Archive for the ‘Governance’ Category

The Mountains are High, The Emperor So Far Away

August 19th

The Emerging Dynamics of the Integrated Digital Enterprise

Triumvirate

A recent report on Being Digital (versus merely Looking Digital) from Accenture’s Institute for High Performance, presents a vision of the future of decision-making and organization that will challenge many traditional expectations about leadership.

With emerging technologies, we are poised on the edge of a second digital revolution. Market leaders have moved from experimenting with one-off digital applications to creating integrated digital enterprises. But while the new style of digital enterprise is going to be vastly more efficient and more effective in identifying and serving customers, the dynamics of the new enterprise are going to change the agenda for future leaders, at least the successful ones.

We are all being spoiled by the experience of being customers of Apple and Amazon. We expect service to be omnichannel, seamless and swift. Ubiquitous data streams are becoming routine and advanced analytics and modeling combined with rich data representations, the authors from Accenture anticipate, to create a new kind of enterprise.

One of the most striking differences to be seen in the emerging Integrated Digital Enterprise will be the way that the new technology can empower individuals by augmenting their natural human capacities.   The augmented cognitive, physical and collaborative worker of the future will be supported by mobile intelligence, 3D printing and robotics among other new capabilities. The future worker will operate in organizations where such crucial questions as “who” makes decisions, “where” decisions will be made and “how” work will be structured and located are going to change.

Critically, there will be an opportunity to move decisions to the edge of the enterprise, closer to the action.  The authors argue “Information and decision-making authority formerly the exclusive domain of a centralized authority will increasingly be pushed out toward the boundaries of the firm.”

In some sectors such defense, military planners who are now concerned with fighting in anti-insurgency conflicts, have been talking about decision-making at the edge for some time. And these ideas are important. In an information rich workplace there will be a growing need to grant greater autonomy to local decision-makers. They will demand it.

Of course, such devolution of authority flies in the face of centuries of tradition. Strategic decision-making from the time of the Ancient Greeks has made strategy the work of generals. Strategy has determined the deployment of resources against long-term competitive threats in war, in government and in business. A central concern of future leaders in a world where edge centric decision-making is possible will be how to reconcile the traditional top down and the new bottom up.

Even in the best of worlds where the leaders from the provinces cooperate in aligning their actions with the Emperor’s central authority, their independent, empowered decision making is not always going reach the conclusions that are the same as the ones that would be reached in the capital. The top down vision of the central leadership may be prescient. Yet the world often looks different closer to the action and pushback is going to become a common occurrence. There are going to be a growing number of instances reminiscent of the ancient Chinese proverb. When the Emperor is far away, you can often do what you think is best.

If adopting new technology were all that mattered, there might be little news to report here.   But in fact, in organizations that have moved decision-making to the edge, the local leaders are going to demand a role in shaping policy rather than merely implementing it; and where these democratic impulses are suppressed, the dynamics of the future enterprise will create problems.

No one should miss the fundament challenge that this shift is going to pose to traditional governance structures. Once the decisions are moved to the edge, there will be a need to recognize the democratic impulse and to respect it.

One of the principle challenges that this view of the future is going to represent comes from the fact that “Boards still don’t see the value of digital” writes Walter Frick of the Harvard Business Review Press. Boards will need to see the significance of the tipping point and the emerging integrated digital enterprise. Embracing the implications of the new dynamics of the democratic enterprise will challenge future leaders ar to think top down and bottom up simultaneously.

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Notes:

  • From Looking Digital to Being Digital: The Impact of Technology on the Future of Work Robert J. Thomas, Alex Kass and Ladan Davarzani, Accenture Institute for High Performance, April 2014
  • Strategic Principles for Competing in the Digital Age, Martin Hirt and Paul Willmott McKinsey Quarterly May 2014.
  • The Seven Habits Of Highly Effective Digital Enterprises. Tunde Olanrewaju, Kate Smaje, and Paul Willmott, McKinsey Quarterly, May 2014
  • The Digital Tipping Point, Results of the 2014 McKinsey Global Survey. McKinsey Quarterly.
  • Digital Transformation, Creating New Business Models Where Digital Meets Physical, IBM Institute for Business Value, Saul J. Berman and Ragna Bell, 2014
  • “Boards Still Don’t See the Value of Digital”, Walter Frick. HBR Blog Network citing the results of the McKinsey Global Survey, July 3, 2014.
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Telling Your Story

April 15th

Leaders in a complicated, over communicated marketplace will need to focus on telling their stories in an increasingly compelling manner, that and to recognize that the audience is listening for a story about a success and the way forward, not another Information Age melodrama

Unquestionably one of the most striking aspects of my experience in teaching at Georgetown’s McCourt School of Public Policy was to watch the power of telling the stories that came from my experience in more than 3 decades of working on public policy concerns during times of stress and transformation.  Frankly, I had slipped into a pattern that’s familiar, especially in the business, government and academic, settings where I had worked, of taking the work seriously and sometimes ourselves even more so.  But it was stories that communicated.

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And its not as though I had not been given fair warning.  In 2011 I had traveled to Wilmington to teach a class at the National Association of Corporate Directors advanced workshops.  My subject was the experience of telling the Board of the USPS that volume would almost certainly decline unless there were an unexpected change in the patterns that were already visible in  the markets that were being reshaped by the Internet.  But they didn’t believe me.

My story may have been believable from an analytic perspective.  They allowed me to put the forecast of decline into the Strategic Plan that we published in 2000.  But as Vice President for Strategic Planning more should have been expected of me than making the right forecast and publishing it.  The organization did not want to face the painful choices that would follow from accepting this view.  Multiple stakeholders were even more passionate in their rejection of the forecast of decline.  And to be fair, for at least 6 more years the trend seemed to be rising, not falling.  Only later was it clear that this was only a recovery from the decline that followed 9-ll.

“You needed a better story,” one of my director students told me after the session.

I remembered an interview that I had seen in the Harvard Business Review in 2003, (“Storytelling that Moves People, A conversation with Screenwriting Coach Robert McKee”, Bronwyn Fryer, June 2003.)  She asked a professional screenwriter and coach “why is persuasion so difficult and what can you do to set people on fire?”

His advice was that you have to unite an idea with an emotion.  “The best way to do that is by telling a compelling story.”  McKee explains that your goal needy s to be to harness imagination and the principles of a well told story.  “A story expresses how and why life changes,”  He explains that stories begin with a situation where life is relatively in balance “but then there’s an event – in screenwriting we call it the “inciting incident” – that throws life out of balance.  The story is the description of the protagonist’s experience with the crash when subjective expectations confront uncooperative objective reality.

The classes that I taught at Georgetown soon contained the stories that had shaped my perceptions of leadership and what it takes to lead change successfully.  I commited to finishing writing about what I had learned before I returned to communicating it and one of the benefits of doing that will be that now the stories will be included as well.

Including the stories also lends a sobering touch to recalling my experience.  If my story had given the leadership any compelling message that connected an idea with emotion, it had to have been a story that conveyed an ominous warning of pending disaster.  Perhaps that was appropriate.  But its not a story that you want to tell inadvertently, and it would have been even more important to have recognized that the story needed to be about the successful conclusion rather than the pending crash.

 

Grounding

April 14th

GerogetownDefining your vision and connecting it to ground truth is more important in an age when the pace of change is accelerating exponentially than it has ever been before.

The process is surprisingly personal.  Some leaders may find it difficult to take the path that grounds strategic insight by making a personal connection.  Yet this personal grounding process is critical to sustaining legitimacy and practicing authentic leadership, especially when turning points requiring judgment are coming faster and more often.

In my case, the process came together in a classroom.  In the spring of 2013, I had an opportunity to teach a course on Leading Transformation at Georgetown’s McCourt School of Public Policy.  Because the experience created such an important turning point in focusing my interest in exploring the dynamics of transformation, I wish that I could point to a key moment or an encounter with a burning bush when there was a dramatic conversion. But instead it was the process of teaching and then writing that created the most significant impactGerogetown.

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Gerogetown

Gerogetown

Gerogetown

GerogetownCertainly the class did have its moments.

  • I asked the students whether they knew what I was talking about when I referred to Andrew Grove’s “Strategic Inflection Points”. One of the students told us “that’s what my boss calls the ‘Come to Jesus moment’ ”.  And I smiled and thought to myself only at Georgetown.
  • Or there was the time when I asked the students whether they remembered what I had talked about the previous week when I had described five arguments for democratizing transformation. I watched with astonishment as one of the students read back to me the five points in succession. It’s frightening. They were taking notes and listening to what I said is if it was doctrine.
  • And there was, at least for me, the dramatic moment when I began telling my own stories about my experience with energy policy making.  There has been such a dramatic change in the US strategic position as the country is now poised now to become an energy exporter.  This moment seems so different from the grim days of Energy independence in the ‘70s that I thought there was a need to anchor the change.  These were stories that dated back to government and to teaching in a classroom at the Yale School of Management decades earlier, and yet they were part of the insights that had brought me to that graduate school classroom at Georgetown. A visitor would have found it difficult to miss the fact that these stories were communicating far more effectively than anything that I had said earlier in the evening about policy or theory.

What was as important as the interaction with the students, was my commitment this time to write about what I had learned.  A monograph that I had written for the IBM Center for the Business of Government, “The leaders guide to transformation: Creating a Playbook for leading Transformational Change” was what had led me to Georgetown in the first place. The class was an opportunity to explore what I had learned about leadership and the dynamics of transformation

The experience of teaching the course and writing the book was important in shaping a turning point in my thinking.

  • First, the book took me back to a much broader perspective.   When I was recruited by the postmaster general to lead the development of the digital strategy for the Postal Service at the dawn of the Internet revolution,  I found, as many leaders do, that there is a severe challenge in living in both the world of strategic insight and high performance at the same time.  Even when it’s possible to sustain the focus on strategic initiatives rather than the next quarter’s earnings, it’s often because of an investment in depth rather than breadth and performance is achieved at the expense of perspective.
  • Second, the course and the book kept my focus on the dynamics of transformation.  I was given a unique vantage point in the ‘90s. Two decades later, the experience had yielded as many insights about the dynamics of changing large complex organizations in the new marketplace as it had identified digital business opportunities. (There were many of those.  But ultimately one of the things that was most interesting about them was the struggle that they created within the traditional organization that often was highly effective in killing them off.)  The story is rich.  But the distractions are many.  What may be most important in the end may be the insight into the dynamics of leading change
  • Third, the interaction with the students made it necessary to draw upon experiences in multiple public policy and public-private areas of interest.  When I was recruited to be the first Vice President for technology applications at the Postal Service and went on to be Vice President for strategic planning, I found myself hearing the echoes of the challenges that I had seen former leaders face in fields that ranged from energy policy to healthcare to telecom, politics and government.  The creation of the Internet was not my first experience with at epic transformations or the traumas that they create for leaders.  The course at Georgetown and the book that followed reconnected me with broader interests.

Perhaps most of all the experience of teaching reminded me that there is a ground truth that comes from the process. Ground truth is often cited today as critical in balancing the perspectives of leaders.  For those who have not yet encountered the phrase, ground truth is what General Colin Powell describes as the kind of insight that he was able to get throughout his career by walking around and talking to people about real problems.  Leaving the eighth floor and the view over the mall to talk to State Department employees in hallways, waiting for elevators and on their way home was critical to him in keeping him grounded.

The process of teaching, of trying to explain the ideas in simple clear terms, was a filter that drove much of the theory into the end notes.  Talking to students with diverse backgrounds, and in Georgetown’s case, with diverse public policy interests, reset my focus to the wide-angle lens.  The experience caused me to personalize the story in a way that I never would have anticipated would be useful, even important in making in accessible for future leaders who will have to make such connections to sustain their authenticity.

Gerogetown

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Transformational Leadership – The Framework*

October 20th

There is growing interest in how to lead transformational change.   Many people – from those in positions of formal authority to non-traditional players who are being given access to key decision-making and granted a seat at the table by emerging technologies – are increasingly interested in knowing how successful transformation works.

In part, this is because organizations in both the public and private sectors are being confronted by imperatives to change that have been driven by technology, financial crises, resource constraints and new conditions that are forcing them to address issues such as,

  • How do we change the services we deliver to our customers?
  • How should we change the business model of our organization? and
  • How do we change while retaining our essential character?

My work with leaders who are facing these questions reveals that there are seven basic elements that are present in every successful transformation – elements that are illustrated by fundamental questions that must be answered:

  • Why change?
  • Who is going to be involved in planning, executing and sustaining the transformation?
  • When to launch?
  • Where is the change going to lead?
  • How should the journey be structured to achieve creative balance?
  • …To be imlementated dynamically? and
  • …To sustain the gain?

Addressing these seven questions will be aided by building your own playbook and using it to create a gameplan that fits your context . Your playbook needs to address:

The two preliminaries:

  • Why change?
  • Who leads?  and

The five elements of transformation:

  • Timing
  • Innovation
  • Strategy
  • Implementation, and
  • Sustainability

This is the framework.  Effective transformation strategy will address each of these classic themes.

What makes this interesting today is that we have reached one of the great inflection points in history when new voices and new players have been empowered by technology change and are making the dynamics of transformation come alive.  Looking at the framework, some old hands will be tempted to say that they have seen it before.  After all, the essential elements of transformation have a timeless quality.  But historically, future directions were defined top down.  Since Ancient Greece, strategy has been the work of generals.  This this is in the process of changing.

If the moral of this story were “adapt to technology” there would be little news here.  This has been a common theme for nearly 20 years since the Internet became a mainstream communications channel.  But today, interactive technology and transparent enterprise are writing new rules for future leaders forcing traditional leadership to adjust to the force of the new players.  The dynamics of organizations in every sector of the economy are being changed.

Some will need to react and democratize their enterprise as quickly as possible; others have more time to choose their future path.  But everyone needs to understand the implications of the forces that are democratizing transformation.

 

* Preparing to teach seven classes on Transformational Leadership at the Georgetown Public Policy Institute, it became valuable to create a brief summary of the framework for the discussion.  Some of the discussion here has appeared in different forms in this blog and in the Working Papers on this Transformation Strategy site. Much of it is new.

Directors Hazard and the New Rules of Governance

July 20th

The Murdoch hearings before Parliament gained a global audience and once again served to focus attention on the governance issues that now seem to arise at every turn.  Or, at least, when something goes wrong and we look back to determine who was responsible? or who should have been responsible? we seem to be confronted repeatedly with issues of governance and questions of moral hazard.

Where you responsible Mr. Murdoch?  No, he answered the people he trusted were responsible and the people that they trusted.

Unfortunately, since there had plainly been wrongdoing in the interest of selling more newspapers, Mr. Murdoch’s answer became the centerpiece of much of the coverage that followed.  Should he have assumed greater responsibility?  Was it even true that he didn’t know what was happening?

For directors who are responsible for protecting the well being of their companies, this answer raised troubling questions (once again) about the nature of moral hazard.  Economists talk about moral hazard (a condition that occurs when a party that is insulated from risk behaves differently than they would if they were exposed to the risk) as a case of information asymmetry.  Insurers need to be protected, according to the theory, from cases where the insured do not behave as they would if they had no insurance, if they were themselves subject to the full risks of their behavior.

In the 17th Century when insurance companies were first grappling with the concept of risk, they sought to understand whether the people that they insured would behave in a riskier manner as a result of the insurance.  In the case of health insurance today, there is ongoing debate over whether insurance encourages an overconsumption of health care and then there is a debate over whether that’s a bad thing.  Co-payments and other devices are used to encourage the consumer to assume part of the risk.

But in recent years, especially after the financial crises of 2008, the question of risk to the taxpayer became clear as institutions were protected, at taxpayer cost, from behaviors in which they had assumed too much risk.  Directors and national leaders, it was reasoned, would be better able to protect shareholders and taxpayers if the actions of CEOs were less protected and if their decisions were required to be transparent.

Michael Anteby, an associate professor of organizational behavior at Harvard Business School, writes in Working Knowledge, an HBS blog that “many companies today operate like Russian nesting dolls, relying heavily on other companies or external individuals to conduct many of their activities”.  (“Rupert Murdoch and the Seeds of Moral Hazard”)  Anteby expands the concept of agency and moral hazard by looking more broadly at the implications of the interconnectedness of our society.  He is concerned that when companies interconnect the “associated moral hazard often goes unnoticed.  Such risk can prove even greater when the various elements of the ‘delegation chain’ obey different standards.”

Whether or not the Murdochs knew about the phone hacking at the News of the World they were plainly in a situation of “plausible deniability”.  In the food and apparel industries, Anteby argues, there is a need to “secure” all elements of the production chain.  Whether they have in fact recognized this and whether there is a similar requirement in other industries is a debatable point.  But certainly one of the most interesting consequences of Rupert Murdoch’s denial of responsibility for the actions of his agents was to raise once again the question:  If not you, then who is responsible for the actions of your employees?

Future directors will have to think carefully about what these emerging concepts of “responsibility” will mean for them.  Will transparency be sufficient to protect the shareholders and the public?

We have reached a time when every company is an IT company.  Some Boards are beginning to see this and to grapple with the risks associated with information.  They may not yet have reached the point where they are grappling with the risks of information asymmetry and, if transparency is an antidote to the problem of the Russian nesting dolls, the consequences that this form of insurance will convey.

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