Dialogue Q4 2019 by LID Business Media

C E L E B R AT I N G 25 I S S U E S

RITA GUNTHER MCGRATH

MEGAN YUAN & LIZ MELLON

Q4 2019

THE NEW BUSINESS CONTEXT FOR LEADERS

The new battlegrounds Pivot! The Merck story JUSTIN FERRELL DIALOGUEREVIEW.COM

THE NEW BUSINESS CONTEXT FOR LEADERS

Renaissance man

BORDERLESS LEADERSHIP

Borderless leadership Winning in a world without boundaries

Q4 2019

LEADERSHIP

INNOVATION

FINANCE

MARKETING

STRATEGY

Inspire a movement

Jobs to be done

Faster, stronger

Selling disruption

Project economy

Unleash your employees

Customer centric innovation

Learn from the quickest

Create social contagion

Build your core muscle

THE VOICES BEHIND THE

THINKING

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CONTENTS

Digest 14 FOCUS

BORDERLESS LEADERSHIP

The boundaryless corporation

Adaptive leadership across boundaries

Pivot! The Merck story

Getting a grip on global reputation

REGULARS 7

My edit

News nation

Patrick Woodman on ‘either/or’ thinking

Canada – the picturesque polluter

Spark What you need to know

Great minds Michael Chavez on good principles

Reviews Books and apps recommended for you

Michael Canning on agile manning

Ben Walker meets Justin Ferrell

Liz Mellon on culture

Upfront

The big interview

Last word

Q4 2019 Dialogue

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CONTENTS

In depth LEADERSHIP & PEOPLE

I N N O VAT I O N & TECHNOLOGY

Kate Cooper: The leadership column Inspire a movement

Vivek Wadhwa: The innovation column Customer-centric innovation

Trial and error

Fighting back against the digital barons

Leadership under the microscope

FINANCE & AC C O U N TA N C Y

MARKETING & SALES

Phil Young: The finance column

Giles Lury: The marketing column

Faster, stronger

Selling disruption

Trust in the transfer

The future is omnichannel

S T R AT E G Y & O P E R AT I O N S

Rita Gunther McGrath: The strategy column

Succeeding in the project-based economy

Check your assumptions

Q4 2019 Dialogue

AGENDA

Contributors

PARAG KHANNA

Parag Khanna is a leading global strategy advisor, world traveller and best-selling author. He is founder and managing partner of FutureMap, a strategic advisory firm. Appearing on Esquire’s ‘75 Most Influential People of the 21st Century’ list, Khanna is a young global leader with the World Economic Forum and author of six books, including The Future is Asian: Commerce, Conflict & Culture in the 21st Century (2019).

MEGAN YUAN

Megan Yuan joined the Merck Sharp and Dohme communications team in Shanghai in 2013 after spending two years in government aﬀairs in Washington, DC. She gained experience in marketing and clinical development in a broad portfolio on the General Management Acceleration Program in 2016-2017 and now leads on constructing balanced policy dialogues in cancer care. Yuan received her Master’s from the University of Chicago. Dialogue Q4 2019

MAARTEN ASSER

Maarten Asser is a renowned organizational change and leadership development consultant and coach, and a strong proponent of corporate collective intelligence, globalization and integration. A former intellectual property lawyer, Asser co-authored The Global M&A Tango: How to Reconcile Cultural Diﬀerences in Mergers, Acquisitions and Strategic, with Fons Trompenaars (2010).

KATE SWEETMAN

Kate Sweetman is founding principal and chief client oﬃcer of the Sweetman Cragun Group. A former editor of Harvard Business Review, with an MBA from Harvard Business School and several years’ experience working in Malaysia, Sweetman has twice been shortlisted for the Thinkers50 list of the most influential management thinkers in the world. She was co-author of The Leadership Code (2009) with Dave Ulrich and Norm Smallwood.

RITA GUNTHER MCGRATH

Dialogue’s new strategy columnist is a world-leading expert on innovation and growth during uncertain times. McGrath is a professor at Columbia Business School and has been ranked #1 for strategy by Thinkers50. She is author of The End of Competitive Advantage and Seeing Around Corners, out September 2019, and will teach on Duke Corporate Education’s new Building Strategic Agility programme.

SHANE CRAGUN

Shane Cragun is founding principal and chief executive oﬃcer of the Sweetman Cragun Group. Specializing in the digital age and how both individuals and organizations can win in tumultuous times, Cragun is co-author, with Kate Sweetman, of Reinvention: Accelerating Results in the Age of Disruption. He is a fellow of the European Leadership University, and mentor to international fellows at Massachusetts Institute of Technology’s Legatum Center.

AGENDA

My edit

“We live in a borderless world.” Reading that statement, would you regard it as a self-evident truth, or palpable nonsense? A case can be made either way. Today’s ‘metanationals’ span the globe, flying employees where they’re needed, shaping how we consume goods, and wielding huge economic power. More, perhaps, than nation states, which look leaden by comparison (see Parag Khanna, page 16). On the other hand, borders and boundaries have hardly disappeared. The rise of populists pledging to reinforce walls has been a defining trend of recent global politics, and business is not immune from these dynamics. The seemingly unstoppable march of the Western digital giants is halted by China’s walls, while borders have new salience for manufacturers confounded by the possible supplychain implications of Brexit. In truth, then, the notion of a borderless world is both right and wrong: it is not an ‘either/or’ question. In fact, either/or thinking is something that leaders need to get away from. As Maarten Asser explains (page 20), the most eﬀective leaders are those who are adaptive, embracing apparently contradictory positions. The connection to the ‘firm brand, loosely held’ model – global and local – described by John Davis is clear (page 28). This is precisely why developing borderless leadership is a business-critical priority for executives tasked with getting their organizations ready for what’s next. Leaders have to be capable both of working across national borders and overcoming their organizations’ own internal boundaries. That’s why Megan Yuan and Liz Mellon’s report on pharma giant Merck is so fascinating (page 24). Its global leadership development programme is exemplary. That Merck has unleashed a wave of

change, challenging the prevailing company culture in unexpected ways, is significant: the capacity of employees to drive change is rarely fully exploited, yet it can be transformative. That point is brilliantly made by Kate Sweetman and Shane Cragun (page 38). A former state-owned Moroccan phosphate exporter hardly sounds like fertile ground for a radical rethinking of leadership, but OCP proves otherwise. This could be the ‘big idea’ of our times. How many leaders dare follow this manifesto for inspiring a movement? Elsewhere, our new star columnist, Rita Gunther McGrath (page 71), warns that yesterday’s strategic tools are poor guides to today’s choices, when disruption is most likely to come from new market entrants. Gary Storer and Beth Ahlering look at leadership in regulated sectors; Suzanne de Janasz and Maury Peiperl call on leaders to keep experimenting; and Terence Tse, Mark Esposito, Olaf Groth and Josh Entsminger warn that the digital barons could make AI serfs of us all. One quick final word: this issue marks the retirement of our wonderful editorial chair, Liz Mellon. A former professor of organizational behaviour, Liz co-founded Duke Corporate Education’s London oﬃce in 2000 before serving as regional managing director for India. She was part of Dialogue from the start, and she signs oﬀ with a look back at our first 25 issues (page 8) as well as, fittingly, with the ‘Last word’ (page 86). Everyone at Dialogue will hugely miss her expertise, insight and creativity. We wish her the very best. Patrick Woodman is editor of Dialogue

Q4 2019 Dialogue

Spark

C E L E B R AT I N G D I A LO G U E ’ S 2 5 T H I S S U E

Sterling silver Liz Mellon, outgoing chair of the Dialogue editorial board, reflects on our first 25 issues Duke Corporate Education has been ranked among the world’s very best custom executive education providers by the Financial Times every year since its inception in 2000, when it was spun out of Duke University’s Fuqua School of Business. This remarkable sustained success has been achieved against powerful consultancies like McKinsey and Deloitte, as well as traditionally organized business schools. The Duke Corporate Education model is unique. We work with a variety of educators – everyone from academics through Formula One teams to magicians – enabling us to customize tightly around any organization’s development needs. Articles and publications traditionally came from our sister business school, but Duke Corporate Education was brimming with ideas and insights about the future of business too, so in September 2013 we launched Dialogue. In the six years since, it has shown not only that we have a ‘point of view’, but that we have real understanding of the live and current challenges that businesses face. This is our 25th issue. I am proud to have been part of the inception, launch and delivery of Dialogue over the past six years, and to have had the privilege of working with our talented contributors.

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THE CHANGING FAC E O F D I A LO G U E Change is a constant in business, and the same is true for Dialogue. We’ve been continually evolving over the last six years, and one thing’s for certain as we look to the future – further change is never far away…

Dialogue Q4 2019

We work with everyone from academics through F1 teams to magicians

This issue is my last as chair of Dialogue’s editorial board. As I step down, I wish our spirited and entrepreneurial partnership team at Duke Corporate Education and LID Business Media ongoing success.

Reading the classics Taking a look at Dialogue’s most-read articles and features New analysis of Dialogue web data has highlighted some of the most popular and influential pieces to have featured here during our first 25 issues. The table is topped by worldrenowned business educator, coach and best-selling author, Dr Marshall Goldsmith. Four bad habits of super-smart leaders (from Q3, 2016), warns leaders against showing how smart they are, proving they are right, pointing out “I already know that”, or falling into the trap of wishing “Why can’t they be me?” It is as compelling a read today as it was when first published. So too is Dr Goldsmith’s Six daily questions for winning leaders (Q1, 2017), which also makes the most-read list. It sets out how leaders can ask themselves active questions to transform how they engage with their goals. The perennial challenge of building and sustaining team performance is another evergreen topic, and it was the focus for Derek Newberry, Mario Moussa and Madeline Boyer in their

GREAT MINDS WITH MICHAEL CHAVEZ

It’s time to get tough if you want to change behaviours

Good principles are hard to reach popular feature (Q4, 2016) How to stop good teams failing. The bad news, they warned, is that “most teams, even elite ones”, underperform. The good news was that leaders could take three steps to supercharge performance. The highest-charting interview is Liz Mellon’s discussion with the then-chief executive of Swiss pharmaceutical multinational Novartis, Paul Hudson (now of Sanofi), originally published in Q2, 2018. The interview dives into the culture-change programme initiated by Hudson after joining Novartis in 2016, which aimed to strengthen the company’s external orientation, and “make things simple” – no small task in a $50 bn business. All Dialogue content can be found on Duke Corporate Education’s website, www.dukece. com and at www.dialoguereview. com. — Have you found a Dialogue feature particularly useful? We would love to hear from you. Share your stories with us at media@lidbusinessmedia.com

What’s in a value? Not a lot, much of the time. The feedback I hear from clients is clear: many company values are vague, platitudinous – almost meaningless. None of this means organizations ought not bother with values: when constructed properly, values are deeply valuable. But there is an art and a science to crafting them, so they drive actual behaviours. In the last issue, we met the Great Mind Lara Yumi Tsuji Bezerra, chief purpose oﬃcer at Roche India. It is worth revisiting Roche: it is a true innovator in developing company values, purpose and principles. Instead of asking questions like ‘what do we fundamentally care about?’ to generate values, Roche does things diﬀerently. It seeks principles rather than values. Each principle passes a trio of key tests: they guide behaviours that the company wants (and guide away from behaviours it doesn’t want) they speak to the most crucial behaviours (rather than diluting the message with nice-to-haves) they are tough to implement. The last test might surprise. Yet it is at least as important as the first two, because it avoids ‘principles’ that simply drive acts which are part-and-parcel of the company’s day-to-day business. I was struck by all of Roche’s socalled Leadership Commitments. Three, in particular, stood out. I empower and trust people to make decisions. Leaders find this hard. Human nature tends to the retention of control. But, in most organizations, leaders simply lack the capacity to be involved in every decision. At Roche, micromanaging renders them directly in breach of a Leadership Commitment. It’s a principle that genuinely drives

changes in behaviour. I listen carefully, tell the truth and explain ‘the why’. Leaders find this hard too. Expediency can militate against explanation. Yet if employees are to be engaged in an organization, they must understand the rationale for decisions. I set priorities and simplify work. Major organizations are complex. There is a premium on simplification – especially in ultra-complex research-driven businesses like Roche. But it is a key part of leaders’ roles to demystify them. When devising principles, perform an ‘edginess test’. They must be hard to achieve: stay away from bland statements and facile truisms. Once adopted, principles require constant reinforcement. Leaders must be explicit about how principles link directly to critical decisions and behaviours, as these provide proof that principles are applied practically. It takes lots of repetition. And don’t underestimate the power of the negative. Contra-behaviours – those we don’t want, but often see – prove principles in reverse. Point them out. As the need for collaborative problem-solving and innovation increases, superior leadership is required. Clear expectations and guidelines are at a premium. Great Minds like those at Roche hone their principles so they change the realities of their companies. If they are too easy, they are unlikely to be eﬀective, and worse, may lead to cynicism. Focusing on behaviours ones that matter, and are tough - will help keep it real. — Michael Chavez is chief executive of Duke Corporate Education — A version of this piece appeared on Forbes.com Q4 2019 Dialogue

LEADERS ARE THE GREATEST LEVERS FOR WINNING IN AN UNPREDICTABLE WORLD...

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UPFRONT

MICHAEL CANNING

We can achieve agility through ‘modularity’ and ‘minimal manning’

How a navy ship heralds a sea change Michael Canning is global head of new businesses at Duke Corporate Education

The people who did best tended to score high on ‘openness to new experience’

The secret is borne on the Pacific Ocean. Littoral combat ship 10, the USS Gabrielle Giﬀords, reveals how quickly the transformation in the world of work is happening. The skills people need for what’s next is writ large in battleship grey. A fascinating piece in The Atlantic reveals that USS Gabrielle Giﬀords was built to test two game-changing concepts – ‘modularity’ and ‘minimal manning’. Modularity means the ship has the flexibility to morph from combat ship to submarine-hunter or minesweeper. She is propelled by water jets, instead of propellers, allowing her to manoeuvre with more agility in shallow waters near coasts. The more transformational concept is ‘minimal manning’. The ship is designed to operate with a crew of 40, just 20% of those typically found aboard a comparably sized naval ship. And, in doing so, she has become the first large-scale navy ship to move from large teams of specialists to a small group of so-called ‘hybrid sailors’. The seamen wear many hats. They perform routine tasks in the kitchen. They complete perfunctory jobs on deck. Yet they also work in the deeply technical provinces of engineers, electricians and machinists. Our companies are headed in the same direction. They are trying to build more modularity – or agility – to pivot quickly to meet rapidly changing market conditions. And, soon, we will be testing the equivalent of ‘minimal manning’ internally. This will be enabled by AI, machine learning and robotic technologies designed to do the repeatable, routine tasks across all functions. As on the ship, this will lead to the replacement of larger groups of specialized workers by fewer, adaptive, creative problem-solvers. Embedded in most HR systems is the notion of accumulated knowledge and levels of expertise in specific competency areas. But what if the mental agility, openness and collaborative acumen that makes these utility players successful is a unique combination of inherent abilities, not accumulated wisdom? The US Navy had the same question and

commissioned Jeﬀery LePine, an Arizona State management professor and former US Air Force oﬃcer, to research individual and team adaptation and decision-making in rapidly changing environments. His computer simulations have contributed to what the US Navy now uses to identify good hybrid sailors. LePine put people through a range of military simulations to assess individuals’ and teams’ capacity to shift routines and perform in the face of adversity. He did so by scoring three things – cognitive ability, openness to new experiences and conscientiousness. He found a strong positive correlation between cognitive ability and standard of performance in tasks that are novel and complex. A lower correlation came for tasks that are routine and simple. LePine’s notion of conscientiousness included an achievement component – striving and self-discipline; and a dependability component – which included things like orderliness and deliberation. Part way through, LePine injected a curveball and the scoring rules were changed. When this happened, he noticed that players who scored high on conscientiousness scored lower in the simulation. Instead of adapting to the new rules, they kept doing what they were doing, only more intently. LePine’s test revealed another correlation: the people who did best tended to score high on ‘openness to new experience’– a personality trait that is rarely considered a major job-performance predictor. This begs the question of when to deploy people with high fluid intelligence – the ability to solve novel problems, think quickly and identify patterns – which peaks in one’s 20s; and when to deploy those with more crystalized intelligencelearned knowledge, expertise and ability – which peaks in one’s 50s. For now, two things are certain: this will be a disruptive transformation; and it is going to happen fast. A sea change is coming. Q4 2019 Dialogue

FOCUS

Focus

Borderless leadership

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Todayâ&#x20AC;&#x2122;s global economy is shaped more by businesses than by nation states: by the goods and services they provide, the networks and supply chains they build, and the innovation that they drive. Yet while the most successful businesses and brands seem to leap effortlessly over borders and boundaries, the world is not standardized or uniform. Cultural differences persist: they make themselves felt both within organizations, and externally, in market behaviour. How do leaders create truly boundaryless organizations? How can they stay authentic while adapting to different cultures? And how can they manage the tension between global and local?

ARTICLES 16

The boundaryless corporation 20

Adaptive leadership across boundaries 24

Pivot! 28

Getting a grip on global reputation

FOCUS

The boundaryless corporation Metanational firms and their supply chains have changed the world. Now it’s time to go local, says Parag Khanna

The boundaryless world belongs to corporations, not nation states. While large sovereign states emphasize and protect their borders, large corporations span the world. With their cash reserves and legal protections, corporations act with greater agility than governments, who face greater constraints. When corporate profits at home are down, they can be balanced by income elsewhere. Over the past two decades, global capital markets, technological connectivity and the growth of new consumer markets worldwide have given rise to massive corporate platforms in Dialogue Q4 2019

commodities, finance, information technology, retail and other sectors. The scale of entities such as Google, Facebook, Walmart and GE has made them appear almost stateless as they operate in a global playground. Yet the future of these stateless superpowers will be much more complex and challenging. In the face of rising nationalism and regulation, the opportunities presented by global markets – even fragmented ones – will push corporations to ‘go local’ everywhere, anchoring themselves in each market to comply with domestic requirements.

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By 2025 there will be at least 40 megacities around the world

Only nations have boundaries

For today’s stateless corporations, ‘home’ is a riddle. Try asking an Accenture consultant or DHL delivery agent where the company ‘is’ and see what answer you get. Accenture’s employees are scattered across 55 countries: where the regulatory environment isn’t ideal for business, consultants fly in for assignments, complete their work and return to regional hubs deemed more business-friendly. The human resources department ensures that consultants don’t spend too much time on site, to avoid establishing residency status.

Government proposals such as taxing companies based on the location of their ‘headquarters’, or attempting to apportion revenues according to jurisdiction, seem stuck in the quaint 20th century of territorially rooted multinationals, rather than 21st-century “metanationals”, the term coined by INSEAD professor Yves Doz. So, too, the nativist uproar in many Western countries against migration. The movement of people across borders represents the most profound challenge to the traditional conception of states. There are more migrants than ever in history: more than 300 million Q4 2019 Dialogue

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people are ‘expats’, living outside their country of origin. The truth is that nationalism as an ethnic rallying cry simply won’t unwind the expansive immigration policies of recent decades. In a world of mass migrations and racial dilution, nationalism is not an unshakeable force, but one competitor in the marketplace of identity.

The future of the boundaryless corporation

Nonetheless, the fragmentation of regulation and the anti-foreign backlash implies that in the long run, global companies will morph into new forms. One possible model is for companies to be organized as aﬃliated networks of independently-operating, locally-registered, privately-held partnerships. Signs of this are already evident. Inspired by China’s decades-long success as the world’s factory floor, the #MakeInIndia campaign has forced American defence contractors like Lockheed Martin into joint ventures in order to gain lucrative contracts, and raised the bar for Apple to be granted permission to open flagship stores in the country. Meanwhile, China’s Xiaomi and India’s Micromax are gaining ground across Asia. Asian intentions are clear: soon, Western companies will seek to be part of Chinese and Indian supply chains, rather than the reverse. Firms may also be motivated by more progressive or experimental regulatory frameworks. Two US companies, Domino’s Pizza and drone operator Flirtey, have started testing aerial pizza delivery in New Zealand, and have their eyes fixed on seven non-US markets with more favourable regulations. Similarly, Amazon has chosen the UK to test delivery drones. Change may also be driven by the eﬀorts of emerging markets to crack down on multinational transfer pricing. From India to Indonesia, governments have ramped up

Dialogue Q4 2019

Attracting commercial flows is what made China a superpower, not nuclear weapons

audits, raised capital gains taxes, and demanded country-by-country reporting on profits and tax payments in order to strengthen local presence. In almost all cases, companies comply so as to retain access to fast-growing markets. In eﬀect, host governments want foreign investors to act like private equity firms, capitalizing local companies and operating through joint ventures or special purpose vehicles so that cash is held onshore for longer.

Control supply chains, control the world

Stateless superpowers view the world not in terms of nations and borders, but supply and demand. Supply chains are now an autonomous force in the world, and they are reorganizing our geography away from simple political states and borders towards functional connective infrastructures. But supply chains are not things in themselves: they are transactions that confer weight on participants. Amassing and facilitating transactions is how power is built, whether by countries or companies. China in the 1970s was an over-populated peasant society, but within a generation it had become the epicentre of the world’s manufacturing supply chains. Attracting commercial flows is what made China a superpower, not nuclear weapons. The European horse meat scandal in 2013 demonstrated the complexity of untangling the supply chains of producers, distributors and vendors spanning a dozen countries. From Romanian abattoirs, to IKEA in the Czech Republic, to frozen lasagne meals in Britain’s Tesco grocery stores, the process of tracing the origins of the horse meat, conducting food safety tests, and enforcing standards overwhelmed regulators, laboratories, consumers, and food vendors. In many sectors, supply chains have become nearly impossible to untangle, even within just one or two countries. The supply chains of energy, finance, electronics, and much else, have driven the matrices of business to envelop the world. Many Western and emerging market firms have become sprawling nexuses without a single headquarters. Our dependence on supply chains is nearly absolute. When China suddenly banned the export of rare earth minerals in 2010, politically oblivious disk drive manufacturers woke up to their reliance on Chinese suppliers. Command of supply chains, rather than geography per se, is how winners and losers are determined today.

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Yet a supply chain’s ambition is not territorial aggrandizement, but access to markets, seeking to oversee the greatest share of the flow of goods, capital and innovations. According to Bain Capital, if countries reduced border administration delays and improved telecom and transport infrastructure to just half the global standard, global GDP would rise by 5%.

With power comes responsibility

The paradox of the growing power of corporations is that even as their autonomy grows, their role as co-governors – or suppliers of governance – grows too. More than ever before, corporate supply chains shape and even create government regulation where it is lacking and provide public goods that governments don’t. European hydropower companies write the legislation governing their industry in Nepal, since no such laws exist; private hospital chains in India provide basic medical services in poor backwaters not served by the government, while private or philanthropic schools spread literacy. As states come to depend more on corporations, the distinction between public and private, customer and citizen, melts away. Accountability means knowing where the buck stops, which is increasingly complicated in a supply-chain-driven world. Governments can’t fully control what they do not own. Strict rules set out by a franchise business like McDonald’s, where a powerful parent company is determined to protect the brand, create more accountability than government monitoring. The Fair Labor Association (FLA), with over 4,000 corporate members, works with nongovernmental organizations (NGOs) to make supply chains safer and cleaner. It has pressured Apple, for example, to improve conditions at FoxConn factories, where Chinese authorities preferred eﬃciency at the lowest price.

Where to compete?

One possible model for global companies is to become an affiliated network of independent, local, private partnerships

For fastest growth, metanationals should look to the megacities. Cities are mankind’s most enduring and stable mode of social organization, outlasting all empires and nations over which they have presided. They have become the world’s dominant demographic and economic clusters. As the sociologist Christopher Chase-Dunn has pointed out, it is not population or territorial size that drives world-city status, but economic weight, proximity to zones of growth, political stability, and attractiveness for foreign capital. In other words, connectivity matters more than size. In many emerging markets, such as Brazil, Turkey, Russia and Indonesia, the leading commercial hub or financial centre accounts for one-third or more of national GDP. In the UK, London accounts for almost half Britain’s GDP, while around one-third of US GDP is accounted

for by the Boston-New York-Washington corridor and greater Los Angeles. By 2025, there will be at least 40 such megacities. The population of the greater Mexico City region is larger than that of Australia, as is that of Chongqing, a collection of connected urban enclaves in China spanning an area the size of Austria. Cities that were once hundreds of kilometres apart have now eﬀectively fused into massive urban archipelagos, the largest of which is the Taiheiyo Belt, the Tokyo-NagoyaOsaka megalopolis which encompasses twothirds of Japan’s population. By 2030, however, Euromonitor predicts that Jakarta will overtake Tokyo as the largest city in the world. Great and connected cities belong to global networks. The world’s 20 richest cities have forged a super-circuit driven by capital, talent, and services. They are home to more than 75% of the largest companies, which invest in expanding across those cities and add to the intercity network. In many cities, entire new districts, sometimes called aerotropolises, have sprung up around airports to evade urban congestion and more eﬃciently connect to global markets and supply chains. This underscores the intrinsic value of connectivity: the airport is the gateway to world markets. A world map based on the three dozen megacities therefore tells us much more about where money and power are located than a conventional map of 200 countries.

How boundaryless is your company?

Metanationals optimize performance in three areas: taxes, technology and talent. For nations, geography is fixed, but for firms, it is an arbitrage opportunity. The Financial Times has reported that Starbucks, Google, Amazon and other mega-companies pay less in tax to the UK than their share of revenue from it, by using oﬀshore holding companies stretching from Belgium to Bermuda. A capacity for regulatory arbitrage and the ability to be geographically agile in mastering jurisdictions and regulations is an important component of a firm’s resiliency in today’s boundaryless world. On the technology front, the aim is to master global supply chains and to ensure that products and services are well adapted for local markets. And when it comes to talent, metanationals need to be able to attract the best from all over the world and ensure that it is globally deployed. If you want to thrive in a boundaryless world, ask how you score in these three areas. The next few years are set to be much more challenging for metanationals than recent years, but with a clear strategy, they will continue to shape our world. The future will not be not local or global; it will be local and global. — Parag Khanna is a leading global strategy advisor, and the founder and managing partner of FutureMap Q4 2019 Dialogue

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Adaptive leadership across boundaries Success in global business means reconciling the tensions inherent to leadership. Maarten Asser explains

cultures – in essence, to leverage diﬀerences. We came to realize that the most successful leaders’ underlying ‘living’ logic, their mindset, and their analytical thought process are based on duality rather than singularity. In other words, they enjoy working with true tensions between seemingly opposed values and opinions, whereas traditional leaders try to avoid or ignore these conflicts. These successful leaders have a fundamental skill – they are adaptable. Truly adaptive leaders are inter-culturally competent: they can value each culture in its context, and still create organizational and/or team value from the diversity of seemingly opposed cultural norms and values.

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The facets of adaptability

Dialogue Q4 2019

For more than a decade we have been asking, “can leaders be effective when taken out of their national culture?” After all, societies differ in fundamental ways. In some, the collective is more important, as in Japan. In others, say Australia, the individual comes first. If societies differ so greatly in how their inhabitants are nurtured, is it possible to adapt to new leadership norms without losing your sense of self? That is, can you both be successful abroad and remain authentic and true to your core beliefs and values? At Intercultural Business Improvement (IBI), we have worked alongside thousands of managers, and assessed leaders who work across boundaries on two critical abilities. The first is the ability to integrate differences; the second, the ability to bridge the divide across national

We created a questionnaire, the Intercultural Readiness Check (IRC), to help us distinguish between high- and low-potential integrators of seemingly opposed dualities. We now have a database of over 50,000 senior leaders in business, politics and academia from around the world. From this practical research and a large literature study, we concluded that adaptability can be assessed on the basis of four separate competencies: sensitivity, communication style, ability to build commitment, and managing uncertainty. Each measures a leader’s eﬀectiveness in working across opposed value propositions. A score is created for each competency and they are broken down into cognitive and action-oriented facets, reflecting the importance of both thinking and doing. Figure 1 shows average scores across the entire dataset. Although the percentages of ‘advanced’ scores look reasonable, the combined ‘medium’ and ‘needs attention’ scores indicate that, across all eight facets of the competencies, widespread improvements are needed for organizations and leaders to become truly adaptive across boundaries.

What is leadership adaptability?

What we learned from our database is that the more adaptable leaders are, the more inclusive

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FIGURE 1

T H E FO U R FAC E T S O F A D A P TA B I L I T Y C O M P E T E N C E The graphs below show average scores for the four facets of adaptability competence. Each of the four facets carry underlying tensions. SENSITIVITY

C O M M U N I C AT I O N

Cultural awareness Advanced Medium Needs attention %0

Active listening Advanced Medium Needs attention 10

Attention to signals Advanced Medium Needs attention %0

Adapting communication style Advanced Medium Needs attention 10

1 How actively are you interested in yourself, other people, their cultural backgrounds, needs, feelings, knowledge and perspectives? 2 How much do you notice anthropological signals when you are interacting with other people? Underlying tension: your own self-awareness versus picking up new unfamiliar signals

3 How mindful and self-reflective are you when communicating (listening and talking) with others, and how willing are you to understand the topic at hand from their perspective? 4 How effectively do you adjust your style to meet the expectations and needs of others? Underlying tension: being conscious of your own entrenched mindset and communication style versus listening to understand, not just to be understood

BUILDING COMMITMENT

M A N A G I N G U N C E R TA I N T Y

Building relationships Advanced Medium Needs attention %0

Openness to cultural complexity Advanced Medium Needs attention 10

Reconciling stakeholder needs Advanced Medium Needs attention %0

Exploring new approaches Advanced Medium Needs attention 30

5 How much do you invest in developing deep relationships and diverse networks? 6 How creative are you in developing solutions that satisfy the interests of different stakeholders? Underlying tension: your own sense of relationships and trust, versus reconciling stakeholdersâ&#x20AC;&#x2122; needs at a higher level of integration

7 How well do you deal with the complexities of greater cultural diversity of thought, and how comfortable are you in this complexity and ambiguity? 8 How effectively do you use diversity of thought and understanding as a source of self-learning and emancipation, and how effectively do you use learning about diversity as a tool for innovation and creativity for all? Underlying tension: awareness of your own need for certainty and confidence versus openness, being vulnerable, and willingness to explore

Q4 2019 Dialogue

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and eﬀective they are across any kind of boundaries, including diﬀerent cultures. In terms of sensitivity, the most adaptable leaders are those who are exceptionally self- and culturally-aware, and are curious about picking up new signals from others. They make no assumptions about other’s habits and thought processes, as they don’t imagine them being the same as their own. The best communicators are those highly aware of their own communication style. They are able to adjust their style, verbal and nonverbal, to the needs of those they communicate with and whom they wish to understand. The best commitment builders are leaders who take time to develop deep, long-lasting relationships. They work tirelessly to satisfy individual stakeholder needs while reconciling all stakeholder needs, including their own. Those who best manage uncertainty are aware of the complexity of life and don’t attempt to simplify it. They empathetically and consciously embrace the challenges of uncertainty by remaining open to changing their own minds. They admit fallibility and vulnerability, and actively explore and support others’ viewpoints for the benefit of all involved.

Leadership adaptability in action

The critical importance of leadership adaptability was evident in a fascinating encounter I witnessed in Rwanda in March 2018. It was the first meeting between a native Rwandan neurologist, Dr Fidèle Sebara – who had been sponsored and educated by the mid-sized pharma company that brought IBI to Rwanda – and Innocent, the leader of a 500-strong group of local medicine men. These traditional healers practise medicine in rural villages, drawing on knowledge passed down through generations. Rwandan health clinics can be several days’ walking distance from villages, so locals rely on the traditional healers to cure both simple and serious ailments. We aimed to find a solution for a growing problem. After the 1994 genocide in Rwanda, many female patients complained about seizures, with symptoms akin to those of epilepsy patients. Traditional healers did not treat these women on the basis of the latest neurological science. We wanted to change that. Meeting for the first time, both the neurologist and the traditional healer had to

What we learned is the more adaptable leaders are, the more inclusive they are Dialogue Q4 2019

HOW TO GROW YOUR LEADERSHIP ADAPTABILIT Y

Assess your leadership adaptability with our starter list of questions to ask yourself, or for asking others to answer about you. By all means add your own. 1 How frequently and sufficiently do I question the context from which I am reasoning? 2 How do I see my own logic as a double-edged sword that I could use to hurt or disadvantage some people? 3 How do I stop thinking in singularities and start thinking in true dualities on a regular basis? 4 How can I hear what people are not telling me? 5 How can I articulate my own leadership logic transparently, and how can I clearly reason against it from its logical opposite? 6 How can I develop the specific abilities associated with resolving nonlinear problems – like framing, shaping, contextualizing, listening, resounding, and humanizing? 7 How can I remain sufficiently ambidextrous and continue to chase ‘the best of both worlds’? 8 How do I allow my holistic and integrative humanistic side to grow in a world of increasing specificity?

overcome the fear of what the other might do to their identity and stature in their respective communities. Both men had found many reasons to postpone earlier attempts to meet. The meeting had been brokered by Dr Dirk Teuwen, vice-president of corporate societal sustainability for the pharma company, himself an established Western-educated medical doctor with decades of experience working with local governments across the African continent, as well as in rural China. Aware of his own status as a mediating outsider with some influence, Teuwen managed to lead the two men to a mutually beneficial commitment by creating and holding the space, guiding the conversation through humble presence – he didn’t speak Kinyarwanda, the local language – and tone of voice, empathy, and mutual respect. Such meetings are not negotiations, and if the first meeting had been unsuccessful, it is unlikely that there would have been another. Teuwen’s ability to be adaptable – both flexible and firm, creative and consistent, goalas well as relationship-oriented – provided the context within which the two Rwandan men found a way to collaborate. The event quickly became famous among local medicine men and the medical community: in its wake, hundreds of traditional healers met Sebara in workshops, learning how they could better diagnose the neurological disorders that many patients suﬀered after the genocide. Literally thousands of potential neurological patients in Rwanda stand to benefit from this collaboration.

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FIGURE 2

O R G A N I Z AT I O N A L T E N S I O N S On the one hand, we want/need...

On the other hand, we want/need...

Centralization

Decentralization

Commoditization

Customization

Autonomy

Commonality

Individual bonus

Group reward

Being patient in new markets Looking out for my community/region

versus

Short-term market demands Working on enterprise-wide needs

Entrepreneurship

Central control

Courage and take risks

Caution and be careful

Short term goals and rewards

Long-term goals and rewards

Product coverage/focus

Regional focus

Micro-management culture

Empowerment style

Core strength and flexibility

Successful adaptable leadership means a new way of leading and navigating between two compelling, positively framed, and desirable value propositions. The traditional, competitive, ‘either/or’ approach isn’t very eﬀective when it comes to reconciling widely diﬀering value orientations. As an individual, you need a strong and consistent core and at the same time, you need to be flexible and adaptable at the boundaries, in order to provide clarity and fairness, confidence and shelter and create value for multiple stakeholders. A good metaphor is the willow tree. It has a wide network of roots extending well beyond its branches. The tree’s core – its trunk – is strong, tight and consistent, but its roots and branches are flexible and adaptable, able to sway in the storm while staying intact. In the same way, the adaptive leader requires a strong core, great self-control and self-awareness in order to stand strong, while remaining open to movement and being able to reach for new relationships, connections, learning, understanding and insight.

The value of adaptability

Most organizations consist of tensions: long-term strategy and short-term results, autonomy and collaboration, individual and team rewards, as Figure 2 illustrates. Leaders need

The adaptive leader requires a strong core while remaining open to movement

to positively (re)frame the underlying value propositions and make both sides desirable, before entering a process of reconciliation and integration to get the best of both worlds. Adaptive leaders have the potential to be very innovative, as the most interesting innovations are true integrations of cross-disciplinary tensions: it is why they are scarce, and potentially very profitable. In a world where business spans borders and boundaries, leaders need to ask questions of themselves and their environment. It is always possible to change your current logic, mindset, and conversations; to increase your adaptability. But it means honestly answering some tough questions. How inclusive a person are you? How receptive are you to diﬀerent people and their science, knowledge and insights? How much time do you give people? What is your immutable core? Can you integrate new and diﬀerent perspectives without feeling threatened? Answering those questions can help you to understand others, be clearer in your intentions, and come out with decisions that are better supported by those in your organizations and communities. That is the true value of adaptability. The logic of duality isn’t hard to master, as long as we focus on positively-framed and desirable opposite value propositions, and stop pitching one value against another. Such either/or thinking means putting leaders at odds with each other in divided organizations, in an already too-fragmented world. — Maarten Asser is an executive development faculty member of Duke Corporate Education, a leadership immersion designer, a global leadership expert and an executive team coach Q4 2019 Dialogue

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Pivot! An ambitious leadership development programme at pharma giant Merck is a case study in breaking down boundaries – and changing company culture from the grassroots up. Megan Yuan and Liz Mellon report

Dialogue Q4 2019

Seven years ago, Merck’s senior leaders took a long, hard look at the company and decided that the way it developed its leaders had to change. In an increasingly chaotic and uncertain world, it felt as though the external environment was changing faster than Merck. Multiple business challenges were racing towards them: new technology, a product pipeline drought, new business models, shifting customer needs, double digit growth in emerging markets, and new competitors. Carl Segerstrom, now vice-president, human resources, at Merck Manufacturing, was one of the founders of the new approach. “We were skilled at building US and Western European talent in their function – manufacturing, human health or research. What we needed instead were general managers who could see, understand and manage the whole business. We wanted to build a globally diverse leadership cohort and break

When participants move outside their country, there is an exponential growth. They are tested and their grit and resilience emerge Linda Garrett, key talent leadership learning

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We needed general managers who could see, understand and manage the whole business. We wanted to build a globally diverse leadership cohort Carl Segerstrom, vice-president, human resources, Merck Manufacturing

the mould of expert leaders in their function.” David Howe, now executive director, leadership and global function learning, was also involved. “Merck is large and complicated. To lead effectively you need to understand the breadth of the global business and how things get done. You need a well-rounded perspective and to be able to see challenges from different angles, not just from the perspective of one function. We had leaders who were excellent in their function, or their country, but this isn’t how we compete and win in the market. “We decided to take individual contributors who are early in their career at Merck and give them breadth, to develop the leaders we wanted for the future: agile, able to identify opportunities through new technologies and partnerships, able to pivot.” Merck decided to make a long-term play: a robust and sustained effort to develop leaders for the future, leaders able to see beyond their day job, change agents who could break down silos and push the organization forward. Patrick Bergstedt, head of global marketing and international commercial operations (vaccines), has been a senior line advisor to the programme since the outset. “We have traditionally been a US-based, US-driven company, but times have really changed. For example, in the vaccines business we are having more of a global impact. More of the volume and doses are distributed and sold outside the US today. The General Management Acceleration Program is helping us to develop truly global leaders.”

The General Management Acceleration Program (GMAP)

Merck chose Duke Corporate Education as its educational partner to develop GMAP. Some design principles were fairly standard for a global company with a strong history of leadership development. They wanted educational workshops at regular intervals; face-to-face learning would be complemented by virtual learning; participants were to have coaching, as well as each being supported by a senior leader on a specially-established Line Advisory Board; and participants would work in small groups on action learning projects, designed around real business challenges.

They also adopted some very diﬀerent design principles, demonstrating how serious Merck was about investing in change. As Carl Segerstrom explains: “Our classic approach had been to manage people’s careers for them, but we felt that we were missing hidden gems. So instead, we invited people to apply for the programme and then put them through a world-class selection process. We only wanted a handful of candidates each year, about 15.” There are 350 or more applications for each year’s cohort – it’s harder to be accepted onto GMAP than it is to enter an Ivy League university. The rigorous application process includes a cognitive assessment, leadership assessment, business case and several structured interviews. The process works: there is a positive correlation between success in each round and career development. GMAP alumni make more career moves, vertical and lateral, and are regarded as having higher potential. The second unusual aspect of the programme is its length – two years – and what it demands of participants. The company wanted GMAP participants to get real experiences and own their business outcomes. In their first year, they take a job outside their function. In the following year they undertake a second rotation, moving outside their country and into a third function. Linda Garrett, key talent leadership learning, explains the impact of these placements. “When participants move outside their country, there is an exponential growth. They are tested and their grit and resilience emerge. Early feelings of panic and fear of the unknown are part of this growth. Sometimes the unknown just has to be figured out – that tenacity and patience has to be learned, not taught.” Bergstedt agrees. “The outside-function and country placements really develop resilience. It’s phenomenal to see how the participants adapt and bring fresh perspective.” Sahm Nasseri, promoted after the programme to executive director, human health strategy, is both a programme alumnus and a current GMAP assignment manager with a participant assigned to work for him. He goes further: “GMAP is not just a professional development experience. The overseas rotation took me and my family longer to settle in than expected – the whole 12 Q4 2019 Dialogue

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We now have a cadre of alumni all over the world who understand that we need to break down silos and act as one company Alexandra Fucik, director of talent development and GMAP

months – but the benefits for the whole family made it a standout part of the experience. You don’t always get the opportunity as an adult to make new friends and a new network, to learn and develop and thrive. I’d call this a family programme of learning and development.”

Hard-won success

GMAP challenges many of the traditional precepts of leadership development in Merck. Previously, participants were selected to attend a programme; served time in role, in one function and country; and were eventually promoted. GMAP follows a very different process. Understandably, there was resistance. Segerstrom faced early pushback. “Building cross-border talent was so different to development paths in traditional Merck, I had to make so many presentations to create sponsorship. After seven years, it’s a wellknown brand, it’s cool to see. We also know that post-programme retention has increased in this talent pool.” Alexandra Fucik, director of talent development and GMAP, remembers when she first heard about the programme. “I thought it was elitist and costly. What was the point in taking people off their normal career path for two years? When I joined the programme in October 2018, I was asked to make an assessment – could we justify the cost? So I looked at the metrics and yes, we are starting to see successful career acceleration after GMAP. But more than that, we now have a cadre of alumni all over the world who understand that we need to break down silos and act as one company to continue to be successful.” Caroline Litchfield, senior vice-president treasury, tax and investor relations, was closely involved in the design of GMAP and is its executive sponsor, as well as one of the first Line Advisory Board (LAB) members. “We created a high bar to join an elite programme and then put them through fast-track development. Unfortunately, this created a bit of an entitlement mindset which we had to work through – we need our participants to work with others, as well as to grow individually, and we need managers to understand the value that they can bring.” Tracey Franklin, vice-president chief HR talent and strategy officer, and a senior executive on the LAB, agrees. “A sticking point is how fast GMAP alumni expect to progress versus a mid-level manager who has ticked all the boxes. We need to encourage managers to change the way we think about talent and take a risk in hiring a GMAP alumnus without the traditional experience.”

Critical role of GMAP managers

Sahm Nasseri had to make a major presentation Dialogue Q4 2019

on HPV – human papillomavirus – strategy after only two weeks in the role. Following his GMAP experience, he was able to present it in the context of the whole Merck strategy, including the advantages for shareholders and broader stakeholders. “This is important. In a huge company like ours there are lots of little companies, and if you act in isolation, Merck misses out,” he says. Nasseri believes that effective development through GMAP depends to a large extent on the assignment manager. An apprenticeship takes energy, and the manager needs to invest. “You may have gained a ‘free’ resource, but it takes time to help your GMAP participant to add value. The investment is justified – today, GMAP alumni have become the go-to talent pool for high-impact opportunities in Merck.” Caron Li, managing director, Hong Kong, agrees that the role of the GMAP assignment manager is critical. Merck has taken great care in choosing candidates’ assignment managers, because they understand the exceptional talent it takes to be accepted onto the programme and the investment required to nurture that talent. “My participant can ask for my guidance on any issues and we spend a lot of time in discussion. I think a good assignment manager needs to be open-minded and a good coach. You also need to be flexible, as project work means time away from the day job. Even in her first year, I can see that her mindset has broadened, and she has asked me questions about her project that I couldn’t answer – so I am learning from her too.” Even though the participants are the focus of learning, their ability to look across the business and ask different questions means that others grow and learn alongside them. Bergstedt has the same experience of learning. “It’s helped me personally to overcome my own Western bias. Recruiting our first participants in Asia Pacific, I had to unlearn stereotypes – being calm and reflective doesn’t mean that an individual is laid back or unassertive. Exceptional talent presents in different cultural ways around the world.” Katharina Ruprecht is GMAP senior specialist, global market access vaccines – note how GMAP is included in her job title while

It’s helped me overcome my Western bias. I had to unlearn stereotypes. Exceptional talent presents in different cultural ways around the world Patrick Bergstedt, head of global marketing and international commercial operations (vaccines)

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We are seeing grassroots cultural change. I see GMAP alumni challenging the status quo with confidence, fortitude and an energy we didn’t have before Linda Garrett, key talent leadership learning

attending the programme – and currently a second year GMAP participant. She is an example of how the programme is meeting its aims. “My first assignment was in manufacturing. Before that, when I was in marketing, I used to give my manufacturing colleagues a hard time on delays. Now I understand how complex manufacturing is and see how everyone gives more than 100% to try to get it right. I felt bad about my past complaints and went back to my former manufacturing colleagues and apologized. I have learned to ask, rather than assume. I may not be able to break down silos, but I can connect them.”

Neil Stevens

Unexpected outcomes

The metrics and personal testimonies alike show that GMAP is having a positive business impact, with several alumni, including Nasseri, having accelerated into executive roles. Litchfield relishes the opportunity to develop talent and sees the rotation through GMAP as a way of giving colleagues deeper insight into the finance function and also for importing fresh perspectives into finance, joining up Merck. She acknowledges that the programme’s success has brought both challenges and unexpected outcomes. “We didn’t foresee how hard it would be to place GMAP candidates into the business. Potential assignment managers saw them as ambitious and acting beyond their capability – what they wanted were ‘plug and play’ candidates. Putting alumni back into the business in year three is equally challenging. Our middle management culture needs to shift.” Indeed, the biggest unexpected outcome is how participants’ broader, enterprise-wide outlook is starting to shift Merck’s traditional, hierarchical and rather conservative culture. When a company seeks culture change, one lever is deliberate development of the most senior leaders, from the chief executive down. In contrast, GMAP started out as an acceleration programme for a tiny handful of middle management talent. After seven years, there are still only around 100 alumni compared with a total Merck workforce of 70,000, yet GMAP’s strong, globally-connected alumni community is challenging the executive to change. Litchfield never expected this to be a culture

change programme. “I saw this as a talent development strategy for enterprise leadership. We didn’t connect the dots across the business as we should have, and our aim was to give talented middle managers that breadth. Today, I see the GMAP community challenging our senior leaders in a way that you didn’t see in hierarchical Merck. Our CEO has heard from them the message that it will take more than GMAP alone to change our culture, and we are focused on that.” Others agree. Linda Garrett views culture change as a wonderful by-product of GMAP, while Tracey Franklin says: “By multiplying these talented employees with a different mindset across the world, we are seeing grassroots cultural change. Merck is like so many other large companies, steeped in tradition and with a tendency to look back to a successful past to dictate the future. As the world changes, we need different behaviours and I see the GMAP alumni challenging the status quo with confidence, fortitude and an energy we didn’t have before. We need to place the greater good for Merck in the forefront and I see them doing this. “Twice now I have run off-sites for our top 200 to work through strategic issues and then repeated the exercise with GMAP alumni, who have really innovative ideas. I feed these ideas back to our senior executives, so that we can incorporate them and use the collective thought power of this group to help shape the future of our company.” GMAP alumni continue to ‘pay it forward’. They have been involved in multiple strategic initiatives and are likely to continue to be so, reinforcing new ways of working. Current participant Katharina Ruprecht concludes: “We are change agents – we follow the current mission while creating the future at the same time. We are not afraid of the challenge.” — Megan Yuan is associate director, global oncology policy, at Merck. Liz Mellon is the former chair of Dialogue’s editorial board Q4 2019 Dialogue

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Getting a grip on global reputation John Davis explains how successful brands build trust by adapting to local markets

“It takes many good deeds to build a good reputation, and only one bad one to lose it.” So said Benjamin Franklin, one of the USA’s Founding Fathers, more than 200 years ago – and his words have rarely been so relevant as they are for global businesses today. But what is reputation?

Reputation = Global brand + Local brand Disconnects Too few of today’s organizations and leaders are disciplined enough to live this every day. They don’t realize that a reputation and a brand are one and the same. The good news is that this can be fixed by recognizing that reputation development drives brand strategy. Reputation and trust are synonymous (see ‘Brand of Gold’, Dialogue, Q1 2018), and leaders have an obligation to nurture trust both internally and externally. It cannot be manufactured, or situational. It must be consistently experienced. The key to building a global reputation and being relevant in local markets, minimizing disconnects, is to embrace a ‘firm brand, loosely held’ approach, on the premise that a brand is guided by a universal set of principles, translated to regional locations based on cultural sensibilities. Dialogue Q4 2019

Competitive success

In my book Competitive Success – How Branding Adds Value, I looked at 500 top performing brands to understand how the best cultivated successful global and local reputations. Four brand levels emerged from the research (see page 30). Levels 3 and 4 represent the most successful brands, with the biggest struggles being faced by organizations at levels 1 or 2. Level 3 brands are Professional: for example, consulting firms. Level 4 brands are relatable, and are viewed as more human: Richard Branson’s Virgin brands embody this spirit. At both level 3 and 4, brands are clear about who and what they represent. Their reputations are built through the firm brand, loosely held approach. Unfortunately, too many companies are still structured on last century’s business model, with leaders defining brand management as a systematic way of managing their firm’s image by hard-coating branding and using conventional marketing communications. This approach is obsolete, unimaginative and, as research shows, sows distrust with today’s customers. Top brands deliberately avoid being robotic and systematic, focusing instead on developing an organization that lives and breathes the brand. To paraphrase many of the comments from leaders I interviewed: “We meet people from top brands every day and they exude branding in everything they do. How can I get my organization to be like this?” Put diﬀerently, these leaders are asking how they can humanize their brand. In a 2018 New York Times article, Amanda Hess said

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Shutterstock

branding is a process that “imbues companies with personalities… A company with a soul becomes relatable”. But there is the potential for significant disconnects between attempts to humanize a brand’s personality and how the company operates day-to-day. Minimizing those disconnects requires more than slick marketing. The organization must be deeply connected through a myriad of formal and informal relationships that are observed, felt, and shaped by people within. Commanding and controlling the various reputation levers is impractical. The market owns control: leaders can only influence, not coerce or attempt to control, outcomes, by building strong networks of influencers. The organization’s brand and people’s experience

People from top brands exude branding in everything they do

with it, both inside the organization and outside, must be synonymous.

Brand inside = brand outside

It is critical to recognise that brand inside = brand outside. How you treat employees influences how they represent the brand which, in turn, impacts market perceptions. Rigid, topdown brand control is replaced by the bottomup flexibility to tailor the brand’s core principles to local conditions and social norms, recognizing that any misalignment risks a disconnect that can harm reputation. Internal/external misalignments are not the only branding risk, of course. Misunderstanding and miscommunicating to a local market can quickly create a damaging backlash. The examples, unfortunately, are legion. In 2018 Heineken ran a TV commercial showing a bartender sliding a beer to a lighter skinned customer, passing three darker skinned people as it slid past, with the tag line ‘Sometimes, lighter is better’. Understandably, this ad stirred outrage and charges of racism. Q4 2019 Dialogue

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H O W B R A N D I N G A D D S VA LU E R EL ATA BL E Has resonant meaning, is viewed as authentic and engages effectively at global and local levels. Embodies a sense of hope. Empathetic and emotional. Strives for trusted, inspiring reputation. Has a human soul.

Bra

nd lev els

P ROFES S I ON A L Conveys confidence, reliability and ambition. Has gravitas and credibilty, translating well across markets. Strives for reputation of excellence. More rational and analytical. Has a business soul.

TACTI CAL Perceived as slick, glossy. Can miss local market signals in effort to be efficient. Strives for competent reputation via conventional outreach to market. Has a situational soul.

T R A N S AC T I ON A L Unsophisticated. Strives to survive. Lacks a soul or distinguishable characteristics.

Italian luxury fashion firm Dolce & Gabbana generated anger when it ran a TV ad in China, showing a Chinese model eating a pizza with chopsticks. The cultural message was undeniably insensitive and it led to significant negative publicity worldwide. Alibaba, Suning and other e-commerce firms stopped selling D&G products, and several major Chinese celebrities boycotted the brand’s products. General Motors (GM), meanwhile, found itself in hot water when it ran a Cadillac commercial claiming that hard-working Americans ‘deserve’ a Cadillac, while implying that those of other cultures are lazy and undeserving. While not mentioning specific countries by name, the message was clear. The market reacted negatively. Ford took advantage of the misstep, running a counter-ad that mocked GM by saying that only people with a conscience who want to do good deserve to drive a Ford Focus, an aﬀordable all-electric vehicle.

Ask the right questions

Brand disconnects can undermine a firm’s reputation in minutes. Repairing the damage can take years. So what leads to these disconnects? To paraphrase the GM ad, laziness. The checks and balances required to ensure that a brand’s Dialogue Q4 2019

message is appropriate for a local context are not onerous, but not enough leaders ask the right questions: Do we understand the local market context? Are the messages we’re sending aligned with our values and principles? Is the communication appropriate for the market we’re entering?

Reputation is reinforced everyday by employees on the ground who have a far more informed and nuanced understanding of local context than their remote headquarters colleagues. Great global/local branding doesn’t regard uniformity or being frictionless as objectives. The best brands don’t insist on rigid conformity; regional offices can and do push back when brand initiatives lack local relevance. This is healthy friction, sharpening mutual understanding and signalling internal trust. Unhealthy friction, however, often results when global teams demand strict compliance, signalling their indifference to and disrespect for insights from local offices. In top organizations, everyone owns the brand, so senior leaders are obliged to foster an atmosphere that allows local managers to

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Brand reputation can be damaged in minutes and take years to repair

call out branding that fails to reflect market context. That can be done by providing advance communication about overall brand strategy, by asking local managers if they detect any misalignments between the proposed branding and local conditions, and by supporting locallyled strategy execution. Nestlé is a good example of understanding context. Their country-specific websites feature common worldwide themes followed by unique homepage messages, native languages and highlights of initiatives that resonate with local markets. The eﬀort to combine a common global identify with local tailoring signals that Nestlé understands the importance of being contextually sensitive to its markets.

Don’t just measure, create meaning

Key Performance Indicators (KPIs) can be counted. Our essential ‘humanness’ – our soft skills, our collaborative ability, our effort to empathize – cannot, yet no one would dispute their importance. As the old adage has it: “Not everything that can be counted counts, and not everything that counts can be counted.” In fact, my research found that KPIs are some of the biggest culprits behind reputation destruction. Over-emphasizing the importance of KPIs can disconnect a person’s performance from the larger organizational community, because KPIs can distort individual motivation. Creating a ‘results at all costs’ mentality can lead to reduced engagement from employees, even if financial targets are achieved. To illustrate: a manufacturer in Asia had several consecutive years of impressive financial growth, yet internal engagement scores were declining each year. Although people were achieving their numbers, they were creating a toxic environment in the process, and the brand’s reputation was being damaged. It wasn’t until customers said they felt mistreated, and would leave if the company didn’t fix the problems, that action was taken. The company had to break a culture that was dominated by individual KPI-based performance management. It did so by creating collaborative performance objectives and new soft-skill, growth-mindset routines. New solutions began to emerge, financials continued to improve, and engagement scores started to reverse their decline. The Four Seasons Hotels brand, meanwhile, is widely recognized for its world-class service, delivered uniquely in each market. During one visit, my family and I were greeted by name by

the concierge as we entered the lobby. The front oﬃce manager also knew our names, including those of our children, who were each given a gift specific to their personality, making them eternally loyal to the hotel, much to my financial chagrin. It was a delightful example of creating a meaningful experience. At the time, I was chief executive of a boutique hotel company and I wanted to learn their service secrets. The front oﬃce manager explained that the hotel creates guest profiles before check-in – in our case, using notes that the reservationist took during my call – before preparing welcome gifts. I asked her how they knew our names when we entered the lobby, since we weren’t wearing name badges. She said, “Oh, that’s easy. The valet looked at your luggage tags as you entered the lobby and then phoned the concierge to say that the Davis family – two adults, three kids – has arrived. The concierge hung up and walked over to you.” It was simple, yet powerful. Four Seasons ensures its employees know the universal brand principles and are empowered to contextualize those principles locally, minimizing disconnects and thereby creating meaning for everyone.

Empowering people to build your reputation

Ultimately, empowerment and engagement among employees is pivotal to company growth and demand. Growth requires demand for your offerings; demand is spurred by market interest borne from reputation; and the quality of that reputation starts with the people inside the organization believing they are trusted, and understanding how their contributions affect stakeholders. Command and control micromanagement of work habits and KPIs won’t create an inspired workplace. Employee and partner ecosystems thrive best when objectives, values and contribution to society are mutually reinforcing, not approached as zero-sum. Leaders must understand how their brand creates meaning for both employees and society, and nurture both workplace environments and partner ecosystems that are in sync with each other and with market needs. When aligned this way, brands not only build reputation and drive growth: they even have a credible and positive role to play as a force for good in the world, serving as a de facto decision-making filter when stakeholders are choosing among different value propositions. Leaders must think boldly about what makes their organization a distinctive force for good and recognize how their offerings are experienced. It is not easy to build a successful brand. But when reputation and trust are the drivers, good deeds are bound to follow. — John Davis is regional managing director, Asia, at Duke Corporate Education Q4 2019 Dialogue

INTERVIEW

Renaissance man

Justin Ferrell is the essential voice for design-thinking in organizations

WRITING

Ben Walker PHOTOGRAPHY

Tom Campbell

People have extended opportunities to me that I didn’t see myself Dialogue Q4 2019

Sometimes others are the best judges of your own qualities. “People have extended opportunities to me that I didn’t see myself,” says Justin Ferrell, a guru of design-thinking from Stanford who began his career as a sports reporter on a local newspaper. “It’s not just about your skills, it’s about responding to what others see in you.” Ferrell had a boyhood dream of working at the great campaigning newspaper the Washington Post – “I’d seen All the President’s Men”. It came true – not because of his self-perceived qualities as a reporter – but because of others’ recognition of his skills as a designer. Working on a sports desk of just three people at a newspaper in St Augustine, Florida, everybody did everything. The then 23-yearold Ferrell would write match reports about high-school American football games, then lay them out on page. He learned page design from the sports editor, but longed to be involved in other events. “There are bigger things going on, I wanted to be involved in news. And sports writing is super-competitive. Something like 80 people applied for my job at St Augustine, and I probably got it because they could pay me the least.” Ferrell sent his cuttings nationwide (in those days, before internet news became a thing, they really were cuttings, physically chopped from newspapers). He was rejected time after time. “I sent them all over the United States, I didn’t even get an interview,” he recalls. Then, one

day, a newspaper in Greensboro, North Carolina, called him. “I said, ‘Did you like my writing?’ They said, ‘Oh no, we didn’t like your writing. But the news desk passed your clippings along to us – we are the copy desk. We’re just wondering whether you wrote the headlines on these stories, and whether you laid out these pages?’” Ferrell answered in the aﬃrmative, got an interview as a designer – and got the job. “I became a designer because the industry told me that I had more talent there than I did as a writer,” he says. After five years, he moved on to a management-level newspaper job across the state in Raleigh. Then, after just a year, he landed a job at the Washington Post, the dream fulfilled by a circuitous route – “the opportunities oﬀered to me by other people, rather than my intentions.” Ferrell was at the Post for almost eight years, and when it merged with its website (they were then separate companies), he moved into digital design. When designing the Post iPad app, he read about David Kelley’s work at the Institute of Design at Stanford (Stanford d.school). He later met with a colleague there who worked with Kelley, and was, he says, “blown away by the place”. He joined a journalism fellowship, taking ostensibly temporary leave of absence from the Post, but never looked back. His family loved California. Then, at the end of the year, somebody else saw something in Ferrell that he hadn’t seen in himself. Sarah

You don’t want to be so close to your idea that you’re not open to feedback

Stein Greenberg, the design school’s executive director, wanted to start a non-sector specific fellowship programme at the d.school, and wasn’t in the mood to wait. “She said, ‘We like to launch to learn, so how about we start in a few months and you be the director?’” By that autumn, Ferrell’s life had again turned on a dime, thanks to the recognition from others. There is a satisfying equivalence between Ferrell’s career and the design-thinking he now teaches at Stanford. He tells a story about a used-car salesman. “I’ve nothing against car salesmen,” he says. “But testing is not the same as selling. Instead you are trying to put your idea into people’s hands to see how they react to it.” Like the copy desk at the Greensboro paper all those years ago, they might not react to it in the way you expect them to. “What do they like Dialogue Q4 2019

about it? What do they not like about it? What kinds of questions do they have? What kinds of new ideas do they have? It’s in that feedback that your next direction emerges. You don’t want to be so close to your idea that, one, you are not open to feedback; and, two, you are trying to convince people that you have come up with the perfect thing for them.” Ferrell works as an educator for Duke Corporate Education, applying design-thinking to organizations where employees, colleagues, are leaders’ ‘customers’. “My approach to teaching is behavioural,” he says. “How do we get out of our own way so we are able to look at a situation with fresh eyes? And how do we fight the inertia to do the same things that we have always done?” Inertia, he suggests, is a stubbornly powerful force. “From an organizational perspective, when you are doing something new you are working against the status quo,” says Ferrell. “There are a lot of antibodies that keep you from moving against the stream. There are a lot of reasons why we just want to continue down the path that we were always on – from a personal standpoint it’s more comfortable. “It turns out that we like to do things that we are good at. To stop something where we know what the outcome is going to be, to try something where we are not sure what is going to happen, is diﬃcult. It requires a lot of intention – and a lot of support – to be able to do that.” Companies know they are supposed to innovate, but often interpret it as a mandate for piecemeal development, rather than removing themselves from the day-to-day and asking what their processes are for. “What are the

INTERVIEW

My epiphany as a journalist was not that the folks in Silicon Valley were smarter than we were, but that they were asking different questions

behaviours we are trying to encourage, how do we view the problem from the person’s perspective? In my teaching, I try to give people the space to step back and ask: ‘Who is this for, and how do we engage with those people and get them what they need now?’” Design-thinking is traditionally applied to products and services, ideating, then iterating and testing with the market, co-creating with a customer focus. Ferrell specializes not in product design, but in organization design. The two applications come from the same source. “It’s about helping organizations evolve,” he says. “How do we develop creativity within organizations? We teach the basics of designthinking and then turn it internal, and say: ‘How do we do this as leaders in our organizations, where the people we are designing for are our employees?’” He encourages leaders to see their employees’ needs as verbs (e.g. communicating), not nouns (e.g. email). “The question I ask is, look at the thing you already do and ask what is that thing for? If you frame the problem around the noun, with a ready-made solution, then you are more likely to create an incremental solution.” As Henry Ford famously discovered, if people could travel faster without a horse, they would no longer require the animal. Can he give an example from his own career? “Back at the Post, I was once asked to redesign the newspaper. So after a ten-month project we ended up with an incrementally better newspaper. Our mission statement was: ‘to be for and about Washington.’ If we had said, ‘Instead of taking ten months to redesign the newspaper, let’s take ten months to connect people with the local issues they care about’ – because that was what the newspaper was really for – then we might have designed a social media platform. Facebook was brand new at that time, and we might have designed something like it. We might have reached the conclusion that local is not about geography, it’s about network. My epiphany as a journalist – an industry completely changed by technology – was not that the folks in Silicon Valley were smarter than we were, but that they were asking diﬀerent questions.” This ideation must be performed in a neutral space. Ferrell warns against companies falling into what might be termed the brainstorming trap – that people pass judgement on ideas when they are first touted, killing them at birth. “If you are evaluating the ideas at the same time as you are generating them, we all know that is the quickest way to shut down the generation of ideas. If you say, ‘let me play devil’s advocate’… ‘how much is this going to cost?’… well, we intentionally separate the evaluation from the generation. Not because we think that every idea is going to be brilliant. We know that the majority are not going to be. But

we don’t need a high percentage of great ideas, we just need to get a few great ideas. And the best way to get to a good idea is to get a lot of ideas.” Do organizations often ask the question ‘what is this for?’ and find they don’t have an answer? “If you can no longer articulate what it’s for, you must seriously consider whether you should be doing it at all,” says Ferrell. “One of the things I noticed at the Post, and I think the same is true of other organizations, is that you start to think ‘I don’t have time to do all these other things, I don’t have time to explore the future, because I’m too busy reacting to all the inbound stuff of the present’. But at the Post I used to say, ‘well, we are journalists, don’t we get to decide what we are going to do? We edit all the time!’ “The same is true of other organizations – all the things that you have to do on a daily basis were created by you or the people you work with. Those were the products of decisions that people themselves made. We are not stuck in this wheel. We created this wheel! If we created this wheel, we can create another one. Or we can get off.” Ferrell instils in his tutees a mindset of empowerment – that, since organizations were created by human beings, they cannot be more powerful than the people within them. “David Kelley has this phrase that self-efficacy is the belief that you can achieve what you set out to do,” says Ferrell. “Creative self-efficacy is the belief that you can achieve what you set out to do in a way that you have never done before. I think that’s a really important place to start – looking at what you currently do and thinking, ‘you know what? I can do this differently.’ Once you believe you are creative, that you have that creative self-efficacy, you look at the world as malleable.” But even in his own sessions, Ferrell rarely finds more than half the delegates consider themselves ‘creative’, at least not before he gets to work with them. At the risk of diverting into social commentary, we debate whether opportunity is equitably distributed, either in perception or reality. Does everyone have the agency to change the wheel – or get off it? “I’m not saying that opportunity is equitable,” says Ferrell. In his personal life, Ferrell does a lot of work in social justice: he knows that for many people, access to resources is not evenly distributed. “There are places that I get to go with Duke, places in the world, where opportunity is not equal,” he says. But individuals and companies can change themselves for what’s next. “These organizations can create their own future,” says Ferrell. “I think it’s just about reminding them of that, and giving them the room and the tools to do it.” — Ben Walker is editor-at-large of Dialogue Q4 2019 Dialogue

BEYOND THE WRITTEN WORD AUTHORS WHO ARE EXPERTS LID Speakers are proven leaders in current business thinking. Our experienced authors will help you create an engaging and thought-provoking event.

A speakers bureau that is backed up by the expertise of an established business book publisher.

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KATE COOPER

Meetings survive because people like talking to each other

To meet is human Kate Cooper is head of research, policy and standards at the Institute of Leadership & Management

Imagine a situation where the person calling the meeting must share the ‘bill’. Would those who had spoken little or arrived late expect to pay less?

Eight years ago, Japanese precision tool manufacturer Disco implemented a radical change to its management model. Under the changes, teams were billed for their work and individuals treated as oneperson start-ups, having to pay for desks, computers and the use of meeting rooms. One beneficial consequence of this marketdriven approach is that people cut back on “useless meetings”, as employee Hiroyuki Suzuki told Bloomberg. There is no shortage of proposed countermeasures. A Google search for ‘useful meetings’ yields some 369 million results. Nor is the search for meeting Shangri-La new: the management guru Peter Drucker included running productive meetings as one of the eight practices of effective executives. Most people who work in Western organizations could describe what constitutes a useful meeting. Their descriptions are unlikely to include: it starts and/or finishes late; it lacks an agenda; is attended by people ancillary or irrelevant to the itinerary; it runs off topic; it lacks outcomes or agreed actions. But monetizing the process might not be quite the panacea managers seek. If everyone must bear the cost – or at least invoice colleagues for turning up – meetings would be very different, and not necessarily in a good way. Imagine a situation where the person calling the meeting must share the ‘bill’, rather like in restaurants. Would those who had spoken little or arrived late expect to pay less? Would those leaving early contribute to the cost of the meeting prior to departure? Would service be added for good contributions or a percentage deducted when the contribution was considered below par? Would there be surcharges for deviating from the agenda? This system offers infinite scope for discord. Consider, too, that what constitutes a ‘useless’ meeting differs from culture to culture. Edgar Schein aptly defines culture as ‘a pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration’. Thus, it will differ not just from nation to nation, but from company to company, even department to department.

Meetings have a role in creating, maintaining and communicating the culture of an organization that transcends any agenda or itinerary. An expectation that they should, or are even able, to serve one unified purpose is rather simplistic a view. Imagine the plethora of responses to the question, why are you at this meeting? They might include: it was mandated; I’m enjoying the company of colleagues; I’m finding something out; I’m fearful of decisions made without me; I have information to share. Or simply: because I always attend. Many of us have been entertained by YouTube videos of online meetings, a phenomenon that might have fascinated Drucker. Such digital conferences would challenge his view that meetings should have a clear purpose and be terminated when the purpose is accomplished. There was no space in the great man’s world for “while we’re all here, let’s discuss x”. Disco’s charging model would militate against face-to-face and encourage online meetings – reducing meeting room costs, even offering the potential for charging by the participation minute. How many of us, unconstrained by any sort of charging model, issue invitations to online meetings because it’s an easy, ‘no-cost’ addition? It is easy to ignore the impact extraneous individuals have on their efficacy. Yet perhaps we are looking at meetings the wrong way. If we examine, instead, the myriad motivations for attendance; the numerous reasons given for holding meetings; and – as digital technologies put up more barriers to human interaction – the increasing need to ‘include’ rather than ‘exclude’, then a different picture emerges. Rather than reify the meeting as another element of business life that has to be ruthlessly productive, instead consider humans’ manifold motivations for attending. We find out more about each other when we converse. Meeting is inherently human, and decidedly humane. Let meetings be open and, to some degree, messy. Then we might find that ‘useless’ meetings are not so useless after all. Q4 2019 Dialogue

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Inspire a movement Even the most traditional of businesses can be transformed if leaders put people at the forefront of change. Kate Sweetman and Shane Cragun get radical

The call to action was broadcast in the middle of the night on 22 November 2004. “The time has come to defend your life and Ukraine. Your victory depends upon how many people are ready to say ‘No’ to this government, ‘No’ to a total falsification of the elections.” Exit polls had suggested that the race to be the next president of Ukraine had been won by opposition candidate Viktor Yushchenko, after a campaign in which he had been poisoned and nearly died. But state-controlled media declared the regime’s candidate, Viktor Yanukovych, the winner. When the Ukrainian people realized that even election oﬃcials were in on the fraud, they answered the call for action and poured into the streets. For 17 days, in the bitter cold of winter, over a million citizens marched in protest. They formed human barricades around government buildings, paralysing state functions. Restaurants donated food, businesses contributed tents, and ordinary people brought blankets, clothing and money. At night, rock bands energized the protesters. In total, almost 20% of the Ukrainian population took part in the movement to take back their country. And they won. In December, a new vote was held, which Yushchenko won decisively. He was sworn in as president on 23 January 2005. As Steve York, director of the documentary Orange Dialogue Q4 2019

Revolution, said: “It’s exhilarating to watch what happens when ordinary people, who are normally considered powerless, recognize their own power, and decide to take action.” It is much harder to launch such movements in business.

Business as usual

Passion most matters at the grassroots level when intention can become action. In the political sphere, we can quickly find examples of inspired movements, from Gandhi to the 2019 Hong Kong protests against proposed extradition legislation. Today’s social media can unleash a movement in seconds. But businesses are not democracies based on one person, one vote. They do not ride waves of emotion driven by a deeply personal sense of purpose. Even when business attempts to provide a ‘why’ of work – a sense of purpose – the ‘way’ of work mitigates against deep personal connection and passion. The reason? The essential nature of business, with few exceptions, has long been top-down and controlled. The dynamics typical of business tend to mitigate against radical action. The need for control, risk management, internal politics, and quarterly earnings pressures weight decision-making in favour of incrementalism and greater certainty. These are the enemies of unquenchable passion and limitless drive.

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Q4 2019 Dialogue

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Control, risk management, internal politics and quarterly earnings pressures are the enemies of unquenchable passion and limitless drive

A new way to inspire movements

Two years ago, we set out to answer the question that many have grappled with, but none have fully articulated: what integrated, holistic strategic leadership model can provide concrete guidance in our age of disruption? Our goal was to find answers that defied boundaries and offered the potential for overturning those traditional business dynamics. Our research included interviews in 40 countries, in 60 industries and in seven kinds of roles: line leadership; HR, talent management and L&D; external recruiting; authors and academics; professional services; disruptors, especially in Silicon Valley and China; and specialties, such as those from religious institutions or mindfulness and meditation experts, who could help us to understand resilience and poise under pressure. Through this research, we have uncovered a five-part strategic leadership framework that can successfully create a movement, a seismic shift in approach and performance, in business. Morocco-based OCP Group – originally the Office chérifien des phosphates, or Cherifien Office of Phosphates – has become a poster

Dialogue Q4 2019

child for our research. We met OCP’s chairman and chief executive, Dr Mostafa Terrab, at an entrepreneurship conference in Essaouira on Morocco’s Atlantic coast in May 2018. We realized that he was an excellent example of the type of leader needed to navigate our times. In fact, what we had been calling a movement, he had also been calling “le mouvement ” in OCP. OCP is a fertilizer company. It has 21,000 employees, located primarily in four mining sites and two chemical complexes in Morocco, as well as other international locations, with a 2018 turnover of US$5.9 billion. Until 2006, there existed no more bureaucratic an organization. It was founded in 1920 as a government bureau in order to exploit Morocco’s greatest natural economic asset: gigantic phosphate deposits. Phosphorus – along with nitrogen and potassium – is one of three key nutrients for plants, and as the main ingredient in phosphate fertilizer, is vital to food production globally. Morocco holds 70% of the world’s phosphates, with deposits large enough to last the next 400 years, even given the projected growth of the world’s population. Until 2006, the only activities in OCP were mining, a certain amount of chemical processing, a limited amount of production of its own fertilizer – its runoﬀ highly polluting to waterways – and shipping phosphate around the world. The primary metric was production, and the primary motivation for working there was a job for life.

If your identity is fertilizer, you only see fertilizer

Terrab joined as chairman and chief executive in 2006. With a background in both Moroccan and international organizations, he saw vast untapped potential in OCP, which at the time was deeply in the red. After a couple of years of improving operational eﬃciencies, Terrab shifted his attention to preparing for what he called “the post-fertilizer world”. He intended to change the business dramatically: to disrupt OCP before it was disrupted by some bioengineering firm designing plants capable of thriving without fertilizer. He took the bold step of breaking the social contract in the organization, retiring the old guard a decade early and bringing in fresh thinking in the form of Millennials, digital natives with the right skills and attitudes. What became le mouvement arose spontaneously in a town hall meeting in 2016. As Terrab urged 50 early career managers to create a diﬀerent future by finding innovative solutions to existing problems and inventing new businesses, he was directly challenged. They said: “How can you expect us to find the

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TEN PRINCIPLES OF A MOVEMENT

When people are inspired by a powerful movement, traditional management issues tend to melt away.

The heart is volunteered and cannot be bought.

An inspired tribe creates a powerful movement.

Both employees and key influencers/ stakeholders throughout your ecosystem must be on board.

Without a credible evangelist who creates a high trust environment, a movement never gets liftoff.

Without a healthy profit, a movement cannot be sustained. Profit and purpose must be equally balanced.

Leverage your expertise. The movement must be something that your company and industry is uniquely qualified to pursue, not a generic charitable cause.

People crave community – tap into that.

Your impossible will happen to the degree that members fully volunteer their hearts to the cause.

Every tribe member must feel they play a central role in bringing the movement to life for them to be fully engaged. Let them choose the best way for them to contribute. A cookie cutter approach cannot be sustained.

time, energy or latitude to do that when we are on the hook for KPIs?” Without pause, he responded: “Forget your KPIs. Design the job that you think you should have.” While his response was spontaneous and delivered under pressure, his follow-through showed total commitment. He realized that those managers were right: the system needed to be blown apart. “The world moves continuously but we change in phases and increments, halted by our mental maps. We need to start with ‘who’. It is not about sense-making. It is about sense-makers.” In other words, it was all about employees. Within three months, any employee could take on any challenge they saw fit, as long as it was in keeping with the mission of the firm, to “contribute to sustainably feeding a growing world population”, and at least one of three key strategic initiatives: digitalization, a company of learners, and globalization.

Le mouvement

Forget your KPIs. Design the job that you think you should have

Le mouvement took two forms. The first was ‘subsidiarity’, the principle that decisions should be taken at the lowest level possible, by the person or people with the greatest knowledge and passion. This principle applied best to incremental but important improvements to people’s jobs or their environment. The second form was les situations. This came into play for more complex opportunities, or new initiatives to do something larger. Through

this form, employees set up a fully-fledged media organization in place of old-fashioned communications groups, complete with TV programming and a social media presence, and launched a new, inexpensive solar-powered pump aimed at African subsistence farmers. In both forms, there was an expectation that employees were to act on their own cognizance, engaging peers as advisors where appropriate. The larger, more complicated ‘situations’ ultimately did require senior management approval and buy-in to gain funding. The originating employee would put together a team to develop the idea and help decide if the idea was sound. If the idea reached the point where it needed resources or funding, it was presented to a senior leader for approval. Once resources were in place, the team was back in charge of taking it to the next level. The key to the ‘situation’ is that, despite senior management involvement, it is completely driven by convinced and passionate employees. There were no KPIs to meet, no ROI to prove, no schedule to hit, and no other sort of control by anyone else.

Free people to create

By June 2018, le mouvement was practised by about half of OCP’s employees, and rising. It has resulted in a large number of improvements. They include the launch of 60 bespoke fertilizers, each designed for different plants and conditions, which nourish plants without releasing polluting runoff. These life-giving elixirs are especially focused on the needs of poor African farmers, whose use of fertilizers has historically been limited by cost and access. They also reflect the embrace by OCP of sustainability, a dramatic concept for a company whose sole product historically polluted land and water. Other results have included the development of four fertilizer ‘mini-mills’, capable of small production runs and a one-hour turnover of the line, and the launch of four spin-off businesses which were judged to be good for Morocco but not to sit in OCP’s wheelhouse – so are now run independently by former OCP employees. We defy any leader reading this to have a more difficult challenge than building passion around a product like fertilizer. But if a movement can transform a traditional fertilizer business, think what it could do for your organization. OCP beautifully illustrates what we have rarely seen in other firms. Start by freeing people up mentally, emotionally and organizationally; enable them to learn and develop in ways that fulfil them; and watch them create the inspiration and results you need. — Kate Sweetman and Shane Cragun are the founding principals and chief client officer/chief executive, respectively, of SweetmanCragun Group. Their new book will be published in 2020 Q4 2019 Dialogue

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Trial & error Executives should never stop trying new things, write Suzanne de Janasz and Maury Peiperl. Are you open to experimentation?

Jeff Bezos, whose penchant for continuous innovation exhausts even the hardiest Amazon employees, sees the world as his laboratory. Following up market firsts with more market firsts, like drones delivering packages to customers within 30 minutes of ordering them, Bezos explains, “Experiments are key to innovation because they rarely turn out as you expect, and you learn so much.” His lead is rarely followed by other chief executives, whose career success deters them from engaging in experiments. Unfamiliar processes and unpredictable outcomes are avoided by leaders under constant pressure to Dialogue Q4 2019

produce results over short time horizons. This often permeates the organization, encouraging employees at all levels to avoid risk, let alone failure. How can leaders challenge this tendency to stay within the ‘zone of the known’ and instead engage in experiments? During a five-year study of leaders’ development, we have interviewed 49 chief executives, chief financial officers and board chairmen from large public companies in the UK, Europe and the US, plus 15 HR and chief learning officers, executive search consultants and board effectiveness specialists. We have identified five steps for effective experimentation.

Experiments are key to innovation because they rarely turn out as you expect

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Opening one’s mind

Engaging in experiments requires leaders to challenge assumed ‘best practice’ and to acknowledge that current processes, products, or pathways are imperfect. Yet how often do we see the emergence of workarounds, rather than fresh starts, even when we are in uncharted territory? Perhaps this tendency explains the popularity of the television show Undercover Boss, in which a chief executive, in disguise, toils in rank-and-file positions to experience how employees

view their jobs, the organization and its leadership. This helps shatter the confirmation bias whereby we look for information that supports our beliefs and dismiss evidence of new or underappreciated threats. As Jean Thompson, chief executive of Seattle Chocolates, told us: “The minute you think you’ve nailed it and are comfortable [is when things] change. Comfort is your first indication that you need to change; it leads to complacency.” The failure to challenge assumptions when things are going well becomes Q4 2019 Dialogue

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even more entrenched in the face of the time pressures, negative emotions, and sheer exhaustion that ensue when external changes demand adaptation for survival. Being open to diverse ideas and experiences is key. Leaders should ask others for their ideas and listen without judgement or bias. Research shows that those in decision-making roles tend to focus on things that are already familiar to leaders (‘Accelerate your learning’, in The First 90 days in Government, Harvard Business Press, 2009) and evaluate ideas relative to their fit with what the organization is currently doing (Jennifer Deal, ‘Leaders Say They Want More Creativity. But They Really Don’t’, Wall Street Journal, 18 September 2016). Other people can help you overcome your blind spots. Diverse experiences allow for divergent thinking and can increase innovation. Steve Jobs didn’t expect a college calligraphy class to inspire Apple’s typography, and Jeﬀ Bezos probably never expected that taking apart his grandfather’s Caterpillar tractor would lay the foundation for his later disruptive thinking. Engaging in activities outside your norm – books, hobbies, travel – with an open mind can spark new pathways in your thinking, promoting learning, creativity and innovation.

Feel the fear and do it anyway

As a natural response, fear is often healthy. But as it runs along the continuum from paralysing to propelling, it can prompt widely diﬀerent actions, and, in particular, inaction. First, pursuing change can make experts, and leaders, worry about others’ perceptions: “If I take the risk and the outcome is good, then I’ll be seen as brilliant; but if the outcome is bad, I was stupid to take that risk.” Sticking with the status quo appears safe and demonstrates to others that the leader sees no cause for worry. Changing course may feel akin to admitting failure. Related to this is the idea of escalation of commitment, or the fixation error: having invested in a course of action, leaders are loath to start all over with a new plan. Second, change can challenge a leader’s identity. Social scientist Karl Weick investigated firefighter fatalities in wildland fires and found that many could be attributed to firefighters’ unwillingness, or inability, to drop their tools, even when ordered to do so – causing them to be overrun by fire, even yards from safety. As Weick writes: “When tools are clearly tied to identity, these tools can preclude ways of acting.” (‘Drop your tools’, Journal of Management Education, 2007).

Dialogue Q4 2019

Comfort is your first indication that you need to change; it leads to complacency

Third, many leaders fear not being in control. The leader knows the current system: it may not be perfect, but they have ‘perfected’ ways to work around it. Changing the system means losing control of how it works. Fourth, a chief executive may want to avoid conflict, perhaps with the management team, the board, or outside stakeholders, especially in the wake of other conflicts. Finally, leaders, like everyone, are subject to cognitive biases which usually go unnoticed by those holding them. Even when they are pointed out, we may be loath to challenge our ‘truths’ and accept that we may be wrong. When we avoid learning and integrate mistaken thinking or assumptions into the complexities of daily life, it can endanger the success of our businesses. Often, the more pressing the immediate problem, the harder it is to see the bigger picture. When a leader is focused on optimizing a manufacturing process, or improving the utilization of store retail space, it is hard to think about reconfiguring the entire manufacturing or retail network. Even these steps may prove insuﬃcient when entire industries are being disrupted, as with Kodak or Nokia. Leaders can engage in experiments by first mapping their organization’s territory, identifying relevant people or entities and their implications for the organization, and then plotting a course to get from A to B, storyboarding the necessary steps and accounting for requirements, risks, and outcomes of each. Finding inspiration and validation in others’ successes can also help dispel fear of change, as can reframing the challenge to focus on the longer term. As Thompson says, leaders must ask: “What is the risk of not taking this risk… of being complacent?”

Enlist others for support

Once leaders have decided to engage in an experiment, they need the support of others who can provide diﬀerent points of view and identify potential pitfalls. Leaders can increase buy-in and ownership of the experiment by sharing power over it. Creating an environment

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where risk-taking is rewarded at least as much as bottom-line results also prepares others to participate in the leaders’ next experiment. At Microsoft, project leaders whose projects fail are typically given a new project to lead, promoting risk-taking and encouraging the application of lessons from failure in the next project. How many others to involve is less important than what each ‘other’ adds, but in general, the more the better. Tapping into others’ experiences provides greater breadth and depth of learning and support. Plus, by being vulnerable and inviting others into the learning process, a leader can enable their direct reports to help mitigate risks while becoming trusted supporters and advocates, something former Starbucks boss Howard Schultz pointed out to us: “I think it’s important to share with everyone what I’m learning. It’s not an exclusive thing.”

Learn throughout the experiment

Focusing on both process and results is key. When leaders collect data throughout the experiment, they are able to update predictions, so they can fail earlier and at lower cost. It is essential for leaders to monitor their own egocentric worldview. Learning requires that one sets out to test what has actually occurred, not to prove an assumption or opinion. As E.D. (Don) Hirsch, founder and chairman of the Core Knowledge Foundation, puts it: “Let the data lead you to your answer, not the other way around… even if it means you discard your hypothesis.” Gather data regularly to discern trends, and be creative about collecting data – when, how, and from whom. In-person surveys and regular online feedback can be complemented by social media, virtual focus groups and beta testers. Many of these processes can be incentivized to increase response rates. Leaders also need to create an internal environment that is safe for criticism – indeed, to actively solicit substantive feedback, while being aware of the biases that lead them to negatively judge or dismiss criticism. Feedback is a gift that enables learning.

The ability to remain open to learning from others is essential to leaders’ development

Debrief the experiment

At the end of an experiment or project, whether a success, a failure, or something in between, it is imperative to identify lessons learned and institutionalize them in business practice. This promotes the habit of learning from experience, increases reflective thinking, and enhances organizational knowledge, all of which aﬀect the bottom line. Without a debrief or after-action review, it’s diﬃcult to know why a change process worked or did not, yet it is often neglected – especially when projects are successful. Olivier Rousseau, CEO of French glass firm Verallia, told us of an enterprise resource planning change ten years ago when he was at Goodyear, involving hundreds of people across Europe. Detailed reports were produced one and five years later, assessing what had been done well, how teams worked, and how problems were solved. They were hugely valuable for subsequent projects. One reason the debrief is so important is the human tendency to engage in the fundamental attribution error. If a project succeeds, leaders attribute success to their own behaviours and abilities, as opposed to contextual, coincidental, or external factors. Such factors, in leaders’ minds, would more likely ‘explain’ a failure. A debrief helps capture and codify the factors at play, and can lead to valuable changes in procedures, training, or approaches to future projects. Research also suggests that they can improve team cohesion and performance.

Keep experimenting

Day-to-day pressures and the social norm that leaders act as though they have all the answers can severely constrain leaders’ learning. But as Hrund Rudolfsdóttir, chief executive of Iceland’s Veritas, says: “If you don’t think about this constantly, if you don’t concentrate on it, then you can go through a long time in your job as CEO without actually learning anything.” The processes of experimentation and learning are as much or more about human behaviour, connection and mutual support than they are about project design and execution. More than anything else in our research, the ability to remain open to learning from and through others – whether via direct feedback, active group debriefings, vicarious observation, or trusted mentor relationships – is essential to leaders’ successful development. Any current or aspiring leader would be well served by asking when they last experimented. — Suzanne de Janasz is visiting professor of management and conflict resolution, and Maury Peiperl is dean of the School of Business, at George Mason University Q4 2019 Dialogue

Leadership under the microscope Sharp scrutiny and increasing intervention point to a new model for leadership in regulated sectors, write Gary Storer and Beth Ahlering When Mark Zuckerberg was questioned by the US Congress for two days in April 2018 about alleged misconduct, he was perhaps the most highprofile example of a 21st-century phenomenon aﬀecting leaders around the world. Since the global crash in 2008-10 there has been increased social, political and regulatory pressure on Dialogue Q4 2019

business. Zuckerberg admitted: “We didn’t take a broad enough view of our responsibilities, and that was a big mistake. It was my mistake, and I’m sorry. I started Facebook, I run it, and I’m responsible for what happens here.” Across the world, leaders are held to account for past decisions or for actions in which they

LEADERSHIP

Today, regulators hold leaders accountable for the impact of day-to-day decisions

may have had little or no direct involvement, such as systems failures providing customers with misleading statements, sales teams selling the wrong products, or a bullying culture in the workplace. Historically, senior managers were held to account for breaking the law, negligence or major financial losses. Today, regulators hold them accountable for the impact of day-to-day decisions on customers and markets.

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Increasing scrutiny

While all business is subject to regulation and legal obligations, sector-specific regulators have a mandate to protect citizens and consumers where misconduct can leave them suffering significant harm. Financial services, telecommunications, pharmaceuticals, legal services, education, the charity sector, care providers, energy suppliers and the public sector have their own regulators and ombudsman services. There are also pan-sector regulators, such as the new data security bodies. All of these regulators are increasingly interventionist, concerned with setting conduct standards and dealing with misconduct rather than, as formerly, solely with strategic issues such as pricing or competition. In 2017, Gary Storer spent more than 100 hours interviewing leaders from these sectors about the impact of the heightened accountability they faced, exploring whether there are particular skills or ways of thinking that differentiate successful leaders in regulated sectors. Many interviewees highlighted the personal challenges they had encountered. One leader had to present a major remediation plan to the UK Financial Conduct Authority. Realizing that he was personally accountable for its implementation and that the immediate future of the business was at stake, he said: “I felt I was carrying not just my own accountability and career as we drew up the remediation plan, but also the financial wellbeing of my company, the jobs of many of our staff and the returns of our shareholders… if we had been fined I felt I would have let everyone down.” Being subject to the intervention of external regulators means facing a significant layer of additional demands not faced by leaders in non-regulated sectors. Another commented that he felt continuously accountable and responsible for what happens to customers, much more acutely

than when he led a non-regulated technology business. One leader talked about the pressure of presenting to non-executive directors who were increasingly challenging, conscious of their own duties to question and probe. He described presenting the business strategy to regulators who approached issues solely from the perspective of protecting customers, not understanding the organizational complexities or the market and employee consequences of their comments. They underestimated, for instance, the cost and time needed to improve how complaints were handled and to strengthen the customer culture, setting an unrealistic six month deadline for major improvements.

A new model for regulated leadership

Twelve characteristics, skills and areas of focus emerged from our research as vital for leaders in regulated sectors. They can be gathered into five main clusters (Fig. 1, over), and they diﬀerentiate the more successful and experienced regulated leaders from their competitors.

Putting customers first Genuinely putting customers at the heart of everything that happens and all decisions that are made, and feeling accountable for a moral ‘duty of care’ towards customers.

Focused on business conduct Prioritizing change initiatives, investment and activity which will maintain or raise standards of conduct and, therefore, safeguard or enhance outcomes for customers.

Risk thinking Valuing the importance of understanding risks and managing them. Seeing risk as a fundamental domain of management and leadership, not just a technical hygiene issue.

Engaging and communicating Recognizing that change, performance and delivery to customers is dependent on engaging people and two-way communication, rather than relying on status, top-down cascade or a forceful personality.

Conflicts and dilemmas Understanding that decision-making and action in regulated businesses are dominated by apparent conflicts and dilemmas which need to be explored, managed and resolved.

Culturally intelligent Devoting most personal time and energy on people and culture as the core enablers of business success rather than targets, operations, process or technology; understanding the complexity and nuance of changing people and culture. Q4 2019 Dialogue

LEADERSHIP

Investigative mindset Diving into the detail of information, plans and proposals when necessary and spending time exploring the business to get to know, first hand, what goes on, the people, products and services, and how customers are treated.

Leaders need to learn when to be necessarily disruptive without being dangerous

Making connections Drawing on previous experience and knowledge, considering diﬀerent viewpoints and arguments to see the ‘full picture’, and drawing accurate conclusions from patterns and trends.

Rigorous challenge Not accepting glib answers or over-optimistic claims about what can be achieved, and always questioning their own beliefs and views to ensure they are sound.

Encouraging reflection Making time for thinking and reflection, and expecting others to do the same before acting; ensuring the pace of decision-making and change is not dangerously fast, or that management is too stretched.

Systems thinking Managing eﬀective oversight of the alignment of the many parts of the organizational system such as people, policy, products, processes, technology and controls.

Learning and anticipating Focusing everyone on learning from changes and experience, and increasing their knowledge and capability. Anticipating the impact of initiatives and change through scenario-thinking, modelling and stress-testing.

Skills to dial up…

Leaders in regulated businesses pay attention to detail Dialogue Q4 2019

“It’s like a graphic equalizer on the stereo system,” said one bank’s managing director. “You have to turn up some things you do and turn down others.” It’s not that there are substantially diﬀerent leadership skills needed for regulated sectors, but rather that some need to be emphasized, while others can create instability. For example, to maintain a balance between managing risk while not becoming overly bureaucratic, leaders need a deep understanding of their business operations and the risks on the front line. Leaders in regulated businesses need more technical and product understanding, and the ability to challenge their specialists. These leaders pay attention to detail, not simplified recommendations. They understand that in the regulated world, decisions are complex and situations are often messy or chaotic. Regulators expect these leaders to understand the small print. This can be disconcerting to reporting managers and risk specialists who are challenged on their analysis, explanation and assumptions.

Perhaps one of the most interesting characteristics of successful regulated leaders is a heightened capacity for ‘learning and anticipation’. They explicitly demand that they themselves, and their managers and businesses, learn from failures or mistakes. They ask for investigations and reviews when things go wrong, and they are personally reflective. As well as being adept at learning from experience, successful regulated leaders also seem skilled at anticipating future outcomes from market changes, customer behaviour and organizational change initiatives. Specifically, they use value modelling, stress-testing and forecasting against worst-case scenarios when making decisions.

…and to dial down

Some leadership skills need to be dialled down. For example, given the focus on cultural sensitivity, engagement and information gathering, leaders who are predominantly charismatic, forceful, vision-led communicators are less likely to be successful in regulated environments. This leadership style can suppress the escalation of risks or compliance issues, as we saw in the financial services crisis. Similarly, leaders who are focused on driving organizational transformation at pace may not encourage sufficient reflection, stability, investigation, risk modelling or discussion to perform effectively. Leaders who over-prioritize commercial growth and profitability above their duty of care for customers are likely to fail in regulated environments, often more catastrophically than in other sectors. Leaders who move from successful careers in non-regulated sectors frequently struggle, finding their entrepreneurial instincts reined in. They can become frustrated by what they see as unnecessary control. They need to quickly develop their ability to judge which controls are indeed too burdensome, and which are needed to prevent risks or demonstrate compliance. Many such leaders can appear dismissive of the concerns of regulators, who then place their organizations on higher monitoring. Leaders need to learn the rules of their new game quickly, and judge carefully when they need to be disruptive, without being dangerous. These incomers must build a relationship with their regulators, which is an art in itself given their often different styles.

LEADERSHIP

FIGURE 1

A M O D E L FO R R E G U L AT E D L E A D E R S H I P 1 Putting customers first 2 Focused on business conduct

3 Investigative mindset 4 Making connections 5 Encouraging reflection CUSTOMERS & CONDUCT

M A K I N G D I F F I C U LT DECISIONS

12 Learning & anticipating

CHANGING O R G A N I Z AT I O N S & PEOPLE

RISK & GOVERNANCE

9 Engaging & communicating 10 Culturally intelligent 11 Systems thinking

A case study in change

HomeServe, a UK retail insurance intermediary, lost many customers because of mis-selling, poor systems, controls and risk management over a period of six years. It suﬀered severe reputational damage, as well as major regulatory intervention and a £34m fine in 2014 for mis-selling. A new executive team was put in place, alongside new managers, and chief executive Greg Reed reorientated the business to put its customers first, instead of profitability or sales targets. “We had to rescue the business in the short term, but we realized in year two that the changes were being driven through by us as senior leaders, [and] actually we weren’t changing the thinking of our people or how they dealt with customers,” Reed said. “The shadow of the previous leadership team was so heavy that even when they were no longer around, people kept old behaviour patterns. “We had to change the minds and behaviour of our people. We communicated and communicated, changed compensation packages, instituted daily ‘customer first’ meetings, re-trained people and, inevitably, many found this wasn’t the organization for them and moved on.

6 Risk thinking 7 Rigorous challenge 8 Conflicts and dilemmas

“I think it took me three years of constantly asking people for their views and opinions until they really trusted that I meant it, and they stopped telling me what they thought I wanted to hear.”

Investing in leaders

Our regulated leadership model shows that there is a premium on diﬀerent skills and characteristics for leaders in these sectors. Too often, the pressure to reduce prices to consumers means that spending on leadership development is slashed, which is a false economy. In fact, these leaders should be developed diﬀerently from the approaches classically employed by the major business schools, as we will explore in a future Dialogue article. No executive wants to find themselves in the spotlight and on the defensive like Zuckerberg before Congress, but it is an ever-present possibility for leaders in regulated sectors. Knowing which behaviours to dial up is critical to avoiding that fate. — Gary Storer is founder and managing director of Enterprise Learning. Beth Ahlering is managing director and professional practice lead at Duke Corporate Education Q4 2019 Dialogue

INNOVATION

VIVEK WADHWA

Fair judgement is being crushed by data

AI bias is a myth. Human bias is the problem Vivek Wadhwa is distinguished fellow at Carnegie Mellon University’s College of Engineering and author of Your Happiness Was Hacked

AI presents a great risk by determining decisions that exert huge influence over people’s lives

Enough of the nonsense. AI isn’t inherently biased. The world as humans shaped it is. AI is merely a fast computer system which recognizes the patterns that we have taught it. It is several orders of magnitude bigger and more powerful, but it’s essentially an Excel spreadsheet plugged full of data created entirely by Homo sapiens. And therein lies the problem. Humans are biased beings. Our prejudices are concern enough when they are limited to individuals. When they are compressed, distilled and disseminated through ultrapowerful computer networks, they become dystopian. Much of the bias amounts to little more than confirming stereotypes via low-level generalizations: because most builders are men and most secretaries women, all the builders on Google Images’ first page are male, and all the secretaries, female. But you need not look much further to discover something altogether more sinister. AI learns by encoding patterns from the data it feeds on. If you build an AI system to identify who is at risk of becoming a criminal in the US, the AI can operate only on the data it has. Since the proportion of black people in prison is higher than the proportion of white people in prison, most systems will infer that being black makes you more likely to commit a crime. These unthinking machines lack the wherewithal to account for the deep-set societal biases in the US that lead to blacks’ relatively higher incarceration rates. Rather than using mathematics and statistics to challenge prejudice, they amplify it. Recently, US senators Ron Wyden and Cory Booker and congresswoman Yvette Clarke introduced the Algorithmic Accountability Act. It is a response to lawmakers’ increasing concern that AI is magnifying human bias in the tools that, more and more, shape our lives. Yet despite the goodwill, change is going to be hard to come by. AI remains restricted by the data available. Human programmers are yet to crack the puzzle of

how to control their own biases. Let’s return to our criminals. Imagine we removed racial data completely. Would this solve the problem? Not a chance. Other demographic data, such as income, district of residence, single-parentage and standard of education – in the US at least – correlate so strongly with race they become a proxy for it. Machine learning isn’t at the stage where it can neutralize linkages between metrics. With their ability to deploy qualitative measures and exercise judgement, it turns out that professional, educated humans do a better job of making assessments than algorithmic tools. This is not to say that AI has no role in public policy. In healthcare, its ability to predict risk is a godsend: a tumour is a tumour whether it is in the body of an Asian or an African-American. The databases they use are updatable, if and when interpretations of the data are overhauled. Yet we risk committing too many sensitive, society-defining decisions to machines. AI presents a great risk by determining decisions that exert huge influence over people’s lives. When a computer decides whether you get a mortgage; whether your child is admitted to college; or whether a youngster should be separated from his family because of risk of abuse; we have abandoned our responsibilities as humans. Moreover, we have failed to recognize and act upon our human advantage. The failures of AI continue. Streaming services such as YouTube use algorithms to boost user engagement by promoting the most engaging content. Yet human judgement is again conspicuous in its absence – any qualitative assessment on whether promoted content is good for society is at best a flimsy afterthought. The growing recognition that human biases are being exacerbated by systemization has done little to prevent the march of AI. Instead, this convenient, prejudiced, sociopath beats on, while human judgement is relegated to the past. Q4 2019 Dialogue

INNOVATION

Customer-centric innovation In a globalized business world, there are three key dimensions to customer-centric innovation. Hari Nair explains

Nearly 20 years ago, I was an R&D engineer designing laundry detergents for markets around the world. One was a washing machine detergent for China. Having analysed the data showing widespread ownership of washing machines in Chinese homes, we were confident it would sell well. We were wrong. The reason why became clear when I moved to China and spent more time in Chinese homes. I saw that washing machines typically sat in the living room corner, covered by a sheet and rarely used, save for bulky clothes. Most laundry was done by hand: a better product would have been a great hand-washing detergent. In global businesses, it’s all too easy to make flawed assumptions about the products that consumers in an unfamiliar part of the world might want. Successful customercentric innovation demands that we genuinely understand our customers’ needs. But that alone is not enough. As the IDEO Design Thinking toolkit identifies, there are three factors for success: desirability, feasibility, and viability.

Desirability

Customers don’t buy products simply because of their gender, their age, or their profession. As customer motivation experts Bob Moesta and Clayton Christensen put it, they buy because they have ‘jobs to be done’ in their lives. Truly customer-centric organizations identify the jobs their customers need done and find solutions, often breaking out of pre-existing industry or product categories in the process. My experience working with Godrej & Boyce on a refrigeration product for the Indian market shows the importance of really understanding the job to be done. Our initial market research focused on non-consumers. We observed that while some had access to community fridges, or had second-hand units, they were usually much Dialogue Q4 2019

bigger than needed, making them expensive to run. Our insights led us to a radical design: the chotuKool was small, suitable for keeping just a few items cold overnight, used much less power, and was far more aﬀordable. Our innovation made it highly desirable, and created a new growth category for Godrej.

Feasibility

Desirability needs to be backed up by feasibility, the technical ability to create and deliver the solution. For chotuKool, an important part of our success was partnering with India Post, the largest postal network in the world, to reach our target rural consumers. By contrast, feasibility was a real issue for a laundry service start-up I was part of launching in 2009. Our service was highly desirable, offering a quality but affordable and convenient service based on putting laundry kiosks on street corners – but that distributed model meant we needed to collect cash every day, which proved hard. After trying a number of approaches, we ended up selling the business. At that time, our model simply wasn’t feasible in the Indian market – though today, with the rapid rise of smartphones and cashless payments, things would be very different. Testing an idea with small pilots and incorporating the lessons learned is vital. Planet Fitness has become one of the largest and fastest-growing fitness centres in the US by offering lower-cost gyms that cut out premium features, an approach that was tested and refined in its first few sites.

Viability

Great products also need a solid financial and business model. Research by one of my colleagues at New Markets Advisors looked at 5,000 innovations over a 15-year period: just

Above The chotuKool mini fridge created a new growth category for Godrej

Image courtesy of Godrej / chotuKool

2% of those initiatives delivered 90% of the cumulative value. One of the key things that marked out the high-performing initiatives was that they shifted the means of customer engagement and the business model. They went beyond simple product improvements, seeing a job to be done that required a new business model, often fundamentally changing their industry. For example, businesses like Harry’s and Dollar Shave Club have seized the opportunities created by digital technologies to build a new model for selling razors, going direct to consumers on a subscription basis. Their model is viable thanks to digital technology, which has helped them disrupt a market long dominated by major incumbents.

Take the first step

An important first step in customer-centric innovation may sound unorthodox if you’re used to making decisions based on spreadsheets and charts. It is to build customer empathy by talking to the actual people who might buy your product. Observational research can unearth jobs to be done that are simply not visible in consumer data, especially when you

are innovating to meet new jobs to be done and there is no data to draw on. Take South Korea, one of the many countries today with an ageing population, where over65s now account for 14% of the total population and rising. Human longevity is creating lots of new jobs to be done and one that I observed is the desire of senior citizens to record their life experiences in a book. They might only print 50 copies, but in a culture that strongly respects older people, an interviewing and writing service could be hugely popular. While we decided not to pursue the opportunity, it could yet be a success for a small entrepreneurial firm. You cannot find opportunities like that in spreadsheets or graphs. It needs real engagement with customers. As the first step in developing your next product, find a real question or unknown that’s important to your work, frame some questions using the ‘jobs to be done’ theory – and get out of the oﬃce for some real conversations.

As the first step in developing your next product, get out of the office for some real conversations

— Hari Nair is a fellow of the Advanced Leadership Initiative at Harvard University, senior advisor at New Markets Advisors, and an instructor on Duke Corporate Education’s Building Strategic Agility course. See digital.dukece.com Q4 2019 Dialogue

INNOVATION

Fighting back against the digital barons

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The dynamics at play in todayâ&#x20AC;&#x2122;s AI industry will reshape the global economy. Terence Tse, Mark Esposito, Olaf Groth and Joshua Entsminger look at how to respond

We are in the midst of a revolution in intelligent automation. New products, new services, and new markets are developing fast, fuelled by an acquisitions race in which the digital giants are united in placing multi-billion dollar bets on the ability of artificial intelligence (AI) to drive intelligent automation at scale in the years ahead. This race is turbo-charging the trend for global platforms to gain market power through digitization, which has reshaped sectors ranging from transportation to job search to banking and knowledge acquisition over the last decade. When it comes to AI, the critical mass of data, computational power, and cutting-edge talent accumulated by the giants has put them entirely out of reach of smaller competitors. The

Dialogue Q4 2019

digital giants are becoming a global oligopoly, with a stranglehold on production assets that will become critical for the rest of the global economy. Managers, entrepreneurs and policymakers alike need to be aware that a high concentration of advanced AI capabilities in few corporate

Power is consolidating quickly in the hands of the AI industry, creating a global oligopoly

INNOVATION

hands points the way towards a new, more entrenched form of market dominance. This dominance will be defined by the power of these firms to price all market participants’ access to cognitive value. In a world where data-driven insights are the fundamental edge needed to find an advantage, or even to stay competitive, that should worry us all.

Big capital for bigger tech

In 2017, Microsoft launched its AI incubator at Station F in Paris. The move was small but demonstrative, reflecting a wider trend among large firms of pivoting away from internal innovation to focus on finding promising AI start-ups to acquire. Microsoft has been joined by Apple, Baidu, Nvidia, Alphabet, Amazon,

Intel, Tencent, and a host of other firms united by a common focus on the implementation of AI, not necessarily its creation. Such giants may seem to be AI pioneers, but in large part their dominance has been bought with hard cash, not grown organically. Perhaps the best-known example is DeepMind, the AI powerhouse start-up that was acquired by Google in 2014 for US$650 billion, despite having no products on the market. DeepMind’s AlphaGo created a ‘Sputnik moment’ for AI and the global economy when it beat the reigning Go champion, Lee Sedol, in 2016. But other high-price AI acquisition examples abound, such as Kensho, founded out of MIT and Harvard in 2013 and acquired by S&P Global for $550m in 2018, and Mobileye, aa

Q4 2019 Dialogue

INNOVATION

consolidate the dominance of the AI giants.

This is the world of the autonomy economy, where value is generated by autonomous cognitive processes displaced from the human mind

collision-avoidance technology firm founded in 1999 and acquired by Intel in 2017 for $15.3bn. The current economics of AI competitiveness mean that the value of an AI start-up is a function of what the acquiring company can do with it, and at what scale. The implication is not so much that smaller firms cannot develop AI, but that the AI they develop is functionally less useful than AI developed or acquired by larger firms. That is not the only problem. Competitiveness in the AI industry is not simply a question of data; rather, it is driven by seven elements. These are: having the talent capable of creating and augmenting AI solutions; the AI algorithms themselves; perception sensors, capturing the right data relevant to producing unique functionality; rich amounts of good data with which to train the AI solutions to be functionally relevant to businesses; the computational power to run those solutions; human consumers, to generate transaction data; and privacy, security, transparency and ‘explainability’ safeguards around that data. These elements are inextricably tied together, making the sector a complex concert of assets: a deeptech ecosystem. It is the unique combination of all elements that creates sustainable advantage. That gives the internet giants huge leverage, because it means that the competitiveness of firms seeking to apply AI is tied to which of the giants can make the ecosystem accessible, and at what price. Most leading AI-driven platforms oﬀer cloud services to make that happen, but there are only so many to choose from. In response, attempts to democratize AI by lowering the cost of access have been made both by well-known innovators, such as Elon Musk through his Open AI initiative, and by data science communities, through initiatives such as Kaggle and Algorithmia, which have oﬀered better access to expertise, algorithms, and datasets. The giants themselves have talked the language of democratization, including the chief executives of Google, Apple and Microsoft. Yet many of the platforms and mechanisms designed to aid democratization have now been acquired: Kaggle by Google, GitHub by Microsoft, and Wise.io by GE, among others. Ironically, attempts at democratization have served to Dialogue Q4 2019

What’s next?

The fact that even efforts to democratize AI can be captured by the digital barons should give us pause. It is nothing short of an inflection point in the nature of cognitive markets: it’s not just about a firm’s competency to develop a single competitive solution, it’s about the power to create and then dominate an expensive and complex ecosystem. This creates a selfreinforcing dynamic. Because advanced AI ecosystem platforms are able to learn and improve faster and more efficiently, the firms that dominate one generation of AI create barriers for the next generation. Smaller firms who want to create new AI, not just implement existing algorithms, will find it harder and harder to overcome those barriers. And what if the next stage of AI’s development sees AIs themselves assisting in the development of new AI? That phase would likely be powered by quantum computing – the intellectual and financial capital requirements of which would further widen the chasm between the global internet barons and their AI application serfs. There needs to be a collective recognition of the fact that a new kind of data market dominance is emerging. It is ill-defined by comparisons to oil: it needs to be defined and understood on its own terms. The ability of a small number of companies to reshape industries, retool value chains and pre-empt competitive rivalry means that they could come to define the future of both human and economic growth. Other businesses – what we might dub the ‘AI taker’ category – will soon be left with only a few options. They might band together to collectively exercise bargaining power to try and shift the price, particularly by creating alternative data collection and computing capacities; they could lobby governments to break up the oligopoly and force a more democratized market structure; or, they could do both. That is why there needs to be a global sense of urgency about the future of the AI industry. What is the long-term vision for markets and the nature of competition? What role can traditional analogue or non-platform firms play in facilitating a new market dynamic? And what new business models will incentivize participants to innovate and offer users the levels

Ironically, attempts at democratization have served to consolidate the dominance of the AI giants

INNOVATION

Executives need to think carefully about who actually owns their advantage in a data driven world

of integrated convenience they enjoy from the internet barons? These are non-trivial questions, the answers to which could fundamentally reshape the global economy.

What executives need to consider

The conventional dilemma in AI is whether to build or to buy. That question misses the significance of the new divide in who owns the resources needed to prototype, generate, and maintain competitive AI solutions. Executives outside of the AI giants need to think carefully about who actually owns their advantage in a data-driven world. It is not simply a question of who owns the data and the servers, but of who owns the ecosystem by which that data is made functional and therefore valuable. Executives also need to be aware of the changing dynamics of disruption. Increasingly, the concern is less about small players taking bites out of core business, than about large firms coming in and reshaping the market. The AI giants are market incubators and market-makers. We suggest the following five responses.

Acquire the right kinds of computational scientists and learn to speak the language, so you can at least negotiate with the barons. If you don’t know where and how AI market power is generated, you can’t position yourself in the value-chain with the right approach to value creation and capture. While oﬀ-the-shelf AI products may help provide minimal automation, the kinds of intelligent automation and insights provided by eﬀective AI usage will drastically outpace poorly integrated, non-customized products.

Support R&D efforts on alternatives, specifically those focused on building less datadependent AI and on increasing access to its eﬀective deployment. Examples include reinforcement learning, generative adversarial networks, transfer learning, and one-shot learning. The next generation of lean and data-free learning solutions may help upend the current data economics of competitiveness, shifting when and where data-rich environments create barriers to entry.

Form networks with other nondigitally native companies. Pool anonymized data governed by human-centric principles to improve access to the insights that shape competitive advantage. Such networks can help build a front against barons that are fundamentally less ethical.

Define your competitive advantage by becoming a hybrid physical-digital player who brings a nuanced understanding of the context, history and demands of the problems to which AI is applied. This combination is immensely valuable, because digitally native players often don’t have a great understanding of the world where AI solutions are actually applied.

Expand your awareness of changing industry boundaries. AI will be a fundamentally diﬀerent game for disruption in the medium term, but in the short term, unconventional firms will come into numerous markets by virtue of their access to agile technologies and rich data. There is no business which Google cannot enter. What is at stake today in the structure of the AI industry is nothing less than the structure and concentration of commercial power in the global economy as a whole. Businesses’ ability to generate insights, shape and drive consumer behaviour – indeed, the very future of economic relations – will be determined by how this critical industry develops. This is the world of the autonomy economy, where value is increasingly defined and generated by autonomous cognitive processes, displaced from the human mind. It is a world where conventional understandings of the immutable advantage of intellectual labour and capital are being upended and reorganized. In such a world, we need to ensure that a larger network of stakeholders, not just the AI oligopoly, get to exercise influence and define how platforms function. Otherwise, we are set to drift into a neo-medieval era of digital barons and bonded serfs. — Terence Tse is professor at ESCP Europe Business School, and cofounder and executive director of Nexus Frontier Tech. Mark Esposito is professor at Hult International Business School and cofounder of Nexus Frontier Tech. Olaf Groth is chief executive of Cambrian.ai and professor at Hult International Business School. Josh Entsminger is an applied researcher in technology and policy at IE School of Global and Public Affairs, and at École des Ponts Business School Q4 2019 Dialogue

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FINANCE

PHIL YOUNG

Brand equity is an imprecise moniker for a valuable thing

A brand by any other name Phil Young PhD is an MBA professor and corporate education consultant and instructor

I was partly amused. But I was mostly McDonald’s? They are Interbrand’s 2018’s confused. The first time I heard the term ten most valuable brands, listed in order ‘brand equity,’ my immediate reaction from the top. was one familiar to finance guys: “There go Interbrand’s method of calculating a those marketing people again – throwing brand’s value is proprietary and results in around highfalutin buzz words with no oddly precise numbers. For example, the precise nor agreed-upon definition.” value of Apple’s brand in 2018 was given as Yet a company’s brand does indeed $214.48 billion. make a diﬀerence to its financial success. But Interbrand does not say if this And if one were to view a brand’s value is the same as, or related to, Apple’s importance in financial terms, one can see equity. The book value of Apple’s equity that it creates product loyalty (recurring in 2018 was $107 billion. Currently, the revenue) and enables premium pricing market value of its equity (its market (higher profit margins). capitalization) is about $935 billion. But why use the term ‘equity’? I did a quick Alphabet search of the In finance and term ‘brand equity’. accounting, we talk Note how my use about stockholders’ or of Google’s parent If Investopedia can shareholders’ equity, company’s name accept the marketing was not nearly as which is the value of profession’s more liberal the stakes held by a meaningful. company’s owners. Investopedia, definition of equity, then So, if a brand has a trusted source of even we finance guys can value for a company, financial information, learn to wear it would it not be more defines brand equity as: accurate to call it an “A value premium that a asset? In fact, that’s company generates from exactly what happens when one company a product with a recognizable name when buys another. compared to a generic equivalent. After the purchase, valuation experts “Companies can create brand equity for go to work to put a price tag on the value their products by making them memorable, of the brand of the acquired company. To easily recognizable, and superior in quality use recent headline news, I’m sure that and reliability.” these experts will soon be working on It’s true this definition fails to pertain putting a brand value on IBM’s $34 billion directly to the financial definition of purchase of Red Hat. And whatever that equity. But if Investopedia can accept and value is, it will go down on IBM’s books as use the marketing profession’s more liberal an intangible asset. definition of equity, then even we finance Some years ago, a company called guys can learn to wear it. Interbrand devised a method of estimating The traditional rivalry between the value of a company’s brand and marketing and finance means the latter published a list – Best Global Brands. group will continue to mock the former’s Without even peeking at the league table, lexicon. But behind the imprecise language I’m sure you could come up with some of hides precisely the sort of asset finance those in the top ten. people want in the companies they Did you think of Apple, Google, manage. Amazon, Microsoft, Coca-Cola, Samsung, However you term it, brand equity is Toyota, Mercedes-Benz, Facebook, and big business. Q4 2019 Dialogue

FINANCE

Faster, stronger Innovation underpins the performance of some of the world’s quickestmoving companies, as the latest research by Joe Perfetti reveals

Speed. It is perhaps the most potent advantage a company can have in a complex, ever-changing world. Change is no longer linear and predictable, but exponential and volatile. That means that speed can be a matter of survival in a world where a company can fall irretrievably behind in a matter of months. Our latest analysis of Financial Cycle Time (FCT) builds on our previous articles (e.g. Dialogue Q1 and Q3 2019) and identifies the companies that are excelling in speedily turning investment into revenue. The winners are worth noting and emulating.

About the FCT rankings

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This is third year that we have analysed FCT data. We looked at more than 1,000 publicly traded companies around the world, divided in 68 sectors as per the Global Industry Classification Standard (GICS), to determine those that are the swiftest and most agile. FCT measures the length of the business process, discovering how long it takes to turn investment into sales. It’s a productivity metric that is easily used to benchmark against the competition, allowing a company to track its progress over time using publicly available financial statements. It is determined by taking the total investment from the balance sheet in your business and dividing it by your annual sales. This shows what percentage of a year it takes to sell the investment. Multiply by 365 days, and you have an estimate of your average FCT; divide the total investment by the days of cycle time to get an estimate of the cash tied up for each day or period of time. There is no single, overall winner: every industry is diﬀerent, so awards are necessarily industry-specific. We do not make direct comparisons with last year’s rankings either, as we evolved the methodology this year: we are now using the number of days it takes for a dollar of operating invested capital with leases to result in a dollar of sales for the company as the key metric for FCT. What can we learn from some of the winners about accelerated performance?

Dialogue Q4 2019

Pivoting to perfection

If your teen applies Clearasil or you spray Lysol to sanitize your home, you’ve used a Reckitt Benckiser (RB) brand, which has an FCT of

55 days, with its nearest competitor, Church and Dwight, at 71. As a large multinational, RB recognizes that its size might hamper its agility, but it has responded in an intriguing way. It actively courts small companies, urging them to “pivot their products” – to think of new ways to use existing products and technologies – and to consider joining forces to take advantage of the larger company’s reach and ability to scale quickly. As RB itself has said, “An agile partnership can deliver a product to market within as little as 18 months.” RB cites its partnership with a small firm on “an institutional fragrance solution” as a great example of pivoting products. Together, they expanded the institutional product to the consumer market. RB said, “Not only had we uncovered a product that generated significant demand from the outset, it also provided a solution to a consumer need that had previously been unarticulated.”

Know your purpose

American consumer electronics firm Best Buy is second in its industry – FCT 66 days, nearest competitor 72 days – and another high-profile ‘traditional’ company using innovation to turbocharge its FCT. Many pundits used to argue that Best Buy was ‘on the ropes’, doomed to extinction by its nimble nemesis Amazon. But Best Buy refused to regard the web giant as a nemesis, and instead focused on leveraging it as another distribution channel. They reinvigorated the customer experience both online and, importantly, in store, recognizing that far from being a ball and chain, its brick-and-mortar stores have great value. That value was reflected in the 2018 announcement of a partnership between Best Buy and Amazon to sell TVs powered by Amazon’s Fire TV operating system.

Tapping the ingenuity of suppliers and workers Some firms provide products so familiar that it’s hard to discern the magnitude of innovation each represents. Take Stanley Black & Decker, which ranks second in its industry with an FCT of 46 days (the sector leader scores 41 and the third-placed competitor is at 55 days). It has thrived thanks to its Digital Accelerator, a tech hub in Atlanta charged with “advancing digital excellence across the company’s global

FINANCE

TABLE 1

WINNERS IN THE 2019 FCT RANKINGS INDUSTRY

FCT aw a r d

Technology, Hardware Storage & Peripherals

Entertainment

Multiline Retail

Pharmaceuticals

Textiles, Apparel & Luxury Goods

Household Products

Speciality Retail

Machinery

Company

Production Cy c l e T im e (P C T ) – d a y s

Financial Cy c l e T i m e (FCT) – days

I n v e s t ed C a p i t a l Per D a y –U S$

Gold

NetApp

(51)

Silver

Dell Technologies

(8)

248

Bronze

(57)

160

Gold

Netflix

(14)

(21)

Silver

Activision Blizzard

Bronze

Electronic Arts

Gold

Magazine Luiza

Silver

Wesfarmers

116

260

Bronze

Nordstrom

139

Gold

Pfizer

126

147

Silver

Johnson & Johnson

224

Bronze

Allergan

Gold

122

Silver

Puma

132

Bronze

Nike

144

100

Gold

Reckitt Benckiser

Silver

Church & Dwight Co

Bronze

Clorox Company

Gold

Dufry

Silver

Best Buy

117

Bronze

Fnac Darty

Gold

Paccar

Silver

Stanley Black & Decker

Bronze

Meritor

Production Cycle Time: PCT represents the number of days it takes for a dollar of core invested capital to result in a dollar of sales. Financial Cycle Time: FCT represents the number of days it takes to turn a dollar of operating investment including leases into a dollar of sales. Note that some companies, e.g. Netflix, are paid in advance and have negative FCT. Invested Capital Per Day: this figure indicates how many dollars of cash are tied up for each day of FCT.

enterprise”. Like RB, Black & Decker seeks out smaller companies with fresh ideas, describing its Accelerator as “a frequent, key collaborator on projects to invent and bring to market digitally-driven, world’s-first solutions”. It also hosts an internal portal to tap the ingenuity of its workforce. Called the Drawing Board, the portal crowdsources “inventive ideas from all the people of Stanley Black & Decker”. Or consider VF Corporation, with an FCT of 79 days compared to its nearest competitor at 88 days. The name might not be familiar, but if you’ve ever donned a pair of Dickies workpants, Vans or Timberland shoes, or a jacket from The North Face, you’ve bought from VF.

One of their strengths has been in encouraging innovation through their supply chain. By bringing designers, technical specialists and manufacturers together in dedicated innovation centres to enable close collaboration, new ideas have been encouraged in a competitive market. Congratulations to all the 2019 winners. Their successes show that any company can stay fast and nimble when it’s focused on the future. — Joe Perfetti teaches equity analysis at the University of Maryland and is an innovation fellow with Duke Corporate Education. Noah Miller and Kush Patel assisted in the research. Download all the rankings at: www.dukece.com/downloadresults-supporting-resources Q4 2019 Dialogue

Trust in the transfer The booming market in online money transfers has changed the financial sector, but how can businesses build consumer trust? Helen Scott reports

Firms offering online transfers must create confidence in their brands by highlighting their track record Dialogue Q4 2019

More than US$5 trillion in foreign exchange payments is traded every single day around the world. Yet for many consumers, sending money abroad remains laborious, costly – and slightly nerve-wracking. Yet for globally-mobile populations it is a vital service, relied on by increasing numbers of people. A new generation of online companies has made the process of transferring money slicker, easier and cheaper than ever. But their emergence has opened up questions of trust. Consumers can be left wondering “how safe will my money be?” when using a provider they can’t see. A long-established brick-and-mortar bank is unlikely to go bust overnight or to run oﬀ with customers’ money, but even if one did, consumers’ money is often protected by governments: in the UK, up to £85,000 of savings are protected under the Financial Services Compensation Scheme (FSCS). The worry for many people is that nonbank providers are not included in FSCS. It’s important that they feel confident enough to trust companies with what may in many cases be a significant sum of money, or even their life savings. How best to build that confidence? The first point that businesses need to make clearly is that the payments industry is still regulated. The EU Payment Services Directive (PSD) came into force in 2009, followed by PSD2 in 2017. It sets minimum net asset and client money segregation standards across Europe: in the UK, these standards are enforced by the Financial Conduct Authority (FCA), which acts as a safeguard for consumers’ money. The FCA’s authorization is required by any firm seeking to provide money transfers. Secondly, firms oﬀering online transfers must create confidence in their brands by highlighting their track record. Many money transfer firms are not as new as they might appear to consumer. They need to demonstrate their longevity, reinforcing the message with customer testimonials.

Thirdly, the sheer size of these online operations should instil confidence. This is not a tinpot industry; some firms can boast track records totalling billions of pounds worth of transfers made for hundreds of thousands of customers. Comfort can be found in these numbers. And with the market moving quickly away from banks towards specialist online payment providers, there is no reason for consumers to doubt the ability of authorized, reputable firms to provide for their transfers.

Working with regulators

The shift to online platforms should, in theory, have increased transparency for consumers. However, with many providers overcharging customers through hidden charges or inflated exchange rates – even using personal customers to subsidize their business custom – that’s simply not the case. It’s likely thousands of customers are losing money on their transfers without even realizing. The UK’s Advertising Standards Authority (ASA) and the FCA have seen companies potentially misleading customers with false advertising or incorrect rates. It has led to a handful of well-known firms having complaints upheld against them. In 2015, the ASA ruled

FINANCE

Shutterstock

It’s time to offer customers a transparent money transfer solution

that the widespread use of website ‘currency converters’ by online foreign exchange providers was potentially misleading, since the interbank rate they returned could not be achieved by customers. The FCA agreed, and by 2018 they were all but gone. However, instead of replacing the potentially misleading prices with meaningful information, many firms have chosen not to give any upfront pricing at all. They often advertise their services as having ‘no fees’, or as ‘free international currency transfers’, but potential customers are not told the actual cost until after they have provided contact information or, in some cases, registered. This makes it very diﬃcult for potential customers to shop around and compare providers. In the UK, the FCA was only granted powers to deal with such malpractice in 2018, when it was empowered by HM Treasury to tackle the issue at industry level rather than firm-by-firm. New recommendations for standards in the payment and e-money sectors come into eﬀect at the start of August 2019, aiming to ensure good price disclosure and more competition based on price. Its rules and guidance are designed to require providers to ensure that their communications are accurate, balanced, and

do not disguise, diminish or obscure important information. Such changes are much to be welcomed, but they need to go further. Consumers deserve clear cost information at the earliest point in a customer journey, long before they are asked to give contact details or required to register with a provider. Some firms are leading the way by displaying live rates online that update by the second. That gives customers a clear view of the rate that they’re getting compared to the interbank rate, the exchange provider’s margin, and the total amount they would get in their desired currency. But these are few and far between, and often tough to find for the general consumer who needs to get money abroad, fast. In a globalized world, it’s time to oﬀer customers a transparent money transfer solution. Exchange providers should welcome regulators’ eﬀorts to protect consumers and look to transform the industry with an injection of transparency. It falls to leaders to ensure that each and every consumer gets a fair deal up front. — Helen Scott is founder and chief executive of Eris FX, a global money transfer and international payments company. She is regulatory liaison to the International Transparency Task Force Q4 2019 Dialogue

ANITA BRIGHTLEY-HODGES Specialist advisor to family-owned businesses

Anita works as a personal advisor to those at the helm of family-owned businesses. She works side-by-side with ambitious leaders to overcome their biggest challenges. Giving them the confidence and the tools they need to take their business to the next level.

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For a discreet, private conversation:

MARKETING

GILES LURY

Great brands change the world

Agents of change

Giles Lury is director at The Value Engineers and author of Inspiring Innovation: 75 Marketing Tales to Help You Find the Next Big Thing

Brands increasingly want to play a part in changing society for the better

Brands drive change. They change categories, markets, and habits. They are sources of ideas, of products, services and innovations that help drive change. Through relationships with their stakeholders, their employees and us, the general public, brands have the budgets, the breadth and the depth of connections to seed and drive lasting diﬀerences. Brands can and do change the world. In 1956, the Houston Post reported that “it has been estimated that Brownie Wise has helped more women to financial success than any other single living person.” The tool with which Brownie achieved that end? Tupperware. The brand power of those simple plastic boxes, combined with Brownie’s parties, brought financial liberation to thousands of local representatives. Apple’s brand power has repeatedly driven change. The iPod wasn’t the first MP3 player, but its arrival changed the category. iTunes subsequently changed how we buy music, and as the music industry moves to streaming, Apple has again helped change the landscape, though it’s now on your iPhone. Amazon started as a brand retailing books, but it changed the staid category of publishing, and now its brand is synonymous with a complete change in how we shop. These are not always side eﬀects. Brands increasingly want to play a part in changing society for the better. Whether this is always their initiative, or a reaction to social change, is open to debate, but they reflect a desire to go beyond a narrow corporate mission. Ariel’s #sharetheload campaign has done wonders in India to encourage men to do their fair share of housework; Lifebuoy has helped 1 billion people around the world improve their handwashing habits, helping reduce instances of pneumonia by 23% and diarrhoea by 45%. There are several engines of change for brands today. Marketers’ current ‘darling’ is brand purpose, often a manifestation of the beliefs of the brand’s founders. This isn’t entirely new. Patagonia, founded in

1973, dubs itself an activist company; the Body Shop had a purpose when it started in 1976; further back, chocolate-makers Cadbury’s was driven by Quaker principles in 1824. But it is increasingly common. Not all purposes are about some higher ideal. James Watt and Martin Dickie “set out on a mission to make other people as passionate about great beer as we are”. That might not be a lofty moral statement, but it’s working: BrewDog is driving huge change in the brewing industry. Another common driver is the desire to democratize a product, a service or an experience. That sounds worthy, but it can also be seen as the search for growth. Think of how Henry Ford democratized cars and Ryanair democratized air travel. Brands’ ability to create awareness, obtain distribution or provide channels to market is another key factor in changemaking, especially when it comes to technology. Brands can be seen as technology super-chargers, turbo-boosting the adoption of new ideas. Behavioural change is also made easier by the ability of a great brand to make something convenient and accessible: Apple is a past master. Competition is another powerful driver, inspiring innovation. Motorola was worried about losing out to AT&T in the in-car mobile phone market, which led it to start developing the first personal mobile phone. Last on this starter list is when real changes are an unintentional result of an action. In the early 1900s, Hyman Kirsch, a soft drinks retailer in Brooklyn, became vice-president of the Jewish Sanitarium for Chronic Disease. He and his son Morris came up with the idea of creating a special beverage treat for the hospital’s diabetic and cardiovascular patients. His No-Cal soda brand became a huge success with an audience that went way beyond diabetics, attracting people who were just trying to watch their weight. It inspired Coca-Cola and Pepsi to respond, introducing diet versions of their masterbrands. Change in business is now a constant. Brands remain a constant driver of many of those changes. Q4 2019 Dialogue

MARKETING

Selling disruption

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Marketing innovation means building social contagion, explains Ben Shenoy

Dialogue Q4 2019

MARKETING

To sell disruption we need to make the strange familiar and the familiar strange

Do you remember the Sinclair C5, the Apple Newton or Cheetos Lip Balm? You may not have come across the cheese snack-flavoured lip salve, but the computers have gone down in business history as innovative products that failed dramatically in the marketplace. Innovation is supposedly the lifeblood of corporations, essential for organizational survival and long-term growth. Billions are spent each year on product and service development. Yet research shows that a staggering 95% of all new consumer products do not survive (‘Clayton Christensen’s Milkshake Marketing’, HBS Working Knowledge, 2011). Why such a high failure rate? After all, humans are inherently curious and attracted to the new. Whether it is a shiny gadget or a piece of information, we are drawn to the novel. This makes sense from an evolutionary perspective, as anything new can have survival implications. It may make life easier, or it may be something to be avoided at all costs. The truth is that, paradoxically, we are simultaneously drawn to the novel, and resistant to it. For some people, the more alien an innovation appears to be, the stronger their resistance, even to the point of active aversion (Heidenreich and Kraemer, Journal of Economic Psychology, 51, 2015). There are, of course, many reasons why new products fail. Some work poorly or only satisfy a trivial customer need. But for disruptive innovations – products or services that fundamentally affect the way a market or industry operates – our paradoxical reaction to the new creates additional hurdles to clear. How these innovations are sold is critical. Innovations are often sophisticated and complex, and consumers can fail to understand and appreciate their full implications. Marketers instinctively seek a simple advertising message, but simplification can eviscerate an idea, removing its heart and soul, stripping away the rich nuances which make it compelling. The inability of consumers to understand the relevance of an innovation is often underestimated by developers who are trapped by the ‘curse of knowledge’. Being intimately acquainted with how the product works and all its benefits, developers struggle to communicate the idea in a way that is easily understood. That’s not the only barrier. Aristotle noted that ownership imbues an article with ‘specialness’, arguing that “most things are differently valued by those who have them and by those who wish to get them”. This is the endowment effect, which has more recently been empirically demonstrated by Nobel Prize winner Richard Thaler. Coupled with our status quo bias, it makes us reluctant to switch to new alternatives, even when that would be to our advantage. The loss of a feature we currently

enjoy, even if insignificant, is felt far more keenly than the benefit of gaining something new.

Social proof

Marketers need to harness consumers’ attraction to novelty in order to overcome innovation resistance. One option is to try to make the new seem familiar: we often understand new things best by relating them to something we know. But for true innovations, a suitable frame of reference is hard to find, and if we fail to relate to an innovation, we are unlikely to adopt it. Instead, a useful insight on how we can sell disruption comes from Novalis, an 18th-century German philosopher and poet. He exhorted us to see “the ordinary as extraordinary, the familiar as strange”, often paraphrased as “make the strange familiar and the familiar strange”. We need to shift perceptions to a new equilibrium where the strange and intimidating becomes sophisticated and cool. That means making our innovation familiar, observable and socially current. Humans are tribal creatures, and when we are unsure about something, we look to those around us for social proof. If we see others trying a newfangled invention, we feel comforted. In this way the innovation gains social currency and becomes not just less threatening, but actually appealing – shared until it becomes socially contagious. Two very diﬀerent examples of this are the banana and the Sony Walkman. In the 1880s Andrew Preston, an American businessman, had the crazy idea that he could popularize bananas. The fruit was virtually unknown and its suggestive shape was seen as problematic. Preston set out to make the banana cool by creating a series of promotional postcards showing elegant society ladies in beautiful settings, holding and eating bananas. This legitimized the banana and created a food craze that has lasted to this day. In 1979, Sony announced its new portable cassette player, the Walkman. Before its launch, it was lampooned in the press, and market research indicated little consumer interest. Undeterred, Sony set about making it familiar, observable and current. They photographed celebrities and actors posing with it – a blueprint for the success of Beats headphones in recent years – and they hired young people to stroll around oﬀering passers-by the chance to hear the Walkman’s excellent sound quality. Within a month the product had sold out; in a decade, Sony had sold 50 million units. As is often the case with disruption, we sometimes have to turn conventional wisdom on its head. When selling the novel, we have to overcome unfamiliarity by making it not only less strange, but cool. — Ben Shenoy is a visiting professor at the London School of Economics and an educator with Duke Corporate Education. Twitter: @PsySleuth Q4 2019 Dialogue

MARKETING

The future is omnichannel Consumers will abandon brands that fail to provide personalized marketing. Rasmus Houlind and Colin Shearer explain

Omnichannel is more than a marketing buzzword. It refers to a significant shift in marketing practice, to the point at which the entire organization has recognized that customers’ buying decisions are not linear. Consumers today do not distinguish between e-commerce and commerce. Nor do they care whether they buy from a local company or not. They do, though, expect a seamless experience when switching between digital and physical sales, and between communication channels; and they get annoyed by irrelevant oﬀers that fail to take account of their history with a company. As a result, more and more companies are moving from a salesoriented multichannel focus to an omnichannel focus, where customer profitability and customer loyalty are at the heart of all major decisions. A 2017 study from Brightpearl, The State of Omnichannel Retail, found that 91% of retailers already either had an omnichannel strategy or planned to invest in one. However, only 8% felt that they had mastered it. While doing research for our book, Make It All About Me (LID, 2019), we found six common disciplines shared by that minority of market leaders – disciplines which have made firms like Sephora, Amazon, Nordstrom, The North Face and Telenor masters of omnichannel. How are these six areas set to develop in the years ahead?

Consumers get annoyed by irrelevant offers that fail to take account of their history Dialogue Q4 2019

Being recognized in the physical world will become the norm

Leading omnichannel marketers recognize their customers across channels and ask for permission to communicate directly. At Forevermark’s Shanghai jewellery store, Libert’aime, customers that have signed up through WeChat and booked a try-on session

are automatically recognized and greeted by name on arrival. This comes as a surprise to many customers today, but it will become the norm. Consumers will expect sales associates to have full insight into their previous purchase patterns and communication history, and to be treated accordingly.

Data collection will be ubiquitous

Today’s leaders collect data systematically from all touchpoints and channels; that will become ubiquitous. Amazon collects customer data from Amazon Prime, Kindle, Echo, AmazonGo, Amazon.com and a host of other services. Data sources aren’t limited to website visits and email clicks, but include physical presence recorded by camera, voice recorded by Echo, and rich behavioural data, for example from Kindle devices. In the future there will be no customer interaction without data collection.

Algorithms will bring superpowers to marketers

Modern start-ups such as the audio book subscription service Storytel.com are already using AI and machine learning techniques to systematically uncover the most important moments of truth with customers’ use of their services. They extract features such as sentiment and excitement curves for brand new books that no-one has even read – except the algorithm. Technology will oﬀer a hitherto unseen variety of insights on customers, which can be leveraged with each customer to gradually increase their satisfaction and lifetime value.

Marketing becomes service

Today’s leaders already act on their data and insights to create better communication, service and CX (customer experience). What we used to think of as marketing will become helpful communication

MARKETING

THE OMNICHANNEL HEXAGON The six disciplines your organization needs to master to succeed with omnichannel marketing

Technology will offer a hitherto unseen variety of insights on customers

C U S TO M E R R ECO G N I T I O N & PE RM IS S IO NS

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Personalized Segmented

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One-to-one AI & insights

& A LY AI T IC

en ted Cu sto ce me ntr ric

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ed rat eg

TA I O D AE C T

Engagement

LL ta da CO al n tio era ata rd Op me s sto ilo Cu in s

Volume

Int

& ORG MA A NA NIZ GE IN ME G Pro NT du

Identification

Mass communication

CO M M U N I C AT I O N & S E RV ICE

that guides consumers to take the right decisions earlier – whether that’s putting the next audio book on the reading list, or purchasing that outdoor jacket from The North Face before cold weather hits. Consumers will find this useful, not creepy: in fact, they will abandon brands that fail to use their data to create truly personalized and meaningful customer experiences.

Customer metrics will overrule channel metrics

Successful omnichannel companies such as Nordstrom have started reporting to the stock market using customer metrics that ensure satisfaction and profitability on a customer level. Relying solely on channel-specific metrics, such as sales per square foot or sales per channel, court danger: there is a risk of sub-optimizing the channels and damaging the customer experience.

Organizing for omnichannel success

Success with omnichannel marketing calls for some heavy changes in how most companies organize. But since omnichannel

has become an accepted business strategy, it’s easier than ever to anchor customer-centricity with senior management, and implement the necessary changes. For instance, Sephora in North America has merged its retail, digital and customer service departments under one roof. New organizations will be born without the inherent conflicts of interest that arise from channelspecific silos and compromise CX. New staﬀ will come from organizations that already work in an omnichannel way. Systematic training in understanding omnichannel and using digital tools will be a mandatory part of employee onboarding programmes. We don’t expect to see brands suddenly leapfrog to a position of omnichannel excellence and customer centricity, because these six predictions aren’t based on simple dos or don’ts. They are guiding principles for where marketers should focus and how they can gradually improve the customer experience, while balancing resources and personalization eﬀorts to maximize profitability. The omnichannel hexagon (above) is our way of slicing the elephant into small bites and providing a channel-neutral common ground for understanding and enabling collaboration around customer centricity. These six predictions may sound like science fiction for incumbent brands. If that’s the case for you, it’s time to start catching up: they are already reality for today’s omnichannel leaders. — Rasmus Houlind is chief strategy officer at marketing technology company, Agillic, working with some of the largest brands in the Nordics. Colin Shearer is chief strategy officer at Houston Analytics, a Finland-based European leader in artificial intelligence — Make It All About Me: Leveraging Omnichannel and AI for Marketing Success LID Publishing (2019) bit.ly/AllAboutMeBook Q4 2019 Dialogue

We are a team of architects, designers and creative thinkers

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STRATEGY

RITA GUNTHER MCGRATH

Arenas, not industries, are the new business battlegrounds

The old tools don’t work anymore Rita Gunther McGrath is professor of management at Columbia Business School

Your most significant competition might come from another industry invading yours

The long postwar period of expansion of the US economy gave us many things. Steady economic growth. Bold new industries that operated on a global scale. The rise of the information worker. And many of the concepts strategists rely on. Here’s the problem: today is not the 1960s, yet the tools developed during those years have proved stubbornly hard to retire. In the face of strategic inflection points, when the assumptions we make about how to achieve business success no longer hold, using them can lead to disaster. Take the venerable BCG matrix. Designed to evaluate the potential of a product portfolio, it was derived from seminal research on the learning curve. In manufacturing, unit costs decreased by a predictable amount as cumulative units produced increased. Its impact was revolutionary. One could predict a decline in unit costs relative to units produced, which implied that the best place to invest, strategically, was early in a fast-growth industry. Achieve a large market share in a sector, and you could cut your costs of production well below those of your competition, thus racing ahead. This radical thinking fundamentally changed how executives thought about businesses in their product portfolios. Businesses with big market shares in fastgrowth industries were deemed ‘shooting stars’ entitled to significant investment. Those that were large-share businesses but in slower-growth environments could benefit from the positions established earlier and should be milked – they became known as ‘cash cows’. Businesses with small shares in low-growth conditions were dogs, ripe for rejection. So central had the BCG matrix become that it informed the corporate strategy of hundreds of US firms. Companies backed their stars, milked their cows and dumped their dogs. It was all right for a while. But, over time, some nasty consequences emerged. American firms ceded leadership

in entire sectors – such as televisions – which were considered slow-growth dogs, not realizing that innovation is path dependent. Rival nations became innovators in the digital displays of the future, because the legacy TV-manufacture business had been outsourced to them. Empirical work found that the predictions of the BCG matrix were not being realized. My colleagues Ian MacMillan and Don Hambrick showed that so-called dogs were in many cases healthy and profitable parts of the portfolio. So what’s up? One of the most dangerous assumptions in the BCG matrix is that a company’s position in an industry is central to its business strategy. It isn’t, not any more. Strategists who look at the world through an industry lens have a severely diminished field of view. Today’s reality is that your most significant competition might well come from another industry invading yours. We need to think of strategy and competition in terms of competitive arenas, not industries. An arena represents a chunk of resources controlled by diﬀerent stakeholders – customers, certainly, but others too. They all have, to use Harvard business professor Clayton Christensen’s term, ‘jobs to be done’. Do the job better than a competitor – even one from another industry – and the advantage is yours. Consider all the jobs a modern smartphone does. It’s a camera. It’s a flashlight. It’s a map. It’s an emailer. It’s a voice recorder. It’s an encyclopedia. Oh, and incidentally, it’s a phone! So, what ‘industry’ is the smartphone in? The arena concept is invaluable when considering your growth strategy. Start with what jobs important stakeholders, such as customers, want done, then look at a service that does that job in a more convenient way. To compare your business to its immediate peers is to use the broken tools of the past. The threats – and opportunities – are from outside. Q4 2019 Dialogue

STRATEGY

Dialogue Q4 2019

STRATEGY

Succeeding in the project economy The way we work has been transformed. Executing on strategy means learning from project management

WRITING

Christoffer Ellehuus ILLUSTRATION

Adam Quest

We need to rethink our approach to talent, and recognize the skills needed to succeed

We work in a world being transformed by powerful trends. Globalized business models, the proliferation of information and the emergence of new technology are driving complexity in the markets we operate in, whether we work for incumbent firms or for fast-growing challengers and disruptors. The nature of work is shifting too, driven by digitization, in ways that profoundly change what managers and professionals do, and the tools they need to succeed. In this context, how should leaders and organizations act? Twenty or thirty years ago, the answer to that question was to improve eﬃciency. The thinking was that we could hone our processes and models, making operations leaner and more eﬃcient, using tools like Six Sigma. But today, those processes are either being digitized, outsourced, or automated. Instead, the focus for leaders has to be on the changing environment and increasing the ability of their organizations to adapt to change. That means that organizations need to understand and respond to two major dynamics. First, work has changed from being based on operations, to projects. Second, because of that change, we need to rethink our approach to talent, and recognize the new skills and behaviours needed to succeed in a world that is oriented around projects.

A changing balance

The balance of how we work is changing. Research cited by project guru Antonio NietoRodriguez suggests that executives’ time used

to be split in a 90:10 ratio between the relatively routine work of ‘running the business’ and ‘changing the business’. That formula has been overturned. Today, we estimate it to be a 70:30 ratio in the other direction, with the bulk of leaders’ time spent on changing their business. Change can, of course, take any number of forms. It includes developing new products and services, moving into new territories, or responding to competitors and regulatory changes. Whatever the change, it tends to be delivered through discrete, defined initiatives: in other words, projects. In all sectors, across business, government and not-for-profits, organizations are increasingly working with a project-driven workflow. It might not be called ‘project management’ – it’s just ‘work’ – but the shift is unmistakable. The change is global in scale: it’s forecast that project-oriented economic activity could grow 68% over a 14-year period, from US$12trn in 2013 to $20.2trn in 2027 (Project Management Job Growth and Talent Gap 2017-2027, Project Management Institute, 2017). Yet organizations rarely acknowledge this shift. The costs could be substantial. One McKinsey study of over 5,000 business projects found that 56% delivered less value than expected, and 45% had cost overruns. Some 17% went so badly that they threatened the company’s very survival. If they cannot improve those odds, organizations are playing Russian roulette in their approach to managing projects. This failure rate also betrays a lack of thinking about the implications of the project-based Q4 2019 Dialogue

STRATEGY

The core techniques of project management need to be developed in everyone

economy for organizations’ talent strategies. Our research has found that a lack of change management skills is the top reason for project failure, identified by 45%. We looked at firms across the US, Europe and Asia-Pacific and found that 95% of project-based workers are neither certified, nor even called project managers, even though their roles involve managing and delivering projects. You will find these professionals all over organizations today. It is the sales operations director leading a big change in go-to-market strategy, or the change management consultant in HR leading a large-scale reshaping of the firm’s performance management process. Those project-based professionals may have no interest in pursuing a career in project management, but they need project management techniques to succeed. The Project Management Institute (PMI) has warned that shortages in project management talent and skills could cost employers $208bn over the decade to 2027. This reflects the widespread view of project management as a niche technical discipline that really only matters for IT and technical work. This has not been helped by project managers who are too often focused on project orthodoxy, opaque terminology and rigid processes, rather than being delivery-focused and responsive to today’s requirements. Yet it is an increasingly unhelpful and outdated view of project management.

Getting work done

A better approach means stopping thinking about the challenges we face today in terms of ‘project management’. Instead, we have to reframe the question as being about how we get work done most eﬀectively. It also means stopping thinking about project management as a technical discipline, and recognizing it instead as being a combination of skills and disciplines that are needed to get work done today. This shift has four major components.

Strategy

Alignment and executing on strategy means that the strategy has to be rooted deeply in the organization and understood by all. The business’s aims – its purpose – and the fundamental economics of the organization need to be grasped by everyone, because prioritizing work and eliminating ‘noise’ is an ongoing challenge for us all. Our 2019 survey and report, Emerging Trends in Project-Based Work, found that the biggest challenge in this area, identified by 86%, is selecting the right work to be done – and eliminating work that should not be continued, or even started. Getting this right is impossible without a genuine understanding of the strategy.

Dialogue Q4 2019

So is identifying opportunities for innovation, growth and value creation – the second biggest challenge, highlighted by 79%. Most leaders need to spend more time on building this understanding in their organizations. It is simply not enough for leaders to present the strategy once a year and hope that is an adequate anchor. Forcing change through is unsustainable, so leaders need to bring people with them on the strategy. The critical question is: do leaders and managers often talk to the organization about the underlying purpose and economics of the company, and why it is important?

Work

Getting work done demands action in three areas: process expertise, workflow management and innovation. The most urgent area of focus is managing multiple priorities and interrelated workstreams, identified as a challenge by 83% in our research. Doing this eﬀectively demands that the core disciplines of project management be developed in professionals in all parts of organizations, not just IT or digital teams. The core techniques of project management – defining the aim and scope of a project, preventing scope creep over time, managing budgets against cost inflation, staying on course – are relevant to all. Project management is a core muscle to be developed in everyone. That is increasingly being recognized by major organizations. We are currently working in partnership with BP in Azerbaijan under their social investment programme, for example, to develop both strategic leadership skills and the core project management skills of the local workforce: the skill-sets are closely interrelated, and success depends on having both in place across diﬀerent management levels throughout the organization. Ask: do leaders of project execution deploy work approaches, including design thinking, to identify opportunities for innovation and problem-solving?

People

In our study, the most urgent area of focus for improving how we manage people today is creating the conditions for leading and managing a team in an environment of ambiguity and uncertainty – a challenge identified by 80%. A similar number, 79%, see the challenge of leading through change or transformation as a priority, and the two challenges go hand in hand. With a 70:30 focus on changing the

STRATEGY

S T R AT E G Y E X E C U T I O N ’ S COMPETENCY FRAMEWORK S T R AT E G Y Aligning & executing strategy

Strategy alignment Business acumen

WORK Getting work done

Process expertise Workflow management

Business contact

Innovation

Critical thinking & problem solving

Relationships

Adaptive mindset SELF Improving yourself

Being able to build alignment in the face of ambiguity and uncertainty is essential

Influencing Executive presence

Team leadership

PEOPLE Building & nurturing relationships

business now the norm, leaders have to create a team environment where people accept a degree of uncertainty and ambiguity, and are able to still move forward and get work done. That means a major shift is needed in how leaders approach people management, towards nurturing team members and building their capacity to deal with the challenges that the organization faces. It also means moving beyond basic project management to develop portfolio management skills, allowing project leaders to prioritize better as business needs change. Janus-like, managers face both inwards to their teams and outward: they need to be adept at managing upwards, at influencing and managing through networks, and engaging stakeholders throughout the diﬀerent phases of projects, from initiation and development through execution and delivery. Despite the importance of the people dimension, it is still too often the case that management positions go to those who are technical experts, but not ‘people people’. This under-valuing of so-called ‘soft’ skills can cost organizations dearly in terms of project success rates.

Self

The fourth dimension is that of self. A well-developed ability to manage yourself and to improve your own capacity is immensely valuable. The most urgent areas of

focus are to build creative, problem-solving and critical-thinking skills, and to build an adaptive leadership mindset that equips a manager to deal with the ever-changing world. Organizations need to support this shift. They can help develop diﬀerent approaches to problem-solving and innovation among project leaders, equipping them to discover solutions to emerging challenges. One global technology company is working to develop adaptive leadership capability throughout the business, realizing that it cannot only be about the top tier: in today’s organizations, everyone is a leader and needs to build their adaptability muscle. Personal resilience is also critical. Complexity and change create circumstances that continually stretch and challenge us as leaders. Being able to build alignment with the strategy and drive execution in the face of ambiguity and uncertainty is essential.

Adapting to change

The projectification of work has rapidly shifted the nature of work for most professionals: away from running routine operations and decisively towards leading projects. In this new world, executives have to answer three critical questions. Does your organization have the capabilities to thrive in the projectbased economy? Do professionals across your organization have the right adaptive mindset to execute on critical projects? And do your project leaders have adequate business skills for prioritizing among competing workstreams and aligning with shifting business priorities? In every sector, an adaptive mindset based on the core techniques and skills of project management is now essential. The days where project management was mainly a technical skillset deep in the IT function have long gone. — Christoffer Ellehuus is chief executive of Strategy Execution. Discover the Duke CE Adaptive Strategic Execution Program in partnership with Strategy Execution at www.dukece.com/our-work/adaptivestrategic-execution-program Q4 2019 Dialogue

STRATEGY

Check your assumptions Making great decisions outside your comfort zone means being able to question what you think you know, says Andy Cohen

Bad decisions can lead to inefficiencies, stalled growth, and costly mistakes Dialogue Q4 2019

When was the last time you or your organization felt that you were in your comfort zone? For many of us today, it feels a long time ago. The speed of change and apparent compression of time keep us all, individuals and organizations alike, almost permanently outside our comfort zones. The sense of unpreparedness and anxiety this produces can lead to faulty decisionmaking as a result of greater dependence on untested assumptions. Bad decisions can lead to inefficiencies, stalled growth, and costly errors. It’s why the military places such emphasis on checking assumptions. As General Mark A Milley, chief of staff in the US Army, has said: “Every assumption we hold, every claim, every assertion, every single one of them must be challenged.” For businesses, the implications might not be life-or-death, but they could certainly be critical to survival. Even those who have built their reputations on doing things differently can make faulty or irrational decisions when they move out of the security of their comfort zones. It has nothing to do with courage, IQ, talent, or prior success, and everything to do with checking assumptions.

The danger of unchecked assumptions

Two historical examples show how untested assumptions lead us astray. Orville Wright, one of the two brothers who ushered in the age of modern aviation, dismissed the idea of creating a runway that smoothed over the debris on the airfield (McCullough, The Wright Brothers, 2015). In his eyes, if a man had to smooth over every

takeoﬀ strip, he shouldn’t be flying. Harry Houdini, meanwhile – the king of escapes – once found himself riding with a friend in a new car and unable to open the door on his own. The door handle was in a diﬀerent place than on older models. Houdini joked: “I’ve escaped from practically every type of container and every size, shape, and weight of boxes, trunks, and other such things, but I wish someone would tell me how I can get out of this darned automobile!” (Shimeld, Walter B Gibson and The Shadow, 2005). One simple design change had stymied the master.

STRATEGY

Moving out of your comfort zone requires a level of openness to considering new ideas and solutions rather than reverting to old, comfortable ways of doing things. Answers begin with taking a contrarian viewpoint. Making an assumption is neither good nor bad; assumptions lie within every decision.

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Leveraging your assumptions

The late Chris Argyris – management guru, ‘father of organizational learning’ and professor at Harvard Business School – illuminated the “invisible process” that formulates our thoughts

and leads to decisions. He created a mind map illustrating how we think, known as the Ladder of Inference (Figure 1, over). We begin by collecting data, then sort through that data to assign meaning and form assumptions. From there, we draw conclusions, form beliefs, and make decisions that result in action. The assumption is at a critical point in the middle of the ladder. It is something we treat consciously as a truth, rather than something we take for granted or believe subconsciously. The ladder helps us become more aware of our thinking process and provides a way to Q4 2019 Dialogue

STRATEGY

FIGURE 1

THE LADDER OF INFERENCE

TA K E ACTION ADOPT BELIEFS D R AW CONCLUSIONS MAKE ASSUMPTIONS ASSIGN MEANING SELECT D ATA Data pool & experiences

Source: Chris Argyris

probe what others are thinking. Understanding our ‘true thoughts’ leads to smarter decisions. This does not diminish the value of trusting gut instinct, but there are just too many decisions to make in the course of even one day. Instinct alone is not enough to help you manage every decision. Unlike most organizations, the US Army very specifically addresses the assumption’s role in the decision-making process. Its definition of assumption, set out in the Department of Defense Dictionary of Military and Associated Terms, is “a supposition on the current situation or a presupposition on the future course of events, either or both assumed to be true in the absence of positive proof, necessary to enable the commander in the process of planning to complete an estimate of the situation and make a decision on the course of action.” Even in the Army, though, the process of identifying and then challenging assumptions is not always personally internalized. As one military leader confided, “Most [in the military] recognize the importance of assumptions, but don’t often invest enough time in developing them.” Dialogue Q4 2019

The reason leaders need to make this investment is that the assumption is one of the key components behind every action. Making an assumption is as natural as breathing. To judge yourself for making an assumption is unproductive: nobody should blame themselves for an action that is a natural part of the decision-making process. Instead, accept that you make assumptions by surfacing them and owning them without guilt.

Challenging dangerous assumptions

Assumptions are quickly propagated for a number of reasons: fear, change, facing a new experience, or confronting the inconceivable. Many of these assumptions serve the purpose of gently coaxing you back into your comfort zone as a way to reduce that anxiety. In other words, they act as barriers to new thinking or solutions. They are dangerous. But they are also easily identifiable via five common verbal cues. “It can’t be done. It’s impossible.” “There isn’t enough time, or money” – or some other vital resource. “We tried it last year and it didn’t work.” “The client will never buy it.” “They are

STRATEGY

The goal for leaders is to identify key assumptions and convert them to ‘truth assumptions’

not giving me the support I need.” I have dubbed the process of managing an organization’s assumptions ‘making an Assumpt!’ The difference from the word ‘assumption’ signals the moment you become aware that you are taking something for granted or treating a belief as fact or truth. The goal for leaders is to raise individual and organizational consciousness in identifying key assumptions and converting them to ‘truth assumptions’ – those which have been surfaced, explored, and tested – in order to make faster, smarter decisions. One universal assumption is that “the world thinks like me.” Investing in this assumption without positing it as an Assumpt! results in negative behaviours and sales. For example, when the American business Home Depot launched its do-it-yourself (DIY) store in China, it bombed. It discovered that most people in China don’t like to do it themselves so, as a result, they didn’t come to Home Depot stores. Walmart, meanwhile, lost US$1 billion when it was forced to pull out of Germany, having failed to attract customers thanks to differing cultural consumer and business practices: Germans are less price-sensitive than Americans, weren’t interested in having a store open for 24 hours, and utilized a distribution system favouring small- and medium-sized businesses. American brands aren’t the only ones who have suffered from the assumption that a brand that attracts loyalty in one country will do the same in another. I worked with one of Germany’s leading appliance manufacturers seeking help in understanding why the US market wasn’t falling head over heels with its products. By acknowledging the assumption that success in one country would translate to another, I helped them to see that while their brand was certainly well respected in the US, it was in a limited marketplace – relevant in dishwashers, but not in stoves, refrigerators, microwaves, and so forth. The company realized that a major marketing investment would be needed in the US to generate stronger brand loyalty, and so decided to focus its attention elsewhere. An organization can be defined by its shared assumptions. As a leader you share the responsibility of helping those in the organization realize the risks of their assumptions and manage them better.

Encouraging your customers to use your competitors: Amazon

Part of Amazon’s growth can be credited to Jeﬀ Bezos’ ability to question and challenge prevailing assumptions. In 2000, despite the absence of any supporting research, Amazon invited third-party vendors to sell their goods through Amazon, even when they oﬀered a lower price than Amazon did on the same items. Bezos recognized the risk that this could

significantly cannibalize profits, but he felt that oﬀering third-party goods for less reinforced Amazon’s commitment to put the customer first. Instead of losing a sale to a lower price – which might have been the initial assumption – Amazon discovered that in the long run, it was the more profitable approach. In 2014, Amazon revealed that it had two million third-party vendors on its site, producing record sales of over two billion units. Ask yourself: what do your customers want that would make them happy but potentially reduce your revenue? What are the assumptions you come up with? Give yourself permission to explore without judgement – and then challenge your assumptions using these four strategies.

From assumptions to Assumpts!

Expand

Ditch the bias that assumptions are “something I shouldn’t make”. Accept, without judgement, that assumptions are part of your ladder of thinking and decision-making processes. Within every decision lies an assumption.

Identify

Listen to the verbal cues generated when moving out of your comfort zone. Be aware of how your present emotional state influences those assumptions. Bring them to the surface – this is the process of making an Assumpt!

Accepting your Assumpts! means acknowledging that you can live with the consequences of where they lead you – that you can leave them ‘unchecked’. This is important, because many assumptions are beneficial and serve to help you make decisions quickly and accurately. Not all are dangerous.

Challenge There are three levels in the challenge.

Question This may be as simple as stating,

“Perhaps if I tried to do this in a diﬀerent way…” Explore The next level is to explore in detail, to determine the origin of the idea. “What is this based on, and what are the consequences in accepting it?” Reject The fastest way to create new thinking is to reject your Assumpt! When it comes to moving out of your comfort zone, talent, IQ and experience don’t often matter. Business success in uncharted territory is dependent on how you identify and manage assumptions. It’s time to start checking yours. — Andy Cohen is a New York Times notable author, TEDx speaker and Duke Corporate Education faculty member. He is author of Challenge Your Assumptions, Change Your World Q4 2019 Dialogue

NEWS NATION

The picturesque polluter Rich in raw materials, famously multicultural and led by a glamorous young prime minister, Canada appears to have it all. But it comes at a price: the country is one of the world’s biggest greenhouse gas emitters

ICELAND GREENLAND ( K A L A A L L I T N U N A AT ) (Denmark)

ARCTIC OCEAN

The OECD ranks Canada as the most highly-educated country in the world, based on the proportion of 25-64 year olds who have completed tertiary education

ALASKA (United States)

Biggest polluter

CANADA

Edmonton

The World Resources Institute ranks Canada as the highest per capita polluter in the world

Calgary

PAC I F I C OCEAN

Top of the class

Vancouver

Québec

Winnipeg

Montreal

OT TAWA Toronto

U N I T E D S TAT E S

AT L A N T I C O C E A N

3rd

Canada is second only to Venezuela and Saudi Arabia in the size of its oil reserves. Much is in oil sands.

FAC T F I L E C A N A D A Land area

3,511,023

Official language

(9,093,507 sq km)

English, French

Population

GNI per capita

36,881,659

$47,280

Capital

Life expectancy

Ottawa

85 Women

sq mi

Religion

Catholicism Dialogue Q4 2019

79 Men

Use what you’ve got

We feel that oil and gas will remain a source of energy for the foreseeable future Amarjeet Sohi, Canadian minister for natural resources, October 2018

Controversial construction

1,150km

Length of the Trans Mountain pipeline which is set to have its capacity tripled after plans were approved in June 2019. The C$7.4bn (US$5.7bn) project is being challenged by the indigenous First Nations

NEWS NATION

Canada is trading integrity for money… and is lagging behind on the world stage. It’s an embarrassment to any Canadians

Join the Dialogue

Musician Neil Young, on stage at Toronto’s Massey Hall, January 2014

CRANK IT UP

104 megatonnes

Canadian greenhouse gas emissions projected for 2020 – more than double the 48 megatonnes produced in 2010

BIG BUSINESS

740,000

Canadians employed in the oil and gas sector

TA R G E T S FOR CHANGE

2030

Year the Canadian government promises coal-fired power will be phased out, replaced by sustainable sources – though it regards carbon capture as an acceptable substitute to closing coal plants

DANGER TO LIFE

+ 20,000

Canadians killed by pollutionrelated illness between 2017 and 2018. It is estimated that pollution-related healthcare cost Canadians C$39 billion (US$30 billion) in 2015

D AT E I N THE DIARY

21 October 2019 Scheduled date for Canada’s next federal election

IT’S IN THE PIPELINE

840,000

Kilometres of oil and gas pipelines laid in Canada since the 1850s

Diversity isn’t just sound social policy. Diversity is the engine of invention. It generates creativity that enriches the world Prime Minister Justin Trudeau, 2016

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DIALOGUE IS BROUGHT TO YO U B Y… EDITORIAL BOARD

Dr Liz Mellon, chairman Tom Albanese, ex-chief executive, Vendanta Resources Michael Canning, Duke Corporate Education Professor Pedro Nueno, president, China Europe International Business School Ben Walker, editor-at-large, Dialogue EDITORIAL

Patrick Woodman, editor Kate Harkus, art director Luisa Cheshire, chief subeditor Kirsten Levermore, assistant editor MANAGEMENT

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Disclaimer Copyright 2019 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

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Q4 2019 Dialogue

REVIEWS

The triumphant generalists Tom Cheesewright learns the benefits of not knowing what you want to be when you grow up

Range David Epstein Macmillan bit.ly/RangeBook

In my work as a futurist, the question I am most frequently asked is this: “What should I teach my children to give them the best chance of success in tomorrow’s world?” In Range: How Generalists Triumph in a Specialized World, David Epstein encourages us to consider not what we teach, but how we teach it. Perhaps this is the more valuable question. He argues that we have become enthralled to the idea that success is best bred through early specialization. The two tigers – Tiger Woods and the ‘tiger mom’ – have become powerful stories about how a sustained and narrow focus on particular disciplines can give our children a head start. But through collected research and examples from education, music, business and sport, Epstein shows that people with a broad education often outperform their specialist counterparts over the long term. It is an idea that extends well into our careers: the genesis of the book was in Epstein’s conversations with highly educated military veterans nervous about starting new careers later in life. Their fear showed Epstein how powerful the “cult of the head start” had become, and he sought evidence to show them their experience might be an asset, not a handicap. Epstein makes a compelling argument. I found that I needed little convincing. Most of us have not pursued our lives with a singular focus. Our careers have meandered. That we may, accidentally or intuitively, actually have been pursuing the best path to long-term success is a seductive idea. The envy we may have felt of the early success of our hard-charging peers can turn to smugness about our prospects of overtaking them in time – and we will have had a broader, more enjoyable experience along the way.

We need breadth of experience, comfort with ambiguity, and openness to learning Dialogue Q4 2019

The thesis is equally seductive for parents. Most of us take a rather haphazard approach to our children’s education. Few of us are tiger parents, driving our children through regimented tuition in a narrow selection of skills. We let them pursue their passions, which wax and wane. We might cajole them into getting their homework done, but we are likely to let them spend more time playing, reading, or just crashing in front of the TV. It turns out we may be building more rounded, successful future humans.

Lessons in learning

This isn’t to say that Range is without a call to action. In fact, it has reinforced two of my beliefs about the future of education and careers, and reinvigorated my desire to tackle these issues. The first is about the nature of the skills we need for success, today and tomorrow. Many of us already consider ourselves generalists. Success often requires a solid mix of skills in research, analysis and communication, as well as many more specific technical strengths. But being a successful generalist really requires the ability to keep learning, maintaining openness of mind and adapting to new, complex and uncertain scenarios. Epstein points to the tale of the hedgehogs and the foxes, two classes of political analyst named by Philip Tetlock in Superforecasting after the tale by Isaiah Berlin. Hedgehogs know one big thing: they pursue a single idea or ideology to great depth and believe that defines the world. Foxes know lots of little things: they can hold multiple ideas in their heads and recognize that all of them may be true. Foxes oﬀered much more accurate predictions of the collapse of the Soviet Union because they could recognize the impact of multiple influences, rather than having their view defined by a single philosophy. The second point is about how we learn. Epstein confirms what many parents intuitively believe: intensive ‘teaching to the test’ leaves children with lower long-term recall, and is less valuable in broad-based skills development than more open and exploratory learning. Concentrated cramming leads only to short-term

REVIEWS

success. Inquiry, exploration, ambiguity, variety, the interleaving of subjects and periods of rest, reflection, and play, are much more eﬀective at building deep knowledge and the skills to recall and apply what has been learned. If, like me, you believe school education is over-prescribed and its testing schedule excessively rigorous, Range will give you plenty of ammunition to lobby for change. We should also remember to adopt a more exploratory style in our own homes to structure our continued learning.

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Reassurance and ammunition

Like the path I now know may lead to the most successful careers, Range is a little meandering. Epstein spends a long time tackling each facet of his argument, repeating and returning to each argument with new evidence and diﬀerent

nuances. The experience is enjoyable, but occasionally I found myself craving a more condensed argument and a sharp summary. Nonetheless, Range is an important read. If you find yourself in your twenties, or even your fifties, not knowing what you want to be ‘when you grow up’, then read Range for reassurance. If you’re just starting out, read it for insights about what will be the critical skills for your career: we need breadth of experience, comfort with ambiguity, and an openness to continued learning. And if you’re a parent, read Range and relax a little about not being a tiger. We best prepare for the future by exploring a range of interests. — Applied futurist Tom Cheesewright is a consultant, speaker and commentator on digital transformation and tomorrow Q4 2019 Dialogue

REVIEWS

Back to the future Adi Gaskell looks at what we can learn from the first three industrial revolutions

The Technology Trap: Capital, Labor and Power in the Age of Automation Carl Benedikt Frey Princeton University Press

A scant 15 pages are devoted to ways out of the trap

Oxford University researchers Carl Benedikt Frey and Michael Osborne shot to public attention in 2013 with their prediction that 47% of jobs could be automated within a decade or two. It was perhaps the first serious attempt to forecast the impact of artificial intelligence and robotics on jobs. Their forecast has been followed by near-endless rival predictions, but it retains prime position in a crowded field, referenced by futurists and governments alike. It makes Frey’s attempt to flesh out their hypothesis a noteworthy contribution to the conversation about the future of the global economy. The Technology Trap is a fascinating exploration of the preceding three industrial revolutions and the technological, political, social and economic landscape of the day in each case. Frey shows that in each phase, those bearing the brunt of disruption – measured in jobs lost, rising inequality and a dwindling share of income to labour – reacted predictably negatively. It leads him to ask if this is an inevitable trap, inherent in new technology, or if we can break the cycle. “While there are good reasons to be optimistic about the long run, such optimism is only possible if we successfully manage the shortterm dynamics,” he writes. “People who lose out to automation will quite rationally oppose it.” Frey’s historical analysis is superb, but resistance to change is only part of the story:

history shows us that new technologies have ultimately been a force for good. People eventually adapt. Yet, frustratingly, a scant 15 of the book’s 350 pages are devoted to how we might break out of today’s technology trap and alleviate the short-term pain of disruption in the age of automation. Most ideas are intended for governments: the priority, Frey suggests, is to encourage greater adaptability among workers, for example by improving educational opportunities throughout life so that people can develop new skills and start new careers. He also proposes supporting mobility between regions, through better transport links, mobility vouchers and zoning changes to rectify urban housing markets that price many people out. Frey warns against populist promises of quick fixes. We need a full-spectrum policy response to ensure both that society benefits from technological advances, and that the benefits are shared fairly. He might have focused more on this challenge: for policy-makers and business leaders alike, there is a pressing need to move beyond knowing and towards doing. The Technology Trap is a powerful analysis of the perils we face, but leaders looking for ways out of the trap will need to keep hunting for fully-fledged solutions. — Adi Gaskell is an innovation consultant and a Forbes.com writer. Follow him on Twitter @AdiGaskell

APPS FOR LEADERS: NOZBE

Perry Timms is smitten with a new work-management app The market for task/project management tools is a crowded one. Jira, BaseCamp, Asana, Podio, Trello, Pivotal Tracker, Monday, Todoist: I’ve tried them all. I settled on Asana, as reviewed here as long ago as 2015. But, having tried Nozbe, I feel like someone’s just driven past me in a Tesla Model X, and now I want one. Nozbe has a clear user interface and is very intuitive. There are no overcomplicated menu structures or functions hidden inside others. There’s Inbox, Projects, a neat Priorities option, and easy-to-understand sub-menus like You+Team and Search. It’s like a hybrid of Dialogue Q4 2019

email and Asana, and I’m smitten. Before long, you might wonder how you ever felt productive without Nozbe’s help. It interacts with Evernote, Google and Microsoft Office documents, Dropbox and Box, and more. You can add comments to your tasks or attachments to your projects. You can sync calendars. It integrates seamlessly. Most importantly, Nozbe helps you focus on your work, and is not a cognitive distraction or chore on top of what you do. For that alone, it’s worth a go. If you like David Allen’s Getting Things Done approach, it’s definitely for you. Nozbe is on all mobile platforms and

offers a synchronized desktop web app too. It has a free 30-day trial, with price options both for solo players and small businesses. It’s secure and encrypted, which will help persuade your firewall overlords to allow Nozbe into your digital ecosystem, and is banking-grade PCI compliant. I highly recommend giving Nozbe a spin. — nozbe.com — Perry Timms is an independent HR/OD practitioner and CIPD advisor on social media and engagement. Follow him on Twitter @PerryTimms

REVIEWS

PIERS CAIN ON BOOKS

Is ruthless self-interest the only way to reach the top?

The dark arts of getting ahead Piers Cain is a management consultant

How far would you go to get a promotion? be loyal to you. They want people who Would you take credit for another’s work? are committed to the values they espouse Steal their ideas? Double-cross someone and behave in the ways prescribed by the who has gone out of their way to help you? company culture. If you don’t comply, at Lie? Betray a friend? Leave jobs half-done, best, you won’t be promoted; at worst, you only doing the minimum needed to get will be let go. It is imperative to give the noticed? appearance of being fully signed-up, even Maybe you should consider all of while recognizing in a secret part of your the above. Dr Mark Powell and Jonathan heart that none of this will last. Gifford, authors of Machiavellian One of the most striking observations Intelligence, have a bracing message: from Powell and Gifford is that seeing a modern organizations are inherently project through to its conclusion could inhuman. They are ungrateful, heartless, damage your career. Even if you deliver amoral and duplicitous. The organization the promised benefits, your sponsor may is a legal person and its have moved on, having senior officers are duty taken the credit for bound to do whatever is themselves. Or, having This world view sees necessary to ensure the completed the project, the modern office survival and growth of the organization may as Game of Thrones, with that legal person, even decide you are no uglier people if it means sacrificing longer needed. After all, everyone that works for organizations promote the organization along and recruit on the basis the way. It is as true for public services and of potential – what you might do for them not-for-profits as corporations. in future, not what you have already done. This world view sees the modern office If you are working on an eye-catching as Game of Thrones, with uglier people: it’s project, consider whether it would be all about power. The higher up the ladder better to cash in your chips early. you get, the safer you will be; plus, there At points, Powell and Gifford seem is better compensation on offer should you rather uneasy about their conclusions fail. But as Powell and Gifford emphasize, and the strategies they recommend. for you to succeed, others must have failed. Some readers will find the picture You can’t beat the system, so it pays to act they paint too bleak: yet it is true that accordingly. modern organizations are structured and What does this mean in practice? First, incentivized in ways that reward selfrecognize that the habits and beliefs you seeking, antisocial and heartless behaviour. regard as virtues could be holding you No one should be surprised when people back. You work hard every day. You give act accordingly. Indeed, it is a tribute to the your all. But that only works up to a point. positive side of human nature that many Unless you spend at least 20% of your time choose not to do so. Many business leaders networking and promoting yourself with complain that they get little recognition or potential sponsors within the firm, the respect. If they will not change the rules of odds are that you will be overlooked. And the game, why are they surprised? one day, someone more senior, who may — Machiavellian Intelligence: How to Survive have contributed less than you, might just and Rise in the Modern Corporation by Dr Mark decide you are surplus to requirements. Powell and Jonathan Gifford, LID Publishing Corporations want loyalty, but they won’t bit.ly/MachiavellianIntel Q4 2019 Dialogue

LAST WORD

LIZ MELLON

Leaders have to make culture visible before they change it

The unseen hand There’s an apocryphal story about a group of monkeys, whose keepers prevent them from reaching a tempting bunch of bananas by spraying them with water. Once the monkeys have learned to keep away from the bananas, one by one, the keepers swap the monkeys out of the tribe. The newcomers have never been sprayed, but the fearful inhabitants, who remember the unpleasant wetting, prevent the newcomers from an assay on the bananas lest they all get soaked again. Eventually the tribe comprises only monkeys who have never been sprayed with water but have learned to stay away from the bananas. They can’t explain why – it’s just the way things get done. What I’m describing is, of course, organizational culture. It gives meaning to meaningless rituals and practices, the origins of which are lost but which still drive behaviours until the firm dies: not of illness, but of irrelevance. In a post-VUCA world where speedy change is critical just to keep pace, let alone get ahead, culture can be a source of competitive advantage or a harbinger of demise. The challenge is that it’s invisible, driving inexplicable decisions and initiatives, yet sticky and very hard to shed. And it’s everywhere. In its heyday, football club Manchester United had leaders who consciously reinforced the club’s culture. Sir Alex Ferguson, manager from 1986-2013 – who has been called the greatest manager of all time – used to tell stories about predecessor Matt Busby, who managed the team from 1945-1969. The tragic death of eight players, later nicknamed the Busby babes, at Munich airport in 1958 was part of the defiant fabric behind their success. It bound together lifelong supporters and players like David Beckham, one of the so-called ‘class of ’92’, driving their outstanding achievement in the 1998-9 season in winning the treble of the English FA Cup and Premier League titles, and the Europe-wide UEFA Champions League. Their culture was a source of competitive Dialogue Q4 2019

advantage. But nothing lasts unless it is nurtured and kept relevant by being consistently nudged towards the changing future. What to do if you find yourself in an organization that badly needs to adapt but seems stuck in the past? Just as in a horror movie, you can’t fight what you can’t see, so make it visible. Try this. Take a diagonal slice through your organization and form a group of employees representing the longestserving through to the newest. Ask them to chart key events, decisions, actions, awards and heroes, recounting the stories and myths, drawing a timeline as far back as they can remember. Once you understand the core values of the organization and where they originated, you can start to make changes, to engender fresh stories and create new heroines fit for the future. The culture of an organization is fabricated over time, like a patchwork where most pieces fit, yet dissonant pieces can be added at the edges. It makes sense to insiders only because of the tales, narrated and repeated, that create a credible storyline. Newcomers feel the culture sharply and must learn to navigate unseen tripwires, finding they unknowingly bump up against rules and hidden practices. Garnering their views soon after entry is another powerful way to throw a spotlight on the culture. The unseen hand is fuelled more by stories, values and habits, emotion and rhetoric, than by metrics and rational analysis. To change a culture means tackling an organization’s emotional DNA. It can frustrate rational leaders, who seek change through organizational redesign, new metrics, refreshed reward mechanisms and strategic blueprints. Displacing the sticky hand is an altogether messier business, but the job must be tackled. Remember, culture eats strategy for breakfast. — Liz Mellon chaired Dialogue’s editorial board

Culture can be a source of competitive advantage or a harbinger of demise

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