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.

Purpose Has Transformative Power

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Purpose Has Transformative Power

GUEST POST from Greg Satell

Wherever I go in the world to speak and advise organizations, I always get the same question: “How can I get people to listen to my ideas?” The truth is that no one wants to listen to your ideas unless they solve a problem that is meaningful to them. So many initiatives fail because leaders get so focused on their passion for an idea that they fail to communicate it effectively.

People already have enough going on in their lives with their own responsibilities, ambitions and dreams. They have families to take care of, friends that they want to spend time with and their own ideas that they want to pursue. The status quo always has inertia on its side and never yields its power gracefully.

The truth is that good ideas fail all the time. In the two decades I have been researching and advising leaders about transformation, what I have found is that few have trouble coming up with new concepts. The hard part is to get others to buy in and work together towards a common purpose. That can only be done in the context of shared sense of values and mission.

Why Occupy Not Only Failed, But Could Never Succeed

On September 17, 2011, #Occupy Wall Street took over Zuccotti Park, in the heart of the financial district in Lower Manhattan. Declaring, “We are the 99%,” they captured the attention of the nation and then the world, eventually growing to encompass protests in 951 cities across 82 countries.

The protesters were angry and rightly so. A global economic elite had bilked us out of trillions and then gotten off scot-free. However, despite all of the self-righteous indignation, they offered no alternate vision of how they wanted things to be. There were no proposals for legislation, alternative business models or anything else really, just anger and frustration.

As Joe Nocera noted in the New York Times, the Occupy movement “had plenty of grievances, aimed mainly at the ‘oppressive’ power of corporations,” but “never got beyond their own slogans.” It’s never enough to merely point out what you don’t like — you need to put forward a clear idea of what you want instead.

When General Stanley McChrystal sought to transform military operations in Iraq, his mantra was “it takes a network to defeat a network” and he built his strategy for change around that one basic principle. Lou Gerstner pulled off one of the most extraordinary turnarounds in history by refocusing his organization from its proprietary “stack” of products to its customers’ “stack” of business processes.

A sense of grievance is never enough to bring change about. You need to put forward an affirmative vision of tomorrow.

How the Mission Drives Your Strategy

We usually think of strategy as a rational, analytic activity, with teams of MBA’s poring over spreadsheets. We often forget that strategy has to have a purpose and that purpose is almost always personal and emotive. Great strategy starts, not with analysis, but from defining and committing to a mission.

Strategy is never created on an empty canvas. While we can make rational assessments about whether we want to pursue a strategy based on low costs, differentiation or an attractive niche. We can, through investments and divestments, fill in missing pieces on a PowerPoint chart, but the fate of a strategy ultimately hinges on personality and ambition.

The success of Apple can’t be separated from Steve Jobs’ ambition to weave technology and design into products that were “insanely great.” Southwest’s dominance in the travel industry is a direct consequence of Herb Kelleher’s mission of being “THE low cost airline,” which drove everything he did from the planes he bought to which routes he competed on.

As Adam Michnik, one of the key intellectual leaders behind the Solidarity movement in Poland, put it, “Start doing the things you think should be done, and start being what you think society should become. Do you believe in free speech? Then speak freely. Do you love the truth? Then tell it. Do you believe in an open society? Then act in the open. Do you believe in a decent and humane society? Then behave decently and humanely.”

Any vision for the future needs to be rooted in desire and desires are essentially personal. They are deeply entrenched in our sense of self.

The Value of Values

The 2008 financial crisis posed serious challenges for every business. With sales taking a nosedive, companies had to make painful cuts to rein in costs. In the vast majority of cases, that meant layoffs and millions lost their jobs. It’s one of those understandable misfortunes.e No one likes it, but few see alternatives.

The steel giant Nucor, however, had pledged never to lay off employees and it cost it dearly. In 2009, the company lost $294 million dollars. At the time, many saw the move as quixotic and impractical. Yet the results speak for themselves. Today the company is valued more than 30% higher than its closest rival ArcelorMittal S.A., with significantly higher profit margins and twice the return on equity.

In The Good Jobs Strategy MIT’s Zeynep Ton tells a similar story about Mercadona, Spain’s leading discount retailer, when it needed to cut costs in 2008. Rather than cut wages or reduce staff, it asked its employees to contribute ideas. The result was that it managed to reduce prices by 10% and increased its market share from 15% in 2008 to 20% in 2012.

Values are how an enterprise honors its purpose. Yet living up to them involves certain costs. You can’t say you value employees and then lay them off at the first sign of trouble, just like you can’t say you value innovation and obsess about quarterly earnings. You can’t commit to a purpose without making hard choices.

We Need to Start Asking Different Questions

When the Business Roundtable issued a statement in 2019 that discarded the old notion that the sole purpose of a business is to provide value to shareholders, many were dismayed. Some thought it was just another example of misguided altruism by “elites.” Others saw it as a cynical and disingenuous ploy.

The truth is that the whole idea of shareholder capitalism was a cop-out. It gave leaders an excuse for not making choices because it implied that whatever the stock market valued was somehow more relevant than human agency. The anonymous collective of the market was primary, while individual choice was considered to be less consequential.

The ascendant concept of “stakeholder capitalism,” unfortunately, isn’t much better. Surely we can’t value all stakeholders equally. So which communities should we choose to serve? Which consumers do we value over others? Which partners do we choose to get in bed with? What standards should we insist that our suppliers meet?

None of these are easy questions. If for instance, we stop working with suppliers who don’t meet certain environmental or governance standards, we take away jobs from certain communities and run the risk of diminishing our ability to serve our customers. So we need to be thoughtful and offer intelligent standards making tough and uncertain choices

The reason so many organizations find themselves unable to pursue a purpose isn’t because they don’t want to, but because it is hard. Purpose doesn’t begin with a single step, but with a diverging path. We must choose one direction at the expense of another, or stay mired and lost, unable to move forward.

— Article courtesy of the Digital Tonto blog
— Image credits: Dall-E

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Revolutions Never Begin with a Slogan

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Revolutions Never Begin with a Slogan

GUEST POST from Greg Satell

Ukrainian President Volodomyr Zelenski has been compared to great orators like Winston Churchill. He vowed to the English House of Commons to fight “in the forests, in the fields, on the shores, in the streets.” In a speech to the US Congress he told President Biden, “Being the leader of the world means to be the leader of peace.”

While new to politics, Zelensky is no neophyte when it comes to delivering a line. A longtime actor and comic who was the voice of “Paddington” in the Ukrainian adaptations of the hit movie, his production company Kvartal 95 produced a series of hits. It would be easy to boil his effectiveness down to his communication skills.

That would be a mistake. Zelenski’s eloquence derives its power from the plight of his people, their passion for freedom and their unwillingness to return to an often troubled past. One reason why change so often fails is that we spend so much time focusing on wordsmithing that we neglect why the need for change arose in the first place. That is where we must start.

Gandhi’s Satyagraha

As a young man, Mohandis Gandhi wasn’t the type of person you 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. Yet he would do so not by attacking his enemies, but by targeting his own weaknesses. The aim, as he put it, was “the vindication of truth not by affliction of suffering on the opponent, but on one’s self.”

His method of Satyagraha was not passive resistance as commonly understood, which he considered a “weapon of the weak.” In fact, it was extremely strategic. Its aim was to undermine his opponents legitimacy and, in doing so, their freedom of action. He sought to back them into a corner in which both action and inaction would yield essentially the same result —an upending of the existing order.

At its core, Satyagraha is intended to be a quest for truth. The aim is to get your opponents to confront themselves. As the South African leader Jan Smuts would put it. “It was my fate to be the antagonist of a man for whom even then I had the highest respect… For me — the defender of law and order — there was the usual trying situation, the odium of carrying out the law, which had not strong popular support.”

Stalin’s Gift That Just Kept Giving

One of the first things a visitor to Warsaw will notice is the Palace of Culture. When arrived in the country in 1997, it dominated the skyline. A replica of the Seven Sisters buildings in Moscow, it was forced upon the Polish people by Stalin in 1955 and for decades it served as a reminder of Soviet domination.

I remember attending a business meeting there where my host pointed out that it had the best view in Warsaw, because it was the only place where you couldn’t see the Palace of Culture. Its tower had the feel of Sauron, the evil force in J. R. R. Tolkien’s Lord of the Rings series. It was more than just a foreign presence at the heart of the capital city. It was an all-watching eye, a reminder that Poles’ lives were not fully their own.

We remember the Solidarity movement in Poland as a struggle for labor against communism and economics were certainly part of it. But the larger grievance was encapsulated in the Palace of Culture, the feeling of being completely subjugated by another nation. Poles felt it deeply and never truly accepted Soviet rule.

Much like Gandhi on the train, it was that emotional sense of injury that pushed the Polish people to be passionate about change and it is similar forces that propel the Ukrainians now. Vladimir Putin, much like Stalin before him, has unwittingly empowered his own opposition by failing to recognize their identity and attempting to subjugate their identity,

Today, the Palace of Culture still stands, albeit enfeebled by the modern skyscrapers bustling with commercial activity, that surround and obscure it.

Steve Jobs and the Products That Sucked

Steve Jobs didn’t believe in market research. He once explained, “Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d ask customers what they wanted, they would’ve told me a faster horse.’ People don’t know what they want until you show it to them.” That’s why he didn’t start out with a product idea, but something that “sucked”

Computers sucked. They were ugly and hard to use. That’s what drove him to create the Macintosh. Music players sucked. He wanted something that would put 1000 songs in his pocket. That’s what drove him to create the iPod. Phones sucked. That’s what drove him to create the iPhone. Much like Gandhi’s humiliation and the Palace of culture, these things offended his sensibilities.

If you want to create change in this world, you need to identify a grievance that people care about. Because if people don’t see a problem, they’re not going to care about your solution. It doesn’t matter if it’s in your team, your organization, your industry or throughout society as a whole. Change isn’t about ideas, it’s about solving meaningful problems.

When we begin to work with a leadership team on a transformational initiative, we always start out asking about what problem they are trying to solve. Often, they don’t know. There are so many wonderful things to adopt that it’s easy to fall into the trap of identifying a solution before you’ve actually defined a problem.

Don’t Let Talking About Change Undermine Your Ability to Achieve It

Every leader wants to be seen at the vanguard of change. The truth is, it’s relatively easy to announce a change initiative, hire vendors to implement new technologies and then bring in change consultants to hone messaging and arrange training, but these things are unlikely to bring about successful transformation.

In fact, evidence suggests that all of the talk about change may be undermining our ability to achieve it. One survey found that 44% of employees say they don’t understand the change they’re being asked to make, and 38% say they don’t agree with it. A clear majority, 65% of respondents complained of “change fatigue.”

Change doesn’t begin with an idea. It starts with identifying a meaningful problem. That’s why it’s so important that before you start an initiative you ask questions like, ask questions like, “What problem are we trying to solve? Is there a general consensus that it’s a problem we need to solve? How would solving it impact our business?

When we look at transformational leaders who achieved great things, the first thing we tend to notice is their words, not the cause that compelled them to act. The words are easy to replicate. Anyone can speak them. But If you want to create change in this world, you need to identify a grievance that people care about. Because if people don’t see a problem, they’re not going to care about your solution.

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

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Don’t Get Fooled by Hucksters, Gurus and Consultants

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Don't Get Fooled by Hucksters, Gurus And Consultants

GUEST POST from Greg Satell

When I lived in Poland, it was common to say that “life is cruel, and full of traps.” From an American perspective, the aphorism can be a bit of a culture shock. We’re raised to believe in the power of positivity, the American dream and the can-do spirit. Negativity can be seen as something worse than a weakness, both an indulgence and a privation at the same time.

Over the years, however, I came to respect the Poles’ innate suspicion. The truth is that we are far too easily fooled and taken in by those prey on the glitches in our cognitive machinery. Sometimes the ones peddling bunk have fooled also themselves. Their claims seem to be supported by logic and evidence, but their promises never quite pan out.

We’re taken in because we want their claims to be true. We’d like to think that there is a secret we’re missing, that there’s a black magic that we’re not privy to and, if we prove our worth and obtain access to a few simple truths, we’ll capture the success that eludes us. Yet these frauds follow common patterns and there are telltale signs we can learn to spot.

1. The Survivorship Bias Trick

In 2005 W. Chan Kim and Renée Mauborgne, both distinguished professors at INSEAD, published Blue Ocean Strategy. In their study of 108 companies the authors found that “blue ocean” launches, those in new categories without competition, far outperformed the shark-infested “red ocean” line extensions that are the norm in the corporate world. It 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 and it is a trick that hucksters, gurus and consultants regularly employ to falsely establish dubious claims. It’s 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 the ones that survived.

Can you imagine a medical researcher failing to include the results of patients that died? Or an airplane designer forgetting to mention the prototypes that crashed? Yet hucksters, gurus and consultants get away with it all the time.

2. Dressing Up Social Proof As “Research”

Another trick hucksters, gurus and consultants use is to dress up social proof as research in order to increase their credibility as experts and establish a need for their services. They say, for example, that they find company profitability is strongly correlated with a customer focus or that culture has a statistically powerful effect on performance.

At first glance, these claims seem reasonable, but as Phil Rosenzweig explained in The Halo Effect, it’s all part of a subtle bait and switch. What is being “researched” is not really “customer focus” or “culture,” but perceptions about those things in responses to a survey. So it is highly likely that successful companies are merely being perceived as having these traits.

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” really change that much in a year, with the same leadership?

Some might say that it’s “obvious” that a strong culture and customer focus contribute to performance, but then why go through the whole kabuki dance of “research?” Why not just say, “if you believe these things are important, we can help you with them?” It’s hard to avoid the conclusion that their is either an intent to deceive or just pure incompetence.

You don’t have to look far to see that this is an ongoing con. A few quick Google searches led me to major consulting firms currently selling halo effects as causal relationships to trusting customers here and here.

3. The VUCA World

Today it’s become an article of faith that we live in a VUCA world (Volatile, Uncertain, Complex and Ambiguous). Business pundits tell us that we must “innovate or die.” These are taken as basic truths that are beyond questioning or reproach. Those who doubt the need for change risk being dismissed as out of touch.

The data, however, tell a very different story. A report from the OECD found that markets, especially in the United States, have become more concentrated and less competitive, with less churn among industry leaders. The number of young firms have decreased markedly as well, falling from roughly half of the total number of companies in 1982 to one third in 2013.

A comprehensive 2019 study from the National Bureau of Economic Research found two correlated, but countervailing trends: the rise of “superstar” firms and the fall of labor’s share of GDP. Essentially, the typical industry has fewer, but larger players. Their increased bargaining power leads to more profits, but lower wages.

The truth is that we don’t really disrupt industries anymore. We disrupt people. Economic data shows that for most Americans, real wages have hardly budged since 1964. Income and wealth inequality remain at historic highs. Anxiety and depression, already at epidemic levels, worsened during the Covid-19 pandemic.

So why do hucksters, gurus and consultants insist that industries are under constant threat of disruption?

4. The Allure Of Pseudoscience

In Richard Feynman’s 1974 commencement speech at Cal-Tech, he recounted going to a new-age resort where people were learning reflexology. A man was sitting in a hot tub rubbing a woman’s big toe and asking the instructor, “Is this the pituitary?” Unable to contain himself, the great physicist blurted out, “You’re a hell of a long way from the pituitary, man!”

His point was that it’s relatively easy to make something appear “scientific” by, for example, having people wear white coats or present charts and tables, but that doesn’t really make it science. True science is testable and falsifiable. We can’t merely state what you believe to be true, but must give others a means to test it and prove us wrong.

This is important because it’s very easy for things to look like the truth, but actually be false. That’s why we need to be careful, especially when it’s something we already believe in. The burden is even greater when it’s an idea that we want to be true. That’s when we need to redouble our efforts, dig in and make sure we verify our facts.

Hucksters, gurus and consultants love to prey on our weakness for authority by saying that “the science says…” The truth is that science doesn’t “say”anything, it merely produces hypotheses that haven’t been disproven yet. Some, like Darwin’s theory of natural selection, have been around a long time, so we’re pretty sure that they’re true, but even in that case a large part of it was debunked within months. The ‘theory” as we know it now is what survived.

There are no absolute answers. There is, as Sam Arbesman has put it, a half life of facts. We can only make decisions on higher or lower levels of confidence. In the real world, there are no “sure things,” and don’t let hucksters, gurus and consultants tell you any different.

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

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Building Transformative Teams

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Building Transformative Teams

GUEST POST from Greg Satell

One of the most common questions I get asked by senior managers is “How can we find more innovative people?” I know the type they have in mind. Someone energetic and dynamic, full of ideas and able to present them powerfully. It seems like everybody these days is looking for an early version of Steve Jobs.

Yet the truth is that today’s high value work is not done by individuals, but teams. It wasn’t always this way. The journal Nature noted that until the 1920’s most scientific papers only had a single author, but by the 1950s that co-authorship became the norm and now the average paper has four times as many authors as it did back then.

To solve the kind of complex problems that it takes to drive genuine transformation, you don’t need the best people, you need the best teams. That’s why traditional job descriptions lead us astray. They tend to focus on task-driven skills rather than collaboration skills. We need to change how we evaluate, recruit, manage and train talent. Here’s what to look for:

Passion For A Problem

I once had a unit manager who wasn’t performing the way we wanted her to. She wasn’t totally awful. In fact, she was well liked by her staff, coworkers, and senior management. But she wasn’t showing anywhere near the creativity required to take the business to the next level and we decided to ease her out of her position.

Then a funny thing happened. After she left our company, she became a successful interior decorator. Her clients loved how she could transform a space with creativity and style. She also displayed many of the same qualities that made her so well liked as a manager. She was a good listener, highly collaborative, and focused on results.

So why is it that someone could be so dull and unimaginative in one context and so creative in another? The simplest answer is that she was a lot more interested in interior decorating than she was in our business. Researchers have long established that intrinsic motivation is a major component of what makes people creative.

The biggest misconception about innovation is that it’s about ideas. It’s not. It’s about solving problems. So the first step to building a transformative team is to hire people interested in the problems you are trying to solve. If someone has a true passion for your mission, work to develop the ideas you need to crack the problem.

Collaboration Skills

We often think of high performing teams being driven by a dominant, charismatic leader, but research shows just the opposite. In one wide ranging study, scientists at MIT and Carnegie Mellon found that high performing teams are made up of people who have high social sensitivity, take turns when speaking and include women in the group.

Harvard professor Amy Edmondson has researched the workplace for decades and has found that psychological safety, or the ability of each team member to be able to give voice to their ideas without fear of reprisal or rebuke, is crucial for high performing, innovative teams. Google found much the same thing when it studied what makes great teams tick.

Stanford professor Robert Sutton also summarized wide ranging research for his 2007 book, The No Asshole Rule, which showed that even one disruptive member can poison a work environment, decrease productivity and drive valuable employees to leave the company. So even if someone is a great individual performer, it’s better to get rid of nasty people than allow them to sabotage the effectiveness of an entire team.

The most transformative teams are the ones that collaborate well. Unfortunately, it’s much easier to evaluate individual performance than teamwork. So lazy managers tend to reward people who are good at taking credit rather than those who actively listen and provide crucial support to those around them.

High Quality Interaction

There is increasing evidence that how teams interact is crucial for how they perform. A study done for the CIA performed after 9/11 to determine what attributes made for the most effective analyst teams found that what made teams successful was not the attributes of their members, or even the coaching they got from their leaders, but the interactions within the team itself.

More specifically, they found that teams that work interdependently tend to perform much better than when tasks are doled out individually and carried out in parallel. Another study found that teams that interacted more on a face-to-face basis, rather than remotely, tended to build higher levels of trust and produced more creative work.

While the quality of remote working tools, including teleconferencing apps like Zoom and collaboration tools like Mural and Miro, have greatly improved in recent years, we still need to take the time to build authentic relationships with those we work with. That can include regular in-person team meetups for remote teams or even intermittent relationship building calls unrelated to current projects.

What’s crucial to understand and internalize is that the value of a team is not just the sum of each individual contribution, but what happens when ideas bounce against each other. That’s what allows concepts to evolve and grow into something completely new and different. Innovation, more than anything else, is combination.

Talent Isn’t Something You Hire, It’s Something You Build

The truth is that there is no effective answer for the question, “how do we find innovative people?” Talent isn’t something you hire or win in a war, it’s something you empower. It depends less on the innate skills of individuals than how people are supported and led. As workplace expert David Burkus puts it, “talent doesn’t make the team. The team makes the talent.”

All too often, leaders take a transactional view and try to manage by incentives. They believe that if they contrive the right combination of carrots and sticks, they can engineer creativity and performance. Yet the world doesn’t work that way. We can’t simply treat people as means to an end and expect them to achieve at a high level. We have to treat them as ends in themselves.

Effective leaders provide their teams with a sense of shared purpose and common mission. They provide an environment of psychological safety not because of some misplaced sense of altruism, but to enable honest and candid collaboration. They cultivate a culture of connection that leads to genuine relationships among colleagues.

What’s crucial for leaders to understand is that the problems we need to solve now are far too complex for us to rely on individual accomplishments. The high value work today is done by teams and that is what we need to focus on. It’s no longer enough for leaders to simply plan and direct action. We need to inspire and empower belief.

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

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We Need to Stop Rooting for Change

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We Need To Stop Rooting For Change

GUEST POST from Greg Satell

Today, everyone seems to want to associate themselves with change. Jeffrey Immelt, General Electric’s former CEO, loved to call his firm a 124 year-old startup. Its value fell by 30% under his tenure and would later collapse. Bill Gates pointed out that the culprit wasn’t innovation or disruption, but basic mismanagement.

It seems that, these days, Immelt’s leadership is closer to the rule than the exception. Everybody wants to be an innovator. Nobody wants to be associated with the status quo. Even political conservatives describe themselves as a “movement,” a seeming contradiction in terms. Change has become gospel, an end in itself rather than a mere means to an end.

The truth is that innovation is less about new ideas than it is about identifying meaningful problems. Too much happy talk about change can actually undermine meaningful transformation. If your focus on the fabulous yonder obscures your view into the day-to-day, you’re most likely headed for trouble. We need to start taking change more seriously.

Change Is Hard. People Are Struggling

Humans struggle to adapt. Our brains are not wired for change, but build synaptic pathways based on past experiences. These can change over time, but with some difficulty. We are also greatly influenced by those around us, whose brains have been shaped by similar experiences. Finally, there are often genuine switching costs that need to be overcome.

The notion that transformation can be challenging is nothing new. What managers often fail to account for, however, is that change never happens in a vacuum. It must be seen in context of everything else that’s going on in people’s lives, including pressures related to family, economic and health concerns.

Consider that research points to a dramatic increase of anxiety and depression since the start of the pandemic. Another study reported in Harvard Business Review found that 76% of employees in 2021 reported at least one mental health symptom, up from 59% in 2019 and 50% have reported leaving a job due to mental health concerns, compared to 34% two years earlier. Those are dramatic increases on already high levels.

Yet even before the pandemic there were signs of trouble. A 2014 report by PwC revealed that 65% of respondents in corporations cited change fatigue, 44% of employees complained they don’t understand the change they’re being asked to make, and 38% say they don’t agree with it. Should we be surprised that so many change initiatives fail?

Too Much Early Talk Ignites Resistance

Managers launching a new initiative often seek to start with a bang. They work to gain approval for a sizable budget as a sign of institutional commitment. They recruit high-profile executives, arrange a big “kick-off” meeting and look to move fast, gain scale and generate some quick wins. All of this is designed to create a sense of urgency and inevitability.

Yet this approach can often backfire. Any time you ask people to change what they think or how they act, there will be some who won’t like it and they will work to undermine you in ways that are often dishonest, underhanded and deceptive. Starting a transformation initiative with a big kickoff just gives them an early warning that they’d better get started sabotaging you or change might actually take place.

Unfortunately, there are perverse incentives involved in many initiatives. When change involves new capability, there are inevitably vendors involved and consultants are brought in to manage the process. Often, in addition to helping to design and procure systems, these consultants are given the assignment for organizational change management as well.

At first, it may seem intuitive and sensible that the same vendor that designs the system helps implement the program. However, what is often missed is that these consultants are much more heavily financially incentivized to close the deal, which can often be worth hundreds of millions of dollars, than to drive genuine long-term transformation.

So it shouldn’t be surprising that what passes for “organizational change management” is often little more than an internal communication strategy and a training program implementation. That clearly doesn’t suffice.

Change Is Nonlinear. There Are Advantages To Starting Slow

People who are passionate about change naturally want it to happen as soon as possible. This is especially true of action-oriented managers, who pride themselves on executing a plan quickly and efficiently. There are often informal organizational incentives as well. Executives who are seen to be hard-charging and who “get things done” can be more likely to move up the corporate ladder.

Yet consider the case of Gandhi and the struggle for Indian independence. Soon after returning to India from South Africa, he called for nationwide strikes in response to the repressive Rowlatt Act. The people immediately rose up, but things quickly spun out of control and ended in tragedy. A decade later, he learned from his mistake and set out on his Salt March with just a small, disciplined cadre, which would inspire the world and help lead to Indian Independence.

Similar strategies have proven highly effective in organizational transformations. When Wyeth Pharmaceuticals began its shift to lean manufacturing, it started with a single team in a single plant, but success there led to a transformation involving 17,000 employees. When Experian sought to shift to a cloud-based enterprise, it started with internal API’s that had limited effect on its business, but helped lead to genuine and complete change.

What each of these had in common is that they started with a keystone change, which had a concrete and tangible goal, involved multiple stakeholders and paved the way for future change. While the initial wins were small, they showed what was possible and, because they were successful, they were able to build momentum and grow exponentially.

Change isn’t linear. Success grows exponentially on success. That’s why you often need to start slow to move fast.

Making Change Meaningful

My friend Srdja Popović once told me that the goal of a revolution should be to become mainstream, to be mundane and ordinary. If you are successful it should be difficult to explain what was won because the previous order seems so unbelievable. Yet many leaders approach change initiatives as if they were swashbuckling heroes in their own action movie.

The simple truth is that every change initiative starts out weak and vulnerable, without a track record of success. People are bound to be suspicious. They already have everyday struggles and don’t want someone else’s idea to add to their burden. Most often, they’ll pay lip service, take a “wait and see” approach and then turn away at the first sign of trouble.

The problem with cheerleading change is that it puts the cart before the horse. People don’t embrace change because you came up with a fancy slogan, they adopt what they find meaningful, that creates genuine value to their lives and their work. Without that, all the happy talk just seems like a con.

We need to have more reverence for the mundane and ordinary. For better or worse, it works and it’s what people know. To create genuine transformation we need to get out of the business of selling ideas and into the business of selling success. If we can help allies to make change successful, even on a small scale, they can bring in others who bring in others still.

That can’t be done through persuasion, we have to start by identifying people who are already enthusiastic about change. Change isn’t about communication, but empowerment.

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

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How to Leverage Haters to Your Advantage

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How to Leverage Haters to Your Advantage

GUEST POST from Greg Satell

What can be hardest about change, especially when we feel passionately about it, is that at some point, we need to accept that others will not embrace it. Not every change is for everybody. Some will have to pursue a different journey, one to which they can devote their own passions and seek out their own truths.

Yet there’s something about human nature that makes us want to convince those who vehemently oppose our idea. That’s almost always a mistake. Often, the reason for their opposition has less to do with any rational argument than their identity and sense of self. For whatever reason, it offends their dignity.

Still, we can learn to love our haters, because they can often help us find the way forward. All too often, we end up preaching to the choir instead of venturing out of the church and mixing with the heathens. That’s how change efforts fail. On the other hand, if we can learn to use their tactics and rhetoric to our own advantage, we have a powerful weapon for change.

“Separate But Equal” as a Force for Justice

In 1896, the Supreme Court case of Plessy vs. Ferguson codified the doctrine of separate but equal into constitutional law, which allowed states to discriminate against black Americans. Many saw it as fundamentally unjust and argued passionately against it. But a brilliant lawyer named Charles Hamilton Houston saw it as an opportunity to use his opponent’s evil idea for good.

The principle of “separate but equal” was designed to prevent blacks from benefiting from common resources, such as a water fountain or a grade school. However, when applied to rare resources, such as a graduate school, its logic began to unravel. When a man named Lloyd Gaines was refused admission to the University of Missouri law school because he was black, Houston brought suit.

But he didn’t argue against “separate but equal.” In fact, he argued for it. Clearly if the State of Missouri was going to refuse Gaines admission, there had to be a separate but equal facility. Yet there was only one law school in the state and it would be out of the question for the state to build an entire law school just to satisfy the doctrine. The Supreme Court ruled in Gaines’ favor and he was admitted to the program.

Houston would continue to argue similar cases along with his protege, Thurgood Marshall, and began taking down Jim Crow brick by brick. Unfortunately, he would die of a heart attack in 1950, before Brown vs. The Board of Education would strike down the doctrine of “separate but equal” in 1954, but his legacy lives on through Howard University Law School, which he helped build and shape.

Using Arrests To Bring Down A Regime

One of the primary tools a repressive regime has to intimidate its citizens is arrests. Getting arrested being treated like a common criminal is scary and degrading. You are made to feel alone and helpless. Yet the Serbian movement Otpor was able to figure out how to turn arrests to their advantage so that they furthered, rather than weakened their cause.

The first step was preparation. The protesters were trained so that they knew what to expect during arrests and how to respond. One key procedure was to always have “reserve” activists at every action to observe what took place. If the police arrived and began taking the comrades away, they would alert teammates who would set a plan in motion.

Phone calls would immediately go out to lawyers, friendly journalists and international NGOs as well as musicians, actors and other celebrities. While the lawyers met with the police, a protest would be organized outside the precinct, including music, games and “Mothers of Otpor” who would demand to know why the police were abusing their children.

After the fall of the Milošević regime, internal documents made it clear how frustrated the police became with all of this. The protests outside the police stations, along with the media spotlight they created, would tie their precinct up for hours. Any brutality on their part would be publicized, undermining their authority further. Often, Otpor would get more and better publicity from the arrests than from the initial protests.

This is what my friend Srdja Popović calls a dilemma action because it puts your opponent in a bind. The police had two choices, they could either stop arresting Otpor activists or continue to arrest them, but either way Otpor would grow stronger.

Betting On The Muscle Of Electric Cars

Environmentalists make the case that the long-term dangers of pollution and climate change far exceed the costs of the short-term sacrifices required. They advise us to turn down the thermostat and wear a sweater in winter, check the air in our tires and buy small cars. Clearly, these are not insurmountable challenges with the fate of the planet in the balance.

Yet the truth is that people don’t like to be inconvenienced, especially when it comes to their cars. Americans in particular have always had a love affair with big, fast muscle cars. Sure, a Prius will get you from point “A” to point “B”, but you can’t feel POWERFUL. It’s like going to a steakhouse and only eating the vegetables.

That’s why the first electric vehicle Tesla came out with in 2008, the Roadster, was anything but “responsible. It was a $100,000 status symbol for Silicon Valley millionaires. Because these customers could afford multiple cars, range wasn’t as much of a concern, but in any case the high price tag made a larger battery more feasible.

Compare that to Shai Agassi and the strategy for his electric car company, Better Place, which was a much more expansive vision. Instead of building a high-performance sports car, he built a family car for the masses and sought to overcome the challenges of range through a network of battery switching stations. It blew through $700 million before it went bust.

Musk understood a car is far more than a mode of transportation. It is a part of people’s identity. You can ask people to change just about anything, except to stop being who they think they are.

Your Targets Determine Your Tactics

When we feel passionately about change, we want to take action. We want to take to the streets, argue against injustice. We want to make decisions, launch a business, get things done. Activity gives us something to point to. It’s something rather than nothing. When we take action we can tell ourselves that we’re not just sitting idly by.

Yet actions without a sound strategy are doomed to fail. That’s why we need to learn to love our haters. If we listen to them they will show us how to win. Charles Hamilton Houston could have railed against the doctrine of “separate but equal,” but he leveraged it to take down Jim Crow instead. Otpor used the Milošević regime’s own repressive tactics to their advantage. Elon Musk didn’t ask Tesla’s customers to sacrifice, but satisfied their desire for high-performance cars.

In each case, redefining the target made all the difference. “Separate but equal” was designed for grade schools, but its significance changed completely when applied to graduate programs. A cop on the beat is almost all-powerful, but vulnerable at a precinct. The Tesla Roadster wasn’t designed for regular families to use every day, but for millionaires to zip around in on the weekends.

To change the world, we need to learn to see it differently. We can’t just fight the same losing battles. We need to redefine the terms of our struggle in ways that tilt the playing field to our advantage. In the final analysis, that’s what makes the difference between people who want to make a point and those who actually make a difference.

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

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Why So Many Smart People Are Foolish

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Why So Many Smart People Are Foolish

GUEST POST from Greg Satell

When I lived in Moscow, my gym was just a five-minute walk from my flat. So rather than use a locker, I would just run over in my shorts and a jacket no matter what the weather was. The locals thought I was crazy. Elderly Russians would sometimes scream at me to go home and get dressed properly.

I had always heard that Russians were impervious to the effects of weather, but the truth is that they get cold just like the rest of us. We tend to mythologize the unknown. Our brains work in strange ways, soaking up patterns from what we see. Often, however, those experiences are unreliable, such as the Hollywood images that helped shape my views about Russians and their impenetrability.

The problem is that myths often feel more real than facts. We have a tendency to seize on information that is most accessible, not the most accurate, and then interpret new evidence based on that prior perception. We need to accept that we can’t avoid our own cognitive biases. The unavoidable truth is that we’re easiest to fool when we think we’re being clever.

Inventing Myths

When Jessica Pressler first published her story about Anna Sorokin in New York Magazine, it could scarcely be believed. A Russian emigrant, with no assets to speak of, somehow managed to convince the cream of New York society that she was, in fact, a wealthy German heiress and swindled them out of hundreds of thousands of dollars.

Her crimes pale in comparison to Elizabeth Holmes of Theranos, who made fools of the elites on the opposite coast. Attracting a powerful board that included Henry Kissinger (but no one with expertise in life sciences), the 20-something entrepreneur convinced investors that she had invented a revolutionary blood testing technology and was able to attract $700 million.

In both cases, there was no shortage of opportunities to unmask the fraud. Anna Sorokin left unpaid bills all over town. Despite Holmes’s claims, she wasn’t able to produce a single peer-reviewed study that her technology worked even after 10 years in business. There were no shortage of whistle blowers from inside and outside the company.

Still, many bought the ruses and would interpret facts to support them. Sorokin’s unpaid bills were seen as proof of her wealth. After all, who but the fabulously rich could be so nonchalant with money? In Holmes’ case, her eccentricities were taken as evidence that she truly was a genius, in the mold of Steve Jobs or Mark Zuckerberg.

The Halo Effect

People like Sorokin and Holmes intentionally prey on our weaknesses. Whenever anybody tried to uncover the facts, they threw elaborate defenses, making counter-accusations of any who dared to question them. Often, they used relationships with powerful people to protect them. At Theranos, there was very strict corporate security and an army of lawyers.

Still, it doesn’t have to be so diabolical. As Phil Rosenzweig explains in The Halo Effect, when a company is doing well, we tend to see every aspect of the organization in a positive light. We assume a profitable company has wise leadership, motivated employees and a sound strategy. At the same time, we see the traits of poorly performing firms in a negative light.

But what if it’s the same company? Rosenzweig points out that, when Cisco was at its peak before the dot-com bust, it was said to have an “extreme customer focus.” But a year later, when things turned south, Cisco was criticized for “a cavalier attitude toward potential customers” and “irksome” sales policies. Did its culture really change so much in a year?

Business pundits, in ways very similar to swindlers, prey on how our minds work. When they say that companies that employ risky strategies outperform others who don’t, they are leveraging survivorship bias and, of course, firms that took big risks and failed are never counted in the analysis. When consulting companies survey industry executives, they are relying more on social proof than uncovering expert opinion.

The Principle Of Reflexivity

In the early 70’s, a young MBA student named Michael Milken noticed that debt that was considered below investment grade could provide higher risk-adjusted returns than other investments. He decided to create a market for the so-called junk bonds and, by the 80’s, was making a ton of money.

Then everybody else piled on and the value of the bonds increased so much that they became a bad investment. Nevertheless, investors continued to rush in. Inevitably, the bubble popped and the market crashed as the crowds rushed for the exit. Many who were considered “smart money” lost billions.

That’s what George Soros calls reflexivity. Expectations aren’t formed in a vacuum, but in the context of other’s expectations. If many believe that the stock market will go up, we’re more likely to believe it too. That makes the stock market actually go up, which only adds fuel to the fire. Nobody wants to get left out of a good thing.

Very few ever seem to learn this lesson and that’s why people like Anna Sorokin and Elizabeth Holmes are able to play us for suckers. We are wired to conform and the effect extends widely throughout our social networks. The best indication of what we believe is not any discernible fact pattern, but what those around us happen to believe.

Don’t Believe Everything You Think

One of the things that I’ve learned over the years is that it’s best to assume people are smart, hardworking and well-intentioned. Of course, that’s not always true, but we don’t learn much from dismissing people as stupid, lazy and crooked. And if we don’t learn from others’ mistakes, then how can we avoid the same failures?

Often, smart people get taken in because they’re smart. They have a track record of seeing things others don’t, making good bets and winning big. People give them deference, come to them for advice and laugh at their jokes. They’re used to seeing things others don’t. For them, a lack of discernible evidence isn’t always a warning sign. It can be an opportunity.

We all need to check ourselves so that we don’t believe everything that we think. There are formal processes that can help, such as pre-mortems and red teams, but most of all we need to own up to the flaws in our own brains. We have a tendency to see patterns that aren’t really there and to double down on bad ideas once we’ve committed to them.

As Richard Feynman famously put it, “The first principle is that you must not fool yourself—and you are the easiest person to fool.” Smart people get taken in so easily because they forget that basic principle. They mythologize themselves and become the heroes of their own stories. That’s why there will always be more stories like “Inventing Anna” and Theranos.

Suckers are born every minute and, invariably, they think they’re playing it smart.

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

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Good Management is Not Good Strategy

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Good Management is Not Good Strategy

GUEST POST from Greg Satell

One of the most annoying things I hear from leaders is that “we had a great strategy, but just couldn’t execute it.” That’s simply not possible. If you can’t execute it, it’s not a great strategy. Most likely, it was a fantasy cooked up by some combination of consultants and investment bankers which was enshrined in PowerPoint.

As Richard Rumelt points out in his book, The Crux, planning is not strategy. Yet that’s what managers are good at, so when they set out to create a strategy they build a plan, starting with objectives and working back to resources and operational directives, rejiggering assumptions along the way to make everything fit.

Good strategy doesn’t rely on assumptions. It changes them. When you look at visionary leaders, like Ray Kroc and McDonalds, Charles Lazarus at Toys “R” Us or Thomas Watson Jr. and the IBM 360, they all focused on solving an emerging problem. The truth is that the next big thing always starts out looking like nothing at all. Good strategy creates something new.

Defining A Problem And It’s Crux

Managers lead through objectives, or what they call in the military commander’s intent, to achieve a desired end-state. To achieve these objectives, good managers make plans, allocate resources and delegate authority to direct action. They monitor progress, give advice and guidance, and maintain an atmosphere of accountability and good morale.

But how are objectives determined? Is the prescribed end-state really desirable? Is it achievable and meaningful? As Rumelt points out, without a true strategic process in place, objectives tend to be tied to financial goals that are easily measured, such as “We want to achieve 15% revenue growth, while improving profit margins and increasing market share.”

Good strategy starts with defining a problem that addresses a particular market reality. Kroc designed McDonalds to fit with an emerging suburban lifestyle. Lazarus came up with the “everyday low price” at Toys “R” Us to solve for the huge inventory swings that sale events caused. Watson bet the company on the IBM 360 because the lack of compatibility among IBM’s machines was slowly killing the company.

Rumelt calls these “gnarly challenges” because none of them had obvious solutions, or even clear alternatives to choose from. Fast food franchises didn’t exist when Kroc got into the business. Most toys stores continued with sales even after Toys R Us came to dominate the industry. None of IBM’s competitors made a similar investment in compatibility.

What most people miss about strategy is that it’s not simply about making choices among defined alternatives. Innovation is never a single event, but a process of exploration, engineering and transformation.

What Do We Know?

Because good managers are so operationally oriented, their minds tend to focus on what they see every day. So in a typical leadership team, the CFO worries about financial and economic data, the CMO follows consumer trends, the CIO is concerned about shifts in technology, the CHRO takes note of changes in the workforce and so on.

When we first start working with a team we do something called a PDO analysis (Problems, Disruptions & Opportunities) to begin to uncover relevant challenges. What I always find interesting is how often some team members are completely unaware of issues that others consider dire threats or important opportunities.

With some further discussion and analysis, we can begin to pare down the list and prioritize a limited number of challenges. We discuss what makes them important and difficult to solve. We ask questions like, “What’s the potential impact these could have on the business?” and “How much do we actually know about them?” “Where we can find out more?”

During this exploration phase, it is important to stay disciplined and curb action-oriented managers’ tendency to want to jump immediately to a solution. At this stage, we mainly want to better understand what the desired end state might look like. Only then can we start to build a strategy to tackle the problem.

What Can Be Done?

The most salient aspect of any journey is that you don’t end up where you started. As you explore the challenges your organization faces, you will encounter insights that lead definable alternatives. You will need to make choices about, as A.G. Lafley and Roger Martin have put it, where to play and how to win.

Yet as I’ve pointed out, strategy is not a game of chess, in which we patiently move inert pieces around a well defined board of play. We need to learn to leverage ecosystems of talent, technology and information from a variety of sources, including partners, suppliers, customers and open resources as well, as from within our organization itself.

That’s why strategy isn’t made in a conference room and doesn’t live on a PowerPoint deck. It reveals itself over time. What we can do is choose a path forward, which means that we leave some attractive alternatives behind. Great businesses like McDonalds, Toys R Us and the IBM 360 didn’t arise from a flash of insight, but emerged as successful initiatives were built upon and failures discarded.

Yet it takes discipline to be able to continue on a chosen path while at the same time retaining the flexibility to adapt as the marketplace evolves. My friend Ed Morrison, whose Strategic Doing framework helps build strategies for collaborative problem solving, recommends holding monthly 30/30 meetings, which review the last 30 days and plan for the next 30.

Good Strategy Isn’t “Right,” But Becomes Less Wrong Over Time

As Mike Tyson has pointed out, “everybody has a plan until they get hit,” which is why we need to take a more Bayesian approach to strategy, in which we don’t pretend that we have the “right” strategy, but endeavor to make it less wrong over time. Good strategy isn’t a plan, but a set of choices made about how to address meaningful challenges.

Ray Kroc didn’t invent the Egg McMuffin at McDonald’s, but his strategy of allowing franchisees to experiment gave birth to it and many other things as well. Charles Lazarus started with a baby furniture store, but his quest to find repeat customers led him to create Toys “R” Us and pioneer the category killer. Thomas Watson Jr. bet the company on the IBM 360, but it was the decision to move to an 8-bit byte that would revolutionize the computer industry. None of these were planned for.

Today, we need to shift our mindset to compete in an ecosystem-driven world in which our ability to compete is no longer determined by what we can command and control, but what we can access. That’s why we need to abandon the fantasy that making a strategy successful is just a matter of executing a series of predetermined moves.

Good strategy is not a function of good management, but a process of discovery. Managing by metrics will always be limited to what came before and cannot see what lies ahead. We need to learn how to identify grand challenges that shift the competitive environment and change perceptions of what is possible.

The essence of a good strategy, as Richard Rumelt noted in Good Strategy/Bad Strategy, is that it brings relative strength to bear against relative weakness in the service of solving a meaningful problem.

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

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Four Reasons Change Resistance Exists

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Four Reasons Change Resistance Exists

GUEST POST from Greg Satell

Probably the greatest misconception about change is that it fails because people don’t understand it. The truth is that change usually fails because it is actively sabotaged. The status quo has inertia on its side and never yields its power gracefully. Anytime you ask people to change what they think or how they act, you can expect resistance.

Yet not all resistance is the same. Some people are merely skeptical about change, they are looking for evidence based, rational arguments that the proposed action will achieve positive results. Often, however, resistance is irrational and no amount of evidence will be persuasive. People are actively working to subvert change efforts.

We can’t let our transformation efforts be defined by those who want it to fail. Not everyone will embrace change. Instead of wasting time and effort to convince the opposition, we should focus our efforts on empowering those who want it to succeed. However, we need to learn to recognize different kinds of resistance so that we can address genuine issues.

1. Change Fatigue

In recent years, business pundits have embraced the change gospel. We are told that we live in a VUCA world (Volatile, Uncertain, Complex and Ambiguous). Therefore, we must “innovate or die.” This creates an environment in which leaders have strong incentives to be seen as dynamic change agents who drive multiple initiatives.

Yet the truth is that, for most industries, we live in a decidedly un-VUCA world. In fact, a report from the OECD found that markets, especially in the United States, have become more concentrated and less competitive, with less churn among industry leaders. The number of young firms have decreased markedly as well, from roughly half of the total number of companies in 1982 to one third in 2013.

With so much talk about change, but so little of it actually happening, it shouldn’t be surprising that a study by PwC found that 65% of workers experienced “change fatigue” and that only half felt that their organization had the capabilities to deliver change. In other words, the change gospel is undermining our ability to produce real change!

That’s why in our transformation workshops the very first thing we ask participants to define is the need for change. We simply can’t expect people to get on board with a change initiative if they don’t see a genuine, meaningful problem being solved. Change, for change’s sake, is simply a waste of everybody’s time.

So before you embark on any transformation initiative ask yourself: “Why do we need this change? What problem are we solving? What value would we derive from solving it? Is that value worth disrupting people’s lives and work?

2. Perverse Incentives

Earlier in my career my work focused on turning around media companies in Eastern Europe and I noticed an interesting trend. Managers of sales departments in struggling companies often accounted for the majority of sales (and commissions) in their companies. Because these leaders were seen as major drivers of revenue, they had an enormous amount of power.

The secret to their success had less to do with any actual sales ability and vastly more to do with the fact that, for a variety of reasons, they had managed to get the prime accounts for themselves and, even if they were managing those accounts poorly, had no incentive to spread them around. They were, in effect, being incentivized to mismanage.

The truth is that we’ve known for decades that financial incentives usually backfire. Nevertheless, when we sit down with leaders to define a change strategy they invariably want to start by devising a complex system of “carrots and sticks” to engineer the behavior they want to see and are often disappointed when they are told that it’s a bad idea.

You never want to have to incentivize people to drive change. If an initiative has real value, you should be able to find people who are enthusiastic about it and want to make it work. Even a small initial cadre should be enough to deliver a successful keystone change and get the ball rolling. After that, the issue has more to do with scaling change than anything else.

3. Switching Costs

Every change encounters switching costs. In one particularly glaring example, the main library at Princeton University took 120 years to switch to the Library of Congress classification system because of the time and expense involved. Clearly, that’s an extreme case, but every change effort needs to take inevitable frictions into account.

There are a number of reasons why switching costs can become a significant roadblock. The first is our innate bias for loss aversion. First identified and documented by Amos Tversky and Daniel Kahneman, we all have a tendency to avoid losses rather than seek out new gains. The comfort of the status quo can be more powerful than the mysterious promise of transformation.

Another important force is the availability heuristic, which reflects our tendency to overweight information that is most easily accessible. What we experience in the here and now always seems more tangible and concrete than the more distant benefits of change, which many will suspect will never come.

You never want to get bogged down in selling an idea. The switching costs will always be more real to skeptics than any image you can conjure. Rather, you want to identify people who are already enthusiastic about the change and willing to bear any costs associated with switching. If you can empower them to succeed with a keystone change, you can sell that tangible success, which is always a stronger value proposition.

A key thing to remember here is that you shouldn’t have to convince early adopters. If you feel the need to persuade, you either have the wrong change or the wrong people. Find people who are as passionate as you are and show change can work. Then you can start thinking about bringing others in.

4. Identity And Dignity

Gary Starkweather had a big idea, but his boss at Xerox’s Research Center in Webster, NY hated it so much that he threatened to fire anyone who worked on it. To him, Xerox was a copier company and the idea didn’t have anything to do with copiers. Luckily, for Gary and for Xerox, the idea meshed perfectly with the new Palo Alto Research Center (PARC)’s mission and the laser printed he developed there helped save the company.

Xerox PARC has since become almost synonymous with innovation, but even the researchers there could be hostile to ideas that were different. Dick Shoup and Alvy Ray Smith, were working on a new graphics technology called SuperPaint. Unfortunately, it didn’t fit in with PARC’s vision of personal computing and the two became outcasts. Smith would later team up with Ed Catmull and the technology would form the core of what became Pixar.

One of the biggest mistakes change leaders make is assuming that resistance to change has a rational basis. Very often people oppose change because it offends their identity and sense of self. We all take pride in the way we go about things, whether that involves our actions or our way of thinking about things.

This is the most visceral kind of resistance. We can motivate people to push through fatigue or bear the burden of inevitable switching costs, but we can’t ask people to stop being who they think they are. When people see themselves in a particular way, they rarely change and, in fact, will pay almost any price to stay true to their inner core.

What can be hardest about change, especially when we feel passionately about it, is that at some point, we need to accept that others will not embrace it and we will have to leave some behind. Not every change is for everybody. Some will have to pursue a different journey, one to which they can devote their passions and seek out their own truths.

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

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Shifting Mindsets to Compete in an Ecosystem-Driven World

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Shifting Mindsets to Compete in an Ecosystem-Driven World

GUEST POST from Greg Satell

In 1980 Harvard professor Michael Porter published Competitive Strategy, which recommended that firms create advantage by driving efficiencies throughout the value chain and mastering competitive forces by maximizing bargaining power. These concepts drove corporate thinking for decades.

Yet as AnnaLee Saxenian explained in Regional Advantage, around the same time that Porter’s ideas were ascending among CEOs in the establishment industries on the east coast, a very different way of doing business was gaining steam in Silicon Valley. The firms there saw themselves not as isolated fiefdoms, but as part of a larger ecosystem.

Competitive advantage can no longer be reduced to the sum of efficiencies in a value chain, but is embedded in webs of connections. To compete in an ecosystem-driven world, Leaders need to do more than adapt how we deploy assets, we need to look at things differently. It is no longer enough to merely plan and direct action, we need to inspire and empower belief.

Shifting From “Compel And Control” To “Access And Empower”

In the 1920s Henry Ford built the almost completely vertically integrated River Rouge plant. Because the company had the ability to produce just about every facet of its product itself (the plant even had its own steel mill), it had tremendous control over the value chain, making it virtually immune to the bargaining power of suppliers.

However, as the industry matured, other companies began to specialize in particular components. Ford, unable to compete in so many directions, became integrated into the larger ecosystem. In fact, during the financial crisis in 2008, the company’s CEO, Alan Mulally, said this in testimony to Congress:

“In particular, the collapse of one or both of our domestic competitors would threaten Ford because we have 80 percent overlap in supplier networks and nearly 25 percent of Ford’s top dealers also own GM and Chrysler franchises”

In a value-chain-driven world, Ford would have welcomed its competitors’ demise. In an ecosystem-driven-world, however, their collapse would damage nodes that the company itself depended on. Clearly, the principles of competitive advantage have changed. Today your fate depends less on the assets and capabilities you control, than what you can access.

That, in essence, is why we need an ecosystem strategy. Control has become a dangerous illusion. It’s what led to the demise of the East Coast technology companies such as DEC and Data General that AnnaLee Saxenian wrote in her book. By seeking full control of their value chain, they cut off connection to important parts of the ecosystem. When the market and technology shifted, they were left on their own island.

Building Silos Of Excellence

It’s become so common for pundits to complain about organizational silos that few even think about what it means anymore. Why do silos form in the first place? Why do they persist? If silos are so egregious, why are they so common? And once we get rid of them, what takes their place? To “break down silos” and not ask these questions is just lazy thinking.

Silos aren’t necessarily a bad thing. Essentially, they are centers of excellence. It’s true that people who work closely together naturally form a working culture and tacit domain knowledge that can be hard for others to penetrate, but breaking those units apart can undermine the important work they do.

Another problem is that when you reorganize to break down one kind of silo, you inevitably create others. If, for example, your company is organized around functional groups, then you will get poor collaboration around products. But when you reorganize to focus on product groups, you get the same problem within functions.

The truth is that you don’t want to break down silos, you want to connect them. What we need to learn is how to network our organizations to help silos become interoperable with other silos that have complementary resources and areas of areas of expertise. That, essentially, is what an ecosystem is, a network of interoperable networks.

Paradoxically, we need silos of excellence to provide value to the ecosystem in order to get value out. The best way to form a connection is to have something attractive that others want to connect to.

Connecting Silos To Leverage Platforms

It’s become clear that no organization can survive focusing exclusively on capabilities it owns and controls. Today, we need to leverage platforms to access ecosystems of technology, talent and information from a variety of stakeholders, including customers, partners, vendors and open platforms. Yet, that is often easier said than done.

The truth is that while platforms offer enormous possibilities to scale, they also have deep vulnerabilities. Yes, platforms can help connect to capabilities and assets, but they are no substitute for a sound business model that creates, delivers and captures value. That was one problem with Uber, it created connection, but little else.

Organizations that successfully leverage platforms do so with silos of capability at the core. Amazon has leveraged decades of investment in building an unparalleled logistic capability to create a dominant commerce platform. In a similar way, IBM has leveraged its expertise in quantum computing to create a network of like-minded organizations. Corporate Venture Capital (VC) funds leverage industry expertise to access entrepreneurial innovation.

There are a number of ways even small firms can leverage platforms to access ecosystems. The Manufacturing USA Institutes cater to small and medium sized firms. Local universities are often overlooked resources to access deep expertise. Harley Owners Groups are a great example of how firms can leverage their own customer networks.

Strategy Is No Longer A Game Of Chess

Traditionally, strategy has been seen as a game of chess. Wise leaders survey the board of play, plan their moves carefully and execute flawlessly. That’s always been a fantasy, but it was close enough to reality to be helpful. Organizations could build up sustainable competitive advantage by painstakingly building up bargaining power within the value chain.

Yet as Rita McGrath has pointed out, it’s no longer as important to “learn to plan” as it is to “plan to learn.” Today, a better metaphor for strategy is an online role-playing game, where you bring you certain capabilities and assets and connect with others to go on quests and discover new things along the way.

Unlike chess, where everyone knows that their objective is to capture the opponent’s king, in today’s ecosystem-driven world the basis of competition is in continuous flux, so we cannot be absolutely sure of the objective when we start out, or even if our opponent is really an opponent and not a potential ally.

That’s why strategy today requires a more Bayesian approach in which we don’t expect to get things right as much as we hope to become less wrong over time. As I wrote in Harvard Business Review some years ago, “competitive advantage” is no longer the sum of all efficiencies, but the sum of all connections. Strategy, therefore, must be focused on deepening and widening networks of information, talent, partners, and consumers.”

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

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