by Sam Ridesic, Partner and Managing Director, and Roselinde Torres, Senior Partner and Managing Director Boston Consulting Group
Adaptive Advantage in Strategy Creation and Alignment Businesses have had 10 years to conclude that the 21st century is different from the 20th – with its global focus, variety of business models, rapidly evolving technology, higher transparency, greater innovation, demographic shortages, higher speed, and shorter product lifecycles. In this new environment, traditional approaches to strategic planning are futile because the key variables are constantly shifting and difficult to forecast. Clearly, this changes how leaders must lead, but some companies are still standing firmly in the 20th century. What’s needed is a more dynamic approach to strategy, one with an adaptive advantage – the ability to achieve superior outcomes in a turbulent environment by continuously reshaping the business through a process of managed evolution.
The first step is to be aware of the challenges and opportunities of an unpredictable environment. Leaders can begin this journey by asking their management teams these questions: •
How rapidly and fundamentally is the basis of advantage changing in our industry?
How effectively are we tracking and adapting to these changes?
What is the cost of not adapting to change?
What is the best way for us to adapt, given our situation and environment?
What’s stopping us from embracing and deploying an adaptive advantage?
Understanding the Undertaking Adaptive advantage involves not only different ways of operating but different ways of thinking about strategy. Please turn to page 11 Birth of a Strategy at DAI | How Successful Strategies Win | Strategy Execution is All About Behaviors www.watercoolernewsletter.com
By Cindy Limoges, Chief Transformation Officer, and Jean Gilson, Senior Vice President, Strategy & Marketing DAI
Birth of a Strategy at DAI The last decade has been kind to Bethesdabased DAI. In a short time, our company, which implements international development projects in some 60 countries, has experienced an impressive growth and has substantially raised our profile in the industry. DAI works to improve governance, infrastructure, agriculture, business, health care, the environment, and other areas vital to the progress of developing countries. The U.S. Agency for International Development has historically provided the bulk of the firmâ€™s revenue. In the past few years, the agency has been heavily focused on rebuilding Afghanistan. Thatâ€™s where DAI and our development experts come in. We have rapidly become the number-one firm working in the country on various stability, governance, agriculture, and economic development projects. Such fast growth comes with its own issues. And, as we have begun to realize, the challenge we now face is the need to expand and diversify our client base. With the help of Root Learning, we took the first step: defining our current reality. The Root team helped us think clearly about our marketplace and our position in it. Part of this process included an assessment of potential gamechangers on the horizon, such as a reduction in foreign aid caused by the worldwide financial crisis and a major shift in how development work gets funded. The next step of the process was to develop a compelling plan for the future, followed by aligning priorities to reach
For each module, we held a rollout in Bethesda, where many of our employees are based. Each employee was invited to a live session, going through the marketplace module first and then the strategy module. This was later extended to include video conferences with the international offices and training sessions with employees who regularly travel to project sites and corporate offices to serve as facilitators and share the modules there.
that future. It was clear that we needed a strategy to translate the excellence of our work for USAID into a broader market presence. In the past, the firm had created other strategies that looked great on paper but were challenging to execute. We realized we needed to focus not only on creating a strategy, but also on alignment, engagement, and measurement.
The modules got people engaged in how the new strategy will meet the challenges to come. The hardest thing to They brought to life the story of the do is to look in the mirror marketplace and DAI’s and determine what we strategy. need to change about
“The crucial difference between this strategy and those of years past is that strategy used to be approached as homework. Once they were finished and studied, they all turned into dusty documents,” said DAI’s Dan Hogan, Vice President of Business Development. “Kudos to management for getting us here. We are grounded and able to determine what needs to change about us to move forward.”
“The hardest thing to do, both for an organization and an individual, is to look in the mirror and determine what we need to change about ourselves,” said DAI’s Jim Winkler, Chief of Party, Vietnam. “And we are doing just that. Two key elements I look for in a strategy are inspiration and aspiration. The strategy should leave you inspired, and aspiring to the very clear view of where we are headed. This strategy does both.”
For the next few months, we worked to establish a vision, a concept of what it means to be a global development company. Although we already had a client base including the U.K. Department for International Development, the European Commission, the Gates Foundation, and others, DAI had perhaps been pigeonholed as a project implementer for USAID. We wanted to offer our diverse services to an expanded, more locally driven client base from offices around the world, proactively selling and positioning solutions to new buyers in different ways.
As Chief Transformation Officer, Cindy Limoges is charge of managing DAI’s efforts in implementing its new five-year strategic plan.
Our leadership and Board of Directors were involved in the process from the start. Eventually, we engaged more than 1,000 employees across the world in two Learning Map® modules: one on the marketplace and one on strategy.
Jean Gilson leads Strategy and Marketing at DAI, and has over 25 years of experience in the economic development field.
By Brad Haudan, Managing Director and Don Maclean, Managing Director Root Learning
Successful Strategies Win: How
Strategic Change as an Interdependent Process
2 DEVELOP A COMPELLING FUTURE STATE
All organizations have business processes, such as order-to-cash and new product development. And today’s organizations are constantly trying to transform – from a holding company to an integrated operating company, from manufacturing to brand-led, from domestic to global. But if you ask these organizations that are rich in process discipline for the process that guides the way they manage the organization through change, you may get a blank stare.
Strategic change is a process, but all too often, it’s managed as a series of independent events led by functions. It’s not the process itself but how it’s executed that differentiates the winners from the losers. Over the last 20 years, we’ve found that organizations that “win” have a few unwavering principles that guide the way they lead the strategic change process.
1 2 3
times before they’re ever called in a game. We never question why they practice the plays over and over. They do so to make sure that every player has shared meaning and has developed muscle memory for how the play should be run and the type of adjustments they may need to make. Likewise, in business transformation, playbooks are often handed to functional leaders, and the next step is “game day” execution. Six to 12 months later, the Sales group and the Marketing group don’t look like they are on the same team. It may be because, as the defense or environment has changed, it’s become painfully obvious that these two functions never had shared meaning on the organization’s desired future state and strategic priorities to begin with. The winning organizations allocate “practice” time when functional leaders collaborate to form a clear picture of the
They force collaboration and shared meaning across functional boundaries while maintaining functional ownership and accountability. We can appreciate this concept in sports, but we fail to apply it in business. As a football fan, I know that even though players have a playbook that details what they’re expected to do, the team practices a core set of plays countless
DEFINE & ALIGN ON CRITICAL STRATEGIC PRIORITIES
ENSURE BEHAVIORS AND CULTURE SUPPORT THE VISION
CREATE BROADER LEADERSHIP ADVOCACY
desired future state and strategy that everyone sees in the same way. Then, when “audibles” are called in the midst of the transformation, they’re executed with a common mental model in mind.
They invest in capability-building at all levels, starting with the top leaders. Change is very difficult. We often ask others to change before we are willing to change ourselves, and senior executives aren’t immune to this. They often chart a course for strategic change without considering how they need to change and grow. At the executive level, these capability shifts are usually tied to observable behaviors, such as how leaders spend their time or what they reward. Employees often model their leaders’ behaviors, and for an organization to effectively change, leadership behaviors must change first. Winning organizations clearly define and track the observable behavioral shifts that are required by leaders if the organization is to achieve its desired future state.
They shatter traditional hierarchies and enroll a larger group of leaders as advocates in the change. “Strategy” and “change” are usually very confidential terms. Only the top 10 or 20 senior leaders plan the change, while the other 4,880 employees are informed on a “need to know” basis. When this happens, the transformation effort usually crumbles under its own weight, because the only “advocates” are the critical few who drafted the change. The winning organizations enroll a broad group of leaders in the change. This next level of leaders often brings truth statements, barriers and, most important, new solutions to the executive team. The point is that, without crafting a process for managing the change you’ve planned, you’re making your game much more difficult to win. If you would like to discuss Root’s Strategic Change Process further, email us at SCP@rootlearning.com.
Try this with your team!
Getting Real About Strategic Change Does this scene resemble your business and the way you develop and communicate strategy? Gather your team around this picture and discuss the questions below. Your answers may give you a whole new view on strategy at your company!
First, describe the details of the scene and read the labels and quotes.
Which of the issues in the picture are currently having the biggest impact on your organization and its ability to create its strategy?
Rank your organization on a scale of 1 to 10 on its ability to set strategy. Then, discuss what it would take to raise that score by one point.
Which of the issues are currently having the biggest impact on your organization’s ability to execute its strategy?
Now, rank your organization on a scale of 1 to 10 on its ability to execute strategy. Then, discuss what it would take to raise that score by one point.
Notice the mice at the lower left corner. If “mice” were observing your senior management team meetings, what would they be saying? Why?
If the mice and others can see these problems, what is keeping your organization from addressing the issues?
What is at stake if these issues aren’t addressed?
By Jim Haudan, Chief Executive Officer Root Learning
From the CEO’s Desk
Successful Strategy Execution is
All About Behaviors The purpose of strategic planning After the shock wore off, we probed the leaders who attended for the reasons behind this skepticism. We quickly found out that their lack of confidence was based solely on the all-too-transparent hypocrisy between what the new company direction claimed to be and the way senior leaders continued to exhibit “old strategy behaviors.” Once the senior leaders got the message and corrected their personal behaviors, the strategy took off and the stock price doubled.
is not to make plans. It’s to change the way we think and act. If our newly formed visions and strategic plans are intended to propel us to places where we’ve never been, at a very personal level, we’ll be required to do things individually that we’ve never done. Successful strategy execution is all about behaviors. The act will trump the thinking every time. Several years ago, we spent six months assisting a U.S. conglomerate to prepare their strategic plan for launch at a meeting of several hundred top leaders. Then, for three days, we worked with those leaders, discussing the merits of the plan and the critical actions required to achieve the desired results. The group seemed to be engaged.
Another large Fortune 100 company we partnered with embarked on a bold business transformation. They spent hours analyzing market data, market positions, growth opportunities, and margin possibilities. They carefully crafted a robust strategy to drive a “thinking differently” part of the overall plan. As they deployed the strategic plan to the top 225 leaders of the company and sought to enlist their leadership, we heard a single resounding theme: “The strategy is not the problem. It’s the fundamental disbelief that leaders will change their behaviors so we can bring the strategy to life.” They too stressed the “behavioral proof points” that illustrated new behaviors needed to match the transformation and cited behaviors that needed to change.
Just before the close of the three-day meeting, we wanted to orchestrate a rousing send-off. We gave each person an audience response device so they could anonymously vote on how confident they felt about the strategic plan. We had assumed that we had won their sponsorship and strong support. But what flashed on the screen after three days of intense conversation was a stunning 19% vote of confidence by the top leaders of this 53,000-person company!
The problem in cases like these is that deeply embedded traditional behaviors tend to persist, and they change far more slowly than marketplace factors and new strategic thinking. Speed of leader behavior change becomes the pace car for strategy execution.
suggestions to change behaviors, practices, rituals, habits, and routines for executing the new strategy.
There are three key areas of focus that constantly turbo-charge this organizational change race.
Embracing Public Vulnerability. Successful strategy execution requires a rigorous confrontation of reality. But this can be less than effective if leaders don’t go first in being brutally honest about the behaviors that they must personally change. When leaders go first by identifying their personal behaviors that are inconsistent with the new strategy, they send two critical messages. First, they set the precedent for others to be vulnerable and acknowledge the importance of embracing the discomfort associated with being accountable for dropping old behaviors and adopting new ones. Also, they send the signal that is safe to talk about other company weaknesses. It encourages managers and employees to make key
Letting Go. Letting go is hard to do, but it’s core to successful change. In a recent strategy execution deployment, a Root client involved former IBM CEO Lou Gerstner in the launch of its new strategy. Gerstner said that, in the IBM transformation of the late 1990s, he constantly referred to the metaphor of Tarzan. He encouraged leaders to think of their role of leading change as swinging in the jungle, letting go of the vine, and knowing to grab the new vine – with the threat of hungry lions below and the horizon of success only slightly visible through the trees. Letting go means stopping the actions, behaviors, and roles that provided us with a current sense of value, achievement, and recognition. It also means letting go of what you’re very good at so you can develop new skills vital to the future strategy. Willingness to move away from what you do best in the business of yesterday to risk doing what you don’t know is critical to the business of the future. Please turn to page 10
continued (from page 9)
Build Trust to Gain Speed. New strategies and the need to move quickly will expose behavior changes that have been ignored in the past but are now critical to success. It’s important to establish new behavioral standards. As trust rises, transaction costs and time to results go down. Over the past 10 years, most senior teams that we’ve worked with have understood the need to establish new behavioral contracts that individually and collectively establish behavioral ground rules necessary for executing strategy. Interestingly, many teams prioritize some of the same behavioral ground rules. These are the top eight: 1. Assume positive intent, and trust our experts. 2. In the face of ambiguity, provide clarity for ourselves and our people. 3. Balance the need to make fact-based decisions with the urgency to act before we have complete information. 4. Own the whole of the business before your piece. 5. Have open, honest, candid, and direct conversations that are tough on issues and respectful of people. 6. Decisions made in the room must be publicly supported outside it. If decisions need to be reconsidered, the team does it together. 7. Rapidly share learnings that are uncovered in success or failure. 8. Support and encourage telling the truth about execution as a regular practice.
Anyone can dictate or proclaim a new strategy. But it takes a deliberate, genuine change in behaviors from every leader to convince an organization to believe it. Otherwise, it’s just words. Want to hear more? Jim Haudan’s book The Art of Engagement: Bridging the Gap Between People and Possibilities, is available at www.rootsofengagement.com.
continued (from page 1)
1. Navigating the Business Environment. Adaptive
To balance what’s possible with current capabilities, most companies do a gap analysis, beginning with the senior team. They consider whether the leadership group has the right composition for growing this strategy, how (and how well) the leaders interact, and leaders’ level of openness and passion for the business.
leaders must embrace uncertainty and adopt new approaches to chart a course amid turbulent conditions.
2. Leading with Empathy. Adaptive leaders create a shared sense of purpose, and manage through reputation and influence rather than role authority.
The Adaptive Leader Mindset A solid leadership team is more important in the 21st century where leadership is less about one heroic leader and more about a distributed leadership team. Companies that successfully align and deploy new strategies are committed to experimentation and intelligent risk-taking. When they know they need to change but don’t know how, they try some pilots and observe. These companies are also very externally oriented. They talk to company leaders at all levels. They’re curious about what’s going on, and they ask questions.
3. Learning through Self-Correction.
Adaptive leaders encourage – indeed, insist on – experimentation to abandon past success models. Of course, some experiments will fail, but that is how adaptive organizations learn.
4. Creating Win-Win Solutions.
Adaptive leaders focus on sustainable success for both the company and its external network of stakeholders.
When a team of adaptive leaders is aligned on the vision and value creation, the next step is a fact-based discussion about specific changes. This can be a challenge. The way companies adapt their strategies defines the winners and losers. Moving the organization in a different direction requires the development of new muscles. Leadership teams of the 21st century have a mandate to think and act differently, and adaptation is the key word when creating and aligning on a new strategy.
To effectively create and maintain adaptive advantage, leaders must embrace the mindset represented by four elements of adaptive leadership.
BCG is a global management consulting firm and the world’s leading advisor on business strategy. BCG partners with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. For more information on the Boston Consulting Group, visit www.BCG.com.
IABC World Conference, June 12 – 15, San Diego, www.iabc.com SHRM Annual Conference and Expo, June 26 – 29, Las Vegas, www.shrm.org Engaging Employees Experientially: Successfully Executing the Convergys Strategy, Debbie Lower, Vice President, Communications, Convergys Customer Management. Presented at the Extending Your Brand to Employees Conference, June 16 – 17, Westin at Times Square, NY, www.conference-board.org Follow us on: http://www.facebook.com/rootlearning http://twitter.com/rootlearning Check out Root’s blog at www.rootlearning.com/blog.
The next issue of this newsletter will be published in July/August 2011.
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Published on May 18, 2011
Anyone can dictate or proclaim a new strategy. But it takes deliberate, genuine change from alignment to behaviors from the leaders in an or...