Archive for the ‘Organizational development’ Category

Why Change Initiatives fail and what we can do about it.

June 6, 2016

According to a study back in 2013 by Towers Watson, only 25% of change initiatives are successful in the long term! (See Victor Lipman, Forbes, Why Change Management Fails)

Quite dismal results when you think of the huge investment made by many corporations to implement change initiatives in their organizations, even more so when you consider that such initiatives are almost always announced as critical for future business success!

Highlights of the study involving approx. 280 large and middle size organizations from North America, Europe and Asia showed that:

  • Employers felt 55% of change management initiatives met initial objectives but only 25% felt gains were sustained over time
  • 87% of respondents trained their managers to manage change but only 22% felt the training was effective.
  • 68% of senior managers said they got the message for change but this fell to 53% for middle managers and 40% for front-line supervisors.

 

These are quite dispiriting figures and seem to show, unsurprisingly, that the lower down you go in the organization, the less informed and therefore less engaged employees are.

Why do these change initiatives fail? More importantly, what can we do about it?

Commentators suggest the following reasons why change initiatives fail:

  • The change initiative goals are not realistically attainable
  • The CEO is not at the forefront of driving the change
  • Senior managers talk the talk but don’t walk the talk.
  • Middle managers and supervisors are not sufficiently informed and don’t really understand the reasons why the changes are needed
  • Management wants a quick fix and doesn’t understand that implementing change is a long-term effort.

These are certainly very understandable reasons and the following solutions would seem the very least we should do:

  • Look at the territory and not the map. Set SMART change objectives.
  • Make sure the CEO is at the forefront and leads the way!
  • Make sure senior managers not only talk the talk but walk the talk by demonstrating the behaviors required to drive the change down into the organization
  • Prepare for the long term. Lead, plan and budget accordingly.

But what about the crew down in the hold rowing hard to the corporate drum beat?

Doing all the things listed above will certainly increase our chances of getting more buy in from grassroots employees but what more can we do?

How can we get grass roots employees to engage more directly and more often in supporting and implementing enduring and sustainable change? How can we harness the power of the grass roots employees to deliver extraordinary results long-term?

This is really the question at the heart of “The Open Organization, Igniting Passion and Performance”, Jim Whitehurst’s account of his leadership journey when he became CEO of Red Hat, a world leader in open source solutions.

open orgThe starting point of Jim’s leadership journey was his realization that the traditional top down, command and control, classical hierarchical organization that he was used to at Delta Airlines could not work for the Open Source culture of Red Hat.

For Jim joined an “Open Organization”, an organization that is not led in the traditional top-down way and that depends on ever-growing collaboration between internal and external communities of contributors who update and improve software (essentially Linux based) by working together, an organization where decisions are taken not top down but bottom up or even from edge to edge of the organization to respond to business opportunities. If Linux is open source and supposedly free, Red Hat is in the business of adding value to free code and providing customers with peace of mind that “their entire system based on Linux is the most stable and secure system on the planet”. And to do that, openness, transparency, participation and cooperation inside and outside the organization is critical.

Moreover, as Jim explains, not only do they need the inputs of more and more employees

Think Outside The Box Tic Tac Toe Concept

further and further away from the centre or from partners and customers if they are to innovate and gain competitive advantage but decisions have to be taken faster and faster. For such organizations, the traditional hierarchical chain of command no longer works because it takes too long, consumes too many resources and because they don’t own the code on which their solutions are based. As he says himself, “you can’t command initiative, creativity or passion”. These are gifts and every day, employees choose whether to bring them to work or leave them at home. Suppliers and customers likewise.

So leading such an Open Organization requires a new management paradigm where decision-making is no longer the prerogative of hierarchy and where decision making is top down but one where decision making is bottom up, where employees are trusted to do the right thing and where management is hands off enough to allow the people in the organization to direct them and make their own decisions.

open org management model

 

I would highlight 7 key leadership principles that are key to managing change successfully in Open Organizations and indeed in all 21st century High Tech, innovative organizations.

  1. Start with Why!

For Jim Whitehurst, you must start with “Why” because starting with “Why” and building a compelling sense of Purpose creates an extraordinary degree of engagement among all stakeholders and catalyzes creativity, innovation and organizational commitment. Jim Whitehurst quotes Whole Foods CEO John Mackey and Babson College Professor Raj Sisodia:

PURPOSE concept

“People are most fulfilled and happiest when their work is aligned with their own inner passions. Personal passion, corporate purpose and business performance all go together”. If you can create a compelling reason for people to participate, they will.

So a compelling Purpose is the first driver of engagement and if your change initiative doesn’t have a clear compelling Purpose that employees identify with, you won’t get the levels of engagement from employees required to drive change successfully.

 

  1. Ignite Passion!

But a compelling Purpose is not enough. Today’s workers want their work to mean something and they want to be part of something that makes a difference. So organizations must activate passion amongst employees to really achieve great performance.

An employee who feels passionately about his company’s purpose will be engaged and

Wherever you go, go with all your heart

motivated to deliver extraordinary performance and go that extra mile. And to get that passion, organizations must be prepared to challenge their people to take initiatives, find ways to innovate and of working together to gain an edge on the competition. As Jim Whitehurst says, if you don’t want passionate people, you can always use robots but robots won’t deliver innovative solutions to unforeseen or new complex challenges!

So the second ingredient in managing change: encourage passion in your employees and give them opportunities to express their passion from Day 1!

  1. Engage your employees from Day One!

As employees today need to understand “Why”, leaders need to engage with their workforce in a much more direct, continuous and positive way. Expecting employees to behave proactively and assume accountability for their decisions means that leaders have to provide much more information and context than ever before and this means much more than simply pushing information down the organization through the usual internal communication channels.

This means constant and ongoing dialogue between leaders and employees at all levels. So in an Open Organization, the leadership role is not undermined or abandoned. Rather, the leader’s role becomes one where he/she constantly provides context and meaning and constantly supports employees in their decision making by “determining the appropriate amount of latitude that each individual is capable of handling, plus develops, coaches and stretches their capabilities along the way”.

This third element of successful change management requires leaders to engage constantly with employees and not only when some change management initiative needs to be implemented. If leaders haven’t been busy building the engagement of their team members from day one, don’t expect to get it when you need to launch an urgent organizational change. It’s too late!!!

  1. Develop Accountability!

In conventional, top-down command and control organizations, Accountability is simple. I am accountable to my boss who is accountable to his/her boss who in turn is accountable to his boss, etc. But as Jim Whitehurst points out, real Accountability is not asking permission to do something or saying “May I” all the time.

It’s about being accountable for a set of outputs after the fact! And if you want employees to accept real accountability, you need to foster a culture that encourages initiative, trust, transparency, information sharing and all the things that allow employees to feel that they have the means and the support from leaders to take reasonable decisions at their level and are willing to be therefore accountable for the results.

 

AccountabilityAbove all, the best way for leaders to develop Accountability is to demonstrate it themselves and walk the talk by actively seeking feedback from all levels of the organization on whatever issues concern team members. Leaders have to listen to and engage with employees on how to resolve the issues raised rather than simply telling them to shut up or accuse them of being obstructionist. One very frequently used way of getting feedback is the annual employee survey and one equally important way of walking the talk is by acting on the employee feedback obtained in the annual survey in a positive way.

As Jim Whitehurst says, feedback is a gift so take the feedback at face value, don’t shoot the messenger or risk disengaging your employees!

It’s all about trust. Employees who trust their managers are more productive and trust comes from open dialogue and from leaders walking the talk!

So real accountability is a 4th element in ensuring successful change management and again, this has to be from Day One and not only when circumstances require it.

  1. Enroll your thought leaders, not just your managers!

In classical top down organizations, decision-making is simple. The Boss decides ultimately and the hierarchy dictates who gets heard. In Open organizations like Red Hat, this can’t work.

Those closest to the issue rather than those responsible for overall direction of the organization or team, tend to make the decisions. This of course requires collaboration and mutual respect between employees and their managers in a complimentary relationship. Decisions are made on merit. In other words, they are made on the best case put forward and excellence, not position, prejudice, titles, politics or privilege is the criterion of choice.

So the role of leaders is to ensure decisions based on merit can be made by the right people working together on the right things. And how do leaders do this?

They can do this by building an organization that listens to all employees and allows Hand writing the text: Be a Voice Not An Echoeveryone to voice their opinions openly so that gradually, real thought leaders can rise to the top. Organizations of course usually know who their key influencers are (the thermostats as Jim Whitehurst calls them), those thought leaders within the organization who are generally recognized by their peers for their achievements and expertise and whose contribution is vital for the success of any change initiative. But such thought leaders are unlikely to contribute positively if they are being stifled by a command and control type manager or if they witness colleagues being gagged or not being listended to. If you want your thought leaders to participate willingly and if you want to avoid groupthink conformity, proactively encouraging a culture of open expression where everyone’s voice is heard is a (small) price to pay!

So to ensure the success of your change initiatives, listen to everyone from day one!

  1. Nurture creative abrasion!

It’s not enough to show you listen. In conventional organizations, everyone is expected to fall in line and conflict is seen as a threat and usually repressed. But as Jim says, you can’t get the best creativity, initiative or efforts from members of an Open Organization, indeed any organization, by saying “Go do this”. The best ideas happen when teams “hash things out”! Open organizations therefore encourage and accept not only bottom up feedback but also organize and develop strong, energetic internal debates which may even occasion conflict and opposing points of view.

What Jim Whitehouse calls “creative abrasion”, something that involves some level of conflict – a disagreement, contention or argument – works best when it is practiced in a community that has a shared purpose, shared values and rules of engagement that help keep the conflict productive rather than destructive”.

If you don’t encourage such debate, you may well end up with what Jim calls a “terminally nice” culture that ends up in real trouble because you never initiated the difficult conversations required to challenge the status quo and get the meaningful inputs required to turn things around.

And the role of leaders in these Open Organizations is even more important: encourage and manage these abrasively creative discussions where everyone is free to exchange their points of view in a candid, positive way. Jim quotes the former CEO of Xerox PARC who

Disrupt Change Innovate New Business Product Concept Word Collag

said: “you want an organization that argues with you. And so you want to nurture the bottom up but you’ve got to be careful that you don’t degenerate into chaos”. In a way, leaders have to disrupt the conventional way of getting things done if they want to avoid falling in to the “terminally nice” culture that suffocates successful change management!

 

Lots of tools now exist to orchestrate such internal debates and in implementing them, you can use the wisdom of the crowd to police discussions. Indeed, peers themselves will step in themselves if discussions become too virulent, if you really have a community of like-minded employees who share a common goal.

So 6th element in managing change, accept being challenged and proactively promote a creatively abrasive, bottom up feedback culture and do it from Day One!

  1. Involve employees directly in decision-making!

Managing change is fundamentally about decision-making and getting decisions implemented operationally. So change management is not only about big transformational projects but is at the heart of what leaders need to do every day: get their team members to adapt with agility to change and execute effectively.

In a typical command and control organization, the manager says and the employee does but we all know that it doesn’t work like that in real life, especially in Open Organizations, indeed in most 21st century high tech organizations. Leaders need the buy in of employees to execute effectively.

But as Jim Whitehurst points out, classical change management approaches usually focus on the “execution” phase and huge effort is spent on “explaining and selling the changes” top-down to employees, once decisions are made by management at the top.

At Red Hat, they do it differently. Rather than focus on “selling” the execution plan to employees once the plan is hatched, they have moved most of the change management activities into the decision-making process itself and using a host of different feedback mechanisms, get inputs from all levels in the organization before any significant decision is made or implemented. The drawbacks are numerous: the feedback process is time consuming, objectives needs to be explained and understood, leaders have to be prepared to listen and even ready to alter their plans according to the concerns raised and this can be threatening for many managers.

But as Jim Whitehurst points out, the results are worth the effort because the time you

pride acronym concept

lose in preparing your change is gained back in the adoption phase because you have more employees on board and they will follow you “because they trust you and not because you ordered them to”. As we all know, employees feel more ownership in the changes needed when they are involved in the decision behind them!

This doesn’t mean that a company is a democracy. leaders still remain the ultimate decision makers and may have to make difficult decisions despite all the efforts to listen and engage teams. But if you take the time to explain why and can back it up with a rationale, you can still drive progress and get things done.

So the 7TH element in managing change successfully is in switching the change management from the execution phase to the decision making phase and really making the effort to involve employees in the decision making process on an ongoing basis.

Hurry slowly. It’s worth it!

So 7 simple principles for leading change in Open Organizations.

And they obviously work for Red Hat as they have grown from an organization with revenues of $400 million to one with revenues of $1.5 billion. A great achievement.

But in my view, these 7 essential principles of leading an Open Organization can be applied in any organization, Open Source or otherwise, that seeks to foster initiative and creativity rather than running operations on HiPPO – the “highest paid person’s opinion”.

And if they are applied, they will help to build a really collaborative culture where employees are engaged from Day One and change doesn’t need to be “managed” but is an integral part of the leadership and collaborative team work process on a daily basis.

Remember the 7 Principles of leading in change in an Open Organizations:

  • Start with Why
  • Ignite Passion
  • Engage with your employees from Day One!
  • Develop Accountability at all levels
  • Enroll your thought leaders as well as your managers!
  • Nurture creative abrasive bottom up feedback
  • Involve employees proactively in the decision-making process

 

What do you think?

 

What makes a Great Team? How to go from Good to Great!

May 7, 2016

 

So Leicester City has won the English Premier League!

If you are not an avid soccer or sports fan, this piece of news will probably leave you cold.

But for all the crazy sports fanatics around the Globe, this is a truly astonishing result.

Here is a team that has absolutely no recognized « A » players in its first team, has one of the smallest budgets in the Premier League, that was almost relegated to the lower league last year, has a manager who had never before won anything and that was given 5000/1 odds to win the League at the start of the championship!

Yet, Leicester managed to beat some of the richest teams in Europe, all staffed with high profile “A” players. A victory indeed for the underdog!

leicester

Leicester City: Soccer Scrum Champions?

So how did the 5000/1 underdogs do it? They undoubtedly had good players at the start of the season but how did they go from Good to Great?

Of course, there are many reasons but one key reason has got to be great teamwork!

 

 

And what are some of the success factors that contributed to achieving this great teamwork?

I guess Jeff Sutherland, the father of “Agile Management” and co-creator of the “Scrum Software Development Framework” would probably have some more very interesting ideas on this subject.

 

This is the question he sets out to answer in

Capture d’écran 2016-05-06 à 11.37.01

Why do some teams achieve greatness when  other teams languish in mediocrity?

Indeed, after some years of working in various senior management positions managing software development projects, Sutherland came to two very simple conclusions:

  • The traditional command and control « Waterfall » method of software development where projects were completed in distinct stages and moved step by step towards ultimate release to consumers and software users just didn’t work. Projects were often late, overran on budget and quite often were even abandoned because they no longer corresponded to the customer’s needs.
  • Worse, from a people point of view, this traditional “Waterfall” approach was a nightmare for those who had to apply it, made life miserable for all and more or less encouraged mediocrity, poor teamwork and failure.

Inspired by the Toyota Total Quality System (TQM) in automotive manufacturing,

Women hand writing element of TQM concept.for business concept and use in manufacturing

Sutherland gradually came to define an alternative way of managing software development projects, which he called “Scrum” and which has become globally recognized as one of the most effective way of developing software projects.

How does Scrum work?

To simplify, rather than trying to implement the inefficient “Waterfall method”, whenever you start a project, you regularly check in with your team members, see if what you’re doing is going in the right direction and if it’s actually what people want. And at the same time check if there are ways to improve how you are doing what you are doing and if there are any ways of doing it better and faster and what obstacles may be getting in your way. Simple really!

This dynamic process follows a few simple steps:

  • Build an initial plan and rough cost estimate good enough to start;Concept of Scrum Development Life cycle and Agile Methodology, Each change go through different phases and Release
  • Gather a small, competent and empowered and cross-functional team to execute;
  • Prioritize the work around the initial tasks that will deliver some value very quickly for the customer and use demos to show to all at the end of each work cycle;
  • Organize the teamwork around short work cycles of 2 to 4 weeks called Sprints;
  • At the end of the Sprint, check what has been done, what remains to be done, what was done well, what can be improved and move on to the next cycle.

 

But what has Scrum and Software Development to do with the success of our 5000/1 Leicester City sporting underdogs?

 

For Scrum to work, it involves not only a whole new way of working but more importantly, a whole new mindset to managing projects and teams.

As Jeff Sutherland says, Scrum is a simple idea but executing it requires thought, introspection, honesty and discipline and Leicester City certainly showed all of these qualities throughout the season.

But when we look closer at some of the Success Factors behind Scrum which help teams go from Good to Great, I would highlight at least 7 key success factors I suspect helped Leicester City transform themselves from Good to Great.

 

1. Great teams have a goal but build the road as they go!

Scrum teaches us that while it is important to have a clear idea of the final objective, great teams build the road as they go and it is better to refine the plan throughout the project rather than do it all up front. You can never plan everything up front. The real world doesn’t work like that. People don’t work like that.

Plan in just enough detail to deliver the next increment in value and estimate the rest of the project in large chunks. This of course means having confidence in the team to work closely together as they go so that the plan is constantly adapted to the changing environment and customer needs.

Key takeaway: Promote an agile organization that doesn’t over obsess with Gantt charts and exhaustive planning and accepts that what seems like a bad decision now is better than a decision delayed taken too late. Progress slowly towards the goal, Sprint after Sprint, match after match!

 

2. Great teams plan and prioritize…just enough!

If Jeff Sutherland reminds us of the trap of trying to plan exhaustively everything that has to be done before acting, he never suggests that we should work in an ad hoc way.

If you want to go fast, you nevertheless need to plan sufficiently to ensure you attack the key challenges that really add value for the customer.

For any software development program, as Jeff Sutherland points out, 80% of the value is delivered by 20% of the functionalities. So Scrum insists on defining that 20% of essential work that needs to be done, prioritizing that work in terms of value for the customer and then attacking those tasks delivering highest value first in the Scrum work cycle called a Sprint, usually of a duration of 2 to 4 weeks.

Sutherland reminds us of some simple quality tools that are very useful for planning and Demingkreisnotably, the Plan, Do, Check, Act (PDCA) cycle created by Prof. W. Edwards Deming and
adopted by Toyota. This simple tool helps to plan and prioritize work from Sprint to Sprint so that you define what you want to do, you do it, you check what you have done, and you correct what you did not do or did wrong.

A simple but effective way of escaping the ad hoc, day-to-day execution of tasks!

Great teams plan simply and prioritize so that they deliver 80% of the results by doing the key 20% tasks first from cycle to cycle.

Key Takeaway: Train all employees in all functions to use continuous improvement tools such as PDCA and Pareto. It will help teams plan, do, check and act on the key 20% of tasks adding 80% of value. Above all, you will drive improvements everywhere.

 

3. Great teams focus on Systems! Hire Eagles and teach them to fly in formation!

All companies want to recruit the best person for any job but as Jeff Sutherland points out, modern business has perhaps become too focused on finding “A” players and star individuals when the real exponential value is generated through building effective systems which allow great teams to flourish.

Scrum teaches us to focus above all on the System and not the person because an efficient system will always deliver exponentially more value. It is really a case of 1+1 = 3n rather than 1+1 =2. As Aristotle said more than 2000 years ago:

whole is more print

And Leicester City surely demonstrated this more than 2000 years later by putting the system first!

Key takeaway: Great teams focus on effective systems. Seek to develop and optimize high performance systems that allow great teams to flourish! Hire Eagles and teach them to fly in formation!

 

4. Great teams promote a no-blame culture!

If improving the system can deliver much more than blaming any one individual, it is important to understand this and promote a no-blame culture that encourages everyone to participate in perfecting the system.

As an example of why this is important, Jeff relates the case of General Motor’s NUMMI automotive plant in Fremont, California that was closed 1982 by GM who considered the workforce the worst in America.

When Toyota wanted to reopen the plant in 1984 with GM in a JV, GM recommended hiring the management but not the workforce!

Toyota did the exact opposite and rehired the workforce but not the management!

Very soon, NUMMI was producing cars with the same precision and as few defects as those made in Japan. As Sutherland says, same people, different system, different management methods, different outcomes!

NUMMI

This is what I like to think happened at Leicester City. They focused on the system just as Toyota did at NUMMI, forgot about the poor results of previous years and set about building a system that would eventually deliver outstanding success.

Key takeaway: rather than blame individuals, always promote a no-blame culture. Team members will be more ready to cooperate, participate proactively and contribute to improving the system. Blame the people and you sap the team spirit and morale, you tackle the wrong problem and you allow a failing system to continue. It’s as simple as that.

 

5. Great Teams build Trust

Trust is the glue that holds great teams together.

Diagram of trust

If you have a goal and you work to that goal and fight to continuously improve so that you can accelerate and deliver more, this means focusing on how to improve the process as you go.

This means team members must take responsibility for their own share of the work and how to improve it and they will only do so if they trust their team. Team members have to be able to give honest and straight feedback to one another that helps every one to improve and this will only happen in a climate of trust. If there is no trust, team members may adopt all sorts of deviant behavior such as hoarding information, ignoring errors, silo mentality, blaming others, all the behaviors that inevitably inhibit greatness.

 

6. Great teams share Purpose, Autonomy & Skills

To achieve team greatness, as Jeff Sutherland points out, all teams must have 3 key characteristics:

  • A higher sense of purpose which unites and motivates them to overcome difficulties and achieve success together
  • A sense of empowerment to take the decisions they need to take at their level to move fast. The more a team has to defer to an external authority to get things done, the less chance they have of success.
  • Finally, each team should have all the skills it needs within the team to deliver the expected results. The more a team has to defer to an external resource to get something done, the less likely it will succeed.

Key takeaway: Instill in the workforce a sense of higher purpose; Build a system that empowers them to act effectively towards that purpose and constantly track and provide the skills needed by that team to become Great.

 

7. Great teams seek to improve continuously!

At the heart of Scrum and the Toyota Total Quality System is a constant quest for continuous improvement.CONTINUOUS IMPROVEMENT Vector Sketch Notes

Scrum encourages teams not only to ask what they have done but how they can improve on what they have done so that in the next work cycle or Sprint, they can go even faster.

Continuously improving the process accelerates the productivity from Sprint to Sprint so teams can work smarter without having to work harder!

 

 

Indeed, at the end of each Sprint, team members perform a ”Sprint Retrospective” where they look at:

  • What was done during the Sprint?
  • What went right?
  • What could have gone better?
  • What can be improved during the next Sprint?

These simple questions can be asked everywhere throughout any organization for any project or task.

This continuous improvement mindset must of course be shared by the whole organization, from top to bottom and not only those on any given project. If senior managers don’t believe this, employees lower down won’t either.

As everyone in the organization must not only “talk the talk” but “walk the talk”, this involves the company culture and values and everyone needs to understand and buy into this continuous improvement culture and values.

All employees can be educated to understand and adopt this mindset in many ways: from on boarding, to the annual objective setting process, to rewards and recognition, to work methods and processes, to internal communications, to training and development, to Succession Planning, even to the internal Annual Survey and the types of questions you ask, how you ask them and how you act on employee feedback.

And every function should have its own continuous improvement goals and agenda.

Key takeaway: Actively seek to promote a continuous improvement culture throughout the organization and train and educate employees at all levels to adopt a continuous improvement mindset that seeks not only to “do” but also to improve “how” to do.

 

To conclude, these 7 key success factors contribute to building Great teams:

  1. Have a goal but build the road as you go
  2. Plan and prioritize…just enough
  3. Focus on effective systems. Hire eagles and teach them to fly in formation!
  4. Build a no blame culture
  5. Promote Trust
  6. Develop Purpose, Autonomy and Skills
  7. Seek to improve continuously

 

Great teams of course do much more than this but you will have to read Scrum: The Art of doing Twice the Work in Half the Time to discover more “Success factors” on how to help teams go from Good to truly Great.

 

And well done to Leicester City who, like real champions, show us how the “Whole is so much greater than the sum of the parts” and that good players can become a Great Team when some Scrum success factors are added into the mix in a disciplined and honest way!

 

What do you think?

 

PS: I’m a Munster fan myself. That’s Rugby Scrum and not Soccer Scrum…but that’s another story!!!

 

A Contrarian’s view to start-up success -from Zero to One by Peter Thiel

March 3, 2016

It could seem quite contrarian indeed  to question generally accepted conventional wisdom that competition is synonymous with capitalism. Ever since Adam Smith, we have been educated to believe that free competition is the foundation of economic prosperity and every entrepreneur should willingly and gladly accept that competing for market share is the rule of the game.

Nor would you expect such a contrarian point of view to come from someone who studied at Stanford law school before going on to co-create a successful start-up like Paypal before selling it off to eBay for 1.2 Billion USD.

But this is what Peter Thiel precisely does in his very provocative and contrarian minded book “Zero to One: notes on startups or how to build the futurethielbinb. In his presentation to the Chicago Ideas week in 2015 on the subject of entrepreneurship,   he touches of some of the key ideas and themes that run through “Zero to One…“. In his speech below, he underlines three key points that he believes entrepreneurs should bear in mind which are nevertheless contrary to conventional wisdom on how to get a startup to succeed.

1. Aim for a monopoly in a niche market to escape competition!

To succeed, businesses need to be unique and so differentiated from their competitors that they are no longer even competing. Why? Because as Peter Thiel points out, a world of perfect competition “competes away” all profits. The more companies compete over the same finite piece of cake, the less cake there is, the more their profits are squeezed and the less cash flow they have, the less they can invest in long term growth. Successful start ups create their own market through discovering and growing a unique value proposition and executing fast before any possible competition has time to react. In other words, they escape the competition trap by creating a monopoly in a niche market!

 

Peter Thiel cites Google as a good example of a company which has managed to “escape the competition trap” by acquiring more or less a monopoly of the internet search market thereby guaranteeing itself huge cash flows for years to come. Happy companies like Google found a way to radically differentiate themselves from the competition early and escape the competition trap. Unhappy companies however are all alike because they failed to escape the essential sameness of competition. So the goal for any start up is to build a technology or a solution or an answer to a market need that is so unique that it allows the startup to escape from this competition trap. As Peter Thiel provocatively asserts,  “competition is for losers”.

2. Find a secret that nobody else can see!

For Thiel, the “cone of progress” has become too narrow and technological innovation seems to have been restricted to the IT space in the last decade or so. The IT space will continue to innovate but there are other realms which are worthy of exploration, such as bio-tech and space. We seem to have stopped exploring  these other realms for many reasons but we need to seek out the secrets that these areas are hiding. Secrets are unique opportunities that others don’t see. There are still many secrets to be discovered in the world of medicine, space exploration, bio-technology and it takes effort, dedication, hard work and investment to uncover the secrets these realms still contain. Above all, whether it is iT or bio-tech, to succeed, we  need to see a unique problem nobody else has tried to solve and solve it rather than simply compete with others in the same market.

3. Globalize horizontally  and innovate vertically!

Finally, Peter Thiel distinguishes between Globalization on the one hand and Technological innovation on the other and while he believes we must do both, he asserts that we must make a careful distinction between Globalization on the one hand and Technological Innovation on the other. For Thiel, Globalization means spreading existing technology horizontally on a massive scale. He cites China as an example of horizontal growth where the Chinese are copying on a large scale technologies invented elsewhere in order to close the gap as fast as possible with the developed world. This we need to continue to do of course.

On the other hand, Technological Innovation or vertical innovation as he calls it brings new and radically different step changes in existing technologies and this technological innovation can only be achieved through focusing on widening the cone of progress beyond IT into other neglected realms of technological exploration.

As Peter Thiel says, we need to “develop the developed world” because the very idea of a “developed” world implies that we no longer need to progress. If so, we will gradually slip into a state of sclerosis. So the good news is that there are still new frontiers to be discovered and conquered in medicine, space, aeronautics, science,..and Thiel invites all would be entrepreneurs to seek out the secret path and unique idea that will set them on the way to success, with a lot of hard work, risk and investment of course.

In “Zero to One”, it is worth recalling  7 core questions Thiel says all businesses should answer before launching any new venture:

  1. The Engineering Question: can you create breakthrough technology instead of incremental improvements?
  2. The Timing Question: is now the right time to start your business?
  3. The Monopoly Question: are you starting with a big share of a small market?
  4. The People Question: do you have the right team?
  5. The Distribution Question: Do you have a way not just to create but to deliver your product?
  6. The Durability Question: will your market position be defensible in 10 and 20 years into the future?
  7. The Secret Question: Have you identified a unique opportunity that others don’t see?

 

Very hard questions of course. Very contrarian and provocative and food for thought for all entrepreneurs big and small!

Enjoy “Zero to One”, a great overview of the forces driving innovation in  the IT sector and why we need to widen the cone of progress if we want to launch a new age of entrepreneurialship. Elon Musk is showing the way!

JN

 

Managing paradoxes – The Competing Values leadership framework

January 31, 2016

Organizations today are more and more complex and it is very challenging indeed for managers to understand how to deal with this complexity in an effective way. Quite often, managers are torn between what would seem to be “competing” and even “conflicting” requests pulling them in opposite directions simultaneously. At the same time, their surroundings seem more and more complex, inhibiting effective action. They understand that simplicity is required but such simplicity would seem hard to reach.

The “Competing Values” leadership Framework, first conceived at the University of Michigan business school is a very simple leadership model which provides managers and team members alike with a very simple and coherent tool, allowing all  to “see” through the apparent complexity of their organizations to the underlying simplicity driving their business, thereby offering an insight into the apparently contradictory but inevitably positive and complimentary  tensions and constraints acting on them, tensions that can be harnessed to work effectively and positively in a constructive way.

How does the “Competing Values” leadership Framework work?

As Jeff deGraff explains in the Video below, the “Competing Values” model looks at two positive tensions found in all organizations:

Tension 1: On a vertical axis, there is a necessary tension between the organization/person seeking “flexibility” and the organization/person seeking “stability“;

Tension 2: On a horizontal axis, there is a necessary  tension between the “internally facing” organization/person and the “externally” facing organization/person.

Capture d’écran 2016-01-31 à 17.02.28

These two positive tensions create 4 specific profiles  that occur at the individual level, the organizational level and of course at the outcome level.

  • Profile 1: the “Create” profile. In the top right quadrant, the “Create” profile seeks high flexibility and is focused on the external world. When we think of this profile, we think of the person who likes to “do things first“, the “innovator“, “pioneer“, “inventor“, the “artist“, the “visionary“. Steve Jobs would be a good example of this “Create” profile. The upside of this profile is that he/she is most likely to come up with the right solution. The downside, there is a lot of risk involved. Organizations with a “Create” profile run high risk and rely on radical innovation to progress quickly. All will remember the ad campaign run by Apple which even had as a banner “Here’s to the Crazy Ones” which illustrates the “rebel” nature of the “Create” profile.

  • Profile 2: The “Control” profile. Opposite in the bottom left quadrant, is the internal, stability focused profile. This profile seeks to “do things right” through robust processes, procedures and lots of metrics. This is a profile operating in a highly complex environment requiring large amounts of data with a lot of scalability where risk and failure is not an option (engineers, surgeons, doctors, pilots,…). Such organizations seek incremental innovation with little risk and seek to avoid radical transformation at all costs.

The interplay of these two profiles “Create versus Control” creates a tension around innovation and “how much” innovation a company needs.

  • Profile 3: The “Competitor” profile. In the bottom right quadrant, we have the individuals/organizations that are “externally and stability” focused and who seek to “do things fast“. These profiles are strongly goal oriented and seek to win “at all costs“. These profiles are focused very short-term. The down-side of this group is that they are not very good at building sustainability because their sole concern is “winning the game today“.
  • Profile 4: The “Collaborator” profile. In the top left quadrant is the Collaborator profile who is inwardly and flexibility focused, who wants to do “things together that last” and is held together by very strong values that he/she is trying to instill in the organizations he/she serves. These profiles are great at building “sustainable, long-term” organizations but they don’t always move so fast (relatively speaking) as they are focused on relationship building which necessarily takes time.

The interplay of these two opposing profiles “Competitor versus Collaborator” creates a second tension in any organization concerning “How fast the organization should innovate”. Do we go really fast to obtain the short-term goals or do we go a little less fast so that we can develop the culture and competencies that will make the organization more sustainable in the long term?

Jeff deGraff reminds us that there are 3 key points to be remembered when applying the “Competing Values” framework to any organization:

  1. Any organization is only as good as the “weakest” quadrant. To develop, grow and succeed, you need all 4 quadrants to play an integral part. For example, if we are great at the “Create” quadrant but not great at the “Control” quadrant, we won’t be able to take that radical new idea and turn it into a really big idea that will work everywhere because we won’t be systematic enough. So all 4 quadrants are necessary and they have to work in sync.
  2. We must build a management “portfolio” because one style of management won’t work everywhere. We may start a project in the “Compete” mode with a strongly goal focused project manager but at a certain moment in time, we may want to transition to a “cooperator” profile if we want to make the project sustainable in the long term.
  3. Most importantly, “how we create” is “what we create”. In other words, define your processes to the outcome you expect. If you want a radical new idea, select a “Create” profile and not a “Control” profile, pick the right kind of processes which encourage a “radical” outcome and don’t burden the project with excessive processes and procedures which will inhibit action and the generation of a radical outcome expected.

To summarize, as Jeff de Graff points out, rather than being counter productive and to be eliminated at all costs, the tensions generated by the interplay and competition of these four profiles : “Create versus Control” and “Compete versus Cooperate”  through “constructive conflict” can produce the hybrids and types of innovations today’s complex organizations are looking for.

Above all, as Jeff de Graff’s fellow academics Cameron and Quinn point out in their book entitled “Diagnosing and Changing Organizational Culture” (2011), “the highest-performing leaders…have developed capabilities and skills that allow them to succeed in each of the four quadrants. That is, they are self-contradictory, behaviorally complex leaders in the sense that they can be simultaneously hard and soft, entrepreneurial and controlled….Managerial effectiveness is inherently tied to paradoxical attributes, just as organizational effectiveness is. Effective managers and effective organizations are paradoxical! 

Food for thought!

Check out  Jeff de Graff’s website for more information on the Competing Values framework at Competing Values Leadership

 

 

 

 

 

 

 

 

 

Why do so many companies die prematurely? 4 key factors

November 29, 2009

In his book “The Living Company” first published in 1997, a former senior executive of Shell, Arie de Geus, asked one simple question: why do so many companies die prematurely? A key contributor to business strategy at Shell, de Geus was investigating how to diversify the activities of Shell, knowing that its core business, petroleum,  in the long term would disappear. When he investigated what other companies were doing to ensure their long term future, he was startled to discover that there were few companies of the size of Shell who had the same or a longer lifespan.

The figures presented by de Geus on the subject of company longevity are indeed depressing. The average life expectancy of a multinational company  is between 40 & 50 years. One third of companies listed in the 1970 Fortune 500 had vanished by 1983. Human beings at least in the developed world now enjoy a life expectancy of 75 years and more yet companies have a mortality rate which is much higher. Indeed, if large companies can somehow hope to survive at least 40 to 50 years, this figure falls dramtically if you consider all companies big and small. De Geus quotes a study performed in Holland where the life expectancy of all firms investigated was calculated as 12,5 years!

The current crisis with the failures of institutions such as Lehmann Brothers (initially founded in 1853!) and the virtual bankruptcy of General Motors  makes the question of company mortality rates all the more relevant today.

When you consider all the social misery that such high levels of corporate mortality bring, it seems important to try to understand why so many companies fail and why some seem to survive despite all the political, social and economic upheavals around them. So why do so many companies fail? For de Geus, the reason is that their managers focus on the economic aspects of producing goods and services and they forget that their organization’s true nature is that of a community of humans!

Some companies nevertheless indeed last hundreds of years and de Geus gives examples such as DuPont, Kodak, Sumitomo, Mitsui and Daimaru. In France, Saint-Gobain has been around since 1665! So if you want to understand what is the secret to corporate longevity, study those large companies which have the longest lifespan to see what secrets they share.

De Geus identified 40 companies who were as large as Shell and older. After much analysis, he identified 4 key factors shared by all companies with a long lifespan:

  1. Longlived companies were sensitive to their environments and constantly adapted to societal changes around them.
  2. Long-lived companies were cohesive with a strong sense of identity. No matter how diversified they were, their employees felt they were all part of one single entity. It would appear that strong employee links is essential to survival in times of change.
  3. Longlived companies were tolerant and did not try to dominate or impose a centralized control throughout the organization.
  4. Longlived companies were conservative in financing, were frugal and did not risk their capital gratuitously. They managed cashflow wisely to maintain flexibility and independence.

What does this mean for managers running businesses who are fighting to deliver short-term results while guaranteeing the future?

De Geus defines the 4 factors in the following ways:

  1. sensitivity to the environment represents a company’s ability to learn and adapt
  2. cohesion and identity concerns a company’s ability to build a community and a persona for itself
  3. tolerance means the ability of an organization to build constructive relationships with other entities within and outside itself.
  4. conservative financing means the ability to govern its own growth and evolution effectively.

These 4 basic components: leaning to adapt, building a community with a shared purpose, building constructive relationships and being able to govern one own’s growth form a set of organizing principles of managerial behaviour and represent the critical aspects of the work of any manager who wants his or her company to survive and thrive for the long term.

But these 4 components can only flourish if we operate a paradigm shift and change the way we think of a company. For de Geus, a company is a living entity and not just a machine built to deliver products and services or satisfy customer or shareholders.

Anyone who has worked in a business would not be surprised with such a view of an organization. Organizations need to learn, all have an identity, all seek to guarantee their coherence, all build relationships with other entities and all grow and develop until they eventually die.

Considering a company as a living entity has important implications for answering another key question: what are companies for? According to the dominant paradigm in business, a company’s purpose is to deliver products and services, to serve customers and deliver ROI to shareholders.

De Geus anwers this question in a far more provocative way. A company, like all living entities, exists for its own survival and improvement : to fulfill its potential and to become as great as it can be. Just like a human being who doesn’t exist solely for his/her job or his/her career but seeks to survive and thrive, to realize his/her potential.

Profit, return on investment are a means to an end but not the end in itself. The end in itself for a company is simply to grow and thrive.

The implications of defining a company’s purpose in this way for managers and management practice are fundamental and far-reaching. If we accept that the purpose of a company is simply to survive and thrive, then the priorities in managing such a company are very different to those set forth by the champions of the dominant paradigm which sees a company’s purpose only as to deliver short term results.

Those companies with the longest life span would seem to have understood that their real purpose was to survive and thrive in the long term and they consequently managed their businesses around that goal.  In the present crisis, with so many companies going to the wall, it would be well worth rediscovering the views of Arie de Geus and investigating more deeply how we can benefit from the lessons and management best practices of the tercentenarian companies who put the sense of community first.

For more information, read Arie de Geus,  “The living company, Growth, learning and longevity in business“,  1997

arie de geus on organizational change

Transform your managers into leaders if you want to transform your organization effectively

October 17, 2009

The current economic crisis has accelerated the need for companies to transform their organizations radically and urgently  and many organizations have embarked on significant transformation programs in order to become more flexible, leaner, more proactive, more cost effective, etc.

Quite often, organizations might be tempted to consider their workforce as the obstacles to successful transformation and frequently one hears or witnesses managers complaining how the workforce is not willing or able to transform itself to meet the challenges of moving to a new business model.

But what if the obstacle is not the workforce but the style of management which is the true blocker?

This is where understanding the difference between leadership and management is key to understanding what may be the true cause of any blockage to successful transformation.

When you set out the differences between management an leadership, you understand that to transform your organization, you have to move from a model centred on “managing” people to a model centred on “leading” people”. This is especially the case if your organization employs significant numbers of “knowledge workers” who have high expectations in terms of understanding the vision and goals of the organization, how they can contribute to these goals, what responsibility they have to drive these goals, how they can develop their skills and continue to learn to be able to meet the new challenges that a continuously changing environment.

This is not to say that leadership should replace management. Both go hand in hand. The manager’s job is to plan, organize and coordinate. The leader’s job is to inspire and motivate. However, it is important to understand the difference because this is a first necessary step in being able to adopt the most effective approach when leading transformational change. You can’t manage transformation, you must lead transformation.

Here are some other key differences between management and leadership:

  1. The manager administers; the leader innovates.
  2. The manager is a copy; the leader is an original
  3. The manager focuses on systems and structure; the leader focuses on people
  4. The manager relies on control; the leader inspires trust
  5. The manager has a short-term view, the leader has a long-range perspective
  6. The manager asks how and when; the leader asks what and why
  7. The manager has his or her eye on the bottom line; the leader’s eye is on the horizon
  8. The manager imitates; the leader originates
  9. The manager  accepts the status quo; the leader challenges it
  10. The manager is the classic good soldier; the leader is his own person
  11. the manager does things right; the leader does the right thing.

In the classical Taylorian world of work, there were many managers and few leaders and the difference between the two was easy to make. A team leader on the production line didn’t need to give too much time or thought to what he had to do or how he had to manage the people producing the parts on the production line. His job was to follow orders, organize the work, assign the right people to the tasks, coordinate the results and ensure the job done done. In other words, he focused on being efficient.

In our new, crisis-driven, knowledge based economy, where value creation depends on the knowledge people have and how they mobilize that knowledge, contributors are no longer simple cogs in a machine. In such  a world, management and leadership are not so easily separated. Individual contributors look to their managers not just to assign them a task but to give them a purpose. To get the best out of their people, managers must not only maximize efficiency but develop skills, talent and inspire results. Managers must not only seek to do things right but seek to do the right things right and this can only be achieved if knowledge workers are empowered, have a sense of ownership for their job and can contribute to decisions in an appropriate way.

As Peter Drucker explains so clearly in his book “The effective executive“, the advent of the knowledge worker means that you no longer “manage” people. Your job is to “lead” people. Your job is not to squeeze people like lemons until they can produce no more but to make them more productive and effective so that they continue to grow in their jobs, learn new skills and knowledge and continuously adapt to their changing environment.

Transforming an organization is an enormous challenge because it means:

  • innovating and creating new ways of doing things and working together
  • building the road as you go and supporting people to follow you on the journey
  • trusting your people because trust generates commitment and loyalty
  • building a long term perspective, looking to the horizon and ensuring followers key their eye on the horizon
  • Being constantly able to explain what and why because meaning is key to motivation
  • Building from scratch which is always harder than doing things as they have always been done
  • Challenging the status quo and rocking the boat
  • Moving from requiring simple execution to inviting contribution and commitment
  • Delegating effectively because you can’t control everything, you can’t manage everything and you need others to take responsibility
  • Team work horizontally and vertically
  • Negotiating win-win
  • Less rules, more self-regulation
  • Lead by example and walk the talk
  • Taking risk and accepting failure
  • Developing a no-blame culture

You cannot achieve all of these by simply managing people and requiring them simply to execute. To get all of these, your management model has also to transform itself.

As Albert Einstein said, you can’t solve a problem using the logic that caused the problem in the first place and many of the problems blocking effective organizational change today such as poor commitment by employees, lack of skills, lack of responsibility, disengagement, organizational inertia, poor team work, etc. are caused by a failure to realize that the management model continues to be  “management-centric” when it should be “leadership-centric“.

To summarize, it may be  a platitude to say so but if you want to transform your organization, you must first transform your managers and help them move from “managing people” to “managing and leading” people and that if they will continue to manage, they must above all become leaders.

When you do this, you will have your transformation champions capable of leading transformation effectively in your organization.

Some leadership quotes

One World, One Team – Leading teams effectively in a global environment

January 11, 2009

Managing diversity: the real challenge
Hello all. This blog is dedicated to understanding how to lead teams more effectively in a global environment. Business is more and more global and many executives face the challenge of leading teams over different geographies and time zones with team members from different cultures, speaking different languages, with different mindsets, values and expectations. All of these differences can cause divergence if we let them do so. However, where there is a will, there is a way and with the right effort and energy, these differences can be transformed into drivers of convergence and this diversity can be valued for what it is: a source of wealth and increased skills, knowledge and know-how.

This diversity makes life very challenging and very interesting indeed. Project leaders need many different skills to be able to build the convergence necessary to achieve the desired results.

Our purpose is to explore the challenges of leading globally and define a framework to help all get the best out of their global teams. In our opinion, these challenges involve the following themes:

Change management which becomes more challenging when the change must be implemented in culturally diverse organisations
Talent Management: again, developing talent across geographically spread organisations brings particular challenges
Engagement: how can global leaders develop the engagement of culturally diverse teams with different mindsets?
Human Factors: what strategies need to be adopted to develop flexible leadership behaviiours which are inclusive of he human factors which impact on building a On Team culture
Leadership: what are the leadership skills which are required to manage in complex and ambiguous environments?
Creativity: how can leaders and employees develop their creativity to manage the complexity of working in fuzzy organisations?
Cultural diversity: how can leaders and team members transcend the challenges diversity brings to build inclusive teams positive to diversity?

Visitors can explore the right hand menu to discover more on ideas and best practices on these subjects.

Building relationships
In our view, global teams will only be effective if project leaders and team members create a common vision and purpose, agree on shared objectives and build together the trust in one another to get things done according to the agreed deadlines. This means building strong relationships amongst all project team members on the basis of the belief that all share one fundamental characteristic: the will to succeed together. This means all team members sharing the idea that all can contribute to success and that success will only be achieved through trust and respect.

So many things conspire against global teams: language, time, geography, culture,.. However, all the more reason to think of all the different ways of transcending these differences so that the reasons for succeeding far outweigh the reasons for failing.

We’re open to tips, suggestions, articles, lessons learned, best practices from all those who have worked in a global environment and who wish to share their knowledge and experience with fellow global journeymen.

Joseph Noone


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