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Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited
Article Type: Quick takes From: Strategy & Leadership, Volume 39, Issue 6
These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.
Successfully implementing radical management at Salesforce.comStephen Denning
Five years ago, Salesforce.com’s growth was in decline. During a previous growth spurt, Salesforce.com had introduced practices intended to promote disciplined execution but which also put a brake on innovation. Over time, the firm’s innovation, a key source of competitive advantage, was entangled in the creeping dysfunctionality of hierarchical bureaucracy.
Flash forward to today: Salesforce.com is delivering a 41 percent annual return to shareholders. This extraordinary performance – an example of a true innovation turnaround – occurred after the firm instituted a set of radical practices that make it a model for businesses seeking to grow though implementing “radical management”.
“Radical Management” is a set of agile, customer-driven, outcome-oriented, iterative management practices. None of the practices is by itself new. At Salesforce.com they succeeded by doing all the practices, together, in a disciplined way of getting all work done. The ten core practices are cited.
Key learnings from the Salesforce.com experienceThe leadership saw the transformation not so much as a wholly new approach, but rather a return to the firm’s core values. Three other elements helped their transition. First, the firm’s on-demand software model was a good fit for iterative methods. Second, an extensive automated test system was already in place to provide the backbone for the new methodology. And third, a majority of the R&D organization was working at the same location.
Six common mistakes that Salesforce.com did not make:
Mistake #1: Introduce the change as just another business process. It is not. It is a new way of thinking, speaking and acting in the workplace.
Mistake #2: Top management hedges its bets. By contrast, the leadership at Salesforce.com made it clear from the outset that they were committed to making the change work; this was further evidenced in their actions as implementation proceeded.
Mistake #3: Rigidly apply a methodology conceived elsewhere. Salesforce.com built on what had been learned in other organizations, but also adapted it to their own context.
Mistake #4: Micromanage the change. Salesforce.com modeled the new management philosophy of direction-setting and enablement, rather than detailed control.
Mistake #5: Keep key management decisions secret. Salesforce.com embraced total openness. The willingness to share information with everyone enabled people to adapt on a daily basis to what was happening.
Mistake #6: Skimp on training and coaching. With the very future of the organization depending on success, skimping on coaching can be highly counterproductive.
How BMW effectively practices sustainable leadership principlesGayle C. Avery and Harald Bergsteiner
This BMW Group case illustrates how sustainable leadership can be successfully implemented, even in trying times. Despite the global financial crisis and the subsequent recession, BMW chose to follow established sustainable leadership principles. In a period of uncertainty, when other leaders chose to go into survival mode, BMW weathered the crisis by remaining true to its “honeybee” principles. Although badly hit by the recession like the rest of the auto industry, BMW has now emerged strongly, reporting the best results in its history in 2010.
Survival techniquesThree major factors contribute to BMW’s resilience: its business model, its creative initiatives, and its sustainable leadership approach. These three factors are driven by the company’s long-term strategy: creating dynamic performance and efficiency while embedding sustainability in everything it does. This BMW case study cites specific examples of how it applied the 23 honeybee principles identified by the authors, with particular emphasis on actions taken during the global financial crisis.
Where to begin?For companies seeking to emulate BMW, the first step is to conduct an audit of the extent to which of the 23 practices on the Sustainable Leadership Pyramid (see Exhibit) are routinely practiced.
Based on the feedback from the audit, the firm should assess which foundation principles it needs to implement. An excellent place to start is to develop a compelling and effective 10-20 year vision of the future. Next, bring employees, investors, suppliers and other stakeholders on board to participate in this exciting future. It is vital to move away from short-term thinking. This requires continually telling the financial markets where the company is going, and then to not buckle under market pressure. Eventually, sustainability will make the company more attractive to long-term, patient capital.
Over time, the honeybee principles – as with BMW – will become a part of the DNA of an organization.
Seven basic strategic missteps and how to avoid themSimon Mezger and Maurice Violani
How do you know if your company has a winning strategy or one that is herding your business toward stagnation or worse? To decide, say these A.T. Kearney consultants, ask yourself if your strategic initiative suffers from any of seven common yet crippling shortcomings:
The strategy fails to exploit accumulated insight about the basis for advantage. What is it among competitors? What is ours? The right answer is based on your unique combination of privileged assets, capabilities or resources, and market position that truly create value. Don’t confuse this with your “table stakes” resources – such as good operations or processes.
The strategy does not say “no” to anything. Embrace the tension between making choices and keeping options open.
The strategy focuses only on the short term. A strategy should focus on creating value over a mid- or long-planning horizon. Shorter-term horizons risk sending organizations into a tactical spiral in which they fail to invest time in developing new capabilities to build new bases for advantage.
The strategy fails to take into account competitors and their moves. It is increasingly easy to model expected competitor behavior, yet this is often not done.
The strategy mistakenly either over-commits to “big bets” or settles for tactical incrementalism.
The strategy can’t be implemented because it isn’t aligned to the organization’s capabilities.
Strategy implementation is not well planned.
Opportunities to strategize effectivelyThese seven missteps are critical because, if they are not addressed, they lead to subsequent stumbles and pratfalls. They are dangerous because they are the root of value-destroying practices. When top management gets the strategy wrong, many standard management virtues prove irrelevant.
By taking these turning points as opportunities to manage effectively – by seeking a basis for advantage, saying “no” to trying to do everything, focusing on long-term value creation, factoring in competitor reactions, balancing ambitious bets with caution, understanding the organization’s capabilities, and linking vision to execution – you can stay on the path to strategic success.
Five questions for addressing ethical dilemmasGerard L. Rossy
The suffering brought on by our global “Great Recession” is linked to a series of unethical decisions and poor judgments by both organizations and individuals. Sadly, such ethical lapses and unethical conduct of individuals have been common throughout history and have been at the root of some of the greatest business failures of the last 25 years. This is a true threat, a risk for every company. Leaders who learn to recognize and prevent potential ethical lapses sooner and more effectively than their rivals will give their organizations and their management teams critical competitive advantages.
The key factsMost breaches of ethics are not intentional and most individuals want to behave ethically. Their breach is often the result of making decisions without adequately thinking through the implications of a decision or of allowing outside pressures – time, the undue influence of others, or personal interests – to override what our gut, our moral intuition, is telling us is right.
The five questionsIf the central issue that underlies an ethical dilemma becomes clear, the answer (the right thing to do) is usually obvious.
Here are five questions to be used by executives, managers, and professionals to tackle ethical dilemmas and avoid ethical mistakes. While these five questions will not guarantee making the right decision, they can help avoid making the wrong one:
What’s in it for me?
What (decision or action) would lead to the greatest good for the greatest number?
What rules, policies and social norms (written or unwritten) apply in this situation?
What are my obligations to others?
What will be the long-term impact for me and important stakeholders?
Above all, remember the fifth question: “What will be the long-term impact on me and important stakeholders?” In the end, this may be the most important question of all. This was the failing of David Sokol, the former top aide and heir apparent to Warren Buffet, as shown in a case study.
The CEO’s ethical dilemma in the era of earnings managementRoger Martin
Stock-based compensation of executives is a very recent phenomenon in corporate America. It continues despite that fact that it is associated with lower shareholder returns, bubbles and crashes, and huge corporate scandals. Now is the time to bring an end to it and find a better, more authentic approach that will enable both the financial community and its stakeholders to thrive.
What is going on?Numerous cases of illegal, unethical, self-serving executive behavior threaten American corporations and suggest that something is seriously out of whack in the corporate world:
Aware of stock price dynamics, executives have become proficient at “meeting the numbers.” When 400 financial executives from major American public companies were surveyed, more than three quarters would give up economic value in exchange for smooth earnings. That is to say, these executives would damage the future prospects of their company – to the clear detriment of shareholders – in order to please those same shareholders by ensuring that the company unfailingly met or beat analyst expectations. Not only will executives talk down their own stock to meet expectations, they will sacrifice the long-term financial performance in the real market in order to satisfy the vagaries of the expectations market.
With the rise of shareholder capitalism, the capital markets, institutional investors, equity analysts, investment bankers and hedge funds have emerged as the central figures in the CEO’s community. To be a valued member of this dysfunctional community, a CEO has to give guidance to analysts on things that he can’t actually predict – and then make those predictions come true. He must undertake transactions that provide investment bankers with fees but return little to the firm, provide arbitrage opportunities for the hedge funds, and keep shareholder value rising perpetually for institutional investors. Most CEOs know full well that little of this produces anything good for their company. But they have been told, in no uncertain terms, that increasing shareholder value is the core purpose.
The bottom line is that when shareholder value is paramount, other stakeholders suffer. CEOs will readily slight customers, sack employees and despoil the environment to meet the stock market’s expectations.
Restoring health and authenticityThe good news is that this CEO behavior is not inevitable. The simplistic answer is to tell CEOs to ignore the capital markets; but in the current environment, to ignore the market’s expectations is to court disaster. The better answer is to eliminate the use of stock-based compensation as an incentive. While this may seem radical, remember that it worked very well for the majority of the history of modern business.
From social media to Social CRM: reinventing the customer relationshipCarolyn Heller Baird and Gautam Parasnis
Social CRM is gaining momentum as the next generation technology for customer relationship management (CRM). But the shift to Social CRM is more than an adoption of new operational models or technologies; it is a philosophical, cultural shift. Social CRM is digital stewardship of the customer relationship, not its management. This transition is still in the early stages, but the sooner companies embrace the fundamental precept – that the customer is now in control of the relationship – the sooner they can exploit this shift and unlock the full potential social media holds. A first step is to understand the conceptual shift.
The conceptual shiftTraditional CRM focuses on management solutions for dealing with customers through channels such as corporate Web sites, call centers, and brick and mortar locations, and usually from the company’s perspective. In comparison, Social CRM encompasses the dynamic community of customers who communicate through social media and who have the power to influence others in his or her social network. It is aimed at customer engagement rather than customer management.
Social media challengesThe complexity of implementing a social media program is evidenced by the wide variety of challenges executives identify as key concerns. These include establishing ROI goals, monitoring employees” social media use, and mitigating the risks associated with negative brand exposure.
Recommendations and next stepsSocial media is here to stay. Using it to reinvent customer relationships will require companies to rethink their traditional CRM approach and smartly address the many challenges involved in this endeavor, including how to grapple with managing the impact on their engagement models, operations, corporate culture, and bottom line.
Detailed points are offered to help with the transition to a Social CRM approach, including how to:
Blur the lines between marketing and customer care.
Build a Center of Excellence governance model for Social CRM.
Empower employees with training, mentorship and incentives.
Build virtual communities of connected employees.
Improve ROI and mitigate risk with customer analytics and insights.
Exhibit 3 illustrates how companies can progress from 1) isolated social media projects to 2) social media programs that encompass multiple initiatives within a function to 3) a company-wide Social CRM program.
Catherine GorrellPresident of Formac, Inc. a Dallas-based strategy consulting organization (firstname.lastname@example.org) and a contributing editor of Strategy & Leadership.