Author Archives: Greg Satell

About Greg Satell

Greg Satell is a popular speaker and consultant. His latest book, Cascades: How to Create a Movement That Drives Transformational Change, is available now. Follow his blog at Digital Tonto or on Twitter @Digital Tonto.

Three Strategies for Overcoming Change Resistance

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Three Strategies for Overcoming Change Resistance

GUEST POST from Greg Satell

Max Planck’s work in physics changed the way we were able to see the universe. Still, even he complained that “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

For most transformational efforts we need to pursue, we simply don’t have that kind of time. To drive significant change we have to overcome staunch resistance. Unfortunately, most change management strategies assume that opposition can be overcome through communication efforts that are designed to persuade.

This assumes that resistance always has a rational basis and clearly that’s not true. We all develop emotional attachments to ideas. When we feel those are threatened, it offends our dignity, identity and sense of self. If we are going to overcome our most fervent opponents we don’t need a better argument, we need a strategy. Here are three approaches that work:

Strategy 1: Designate An Internal Red Team

Resistance is never monolithic. While some people have irrational attachments based on their sense of identity and dignity, others are merely skeptical. One key difference between these two groups is that the irrational resistors rarely voice their opposition, but try to quietly sabotage change. The rational skeptics, on the other hand, are much more eager to engage.

While these are different groups, they often interact with each other behind the scenes. In many cases, it is the active, irrational opposition that is fueling the skeptics’ doubts. One useful strategy for dealing with this dynamic is to co-opt the opposition by setting up an internal red team to channel skepticism in a constructive way.

Red-teaming is a process in which an adversarial team is set up to poke holes in an operational or strategic plan. For example, red teams are used in airports and computer systems to see if they can find weaknesses in security. The military uses red teams to test battle plans. Perhaps most famously, a red team was used to help determine whether the conclusions that led to the raid on Osama bin Laden’s hideout were valid or if there was some other explanation.

Recruiting skeptics to be an internal red team provides two benefits. First, they can alert you to actual problems with your ideas, which you can then fix. Second, they not only voice their own objections, but also bring those of the irrational opposition out into the open (remember, irrational resisters rarely speak out.)

What’s key here is to make the distinction between rational skeptics and the irrational saboteurs. Engage with skeptics, leave the saboteurs to themselves.

Strategy 2: Don’t Engage And Quietly Gain Traction

Have you ever had this happen?: You’re in a meeting where things are moving slowly towards a consensus. Issues are discussed, objections raised and solutions devised. Toward the end of the meeting, just as things are shifting gears to next steps, somebody who had hardly said a word the whole time all of a sudden throws a hissy fit in the middle of the conference room and completely discredits themself.

There’s a reason why this happens. Remember saboteurs are not acting rationally. They have emotional attachments that they often can’t articulate, which is why they rarely give voice to their objections, but rather look for more discreet opportunities to derail the process. When they see things moving forward, they panic.

This doesn’t happen just in conference rooms. Those who are trying to sabotage change prefer to lurk in the background and hope they can quietly derail it. But when they see genuine progress being made, they will likely lash out, overreach and inadvertently further your cause.

This behavior is incredibly consistent. In fact, whenever I’m speaking to a group of transformation and change professionals and I describe this phenomenon to them, I always get people coming up to me afterwards. “I didn’t know that was a normal thing, I thought it was just something crazy that happened in our case!”

It’s important to resist the urge to respond to every attack. You don’t need to waste precious time and energy engaging with those who want to derail your initiative, which is more likely to frustrate and exhaust you than anything else. It’s much better to focus on empowering those who support change. Non-engagement can be a viable way to deal with opposition.

Strategy 3: Design A Dilemma Action

I once had a six-month assignment to restructure the sales and marketing operations of a troubled media company and the Sales Director was a real stumbling block. She never overtly objected, but would rather nod her head and then quietly sabotage progress. For example, she promised to hand over the clients she worked directly with to her staff, but never seemed to get around to it.

It was obvious that she intended to slow-walk everything until the six months were over and then return everything back to the way it was. As a longtime senior employee, she had considerable political capital within the organization and, because she was never directly insubordinate, creating a direct confrontation with her would be risky and unwise.

So rather than create a conflict, I designed a dilemma. I arranged with the CEO of a media buying agency for one of the salespeople to meet with a senior buyer and take over the account. The Sales Director had two choices. She could either let the meeting go ahead and lose her grip on the department or try to derail the meeting. She chose the latter and was fired for cause. Once she was gone, her mismanagement became obvious and sales shot up.

Dilemma actions have been around for at least a century. One early example was Alice Paul’s Silent Sentinels who picketed the Wilson White House with his own quotes in 1917. More recently, the tactic has been the subject of increasing academic interest. What’s becoming clear is that these actions share clear design principles that can be replicated in almost any context.

Key to the success of a dilemma action is that it is seen as a constructive act rooted in a shared value. In the case of the Sales Director, she had agreed to give up her accounts and setting up the meeting was aligned with that agreement. That’s what created the dilemma. She had to choose between violating the shared value or giving up her resistance.

How Change Really Happens

One of the biggest misconceptions about change is that it is an exercise in persuasion. Yet anyone who has ever been married or had kids knows how hard it can be to convince even a single person of something they don’t want to be convinced about. Seeking to persuade hundreds or thousands to change what they think or how they act is a tall order indeed.

The truth is that radical, transformational change is achieved when not when those who oppose it are convinced, but when they discredit themselves. It was the brutality of Bull Connor’s tactics in Birmingham that paved the way for the Civil Rights Act in 1964. It was Russia’s poisoning of Viktor Yushchenko in 2004 that set Ukraine on a different path. The passage of Proposition 8 in California created such controversy that it actually furthered the cause of same-sex marriage.

We find the same dynamic in our work with organizational transformations. Whenever you set out to make a significant impact, there will always be people who will hate the idea and seek to undermine it in ways that are dishonest, underhanded and deceptive. Once you are able to internalize that you are ready to move forward.

Through sound strategies, you can learn to leverage opposition to further your change initiative. You can co-opt those who are rationally skeptical to find flaws in your idea that can be fixed. For those who are adamantly and irrationally opposed to an initiative, there are proven strategies that help lead them to discredit themselves.

The status quo always has inertia on its side and never yields its power gracefully. The difference between successful revolutionaries and mere dreamers is that those who succeed anticipate resistance and build a plan to overcome it.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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Unlearning is More Important Than Learning

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Unlearning is More Important Than Learning

GUEST POST from Greg Satell

When I first went overseas to Poland in 1997, I thought I knew how the media business worked. I had some experience selling national radio time in New York and thought I could teach the Poles who, after 50 years of communism, hadn’t had much opportunity to learn how a modern ad market functioned. I was soon disappointed.

Whenever I would explain a simple principle, they would ask me, “why?” I was at a loss for an answer, because these were thought to be so obvious that nobody ever questioned them. When I thought about it though, many of the things I had learned as immutable laws were merely conventions that had built up over time.

As I traveled to more countries I found that even basic market functions, such as TV buying, varied enormously from place to place. I would come to realize that there wasn’t one “right” way to run a business but innumerable ways things could work. It was then that I began to understand the power of unlearning. It is, in fact, a key skill for the next era of innovation.

The One “True” Way To Innovate?

Innovation has become like a religion in business today, with “innovate or die” as its mantra. Much like televangelists preaching the prosperity gospel to gullible rubes, there’s no shortage of innovation gurus that claim to have discovered the secret to breakthrough innovation and are willing to share it with you, for an exorbitant fee, of course.

What I learned researching my book Mapping Innovation, however, is that there is no one “true” path to innovation. In fact, if you look at companies like IBM, Google and Amazon, although they are all world-class innovators, each goes about it very differently. IBM focuses on grand challenges that can take decades to solve, Google integrates a portfolio of innovation strategies and Amazon has embedded a customer obsession deep within its culture and practice.

What I found most interesting was that most people defined innovation in terms of how they’d been successful in the past, or in the case of self-described gurus, what they’d seen and heard to be successful. By pointing to case studies, they could “prove” that their way was indeed the “right” way. In effect, they believed that what they experienced was all there is.

Yet as I’ve explained in Harvard Business Review, innovation is really about finding novel solutions to important problems and there are as many ways to innovate as there are different types of problems to solve. Many organizations expect the next problem they need to solve to be like the last one. Inevitably, they end up spinning their wheels.

The Survival Of The Fittest?

The survival of the fittest is a thoroughly misunderstood concept. Although it arose out of Darwin’s work, it did not originate from him. It was coined by Herbert Spencer to connect Darwin’s work to his own ideas. Darwin’s theory was so novel and powerful at the time, it was difficult to articulate it clearly, and the phrase caught on.

All too often, people assume that Darwin’s theories predicted some sort of teleological end state in which one optimized form will dominate. If that were true, then the optimal strategy for every organism, as well as every business model and every organization, would be to strive to achieve that optimal state and dominate the competition.

Yet that’s not what Darwin meant at all. In fact, his theory rested on three pillars, limited resources, changing environments and super-fecundity, which is the tendency of organisms to produce more offspring that can survive. “Fittest” refers to a temporary state, not a permanent advantage. What is “fit” for one environment may be detrimental in another.

Eastern Europe was, for me, similar to the Galápagos Islands where Darwin first formed his famous theory. Seeing different business environments, in close proximity, give rise to so many different business models opened my eyes to new possibilities. Once I unlearned what I thought I knew, I was able to learn more than I could have imagined.

Turning The Page On Welchism

At the beginning of this century, Fortune magazine proclaimed Jack Welch to be the optimal manager of the last one. American industry had grown sclerotic and bureaucratic. It was in great need of some trimming down and Welch was truly an optimized fit for the environment.

Nicknamed “Neutron Jack” for his penchant of getting rid of all the people and only leaving the buildings standing, he voraciously cut through GE’s red tape. Profits soared, Welch became something of a prophet and “Welchism” a religion. Corporate boards heavily recruited GE executives as CEOs to replicate Welchism at their companies.

Yet as David Gelles explains in his book about Welch’s tenure at GE, The Man Who Broke Capitalism, not all was as it seemed. Yes, Welch made GE more efficient and profitable, but he also increased risk through “financializing” the industrial company, undermined engineering and innovation by moving manufacturing facilities overseas and cooked the books to make profits seem much smoother than they were.

GE would eventually implode, but the damage went much further and deeper than one company. Because Welchism was seen as the “one best way” to run a business, many other firms replicated its methods. The results have been alarming. In fact, a 2020 report by the Federal Reserve found that business dynamism in America has steadily declined since Jack Welch took the helm at GE in 1981.

Clearly we have some unlearning to do.

Moving Boldly Into An Uncertain Future

I’ve thought for some time that the 2020s would look a lot like the 1920s. That was the last time that we had such a convergence of technological, demographic and political forces at one time (and a pandemic as well!). Yet historical analogies can often be misleading. History is long and, if you look enough, you can find an analogy for almost anything.

It is certainly true that history seems to converge and cascade on particular moments and we seem to be at one of these moments now. We will need to unlearn much of what we thought we knew about shareholder value and other things as well. Yet correcting the mistakes of the past is never enough. We need to create anew.

The recently passed CHIPS Act is a good model for how to do this. Much of the $280 billion bill goes to tried and true programs that we under-invested in recent years, such as science programs at the NSF and the DOE as well as programs that support manufacturing and, of course, subsidies to support semiconductors. We know these things work.

Yet other programs are experiments. Some, such as a new Technology Directorate at the NSF are controversial. Others, such as $10 billion that will be spent on regional technology hubs and $1 billion that will go to a RECOMPETE pilot program to empower distressed communities, are new and innovative. We can almost guarantee that there will be hiccups and outright failures along the way.

It is tautologically true that the well-trod path will take us nowhere new. We need to unlearn the past if we are to learn how to build a new future.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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Science Says You Shouldn’t Waste Too Much Time Trying to Convince People

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GUEST POST from Greg Satell

Experts have a lot of ideas about persuasion. Some suggest leveraging social proof, to show that people have adopted the idea and had a positive experience. Others emphasize the importance of building trust and using emotional rather than analytical arguments. Still others insist on creating a unified value proposition.

These are, for the most part, constructive ideas. Yet they are more a taxonomy than a toolbox. Human nature can be baffling and our behavior is rarely consistent. Sometimes we’ll dig in our heels on a relatively minor point and others we’ll give in on a major issue relatively easily, often without any constable rhyme or reason.

Yet consider this one simple science-based principle that explains a lot: The best indicator of what we think and what we do is what the people around us think and do. Once you internalize that, you can begin to understand a lot of otherwise bizarre behavior and work to spread the ideas you care about. Often it’s not opinions we need to shape, but networks.

Majorities Don’t Just Rule, They Also Influence

Consider a famous set of conformity studies performed by the psychologist Solomon Asch in the 1950s. The design was simple, but ingenuous. He merely showed people pairs of cards, asking them to match the length of a single line on one card with one of three on an adjacent card. The correct answer was meant to be obvious.

However, as the experimenter went around the room, one person after another gave the same wrong answer. When it reached the final person in the group (in truth, the only real subject, the rest were confederates), the vast majority of the time that person conformed to the majority opinion, even if it was obviously wrong!

The idea that people have a tendency toward conformity is nothing new, but that they would give obviously wrong answers to simple and unambiguous questions was indeed shocking. Now think about how hard it is for a more complex idea to take hold across a broad spectrum of people, each with their own biases and opinions.

The truth is that majorities don’t just rule, they also influence, even local majorities. So if you want people to adopt an idea or partake in an action, you need to take into account the communities they are already a part of—at home, at work, in their neighborhood and in other aspects of their social circles. That’s where their greatest influences lie.

The 3 Degrees of Influence Rule

In 1948, Congress authorized funding for the Framingham Heart Study, which would track the lifestyle and health habits, such as diet, exercise, tobacco use and alcohol intake, of 5209 healthy men and women. It was originally intended to last 20 years, but the results were so incredibly useful, it lasted for decades and even included the children of early cohorts.

More than a half century after the study began two researchers, Nicholas Christakis and James Fowler, began to suspect that the Framingham Heart Study could be used for a very different, but important purpose. What they noticed was that the data included not only information about people’s habits, but their social networks as well.

So they set out to see if they could identify causal links between people’s health and their social connections. Using 32 years of data, they were able to establish a strong effect in areas as diverse as happiness, smoking and even obesity. As it turns out, the people around us not only help to shape our opinions, but our health as well.

The really astounding discovery, however, was that the effect extended to three degrees of influence. So not only our friends’ friends, influence us deeply, but their friends too—people that we don’t even know. Wherever we go, we bring that long, complex web of influence with us and we, in turn, help to shape others’ webs of influence too.

So when set out to shape someone else’s opinion, we need to account for social networks. We may, for example, be able to play on a target’s emotions, give them all the facts and evidence and demonstrate strong social proof, but their communities — extending out to three degrees of influence — will always factor in. While we’re working to persuade, those invisible webs of influence may be working against us.

Thanksgiving Dinners And Earnings Guidance

There is no greater American tradition than the crazy uncle at Thanksgiving dinner. No matter what your political persuasion, you are bound to have some relative who holds very different opinions than the rest of the family and who feels no compunction about making clear to everyone at the table exactly where they stand.

As should be clear by now, the reason our crazy uncles are so impervious to persuasion is that we aren’t actually arguing with them at all, but the totality of their social networks. Their friends at work, buddies at the bar, people in their neighborhood and everybody else who they interact with on a regular basis, all get a say at our holiday table.

In much the same way, there isn’t any real reason for CEOs to provide earnings guidance for investors. Steve Jobs refused do it and Apple’s stock during his tenure. Same thing with Unilever under Paul Polman. In 2018, JP Morgan CEO Jamie Dimon and uber-investor Warren Buffett wrote a strong Op-Ed in the Wall Street Journal urging CEOs to end the practice.

During the pandemic many companies stopped giving earnings guidance to investors but, as soon as things began to stabilize, they started up again. It seems incredible, because all of the experts, even McKinsey, have advised against it. Still the vast majority of CEOs are unconvinced, despite all the contrary evidence. Could their networks be playing a role?

Don’t Try To Shape Opinions, Shape Networks

We like to think we can shape the ideas of others. It can sometimes seem like a puzzle. How can we conjure up the right combination of value proposition, analysis, emotive argument and social proof, to persuade our target?. There is, in fact, an enormous communication industry dedicated to exactly that proposition.

Decades of scientific research suggests that it’s not so easy. Our thoughts aren’t just the product of neurons, synapses and neurotransmitters reacting to different stimuli, but also our social networks. The best indicator of what people think and do is what the people around them think and do. While we’re trying to score debate points, those complex webs of influence are pushing back in often subtle, but extremely powerful ways.

We need to be far more humble about our persuasive powers. Anybody who has ever been married or had kids knows how difficult it is to convince even a single person of something. If you expect to shift the opinions of dozens or hundreds—much less thousands or millions—with pure sophistry, you’re bound to be disappointed.

Instead of trying to shape opinions, we’re often better off shaping networks. That’s why we advise our clients pursuing transformational change efforts to start with a majority, even if that majority is only three people in a room of five. You can always expand a majority out, but once you’re in the minority you’re going to get immediate pushback.

Rather than wordsmithing slogans, our time and efforts will be much better spent working to craft cultures, weaving the complex webs of influence that lead to genuinely shared values and shared purpose.

— Article courtesy of the Digital Tonto blog
— Image credit: Pexels

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The Killer Strategic Concept You’ve Never Heard Of

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You Really Need to Know About Schwerpunkt!

GUEST POST from Greg Satell

When Steve Jobs returned to Apple in 1997, his first mission was not to create but destroy. He axed a number of failing products and initiatives, such as the ill-fated Newton personal digital assistant and the Macintosh clones. Under Jobs, Apple would no longer try to be all things to all people.

What came after was not a flurry of activity, but a limited number of highly targeted moves. First came the candy-colored iMac. It was a modest success. Then came the iPod, iPhone and iPad, breakout hits which propelled Apple from a failing company to the most valuable company on earth. Each move shifted the firm’s center of gravity to a decisive point and broke through.

That, in essence, is the principle of Schwerpunkt, a German military term that roughly translates to “focal point.” Jobs understood that he didn’t have to win everywhere, just where it mattered and focused Apple’s resources on just a few meaningful products. The truth is that good strategy relies less on charts and analysis than on finding your Schwerpunkt.

Putting Relative Strength Against Relative Weakness

The iPod, Apple’s first major hit after Jobs’ return, didn’t do anything to undermine the dominance of Microsoft and the PC, but rather focused Apple’s energy on a nascent, but fragmented industry that made products that, as Jobs put it, “sucked.” At this early stage, Apple probably couldn’t have taken on the computer giants, but it mopped up these guys.

Yet the move into music players wasn’t just about picking on scrawny weaklings, it leveraged some of Apple’s unique strengths, especially its ability to design simple, easy-to-use interfaces. Jobs’ own charisma and stature, not to mention the understanding of intellectual property rights he gained from his Pixar business, made him almost uniquely placed to navigate the challenges of setting up iTunes store, which at the time was a quagmire.

In Good Strategy | Bad Strategy management scholar Richard Rumelt makes the point that good strategy puts relative strength to bear against relative weakness and that is a key part of Schwerpunkt. In order to find your focal point, you need to get a sense of where your strengths lie and where are the best opportunities to leverage those strengths.

That’s exactly what Steve Jobs did at Apple over and over again. Entering the music player business would not have worked for Microsoft or Dell, who both dominated the computer industry at the time. In fact, after the launch of the iPod both tried to create competitors and failed. The iPod was Apple’s Schwerpunkt, nobody else’s.

Identifying The Focal Point

In a military conflict, leaders determine where to concentrate their efforts by weighing a variety of factors, including commander’s intent, or the desired end state, the situation on the ground gleaned through intelligence, the terrain and the enemy’s disposition on that terrain. Officers spend their whole careers learning how to make wise decisions about schwerpunkt.

Business leaders need to weigh similar factors, including the internal capabilities of their organization such as talent, technology and information, the market context, the competitive landscape as well as what they can access through external partner ecosystems. By the time Steve Jobs returned to Apple, he had become a master at evaluating the forces at play.

With respect to the iPod, he felt confident in Apple’s ability to combine technology with design and that the market for digital music players, as he liked to put it, sucked. By looking at what competitors had to offer, he was confident that if he could create a device that would “put 1000 songs in my pocket,” he would have a hit product.

The only problem was that the technology to create such a product didn’t exist yet. That’s where the external ecosystem came in. On a routine trip to Japan to meet with suppliers, an engineer at Toshiba mentioned that the company developed a tiny memory drive that was about the size of a silver dollar, but didn’t know what it could be used for.

Jobs immediately recognized that the memory drive was his Schwerpunkt. He produced a $10 million check on the spot and got exclusive rights to the technology. Not only would he be able to create his iPod with the “1000 songs in my pocket” he so coveted, for a time at least, none of his competitors would be able to duplicate its capability.

Getting Inside The OODA Loop

When he was still a pilot, the legendary military strategist John Boyd developed the OODA loop to improve his own decision making in the cockpit. The idea is that you first OBSERVE, your surroundings, then you ORIENT that information in terms of previous knowledge and experiences. That leads you to DECIDE and ACT, which will change the situation in some way, that you will need to observe, orient, decide and act upon.

We can see how Steve Jobs employed the OODA loop in making the decision to immediately produce a $10 million dollar check for a technology that Toshiba had no idea what to do with. He took the new information he observed and immediately oriented it with previous observations he made about the market for digital music devices.

Yet what happened next was even more interesting. When the iPod came out, it was an immediate hit, which changed the basis of competition. Other computer companies, which were competing in the realm of laptops, desktops and servers, suddenly faced a very different market and moved to create their own digital music players. Dell’s Digital Jukebox launched in 2004, Microsoft’s Zune came out in 2006. Both failed miserably.

By then Apple was already preparing the launch of the iPhone, which would change the game again, causing its competitors to Observe, Orient, Decide in Act in reaction to what Apple was doing. Boyd called this “getting inside your opponent’s OODA Loop.” By continually having to orient and react to Apple, they weren’t able to gain the initiative.

Today, it’s hard to remember just how powerful firms like Microsoft and Dell were back then, but they were absolute giants. Nevertheless, by employing the concept of Schwerpunkt, Apple went from near bankruptcy to dominating its rivals in less than a decade.

A Journey Rather Than A Destination

The biggest strategic mistake you can make is to try and win everywhere at once. To win, you need to prevail in the decisive battles, not the irrelevant skirmishes. That, in essence, is the principle of Schwerpunkt—to identify a focal point where you can direct your resources and efforts.

When Steve Jobs returned to Apple, computer companies were duking it out in the PC market, yet he identified digital music players as his Schwerpunkt and the iPod made Apple a serious player. As his competitors were still reacting, he launched the iPhone and on it went. Whenever Steve Jobs would, towards the end of a product presentation say, “and just one more thing,” You could guarantee that he had identified a new Schwerpunkt.

Notice how Schwerpunkt is a dynamic, not a static, concept. It was Jobs’ ability to constantly innovate Apple’s approach, by constantly observing, reorienting and shifting the competitive context. In each case, his strategy was uniquely suited to Apple’s, capabilities, customers and ecosystem. Competitors Microsoft or Dell, more suited to the enterprise market, couldn’t be successful with a similar approach.

There is no ideal strategy, just ones that are ideally suited to a particular context, when relative strength can be brought to bear against relative weakness. Discovering the center of gravity at which you can break through is more of a journey than a destination, you can never be sure beforehand where exactly you will find it, but it will become clear once you’ve arrived.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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3 Reasons Why Bad Business Thinking Exists

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3 Reasons Why Bad Business Thinking Exists

GUEST POST from Greg Satell

“The single most important message in this book is very simple,” reads the first line in John Kotter’s highly regarded The Heart of Change. “People change what they do less because they are given analysis that shifts their thinking than because they are shown a truth that influences their feelings.

Really? That’s the important message? That emotive arguments are more powerful than factual arguments? What about other reasons why people change their behavior, such as social proof, conformity, incentives or coercion? By setting up a binary and artificial choice between two communication alternatives, he eliminates important strategic and tactical options.

It’s not just Kotter either, who is a well respected professor at Harvard Business School. The truth is that a lot of management thinking is surprisingly shoddy, with arbitrary notions and cognitive biases dressed up as scholarly work. We need to be more skeptical about “research” that comes out of business schools and consultancies. Here are three things to look for:

1. WYSIATI And Confirmation Bias

Kotter’s point about emotive vs. analytic arguments is, of course, completely valid. The fundamental error he makes is that he focuses on that particular aspect to the exclusion of everything else. Daniel Kahneman calls this WYSIATI, or “what you see is all there is.” Once you get tunnel vision on a particular fact or idea, it’s hard to see anything else.

Consider this thought experiment: You go to a conference featuring a powerful, emotive presentation on the need to combat climate change. You see glaciers melting, polar bears losing their habitat and young children starving from drought. Then you go back to the office, fired up and ready to do something about it, but everyone else has a strong argument against acting on climate change.

What is likely to happen next? You convince you co-workers—including your bosses— about the urgency of the crisis? Or, surrounded by skeptics, your conviction begins to wane? When all we see is the poor polar bears and starving in an echo chamber of likeminded people, we forget about other considerations, but that doesn’t mean that’s all there is.

An issue related to WYSIATI is confirmation bias. Kotter proudly points out that he worked with Deloitte to conduct extensive research for his book. Amazingly, after analyzing over 200 interviews, he ended up with the same 8-step process he cited in his earlier work. So what was the purpose of the research, to gain actual insights or to confirm what he thought he already knew?

Perhaps not surprisingly, after decades of organizations applying Kotter’s ideas about change McKinsey still finds that more than two-thirds of transformational efforts fail. Maybe there is actually more to change than communication strategy.

2. Halo Effects And Confounding Variables

One of the most popular modes of analysis that business thinkers use is to examine successful companies and see what they do differently. A number of bestselling management books, such as In Search of Excellence, have used this method. Unfortunately, when doing so they often fall prey to a cognitive bias known as the halo effect.

For example, in 2000, before the dotcom crash, Cisco was flying high. A profile in Fortune reported it to have an unparalleled culture with highly motivated employees. But just one year later, when the market tanked, the very same publication described it as “cocksure” and “naive.” Did the “culture,” under the very same leadership, really change that much in a year? Or did the perceptions of its performance change?

Cisco had a highly motivated and, some would say, aggressive sales force. When the company was doing well, analysts assumed it was their aggressiveness that produced good results and when its fortunes changed, that same aggressive behavior was blamed for its failures. This is what’s known as a confounding error, the fact that an aggressive sales force correlated with specific results doesn’t mean that the aggressive sales force caused the results.

Every organization has things which it does differently, that are idiosyncratic to its management and culture. In some market contexts those traits will be advantageous, in other environments they may not be. It takes work—and some humility—to separate what’s truly a success factor, what’s merely fit for a narrow purpose and what’s not really relevant.

3. Survivorship Bias

Business school professors and consultants gain fame—not to mention large fees—when they are able to define a novel concept or success factor. If you are able to isolate one thing that organizations should do differently, you have a powerful product to sell. A single powerful insight can make an entire career, which is probably why so many cut corners.

For example, in their study of 108 companies, distinguished INSEAD professors W. Chan Kim and Renée Mauborgne found that “blue ocean” products, those in new categories without competition, far outperform those in the more competitive “red ocean” markets. Their book, Blue Ocean Strategy, was an immediate hit, selling over 3.5 million copies.

Bain consultants Chris Zook and James Allen’ book, Profit from the Core, boasted even more extensive research encompassing 200 case studies, a database of 1,854 companies, 100 interviews of senior executives and an “extensive review” of existing literature. They found that firms that focused on their ”core” far outperformed those who strayed.

It doesn’t take too much thinking to start seeing problems. How can you both “focus on your core” and seek out “blue oceans”? It betrays logic that both strategies could outperform one another. Also, how do you define “core?” Core markets? Core capabilities? Core customers? While it’s true that “blue ocean” markets lack competitors, they don’t have any customers either. Who do you sell to?

Yet there is an even bigger, more insidious problem called survivorship bias. Notice how “research” doesn’t include firms that went out of business because there were no customers in those “blue oceans” or because they failed to diversify outside of their “core.” The data only pertains to those that survived.

It’s hard to think of any other field where researchers could get away with such obviously careless work. Can you imagine medical research that didn’t include patients that died, or airplane research that didn’t include the flights that crashed? Suffice it to say that since the two books were published two decades ago, they’ve shown no capacity to predict whether a business will succeed or fail.

Don’t Believe Everything You Think

When I’m finishing up a book, I send out sections to be fact-checked by experts and those who have first-person knowledge of events. I’m always amazed at how much I get wrong. In some cases, I make truly egregious errors about facts I should have known (or did know, but failed to take into account). It can be an incredibly humbling process.

That’s why it’s so important to not to believe everything you think, there are simply too many ways to get things wrong. As Richard Feynman put it, “The first principle is that you must not fool yourself—and you are the easiest person to fool.” I would also add a second principle that just because you’ve managed to fool others, doesn’t mean you’ve gotten it right.

Unfortunately, so many of the popular management ideas today come from people who never actually operated a business, such as business school professors and consultants. These are often people who’ve never failed. They’ve been told that they’re smart all their lives and expect others to be impressed by their ideas, not to examine them thoroughly.

The problem with so much business thinking today is that there is an appalling lack of rigor. That’s the only way that obviously flawed ideas such as “blue oceans,” “profiting from the core” and John Kotter’s ideas about change management are able to gain traction. It’s hard to imagine any other field with such a complete lack of quality control.

That’s why I send out fact checks, because I know how likely I am to think foolish and inaccurate things. I’ve also noticed that I tend to be most wrong when I think I’ve come up with something brilliant. Much as Tolstoy wrote about families, there are infinitely more ways to get things wrong than to get things right.

— Article courtesy of the Digital Tonto blog
— Image credit: Pexels

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Change is More About Power Than Persuasion

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Change is More About Power Than Persuasion

GUEST POST from Greg Satell

The greatest misconception about change is that it’s about persuasion. All too often, we think that once people understand our idea, they will embrace it. Nothing can be further from the truth. Anybody who’s ever been married or had kids knows how difficult it can be to convince even a single person of something.

Clearly, if you intend to influence an entire organization — much less an entire society—of something, you have to assume the deck is stacked against you. Still, organizations routinely pay armies of change management consultants to spend endless billable hours wordsmithing internal marketing campaigns. No wonder change so often fails.

The truth is that change isn’t about persuasion, but power. If you want change and can access the power to implement it, it will happen. If not, it won’t. That’s why effective change agents learn to leverage multiple sources of power. They mobilize people to influence institutions that can further their cause. That’s how you bring genuine transformation about.

The Paradox Of Hard Power

In early March, 2022 the prominent political scientist John Mearsheimer gave an interview to The New Yorker in which he argued that the United States had blundered greatly in its support of Ukraine. According to his theory we failed to recognize Russia’s role as a great power and its right to dictate certain things to its smaller and weaker neighbor.

That conclusion had a shelf like of about a week. Very quickly, the idea that America should have left Ukraine at the mercy of Russia became not only morally questionable, but patently absurd. How could such a respected expert of foreign affairs get things so wrong? Part of the reason has to do with his misinterpretation of key facts, but perhaps an even greater problem is his misunderstanding of power.

Mearsheimer’s error is that he focused on hard power—the power to coerce—to the exclusion of everything else. The problem with hard power is that the more you use it, the weaker it gets. After brutalizing its neighbors and meddling in the affairs of western nations for over a decade, Vladimir Putin had unleashed forces whose power greatly exceeded Russia’s.

Wise leaders, whether in a political or a business context, must learn to wield coercive power wisely. Use it too little and you undermine your authority and effectiveness, but use it too much and you undermine trust, which eventually will undercut and dilute your capacity. Hard power works best when combined with other sources.

The Attraction Of Soft Power

One factor that Mearsheimer failed to consider is soft power, which Joseph Nye, who coined the term, defined as the ability to influence others without coercion. To do that requires that you build up confidence and stature, which is no easy task. You can’t simply bully or bribe people into admiring and trusting you.

For years, Putin had wielded hard power, including Russia’s military, energy assets and intelligence services, with considerable skill and alacrity. Yet by doing so, he undermined his ability to attract others to his cause. In fact, many found Russia’s actions to be so repugnant and objectionable that they became determined to work against its interests.

Businesses, especially large corporations, are increasingly attentive to soft power. Consider Apple, which is no stranger to wielding hard power. It is known as a ruthless competitor, especially with regard to its supply chain. Yet it also works hard to position itself as a consumer advocate for privacy (while taking a shot at its competitors, of course).

One reason why protestors target corporations is that they are especially vulnerable to attacks on their soft power. When activists wanted to campaign against restrictive new voting laws in Georgia, they didn’t target the politicians who wrote the legislation, but companies like Coca-Cola and Delta Airlines. The firms quickly took a public stance against the laws.

Networked Power

As Anne-Marie Slaughter explained in The Chessboard and the Web, “Power in networks flows from connectedness: the number, type, and location of connections a node has… the most central nodes have the most connections and the highest likelihood of gaining more.” It is this power that Russia may have feared most in Ukraine.

It’s a salient fact that Russia sparked Euromaidan protests in 2013 not in response to any military moves, but because of an economic agreement between Ukraine and the EU. At the same time, Russia was trying to create its own network through a Eurasian Customs Union. Deeper connection between Ukraine and the EU would have undermined the centrality of that project, which had deep significance to Putin’s plans.

One of the biggest misperceptions about power in networks is that it depends on the number of connections. It doesn’t. What’s often far more important is your position in the network. Just like Ukraine’s position in between Russia and Europe increases its importance—and hence, its power—a person’s position in an organizational network or a company’s position in a market network can give them influence that far exceeds their hard or soft power.

In a now famous essay, Lina Kahn, who currently heads the Federal Trade Commission, pointed out that Amazon has attained massive network power by making itself the central node in then American retail industry. It’s not just Amazon either. The Federal Reserve has found that corporations have been increasing their power over the US economy in recent decades, leading to excessive market concentration in most industries, with lower competition and dynamism.

This is, of course, exactly the opposite of what we expected from the digital era, which was supposed to be a democratizing force. Nevertheless, here we are …

The Revenge Of Power

In 2013, the political scientist Moisés Naím published The End of Power, in which he argued that because of the increase in mobility and technology and decrease in poverty, the power of institutions was diminishing. Power hadn’t ended exactly but, as he put it, power was becoming “easier to gain but harder to use or keep.”

However, in his more recent book, The Revenge of Power, Naim points out that autocrats, governments, corporations and other institutions have been able to combine hard power, soft power and networked power to wring back control. It is the coordination and combination of the three, rather than a particular strength in any one, that yields results.

Unfortunately, few seem to learn this basic principle of change. The Occupy Movement focused exclusively on mobilizing people in the streets and, predictably, had no effect on institutions. Common Core activists, on the other hand, focused on institutions, left themselves open to mobilizations from grass-root activists and ran into serious problems.

To make a significant impact, you need to mobilize people to influence institutions and the best way to do that is through leveraging networks. In the final analysis, it is small groups, loosely connected, but united by a shared purpose that drives transformational change. As leaders, it’s our job to help those groups connect and to inspire them with purpose.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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People Will Be Competent and Hardworking – If We Let Them

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People Will Be Competent and Hardworking - If We Let Them

GUEST POST from Greg Satell

Go to just about any business conference these days and you’re likely to see some pundit on stage telling a story about a company — often Blockbuster, Kodak or Xerox — that got blindsided by nascent trends. Apparently, the leaders who rose to the top of the corporate ladder were so foolish they just weren’t paying attention.

These stories are good for a laugh, but they usually aren’t true. People who lead successful companies are, for the most part, competent, hardworking and ambitious. That’s how they got their jobs in the first place. There are, of course, exceptions. People who have a talent for self-promotion can get to the top too.

Still it’s much better to assume competence. That’s how we learn. The truth is that we all get disrupted sooner or later. It doesn’t only happen to silly people. Every square-peg business eventually meets its round-hole world. Smart, competent people fail all the time and, if we want to have a chance at avoiding their fate, we need to understand how that happens.

Mismanagement Myths

During Apple’s rise, Microsoft was considered to be big, slow and incompetent. Its CEO, Steve Ballmer, had foolishly dismissed the iPhone and the company never seemed to gain traction in the mobile world. It launched weak products, such as the Zune music player and the Windows phone. Its failed acquisition of Nokia just seemed to add insult to injury.

Yet still even accounting for Ballmer’s mobile missteps, Microsoft’s business continued to perform well, growing its revenues at double digit rates and maintaining high margins. How can that be? Most of Microsoft’s revenues don’t come from the consumer categories that business journalists tend to cover, but in selling B2B products and services to CIOs. While everyone was focused on gadgets, it was building a monster business in the cloud.

When you look more closely, the clever pundits often miss the real story. Blockbuster didn’t ignore Netflix, but executed a viable strategy and still failed. Kodak didn’t ignore the market for digital cameras, in fact its EasyShare line were top sellers. Unfortunately, selling digital cameras couldn’t replace the profits from developing film. Yes, Xerox PARC failed to successfully market the PC, but its invention of the laser printer saved the company.

The reason why pundits tell the caricatures rather than the real stories is that imagining CEOs to be fools makes us feel better about ourselves. After all, if only foolish people get disrupted, then we—assuming we are not fools—should be okay. Unfortunately, that’s not how the world works. Being smart and working hard won’t save you.

Why Do Smart, Competent People Fail?

There are many reasons why smart, competent people fail. A very common one is a category error. For example, Steve Ballmer didn’t think anyone would pay $500 for a phone, but the iPhone wasn’t just a phone, it was an entirely new business model and ecosystem. People would not only pay for it differently (through their mobile plan), they would also use it very differently than earlier phones.

That opens up a very different set of issues. How do we know if we’re making a category error? We put things into categories for a reason, to understand their relations to other things. For example, a plate is something that goes on a table. But sometimes, such as the case with a commemorative plate, they go on a wall. So when does a plate become commemorative?

Other famous failures ran into similarly thorny issues. The CEO at Blockbuster, John Antioco, developed a viable strategy and executed well, but failed to gain alignment among important stakeholders. Kodak marketed digital cameras, but they weren’t nearly profitable enough to replace developing film. Xerox PARC was designed to build the “office of the future,” not to market consumer products like the Macintosh.

What at first might seem like CEOs asleep at the wheel actually exposes some very thorny issues. How much alignment do we need before pushing an important strategy forward? What do you do when your cash cow dies? When you shoot for the moon, how should you hedge your bets?

These are tough problems with no obvious solutions. But notice that when we assume that the leaders were competent, it forces us to think about them much more seriously and, hopefully, learn something useful.

Seeing Competence All Around Us

I was recently talking to my friend Bob Burg, co-author of the Go-Giver series, and something he said reminded me of a short Borges essay I’ve long admired, called Borges and I, in which the acclaimed author writes about the challenges of balancing a public persona with a private one. I brought it up during our conversation and promised to send it to him.

The whole essay is just two short paragraphs of Borges comparing himself, who drinks coffee and walks the streets of Buenos Aires, to the famous author who will live on in posterity. “Little by little, I am giving over everything to him, though I am quite aware of his perverse custom of falsifying and magnifying things,” he wrote.

Unfortunately, in sending Bob the essay, I screwed up. Because it was so short, I didn’t send a link but copy-pasted the text into the body of the email and, carelessly, didn’t include the title or the author’s name, which made the whole thing impossible to understand. Most people would have just written it off as something stupid. Bob did something different.

Instead of imagining me a fool, he humbly wrote me back, apologized for his inability to understand the essay and asked if I could explain it to him, which gave me the opportunity to correct my mistake. In doing so he did both of us a service. He got the small benefit of reading an interesting essay and I got the enormous gift of being able to redeem myself.

When we assume those around us are competent—not stupid or lazy—we do far more than give them the opportunity to be their best selves. People who feel validated actually tend to perform better too.

We Are Always Wrong

We all like to imagine ourselves as heroes in our own story. Unlike others, we are witnesses to our internal process and get to observe our logic develop. So our thoughts makes perfect sense to us and it can be incredibly frustrating when others don’t see it as we do. Our inclination is to imagine them to be fools, simply incapable of grasping basic concepts.

That’s why pundits tend to tell such facile stories. Blockbuster wasn’t paying attention to Netflix. Kodak ignored digital photography. Xerox PARC invented breakthrough products, but neglected to market them. None of these stories are accurate, but it’s far easier to portray a failure as a silly blunder, than admit to ourselves how easily it could happen to us.

The hard truth is that we’re always wrong. Sometimes we’re off by a little and sometimes we’re off by a lot, but we’re always wrong. We succeed not by coming up with the “right” idea from the start, but by taking a Bayesian approach and becoming less wrong over time.

The best way to do that is to assume other people are smart, competent and hardworking. Lazy fools will make themselves obvious soon enough. But by seeking out intelligence and virtue, we are not only much more likely to find it, but also to identify and correct deficiencies in ourselves and our thinking.

— Article courtesy of the Digital Tonto blog
— Image credit: Pexels

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Getting Back to Measuring What Matters

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Getting Back to Measuring What Matters

GUEST POST from Greg Satell

“Not everything that can be counted counts and not everything that counts can be counted,” is a quote often attributed to Albert Einstein, which I think aptly sums up the past 40 years. Since the 80s, we’ve been laser-focused on numbers and missed the underlying math. We’ve become finance-obsessed but lost track of economics.

Consider Jack Welch, who Fortune magazine named “Manager of the Century.” In the article explaining why he deserved such an honor, it lauded the CEO’s ability to increase the stock price and deliver consistent earnings growth, but nowhere did it refer to a breakthrough product or impact on society.

There’s a good reason for that. As NY Times columnist David Gelles explains in, The Man Who Broke Capitalism, Welch increased profits largely by firing workers, cutting investment and ‘financializing’ the firm. During his 20 year reign, innovation faltered and the company produced less, not more. Clearly, we need to reevaluate what we consider valuable.

What’s The Purpose Of A Company?

In a famous 1937 paper, Ronald Coase argued that the economic function of a firm was to minimize transaction costs, especially information costs. For example, it makes sense to keep employees on staff, even if you might not need them today, so that you don’t need to search for people tomorrow when important work needs to be done..

In 1976, Michael Jensen and William Meckling built on Coase’s work in their groundbreaking paper entitled The Theory of The Firm, which asserted that the purpose of the firm was to make money for its owners. They further argued that there is a fundamental principal-agency problem between managers and owners because their interests are not perfectly aligned.

These were brilliant works of economic theory, but as reflections of reality they are somewhat absurd. People start businesses for all sorts of reasons, profits being just one motivation. That’s why we have public benefit corporations and socially responsible investment funds. Heirs such as Abigail Disney have spoken out strongly against corporate greed.

There is simply no basis for the notion that owners of businesses care only about profits, much less the stock price over a given period. Yet during the 1970s and 1980s there was a growing conservative intellectual movement that argued that managers had a moral responsibility to increase shareholder value at the expense of pretty much everything else.

Today, many portray the conservative movement behind the nation of shareholder value as evil and greedy. Most of the evidence indicates that its leaders thought they were doing the right thing. It seems that there were more fundamental errors at play.

Management By Algorithm

In the 1920s , a group of intellectuals in Berlin and Vienna, became enamored by an idea that came to be known as logical positivism, that human affairs should be subjected to the same logical rigor as physical sciences. It failed miserably and, when Kurt Gödel published his incompleteness theorems in 1931, it was completely discredited.

Yet the strain of thought that arose in the 1970s that gave rise to Jack Welch’s brand of capitalism was essentially the same thing. It was, in effect, management by algorithm, in which human agency was eschewed and decisions were boiled down to a single variable to be optimized. Pretty much everything else could be blissfully ignored.

Does a particular action further the mission of the enterprise? It doesn’t matter as long as the stock price goes up. Will a merger of two companies undermine market forces and restrain trade? Unless regulators can prove that prices will go up, they have no right to step in. What should govern relations between nations? They should simply pursue their interests.

These ideas failed for the same reason that the original theory of logical positivism did. The world is a messy place, with lots going on. You can’t simply boil complex problems down to a single variable—or even a limited set—and not lose important information in the process. The notion that you could was naive and reckless.

The Cost Of Carelessness

To understand why the Welch era went so badly, let’s look at one common practice that took hold in the 1980s and 90s: Offshoring. From a shareholder value perspective, it has an intuitive logic. You move your factory from high wage countries such as the US to low wage countries such as China and pocket the savings. You lower costs and increase profits, at least in the short-term.

Yet that analysis omits some important factors. First of all, it undermines trust among employees, suppliers and other partners when relationships are treated as purely transactions. Also, a Harvard study found that moving the factory floor thousands of miles away from R&D reduces knowledge transfer and has a negative effect on innovation.

Looking back, it’s easy to see how this played out at GE. The company became more profitable, but less productive. For decades, it failed to innovate. Its last major invention was the CT scanner, which came out in the 1970s, before Jack Welch took the helm. Today the company is worth about $60 billion, roughly the same as back in the 90s.

The results for society are just as clear. Our economy has become markedly less productive, less competitive and less dynamic. Purchasing power for most people has stagnated. Life expectancy in the US has decreased in a number of years over the past decade. Anxiety and depression, which have been rising for a while, accelerated during the pandemic.

Creating Mission-Driven Organizations

The statistician George Box famously said, “All models are wrong, but some are useful” and that’s especially true of economic models. When Ronald Coase argued that the “nature of a firm” was to reduce transaction costs, he didn’t mean that was the only purpose of an enterprise. To argue that there is a principal-agent problem between owners and managers should not imply that it only applies to profits.

In fact, as Andrew Winston and Paul Polman explain in their book Net Positive, many practices that aren’t sustainable depress profits in the long run. Running an enterprise that dismisses the interests of customers, partners and communities is destined for trouble. Sooner or later, there will be a reckoning.

In the final analysis, the purpose of an enterprise is its mission. When we think of great founders such as Henry Ford, Sam Walton and Steve Jobs, they had vastly different purposes in mind, but it was fulfilling that purpose that drove profits. Ford was passionate about the power of transportation. Walton was fanatical about serving the customer. Can you imagine what Steve Jobs would have said about an ugly product that could make him a lot of money?

That’s what we’ve gotten wrong over the last 50 years. We’ve been counting the wrong things. Economics should serve people, not the other way around. The success of a society needs to be measured by the well-being of those who live in it. If companies profit, but our people are impoverished, our air and water are more polluted, our children less educated, we live unhappy lives and die deaths of despair, what have we really gained?

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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You Must Learn the Change Lifecycle

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You Must Learn the Change Lifecycle

GUEST POST from Greg Satell

When a transformational initiative fails, it’s often said that it was because people don’t like change. That’s not really true. Everywhere I go in the world, no matter what type of group I’m speaking to, people are enthusiastic about some kind of change. It’s other people’s ideas for change that they aren’t so crazy about.

Senior leaders love to tell me about their inspired visions for their enterprise, but complain that they can’t get the rank-and-file to go along. Middle managers complain that they are bursting with ideas, but can’t get the bosses to go along. As failed initiatives pile up, people talk past each other and change fatigue sets in.

It doesn’t have to be this way. There are natural laws that govern change and these laws can be learned and applied by anyone. The problem is that managers don’t study change the same way they study finance, or marketing, or strategy. Business schools don’t teach it as a discipline. But change has a lifecycle that we can learn to manage and exploit.

Identifying A Problem That Needs Solving

As a young man, Mohandas Gandhi wasn’t the type of person anyone would notice. Impulsive and undisciplined, he was also so shy as a young lawyer that he could hardly bring himself to speak in open court. With his law career failing, he accepted an offer to represent the cousin of a wealthy Muslim merchant in South Africa.

Upon his arrival, Gandhi was subjected to humiliation on a train and it changed him. His sense of dignity offended, he decided to fight back. He found his voice, built the almost superhuman discipline he became famous for and successfully campaigned for the rights of Indians in South Africa. He returned to India 21 years later as the “Mahatma,” or “holy man.”

Revolutions don’t begin with a slogan, they begin with a cause. Martin Luther King Jr., as eloquent as he was, didn’t start with words. It was his personal experiences with racism that helped him find his words. His devotion to the cause that gave those words meaning, not the other way around.

Steve Jobs didn’t look for ideas, but for products that sucked. Computers sucked. Music players sucked. Mobile phones sucked. His passion was to make them “insanely great.” Every breakthrough product or invention, a laser printer, a quantum computer or even a life-saving cure like cancer immunotherapy, always starts out with a problem that needs to be solved.

Painful Failure

In 1998, five friends met in a cafe in Belgrade. Although still in their 20s, they were already experienced activists. In 1992, they had taken part in student protests to protest the war in Bosnia. In 1996, they took to the streets to support Zajedno, a coalition of opposition parties aligned against Slobodan Milošević. Both efforts, for very different reasons, failed.

This isn’t unusual. Gandhi had his Himalayan miscalculation. The first march on Washington, for women’s suffrage in 1913, was a disaster. Martin Luther King’s Albany campaign proved to be a big waste of time. Many modern movements, such as #Occupy, Turkey’s Gezi Park protests and the Arab Spring, achieved little, if anything at all.

It’s not just political movements either. Good ideas fail all the time. Even important, revolutionary scientific breakthroughs, such as cancer immunotherapy and sanitary practices in hospitals were rejected outright at first. Legendary entrepreneurs, such as IBM’s Thomas Watson at IBM and Apple’s Steve Jobs had miserable, heart wrenching failures.

The problem is that every idea has flaws. No plan survives first contact with the enemy because every plan, no matter how carefully considered or how righteous the cause, is wrong. Sometimes it’s off by just a little and sometimes it’s off by a lot, but it’s always wrong. You need to be prepared to take a few hits along the way, pick yourself up and apply what you’ve learned from the experience to do better next time.

Finding Focus

Successful change efforts are not, as many assume, all-out efforts. Rather, they learn to focus their own relative strengths against an opponent’s relative weaknesses. They focus resources at a particular opportunity at a time and place of their choosing. Military strategists call this principle Schwerpunkt, the delivery of overwhelming force at a specific point of attack.

In that cafe in Belgrade in 1998, the young activists took a hard look at what had worked and what didn’t. They knew that they could get people to the polls and they knew that if people went to the polls they could win the Presidential election coming up in 2000. They also knew, from bitter experience, that if Milošević lost the election he would try to steal it.

That, they decided, would be their focal point. They created a movement called Otpor that was steeped in patriotic imagery from the World War II resistance. It grew slowly at first, amounting to only a few hundred members after a year. But by the time the elections came around in 2000, Otpor’s ranks swelled to 70,000 and had grown into a potent political force.

When Milošević tried to falsify the election results massive protests, now known as the Bulldozer Revolution broke out. This time Otpor was able to enforce unity among the opposition parties and the Serbian strongman was forced to give in. He would later be extradited to The Hague and die in his prison cell.

Surviving Victory

One of the most surprising things that I’ve learned about change is that the victory phase is often the most dangerous. When you think you’ve won, that’s when you take your eye off the ball. But the people who oppose your idea don’t just melt away and go home because you won an early battle. In fact, now that they see change is possible, they’ll likely redouble their efforts to undermine what you’re trying to achieve.

The Otpor activists knew this from experience. When the Zajedno coalition won an electoral victory in 1996, it was pulled apart from the inside as a result of some deft political maneuvers by the regime. After the overthrow of Milošević, they quickly moved to head off any such efforts. The day the new government took power, billboards went up all over Belgrade that read, “Now We’re Watching You!”

The billboards, however, were merely a tactic. The real work started months before. The activists had learned from the earlier failures and anticipated officials straying from the cause. So they made a plan to survive victory and forced each opposition politician to sign a “contract with the people,” so they couldn’t backtrack after victory was won.

We do a similar exercise with our transformation clients. We ask questions like, “How would someone possessed by an an evil demon undermine the change you seek? Where are you most vulnerable to an attack? How can you leverage shared values to mitigate those efforts? You can’t prevent bad things from happening, but a little preparation goes a long way.

Perhaps most importantly, we need to remind ourselves that transformation is a journey, not a destination. Change has a lifecycle. Whatever impact you seek to make is far more likely to be a marathon than a sprint. No defeat or victory is final. The road is long and, to travel it effectively, you need to learn to recognize and anticipate the various twists and turns.

— Article courtesy of the Digital Tonto blog
— Image credit: Gemini

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Values Determine Your Competitiveness

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Values Determine Your Competitiveness

GUEST POST from Greg Satell

When Lou Gerstner was chosen to lead IBM in 1993, he was an unlikely revolutionary. A McKinsey consultant and then the successful CEO of RJR Nabisco, he was considered to be a pillar of the establishment. He would, however, turn out to be as subversive as any activist, transforming the company and saving it from near-death.

Yet there was more to what he achieved than simply turning red ink to black. “The Gerstner revolution wasn’t about technology or strategy, it was about transforming our values and our culture to be in greater harmony with the market,” Irving Wladawsky-Berger, one of his chief lieutenants, told me.

Values are essential to how an enterprise honors its mission. They represent choices of what an organization will and will not do, what it rewards and what it punishes and how it defines success and failure. Perhaps most importantly, values will determine an enterprise’s relationships with other stakeholders, how it collaborates and what it can achieve.

Values Incur Costs And Constraints

At his very first press conference, Gerstner famously declared: “the last thing IBM needs right now is a vision.” It was an odd, even shocking statement for a new CEO charged with turning around a historic company. But what he understood, and few others did, was that unless he changed the culture to honor the values its success was built on, no strategy could succeed.

“At IBM we had lost sight of our values,” Wladawsky-Berger would later tell me. “For example, there was a long tradition of IBM executives dressing formally in a suit and tie. Yet that wasn’t a value, it was an early manifestation of a value. In the early days, many of IBM’s customers were banks, so IBM’s salespeople dressed to reflect their customers. So the value was to be close to customers.”

Gerstner had been a customer and knew that IBM did not always treat him well. At one point the company threatened to pull service from an entire data center because a single piece of competitive equipment was installed. So as CEO, he vowed to shift the focus from IBM’s “own “proprietary stack of technologies” to its customers’ “stack of business processes.”

Yet he did something else as well. He made it clear that he was willing to forego revenue on every sale to do what was right for the customer and he showed that he meant it. Over the years I’ve spoken to dozens of IBM executives from that period and virtually all of them have pointed this out. Not one seems to think IBM would still be in business today without it.

The truth is that if you’re not willing to incur costs and constraints, it’s not a value. It’s a platitude. “Lou refocused us all on customers and listening to what they wanted and he did it by example,” Wladawsky-Berger, remembers. “We started listening to customers more because he listened to customers.

Values Signal Trust And Credibility

In South Africa, the Congress of The People was held in June, 1955. The gathering, which included blacks, mixed race, Indians and liberal whites, convened to draft and adopt the Freedom Charter, much like the Continental Congress gathered to produce the Declaration of Independence in America. The idea was to come up with a common and inclusive vision.

However, the Freedom Charter was anything but moderate. It was a “revolutionary document precisely because the changes it envisioned could not be achieved without radically altering the economic and political structure of South Africa… In South Africa, to merely achieve fairness, one had to destroy apartheid itself, for it was the very embodiment of injustice,” Nelson Mandela would later write.

Yet despite its seemingly radical aims, the Freedom Charter spoke to common values, such as equal rights and equal protection under the law—not just among the signatories, but for anyone living in a free society. It was powerful because of how it signaled to outside stakeholders, such as international institutions, governments and corporations that they shared more with the anti-apartheid movement than they did with the regime.

It was because of those values that activists were able to successfully boycott firms, such as Barclays Bank and Shell Oil, that did business in South Africa. When those companies pulled their investments out, the dominoes began to fall. International sanctions and political pressure increased markedly and Apartheid became politically untenable.

Here again, values would play a crucial role. Much like Gerstner’s willingness to lose revenue on every sale to keep his commitment to IBM customers, Mandela’s commitment to the Freedom Charter, even during 27 years in prison, signaled to stakeholders—inside and outside of South Africa—that supporting his cause was the right thing to do.

Shared Values Drive Collaboration

In the 1960s and 70s, Route 128 outside of Boston was the center of technology, but by the 1990s Silicon Valley had taken over and never looked back. As AnnaLee Saxenian explained in her classic, Regional Advantage, the key difference had less to do with strategy, technology and tactics than it did with values and how the firms saw themselves.

Dominant Boston firms such as DEC, Data General and Wang Laboratories saw themselves as warring fiefdoms. The west coast startups, however, saw themselves as part of the same ecosystem and tended to band together and socialize. “Everybody worked for the same company — Silicon Valley,” Saxenian would later tell me.

This difference in values translated directly into differences in operational practice. For example, in Silicon Valley if you left your employer to start a company of your own, you were still considered part of the family. Many new entrepreneurs became suppliers or customers to their former employers and still socialized actively with their former colleagues. In Boston, if you left your firm you were treated as a pariah and an outcast.

When technology began to shift in the 80s and 90s, the Boston firms had little, if any, connection to the new ecosystems that were evolving. In Silicon Valley, however, connections to former employees acted as an antenna network, providing early market intelligence that helped those companies adapt.

When you value competition above all else, everyone is a potential enemy. However, when you are willing to forsake absolute fealty in the service of collaboration, you can leverage the assets of an entire ecosystem. Those may not show up on a strategic plan or a balance sheet, but they are just as important as any other asset.

Moving From Hierarchies to Networks

The truth is that IBM was not devoid of values when Gerstner arrived. It’s just that they’d gone awry. “IBM had always valued competitiveness, but we had started to compete with each other internally rather than working together to beat the competition,” Wladawsky-Berger remembers. Certainly it valued technology and profits, just not customers.

What Gerstner did was, as noted above, bring the company’s culture and values back into “harmony with the market.” The company no longer wielded monopoly-like power. It had to collaborate with a wide array of stakeholders. It was this realization that led it to become the first major technology company to embrace open source software and support Linux.

Traditionally we’ve seen the world as driven by hierarchies. Kings and queens ruled the world through aristocracies that carried out their orders. Corporate CEO’s outlined strategies that underlings would have to execute. Discipline was enforced through a system of punishments and rewards. Power was valued above all else.

Yet as Moisés Naím pointed out in The End of Power, “Power is easier to get, but harder to use or keep.” Therefore, the ability to attract has become more important than the power to compel or coerce. That’s why today, strategy has less to do with increasing efficiencies and acquiring resources and more to do with widening and deepening networks of connections.

Power no longer lies at the top of hierarchies, but emanates from the center of networks. What determines whether we will get there or not is our values.

— Article courtesy of the Digital Tonto blog
— Image credits: Pexels

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