Customer Service Failure Gold!

Did you mess up again?

Have you ever thought about the marketing value of knowing the mistakes you have made in the past? I am here to tell you that learning about your mistakes is a gold mine of marketing wealth. Most of us would like to think that we are providing good services to everyone who takes a chance on using our businesses. Unfortunately, this is rarely true for absolutely everyone who patronizes our businesses.

If you are competent and have a pleasant disposition, odds are that you are able to meet the needs of the vast majority of your clients. However, none of us are one hundred percent successful and the gold is found in understanding what caused us to lose clients. Somewhere, your marketing and customer service systems failed you and more than likely it will happen again unless you address it.

The real problem here is studies have shown that up to 96 percent of people who experience a bad interaction with your business will never spontaneously complain to you. Why is it a bad thing you don’t have to deal with their complaints? Because they just leave and never come back! Despite the fact that they don’t complain to you, they will be more than happy to tell everyone they know to stay away from your business.

Typically for every complaint you hear about, about 25 others are unhappy with you and don’t bother to tell you. Again, they just leave! If that isn’t enough to motivate you, realize that up to 95 percent of them would have continued to patronize your business if you had resolved the problem quickly.

In today’s economy setting up a system to track client feedback about your business may be the most cost effective marketing task you will ever accomplish. It really isn’t that hard to do. First you need to have a system to track who patronizes your business and how often. Second you must have their contact information. Finally, you must develop a system to actively solicit their feedback about the experience with your business. Of course there are a lot more details to put all this together, but the overall system is that easy. The vast majority of business never bother to set it up!

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Yahoo Rejects Microsoft- A Great Day For Small Business

Well it appears that Yahoo has rejected the unsolicited bid from the evil empire! In my opinion this is a great day for small businesses. I can imagine nothing worse for the future of the internet than a domination by Microsoft. While Google may have a strangle hold on the search and advertising business on the internet, they have gotten it the honest way- by commitment to an ever improved service to their user base. They early on developted a corporate strategy of "do no evil" which is about the polar opposite of Microsoft. Google has gone to the top based upon a free market choice of their services due to the quality they provide their users. Microsoft has historically made it to the top by rolling over competition and forcing their users into having no choice except what they choose to provide. Their products typically are either a rip off of someone else (i.e. Windows) or promoted by forcing competition out of business by bundling tactics (i.e. Internet Explorer).

Right now we have three major players in the internet services arena- Google, Yahoo, and Microsoft. It would be a travesty if Microsoft was able to buy their way into a two way fight with Google. I am relieved that Yahoo has rebuffed them for now, but I remain concerned as Yahoo obviously has some real business problems. I hope that they invest in innovation to compete with Google and force the bar higher for first class service to internet users. That can only be good for individuals and small businesses. However, if Microsoft had been able to buy their way into a two way fight with Google the tactics they would use to compete would likely to have little to do with innovation or service to the community.

Well done Yahoo!

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Team Leadership

‘A set of persons working together’. That’s a bald definition of ‘team’ from the dictionary, and it tells you all too little about the term in a business management context. You don’t know how big or small the ‘set’ has to be before it ceases to be a team. More important, you don’t know what ‘together’ means. Working in the same department on separate matters isn’t teamwork: that over-used word implies exchange of information, views, ideas, contributions, etc. That exchange should result in synergy, that magical process by which two and two makes five (if not more).

If true teamwork is achieved, the magic is real enough. The joy of working together is supposed to cement the collective power of a group of people - a power which, so psychologists aver, is greater than that of a single brain, however brilliant. The gains from that power, moreover, are by no means small. The American Society of Training and Development learned from 230 personnel executives that they had seen the following team-driven gains in performance in their companies: productivity, up 78%; production quality, 72% higher; job satisfaction, 65% up; time wastage, down 54%.

To cap all these solid internal achievements, the key index of external performance - customer satisfaction - had improved by over half. However sceptical you are about such surveys, and however amply justified that scepticism may be in general, few managers will want to challenge these findings. After all, they endorse the received wisdom. The more closely any set of persons works together, surely, the better that work must be. Irrespective of the results, moreover, ‘team’ has good, powerful, emotional correlations.

ORGANISATIONAL DEMERIT

No manager would boast of being a bad teamworker; that’s a demerit in any organisation. A good team, on the other hand, virtually defines good management. It is well-led towards precise objectives, decision and action alike are effective, communication is top-class, and every member works towards meeting those clear targets - for the group and for themselves. Nor would any manager deny that forming and nurturing teams of itself contributes to this high-level management.

All that being so, why is good teamwork so difficult to achieve? One answer is that sometime demon, human nature. Writing in the Harvard Business Review, two authors, Vijay Govindajarajan and Chris Trimble, study the case of CoreCo and NewCo - an established business and a start-up launched by top management in the pursuit of new growth. Everybody in both divisions shares an important interest in NewCo’s success. Yet the latter encounters obstruction rather than genuine cooperation from CoreCo’s people, who perceive that NewCo will.....

• cannibalise their revenues
• damage existing CoreCo products
• damage CoreCo business relationships
• damage bonus payments by its losses
• compete for scarce resources

In a word, then, it’s a matter of trust. CoreCo’s managers are deeply suspicious of anything the newcomer’s leaders may do; the presumed danger to the veterans’ established interests far outweighs the benefits, in their minds, that a new and vital business would confer on the group. As the authors remark, establishing trust between two very different outfits is the problem, compounded by jealousy:

‘CoreCo managers are jealous of NewCo… They have worked for years or decades to advance within CoreCo, and now CoreCo may appear inferior to a much younger…sexier division’.

The analogy with teams is obvious. In theory, the existing members should welcome new talent with open arms. The better the new recruit performs, the better the team will do - and, again in theory, team success is everyone’s primary concern. In practice, however, that demonic human nature will rear its ugly head.

Just like the CoreCo veterans, established team managers will feel threatened. In a bizarre twist, the new person’s failure may be more welcome to the envious colleagues than his and the team’s success.

DISRUPTIVE RIVALRY

This is by no means theoretical. The HBR authors cite the troubles which beset New York Times when it was tempted, like most media owners, by the promise of the Internet. ‘Tensions rooted in rivalry’ proved disruptive and interactions took on an ‘us versus them’ undertone. The net people aimed to be ‘fast moving, anti-bureaucratic, risk-taking and experimental’. The Times newspaper staff resented the implication here that they were sluggish, bureaucratic, risk-averse and tied to ‘the way we do things round here’.

Which they probably were. Companies are most commonly formed on divisive lines which entrench the status quo. Bureaucracies serve hierarchies of power. Where the matrix rules, product, geography and function have hardened into strong and separate baronies. The company may be decentralised into ‘strategic management units’: under that or any other name, these profit centres are walled off from what should be corporate partners.

Very few businesses are truly entrepreneurial, with flat structures and a pro-risk culture, and even fewer are truly people-based, giving the employees ownership of their jobs and full responsibility for execution. Yet this is the wave of the future, and the reason why the role of teams in management is clearly and strongly rising in importance. The significance of the NewCos is waxing while that of the CoreCo is waning. And NewCos are the natural ground for team working, which expresses the positive aspects of human nature in groups.

Benign human nature, economic trends, key management principles and technological change all point in the direction of more and better teams. Man is a gregarious animal to whom group loyalties are very powerful - witness the devotion in all social and economic classes to football clubs with which the fan may have no link other than his loyalty and whose teams are largely composed of multinational mercenaries who have no loyalties themselves.

LOYALTY DRIVE

Harness the loyalty drive of its members to any company team, and you maximise the benefit from their collective power. You need that power to exploit the new opportunities which must be taken at a time when core activities are being commoditised, outsourced, pooled, etc.

Even if they remain cash cows, the milk is less rich; and bovine businesses are no match for rising stars. The latter’s rise, however, will be slowed and even frustrated unless entrusted to truly independent teams.

The difficulties reported in the HBR article explored above frequently hinge on misplaced efforts to restrain the NewCo’s freedom of decision and action. At Corning a new venture in micro arrays for handling DNA samples had a rough passage for two years: ‘All of CMT’s troubles’, the authors comment, ‘were probably inevitable from the moment CMT adopted Corning’s organisational design.’ At New York Times, success on the net only followed when ‘company leaders carefully monitored interactions with the newspaper’ - basically to stop the latter from strangling the infant in its crib.

It makes no difference whether a team is building a lasting new entity (as in the above cases); tackling a major issue that is intended to cease (like putting two companies together after a merger); combining back offices of separate businesses in an outsourcing move; or running a drive to improve production quality.

In any operation, the likely best approach is to build units around a discrete activity and then divide the overall project into the most efficiently manageable sub-units, teams in their own rights and themselves managed on the same principles of delegation and autonomy. Stand-alone project management is the prime example of teamwork, and has of necessity spread fast throughout the corporate world. While there are many other possible areas of teamwork, from the boardroom to the finance department, the more they share the stand-alone virtues the better.

The starting point naturally comes first - a purpose. Why has the team been created? In the justly famous case of IBM’s Personal Computer, the object was not just to develop a rival to Apple in this new computing market, but to do so at unprecedented speed, while offering significant improvements in the technology.

The fact that it was a crash programme proved to be a major asset. That always gives the project a driving urgency and enables a team to sweep potential constraints out of its way - here, independence even embraced freedom to break IBM’s insistence on making and buying all components in-house.

PHENOMENAL WORK

The world-changing rise of personal computing, however, drew heavily on the phenomenal work of an even greater team, the Palo Alto Research Center established by Xerox. Although its aims were grand and relevant - to combine the many Xerox technologies for a great leap forward into a new age - PARC lacked the focus of IBM. Nobody knew exactly what the lab was supposed to achieve. When the prototype PC emerged from the combined brilliance of the team, nobody knew what to do with the wonder. It didn’t fit mentalities developed to make and sell copiers.

Team purpose should be very precise and germane to the business: and the bigger the objective the better. Think small, and you’re liable to end small. Think big, and you may well be most agreeably surprised: self-fulfilling prophecies are the best forecasts of all. To its own amazement, IBM was swamped by the totally unexpected flood of orders for the new PC. In many other companies and cases teams given unreasonable aims have greatly exceeded the expectations of their sponsors. Thus NCR’s engineers in Dundee, asked to double the reliability of ATMs, trebled it and set the company on the way to world leadership.

One vital asset of team purpose is that it can be shared. It’s the keystone of participation, which in turn breeds total commitment, both to the overall plan and to the agreed sub-plans needed for the whole. It tells all the team members where they are going and why – from the bottom to the leadership at the top. The leader, of course, is the chief custodian of the purpose and is responsible for seeing that the team members, and the team as a whole, achieve the desired performance. Do not forget: teams exist to produce superior outcomes.

In obtaining their good results team leaders turn into conductor rather than driver, enabling others to play the right music, not by hands-on domination of all decisions and execution, but by providing inspiration, invigilation and stimulus. Dominance obviously fits ill with what should be the collective ethos of the team. Its leader is, or should be, primus inter pares, a first among equals; not the typical CEO, who is primus - and never mind about the equality.

Another article in the HBR identifies seven types of leadership, only one of which mentions teams. That’s the Achiever, who ‘meets strategic goals’: he/she ‘effectively achieves goals through teams’. You would suppose this character to be the hero of authors David Rooke and William R. Torbett. Not so - even though, when it comes to implementing the strategies, the Achiever significantly outdoes the Opportunist (‘wins any way possible’), the Diplomat (‘avoids overt conflict’) and the Expert (‘rules by logic and expertise’).

But the Achiever in turn is beaten to the performance punch by three others: the Alchemist (‘generates social transformations’), the Strategist (this type ‘generates organisational and personal transformations’), and the Individualist (‘interweaves competing personal and company action logics’).

OBVIOUS PARADOX

The paradox in this classification is obvious. How can any of the other six types perform well without the Achiever’s ability to effectively achieve goals through teams? For that matter, how can the Achiever succeed without deploying the powers of the Diplomat, etc? And why does the Achiever account for 30% of the research sample, three times as many as those described as Alchemists and Strategists, if the latter are ‘most effective for organisational leadership’?

The questions recall Meredith Belbin’s first, famous account of the seven roles needed for team success: coordinator, ideas person, critic, implementer, external contact, inspector, team-builder. Somebody has to fill each role, and the team leader (a role not identified with any of the seven) has a part to play under each heading. The same truth applies to the Rooke-Torbert types. The Achiever-leader plays many parts, but only in part. The rest is delegation. That’s what gives teams their special strength and their pole position in today’s races for success. That demon, human nature, has many facets, good and bad. The well-led team of well-chosen, well-deployed people negates the bad and accentuates the good - and everybody wins.

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Management Advice

Advice is plainly a highly desirable commodity - if it’s good advice. Everybody will at several points in their careers ask for, or receive gratis, advice, whether professional management consulting or friendly words of wisdom - real, supposed or plain dubious. So it was a great idea of Fortune magazine to ask 29 career stars, mostly business people, to identify the best advice they had ever received; the words that had most influenced them on their several ways to the top.

In fact, advice, like so much else in management, has become institutionalised in recent years. Mentors, coaches and councillors have always operated at the lower levels of business, but paid providers are now to be found advising at much higher levels. The analogy is obvious. If a tournament-winning golf pro, or any other athletic star, employs a full-time coach to improve his brilliant game, why shouldn’t a CEO have the same assistance, as he or she goes about their difficult (but highly paid) task?

There’s nothing new about top hands requiring helping hands. Business history contains several examples of executive suite partnerships in which one of the partners (usually a super-boss) was far more equal than the advisor. One such tycoon (so I recall) called his right-hand man ‘my day wife’, which described the relationship rather neatly. In politics too the concept of the ‘eminence grise’ advisor is well-known - the wise and devious grey eminence who lurks in the king’s shadow and under his protection.

PERSONAL SUPPORT

Many executives have used top management consultants, who are very eminent and often grey, as personal support systems. It’s by no means a bad choice. The people who get to the highest posts in consultancy are highly intelligent, enormously well informed about the practices and pranks of other chief executives, skilled at recognising situations which are repetitive, and quick at getting on to the client’s wavelength. The relationships can last for years – as demonstrated by Peter Drucker, the greatest of mentors.

Two of the Gang of 29 swear by Drucker, including author Jim Collins (who learnt from a day with the grand guru that ‘The real discipline comes in saying no to the wrong opportunities’). And church founder Rick Warren still likes to ‘go sit at the feet of Peter Drucker on a regular basis’. Many business leaders have found those feet (now 95-years old) equally inspiring. Some of Drucker’s great store of wise anecdotes stems from these encounters.

Thus, he used to advise a New York banker once a year at meetings where, no doubt, they exchanged views and ideas about the financial system in general, and the bank’s management in particular, to great effect. But Drucker noticed two odd, extraneous things - that the meetings always lasted exactly an hour and a half, and that they were never interrupted.

When Drucker asked for an explanation the banker replied that experience had taught him that meetings were never useful after an hour and a quarter, because people began to repeat themselves. So at exactly that time he would ask the other party to sum up, which took quarter of an hour.

And the lack of interruptions? ‘While we meet my secretary is under orders only to put through a call if the President of the United States or my wife should ring. The President seldom rings - and my wife knows better’.

Note that here the highly disciplined banker was turning the tables, advising his advisor. Much advice is of this kind - the offer of one person’s experience as a guide to the better performance of other people. There is a very human tendency to believe that if someone else’s success has involved a particular method, that method must have some direct connection with the success, and by repeating the method, you increase your chances of being equally successful, at least within your own terms.

ASLEEP AT THE WHEEL

That argument is appealing, but flawed. Super-tycoon John D. Rockefeller I's habitual pose in meetings was prone - he would lie on a sofa with his eyes shut, saying nary a word, apparently asleep, but listening intently behind his closed eyes.

I don’t suppose for a moment that Rockefeller’s billionaire fortune would have been one cent smaller had he kept his eyes open or sat at the table like the others. But his eccentricity served three purposes: it set the boss apart as an unusual individual whose eccentric ways had to be respected, it reminded everybody there of the sovereign importance of listening, and it kept the great man from dominating the discussion - as great men are wont to do.

So the Rockefeller story is really a parable. What he did was less important than what it conveyed. There are some good examples of parable in the Fortune article. The best advice ever received by Vivek Paul, the brilliant Indian businessman who turned Wipro Technologies into a global force, came from an elephant trainer in the jungle. The elephants were large, but tethered to small stakes. How come?

The unlikely guru explained; ‘When the elephants are small, they try to pull out the stakes and they fail. When they grow large, they never try to pull out the stake again’. Paul drew from this strategy a powerful lesson; that ‘we have to go for what we think we’re fully capable of, not limit ourselves by what we’ve been in the past’.

POWER OF THE PARABLE

Note that the power of the parable doesn’t lie in the story itself, which isn’t especially arresting, but in Paul’s interpretation - and still more in the ambitions he proceeded to form and turn into remarkable deeds. To receive really good advice, in other words, you must be a really good advisee. That requires LLL, PPP, AAA:

1. LLL: Listen, Look and Learn

2. PPP: Priority of Powerful Purpose

3. AAA: Act , Advance and Achieve.

Paul’s story is an especially convincing demonstration of the threefold advisee kit. How many bicycle tourists in that Bangalore jungle would have noticed the size of the stake or questioned the trainer? Every day everybody, metaphorically speaking, walks past an elephant, notices nothing, and asks no questions.

You can’t, of course, follow up every elephant and cross-examine every trainer. In my latest book, Seven Summits of Success, co-written with the famous mountaineer Rebecca Stephens, she tells a parable about filling a bowl with stones of various sizes. An Eastern guru uses this humble operation to put across a high lesson: Put the important things first. They have to be important to you, well worth doing, and purposive; that is, they convert into the third stage, the AAA of Act, Advance, Achieve.

People like Paul, of course, have the Triple A built into their genes. Jack Welch, the 20-year hero CEO of GE, must have told many others about his habit, on landing in New York, of imagining that this was his first day in the chair, succeeding ‘a real dud’. Like all the others who heard this, Paul listened to the Welch questions; ‘What would I do that was different from the guy before? What big changes would I make?’ But how many others, having heard Welch, promptly decided, as Paul did, ‘to zero-base myself’ every Christmas?

Welch’s own best advisor, a business acquaintance, told him to ‘Be yourself’; that is, remember how you got where you are, and don’t pretend to be someone else, especially when you get all the way to the top. The background of your best adviser, to judge by the Gang of 29, is most likely, like Welch’s, to be business. That may be coincidental; fathers or bosses are obvious and frequently excellent sources of advice; the former are often in business, the latter, of course, always. Both types are likely to be father-figures, even when there is no parental connection.

LOVE THAT JOB

However, the authentic father-figures are no use if they act the domineering, prescriptive parent of fact and fiction. Rather, the good ones encourage offspring to do what they really want. Anything else would contradict an attractive theme that runs through the 29, epitomised by TV anchor man Ted Koppel (‘Do what you love’) and ad-man Donny Deutsch (‘If you love something, the money will come’). The burden of Drucker’s invaluable advice to author Collins was to give up any idea of starting his own organisation and concentrate on what he would enjoy most.

There are other wise and pragmatic counsels among the 29 - one of them in reverse. Warren Buffett stepped on the road to the world’s greatest investment fortune by disobeying, not one mentor, but two: his guru and teacher, Ben Graham, and his own father. In 1951 both men advised young Warren that the stock market was too high, and that he should stay clear. He disobeyed - but in doing so followed their most important advice, which most people find exceptionally hard.

‘You’re right not because others agree with you, but because your facts are right’. The words are Graham’s, but the thinking is fundamental. In management, as in all life, there is at any given moment an accurate, factual description of events which can be discerned and described by logical analysis. The nearer you can get to that truth, and the closer your actions to what the truth demands, the better you will do - in anything.

Andy Grove, Intel’s genius CEO, followed this faith when his life was threatened by prostate cancer. Experience as a trainee engineer had taught him, in his professor’s words, that ‘When “everyone knows” something to be true, it means that nobody knows nothin’. That was the case with Grove’s cancer; he did all his own research - and survived.

Reduced to one-liners, some of the other advice received by the 29, while sound as a bell, hardly ranks among the World’s Great Thoughts. ‘Balance your work with your family’: ‘Let others take the credit’: ‘Have the courage to stick with a tough job’: ‘Don’t listen to nay sayers’: ‘You can learn from anyone’. You might find these in a cracker, but you couldn’t build a career on them - not even ‘Recognise the skill and traits you don’t possess, and hire people who have them’.

That sounds like a statement of the obvious, even when you know that, uttered by the leadership guru Warren Bennis, it had a great influence on Howard Schultz of Starbucks - who has used Bennis as a (presumably paid) adviser for many years. Enough of the 29 have such relationships to confirm, as noted earlier, that having a professional mentor is no fad. As your career matures, the frank advice of someone you trust is an antidote to arrogance, prejudice, inability to face uncomfortable truths and perplexity.

SPECIFIC ADVICE

Professional advisors can also be superb mentors. Sumner Redstone, the omnipotent boss of Viacom, has known and used Ace Greenberg of bankers Bear Stearns for over 15 years. But I’m sure that Greenberg’s specific advice on Redstone’s deals was more valuable than this; ‘Follow your own instincts, not those of people who see the world differently’. Redstone is an exemplar of common traits of the 29. They know who and what they are, trust their instincts, and rarely need any second bidding to follow them. Nor should you.

Two thoughts stick out, though. Klaus Kleinfeld, the new head of Siemens, always envisions the outcome of his proposed actions two years on. He’s right to do so.

And what advice does Peter Drucker, mentor of mentors, value most? That of his first editor, who told him, in effect, ‘Get good - or get out!’ Advice learnt in youth thus stays a long, long time - but it’s the value of how you use it, not the advice, that truly counts.

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Management Teams

Suppose that every organisation had within it four teams, each of which had a specific task. People on these teams would have other roles as well, but would work together as a team for the specific role of that team. The focus of each team would be distinct, and it is important that this distinctiveness is preserved. The rigidity of this team structure might surprise those who believe that creativity should be free and unstructured.

Team one is the values team. The role of this team is to find and figure out values that matter. Values might be permanent or temporary. Values might change. There might be trends. There is a certain amount of sense in asking focus groups, etc. to indicate their values. Such a process is usually not very productive, because people are good at pointing out what is wrong, but they are not so good at designing new needs and possibilities.

It may be useful to try out values designed by the design team on focus groups to see if such values are acceptable or desirable. This is different, however, from asking the group to come up with values.

My book Six Value Medals would provide a broad framework, but within this framework there would be a need to design specific values. Another book of mine called Supertition could also be useful in the design of values.

Values might arise from social observation. Values might be triggered by changes in technology. For example, the development of mobile phones creates a whole range of new values and possibilities.

Technology might even create negative values, and then there will be a need to get rid of the negative values.

For example, there might be a growing need to look at ‘privacy’ and ‘tranquillity’.

• How can you be undisturbed but not detached from the world and those who need to contact you?

• How can the value of dieting be combined with the value of enjoying your food?

• How can the value of comfort in travel be combined with the value of excitement?

• What are the values inherent in the investment process?

Team two is the idea team. The idea team takes the defined values from the value team and seeks to design an idea that would allow defined values to be delivered in a practical way. It isn’t just a matter of delivering the values, but of delivering them with sound business management skills and in a way that is good business sense. There has to be profitability and there has to be cost control.

It is possible to define values in a very broad and general way. It is also necessary to define values very precisely. It is not enough to say that you would solve a problem by finding ‘a suitable solution’. There is a need for ‘valufacture’ (a word I created to describe the creation of value).

The idea team takes the defined values from the value team and seeks to design an idea that would allow the values to be delivered in a practical way.

It is not just a matter of delivering the values, but of delivering them in a way that makes business sense. There has to be profitability and there has to be cost control.

This team has a real need for formal creative processes such as lateral thinking. The goal is clearly defined: how can we deliver the specified value?

At first this separation of ‘value design’ from ‘idea design’ might seem artificial, but it has the practical merit of defining targets more precisely. In too many cases a creative person has an idea and then looks around to see what value it might deliver. Here the process is reversed.

If the value is ‘instant viewing of photographs’, then the idea team might think in terms of Polaroid photography or stand-alone digital printers, which can print the photographs from your digital camera cards immediately.

Team three is the implementation team. At first it may seem that this function duplicates the ‘idea team’ function. At times there may be an overlap.

If the idea team comes up with stand-alone digital printers, then the implementation team looks into the availability or possibility of these. The implementation team would also do the decision making on who would own and service these machines.

• Would they be in stores or on their own in shopping malls?

• What existing organisations might be interested inco-operating in the matter? - and so on. Implementation has to go into detail in a very specific way. It is not enough to say: ‘there would be a way of doing this’. The specific way would have to be spelled out.

• How is it going to be done?

• Who is going to pay for it?

• What might the problems be?

The implementation team needs to be able to answer all such questions in a detailed and specific way. There may be a need for new creative ideas in the way that an idea is implemented. There may even be a need to modify the original idea to allow it to be implemented in a particular way.

Team four is the assessment team. There has been a defined value. There has been an idea for delivering that value. There has been a specific suggestion as to how the idea might be implemented. The assessment team can now look at the whole picture.

• Will the idea work?

• Will the idea be acceptable?

• Are the costs acceptable?

• Will the idea be profitable?

• Will the idea be durable?

• How strong a competitive advantage does the idea provide?

Many of these questions will already have been considered by the preceding teams, who may be asked to give their answers to the questions.

The assessment team is not just a critical team. It is the team which can look at the total idea. The team should function in a positive and constructive sense. Where necessary, modifications might be suggested. The assessment team should contain creative people as well as number-crunchers.

FUNCTION

The proposed teams - Value, Idea, Implementation, Assessment - work separately, but together: like the four legs of a horse or the four wheels of a car.

Another analogy might be the human digestive tract. Each part does its prescribed job and then passes matters on to the next section.

The clearly defined function of each team clarifies the thinking and ensures that every aspect of an innovation is fully considered.

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Creative Thinking Techniques

Some months ago a Nobel prize economist told me that at the top level economics meeting in the US they had been using my Six Hats method. This is now in wide use around the world because it is so much better a way of exploring a subject than argument wandering discussion. Meeting times are reduced to one quarter or even one tenth of the normal time. Most important, every person present has to contribute fully - not just in the usual critical mode.

The purpose of thinking is to enjoy and to deliver our values. But what are those values? Everyone is aware of the importance of values. If pressed, almost everyone can spell out the values that matter. There is a lot of ‘lip-service’. There is almost as much lip-service about values as about creativity and innovation. These things are important but talking about them is much less trouble than acting on them. To be seen to consider all values is what matters most.

Values are vague, general and poorly defined. We know what they are and we can recognise them, but looking for them is not easy because they are far from concrete. Why do we give names to vegetables? You would recognise a tomato even if it had no name. It would not be so easy to go into a greengrocer and ask for ‘those round red shiny vegetables that we use in salads’. It is very much easier to ask for ‘tomatoes’.

PERCEPTION

Perception is a key part of thinking. Research at Harvard has shown that 90% of the errors in thinking are errors of perception. Improving perception through my thinking programmes in schools has a dramatic effect. In one case, teaching this thinking to youngsters in a special school, which took youngsters too violent to be taught in normal schools, reduced the actual rate of criminal convictions over a 20-yearperiod to one tenth of the rate for those not taught thinking. This is powerful stuff.

With perception we can only see what we are prepared to see. The untutored eye looking a painting sees only that the painting is agreeable. The art critic can focus on the composition, the space, the brushwork, etc. etc.
In watching a game of soccer you actually see much more if you know some of the possible plays and can then see them in action.

If a person who is born blind is suddenly enabled to see then it takes quite a while for that person to see things. The brain has to get used to recognising shapes and forms. It is very much the same with values. Unless we have a clear picture of the different values it is not easy to see them.

Furthermore, it is not enough just to see values. We also need to talk about them and to discuss them. We
need to compare the different values in alternative courses of action. The Six Hats provides a language for talking about thinking and the new framework provides a means for focussing on values and talking about them. The new framework is THE SIX VALUE MEDALS. The metaphor of the ‘medal’ has been chosen because a medal is a reward. In the same way, if you deliver value you deserve a reward.

GOLD MEDAL

The Gold Medal represents ‘human values’. These are the values that matter to people. There can be positive values and also negative values. Being ignored or humiliated are obvious negative values. Being appreciated and having your contribution recognised are positive human values. When GE asked its creative people what reward they wanted for creative effort, the simple answer was ‘recognition’. They wanted someone to recognise they had contributed an idea.

SILVER MEDAL

Silver Medal values represent ‘organisation values’. Most often it would be a business corporation but organisations can include families, governments, clubs, teams, etc. The most obvious Silver Medal value is survival. If the organisation does not survive then not much else matters to that organisation. There maybe a clash of values if the ‘shareholder’ group wants the organisation wound up. There are obvious Silver Medal values like profits, market share and brand equity. Having happy and hard-working employees may need to combine Gold Medal values with Silver Medal values.

STEEL MEDAL

Steel with poor quality is poor steel. The Steel Medal values are directly quality values. Quality means that whatever is being done is done with quality, whether it is a service or a product. Quality means fulfilling the desired or offered function. A camera which takes poor quality pictures is a poor quality camera. A cafe with very slow service is a poor quality cafe. There are many programmes directed at quality management and improvement and most of them do a good job. The Steel Medal Values area way of recognising such values, not an attempt to teach how to get them.

Again there may be a clash of values. Improvement in Steel Medal values might mean an increase in production costs (like employing more people in the cafe) and this may impact Silver Medal values by reducing profitability. In the long run, however, poor quality will affect Silver Medal values through loss of business or losing out to better quality competition. If we believe that quality is essential then there is no clash of values at this point.

OTHER MEDALS

There are three other medals. The Glass Medal is for innovation, creativity and change. The Wood Medal is for ecological values in the broadest sense - not just nature. The Brass Medal is for perceptual values because brass looks like gold but is not. These other medals are described in more detail in the book SIX VALUE MEDALS (published by Vermillion Press in the UK, March 2005).

One of the advantages of having a perceptual framework is that it becomes possible to lay out the values in a ‘value map’. This means that comparative values may be seen at a glance. It becomes possible to see where the values are strong, where they are weak and where they are negative. Two such value displays are suggested in the book.

The idea of a ‘negative’ value is really a contradiction in terms, because values are seen as positive. But if we take the broader view of values as something which ‘influences’ or ‘has an effect’ then that effect may be positive or negative. There is no need to indicate the positive values as such but there is a need to indicate ‘negative’ values.

To describe negative values as ‘harm’ or ‘danger’ is weak and makes it difficult to see all the different values at a glance. Having the concept of positive and negative values makes it possible to scan them all on the same sheet.

LABELS

As people become familiar with the Six Value Medal system, the values may come to be referred to simply as ‘Gold Values’ or ‘Steel Values’. There is no need to keep repeating the ‘medal’ part.

The importance of the labels is that they provide a perceptual framework which makes values more tangible. The framework also allows us to focus more clearly on the different values and so to see where they are strong and where they are weak or even negative.

Readmore »».....

Business Ideas

Any managements which don’t find the present day challenging must be either very lucky or completely comatose. It doesn’t matter whether the business is a long-term, high-tech growth star, like Finland’s Nokia, or a solid, stolid retail empire, like Britain’s Marks & Spencer. Get your present-day strategy wrong, and retribution, as in those and many other cases, is swift to follow. The marketplace, the media, and the financial markets turn on former heroes with a vengeance – and this reaction, of course, only intensifies the pressure on those who have lost their way.

Note that these observations apply to present-day strategy - how companies are managing in the here and now, and never mind the problematical future. But if managements are unable to meet the challenges that surround them now, tangible and visible, they can’t offer much hope of surmounting the much harder challenges of the future. The future, remember, cannot be known. You can make intelligent predictions. But you don’t know whether they really are intelligent until much later - which will often be too late to avert catastrophe.

NOWHERE TO HIDE

Thus Nokia can’t be excused for missing the threat posed by the union of Sony and Siemens in mobile phones, or the possibility of a resurgence of its major Scandinavian rival, Ericsson. Nor can M&S hide from its culpability in missing the challenge created by its customers and competitors as the former responded to faster-moving fashions and more stimulating formats - the creations of newer and fresher minds and eyes that the old champion could deploy.

Yet both companies can be forgiven in theory (they won’t be forgiven in practice) if their vision of the year 2014 proves to be hopelessly wrong. The decisive phenomenon of the present-day is the revolution in information and communications technology (ICT). The digital onrush has created an entire new economy which impacts on the old economy at every turn. But the significance of the World Wide Web couldn’t be surmised until it existed, and even then the correct response to this marvel was evidently difficult to devise. The dot.com bust wasn’t a failure of the technology or the systems, but a result of profound misunderstanding and crass mismanagement.

The challenge for managers is therefore to manage the present better - much better - as preparation for the unforeseeable. Companies have no option but to live by the old Boy Scout maxim, Be Prepared. And that is what ties present and future together.

After correctly recognising and interpreting what is happening now, inside and outside the firm, you can at least ensure that the present nature and standards of management are appropriate and effective.

That’s the foundation on which you build the future - not on forecasts of the future as a whole, but on ideas strong enough to create your very own future. Nokia, as it happens, is a rightly famous example of doing precisely that - throwing away the entire contents of a ragbag of businesses to concentrate on the one market where it had the chance of developing real competitive edge. Its continuous stream of innovations both stimulated and satisfied demand. In doing both, Nokia closed the gap between the dreary present it knew and the golden future which it wished to achieve.

CREATING YOUR FUTURE

Closing the gap, however, applies to other key aspects of today’s management challenge. To create your own future, you have to close the gap between generating ideas and achieving results: and that also means closing the large gap between the typical organisation’s current behaviours and those that foster ideation. And that is something that the typical manager finds difficult - and shouldn’t.

Here, for example, are what I diagnosed as ten prime attributes of a critical Nokia supplier: ARM, designer of 75% of the silicon chips used in mobile phones. ARM’s attributes offer further penetrating insights into the 21st century ‘Ideas Company’.

1. Get the business model right – and keep it that way
2. Make the customers into real and treasured partners in the business
3. Honour and reward the innovators
4. Foster - and never lose - a desire to survive and succeed
5. Develop new ideas to attack new markets
6. Give R&D its own special place in the organisation
7. Ensure a proper balance between current development and future research
8. Make sure that there’s a place and hearing for whacky and far-out thinking
9. Create closely knit teams of people at all levels of the company
10. Regard challenges as the source of the best opportunities - and take them.

Are any of those policies ones which would strain your organisation? Do you consider any of them wrong-headed, or dangerous? On the contrary, the ten are not only practical and beneficial; they constitute part of the template for the Ideas Company, the one that can create its own future.
But there’s another question: how many of the ten actually feature in the management of your workplace?

My educated and experienced guess is that very few established companies practise more than a handful of these behaviours. They may have a business model, but it will be much the same as that of the competition, providing no useful edge, let alone a transcendent one.

Despite many fine words about customer relations, these are often antagonistic. Firms pay lip-service to innovation, but little else. Unorthodox thought and thinkers are equally important - but ignored. And if meeting the challenges involves disruptive action, it will be delayed as long as possible - too long.

GROWN-UP START-UP

True, ARM is a grown-up, high-tech start-up that doesn’t have the historical lumber or organisational deadweight that hamper businesses of greater age and slower-moving technology and markets. But weren’t the gee-whiz digital growth stars supposed to become the models for the 21st century company? Of course, many stars were nothing like what they were cracked up to be. But their speed of reaction and innovation was and is real enough. And that speed is in itself armour against the unexpected: i.e., the future

For a complete contrast, I visited a company that is about as far from ARM as you could find. It is old-established (1876), sells a very traditional product (English ale), and is largely confined to one area, the East of England(whose Development Agency commissioned my three studies). ARM is a public company that has been riding the high-tech seesaw. The brewer, Charles Wells, is private and family owned. As for the future, not long ago it didn’t seem to have one: giants were mopping up the independents.

So what behaviours had kept the company thriving and growing?

1. Base new development on a foundation of lasting and relevant virtues.
2. Make continuous improvement over time the basis for radical change.
3. Build the brand – manage both the corporate brand and the products.
4. Be old-fashioned about good financial house-keeping and strategic prudence
5. Be innovatory about everything else, with new projects at all levels and in all activities.
6. Don’t insist on being first – but insist on being best.
7. Be very patient but extremely determined in breaking new ground.
8. Keep close to the customers and develop new ideas around satisfying their needs.
9. Involve staff fully in the company’s strategy and its progress.
10. Have a unifying and bold ambition to which everybody can respond.

The difference in flavour between ARM and Wells is evident - as you would expect, given the differences in their markets, products, ownership and history. That expectation is in itself an important point. My recent book, The Fusion Manager, made this point most emphatically - that there is no one right answer, only the best answer you can produce at the right time.

Neither of these two companies is run by theorists, but both are essentially pragmatic. They follow the philosophy of a stock market professional I once knew: he never acted on predictions, but only followed ‘money on the table’ - the amount of cash investors were actually placing on their bets.

THE PERFECT COMPANY

That doesn’t sound very clever, but it made him exceedingly rich. Yet there is a valuable place for theory and experiment. At HFL, my third subject, the astonishing aim is to create ‘The Perfect Company’.

This is, of course, impossible, since perfection is not given to man. But the pursuit of perfection is eminently feasible, hard to better as an animating, driving force.

The bedrock of HFL’s business is bio analysis, primarily testing racehorse and greyhound samples to check that no illegal substances have been used to enhance the animal’s performance. Since scientific perfection is within reach, the work is a good match for HFL’s ceaseless and many-sided search for perfect corporate performance. The ten key principles I found there are vigorous and vital.

1. Set all targets and ambitions at the highest feasible pitch.
2. Use every available channel of communication, and invent ones of your own.
3. Make voluntary activity a critical element of the ideas organisation.
4. Use IT as a positive means of storing and exchanging ideas.
5. Lead from the top, but to animate and facilitate rather than command and control.
6. Relate all innovatory activities to the strategy and the economic performance of the business.
7. Look for new ideas in management and people policies, not only in products and processes.
8. Use informal methods to reinforce the formal elements of the organisation
9. Never be shy about ‘creative swiping’
10. Invest in people’s personal as well as their professional development.

MORE AVANT-GARDE

As noted, this list is more avant-garde than at ARM or Charles Wells: yet it’s hard to believe that the other two managements could not subscribe to the HFL policies.

Investing in your staff’s personal development is obviously a sound idea, for instance. So is the stress on communication, and the openness to new ideas in all departments. So is making the intranet into the digital lifeblood of the company. Recognising the high value of these policies, however, is one thing. Putting them into action is quite another. It’s the gap-closing issue again - closing the usual gulf between good intentions and inadequate, or even absent execution.

You may feel that the pressures of business leave no room or time for doing all these desirable deeds. But the future will not wait for you to catch up. These three companies share three crucial pillars – unreasonably high ambitions, shared by everybody; people-centric management, pervading all policies and processes; and determination to build their respective Ten Commandments into the fabric of the organisation - ’the way we do things round here’.

That cannot be done overnight. When you embark on the creation of a company fit for the future, you are looking ten years ahead. In other words, you are also committing the whole organisation to attitudes and approaches that are designed to achieve effective change right through to 2014. That isn’t futurology: it’s ‘the way we’re going to do things round here’.

Readmore »».....

Strategic Planning

Any managements which don’t find the present day challenging must be either very lucky or completely comatose. It doesn’t matter whether the business is a long-term, high-tech growth star, like Finland’s Nokia, or a solid, stolid retail empire, like Britain’s Marks & Spencer. Get your present-day strategy wrong, and retribution, as in those and many other cases, is swift to follow. The marketplace, the media, and the financial markets turn on former heroes with a vengeance – and this reaction, of course, only intensifies the pressure on those who have lost their way.

Note that these observations apply to present-day strategy - how companies are managing in the here and now, and never mind the problematical future. But if managements are unable to meet the challenges that surround them now, tangible and visible, they can’t offer much hope of surmounting the much harder challenges of the future. The future, remember, cannot be known. You can make intelligent predictions. But you don’t know whether they really are intelligent until much later - which will often be too late to avert catastrophe.

NOWHERE TO HIDE

Thus Nokia can’t be excused for missing the threat posed by the union of Sony and Siemens in mobile phones, or the possibility of a resurgence of its major Scandinavian rival, Ericsson. Nor can M&S hide from its culpability in missing the challenge created by its customers and competitors as the former responded to faster-moving fashions and more stimulating formats - the creations of newer and fresher minds and eyes that the old champion could deploy.

Yet both companies can be forgiven in theory (they won’t be forgiven in practice) if their vision of the year 2014 proves to be hopelessly wrong. The decisive phenomenon of the present-day is the revolution in information and communications technology (ICT). The digital onrush has created an entire new economy which impacts on the old economy at every turn. But the significance of the World Wide Web couldn’t be surmised until it existed, and even then the correct response to this marvel was evidently difficult to devise. The dot.com bust wasn’t a failure of the technology or the systems, but a result of profound misunderstanding and crass mismanagement.

The challenge for managers is therefore to manage the present better - much better - as preparation for the unforeseeable. Companies have no option but to live by the old Boy Scout maxim, Be Prepared. And that is what ties present and future together.

After correctly recognising and interpreting what is happening now, inside and outside the firm, you can at least ensure that the present nature and standards of management are appropriate and effective.

That’s the foundation on which you build the future - not on forecasts of the future as a whole, but on ideas strong enough to create your very own future. Nokia, as it happens, is a rightly famous example of doing precisely that - throwing away the entire contents of a ragbag of businesses to concentrate on the one market where it had the chance of developing real competitive edge. Its continuous stream of innovations both stimulated and satisfied demand. In doing both, Nokia closed the gap between the dreary present it knew and the golden future which it wished to achieve.

CREATING YOUR FUTURE

Closing the gap, however, applies to other key aspects of today’s management challenge. To create your own future, you have to close the gap between generating ideas and achieving results: and that also means closing the large gap between the typical organisation’s current behaviours and those that foster ideation. And that is something that the typical manager finds difficult - and shouldn’t.

Here, for example, are what I diagnosed as ten prime attributes of a critical Nokia supplier: ARM, designer of 75% of the silicon chips used in mobile phones. ARM’s attributes offer further penetrating insights into the 21st century ‘Ideas Company’.

1. Get the business model right – and keep it that way
2. Make the customers into real and treasured partners in the business
3. Honour and reward the innovators
4. Foster - and never lose - a desire to survive and succeed
5. Develop new ideas to attack new markets
6. Give R&D its own special place in the organisation
7. Ensure a proper balance between current development and future research
8. Make sure that there’s a place and hearing for whacky and far-out thinking
9. Create closely knit teams of people at all levels of the company
10. Regard challenges as the source of the best opportunities - and take them.

Are any of those policies ones which would strain your organisation? Do you consider any of them wrong-headed, or dangerous? On the contrary, the ten are not only practical and beneficial; they constitute part of the template for the Ideas Company, the one that can create its own future.
But there’s another question: how many of the ten actually feature in the management of your workplace?

My educated and experienced guess is that very few established companies practise more than a handful of these behaviours. They may have a business model, but it will be much the same as that of the competition, providing no useful edge, let alone a transcendent one.

Despite many fine words about customer relations, these are often antagonistic. Firms pay lip-service to innovation, but little else. Unorthodox thought and thinkers are equally important - but ignored. And if meeting the challenges involves disruptive action, it will be delayed as long as possible - too long.

GROWN-UP START-UP

True, ARM is a grown-up, high-tech start-up that doesn’t have the historical lumber or organisational deadweight that hamper businesses of greater age and slower-moving technology and markets. But weren’t the gee-whiz digital growth stars supposed to become the models for the 21st century company? Of course, many stars were nothing like what they were cracked up to be. But their speed of reaction and innovation was and is real enough. And that speed is in itself armour against the unexpected: i.e., the future

For a complete contrast, I visited a company that is about as far from ARM as you could find. It is old-established (1876), sells a very traditional product (English ale), and is largely confined to one area, the East of England(whose Development Agency commissioned my three studies). ARM is a public company that has been riding the high-tech seesaw. The brewer, Charles Wells, is private and family owned. As for the future, not long ago it didn’t seem to have one: giants were mopping up the independents.

So what behaviours had kept the company thriving and growing?

1. Base new development on a foundation of lasting and relevant virtues.
2. Make continuous improvement over time the basis for radical change.
3. Build the brand – manage both the corporate brand and the products.
4. Be old-fashioned about good financial house-keeping and strategic prudence
5. Be innovatory about everything else, with new projects at all levels and in all activities.
6. Don’t insist on being first – but insist on being best.
7. Be very patient but extremely determined in breaking new ground.
8. Keep close to the customers and develop new ideas around satisfying their needs.
9. Involve staff fully in the company’s strategy and its progress.
10. Have a unifying and bold ambition to which everybody can respond.

The difference in flavour between ARM and Wells is evident - as you would expect, given the differences in their markets, products, ownership and history. That expectation is in itself an important point. My recent book, The Fusion Manager, made this point most emphatically - that there is no one right answer, only the best answer you can produce at the right time.

Neither of these two companies is run by theorists, but both are essentially pragmatic. They follow the philosophy of a stock market professional I once knew: he never acted on predictions, but only followed ‘money on the table’ - the amount of cash investors were actually placing on their bets.

THE PERFECT COMPANY

That doesn’t sound very clever, but it made him exceedingly rich. Yet there is a valuable place for theory and experiment. At HFL, my third subject, the astonishing aim is to create ‘The Perfect Company’.

This is, of course, impossible, since perfection is not given to man. But the pursuit of perfection is eminently feasible, hard to better as an animating, driving force.

The bedrock of HFL’s business is bio analysis, primarily testing racehorse and greyhound samples to check that no illegal substances have been used to enhance the animal’s performance. Since scientific perfection is within reach, the work is a good match for HFL’s ceaseless and many-sided search for perfect corporate performance. The ten key principles I found there are vigorous and vital.

1. Set all targets and ambitions at the highest feasible pitch.
2. Use every available channel of communication, and invent ones of your own.
3. Make voluntary activity a critical element of the ideas organisation.
4. Use IT as a positive means of storing and exchanging ideas.
5. Lead from the top, but to animate and facilitate rather than command and control.
6. Relate all innovatory activities to the strategy and the economic performance of the business.
7. Look for new ideas in management and people policies, not only in products and processes.
8. Use informal methods to reinforce the formal elements of the organisation
9. Never be shy about ‘creative swiping’
10. Invest in people’s personal as well as their professional development.

MORE AVANT-GARDE

As noted, this list is more avant-garde than at ARM or Charles Wells: yet it’s hard to believe that the other two managements could not subscribe to the HFL policies.

Investing in your staff’s personal development is obviously a sound idea, for instance. So is the stress on communication, and the openness to new ideas in all departments. So is making the intranet into the digital lifeblood of the company. Recognising the high value of these policies, however, is one thing. Putting them into action is quite another. It’s the gap-closing issue again - closing the usual gulf between good intentions and inadequate, or even absent execution.

You may feel that the pressures of business leave no room or time for doing all these desirable deeds. But the future will not wait for you to catch up. These three companies share three crucial pillars – unreasonably high ambitions, shared by everybody; people-centric management, pervading all policies and processes; and determination to build their respective Ten Commandments into the fabric of the organisation - ’the way we do things round here’.

That cannot be done overnight. When you embark on the creation of a company fit for the future, you are looking ten years ahead. In other words, you are also committing the whole organisation to attitudes and approaches that are designed to achieve effective change right through to 2014. That isn’t futurology: it’s ‘the way we’re going to do things round here’.

Readmore »».....

Management Strategy 2

One advantage of having a very long memory for strategic management (and mismanagement) is that you can check the allegedly heroic present against the foolish past. But long memories are scarce in this field.

Royal Dutch-Shell can thus more easily promote its current top-level reshuffle as a sweeping, radical modernisation, bringing the blessings of ‘clarity and simplicity…efficiency…accountability’; and, of course, conferring much credit on its authors.

The reality, however, is that the architects of reform had been deeply implicated in perpetuating a system that was unclear and complicated, inefficient and inadequately accountable. Radical reformation only followed in the wake of the oil reserves scandal - the deliberate misreporting that cost the chairman, Sir Philip Watts, his job. It is, of course, right and proper that the chief executive should pay the price of such monumental error. But that isn’t what happened - for Watts was not the chief executive.

Nobody was, believe it or not. The unusual split of the group’s ownership between the Dutch company (representing 60% of the equity) and the British was reflected by two boards, two equities, and two chairmen. True, the operating interests were combined under the banner of Shell Petroleum. Its managing directors (usually seven in number) acted as a kind of collective CEO under the leadership of a ‘senior managing director’: but that ramshackle set-up was hardly fit for the 21st century.

INFLEXION POINT

How could so extraordinary a fix have come about? How could a vast multinational corporation, staffed with brilliant people and stuffed with billions in cash, have so basically mismanaged its affairs? The answers aren’t specific to Shell or to large public organisations.

Small family companies commit exactly the same mistakes and for much the same reasons - or rather lack of reasons. They pass what may be called the ‘management inflexion point’ - the moment when the practices and precepts that have served well enough in the past no longer apply.

The consequent decline may take decades rather than days. Never mind being unfit for the 21st century. Actually, Shell’s structure wasn’t even fit for the early Sixties, which is when the appointment of a single CEO was first proposed. The proposers were McKinsey consultants, who launched their astounding rise to British fame and fortune on the back of their work for Shell. The rejection of their (literally) central recommendation wasn’t based on any factual argument or alternative and superior theory. McKinsey’s standard solution was (and no doubt still is) that corporate effectiveness rests on having ‘streamlined decision-making with clear lines of authority and an empowered chief executive’.

The Shell directors who put their names to the above sentence have as much to explain as the predecessors who saddled the group with four decades of clumsy decision making and fuzzy lines of authority - although nearly every other major business, inside and outside oil, had the clearly superior structure now being adopted. The truth is that Shell was inordinately proud of its differences, including the time-honoured ‘committee of managing directors’. Now to be abolished, this bevy of barons was once an object of great internal pride.

UNDERSTANDABLE PRIDE

Now, pride in your company, its history and its uniqueness is wholly understandable and even valuable for its contribution to morale. But a moment’s logical thought makes it clear that the pride is emotional and is attached, not to strengths that can be rationally analysed, but to accidents of history and misreadings of the present. Most groups of people like to believe that they and their organisation are ‘the best’. But it’s plain that everybody can’t be the best.

In other words, self-delusion is rampant. That explains the typical reaction when anybody - like McKinsey at Shell - suggests changes that a company, above all its leaders, finds deeply unpalatable. The response is basically ‘why should we change when what we’re doing now works so well?’. To crack this barrier, people need to be persuaded of three crucial points:

• that ‘what we’re doing now’ doesn’t work so well, and may even be working badly

• that unless the top managers do embrace change, they will be courting failure

• that others, including critical insiders and external observers, know better than you do

All three of these ideas are far less welcome than the alternative belief that yours is the best of all possible companies. The first of the trio demands self-criticism; the second raises the fear of failure; the third involves a degree of self-abasement. At least, that’s how it looks to managers who do not understand the essence of good management. That hinges on intelligent self-criticism, plus readiness to accept the reality of weaknesses and threats, with equal acceptance of the wise contributions of others - inside or outside the company.

Once again, emotion is confronted by logic: but once again emotion generally wins, unless it is brought down to earth by a really humiliating disaster like Shell’s - or the recently announced first loss in J. Sainsbury’s long history. Emotion is so powerful that it can even swamp the personal self-interest of people who are in a position to intervene in the company’s affairs: notably family shareholders. The Sainsburys have nearly two-fifths of the supermarket company’s shares. How did they ever allow the mismanagement of the business to reach this pass?

Sir John Sainsbury, the all-powerful boss who took the chain to the top of the supermarket tree, is still alive; and many other family members exist, all of them sharing the sorry injury inflicted on their fortunes by the sitting managements. Families may even not react as soon as the unmistakable evidence of systemic failure appears. As at Sainsbury and Shell, awakening can take years, even decades. And really valuable intervention averts failure by intervening to nip mistaken policies in the bud.

CLASSIC NON-EXEC CODE

These family owners, however, abide by the classic code of all non-executives. You appoint a chief executive of whose abilities you have been convinced, and you thereafter leave him or her alone to get on with the task. The code, however, goes further than this basically sensible rule. The code holds the CEO innocent until proved very guilty, and shies away from early intervention - for that would plunge the family or other non-executive directors into the unwelcome waters of management upheaval.

It took even the eminently sane Warren Buffett two years of increasing disaster to initiate action against the blundering CEO of Coca-Cola, Doug Ivester. At IBM, there on the board sat Thomas Watson, Jr., the hero who had converted the business into by far the largest and best force in computing: and who sat there during the ten years, ending in 1993, during which John Akers as chief executive, despite (or partly because of) one reorganisation after another, led the company down a slippery slope. We will probably never know what efforts, if any, Watson made to avert that slide: but Akers for long seemed to be sacrosanct, no matter how convincing the evidence of failed leadership.

Part of the problem is that appointing a CEO is an act of very substantial faith, requiring true believers who thereafter cling irrationally to their beliefs. Right now I have no idea whether appointee Jeroen van der Veer is the right man to lead Shell into a new era. But I would be surprised if the non-executives who voted for his appointment know much more. And I will be downright astonished if van der Veer (or anybody else, for that matter) can handle the massive burdens placed on his shoulders in these intriguing words:

‘The chief executive will be empowered to drive strategy implementation, operational delivery and cultural change. To reinforce the focus on delivering the Group’s strategy and priorities, management will accelerate the existing programmes of standardising systems and processes and establishing global businesses and global operating models’.

WHO DRIVES STRATEGY?

Key aspects of this job description raise more questions than they answer. Van der Veer is to drive strategy implementation, but just who devises the strategy? The second sentence implies that a strategy and priorities already exist. Were these threshed out by the previous twin boards of directors? Is strategy now in the hands of the newly unified board? If so, does anybody believe that a huge committee of fifteen people, ten of them non-executive, can ever shape a business strategy, or do more than merely rubber-stamp somebody else’s proposals?

The true strategic power must surely lie in the hands of the executive committee headed by van der Veer and consisting of four top managers: the chief financial officer and three barons (or rather two barons and a baroness) who divide the operating interests between them. This condensed version of the now abolished ‘committee of managing directors’ has similar faults.

Its three baronial members will be largely preoccupied with the many operational concerns of impossibly wide areas of global responsibility. That fact of life must affect van der Veer himself, who isn’t likely to have much time left over for the amorphous business of ‘driving cultural change’.

That’s been a hobby of top Shell executives for a long time - dating right back to the early Sixties mentioned earlier. This culture lust is by no means confined to Shell. But whenever chief executives mention cultural change, reach for your gun. Nobody knows what it means; nobody knows how to achieve it; and nobody knows how to measure its results. What you really want is to change people’s behaviour, not culture. Then you might not find one of the world’s oldest and often most successful multinationals falling so far behind - only getting round to setting up ‘global businesses’ and establishing ‘global operating models’ in late 2004.

As for standardisation of systems and processes, I was involved several years ago in a massive programme to provide a worldwide IT platform for the group. My role was to help train trainers, lecturing to those
Who would go forth to embed the new systems in the minds and practices of Shell people. Whether or not this would-be office revolution was concluded as planned, it must have left large gaps behind. Otherwise, why is standardisation so prominently featured on the late-2004 reform menu?

ETERNAL GIVEAWAY

That’s the eternal giveaway - when new policies are declared and implementation decreed, only for the same bad practices to survive after many years and immense numbers of man hours. Peter M. Senge of MIT never wrote truer words than these: ‘however hard you push, the system pushes back harder’. During John Akers’ long and losing struggle to reform IBM, he once got ‘goddam mad’ and declared that ‘Everyone is too comfortable when the business is in crisis’. That’s when the management inflexion point is passed - when the intensity of the crisis is hidden from people by the comfortable corporate ways and the familiar system.

How can people be made more uncomfortable? There is no substitute for rigorous efforts to unearth the truth telling what those who work for and do business with your company truly feel and think about its goods, services, people and performance. That truth, though, only starts to add value when converted into action plans which aim at correcting the negatives revealed (they will be abundant) while exploiting and enhancing the (invariably fewer) positives.

Action plans, as the words say, demand action. So each plan must be clearly allocated to responsible people with whom a tight, tough timetable is agreed and whose progress is efficiently monitored. The chief monitor is the CEO. But the beginning of wisdom is to abandon the blind faith that he or she can do it all.

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Strategic Thinking

A fat man and a thin man are running a race. For reasons which will become obvious later, we shall change from a ‘race’ to ‘running after the girls’. The thin man will come out ahead in most cases - unless the thinness of the thin man is due to illness or starvation! Let us look at some different thought approaches to this situation.

CATEGORY APPROACH

Here we put the fat man into the appropriate ‘fat man’ category. We then know that fat men do not run very fast. This is the approach adopted by psychologists, psychiatrists and business executives in general. Once we can ‘box’ the situation, we know the expected behaviour. If it is this type of situation, then we know, from experience, how the situation will develop.

The whole of our ‘thinking software’, as developed by the GG3 (Greek Gang of 3) is about identifying the standard situations and thus knowing all about them. A doctor does this all the time. The doctor diagnoses the illness. Once the diagnosis has been made, the probable course of the illness is known. The possible complications are known.

Most important of all, the standard treatment is known. Identifying the category immediately indicates the required action. While this may be very useful in predicting the outcome of the competition between the thin and the fat man, it does not help the fat man at all.

THE GENES APPROACH

This is even more fundamental than the category approach. Here we say that the fat man has ‘fat man genes’. There is nothing he can do about it. He will always be fat, because that is the way his metabolism works. So he had better adjust to the situation and stop trying to compete with thin men.

While this approach may seem rather negative, it also seems practical. Why attempt the impossible? Be pragmatic. Do what can be done. Assess the actual capabilities of your organisation and yourself, and then play to those capabilities.

This can rather easily translate into: ‘be content with the existing situation and do not strive to change it’.

The result is complacency. Many organisations have this strategy, even though they would rarely admit it: ‘You cannot change your genes - so do not waste your time trying.’

THE ANALYSIS APPROACH

This would probably be the most common, because it arises from the way in which we are taught thinking at school, at university, in business schools etc. We analyse the situation: the fat man cannot run fast because he is fat.

We now seek to put things right. We analyse further. Why is this man fat? We refuse to accept the passivity of the ‘gene approach’. We suspect that the man is eating too much. So, based on our analysis, we take action to put things right. We put the man on a strict diet. The hope is that the fat man will indeed lose weight and will then compete with the thin man.

Analyse the situation. Find the cause. Remove the cause. You have now put things right and solved the problem. This approach works quite often. At this point we may believe that we have covered all the approaches. But we have not. The best approach is still
to come.

THE BICYCLE APPROACH

We provide the fat man with a bicycle, and he will now surely outdistance the thin man. At this point we can see why the ‘race’ metaphor would not have applied, because the rules of the race would have precluded a bicycle. The approach is not that of analysis, but the approach of ‘designing the way forward’. Here is the situation. How do we design a way forward to reach the values that we want? Design is very different from analysis.

DESIGN AND ANALYSIS

When Greek thinking was re-introduced into Europe at the Renaissance, schools and universities were largely run by the Church. The Church had a great need for the ‘truth’. This was needed to prove heretics wrong. Education became truth-obsessed. Analysis is part of the search for the truth. What are the elements here? How is this made up? What is the underlying truth?

We believed, and still believe, that if you have the truth, then action is easy. You can have the truth about the present and the past, but you cannot have the truth about the future. Design is about the future. Analysis is about the past.

You can never have the truth about something which is not yet there and will not be there until you have designed it. As a result ‘design’ has never been a part of formal education. Education is about the way things are and about the ‘truth’. Of course, there are certain fields like architecture which are all about design - even though they are too often taught as the ‘analysis of different styles’. But, in general, design is not adequately taught.

PRACTICAL IMPORTANCE

Most people working on human thinking set out to analyse the different stages of thinking. They then set out to teach these stages. But description does not provide an operational tool. The same people seek to analyse why someone thinks in a certain way. They then seek to correct any obvious faults. This is the traditional analysis approach. So what is the ‘design’ approach?

In the ‘design’ approach we design frameworks and structures which people can learn and use deliberately. So the Six Thinking Hats is a designed structure that can be learned and used. It is so practical and simple to use that it is in fact used by four-year-olds, by senior executives and by top economists. It is a far better way of exploring a subject than the absurdity of argument.

• A major corporation in Finland used to spend thirty days on its multi-national project discussions. Using the parallel thinking of the Six Hats, the discussions now take only two days.

• MDS, a company in Canada, did a careful costing and showed that using the Six Hats saved $20 million in the first year.

Another example of a ‘designed’ framework is the CoRT thinking tools which bring about an expanded perception. The Hungerford Guidance Centre in London takes youngsters who are too violent to be taught in normal schools. When David Lane was the principal, he started teaching these thinking tools to the youngsters. He has now done a 20-year follow-up, which has shown that the rate of crime, measured by convictions, is far lower in the group taught thinking than in the group not so taught. This is a remarkably powerful effect. Sadly, most people in education – and business - have no idea that designed thinking tools can make a huge difference.

DESIGN

Design means putting together what we have in order to deliver a value that we want. In the beginning every business was a design. Later, maintenance and problem solving take over, and the design element disappears.

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Business Management

In an increasingly complex world society, the advancing complexity of business management is inevitable. It’s been visible for at least four decades, and no doubt will continue indefinitely. You can follow one cause (and effect) in the changing preoccupations of the largest companies. In the mid-Sixties their concerns were primarily internal – but the outside world was about to assert itself.

Before that sea-change, the world’s major markets were astonishingly stable. The giant companies set the tone and managed the economy. They were by and large production-led, paying lip-service to marketing orientation, but actually churning out goods and services as they (and not the customers) saw fit. Their output featured fairly continuous improvements, but no great attention to cost. Markets were served on a take-it-or-leave it basis; but mostly customers had to take it, for lack of any alternative to the big brands.

CHALLENGED MODELS

Today’s successor companies have no such luxury. Markets and their exploitation have evolved into new, fluctuating patterns that challenge both the business models and the marketing means. To take just one factor, the internet is continuing to revolutionise the entire customer process from information to after-sales service. Very few companies have fully mastered this new chain of communication and execution. But what might be called the Dell model, after one of the very best users, is the tidal wave of the future.

Among the myriad consequences, process change has become much faster. Websites can be changed far more rapidly than factory layouts - but the latter reforms should also have been speeded up by the new technology. Grasping its implications and potential is plainly possible: witness the achievements of the vendors of high-tech itself. Intel, Apple, Microsoft and the above-mentioned Dell have achieved speeds of effective response that traditional management modes could never match, but which are now badly needed.



The high-tech tools, however, still must be applied to issues that are neither technical nor new. Management still hinges on correct analysis of situations, correct decisions on how to turn these situations to optimum advantage, correct execution of the decisions, correct response to feedback as results in the real world flow in. And then you repeat the process. ‘Analyse, Decide, Execute, Feedback, Again’ (ADEFA) is the management mantra. How would you apply it to these five scenarios, picked by Fortune as among ten of the toughest challenges around today?

1. Your banking business needs greater organic growth, but must simultaneously cope with the damage done to its reputation by scandal and corruption: plus the departure of many of its experienced managers.

2. Your soft drinks business, long a wholly reliable source of growth and profits, has run out of the former. How can you replace 85% of turnover with a more powerful driving force?

3. As a fashion retailer, your offerings are looking tired. Both managers and customers are deserting you, and the need is to match the brand strength with better market penetration.

4. The company sells pharmaceuticals, but one of its big sellers has had to be withdrawn because of lethal side-effects. Just when you need a new blockbuster, the shelves look alarmingly empty.

5. You have a quasi-monopoly in the world’s leading technology. But almost every one of your markets is under threat from newcomers and long-standing competitors alike. How can you defend your position?

SWOT ANALYSIS

The five companies are Citigroup, Coca-Cola, Gap, Merck and Microsoft - five of the most successful businesses the world has ever seen. Is there any common denominator that explains their very similar dilemmas? One is very clear: the difficulties have developed over a period. At any point, SWOT analysis would have shown that their Strengths had been weakening, relatively speaking, while their Weaknesses were become more serious. Their Opportunities required new entrepreneurial drive, and the Threats were real and potentially lethal.

So when did you last conduct a SWOT analysis, either on the whole business or the section in which you manage? It’s not a fashionable piece of management technology. But its disregard can be deadly. Another article in the same issue of Fortune shows in a brilliant study of General Motors what happens to a company whose Strengths are exaggerated, whose Weaknesses are ignored as Opportunities are missed, and whose Threats are brushed aside.

In all five companies, as at GM, the supreme tendency was to forget the bad news and concentrate on the good. The same factor has bedevilled the vicious three years of war in Iraq. Any planning for the occupation was ruled unnecessary because the Iraqis would be so thrilled to be occupied and so grateful for US ‘reconstruction’ of the country. The actual, awful experience was likewise wished away by the occupiers because it contradicted the basic assumptions on which they had gone to war.

Similarly, GM’s top management cannot face up to the all-too real prospect of bankruptcy. In their misguided eyes, the car giant is still the greatest manufacturer in the world. Nor will you find many at Coke ready to admit that the business has run out of steam: that the largely financial reforms instituted by Roberto Goizueta have exhausted their once-for-all magic; that the great CEO’s achievements only put off the evil day when lack of diversification and innovation would come home to roost.

THIRD CEO SINCE 1992

The present CEO, Neville Isdell, is the third since 1992, which is both a bad sign and an evil in itself. Launching hundreds of new products is not likely to be any more effective than the rapid-fire changes of CEO. These stem from the second key cause of large company failure: excessive faith in the ability of one high-and-mighty boss to design and implement the ADEFA cycle. Even Goizueta missed out (in diversifying into Hollywood and bombing with a deeply unloved effort to replace the much loved traditional Coke formula).

Any solution to Coke’s huge problems will complicate the management process. Top down rule by the CEO is simpler, but simply inappropriate in modern markets. Study P&G, widely hailed for having escaped from a bad case of Big Company Blues. The escape rested on a new innovation model - ‘Connect and Develop’. P&G would forget its old reliance on internal innovation and seek new ideas from outside the company’s doors.

The search was based on:

(1) identifying the Top Ten consumer needs

(2) identifying adjacencies – ‘new products or concepts that can help us to take advantage of existing brand equity’

(3) ‘technology game boards’, used when you need answers to key questions:

• Which of our key technologies do we want to strengthen?

• Which technologies do we want to acquire to help us better compete with rivals?

• Of those technologies which we already own, which do we want to licence, sell or co-develop further?’

The answers to such questions help to direct the networking with proprietary networks which involve ‘technology entrepreneurs and suppliers’, and the ‘open networks’ which connect P&G with hundreds of thousands of experts. I particularly like ‘Your Encore’, whose participants are 800 high-performing retired scientists and engineers. Tapping such knowledge makes every kind of sense. The innovatory cycle of Discover, Evaluate, Launch and Co-create works as well with outside talent as with insiders.

Using outsiders does, of course, dissipate the control traditionally exercised by the corporate centre. P&G does indeed have a vice president for innovation and knowledge who has day-to-day accountability for connect-and-develop. But his role is that of overseeing initiatives which he cannot ‘manage’ in the traditional way. The CEO, A. G. Lafley, set the new approach going and named a broad goal - to acquire half of P&G’s innovations from outside the company. By definition, that radically changed the way P&G managed itself.

RADICAL RESULTS

In turn, this radically changed the results. ‘Our R&D productivity has increased by nearly 60%. Our innovation success rate has more than doubled, while the cost of innovation has fallen. R&D investment as a percentage of sales is down from 4.8% in 2000 to 3.4% today’. The essential point is that such success would have been utterly impossible without a revolution in ‘the way we do things round here’, and without a surrender of direct power by Lafley and his cohorts. Responsibility and authority are not affected. But involvement is simply redefined.

The following words ring very true: ‘Leadership is not defined by the exercise of power but by the capacity to increase the sense of power among those who are led. The most essential work of the leader is to create more leaders’. There’s only one trouble with this excellent statement. It was published by one Mary Follett in 1924.

Over all the intervening decades, management hasn’t caught up with her wisdom. Follett’s book was titled Creative Business - and innovative creativity, as at P&G, is where new approaches to management are most required.

The entrepreneur is essentially a creative innovator. In a recent blog, I recounted the nine attributes of the entrepreneur as identified in the HBR at end-1979. They convert into nine questions. Do you have?...

• A high level of drive and energy

• Enough self-confidence to take carefully calculated, moderate risks

• A clear idea of money as a way of keeping score, and as a means of generating more money still

• The ability to get other people to work with you and for you productively

• High but realistic, achievable goals

• Belief that you can control your own destiny

• Readiness to learn from your own mistakes and failures

• A long-term vision of the future of your business

• Intense competitive urge, with self-imposed standards.

If you haven’t answered with nine resounding shouts of Yes, don’t despair. As I wrote in the blog, these attributes are not immutable elements of personality.

Every one of the nine can be developed, if you are prepared to confront your shortcomings and then to work to change your behaviour. These are basics of management and leadership alike. However, there’s something missing - the combination of marketing and innovation that creates a great customer franchise.

CUSTOMER PROPOSITION

My blog describes how I spotted this Wow! Factor when writing about nine great entrepreneurs who each exemplified one of the nine attributes in particular(although they actually were proficient at them all).

The story was the same whether it was Miguel Torres in wine, Bill Hewlett and Dave Packard in electronics, William Morris in cars, Gottlieb Duttweiler in cut-price groceries, Marcel Dassault in aircraft, Akio Morita of Sony in consumer electronics, Camillo Olivetti in office machinery, Ruben Rausing in packaging, or Robert Bosch in auto components. Each of them had grasped a great new idea which, with the aid of excellent execution, had metamorphosed into an irresistible customer proposition.

Each man had developed an irrefutable answer to the fundamental question: Why should the customer buy from me, and not from anyone else? As the P&G story shows, getting the right answer, and the answer right, is much more complicated in the complex world I described earlier. But when Hewlett said ‘If I have to tell a guy something, I consider myself a failure as a manager’, he was articulating a philosophy that Mary Follett would have applauded, and that Lafley seems to be following at P&G.

The complex challenges won’t be mastered without innovation in products and processes (including the processes of management itself). The leader’s role is to develop and encourage as many sources of ideas as possible, within the business, outside the business, and in combinations of external and internal. You deploy the attributes of the entrepreneur to break complexity down into manageable parts set in a frame of basic disciplines - above all, self-discipline. And you win.

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