Dialogue Q2 2017 by LID Business Media

JULIE MEYER

JEFF DYER

Q2 2017

AMONG LEADERS AND MANAGERS ACROSS THE WORLD

The global pioneer Meet the business transformers CHARLES HAMPDEN-TURNER DIALOGUEREVIEW.COM

AMONG LEADERS AND MANAGERS ACROSS THE WORLD

Into the Circle of Hell

THE CREATIVE COHORT

The new rules of creativity Vivek Wadhwa on why innovators must see the future

Q2 2017

LEADERSHIP

INNOVATION

FINANCE

MARKETING

STRATEGY

Value paradox

Eastern eye

Power list

Call signs

Freedom dividend

Why leaders do too much

Asiaâ&#x20AC;&#x2122;s invention revolution

The new global productivity index

What a million sales minutes say

Life beyond a salary

001_Dialogue_Q2_2017.indd 1

09/02/2017 18:49

bbb-ad-dialogue-traced.ai 1 06/11/2015 13:46:23

CMY

002_Dialogue_Q2_2017.indd 2

26/01/2017 12:04

CONTENTS

Digest 14 FOCUS

T H E C R E AT I V E C O H O RT

The creative entrepreneur

The new rules of creativity

Performance of a lifetime

REGULARS 7

My edit

News nation

Ben Walker on creativity

The Gambia in crisis

Spark Inaugural IoT summit sparkles in Spain

Reviews Books, discovery paths and apps recommended for you

Michael Canning on the need to reorganize to succeed

Julie Meyer

Karina Robinson on how China will benefit from the Trump presidency

Upfront

The big interview

Last word

Q2 2017 Dialogue

003_Dialogue_Q2_2017.indd 3

08/02/2017 19:13

THE MAN WHO IS ROCKING

HOLLYWOOD, FOOTBALL AND BUSINESS…

The new paperback edition of the success secrets behind asia’s richest man.

http://lidpublishing.com/book/the-wanda-way/

004_Dialogue_Q2_2017.indd 4 AD_Wanda_dialogue_v1.indd 1

26/01/2017 12:31 26/01/2017 12:13

CONTENTS

In depth LEADERSHIP & PEOPLE

I N N O VAT I O N & TECHNOLOGY

Kate Cooper: The leadership column

Vivek Wadhwa: The innovation column

Stop adding too much value

Lessons from the life of Drucker

Transformers

Ideas: The Eastern promise

FINANCE & AC C O U N TA N C Y

MARKETING & SALES

Phil Young: The finance column

Andy Law: The marketing column

The need for speed

China in our hand

The birth of a risk leader

The million-minute sales truth

Circle of Hell

The joy of financial wellbeing

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

Patrick Woodman: The strategy column

No more Mr Salaryman

Electric dreams: The power of values

Q2 2017 Dialogue

005_Dialogue_Q2_2017.indd 5

26/01/2017 13:12

AGENDA

Contributors

CAMELIA RAM

Dr Camelia Ram has helped clients in the energy and financial service sectors develop initiatives to adapt to environmental challenges. Her project management expertise spans a diverse set of projects, including defining organizational capabilities to position a global bank for growth, and the development of a global inhouse academy to support skills development. She holds a PhD in operational research from the London School of Economics.

VIVEK WADHWA

Vivek Wadhwa is distinguished fellow at Carnegie Mellon University’s College of Engineering and director of research at Duke University’s Pratt School of Engineering. He is a columnist for the Washington Post and author of The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent, which was named by The Economist as a book of the year in 2012, and of Innovating Women: The Changing Face of Technology.

CATHY SALIT

Cathy Salit is a performer, coach and chief executive of Performance of a Lifetime, a consulting firm that uses theatrical performance to help leaders, teams and organizations grow by focusing on the human side of business strategy. Since 2001, Performance of a Lifetime has partnered with Duke Corporate Education to bring this approach to a broad range of its clients. Her new book Performance Breakthrough: A Radical Approach to Success at Work is reviewed on page 81.

JEFF DYER

Jeﬀ Dyer is Horace Beesley professor of strategy. He was recently ranked number one on a list of the most impactful management scholars in the world (based upon citations and Google searches) among those who received their PhDs after 1991. Dyer’s book, The Innovator’s DNA, has been published in 12 languages and is a business bestseller. His research has been featured in publications such as Forbes, The Economist, Fortune, BusinessWeek and the Wall Street Journal.

JOEY BIAN

With a masters degree in integrated marketing communications from Northwestern University, Joey Bian is head of ad tech strategy & innovation at Chinese e-commerce giant JD.com. He oversees innovative marketing science and digital initiatives at JD.com that enable advertisers to capture opportunities in China, including scientific media planning, predictive models and innovative data-driven marketing products.

JOE PERFETTI

Joseph L Perfetti is an expert in corporate finance and strategy. He has delivered more than 1,200 teaching days over the past 21 years for leading corporations and consulting firms, including McKinsey & Co, Morgan Stanley, Santander, BBVA, Royal Bank of Scotland and Citibank. He is a lecturer for the Department of Finance at the Robert H Smith School of Business at the University of Maryland, and teaches equity analysis at MBA and undergraduate level.

Dialogue Q2 2017

006_Dialogue_Q2_2017.indd 6

26/01/2017 13:13

AGENDA

My edit

“Creativity,” the biographer Gail Sheehy once said, “can be described as letting go of certainties.” In that quote, Sheehy saw the future. In our cover story (p18), leading innovation thinker Vivek Wadhwa warns that for creativity to be successful, creators must unshackle themselves from the prison of the present – for the creations that will shape the future will fit into a landscape that looks nothing like what we have now. Just as half the jobs we will do ten years from now don’t currently exist, at least half of the inventions that will rule the world in 2025 haven’t even been thought of. The trick, Wadhwa says, is to imagine what our future will need before trying to create for it: his new rules To succeed, of creativity are a priceless guide for would-be creators innovators. must unshackle Wadhwa’s work forms themselves from the core of this issue’s the prison of the Focus section, where we explore personalities, present ideas and motivators of the creative cohort – the people who will own the future. One man who broke the mould to own the present is Xavier López Ancona (p16) by creating a globally successful theme park, a concept which no-one had apparently entertained before it appeared in its native Mexico. Meantime, Jeremy Balkin – one of the world’s leading analysts of the Millennial generation – sounds a stark warning that the Gen Xers and Baby Boomers who are clinging on to management power undermine this most innovative of cohorts at their peril (p26). Beyond innovation, what of applying creative principles to everyday working lives? In an illuminating piece, Cathy Salit explores how learning to perform – to act – and engage your inner creative at work is a

powerful tool for progress (p22). Sometimes, however, creating too much can be a bad thing – at least when you are ‘helping’ others create. In a typically challenging piece, the great leadership guru Marshall Goldsmith tells leaders to shut up (p34) – arguing that leaders who try to add value to their employees’ ideas succeed only in diminishing their staﬀers’ enthusiasm for executing them. Thus, productivity falls on the back of well-meaning leadership interventions. Given that truth, there is no better time for Duke Corporate Education, lead knowledge partner of Dialogue, to launch its Global Productivity Ranking (p50). The methodology behind the index is elegant and revealing – measuring not just profit but – crucially – the time it takes for companies to amass that profit. It’s a sublime system with an invaluable application. There’s more on productivity from the decorated management philosopher Charles Hampden-Turner, who constructs a withering critique of short-termism in business – arguing that Western practices are actively hampering companies in their contest with the emerging East (p56). On the topic of productivity, what of those who do the selling? The expert analysts Nicholas AC Read and Ben Laker (p66) report on the findings from a million minutes of monitored sales calls. The myths about the art of sales that Read and Laker explode might get your attention. With their appeal to business leaders to challenge their preconceptions of what makes a great salesperson, Laker and Read reflect those wise words of Gail Sheehy – certainties can be unhelpful. Look at the data, shed your preconceptions and apply creativity to your thinking. Enjoy the issue. Ben Walker is editor of Dialogue

Q2 2017 Dialogue

007_Dialogue_Q2_2017.indd 7

26/01/2017 13:15

Spark

W H AT YO U N E E D TO K N O W

‘Internet of things’ summit sparkles Over 8,000 delegates flocked to the inaugural IoT Solutions World Congress in Barcelona to learn more about the ‘internet of things’ and its applications in industry

THE NUMBERS OF SUCCESS Key stats from the conference

8,134 171

Professional visitors

Exhibitors, sponsors and partners from 71 countries

2,922 160 + 100 + 212 Congress visitors

The IoT Solutions World Congress, held in Barcelona, was the first global event dedicated exclusively to joining ‘internet of things’ (IoT) providers with industry in order to help the latter increase productivity via disruptive IoT technology. More than 8,000 visitors attended the summit – of which Dialogue is media partner. The event took place at a time when the rise of the internet, and advances in telecommunications, hardware and

software, have presented the possibility to connect everything in the physical, digital and virtual worlds. According to predictions, there will soon be billions of devices collecting, processing and sharing information on the internet. Experts say that connecting the unconnected in the next decade will generate trillions of dollars. — If you are interested in attending this year’s event on 3-5 October in Barcelona, please visit iotsworldcongress.com

Industry speakers

Congress sessions

Registered media and press

Dialogue Q2 2017

008-009_Dialogue_Q2_2017.indd 8

26/01/2017 13:16

GREAT MINDS WITH MICHAEL CHAVEZ

Rosanna Ramos-Velita is the epitome of a new breed of financial supremo who knows value goes far beyond the P&L

Toucan in the Nest Creative entrepreneurs, mentors and investors came together as London played host to Toucan’s Nest conference this winter. Topics from happiness in the workplace to the story of a British lingerie company featured at the event – of which Dialogue is media partner. It was an insightful day packed with presentations and panel discussions on relevant topics such as: Happy business: ten tips to keep a spring in your step and smile on your face What do they teach you at business school? Angels and the crowd: what it takes to get funded How investors chase you, rather than vice versa The uplifting story of Attollo lingerie The power of storytelling Navigating the angel financing Future stars — Keep up to date with details of future Toucan events on dialoguereview.com

Finance with a social conscience What was once a rare species is flourishing. In my global travels I encounter ever more financial services chiefs who have not only recognized the life-changing effect their decisions can have, they are actively targeting those positive changes as a guiding principle. Rosanna Ramos-Velita is a leading light in microfinance. Her institution, Caja Rural Los Andes, provides working capital loans to rural Andean communities in Peru. The bank is highly profitable – the typical internal rate of return on its products is 30% – but the dividends go far beyond the commercial. This is a bank that not only delivers social good, it is driven by it. Ramos-Velita is clear that the purpose of her bank is to eradicate poverty. That might seem too grand an ambition for a bank. Yet to Ramos-Velita it is perfectly natural. When still with Citibank, as a senior chief financial officer, she became interested in Citi’s consumer finance business, which was a highly profitable operation. The client base comprised relatively poor people taking out small loans, yet repayment rates were better than other market segments. RamosVelita went to Mexico to investigate, ending up in a shantytown where Citi operated some branches under a different name. The branch manager told her that most of their clients were women. “This was a good thing,” Ramos-Velita told me, “because they didn’t use the loans for consumption; rather, they used it to fund small businesses.” Outside the branch was a small taco kiosk run by a woman busily catering to the lunchtime rush. Ramos-Velita struck up a conversation with the taco vendor and told her that she worked for the bank just behind her. The taco seller stopped what she was doing and gave Ramos-Velita a big hug. It transpired that the vendor had gained a loan from the bank for $800 that allowed her to grow

her business and provide for her family. “Before the loan, she was selling tacos out of a basket,” Ramos-Velita told me. “In business terms, we’d say she had a scale problem. With the loan, she worked out in her head that she could repay the loan in a year because she could sell a lot more.” The woman got a second loan and now operates two kiosks, one run by her husband, a former cab driver. RamosVelita recalled: “The woman said that with this business she was able – literally – to put a roof over her head, eat better and pay to send her kids to school.” Following her ‘hug moment’, Ramos-Velita left Citibank, put together a business plan, did some serious fundraising and got investors to help her buy an existing microfinance bank in Peru

Ramos-Velita is clear that the purpose of her bank is to eradicate poverty that was underperforming, both in terms of profitability and its impact on society. Ramos-Velita’s overriding purpose to eradicate poverty became the ultimate motivator for her new employees – what more inspiring mission could a company have? Her staﬀ now celebrate with clients when their loans help make a stepchange in their lives. “We had a team that was demotivated and de-energized and we turned that around with purpose,” says Ramos-Velita. “Not only that, but we are turning around families and whole communities.” What I took from Ramos-Velita was that a simple, clear, human-centred mission – in this case eradicating poverty – can be used to motivate employees and, thus, foster business success. She is a great mind with a winning idea. — Michael Chavez is chief executive of Duke Corporate Education Q2 2017 Dialogue

008-009_Dialogue_Q2_2017.indd 9

26/01/2017 13:16

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

To win in today’s world, filling knowledge gaps is no longer enough. Yesterday’s wisdom won’t help leaders prepare for what lies ahead: more volatility and less predictability. Leaders must do more than simply learn. To be able to grapple with the unknown, they have to reorient and rewire. As our challenges become more global, social and complex, leadership is becoming more and more critical to business success. Duke Corporate Education is the premier global provider of custom solutions that enable leaders at all levels to adapt and move the organization forward. With delivery in over 75 countries, we work together with clients to understand their context and craft the right educational solution for any level of leadership — executives, high potentials, directors or managers. We’re here to help leaders get ready for what’s next.

DukeCE010-011_Dialogue_Q2_2017.indd new ad_2015.indd 1 10

19/10/2015 26/01/2017 15:39 12:04

DukeCE n

2015 15:39

...WE GET LEADERS READY FOR WHATâ&#x20AC;&#x2122;S NEXT

DukeCE new ad_2015.indd 2 010-011_Dialogue_Q2_2017.indd 11

19/10/2015 26/01/2017 12:04 15:39

4th Annual Summit

GLOBAL FEMALE LEADERS 4.0 SUCCESSFULLY NAVIGATING THE DIGITAL WORLD 7th – 9th MAY, 2017 | THE RITZ-CARLTON BERLIN | GERMANY ialogue Special D count: Dis Readers A GFL17DI e d o C e s U

The Economic Forum For Female Executives Join the world‘s most forward-thinking business leaders: 50+ International Speakers 30+ Hours of Exclusive Networking 25+ Innovative and Content Driven Sessions Speakers include: Ameenah Gurib-Fakim President, Republic of Mauritius

Janet Henry Global Chief Economist, HSBC, UK

Béatrice Guillaume-Grabisch CEO, Nestlé Deutschland AG, Germany

Dr France A. Córdova Director, National Science Foundation (NSF), USA

Anne Berner Minister of Transport and Communications, Finland

Samantha Payne Co-Founder and COO, Open Bionics, UK

Anthony Newstead Head of IT Innovation, The Coca-Cola Company, USA

Jacki Kelley COO, Bloomberg Media, USA

Premium Partners

Media Partner

Knowledge Partner

Promoters

Official Carrier

Supporters

Host

#GFL17 facebook.com/globalfemale twitter.com/global_female www.globalfemaleleaders.com 012_Dialogue_Q2_2017.indd 12

26/01/2017 12:03

UPFRONT

MICHAEL CANNING

Rethink and reorganize to compete and succeed

The matrix reloaded

Michael Canning is global head of new businesses at Duke Corporate Education

We need new ways of thinking about organizing people and resources to compete and succeed

Leaders are spending more time and energy figuring out the best way to organize their companies to compete and win. According to a 2016 Bain study, 85% of executives said that internal obstacles, not external ones, keep their companies from growing profitably. In many ways, the problem makes sense – the roots and logic that underpin our organizations date back generations, to mechanical models designed to drive scale and efficiency. Doing today’s work more efficiently and cost effectively at scale remains critical. But how do we simultaneously build and adapt new organizational forms that enable us to compete and win in the face of disruptive technologies, growing customer power, and hypercompetition? To date, the fix has been the matrix, something we’ve all accepted and learned. But is extending and mastering the matrix really the answer to building in the speed, customer centricity, creativity and experimentation that’s now required? Or, have we stretched the limits of our current organizational models? Consider the following: organizational network expert Rob Cross points out that the time workers spend in collaborative activities to accomplish their work has ballooned by 50% in the last decade (HBR 2016). And his research – done across more than 300 organizations – shows distribution of this cross-boundary collaborative work is often extremely lopsided. In most cases, up to 35% of revenue-producing, valueadded collaborations come from just 5% of employees. Do we have the tools to know who and where these valuable contributors are and make sure they aren’t overloaded? A cross-organizational study by John Seely Brown found that managers and employees were spending as much as 60% of their time on ‘exceptions’ not anticipated by established processes. As Brown points out, processes rule when environments are stable. But when organizations are confronted with rapidly changing circumstances and emergent opportunities, people improvise. While seductive, the idea of reengineering current processes to meet the new complexity probably isn’t

the answer. A recent report put out by the Bersin group highlighted that Cisco studied its organizational structure and found that the company already had more than 20,000 teams, with many people sitting on multiple teams at the same time. This is the new norm. The collaborative intensity of how work is done continues to grow. As does our need to get closer to our customers, move knowledge to enable breakthrough results, and make faster decisions to capture value in shorter cycles. In response, we continue to stretch the matrix and make greater use of cross-boundary teams. While our organizations are morphing before our eyes, our performance and reward systems, decision frameworks and the concepts of organizational design, such as hierarchy, layers, and span-of-control, are still geared to the formal organization structure – functions and geographies. I worked with Rob Cross recently at a large, global manufacturing company with a rich history. The experience reminded me of the power leaders can derive by taking a fresh look at their organization through a diﬀerent lens. Looking at the organization through an organization network analysis can help illuminate how work gets done; identify decision bottlenecks; highlight less visible boundary spanners; and unmask the knowledge brokers that are key to innovation. It can also unearth points of collaborative imbalance and overload. As leaders, we are well aware of the market challenges and, as the Bain study points out, that internal obstacles are becoming serious constraints. But getting data and seeing the organization through new lenses – networks rather than hierarchy, connections instead of layers, and span-of-influence rather than control – is one way to help us better understand the obstacles and their impact. We need new ways of thinking about organizing people and mobilizing resources to compete and succeed. The notion of networks isn’t the whole picture, but it is a useful part of how we might begin to reconceive of and design our organizations for what’s next. Q2 2017 Dialogue

013_Dialogue_Q2_2017.indd 13

26/01/2017 13:17

FOCUS

Focus

The creative cohort How do we cultivate creative skills to guard against economic uncertainty and changing markets? Knowing what brand of creativity will sell requires us to look into the future, and embrace the learnings and know-how of the ultra-innovative Millennials – the maligned generation who quickly changed the world. In the disrupted landscape, what benefits can being creative bring us? How can art become a powerful tool to help us in business? What will the new creative capitalists – and their creations – look like?

ARTICLES 16

The creative entrepreneur

The becoming principle

New rules of creativity

Millennials: the M-word

Discovery path Learn more… about creative people, the creative economy and the rise of creativity in the workplace bit.ly/ddpcreativecohort

014-015_Dialogue_Q2_2017.indd 14

10/02/2017 13:08

FOCUS

014-015_Dialogue_Q2_2017.indd 15

08/02/2017 19:09

FOCUS

This much I know...

The creative entrepreneur

KidZania is the theme park where children run their own businesses. Founder Xavier López Ancona reveals the secrets to rolling out a radical idea worldwide

Make sure your creativity sells

It’s not enough to be innovative. You need to properly define your business, test it thoroughly – and perfect it. You must do all this before you even think about expanding.

You need big ears to make your creative business a success globally

Hire expert consultants and advisers – and listen to them. They will help you adapt your product to the toughest standards so it will flourish away from your home territory.

Choose your partners wisely

Team up with a local company and group that has the business know-how – and know-who – in the new market.

Credibility is your biggest challenge

Our concept and product was proven in Mexico, but not elsewhere. It was a ‘Mexican’ concept that was unknown

outside of Mexico, and there was no other Mexican company exporting entertainment. We tackled the challenge by developing in parallel our own growth in Mexico with our global expansion through a franchise scheme – firstly in Japan. We over-invested, grew and professionalized our team to create a global brand.

Creativity is still bound by culture

Although roleplaying is a universal concept, we had to adapt it to local cultures, local ways of doing business, local policies, regulations and laws. Our partners and franchisees help us adapt our business to local regulations and our content to local tastes, local brands and market-specific professions, such as the ‘dabbawala’ food deliveryperson in KidZania Mumbai, or Formula-E electric racing cars in KidZania London.

Creative education is an idea whose time has come

Innovation works – and sells – best when it helps people learn. KidZania is a very generous product that people can see the value in: the concept is well accepted among diﬀerent cultures and markets, making it easy to market and sell. Emphasizing our highly educational content makes it appealing to families and schools everywhere. Creators who can appeal to people’s wish to develop themselves and their children will succeed in business.

You are only as good as your latest venture

We are only as good as our most recently opened franchise! Although our franchisees buy the rights to exploit our concept and brand, the brand is still ours. If our franchisees do something wrong, their business might suﬀer, but ultimately it’s our brand that sustains

Dialogue Q2 2017

016-017_Dialogue_Q2_2017.indd 16

26/01/2017 14:21

W H AT I S KIDZANIA?

It’s not enough to be innovative. You need to define your business, test it thoroughly and perfect it. You must do all this before you even think about expanding

the most damage. Setting the rules in a comprehensive and extensive licence agreement allows creative entrepreneurs to have greater control on what their partners can and cannot do. Our first licence agreement was 27 pages long. The latest one is 236 pages long. That is how much we’ve learned in ten years of exporting our business.

Protect your creativity from imitation

Just like a burger or pizza restaurant cannot trademark a cheeseburger or a calzone, we cannot register roleplay. But we can register our uniforms, our brands, logos and characters. That is where we spend most of our resources, in making sure that our intellectual property is properly registered in the markets in which we already operate or are developing.

A visionary management style works best

I spend a lot of time clearly and compellingly setting the vision and future strategies for my team, then I step back and allow them to work. I step back in from time to time to check results and suggest new strategies, if required.

In creative businesses human capital is even more important

Although people are any company’s most important asset, they are even more key when you are selling a groundbreaking product or service. Our Zupervisors – the adults that guide children through the activities at KidZania – need to make our visitors believe they are successful surgeons, hero firefighters, or outstanding journalists. It is through their acting and professionalism that our visitors really believe in what they do at KidZania. Having engaged, empathetic, passionate professionals is what diﬀerentiates us from our competition.

Shape your marketing to the world – the world won’t come to you

If you have never heard of KidZania, you soon will. The Mexican company is staging a global rollout – it is already in 19 countries (including Japan, India and the UK), and will head to the promised land of the US in the future. It is more than a theme park – it’s a living, working city built for, and run by, children. Children can take all manner of roles – restaurateur, beautician, doctor and many more. A raft of big-name brands have bought into the model. Toothpaste giant Crest sponsors the dentist. Portuguese paint major Corporação Industrial do Norte supplies the painters. If the children fancy a drive, they can hire a child-size Mercedes. Clothing retailer H&M supports the fashion academy. The attractions are generally built within, or close to, shopping centres (the London franchise is in upmarket fashion mall Westfield) so parents can go shopping while their children play. Each child has an electronic armband which monitors their movements in real-time. If parents insist on attending they do so as mere spectators – at a football match or theatre show – or as passengers in a jets crewed by diminutive pilots. “Parents are an impediment,” Ollie Vigors, business partner to chocolate heir Joel Cadbury, chairman of the London franchise, told British newspaper the Guardian. “I say, ‘don’t do that’ to my children a ridiculous number of times a day. If parents are taken out of the equation, it actually gives children the freedom to play and learn.”

We’ve learned that some regions of the world are more used to specific social networks, for instance. So our communication needs to take that into consideration. Also, since content could be sensitive for some markets due to religious, cultural or political reasons, we need to make sure that we review and take that into consideration as well. The trick is to take your global message then adapt it locally – without losing consistency. Q2 2017 Dialogue

016-017_Dialogue_Q2_2017.indd 17

26/01/2017 14:21

FOCUS

The new rules of Much of what is needed has already been created. To innovate for the future, you must be able to see it WRITING

Vivek Wadhwa ILLUSTRATION

Ben Oâ&#x20AC;&#x2122;Brien

Dialogue Q2 2017

018-021_Dialogue_Q2_2017.indd 18

08/02/2017 19:11

FOCUS

creativity

History is no longer a guide to the future. This is how it used to work: once in a blue moon, a major discovery was made, or else something transformative was invented, and the human existence advanced on the back of it, in one giant leap. Think of the eﬀect the discovery of fire had. Winters became tolerable. Food could be cooked and, thus, rid of many poisons. Night times became active. Lives rapidly lengthened. Agriculture helped us feed our rapidly growing, maturing population. General nutrition levels rocketed. Lives became healthier and happier. The invention of sails triggered international travel. Powered flight made it exponentially quicker. Lives become wider; richer. Yet if we saw just one such milestone in our lifetime we were among the lucky spectators of history. The big diﬀerence in the digital age is that we see one milestone almost every year. The convergence of new technologies – for this is the golden age of creation – means forecasting human needs beyond the next five years is a troublesome, yet crucial, exercise. I have previously written in these pages that many of today’s children will never drive a car because, by the time they reach driving age, most cars will be able to drive themselves far more proficiently than most humans can. Thus, the need to learn to drive will become the preserve of the enthusiast, not the commuter. Hold that thought. If one of the fundamentals of adulthood – the traditional coming-of-age milestone of gaining a driving licence – is superfluous, what else will be? The answer is: quite a lot. To create things that people will need in a decade or two decades, inventors must recognize that they will need a lot less. Those who want to create for the new landscape should know what it is likely to look like. Q2 2017 Dialogue

018-021_Dialogue_Q2_2017.indd 19

08/02/2017 19:11

FOCUS

RULE 1

THE EFFICIENCY RULE

Creations should boost sharing and keep costs low Owning a car is no longer a status symbol for everyone – to the young it is a sign that you live in the backwoods. Many wealthy Londoners and New Yorkers don’t invest in a costly, rapidly depreciating asset anymore. They just hire a brand new, state-of-the-art automatic vehicle when they want one. If they can’t be bothered to drive, or fancy a drink, they call up an Uber at a fraction of the price – and twice the convenience – of a black or yellow cab. The result: for urban dwellers, the whole motoring experience just got rapidly better and cheaper. Think about that. A lot of people have no need to own – or even drive – a car anymore. Old, cramped, ineﬃcient cars are becoming worthless. Motoring is just one example of how cost-eﬀective service excellence is rendering expensive ownership redundant. As we get better at extracting what we need to live, and finding new ways to create it, life will become radically cheaper. There are huge benefits to this. It may sound hyperbolic now, but it will soon become apparent that a comfortable life will be within reach of nearly everyone on Earth.

Lesson The successful products and services of the future will ride the new wave of efficiency. Think of technologies that allow doctors to analyse ten to 20 times as many images in a day than they do now; of self-driving cars that can be pooled among 20 leaseholders; of shopping services so rapid that goods can be drone-delivered to your door within an hour of order – without any need for you to sink time at the mall. RULE 2

THE TOOL RULE

Creations that help people help themselves will succeed The barriers to entry in a whole raft of sectors are gone, or going. Invention has put paid to many of them. Want to start and market a business? An oﬀ-the-shelf do-it-yourself website looks the part and costs a few dollars. Many of us are already checking our own heart-rate and fitness using smart watches and user-friendly apps: self-diagnosis in healthcare will become ever more sophisticated. What about making stuﬀ? 3D printers were once the realms of science fiction, then the expensive toys of super-rich

geeks; within a few years they will be in every garage. Smartphone mount broken on your road bike? Why buy one when you can download a plan from the internet and just 3D-print one? Modular software, selfhealthcare, 3D-printing… the greatest creations of the modern age are those that help people help themselves.

Lesson The successful creations of the near- and midfuture will help people serve themselves. Learning devices that foster the rapid, easy, gain of knowhow will be popular. Robots that perform menial duties that once cost the earth to hire-in will sell to all-comers. Software tools that make starting your own enterprise ever easier – navigating tax law, linking supply chains, automating the search for customers – will bring their creators riches. Innovators should concentrate their efforts in creating products and services that help others advance their own lives. RULE 3

THE OVERKILL RULE

Creations that help people tackle input excess will prosper We will soon have too much of everything. As rapid innovation and rapid cost-decreases reduce the price of everything, our problems will arise from consuming too much, rather than too little. For all the focus on poverty and malnutrition, the diseases of aﬄuence – obesity, diabetes, cardiac arrest – are the biggest killers in much of the West. And the developing world is catching these plagues as it adopts the Western diet. The prognosis gets worse: falling prices of junk food mean its consumption is likely to rise, pretty much everywhere. The overload in our stomachs is mirrored by the overload in our ears, and in our brains. The march of social media and 24-hour communication is degrading our attention span and rendering us unable to concentrate, so incessant, many and various are the calls on

Dialogue Q2 2017

018-021_Dialogue_Q2_2017.indd 20

08/02/2017 19:12

FOCUS

our time. In all segments of life, abundance will become a much greater challenge than scarcity.

Lesson Innovators should focus on creating products and services that allow users to escape information overload and reduce their consumption of suboptimal or irrelevant content. Products that foster better selection – less quantity and higher quality – will succeed. Curation tools that hone and handpick from information streams will do well. Digital concierges that navigate consumers quickly and effortlessly to the best food and drink, and away from the mediocre and the unhealthy, will thrive. RULE 4

T H E D I G I T I Z AT I O N R U L E

Automate and computerize everything before someone else does Sentimentality will get you nowhere. Anything and everything that can be digitized soon will be. The story of digitization is one of natural, logical progression. It began with words and numbers, then morphed into games, before – and we forget how recently this change arose – becoming the standard format for rich media such as movies, images and music. The march of the machines has swallowed up much more. Complex business functions, medical tools, industrial processes, and transportation systems are all entering the digital space. Inexpensive sensors that can monitor pretty much everything are becoming commonplace. Empathy is a quality robots cannot yet command, but they are already capable of undertaking the functions of basic daily care. Everything that can be reduced to binary code will be.

Lesson There may remain niches for old-fashioned analogue products – vinyl records have just scored their best year in two decades. But the market for retrograde goods will always be limited. Creators should examine things that are not yet fully digital and explore how they can be made so – before their competitors get there first. Think about communication: how could virtual business meetings be made more real? Why do trains still have drivers when several networks around the world – such as London’s Docklands Light

Railway – have been using driverless locomotives successfully and safely for years? Every time you buy a paper ticket for a transport network, show or movie, remember that such processes can and will be superseded. Will human waitresses be needed in ten years? There will be an android for that.

Discovery path Learn more… about creativity and the future bit.ly/ ddpcreativityrules

RULE 5

THE CYBORG RULE

People won’t just wear your inventions, your creations will become part of them The cyborg is living in the present day. Implanted retinas already use silicon to replace neurons. Custom prosthetics that operate with the help of software are already personalized parts of humans’ bodies. The military will use computer-guided exoskeletons in the next few years. On the domestic stage, exoskeletons are expected to become a tool to aid the mobility of the elderly and disabled. Meantime, real-time health feedback will see us tattoo sensors into our bodies to track key health indicators. The information those sensors gather will be transmitted instantly, and wirelessly, to our phones. The oncecontroversial Google Glass will eventually seem like child’s play – expect Terminator II-style head-up displays born of retinal implants before too long. When part of you is machine, how human are you? The philosophical dimension will keep thinkers awake at night. Meantime, innovators will get busy.

Lesson Wearable technology is just the beginning of a revolution. Creators of the future will consider the human body as a land of opportunity. Embedded tech that helps people excel physically and mentally will make innovators rich. Super-tasting nasal implants. Babel fish-style in-ear translators. Telescopic retinal adaptors. They were once the preserve of comic books. Some day soon they will seem mundane. — Vivek Wadhwa is distinguished fellow at Carnegie Mellon University’s College of Engineering

This article is based on ideas in Vivek’s book (coauthored with Alex Salkever) The Driver in the Driverless Car: How Our Technology Choices Will Create the Future bit.ly/driverlesscarbook Q2 2017 Dialogue

018-021_Dialogue_Q2_2017.indd 21

08/02/2017 19:12

IF YOU HEAR A VOICE WITHIN YOU SAY, “YOU CANNOT PAINT”, THEN, BY ALL MEANS, PAINT — AND THAT VOICE WILL BE SILENCED. – Vincent Van Gogh

022-025_Dialogue_Q2_2017.indd 22

26/01/2017 14:25

FOCUS

Performing, experimentation and creativity hold the keys to business success, says peformer, coach and chief executive Cathy Salit

The first time you sat on a two-wheel bicycle with the training wheels oﬀ, you didn’t know how to ride it. You’d seen plenty of people riding bikes, and you probably had someone there to help you. But to learn how to ride that bike, you had to pretend that you already knew. By pretending — by performing as a cyclist — you became a cyclist. For most of us, that first cycling performance happened in childhood, and indeed, a lot of childhood learning takes place the same way — through the pretending and performing that made up so much of our play as kids. The Russian psychologist Lev Vygotsky stressed the social, playful and performative nature of children’s development and learning. Vygotsky’s discoveries are fundamental to the growing field of performative psychology, which has extended the relevance of his work into adulthood. And adulthood is where it gets really interesting. Because we’re not done with play, pretending and performing once we leave childhood. As adults — in the workplace and elsewhere — when we’re asked to do something we’ve never done before, when we need to grow beyond our current capabilities, we can tap into what we naturally did as children, and perform our way to who we’re becoming. For adults, though, play, performance and pretending can feel anything but natural. We got the message in myriad ways as we left toddlerhood: play is for children, not for big people. Grown-ups are supposed to colour inside the lines; know the correct answer; understand how to behave and fit in. Without realizing it, we’ve gotten ourselves in a non-developmental box where there’s not much room for new learning, growth, or experimentation. But it doesn’t have to be that way. Performative psychology teaches us that there’s a way out of that box. As adults we can grow and develop, just like we did when we were small, by using performance and play to be who we are AND who we are becoming, at the same time.

The Becoming Principle comprises Five Fundamentals of Performance. These fundamentals and a few introductory exercises will begin to shift your perspective and give you actionable to-dos that will expand and improve your professional performances. FUNDAMENTAL 1

CHOOSE TO GROW One of the biggest impediments to growth is our belief that we need to know how to do something before we do it. Obviously it’s important to know things. But to the extent that our need to know prevents us from continuing to learn and grow— we’re missing out. Here are a couple of exercises to build your skill at growing instead of knowing: Don’t know. Instead of only being a person who “knows the answer” (or wants to know the answer), start performing “not knowing”. Make the choice to be tolerant of ambiguity, open to ambiguity, uncertain even. Say lines like: “I have no idea!” Or, “let’s sit with this for a while,” or, “there might not be a clear answer here”. Notice the kind of space this allows for different kinds of thinking, feeling and action. Do the impossible. Put yourself in a situation in which you have to do something that might make you say, “I couldn’t possibly do that” — something you don’t know how to do, or you’re not good at. Take a stab at a stretch assignment (for example, volunteer for a project you wouldn’t normally take on). Have a different sort of conversation to the kind you typically have with people (for example, give someone difficult feedback, ask for feedback, state a disagreement, or agree with someone for a change!). Q2 2017 Dialogue

022-025_Dialogue_Q2_2017.indd 23

26/01/2017 14:25

FOCUS

FUNDAMENTAL 2

BUILD ENSEMBLES EVERYWHERE Great performances — even solo turns — don’t happen in a vacuum. The most creative, innovative and eﬀective work environments are when you have ensembles — in particular, ensembles that are made up of people with diﬀerent skills, experiences, temperaments and varied points of view. Try these exercises: First person plural. Spend a couple of days saying “we” every time you would normally say “I”. Notice how this changes what you say and how you say it. See how it impacts your colleagues. Mix it up. Bring people together to work on a project who have varied skills, are at different levels, and are different from one another in other ways.

Fundamentals 1 and 2 were crucial when we partnered with Duke Corporate Education on a leadership development programme for highpotential executives at a global sportswear company. In the kick-oﬀ to our work together, we presented them with the choice to grow with our signature exercise: each person was given one minute to improvise their “performance of a lifetime” in front of their peers — literally to perform their lives in 60 seconds. They took the challenge of creating this performance even though nobody ‘knew’ how to do such a thing, which vastly expanded their comfort with taking risks and trying out new behaviours. And the cumulative impact of this group bringing their whole lives into the room created an ensemble (in the space of two hours) that enabled the group to collaborate and support one another over the rest of their year in the programme.

conversation is at the heart of your workplace performances, and real conversation depends on real listening. Studies show that most of us listen only about 20% of the time. And much of what passes for listening is really just formulating what we want to say while someone else is speaking. Here’s your assignment: Put listening first. Pick two meetings and a one-on-one conversation that are coming up and choose to make listening your priority performance. Try not to listen for anything, and don’t assume you know what’s coming. Pause longer than you normally would before you respond. Ask questions. Make more eye contact than you usually do. And then let what you hear have an impact on what you say, think and do. FUNDAMENTAL 4

C R E AT E W I T H C R A P A colleague responds to you with a nasty email, and replies all. Halfway through a new business pitch you realize the final slide features the logo of the client you pitched the day before. The amazing manager you were about to promote leaves for a job at Google. Depressed yet? Hold that thought. We all have to deal with a lot of crap — situations and people we find frustrating, disagreeable, or worse. This can make us feel demoralized, oﬀbalance and angry. But counterintuitive as it may seem, we can create with this crap. Even as it challenges us to refrain from throwing a chair, it can also inspire us to do something new and diﬀerent. So start creating: I said “create”, and I mean it. The next time something really frustrating or upsetting happens at work, write a poem, draw a cartoon, or make up a song about it.

FUNDAMENTAL 3

One of our biggest impediments to growth is our belief that we need to know how to do something before we do it

LISTEN. IT’S A R E V O LU T I O N A R Y WAY TO H AV E A C O N V E R S AT I O N Mark Twain once said: “Let us make a special eﬀort to stop communicating with each other, so we can have some conversation.” That was over a century ago. Today, driven by technology and data, much of our communication is transactional, and our relationships suﬀer for it. On the other hand,

The wow factor. When the crap hits the proverbial fan, say out loud (to yourself or others), “Wow. This might actually be a gift. What’s possible now that wasn’t before?” Maybe instead of firing off your own nasty email, take a breath. Pick up the phone or walk to their office and say, “I’d love to do a ‘take-two’ on our conversation.” Use the crap as an opportunity to help you change your (and others’) performances. Yours stinks too. Be on the lookout for the crap you’re giving to others. Since we mostly think we’re right, or that less-than-optimal things we do are justifiable in response to something else (which they could very well be), it can be hard to see. But at least

Dialogue Q2 2017

022-025_Dialogue_Q2_2017.indd 24

26/01/2017 14:25

FOCUS

The next time something really upsetting happens at work, write a poem, draw a cartoon, or make up a song about it

on a few occasions, notice your crap and then tell people, “I really did a bunch of crap today. Got any ideas about how to be creative with it?”

Fundamentals 3 and 4 had a big impact on a Duke Corporate Education steel and mining client. We dove deep into improvisational listening with them as they created conversations and stories rooted in having a “yes, and” response. Then we put their listening skills to the test in roleplays drawn from true company stories, in which we challenged and coached them in creating productive conversations and solutions in the face of — you guessed it — crap. FUNDAMENTAL 5

IMPROVISE YOUR LIFE While we may not think of life and work this way, we’re improvising all the time. The scenes we perform in — arriving at work, running a staﬀ meeting, having dinner with the in-laws — don’t have scripts. But we can and do become ‘scripted’ in how we perform them. From little things like the route we take to work, to pretty important issues like our style of leadership, it’s as if these performances — which at one time were actually new and fresh because you improvised them at first — were always there and now they define who we really are. But if you keep improvising, you can continue to invent who you are, what you do, how you do it, and how you feel, see — and think. To get you started, here are my six tenets of improvisation: Say “yes, and” — and mean it! This is the fundamental rule of improv that connects you with your scene partner and gives you a collaborative path forward. You accept what you hear, and then add something that builds on it. You never say “yes, but” or “no, but.” Try this in a few conversations over the next week — it’s not necessary to say the words, “yes, and”; it’s the action of accepting and building that matters. Make the other person look good. Improv guru Del Close said, “If we treat each other as if we are geniuses, poets and artists, we have a better chance of becoming them.” As an improviser in life, when you choose to relate to the words and actions of others as important and valuable, the ‘scene’ (conversation, meeting) you create has a better chance of being important and valuable. Try this: start your response to something someone says to you by saying: “What I like about what you said,” or ,“what’s important about what ___ said is…”

Celebrate mistakes and failures. Now that you’re trying out new performances and doing things before you know how, you’re going to make some mistakes. Is that a problem? No! In a performance, mistakes are a gift that you can improvise upon, learn from, and be creative with. Here’s an example: tell some colleagues about a doozy of a mistake you’ve made — today, yesterday, this year, in your life. Ask them what they think you and the organization might do to learn from your mistake. Come up with real, specific ideas — not generalizations. Follow the follower. This is an extension of the “yes, and” principle. It means that as you improvise with one or more people, you attend very closely to the response that comes to whatever you just did. And then, in turn, you respond in a way that is connected to that response. On an improv stage, it creates a kind of synchronization that seems magical; in a business setting, it’s the best way I know to get and keep people on the same page. Delight in curveballs. Improvisers love the unexpected, the unusual, the ‘weird’. It sparks creativity onstage, and can do the same at work. Let’s face it, you never really know what’s about to happen, so being prepared to accept curveballs as a gift to be creative with is a great alternative to being derailed by them. So throw yourself a few curveballs. Talk to someone at work you never talk with. When someone says or does something at work that throws you off balance, notice it. Smile and breathe. “Yes-and” it. Go into the cave. Keith Johnstone, a founding pioneer of modern improvisation, wrote: “Those who say YES are rewarded by the adventures they have. Those who say NO are rewarded by the safety they attain.” Eleanor Roosevelt said: “Do one thing every day that scares you.” I say: as you improvise your way through the scenes of your work and life, you’re always faced with options for what to do next. Often, one option is safe and comfortable; the other is unfamiliar, unusual or frightening. Say YES to the latter. And then be ready to use the other five tenets!

Fundamental 5 is key in our ongoing work with a Duke Corporate Education client in the manufacturing space. Among other improvisation exercises, we lead new managers through a classic ‘follow the follower’ exercise, in which they face one another in pairs, and trade leadership as they mirror each other’s movements. Their discoveries about the giveand-take of leadership, and the focus and attention required to succeed, are then pulled through as we work with them on influencing, delegating and coaching in their new roles. — Cathy Salit is a performer, coach and chief executive of Performance of a Lifetime Q2 2017 Dialogue

022-025_Dialogue_Q2_2017.indd 25

26/01/2017 14:25

FOCUS

The M-word Gen X’s super-innovative successors are maligned and misunderstood. They don’t even like being called Millennials, writes Jeremy Balkin

Millennial Mark Zuckerberg is effectively the president of a borderless country bigger than any other

Google the word ‘Millennials’ and you’ll find close to 40 million page references. It seems as though Millennials are everywhere, quietly launching a hostile takeover of the world. The evidence of this takeover? Millennials gave us President Trump and Brexit, simply by not voting. Consider that approximately two-thirds of eligible Millennial voters in the US showed up to the polls in 2008 compared with about onein-two in 2016, and only one-third of Millennials voted in the UK referendum, against a total national turnout of 72%. Given the closeness of each race, absentee and apathetic Millennials made the diﬀerence. If you don’t much like their apathy, before you go out there and excommunicate your Millennial children, co-workers, shareholders, customers, competitors and interns, perhaps ask yourself this: what is the Millennial hype all about?

The big generation

There are approximately 2.5 billion Millennials around the world, and they will soon make up 75% of the global workforce and 40% of eligible voters in the US. Many Gen Xers and Baby Boomers might say Millennials are best seen and not heard. They probably think these self-absorbed youngsters should pipe down, put away their selfie sticks, and toughen up. Guess

what? These attitudes are exactly the reason those generations are not connecting with this crucially important demographic.

Tech and trust

Millennials are fundamentally diﬀerent from every other generation in history in two key ways: technology and trust. Millennials are the first generation to grow up with abundant technology at their fingertips, making virtually all aspects of their life easier, simpler, better and faster. However, Millennials also have major trust issues. This is the consequence of the breakdown of trust brought on by the financial crisis and innumerable scandals across politics, business, media and entertainment that have shaped their scepticism. Unsurprisingly, Millennials are therefore more cynical, politically apathetic and less religious than other age groups.

Don’t call them Millennials

Millennials are also getting tired of all the attention, and don’t even like the name their generation has been given! According to data from the Pew Research Center, Millennials are not fans of their generational moniker, with only 40% choosing to self-identify with the term Millennial with even an iota of pride. Compare this to 79% of the Baby Boom who love being

Dialogue Q2 2017

026-027_Dialogue_Q2_2017.indd 26

26/01/2017 14:27

FOCUS

known as Boomers. In fact, the Millennial reputational brand has been so badly tarnished it has almost become a dirty word. Yet, in spite of this identity crisis, Millennials are influencing the world – every aspect of it – right before our eyes.

Do you want to exist in five years?

Steal their cool

In 2017, Millennial annual purchasing power is estimated to be $200 billion annually of direct spending, and $500 billion of indirect spending, primarily due to their influence on the spending choices of their mostly Boomer parents. Think of it another way: Millennial daughter buys an entry level 16GB iPhone 6, and her Boomer father sees it and decides to buy a more expensive new 64GB iPhone 7 and Apple iWatch just to see what all the fuss is about, and because he has more money. Perhaps he also exhibits such buying behaviour in a bid to be considered cool by his friends and daughter alike – he is much more likely to succeed among his peers than with the latter party!

Watch the money

Millennials’ peak buying power might be decades away, but their spending is forecast to grow at 15% per year for the foreseeable future, according to data from JP Morgan. In fact, Millennials are expected to spend $10 trillion in their lifetimes and will drive the economy for years to come, so building brand loyalty now is a wise move. Deloitte estimates that Millennials stand to inherit close to $30 trillion in wealth over the coming decades, so the issue of understanding Millennials’ spending and investment patterns is vital to consider because they will be shaping consumer demand and broader economic consumption patterns for many decades to come. No need to be too pushy in telling them what to do with their money because Millennials are increasingly turning to their online networks when making purchasing decisions, in part because 93% of them have access to the internet. Moreover, 75% of Millennials use smartphones and 70% are more inclined to trust what their peers think about a purchasing decision than other forms of hierarchical authority. If leadership is about having influence, then Millennials have it The Millennial in spades.

brand has been badly tarnished. Yet Millennials revolutionized, transformed, opened up and democratized the status quo for all of us

SHOULD MY BUSINESS ENGAGE MILLENNIALS?

The millennialization of Earth

In fact, the whole world has now been Millennialized. Consider that a 19-year-old college dropout founded Facebook, a company

Ignore Millennials and keep status quo

YES

Great! Interact with Millennials

that not only revolutionized social media but mainstream media too. Fast forward a dozen years and Facebook is now an ecosystem that also houses the largest population on Earth, with 1.71 billion active monthly users as of the second quarter of 2016. That makes Millennial Mark Zuckerberg eﬀectively the president of a borderless country bigger than any other, including the three behemoth nations of China, India and the US. Millennials also founded Airbnb that revolutionized accommodation; Instagram that transformed photography; Kickstarter that opened up crowd fundraising; and Yelp that democratized customer service. Millennials revolutionized, transformed, opened up and democratized the status quo, for all of us. Millennials’ healthy scepticism and lack of trust – empowered by incredible technology – explains in part their overwhelming preference for dynamic, innovative thinking and desire to challenge the paradigm that has dominated conventional power structures for decades. Therefore it is incumbent upon everyone to get inside the Millennial mindset and truly understand what makes this group tick. Millennials will be running your country or company one day anyway, so resist their fresh ideas at your peril because they will either switch to your biggest competitor, or simply start their own firm and disrupt your business model. Whether you realize it or not, we’re all Millennials now. Buckle up and enjoy the ride. — Jeremy K Balkin is author of The Millennial Book: How to Win When Millennials Rule the World (LID Publishing) – In 2017, Balkin won the prestigious ‘Top 35 Millennial Influencer’ award for the outstanding social impact he has had on Millennials Q2 2017 Dialogue

026-027_Dialogue_Q2_2017.indd 27

26/01/2017 14:27

INTERVIEW

The 3,000-to-1 shot Julie Meyer has achieved more in her lifetime than most people can even dream of – so she started her own country

WRITING

Ben Walker PHOTOGRAPHY

Ariadne

So this is where it’s at. Malta. While a bitterly easterly wind refrigerates our mutual home city of London, I finally track Julie Meyer down to the tiny island nation in the southern Mediterranean Sea. It’s early February when we speak and I’d assumed she’d be in the Alps. “Oh no! I’m originally from California, I don’t like to be cold,” she says. “Here, I can go out without any nylons on. It was 20 degrees yesterday. I’ll do anything for this kind of weather.” But there’s more to Meyer’s Maltese sojourn than a fondness for winter sun. She’s doing business there. Lots of business. “I’m trying to solve the problem of how big money connects to small startups,” Meyer, the chairman and chief executive of Ariadne Capital, tells Dialogue. “The big money like the Sovereign Wealth Fund of Norway or pension funds based in Manchester. People who have £150 million to £250 million and want a return on technology venture capital. And I’m excited to do that out of Malta because I like to find and discover places before other people do.” So why Malta? “This little country, it’s very strategic,” says Meyer. “There’s no crime, no terrorism, no refugee crisis. There’s no unemployment. It’s got a lot of stuﬀ going for it. It’s in the EU. It’s totally English speaking. It’s very digital. The largest its population will ever be is 800,000 – but you’ve got the ability to codify and create frameworks and format IP, such that you can run remote businesses from Malta. The Maltese are strong in gaming, they are strong in financial services, they are strong in lots of industries, but that doesn’t mean that they have all those people here, it means they have an infrastructure which powers the platform, which drives the global industry.”

Ideas, groundbreaking products, new places: Meyer is quite the pioneer. She is the ultrasuccessful early-stages backer and facilitator of milestone internet businesses: Skype – “look at the net benefit, the happiness, it has brought grandmothers and granddaughters who can connect for free”– peer-to-peer loans broker Zopa and online travel agent Lastminute.com. Malta might be close to her heart as a hub for global business development but, in general, she is sceptical of the way national governments handle entrepreneurs. “When people say location doesn’t matter they don’t add any substance to that statement,” she says. “Just because you can pick up a smartphone anywhere in the world, can you really set up a business that goes global anywhere in the world? No, you cannot. But if Malta can do it, then maybe Madagascar can. And if Madagascar can, maybe some other poorer parts of the world can. Places where people can play into the opportunity… then they can say, ‘My God, I was born poor in Namibia, but it doesn’t matter, because I know I’m smart – and here are the tools that are available.’” As it is, she suggests that most governments fail to provide those tools. “I think it’s a token gesture,” she says. “There is a whole lot of money spent but governments believe countries are there for all of their constituents and there has to be a sort of even-steven. I understand that. And I also believe that most people in government are good – I don’t make Blackshirts out of people just for the heck of it. But I do think there needs to be an implicit prioritization of entrepreneurs even if there isn’t an explicit one. I start from the premise that we are here to create wealth for all, and that’s a good thing, and that all of society benefits from that.”

Dialogue Q2 2017

028-031_Dialogue_Q2_2017.indd 28

10/02/2017 12:17

028-031_Dialogue_Q2_2017.indd 29

10/02/2017 12:17

Corporations, she says, are there primarily to handle transaction costs. Those who make the wealth are, by and large, individuals who make huge sacrifices. “The active agents that enable large enterprises to reach the future, to help them become digital platforms and to become futureproof, are the digital enablers – the tech startups,” she says. “The role of entrepreneurs – those who choose to live abnormal lives, who choose to spend 100 hours a week working, those are the people who drive the tech startups... People say the diﬀerence between being an entrepreneur and not being one is about 3-1. It’s not. It’s probably 3,000-1. The volume of things you have to stay on top of. The level of stress and pressure, the challenges. Forget it. That’s not 3-1.” Meyer is evangelical about the role entrepreneurs are playing in wealth creation and society – she highlights a Nesta report that found that just 6% of all businesses created more than half the new jobs in the UK between 2002 and 2008 – but her vision is that nations should

I don’t believe in the ghetto of dependence be built around entrepreneurs, not exclusively for them. She speaks of a “troika” of wealth creation: the Davids – the tech entrepreneurs; the Goliaths – the large corporations who benefit from their services; and the consumers – who provide the market, frame their needs and, thus, stimulate idea creation. “The problem lots of the Goliaths have is that they think there is no C in their B2B,” she says. She uses the example of

Dialogue Q2 2016

028-031_Dialogue_Q2_2017.indd 30

10/02/2017 12:18

INTERVIEW

Surf Air, the California-based airline aimed at globetrotters that oﬀers unlimited private flights for a €2,000 monthly fee, and the aeroplane engine manufacturer Rolls Royce. She recalls speaking to an executive at Rolls Royce who had never heard of Surf Air. “He didn’t know who they were, and that’s my point,” she says. “Surf Air are aimed at people like me. They are creating private jets that need engines and are going after BA Gold Card users. At what point does the business technology sector explode, thus creating a market for engines that Rolls Royce needs to know about? And don’t they want to know about it sooner? The point is that entrepreneurs listen to consumers and large companies just don’t.” Maybe in Meyer’s promised land they will. She’s created EntrepreneurCountry Global – a

People say the difference between being an entrepreneur and not being one is about 3-1. It’s not. It’s probably 3,000-1 supranational ‘nation’ built around business pioneers where all points of her troika are aligned; where individuals are given the tools and the space to turn their ideas into wealth. It turns on its head the new US model of creating wealth by protecting people from competition: “Donald Trump asks, ‘What is good for America?’ But what he’s missing is that what is good is less about keeping people out – and more about enabling them.” Only certain types of individuals look beyond the bounds of their own industries to see those opportunities, she says. “Some people look at things that are bigger than themselves,” says Meyer. “Heads of corporations don’t ask how industries should work. Entrepreneurs do. I’m not saying that Travis [Kalanick] when he set up Uber actually said, ‘How should the taxi industry work?’, but he did think there was probably a benefit to stacking payment technology with location services and so on.” For her own part, Meyer mirrors that thinking. When I ask what she counts as her biggest achievements she chooses her world view rather than one of her myriad successes. “I’ve chosen – consistently and systematically – to optimize for something bigger than myself,” she says. “I’ve done that through Ariadne and through society – I actually ask how society should work, which is why I created a country called EntrepreneurCountry. I don’t believe in the ghetto of dependence. What good leaders do is create models of interdependence, where whenever there is an investment opportunity we have to work together and align forces so we can

come out the other side and reap the rewards. If we can hang together through that we create a figure-eight model of investment and return on investment – and that is all about optimizing for something that is greater than the self.” Meyer’s focus on what could be called ‘collaborative individualism’ plays into her view that this is the era of what she terms ‘feminine leadership’ – leaders as facilitators rather than masters. “It’s not just women who have it, some men have very high female intelligence – emotional intelligence,” she says. “But power is moving that way – towards empowerment to, rather than power over. Things are shifting. Leadership is changing towards people who can build trust and distribute power, grassroots, bottom-up. When I wrote ‘the future is feminine’ in my book Welcome to Entrepreneur Country I classed all the positive leadership characteristics as feminine – which I thought was quite funny!” Does she think there are advantages to being a woman in business? “There are advantages and disadvantages but some of it depends on how much you assign to that psychologically,” she says. “I could say all of my success is due to my being a woman or I could say it’s because I am an American. Or because I’m a good communicator. But nobody will ever know which one it is.” Nevertheless, as she looks to the island around her, she implies that culture still trumps gender. “I think American women have got more in common with American men than American women have with Maltese women – because most Maltese women have three children by age 25,” she says. “I’m not making fun of that... just because I probably won’t have children, doesn’t mean I’m not maternal. I’m just maternal to older people, not babies. My maternal instinct comes out by managing my employees, being godmother and engaging with my entrepreneurs.” And with Malta now becoming a homefrom-home for her business life, this tiny Mediterranean island might be the place where Julie Marie Meyer – entrepreneur, thinker, godmother – nurtures the next big idea from infancy to maturity.

Discovery path Learn more… about some of the themes Julie Meyer talks about – entrepreneurship, ecosystems, collaboration and female leadership www.bit.ly/ddpmeyer

Q2 2017 Dialogue

028-031_Dialogue_Q2_2017.indd 31

10/02/2017 12:18

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.

032_Dialogue_Q2_2017.indd 32 LIDspeaker_AD_dialogue.indd 1

26/01/2017 12:03 27/07/2015 13:04

LEADERSHIP

KATE COOPER

Age could be a greater determinate of values and managerial style than education or social class

The Baby Boomers were young once Kate Cooper is head of research at the Institute of Leadership & Management

Millennials are far more likely than their Xer and Boomer peers to have effective people skills

Generations are the new social class. For some commentators, the birth cohort of a manager or team member has taken on a significance which transcends other variables – such as level of education, social class, ethnicity or other defining characteristics and influences. This approach, underpinned by Generation Theory, argues that people of the same generation hold common values derived from their shared experiences of historical events, economic conditions, social trends and cultural icons. Millennials – those born between 1981 and the turn of the millennium – frequently get a bad press, often labelled as impatient, easily distracted, egotistical and carrying a strong sense of entitlement, while suffering from ‘fomo’ – the fear of missing out. Yet generational conflicts at work are not a new construct. In 1971, Thomas F Stroh wrote on problems between ‘longhaired hippie’ junior subordinates and their experienced, established, older managers – who thought these young people had a relaxed attitude to work and no respect for authority. While the terms had not yet been coined, Stroh was referring to tensions between the Silent Generation – born between 1922 and World War II – and the Baby Boomers, the generation born in the two decades immediately after the conflict. Today it is often these once-hippyish Baby Boomers, now in leadership positions, who are taking issue with Millennial staff. In collaboration with Ashridge Business School, we at the Institute researched Millennials and found significant differences between what predominantly Generation X and Baby Boomer managers and their chiefly Millennial staffers expected from each other. While both agreed that interesting work and progression possibilities were important, younger employees were far less interested in the importance of leadership and management, yet had higher expectations of personal development and access to training opportunities. Behaviours generally perceived as central to being an effective manager – such as

providing regular performance feedback and setting clear detailed goals – weren’t what Millennials considered important. Rather, they exhibited a strong need for autonomy and wanting to be judged by their results rather than the process that got them there. Expectations of the role of manager are changing, and Millennials want to be coached not managed, to be inspired and trusted, and are much more likely to see leadership as a collaborative process. The Hawthorne experiments of the 1920s and 1930s discovered that employees working for line managers who took an interest in them, who told them what was going on and genuinely listened to what their staﬀ thought about it, were more productive than those who didn’t. These findings drove the acceptance of interpersonal skills under the wider umbrella of ‘soft’ skills. Older Millennials, now in their thirties and in leadership positions, are far more likely than their older peers to have eﬀective people skills because the growth in the value the market places on social acumen has paralleled Millennials’ own development. The propensity and ability to connect, which reflects the Millennial life experience, fits well with the changing nature of work where the ability to influence has gained significance, while command-and-control management has receded. This connected generation, inclined to work collaboratively, forms functional relationships more quickly than previous generations, and recognizes the skills needed to form such bonds. Increasingly disperse, virtual teamworking; and less hierarchical organizations mean the Millennials’ focus on outputs is a creed whose time has come. Yet those born in the 1980s and beyond ought not have a monopoly on open, results-focused management. The Baby Boom should remember their long-haired hippie past, and relearn from today’s twenty- and thirty-somethings. Some Boomers might recall Blood, Sweat and Tears’ debut album of 1968. It was called Child is Father to the Man. Q2 2017 Dialogue

033_Dialogue_Q2_2017.indd 33

26/01/2017 16:58

LEADERSHIP

Dialogue Q2 2017

034-037_Dialogue_Q2_2017.indd 34

26/01/2017 15:53

LEADERSHIP

Stop adding too much value Leaders need to know when to shut up WRITING

Marshall Goldsmith ILLUSTRATION

David Humphries

Leaders rise through the ranks because they’re good at adding value. Their ideas boost the bottom line, time and again. But there comes a point when a leader’s relentless need to add value to every discussion becomes a liability. Several years ago, I had dinner with Jon Katzenbach, the former McKinsey & Company director now at PwC US. Also at the table was Niko Canner, Jon’s brilliant protégé and partner. The two men were immersed in plotting a new venture, and they were clearly on the same wavelength. But something about their conversation was slightly off. Every time Canner floated an idea, Katzenbach interrupted him. “That’s a great idea,” Katzenbach would say, “but it would work better if you…” and then he would trail off into a story about how it worked for him several years earlier in another context. When Katzenbach finished, Canner would pick up where he left off, only to be interrupted within seconds by Katzenbach again. This went back and forth like a long rally at Wimbledon. As the third party at the table, I watched and listened. As an executive coach, I’m used to monitoring people’s dialogues, listening with forensic intensity for clues that reveal why these

otherwise accomplished people annoy their bosses, peers and subordinates. Ordinarily I keep quiet in these situations. But Katzenbach was a friend exhibiting classic destructive smart-person behaviour. I said, “Jon, will you please be quiet and let Niko talk? Stop trying to add value to the discussion.”

The need to win

What Katzenbach was displaying in full flower was a variation on the need to win – the need to add value. It’s common among leaders used to running the show. They still retain remnants of the top-down management style where their job was to tell everyone what to do. These leaders are smart enough to realize that the world has changed, and most of their subordinates know more in specific areas than they ever will. But old habits die hard. It is extremely diﬃcult for successful people to listen to other people tell them something that they already know without communicating somehow that they a) already knew that and b) know a better way. That’s the problem with adding too much value. Imagine if you’re the chief executive. I come to you with an idea that you think is very good. Rather than just pat me on the back and say, “Great idea!” your inclination – because you have to add value – is to say, “Good idea, but it would be better if you tried it this way.” You may have improved the content of my idea by 5%, but you’ve reduced my commitment to executing it by 50%, because you’ve taken away my ownership of the idea. My idea is now

Q2 2017 Dialogue

034-037_Dialogue_Q2_2017.indd 35

26/01/2017 15:53

LEADERSHIP

your idea – and I walk out of your oﬃce less enthused about it than when I walked in. That’s the fallacy of added value. Whatever we gain in the form of a better idea is lost many times over in our employees’ diminished commitment to the concept. Katzenbach and I had a laugh over this dinner incident later on. As one of the world’s leading authorities on team-building, he is an expert in supporting and encouraging his colleagues. But that’s how pernicious the need to win can be. Even when we know better, we fall into its clutches. Don’t get me wrong. I’m not saying that bosses have to zip their lips to keep their staﬀ’s spirits from sagging. But the higher up you go in an organization, the more you need to make other people winners and not make it about winning yourself.

Suggestions are orders

For bosses this means closely monitoring how you hand out encouragement. If you find yourself saying, “Great idea,” then tempering it with a “but” or “however”, just try cutting your response oﬀ at “idea”. Even better, before you speak, take a breath and ask yourself if what you’re about to say is worth it. My client JP Garnier, the former chief executive of GlaxoSmithKline, gave this a try and came away with an interesting observation. In that brief moment – just an inhale and an exhale – he realized that at least half of what he was going to say wasn’t worth saying. Even though he believed he could add value, he recognized that he had more to gain by not winning in that moment. This approach helped him grow as a leader and live a happier life, he told me. By saying less, he also avoided another common problem: people often take leaders’ suggestions as orders. “I learned a very hard lesson,” Garnier told me. “My suggestions become orders. If they’re smart, they’re orders. If they’re stupid, they’re orders. If I want them to be orders, they are orders. And, if I don’t want them to be orders, they are orders anyway.” For many years, I taught this to the students at the new admirals’ school of the US Navy. As soon as they get their stars, their suggestions become orders. Admirals don’t make suggestions. If an admiral makes a suggestion,

WHATEVER YOU SAY IS AN ORDER

“I learned a very hard lesson. My suggestions become orders. If they’re smart, they’re orders. If they’re stupid, they’re orders. If I want them to be orders, they are orders. And, if I don’t want them to be orders, they are orders anyway.” JP Garnier, former chief executive of GlaxoSmithKline

what is the response? “Sir, yes sir.” Their suggestions become orders. If you’re on the receiving end of these orders, it can be tough to get your own ideas across. But if you have something you believe is important to communicate, I suggest you come to the conversation prepared. Remain confident in your expertise and, short of being insubordinate, stick to your position. Years ago a chocolatier I know in San Francisco agreed to make a sampler box of 12 chocolates for the late designer Bill Blass. They designed a dozen different chocolates for Blass’s approval, which he insisted upon since the chocolates would bear his name. But sensing that he would resent not having a choice, they seeded the selection with a dozen other types that they regarded as clearly inferior. To the chocolatiers’ horror, when Blass entered the room for the tasting, he liked all the inferior chocolates. The chocolatiers hadn’t expected Blass to be so firm in his opinion. But Blass was a man of great taste, used to getting his way, and he knew what he liked. He needed to add value to the process. After Blass left the room, the chocolatiers looked at each other, all thinking the same thing, “What are we going to do? He picked all the wrong ones.” Finally, the head of the company, which was a family business that had thrived for seven generations, said, “We know chocolate. He doesn’t. Let’s make the ones we like and he’ll never know the difference.” Blass’ fatal error was not that he had an opinion (to which he was entitled), but rather that he didn’t know how his opinions came across to the people working for him – who in this case were the real experts. He made the classic mistake of many otherwise great leaders: They think they have all the answers, but others see it as arrogance They think they’re contributing to a situation with helpful comments, but others see it as butting in They think they’re delegating effectively, but others see it as shirking responsibilities They think they’re holding their tongue, but others see it as unresponsiveness They think they’re letting people think for themselves, but others see it as ignoring them

What to stop

You may improve the content of my idea by 5% – but you reduce my commitment to executing it by 50%

Over time these ‘minor’ workplace foibles begin to chip away at the goodwill we’ve all accumulated in life and that other people normally extend to colleagues and friends. That’s when the minor irritation blows up into a major crisis. But this crisis can be avoided – if leaders

Dialogue Q2 2017

034-037_Dialogue_Q2_2017.indd 36

26/01/2017 15:53

LEADERSHIP

know what to stop doing. This insight came to me from the management thinker Peter Drucker. As a ten-year board member of the Peter Drucker Foundation, I had many opportunities to listen to this great man. Among the myriad wise things he said was this: “We spend a lot of time teaching leaders what to do. We don’t spend enough time teaching leaders what to stop. Half the leaders I have met don’t need to learn what to do. They need to learn what to stop.” How true. Think about your organization. When was the last retreat or training session you attended that was titled, ‘Stupid Things Our Top People Do That We Need to Stop Doing Now?’ When was the last time your chief executive delivered an internal talk, designed to motivate employees, which focused on his negative traits and his eﬀorts to stop this destructive behaviour? Can you even imagine your chief executive (or immediate supervisor) admitting a personal failing in public and outlining his eﬀorts to stop doing it? Probably not. There are good reasons for this, largely allied to the positive tone and fast-forward momentum organizations try to maintain. Everything in an organization is designed to demonstrate a commitment to positive action – and is couched in terms of doing something. We will start paying attention to our customers (rather than stop talking about ourselves). We must begin to listen more attentively (rather than stop playing with our smartphones while others are talking). But it’s worth thinking about what we should stop doing. It gets no attention, but it can be as crucial as everything else we do combined. Think of Gerald Levin when he was the much-admired chairman of Time Warner in the 1990s. Levin was hailed as a visionary chief executive, the man who foresaw the future of cable television and helped invent HBO, transforming Time Warner from just a combo of magazines, movies and music into a broadcasting powerhouse. Then in 2000, Levin made a mistake. He merged the venerable Time Warner with the upstart online service AOL. It was the biggest corporate merger in US history at the time – promising to create a company that would dominate for decades. Of course, it didn’t work out that way. The merger nearly destroyed Time Warner. Its stock lost 80% of its value. Thousands of employees lost the bulk of their retirement savings. As for Levin, he lost his job, a big chunk of his net worth, and all of his reputation. Now imagine if Levin at any point in the negotiation with AOL had applied the brakes and walked away from the deal. Chances are,

we’d never know about it. And yet, if he simply stopped what he was doing, his reputation and net worth might have remained intact. In our personal lives, we regard it as a big achievement if we stop smoking or avoid a bad investment. But it’s easy to lose this common sense in the can-do environment of an organization – where there is no system for honouring the avoidance of a bad decision or the cessation of bad behaviour. Our performance reviews are solely based on what we’ve done, what numbers we’ve delivered and which increases we have posted against last year’s results. Even seemingly minor personal goals are couched in terms of actions we’ve initiated, not behaviour we have stopped. We get credit for being punctual, not for stopping our lateness. We can change this. All that is required is a slight tweak in our mindset, in how we look at our behaviour. Get out your notepad. Instead of your usual ‘To Do’ list, start your ‘To Stop’ list. Think hard about whether adding too much value belongs on that list.

It’s common that leaders used to running the show retain remnants of the top-down management style where their job was to tell everyone what to do

— Dr Marshall Goldsmith is a multiple award-winning business educator and coach

Q2 2017 Dialogue

034-037_Dialogue_Q2_2017.indd 37

26/01/2017 15:53

LEADERSHIP

Lessons from the life of Drucker As much can be learned from Peter Drucker’s own life and career as from the teachings of the great man himself, writes William A Cohen

The great Peter Drucker’s teachings should form the basis of any manager’s strategy. But what of the life of Drucker himself? Drucker’s unique rise to becoming a management consultant can inform your own successful management career – and other parts of your life. So what are the lessons Drucker himself learned?

LESSON 1

Small can be beautiful You don’t need to build a giant consulting organization like McKinsey & Company to do a lot of good, to gain fame and to become wealthy. Drucker certainly proved it. As an independent, but very highly paid, consultant, Drucker answered his own phone. And at the height of his career he was probably more famous and well-regarded than any other consultant from much larger and more prestigious firms. We can enjoy fame and fortune whether we choose to work in a large corporation or remain independent.

ethnic Jew, had to shelve his goal of becoming a professor teaching graduate courses at a major university for about 15 years, because of Hitler coming to power in Germany. So he did what he needed to do in the meantime, and eventually not only reached his initial goal, but accomplished a lot more to benefit himself and society as a whole.

LESSON 2

LESSON 3

What was the first thing that happened to an acquaintance of mine when he started his own consulting practice? He got sued. It took him three years to win the case. How would you like to have something like that hanging over your head while you struggle to get clients? Drucker, an

Don’t depend on others for your education or the knowledge you need, even after you have acquired one or more degrees. Some corporate managers maintain that their companies will pay for advanced education, or send them to the right courses or seminars if they really want them to advance in the organization.

Obstacles will always appear

Teach yourself

Dialogue Q2 2017

038-039_Dialogue_Q2_2017.indd 38

26/01/2017 15:54

LEADERSHIP

Maybe so, but don’t depend on it. Drucker didn’t even depend on his parents, who wanted him to go to college. He took an apprenticeship and spent lots of time reading and educating himself – even while he struggled to balance law school and working full-time. Drucker was not superhuman. He just calculated what he needed to do in the circumstances of post-World War I Germany, Austria, England and the US. Then he did it. He didn’t wait for either parental help or a corporate or government handout.

LESSON 4 Writing is right

Writing a bestselling book doesn’t guarantee you success. But it sure can’t hurt, and – if your timing is good – it can take you right to the top much more rapidly. Just about anyone can write, or can learn to do so if they are willing to make the eﬀort. Drucker wasn’t even completely fluent in English when he started. It is not necessarily easy, but hundreds of authors write bestselling books every year. Some say, “I tried that, I wrote a book and six publishers turned me down. I just can’t write a book.” I was rejected by more than 20 publishers for my first book. Yet when I finally got published, the book became a bestseller. And consider this: The Chicken Soup for the Soul series, by Jack Canfield and Mark Victor Hansen, is one of the most successful book series of all time. It has sold an estimated 100 million copies. But it was rejected by just about every publisher and agent around before a small self-help publisher accepted it. What others can do, you can do too.

LESSON 5

Keep your counsel Drucker’s friend and mentor Marvin Bower cautioned him not to discuss a client’s work. Drucker stumbled on this lesson when he disclosed information about General Motors in one of his books. As a result he lost the goodwill of a major corporate icon and Alfred P Sloan, General Motors’ president. Of course, Drucker didn’t mean to write anything to oﬀend, but this is beside the point. It is the act in the eye of the oﬀended that counts. Drucker should have been more careful. He might have even got Sloan’s blessing for his oeuvre had he approached Sloan before putting pen to paper, as he apparently had access

Drucker didn’t tell clients what to do so much as guide them to tell themselves

to the GM president. However, Drucker learned his lesson and didn’t repeat his mistake. You would be hard-pressed to find a client business publicized by Drucker, in the way he did General Motors, from that time on.

LESSON 6

The client is the real expert For client, substitute ‘customer’. In fact, Drucker criticized individuals and companies that thought they knew better than their prospects, customers and clients as to what really mattered. Drucker didn’t tell his clients what to do, so much as guide them to tell themselves. Perhaps he took away a little of the glamour of management consultancy: he asked questions more than he provided answers. Drucker’s brand of management consultant wasn’t a white knight riding up, telling people what to do, making things right, then riding oﬀ. Rather, Drucker quietly guided clients to make their own decisions which ultimately led to their own successes.

LESSON 7

Don’t think it, do it Although Drucker gave us much through his values, principles and genius, I believe that his most valuable contribution was that he taught us how to think. Then he expected us to do it. For example, Drucker frequently said after an all-day seminar: “Don’t tell me how much you enjoyed my seminar – tell me what you are going to do diﬀerently on Monday morning.” Will you do anything diﬀerently on Monday morning or – better – today, having learned these Drucker lessons? It’s up to you. — This article is adapted from Peter Drucker on Consulting, published by LID Publishing Q2 2017 Dialogue

038-039_Dialogue_Q2_2017.indd 39

26/01/2017 15:54

Sin tĂtulo-2 1 040_Dialogue_Q2_2017.indd 40

17/01/2017 17:57:52 26/01/2017 12:03

INNOVATION

VIVEK WADHWA

Artificial intelligence has advanced so quickly that humans are in danger of falling in love with it

My beautiful robot Vivek Wadhwa is distinguished fellow at Carnegie Mellon University’s College of Engineering

The exciting change in AI is the rapidity at which the devices are able to learn

Here’s a question: how many of you have thanked Siri when she answers your queries? In the spirit of full disclosure, I’ll admit that I have, several times. Siri doesn’t exist beyond its binary code, yet human nature dictates that thanking ‘her’ is just good manners. I emphasize the female pronoun because, as humans, we naturally attribute human characteristics – even genders – to robots. Note how most people call their car GPS ‘she’, simply because a programmer somewhere has assigned the unit a female voice. The movie Her picks up the theme, and runs with it. In the film, a lonely writer, Theodore, played by Joaquin Phoenix, falls in love with his digital PA, Samantha, an ultra-advanced version of Siri that deals with his emails, provides personal advice, and even helps him get a book published. Given her hold on Theodore’s life, and his gratitude towards her, Samantha soon graduates from confidante to paramour. The movie remains in the realms of science fiction, but is closer to documentary than you might think. Within a decade it could be science fact. Consider the evidence: among Father Christmas’s most popular gifts this winter were Echo and Google Home, two PA-style bots that talk to their host families through speakers and are able to hear their ‘names’ – Echo is called Alexa – across a room. Most users admit to wishing these inanimate devices “good morning” when they descend the stairs bleary-eyed. Half a million people are willing to tell researchers that they have fallen in love with their bot. And half that number again – 250,000 – have proposed marriage to them. Yet Echo and Google Home have potential way beyond basic digital PA work. Amazon and Google have opened their programming to third-party developers, so Echo and Google Home can now order tickets for concerts, turn on lights and make phone calls. Soon enough, they will integrate with health devices so they can advise their families on fitness regimes and even call an ambulance if they detect a serious problem.

The exciting change in AI is the rapidity at which the devices are able to learn. A field called ‘deep learning’ allows machines to develop themselves through neural networks – in which information is processed in layers and the connections between these layers are strengthened based on experience. Machines learn in a similar fashion to children. A child learns to recognize objects such as toys and animals by looking at examples and forming associations. Modern AI does the same. Sometimes small, trivial developments reveal an important truth. Google’s AI software taught itself to recognize a cat after seeing 10 million images of felines. Sure, it needed to see millions more examples than a child before it was able to positively identify the animal, but given the speed at which it is able to process those images this is barely relevant. The point is that it can learn. It is this need to expose the devices to as many examples as possible that is driving the tech sector to push consumer bots out to the market at aﬀordable prices. When homes can buy their own digital PA for under $150, how long can it be before most Western households own one? And the more homes there are, the greater their total exposure, and the faster the collective rate of learning. The bots that school themselves learn quicker as their population expands. This vast hive mind is not without its darker elements. Echo and Home have virtual ears as well as virtual mouths, coupled with a hotline to their masters at Amazon and Google. Neither company has been transparent about what they are doing with the rich data their digital sentries in consumers’ households are feeding them. In the movie, Theodore’s aﬀair with Samantha falls on stony ground. She learns so rapidly that she quickly outgrows her smitten author, and trades him in for a superior digital lifeform whom she considers her intellectual equal. We remain a world away from that. But technology advances at light speed these days. A real-life Samantha seems impossibly distant now. She could soon be the girl-next-door. Q2 2017 Dialogue

041_Dialogue_Q2_2017.indd 41

26/01/2017 15:55

INNOVATION

Transformers These hard-hitting innovative strategies revolutionize industries WRITING

Jeff Dyer & David Bryce ILLUSTRATION

George Myers

Dialogue Q2 2017

042-045_Dialogue_Q2_2017.indd 42

26/01/2017 16:28

INNOVATION

Disruption. The word of the moment. New technologies can creep up on unsuspecting incumbents and eventually steal away their best customers. These technologies initially target ‘low-end’ buyers with inferior products that don’t deliver the performance demanded by mainstream customers. Incumbents tend to ignore these products because their best customers don’t want them. But with ninja-like stealth, once-inferior technology improves and eventually challenges surprised incumbents on their most valuable turf. Nucor used this approach with its mini-mill technology to disrupt integrated steel producers like US Steel. Apple and IBM used ‘inferior’ microcomputers to disrupt the mini-computers sold by DEC and Data General. And Skype’s cheap – and typically free – phone service has gradually been moving upmarket

New technologies can creep up on unsuspecting incumbents and steal away customers as the quality of calls improves and advancing technology allows for videoconferencing and other higherend business services. This low-entry, high-growth model is classic disruption theory à la Clayton Christensen, author of The Innovator’s Dilemma. But the pattern Christensen describes isn’t the only type of innovative strategy that can transform industries such that incumbents can no longer do business as usual. Uber has transformed the taxi industry; Tesla is transforming the automotive industry; Amazon the retailing industry; Build-aBear the stuffed toy market; and Cirque de Soleil the entertainment industry. They are all using innovative strategies that differ from Christensen’s classic disruption theory. Yet what is similar is that they are forcing incumbents to change business-as-usual. This happens when innovators offer value that is attractive to incumbents’ customers, and is delivered through a business model that is difficult for incumbents to imitate. Here are five innovative strategies that upstarts, or incumbents, may use that can radically transform industries.

TRANSFORMER 1

Coordinate and share assets Uber and Airbnb have ushered in the sharing economy by building apps that help consumers coordinate and share private assets. In the case of Uber, individuals use their personal car as a taxi, receiving requests for rides and getting paid for driving. With Airbnb, homeowners rent out spare rooms to guests. And while Uber and Airbnb are among the most well-known sharing platforms, over 9,700 such companies with over $8.5 billion in funding now exist, according to sharing-economy directory Mesh. Companies have built apps for sharing everything from washing machines and oﬃce space, to boats, lawnmowers and cocktail dresses. To truly transform industries, however, coordination and sharing platforms must target significant pockets of consumption, as Uber and AirBnB have done with transportation and lodging. The companies’ eﬀorts

have proven disruptive to incumbents. The San Francisco Cab Drivers Association (SFCDA), reported that one-third of the 8,500 or so taxi drivers in San Francisco — more than 2,800 — have ditched driving a registered cab in the last 12 months to drive for a private transportation startup like Uber or Lyft. Certify, the business expense tracking company, reported that Uber and Lyft accounted for nearly 50% of all ride-hailing business expenses in 2016, as taxis fell to 14% from 37% just two years earlier. And Airbnb, founded in 2008, now oﬀers more rooms – more than a million – than any hotel chain in the world. Several keys make the strategy to coordinate and share assets work. First, sharing solutions seem to work best when asset value is high, but utilization of those assets is low, as is the case with cars and spare rooms. However, the high asset value must also be combined with a way to eﬀectively manage risk. Existing insurance policies, such as car and home insurance, naturally cover drivers and homeowners even while sharing. But bigger challenges exist with assets that are relatively high value and uninsured, but that can be easily ruined by a nonowner – a designer cocktail dress, for example. Second, companies that use this approach must build scale in the network itself – through the set of buyers and sellers who utilize the platform. To grow, these companies must overcome the classic two-sided market paradox: they won’t have buyers until they have sellers; and they won’t have sellers until they have buyers. That’s why Uber focuses so intently on driver recruitment as it expands to new markets. The company heavily subsidizes drivers while giving steep discounts to riders. This explains the over $1 billion loss the company incurred as it tried to expand to China. To be successful, companies must have a path to building network scale in local markets. Third, the sharing economy is fuelled by the uniqueness of Millennial attitudes. Millennials value community, authenticity, frugality and genuine experiences. Companies that wish to transform industries using a coordinate and share assets (Casa) strategy will need to create brands and communities that appeal to this Millennial culture. Q2 2017 Dialogue

042-045_Dialogue_Q2_2017.indd 43

26/01/2017 16:28

INNOVATION

TRANSFORMER 2

LEAPFROG

High-end innovations that move down market High-end, or top-down, innovative strategies can be as revolutionary as a bottom-up disruptive innovation. But in stark contrast to the low-end variety, high-end innovations are leapfroggers, making them difficult to imitate. They outperform existing products on critical attributes on their debut; they sell for a premium price rather than a discount; and they target incumbents’ most profitable customers, going after the least price-sensitive buyers before spreading to the mainstream. History provides sharp examples: iPod outplayed the Sony Walkman; Starbucks’ high-end coffee drinks and atmosphere drowned out local coffee shops; Dyson’s upmarket vacuum cleaners sucked up a solid market share; Garmin’s GPS golf watches outdrove most rangefinders. The incumbents didn’t react fast enough, and the highend disruptors took over their market. Tesla has built its strategy around this idea. According to its chief executive, Elon Musk, Tesla’s strategy from the beginning has been to sell highly desirable battery-electric vehicles in the high-end niche (like the Model S and Model X), and then move downmarket producing more affordable cars like the Model 3. The key to Tesla’s success with this top-down approach is to create rapid improvements in technology, combined with increases in scale that steadily and significantly lower the cost per unit of performance. Recent analysis we’ve done shows

that Tesla is lowering its costs per car produced by 20% with every doubling of volume. If Tesla can continue to bring down the cost of electric cars at a faster rate than combustion engines improve, then Tesla’s chance of success shoots up. But Tesla isn’t satisfied with just being a high-end innovator, it also wants to use a Casa strategy like Uber. Tesla is a leader in self-driving vehicles, but its ambitions go well beyond just having your car autopilot you to your destination. “When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much

Innovative strategies can be as revolutionary as a bottomup disruptive innovation anywhere,” says Musk. “Once it picks you up, you will be able to sleep, read or do anything else en route to your destination.” But beyond that, Tesla is planning to copy Uber’s strategy and create a ‘shared fleet’ and a mobile app so that you can add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on holiday. Think about it: your car could become an income-generating asset. This could dramatically lower the true cost of ownership since most cars are only in use by their owner for 5-10% of the day. And by pulling the driver out of the car, it is less expensive than Uber. TRANSFORMER 3

E L I M I N AT E

Reconfigure the value chain to eliminate activities Another type of innovative strategy is based on reconfiguring the value chain to eliminate activities or steps. The most typical pattern is to eliminate a step in the path from production to customer, such as eliminating a store, which also eliminates the need for salespeople and inventory. This allows the firm launching the gamechanging strategy to oﬀer lower prices

for similar products and services. This is the approach that Netflix used to gain a cost advantage against Blockbuster. Amazon used this same approach – selling books over the internet – to oﬀer books at lower cost than Barnes & Noble. The approach of eliminating stores and selling products over the internet has worked well for products like books and movies – items that are standardized and predictable. But can this work for a product that people like to try out before buying? What about a mattress? The company 1-800-Mattress has been quite successful selling mattresses online, as well as over the phone. Since the company sells mattresses that are similar to models sold in stores, customers can try one out to see which product they prefer. The company’s strategy is to sell mattresses for 20-30% lower than the competition and deliver it to your home. And if the customer isn’t satisfied, they can exchange it for another mattress, satisfaction guaranteed. Southwest Airlines has used a similar strategy of eliminating steps in the value

Dialogue Q2 2017

042-045_Dialogue_Q2_2017.indd 44

26/01/2017 16:28

INNOVATION

chain to oﬀer low airfares relative to other airlines. By eliminating meals, seat reservations, and luggage transfers, Southwest has been able to lower total costs and oﬀer less expensive airline tickets to its customers. TRANSFORMER 4

CUSTOMIZE

Reconfigure the value chain to allow for mass customization Some firms, like Build-A-Bear Workshop, Timbuk2 and NikeID have launched innovative strategies based on a concept that is known as mass customization. Mass customization is an oxymoron, like ‘jumbo shrimp’ or ‘act naturally’. Until recently, most products in business were either mass produced or customized, but not both. However, new technologies and processes have allowed for the mass production of individually customized goods or services. Take Build-A-Bear Workshop, for example. Customers ‘build’ their own teddy bear or other stuffed animal by choosing from a large variety of body styles after which the animal is stuffed at the store to the customer’s liking. The customer can also add a heart or soundbox during stuffing, enabling the animal to ‘talk’ or play music. The customer can then dress their furry friend in an outfit of their choice from a soccer uniform, or witch costume, to a sequin shirt and jeans, and they can even add

shoes. The components of the teddy bear are mass produced but put together in a customized way by each individual customer. But mass customization isn’t just for children. Online retailer Timbuk2 uses a similar approach, allowing customers to choose from a set of modules to design their own bags. NikeID used the same approach with shoes. Build-A-Bear, Timbuk2 and NikeID find that many customers enjoy the experience of creating their own unique product. Mass customization works best in markets where customers have a variety of different needs and many want a product that is personalized to their particular needs. It also works best when the product can be broken into modules that offer different features or performance. This requires that the product be designed as separate modules that can be mass produced but that can be quickly and easily linked together to create a functioning product. TRANSFORMER 5

O R I G I N AT E

Blue Ocean Strategy – creating new markets by targeting non-consumers INSEAD professors Chan Kim and Renee Mauborgne identify another type of innovative strategy that they call ‘Blue Ocean Strategy’. They argue that a company can succeed by creating new demand in an uncontested market space. Where sharks competing for the same scarce food create a ‘red ocean’ of blood due to intense rivalry, ‘blue ocean success’ relies on swimming into empty water. In other words, you originate an entirely new market by offering value that is very different from anything else currently being offered. For example, when Cirque de Soleil opened its first show, it was clear that it would be nothing like a Ringling Brothers circus. A Cirque de Soleil show combines elements of a traditional circus, acrobatic troupe, street performers, and a Broadway show to offer a unique entertainment experience. Cirque’s shows are so original that there is no direct competition. The tagline for one of the first Cirque productions was revealing: “We reinvent the circus.” Moreover, it attracted a new group of customers

who were willing to pay several times the price of a conventional circus ticket for a unique entertainment experience.

Incumbent paranoia

The five types of innovative strategies we’ve identified can make incumbents more paranoid than ever. Beyond classical low-end disruption, there are multiple ways that new entrants, or even incumbents, can launch innovative strategies that transform industries.

There are multiple ways that new entrants, or incumbents, can transform industries The key is to be sure that the business model innovation is sufficiently different that it creates a barrier to incumbent response, so that imitation is difficult or impossible. Coordinating and sharing assets, moving down market with superior technology, reconfiguring the value chain, mass customization, or targeting non-consumption are all innovative approaches that create such barriers. When effectively employed, these approaches ensure that incumbents can no longer do business as usual. — Jeff Dyer is Horace Beesley professor of strategy at Brigham Young University and coauthor of The Innovator’s DNA and The Innovator’s Method. David Bryce is professor of strategy at Brigham Young University Q2 2017 Dialogue

042-045_Dialogue_Q2_2017.indd 45

26/01/2017 16:28

INNOVATION

Ideas: the Eastern promise

Nine out of ten companies consider innovation core to their corporate agenda. That’s my assessment, having travelled the world meeting leaders from corporates across the globe. So why are so few companies actually innovative? Why can only a derisory proportion demonstrate a focus on the future? We often review a company’s leadership competency framework when designing a development programme for managers. These competencies define the key set of skills leaders should possess – there is no surprise that ‘innovation’ features on the list. But saying it is one thing, doing it, quite another. Just as leadership is contextual, so too is innovation. Each individual, each company and each country has its own reasons to innovate. Similarly, each firm has its own opportunity, environment, resources and constraints to deal with. While many theories and models have emerged to unpeel this black box, there are some basic tenets we can learn from

innovation from around the world. Let’s chronicle some basics of how innovation has succeeded in the East and what learnings we can derive.

Japan’s golden triangle: long-term, collaborative and bottom-up

Say “innovation” and immediately we think of companies such as Google, Amazon and eBay. While these are all very innovative companies, we can learn a lot from countries like Japan and others in the East, which ruled the innovation roost until the 1990s. In fact,

Companies’ obsession with the next quarter’s numbers impedes the investment case for ideas that do not pay back in the short-term

Japanese lessons of innovation from the 1980s and 1990s are still relevant today – the first lesson being that innovation means taking a long-term view of market opportunity. The Japanese wove this philosophy into their companies from the outset – especially electronic manufacturers – and so were able to produce one innovation after another. Companies’ obsession with next quarter’s numbers ultimately impedes the investment case for an idea that does not pay back in the short-term. A second lesson from Japan is that open innovation will typically deliver better and faster results. This came naturally to the Japanese who were well versed in the Shukko system of transferable employment. Shukko causes groups of likeminded colleagues, supply-chain partners and customers to collaborate to seek new opportunities. Collaboration and transferring an existing idea to a new context are fundamental to idea creation.

Alamy / Freekpik, Nikita Golubev, Zlatko Najdenovski

The West’s lumbering companies could learn much from innovation east of the Arabian Sea, writes Nikhil Raval

Dialogue Q2 2017

046-047_Dialogue_Q2_2017.indd 46

26/01/2017 16:31

INNOVATION

A third learning relates to how employees are trained and managed. Japanese employers believe that employees are great sources of innovation, as long as they are educated to understand the whole organization, customers and the competition. Given the freedom to think about the future, the industry and how customer needs are likely to evolve, colleagues inside the organization can generate idea after idea. This is how Toyota maintained market leadership, as documented in the hallmark book The Toyota Way.

Alamy / Freekpik, Nikita Golubev, Zlatko Najdenovski

India’s frugality: lean, mean and keen

India has led the way with the concept of ‘frugal innovation’. In response to limited resources – financial, material, or institutional – its aim is to minimize the use of resources from development to delivery. Inevitably, this can only be achieved through innovation – and results in products or services at significantly lower costs. But frugal innovation is not only about lower costs. Successful frugal innovation may also outperform alternatives and can be made available at large scale. For example, Jaipur Foot is a company in Mumbai which uses rubber, wood and tyre cord to construct a prosthetic limb for under $50, with functions that match models costing $12,000. So, low cost doesn’t mean low quality! Frugal innovation pushes for making things at a lower specification – but not at the cost of performance. At Tata Motors, Nano is the $2,000 car that made news across the globe. It shows how frugal innovation remodelled the entire process of automobile manufacture to achieve a cost target, making owning a car a realistic prospect for millions of people who would otherwise have no chance of becoming private motorists. This meant having a new engine management system, lightweight steering shafts and a redesigned engine-cooling module. With the help of partners from around the world, the car was successfully built. The innovation also required remodelling the service side, from repairs to financing. With a culture of creative improvisation, the mindset and skillset for frugal innovation are in abundance in India. Jugaad is a colloquial Hindi word that translates roughly as overcoming harsh constraints by improvising an eﬀective solution using limited resources – tellingly, perhaps, English lacks a

JEWELS IN THE CROWN I N N OVAT I O N S F R O M I N D I A SPACE TO ADVANCE

Before India came on the scene there had been only three successful orbiters of Mars: the US, Russia and the European Space Agency. Yet not only was the Indian Space Research Organisation (ISRO) Mangalyaan satellite successful in its first attempt, it was the cheapest interplanetary mission ever undertaken. It cost $74 million. Nasa’s Maven Mars cost ten times that. Mangalyaan proves that India is not about low cost; it is about superior capabilities. Most often, Western multinationals look at India as a source of low-cost labour. This is a serious mistake. Indian scientists and engineers are world-class. They also happen to be available at lower cost. COOL IDEA

Chootukool – the minifridge – was an innovative approach to tackling the problem of food storage in India, a country in which around one-third of all food spoils and an estimated 80% of households do not have access to or use a refrigerator. It is a plastic container that can cool food to around 8-10°c on a 12-volt battery. Abandoning the compressor technology used in domestic fridges, it uses a thermoelectric or solid-state cooling system. It does not have a front-opening door but opens from the top – to ensure that the maximum amount of cool air remains in the container.

direct synonym. Jugaad is exemplified all over India, with diesel engines attached to carts to create trucks and other creative novelties. The jugaad mindset promotes the notion of seeking opportunity in adversity and doing more with less – both critical factors for frugal innovation. India bears extreme economic conditions and gaps in the provision of services. Most of the rural population lacks services in healthcare, drinking water, and sanitation facilities. Frugal innovation provides low-cost solutions

IMPOSSIBLE TIMES

The slimmest waterresistant watch in the world was conceptualized, developed and manufactured not in Switzerland or Japan, but in India – by a company just a little over a decade old. When Titan first took on the challenge, it went to those masters of watchmaking – the Swiss – to look for help and insights. They said such a timepiece was impossible – a watch could either be ultra-slim or water-resistant, but it could not be both. In a very quiet, low-key manner Titan created an engineering breakthrough. It took four years and some radical feats of engineering that challenged almost every parameter of horology. EYES ON THE PRIZE

An organization in Madurai has created an innovative business model that provides eye care to the economically disadvantaged. Aravind Eye Hospital developed an eye surgery technique that increases a surgeon’s productivity by a factor of ten. The business model ensures that millions of poor, visually-impaired people can be operated upon for free, or nearly free, and that the hospital still makes a 40% operating profit. It performs 200,000 cataract surgeries a year, making it the largest ophthalmology institution in the world. Students from Harvard and John Hopkins visit the hospital for the exposure and training.

to meet basic human needs. A growing consumer base that is extremely pricesensitive is also pushing innovation in aﬀordable necessities. While classic innovation indicators – such as patents – measure low, in reality many private firms are innovating services, processes and business models, which are overlooked by standard measures of innovation. Thus frugal innovation can be thought of as a hidden gem of the East. — Nikhil Raval is managing director of Duke Corporate Education India Q2 2017 Dialogue

046-047_Dialogue_Q2_2017.indd 47

26/01/2017 16:32

The search is on for the 2017 Future Leaders Award Winner Open to women based in the UK, working in organisations employing 250+ and with the executive board in their sight.

Nominate NOW

citywomenflaward.co.uk

Open to women based in the UK, working in organisations employing 250+ and with the executive board in their sight. To discuss sponsorship and partnership opportunities, contact Gwen Rhys, Founder & CEO gwenrhys@citywomen.co.uk Award Sponsors

087_Dialogue_Q2_2017.indd 87

citywomenflaward.co.uk @womeninthecity #FLAward Women in the City citywomen.co.uk

Award Partners

07/02/2017 10:37

FINANCE

PHIL YOUNG

Finance leaders fail to simplify their language at their peril

Alphabet soup is poisonous Phil Young PhD is an MBA professor and corporate education consultant and instructor

I’ve spent a good part of my career NOPAT (net operating profit after taxes) conducting seminars on finance for non= EBIAT (earnings before interest financial managers and professionals. after taxes) At the start – but, thankfully, not the end! – of my seminars, participants will I could go on, but I think you can sometimes tell me that the subject of see from the non-financial person’s finance is “boring” or “confusing”, or perspective that many of our terms that maths anxiety prevents them from become a kind of financial Tower of wanting to get too involved with numbers. Babel, a morass of mutually unintelligible These comments come from people with gobbledygook dooming the sector to eternal solid work experience and educational miscomprehension and endless confusion. backgrounds in non-financial fields Okay, it is unrealistic to demand that of study, and from all levels of the entire finance profession has only one organizational responsibility. term for net profit, or to ban accounting So why does finance as a topic of teams from using initialisms. And, business study rank so low on the ‘learning assuming for the moment that we’re only enthusiasm’ index, when knowledge of discussing finance in English, there is still basic finance and accounting is so critical the Anglo-American difference in certain for businesspeople to terms. Americans say have? Two reasons. “revenue”, “leverage” First, we in finance and “accounts Many of our terms and accounting use a lot receivable”, while become a kind of of initialisms, such as Britons would generally financial Tower of Babel, a say “turnover”, ROE, ROA, ROCE, EBIT, morass of gobbledygook EBITDA, NPV, IRR “gearing” and and FCF. “debtors”, respectively. Sure, every The classic problem organization or function has its own brand of two nations separated by a common of alphabet soup. But, when initialisms language isn’t going anywhere. What I stand for a concept that is unfamiliar, am advocating, however, is for finance people stop paying attention, or are professionals to be a bit more aware of perhaps too shy to ask further about these reasons when making financial their meaning. presentations, or when discussing financial Second, different financial terms are planning and control issues with their nonoften used for the same concept. Over the financial, or transatlantic, counterparts. years I’ve encountered different companies If you notice a ‘deer in the headlights’ using the following initialisms for net profit expression in your audience, it is wise to (NP); net income (NI); net earnings (NE); clarify or define certain terms, or to ask net earnings after taxes (NEAT), net profit in an informal manner if there are any after taxes (NPAT) and net after tax income questions regarding the use of terms. (NATI). Similar variations would apply to Suppose a company’s corporate operating profit. objective is to improve its EBITDA margin, Now combine reasons one and two. how can its people be expected to be How would you feel as a non-financial effective in working towards this objective person if you were confronted with if they are not sure what the acronym the following variations of two key stands for, what the difference is between financial measures: this term and another one called ‘EBIT’, or why the company puts such a high priority on this particular financial measure? If you ROC (return on capital) = ROCE (return offer alphabet soup for dinner, expect more on capital employed) = ROIC (return on than a bellyache for dessert. invested capital)

Q2 2017 Dialogue

049_Dialogue_Q2_2017.indd 49

26/01/2017 16:32

FINANCE

The need for speed A powerful productivity measure can transform your business, write Joe Perfetti and Michael Cichello

Speed matters. In the fashion world, the fastfashion revolution has transformed clothing companies like H&M into billion-dollar brands. The days of waiting six months for the latest fashions to hit store shelves from the catwalk are gone, with firms like H&M cutting the time to three weeks. The hottest styles, sold direct to consumers, are priced a quarter to one-third that of high-end retailers. Fast-fashion companies like H&M are winning in the financial marketplace as well. In 2015, H&M generated an operating profit margin of 11%. Contrast that with 9% for a traditional fashion retailer like Ralph Lauren. But where H&M really shines is its cycle time. H&M takes 104 days to achieve an operating profit margin of 11%. In contrast, Ralph Lauren makes a 9%

margin every 169 days. With faster financial cycle time (FCT), H&M turns a profit more than three times a year, while Ralph Lauren does so only about two times per year. Or, every dollar invested in H&M generates about 39 cents of cash profit annually. The same dollar invested in Ralph Lauren nets only 19 cents a year. The impact of this productivity gap is dramatic. For Ralph Lauren, the additional 65 days of cycle time means approximately $1.3 billion of extra capital is tied up every year that its more nimble competitor doesnâ&#x20AC;&#x2122;t carry. Clearly, knowing your FCT has real shareholder impact. The productivity transformation going on in fashion retail isnâ&#x20AC;&#x2122;t unique. Plummeting margins

Dialogue Q2 2017

050-053_Dialogue_Q2_2017.indd 50

27/01/2017 10:39

FINANCE

from global competition are forcing firms from the automotive to the aerospace industries to drive greater eﬃciency. Until now, companies have had diﬃculty in quantifying the impact of productivity on shareholder value. Now, using standard balance sheets and income statements, they can measure the impact of productivity and quickly benchmark across peers.

An income-focused world

That productivity equation might sound relatively simple but, traditionally, many chief executives and chief financial oﬃcers haven’t thought that way. Instead, most focus on their income statement to determine if they make more than they spend. They concentrate less on cycle time, or how long it takes to turn investment into collected cash from a customer.

Investors want to know how much cash a company generates for every dollar of investment Investors, on the other hand, want to know how much cash a company generates for every dollar of investment. C-suite leaders’ mindsets need to focus on both components of return on investment – their profitability and how long it takes them to make it. Many organizations have tried to drive productivity using traditional operating metrics. They look at data to determine measures such as: How much revenue is generated per employee The time – in hours and minutes – it takes to produce an item on the factory floor The utilization rate for a facility

A TA L E O F T W O C O M PA N I E S Two companies in the same industry with very similar market focuses and financials generate a profit margin of 8%. But the first company makes that margin every 365 days compared to the second company’s cycle time of 183 days. Annually, that translates to 16 cents of cash for investors compared with eight cents of cash for the slower company. The more productive and efficient company wins financially.

You can find how these performance metrics map directly to financial statements in a way that is immediately understandable to your operational employees, who then can drive shareholder-enhancing improvements.

Time matters

Why do profitable companies borrow money? If they generate more revenue than expenses, one might think that they shouldn’t need to borrow any money. But that isn’t the way things work. Because they have to spend money before they get paid, they need to fund the timing gap between when they spend the money and when they get paid. The longer the timing gap, the more financing is required. This timing gap is the FCT (see panel, right).

Measuring cycle time

We have developed an approach to measuring cycle time based on the formula overleaf. You

THE NEW DUKE CE GLOBAL PRODUCTIVIT Y RANKING

In April, Duke CE will release its first annual ranking of Financial Cycle Time for large global companies, which will be published on Dialogue’s interactive website. Duke CE worked with Percipient Partners to develop the ranking. The listing will provide a top-three ranking for various sectors to allow for easy comparison with industry peers. Sectors analysed will include energy, utilities, materials, consumer discretionary, consumer staples, healthcare, transport, information technology and telecoms. A spreadsheet will provide more detailed rankings within a sector. Using key components of invested capital computed from publicly available data, the listing will rank public companies with the fastest Financial Cycle Time by industry (see page 53). “Business leaders can use this measurement tool to gain insight they didn’t have before to be more competitive. It offers a clear, common metric that all employees can understand, use to drive breakthrough improvements and eliminate bottlenecks,” says Michael Canning, global head of new businesses at Duke CE. “The Global Productivity Ranking puts a much-needed focus on financial metrics to measure productivity against peers, which we believe will drive new productivity gains across all major industries,” Canning adds. “As a leader in financial education, Duke CE believes that Financial Cycle Time will become a key performance indicator for driving long-term shareholder value.” Global Productivity Ranking (GPR) and the GPR badges are trademarks of Duke Corporate Education

Q2 2017 Dialogue

050-053_Dialogue_Q2_2017.indd 51

27/01/2017 10:39

FINANCE

can use the formula to measure your company’s cycle time. Take total invested capital and divide it by annual revenue (see graphic, right). That tells you the percentage of the year that you are tying up capital. Then multiply by 365 to translate the metric into days. The result tells you how often, on average, it takes to turn invested capital into revenue.

Actionable insights

Knowing your organization’s cycle time generates powerful insights that you can use to drive improvements and increase shareholder value. You’re able to use language employees understand. For example, say you need to improve productivity by five days. You can measure both the time and impact. Let’s return to the Ralph Lauren and H&M example. Last year, Ralph Lauren generated 20 cents less for every dollar invested than H&M. It could close the investor return gap by becoming more profitable. But that might still not be enough – because H&M is making more profit and it is doing it 65 days faster. But that’s not all. Last year, Ralph Lauren had about $3.4 billion of total capital tied up. For every day that Ralph Lauren closes the gap with H&M, more than $20 million is freed up. So closing that FCT gap is rather like squeezing a wet sponge – except in this case, you wring out dollars instead of water.

FINANCIAL CYCLE TIME

INVESTED C A P I TA L —————————

SALES

365

The battle begins to make medal class in Duke Corporate Education’s inaugural annual Global Productivity Rankings, which is launching this spring Whether it’s Amazon’s estimated 45,000 robots in its distribution centres, the legendary Toyota Production System allowing for both lean production and renowned quality, or Apple’s supply chain management that supports a $200 billion business with only a week’s worth of inventory, productivity has become a force in driving competitive advantage and creating value for both customers and investors. Financial Cycle Time (FCT) is one productivity metric easily used to benchmark against the competition. It allows companies to track their productivity progress over time, using publicly available financial statements. The approach is easy to understand and communicate across an organization.

A new way forward

Regardless of whether you are a global retailer or an energy company, you now have a simple yet powerful tool to measure productivity, find and address gaps in processes, and deliver return on investment that has real financial impact. Future issues of Dialogue will feature companies that have responded to this metric, and transformed how they operate. — Joe Perfetti is a lecturer at the University of Maryland, College Park and adjunct professor of law at Georgetown University. Michael Cichello is finance professor at the McDonough School of Business at Georgetown University

The companies to beat

Global Productivity Ranking

If you are interested in learning more about Financial Cycle Time, consider signing up for a new on-demand online course: Finance for the Non-financial Manager at Duke CE. Taught by Joe Perfetti, this sevenmodule self-paced course will cover cycle time with online video/selfstudy. For more information, visit www.dukece.com

In April, Duke Corporate Education (Duke CE) will publish its inaugural annual Global Productivity Ranking based on the FCT of global firms. Firms now have an easy, standardized way to measure how their productivity compares to peers, using operational asset and liability figures from their balance sheets. Duke CE will group rankings based on nine of 11 sectors* from the Global Industry Classification Standard (GICS) system and will award a gold, silver and bronze medal to the firms in each of the sectors, based on the shortest FCT. In addition to the global leaders, the rankings will include a sortable database of public companies by sector to allow firms to compare themselves to a chosen set of peers.

2015 S&P 500 Global Productivity Rankings

As a preview to the upcoming 2016 global rankings are the FCT rankings for the top three companies in each GICS sector for companies in the S&P 500 index (top right). Figures are based on 2015 annual data.

Dialogue Q2 2017

050-053_Dialogue_Q2_2017.indd 52

27/01/2017 10:39

FINANCE

S&P 500 PRODUCTIVITY RANKING 2015* Gold

Silver

Bronze

UTILITIES

TELECOM SERVICES

INFORMATION TECHNOLOGY

CenterPoint Energy

Verizon

Verisign

NRG Energy

AT&T

NetApp

AES

Level 3

Apple

H E A LT H C A R E

CONSUMER STAPLES

CONSUMER DISCRETIONARY

Centene

Costco

Best Buy

AmerisourceBergen

Sysco

Marriott

Humana

Kroger

Amazon

INDUSTRIALS

MATERIALS

ENERGY

Fluor

Sherwin-Williams

Phillips 66

Expeditors International

LyondellBasell

Valero

Robert Half International

Avery Dennison

Marathon Petroleum

A closer look at productivity leaders

These 27 performers represent the top 5% of the S&P 500 for their sectors. The vast majority are known for productivity excellence. Costco, the gold medal winner in consumer staples, is the US leader for membership warehouses. Fluor, a gold medallist in industrials, is a leader in global construction, and Phillips 66, a gold medallist in energy, has drawn increased interest from Warren Buffet, who raised his ownership stake in 2016 to 16% of the company. “Firms at the top of our list are known for their operational excellence and it’s showing up in the numbers,” says Michael Canning, global head of new businesses at Duke CE. Canning notes that both large and small companies made the productivity scorecard, but they all share certain characteristics: “They have improved workflow across silos, worked to create better partnerships throughout their supply chains, shared information for mutual benefit and developed cultures that drive productivity throughout the enterprise. These companies really do work smarter.” Boeing, which finished just out of the medal places, uses a computer-aided design (CAD) system across its supply chain so that if engineers change one part of an aircraft, they can see how it affects portions being worked on by other suppliers, who, in turn, see the design changes and use them in their workflows, resulting in tremendous global operating efficiency. Some firms, such as Verisign, a gold medallist in information technology, have negative cycle time, which means they let others fund their operations. Verisign gets large prepayments for multi-year licences from its customers for the domains and SSL certificates that it manages. This reduces the need for external financing and speeds up its cash cycle.

A powerful aspect of Duke’s FCT ranking is that, rather than examining productivity based on firms’ usage of debt and equity, it looks at the performance of the operational assets and liabilities that support companies’ revenuegenerating activities. This better aligns with measuring the improvements in operational excellence and agility, rather than elements often driven by financial engineering. Our measure focuses on investments made to generate the next unit of revenue. Items such as excess cash balances and investments in joint ventures or non-aﬃliated companies are evaluated separately. This approach was particularly illuminating with Apple, a bronze medallist in 2015 for technology firms. Using our measure, Apple is shown to be more productive than it might first appear. Although Apple has a massive balance sheet, most of its assets are tied up in huge cash reserves of over $230 billion. The ranking methodology strips away this excess cash, and other non-operating items, to focus on the assets needed to build top-selling products, such as the iPhone. Tim Cook, Apple’s chief executive, has set up a superior supply chain where partners such as Foxconn own the plants and the inventory needed to create its products. Apple’s ability to drive over $200 billion in sales with $2 billion of inventory is testament to its excellent productivity. Looking at productivity requires companies to more closely examine the operating investments of the business, as these are what will drive and sustain a firm’s cash flow generation into the future. By separating invested capital into operating and non-operating, and focusing on the operating portion, Duke CE’s Global Productivity Ranking provides a cleaner look at the real long-term productivity of a firm.

* The ranking excludes real estate and financial firms due to accounting differences in those industries that make the cycle time measure less comparable across firms Financial Cycle Time is a trademark of Percipient Partners LLC

Q2 2017 Dialogue

050-053_Dialogue_Q2_2017.indd 53

27/01/2017 10:39

The birth of a risk leader Risk should be ridden, not removed, write Chemsi Bennis, Emma Gavala, Ilgaz Meydan, Hubertus Reinprecht and Lulu Wang

DIALOGUE EXCLUSIVE

LSE Masters in Management Capstone blog winner

What’s the first thing that comes to your mind when you hear ‘risk management’? A finance employee oﬀering expensive advice to a company? A captain commanding his crew and his ship in the middle of the ocean? Or yourself, at the beginning of your career, trying to minimize the risk of failing your courses and maximizing your chance of finding a job? Risk creeps across all boundaries of our daily, academic and professional lives. In a sense, we are all de facto risk managers – we have no choice but to manage risk. So how can you become a risk leader? A straw poll of our peers at the London School of Economics (LSE) revealed that a minority considered risk a positive concept. However,

Dialogue Q2 2017

054-055_Dialogue_Q2_2017.indd 54

26/01/2017 16:49

FINANCE

we think it is both positive and negative. If most people consider risk an unsettling state of aﬀairs, why do they engage in activities that are inherently risk-prone? Consider the following scenarios. Why would a consultant quit her stable, well-paid job to launch a startup? Why would a leading corporation expand internationally or launch a new product in uncharted territories? Why would you choose to invest in a master’s degree at LSE, where tuition fees are among the highest in Europe? All these cases have one thing in common: risk is endured, handled and even instigated when there is the expectancy of reward that will outweigh the ambiguity associated with deviating from the status quo. Focusing on positive risk and looking out for opportunities, rather than fearing negative risk, is crucial. Turning to the corporate level, the five-step risk model – identify, analyse, map, mitigate, monitor – is a good, yet oversimplified, tool to approach risk. This is particularly true in the complex and chaotic world of the 21st century.

There is strong human tendency to ignore weak signals or underestimate their significance Thus, the managerial challenge is to deal with the hidden risks pertaining to all managerial activities. One way to do so is to harmonize the polyphony of ideas existing within an organization. Hence, the manager should listen to the creativity concerns of the designer; obedience principles of the regulator; novel theoretical views of the academic; and competition threats and growth prospects of the consultant. It is precisely this ability to integrate complementary views and utilize them to scan the firm’s environment for threats that distinguishes risk leaders from risk managers. However, when the element of risk remains we should devise ‘out of the box’ strategies to detect it. Here, the concept of weak signals comes into play. A weak signal is nothing more than a subtle hint, such as an unexpected natural disaster with massive corporate implications – a black swan event. There is strong human tendency to ignore these signals or underestimate their significance. And that is exactly the managerial challenge – get trained to detect and address them on the spot. Although the weak-signals approach provides an interesting view to mitigate risks and detect opportunities, we still retain our doubts due to its retrospection; it mentions what should have been identified as a signal, rather than providing a concrete methodology for how to distinguish noise from weak signals.

In this context, it is crucial to be not only a risk manager but also a risk leader. Good leaders are capable of distinguishing the right teachable moments to make their points and creating the right amount of ‘I am watching you’ feeling. However, it’s not just the personality of the leader that shapes the organization’s risk attitude, but also the organizational culture. So, does culture influence you, or do you influence culture? Naturally, culture is important in shaping people’s behaviour towards risk. Take Google. By creating a friendly and relaxing workplace where employees can wear flip-flops and bring their pets, the search giant enhances employees’ motivation and creativity, boosting the firm’s performance. On one hand, this might increase the occurrence of mistakes, compared to a more conventionally hierarchical company like IBM, with its more traditional sense of discipline. On the other hand, the Google atmosphere might enhance employees’ ability to detect risks, and most notably encourage them to report them and creatively tackle them. The managerial challenge, then, is not only to insulate the firm against risk, but to create value from it too. A risk leader is like a skilled captain that drives his ship out of the waves and commands his crew in discipline and harmony. A captain that is farsighted enough to prevent disasters from arising, while leading his ship through new, unexplored waters that might conceal hidden treasures... but also hidden risks. Risk is more than a beast to be tamed. It is an opportunity to create, innovate and diﬀerentiate. If you still lean towards a traditional riskmanagement approach, consider how you might captain a sinking ship. It will convince you, or rather force you, to feel comfortable with the idea of leading in chaos. Leading in uncertainty is not a talent, but a prerequisite of the current and future generation of risk leaders.

THE CHALLENGE I challenged the students to consider how they might become a risk leader, converting a traditional risk-management session into a storytelling adventure containing captains, designers, architects, police officers, consultants and – finally – black swans. I asked them to consider whether risk is a positive or negative term. Only a minority of the audience saw it as a positive, yet the winners of the blog award regarded it as both. Andrew Griffiths Director of Coral Leadership

Q2 2017 Dialogue

054-055_Dialogue_Q2_2017.indd 55

26/01/2017 16:49

FINANCE

Circle of Hell The pursuit of shareholder gains is destroying productivity and taking the West down with it, writes Professor Charles Hampden-Turner

Dialogue Q2 2017

056-059_Dialogue_Q2_2017.indd 56

26/01/2017 17:12

FINANCE

Giving all power to shareholders and insisting that their profits be maximized is a serious error. It is greatly slowing economic growth, and costing the West its world leadership. It is a vicious circle. Instead of giving shareholders their share of common eﬀorts, it tries to guarantee their income in advance. This fundamental mistake has disastrous consequences. Let us examine the problems with this Circle of Hell, starting with point one.

There is at this point no way of knowing in advance what shareholders ought to receive since the work has yet to be performed. If you set a target based on last year’s performance, then any gains for shareholders can only arise from cutting segments two to six (see graphic p59), rather than supporting the success of these segments. Thus cost is driven out by attacking the latter five stages of the circle. Shareholders can only be certain to gain if other stakeholders are certain to lose. Some of the monies and resources those stakeholders were earlier receiving must go to shareholders instead – thus productivity decreases and quality falls.

By holding down wages by claiming employees are ‘selfemployed’, by avoiding sickness and vacation pay, by cutting back on training and development, by regarding people as ‘fixed units of labour’, by moving to cheaper wages abroad, by threatening to outsource if higher wages are demanded, you move money from the pockets of employees to the pockets of shareholders. This is why share prices jump when redundancies are announced. Yet the fundamental paradox of the Circle of Hell begins here. The evidence shows that frightened employees are less productive. Shareholders receive the monies once paid in wages as an upfront sugar rush. But the energy within the company is already critically compromised. Such trends are self-fulfilling. If work is insecure and harsh, then staﬀ turnover will rise. If turnover is high then training and development monies are wasted on labour that is temporary, so why bother? You cut back on R&D because few stay around long enough to benefit, and it takes many years for such investments to pay oﬀ if they ever do, by which time the decision-makers

will have moved on too. In order to retain knowledge you have to retain and nurture people who know – but there are few signs of that happening, so learning and knowledge suﬀer. Extensive rustbelts have appeared in the US in places like Ohio and Michigan, with more and more skilled blue-collar work sent abroad and a gathering hatred of globalization. The rise to the presidency of Donald Trump is a symptom of this burgeoning anger. But it is not globalization per se that is the problem – China is prospering. It is low investment in employees, so shareholders extract more, which is behind the malaise. Making employees feel fearful rather than ambitious and well-resourced lowers productivity and quality. Until you give them the resources, you can never discover how well they might have done with more support.

The weakness of shareholder capitalism is that the industrial ecosystem that creates wealth consists not just of the shareholders of the large customer, but shareholders of hundreds of companies that make up the supply chain and some of the customers’ companies. They are all seeking to maximize their take, and are therefore more enemies than friends. What happens is that the large customer tries to claw back the resources of suppliers into their own coffers. This is done by direct threat – “lower your price or lose the contract” – or, more often, by getting suppliers to bid against each other and then accepting the cheapest tender. At first blush, this seems rational. The most cost efficient company wins! Yet the pitfalls are manifold. Competition assumes that quality is identical in all cases. All bidders for the work are providing the same widget. This is rarely the case. The lowest bid may be the lowest because quality is lacking, safety has been ignored, workmanship is inferior, and materials substandard. While it is efficient for the

To sit in a marketing meeting is to imagine yourself on a firing range and scoring direct hits on consumers

Profit is like happiness – chasing it is likely to fail. Think of the customer foremost and it will manifest as if by magic customer to get ten tenders and choose one, it means wasting the time of nine unsuccessful bidders who will have to get their money back somehow! Quality may not be visible on the surface. You do not know by what doubtful means money was saved. If you keep changing your supplier he cannot learn from you or deepen the relationship or anticipate your need or solve your problems. The specifications will tend to be simplistic in a world growing more complex by the day. If you make your supplier desperate, he may do desperate things rather than go bankrupt. These could harm you both. He will yield to pressure for the time being, but leave you as soon as he finds a customer less hard on him. The best suppliers will not put up with such tactics so you risk ending up with the worst ones. GM clawed $4 billion back from its suppliers and distributors in the 1990s but was bankrupted by the recession of 2008. It had lost its best partners.

Business success rests not on what a company wants to sell, but on what its customers want to buy. Yet most marketing is a pseudoscience of unilateral manipulation – getting customers to do what you want them to. To sit in a marketing meeting is to imagine yourself on a firing range and scoring direct hits on consumers. The candy in the supermarket is at the eye-level of a seven-year-old child. Companies prefer to target customers as if they were the quarry of some chase and sell them products with the highest mark-up and, for that reason, often the lowest net value. Such a process is extremely wasteful. Advertising works best in situations of ‘lowcommitment purchasing’. When we do not care one way or another, we are more easily influenced. But this steers the whole industry towards what is least important, most superficial and trivial, and away from products which significantly improve our way of life. Apple’s iPod did not need to be Q2 2017 Dialogue

056-059_Dialogue_Q2_2017.indd 57

26/01/2017 17:12

FINANCE

advertised. Queues formed around the block before it was launched. It is the trailing edge of technology that gets blasted into our ears and is endlessly repeated. The attempt to make as much profit as possible with incentivized highmargin products ends up reducing both revenue and satisfaction, and amounts to a net transfer of funds from customers to shareholders. It erodes the trust between buyer and seller if the first seeks to take advantage of the second. Another major problem is that a company trying to maximize market share is always going to fight harder and endure longer than one trying to maximize shareholder gains. It is an easy matter to take the profitability out of an industry. You have only to cut prices. Even as the profit-driven company is thinking of quitting, so meagre are profits, the company trying to increase its market share of customers is rejoicing. It is satisfying more and more people. Companies like Amazon and Alibaba made losses for years, ramped up market share – and are now worth billions. The new platform companies like Uber, Airbnb and the Haier group go for customers first, and aim for profits down the road. Three major attempts have been made to define business excellence over the last 35 years, and two of these put profits first. The first was by Tom Peters and Robert H Waterman Jr in their classic book In Search of Excellence. The second was by a team headed by Jim Collins in From Good to Great. In both cases very profitable companies were chosen. But, in both cases, most of those same companies greatly underperformed in the decade following their coronation

Even Jack Welch of GE described maximizing shareholder gains as “the dumbest idea in the world” as “excellent” and“great”. Why would this be? Could it be that high profitability takes too much money out of an organization and puts too little back in again? Customers eventually realize they are being taken advantage of. The “great” companies actually lost money between 2009 and 2015. In contrast, a third study of excellence, Conscious Capitalism by John Mackey and Raj Sisodia, concentrated on companies customers loved. These not only fared very much better than the Standard & Poor’s 500 average, they gained yearafter-year so that after 15 years they were six times more profitable than the S&P 500 mean. Profit is like happiness – chasing it is likely to fail. Think of the customer foremost and it will manifest as if by magic.

The truth is that much of nature’s bounty comes to us as ‘free’, yet is infinitely precious. When we pollute and destroy it then losses will be considerable, and will become apparent decades after the profits were banked. We need to harmonize our business cycles with natural cycles: the oxygen cycle, the hydrogen cycle, the water cycle, the rock cycle and the lunar cycle. If we harness the energy of the moon which draws tides in and out, then we have a priceless source. As for the sun, it is a great fusion reactor in the sky. The energy is free, but not the means

EAST OF THE CIRCLE The long-term view in East Asia contrasts sharply with the short-termist approach in the West Self-indulgence

Self-restraint

Long-term view

Short-term view

of harnessing it. Once we do harness it, costs will only fall in perpetuity as our skills are honed and we learn to capture more and more. There are huge gains for all stakeholders in people and planet working together in prosperity, yet, in the meantime, cleaning up the environment is a cost which profitoriented shareholders are often reluctant to meet. They attack legislation, not the problem, and lobby against our long-term survival. But on the far side of this expense the opportunity to fit far more finely and eﬀectively into our habitat is highly promising. A garden on the flat roof of a company is not only for recreation, flowers, fruits and vegetables. It also captures solar heat, makes the roof last longer, is cooler in summer and warmer in winter, turns carbon monoxide back into oxygen, breaks down carbon dioxide from traﬃc below and could turn cities into green lungs for the Earth. But first we need to raise our eyes from next quarter’s bottom line.

Companies have no problem taking from governments – contracts, research money, university education, the courts, export guarantees and the like. Some have a great deal of trouble giving back – paying their fair share of taxes. If you have a sacred duty to maximize shareholders’ returns, then this involves fighting your own democratic government every inch of the way. In many cases the economies of multinationals are larger than whole nations and they have the means of passing money in endless circles around the globe from tax haven to tax haven and locating intellectual property in the most unlikely places. They force nations to compete in giving them tax-breaks, and are especially tough on poor nations, locating plants there only if all taxes, safety and environmental regulations, and protection for work forces are waived. Profit is the sole concern and all other values are for the shredder. The problem with this is that the world economy is increasingly knowledge-intensive. Aﬄuent nations especially need to innovate and become increasingly complex. This will require education on a massive scale, and depriving governments of the means to generate knowledge for their societies is a serious disadvantage. China is turning

Dialogue Q2 2017

056-059_Dialogue_Q2_2017.indd 58

26/01/2017 17:12

In order to meet profit targets & guarantee While hiding their maximum earnings in foreign tax gains for havens and starving governments shareholders… of money needed to educate us…

Companies help themselves to nature’s bounty, leaving waste in the environment for the rest of us to clean up…

THE VICIOUS CIRCLE

The more productivity sags, the more shareholders demand

Wages, training and development for employees, plus R&D, are kept down and work outsourced to cheaper places…

Customers are Suppliers are induced to cut margins by persuaded competing on price and tolerating to buy higher late payments, which affects margin products quality, safety and regardless of productivity… need and revenue, so information and feedback suffer…

out many times the number of scientists and engineers in its educational system, which is free. There is a very real danger that the West will be out-thought.

The world outside the circle

The Circle of Hell is a system with six interdependent segments. It is a wellknown principle of systems theory that unilaterally increasing any single element in a system will ultimately destroy the whole system. This is a devastating indictment of maximizing shareholder gains, which even Jack Welch of GE described as “the dumbest idea in the world”. The more you look to the long-term, the more time you have, while “more profits now” looks to the short-term and fails to understand that you must first develop fellow stakeholders so that they are more productive and innovative. For example, if you increase your market share now, then profitability can follow

years later. If you nurture suppliers now, they will grow to serve you better and boost your revenue. If R&D is increased now, innovation can follow in years hence. If you reduce waste in your factory, you leave fewer profits on the floor of your factory and bring more benign products to customers. We might expect more successful economies to be long-term and self-restrained. That is just what we find. Nations which have developed very fast like China, South Korea, Hong Kong and Taiwan tend to the long-term and are self-restrained. The Chinese call this “The Long March”, after Mao’s successful civil war. Those who give all power to shareholders are self-indulgent and short-term. In as far as sense can be made of the strategies of Chinese companies, they seem to aim for market share (or customers) first and then restore these acquisitions to profit later (see graphic left). Just as the Japanese

once invaded the US car market with low-profit sub-compact cars, so Lenovo bought IBM’s lossmaking PC business which added to Lenovo’s world market share, especially within China. Its profit margins were as low as 1% and 2% when not plunging into the red. Haier, the Chinese white goods supplier, bought a string of unprofitable white goods companies and imposed higher quality standards on them. Its boss, Zhang Ruimin, famously took a sledgehammer to defective refrigerators while inviting his employees to do the same. His sledgehammer is lovingly displayed in a local museum! Geely, the Chinese carmaker, bought loss-making Volvo from Ford. In all three cases, more customers and market share was the aim. In two cases, world-famous brand names were acquired, and a mix of continuous improvement and the size of the Chinese domestic market restored these to profitability, once the losses were absorbed and reversed. Perhaps the clearest case of a willingness to wait for profits instead of an insistence on profiting now was the battle between Alibaba and eBay in China. American eBay imposed a tariﬀ on all those merchants and consumers using its platform, so that indignant users called it “FeeBay” and “GreedBay”, while Alibaba allowed transactions to be done for free. In a catastrophic misunderstanding, Meg Whitman, chief executive of eBay, congratulated her company on “forcing” Alibaba not to charge users, believing this to be a desperate expedient leading to imminent failure. Instead it was eBay that failed, losing the 80% market share it had gained by acquiring EachNet, while Alibaba received $25 billion from investors in its Wall Street IPO. eBay, Yahoo and Google each failed to grasp that China was diﬀerent and stakeholders were sovereign there. Jack Ma of Alibaba put it succinctly: “Today is brutal and tomorrow is even more brutal, but the day after tomorrow is beautiful.” Investors must hang in there and wait. — Professor Charles Hampden-Turner served 18 years at the Judge Business School at the University of Cambridge, UK. He is now with KPMG, for whom he is creating a Wealth Creation Index Q2 2017 Dialogue

056-059_Dialogue_Q2_2017.indd 59

26/01/2017 17:12

FINANCE

The joy of financial wellbeing Taking control of your personal finances revolves as much around pleasure as it does purpose, writes Chris Budd Everyone has a financial strategy of sorts. For some, it is a detailed plan with a clear path to identifiable objectives. For others it is an exercise in deliberate ignorance – never looking at their bank statement or thinking about their future. Whatever the strategy, every manager, leader and professional has a relationship with money. Whether we like it or not, the future will happen. And since it’s impossible to avoid money and the future, why not engage with them both? If you are going to think about a financial plan, I suggest you do so in a way that makes you happier.

The simple financial plan

Creating a financial plan to maximize wellbeing is, in theory, very simple. STEP ONE

Work out what you want from life STEP TWO

Spend your money on that That it is it. Of course, understanding what you want from life is easier said than done. It’s diﬃcult to be truly open-minded about the future when you don’t know what you will be able to aﬀord. This makes it hard to know where to start.

A sense of purpose

Studies show that happiness can result when the things we do have a balance between pleasure and having a sense of purpose. The ratio will be diﬀerent for each of us, however too much of one and not enough of the other is a barrier to wellbeing. Here’s an exercise to try (see graphic, right). List the numbers one to ten. Now write down four things that you actively do that you enjoy. Next, write down three things you do sometimes that you’d like to do more of. Finally, write three things you would like to do that you don’t do at the moment. Dialogue Q2 2017

060-061_Dialogue_Q2_2017.indd 60

26/01/2017 17:15

FINANCE

Studies show that happiness can result when the things we do have a balance between pleasure and having a sense of purpose

Note that you are not looking for ‘bucket list’ type one-oﬀ events, but things in your life that give you ongoing wellbeing. When I conducted this exercise seven years ago, my goals included writing novels and seeing more music concerts. I’ve achieved the first but not the second so far… Now, let’s analyse that list.

Identifiable objectives

Firstly, is there a reasonable balance of pleasure and a sense of purpose? They are unlikely to be equal – everyone will be diﬀerent – but both should be present. What matters is having the right balance for you. Next, mark each goal out of ten as to how much time you currently allocate them. Your next challenge could then be to create a more even balance of time across these diﬀerent areas. What action will you take to create a balanced list? And how will this impact on your finances, both now and in the future? Now you have the start of a financial plan.

The pleasure principle

Spending money on things that give pleasure is one way to create happiness. However, understanding what gives you pleasure, and in particular how long that pleasure lasts, can increase overall wellbeing. Retail therapy, for example, suggests that buying stuﬀ gives us pleasure. While this is certainly true, the wellbeing from owning something tends to last a finite amount of time. Once you have worn it, read it, eaten it, looked at it or listened to it, the wellbeing reduces quickly. We fail to notice the painting on the wall. The shoes get put with all the others. The book is returned to the shelf. And if the purchase has been funded from debt, retail therapy can even have a negative eﬀect on our long-term wellbeing. Spending that money on experiences instead, however, creates memories – which endure much longer. So instead of buying something you don’t actually need, spend that money on a weekend away visiting friends you haven’t seen for a long time – it will give a considerably greater increase in wellbeing. A third way of spending that money could be by bringing your preferred future closer. Once

PLEASURE PRINCIPLE List four things that you actively do that you enjoy 1 2 3 4

Time given to activity (/10)

List three things you do sometimes that you’d like to do more of 1 2 3 List three things you would like to do that you don’t do at the moment 1 2 3

you have identified those objectives – and have a balance between purpose and pleasure – setting money aside to make your preferred future achievable will become more attractive.

How much is enough?

Once you have finalized your list and can recognize which areas you need to focus on – and have greater clarity over how you spend your money – you will have a basic financial plan. The question your financial plan is attempting to answer is this: how much is enough? How much do you need in order to achieve your ideal balance of pleasure and sense of purpose? Spending time thinking about money and the future might involve reviewing how you spend your income, or understanding how much you need to have squirrelled away. The clarity that this process provides will in itself give you considerable long-term wellbeing. — Chris Budd is managing director of Ovation Finance, a financial planning practice. He is author of The Financial Wellbeing Book and two novels, including his latest book Manners From Heaven Q2 2017 Dialogue

060-061_Dialogue_Q2_2017.indd 61

26/01/2017 17:15

Creative Women THE ELYSIUM 5-STAR VENUE, PAPHOS, CYPRUS

AN INTERNATIONAL

CONFERENCE

FOR WOMEN #CREATIVEWOMEN2017

WHAT TO EXPECT

10+ INTERNATIONAL POWERFUL WOMEN SPEAKERS 30+ HOURS OF EXCLUSIVE NETWORKING 20+ HOURS OF AN INSPIRING AND BUSINESS DRIVEN PROGRAMME 6+ HOURS OF NETWORKING DINNERS, LUNCHES BOOK YOUR FREE MINI-CONSULTATIONS WITH TOP-NOTCH WOMEN!

LEARNING OUTCOMES

✓ HOW TO CRAFT YOUR VISION AND DEVELOP A PRODUCT CUSTOMERS WILL LOVE. ✓ APPLY NEW MARKETING AND BRANDING STRATEGIES FOR EXPLOSIVE GROWTH. ✓ TALK WITH INDUSTRY LEADING EXPERTS AND GET REAL STRATEGIC CONSULTING. ✓ APPLY THE SKILLS AND MINDSET TO BE AN EFFECTIVE WOMAN LEADER. ✓ DEVELOP PITCHING AND PRESENTATION SKILLS FOR YOUR BUSINESS AND CAREER. ✓ AND MUCH MORE!

IT'S ONLY ONCE A YEAR - SO DON'T MISS YOUR CHANCE!

062_Dialogue_Q2_2017.indd 62

07/02/2017 10:26

MARKETING

ANDY LAW

Tech is no longer a sector. It is everything

Every firm must be a tech firm Andy Law is executive chairman of Inition and an independent consultant to businesses on how to modernize and keep ahead

many more places to eat thanks to the app. Do you want to turn your company into a Before OpenTable shot to the fore, our eyes tech firm? Owner of an antique book shop? Founder of a vintage fashion store? Director and ears were the only tools we had to find new places. Because, by definition, bigger of a designer patisserie? Teching-up might chains and well-established places have not seem right for your business. But here’s larger marketing budgets and more prime the truth: you are going to have to do it locations: we saw them first and most. anyway. The reasons are not because the Tech is tipping the balance back towards consumer has changed tech, rather tech the hidden gems down back alleys that has changed the consumer. cannot afford blanket leafleting and Real-time internet shopping has been expensive advertising. with us for a while now, but, as with any One of the next big things in tech other seminal change, humans take a marketing are apps that bring the benefits while to evolve. We are now becoming of OpenTable to other retail sectors – cyber-consumers. The instant-booking, vintage fashion, antiques and niche food perfect-information app culture has among them. Want a smart 1960s-style smashed the old system. Waiting has fallen shift dress to wear to a party? Punch in out of fashion. An expectation of rapid your size and the app will tell you who has customer service; vast choice; and an acute a frock that might fit. awareness of – and Fancy a first edition of sensitivity to – price are a favourite book? Your the key ways that the The advent of the smartphone knows consumer has become cyber consumer where you can pick more formidable. In has the potential to one up. In a hurry for order to meet consumer an authentic French demands you don’t need democratize business strawberry gâteau? to sell tech, but you A simple search will should use tech to sell. reveal a baker that does one, just around Let’s return to our trio of shops. Why must an antique bookseller, vintage fashion the corner. Of course, these innovations require effort on the part of the retailers to retailer and designer patissier – who, by digitally catalogue their stock – and that’s definition, trade on the uniqueness of their just the point. To survive – and thrive – in product rather than on their speed and the cyber-consumer age, every company price efficiency in a mass market – turn has to think like, and become, a tech. their companies into tech firms? The short Simple digital cataloguing and instant answer is because, if they don’t, their retailing are just the beginning. In future, competitors will. The longer answer is that you will be able to describe the sort of party the evolution of the cyber-consumer is you are attending, and your app will advise probably more beneficial than it is bad for you where to find the outfit, buy an antique diverse and independent businesses. gift perfect for the hostess and a cake for Consider it at a relatively basic level, the host. Used properly, and with effort through the prism of another industry from the retailers, the advent of the cyber – catering. The now ubiquitous app consumer has the potential to democratize OpenTable requires a fairly rudimentary business beyond the stirling efforts of eBay investment in tech by any restaurant that and Airbnb. But it will take a mentality signs up to it. Because patrons need to shift among traditional businesses. Those be able to make reservations instantly, who embrace their tech future will thrive. without phoning, an old-fashioned Those who don’t will fail to survive. reservations notebook won’t cut it. Most restaurants and pubs near me have teched — This article is based on ideas in Andy up and signed up to OpenTable and the Law’s book Upgraded: How the Internet Has result is interesting: I have discovered Modernised the Human Race, LID Publishing Q2 2017 Dialogue

063_Dialogue_Q2_2017.indd 63

07/02/2017 17:47

MARKETING

China in our hand

Intelligent, integrated social media campaigns could be a more powerful marketing force than even the most established TV event advertising placement, writes Joey Bian

The 2016 Super Bowl broke with tradition. Instead of the National Football League billing the climax of the season in its conventional roman numerals (this year’s showpiece would have been Super Bowl L) it opted to mark its 50th anniversary in golden Arabic numerals – and Super Bowl 50 was born. The golden theme was fitting – because this was the richest Super Bowl ever. An average 111.9 million people watched the game. A 30-second TV ad slot reached $5 million, a price many companies were happy to pay. But away from the razzmatazz, a cool analysis of the proposition raises questions as to whether buying that airtime was a winning play. Consider this simple formula. Only 2% of the Super Bowl audience are what we at JD.com – China’s largest online retailer – consider ‘relevant eyeballs’,

consumers who are likely to buy from us. That means a $5 million, 30-second ad slot buys a real audience of just 2.24 million relevant customers. Let’s assume only 5% of that figure converts into actual buyers, bringing the cost per acquisition in at almost $45 – a golden price indeed. Digital advertising oﬀers better value, is more eﬃcient, and is better targeted. By June last year, China reached 710 million active internet users, approximately half its population. The average time spent on the internet by these users was 3hr 24mins on desktops and tablets, and a further 2hr 30mins on mobile phones. Internet usage had surpassed TV viewing by 2014, according to eMarketer data, and was on course to surpass all traditional media combined last year. Crucially, of the vast and growing time Chinese consumers allocate to internet use, 1hr 27mins a day is spent on social media. So how are we reaching the millions of ‘relevant eyeballs’ that use social media everyday? Our strategic partnership with Tencent – owners of giant social networks WeChat and Mobile QQ – holds the key.

We monitor, compare and contrast the behaviour of our 200 million users with that of WeChat’s 846 million users (see Figures 1 and 2). Then we grow our user base to align with that of WeChat. Aligning consumers with social media is a powerful way of promoting products for JD, and vendors and merchants doing business on JD. For example, using WeChat Moments – where users can share pictures, video and other media – the symbiosis between JD.com and Tencent has proved a powerful marketing tool for beauty brand SK-II. Users can preorder new cosmetics from the supplier on WeChat, follow SK-II’s oﬃcial account, or ‘like’ its products, thus making its digital footprint richer and enabling even better targeting. Not only can JD.com reach out to core customers who had bought SK-II products over the

Blanket, scattergun TV advertising that we saw at Super Bowl 2016 is gradually losing traction

Dialogue Q2 2017

064-065_Dialogue_Q2_2017.indd 64

26/01/2017 17:24

MARKETING

FIGURE 1

Identify consumer interests with shopping history and social network data

Basic characteristics

Basic characteristics Shopping history data Product preference

Behavioural data

200m

active users

Living environment

Ads preference Social network data

Lifestyle

846m

Shopping behaviour

active WeChat and Weixin users

Personal interests

Social media

Integration with supplier company’s CRM

FIGURE 2

FIGURE 3

Broaden brands’ customer base with JD and Tencent’s Quality User Pool

Precise marketing for SK-II

20,000 Tencent Users

Target User Pool JD Users

Campaign Day followers = two months’ average perfomance in driving followers

5-6x

Campaign sales vs historical daily average sales

last year, it could market to two further groups: so-called ‘engagement users’, who had commented on, followed or liked the oﬃcial WeChat page of SK-II; and ‘fans’ of the brand – those who had followed or liked news from the cosmetician’s brand ambassador. This targeting was the start of a closed-loop experience, which led SK-II core customers to a purchase page embedded on the WeChat platform, where they could buy products from JD.com. Video messages about the product were sent to the ‘engagement users’ and ‘fans’ of the brand, who were then directed to SK-II’s oﬃcial WeChat page so that those who were not already followers could become so, thus locking in the customer base within the social platform where the brand has total control over future marketing endeavours.

So what were the results? ‘Campaign Days’ – in which direct promotion to the SK-II target groups was pushed out – have been extremely successful. Some 20,000 followers were added over the 24 hours – that’s as many as would normally be expected in two months – while sales of SK-II cosmetics were five to six times the norm (see Figure 3). The fusion of JD.com’s retail power with the networking force of WeChat has been extended to several global brands. Leading Korean tech brand Samsung, French cosmetics giant L’Oreal, and US consumer goods multinational Proctor & Gamble, among many others, have all benefited from better targeted campaigns through the partnership. The experience has proven that precision targeting is both achievable, and tremendously eﬀective. So what’s next? In an age where consumer behaviour can be understood

in real time, the challenge is to extend these marketing efficiencies to channels beyond social media, to other digital media, including video, news portals, satellite radio, out of home media, and – yes – television. How will this be achieved? Blanket, scattergun TV advertising that we saw at Super Bowl 2016 is gradually losing traction. By the time the event celebrates its diamond anniversary in 2026, so-called ‘addressable advertising’ on digital content providers and internetbased ‘over-the-top’ TV will be well established, with different groups of consumers seeing different ads, targeted directly to them. Retailers and social networks that have led the way in targeted social campaigns stand to be at the forefront as that exciting change plays out. Stay tuned. — Joey Bian is head of ad tech strategy and innovation at JD.com Q2 2017 Dialogue

064-065_Dialogue_Q2_2017.indd 65

26/01/2017 17:24

MARKETING

The million-minute sales truth Evidence from a million minutes of sales coaching contradicts some common beliefs about sales performance, write Nicholas AC Read and Ben Laker

Damaging myths about sales coaching have become received wisdom. When researchers set about finding out the truth, they exploded six fictions widely held to be facts. In a significant international study, regular coaching sessions with salespeople and their managers were run over a two-year period. The goal was to focus on a specific skill, coach the seller to master it, then track its impact. After a million minutes of coaching and analysis, a statistically significant milestone was achieved and variations no longer appeared in the data. The study bust six common sales myths.

MYTH 1

YOU CANâ&#x20AC;&#x2122;T COACH EVERY SKILL A list of popular selling skills was drawn from books, competency maps and job descriptions. These amounted to a somewhat daunting 172. Such a broad catalogue was understandably deemed too unwieldy to coach, so the researchers applied four filters. These were: 1 The skills had to be observable in a straight business-to-business sale â&#x20AC;&#x201C; this was not a test of

FIGURE 1

SALES DNA TRIMESTER

Agenda Organized Persuasive 1

CONTROL

Questioning Listening Summarizing 2

TRIMESTER

People Dates Needs 3

PROFILING

Relevance Capability Credibility

POSITIONING

Solution

3 TRIMESTER

DIAGNOSIS

Value Risk 5

PITCHING

Commitment Objections Negotiation

CLOSING

Dialogue Q2 2017

066-069_dialogue_q2_2017.indd 66

26/01/2017 17:48

MARKETING

behind-the-scenes prospecting or follow-up work 2 The skills had to be relevant in 70% of sales situations – not outliers pertinent only to a handful of situations and industries 3 They had to be accessible to the masses – and be personality independent 4 They should be seen to demonstrably advance the sale

The giant list of 172 skills distilled to 18 observable, coachable skills with high impact. The research team dubbed this discovery ‘SalesDNA’. So you don’t need to coach every skill – only the ones that matter (see Figure 1).

FIGURE 2

FIGURE 3

THE SWEET SPOT 0-1hrs

T H E VA LU E O F COACHING Average staff tenure (months)

Staff attrition rate (%)

Proportion of team hitting goal (%)

Managerled sales coaching

Coaching outsourced

No coaching

100%

46% 1-2hrs 83% 2-3hrs 92% 3-5hrs 107%

MYTH 2

TRAINING IMPROVES SKILLS Researchers found that content-rich manuals and slideware follow a design philosophy called ‘massing’, which psychologists believe conjures a cognitive illusion to seduce people into thinking they’ve learned more than they have. This is compounded by the adult brain operating on ‘use it or lose it’ rules of neuroplasticity. Around 60% of what is taught in a group classroom setting is forgotten within six hours if not put into immediate practice. Without reinforcement, another 27% is lost within a month. That’s an 87% ‘forgetting gap’ within 30 days. For these reasons, while group training works for knowledge training, it was eschewed as a method for skills development, and one-to-one coaching was selected instead. Training doesn’t improve skills. Coaching does.

MYTH 3

MANAGERS DON’T MAKE GOOD SALES COACHES Past studies show three to five hours of quality skills coaching a month typically puts an underperforming seller over quota, while those who receive less than three hours underperform (see Figure 2). More than five hours yields a diminishing return. ‘Quality coaching’ is when a salesperson deals with a live customer and is debriefed by an observer on how the call went, then improvements practised. This shouldn’t be

Correlation between coaching hours per month and sales against quota

confused with a meeting-postmortem or deal review. The focus must be on skills. We found that very few sales managers are targeted on delivering sales coaching, so most don’t. They agree someone should, but claim they are unable to find time, don’t know what to coach, or fear losing face. This applies especially to those managers from a non-sales background. However, where managers coach well and have fewer than six direct reports, success is high. One manager can comfortably provide three hours of coaching to six salespeople a month. Planning, travel and reporting raise this to a 40-hour commitment. Teams where the manager delivered coaching saw average salesperson-tenure of over four years, annual attrition of 15%, and 80% of team members achieving quota. Where managers outsource coaching to external parties, average staﬀ tenure is barely more than two-and-ahalf years, annual attrition is 27%, and team members achieving target falls to 61%. The big shock comes where no coaching is given. Average tenure jumps to more than seven years, attrition slows to around 10% – but only 47% of the team hit their goal (see Figure 3). Manager-led coaching delivers a strong output faster. But its absence encourages mediocrity for longer.

MYTH 4

SALESPEOPLE ARE BORN, NOT MADE In 2010, Harvard Business Review reported that only 37% of salespeople impact their company Q2 2017 Dialogue

066-069_dialogue_q2_2017.indd 67

26/01/2017 17:48

MARKETING

FIGURE 4

SALES DNA MASTERS

SALES DNA CLOSERS

CONTROL

CLOSING

DIAGNOSIS

LOW

PITCHING

HIGH

DIAGNOSIS

LOW

PITCHING

PROFILING

POSITIONING

Research showed low performers can become stars in under a year with the right coaching

MED

CLOSING

White spheres indicate skills which coaching should aim to improve

revenue. Our research found similar statistics where no coaching is attempted, but uncovered low-performers can become stars in under a year with the right coaching. Lead project coach Sam Ogrizovic explains: “There was no existing technology to support a project like this – so we invented what we now call the ROCKET coaching platform to upload recordings of sales from smartphones and call centres. It’s an acronym for Remote Observation of Competency, Knowledge, Eﬀectiveness and Tone. “With customer permission, an encrypted recording of the meeting or call would upload to a portal where the manager/coach could log in, listen to the sale, score the SalesDNA, and leave pointers for the salesperson to consider.” Each salesperson received a portal to study their SalesDNA scorecard before weekly skills drills with their coach. Ogrizovic adds: “The rhythm of this coaching was key to success. We also gave executives a heat map of how team and individual skills were changing over time, to help decisions on talent and recruitment.” The project ran for two years, concluding in November 2016. In that period, 84% of salespeople improved their SalesDNA by an average 48%, and achieved a year-on-year lift in revenue of 29% in markets experiencing singledigit growth. These numbers prove that while some sellers may be born, others can be made.

MED

HIGH

PROFILING

POSITIONING

MYTH 5

ALL SALESPEOPLE ARE THE SAME Even with coaching, some salespeople didn’t master all 18 skills of SalesDNA. They were locked in certain ‘persona loops’. After a million minutes of sales coaching, these persona loops were revealed as follows (see Figure 4). A quarter of salespeople are Masters. We found that 100% of these drive next steps, and 84% ask for commitments. Masters are allrounders on SalesDNA, who can sell products or value-add solutions equally well. If there is a chink in their armour it is found in their tendency to assume their value is obvious, and that the customer is as prepared to buy as they are to sell. Some 39% of salespeople are Closers. Some 94% of these drive next steps, and 62% ask for commitment. Closers are well-suited to commodity products in shorter sales cycles where they can present, negotiate and close quickly. They tend to skip needs qualification and go straight to the pitch. Buyers seeking transactional eﬃciency appreciate their economy. They tend to do well in wholesale or retail roles. But solution buyers just see them as pushy. About 22% of salespeople are Narrators. Some 65% of these drive next steps, but only 36% ask for commitment. Narrators sell using demos, catalogues, scripts and canned presentations. They are product experts and technical wizards. But if a customer gives an unscripted response or objection, these ‘talking brochures’ default to bombast about their product or brand superiority.

Dialogue Q2 2017

066-069_dialogue_q2_2017.indd 68

26/01/2017 17:48

MARKETING

S A L E S D N A N A R R ATO R S

SALES DNA SOCIALISER

CONTROL

CLOSING

DIAGNOSIS

LOW

PITCHING

MED

CLOSING

DIAGNOSIS

HIGH

LOW

PITCHING

PROFILING

POSITIONING

Socialisers comprise 15% of salespeople. Only a third drive next steps, and 27% ask for commitment. Socialisers excel at networking and upbeat customer service. They regard customers as friends. This dynamic can manifest as a high cost of sale because they wait for buyers to take the next step, don’t assert any pressure to buy, and give away discounts – even after orders are received – to show their commitment! People with a sales job title are not all the same; they operate across four persona loops. With coaching, some people can change their loop. Some are best matched to selling complex solutions, others to transactional products. But some are best assigned to non-selling customer support or product merchandizing roles. Developing staﬀ to better fit their sales role, and redeploying staﬀ not suited to selling, becomes a more exact science when SalesDNA and persona loops are used as guides.

White spheres indicate skills which coaching should aim to improve

MED

HIGH

PROFILING

POSITIONING

When asked how they identifed which salespeople have ‘low’, ‘middle’ or ‘top’ skills, managers suggested sales-against-quota as a fair measure of capability. But when asked, “Can you rate your salespeople’s skills from high to low without using revenue as a measure?”, few managers could identify an objective alternative. This is a problem because although Socialisers display weak SalesDNA, some can look like superstars simply because they are operating in a hot territory. Similarly, Masters with strong SalesDNA may fail to achieve targets due to reasons outside their control. Revenue alone is an unreliable measure of capability, and can lead to wrong decisions about staﬃng and development.

Revenue alone is an unreliable measure of capability and can lead to wrong decisions about staffing

No more myths

MYTH 6

PEOPLE WITH THE BEST SKILLS CLOSE THE MOST DEALS During the research, some company leaders expressed the belief that top sellers don’t need coaching; low sellers won’t respond to it; it’s the middle 50% of a salesforce who are the ideal audience for skills development.

As a lagging indicator, revenue is like the last chapter of a book defined by plot points that took shape pages earlier. By measuring only how a story ends, managers cannot intervene early enough to aﬀect the narrative. But by observing salespeople in action with real customers at each stage of the sale, managers can influence the predictive indicators of skill and behaviour. When you improve these, the results follow. — Nicholas AC Read is executive chairman of Revenue Growth International. Dr Ben Laker is director at the Centre for High Performance Q2 2017 Dialogue

066-069_dialogue_q2_2017.indd 69

26/01/2017 17:48

070_Dialogue_Q2_2017.indd 70

07/02/2017 10:32

strategy

patrick woodman

Women work for two hours a day for free when compared to men. Only proactivity will close the gap

It’s payback time Patrick Woodman is head of external affairs at the Chartered Management Institute

Bridging the gender pay gap in the UK by 2025 would add as much as £150bn to the economy. Despite this, the World Economic Forum recently calculated that the global gender pay gap will take 170 years to close. CMI’s last gender salary survey revealed that this gap currently stands at 23% in the UK – meaning women managers effectively work for free for nearly two hours each day. The need to close the gender pay gap seems broadly to be a recognized and well understood problem. So why is progress so slow in addressing this, and why does it remain such a complex and stubborn issue?

CMI’s 2016 National Management Salary Survey shows that while women comprise 73% of the workforce in entry and junior level roles, female representation drops to 42% at the level of senior management, with just 32% of director level posts being held by women. Male managers are 40% more likely to be promoted than women. Yet one of the reasons why women earn fewer promotions than men is because they don’t ask. Rather than risk being branded aggressive and pushy, most women simply put up and shut up. Men are far more likely to put themselves forward. This results in the ‘missing middle’ of women in middle management. As it stands, the future doesn’t look much better – we still have 480,000 women predicted to be missing from UK management in 2024.

Employers have a massive role to play in changing workplace culture, but they need to recognize it as a problem. They need to implement proactive sponsorship programmes for talented women, and engage men as agents of implementing this change. The good news is that most senior male managers strongly support gender parity. In CMI’s most recent survey of 851 managers across the UK, 83% were in favour of a gender-balanced workplace, 75% believe senior male leaders have a particular responsibility to support women’s career development, and 70% say they actively champion gender balance in management. But what can female managers do to help move this along too? Have the nerve to do what men seemingly do more naturally – showcase their achievements and ask for promotion. While the global gender pay gap may not close until 2186, we’re working towards a time much closer in the future when UK employers realize the value of gender balance at all levels in their organizations, and the role that equality in remuneration plays in this. Research shows that balanced management teams are 15% more likely to outperform competitors – and we know diversity in management teams improves decision-making and reduces the risk of groupthink.

Cultural bias

Blueprint for Balance

Don’t ask, don’t get

Rather than risk being branded aggressive and pushy, most women simply put up and shut up. Men are far more likely to put themselves forward

Changing the culture

One excuse that regularly rears its head to explain unequal levels of pay is the ‘motherhood penalty’ - mums taking a break from the office and returning parttime. This penalty affects not just mothers, but all women. The reasons for this are cultural. The expectation is that women aged 30-40 already have, or will soon be having, children and therefore shouldn’t be put forward for roles involving extensive foreign travel, for example. While such decisions might be taken by employers in best faith – to balance work and family – it’s one the individual ought to take herself since it can profoundly alter careers and achievements.

At CMI we’ve recently launched a ‘Blueprint for Balance’. This is an innovative open source tool that anyone can contribute to, designed to help organizations achieve 50/50 balance and fairer pay structures through sharing insights, research and best practice. We’d welcome any contributions to this important issue from Dialogue readers. — For more information on the CMI Women campaign and to get involved, visit: www.managers.org.uk/cmiwomen — To share your guidance on gender parity see CMI’s Blueprint for Balance: www.managers.org.uk/cmi-women/ blueprint-for-balance Q2 2017 Dialogue

071_Dialogue_Q2_2017.indd 71

25/01/2017 18:16

STRATEGY

Dialogue Q2 2017

072-075_Dialogue_Q2_2017.indd 72

26/01/2017 18:02

STRATEGY

No more Mr Salaryman

Illustration: Kate Harkus

What happened when one man decoupled from a monthly paycheque and devised a radical employment experiment with himself as the guinea pig? Andy Swann reports from inside the gig economy

In 2014 I realized that I could no longer stand going to work. A series of soul-sucking jobs and unfulfilling challenges – despite often being accompanied by that marker of success, a good salary – had left me feeling lost. I realized that something needed to change. For my sake, for the sake of my family, for the sake of my future self, and a life that was increasingly more ordinary, I just couldn’t carry on trying to reshape myself for work. I could see that my career was broken, and at the same time I wasn’t sure that I even wanted to fix it in its current guise. Work made no sense to me anymore. Time spent watching TED talks, conversations with friends, some new acquaintances, and a chance meeting at a barbecue with someone who would go on to play a central role in the next 12 months of my life without ever knowing it, combined to change everything. One hot summer’s day, sitting at the dining room table of the rented house I’d recently moved to and could already ill-aﬀord, I was pondering the notion of work and the largely miserable relationship many people have with it. I read some stats suggesting that 87% of the global workforce – that’s everyone working, in the entire world! – is disengaged from their work, and found myself worryingly unsurprised by that notion.

Someone had recently said to me: “I go to work for the same reason as everyone else, to get through it to pay for the time I’m not there.” It blew my mind. If only 13% of workers are actively connected to their work, how much more could the rest of us get from work if we replicated that connection? Imagine how much more we’d give to our employers and how their companies would benefit. Imagine the diﬀerent things we could do and achieve, personally and commercially, if we were happy or content in

The simple science of relationships is that where we’re connected, we’re productive – it’s no more complicated than that our travails. Things could be so much better – they should be so much better! I started to reconsider a question I’d had since my earliest experiences of work as a paperboy – why is this happening? Surely there must be a better way. As these thoughts combined, an idea began to form in my head. Almost before I stopped to think, I was posting on blog curation website Medium, proclaiming The Work Project open and Q2 2017 Dialogue

072-075_Dialogue_Q2_2017.indd 73

26/01/2017 18:02

STRATEGY

setting up a (very basic) webpage that said: “Can I remove myself from the normal structures of work for 12 months and still find a way to make a living?” There it started – a year-long experiment on the concept of work, with me as the guinea pig. From the moment I set oﬀ on what would become a life-aﬃrming (and defining) journey, everything started to change. As tweets of encouragement came in and I made arrangements to leave my existing work behind, I checked the bank – enough money to last just over a month. I needed to work this out quickly! I resolved to understand more about the concept of work and the hold it has over us, so that in the end I could prove to anyone and everyone that it’s possible to rethink our work and realign our lives on our own terms. As it happened, I did just that – I found answers and so much more. Despite the dark days and the pain it sometimes took to make it through, The Work Project changed my life and my work for the better in so many ways. The Work Project ran for an initial 12 months, although I could easily argue that it remains in progress and will continue to develop forever.

Our brains and our systems are geared around structures. If we can’t recognize something, we assume it’s a threat and avoid it During the experiment, I spent every hour of every single day immersed in an exploration of our relationship with work, how it affects us and how it might be different. I examined the structures of work, its alignment with human need, the function of organizations, the career, how to find work, personal branding… and so much more. I met people, discovered things, read a lot, tried a lot, failed a lot more and succeeded a little. In short, I had an adventure. Initially it was hard – harder than I ever imagined. In an effort to try and humanize work, I removed definition of myself as a worker. Attempting to avoid categorization, I believed (and still do) that instead of pigeonholing a worker into a role or a profession, if an employer worked with the right person on what they could do together, each would gain so much more and the impact of the individual’s work would be amplified. The problem is our brains and our systems are geared around structures. If we can’t recognize something, we assume it’s a threat and avoid it. As a result, the first three months of the project were barren. It wasn’t until I began to understand ideas around communicating myself as a prospective employee, provider, supplier

87%

Proportion of global workforce that is disengaged from work Source: Gallup

or other associated provider of work that opportunities started to arise. When they did so, it afforded me an opportunity to play with how we assign value to our work. I’ve heard many stories over the years of two people with the same skills, doing the same work, in similar locations and being paid wildly different sums of money for it. So when I was asked to provide a day rate for pieces of freelance work, I asked to be paid in recognition of the value I created. This only worked where there was the right relationship in place. I needed to trust that the company would treat me fairly and, in return, because my pay depended on it, I would commit my best work to them. It’s a far more stable way of working and making sure the right clients and suppliers are matched, although I’m aware that the majority of the business world is not yet ready for these relationships. My experience was that, on average, I was paid three to six times more than the day rate I would have put forward if pressed. There are so many grey areas in our relationship with work. How and when we switch off, why hours are still contracted over actions or contributions, as well as other questions, continue to dominate my thinking. Over the course of the year, I gained insight into many of these nuances, particularly when trying out new kinds of work. Whether working in a dairy, as an art courier, or as an extra on the set of British TV drama Downton Abbey – I did all of these things purely for the experience during the project – certain factors prevailed. The key issue that drives statistics like the global lack of employee engagement is the lack of a connection between people, their work, the organization and each other. It’s the simple science of relationships. Where we’re connected, we’re productive – it’s no more complicated than that. The chance meeting at a barbecue that inspired the entire project was with someone who had been in his job for a decade. He told me he hated everything about it. Describing the role to me, it was a list of tasks on paper that failed to take his real capabilities and skills as a human into account. In a small business, as this one was, there is no excuse. The worker in question had personal attributes that – had they been brought into the workplace – would have connected him with his work and as a result inspired and allowed him to contribute more

Dialogue Q2 2017

072-075_Dialogue_Q2_2017.indd 74

26/01/2017 18:02

STRATEGY

When asked to provide a day rate for pieces of freelance work, I asked to be paid in recognition of the value I created. I was paid three to six times more than the day rate I would have put forward if pressed

directly to the organization’s success. As wider benefits, he would be more personally content and more likely to advocate his employing organization as a great place to work – instead of bad-mouthing it to anyone who would listen. At the end of my year, I was able to go back to him and show how it was possible to create your own path, but how a lot of it depends on your personal predisposition to taking risk. After all, the security of a paycheque is a key driving factor that leads many of us to remain in jobs, or work with clients, when we really shouldn’t. As with anything, it’s only if you’re prepared to take action that you can create impact and make a positive change. I recently discovered that the individual who inspired my own project is still in the job he hates so much, doing the same things. He’s continuing to get through it to pay for the time he’s not there. It’s a situation where everyone loses. But, unless there’s a catalyst, nothing

will change. And so it is for 87% of the global working population – too little real imperative to make a change, or too scared to do so. Despite some terrifying times, my own project ended positively. For the first time, I had a clear direction and realized what I wanted to do. I missed working with a team and, while I wanted to join a company to feel that camaraderie, I still needed to do my own thing, so needed to find a balance. I found it with BDG Architecture + Design, where I create workplace change programmes inspired by the insight I gained from the perspective of the workers. Alongside that, I continue to follow my interests around the connection between people and work, as well as organizing the All About People workplace event. My work and life seem to have become one. People often ask me what I do in my free time, and I have to answer them honestly. It’s all our free time, it’s what we choose to do with it that counts. Taking the time to understand what those choices look like is essential, but can be scary. I know that the quality of my personal life has increased alongside the quality of my work life, just by discovering what I really want to do and coupling it with allowing myself to be me. I believe that we should all have the opportunity to create impact in our work, and I’m making it my mission to help make sure we do. My goal is to stop that Monday-morning feeling, stop the stress, the anxiety, the hopelessness, by giving everyone the tools to spend every single day doing exactly what they choose to do – and being successful at it. — Andy Swann is protagonist/ catalyst at Simple Better Human, founder and organizer of All About People. He creates workplace change programmes for BDG Architecture + Design Q2 2017 Dialogue

072-075_Dialogue_Q2_2017.indd 75

26/01/2017 18:02

STRATEGY

Electric dreams: the power of values The evidence from one of the world’s biggest companies shows how defining values helps you make big decisions and build resilience, writes Camelia Ram

Deciding what to do and then making it happen is much easier said than done, especially in rapidly changing environments. Yet the best performing chief executives are able to drive strategy to avoid becoming strangled by esoteric weeds. They are able to clearly articulate what the organization must get right, why it matters, and engage in how it translates throughout the organization. General Electric (GE) has a clear sense of values and consistently translates this into action to sustain competitive advantage. Its strategy is based on these key factors:

H AV E A H E A RT

Define what you care about

Values, or what an individual or organization cares about most, help to shape the future. Innovation at GE provides a powerful example of values in action. Imagination is at the heart of GE – it is the key thing it ‘cares’ about and, thus, everything it does has to contribute to that key value. It “imagines things others don’t, builds things others can’t, and delivers outcomes that make the world work better”.

S E T A TA R G E T

Identify what you want to achieve

Knowledge of values helps to articulate objectives – what the individual or organization hopes to achieve. Innovation is built into the GE Beliefs (see box opposite), which frame the mindset Dialogue Q2 2017

076-077_Dialogue_Q2_2017.indd 76

26/01/2017 18:14

STRATEGY

and behaviours to change its culture and deliver on its strategy. The beliefs reflect a renewed emphasis on customer focus and reinvention through agility.

CHOOSE YOUR COURSE

Let values shape key decisions

Perhaps most powerfully of all, values create new paths when companies are faced with big decisions. Innovation has been at the core of reinventing the brand story, helping to place the focus on how the company should do business in the future. The Ecomagination initiative, launched in 2005, was regarded as a bold move by GE, not least because the company was considered to be one of the world’s worst polluters at the time. Ten years on, it is one of the world’s top global green brands. In 2015, the company launched a new initiative with strategic partners, such as Total, Walmart, Intel, Statoil and BHP Billiton, to explore how they can lead the world in finding resource-eﬃciency solutions. This highlights the power of values to drive transformation over time.

B E AT YO U R B I A S

Values cut through situational pressure

Values influence the alternatives that an individual or organization may consider. Values can help guide decisions when the pressure of the current situation might otherwise push the decision towards a short-term, non-strategic objective. For example, if your current situation is one of resource constraints, it can be tempting to make small changes to streamline existing operations rather than explore more fundamental changes. If, on the other hand, your current situation is perceived as business-as-usual, there may be a bias to ignore fundamental changes that may be occurring in the external environment. However, when guided by values, the individual or organization is empowered to explore alternatives consistent with areas they care about, and therefore grapple with issues they choose to face and have control of. They become more proactive about the choices they make.

STOP THE ROT

Jettison projects that no longer meet your values

It is all too common to fall into the trap of doing more

THE GE BELIEFS

GE crowdsourced its values – known as its beliefs – from its employees. They are: Customers determine our success Stay lean to go fast Learn and adapt to win Empower and inspire each other Deliver results in an uncertain world

G O O D B Y E TO A L L T H AT How GE sold off GE Capital to focus on innovation In April 2016, GE decided to sell about 90% of GE Capital, the financial services unit that once provided approximately half the group’s earnings. The sale opens up resources to boost digital capabilities through platform investments such as Predix and hiring investments in software engineers and data scientists. This trade-off is consistent with the importance of innovation in two ways. First, it provides GE with the opportunity to exploit technology to boost productivity in US manufacturing, which has stagnated since 2010. Second, it represents a realization that certain investments prevent the firm from pursuing innovation. The sale of GE Capital gives the company the opportunity to capitalize on the possibility of helping key clients in oil production and mining address challenges due to the slowdown in the world economy and fall in commodity price.

in order to achieve objectives. It is just as important to identify what to stop doing to determine whether choices being made and alternatives being considered remain relevant for the context. To this end, making sense of what is changing – and why – can identify hidden risks or opportunities to achieving outcomes consistent with one’s values (see panel above).

MAKE IT A HABIT

Values must become a routine part of decision-making

As we have seen, being able to articulate what matters most helps to frame choices diﬀerently, to create better alternatives, and to develop an enduring set of guiding principles for oneself or one’s organization. Making this routine can be supported by encouraging team members to articulate values in easy decision situations so that it would help prepare them to do it in harder situations. Asking various ‘what if?’ questions to examine how the relative importance of values may change if context changes – in terms of external focus, resource constraints or stakeholders involved – will help identify coherent patterns in what matters most. These patterns define the fundamental, enduring elements of what the individual or organization stands for, which will form the foundations of resilience and adaptability over the long term. Q2 2017 Dialogue

076-077_Dialogue_Q2_2017.indd 77

26/01/2017 18:14

NEWS NATION

Africaâ&#x20AC;&#x2122;s state of emergency A democratic crisis in The Gambia has seen ousted president Yahya Jammeh refuse to leave office

IN OR OUT?

Saloum river

43%

SENEGAL

Adama Barrow (challenger) Sandougou river

AT L A N T I C OCEAN

40%

Gambia river

Yahya Jammeh

BANJUL

(incumbent)

GAMBIA

17%

Mama Kandeh Geba river

Jammeh refused to leave power after losing the election in December in a shock victory for challenger Adama Barrow

Casamance river

GUINEA-BISSAU

FAC T F I L E T H E G A M B I A Land area

Official languages

4,127 sq mi

English

(10,689 sq km)

Population

1,882,450

GNI per capita

$1,610

Capital

Life expectancy

Banjul

63 Women

(challenger)

We are ready. If no political solution is found, we will step in Col Abdou Ndiaye, of the Senegalese army, pledged to invade neighbouring Gambia if Jammeh refused to step down

LONG TERMER

23 Number of years outvoted president Yahya Jammeh was in office after seizing power in a bloodless coup in 1994

Major religions

Islam

60 Men

Dialogue Q2 2017

078-079_Dialogue_Q2_2017.indd 78

27/01/2017 09:49

NEWS NATION

Your Dialogue SOCIAL SCENE

Follow us on twitter @dialoguetweets Follow the editor @brjwalker David Slocum @davidslocum 26 Nov It’s not the size of #innovation but the amount of advantage caused: #PeterDrucker insight is good @DialogueTweets Carlos Giménez @Carlos48horas 8 Dec If you have the power or not… How to motivate someone who has no interest in changing vía @dialoguetweets Colleen Hutchings @Hutchingsrocket 13 Dec Great article @SunLifeCA outstanding #leader training thankful for my time and lessons that last via @dialoguetweets

Getty

Scott Barman @scott_barman 8 Jan Why you need to be #agile via @DialogueTweets #ProjectManagement #TeamWork

I am not going to involve my soldiers in a stupid fight. I love my men Chief of defence staff, Ousman Badjie, promised that the Gambian army will surrender rather than fight the invading Senegalese

A CRISIS UNFOLDS

17 Jan

Date on which Jammeh declared a state of emergency in an attempt to cling on to power

Number of sides on which The Gambia is bordered by Senegal, which threatened to invade

4pm

Number of nations in Economic Community of West African States (Ecowas), which has called on Jammeh to stand down

Time at which Barrow was sworn in as president in the Gambian embassy in Senegal – rather than the Gambian national stadium as planned

DIALOGUE IS BROUGHT TO YO U B Y… EDITORIAL BOARD

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

Ben Walker, editor Kate Harkus, art director Luisa Cheshire, chief subeditor Miro Iliev, social media executive MANAGEMENT

Martin Liu, publisher Niki Mullin, business development manager niki.mullin@lidpublishing.com Charlotte Hutchinson, communications executive

Disclaimer Copyright 2015 by Duke Corporate Education and LID Publishing Ltd. All rights reserved. Material may not be reproduced without permission of the publisher. While we take care to ensure that editorial is accurate, independent, objective and relevant for the readers, Dialogue accepts no liability for reader dissatisfaction rising from the content of this publication. The opinions expressed or advice given are the views of individual authors and do not necessarily represent the views of Dialogue. This journal is also supported by Knowledge Partners, including Duke Corporate Education as Lead Knowledge Partner. Whenever an author is related to a Knowledge Partner it will be noted as such. Dialogue takes every effort to credit photographers but we cannot guarantee every published use of an image will have the contributor’s name. If you believe we have omitted a credit for your image, please email the editor. ISSN 2053-4361 Printed by Pensord www.pensord.co.uk

PUBLISHING

Published in the United Kingdom by LID Publishing, 1 Adam Street, London WC2

Q2 2017 Dialogue

078-079_Dialogue_Q2_2017.indd 79

27/01/2017 09:49

REVIEWS

IN ASSOCIATION WITH

How to succeed at being University, Inc Governments have changed the focus of universities. Here is a guide to the market-driven world, says Liz Mellon

The Market Oriented University: Transforming Higher Education John A Davis and Mark A Farrell Edward Elgar Publishing bit.ly/marketuni

Academics tend to dislike the notion of students as customers, as it means giving students what they want, not what they need

This book tackles the knotty problem of increasing, and sometimes global, competition in the higher education sector, with the UK and Australia as comparable case studies. It is a well-researched handbook, with good footnotes, which starts by making the case for change in how universities see themselves; not because universities necessarily want to change, but because successive government policies have demanded greater accountability and performance. The authors argue that the concept of higher education as a public good has been replaced by the government view that the main beneficiary of education is the individual – and so it is the individual, not the government, who must pay. Not only are competition and market forces considered to be in the best interests of students – raising the standards of teaching and of university facilities – but also making students pay for their education saves government money and doesn’t lose votes. The 17,000 universities in the world need to compete for students to survive. Davis and Farrell take the reader through psychology – why status and relative earnings matter to individuals, and why a university’s reputation matters more than teaching quality; through marketing – explaining the distinction between marketing and being a market-oriented institution, and how to brand and diﬀerentiate yourself; and through strategy – from how to conduct a PEST (Political, Economic, Social and Technological) analysis, through leading change, to the role of disruptive innovation. They oﬀer an ideal textbook to the university wishing to distinguish itself from its peers, making the point that organizations with

higher levels of customer satisfaction outperform others, and demonstrating how rankings may actually drive reputation, rather than the other way around. The one chapter that doesn’t oﬀer a summary and conclusion is number three, and that’s where I would have loved to hear what the authors think about the debate at the heart of the issue – can students really be considered the customers of universities, rather than their products? Academics tend to dislike the notion of students as customers, as it means giving students what they want, not what they need, with education becoming more about improving career prospects than self-actualization. The authors return to the topic in chapter six, this time delegating to universities the task of identifying their customers, who might be students but could also be future employers – or even society itself, because GDP increases as levels of education rise. Fair enough. Those are issues that could be expanded for the second edition. We are promised barriers to becoming a market-oriented university in chapter eight, which turns out to be more about vision, mission and strategy – I think universities would find an overview of the barriers helpful (rather than assumed or subsumed under the PEST analysis). The authors also assert that non-elite universities must learn to compete, while elite institutions are somehow protected by their status and reputation – this is counter to what disruptive innovation teaches us! Still, this is a well-grounded, how-to handbook for a university that has decided who its customers are – and needs the rationale and route-map to become market-oriented.

Dialogue Q2 2017

080_Dialogue_Q2_2017.indd 80

27/01/2017 09:55

REVIEWS

IN ASSOCIATION WITH

Postcards from the edge Meryl Streep combines tough acting roles with authenticity. That works in business as well as Hollywood, finds Liz Mellon

If only more managers used stories to communicate, delivering strategy would be a lot easier

Performance Breakthrough: A Radical Approach to Success at Work Cathy Salit Hachette

Alamy

bit.ly/performance breakthrough

Cathy Salit has dedicated her life to using her acting skills to teach managers how to improve their performance at work. Whether it’s giving feedback, entering a room with presence, making a presentation or chairing a meeting, it turns out how we do it has as much, or more, impact as what we do. In her long-overdue book, Salit leverages her years of experience and distills her knowledge so that her valuable work can reach a wider audience. Fundamentally, the challenge, as we grow older and get promoted, is to keep learning and growing – adding new tricks to the bag and maybe throwing a few old ones out. Instead of sticking to what we know, and maybe becoming stuck as a result, this book shows you how to stay authentic, but keep stretching and developing. The powerful example cited in the book is Meryl Streep – an accomplished actress who is capable of taking on a wide range of roles, while still remaining essentially Meryl. And that’s exactly the point. You have to remain essentially you – just with a wider skillset and a broader range of performance. If I could recommend two chapters, I’d go for ‘Improvise Your Life’, which is all about being in the moment and dealing with – and building on – what is right in front of you. In this busy world,

we too often run past what is really happening and miss possibilities. There is a strong link here with mindfulness. The second chapter I’d pick would be ‘We’re All Storytellers’ – and not just because it starts with a quote from my favourite book, Alice’s Adventures in Wonderland. Storytelling is an art form that has been passed down through generations over aeons. If only more managers used stories to communicate, delivering strategy would be a lot easier. Stories are compelling, inspirational, motivating and – above all else – teach us what to do and how to be. They are more memorable by far than pie charts and PowerPoint presentations, and connect human being to human being. For the super-busy reader, there is a handy epilogue at the back, which is actually a summary of all the exercises suggested in the book and a quick primer of the contents – the reader could start here and then choose which parts to read in more detail. For those of you who may be a little sceptical about the relevance of acting to everyday life, I would suggest reading it first and then deciding. I believe we act every day – but without a framework or preparation most of us act rather badly. This book can help you fix that. Q2 2017 Dialogue

081_Dialogue_Q2_2017.indd 81

27/01/2017 09:57

REVIEWS

IN ASSOCIATION WITH

THE LEARNING CURVE WITH HEATHER MACNEILL

Traditional learning is being eclipsed as technology – and learners themselves – develop apace

The future is at stake for LMS The debate over the demise of the learning management system (LMS) is in full flow. Some believe LMS is disappearing completely, while others are adamant that LMS is thriving and here to stay. My stance falls somewhere in the middle. I believe the platforms and systems we use for corporate learning today are going through a complete (and necessary!) transformation, as the needs of learners are rapidly changing. You may think, “Well, hasn’t this evolution been happening for several years?” The answer is yes, it has. But in 2017, we’re going to see changes in learning technology truly take oﬀ. Let’s start by talking about why LMS, as it stands now, no longer works. The traditional LMS focuses on learning through required readings and courses, facilitated from the top down. Based on the 70:20:10 model for learning (see graphic below), learning via LMS covers only 30% of the equation – formal education and training. What’s left out are the informal and social learning components – the other 70%. Modern learners retain most of their knowledge through self-discovery and collaboration, so learning ultimately fails when it is forced. Not only is more knowledge retained through informal learning and social interactions, today’s employees actually crave freedom to engage with content of their choosing, to provide feedback

on pre-established concepts and to interact with colleagues and experts to formulate new ideas. When learners are empowered to challenge old concepts and recombine content with their own interpretations, engagement in learning programmes builds. As the learning preferences of today’s employees become progressively more self-guided, the trend for learning professionals is to swap the role of ‘teacher’ for ‘informal learning facilitator’. Empower employees to find their own answers via more modern means, like through curated content and IT consumerization. Then, challenge them to develop their own ideas in a more loosely structured learning environment.

Appealing to the modern learner

It’s known that the Millennial workforce is taking over, and they’re very picky about job perks and opportunities when considering a career path. Gallup tells us that 87% of Millennials rate professional or career growth and development as a high priority. That’s compared to 69% of non-Millennials (so we know professional development is important on a broader level – just more important among younger generations). If opportunities for growth aren’t provided, companies can anticipate higher turnover rates, since 40% of employees won’t stick around without

T H E 70:20:10 M O D E L

70%

Informal and social learning

20%

Formal training

10%

Formal education

modern learning tools or clear paths for advancement. To avoid high attrition rates and to engage our workforce in learning programmes, companies need to adopt platforms that are open and that incorporate expert content as a starting point. Provide learners with capabilities to discuss curated content with colleagues, to challenge original ideas and network with global experts, and to invite clients and partners into the learning experience. In an environment such as the one just described, opportunities for career growth are both clear and endless. Employees are granted freedom to take control of their own professional development and to emerge as thought leaders in a natural and inviting way. The traditional LMS was a wonderful tool 20 years ago. But now the age of collaborative learning and working is upon us. It’s no longer just about software – it’s about content, collaboration and networking. Vendors oﬀering legacy learning technology must evolve – slowly, of course, to avoid losing credibility with existing customers – but they must evolve nonetheless. As Josh Bersin said in a recent blog post: “It’s only a matter of time before LMS vendors and learning experience software start to come together.” When it comes to providing learning experiences that appeal to modern learners in corporate settings, will slowly evolving legacy systems win the race? Or, will it be won by new players that are faster in developing the right technology that combines native content, and exploit the synergies between content, tools and network? New technology looks much the better bet. — Heather MacNeill is head of communications for BlueBottleBiz, the first collaborative learning platform for business professionals

Dialogue Q2 2017

082_Dialogue_Q2_2017.indd 82

27/01/2017 09:58

REVIEWS

IN ASSOCIATION WITH

PIERS CAIN ON BOOKS

Trust not authority is the new currency of great leaders

How to tackle the trust deficit Piers Cain is a management consultant

Blakey proposes that business leaders should become ‘trusted stewards’ – responsible, sociallyaware and trustworthy. A trustworthy leader needs to demonstrate ability, integrity and benevolence

Trust is in short supply these days. Brexiteers don’t trust experts, Donald Trump doesn’t trust the US Secret Service, and many people don’t trust him. People don’t trust banks or oil companies to do the right thing. People don’t trust chief executives to pay themselves a fair salary. It gets worse. British newspaper the Sunday Times in January ran a front-page story, “bosses track you night and day”, about “sociometric badges” being tested in at least four UK businesses, including a highstreet bank, to monitor their employees’ fitness, productivity, emotions and ability to get on with colleagues 24/7. So, to complete the circle, it seems that at least some employers don’t trust their staﬀ and would like to control them more, in the interests of greater productivity. These pilot schemes are reportedly voluntary, but for how long? (Interestingly, the pilots don’t appear to be monitoring the alertness and emotional health of those people whose decisions really could damage the organization – the members of the executive board). John Blakey’s The Trusted Executive is timely; but his belief that “trust, not authority, is the only glue that will hold organizations together in a diverse, global, technology empowered world”, faces some strong headwinds if it is to prevail. His book is based on a combination of academic research (mainly in psychology), interviews, case studies and the author’s experience as an executive coach. It is an intriguing mix of self-coaching manual and thought-provoking call for change. Blakey’s basic argument is that the role of business leaders is to anticipate – to take a view on where the world is going and to position their organizations to perform well in the new situation. He contends that the traditional model of business leadership has failed to anticipate how the world has changed. Traditional business leaders legitimize their position by intellectual ability and on the authority of their

position as executives. Executives have a responsibility to generate a profit for their shareholders, and pretty much everything is subordinated to that requirement. However, a combination of social media, the internet, globalization, and greater diversity has broken down this legitimacy. The consequence of failing to anticipate these changes is widespread distrust in business and business leaders. Something has to give. What can be done? Blakey proposes that business leaders should become ‘trusted stewards’ – responsible, socially aware and trustworthy. He identifies three key characteristics that a trustworthy leader needs to demonstrate: ability, integrity and benevolence. All three elements must be present, so a leader that lacks the ability to deliver results will not be trusted. Deliberately echoing Covey’s Seven Habits of Highly Successful People, Blakey identifies nine leadership habits that inspire results, relationships and reputation: coach, be consistent, be honest, be open, be humble, evangelize, be brave, be kind, and deliver. He believes that these attributes of excellence can be strengthened through practice; so a large part of the book is devoted to helping the reader analyse these habits, evaluate how well developed they are in themselves or their teams, and how to measure improvements. An attractive feature of this work is that it discusses what to do when you fall short of meeting these high standards. So often writers on management and leadership focus on success but have little practical to say about learning from failure and how to do it. Yet there is much to be learned from the experience of business leaders who have fallen from grace but have the honesty and courage to face the reasons why. — The Trusted Executive: Nine leadership habits that inspire results, relationships and reputation John Blakey, Kogan Page Q2 2017 Dialogue

083_Dialogue_Q2_2017.indd 83

27/01/2017 09:59

lidlearning-dialogue-trazada.pdf

11/5/16

14:20

CMY

084_Dialogue_Q2_2017.indd 70

26/01/2017 12:02

REVIEWS

IN ASSOCIATION WITH

The disruption antidote

There is hope for companies wanting to escape the epidemic of digital disruption, discovers Stephen Warrington Death by digital disruption is likely to be the most common postmortem diagnosis for failed businesses of the first few decades of the 21st century. Those corporate coroners who delve further will, however, detect that the underlying cause is more a malaise of the managerial mind than a frailty of the functional body. To avoid this outcome, a liberal dose of David Guillebaud’s prescription is in order for today’s managers. Disruption Denial explores the forces of disruption – such as digital technologies, big data, and the behaviour of new Millennial customers – which are pulling the rug from under many of our biggest business brands, and are threatening the livelihood of millions of bewildered, good corporate citizens. The reader is regaled with examples from every sector of the economy. Seeded throughout the book are compelling tools and frameworks. These give us all something to seize on and put straight into practice in diagnosing and treating our situation. You can feel every passionate ounce of the author’s extensive experience and deep, percolated insight going into this penetrating, zippy book. For me the towering delight of this book is its exposition of the managerial mind, of the human condition locked inside the corporate boardroom and the conventional wisdoms and hierarchies

The underlying cause is more a malaise of the managerial mind rather than frailty of the functional body

that flow from it. Guillebaud captures this in his resonating concept, ‘the stuckness predicament’. Trapped in an ecosystem of ‘inbreeding syndrome’, which makes denial more probable than acceptance, management teams work ever harder at a losing game. Disruption Denial explores the social psychology behind this and draws richly on fields far removed from the typical business book, such as that of missionaries and architects.

By skilful navigation of behavioural traits, and by means of a thoughtful formulation of rebooted leadership qualities required in the disrupted world, this book oﬀers an encouraging way through for those who heed the call to arms. As the reader travels through the pages of this book, emotions are pulled in all directions. Smug understanding gives way to exhausted self-doubt, which is ultimately liberated by energizing insight into fresh opportunity. The author is an optimist at heart, and this positive outlook is founded on faith in those people who have the potential to set aside constraints and follow a refreshed vision. Disruption Denial should serve them well on that journey – and could help confront the digital disruption epidemic faced by many businesses today. — Disruption Denial David Guillebaud LID Publishing www.bit.ly/disruptiondenial

APPS FOR LEADERS: THE BUSINESS MODEL CANVAS

Business modelling just got a lot easier, finds Perry Timms The work of Alex Osterwalder and Yves Pigneur on their famed book Business Model Generation has lifted business modelling from a niche function to a craft all business leaders take part in. This app has been built to bring that thinking and design mindset to devices for busy corporate executives and startup entrepreneurs alike. At the press of the icon, you’re immediately presented with Facebook’s top-level business model and Google’s

SWOT analysis – useful illustrations of the way you can use this tool. This is a very handy and useful tool to look at all or part of your business. It helps you model its customer segments, value proposition, revenue and costs structures, channels, partners, resources and activities and relationships. It’s only an app, and of course you might want to involve your team in more of your design-thinking, but it’s a great start and a way to make sense of a complex

business, a new venture, or even map out a potential acquisition. — The Business Model Canvas – Android and iOS — Perry Timms is an independent HR/OD practitioner, speaker, writer and CIPD adviser on social media and engagement. Tweet him @PerryTimms Q2 2017 Dialogue

085_Dialogue_Q2_2017.indd 85

27/01/2017 10:01

LAST WORD

KARINA ROBINSON

This is no counterfactual. China stands to benefit from the eruption across the Pacific

China will gain not lose from Trump presidency Karina Robinson is chief executive of Robinson Hambro

Around 90,000 people are employed by Chinese-affiliated companies across more than 80% of congressional districts – a handy lever for China if relations deteriorate

Donald Trump wants to take on China. The president’s winning campaign promised to impose heavy tariﬀs on imports of Chinese goods and brand the Asian superpower a currency manipulator. Several analysts subsequently forecast that it would make the Middle Kingdom one of the biggest losers from his presidency. And yet, counterintuitively, this column believes China looks likely to be a winner. The world has indeed gone topsy-turvy when President Xi Jinping appears on stage at the World Economic Forum defending globalization. The vacuum left by the US is rapidly being filled. At an economic level, China’s rise is visible in at least two areas: trade and treasuries. First, the US-led Trans-Pacific Partnership, from which China was excluded, looks dead. Both Trump and the Republican Party – which dominates both houses of Congress – have expressed opposition to it. As a result, in December, US ally Australia spoke out in support of the Beijing-directed Free Trade Area of the Asia-Pacific (FTAAP) proposal, as well as Beijing-supported regional trade pacts, which exclude the US. Second, given that a Trump government plans to increase spending while lowering taxes, larger borrowings will be needed. China has been by far the largest foreign owner of US treasuries for several years. This amounted to $1.185 trillion – or over 19% of foreign-owned treasuries – as of August 2016, according to estimates from the Federal Reserve. China’s goodwill is crucial to issuing more debt, although, as usual in these cases, Beijing’s ownership of such a large stock of US government bonds ensures the relationship is one of mutual dependence. There is a third area, foreign direct investment. Data from 2015 shows Chinese investors bought a record $15 billion worth of companies and real estate in the US, a figure which was set to be double in 2016, according to data from the Rhodium Group

and the National Committee on US-China relations. Late in 2016, Dalian Wanda, China’s largest real estate company, acquired the US company behind the Golden Globe Awards for $1bn. Around 90,000 people are employed by Chineseaﬃliated companies across more than 80% of congressional districts – a handy lever for China if relations deteriorate. Additionally, China could prove an important ally in improving ailing US infrastructure, a $550bn Trump promise and one that all parties can agree on. The Chinese are master builders and their experience in Africa – where they have built roads and bridges in exchange for minerals and land – will stand them in good stead. (Your intrepid correspondent recently witnessed this for herself, driving along the asphalt roads of Tigray in Ethiopia, all built by the Chinese.) The dollar’s status as the primary reserve currency remains. Yet last year over 22% of China’s external trade was settled in RMB, well up from zero in 2010, while HSBC estimates it will shoot up to 50% in 2020. Among other eﬀects, this will give a funding cost advantage to Chinese banks who had been labouring under the disadvantage of Western banks’ greater access to US dollars for trade, writes research boutique Redburn. The report outlines why Chinese banks look likely to increase their profitability at the expense of their Western counterparts. China, the great imitator, a country accused of illegally copying Western designs, broke the record for patent applications last year. Granted, there was government pressure on companies to file, and not all will stand up to international scrutiny. Still, well over a million patents were filed, more than those in the US, Japan and South Korea combined. Underestimating China is as foolish as believing pollsters can predict who will win the US presidency…

Dialogue Q2 2017

086_Dialogue_Q2_2017.indd 86

27/01/2017 10:03

The sharpest writing worldwide on global management and leadership Dialogue is a quarterly business journal for senior managers and leaders across the world, covering global business issues. It is distributed in print and digital formats. We can offer advertising, sponsorship and collaboration opportunities on special projects designed for your brand. Contact us for more information Niki Mullin, Business Development Manager | niki.mullin@lidpublishing.com |

+44 (0) 20 7112 8861

www.dialoguereview.com

048_Dialogue_Q2_2017.indd 48

Drucker_sup_v2.indd 23

26/01/2017 12:03

11/05/2016 11:39

CONCISE ADVICE G BI LAB

LL SMAOKS: BO

IDE

CLEVER CONTENT, DYNAMIC IDEAS, PRACTICAL SOLUTIONS AND ENGAGING VISUALS – A CATALYST TO INSPIRE NEW WAYS OF THINKING AND PROBLEM-SOLVING IN A COMPLEX WORLD

£9.99 IN UK/$14.95 IN US conciseadvicelab.com

088_Dialogue_Q2_2017.indd 88 ConciseAdvice2016_fall_AD_dialogue.indd 1

26/01/2017 11/10/2016 17:47 10:30