Dialogue Q4 2021 by LID Business Media

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IDE

Q4 2021

The New Business Context for Leaders

Stanley McChrystal Build your immunity to risk

Tendayi Viki Escaping the innovation theatre trap

Leadership How to compete on customer time

Strategy Cut through the ESG fog

Q4 2021

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The next play New rules for teams and how to lead them

The new rules for teams

SUDHANSHU PALSULE MICHAEL CHAVEZ

Rehumanizing Leadership

The belief systems that distinguish winners A rigorous evaluation of how leaders behave and how they are driven, revealing the secret code behind consistent and high-level success in leadership and management

Putting Purpose Back into Business The tools and mindset that you need to lead your organization into the 21st century

Research based on 1,000 business leaders Benchmark yourself, your team and your organization against the code now

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PATRICK WOODMAN EDITOR’S LETTER

United we stand

n a crisis, teamwork comes to the fore. It’s been one of the stories of the pandemic: in organizations around the world, the sudden shock of disease and economic disruption prompted astonishing feats of teamwork. From frontline health services to businesses jolted into adapting products and taking services online, the pandemic – especially in its early days – created rare shared purpose and clarity of focus. Yet, paradoxically, the pandemic has also pushed many teams apart. For those of us who thrive on working cheek-by-jowl with colleagues, it has been a long drought. Even for those for whom colleague interaction was more of an occasional treat, this has been a rare period of abstinence. Robbed of their usual ways of working, teams have had to revisit foundational basics: how do we do things? How do we stay in touch? How do we share critical information? That process has had real benefits. Amid the natural, bullish impatience to declare the pandemic ‘done’ and get back to ‘normality’ (something that’s only realistic in some parts of the world, of course, as the pandemic continues to rage), it’s essential that we recognize and retain those gains for our teams. That’s all the more important because of the underlying shifts in how we work, which predated – and will outlive – the pandemic: the drivers of intense competition, digitization, and the dynamics making the business world more volatile, uncertain, complex and ambiguous. Those changes have made teams the “atomic” unit of work today, as Sanyin Siang and Michael Canning put it in their feature (p20). The performance of teams is critical to organizational success; but for them to thrive, leaders need to fulfil a new role as team coach. Unfortunately, the reality is that many teams are mediocre, as Martha Maznevski writes (p28): they muddle their way through. The pandemic, however, has shown us in vivid colour just how teams can evolve to deliver super results. And with virtual working sure to stay, don’t miss Erica Dhawan’s

essential tips for how our ‘digital body language’ can catch up with our new ways of working (p24). Meanwhile, Stanley McChrystal – the retired US army general famed for leading international forces in Afghanistan – shares his thinking about the role of teams in managing risk. Just as the human immune system fights disease, so organizations’ Risk Immune Systems combat the risks they encounter, he argues (p16). Elsewhere in the issue, we have a special feature from B Joseph Pine II and James H Gilmore on that uniquely precious resource: time (p38). Too many businesses are careless with their customers’ time, but there is competitive advantage to be found in helping customers to save time, in creating experiences to help them spend it well, or even in enabling customers to invest their time in transformational goals. The theme of transformation is picked up by Nick Jankel, who explains why leaders need a new mindset to lead change, time and again – but often remain trapped by an outdated legacy mindset (p44). We also turn our eyes to China. Edward Tse reveals the foundations of China’s breathtaking economic success, and sketches three scenarios for its geopolitical and economic future (p74). We take a closer look at some of the key numbers with the News Nation profile (p80), while finance columnist Phil Young argues that the road to Covid recovery runs through Shanghai (p59). For the duration of the pandemic, and for the recovery, team performance will be critical. We’re stronger together.

For those of us who thrive on working closely with colleagues, it has been a long drought

Patrick Woodman is editor of Dialogue

Q4 2021

Dialogue is brought to you by: LID Business Media Editor Patrick Woodman patrick.woodman@lidbusinessmedia.com Art director Kate Harkus Chief subeditor Luisa Cheshire Editor-at-large Ben Walker Assistant editor Kirsten Levermore Publisher Martin Liu Business development executive Alec Egan. For advertising sales: alec.egan@lidbusinessmedia.com Duke Corporate Education Editorial chair Michael Canning Chief marketing officer Christine Robers Publisher Published in the United Kingdom by LID Business Media Ltd, Unit 304, The Record Hall, 16-16A Baldwins Gardens, London EC1N 7RJ

Inside... AGENDA

My edit Patrick Woodman on teamwork

Contributors Featured authors

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

Great minds Michael Chavez on how Jacobs Strategic Consulting’s Alexa Braun shows purpose can be liberating

Upfront Michael Canning on bringing team chit-chat back

Disclaimer Copyright 2021 by Duke Corporate Education and LID Business Media Ltd. All rights reserved. Material may not be reproduced without permission of the publisher. While we take care to ensure that editorial is accurate, independent, objective and relevant for the readers, Dialogue accepts no liability for reader dissatisfaction rising from the content of this publication. The opinions expressed or advice given are the views of individual authors and do not necessarily represent the views of Dialogue. This journal is also supported by Knowledge Partners, including Duke Corporate Education as Lead Knowledge Partner. Whenever an author is related to a Knowledge Partner it will be noted as such. Dialogue takes every effort to credit photographers but we cannot guarantee every published use of an image will have the contributor’s name. If you believe we have omitted a credit for your image, please email the editor. Cover image Shutterstock ISSN 2053-4361 Printed by Newnorth www.newnorth.co.uk

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LEADERSHIP

Kate Cooper on leadership Good leaders accept that change can be painful

Managing time Stop wasting customers’ time. Start helping them save it, spend it well – or invest it wisely

The big interview Nina Lualdi, vice president of product readiness and business evolution at Cisco

We must learn to dance between transactional and transformational leadership Nina Lualdi

Transformation mindset The latest neuroscience shows how to develop the right frame of mind for leading transformative change

Forging connections In a hybrid working environment, leaders need to foster a sense of cohesion

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FOCUS The new rules for teams

INSIGHT

News nation China marks 100 years of the Communist Party. What lies ahead?

Building risk immunity A team’s biggest risk is itself. How can leaders boost organizations’ defences against risks?

Rules for communicating In a hybrid world, digital body language is critical for great team communications

Team coaching: leadership’s new act Teams have become the atomic unit of today’s organizations. Leaders must learn to coach

What we now know about teamwork The pandemic has shown us everything we need to know about creating winning teams

Reviews The latest recommended reading

Big ideas Perry Timms on problem statements

Last word Sanyin Siang on rethinking assists

INNOVATION

FINANCE

MARKETING

STRATEGY

Vivek Wadhwa on innovation The US is losing the global race for talent with its barriers to immigration. It’s time to reopen the American way

The innovation theatre trap Innovation isn’t about putting on a good show: it’s about creating value

Taking responsibility If business wants to do good and help solve historic global challenges, it needs to engage with society

Dialogue Review

Phil Young on finance China was the route into the pandemic. For businesses, it’s probably the route out Future of banking Banks are fighting a losing battle with the disruptors. Could you turn the tide?

The balance sheet is useless for valuing digital corporations Anup Srivastava, p64

Valuing digital companies The old ways of reporting businesses’ value don’t add up in the digital economy 5

Giles Lury on marketing Branding touches every part of a business, but is marketing getting too big for its boots? Beyond marketing Marketers can’t control every aspect of a brand’s messaging, but they can coach a focus on values

In bloom Why we need a new model for understanding consumer needs

Rita Gunther McGrath on strategy The reverse income statement is an antidote to uncertainty Understanding China How the Asian superpower has thrived, and what its future might hold

Cutting through the fog ESG has become central in business, yet many leaders are unclear about what it involves

THE POWER OF BUSINESS

FOR THE COMMON GOOD OF SOCIETY

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

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

Contributors Stanley McChrystal A retired four-star general, McChrystal is the former commander of US and International Security Assistance Forces (ISAF) in Afghanistan and of the US’s leading military counter-terrorism force, Joint Special Operations Command (JSOC). He is founder and partner of the McChrystal Group, advising senior executives on navigating complex change, and is author of the bestselling Team of Teams (2015) and Risk: A User’s Guide, with Anna Butrico (out autumn 2021). Focus p16

Martha Maznevski

Erica Dhawan

Professor of organizational behaviour and faculty director for executive education at Ivey Business School, Western University in Canada. Maznevski has researched global and virtual teams for almost three decades and has worked with teams across the globe in a wide variety of industries. She is passionate about the potential for highperformance teams to manage complexity and engage people within organizations. Focus p28

A leading expert on 21st-century collaboration and innovation and an award-winning keynote speaker, Dhawan is the founder and chief executive of Cotential, and author of the best-selling Get Big Things Done: The Power of Connectional Intelligence. Her latest book, Digital Body Language: How to Build Trust & Connection No Matter the Distance, is out now. Focus p24

B Joseph Pine II & James H Gilmore

Tendayi Viki

Co-founders of Strategic Horizons LLP and co-authors of Authenticity and The Experience Economy: Competing for Customer Time, Attention, and Money, which was twice named one of the top 100 business books of all time. B Joseph Pine II (pictured left) is an internationally acclaimed author, speaker and management advisor. His other books include Mass Customization and Infinite Possibility. James H Gilmore is a sought-after speaker and advisor to organizations around the world. He serves as an assistant professor in the innovation

and design department in the Weatherhead School of Management at Case Western Reserve University, and also wrote Look: A Practical Guide for Improving Your Observational Skills. Leadership p38

A corporate innovation expert, associate partner at Strategyzer and author of Pirates In The Navy, The Corporate Startup and The Lean Product Lifecycle. Viki was previously director of product lifecycle at Pearson, where he co-designed an awardwinning innovation framework, and he has been shortlisted for the Thinkers50 Innovation Award. Innovation p52

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THE ISSUE AT A GLANCE

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

What we’ve learned

The pandemic has taught us all we need to know about leading great teams. Martha Maznevski highlights the need for a ‘heartbeat’, for disciplined pace, and for shared leadership (p28). Meanwhile, Erica Dhawan looks at the new rules for digital body language (p24).

The new rules for teams

It’s about time

Images Shutterstock; Amazon

In today’s economy, the team has become the “atomic unit” of work. So write Sanyin Siang and Michael Canning, as they explore why team performance is now mission-critical, and set out leaders’ new role: team coach (p20). One of the key aspects of teams is their impact on how organizations handle risk, says former US army general Stanley McChrystal, who examines the part played by teams in a healthy ‘Risk Immune System’ (p16).

Time is the most precious human resource – yet firms tend to prioritize company time over customers’ time. That has to change, say B Joseph Pine II and James H Gilmore, as they explain how to help customers save time, spend it well – or invest it wisely (p38).

Change and change again

In a VUCA world, change is not a one-off: it’s continual, so leaders need to help their organizations adapt time and time again. To succeed in that challenge, writes Nick Jankel, they need to break free of a ‘legacy mindset’ rooted in the past and cultivate a transformation mindset (p44). But change cannot be superficial: Tendayi Viki explains how leaders can avoid the trap of showy-but-ineffective innovation theatre (p52).

GREAT MINDS MICHAEL CHAVEZ

Define your purpose, free your people At Jacobs, purpose provides alignment so individuals can shine

an purpose be liberating? The Great Mind of Alexa Braun shows that it can. Braun, vicepresident and operations leader for strategic consulting, North America, at Jacobs, demonstrates how common purpose, clearly defined and universally adopted, allows talent to shine. Jacobs, a global engineering and technology professional services firm, has articulated an authentic purpose that is embedded in its very fabric. The firm’s purpose – to create a more connected, sustainable world – is the foundation not only of the company’s brand, but of everything it does and creates. In services like strategic consulting, purpose provides an arena in which individuals can express themselves, shaping their work to the client and situation through experimentation and ideation. Braun and her colleagues help ensure that this common purpose drives growth and value for Jacobs. Facilitating their effort has been a strong organization-wide focus on leading from purpose, which is a central topic in Amplifi, the firm’s global leadership development programme cocreated with Duke Corporate Education. Jacobs’ strategic consulting services help clients maximize value through delivery of integrated advisory solutions that cut across the traditional silos associated with engineering consulting. To help bring Jacobs’ purpose to life for her team, Braun and her colleagues employed several triggers. One step was to ask a series of stimulus questions: “Who are we?” “Why does strategic consulting exist today?”

“If we were to disappear tomorrow, who would miss us, and why?” A second move was to extract people from their day-to-day operations and challenge them to consider their reasons for being there. Colleagues were asked to define success, map their direction towards it and – crucially – envisage its impact on their clients and the people they serve. How would their achievements make a difference in the world? A third gambit was to seek an outside view. “We asked clients what they thought of us,” the team told me. The final

A thorough analysis of purpose led to a unity of vision rather than a unity of output

examination was introspective. “We asked ourselves how we wanted clients to think of us,” Braun revealed. “There was a need to really share our story and the ‘why’ behind what Jacobs does.” The result was eight key terms that define the team’s approach: ingenuity, diversity, technical excellence, agility, integrity, passion, collaboration, and client focus. The first – ingenuity – speaks forcefully to an ethos of purpose-led freedom: “We ask bold questions, take risks, and frame failure as learning opportunities,” the team told me. Another, agility, extols the vitality of an open mind and shaping one’s approach to circumstances. This thorough analysis of purpose led to a unity of vision rather than a unity of output. Individuals have the freedom and flexibility to chart their own path, which is critical when your business model is based upon creativity and providing a personalized service. “You can’t focus on the metrics first and the people second – that’s something that needs to be flipped,” Braun says. “If you focus on people first, and support their growth and success, the business will grow and succeed.” Together, the eight mantras act as a narrative and catalyst to inform decisionmaking. Their real-life application infuses everything Braun’s team does. They deem purpose the ‘strategic muscle’ that powers the service they deliver to clients, and their image to the world. Jacobs uses purpose to build its brand, “not vice versa”, the team told me. By amplifying and applying that purpose-led brand in their work, the strategic consulting team is a spearhead pointing towards a liberated and integrated future. “It’s that foundation of purpose – of brand – that is the constant,” says Braun. “If everybody is anchored and aligned to it, all the other tangible outcomes will resolve themselves.” Braun is a Great Mind with a grand vision: that defining and aligning on purpose allows your people to shine.

Michael Chavez is chief executive of Duke Corporate Education

“AN EXCELLENT AND INSIGHTFUL ADDITION TO OUR BUSINESS LITERATURE” – PHILIP KOTLER

“…a user-friendly, practical guide to creating an authentic, values-driven organization that offers a service experience based on meaningful engagement with employees and customers” – ROBERT SPECTOR, author of The Nordstrom Way to Customer Experience Excellence

“An informative read which will develop your thinking about the importance of client centricity and the criticality of consistent delivery” – PATRICK NOLAN, Vice Chairman, Global Banking, HSBC

Available through all good book retailers Print edition: ISBN 978-1-912555-80-2 | E-book edition: ISBN 978-1-911671-24-4 Published by LID Publishing (www.lidpublishing.com)

UPFRONT MICHAEL CANNING

Bring chit-chat back Informal moments matter

novel operating environment demands a radical approach. Leading amid maximum uncertainty, complexity and with a need for speed requires teams to operate with new levels of fluidity, collaboration and trust. “Leaders of such teams need to shift from Level 1 transactional relationships to Level 2 personal, cooperative, and collaborative relationships,” write leadership gurus Edgar and Peter Schein in their book Humble Leadership. Level 2 relationships begin by knowing the whole person and not just perceiving others by the role they fulfil. It’s being able to say in actions and words, “I want to get to know you better so that we can trust each other and work together to get our jobs done better.” Leaders must elevate the quality of their own relationships. Yet it is equally essential for leaders that they also cultivate next-level relationships between team members. This requires team leaders to become coaches, developing a team environment and relational platform to build Level 2 relationships between team members. Building this relational platform begins with being curious and interested in those we work with. Take the legendary Coach K of Duke University’s basketball team. Each year the age gap between Coach K – real name Michael Krzyzewski – and his players increases. He uses several techniques to stay in touch with his team. One involves listening to the music that his players love, understanding what they like, and what they respond to. He urges teammates to do the same with each other. Learning to discover commonalities and appreciating differences across the team is a valuable part of building the

team’s relational platform. As Sanyin Siang, executive director of Duke University’s Fuqua/Coach K Center on Leadership & Ethics, notes, team coaches need to create space for informal moments. Research by the MIT Human Dynamics Lab shows that the best performing teams spend around 50% of their time communicating outside formal meetings. Siang neatly frames this ‘the chit-chat imperative’. Xerox PARC understood this – hence its positioning whiteboards and ‘conversation’ chairs in hallways. Another example is former Red Hat chief executive Matthew Szulik. Szulik was a nonengineer leading a company of engineers. So, instead of the usual posh office of a C-suite executive, he set up shop in a

Learning to discover commonalities is a valuable part of building the team

small office with no door, located across from the free soda machine. As engineers walked by, he stopped them for chit-chat moments. This formed a natural pathway for understanding key issues, and creating a sense of shared ownership in the direction of the company. How do you create those chit-chat moments across geographies? McKinney is an advertising firm with major offices in New York City and Durham, North Carolina. ‘Two offices, one company’ is central to its ethos. While visiting its Durham office, I encountered what seemed to be a vertical door into a brick wall. I could see people walk past on the other side of it. But, as I approached, I realized it was actually a digital screen hung vertically to mimic a door. The screen showed the New York office in real time. Magically, the screen was located not in a staid conference room, but next to the coffee station. Both offices were able to easily engage in chit-chat moments. One staffer in Durham even brought her newborn to the North Carolina office to meet her New York teammates. That is the good of it. But rarely are things so rosy. Microsoft’s 2021 Work Trend Index surveyed 31,000 people in 31 countries. It unearthed two disturbing trends: one, people’s networks are shrinking; and two, leaders are falling out of touch with employees and need a wake-up call. The pandemic has stretched relationships. It has physically – and figuratively – dragged people apart. Leaders might be comfortable working remotely, attending and running meetings. Yet the people with whom they work miss the informal chats, connections and coaching they once enjoyed between office meetings. Remember the Scheins? Next-level relationships are needed if teams are to collaborate and create at speed. Remoteness undermines the chit chat imperative. Leaders must invest in spaces that enhance relations – in both the physical and digital worlds.

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

LEADERS ARE THE

!"#$% !"#$%&#%'() FOR POSITIVE

!"#$%& Today, greater complexity and exponential change are stretching organization and leadership models to their breaking points. So, what’s next? The demand for leaders and leadership to solve new types of problems, execute faster, and connect with people is greater than ever. We need a new kind of leadership — the kind that can transform organizations, and innovate and execute in the marketplace through rapid experimentation, greater agility, and harnessing the collective creativity and energy of people. At Duke CE, we believe in the power of leadership and are committed to helping leaders become a force multiplier for positive change in the market, their organizations, and the world. We work with you to create transformational learning experiences for your leaders so they are ready to meet these transformational challenges.

www.dukece.com

THIS ISSUE’S FOCUS

The new rules for teams

usiness is changing. As the challenges, threats – and opportunities – facing organizations are shifting, so too are organizations’ sources of resilience and strength. More than ever before, organizations stand or fall on the success or failures of their teams. It’s time for leaders to refocus on how they lead those teams. In this issue’s Focus, we look at the central importance of teams in how organizations manage risk in today’s economy. We examine one of leadership’s most critical new roles: that of team coach, with a particular responsibility for developing team members. With hybrid and remote working putting a premium on electronic communication, we’ve lost the non-verbal cues provided by physical body language – so we set out the new rules for digital body language. And we reflect on what so many organizations learned about teamwork during the pandemic, and how they can create the high-performing teams needed today and in the future. Read on

Articles 16 Boosting the risk immune system 20 Team coaching: leadership’s new act 24 The rules of digital communication 28 What we now know about teams

FOCUS TEAM RISK

Boosting the Risk Immune System A team’s biggest risk is itself. How can leaders build more robust defences? Writing Stanley McChrystal

couple of years after leaving a 34-year career in the US military, I attended a dinner where I found myself seated next to the former Secretary of State, George Shultz, and a lady he introduced as “changing healthcare in America”. It was an effective attention-getter, and I found myself asking the twenty-something chief executive to tell me more. It was fascinating. Her firm was called Theranos and they were developing revolutionary technology that would deliver a range of important tests from miniscule blood samples. If it delivered as described, it would be game-changing, and extraordinarily lucrative. But little turned out as promised. After a Wall Street Journal exposé illuminated their shady

too easy to portray Theranos as simply the product of a charismatic yet dishonest leader. As is often the case, the company’s fall was a system-wide, teamlevel failure to deal with risk.

Risk, teams and blood samples

Image Shutterstock

Teams need new ways to organize, communicate and collaborate in this increasingly complex age

business practices, the fall of both Theranos and its founder, Elizabeth Holmes, has become a cautionary tale. It was reported that their testing was often inaccurate and their technology unreliable; that they had misled investors; and in some cases, that their science endangered patients. (In 2018, the Securities and Exchange Commission charged Theranos and Holmes with what it called “an elaborate, years-long fraud”, charges that Holmes agreed to settle. Further fraud charges, which Holmes denies, are yet to be tried.) One interpretation of the Theranos story describes the triumph of ambition over integrity, while another highlights the dangers of believing something that sounds too good to be true. But after closer examination, I’ve concluded that it is

You would think that after a life associated with risk, I would have either mastered it or grown sick of it. Neither is the case. I have long been fascinated by the risks we take, or don’t; by why some people are more risk averse than others, and why our perspectives on risk largely stay consistent over time. After leaving the military in 2010, I realized my learnings about risk and teams applied to the corporate world. I founded a consulting firm, McChrystal Group, that took lessons from Afghanistan and Iraq into boardrooms and businesses around the US. The issue that our teams faced against al-Qaeda in Iraq was not dissimilar to what companies struggle with today: competitors who are faster and more dispersed, requiring quicker decisions and more empowerment than ever before. Teams needed new ways to organize, communicate and collaborate against increasingly networked threats. Our ‘team of teams’ methodology, which replaces formal command and control structures with a more dispersed way of leading teams, offers a new perspective on how we should learn and lead in this complex age. This led me to wonder: in a world of networked threats, what’s the greatest risk? I spent 2020 trying to answer that question. The result is a new book that focuses on risk – Risk: A User’s Guide – in which my co-author and I argue that the greatest risk to us, is us. From years of study and my time observing military units and later business clients, I conclude, clearly and plainly, that teams have both unique strengths and their own inherent risks. When a large group gathers around a conference room table, there is power in numbers – but there is also a risk of conflicting narratives, dropped balls of communication, and biases that coagulate into groupthink. I’ve come to believe that the greatest risk to a team is the team itself. The way a team communicates, how it’s structured, its diversity, its set of biases and so on all determine how successfully it responds to risk. Whether you are in a pair of rowers or one of 10,000 employees, your team’s ‘Risk Immune System’ determines how you interact with risk.

The Risk Immune System What is the Risk Immune System? As we all know very well, our human immune systems are silent heroes – toiling day-in and day-out to combat the tens of thousands of threats we ingest daily. We

FOCUS TEAM RISK

become suddenly aware of them when they fail – when the defences crumble and a noxious cough or other malady rushes in. I argue that Risk Immune Systems are the same for organizations: they determine how teams detect threats, assess their vulnerabilities, respond appropriately and learn for the next time the risk comes their way. I’ve concluded that the success of a team depends on the health of its Risk Immune System. In Risk: A User’s Guide, I offer this depiction of the Risk Immune System, composed of eight Risk Control Factors: narrative, structure, technology, diversity, bias, action, timing and adaptability. They are connected by a ninth factor, communication, and overseen by a tenth, leadership (see graphic, right). Teams can calibrate their response to risk by how they leverage these ten factors. Just as we only notice our human immune systems when they break down, it’s helpful to see a Risk Immune System that has failed. At Theranos, there were failures across a range of factors. Firstly, the team’s structure prevented a proper response to risk. John Carreyrou, the journalist who broke the Theranos story, writes that Holmes was the only one “who had the full picture of the system’s development” (Bad Blood: Secrets and Lies in a Silicon Valley Start-up, 2019). Holmes positioned the company’s crucial chemistry and engineering departments far from one another – the departments couldn’t communicate directly, but had to go through her. It was impossible to work through cross-sectional issues and problems. Additionally, as Carreyrou found, Holmes created two rival engineering groups to promote internal competition and didn’t allow them to communicate with one another; she also reportedly kept the board, and its decisions, far away from the company’s day-to-day dealings. Another factor, diversity, also played a key role in Theranos’ fall, as is clear from Chris Clearfield and András Tilcsik’s book Meltdown: What Plane Crashes, Oil Spills, and Dumb Business Decisions Can Teach Us About How to Succeed at Work. Holmes recruited board members such as George Shultz, James Mattis and Henry Kissinger, national security professionals who, Clearfield and

THE BRIEFING

The greatest risk to a team is the team itself

Tilcsik argue, “would have been more at home at a public policy thinktank than at a cutting-edge medical technology firm”. Nobody on the Theranos board could draw on significant subject-specific knowledge to question its technology and risks around its functioning. Beyond diversity, Holmes and Theranos were weak on the timing Risk Control Factor: they continually launched and advertised a prototype, rather than a product. Concerned that slow actions to build perfect products would harm customer appetite and demand, Theranos stalled: it never slapped the table with a finished design proven to work both in the laboratory and with patients. Theranos’s technology Risk Control Factor was also weak, in that they failed to productively apply machinery, equipment and know-how. Yet I believe the greatest cause of Theranos’ fall was the leadership of its figurehead, Holmes, who orchestrated the entire Risk Immune System. As the books of Carreyrou and Clearfield and Tilcsik show, Holmes was quick to fire anyone who challenged her plans, thwarted communication between her teams at the company, and misled investors and board members about the firm’s faulty technology. In a murder case, drops of blood can lead to the killer. In the case of Theranos, the drops from its faulty blood-testing technology lead to Holmes’ role as an unsuccessful leader who stalled the productive functioning of its Risk Immune System. In the end, the greatest risk to Theranos was the company itself: how it was structured, how its teams incorporated diverse opinions, and how and when it applied its technology to test its customers. The company crumbled from within.

Boston and Covid-19 Medical testing is also a key part of the story of the City of Boston – and how it responded to its own healthcare challenge in spring 2020. The threat of the approaching Covid-19 virus was clear to then-Mayor Marty Walsh, a veteran of crises like the snowstorms of 2015 and the Boston Marathon bombing. As businesses and schools began to close their doors and ambulances rushed citizens to

Teams and the source of risk

The solution

In a world of intense competition and networked threats, teams need new ways to organize, communicate, and collaborate: less hierarchical and more dispersed. Teams create strength in numbers, yet they also carry unique risks. In fact, the biggest risk to a team is the team itself.

An organization’s Risk Immune System enables teams to combat the threats they encounter. The System is composed of ten Risk Control Factors including narrative, structure, technology, diversity, bias, action, timing and adaptability – all connected by communication and overseen by leadership.

The ten factors in the Risk Immune System

Narrative

COMMUNICAT IO N

Structure

Bias

Diversity LEADERSHIP

Technology

Action

Adaptability

Timing

school buses and drivers to deliver food to children in need. Mayor Walsh enabled the team to make new connections, so all would benefit from new information shared in the daily call. Unlike Holmes, Mayor Walsh accelerated rather than stalled actions as his team combatted the threat of Covid-19. The City of Boston also had a successful timing Risk Control Factor, building a 1,000-bed field hospital in days and staging ambulances in a productive way to get care to patients more quickly. Actions to combat risk are ineffective if ill-timed – but the Crisis Response Forum kept the entire team working on a rigid cadence to deliver the right materials at the right time. As mayor, Walsh kept the entire Risk Immune System functioning. He was a consistent presence at the Crisis Response Forums, crystal clear in his communications and motivating to his people. Notably, he was humble: he credits the successes of Boston’s response to Covid-19 to the team. It focused on, and strengthened, each of the ten Risk Control Factors. The best leaders build the strongest teams – ones that can reduce their vulnerabilities and weather whatever threats come their way.

Teams, risk and leadership

hospital, Walsh knew he had to connect his team. He focused more than ever on communication. Along with his chief of staff, Kathryn Burton, Mayor Walsh established daily Crisis Response Forums where teams across the city could respond to issues large and small on a shared video teleconferencing platform. With the core leadership team in City Hall, the rest of the team took the call safely from their kitchens and living rooms. They met at 8am every morning with a strict agenda: they would reflect on the past 24 hours of operations and look ahead to the next 24 hours, identifying interdependencies between teams and shared resources. This ensured that they acted on the same set of information. Contrary to Elizabeth Holmes, who intentionally separated departments, Mayor Walsh purposefully connected teams. The Crisis Response Forum leveraged the structure and diversity Risk Control Factors, bringing together teams that wouldn’t typically have worked together to gather diverse perspectives. Two specific programmes relating to job training and education, which hadn’t previously collaborated, began to share meeting spaces and resources. They found idle

Stanley McChrystal is founder and partner of the McChrystal Group. His new book with Anna Butrico, Risk: A User’s Guide, will be published in October 2021

Though the greatest risk to a team is the team itself, teams provide the greatest assets for organizations to successfully interact with risk. Together, your teammates can share information that paints the clearest operating picture of the organization. Your comrades can be intentional about how they structure their units, be conscious of the narratives they create, the diversity of perspectives they seek, and the world beliefs and biases the team shares, in an effort to ward off groupthink. Leaders are the wrench that keeps the dials working together seamlessly to create a robust and effective response to risk. Elizabeth Holmes and Boston’s Mayor Walsh, in their comparison, provide a helpful lesson: the ability to detect, assess and respond to risks starts with the leader and how they leverage the different Risk Control Factors. Prioritize your leadership and focus on making the factors work together to strengthen the Risk Immune System. In the same way, think about where your teams are. As our world continues to become more and more complex, our threats and our vulnerabilities will change – but through our teams, we have the ability to orchestrate successful responses to risk. Focus first on your highest-impact teams and iterate throughout the organization to quickly achieve scale and mitigate your overall vulnerabilities. Though the greatest risk to us is us, our teams have the strength within to provide solutions. The question is: will we?

FOCUS THE NEW RULES FOR TEAMS

Team coaching: the new leadership act Teams have become the atomic unit of work. To realize their potential, leaders must learn how to coach Writing Sanyin Siang & Michael Canning

mplicit in the idea of teams is a promise: together, we can achieve more than we could as individuals. In healthy team contexts, diversity of knowledge, skillsets, and perspectives can all be harnessed to achieve what was seemingly impossible alone. We witnessed this on 18 February 2021, when Perseverance, the Mars rover, travelled more than 300 million miles through space to arrive on the Red Planet. The robot rover’s touchdown was an amazing feat of science, teamwork and leadership spanning years of research and work. There may have been 50 people in Nasa’s control room at the time of the landing, but the actual team numbered more than 1,000. It comprised scientists and engineers from varied disciplines, countries and organizations all around the world. When everyone cheered madly, it was because of the wild success of an audacious team. Adam Steltzner, Nasa’s chief engineer for Perseverance, notes in his book The Right Kind

Teams have become the most pervasive – the atomic – unit of work in organizations

of Crazy that there is no one person who can do the lion’s share of the work. Teams require 100% collaboration and cooperative effort. To achieve something as incredible as the Mars rover landing, you need a group who can operate, collaborate and innovate under pressure. While your team may not be dealing with Nasa-level goals, you’re probably being asked to take on more complex problems, operate under uncertainty, collaborate across more boundaries, and act with increasing speed. All of these demands are fundamentally changing what is expected of teams, how people cooperate on teams, and what it takes to lead a team. Teams have become the most pervasive – the atomic – unit of work in organizations. Externally, it is only through teams that complex strategies can be fully implemented, innovations emerge, and change happens. Internally, teams are the site on which company culture meets the real work, shaping the employee’s everyday experience.

Employees’ expectations are also shifting quickly. People want more engagement and inclusion, and faster, focused development. From the patterns we see in conversations with chief executives, chief people officers, and current and former students, it is clear that workers want and expect more humanity from their work. Employees want to feel like they matter; they want to contribute, learn and develop, both as workers and as people. They long to be part of a team that provides the meaning, challenge and security necessary to become their best selves and accomplish great things. These market and internal forces have shifted what’s required and needed from team leaders. Today, team leaders need different tools – they cannot rely on positional authority and technical expertise to create a winning team. Instead, they need to reimagine their role as a coach. At Duke CE, we are pleased to have partnered with ExecOnline to reach more leaders through a

course on team coaching, part of a wider series on coaching. We have identified four key domains of team success for leaders to focus on as coaches: 1 Fostering collaborative dynamics 2 Building the relational platform 3 Ensuring psychological safety 4 Accelerating learning and adaptation

It is only through teams that complex strategies can be fully implemented, innovations emerge, and change happens 21

While our online course covers all of these aspects, this article will focus on the fourth domain: accelerating learning and adaptation.

Accelerating learning and adaptation In some ways, the goal of all coaching is to accelerate learning and adaptation. But in today’s world, and for today’s leaders, we suggest that there is a specific way to accomplish this objective: create learning and enrichment opportunities in realtime, every day. When time is tight and the stakes feel high, a leader’s natural inclination is often

FOCUS THE NEW RULES FOR TEAMS

to just get the work done. The leader becomes controlling, telling others what to do, or just doing the work themselves. (Does this sound familiar?) The result is that both the leader and the team miss out on a learning opportunity. So how can you turn everyday challenges in your work into development opportunities? To gain insight into this question, a team at Duke CE sought out organizations that demonstrated the capability to accelerate development and deliver high-quality results while under pressure to deliver. They wanted to parse the key factors that made those organizations successful in these particular ways. A benchmark example was the innovative and powerful learning environment at Johns Hopkins School of Medicine. Working with Dr Charles Wiener, MD, professor of medicine and physiology and president of Johns Hopkins Medicine International, Duke CE learned the four foundational principles of Hopkins.

Leaders’ new objective: create learning and enrichment opportunities in real-time, every day

Problem-based learning uses real-world problems as an opportunity to develop critical-thinking and problem-solving skills. At Hopkins, they use ‘rounds’, during which doctors visit patients in the hospital, as the immediate context and material for development. During rounds, young doctors are given the chance to explore the nuances of a medical case with the guidance of a more senior physician. In this way, rounds create a habitual, daily touchstone for exercising meaningful problem-solving skills in an environment safe for exploration. In a business context, our daily, habitual touchstone encounters might be our morning meetings, weekly project updates or customer-client visits. These meetings are probably necessary to the functioning of your organization; are you leveraging them to maximize learning opportunities and growth? Are you exploring hypothetical situations and encouraging everyone to speak? Activating the learning mindset of your team starts with the kinds of questions you ask around the table.

THE BRIEFING

‘Teach, don’t tell’ is a method of teaching based on the Socratic method. It calls upon senior, experienced doctors to use questions and inquiry to teach, rather than simply providing answers. Instead of instinctually providing a diagnosis or opinion, experienced doctors have to ask probing questions and, importantly, listen to gaps in understanding. The Socratic style of questioning not only increases understanding and promotes self-discovery among medical students and young doctors, but provides an immediate feedback loop for the students’ own understanding. This method, long-known and widely utilized in medical settings, is underused in business. The team leader can and ought to ask questions pointed toward problem-solving, aiming to point out gaps in the communal understanding of an issue. Teaching in this manner pushes the leader to be a better coach, empowering individual thought and ideas. This, in turn, accelerates both individual learning and group understanding. As one manager in one of our client organizations said, “Not only does the ‘teach, don’t tell’ method deepen team learning around specific customer challenges, but it also allows a team to explore issues more thoroughly, possibly unearthing previously overlooked errors and incorrect assumptions.” To use this method in practice, try using these coaching questions: “What have you tried thus far?” “What’s working? What’s not?” “Is there a different way we could frame the problem?” “Do you have all the data?” “What assumptions are you bringing to the problem?” “Who does this well? What would she do?”

‘Point of the wedge’ is a metaphor used at Hopkins to describe the position of the junior member of the team – typically an intern – with responsibility for an individual patient’s care. This person stands at the apex of a large team of

Leadership’s new role

How to coach teams

Teams have become the atomic unit of work. It is only through teams that complex strategies can be fully implemented, that innovations emerge, and change happens. Teams are where company culture meets real work, shaping employees’ everyday experiences. Leaders cannot rely on positional authority and technical expertise to create a winning team: instead, they need to reimagine their role as a coach.

One of the key objectives for the leader-coach is to accelerate team learning and adaptation – and four principles developed by the Johns Hopkins School of Medicine illustrate how. Use problem-based learning to develop critical skills. Teach, don’t tell. Devolve key responsibilities to the most junior appropriate person, the ‘point of the wedge’. And learn from mistakes, for instance through after-action reviews.

The components of team success Shared ground rules Conversational dynamics

PSY CH OL O

E SAF

CO LLA

AL IC

E IV AT

ICS NAM DY

Common purpose Connecting structure Collective strengths

LP NA

LE AR N

ING

TIO RELA Next-level relationships Chit-chat imperative

LA TF OR M

L ER ACCE

ED AT

Teach, don’t tell Learn from mistakes and successes

professionals dedicated to achieving quality patient care, and to the learning and development of the individual at the point. In the hospital setting, this wedge comprises attending physicians, residents, medical students and nurses. They are available to provide support to the point of the wedge and observe progress from a distance, to ensure patients are receiving quality care. Importantly, however, the day-to-day responsibility for delivering quality patient care always falls to the junior member of the team. Contextualizing this in the business world means pushing responsibility and accountability to the most appropriate less-experienced team member in order to help them develop and own outcomes. As team leader, our natural instinct is to assign work to the most experienced team member or to the person occupying the role naturally encompassing the work. Overcoming this instinct and appointing a less senior or less experienced team member as the point of the wedge, and pairing them with a more senior person, can accelerate learning and development. The ‘point’ is responsible for preparing rigorously to address the problem, or make the presentation, or handle the client. Once the point has presented their views on the issue, a structured discussion ensues, in which guided inquiry is used to deepen the point’s learning and, in many cases, the full team’s. In our work with clients, we’ve found that less-experienced

Sanyin Siang is executive director of the Fuqua/Coach K Center on Leadership & Ethics (COLE) at Duke University. Michael Canning is global head of new businesses at Duke Corporate Education

team members felt a strong sense of accountability and enthusiasm for their work as a result of being positioned as the point of the wedge. They often expressed excitement over the opportunity to take on additional responsibility and showcase their skills to their teams.

“We learn from our mistakes” is the final principle at Hopkins. Errors and near-misses happen, but should be reframed as opportunities to improve, not to assign blame. After-action reviews (AARs) are the natural locus for reflection in a business context, but what constitutes a good review? In her work with the military, Sanyin Siang learned about two key principles used by the US Special Forces for effective AARs. First, remember that there are multiple perspectives operative in a single team. Each comment made by a teammate comes from their own unique point of view. Everyone has a perspective to share; everyone has a different role to play. When reviewing an action item, take time to hear the perspective of every person in the room. The most junior member of the team might lack certain information, but he may also notice patterns of behaviour that senior members are blind to. Senior team members might not have a hand in every detail of a project, but they might be able to provide context for everyone’s individual work. Second, foster an environment in which everyone is encouraged to speak up, regardless of where he or she stands in the hierarchy. The US Special Forces spend intentional time building culture that promotes speaking-up. Everyone has permission to critique others – if you see something wrong and bite your tongue, you’re not doing justice to the organization. Instead of focusing on blame, though, each person is encouraged to frame an action around what should be replicated and what should be improved. Then, to apply what they’ve learned in an AAR to the next mission, teams take the time to perform a preaction review, ensuring that past learnings are in the front of everyone’s mind. From the military, from medics, and from a groundbreaking mission to Mars: these insights point towards a very different future for how teams work. Like businesses today, today’s teams are having to learn how to run faster and adapt in briefer and briefer cycles. They don’t need captains who are only capable of running a pre-determined play. Instead, they need more team leaders who think and act like team coaches, who are capable of developing a play as it evolves, and who can draw on the very best in their people, to deliver the exceptional results our organizations need.

FOCUS DIGITAL BODY LANGUAGE

The new rules for communicating In a hybrid world, digital body language is critical for team communications Writing Erica Dhawan

ow do we write a message to a superior that makes us sound mature? How do we remind our co-worker to send us the report she promised without sounding passive-aggressive? How do we acknowledge the changes of the past year in our emails without sounding insincere? In May 2021, I published a research study with Quester called The Digital Communication Crisis (available on www.ericadhawan.com), which aimed to understand the challenges that we all face in workplace digital communication. Our survey of almost 2,000 office workers found that over 70% experienced some form of unclear communication from their colleagues. This leads to the average employee wasting four hours per week on poor or confusing digital communications, which adds up to an average annual amount of $188 billion wasted across the American economy. The ways we make meaning in team communications are more confounding than ever. Quarantine and the rise of hybrid-everything over the last year has meant even more digital interaction than we already had, and made the opening questions above more common – and more urgent. When the internet came along, no one was given an instruction manual for how to

Our punctuation, our response times and our video backgrounds are signals of trust, respect and confidence

communicate – how to read signals and cues – in a digitized world. But the new cues and signals we send make up the subtext of our messages in digital communication. They are our digital body language. Everything from our punctuation to our response times to our video backgrounds are signals of trust, respect and even confidence. Yet we have all just picked things up as we went along, which has left room for mistakes and plenty of miscommunication. Even before Covid-19, things like Slack and Zoom had replaced much in-person interaction in the contemporary workplace. Today, roughly 70% of all communication among teams is virtual – and naturally, this has shifted how we work with each other.

Empathy and engagement The loss of non-verbal body signals and cues is among the most under-appreciated and wellconcealed reasons for disengagement at work. If used properly, and at scale, empathetic body language equals employee engagement. Disengagement happens not because people don’t want to be empathetic, but because with today’s tools, they don’t know how to be. Yes, a chief executive can say, “My office door is always open” and tell everyone he’s “accessible” and “approachable”. But what if he’s never actually in

the office, and the only way to communicate with him is to jump into his daily queue of 200+ daily emails or Slack messages? Traditional respect has always been based on the physical signals we exchange in person. Each personal interaction generates positive signals that our brains have come to understand unconsciously, through hundreds of thousands of years of evolutionary training. But today, many of our interactions lack visible cues for making meaning. The issue was illustrated by a meeting I had with my client Kelci, a senior leader at Johnson & Johnson. Kelci had received some tough feedback from her team around morale issues; in her review, her boss commented that Kelci’s “empathy was weak”. When Kelci and I first met, I kept my eye out for the standard, universal markers of belowpar empathy: an inability to understand the needs of others; proficiency (or the lack of it) in reading and using body language; poor listening skills, and a failure to ask deep questions. I was confused.

Kelci was fantastic at all these things. She could make anybody feel at ease in a room, her body language signalled respect and understanding, and she clearly listened deeply and carefully. What was going on? The answer had less to do with Kelci and more to do with today’s tech-reliant workplace. Instead of being low in empathy, Kelci – like nearly everyone I have counselled – didn’t know what empathy meant in a world where digital communication had made once-clear signals, cues and norms almost unintelligible. A tone of voice? Approachable body language? Those things don’t cut it anymore. The digital world requires a new kind of body language. The problem is, no one can agree on what it is. For example, Kelci believed she was doing everyone a favour by keeping her emails brief and succinct. That’s not how they were received by her team, who found them cold and ambiguous. Kelci cancelled meetings at the last minute with no explanation, which made her teammates feel

FOCUS DIGITAL BODY LANGUAGE

THE BRIEFING

disrespected, as though her schedule mattered more than theirs. During strategy presentations, she would glance down repeatedly at her phone, making others feel she was absent. Kelci’s digital body language, then, was abysmal. It cancelled out the very real clarity that comes when workplace colleagues – humans in general – feel connected to one another. Her example shows how important it is to make visible efforts to value others when we communicate digitally, and to consciously show respect and empathy toward people in our professional and personal lives. Over half of all employees report they don’t receive the respect they need or want from their leaders. That sounds like a whole lot of ungrateful leaders – but could there be another explanation? What if those leaders are expressing respect in ways we can no longer recognize? As the signs of respect have changed, so, too, have the skills we need to use to make our colleagues feel valued.

Leaders need to refocus on core communications skills. Read carefully: too much speed may come at the cost of accuracy and clarity. Write clearly: proofread, and make it a point of pride to send unambiguous messages. And remember that a phone call is worth 1,000 emails.

We comprehend less when we read on a screen than we do reading print

according to linguist Naomi Baron, is that we comprehend less when we read on a screen than we do reading print. We devote less time to the passage onscreen and tend to skim and search instead of reading slowly and carefully. One big reason we read so poorly online is that we’re typically moving at lightning speed anyway. Instead of taking the time to go carefully through messages, we race through them towards an indeterminate finish line. Our need for speed then leads to exchanges marred by miscommunication and confusion. It’s the digital equivalent of talking over each other. But are we really as busy as we think we are? We’re not. A lot of our speed, and our anxiety around speed, is artificial. It ends up costing us accuracy, clarity and respect. Even if you really are too busy to get back to people immediately, there are ways to show you aren’t blowing them off. You can show respect by, for example, sending back a quick note (“Got it!”) to let someone know you got their text or email and are on it. Give a ballpark estimate of when you’ll be able to respond at more length. Ultimately, the goal is to show that you’ve really read other people’s messages, by addressing all their relevant points and answering any and all questions. If that’s not possible, let your colleague know you’ll get back to them with more answers when the time is right. That way they know you’re not disregarding them altogether.

Writing clearly is the new empathy Writing well and above all, consciously, is a critical mark of respect. Period. (And no, I’m not angry with you.) The chief marketing officer of a pharmaceutical company was communicating with her team about

Images Shutterstock

How do we show emotional intelligence in our hybrid world? Take three principles from my new book, Digital Body Language. Reading carefully is the new listening Whereas we once talked and shared information across a table or over a phone line, our conversations today happen in written form. Instead of listening while others share their ideas in real time, we’re often reading what others have to say in an email or an instant message. The problem,

With more teams adopting hybrid working, the potential for communication breakdowns has vastly increased. In person, we can express empathy and understanding through non-verbal physical body language. Today, avoiding confusion and disengagement requires us to master our digital body language.

Digital body language

Showing emotional intelligence

New communication needs

punctuation. The solution is simple: proofread your emails before sending them. Take advantage of spell check and other proofreading programs. Proofreading is both a habit and a skill: making it a point of pride to send clean, unambiguous copy will help people take what you write more seriously.

preparing a presentation for a board meeting. She shared a quick idea over email – “Do you think we should add more research on oncology to the presentation?” The CMO was convinced she’d said, “Let’s add an extra two bullet points on this slide”, but her brain was playing tricks on her. Two weeks later, her team had spent 30 hours or so preparing 40 slides on oncology research. The executive had no idea the deck was coming and had frankly forgotten about the two bullet points she’d proposed. But her team was used to responding in full to her requests and seldom asked questions, which made them feel even more devalued when their 40 slides turned into two bullet points. The bottom line: be mindful of writing ‘thinkalouds’, and separate them from true marching orders. When writing, do the little things. Check your tone and think about how your message may be perceived, especially based on your rank. A lot of the time, email misunderstandings are the result of a dropped word or misleading

Check your tone and think about how your message may be perceived, especially based on your rank

Erica Dhawan is an expert on 21st-century collaboration and innovation, and author of Digital Body Language (Harper Collins, 2021)

A phone call is worth a thousand emails A German client once told me about a “neverending email back-and-forth” she was part of with two colleagues. They were “having a circular written dialogue, covering the same ground over and over without understanding each other”. My client got both parties on the phone: together, they were able to explore the key questions in different ways, and eventually get to the bottom of the issue. “Sometimes, I think we are all guessing what the other parties mean on an email chain, when we actually have no idea,” she reflects. A good phone conversation is fast becoming an obsolete art – which is too bad, since a call can save lots of time while simultaneously generating goodwill. We can’t explain everything digitally, – so when you receive a vague or confusing text or email, don’t be afraid to request a phone conversation, a video call or even, if possible, an in-person meeting. If it’s a sensitive dialogue, requesting a quick conversation shows you’re being thoughtful. Instead of making you look indecisive, waiting a few beats before responding to questions shows the other person that you are listening and taking your work seriously. With so many written platforms at our disposal, we can also get caught up in asking too many questions in email or group chat. Phone, video or live meetings safeguard us from asking one tiny question after the next, instead requiring us to formulate the right questions. At the beginning of any project, it’s more helpful to ask open-ended questions than nuanced ones. “It helps me see whether the other person understood what I’m saying,” a leader told me once. Requests such as “Tell me what success looks like for you”, or “Help me understand what the best next steps look like” prevent a slew of emails and ensure that everyone on the team is clear about the project goals and their individual roles. Our understanding of empathy and how we convey it needs to be redefined for the contemporary workplace. In today’s world of hybrid working and digital communication, we’re all immigrants, learning a new culture and language. Learning curves are inevitable. But whether we like it or not, being a good leader or team colleague today means mastering a type of body language that didn’t exist 20 years ago – one that continues evolving at a rapid pace.

FOCUS SUPERPOWER TEAMS

most teams are mediocre, not great. We muddle through with adequate processes, and we get decent results – not great ones. Today, teams have to perform at their very best, sustaining and even increasing their performance while connecting their members in positive relationships, with each other and with the firm. They need to be Superpower Teams. The lessons learned during the pandemic challenge some of our fundamental assumptions about teams in general, and point to new approaches for Superpower Teams.

What you’ve learned from virtual teams

What we now know The pandemic has shown us everything we need to know about creating winning teams Writing Martha Maznevski

rganizations demand more and more from their teams – and so they should. The business environment is changing faster than ever, customers are more demanding, and supply chains are reconfiguring. Today’s organizations face new heights of both possibilities and constraints. Organizations need to be responsive and flexible, while providing stability for both trust and efficiency. Organizational structures, no matter how sophisticated, can’t address all these demands simultaneously. Teams can. Unfortunately, they don’t always live up to their potential. Humans have worked in teams for thousands of years, but

Most leaders have learned a lot about teams during the pandemic

Most leaders have learned a lot about teams during the pandemic. Most importantly, we saw that virtual teams can perform really well – indeed, some worked better virtually. Researchers have known about this for years, but for many people it has been difficult to accept. Plus, it was hard to force ourselves to try a virtual set-up when we didn’t need it. For virtual team-working, there are some critical things to get right. The research summarizes them in three categories: heartbeats, disciplined technology, and shared leadership. The heartbeat is about keeping a team’s blood and oxygen – the relationships and knowledge – flowing. This is extremely difficult to do virtually. Teams that worked in-person pre-pandemic could at least build on what they had before – but if you formed a new team or welcomed new members while working virtually, you had to pay close attention to building relationships and sharing the nuanced knowledge that can’t be found in the manuals. To do this well took a lot of time, but it will have paid off. The best virtual teams schedule heartbeat meetings on a regular basis. Whether daily, weekly or monthly, the regularity is vital. Just as important is the agenda. If you’re simply walking through reports that could be read independently, the heartbeat won’t provide much blood or oxygen. Use shared time to check in with each other personally, and to focus on a few tough problems that require multiple perspectives. This builds trust and shares the knowledge needed to carry the team between heartbeats. The second thing to get right is disciplined technology. You probably gained a new appreciation for your team’s workflow platform, be it a comprehensive application like Microsoft Teams, or a combination of tools. Your team members had to agree on what to put where, how to keep in touch, and who was doing what. They learned to be flexible with technology and to jump

from one platform to another if required. You probably spent far more time talking about how to work together than you ever did pre-pandemic, and you took more time to manage workflow processes. This brings us to a third theme. In effective virtual teams, the leadership role is shared across more people. The coordination job is bigger, so the leader simply can’t do everything well on their own. Good virtual teams delegate much of the process management and sub-task leadership they need to team members. Heartbeats, disciplined technology and shared leadership may have come to the fore during the pandemic – but they are just as important for

traditional, in-person teams. Why did we need to learn this lesson? Because when we’re working in person, we can get away without managing these drivers explicitly. We can muddle through and compensate for a lack of careful management, so we tend to be lazy. This is why traditional teams tend to under-perform compared with their potential: they find ways of working that are “good enough”. Virtual teams have to manage these drivers explicitly, or they fall apart.

Virtual teams can be better There are some things that virtual teams actually do better than in-person teams, once they have 29

FOCUS SUPERPOWER TEAMS

the basics right. These can be summarized in three categories. Virtual teams can discuss ideas better They can compare, analyse and combine ideas particularly well. Traditional teams work like an assembly line: one person speaks at a time, each responding to the previous speaker. A lot of time is spent on what everyone already knows – very little on bringing in new information. Virtual Teams, on the other hand, can work asynchronously and in parallel, for example with shared documents or electronic white boards. Everyone’s ideas can be recorded while still fresh and team members have constant access to all the ideas.

In virtual teams, the leadership role is shared across more people

Virtual teams can address difficult topics better Most of us prefer working in-person so we can read body language and sense each other’s emotions. However, our emotions can also get in the way – when our defences go up it’s hard to listen, and we may react without thinking. If relationships within the team are solid, teams working virtually are more likely to avoid personal conflict, while engaging constructively on tough topics. This improves decision-making and reinforces relationships. Virtual teams can develop leaders better This is a direct result of sharing leadership. When people are more involved in coordinating team activities, they practise leadership without the risk of a big failure. They get used to connecting those activities with the bigger picture objectives and strategic context – all of which prepares them for leading teams on their own.

2019, they had implemented solutions in many key North American markets. When the pandemic hit and customers started demanding digital solutions, the team was ready to accelerate globally. A second example comes from a large global bank. It is organized, like most multinationals, as a matrix. Each country has its own chief executive and functions. Corporate headquarters has a global executive vice president (EVP) for many functions – including cyber security. The country cyber security VPs report directly to their country CEO, with a ‘dotted line’ to the global EVP. The EVP’s top priorities are ensuring local compliance with global policies, and fostering good twoway communication between himself and the geographic units. (Notice how neither of these requires teamwork among the country VPs.) But at the same time, the bank also wants to strengthen its cyber security, prototype new ideas in multiple markets simultaneously, and anticipate threats by seeing global patterns. These broader goals require real teamwork. Cyber security needed a Superpower Team. The corporate EVP started by helping the country VPs build relationships with each other. When they spontaneously started sharing information and requests for help, he began to introduce the possibility of joint initiatives. The country VPs jumped on these eagerly, and selforganized to combine local responsiveness with global alignment. The team became stronger, and the bank was able to fend off attacks that hit their competitors. When the pandemic struck, the

Superpower Teams

Images Shutterstock

Let’s look at two examples of Superpower Teams in very different contexts. The building materials industry has been slow to digitize, and that includes the ready-mix concrete business. One ready-mix leader began to digitize in late 2018, seeing the benefits of more efficient logistics and more accurate ordering, tracking and invoicing. But they faced a host of barriers to change, from the fragmented nature of the industry to harsh working conditions. The company set up a cross-functional team with members from across the US. They developed and implemented solutions simultaneously in pilot markets, before adapting and improving the solutions for roll-out to other markets. They followed agile software development processes, but more importantly, they adopted Superpower Team principles for their teamwork. By late 30

THE BRIEFING

bank was so confident in their cyber-security they moved in-person banking procedures to digital at astonishing speed, learning around the globe.

Building Superpower Teams Superpower Teams don’t think about the in-person to virtual spectrum. They just define themselves as ambitious, engaged teams. They excel in their focus on managing processes and relationships, leveraging the tools they have on hand to achieve what they need. What can we learn from the concrete and banking Superpower Teams? Schedule heartbeats to breathe life into the team Both the concrete and banking team schedule heartbeat meetings at least six months in advance. Pre-pandemic, the concrete team met in person monthly for a full day, in a different place each time. They visited customer and logistics sites to explore improvements, before social events in the evenings. These injections of deep knowledge and relationship-building kept the team going until their next meeting. The global banking team scheduled their heartbeats in the form of two-day semi-annual meetings in-person, and monthly half-day videoconferences. At the in-person meetings they explored customer needs and cyber-security trends, and learned about the local culture in a social setting. The half-day sessions focused on problemsolving specific situations. During the pandemic, both teams switched their heartbeat meetings to virtual formats and increased the frequency – but they stayed disciplined with the agenda, focusing on complex topics and relationships.

Most teams muddle through with adequate processes and get decent results. But the challenges of today’s environment demand new levels of performance, and require teams to be agile and flexible. Fortunately, the lessons learned by virtual teams during the pandemic can propel the next generation of teams.

…to ‘Superpower Teams’ Superpower Teams focus on how they work, with regular ‘heartbeat’ meetings to nurture relationships and solve complex problems. They leverage technology with discipline to improve problem-solving and communications. And they share leadership to deliver winning results.

When we’re working in person, we can muddle through

members to analyse it from their own perspective on a continuous basis. Between heartbeat meetings, team members would discuss improvements; the shared data and analysis ensured they were working from an objective set of facts. The banking team went even further and learned to work well around the clock, passing projects from one time zone to the next. Share leadership to support and accelerate the team Both these teams had already learned the importance of sharing leadership before the pandemic hit. They had assigned different team members to managing the information, coordinating agendas and milestones, and facilitating communication. Both leaders focused on the quality of team interactions and keeping the direction. They were able to jump on difficult situations quickly, seeing them as opportunities to develop solutions before problems became crises. Once the pandemic moved everything online, both teams could continue these routines.

Disciplined technology to keep the tasks and engagement going Pre-pandemic, both Superpower Teams had developed strong discipline in their work between heartbeats. The concrete team used a simple set of tools for organizing their work: email, chat, phones, and shared drives. The banking team’s needs were more complex, as they worked in a highly sensitive area: they employed a full suite of team coordination tools, with dedicated support from the firm’s IT function. Still a team between meetings – working asynchronously Superpower Teams don’t think of teamwork as something that just happens when they’re together. The team is always ‘on’, and asynchronous work is part of the teamwork. In fact, they use the time between meetings to boost the team’s capabilities beyond expectations. The leader of the concrete team used their shared drive to post a constant flow of user data, and expected all team

From traditional and virtual teams…

Leading your team to their Superpower

Martha Maznevski is professor of organizational behaviour and faculty director for executive education at Ivey Business School, Western University

Today you’re probably debating what to keep from virtual ways of working as you move back to inperson working. Why not use what you’ve learned to become a Superpower Team? Remember how Superpower Teams define themselves: ambitious and engaged teams. As the leader, help the team get its toolkit and roles working: that lets you invest your energy in keeping the team’s ambitions high and focused, and supporting team relationships. Those are the two tasks that, critically, cannot be delegated. In Superpower Teams, they are the leader’s most important contribution.

INTERVIEW NINA LUALDI

The digital anthropologist Cisco’s Nina Lualdi serves – and shapes – the way humans live, work and play Writing Michael Canning

uch is spoken about transformational leadership, less is understood. Despite the critical need for transformational leaders to rally global business after a half-decade of extreme challenges, many leaders struggle to define transformational leadership. Fewer still can execute it. A striking exception is Nina Lualdi, vice president of product readiness and business evolution at tech giant Cisco. Lualdi is nicknamed Superglue, such is her adaptability to a series of complex problems, and her ability to connect teams across this $50bn-revenue behemoth. Managing an operation the size and scope of Cisco requires unimaginable levels of interconnectivity across the business. Lualdi terms it “horizontalization” – an effort that demands truly transformational leadership in a lateral space where hierarchies, incentives and reporting lines get re-imagined. “To be a leader, you need followers – if there are no followers, there is no leader,” says Lualdi. “In a horizontal model, people don’t follow you because they report to you. You’re not in charge of their bonus. So, they are only going to follow you if they trust, respect and feel safe with you.” The trap many leaders can fall into, says Lualdi, is the belief that transformational leadership is the 33

To be a leader, you need followers – if there are no followers, there is no leader

INTERVIEW NINA LUALDI

rung above traditional, transactional leadership. “When you suddenly need to work horizontally, you can find yourself having to pull the switch on transformational leadership,” she says. “But there is a misnomer there: when we think about what transformational leadership means, we tend to think, ‘oh, that means I’m a high-level executive, and I’m delivering pretty strategic stuff,’ but that is not what it means. Rather, when you pull that switch, first and foremost is that the empathy within ourselves goes up a notch. The second thing that switch needs to do is make your self-awareness shift for the better. As much as you are looking outside and at the teams that you need to lead, you need to be introspective about who you are, and where you are in the journey of empathy and selfawareness.”

Unique experiences The horizontal shift in leadership reflects a fundamental creative shift in the tech sector. The days of giants such as Cisco selling ‘products’ might be dwindling, or perhaps over. Success is built on building entire ecosystems that deliver unique experiences for customers. “You are moving to a model that needs to support entire experiences, whole platforms and new business models,” says Lualdi. “All of a sudden, you find yourself with a company that needs to shift horizontally. So now when we develop a technology it’s not just engineering that goes into development. It’s the whole company that shifts into development. What we now need to take to market is not a product, nor a platform – it’s an experience.” Lualdi has traced the sector’s metamorphosis from supplier of products to purveyor of holistic experiences. Her career took off as a support engineer at Olivetti in Italy, before moving to what is now Vodafone, via a professorship in Venezuela, where she’d earned her first degree in computer science years earlier. Her Strategic Program Management Certificate at Stanford signaled her transition from vertical to horizontal thinking and, by the late 2010s, she was unwaveringly looking across organizations rather than up and down them. Duke Corporate Education now works with her Cisco colleagues on the adaptive strategic execution programme, designed to help project managers think and act more horizontally. Cisco, like the other tech giants of its age, will require many transformational leaders working across the organization, from all of its parts. “We don’t have to invent it,” says Lualdi. “There has been lots of good research done on this in the past four or five years. But we do need to deeply understand it. We as leaders need to more clearly grasp the difference between transactional

CV Nina Lualdi 2017Vice president, product readiness and business evolution 2014-2017 Senior director, LatAm innovation 2010-2014 Senior director, Brazil transformation strategy and investments 2007-2009 Senior director, Services SW models and product management 2006-2007 Director, corporate operations strategy and planning 1996-1999 Programme manager, field operations Cisco (all above roles) 2002-2003 Strategic Program Management Certificate Stanford University 1992-1994 MBA, international business/marketing University of San Francisco 1982-1987 BSc computer science Universidad Central de Venezuela

leadership and transformational leadership.” She rejects the notion that transformational leadership is only strategic: “There is no one-toone correlation between transformational work and strategic work,” she says. “You can accomplish strategic and tactical work, and in both cases it may be essential to shift from transactional to transformational leadership styles in order to drive a successful business transformation.” Leaders must be prepared to adapt, she says, by coupling a transformational, empathy-driven outlook with the nuts and bolts of transactional management – and pivoting naturally between the two. “We must learn to perform this smooth dance between transactional and transformational leadership,” she says. “Because even in the same effort, even within the same initiative, even within the same body of work, at one point there may be a need for us to go into transactional leadership and, at another point, move into transformational leadership mode.” Lualdi considers this two-pronged approach to leadership as quasi-biological, a sort of inbuilt balance exemplified in nature. “I always go back to the human body,” she says. “The body has a system that allows itself to balance and rebalance. Because the body itself is designed to have the ability to sense things, essentially that is what you need to do in an organization. Transformation is an outcome of continuous evolution and it requires a whole-business version of the agile systems that we created years ago for software development. We need to find the equivalent of agile for whole companies. This is the next quest.”

Learning to let go The free-flowing agile company demands transformative managers that can empathize and inspire, yet these rarefied qualities alone are insufficient. Transformation requires something more prosaic, yet equally exceptional: an ability and willingness to not just embrace, but to let go. “We cannot get attached to things,” says Lualdi. “We have to learn to let go easily. Even if the thing we are letting go of is something that we ourselves have built, that we ourselves have worked on for years. We must let them go when it’s time. You have to go the extremes of yourself, find a reason to let go of something.” Letting go, pivoting, realigning for what’s next, is uncomfortable. Many companies grew up developing exceptional products, and within, there were many individuals that cut their teeth as product managers; many during that era remained with their organizations. How do they transfer and adapt their skills when their company is focused not on developing individual products, but solutions, platforms and experiences?

“The role of the product manager in the industry used to be market analysis, determining opportunities and customer needs,” says Lualdi. “Those needs informed product design, so that role ultimately attracted certain kinds of individuals – generally people who were engineers. They were analytical, plus they understood the technology. They liked to understand requirements and were very focused on needs and features.” However, the big shift towards cloud-based ecosystems demanded a new type of product manager, Lualdi argues. “When you shift a business model, the product manager needs to become a leader – a transformational leader. They need to become a leader that manages a whole portfolio of teams that will deliver an experience for the customer. Sure, they need to analyse the market, but the result of that data analysis must go beyond a set of features for the customer – it must embody an entire experience, and that’s a completely different mindset.” Lualdi likens the challenge to that of an interior designer. The customer thinks she has a clear idea of what she wants – a new kitchen and open family area, the loft extended, the hallway tiled – and the pieces that may fit. “But if you deal with a true professional the first thing they do is ask to see the whole house. Once they have seen the house they sit you down and say, ‘What do you

We need to find the equivalent of agile for whole companies. This is the next quest

Michael Canning is global head of new businesses at Duke Corporate Education and editorial chair of Dialogue

do? What does your husband or wife do? How old are your kids? What do you do when you come home? How do you use the various areas? What makes you happy? What makes you sad?’ All the while, you are thinking, ‘What the heck is this? I just need to redo the kitchen!’ But that is the way they are trained, because the success of what interior designers do is not the physical spaces they deliver – their success is measured by the positive effect these spaces have, how it allows clients to feel about themselves and their lives when they utilize the home.” It is this anthropological approach that makes Lualdi such a stand-out figure in the world of technology. She is the computer science major with a deep human touch. The Stanford strategist who talks about emotion and empathy. The leader who lets others lead. “My daughter has just started in high school,” says Lualdi. “She came home one night and said, ‘You know what I discovered? I’ve found this thing that is the combination of human history and the actual scientific study of the human race, and the classes that I’m best at are history and science, so maybe that’s what I should study?” Lualdi turned to her daughter and said, “You mean anthropology!” It seems a talent for the subject runs in the family.

The book of the pandemic is out now on Amazon

KATE COOPER ON LEADERSHIP

Change hurts, and that’s normal Good leaders accept that change can be painful for people

or most, change provokes anxiety. Few had even heard of the word furlough prior to the pandemic. Yet by the spring of 2020, in my native UK, it had become part of the daily lexicon. Furlough – under which employers imposed state-funded paid leave for workers whose jobs were threatened by the virus – was a very different kind of change to those most had experienced before. Different governments have implemented different sorts of employee support in their responses to the pandemic. Anecdotal evidence suggests that there have been some misuses of the schemes, with people allegedly on furlough being asked by their employers to work. In other cases, staffing has been reduced and remaining employees have found delivering a business-as-usual service difficult. There are some who couldn’t wait to be away from work, delighted to be paid to be able to pursue other hobbies and interests. Yet there were thousands who discovered that being furloughed left a gap in their lives. And it is those people – the many people for whom work fulfils much more than an economic need – who might be most adversely affected by the experience. However rational the logic, however transparent the reasons for the decisionmaking, being surplus to requirements at your workplace when it was such an important part of your life will have a critical impact. Why? Because what has fundamentally changed is the relationship an individual has with their employer.

Familiar models of motivation such as Maslow’s Hierarchy of Needs highlight why changes to work environments, work relationships and job security are such an issue. Once physiological needs have been met, concerns soon progress to feeling secure and belonging. Research undertaken by the Institute of Leadership & Management in 2020 revealed that the primary reason people gave for wanting to remain in their job was their unwillingness to leave their colleagues. Work not only takes up a huge

The primary reason why people want to remain in their jobs is their unwillingness to leave their colleagues

number of hours in many people’s lives, but also often provides essential social contact – after-work activities, work clubs and societies. Work provides an income. Yet it may account for many leisure hours as well. For many people, a working identity is closely connected with their social identity. The process of working from home, being furloughed, and working fewer hours has meant that many people have re-evaluated the relationship that they have with their job and their employer – perhaps their relationship with work itself. Feeling unwanted or surplus to requirements might result in disengagement, a logical defence mechanism. Feelings of frustration and powerlessness may be articulated in such statements as: “It doesn’t matter”, “I don’t care”, “I’m only doing it for the money”, “I’m not interested in the bigger picture”, “It’s only a job”, “I’ll just do what I have to”. In the short term, at least, apathy seems a safer place to be. The end of furlough will bring people back, but possibly with a different relationship to their employer. Work may have receded in importance, but these people, the ones for whom work and identity are closely related, will need special attention, a reaffirmation of their value. A renegotiation of that relationship is required – as is an understanding that disruption and uncertainty rarely have much to recommend them, at least from an employee standpoint. Good leadership demands that we listen to the concerns of people – and perceive anxiety, distress or resistance to change not as deviant behaviour, but as a normal, and expected, human response. Change in organizations is inevitable. As one storm subsides, the next approaches the horizon. But by recognizing – and accepting – the impact of change on individuals, management can be like a rock in the rain.

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

LEADERSHIP MANAGING TIME

Competing for customer time Stop wasting your customers’ time. Start helping them save it, spend it well – or even invest it wisely Writing B Joseph Pine II & James H Gilmore

ost businesses do not think much about our most precious human resource: the time of individual human beings. Manufacturers, of course, consider time when seeking to reduce set-up, changeover, or cycle times to facilitate variety, customization, or lower costs. Service providers similarly seek to reduce time to streamline activities and increase productivity. While valuable, these internal time-reducing efforts often force customers to spend more of their time, whether on buying or resolving problems afterward. Witness, for example, how companies reduce the time that service representatives spend on the phone by compelling customers to suffer phone-tree hell, waiting to discuss calls claimed to be “very important to us”. The external effects of time should be of great managerial concern, for customers increasingly place ever more value on their time. (Socially distanced life during the Covid-19 pandemic has only intensified self-examination of how time is spent.) Think about it: customers’ time is incredibly scarce – limited to 24 hours a day, seven days a

No company should impose wasted time on customers

week, 52 weeks a year – and once consumed, is never to be recovered. What does anyone do with a precious yet limited resource? Conserve it as much as possible and use it wisely. Companies can create value for customers by eliminating activities that waste their time; saving their time when so desired; offering experiences where time is valued; and even helping customers to wisely invest their time. No company should impose wasted time on customers. The primary strategic choices today focus on time well saved and time well spent.

Time well saved When providing time well saved, many old ways of competing on time work rather well – when, that is, centred on saving customer time, not just company resources. UPS, for example, famously focuses on the efficiency of its drivers and their routes, to the point of mandating that drivers simultaneously start vehicles with one hand while buckling up with the other. Yet recently, the company has shifted focus to its customers’ time, 38

be bundled into one shipment, while Dash buttons, Echo devices, and Alexa systems even eliminate the time needed to get online to order. Such relentless focus on saving customer time flows from founder Jeff Bezos’ obsession with customer-centricity. In his 2016 letter to shareholders he wrote: “Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.” Amazon thus employs new technologies to save consumers time, constantly improving its processes. Meanwhile, its suite of ‘asa-Service’ business models – Software-as-a-Service, Platforms-as-a-Service, Infrastructure-as-a-Service, and other Amazon Web Services capabilities – save B2B clients the time needed to set up and operate entire businesses. Amazon turned hardware and software goods into services, seamlessly accessible on demand and mass customized to individual company needs. ‘Frictionless’ has become the byword for companies pursuing time savings – reducing their own time and effort, as well as that of

via its UPS My Choice service, which lets customers choose what day and time – for some packages, even where – to receive deliveries. Amazon excels at saving customer time. It eliminates travel time to and from stores and, through its search and recommendation functions, shopping time itself. It saves customers additional time by remembering credit cards, addresses, and past purchases to avoid duplication and returns. Its one-click ordering all but eliminates checkout time. Prime members avoid the wait for orders that can 39

LEADERSHIP MANAGING TIME

THE BRIEFING

customers. It’s one of the pillars of the so-called ‘CX’ movement (Customer eXperience) which aims to make time-saving interactions with customers “nice, easy, and convenient”. CX works well as a time-well-saved strategy, for when customers want to spend less time as well as less money. However, if a customer seeks time well spent while the company only provides time well saved, the strategy may backfire and result in commoditization. Consider this: when customers buy goods and services from a company as mere commodities – bought at the cheapest possible price and greatest possible convenience – they can turn around and spend their hard-earned money, and their harder-earned time, with companies offering more highly valued experiences.

A matter of time Time is the most precious human resource. Yet when businesses think about time, it is typically considered as a company resource; something that can be saved, for instance, through faster and more efficient processes. Few businesses give equal consideration to how they impact their customers’ time; many waste their customers’ time. It’s about time they stopped – and realized that they are competing for time.

Valuing time Companies’ primary strategic choices involve saving their customers time, and enabling them to spend time well. They may even choose to help customers invest their time wisely. Businesses can measure the money value of time (MVT) of their products and services, and can increasingly charge a premium for those that offer time benefits to customers.

Time well spent Experiences offer time well spent to guests, the customers of such offerings. Experiences are a distinct economic offering, as distinct from services as services are from goods. They use goods as props and services as the stage to engage each individual in an inherently personal way. While experiences offer time well spent, the “nice, easy and convenient” refrain of the CX movement, by contrast, only yields excellent service. Instead of just being nice, experiences are memorable, creating the memories on which brands and businesses become indispensable to customers. Instead of being easy, via a routinization that can make it easy for customers to disengage,

Left and below Amazon eliminates customer ordering and collection time

experiences reach inside customers to engage them in a personal way. And instead of offering convenience, the ultimate focus of any time-wellsaved strategy, distinctive experiences focus on whether customers value the time they spend with the company. If customers spend more valued time, they are likely to spend more money as well – the essence of any time-well-saved strategy. What, then, makes for distinctive experiences? Experiences are revealed over a duration of time and turn the mundane into the memorable through dramatic structure. The late Jon Jerde, the architect who pioneered placemaking, once emphasized that “what we do is design time... The primary design focus is not an object, but time itself. It’s designing what happens to people in time, in a place” (The Jerde Partnership International: Visceral Reality). Experience-stagers must intentionally design the time that customers spend with them to generate time well spent. Think of Uber and Airbnb as respective paragons of time-well-saved and time-well-spent strategies. Perhaps one’s first few Uber trips – summoning a car to your exact location, smoothly reaching your prearranged destination, exiting and paying without any fuss – rise to the level of a memorable experience. But after a while, riders recognize that they’re just saving time hunting down a taxi, telling the driver where to go, and paying. It’s all well-designed, but fundamentally offers only time well saved.

Images Amazon; Airbnb; Shutterstock

In comparison, consider Airbnb and its focus on visiting places – not just the room or home booked, but the locale as well. The company encourages suppliers to act as the ‘host’ for each ‘guest’. It’s why, in 2013, Airbnb hired Chip Conley, founder of the JDV Hospitality collection of boutique hotels, as its chief hospitality officer. It’s also why, in 2017, it created the Airbnb Experiences platform, allowing customers to book experiences in each place, to help increase the value of time during each stay. And it’s why it so readily shifted into virtual experiences when the Covid-19 pandemic hit in 2020. Paid-for experiences, such as sporting events, plays, concerts, movies and theme parks – or entirely new genres of experience that pop up in today’s Experience Economy, such as escape rooms, e-sports, or axe-throwing bars – naturally offer time well spent. Service businesses do not. But pursuing the time-well-spent strategy of staging experiences can lift service providers out of commoditization and pay off in increased revenue, customer retention, and marketplace reputation – especially in retail, hospitality, and other industries where customer interactions remain vital. For example, Zappos, the online shoe retailer now owned by Amazon, offers a remarkable experience through its contact centre. Late chief executive Tony Hsieh banished the industrystandard benchmark of average handling time (AHT), which is a measure of how little time representatives spend on the phone with customers. Zappos instead trains its reps to fully understand and resolve the concerns of each customer, regardless of how much time it takes, to cultivate customers for life and elevate word-of-mouth. The record? Ten hours and 43 minutes! Contrast Zappos’ relentless focus on time well spent with other contact centres. Their just-asrelentless focus on minimizing AHT throws up barriers to reaching a representative and all too often pushes customers off the phone quickly without fully hearing them out – essentially wasting their customers’ time. The lessons? Don’t force callers to sift through menu after menu before putting them into a queue to talk to a live human being, or ask them to key in account numbers only to have a representative ask again once connected. Don’t staff checkouts or other interaction points for the least personnel cost instead of the greatest customer demand. Don’t ask customers to fill out forms asking for information already in your system (seemingly endemic in healthcare). Just don’t!

Stop wasting customers’ time While not crimes against humanity, time-wasters are certainly offences against human customers.

Above Airbnb encourages suppliers to act as a ‘host’, and offers local experiences too

The worst thing you can do is waste your customers’ time 41

The worst thing you can do is waste your customers’ time – yet companies do it all the time. To stop, first eliminate or at least reduce unnecessary and bothersome interactions. Program or fix systems in order to provide information on demand for individual customers. Emulate Dr David Feinberg, the former chief executive of Pennsylvania-based Geisinger Health System, who wrote in a LinkedIn post that he would “like to eliminate the waiting room and everything it represents” in emergency departments. “A waiting room means we’re provider-centred – it means the doctor is the most important person and everyone is on their time. We build up inventory for that doctor – that is, the patients sitting in the waiting room.” Geisinger added medical staff and turned emergency department waiting rooms “into clinical space where doctors would actually treat patients – instead of having patients sit in a chair and wait”. Second, convert badly-wasted time into valuable time well spent, by turning unnecessary interactions into engaging encounters. For example, guests arriving at Vance Thompson Vision

LEADERSHIP MANAGING TIME

in Sioux Falls, South Dakota, receive an iPad to customize their immediate and upcoming nonclinical time. They can watch videos about their forthcoming procedures, read about caring for their eyes, or just play games. The Walt Disney Company long ago mastered managing guest time, making waiting for rides seem less futile, and even fun. It snakes its theme park lines so that guests can people-watch. It provides “wait time” signs that set expectations it always beats, putting guests in a better mood for each ride. As guests advance forward, they soon encounter pre-show vignettes for the ride experience, creating anticipation. And it cuts down the time spent actually getting on a ride to the bare minimum through a continuous boarding process; rides never stop, as guests get off on one side and new guests get on the other. More recently, Disney has developed mobile apps which promise to “turn wait time into play time”, offering interactive games, trivia, music and other activities for those attractions with the longest waits. These will also, over time, offer more ways for guests to interact with park experiences, as with the Star Wars: Galaxy’s Edge attraction. Eventually there will be little if any physical queueing, as guests walk smoothly from one scheduled experience to the next, where experiences include not only rides and restaurants but character interactions, alternate reality games, smartphone-based activities. Such options layer time well spent upon time well spent.

If there is no charge for time, people will assume that such offerings are not worth experiencing

commodities, goods, services, or experiences, think of it as: Money charged = Functionality provided + Net value of time Time wasted has a negative value, time well saved is essentially at zero, and time well spent has a positive value. When customers desire only “nice, easy and convenient”, it is fine to provide exactly that. But when they desire time well spent, the value of that time is much higher to them than that of timewell-saved offerings. That yields premium pricing. There’s one foolproof way to know if experience offerings are worthy of customers’ attention and valued as time well spent. They willingly pay explicitly for the time spent, whether it’s through an admission fee, membership fee or some other form of time-based payment. No one would imagine going to a movie, a sporting event, a concert, play, or theme park without paying an admission fee. These offerings are instantly recognized as experiences offering time well spent. And because people do value their time so highly today, companies far from these traditional fee-commanding industries also now charge admission, including leaders in retail, restaurants, manufacturers and myriad new genres of experiences.

The money value of time

Charging for time well spent

Left and below Uber offers time well saved but not an experience

Customers aren’t stupid. Time is money, as Ben Franklin famously quipped. Wasting their time detracts from the overall value provided. As a result, they will demand a lesser price to make up for supplying wasted time. In effect, this effectively compensates customers for the time wasted in the form of a discounted price. It’s the cost paid by companies for wasting customer time. In contrast, when customers save time over what they can get elsewhere (or do for themselves), they come to value such offerings more highly – and pay in kind. Whether selling 42

All current and potential experience-stagers should examine their offerings by the resulting ‘money value of time’, or MVT. This metric recognizes that the amount of money customers willingly pay for any experience is directly proportional to the value they receive from the time they spend. Their spent money becomes a proxy for

the degree of time well spent in any experience. This has several implications. One, if there is no charge for time, people will naturally come to assume that such offerings are probably not worth experiencing. Two, the more time well spent, the more money customers should be willing to pay. And three, offerings commanding a fee can measure the experience against others – and with itself over multiple periods – on the MVT scale of expenditure per minute. Movies provide perhaps the most common (pre-Covid) experience. With ticket pricing across the world generally between US$8 and $15, assuming $12 as an average price and two hours as an average length, movies generate about 10¢ per minute. Time drinking a Starbucks cup of coffee can run about the same. (An even better measure would include revenue from memorabilia, parking services, food and drinks, in the equation, but these figures are not generally public). Use this MVT as a baseline index. How much is your experience worth? If you can charge around 10¢ per minute, congratulations, you’re staging a good experience, one on par with a successful movie. Netting more means an even better experience; getting less maybe just a so-so experience. In the so-so bucket? Enhance your experiencestaging prowess. Doing better than a movie, or Starbucks? Don’t rest on your laurels. Competition always intensifies and customer expectations continually expand. (Witness the production values in today’s movies compared to just a few decades ago). Disney theme parks have MVTs of around 20¢ per minute, but escape rooms, Instagrammable places such as the Museum of Ice Cream, and immersive art experiences such as those created by Meow Wolf now garner 40-50¢ per minute, or more.

Above UPS shifted its focus from saving company time to its customers’ time with UPS My Choice

Images Uber; UPS; Shutterstock

Time well invested One can offer even greater value than time well spent. How? By helping customers to achieve their broader aspirations, whether via the proverbial “life-transforming experience” or, more likely, through a series of experiences that effect desired change in some significant way. In our book The Experience Economy we simply call such economic offerings transformations – where companies use experiences as the means to guide customers to achieve some particular change. Transformations – think fitness centres, healthcare, education, consulting, coaching of all stripes – can enrich people’s lives. But companies can’t do it alone. As the old saying goes, you can lead a horse to water, but you can’t make it drink. Customers – whether consumers, businesses, or employees – have to undergo the transformation for themselves, whether doing workouts, following

a wellness routine, completing homework, or following counsel or coaching instructions. That’s why transformations offer time well invested. Under the guidance of their transformation elicitor, customers invest their time, aiming to achieve their aspirations and reap dividends now, and in the future. With time well invested, it matters less what inputs the elicitor provides; the main concern is the outcome customers achieve. Indeed, the customer is the product – it is a changed dimension of being that they seek. Therefore, in offering time well invested, companies should not merely charge for well-spent time, but for the demonstrated outcomes that customers achieve. Channelling Ben Franklin again: industries that help people become healthy, wealthy, or wise, in particular, should shift to outcomesbased compensation. A few companies lead the way. Beyond just the money value of time, enterprises guiding transformations should focus on the compound interest of time well invested. When helping a person become healthier, wealthier, or wiser, companies are helping individuals spend their precious and finite time more wisely, from greater wealth, in better health.

It’s about time

B Joseph Pine II and James H Gilmore are co-founders of Strategic Horizons LLP and authors of several books, including jointly The Experience Economy: Competing for Customer Time, Attention, and Money and Authenticity

In today’s Experience Economy the locus of competition is shifting to time: not only the time customers have and want to spend, but also the time of employees. Their time, too, can be wasted, saved, spent and invested. Whether you become commoditized or create the circumstances to thrive depends on your view of time and how it’s consumed. Will you merely provide time well saved or stage time well spent? Or perhaps even guide time well invested? It’s time to make your strategic choice.

LEADERSHIP STATE OF MIND

The transformation mindset The latest neuroscience shows how to develop the right frame of mind for leading continual transformative change Writing Nick Jankel

nprecedented and seismic drivers of change in the outside world, from exponential digital technologies to existential global risks, are putting intense pressures on today’s organizations. They will need to transform their products, processes, and people not just once, but many times. To adapt at pace, leaders in every organization, of any scale or sector, must have a ‘transformation mindset’. Most, however, have a ‘legacy mindset’: not because they aren’t smart and successful, but precisely because they are smart and successful. It used to be the case that well-established legacy organizations could deliver predictable long-term returns without innovation and business transformation. Now, organizations that cannot constantly transform what they do and how they do it will inevitably fail, whether through spectacular bankruptcy, dull underperformance or ignoble acquisition. Covid-19 and the climate crisis leave no doubt about the requirement for constant innovation in markets that are VUCA: volatile not stable, uncertain not predictable, complex not simple, and ambiguous not clear. But after decades of success in markets that were stable, predictable, simple, and clear – where past assets and means allowed wellestablished organizations to maintain market power for sustained periods – most leaders have been protected from the stark realities of

Many leaders have lost access to the creativity and insight needed to lead transformation

constant evolutionary pressures. Lulled into a false sense of security, many leaders have lost access to the creativity and insight needed to lead transformation not just once, but many times, to stay relevant. Change begins with their mindset.

Why mindsets matter The mindset of a leader determines whether their organization ignores and denies evolutionary pressures to adapt, or they metabolize them into value-creating innovations that shape the future of their industry. Just look at Kodak, Nokia, AOL and Yahoo; or Uber, with its ethics and workforce challenges, and Deliveroo, whose IPO flopped because of investor worries about inequality and

injustice. Leaders in all these organization assumed that their success in the (near) past guaranteed success in the future. In today’s fast- and dramatically-changing environments, our mindset – how we sense, feel, think, and then act – is our main driver of competitive advantage, and the only factor in our complete control. Every organization has access to similar technology and capabilities, so we can’t rely on ‘stuff’ – even the very latest machine-learning algorithms – to defend our business. We can’t control what our competitors do, or our customers. We cannot control a pandemic or mass extinction. The only thing we can control – though ‘master’ is a more accurate word – is our mindset.

As leaders, we can and must take ownership of our mindset. We must choose to evolve, develop, and mature it over time, so we can reinvent ourselves and our organizations not just once but many times over as the VUCA reality unfolds.

The legacy mindset The legacy mindset which has trapped so many leaders is shaped by the belief that power, success, knowledge and best practice from the past is enough to ensure we survive and thrive in the future. It persists, in part, because VUCA realities can be overwhelming for our brains, which tend to experience change, chaos, and uncertainty as painful: in moments of perceived threat – even 45

LEADERSHIP STATE OF MIND

when we are not actually physically in danger – our mind’s wiring has us fight or flee from rapid changes in our markets, rather than engage with them with an open mind and heart. We lose our insight and imagination right when we need them most. Always wanting to look right and feel in control, the legacy mindset has us assume that doing what worked yesterday – just better, harder, and faster – will be enough to make it big tomorrow. We become righteous about the business model assumptions and leadership habits that have brought us success. We ignore the imperative for transformation even as our organization loses competitiveness, its culture declines and its power to innovate fades. Schooled by management experiences and theories from a world that was not as digital or disrupted – or complex or chaotic – the legacy mindset has us project outdated meaning-making frames and narratives onto the fast-changing world. It flattens the ‘anomalies’ and ‘weak signals’ that always presage disruption, innovation, and transformation. While others might have the clarity to see and the courage to act on those signs, the legacy mindset has us cling to old assumptions as if they were eternal truths. Professor Sydney Finkelstein, a business professor at Dartmouth, studied the decline of over 50 organizations. In Why Smart Executives Fail, he states that failures are caused by “flawed executive mindsets that throw off a company’s perception of reality” and “delusional attitudes that keep this inaccurate reality in place”. In other words, pretty

Most leaders have a legacy mindset precisely because they are smart and successful

much every organizational crisis is caused by senior leaders unwittingly perpetuating a legacy mindset. This is why Yale professors predict that so many of today’s Fortune 500 companies will be gone by 2030.

The transformation mindset Carol Dweck, the renowned Stanford psychology professor, describes a growth mindset as the belief that our talents can be developed, through “hard work, good strategies, and input from others”. This is a foundational step forward – but it is no match for the fast and furious fluctuations of the VUCA world. The transformation mindset takes the idea of the growth mindset to the next level. We know that our capabilities are far from fixed; we also know that we must, and psychologically can, constantly adapt and evolve ourselves to fit the relentlessly- and ruthlessly-changing world. A leader with a transformation mindset experiences the VUCA world as a constant invitation to lead transformative change of outdated products, processes, and people. We attune our entire being to engage fully in the dramatic changes in our external environment, rather than attempting to ignore, repress, or deny them. Importantly, we own these changes, even if we did not cause them – taking them within to metabolize them, in heart and mind, into exponentially value-creating innovations. With a transformation mindset we can still drive forward continuous improvements in how we get stuff done – when this is fit for the moment. But we can also drive continuous transformations when adaptation and agility are needed. At the core of the transformation mindset is the capacity to switch between these two equally valuable modes of problem-solving.

Two modes of consciousness A transformation mindset is not down to intelligence alone. In fact, recent studies have discovered that the prefrontal cortex – longassumed to be the seat of human reason – is actually less aroused than usual when we are creative. In other words, when we are innovating to solve problems thrown up by the VUCA world, we are less in control, less focused, and less conventionally smart! It turns out that our brain has evolved two quite distinct neural networks that allow for fundamentally different ways of sensing the world and solving problems. Working from the emerging science of these two brain networks, and adding in wisdom from both philosophy and lived experience, I suggest that every leader can access two distinct modes of consciousness that provide very different, yet equally valuable problem-solving approaches. Each mode is a good 46

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Two mindsets

Two modes

Many leaders are trapped in a legacy mindset, relying on the knowledge, skills and behaviour that delivered success for them and their organizations in the past. But in a turbulent VUCA world, leaders need to lead transformation time and again. They need a transformation mindset.

A transformation mindset embraces and owns change, rather than trying to ignore, repress or deny it. Leaders can develop two mental modes – ‘Control & Protect’ and ‘Create & Connect’ – and learn to switch fluidly and flexibily between them, by managing their emotional and bodily state.

fit for specific types of problems; has a different neural architecture underpinning it; and leads to a different set of subjective experiences. Control & Protect Mode In the task-oriented and efficient first mode, we seek to control the inherent chaos of life; predict what best to do next to survive; and protect ourselves. We are highly focused and get stuff done; we drive toward certainty as fast as possible; we leverage technical expertise to solve known problems quickly; we measure success by metrics, and are both rigorous and risk-averse. In this mode, we love to make continuous improvements to business-as-usual, to deliver predictable outcomes such as steady margins and career progression. Create & Connect Mode The second mode allows us to connect with other people – customers, employees, partners, users, investors – to develop the fresh insights we need to innovate valuecreating solutions that resolve novel problems thrown up by the VUCA world. In Create & Connect Mode we are curious, imaginative and empathic. We are more interested in asking better questions than in producing the right answers; we are ready to pause and reflect on complex problems, rather than rushing to solve them; we are able to cultivate safe psychological spaces for diverse opinions to be shared; we welcome others (respectfully) challenging our business model and leadership style assumptions; and we prioritize possibility and agility over certainty and stability.

Success is about creating the right conditions for cross-functional teams to deliver creative breakthroughs

In environments that are stable, simple, predictable and clear, Control & Protect Mode is a very effective problem-solving approach: it prevents us from having to exert the enormous emotional and cognitive effort needed to come up with fresh insights and create new ideas consciously. Yet it is not a great fit for fast-changing environments. Linear and task-oriented, it attempts to apply power and best practice – derived from technical expertise, experience, and training from the past, which are by definition outdated – to emergent transformational challenges that nobody has ever solved before.

Nick Jankel is chief executive and chief transformation officer of Switch On, and author of Now Lead the Change

With such transformational challenges – so-called because they demand business and leadership transformation to resolve them – we must use Create & Connect Mode to metabolize evolutionary pressures into exponentially valuecreating innovations. But we still need Control & Protect Mode to deliver our ideas to time, budget and quality. In fact, the complex process of imagining and then executing high-value ideas involves a complex harmony between modes. As Dr Roger Beaty at Penn State puts it, “creative people are better able to co-activate brain networks that usually work separately.”

From being smart to being wise A leader with a strong yet fluid transformation mindset knows which mode matches the moment. Just as importantly, they know how to switch modes. This is trickier than it seems: the neuroscience suggests that our emotional and bodily states, not our will, largely determine which mode we are in. We cannot simply decide to switch; we have to learn how to regulate and transform our emotions and bodily sensations. To dance with complexity and wrestle breakthrough from the jaws of chaos, we must be wise not just smart. Radical levels of behavioural agility require an unshakeable emotional stability within. The transformation mindset requires unprecedented levels of embodied wisdom in order to cultivate flexible, fluid and free minds in ourselves, and in the team members we rely on to contribute to, and implement, future-proofing innovations. As we develop embodied wisdom, our cognitive ability is expanded, and our egos tempered, by empathy, insight and imagination. Solving the transformational challenges thrown up by the VUCA reality requires that we actively build a transformation mindset. Success is less about technological brilliance or management acumen, and much more about creating the right conditions for cross-functional teams to deliver creative breakthroughs. Gone are the days when we needed to be the smartest person in the room. We need to be wise, not just smart, to confidently and consciously lead our people, organizations and systems towards a thriving future.

LEADERSHIP BETTER TOGETHER

Meaningful connection in human relationships is based on acknowledging that the needs of another matter. Individuals will always go above and beyond for a cause that matters deeply to them. It is what allows two or more individuals to move from ‘me’ to ‘we’. Progress has always been the consequence of a group of committed people coming together to find bold new ways forward. As we find our way out of the pandemic – or, in many parts of the world, continue to wrestle with its devastating effects – we must rely more than ever on these fundamental truths about why and how people make connections. They will be fundamental for success in the uncertain territory of hybrid working environments. There are several ways for leaders to leverage what is deeply and truly human about us, individually and collectively, to unlock new ways of engaging, developing and retaining a productive workforce. Here are three of the most important.

Forging meaningful connections In a hybrid working environment, leaders need to foster a sense of cohesion Writing Camelia Ram

Angle towards vision, not obstacle In the initial stages of the pandemic, many organizations focused on the immediate problems of cash flow and supply chain disruption. Many more are now angled towards a positive vision for the future, reinforced by the expectations of employees, customers and investors that organizations respond to systemic issues such as climate change and social inequality. Bold choices grounded in a strong sense of purpose and conviction will be a defining feature of those who create momentum and alignment on the way forward. Creative and engaging storytelling from authentic and compassionate leaders will be particularly important for employees who may be experiencing burnout, disillusionment, trauma and loneliness. Connect with the person, not the worker Creating cohesion in hybrid teams will require ongoing management of the tensions between the urgent work of today and the important work of the long term. Employers must pay close attention to the new role they are inviting people to play, which goes beyond getting tasks done, to being champions of a cause that’s worth their time and effort. After all, people want to be a part of a force for change; they want to see what they can contribute. Yvon and Malinda Chouinard, founders of outdoor wear specialist Patagonia, started out to make better climbing equipment than what was available, working with and for themselves and their friends. To this day, the company maintains the spirit of peer production. Staff are also paid for up to two months to work in communities threatened by environmental vandalism. By continuing to act like a group of activists, there is no distinguishable difference between person and worker.

he prolonged nature of the pandemic has meant that our most natural means of social connection have been revoked. From dating to productivity, we have had to trust more in means of quantifying and codifying human behaviour – and we have been forced to find new sources of personal resilience as we have navigated novel ways of working and connecting. The shift to hybrid working as a new norm seems clear, and it offers organizations many benefits – not only in a virus-stricken world. Yet concerns abound. How do teams sustain the ability to innovate? How are ideas shared effectively and priorities understood across the organization? How do those in new roles build a sense of belonging? 48

Nurture and grow performance through teams, not process When individuals start pursuing goals they want to achieve, two things happen. First, others see how much those involved care, and want to join in. Second, the joy and excitement of moving towards the objective overtakes the fear of failure. Achieving the bold vision will not just require multiple individuals to champion the cause. It will require dedication and intention from those individuals when they come together, so they assign themselves work aligned to what they want to master, and support others in achieving their own mastery. This requires a new type of connection among individuals: one that is less optimized for efficiency, and more conducive to creativity. It requires individuals to be open about what they want to achieve, and what helps them to do their best work. Development is key – and that includes learning from peers within the team.

Camelia Ram is part of the organization strategy practice at Korn Ferry

Many of the institutions and structures that formed the basis for success during industrialization are being challenged in the new era of digitalization. As we transition, sentiment and behaviours are likely to change erratically. The scale of change poses fundamental questions about what our organizations are here to do, the legacies that they create for society as a whole, and what they need to leave behind – or become – in order to make progress. Building trust through open dialogue at multiple levels, and encouraging individuals to explore their deepest challenges in a safe environment, are important first steps to unlocking the power of communities in organizations today. In the era of hybrid working, leaders need to focus more than ever on building and sustaining team cohesion. Consistency, authenticity and honesty matter more than ever.

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

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

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

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

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

VIVEK WADHWA ON INNOVATION

Reopen the American way Barriers to immigration undermine innovation. The US is losing the global race for talent

he west isn’t wild about immigrants anymore. The great entrepreneurial nation has lost its touch. If you want to make it anywhere, anywhere is somewhere other than America. The United States, a nation constructed with the commercial vim of the global diaspora, has become hostile to the kind who built it. Swallowed by nervousness and strangled by red tape, it is passively rejecting the sorts of people who can lead it into a successful future. A series of impenetrable, politicized and outdated regulations is blocking global talent from coming to its natural home-from-home. The situation for foreign start-up founders is fragile at best: even those that gain temporary rights fear ultimate ejection. The immigrant entrepreneurs who are carving out businesses and building jobs in the United States must keep looking over their shoulders, unless – and until – they eventually gain citizenship. Immigrating to the United States has become a byzantine art. Founders who want to land between sea and shining sea have to shape their application to fit a bizarre selection of visa types. Increasingly, satisfying the criteria requires such intellectual hoopla that many brilliant businesspeople no longer bother. They go to countries that welcome them instead. This is a clear and present threat to the very fabric of the United States. More than 25 competitor nations, including anglophone rivals Singapore and the UK, are actively courting international entrepreneurs. “It’s not like they came up with the idea,” Jeff Farrah, general counsel of the National Venture Capital Association, told Forbes. “It’s an American idea that we failed to act on.” The easy thing to do is to blame Donald Trump. The beaten president was indeed no friend to international innovators. Yet while the new administration rejects the anti-immigrant rhetoric of its predecessor, it has done too little, too slowly, to open America’s arms to the brilliant.

Some of the biggest US brands were founded by overseas innovators

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

Towards the end of his presidency, Barack Obama launched the International Entrepreneur Rule, which allowed foreign entrepreneurs with at least $250,000 to invest to remain in the United States without a visa. Trump shelved it. Biden has pledged to revive it. But even this is just a modest armament in the war for talent. There is a global race, and America is losing it. It is hard to understand the importance of overseas talent to the United States. Some 22% of all US business owners are foreign-born, compared to just 14% of all US residents. Foreign-born entrepreneurs command a combined revenue of over $528 billion. Some of the biggest US brands – Google and Tesla among them – were founded by overseas innovators. Yet the hotbed is cooling to a slow, yet sure, demise. Like a tyre leaking air, its downfall will come slowly at first, before a crash becomes apparent. But the game is not yet up. President Biden, still riding a wave of popularity, has the opportunity to rebuild for the future. Of utmost focus should be the mangled visa system – a regulatory minefield that seems almost designed to push talent away and into the arms of America’s rivals. It must be fixed. The American way is to freedom and openness. The US requires fresh blood daily so its science, healthcare and tech sectors can win the battle of ideas. After Covid-19 has finally finished wreaking havoc on the world’s economies, there will be much work to do. The danger is that America lacks the innovative talent to lead it out, and into the next era.

INNOVATION GETTING REAL

The innovation theatre trap Innovation isn’t about putting on a good show. Leaders need to refocus on the ultimate goal of creating value Writing Tendayi Viki

ately, a few thinkers and practitioners have lamented that ‘innovation’ has become a buzzword, stripped of all meaning. It’s used so often that people are now unsure exactly what it refers to. And no wonder. Part of the reason for this confusion is the sheer number of activities that are referred to as innovation – from pizza nights to hackathons, technology scouting, idea competitions, design sprints, corporate-startup collaborations and full-blown accelerator programmes. Spend any time working with such initiatives and what you start to notice is that a lot of what is referred to as innovation is actually ‘innovation theatre’ (a term coined by Steve Blank in a 2019 Harvard Business Review piece). Yet it remains the case that many of the innovation practices espoused in lean start-up and design thinking can create real value when they are applied properly. As corporate leaders have become more and more interested in building innovation capabilities in their organizations, they now face the challenge of

Innovation theatre looks like innovation but ultimately creates no value for companies and society

differentiating between value-creating innovation activities and innovation theatre. How can leaders distinguish the real innovators from the thespians?

Authentic innovation In order to make the distinction clear, we have to go back to basics and ask a more fundamental question: what is the role of innovative ideas within a company? The goal is to create value; either through optimizing the current business or by creating new revenue streams and profits. This singular goal of creating value is what all innovation efforts inside a company should be pointed towards. Such clarity of purpose gives leaders the ability to ask more pointed questions of innovation teams. It makes clear why just having breakthrough ideas and technologies is not enough. Successful innovation requires that companies take their breakthrough ideas and transform them into value propositions that resonate with customers, and business models that are profitable and scalable.

INNOVATION GETTING REAL

Now that we have the clear definition of innovation as value creation, we can define innovation theatre as activities that look like innovation but ultimately create no value for companies and society. Rita McGrath describes innovation theatre as an excessive focus on ideation, without the requisite focus on transforming those ideas into value-creating products and services. As such, the pointed questions that leaders should ask concern the extent to which their team’s activities truly point towards value creation. For example, innovation teams are also often obsessed with exploring breakthrough technologies. However, developing a breakthrough technology is not the same as creating a great value proposition. The Nintendo Wii is a good example. Rather than compete with Sony’s PlayStation and Microsoft’s Xbox on having the most powerful gaming console, Nintendo decided to focus on its core mission of play over power. With the release of the Wii in 2006, Nintendo offered a simplified gaming console targeted at casual gamers. The company regained a significant share of the market by moving from high-tech to low-tech gaming consoles but providing a great value proposition for customers. Now that we know what we are looking to accomplish with innovation, the next question becomes how innovation teams should be working to accomplish that goal – and how leaders can evaluate whether their innovation programmes are creating value. There are two ways for leaders to help their organizations avoid innovation theatre. They have to create a context in which teams can get beyond ideation to start testing ideas – and, later on, they need to help successful teams get beyond testing to start scaling their ideas.

Even some labs and accelerators are just a different kind of innovation theatre

Beyond ideation In many companies that I have worked with, there is an excessive focus on ideation. I remember once listening to a leader tell his team to bring him ten times the current level of ideas. Some companies host idea competitions and hackathons as a way to generate ideas. There is nothing fundamentally wrong with this: they only become innovation theatre when leaders and teams fail to go beyond ideation. I have been in organizations where these events are held without a sense of how the winning ideas will be funded and supported afterwards. To go beyond ideation, leaders need to focus on three things: 1 Stop the proliferation Leaders need to provide clear strategic guidance about what innovation teams should be working on. Believe it or not, there is such a thing as a bad idea. Bad ideas are those ideas that are not aligned to the strategic goals of the company. In my experience, when teams work on whatever they find interesting, they are far less likely to find leaders supportive when they are ready to scale their ideas. Clear strategic guidance is essential for teams to use as a basis for idea generation.

Below The Wii won market share thanks to Nintendo’s focus on providing a great value proposition

2 Inspire teams to test Once teams have ideas they want to work on, the last thing they should be doing is creating a roadmap for implementation. Instead, they need to identify their riskiest assumptions and begin testing what it would take for their idea to succeed in the real world. Leaders can support this process by designing programmes that give teams the time, resources and training to test ideas. For example, Bayer’s Catalyst Fund provided innovation teams with seed funding and time to test their ideas. 3 Make evidence-based decisions The point of having teams test their ideas is not simply to have them running experiments. The aim is to ensure that the teams can move from idea to profitable business model – and in order to do this, you need a framework that allows leaders to track where teams are in terms of progress towards finding a business model that works.

Images Shutterstock

A few years ago I was part of a team that created an award-winning innovation framework for the global education company Pearson. The framework was called the Lean Product Lifecycle. Its first three stages were called Idea, Explore, and Validate. These early stages focused on searching for a profitable business model with the ultimate goal of achieving product-market fit. The last three stages were Grow, Sustain and Retire. These stages focused on executing a known business model 54

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and exploiting it with efficiency, until the point at which the product would be ready to be taken off the market. What the Lean Product Lifecycle did was give leaders a sense of where teams were on their innovation journey. There were clear criteria as to when a team could move from one stage to another. For example, a team could only move from Explore to Validate if they had produced clear evidence of a customer need while they were testing their idea. Such a practical framework makes the ultimate destination clear to each team: ultimately, to get to the stage where they can launch and scale their product or service in the market.

Welcome to the theatre Innovation has become a business buzzword – and lost its meaning. Even as companies devote more energy to innovation, many have lost focus of its real purpose. Innovation has become a piece of theatre. The challenge for leaders is to refocus their organizations’ efforts on the true purpose of innovation: to create value.

Show’s over To escape the innovation theatre trap, leaders need to stop the proliferation of ideas, inspire innovation teams to test, and make evidence-based decisions. Put an end to the ghettoization of innovation teams – even if they have cool names. Encourage cross-functional collaboration to support scaling, and provide follow-on funding for teams that can show traction.

Beyond testing Some organizations have succeeded in moving beyond ideation and have created innovation labs and accelerators. In these spaces and programmes, teams are provided resources and time to test their ideas. So it might be surprising to learn that I think that even with testing in place, some innovation labs and accelerator programmes are just a different kind of innovation theatre. This is because they often don’t think beyond testing. They don’t have a plan or process for what to do with ideas that are proven to have potential. As noted, innovation teams don’t test ideas for testing’s sake. They run experiments so they can find scalable business models, with a focus on the ultimate point of getting to launch and scale in the market. In 2017, I was working with a global fast-moving consumer goods company which had invested in more than 150 teams all over the world, through a three-month incubation programme. As part of this programme, teams got time and resources to test their business ideas. I was initially impressed by this incubation programme – until I asked what happened to the teams after the programme. What I learned was that the teams returned to their businesses and day jobs. There was no ongoing support or follow-up on the ideas. It was left to the teams to make their own ideas successful. This was a surprise, because the point of an innovation incubator is not to be able to say your company has one: the goal is to find ideas with potential and help them scale. In order to go beyond testing, leaders need to focus on three things:

2 Encourage collaboration with key functions Ensure that other parts of the organization are engaged in helping innovation teams scale – functions such as sales, marketing, legal, compliance and finance. Very few innovation teams can launch and scale their ideas on their own. When they need help from other functions, it is much easier to obtain when company leaders are giving clear support and encouragement for crossfunctional collaboration. 3 Provide follow-on funding Ensure that teams which complete the initial testing phases have access to further funding to scale their ideas. Within Bayer’s Catalyst Fund, funding did not stop after the first three months of the programme. Followon funding was available for those teams that were showing traction; so too was follow-on support, to ensure that teams could succeed during the second phase of testing.

1 Stop the isolation of innovation teams Leaders need to ensure that innovation is not relegated to the ghettos of the company – even if the ghetto has a cool name like ‘lab’, ‘accelerator’ or ‘incubator’. It is important that innovation teams are connected in some way to the parent company. This becomes even more critical when teams need resources and support to scale their ideas.

Tendayi Viki is associate partner at Strategyzer and author of Pirates in the Navy: How Innovators Drive Transformation

For very good reasons, corporate leaders have become more and more interested in innovation. Intrapreneurs today have great opportunities to change the companies we work for. However, we need to ensure that our innovation activities produce tangible results. We need to ensure that we are engaged in authentic innovation practices that create value for our companies. Leaders can support this process by ensuring that they provide an environment where innovation teams have the time and resources to test and scale their ideas. The show’s over. It’s time to close the curtains on innovation theatre.

INNOVATION GOVERNANCE FOR GOOD

Cornerstones of responsible innovation If business wants to do good and help solve historic global challenges, it needs to engage with society Writing Christian Voegtlin & Andreas Georg Scherer

suggest that rigid regulations and risk management frameworks should be complemented with more flexible and adaptable voluntary standards for business responsibility – and that organizations should involve stakeholders in the innovation process as early as possible to establish dialogue and get necessary feedback.

Doing good Merely avoiding harm is insufficient for the challenges that the world faces today. The question is: how can businesses be convinced to help mitigate these challenges by producing innovations that ‘do good’, despite shareholder pressure to maximize profits at any cost? The incentives for business to innovate are based on the expected return on investment for their products or services. Unfortunately, investment in responsible innovations may drag until incentives are in place – such as anticipated regulation relating to the transition to clean energy in many countries. We propose that alternative incentives come from stakeholder collaboration. These include reputational benefits, learning opportunities and information advantages gained through collaboration.

Responsible governance

he world faces unprecedented challenges: the Covid-19 pandemic is but one example. Innovation is crucial for addressing our present and future challenges, and business has a central role to play. However, if companies want to harness the full potential of innovation, it is vital that they put new products and services through a thorough responsible innovation process prior to going to market. Responsible innovation involves three key dimensions: avoid doing harm, do good, and be motivated by responsible governance.

We have found that corporate governance can help steer business toward innovations that avoid harm and do good. More specifically, by involving outside expertise, corporate governance that allows for reflexivity and stakeholder inclusion can make businesses more sensitive to the potential harmful effects of their innovation. Such governance also allows for deliberation on the goals of innovation, enabling dialogue with stakeholders and producing decisions that are informed by discussion, relevant information, and the needs of those affected. Deliberation can help corporations to define the right goals, through public discourse; choose the appropriate means of acting, by involving stakeholder expertise; and win social acceptance, by securing the support of those most affected. Stakeholder participation is key to deliberation. Some companies include expert stakeholders at board level, or employ stakeholder advisory panels. This allows for stakeholders’ direct participation in the company’s decision-making and increases reflexivity by enabling different voices and more innovative ideas to be heard. Corporate governance arrangements can also allow stakeholders to become involved in the innovation decisionmaking process. Decisions to invest in R&D and innovation are far more likely to be accepted by stakeholders when they are part of the discourse. Some key aspects of corporate governance can be leveraged to make business innovation

Avoid doing harm Of course, no organization that wants to stay in business would set out to harm its customers; one can also assume today that most businesses would not do anything on purpose that damages the environment. However, an inherent danger of innovation lies in ‘dual use’ or the ‘double effect’. In other words, innovations can be both beneficial and harmful, both to people and the environment. Nuclear fusion is a prominent, if extreme, example of this dual effect. Existing risk management frameworks that aim to mitigate harm and approve innovations – such as standardized procedures for the clinical testing of new medicines, or universities’ ethics committees – are not sufficient to deal with the complexity and uncertainty of today’s grand societal challenges. We 56

Image Shutterstock

more reflexive and participatory. This includes ownership structure, management accountability arrangements, modes of decision-making and resource allocation processes. In practice this could mean making long-term shareholding mandatory, to avoid short-term profit-maximization pressures, or ensuring that a percentage of company shares is held by socially responsible investors to allow for the increased participation of shareholders with an interest in sustainable development. Incentives for managers to contribute to triple-bottom line performance (that is, profit, people and planet) may be required; as may be resources, particularly financial, to support new social ventures, whether within the corporation or in collaboration with external partners. The effect of reorienting corporate governance toward stakeholder responsibility in this way is exemplified by the B-corporation (or B-corp) certification, which recognizes businesses which “meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose” (see bcorporation.net). B-corps tie the accountability of management not only to profit but also to pursuit of a specific social purpose. One prominent B-corp is outdoors goods brand Patagonia, which has a well-known sustainability agenda. Such movements have now been backed by legal statutes supporting ‘business with purpose’

Rigid regulations should be complemented with more flexible voluntary standards

or ‘benefit corporations’ in several countries, including the US, France, Italy and Brazil. A still more radical approach to stakeholder inclusion and open innovation can be found at Patient Innovation. Through its online platform, patients, caregivers and partners around the world connect to share and create healthcare solutions, providing responsible innovations that ‘do good’.

Managing trade-offs

Andreas Georg Scherer is professor of business administration at the University of Zurich. Christian Voegtlin is professor of managerial responsibility at Audencia

Innovative solutions to address today’s grand societal challenges often face trade-offs between conflicting goals, as the fight against Covid-19 has illustrated. For instance, there were trade-offs to be made between developing innovations quickly but making sure that they do not harm patients, as in the case of vaccines; or in using smartphone data to track Covid cases and contacts, while respecting privacy rights. Deliberative governance creates the preconditions for managing these trade-offs, as it creates the necessary sensitivity to stakeholder rights and related legitimacy questions. It also enables the search for innovative solutions that try to take stakeholder concerns into account. By ensuring that society’s needs and concerns are taken into consideration, corporate governance can increase the potential for business’s innovations to do good and decrease the potential for causing harm – and thus, ultimately, make a major contribution to sustainable development.

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PHIL YOUNG ON FINANCE

All luxury leads to China China was the route into the pandemic. For businesses, it’s probably the route out

he developed world is starting to recover from Covid-19. As we peer out tentatively at the future, it is useful to take stock – and provide some sort of near- and longer-term prognosis for the financial health of companies of all shapes and sizes. My analysis starts and ends with the world’s luxury goods leader, LVMH Moët Hennessy Louis Vuitton – known ubiquitously as LVMH. On the face of it, France’s potent cocktail of couture and champagne seems an unlikely archetype of postpandemic progress. Yet it might just be. It was selected not because it represents the ordeal that most companies have gone through over the past year-and-a-half, but because it might point the way for others on the way out. The Silk Road runs through China. Over the past decade, China has become the most important market for all the world’s luxury goods companies. The Middle Kingdom’s rising middle class, coupled with its cadre of extremely wealthy people, have made it a popular destination for luxury goods from Old Europe. To understand consumer markets in China, it is instructive to examine some recent shifts. A brief review of the financial highlights of this story demonstrate why LVMH provides revealing insights for the future of businesses in the postCovid world. In late 2019, it agreed to buy US luxury jeweller Tiffany & Co for $16.2 billion, in an all-cash deal. Then along came Covid-19. As one would expect, demand for luxury watches and jewellery crashed – or was, at least, deferred. In the US, Tiffany is the place to go for engagement rings, yet with weddings postponed until the end of the pandemic, the vigour rapidly fell out of market. One can guess that the financial modelling folks in the Paris headquarters of LVMH started redoing their numbers with more doomsday assumptions. They wound up with a lower valuation for the New Yorkers. The lower estimates

China has become the most important market for all the world’s luxury goods

Phil Young is an MBA professor and corporate education consultant and instructor

prompted LVMH to reduce the price that it was originally willing to pay when the deal was tentatively made. Tiffany’s response was as expected – so assume that there was even more work for the M&A lawyers of both sides. The two companies finally settled on a price that was $400 million lower than the original one. Going beyond the numbers, why did LVMH want to buy Tiffany? There are three key reasons. First, according to a UBS survey, China’s local shoppers already see Tiffany & Co as a go-to jewellery store, second only to the French glamour puss, Cartier. During the Christmas holidays alone, the American brand experienced more than 50% sales growth in the local market while online sales soared more than 80%. When the now LVMH-owned Tiffany unveiled its bold new Acqua di Parma yellow packaging on Instagram, it broke the internet. A month later, it opened a yellow-themed pop-up in Beverly Hills without any sign of the brand’s beloved robinegg blue. Now LVMH is planning to focus more on precious gemstone and gold categories while revamping the 320 Tiffany boutiques worldwide. Will LVMH’s efforts to rejuvenate, reposition and recolour the 184-year-old company justify its slightly reduced, but still substantial, purchase price? There is only one way to answer the question: ask China. LVMH, that most unique of marques, suddenly finds itself in a similar position to many other premium Western brands. The route out of the Covid-19 slump begins at Shanghai harbour.

FINANCE FUTURE BANKING

Don’t bank on defeat Traditional banks are losing their battle with disruptors. Yet a rare breed of leader can turn the tide Writing Philippe De Backer

maintaining and upgrading obsolete technology that requires endless unpicking whenever any change is required. Because of all this, fintech firms command a much higher stock market price than banks and one that’s often not much less than many major technology firms. To get a sense of the magnitude of the challenge banks face, we need look no further than Ant, the financial arm of Chinese marketplace Alibaba. Its technology can handle 544,000 loan applications every second and reach a decision to grant or not within just three minutes. This is the world’s purest example of digital finance’s tremendous potential. By contrast, the model of the traditional universal bank is dead, killed off by a changing marketplace and the emergence of a new breed of footloose financial players that command destructive technological power.

A different future Banks have a future. But they must accept that they have a different future. If bank leaders fail to make radical changes, they will perish. The time for those changes is now. The way forward is through ambidexterity – the ability to balance the short- and long-term, to reconcile equally the need to exploit existing markets and experiment with new ones. The biggest losers will be the all-purpose ‘bells and whistles’ banks, for so long the immutable cornerstones of a financial landscape that rarely changed except for the rare merger or acquisition that came along every decade or so. They are dinosaurs from a different age. Customers no longer need or even want a one-stop shop, so legacy banks are rapidly approaching a cliff edge: as conventional market segments blur into integrated new arenas, the very model of traditional banking faces an existential threat.

“Disruptors can build more in a month with 100 people and £1 million than a traditional bank could build with 1,000 people and £100 million in three years.” Chris Skinner, thefinanser.com

raditional banks are falling from favour with investors. It is their newly emerged competitors that are in vogue. The scalable business models of the ‘neobanks’ and digitally native banks hand them an easy advantage. They sit outside the stringent regulatory environment of legacy banks, saving them millions of dollars in compliance. Their lower cost structure, lower capital requirement and greater flexibility in introducing products render them nimbler and more adaptable to changing consumer demands. Moreover, they are free from the high labour and capital costs of

The footloose customer Consumers have suddenly become like children in a sweetshop. They can pick between suppliers to find the one that’s offering them what they want, when they want. Increasingly, that isn’t coming from their traditional bank. Each time one of the 60

legacy banks’ customers buys elsewhere, that chips away at the brand loyalty they have worked so hard to build up – and dilutes the mental association consumers have between a bank and their money. That’s a hammer blow to traditional banks who have relied on the inherent stickiness of customers to maintain long-term customer relationships. Inertia, born of loyalty, trust and convenience, once secured the business of traditional banks for the long-term. Once a customer signed with you, they stayed. That’s not true anymore. Customers are falling out of love with their banks, which has opened the door for disruptors to enter. This can be witnessed clearly in the virtual cash arena. With Amazon Cash, for instance, you can load money from your Amazon account on to a card and use this to buy products at physical retailers, even if you don’t have a bank card.

Customers are falling out of love with their banks, which has opened the door for disruptors

Apple Pay is another example. By using this app on your phone, you are further removing the mental association between day-to-day transactions and your bank. Who is making the transaction possible? Apple or your bank? Banking has always been predicated on who one trusts with one’s money. It’s why banks go to such lengths to come across as solid and dependable. Yet when only just over half of Generation Z say they trust their primary financial institution – a bank – most with their money, it seems like tomorrow’s customers are no longer buying into that narrative. That’s borne out by the growth of the digital banks: Europe’s three largest – Revolut, N26 and Monzo – now have over 18 million registered users between them. That number is set to soar to more than 23 million by the end of 2021, according to Finanso.

FINANCE FUTURE BANKING

The ambidextrous bank: explore and exploit

Loan moans

Global bank lending as % of total corporate financing*

2006

2010

32%

2014

Source: FT.com, Capital IQ *Aggregate of Belgium, France, Germany, Italy, Netherlands, Spain, UK and US

Investment is flowing to the disruptors, not the disrupted

“Digital technologies are doing for society and business what the steam engine did for horsepower,” warns Fred Swanepoel, Nedbank’s chief technology officer. “Proof of innovation horsepower is the velocity of delivery of digital innovations commercialized in recent times.” Exploitation of an existing market works brilliantly for prolonged periods – then suddenly fails. Video-hire company Blockbuster is the classic case study. Its monodexterity led to its downfall. It fixated on trying to improve on what it had always done and failed to innovate in response to mailorder and video-on-demand services. Streaming services like Netflix took over and the rest – including Blockbuster itself – is history. Exploiting scale and productivity will only take a business so far. If they are to go further – to survive and even thrive – then banks need to learn the lessons from another kind of business, those that are ‘explore-oriented’. Yet such organizations are rare. In a study by Arthur D Little, only 8% of organizations were ‘explorers’. These exploreorientated firms were typically smaller and less complex than those in the exploit-orientated cohort. They focused on experimentation, risk-

THE BRIEFING

39% 37%

taking, discovery and innovation. They were more flexible and comfortable in the presence of uncertainty than their exploiter counterparts. Efficiency was still a priority for the explorers, but their focus was the creation of an experimental environment from which interesting innovations are more likely to emerge. Neither exploration nor exploitation is inherently good or bad. The key is to balance the two, so you can fully exploit the benefits of both. The ambidextrous bank must balance short-term value drivers with the need for innovation to drive growth and transformation. In the wider economy, it’s easy to spot ambidextrous businesses: Amazon, Google and 3M are among those who blend left- and right-brain capabilities. Yet there are few double handers in the financial services sector. One exception is Goldman Sachs, which is always developing new business models, exploring fresh partnerships, and executing with agility. Another is JP Morgan, which has been equally impressive in the way it has pivoted to leverage the power in its business and revenue models. These are honourable exceptions. Far too many banks lean heavily into exploitation at the cost of experimentation.

Tools of transformation As with any journey, if your destination is to become an ambidextrous organization, then you

Deep disruption

A different future

Traditional banks face a potent combination of challenges. Neobanks and digitally-native banks have profited from scalable business models, while incumbents have wrestled with high labour and capital costs, and the erosion of brand loyalty as customers become increasingly footloose.

To survive and thrive, banks need to quickly become more explore-oriented. Ambidextrous leadership is required to balance short-term value drivers with innovation to drive growth and transformation. That means more diversity in leadership teams, in terms of age and gender, and in digital acumen and skills.

Images Shutterstock Graphics Courtesy of Arthur D Little; Kate Harkus

Moreover, there are increasingly varied incursions into the market from those with business profiles very different from traditional financial institutions. Google has launched a physical debit card linked to a Google Wallet account. And across Europe, supermarkets and high-street brands have become post offices, banks and bureaux de change. Corporate lending is one realm where you might expect traditional banks to maintain a competitive advantage. Yet they are failing to do so even here. Large corporate banks are losing their grip on their market share as alternative providers lure away their traditional customers with cheaper, faster, more transparent, e-commerce-integrated payment services, and superior deposit and lending platforms; highly relevant products that are better suited to the most affluent, profitable customers; and innovative solutions like Kickstarter’s crowdfunding model.

must know your starting point as well as your point of arrival. The first step must be to perform a stocktake of your bank’s exact current position. Given that many executives both overestimate their organization’s internal capabilities and downplay the challenges they are facing, this must be a brutal, warts-and-all dissection. A quick initial ‘pulse check’ can give banks an idea of their current capabilities. It will highlight the weak spots that will hold them back from ambidexterity. This assessment should be sufficiently granular to enable them to identify specific areas requiring change. They can follow this up with a benchmark survey to see how those current capabilities stack up against other banks. After this ‘ambidexterity audit’, banks will have a much better idea of what they need to get a better balance between explore and exploit. For traditional banks, this won’t be a simple matter of cost reduction or adding more features to standard products and services. It will necessitate a total rethink of the business model to enable the bank to differentiate itself in a marketplace that is becoming increasingly commoditized.

The neobanking boom: worldwide launches 100

350 1 Annual number of neobank launches

Total number of neobank launches

296

300

250 60

60 46

200

150

40 27 20

100

19 7

2010

2020

Neobanks: geographical distribution UK North America

Leadership matters Traditional banks need to transform themselves in a new economic landscape where others are taking the lead. Yet at a time when they need capital to transform, they will struggle to find it. Investment is flowing to the disruptors, not the disrupted. Against this negative backdrop, the most important thing they can do is find the right person to lead them to the promised land. This someone needs to be an inspirational and entrepreneurial leader who understands the need for transformation and is willing to take risks and think differently – rather than maintain the status quo. Boards must play their part by choosing a chief executive with the capabilities needed to lead a bank of the future. That might force them to set aside old expectations of what leaders look like – to ensure that they put in place someone who can truly leverage the power of new technologies. The person they are looking for is a rare breed. He or she is a mix of innovator and optimizer: someone who can resolve the exploration-exploitation dilemma by replicating in a large legacy bank the drive and innovative technology of a digital start-up, through risk-taking and experimentation – while simultaneously squeezing the most from an organization in the short term. The problem with big corporations is that even when management agrees it would be beneficial to foster more innovation, rigid processes and legacy policies can get in the way of switching to exploration mode. The board must bring in new blood that will stimulate them to change.

Europe 74

Africa & Middle East Latin America

Asia-Pacific 34

Philippe De Backer is managing partner and global practice leader of financial services at Arthur D Little, and co-author of Disruption, which will be published by LID Publishing in 2021

This should be an increasingly diverse mix of expert directors. Research clearly shows that diverse teams perform better. There should be a widespread mix not just of age and gender, but technology skillsets and digital acumen too, all of which are critically important in challenging a board’s traditional assumptions that would hold it back from change. Timid bankers who hide behind the excuse that transformation initiatives will disturb ‘business as usual’ miss the point. Disrupting business as usual is precisely what needs to be done. And if they feel they cannot, or prefer not to, participate in this, then they should get out and make room for someone who will do what is necessary. If they do not, they will find themselves losing customers very quickly.

FINANCE DIGITAL VALUE

The numbers don’t add up Traditional ways of reporting business value are ill-suited to the digital economy Writing Anup Srivastava

he giants of the digital economy are as big as countries. As of June 2021, the combined market capitalization of FAANG companies (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google) plus Microsoft stands at almost $9 trillion. That exceeds the GDPs of all nations in the world except two. The digital companies have replaced the likes of General Motors, US Steel, General Electric, Standard Oil, and Goodyear as the world’s most valuable firms. However, their rise prompts an uncomfortable question: how well are we able to measure their value? The financial statements developed for 20th-century businesses continue to work well for more traditional companies, but don’t work that well for digital companies. In fact, the two most important financial statements – the balance sheet and the income statement – are practically useless for valuing digital corporations. The difference between 20th- and 21st-century corporations lies in the nature of their key assets. The key resources for the former are physical: factories, land, buildings, warehouses, mines, oilfields, inventory. Such assets, made of atoms and molecules, are reported on the balance sheet of the company. However, the key assets of Facebook, Microsoft and Google are their unique innovation or business ideas, patents, brands, customer and social relationships, organizational strategy, peer and supplier networks, computerized data and software, and talent and human capital. Where

The balance sheet and the income statement are practically useless for valuing digital corporations

these assets are developed by the company itself, they are not reported on the balance sheet. As a result, reported assets are often a minuscule portion of what investors consider as their market values: the current market-to-book ratio for Apple is 28:1, and for Microsoft, 14:1, for example. Strangely, however, the balance sheet does report intangible assets acquired by purchase. When Facebook paid $17 billion for WhatsApp, it was in part buying a network of customers. The value of this network is reported on Facebook’s balance sheet, unlike the value of Facebook’s own customer network – it’s far more valuable, but was developed inhouse. Any user of the financial statement thus has no option but to disregard the reported assets, and therefore the balance sheet. Compounding this problem is another: the requirement that any investments in the building blocks of digital companies – intangible assets – must be treated as an expense and deducted in the calculation of profits. The more a digital company invests in its future, the higher its reported losses. As a result, investors also disregard the earnings or profits, the bottom-line number in the income statement. The next time you hear about a unicorn (a start-up valued at a billion dollars), a loss-making company valued at more than $100 billion (think Uber and Airbnb), or multi-billion dollar prices paid for loss-making companies (think WhatsApp, Flipkart, or Tableau), consider the possibility that the reported profits – or losses – may not be accurate reflections of that firm’s true profitability. And without a correspondence between current revenues and the costs incurred to produce those revenues, the profit margin becomes a useless metric to predict future profits. Who, then, uses the financial statements of a 21st-century corporation? After all, their preparation, audit and reporting to stakeholders requires substantial resources. Ideally, the reported numbers should be used by investors, banks (in calculation of interest and asset coverage ratios), and boards of directors (to determine executive compensation, for example). However, the usefulness of financial statements has dramatically declined for each purpose. Research shows that variation in earnings explains less than 3% variation in stock returns for a 21st-century company. Value investing, based on reported numbers, has largely failed in the last 12 years. And almost 70% of chief executives’ compensation now comes from stock and stock options, with many large companies using heavily adjusted (‘nonGAAP’) numbers in remuneration decisions.

Reforming reporting US financial reporting is stuck in the 20th century. Where do we go from here? It is highly unlikely 64

that regulators will change the structure of financial statements soon, even when they realize the growing problem. One solution is to provide greater information to investors to help them value companies. First and foremost, companies must detail the trends and drivers of revenues – providing an advance indicator of the success of its business model and potential size of the product market. For digital companies, the variable cost for earning an additional dollar of revenue is close to zero, so each additional dollar earned goes straight to the bottom line. What’s more, successful digital companies are often global leaders with ‘winnertakes-all’ payoffs, especially as they benefit from network effects: the larger the subscriber base, the more valuable each new customer. Therefore, what matters most for the digital companies is the potential size of the market, and whether the company is already a global market leader or is moving towards it. That in turns means that the most important information for investors is a detailed statement on the firm’s business model,

Anup Srivastava is Canada research chair in accounting, decision-making and capital markets, and is an associate professor at Haskayne School of Business, University of Calgary

how it translates into revenues, and the trends in principal revenue drivers. Second, firms must voluntarily break their expenses into three categories: those required to support current operations, those invested with the future in mind, and write-offs related to past bad investments. Investors care a lot about what a firm is doing to improve and secure its future. In the treadmill of today’s business world, firms must keep innovating just to stay competitive; they must run to stay in place. Moving forward requires large, uncertain investments as well as a few lucky strikes and lottery-like payoffs. Investors want details of those moonshot projects, like Alphabet – a searchengine company – investing in Waymo, a selfdriving car project. The arrival of new business models in the 21st century requires new models of financial reporting. That hasn’t happened – nor is it likely to happen soon. Until it does, you are advised not to mechanically rely on the reported numbers. Focus instead on the financial information that creates long-term value for digital companies.

ORIGINAL INSIGHTS FROM A LEADING ENTREPRENEUR

Following the recent acquisition of the German hotel group Deutsche Hospitality, founder and CEO of the Huazhu Hotels Group, Ji Qi, reveals the secrets behind his entrepreneurial success. A journey through the visions behind one of the world’s top ten largest public hotel companies.

18 brands

• • In over 140 countries • 5,000 hotels

Generating over a billion US dollars in revenue and counting…

HUAZHU HOTELS GROUP

978-1-912-55568-0 | March 2020 HAR D BAC K

LIDpublishing.com

GILES LURY ON MARKETING

Is marketing too big for its boots? Branding touches every part of a business – but marketers might be over-reaching

recently asked some friends and clients a question. If they had a completely free hand and could create the ultimate organizational structure for a business, what would they do? Amid their varied replies, one thing was consistent. Marketing sat slap bang in the middle of all of their charts. I asked them to explain. Most talked about how marketing managed the interaction with the customer, was forward-looking, and often the department that set the brand vision, so they were a natural focus. This got me thinking about the role of marketing and branding in an organization. In Philip Kotler’s classic 1967 definition, brand is “a name, term, symbol or design (or a combination of them) which is intended to signify the goods or services of one seller or group of sellers and to differentiate them from those of the competitors”. Nowadays, most marketers feel that this definition covers only part of what a brand is, and what they should do. Today we focus on the values of brands, the experiences that brands create, and the ability to build relationships with stakeholder groups both external and internal – customers and consumers, but also employees, present and future. By this broader definition marketers are often leading ‘brand’ initiatives that stretch into other departments’ remits: HR, corporate affairs, business strategy, retail or customer experience. Marketers are potentially treading on a lot of toes. With the recent growth of brand purpose, which has increasingly replaced the company vision or mission statement, marketing has tried to go even further and positioned itself right at the very heart of the organization. A brand purpose has the power to shape the direction of the organization and all that it does. As a lifelong marketer this may be heretical: but this has all the classic hallmarks of a power grab. Is marketing getting too big for its boots? In many organizations, marketing departments

Marketing has positioned itself at the very heart of the organization

Giles Lury is a senior director at brand consultancy The Value Engineers

seem to have successfully defined ‘organizational’ purpose as ‘brand’ purpose – but there is a danger in doing so. The real strength of a purpose could be undermined. A purpose needs to incorporate the business mission and strategy, its objectives, the company culture, its values and principles, the customer experience, and the company’s role in society. It therefore needs to be ‘owned’ right across the organization – and, if marketing takes a long hard look at itself, it knows that it can have a reputation for not being ‘commercial’ enough, and of being both arrogant and ‘fluffy’. In many organizations – especially retailled businesses, more modern tech enterprises, and business-to-business companies – the chief marketing officer doesn’t even have a seat on the board, but answers to a chief customer officer, a chief growth officer or a chief CX (customer experience) officer. Marketing needs to be wary of getting ahead of itself and recognize that the way forward is team-based: a purpose team or a B&B team (brand and business). This would be a combination of senior leadership, business strategy, HR and CSR functions, along with customer and brand marketing. Marketing has long been customer-focused, so the notion of ‘walking in someone else’s shoes’ is nothing new to us. But perhaps marketing needs to spend a little time walking in the shoes of people in other parts of their own businesses. Marketing and branding rightly have a central role in today’s organizations, but we have to recognize the need to bring everyone on board.

MARKETING BRAND IDENTITY

Losing control Marketers can’t control every aspect of a brand’s messaging – but they can coach an authentic focus on values Writing Alan Williams & Samuel Williams

f we ask the question: “Who is responsible for your organization’s brand identity?”, many people would answer “the marketing department”, “the marketing director”, or similar. This is hardly surprising: many organizations operate this way. But today, an organization’s brand identity is too important to be owned by just one function – especially when any shortcomings can be communicated to millions in a heartbeat. 68

Have you ever been disappointed by your personal experience of a brand compared to the official corporate messaging? It can be as simple as a new website extolling the company value of ‘excellence’ where there are spelling mistakes in the copy, or one customer service representative telling you something different to what a call centre operative told you previously. How can a traditional marketing department be responsible for all these elements? Jeff Bezos captured it perfectly when he said, “Your brand is what people say about you when you are not in the room.” From a customer perspective, every single outward-facing detail of the organization forms the brand identity, from the experience with employees – including outsourced employees – to the built environment to the digital experience. Everything counts towards your brand. As marketing guru Seth Godin puts it, “A brand is the set of expectations, memories, stories and relationships that, taken together, account for

Brand identity should inform decisions across the organization

a consumer’s decision to choose one product or service over another.” Just think about how important customer service employees’ uniforms are as a visual representation of the brand. And it goes even further. Are customers the only stakeholders who are influenced by the organization’s brand identity? Not at all. Organizations have to consider how their brand identity is presented to employees, service partners and local communities too.

Image Shutterstock

Owning the brand identity In the past, it was commonly accepted that organizations owned their brand identity. The marketing function usually took the lead: it decided what the brand identity was and then used marketing and public relations campaigns to pump out a message to target audiences. Today, in what we describe as ‘the values economy’, this model no longer works. An organization’s brand identity is co-owned by various stakeholder groups, including customers, employees, service partners, local

Alan Williams and Samuel Williams are authors of The Values Economy: How to Deliver Purpose-Driven Service for Sustained Performance (LID Publishing, 2021)

communities and investors. Across these groups, consistency in messaging is key: in the values economy, there is no place for organizations who try to present one face to one group of stakeholders and a different one to others. As Scott Cook, the Intuit co-founder, has pointed out: “A brand is no longer what we tell the consumer it is – it is what consumers tell each other it is.” In the business-to-consumer arena, the role of social media is pivotal: in networked communities, information flows more freely and faster than ever. This is a double-edged sword. On the one hand, organizations with a clear and consistent brand identity which is experienced as authentic will be lauded; on the other hand, inauthentic brands might not survive. Honesty, originality and authenticity will become prerequisites for achieving sustained performance. The key to success is strategic alignment and coordination execution. It all starts with brand identity (the first element of our Servicebrand approach). Once there is clarity about all aspects of the brand identity, including purpose and values, it can be used to inform decisions across the organization, focusing on the employee and customer experiences. This ensures the organization’s brand identity is alive and aligned at different levels. It can be seen in purpose- and values-led decisions, in employee behaviour, and in a uniform brand voice across channels and stakeholder groups. A shining example of the power of a clear brand identity is the All England Lawn Tennis and Croquet Club (AELTC) – best known for the Wimbledon Championships. Wimbledon is the oldest tennis tournament in the world, one of the sporting calendar’s most prestigious events and one of the largest global media events. At a strategic level, the AELTC will not consider betting firms for direct relationships of any kind, because of the value of integrity. At an organizational level, the AELTC remains a private club, and its board is made up of club members, keeping tennis at its heart. And at an operational level, the branding within the grounds is strongly palette-led, evident in the horticulture and staff uniforms, and the absence of brand logos. The Wimbledon brand identity flows through every facet of the organization and operation. In the future, we believe that the most successful brands will not be focused on direct control of brand messaging. Instead, they will invest energy in being true to their brand identity, led by their purpose and values. They will focus on enabling their stakeholder groups to communicate how they feel about the brand, with these stakeholders effectively acting as an extension of the marketing department – with marketing becoming an ‘authenticity coach’, touching all aspects of the organization. It promises to be a fulfilling future.

MARKETING CONSUMER BEHAVIOUR

In bloom

consumer, concerned about the future and the common good, and eager to play their part in the search for a better way of life. They expect the same commitment from companies and brands in terms of their products, services and communication. That means marketers need to rethink some of their core assumptions. A few years ago, we thought that responsible consumption was mainly linked to the desire for personal fulfilment of the privileged, affluent middle class. Having reached the upper levels of Maslow’s famous pyramid, it was assumed that this group would have found the means to satisfy that desire. But we have since understood that the drive for responsible consumption actually has much deeper roots – and that it concerns a wider

We need a new model for understanding consumers’ aspirations and needs Writing Florence Touzé

urrent studies into consumer behaviour consistently point towards the same conclusion: we are witnessing profound and far-reaching changes. We are seeing the emergence of a new breed of responsible 70

demographic. It is now a fundamental need for any consumer who wants to satisfy new aspirations, alleviate new fears, and resolve the paradoxes between the pleasurable and the sustainable.

The flower of needs

Maslow’s pyramid The psychologist Abraham Maslow originally proposed his five-level hierarchy of needs, usually envisaged as a pyramid, in 1943. According to this model, a new need arises when the previous one is satisfied: we progress towards the summit of our desires and needs via successive levels, passing from concern for ‘having’ to that of ‘being’. The logic of the pyramid has been used by marketers and communicators for decades to design strategies and arguments aimed at consumers. Now, 75 years after Maslow’s pyramid was first proposed, in a world that has seen an unprecedented rate of change, it could do with some adjustment. In a time of economic, climate and health crises – and new aspirations – the progression from one level of the pyramid to another has been called into question. For decades, for a large majority of the population in developed countries, it could be taken for granted that consumers’ basic needs were met. That has been undermined by the current environmental crisis and the pandemic. Basic physiological and safety needs are once again making headlines around the world, including in developed countries.

Image Shutterstock

Shaking up established patterns

Achievement

Physiological

Esteem Links between

Being & Having needs

Safety

The drive for responsible consumption has deeper roots than was previously assumed

But have we returned to the base of the pyramid, unable to reach those higher up? In fact, the reality is more complex. Studies show that ‘to have’ and ‘to be’ now coexist. They intersect and collide. A simple yet vivid example is: “Yes, I would like to drink water from a pretty designer bottle, designed by a local artist – but it needs to be clean and healthy water, without phosphates or bisphenol, and be manufactured and transported without producing waste or greenhouse gases.” Maslow’s five levels of needs are still there, but the progression between them is no longer linear or step by step. In fact, each type of need is linked to all the others, calling into question the hierarchy and verticality of Maslow’s model. Today, we are better conceiving of consumer’s needs as the petals of a flower (see graphic, top right). By showing that consumers’ needs intersect and collide, rather than piling them up on top of each other, we achieve a way of thinking and functioning that is much more in tune with the consumer of today: “By being part of the group, I am part of a system that protects the environment and in which I am engaged. I will be able to ensure my safety through belonging. And I will find the self-esteem (and esteem of others) by meeting

Belongingness

my basic needs responsibly.” This interrelation no longer separates the two states of ‘having’ and ‘being’, but associates them. Sociology had taught us that consumption enables social existence – ‘I consume therefore I am’ – so we could extend that to the belief that ‘I exist for society, because I have’. But today, consumption is also ‘obtained’ by social existence: ‘I have, because I exist in and for society’. This is why the pyramid is transformed – yet this second logic does not replace the previous one. The sense of belonging exists more than ever through people’s association with brands or social networks. This second logic overlaps with the first, redefining the entire process.

Aspirations and fears

Florence Touzé is a professor at Audencia SciencesCom and Audencia’s Positive Impact co-chair

A new understanding of today’s consumer is emerging with the transition from a vertical and linear model to a transversal and inter-relational one. This new vision calls for more complex marketing and communication strategies. It offers a different basis for those strategies, and could help brands to reconnect with a new breed of consumers who have little in common with those of just a decade ago – let alone the post-war consumers whose needs informed some of the dominant models in marketing thinking. New horizontal and collaborative models are necessary to meet the needs of those new and varied audiences. Reconnecting the organization with its audiences, and supporting them in their aspirations and fears, is the great challenge facing marketing and communication teams today.

A COMPREHENSIVE DESCRIPTION AND EXPLANATION OF THE STRATEGY CLASSIC AN INTERNATIONAL BESTSELLER (OVER 600,000 COPIES SOLD IN CHINESE) – A MODERN EXPOSITION TO ENABLE LEADERS TO NAVIGATE BUSINESS TODAY

The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or ruin. Hence, it is a subject of inquiry which can on no account be neglected. – SUN TZU, Chinese general

For Sun Tzu, the art of war is not the art of fighting battles, but the art of not fighting battles. It is not the art of winning by fighting battles, but the art of winning without fighting battles. It is not the art of fighting battles first and winning later, but the art of winning first and then fighting battles later. – SAM HUA, author

The author SAM HUA is a bestselling author on Ancient Chinese philosophy and wisdom, with his books having sold one million copies in total. He is also the co-founder and chairman of the branding consultant Shanghai Hua and Hua Consulting. His previous book, Super Signs: Taking Your Brand to the Ultimate Level, was published in English by LID Publishing.

Now available from all good book retailers in print and ebook format ISBN 978-1-912555-93-2, Hardback, £19.99 (rrp) ISBN 978-1-911671-32-9, Ebook, £12.99 (rrp)

RITA GUNTHER MCGRATH ON STRATEGY

Work back from the future A ‘reverse income statement’ is an uncertainty antidote

here is a great fallacy in business planning, one that my colleague Willie Pietersen at Columbia introduced me to. It’s called the Parmenides Fallacy. When humans compare where they are today with some potential choice for the future, they tend to consider the status quo safer, more secure and more pleasant than the uncertain, unpredictable future that departing from the present implies. Wrong. The correct comparison is to compare that future choice with where we will be at that future time if we do nothing differently in the present. Compare future states with future states. One way to do this is via the ‘reverse income statement’. The idea is that instead of starting with today and using that to anchor our approach to the future, we start with the future and work backwards to what would have to be true today for that future to happen. It’s a remarkably efficient way to quickly discard ideas that won’t work and to flesh out ideas that might. You start with how much revenue you made in a given period, and break costs into those that are directly associated with making that revenue (cost of sales) and those that are associated with running the business. Straightforward enough. Here’s where the first typical fallacy enters into this kind of calculation. People will say things like, “The market for haptic-enabled virtual technology is projected to be $2 billion by 2023, and all we need is 5% of that market.” With that as the core assumption, the person making the pitch will put that $100 million in the revenue box, assume 50% costs, and mentally book a profit of $50 million. This calculation is sheer fantasy. Instead, you can do this an entirely different way and get to reality very quickly. Consider a business my mom really wanted someone to start. Her proposed invention was an automatic door opener that would open and close the French door so she could easily bring food backward and forward from her patio. “Okay,” I said, always trying

It’s a remarkably efficient way to quickly discard ideas that won’t work

Rita Gunther McGrath is professor of management at Columbia Business School

to be a good sport (at least where my mom is concerned), “let’s use a reverse income statement to test this out.” The first thing you posit is what ‘good’ looks like – how much profit would you have to earn? She said if she could make $200,000 in a year on the business, she’d be happy. You can then look up what the return on sales for a business like that might look like – we guessed about 35%, typical for an industry like this. We’d calculated annual revenues at about $570,000. We then talked about how much she’d pay for something like this if it was for sale in, say, Home Depot. She thought $75 per unit would be reasonable. That tells us we’d need to sell around 7,600 of the things to make our revenue numbers. How many does that mean would have to be sold in a typical Home Depot? Well, at the time of the analysis, Home Depot had about 1,800 stores, while Lowe’s had about 1,000. In either case, it would be a business that would be way too small for such stores to bother with. We either drop the idea of selling in big-box stores or get a lot more ambitious about how big the business would have to be. See? Now we’re working with facts, and learning. You can then go through and model many of the other assumptions you might make in a business. By working backwards, you can test whether they are realistic. At times like now, when uncertainty is sky high, the reverse income statement comes to the fore. It is a tool of innovation that is incredibly helpful in setting your agenda for testing and learning.

STRATEGY CHINA’S FUTURE

Why China works Global businesses need to understand how the Asian superpower has thrived – and what its future might hold Writing Edward Tse

ew countries demand the attention of global companies’ senior executives quite like China. Its market size, its continued growth and its importance to global supply chains make it hard to ignore. Its GDP growth of 2.3% in 2020 (as reported by the International Monetary Fund, April 2021) indicates a strong post-pandemic recovery – a performance which is all the more remarkable when compared with the negative growth experienced by the rest of the world in 2020. In the first quarter of 2021, China’s GDP grew by a record 18.3% in comparison to the same period the year before. China has come a long way since the start of its reform and ‘opening up’ policies some four decades ago; in fact, its GDP has grown over 200 times across this period. It is set to overtake the US as the largest economy in the world before the end of this decade. Despite this, many people over the years have cast doubts on whether China’s growth is sustainable. Perhaps the most quoted narrative has been that of a 2001 book, The Coming Collapse of China, which predicted that China would collapse in the “near future.” Yet China has delivered continued economic growth without showing any signs of imminent collapse, despite a rather challenging geopolitical environment and a pandemic. Why has this been possible? The answer lies in a three-layered system of economic development which has guided government and enterprise over many years. It’s time for global businesses to truly understand why China works – and to assess how geopolitical developments may shape its future role in the global economy.

China’s development approach After a rather tumultuous first three decades, the People’s Republic of China (PRC) began its reform under Deng Xiaoping at the end of the 1970s. While retaining key aspects of the state planning system, Deng began to experiment with elements of a market economy to create “capitalism with Chinese characteristics”. This included allowing the return of entrepreneurship, which has become a key component of China’s economy and the most important source of commercially applied innovation. The central government continues to play a significant role in steering the economy and helping the country to develop at a sustainable pace, but China is no longer just a state economy: the private sector has become increasingly significant. That is especially true in today’s digital economy. For instance, the government has allowed two private companies – Tencent and Alibaba – to create and dominate the country’s 74

online payment system. China’s third-party payment transactions have reached ¥280 trillion (about US$44 trillion), of which over 80% are paid through Alipay and Tenpay. It is an example of the central government’s willingness to coordinate with private businesses to put much-needed innovations to work for the country. Collaboration with private enterprises will continue to be essential as the government prepares to launch its central bank digital currency (CBDC). Local governments also play an important role in the Chinese system. They often function as a bridge between central government and entrepreneurs: they frequently provide funding for businesses, and select strategic positions commensurate with the directions set by the central government. Many have built their digital and smart infrastructure to support ‘smart cities’ initiatives driven by the central government. The interaction of central government, local

China is set to overtake the United States as the largest economy in the world by 2030

Above The central Shanghai skyline 75

governments and the private sector amounts to a three-layered model for China’s economic development (see graphic 1, page 77). In addition to this three-layered structure, China has a unique dual economic structure, comprising state-owned enterprises (SOEs) and privately-owned enterprises (POEs). While there are sometimes conflicts between companies from these two sectors, they also co-exist in symbiotic relationships, with SOEs providing public goods, such as infrastructure and environmentimprovement measures. A good example is the development of the world’s most extensive high-speed railway network, built from practically nothing, in just over a decade. Such achievements are possible because these enterprises do not evaluate mission-critical infrastructure projects only on narrow economic viability. Both Chinese people and businesses, including foreign companies, benefit from such infrastructure.

STRATEGY CHINA’S FUTURE

We call this system a ‘three-layered duality’. It is an approach which requires constant juggling of various components to make it work. It is experimental by nature and therefore requires a strong degree of overall orchestration, plus shared vision and values from those who participate. As a result, it has an innate ability to self-adjust over time – as seen in the emergence of China’s innovative private sector.

With its ‘wholeof-nation approach’, China can mobilize resources across the entire country

Key achievements China has developed a strong reputation for innovation. Broadly speaking, there are two strands of innovation. One is technological innovation which is primarily driven by the government. This includes programmes such as space missions (including lunar and Mars probes), deep sea exploration, developments in quantum computing and many others. The other strand is tech-enabled innovation in commercial applications. Prime examples are found in e-commerce, online payment and smart logistics, as well as in the automotive and mobility sectors. Private businesses play a major role in this sort of innovation, often in collaboration with local governments. The three-layered interplay between central and local governments and both SOEs and POEs is evident in many fields. For instance, with the US government’s sanctions on high-end semiconductor chips hitting Chinese manufacturers, China has launched a major initiative to develop selfsufficiency in high-end chip supplies. The central government, many local governments, and various SOEs and POEs are involved in various ventures aiming at creating breakthroughs. The Covid-19 response provided another very visible example. During the lockdown of Wuhan

city in early 2020, two emergency hospitals were built in as little as ten days. China was able to achieve this because as soon as the central and local governments decided that the hospitals were necessary, a large number of SOEs – together with POEs and even foreign companies – quickly collaborated. The commitment to a common goal and sharing of a vision were key motivators. To simply equate this with a simplistic ‘authoritarian’ narrative does not assign enough credit to all those who participated. This is sometimes termed a ‘whole-of-nation approach’ – one that can mobilize resources across the entire country against a certain objective and purpose. It is based on a pragmatic balance between a sense of collective responsibility and individualism by all involved. It is a balance that has driven the unprecedented intensity and pace of China’s innovation and development, as well as its resilience. Small wonder, perhaps, that a recent survey carried out by Canada’s York University found an overwhelming 98% of Chinese citizens indicated that their trust in the national government had increased since the pandemic. The notion of the “coming collapse of China” has little chance of materializing any time soon.

Global businesses in China Below left Along with Alibaba, Tencent has been allowed to create and dominate the country’s online payment systems Below right BMW has taken its Munichbased Startup Garage programme to China

Global businesses who have operated in China for some time may understand the reasons for the country’s success, although many multinationals are yet to fully grasp the impact of Chinese innovation. Some, though, are beginning to recognize what they can learn from China. One large US client told me their board of directors instructed the China team to think about how to leverage Chinese knowledge to help businesses

in other parts of the world. BMW has taken its Munich-based Startup Garage programme to China to gain exposure to innovative new technologies, while Herbert Diess, chairman and chief executive of Volkswagen, said at the 2021 Davos online summit that China was “moving in the right direction” – with it now being easier for foreign multinationals to invest in China than for Chinese businesses to invest in countries such as Germany. As Diess also noted, there is a strong relationship of dependency: “they are depending on the West, we are depending on China”. Indeed, China’s role in the world is becoming ever more important. Its internally driven development approach is moving the country towards a new era of high-quality growth that will be epitomized by more innovation and greater sustainability. However, the external environment is becoming more complicated – and it doesn’t look like this will get better anytime soon.

The second scenario is ‘one world, two systems’. The US and China will remain geopolitical rivals with occasional flare-ups on specific issues, but will find agreement on common interests. Intense competition in high-tech areas will continue, though stakeholders will learn to solve disputes through dialogue. Export controls and other policy measures, as well as differences in the sophistication of digital infrastructure, will see China and the US evolve into two distinct tech systems. China will expand market access to foreign firms, but with stringent data and security policies. As intelligence and connectivity become increasingly embedded in Chinese society, consumers will gravitate towards brands that can give them the desired digital experiences, tailored to local tastes, regardless of origin. The third scenario is one of ‘co-opetition’. The US and China remain geopolitical rivals while collaborating in certain areas of global governance. They both compete and collaborate in high-tech areas. As it grows, China will increase market access for foreign players, while exercising data sovereignty based on recognized principles of global data governance. Again, consumers seek out the brands that can tailor experiences to local tastes, irrespective of origin. In this scenario, companies’ products, services and business models have a better chance of transcending national borders – perhaps with the exception of core technology concerns. We don’t believe a complete decoupling is likely or even possible. The ‘one world, two systems’ scenario will probably manifest under some specific conditions, while the third scenario of ‘coopetition’ is probably more likely over the medium term – perhaps with more competition initially, moving towards greater collaboration over time.

Three geopolitical scenarios

Engaging with China

In determining their strategic approach to China, global companies must evaluate how the evolution of geopolitics could affect their positions. As a global power, China’s relationship with many parts of the world will be critical in the years ahead – but its most important geopolitical relationship is likely to remain that with the US. We believe there are three potential scenarios related to geopolitics and macroeconomics which will affect global businesses, especially US businesses. The first is ‘regionalized isolation’. In this scenario, Chinese companies will be forced out of the US market, with the Chinese government retaliating by virtually blocking US investment in China. The Chinese tech industry becomes self-sufficient and there is a widespread economic decoupling, with Chinese consumers becoming increasingly hostile towards US brands, shifting instead to local products.

Today, a global company’s China strategy is largely dependent on which of these geopolitical and macroeconomic scenarios it expects to pan out. China’s importance to global companies’ finances and competitive positioning will become more critical going forward, despite the uncertain USChina relationship. However the geopolitical context develops, China will continue to generate much of its own economic momentum. Its unique and still-evolving three-layered duality development framework – the whole-of-nation approach – will provide it with significant resilience. The country should be able to continue to make major progress. Making the right bets now on how the world will look in the coming years, and what to do in China, will define the long-term competitiveness of many companies around the world – perhaps even their survival.

1 China’s three-layered development model Central government

Top-down initiatives Regional competition and collaboration

Local governments Grass roots entrepreneurs and enterprises

Bottom-up innovation and competition

Source: Gao Feng analysis

Edward Tse is founder and chief executive of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China

STRATEGY RETHINKING ESG

Cutting through the fog ESG is centre stage in many businesses – yet many leaders are unclear about core concepts. A new framework offers clarity Writing Marc Kahn & Sharmla Chetty

oday’s businesses ignore environmental, social and governance (ESG) considerations at their peril. Changing consumer demand, investor expectations and regulatory requirements are rapidly transforming the business environment from one in which profit trumps people and planet, to one in which these exist interdependently and in mutual support. Yet for many leaders, ESG remains shrouded in fog. Despite sustainability experts’ best attempts to explain ESG, many business leaders still have limited clarity about what it means for their organization in practice, and what they ought to be doing about it. Businesses with an active and deliberate ESG approach reap numerous benefits. Deloitte research in the UK found that 34% of consumers chose brands with environmentally sustainable practices or values in 2020-21, while a 2019 Schroders survey found that 61% of Generation X always consider

ESG performance shapes how firms compete for customers and increasingly for talent, too

sustainability factors when selecting an investment product. And most leaders are familiar with the power of social media to help ethically-driven movements mobilize rapidly, and to destroy business reputations overnight. Think of the impact of MeToo, or how Greta Thunberg has inspired young people around the world. Not only does ESG performance shape how firms compete for customers: it increasingly affects their ability to compete for talent, as values-driven Millennial and Gen Z employees seek responsible, purpose-led employers with sustainable business models. What’s more, ESG metrics have been accurate indicators of stock volatility, earnings risk, price declines and even bankruptcies. According to research produced by Merrill Lynch, ESG could have helped investors avoid 90% of bankruptcies, and an investor who only held stocks with above-average ESG scores would have avoided 15 of the 17 major corporate bankruptcies that markets have witnessed since 2008. And ESG is increasingly affecting capital flows. The Financial Times reported that responsible investment funds saw net flows increase by 275% in 2020 compared to the prior year, and 2021 looks like it will beat that record. It’s clear that ESG will play a central role in markets in the near future, and access to capital for companies without good ESG credentials will be very limited indeed. Understanding ESG metrics, data and reporting is thus becoming critical for businesses as they engage with stakeholders and attempt to meet their demanding expectations – yet a recent PwC survey found in nearly three-quarters of organizations, leaders are only “in the early stages of their ESG journey”. The report praised the record of companies such as Adobe, Salesforce, Microsoft, Procter & Gamble and Best Buy, and emphasized the importance of ESG to strategic reinvention, business transformation and reimagined reporting. Yet a lack of leadership attention or support was identified as a barrier to ESG effectiveness by 33% of those surveyed. The reality is that many leaders remain uncertain, confused or uninformed about ESG and what it means for their business.

The POPP framework for ESG Through his work at Investec, Marc Kahn has developed a simple ESG framework that has helped leaders cut through that uncertainty and confusion. He had found that many people were making the mistake of thinking that Environment means climate; that Social means people; and that Governance means compliance. Those oversimplifications are ultimately incorrect. The misunderstanding was causing confusion and misalignment between leaders, and leaving members of the sustainability team frustrated. Kahn’s framework addresses this by capturing

A potential framework for understanding ESG*

GOVERNANCE

SOCIAL

ENVIRONMENT

People

Operations

Products & services

Philanthropy

Office air quality Healthy food options

Renewable electricity for offices Workplace waste programmes

Renewable energy products Green investments Climate impact considerations in customer services

Donations to clean water, energy projects Charitable support for conservation projects

Diversity and inclusion Well-being programmes Learning offerings

Health and safety practices Data security Digital support

Products or service offerings that improve social equality, quality of education, social infrastructure

Charitable support for education and entrepreneurship Support for youth employment, skills development

People policies Remuneration Board composition (race, gender)

Procurement Operational resilience Supply chain

Policies on fossil fuels Policies on ethical investing

Promoting strong governance in NGO partners

Reporting, management & stakeholder engagement Sustainability indices ESG ratings and rankings Addressing shareholder concerns on ESG Managing ESG stakeholders Relevant institutional memberships Data management and reporting

* There are hundreds of possible indicators. These are just some potential examples

the intersection of ESG with People, Operations, Products & Services and Philanthropy (POPP). The framework helps to determine ‘what goes where’ in relation to ESG. People relates specifically to the organization’s people – primarily employees. Operations refers to the company infrastructure. Products and Services relates specifically to the company’s customer value proposition, the valuecreating activity at the heart of the business model, in contrast to Philanthropy, which covers charitable and non-profit activities. The examples in the framework (above) show how ESG exists across these columns.

What goes where With clarity about POPP, we can plot how a company’s activities sit in relation to ESG. For employees, Environment includes things like air quality and healthy food options in the workplace: this is the ‘E in People’. The ‘E in Operations’ includes using renewable energy for office spaces. When it comes to Investec’s products and services, relevant activity includes its investment products in the renewable energy sector – while the ‘E in Philanthropy’ includes initiatives to support community waste and energy programmes. This may look like a social initiative, but what matters is the underlying driver – here, the environment. For the social dimension, we could look at an organization’s diversity, wellbeing and learning

Dr Marc Kahn is Investec’s global head of people & organisation, and chair of its ESG executive committee. Sharmla Chetty is president of global markets for Duke Corporate Education

programmes. The ‘S in Operations’ would include things like data security and digital support. Relevant products and services at Investec include the Global Sustainable Equity Fund, which seeks to provide investors with capital growth over the long term by identifying investments with strong social characteristics. As an example: Investec is an equity partner in the Invictus Education Group in South Africa, which has enrolled over 20,000 students in its programmes and is making a significant contribution to the country’s skills development. This is not philanthropy – it is a business venture, but one with an explicit social purpose. Governance spans all four parts of the POPP framework. The ‘G in People’ includes the company’s people policies, remuneration practices, and its board composition; metrics might include those for diversity. Operations would include procurement policies and practices, operational resilience and supply chain policies. For Investec, relevant products and services include its ESG lending policies and screening – such as policies on the fossil fuel and defence sectors, while the Philanthropy box would include Investec’s work to promote good governance among its NGO partners. ESG has the potential to drive greater business profitability and improved outcomes for society. This framework shows that ESG gets to the very heart of business, revealing how leaders deliver value for all their stakeholders in our fast-changing world.

NEWS NATION

China On the 100th anniversary of the formation of the Chinese Communist Party, the question on everyone’s minds is: what next for China?

Fact file Land area 3,600,947 sq mi (9,326,410 sq km) Population 1,397,897,720 Capital Beijing (pop. 20,896,820) GDP US$14.723tn (2020) Economic record 2.3% (2020) Economic forecast (OECD) + 8.5% (2021) + 5.8% (2022) GNI per capita $17,200 Currency Renminbi or yuan (CNY) 1 CNY = US$0.15 (July 2021) Unemployment 5% Life expectancy Women 79 Men 74 Official language Mandarin

THE CHINESE REVOLUTION

Years of double-digit economic growth at the turn of the 21st century

133%

Rise of new home sales in China in early 2021, prompting concerns about debt

1911

Final year of China’s last Imperial dynasty, the Qing dynasty, and the establishment of the People’s Republic of China

1921

Year the Chinese Communist Party was formed 80

2.45%

Share of global foreign exchange reserves held in yuan

We will never allow any foreign force to bully, oppress, or subjugate us President Xi Jinping at the Chinese Communist Party’s 100 Year Centenary Conference

TECH TENSIONS

Tech firms fined over 500,000 yuan in July 2021 for merger irregularities, including Alibaba and Tencent

18bn

Size of the fine, in yuan, handed down to Alibaba in April 2021 for alleged antitrust transgressions (US$2.75bn)

They have an overall goal to become the leading country in the world... That’s not going to happen on my watch US President Joe Biden, March 2021

Drop in Alibaba’s share value in late 2020 when the planned IPO of finance spin-off Ant Group was halted, after founder Jack Ma criticized financial regulators

RISING POWER

252m

Estimated Chinese mililtary expenditure in 2020, in US$ – second highest in the world

2.2m

Number of active duty personnel in the Chinese military, making it the largest in the world

The number of Uighur Muslims thought to be imprisoned for ‘re-education’ in Xinjiang

92,277 We can’t use yesterday’s methods to regulate the future Jack Ma, Alibaba founder, criticizing banking regulators in October 2020

Number of Covid-19 cases recorded in China during the pandemic – with just 4,636 deaths (as of July 2021)

REVIEW HEATHER MCGOWAN & CHRIS SHIPLEY

Adapt and thrive For individuals and organizations alike, the future of work requires us to learn, unlearn and adapt

have been a big admirer of Heather McGowan’s work for some time. She has huge credibility as a commentator on the future, and is hugely enlightening as a terrific curator of insight and statistics. She is a real macro trendspotter and storyteller. So I had high expectations of her new book, The Adaptation Advantage: Let Go, Learn Fast and Thrive in the Future of Work, which is written jointly with Chris Shipley and includes a foreword from renowned New York Times columnist Thomas L Friedman. I am pleased to say that my expectations were more than met. The Adaptation Advantage is a compelling and smartly-presented read, devoid of hype and strong on substance. In essence, it is a manual for strategists, creative leaders and inventive teams about the future of work. The premise is, of course, that adaptation is key to the future. But for all that we might think “Of course it is”, time and again, we experience and see failures of adaptation and a lack of adaptability around us in today’s organizations. In my view – although this is not an accusation that McGowan and Shipley level at anyone – we are under the illusion that we’re more adaptive than we really are. It’s why this book is very much needed. The approach is a little like tackling the exam question “how do you navigate the future?” several times over, but a clear structure makes it a consistently pleasurable reading experience. The book makes the case that technology is transforming the world of work faster than ever. Its power and reach have already outstripped our ability to make sense of it all. If you’re into Ray Kurzweil, Peter Diamandis or Salim Ismail’s Exponential Organizations and his ‘law of accelerating returns’ you will be nodding in approval at McGowan and Shipley’s assessment

The Adaptation Advantage is a compelling, smartlypresented read, devoid of hype and strong on substance

and the variety of insight that is curated and shared here. Yet McGowan and Shipley’s take on cognitive skills is fascinating. They are strong champions of the power of the human mind: “silicon cognition”, as they dub it, cannot replace the cognitive prowess evolved by humans over millions of years. As technological augmentation, automation and atomization gather pace, we are commonly urged to shift our jobs to keep pace with technological advances. McGowan and Shipley urge us not to tether our identity to our jobs, because the pace of change is stripping us of our comfortable work-centric identities – a process that can be profoundly destabilizing. Instead of jobs being designed because a specific pile of work has emerged (think of the number of social media manager jobs created as Facebook, Twitter, Instagram, TikTok and so on have boomed), McGowan and Shipley advise us to focus first on skills, untethered to jobs. In effect, they invite people to augment and create their own roles. Jobs flow from this. The approach is akin to adaptive and iterative design, but done by everyone, rather than just a line manager or HR department. This has huge appeal: McGowan and Shipley are surely right that we all need to take more accountability for retooling ourselves. As for our businesses, they must also change their focus: from extracting value to creating new value through learning. McGowan and Shipley may not be the first to make the argument – Peter Senge and others have extolled the virtues of a “learning organization” for some time now – but they connect the idea powerfully to our current situation. The book also looks at how teams need to change (a reflection of the highly-practical approach

Image Shutterstock

Writing Perry Timms

taken by the authors throughout). It amplifies the sense that culture and capacity together define the teamwork of the future – not just capability. This feels absolutely right, because we have to think about the space we need to create to do work that is getting more complex, more technologicallyenabled and entangled. One critical implication: adaptive teams must hire for alignment with values, instead of past skills and experience. When we step back and look at over 40 years of teams-based research, it isn’t charisma, niceness, aligned-behaviours and generosity of spirit that defines a good team (although they help provide harmony and a sense of being together). Rather, it’s a clear and compelling direction, including what we are up for, and up against. That includes a strong sense of structure. Nothing in The Adaptation Advantage says we need less structure in our teams: we just need strong but pliable adaptive structures. For any leader, knowing more about the trends that are set to shape our future can help

us orient towards it: to understand what we can prepare for, even if we can’t precisely plan for it. That preparedness is the hallmark of an adaptively advantaged team, along with an ability to leverage our knowledge and behave in ways that enable us – as individuals, organizations and teams – to be adaptive. As the future of work unfolds, that’s an advantage we can’t be without. Perry Timms is the founder and chief energy officer of PTHR, a consultancy aiming to create better business for a better world. He is a TEDx speaker, top-selling author, and threetime member of HR Magazine’s Most Influential Thinkers list

The Adaptation Advantage: Let Go, Learn Fast and Thrive in the Future of Work Heather E McGowan and Chris Shipley (Wiley)

REVIEW EFFORTLESS ACTION

The easy life Working life seems to get harder and harder. Does it need to be? Writing Patrick Woodman

hat if you could achieve the same results at work – but with less hard work? Or achieve more, with less effort? That possibility is the premise of Greg McKeown’s Effortless. In competitive corporate life, the temptations of overwork are always there: work harder, do longer hours, reply to email faster. But as George Orwell’s doomed workhorse, Boxer, showed us

in Animal Farm, the mantra “I will work harder” has logical limits. Stress and burnout were chronic even before the pandemic struck. McKeown attributes the lionization of hard work – and mistrust of the easy path – to the Puritan worldview. But he points out: “Past a certain point, more effort doesn’t produce better performance. It sabotages our performance.” Effortless is no manifesto for laziness. On the contrary, it’s a call for focus on what really matters. McKeown offers a three-pronged approach to making life easier. It starts with self: what looks hard feels easier when we’re in an ‘effortless state’. His recommendations include inverting our view of challenges, finding the fun, releasing our frustrations, resting well and being present. Next is McKeown’s advice for effortless action. Begin by defining what ‘done’ means to your latest project, and start

with a minimum viable first action. Pace yourself: put upper bounds on what you’ll do, as well as lower ones. In truth, each short, snappy chapter is only a starting point. Applying the ideas to one’s own work will require some, well, effort. But as the final section, on effortless results, points out: ‘residual’ – or compound – results rely on some smartlytargeted work up-front. Get that right and we can leverage things like our learning, automation, and trust in our teams, to deliver stand-out results with ease. In a world where overwork and burnout abound, Effortless is an easy sell. Patrick Woodman is editor of Dialogue

Effortless: Make It Easier to Do What Matters Most Greg McKeown (Ebury Edge)

BIG IDEAS WITH PERRY TIMMS

Problem statements I’ve long wondered: why does the work we have in the 21st century exist? Some might say to generate profit. To serve people. To create innovative products. But ultimately, all work throughout history exists to solve a problem. Whether it’s the lack of shelter, warmth, sustenance or even love, where there’s a problem around any of the basic factors of life, we work to develop and deploy solutions: a safe cave, a fire, food, ways to be with others. As our needs have become more sophisticated, so has our work. So problems are nothing new – but they have been buried in years of evolution and economic development. This is where ‘problem statements’ come in. At heart, problem statements are a

simple description of a situation you want to change. It might be a cultural issue to correct, like over-controlling management; under-engaged team members; or productrelated, such as a defective feature. Before diving into possible solutions, describe your problem in a sentence: “When <something happens/might happen> I/we/others feel <an emotional and/or intellectual response> and I/ we/they want <action orientation/ to do something> that <creates value/ has impact> but <barriers/ obstacles/ challenges are present>.” When problems appear, we often find the real fracture is some way removed from where it came to light. Careful diagnosis is necessary: problem statements help us 84

journey back through the issues involved. You may even find you’re facing a problem cluster, with multiple contributing factors. Problem statements aren’t an attempt at over-simplification. They are a way to wrangle complexity. They also work well when you have more than one thing to define as a problem. Multiple statements are fine: they give you a better chance of working towards aggregated solutions. In fact, problem statements also work brilliantly for opportunities. If you have identified an opportunity for a new service, a different way to work or a new market segment – then try the problem statement approach. Perry Timms is founder and chief energy officer of PTHR, a consultancy aiming to create better business for a better world. He is a TEDx speaker, top-selling author, and three-time member of HR Magazine’s ‘Most Influential Thinkers’ list

PIERS CAIN ON BOOKS

Riding the wave Start-up success demands an ability to surf the megatrends that are re-making the global economy

hell oil started out as a shop in London selling exotic seashells. Berkshire Hathaway started as a merger of a textile mill with a spinning association. Never more so than now, to survive and thrive, businesses have to constantly reinvent themselves, often in unexpected ways. In this fourth industrial revolution, the pace of change is relentless. To meet the challenge, leaders need to make bold, brave strategic decisions that fundamentally reinvent their companies. So argues Professor Peter Fisk in Business Recoded. If you are investing in a new company, starting a business of your own or perhaps creating a new business

Few leaders show an appetite for really bold and fundamental change, unless the organization is at risk of imminent collapse

line in an existing organization, what does Fisk – who also runs a start-up accelerator – have to say about how to increase your chances of success? Fisk’s first pointer is that your business must have a driving purpose. People – both customers and employees – expect you to do more than just make a profit; you must put more back into society and the planet than you take out. According to analysis by Corporate Board, purposeful companies outperform the stock market by 42%. They appeal to customers who pay more; they attract the best talent; and they have investors who support them in the long term. Second, your business strategy needs to align to the wave of at least one ‘megatrend’ – the huge social, economic, political, environmental or technological trends that are driving change in global markets and our everyday lives. Examples today might be the drive for ecological renewal, the rise of Asia, or the development of cognitive tech. McKinsey claims that riding the right wave of change is the most important contributor to business results: a company that finds its wave is four to eight times more likely to be a future top performer. You will need to be innovative to stay relevant and surf the trends. According to business thinker Larry Keeley, who surveyed innovation activities in 1,000 large companies, there are many different types of innovation – but some have a much greater impact than others. Keeley found that almost 90% of company time and resources went into product innovation, even though such efforts generally made only incremental improvements, were quickly copied by rivals, and offered little financial return. 85

The three strategies that had the greatest impact were bolder and more fundamental. First, innovate around your network – how you connect with others to create value – whether your customers or suppliers. Network effects increase exponentially as each additional node is connected. Second, improve your profit model. There are many choices. Epic Games’ online multiplayer game, Fortnite, uses a ‘freemium’ profit model: the basic game is free to play, but additional or premium options carry a charge. Applying a profit model that has proved successful in a different sector can work well. Third, make improvements in customer engagement – for example aligning products and services to your customers’ broader aspirations. This can reveal demand for new and profitable services beyond your original remit. Some of this may seem obvious. But how often are these points ignored? Too often, future change is kept for an ‘away day’ once a year, and soon forgotten about because it is too difficult to combine with keeping the business ticking over. In reality, few leaders show an appetite for really bold and fundamental change, unless the organization is at risk of imminent collapse. While Fisk’s book sometimes feels rushed and a little underwritten, it is full of interesting ideas on how to become more agile, responsive, and above all, more courageous. Fisk’s call for action is important because too few businesses have the capability or appetite for surfing the megatrends that are reshaping the global economy. As the waves of change break ever faster, ‘business as usual’ will no longer be enough to stay afloat. Piers Cain is a management consultant

Business Recoded: Have the Courage to Create a Better Future for Yourself and Your Business Peter Fisk (Wiley)

THE LAST WORD SANYIN SIANG

Rethinking assists Making assists is the hallmark of great team players – and great teams

ayne Gretzky, one of the greatest ice hockey players in the history of the NHL, holds many records. One is the record for the most regular-season goals – 894 – which is undoubtedly impressive. But the one that impresses me most is his record for assists: 1,963. You might wonder why: he didn’t score all those goals, so why do they matter? The assists matter more because they tell us a story about team health and cohesion. In any sport, assists indicate that a team is playing well. Of course, they reveal how many points were scored; but they also indicate where players are looking for better shot opportunities, passing and trusting their teammates. In Gretzky’s case – with double the number of assists compared to goals – it speaks to his unique adaptability and shrewdness as a player. He could see where the puck needed to go and possessed the humility to send it to someone better situated. Those are unusual qualities. If assists can tell us all that, why are they only recorded in the sport world? Gretzky’s story forces us to rethink assists. It teaches us both about the value of assists, and about leveraging individual strengths on teams. When I recently interviewed my good friend Deborah Liu, president and chief executive of Ancestry.com, she told me: “The atomic unit of success is not an individual. It’s a team. We have such an individualistic society – it’s the hero’s journey. But if you look, nothing is accomplished without a team. We’re only as good as our teams.” For Liu, the narrative of success cannot only be a hero’s arc. It’s just not accurate. But if assists are never validated, it makes sense that we see only heroic plotlines. Valuing assists requires a mindset shift. We need to internalize the fact that everyone, and every job, is valuable. Both within corporate organizations and in the larger human family, every role has value. Every task is assisting another task. The pandemic began to shift the conversation. Isn’t it striking that the people we identified as

We might only ever be able to know our superpowers when we’re assisting others

Sanyin Siang is executive director of the Fuqua/Coach K Center on Leadership & Ethics (COLE) at Duke University

‘essential workers’ were the likes of grocery store cashiers? Even as Covid-19 made us more isolated from each other, it began to shift our value system. We began to see the wonderful and terrible ways we were dependent on each other. We began to see and value the assists. Valuing assists – seeing, naming and validating them – also has a practical upshot: we begin to see ourselves more clearly. Suddenly we have a richer vocabulary for describing success. What counts as success is broadened and we’re able to identify in ourselves the strengths that only we can offer. I call these person-specific strengths superpowers. These are inimitable, innate gifts which everyone has. With Gretzky, two of his superpowers could only be detected in his assists: his capacity for astute, quick analysis of a situation, and the unpretentiousness required to know his role in that situation. On their own, these might be valuable gifts. But in a team setting, his superpowers were highlighted, harnessed and leveraged in remarkable ways. We might only ever be able to know our superpowers when we’re assisting others. Rethinking assists means rethinking our values. Who is considered valuable on a team? Why is some work valued more than other work, if it all contributes to a common end goal? When we validate assists, we embrace a spacious definition of success and we can identify our superpowers. And – in a brilliant, circular way – when we unlock our superpowers, we’re also empowered to keep up the assists.

SUDHANSHU PALSULE MICHAEL CHAVEZ

Rehumanizing Leadership

Putting Purpose Back into Business The tools and mindset that you need to lead your organization into the 21st century

Research based on 1,000 business leaders Benchmark yourself, your team and your organization against the code now

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