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Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited
Article Type: Quick takes From: Strategy & Leadership, Volume 39, Issue 2
These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.
InterviewHenry Mintzberg: still the zealous skeptic and scoldRobert J. Allio
Strategy & Leadership took the occasion of the publication of a new compilation of essays titled Management? It’s Not What You Think! to chat with Professor Mintzberg about the state of management and management education. The following are excerpts from the conversation.
Leadership. The problem with the concept of leadership is that it implies everyone else is a follower. But we don’t need more followers. We need a world of community-ship in which employees have a sense of belonging, and a willingness to work hard for it.
Teaching students to be managers. Managing can’t be programmed or simulated or taught, because note of these approaches can communicate the complexity – or rather the intricacy – of managing. The MBA is great training for some management functions like marketing or finance or accounting. But mastering those functions does not equate to mastering the practice of managing.
US management. Much of US practice is off the rails, and much of corporate America is sick. The current crisis is not simply a banking or financial sector crisis, it is a management crisis. Publicly-traded corporations are dreadfully badly managed.
Let’s start with the disproportionate bonus system. Anyone who accepts excessive rewards is not a leader. Almost every CEO of a Fortune 500 company is therefore corrupt. Although they’re not breaking any law, they are allowing the bonus system to disconnect them from their organization.
Downsizing has wreaked havoc – and most of downsizing has not been because firms had their backs against the wall, until the recent severe economic slowdown. Pfizer, for example, fired thousands of its employees, not because it was threatened with failure, but because its profits failed to be as hugely high as they had been. Actions like this destroy sense of community.
Shareholder value. Shareholder value is an absolute crock – all it means is raising the stock price. You’ll be more successful in the long run if you don’t manage to the bottom line in the short run.
Fixing today’s management crisis. The narcissists will have to be driven out of their executive suites, along with their shameful bonuses. In their place will have to come some real leadership; people truly engaged in their enterprise, personally and deeply, in order to rebuild its sense of community … .people with a profound appreciation for their industry, their enterprise, its products and services, and especially its people.
MasterclassThe reinvention of managementStephen Denning
Current problematic management practices cannot be resolved by a single fix, such as getting more employee buy-in, or instilling a sense of urgency, or introducing new technology platforms. This is why business leaders and writers are increasingly exploring a fundamental rethinking of the basic tenets of management. Among the most important changes being proposed are five basic shifts in management practice:
The firm’s goal (a shift from inside-out to outside-in). The marketplace has changed rapidly but management practice hasn’t. Among the most important changes is the shift in the balance of power from seller to buyer. The shift doesn’t merely require more attention on customer service: it means orienting everyone and everything in the firm to the goal of providing more value to customers sooner.
Role of managers (a shift from controller to enabler). Focusing on continuously adding new value for clients requires a change in the way work is carried out: a traditional bureaucracy is not suited to innovation. For a new level of performance, the organization has to empower those doing the work, facilitate collaboration, rapid learning and innovation. The result is a dramatic shift in the role of the manager from controller to enabler. The raison d’être of the firm shifts from reducing transaction costs to scalable collaboration, learning and innovation.
Mode of coordination (from command and control to dynamic linking). “Dynamic linking” means that (a) the work is done in short cycles; (b) the management sets the goals of cycle on what might delight the client; (c) decisions about how the work is to be done are largely the responsibility of those doing the work; (d) progress is measured (to the extent possible) by direct client feedback at the end of each cycle.
Values practiced (a shift from value to values). When the firm’s goal shifts from making money for shareholders to providing more value to customers, there is a necessary shift from a preoccupation with money and cost-cutting to a preoccupation with the values that will grow the business by generating innovation and customer delight.
Communications (a shift from command to conversation). The new mode of dialog takes place in the world of social norms and requires adult-to-adult conversation using stories, metaphors and open-ended questions.
Individually, none of these shifts is new. However what has been learned in recent years is that when the five shifts are undertaken simultaneously, the result is sustainable change that is radically more productive for the organization, more congenial to innovation, and more satisfying both for those doing the work and those for whom the work is done.
MasterclassLeading adaptive change by harnessing the power of positive devianceBrian Leavy
The two most spectacular corporate turnarounds in the last two decades were done by IBM and Nissan. In both cases, their revivals illustrated that:
Organizations find it difficult to recognize that certain types of challenges are not fully amenable to top-down programs and solutions alone.
The capacity to solve some of the most intractable challenges facing any type of organization often lies dormant within, awaiting the right kind of approach and leadership process to fully liberate it.
This “masterclass” has collected three sets of valuable insights to help corporate executives deal more effectively with both issues:
1. Adaptive versus technical challengesThe “most common cause of failure in leadership” comes from “treating adaptive challenges as if they were technical problems.” A technical problem is one that “can be resolved through the application of authoritative expertise and through the organization’s current structures, procedures, and ways of doing things.” In contrast, an adaptive challenge is one that can “only be addressed through changes in people’s priorities, beliefs, habits and loyalties.” This requires a fundamentally different way of thinking about the leadership role.
2. The power of positive deviance (PD)The PD approach is based on the premise that, within communities facing an adaptive challenge:
Solutions to seemingly intractable problems often “already exist.”
They have been discovered “by members of the community themselves.” PDs are often not aware that they are doing something different.
Innovators can find an alternative way, even though they “share the same constraints and barriers that others do.”
The case of PDs solving malnutrition in Vietnam is contrasted to PDs being ignored at Genentech.
3. Enabling truth to speak to powerThe ability to choreograph complex conversations is one of the distinctive characteristics attributed to resilient organizations. A key requirement in overcoming “six core barriers” is the creation of a learning and governance system that enables “iterative, honest, collective, and public conversations about the state of the business and organizational system.” A methodology called the Strategic Fitness Process (SFP) has been adopted by many organizations.
The art of rapid, hands-on execution innovationAnssi Tuulenmäki and Liisa Välikangas
A new business model – with features that give it significant marketplace advantage – only emerges after a learning process of iterative experimentation. The very purpose, and value, of instant experimentation is to actually create the business system in the course of experimentation. The final business model may well be one that no one foresaw at the outset, which makes “execution innovation” distinctly different from other product development systems, such as stage-gate, flexible development models or flash development.
Innovate to executeThe most truly novel ideas, the ones with potential to become distinctive business models, need to be tested and developed through a process of rapid execution innovation.
For example, a business opportunity such as Ikea’s “selling inexpensive furniture” requires many execution innovations – such as flat packaging the furniture to save transportation costs and designing products that are easy to assemble by customers – features that are not derivatives of the original idea. In fact, this implementation innovation requires exceptional creativity. That is why the actual business opportunity – the combination of identifying a value creation opportunity and innovating a supply chain to deliver it – can best be developed through the process of rapid execution innovation. Execution innovation invites and builds upon many small failures and errors that are treated as important learning points. They provide the next target for execution ideas – and are addressed in the next wave of iteration. Thus, execution innovation is about thinking by doing and, as a result, about acting and thinking differently.
The participantsAt each stage, experimentation becomes everybody’s job, a way of changing thinking through action. From staffing point of view, the biggest difference between planning-driven product development and the execution innovation approach is that the latter does not require a separate innovation process, teams of “creative” people or product design consultants. It does not require managers who control or assess progress. Rather, execution innovation invites everyone to contribute to it by rapid experimentation and reflection. Thus experimentation combines action with a conversation about what can be achieved and how.
Tactics for execution innovationSix ways to promote the fresh thinking that powers innovation execution initiatives are offered.
Indulgent parsimony: an enduring marketing approachKenneth Alan Grossberg
In the wake of the plunge in consumer confidence during the Great Recession of 2009, we are now seeing the emergence of a bifurcated market divided between the haves who can afford to spend again and the haves who still are feeling the painful consequences of the recession. Studies show that many consumers, even the well to do, continue to be very careful about how they spend their disposable income. So indulgent parsimony (IP), a frugal but emotionally supportive standard of value, remains a timely and appropriate approach to encouraging buying among the many who have now convinced themselves that they need less than they did three years ago, or refuse to buy unless they can get substantial discounts on their purchases.
The IP concept consists of both practical and emotional elements that jointly influence the buyer’s decision to purchase – this dual appeal is what makes it so powerful. You are persuading and encouraging the consumer to purchase not just on the rational basis of frugality or parsimony, but also by using emotional appeals that add to the value proposition. In the current economic environment, IP gives marketers a useful tool to help them design strategies and forecast what types of offerings can succeed.
Indulgent parsimony concepts – the checklistThe author provides a checklist of 11 pairs of IP motivators.
Analysis-based indulgent parsimonyTo operationalize the concept of indulgent parsimony, a way to detect the potential effectiveness of such a strategy needs to be articulated. One way is to probe members of the chosen target market to see what makes them actually buy something. Multiple drivers of buyer behavior usually exist, and the questions listed in Exhibit 2 could be used to discover what those drivers might be.
Innovating low-cost business modelsNicolas Kachaner, Zhenya Lindgardt and David Michael
One driver of the search for low-cost innovation is the battle for market share in the rapidly developing economies of the world, such as in the BRIC markets: Brazil, Russia, India, and China. Achieving strategically significant revenues in rapidly developing economies requires a robust low-cost strategy to win and maintain a leadership position. Low-cost attackers often hit where it hurts, rapidly crippling the cost structure of more traditional business models. Nokia offers one of the best examples of a successful strategy.
The low-cost model misconceptionsA low-cost approach involves a great deal more than merely offering current customers an opportunity to buy the same goods for less. Most important, it is a truly new value proposition that addresses both existing and new customers and is supported by a novel operating model. For example, offering a limited range of products without compromising on quality is a key element of many low-cost business models.
Leaders should rethink low-cost business models:
Low cost is not low margin. It can be highly profitable.
Low cost is not low quality. It usually entails a narrower range.
Low cost is not cheap imitation. It is true innovation.
Low cost is not unbranded. It is frequently supported by potent brands.
Although not all successful low-cost business models are alike, many have characteristics in common and rely on a carefully selected set of radical and mutually supportive choices across all dimensions of the business model. (See Exhibit 1, “Low-cost business models are based on an integrated model with radical choices.”)
How should traditional companies react? Too often, when it comes to lowering costs, companies get caught in two traps: a denial trap (underestimate the power of low-cost models to affect their business) and an innovation trap. Smart low-cost players invest in true innovation targeted at the large, low-income segments of the population. Leveraging new technologies and frequently new business models, these low-cost players compete and win against yesterday’s technologies.
The low-cost model implementation process is outlined.
Catherine GorrellPresident of Formac, Inc. a Dallas-based strategy consulting organization (email@example.com) and a contributing editor of Strategy & Leadership