pricing strategy basically subsidizing the cost of the car – meant Dyson’s products were unlikely to be profitable. Nonetheless, despite Sir James Dyson’s disappointment, the car venture may well have paved the way for breakthroughs in battery and other technologies which could sow the seeds of a future growth venture. The options, in other words, continue to be strategically useful. With apologies to the late John Lennon, sometimes innovation is what happens while you are busy making other plans. The trick is to frame that high-minded truth in a way that doesn’t scare oﬀ those whom you need to fund the activity. Q2 2020 Dialogue
The four delusions of leadership We have to move beyond the Hollywood version of how to lead strategic change, writes Elsbeth Johnson
Facing page Martin Sheen as President Josiah Bartlet in The West Wing Dialogue Q2 2020
Over the years, a clichéd vision of leadership has become established which is especially popular when it comes to how we lead change. We see it everywhere – from The West Wing and The Apprentice, to chief executives’ memoirs and MBA case studies. In this Hollywood-style version of leadership, an organization that needs to make fundamental changes finds a leader who is charismatic, who can evangelize for the change he believes the firm needs, and who can motivate people to follow him. (And by the way, it is usually a him.) The guy is a rock-star. The problem with this story is not the things this leader is doing. The problem is the things it leaves out – the other things that leaders need to do, and pay attention to, if they are to lead change that not only gets done, but is sustained without the need for their ongoing personal involvement. So, why is it that leaders continue to believe that the charismatic, rock-star type of leadership is all they need when it comes to leading change? Having worked with hundreds of leaders as
Why do leaders continue to believe that the charismatic, rock-star type of change leadership is all they need?
they decide on and then try to lead their change eﬀorts, it is clear to me that many of them labour under what I call the Four Delusions of Leadership. These delusions are, unfortunately, reinforced by much of the existing research on change, which often only investigates the initial stages of a change eﬀort rather than the long term, and only collects data on what leaders say they did during the change, rather than on what followers say they needed. It’s time to challenge these leadership delusions because, for
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as long as they continue, they will limit leaders’ thinking about what it takes to lead successful, sustainable change.
The Magic Delusion
The first delusion is the belief that the secret to making change happen lies in the heroic, personal magic of the leader: their charisma and their ability to charm and inspire followers. This has found support in some well-known change models which claim that charismatic, or transformational, leadership is needed to deliver transformational change. But the Magic Delusion causes real issues for leaders and the change they’re looking to deliver. If leaders believe their personal ‘magic’ is all it takes to fundamentally change a business, the chances are they will devote too little time and attention to the part played by others – and to the less magical and more instrumental parts of leading a change eﬀort, like budgets, roles and key performance indicators (KPIs). The lesson for leaders? It’s less about the magic and more about the mundane. By all means, be charismatic and inspiring; tell people you believe in the change and that you’re there to support them. But then make sure you also sweat the boring details that will set them up to succeed. Worry about the organizational chart and the new roles everyone will need to play in the change. And pay attention to the KPIs and metrics so that everyone knows how they’ll be measured and rewarded for their eﬀorts. That means your personal magic won’t be needed as much to keep the change going in its later stages.
The Activity Delusion
The second delusion is the Activity Delusion: the belief that leading change is all about getting activities going as quickly as possible, thereby creating early momentum through that very familiar phrase, ‘quick wins’. Tempting though it is to prove the value of the change by getting some quick wins up and running, the early
Dialogue Q2 2020
Real change isn’t about activities, it’s about outcomes
activities that are chosen in organizations which succumb to the Activity Delusion often do long-term harm to the change eﬀort. That’s because they focus time, attention and resources on relatively speedy improvements, which are in fact cosmetic and have little lasting impact, rather than on the longer-dated, more fundamental improvements that strategic change actually requires. The lesson? It’s not about activities, it’s about outcomes. In other words, leaders need to work on specifying what will improve as a result of the new strategy. What outcomes will get better, by how much, and by when? It’s only when leaders have been clear about the outcomes being targeted that managers can make smart decisions about which activities to work on.
The Drama Delusion
The Drama Delusion is closely related to both the Activity and the Magic Delusions – often because the same leaders seem to suﬀer from both of them. But whereas the Magic Delusion is about believing that your own personal charisma can push the change forward, and the Activity Delusion tells you to get some projects started regardless of their long-term value, the Drama Delusion is the belief that change is inherently fast, exciting, action-packed and risky. There are two problems with this. The first is that leaders expect, and signal to others, that a new strategy or change should happen quickly: they have little patience for change that takes too long. This means they often focus too little on the elements of the change programme that will take the most time, even when these are usually the areas that will have the most fundamental and longest-lasting impact. The second problem is that leaders who believe that change inherently entails drama, or even requires it, tend to eschew the use of routines that help change to ‘bed down’, and pay too little attention to the new processes and ways of working that need to be developed. The
lesson for leaders: change isn’t fast, it’s slow. It’s less about drama and more about routine. That’s firstly because the reality of a strategic change eﬀort is that it will take time. That’s just the nature of the beast. And it’s only when managers feel that they have the time needed to make a meaningful diﬀerence that they will invest in the deep, fundamental, long-dated work on systems and capabilities that is needed, rather than defaulting to those cosmetic ‘quick wins’. Secondly, if change is going to stick, then it needs to be baked into the everyday processes, habits and routines of the business and its people. For a while at least, these need to be stable and unchanging, producing value for the business without the need for further change or another new strategy. That is how to make your change the new routine, rather than just another change initiative that didn’t work.
The Agency Delusion
The fourth and final delusion is the Agency Delusion. Agency is the capacity of individuals to make decisions and then enact those decisions. Leaders infected by the Agency Delusion believe that it is people alone who make change happen, with no help required from the structure of the organization; if change is slow to happen, it must be because people are resisting. In some ways, the Agency Delusion is just a larger version of the Magic Delusion. But it deserves to be seen as separate because the damage it can do to organizations is much greater and far-reaching. While the Magic Delusion can be cured by leaders saying, “Of course, it’s not just about me, it’s about everyone in the organization”, that still isn’t quite enough to optimize the organization. Leaders need to admit that sustainable change isn’t created just by the eﬀort, willpower or resilience of people, but rather by people using their eﬀorts to change the structures of the organization. That structure includes those elements of an organization that aren’t dependent on new, conscious eﬀort by particular individuals to make them happen. Some of these elements are
The reality of strategic change is that it will take time. That’s just the nature of the beast
what we might call ‘hard’ structure – things like processes, KPIs, decision-rights and dashboards. But the other parts of an organization’s structure are what we might call ‘soft’ or even ‘social’ structure, the best example being the organization’s culture. Whether soft or hard, structure means that getting stuﬀ done in the organization doesn’t require a person, whether a leader or a follower, to make a new, wilful decision every morning to make it happen. It just happens. The lesson for leaders? Leading change is not just about ‘fixing’ the people: it’s about remaking the whole system, of which structure is a critical part. Indeed, my research tells us that if any of the elements which make up the system of the organization – that is, people and structure – are not changed to help support the new direction, then existing structures will slowly defeat the change. The reason is simple: the current structures require no new input from individuals to make them work. They just work. Until they are changed to support the new approach, they will work to deliver the old strategy or way of doing things. Meanwhile, the new strategy or change needs regular, active input from individuals to push it forward. Quite simply, the system can’t work properly without change to the structures. Despite people’s best eﬀorts, willpower and resilience, the old structure will win out - and the new strategy will die. The alternative is for leaders to use their positional power to change the structures of their organization so that they reinforce and embed the change. If you can reshape the culture of the organization, as well as its habits and systems, then not only does the change happen with less individual, agentic eﬀort; it is also much more likely to be sustained. Achieve this, and the structures and systems of the organization will be able to do the heavy lifting for you. The Four Delusions of Leadership remain sub-conscious in the minds of many of the leaders I work with, but they can have deeply pernicious eﬀects. It is only by identifying them, and then by working to combat them, that we will reconceive what it takes to lead strategic change eﬀectively. By doing so, we can massively increase the chances of our change eﬀorts making a lasting impact on the businesses we run. — Dr Elsbeth Johnson is a senior lecturer at MIT’s Sloan School of Management and the author of Step Up, Step Back: How to Really Deliver Strategic Change in Your Organization (Bloomsbury, 2020) Q2 2020 Dialogue
Strategistsâ€™ forgotten discipline Shutterstock
Real-world microeconomics could breathe fresh life into strategy. Itâ€™s time to go small, argue Daniel Deneffe and Herman Vantrappen
Dialogue Q2 2020
Remember the thrill and fascination you experienced as a child when looking through the peephole of a kaleidoscope, its colourful pattern changing dramatically at every slight turn of the tube? And the disbelief, or possibly the disappointment, when you found out that it was just mirrors and a few pieces of glass? We had a similar sensation when we conducted the background research for our recent book on business strategy, FadFree Strategy. We found that not much had fundamentally changed over the last 30-plus years. In the 1980s and 1990s an intensive academic debate took place between the ‘position’ and the ‘capability’ schools of thought about the sources of competitive advantage. The ‘position’ school, championed by Harvard professor Michael Porter, teaches that the design of a strategy should be primarily driven by the structural characteristics of industries
and competitors’ presumed strategies; the ‘capability’ school teaches that it should be primarily driven by a company’s specific resources, competences and management capabilities. Another debate from the same period is about the balance between ‘deliberate strategy’ (formulate a plan, then realize it) and ‘emergent strategy’ (take a step, learn and adapt), to use the terms coined by Henry Mintzberg in 1985. It reverberates to this day in concepts such as transient advantage and strategy-as-learning. All those pieces went into the strategy kaleidoscope, and strategists have enjoyed – or at least experienced – a series of dazzling images ever since. Possibly the first of those came to life in Tom Peters’ and Robert Waterman’s 1982 book, In Search of Excellence, which is emblematic of what we would playfully call the ‘hero company’ genre. The authors observe Q2 2020 Dialogue
The success of a business strategy ultimately depends on the choices that customers make, rather than on managers’ hopes and wishes
the ways of working of a number of companies that were successful for a period of time, and then generate a supposedly generalizable set of rules, which these carefully-selected hero companies allegedly applied. The message is that other companies would be equally successful, if they just were to apply those same rules or best practices. Such strategizing-by-anecdote is still fashionable, but copying the heroes’ alleged rules is risky. For one thing, such an approach suﬀers from adverse selection: successful companies are selected, while those that failed are ignored, including those that might have applied the same rules. Second, every company’s customer and competitive situation is diﬀerent. As a result, those rules are not generalizable or even applicable. For example, the rule that ‘companies should create a strong brand’ may be sensible in certain situations, but in a commodity business such as chemical intermediates, brand-building is most likely a value destructor. Managers are misled when they apply rules that are positioned as unconditionally applicable but are in fact nongeneralizable. They may be misled into making decisions that lead to outcomes which are no more desirable than those that would follow from flipping a coin. One may be tempted to think that a fair amount of coin-flipping is still taking place in strategy today, considering how frequently revenue forecasts of strategic options, such as entry into a new market, continue to be widely oﬀ the mark. Strategists don’t seem to have progressed a whole lot in making more accurate revenue forecasts. Hence, the question for today’s strategists is: how can the sound first principles of strategy from the 1980s and 1990s be converted into a practical and eﬀective approach for making more reliable forecasts about the potential revenues of strategic options?
The short answer: revisit applied microeconomics and make it real-world. The more elaborate answer is as follows. Strategists should apply the two core concepts of strategy – that is, ‘attractiveness’ and ‘advantage’ – not only at a high level, in terms of aggregate market forces, but also at the individual customer level. Don’t just estimate the desirability of various strategic options on the basis of ‘attractiveness’ criteria such as average market growth rate and profitability, and ‘advantage’ criteria that ultimately culminate in a subjective estimate of the market share that the company could hope to obtain. Instead, involve individual potential customers to find out what percentage of them Dialogue Q2 2020
indicate that your company’s planned oﬀering meets their minimum requirements. Find out if those customers would prefer your oﬀering over the best alternative. If a suﬃcient number of customers do prefer your oﬀering, given their best alternative, and at a price at which your company will make money, then the strategic option appears promising. In other words, since revenues equal price times the volume that customers want to buy at that price, we need to understand what microeconomists call the demand curve, which relates volumes purchased of a specific oﬀering to diﬀerent price points. In layman’s terms: the success of a business strategy ultimately depends on the choices that customers make, rather than on managers’ hopes and wishes.
Microeconomics is useful for strategy because it makes use of a number of reasonable and hardto-dispute behavioural assumptions, which it clarifies up front. The most salient of these is that a customer will pick the alternative that gives them the best deal: that is, the option with the largest diﬀerence between their willingness-topay, and the price that they have to pay. To establish the real-world demand curve, which is ultimately the sum of what customers are willing to buy at diﬀerent price levels, one needs information about customer preferences. When considering willingness-to-pay based upon what constitutes a ‘best deal’, it is crucial to recognize that no two customers are alike. Customers have diﬀerent preferences, so relying on concepts like the ‘creation of customer value’ as the key to business success is precarious. To make better decisions, it is critical to understand diﬀerences in customer value, or willingness-to-pay. Those diﬀerences will determine what constitutes a best deal for some customers and not for others. Information about average customer value is irrelevant for decisionmaking.
Talk to your customers
To gather good information about customer preferences and make the demand curve real, strategists need to sit down with customers, ideally face-to-face, and rigorously elicit their preferences. While doing so, they should recognize that customers often don’t want to, or can’t, express their preferences directly. A solid method is needed to help customers in crafting and discovering their preferences in an unbiased manner. Quality is more important than quantity: having hour-long in-depth conversations with, say, 30 potential customers will yield much more meaningful evidence than a 5-minute telesurvey with 1,000 of them. The latter risks generating ‘accurately inaccurate results’.
product could command a price that was ten times higher than the latex gloves currently on the market. We strongly recommended that they consider that belief as a hypothesis that still needed testing. Subsequent evidence from the field demonstrated that very few users or customers cared about the superior benefits of the glove and were willing to pay the targeted price. The commercially most appropriate price, given the willingness-to-pay of customers and the distribution of that willingness-to-pay across customers, was just a few cents above the price of the standard latex gloves. Consequently, the hypothesis was rejected and the launch was put to a halt. It was not much fun for those managers to call a halt – but it saved the company millions of dollars in non-recoverable further R&D and launch expenditure.
Better than averages
Admittedly, gathering the necessary evidence on customer preferences is demanding and time-consuming. But it is surely worth the eﬀort, as it is the source of the most important piece of information that a company can have – the eﬀect on its top line. The good news is that, from there on, the work gets easier: extrapolating from the sample to the entire market, adding information about costs to derive margins, and sizing the impact of moves by competitors that are willing and able to imitate the company’s strategy. The implication of the above is that strategic options that result from a traditional ‘attractiveness and advantage’ exercise at the level of the aggregate market should not be taken as firm decisions, but as hypotheses. These hypotheses can and should be validated, adapted and detailed – or possibly rejected – by gathering evidence about customer preferences and the ensuing real, rather than hoped-for, revenue and margin potential. We use the term Grand Strategy to refer to the process leading to strategic options in the form of hypotheses. We use the term Operational Strategy to refer to the follow-on process of validating, detailing and possibly rejecting these hypotheses.
Strategy has often been proclaimed dead. We believe it just lost consciousness for a time
Knowing when to say no
We once worked with a medical supplies company that had developed a new perforationresistant non-latex glove that could increase surgeons’ protection against HIV. Management was so enchanted with their ability to produce the superior glove, which was 90% HIV-proof, that they wanted to launch it as soon as possible. They were convinced that the revolutionary
The bottom line of this analysis is that to increase a business’s top and bottom line through strategy, averages never matter. What matters are diﬀerences. Likewise, there are no general rules or best-practices which always work in business, just as there are no general strategies that always work in chess. When playing against a star chess player, one might have a onein-1,000 chance to win the game: mimic the champion’s strategy and the chances are zero. Discussions with numerous executives of mainstream companies reveal that the experience of today’s hero companies – say, Amazon – are of remarkable insignificance to the daily practice of executives at 99% of real-world mainstream companies. Amazon’s achievements are so specific and so exceptional that they should not be used or abused as ‘evidence’ and generalized into a set of management rules for everyone to follow. Nor does it help when strategist X, today, uses the Amazon example to ‘prove’ management theory A – and strategist Y uses the same example to make exactly the opposite point tomorrow. Strategy has often been proclaimed dead. We believe it just lost consciousness for a time. A fresh approach based on real-world microeconomics could be just what is needed to revive the discipline. Strategy is about recognizing the specific circumstances and conditions at hand, and identifying profitable ways to oﬀer customers a deal that’s more attractive than the alternatives. Doing so is a matter of applying rigorous, evidence-based and practical microeconomics, rather than ideology or textbook economics. — Daniel Deneffe is professor of strategy and economics at Hult International Business School. Herman Vantrappen is managing director of Akordeon. They are the authors of Fad-Free Strategy: Rigorous Methods to Help Executives Make Strategic Choices Confidently (Routledge, 2019) Q2 2020 Dialogue
Independence islands A little-known island chain, Bougainville, has voted to break away from Papua New Guinea and form a new country
Proportion of Papua New Guinea’s GDP supplied by Bougainville’s Panguna mine (pictured opposite) before it was closed in 1989 due to the Bougainville Civil War
Ounces of gold estimated to be held in the closed mine
$58bn Estimated value of gold and copper in the mine, in US dollars
FAC TF I LE PA PUA NE W GU INEA Land area
(462,840 sq km)
Tok Pisin, English, Hiri Motu, PNG Sign Language
GNI per capita
Christianity Dialogue Q2 2020
Stake in the reopened mine business that will be held by the new Bougainville government if it gains independence
Years until Bougainville is likely to become independent – the referendum, held in December 2019, was non-binding
We are all full of expectations and hope. If we work together the outcome will be good and official… and most importantly, produce lasting peace
Join the Dialogue
President of the Autonomous Bougainville Government, John Momis
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HISTORY OF VIOLENCE
DIALOGUE IS BROUGHT TO YO U B Y…
Tom Albanese, ex-chief executive, Vedanta Resources Michael Canning, Duke Corporate Education Professor Pedro Nueno, president, China Europe International Business School Ben Walker, editor-at-large, Dialogue
Vote in favour of independence from Papua New Guinea for the island chain of Bougainville
Number of Bougainvilleans who attended the meeting with two Members of the House of Assembly to initiate the referendum
Hours that election officials hiked into the jungle to collect the votes of young Upe men unable to travel due to tribal coming-of-age initiation rites
Direct comments, queries and suggestions to: email@example.com
Happiness was an understatement Bougainvillean nursing graduate Alexia Baria after the referendum win
Year in which the Bougainville Revolutionary Army unilaterally declared independence
Length in years of the Bougainville Civil War (19881998)
Estimated deaths caused by the Bougainville Civil War
Patrick Woodman, editor Kate Harkus, art director Luisa Cheshire, chief subeditor Kirsten Levermore, assistant editor MANAGEMENT
Martin Liu, publisher Ben Walker, editor-at-large Alec Egan, business development executive alec.egan@ lidbusinessmedia.com PUBLISHING
Published in the United Kingdom by LID Business Media Unit 304, 16 Baldwins Gardens, London, EC1N 7RJ
Disclaimer Copyright 2020 by Duke Corporate Education and LID Publishing 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. ISSN 2053-4361 Printed by Pensord www.pensord.co.uk
Q2 2020 Dialogue
Place your bets Ian Bailie learns how to make decisions like a great poker player
Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts Annie Duke Portfolio
Holding both a PhD in psychology and a World Series of Poker gold bracelet, Annie Duke knows a thing or two about making great decisions. Combining lessons from two decades as a pro-level poker player with her background in cognitive psychology, Duke’s book is a masterclass in how to make better decisions. Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts argues that the decisions we make in our everyday lives are actually ‘bets’. Duke encourages us to act less on our emotions – beliefs that we have not fact-checked – and the assumption that we can control outcomes, and instead to recognize that all of our decisions are like bets at the poker table. As she puts it: “The more we recognize that we are betting on our beliefs (with our happiness, attention, health, money, time, or some other limited resource), the more we are likely to temper our statements, getting closer to the truth as we acknowledge the risk inherent in what we believe.”
It’s never just a game of luck
One of the first lessons I took from Thinking in Bets is that we often confuse luck and judgment. When a decision pays oﬀ, we jump to take credit for it; but if something goes badly, we never acknowledge responsibility. The opposite happens when we look at the decisions of others: we are quick to berate others for poor results, and to call them lucky when they succeed. We need to recognize the diﬀerence between luck and the quality of decisions – and, importantly, accept that they both determine how things turn out.
By expressing uncertainty, we open the door for others to share what they know Dialogue Q2 2020
Duke explains two important concepts: “resulting”, our tendency to conflate the quality of a decision with that of its outcome; and hindsight bias, whereby we see an outcome as inevitable once we know what that outcome is. To combat these tendencies, we should reframe our decisions as bets, thinking probabilistically. Duke also emphasizes that we need to look back at our decisions to learn from them, considering whether we made the right decision with the data and information that was available to us at the time. Another highlight of Thinking in Bets is its examination of how we form beliefs and how we rarely vet or check the information we receive. Just think how common it is, in today’s world of social media and fake news, that we see something online and immediately believe it to be true. Very rarely do we ask questions or fact-check. Instead, we quickly adopt the belief if it fits our existing narrative, and share it with others, who do the same. We often think we update our beliefs based on new information, but the reality is that we do the opposite: we alter our interpretation of the information we consume to fit pre-existing beliefs. If we consistently think of our beliefs and decisions as binary, either 100% correct or 100% wrong, we are strongly motivated to avoid the possibility we are wrong – that we have gone from being 100% right to 100% wrong. That would feel bad. The result? We ignore or discredit any information that contradicts our existing beliefs.
From the casino to the office
Thinking in bets is helping me to be more aware of the biases in my decision-making. The key first step outlined in the book is to acknowledge that there’s always uncertainty in any decision. What we should do is express a confidence level for each decision we make. Take the hiring process, one of the most common areas for making business decisions based on ‘gut feel’. How confident are you that you are really making the best hire? I challenge
anyone to say that they “just know”, with 100% certainty, that any new hire will work out perfectly. There are just too many outcomes that could happen, which is why hiring is a great example of the resulting and hindsight biases: we look back on a ‘great’ hire and claim credit, and blame lousy luck for a ‘bad’ hire. As a result, we don’t examine how or why we made decisions and learn how to improve. Duke suggests that we replace “I just know” with “I’m 60% confident that we should hire candidate A and 80% confident we should hire candidate B”. By expressing uncertainty, we open the door for others to share what they know, and make it more comfortable for them to provide their opinions: they don’t have to assert that we are wrong. This approach also means we can bring other inputs into decisions to support a higher confidence level. What if you add assessment data into the mix? What if you conduct structured interviews, and have the interview scores from five trained interviewers?
By communicating uncertainty and opening ourselves up to alternative hypotheses, we are more likely to investigate opposing views and use those views, leading to better decisions. It’s possibly this element of Duke’s approach that resonates with me most: after all, other people can spot your errors much better than you can. If you encourage diversity of thought in your team, as well as diversity in characteristics like gender or ethnicity, then you encourage a diversity of perspectives and opinions. Empowering the team to challenge your beliefs encourages the whole team to improve the accuracy of decision-making. It focuses everyone on making ‘good bets’, and less on whether they are going to oﬀend you by suggesting something that goes against your views. Thinking in bets just might lead you to make more of the ‘right’ decisions. — Ian Bailie is managing director of executive training platform myHRfuture. He is an advisor and consultant for start-ups focused on HR technology and people analytics, including Adepto, Worklytics and CognitionX Q2 2020 Dialogue
Rebel, with a cause A fresh look at the science of diversity proves to be a rich source of inspiration and gives much food for thought, writes Patrick Woodman
Rebel Ideas: The Power of Diverse Thinking Matthew Syed John Murray
When it comes to inclusion there can be a tendency to focus on the personal: on the demographic markers we use to measure diversity, and on the attitudes of individuals towards diverse populations. Yet, as Matthew Syed makes clear in Rebel Ideas, the real genius of diversity lies in its eﬀects at a systemic level. A two-time Olympian and award-winning sports journalist, Syed is also a well-regarded business writer with a taste for social and behavioural science. His breadth shows in Rebel Ideas. Eye-catching case studies illustrate his main themes: the CIA’s failure to anticipate 9/11 illustrates how a lack of diversity creates “collective blindness”, while the 1996 Mount Everest climbing disaster shows the dangers of dominance dynamics and social hierarchy. Syed draws insights from social science experiments to show how our behaviour is shaped by powerful cultural norms – with profound implications for the success, or even survival, of our organizations. Syed shows that most of today’s innovations are “recombinant” – based on creative combinations of existing ideas or technologies. He illustrates how intelligent individuals can combine as unintelligent teams, or “teams of clones”. By contrast, intelligent teams, or “teams of rebels”, develop collective intelligence by drawing on diﬀerent cognitive abilities – so long as they share a common cause. It is from such teams that innovative “rebel ideas” are generated.
Intelligent teams, or “teams of rebels”, develop collective intelligence
Spotting the opportunities for such ideas can take an outsider mindset (studies show that entrepreneurs are disproportionately from immigrant backgrounds), or, at least, conscious eﬀorts to encourage the expression of diverse viewpoints. Syed points to Amazon’s practice of producing “good memos” that demand executives give detailed consideration to decisions before hearing what others think; similarly, the notion of ‘brainwriting’, as opposed to brainstorming, could help avoid the tendency for employees to close their mouths once they know what the boss thinks. In the final chapter, Syed proposes that organizations seek to combat unconscious bias, utilize shadow boards as a way of “lifting the conceptual blinkers” that can aﬀect established (and ageing) executives, and promote a giving attitude – but Rebel Ideas is not a practical manual. It is a fascinating guide to the power of diverse thinking, and a brilliant source of inspiration for leaders keen to create more inclusive cultures. — Patrick Woodman is editor of Dialogue
APPS FOR LEADERS: HARVEST
Need help with time management? Try Harvest, writes Perry Timms “There is no time management, only energy management”, has become something of a personal mantra for this reviewer – but Harvest shows there’s still value in a time-tracking app. Let’s face it: most days are a blur of meetings, calls, events and emails, only rarely featuring that other stuff we call ‘work’. Harvest provides a way of logging your activities, so you can improve how you manage your energy and focus. Harvest has a particular benefit: it can synchronize with your project management or task applications, like Dialogue Q2 2020
Basecamp, Trello, or, in my case, Asana. This helps you identify the energy you need, based on the time you devote to particular pieces of work. What’s more, you can add your team, so you have sight of their workloads: Harvest also links to Forecast, the project and resource management app, to help with allocating time to people. Being able to include time for breaks, learning activities and other factors helps make it clear that you don’t expect people to deliver on tasks the moment you assign them. There are lots of productivity apps out
there, but Harvest is a simple start-stop time tracker that happens to integrate with the tasks you set, and the schedule you create, to give you more say on how you use time and energy. That’s something that could benefit us all. — Harvest is available on Android and iOS. www. getharvest.com — Perry Timms is an independent HR/OD practitioner and CIPD advisor on social media and engagement. Follow him on Twitter @PerryTimms
PIERS CAIN ON BOOKS
Non-executive directors must learn how to challenge executives
Speaking truth to power Piers Cain is a management consultant
The UK-based construction giant Carillion the role of boards in ensuring that the right collapsed due to financial diﬃculties in leadership is in place for an organization to 2018. A year later, the café chain Patisserie fulfil its mission. Yes, approving a strategy Valerie went into administration, due to aligned to the mission, keeping an eye on alleged accounting fraud. In both cases, one risk, and making sure there is the capability of the first questions that many observers to execute are important: but in the end, asked was: “Why didn’t the non-executive it all comes down to hiring and firing. In a directors (NEDs) spot something was board battle, it is ‘kill or be killed’. wrong?” According to PwC, NEDs on Critics of today’s governance practices FTSE-listed companies can expect to earn a claim that executive teams too often get base fee of £53,000. The question for many away with dodgy decisions because NEDs critics is: are NEDs really worth the money? fail to challenge the information they A new book, Boards: A Practical receive. Remarkably, none of the crises Perspective, oﬀers guidance on maximizing considered in the book came to light, thanks the value added by NEDs. It’s written by to NEDs’ forensic skills. Dunne alludes to Patrick Dunne, formerly a senior leader the importance of a director’s reputation, in investment firm 3i: a and the risk they run should visiting professor at Cranfield they fail to act properly. Non-execs School of Management, he But what happens when is comfortable drawing on NEDs aren’t motivated by need research to make his points, ‘antennae’ to detect their ‘caste-consciousness’? but his real strength as a Legislators have tried to when things may boardroom guide lies in his compensate by increasing not be quite as they legal penalties, but the own extensive experience. As one would expect unintended consequence has seem of a handbook, there are been an increase in ‘cover my sections on the ‘plumbing’ of back’ behaviour, avoidance boards: the legal basics (focused on the UK), of responsibility, and the use of lawyers. I structures, roles, and the relationship with am not convinced the public believes boards the executive. The biggest take-away is the are behaving better as a result. need for directors to develop ‘antennae’: Likewise, despite acknowledging a finely tuned sensitivity to signals from widespread criticism of excessive executive others, like mood or attitude, which may pay and the ‘ratchet eﬀect’ of remuneration indicate that things in the business are not surveys, Dunne does not mention the quite as they are presented by the executive. emergence of good practices that might Where Dunne’s book suddenly takes oﬀ eﬀectively curb this problem. We must is its substantial section on board dilemmas. conclude either that they do not exist, or Real-life case studies are presented in that there is little appetite at board level for scenario form, outlining the options for addressing the issue. action before revealing which was selected – Dunne is an excellent guide to the ethos and the results. It is striking that in virtually and skills needed to be a good director, yet every case, someone ended up being fired: he oﬀers little comfort for those hoping for the past-it chairman, the chief executive changes in the way organizations are run. who treated company resources as personal — Boards: A Practical Perspective property, or the finance director who was Patrick Dunne (Governance Publishing and covering up irregularities. This underlines Information Services Ltd, 2019) Q2 2020 Dialogue
Shared values create a powerful sense of meaning
Longing to belong
As an immigrant who came to the US at a young age, the word ‘belonging’ holds special meaning for me. Being an immigrant, or in any way a ‘first generation’ in leaving one community and entering another, can be deeply unsettling. You reside in a space between two worlds. You become an outsider to your former community, no longer a full participant in its future – yet you also feel like an outsider in your new community, struggling to learn the language, decipher unspoken norms, and be seen as ‘us’ rather than ‘other’. Survival in this psychological no-man’s land requires the ability to see things from multiple perspectives and confidence in a new identity that is distinctively yours. Those who master the challenge have a tremendous opportunity: to become a bridge-builder and a convener of spaces that oﬀer a place of belonging for others. I have discovered two critical things about belonging. One is that belonging doesn’t have to be tied to a place, geographic construct, or organization. Our identities transcend these physical markers. More than ever, communities are built on a shared mission, values, and purpose: the places and organizations that house communities are vehicles for expression of those values. For me, as a leader and a coach to leaders, this means we need to focus on Dialogue Q2 2020
framing the mission and purpose of our organizations, and the meaning that drives the work we do. Conveying what we stand for is as important as knowing what we make or the services we provide. Scaling this, so people throughout our organizations can do the same, is crucial. The second discovery is that the desire for belonging is incredibly widespread and a driver for many of our actions. It is a need that is not always met. I often find that someone I perceive as an insider sees themselves as an outsider or an imposter. The reality is we can all relate to the feeling of ‘outsiderness’, a sense that we don’t belong, even in organizations in which we hold leadership positions or have worked for years. Yet we often assume that others have an innate sense of belonging, rather than it being something we have to actively cultivate. It is this sense of outsiderness which creates the opportunity for leaders to empathize, build bridges, and convene. As leaders, we have the agency to proactively invite others in, to co-create, and to scale a sense of belonging in our people. In Zulu, the word for hello is sawubona. It means, “I see you.” A simple way to activate feelings of belonging is to truly see our people and help them to see each other. What are their hopes and goals? What is their version of their best, full, selves? How do they matter to us, and to the organization? Do we let them know they matter by seeking their input? That’s important, because belonging is about knowing and feeling that one matters. In an unpredictable and uncertain world, belonging is an imperative for the success of our organizations. We need our people to feel a sense of shared ownership and have the psychological security to speak up. With a purpose they can believe in, and a feeling they are seen and matter, we can inspire people to bring their full selves to work in service of the organization. That is the upshot of belonging. — Sanyin Siang is executive director of the Fuqua/Coach K Center on Leadership & Ethics (COLE) at Duke University
Many perceived insiders actually see themselves as an outsider or an imposter
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The inclusion imperative In the face of rapid change and widespread disruption, the organizations which thrive will be those where leaders...
Published on Feb 18, 2020
The inclusion imperative In the face of rapid change and widespread disruption, the organizations which thrive will be those where leaders...