Creating Value – Part 1


Journal of Management Excellence: Creating Value

 Creating value is the most important objective of every organisation, but it is also the hardest to define.
Oracle takes a look at the many different ways to create value.


  • Connect Enterprise Performance Management Processes to Drive Business Value (Ivo Bauermann)
  • Commentary: If You Are Ready, Now Is the Time! (John Kopcke)
  • The Need for Profitability Management (VJ Lal)
  • Commentary: The Complete Value of an Enterprise Performance Management System (Thomas Oestreich)
  • Centraal Boekhuis: Creating Value by Delivering Business Intelligence as a Service (Emiel van Bockel)
  • Commentary: The Overinstrumented Enterprise (James Taylor)
  • True Value Index: A Measure for Sustainable Business Success (Frank Buytendijk)
  • Industry Insights (Mark Conway)


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Creating Value – Part 2

Journal of Management Excellence: Creating Value, Part II

Creating value is the most important objective of every organization, but it is also the hardest to define. In part two of this series, Oracle‘s newsletter takes another look at the many different ways to create value.


  • World-Class EPM Drives More Than Twice The Shareholder Return (Tom Willman)
  • Commentary: Creating Value By Doing More With Less (Thomas Oestreich)
  • The First Oracle Enterprise Performance Management Index Reveals Modest (Steve Walker)
  • Achievement of Management Excellence (Steve Walker)
  • Guest Commentary: Closing The Loop (Wayne Eckerson)
  • Uncertainty Management: The Source of All Management Value (Jim Franklin)
  • Managing Stakeholder Value With Analysis Chains (Tony Politano)
  • Building the Business Case For Return on Enterprise Performance Management Investment (Ron Dimon)
  • Industry Insights (Mark Conway)

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The Right to Win


A right to win: Undisputed competitive advantage

Business strategy is at an evolutionary crossroads. It’s time to resolve the long-standing tension between the inherent identity of your organization and the fleeting nature of your competitive advantage.

It’s 8 a.m. in the executive conference room of a large global packaged-foods manufacturer (a real company, its name withheld to preserve confidentiality). For the past two months, a team made up of 15 senior people has been exploring options for growth, winnowing them down to three basic strategies. Each is now summed up in a crisp 20-minute presentation.
The first option focuses on innovation. The company would rapidly develop and launch many new types of snacks and foods, packaged in new and interesting ways, offering leading-edge nutrition and convenience.
Under the second option, the company would get closer to its customers, producing the food people ask for. It could incorporate ideas gathered online into its offerings and provide busy working families with customizable, convenient, and well-balanced meals.
The third option would involve transforming the dynamics of the relevant food sectors by competing more aggressively. The company would become a category leader by investing in new process technology, rightsizing operations to push costs down, and completing key acquisitions.
After the screen goes blank, the CEO leans forward and asks a simple question: “Which strategy would give us the greatest right to win?” His tone, calm and direct, makes everyone sit up a little straighter. And they probably should, for this is the core question underlying every business strategy, although it isn’t always phrased that way.
A right to win is the ability to engage in any competitive market with a better-than-even chance of success — not just in the short term, but consistently….

Imagine a coach, observing a player entering a sports competition, saying, “That kid has the right to win out there.” Or a teacher, watching a student about to take a test, saying, “That student deserves to excel.” What they are really saying is, “That contestant is the right player, in the right type of contest, with the precise capabilities needed to meet this particular challenge.” Of course, the contestant will lose at times, but over the years, a consistent innate advantage will establish itself, giving this contestant the ability to pull off seeming miracles while making it all look easy. This essential advantage is particularly rare in business — a more free-form and unpredictable game than sports or academia. But it is increasingly important at a time of unprecedented competitiveness.
The phrase right to win may strike some observers as arrogant. After all, no company has this kind of assurance handed to it. But that’s precisely the point. The right to win cannot be taken for granted. It must be earned. You earn it by making a series of pragmatic choices that align your most distinctive and important capabilities with the way you approach your chosen customers, and with the discipline to offer only the products and services that fit. At Booz & Company, where we call this approach a capabilities-driven strategy, research and experience have led us to conclude that only high levels of coherence — among market strategy, capabilities systems, and a company’s portfolio of offerings — can give any firm the right to win.
All corporate strategies are at heart theories about the right to win. That is why, for those trying to understand the nature of business success, the history of strategy is both helpful and fascinating. One valuable recent source is The Lords of Strategy: The Secret Intellectual History of the New Corporate World (Harvard Business Press, 2010), in which former Fortune managing editor Walter Kiechel recounts the prevailing theories of business strategy over the past 50 years, and the stories of the people who developed them. Drawing on Kiechel’s history and those of others, such as Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel in Strategy Safari: The Complete Guide through the Wilds of Strategic Management (2nd ed., FT Prentice Hall, 2009), we have created a map of this conceptual landscape, organized on the basic principles underlying theories of the right to win. (See Exhibit 1.) The map depicts four broad schools of strategy; each represents a hypothesis about the nature of long-term success in a competitive world.

The Basic Tension in Strategy

Business strategy, as we know it today, has a relatively short history. The word strategy was first applied in print to mainstream business in 1962, with the publication of Alfred Chandler’s book Strategy and Structure: Chapters in the History of the Industrial Enterprise (MIT Press). Since then, at least a dozen major trends and ideas have appeared under the rubric of business strategy, often in great conflict with one another, often drawing companies in very different directions. Despite their differences, all four schools of strategy represent attempts to resolve the same basic underlying problem: the tension between two conflicting business realities.
The first reality is that advantage is transient. Even the most formidable market position can be vulnerable to technological disruptions, upstart competition, shifting capital flows, new regulatory regimes, political changes, and other facets of a chaotic and unpredictable business environment. As William P. Barnett showed in The Red Queen among Organizations: How Competitiveness Evolves (Princeton University Press, 2008), this turbulence can never level off into stability; as companies copy and outdo one another’s proficiencies, the game of business continually becomes more challenging. Rapid economic growth in emerging markets has made advantage even more transient, bringing billions of people into the global economy, along with hundreds of energetic new business competitors.
One might assume that the answer is to become completely resilient, morphing to match the changing demands of the market. But companies can’t, because of the second reality: Corporate identity is slow to change. The innate qualities of an organization that distinguish it from all others — its operational processes, culture, relationships, and distinctive capabilities — are built up gradually, decision by decision, and continually reinforced through organizational practices and conversations. Very few companies have thoroughly reinvented themselves, and those that have managed it have typically had to force many people out, including top executives, and to replace them with new recruits chosen for a different set of attitudes and skills. Even when leaders recognize the need for change or know that the company’s survival is at stake, this identity is difficult to shift; if no deliberate effort is made to refresh it, it can stagnate to the point where it erodes advantage from within. As writers such as Jim Collins, Clayton Christensen, and Donald Sull have noted, it’s all too easy for established companies to fall prey to complacency and hubris (Collins), entrenched customer relationships and disruptive technologies (Christensen), or inertia (Sull).
Yet although the “stickiness” of a company’s identity is typically regarded as a weakness, it’s also a great source of strength. No company can survive long, let alone distinguish itself, without a rich body of capabilities and a resonant corporate culture. Indeed, the fundamental enabler of strategy — the source of competitive advantage — is a distinctive, coherent corporate identity. This is the quality that attracts customers, investors, employees, and suppliers. It is grounded in internal capabilities (that is, the things your company can do with distinction) and in market realities (that is, the games in which your company chooses to play).
The yin and yang of strategic fad and fashion — the movement of business leadership from one trend to another over the past 50 years — has often led companies to make incoherent and ineffective moves. The answer is not to keep adopting new theories in hopes of finding the right answer, but to develop your own capabilities-driven strategy: your own theory of coherence for your business. How do you capture value, now and in the future, for your chosen customers? What are your most important capabilities, and how do they fit together? How do you align them with your portfolio of products and services? The more clearly and strongly you make these choices, the better your chances of creating a corporate identity that gives you the right to win in the long run. Not surprisingly, each of the four basic schools of thought in Exhibit 1 (position, execution, adaptation, and concentration) has something significant to offer business strategists, so long as they are adopted in an appropriately balanced way.

The Value of Position

According to Walter Kiechel, strategy became relatively formal in the 1960s for two reasons. The first was an increasing amount of available data on business costs, prices, and operational performance. The second reason was uncertainty, and the anxiety that went with it. The economic stability of the early 1960s dissolved into the turbulence of the 1970s and ’80s, striking different components of society with different degrees of prosperity and calamity. No company could ever be sure it would remain on top (even in established industries such as steel and automobiles), global economies were highly interconnected (although it wasn’t always quite clear how they might interact), and corporate decision making was increasingly constrained by fiercer capital markets and upstart technologies.
When intuitively obvious decisions fail, people yearn for better guidance. Thus, starting in the mid-1960s, the idea of strategic planning, with echoes of Napoleon, Carl von Clausewitz, and Sun Tzu, evolved into an irresistible business management fashion. In its pure form — as delineated by Kenneth Andrews and Igor Ansoff, the premier authorities on business strategy at that time — a strategy was an overarching plan for growth, usually written up in a formal document and endorsed by the CEO, aimed at creating an unassailable position for the company in the marketplace.
These early efforts by the position (or positioning) school assumed that the right to win would be held by companies that comprehensively analyzed all critical factors: external markets, internal capabilities, and the needs of society. Although Andrews said the goal should be a simple “informing idea” about the direction of the business, it inevitably became a complex checklist of strengths, weaknesses, opportunities, and threats (the origin of the SWOT analysis still prevalent today). This was long before the invention of the spreadsheet program, so big companies hired armies of planning staffers to compile all this data into elaborate documents, which were debated in annual strategy sessions that became exercises in bureaucratic complexity. Only gradually did it become clear that the plans did not correlate with real-world performance or issues.
A breakthrough in the position school occurred in 1966 when Bruce Henderson, founder of the Boston Consulting Group (BCG), began to market services based on what he called the “experience curve.” Analyzing cost and price data across companies and industries, Henderson showed that as experience with operations led to greater proficiency, the capacity to produce increased and costs dropped. The phenomenon was hardly noticeable month by month, but every few years, capacity doubled and costs dropped 10 to 30 percent, so reliably that many companies could plan their investment cycles and competitive marketing accordingly. For example, Texas Instruments Inc. (TI) cut the prices of its semiconductor chips and electronic calculators every few months. Sales rose as customers switched to TI from competitors, and production costs then fell further, which allowed TI to drop prices even more. Even the billing procedures and advertising budgets became more efficient as those departments managed greater volumes.
To Henderson, the right to win went to companies that made the best use of the experience curve by holding the leading position in market share for their sectors. This meant emphasizing the value of some divisions over others, basing those judgments on the dynamics of each business’s customer base (Henderson was an early proponent of market segmentation) and on its competitive position. The famous growth-share matrix divided a company’s businesses into “stars” (high growth and market share), “dogs” (low growth and share), “question marks” (high growth, low share) and “cash cows” (low growth, high share), thus providing a clear rationale for reallocating investment. For instance, it was worth borrowing money to keep a star shining, because a star might end up dominating its market niche.
The experience curve and growth-share matrix rapidly became popular because they worked powerfully well — at first. But in practice, these tools had a serious flaw: As retroactive analyses of a company’s past success, they made it irresistible to continue that same behavior into the future, even when circumstances changed (for example, when competitors began to apply the same approach). This led many companies into counterproductive strategies. Some, including Texas Instruments, got caught up in ruthless price wars that contributed to the commoditization of their own products.
More generally, many business leaders became disenchanted with the idea of formal strategic planning. It was expensive, and it didn’t necessarily make companies profitable. For example, Ford and General Motors experienced losses of more than US$500 million in 1979 and 1980 — their first such losses in decades. In the aftermath of these and other sharp reversals, mainstream business leaders began to question the wisdom of the position school, and its claim on the right to win.

Execution Strikes Back

Those most annoyed by the position school tended to be in production and operations. No wonder, then, that the first great contrary reaction came from operations; specifically, from the Harvard Business School’s (HBS) operations management department, which had been gradually losing status to finance. Two members of the faculty found themselves in Vevey, Switzerland, during the summer of 1979: William Abernathy, the HBS expert on auto manufacturing, and Robert Hayes, known for his studies of assembly lines. Researching the differences between European and U.S. multinationals, Hayes visited a small machine tool manufacturer in southern Germany. Sophisticated Americans barely understood computer-aided manufacturing software, but this firm of 40 people was using it on a daily basis, and producing custom-made tools. Other plants in Germany, Switzerland, France, and even eastern Europe were using machine tools in ways that the Americans couldn’t match.
At a seminar that summer, a European businessman asked Hayes why American productivity had declined so much during the past 10 years. Hayes hauled out the standard answers: organized labor, government regulations, the oil crisis, and the attitudes of the younger generation (which, at the time, meant the baby boomers). The attendees looked at him with polite amusement. “We have all those factors here,” one said, “and our productivity is increasing.”
Confused and shaken, Hayes began taking regular hikes and having long conversations with Abernathy, who had just arrived in Vevey and saw similar stagnation in the U.S. auto industry. Only one explanation made sense to them: The reliance on market share and financial growth as strategic objectives was crippling U.S. industry. For example, many companies had cut back any initiative that didn’t seem to guarantee rapid returns, and the entire U.S. economy was suffering as a result.
Abernathy and Hayes wrote up this conclusion in an article for the Harvard Business Review (HBR) called “Managing Our Way to Economic Decline,” published in July/August 1980. It is still one of the magazine’s most requested reprints, and one of the most controversial articles in its history. They had introduced another school of strategic thought, based on the idea that the right to win came from execution and operational excellence: the development and deployment of better practices, processes, technologies, and products.
The execution message was bolstered by companies such as General Electric and Motorola, which provided influential examples of operations-oriented strategies with their reliance on executive training and such practices as Six Sigma.
Operational excellence was also a basic tenet of the quality movement — the continuous improvement practices that were developed at the Toyota Motor Corporation and a few other Japanese companies in the 1950s and ’60s and are now generally known as lean management. Of the many people associated with the quality movement, including Toyota’s influential chief scientist Taiichi Ohno, the most significant for corporate strategy was W. Edwards Deming. Deming was an American statistician born in 1900. He began consulting regularly in Japan just after World War II, helping Japanese companies develop their production systems. Ignored in the West at first, he became prominent in the United States after 1980, and actively taught and consulted with many of the world’s leading companies until his death in 1993. Deming saw his methods as critical for escaping economic malaise (his most prominent book was titled Out of the Crisis [MIT Press, 1986]). In his view, the right to win was held by companies that honed and refined their day-to-day processes and practices, eliminating waste, training people throughout the company to use statistical methods, and cultivating the intrinsic “joy in work” that people feel when they are truly engaged in their jobs.
Although the execution school would be frequently challenged, it continued to gain influence through the early 1990s — especially after it was adapted by Michael Hammer, an MIT computer science professor, into an approach called “reengineering.” According to Hammer, the right to win went to companies that looked freshly at all their processes, as if redesigning them from scratch. Unfortunately, many companies used reengineering as a launching pad for across-the-board layoffs that left them weaker, and operational excellence couldn’t compete with the exuberance of the high-tech bubble. By the end of the 1990s, execution-based strategy had been largely relegated to the production side of the business.
The idea of building value through managerial methods returned to strategic relevance after the dot-com bubble burst. Its return was symbolized by the business bestseller Execution: The Discipline of Getting Things Done, by strategy expert Ram Charan and then Honeywell CEO Larry Bossidy, a well-known GE alumnus (with Charles Burck; Crown Business, 2002). Many leaders now understood, through experience, both the value of improving execution and its challenges. It generally required major changes in managerial and employee behavior. As BCG strategist George Stalk complained to Walter Kiechel, “That was a lot more difficult than just ‘buying a concept off a shelf.’”

Michael Porter’s Advantage

The other major limit of the execution school was best articulated by HBS professor Michael Porter — probably the most influential thinker on corporate strategy in the institution’s history, and a source of new vitality for the position school. In his early publications, from the late 1970s to the early 1990s, Porter brought positioning to a level of unprecedented sophistication. He recast the turbulence of a company’s business environment into a “value chain” and “five forces” (competitors, customers, suppliers, aspiring entrants, and substitute offerings): two frameworks that could be used to analyze the value potential and competitive intensity of any business.
Then, in his flagship HBR article called “What Is Strategy?” (November/December 1996) Porter pointed out that operational excellence could guarantee competitive advantage for only a limited time. After that, it too would lead to diminishing returns as other companies caught up. (Indeed, most observers believe that Ford, GM, and other Western automobile manufacturers have done exactly that between 1980 and 2010; it may have taken them 30 years, but the quality and resale value of their motor vehicles is, as a whole, rising to meet that of Toyota and Honda.)
To Porter, execution-oriented ideas like reengineering, benchmarking, outsourcing, and change management all had the same strategic limit. They all led to better operations, but ignored the question of which businesses to operate in the first place. Porter argued for picking industries or markets where either overall conditions were favorable — where most companies were relatively weak, suppliers had relatively little clout, and aspiring entrants were few — or where a company could differentiate itself. In “What Is Strategy?” Porter used Southwest Airlines Company as an example of differentiation in a relatively unattractive industry. Southwest’s market power came from the choice not to follow the spoke-and-hub routing model of other airlines, but to offer “a unique and valuable strategic position” — flying only direct routes, with one type of aircraft, using automated ticketing and limited services (for example, no assigned seats). These and other strategic choices allowed the airline to operate a different type of flying business, one that could offer attractive prices and convenience even when compared with travel by bus, train, or car. Sure, operational excellence was involved: Southwest had perfected fast turnarounds and friendly customer service. But the core strategic decision was the pursuit of simplicity through a clear market strategy.
The position school became a major driver of the resurgence of corporate competitiveness in the West during the 1980s and ’90s. W. Chan Kim and Renée Mauborgne took the position argument to its extreme with Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (Harvard Business School Press, 2005). Big companies, they advised, should look for new upstart positions themselves, in places where there were no competitors already, breaking out of conventional ways of looking at their industry. The popularity of that approach demonstrated the pressure that business leaders felt to break free of established practices and find a niche that they could dominate with first-mover advantage.
The limits of the position school became evident in the 1990s and 2000s. Although Michael Porter took pains to explain that industry structures can change and can be shaped by the actions of leading companies, he was interpreted as saying that some industries are innately good and others are irredeemably bad. To many corporate leaders in tough businesses, or in highly regulated industries like electric power generation, there was no real advantage to developing distinctive capabilities or facility with execution. Some companies tried to escape by entering new businesses where they had no distinctive capabilities, “blue oceans” where they didn’t know how to swim. These efforts generally failed. And as the 2000s unfolded, companies with enviable market positions, such as Microsoft, also saw their advantage fade when new competitors, such as Google, emerged. This didn’t disprove Porter’s hypothesis, but it gave others an opening to criticize his thinking.

Adaptation and Experimentation

Starting in the 1990s, another group of strategy thinkers provided an alternative to the position and execution schools. This was the idea of strategy as perpetual adaptation, best represented by Henry Mintzberg, professor of management studies at McGill University. In his history The Rise and Fall of Strategic Planning: Reconceiving Roles for Planning, Plans, Planners (Free Press, 1994), Mintzberg dismissed the position school (which he called the design school) as formulaic. He acknowledged that execution was important, and much of his work was dedicated to analyzing what managers did in practice, but, like Porter, he felt execution was insufficient for success. His strategic approach centered on finding a more creative, experimental approach to executive decision making.
Thus, instead of analysis and planning, executives in the adaptation school (or, as Mintzberg called it, the learning school) sought to gain the right to win by experimenting with new directions. In Mintzberg’s words, they “let a thousand strategic flowers bloom…[using] an insightful style, to detect the patterns of success in these gardens of strategic flowers, rather than a cerebral style that favors analytical techniques to develop strategies in a hothouse.”
Adaptation has helped many companies; it’s been the source, for example, of the vitality of the Chinese manufacturing industry. It’s also been the most central guiding theme of Tom Peters’s work. The companies applauded by Peters — starting with his seminal business bestseller, In Search of Excellence: Lessons from America’s Best-Run Companies (with Robert Waterman; Harper & Row, 1982) — have varied enormously in their industries, approaches, and philosophies, but they all share a willingness to experiment with new ideas and directions, discard those that won’t work, and adjust their efforts to meet new challenges.
But the adaptation school is also seriously limited, because its freewheeling nature tends to lead to incoherence. A multitude of products and services that all have different capability needs and different market positions cannot possibly be brought into sync. The more diverse a company’s efforts become, the more it costs to develop and apply the advantaged capabilities they need. Letting a thousand flowers bloom can lead to a field full of weeds — and to businesses that can’t match the expertise and resources of more focused, coherent competitors.

Concentration at the Core

Hence the appeal of the fourth group of strategy thinkers — the concentration school. Its forerunners were Gary Hamel and C.K. Prahalad, authors of Competing for the Future (Harvard Business School Press, 1994), who argued that the most effective companies owed their success to a select set of “core competencies”: These were the bedrock skills and technological capabilities (such as new forms of hardware, software, systems, biotechnology, and financial engineering) that allowed companies to compete in distinctive ways. Companies that focused on these, and used them to develop a long-range “strategic intent,” would claim the right to win.
Chris Zook of Bain & Company, drawing on his firm’s experience with private equity, has been the most prominent recent exponent of this school. In his book Profit from the Core: A Return to Growth in Turbulent Times (2001, with James Allen; Harvard Business Press, 2010), he argues that the right to win tends to accrue to companies that stick to their core businesses and find new ways to exploit them for growth and value. This means differentiating a company by starting with its central capabilities: Enterprise, Dollar/Thrifty, and Avis all prospered by focusing on, respectively, rentals for people with car repairs, vacationers, and business travelers.
However, in practice, the concentration strategy often becomes a way of holding on to old approaches, even when they become outdated. Many companies (and private equity firms) translate this strategy into slash-and-burn retrenchment. They cut costs and minimize investments in R&D and marketing to create a pared-down company that produces more profits at first, but that can’t sustain the growth required for a healthy bottom line. When they seek to grow, it’s through “adjacencies”: products or services that seem related to their existing core businesses. But many adjacencies are less profitable than they were expected to be, in part because they may require very different capabilities — and in part because the truly successful game-changing leaps, like Apple’s into consumer media or Tata’s into the inexpensive Nano automobile, can’t be managed from a concentration strategy alone.

Strategy as a Way of Life

It’s important to note that most of the thinkers who introduced these strategies to business leaders saw the challenges and limits of their approaches, and even warned against misapplying them. But businesspeople misapplied them nonetheless. Each theory thus backfired, and created opportunities for the next.
How can your company gain the most from considering all these theories of the right to win? Only by stepping back, away from any particular answer, to look at your company’s identity as a whole, encompassing the way you expect to compete, the capabilities with which you will compete, and the portfolio decisions that fit. In fact, that’s exactly what happens with the packaged-foods company described at the beginning of this article.
The CEO’s question about the right to win has sparked many levels of discussion. For several more days, spread over a few weeks, the executive team talks through its three proposed strategies in detail: the estimated market value of each, the risks involved, and the capabilities required. All three strategies have roughly the same potential for increasing enterprise value, but the differences among them become clear when the functional leaders speak.
For example, the head of operations explains that the three strategies would require completely different investments. Becoming an innovator would mean configuring a flexible value chain to launch new products rapidly and economically. The closer-to-customers option would mean selling more food at different temperatures: some frozen, some fresh. It would also mean building a more direct, collaborative relationship between operations and R&D. And the category transformation strategy would require new process technologies, economies of scale, and deftly managed acquisitions.
The head of marketing and sales has a similar presentation. As an innovator, the company would focus advertising and promotion on new products, while ensuring rapid, widespread retail distribution. Being a solutions provider would move the company directly into engagement with consumers, through websites, social media, and better in-store displays. As a category leader, the company would seek to own the grocery shelf through “sharp pencil” tactics (in other words, tactics tailored to each brand and geographic region) for pricing, promotion, and merchandising.
The company executives ultimately settle on the category leader strategy. It fits best with the capabilities that they already have. Another company, even with the same market dynamics, might choose differently — appropriately so, because of very different capabilities and customs.
A capabilities-driven strategy process, like this one, takes into account “market back” aspirations (the position the leaders want to hold) and “capabilities forward” concerns (the company’s ability to deliver). In the course of discussion, ideas from all four schools of thought come forward: ideas about holding an unassailable position, executing with new capabilities, adapting rapidly to competitive pressures, and focusing on the core business as a platform for growth. It takes time to complete this process, and it is very difficult and stressful at times, but the company gains, in the end, from a far higher level of coherence.
It’s taken 50 years for the field of business strategy to reach the point at which many companies can conduct this kind of conversation effectively. Most companies have relied on business strategists for strategic answers. But now we see that we have to generate our own answers — our own theory of the right to win for each company, with its unique identity and circumstances — and that we have the tools to do so. Given the pressures that business continues to face, this leap in knowledge is coming just in time. 

The Sirens of CPG Strategy
by Steffen Lauster

Some strategic concepts, if they’re held as sacrosanct, can lead an entire industry in the wrong direction. Something of that sort has happened during the past two decades in the consumer packaged goods (CPG) industry. Two of the most influential strategy ideas are so widely held, so intuitively appealing, and so apparently true in practice that they are very hard to give up. Yet they can also be quite dangerous to follow.
The first of these misleading ideas is that “bigger is better.” Since the 1980s, CPG companies have tried hard to expand. The conventional wisdom said that the best shareholder returns would accrue to companies with huge brands and the scale to compete in developing markets. The second idea is that “consolidation is inevitable.” For years, experts have predicted that most consumer packaged goods segments would end up like carbonated beverages, shaving products, and disposable diapers — dominated by just two or three big players that took advantage of their scale to acquire or crowd out rivals, while a handful of niche players battled over the scraps.
Recent studies conducted by Booz & Company of total shareholder return among CPG companies show that both of these ideas are, at best, incomplete. Companies that follow them end up sacrificing performance. To be sure, there are categories where scale matters, where one or two players dominate. But many food and consumer products sectors are fragmenting instead, with room for many profitable entrants. In coffee, ready-to-eat meals, shampoos, and pasta sauces, for example, there are more small companies than there used to be; mass and price don’t matter as much as perceived quality. In the New York area, jars of Rao’s Homemade marinara sauce (the same sauce served in the famous Rao’s restaurant of East Harlem) are flying off the shelves.
These days, the best-performing consumer products companies — whether large or small — are those with the greatest coherence. Their market strategy, capabilities system, and product lineup all fit together. They invest their capital and attention in just three to six differentiated capabilities, supporting all the products they offer. This gives them a level of efficiency and effectiveness that most of their competitors can’t match.
In the end, the problem with strategy concepts is not that they’re wrong; they are, in fact, often right. But they are not universal. Beware any strategic idea that most other companies find beguiling. The right strategic destination is different for every company, even in a mature industry like consumer packaged goods.

Steffen Lauster is a partner with Booz & Company based in Cleveland.

Reprint No. 10407

strategy and business

Author Profiles:

  • Cesare Mainardi is the managing director of Booz & Company’s North American business and a member of the firm’s executive committee. He is coauthor, with Paul Leinwand, of The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Press, 2010).
  • Art Kleiner is the editor-in-chief of strategy+business and the author of The Age of Heretics: A History of the Radical Thinkers Who Reinvented Corporate Management (2nd ed., Jossey-Bass, 2008).
  • Disclosure: At least four people named in this article have been contributors to s+b: Ram Charan, Walter Kiechel, Henry Mintzberg, and C.K. Prahalad. Others named in the article have had associations with s+b staff members, with Booz & Company, or with its competitors. Where we assess individuals’ contributions and impact, we have tried to do so independent of any such associations.

Becoming a Next Generation Visionary Company


Built To Last – Summary of Key Points Written by James Collins & Jerry Porras
About this book:
This summary of Built to Last is included because if one is going to change an organization, one needs to know what to change towards. This book is one of the best we know of that answers that question. It is one of the best pieces of research done on why certain organizations are more successful over time than others.

The book makes a comparison of Visionary Companies to a comparison group of good companies. The lessons of the Visionary Companies can be learned and practiced at all levels of the organization.

What is a Visionary Company?
For the purpose of this study they:

  1. were the premier leader in their industry, widely admired
  2. made an indelible mark on the world
  3. have multiple products and have had multiple CEO’s
  4. are at least 50 years old

The authors compared 18 Visionary Companies to 18 comparison companies. The comparison companies have done more than twice as well as the stock market since 1926, while the Visionary Companies have done 15 times as well as the stock market. The comparison is through the end of 1990. Think of the comparison companies as the bronze medalists. Most of the Visionary Companies have had problems, but have displayed a remarkable resiliency in overcoming business challenges.

  A dozen common myths were shattered:

  1. It takes a great idea to start a great company. In fact, having a great idea to begin with is negatively correlated with becoming a great company.
  2. Great companies require charismatic leaders. In fact, charismatic leaders can be detrimental to the long term health of the organization. The leaders of Visionary Companies sought to be clock builders not time tellers.
  3. The most successful companies exist to maximize profits. In fact, maximizing profits has not been the dominate theme in the Visionary Companies. They pursue a number of objectives, sort of like the balanced scorecard. Clearly, profit is one of their objectives.
  4. They share a common (“right”) set of core values. The core values don’t have to even be enlightened (Philip Morris), though they often are enlightened. What’s most important about core ideology is how deeply the company believes in its ideology and to what extend it is aligned with it.
  5. The only constant is change. The Visionary Companies have maintained their core values for many years. But they are adaptive, everything but the core values is subject to change.
  6. The companies are conservative. In fact, they are not. They are willing to engage in BHAG’s (big hairy audacious goals).
  7. These companies are comfortable places to work. In fact, only those comfortable with the core ideology are comfortable working there.
  8. Visionary Companies make their best moves by high level successful strategic planning. In fact, they progress by trying a lot of stuff and keeping what works.
  9. Companies should hire outsiders as CEO’s to breath new life into the organization. The authors found that only 4 of 113 CEO’s in Visionary Companies came from the outside. The comparison companies go to the outside 6 times more frequently.
  10. Visionary Companies focus on beating the competition. In fact, they focus on beating themselves. Always striving to be the best.
  11. You can’t have your cake and eat it to. The Visionary Companies believe in the genius of “the and” and abhor the tyranny of “the or.”
  12. Visionary Companies become visionary by writing vision statement. While they tend to write them, this is only one of thousands of things they do to be visionary.

Clock Building not Time Telling:
Clock building allows a visionary company to exist long beyond the founder. Leaders of Visionary Companies take an architectural approach to building the company. These leaders try to build a company. For example, Hewlett & Packard had no great concepts for products, they just wanted to build a company. HP went a year before it sold anything. Sony’s first products were not very good. J.W. Marriott’s first business was an A&W Root Beer stand in Washington DC, 3M started as a failed corundum mine. In fact, only 3 of 18 Visionary Companies started off successfully (J&J, Ford & GE). However, 11 of the comparison companies started out successfully with a great idea. The companies with early success are much more likely to stick with these products long after they should have been replaced by new products or abandoned.
For example, George Westinghouse was much more brilliant than Coffin at GE. Coffin’s major contribution to GE was the development of the world’s first industrial lab.
When David Packard was asked about HP’s greatest innovation, he responded by talking about the HP way. The article’s headline read, “Packard executive develops company by design, calculator by accident.”
The comparison companies were just as likely to have had strong leadership in their formative years. What the authors are describing is leadership at the Visionary Companies that is interested in socialized power not personalized power.
The contrast between Disney and Columbia Pictures is a good example to illustrate the differences between clock building and time telling. Tape goes into good details.
The Tyranny of the “Or”:
Visionary Companies do not accept that you have to chose between things, i.e. you can have quality or low cost. As F. Scott Fitzgerald pointed out, “The sign of a first rate mind is that it can hold two opposing ideas at the same time and be able to function.”
More than Profits:
Clock builders at Visionary Companies build clocks with a purpose, with a human spirit. The sense of purpose goes beyond just making money. Their values fix a stake in the ground, this is what we stand for, this is what we are all about. Profitability was not the driving force in the Visionary Companies, but seen as necessary. Profits are like oxygen, food and water. You can not live without them, but they are not the purpose of life. In seventeen of eighteen pairs the Visionary company was more ideologically driven than their counterpart. This was one of the strongest correlation in the study. For example, in examining TI the comparison to HP, the authors could not find one single statement that linked TI to anything other than trying to maximize shareholder return. They looked at over 40 articles, studies etc. on TI.
The authors give the example of Merck’s decision to develop a product to cure river blindness, an illness that affects millions in third world countries. While they knew there was not much profit in it, they also knew that they would probably get a lot of free and good publicity. George Merck 2nd, “If we focus on helping cure people through medicine, the profits will be there.”
Not one core value was common across the eighteen companies. There is no set of core values one needs to have to be a visionary company. What is key is the authenticity of the core values and the alignment to those core values. For example, Walmart’s key core value is customer service. Sam Walton would say if you are not serving the customer or helping someone to serve the customer we don’t need you.
Core values are the things the company holds self evident. Core values exist independent of the business environment. Purpose is the fundamental reasons the company exists beyond making money. You should never be able to complete or achieve your purpose. As Walt Disney said, “Disneyland will never be completed as long as there is imagination left in the world.” GE can never complete the task of improving the quality of life through technology and innovation.

Preserve the Core/Stimulate Progress:
The central concept of the book is preserve the core/stimulate progress. The only sacred cow in a company should be its philosophy of doing business. Companies must be able to adapt and change to thrive. Boeing’s being on the leading edge of aviation technology is core, however, building a 747 Jumbo Jet is a strategy that can change. Over time competencies needed, strategies and goals all change, but the core remains the same. The drive for change in a Visionary Company is internal, they don’t often wait for the external forces to make them change. These companies have a high level of achievement motive. Visionary Companies display an interesting mix of self confidence and self criticism. The self confidence allows them to set audacious goals. Self criticism allows them to make changes before the outside world demands them.
Visionary Companies develop tangible mechanisms to preserve the core and stimulate progress. For example, HP helps assure the HP way will continue by having a policy of promoting from within. It supports that policy by tying appropriate reinforcing criteria to selection, promotion and appraisal decisions.
The key is to align everything to the core . Comparison companies frequently tolerate cynicism, strategies, behavior and attitudes that are not aligned with the core values.
Big Hairy Audacious Goals (BHAG’s):
The Visionary Companies use BHAG’s to challenge and motivate their workforce. True commitment to the BHAG is critical, its where the rubber meets the road. A certain amount of hubris is needed to set these goals. However, the goals seem much more audacious to those outside the company than those inside the company. The leaders of the Visionary Companies had great faith they could do what they set out to do. The authors found that 14 of 18 Visionary Companies used BHAG’s more frequently than did the comparison companies.
As an example, they give Boeing’s decision to develop the 707 at a time when they were not the leader in commercial aviation. McDonnell Douglas then the commercial aviation leader thought the future of aviation was in propeller driven airplanes. Building the 707 was a BHAG, it required a commitment of a quarter of Boeing’s then net worth. Its accomplishment propelled Boeing into commercial aviation leadership, where it has stayed. Boeing has a history of using BHAG’s.
GE’s vision statement, which is a BHAG, is compared to Westinghouse’s. GE’s vision, “Be number 1 or number 2 in every market we serve and revolutionize this company to have the speed and agility of a small enterprise.” Westinghouse’s was, “Total quality, market leadership, technology driven, global, focused growth, diversified.” The contrast is that GE’s goal is clear, compelling and exciting, and therefore, much more likely to propel progress.
The example of the moon mission illustrates the motivational power of BHAG’s. Kennedy the charismatic leader, who set the BHAG, died six years before we landed on the moon. Yet we were able to achieve this momentous accomplish because the BHAG itself was compelling, it took on a life of its own. BHAG’s help Visionary Companies transition across changes in leadership.
Paul Galvin of Motorola used BHAG’s to propel the engineers to greater achievement, Zenith did this some in its early years, but stopped doing this with the death of its founder. Eugene McDonald, the founder of Zenith was a great leader, but he was a time teller. Galvin was a clock builder.
An organization can have multiple BHAG’s at one time at different levels of the organization. They need to be very clear and very compelling. A BHAG is a goal not a statement. They should be outside your comfort zone. An organization has to watch out that once they have achieved their goal, they do not become complacent. One answer to complacency is to set another BHAG. BHAG’s needs to be consist with your core ideology. Boeing’s decision to develop both the 707 and 747 were clearly consistent with its core ideology of being on the cutting edge of aviation technology.
When a company develops a sense of its ability to defy the odds and accomplish great things, it makes people feel they belong to something unique, better. This is a key to high morale.

Cult Like Cultures:
Visionary Companies are not great places to work for everyone. If you do not endorse the core values of a Visionary Company, you will probably not like working there. Visionary Companies are not soft. They tend to be more demanding of their people for both accomplishment and adherence to the core ideology.
Visionary have four things in common with a cult: 1) a fervently held ideology, 2) indoctrination procedures, 3) acceptance of only those who adhere to the core ideology and 4) elitism. They draw clear boundaries to being inside or outside the company. If you are inside you are part of an elite group. The authors are not saying that these companies are cults, just more cult like.
The authors use IBM and Disney as really good examples of what it means to indoctrinate their people. The “In Search of Excellence” video has excellent examples to illustrate.

Try a lot of Stuff and Keep What Works:
Many of the Visionary Companies did their best things by opportunistic experimentation. They tried a lot of stuff and kept what worked and got rid of what did not work. Examples include:

  • J&J getting into the talc (Baby Powder) business
  • Marriott’s getting into the business of supplying food to the airlines.
  • 3M’s getting into the wet sand paper and masking tape businesses.
  • Walmart’s people greeters system.

This is evolutionary progress. The book argues for a Visionary Company being able to make revolutionary progress (BHAG’s) and evolutionary progress, if it is going to remain great. Evolutionary theory holds that changes that are adaptive to the changing environment allow the species to survive. “Multiply, vary, let the strongest live and weakest die,” those were Darwin’s words. RW Johnson said, “Failure is our most important product.” Managing failure is a key to evolutionary progress. Many companies, try a lot of stuff. Many are not able to get rid of things that don’t work all that well. They don’t prune well.
A 3M concept is that, “You so often get to where you are going by stumbling, but you can not stumble unless you are moving forward.” 3M understands that big things often come from little things, but you can not tell which little things will blossom into big things, try a lot stuff and keep what works. 3M in contrast to Norton installed a lot of practices that encouraged individual initiative and experimentation, Norton did no such thing. The saying at Norton was you could develop any product you wanted as long as it had a hole in the middle and was round. Norton is in the grinding wheel business.
Five rules to pursue to achieve evolutionary progress:

  • Give it a try and quick
  • Accept that mistakes will be made, let the weakest die
  • Take small steps, its easier to accept failure when it is small
  • Give people a lot room to act, allow people to be persistent
  • Build that ticking clock, that is make the four points above into a process. 3M Examples: a) researchers get 15% of their time to research anything they want & b) turning new products into divisions when they get to a certain size.

They found that the Visionary Companies were less likely to stick to knitting than the comparison companies. The knitting in a Visionary Company is the core ideology.

Home Grown Management:
The authors point out that Jack Welch was not a savior for GE. Welch inherited a very well managed company. Welch’s predecessor retired as the most respect business leader at that time. He was CEO of the year, one year. GE performed as well under Jones’ eight years as they did under Welch’s first eight years. Swope, CEO in the 20’s, introduced what we would call today the Balanced Scorecard. Welch has done a fine job at GE, but the point is that so did Welch’s predecessors at GE. They all: 1) were management guru’s for their time, 2) changed the company and 3) outperformed the competition.
The Welch era is about average for GE. See page 280 for the data. Also see tape for excellent description of the succession planning process used by Jones to select Welch. Jones started the selection of his successor seven years prior to the actual selection.
Comparison companies are six times more likely to have their CEO come from the outside. Only about 3.5% of CEO’s (4) at Visionary Companies came from the outside and three of them were from one company. Its the continuity of quality leadership that counts at the Visionary Companies. The authors found that continuity of leadership was better in 15 out of 18 pairs. Continuity of leadership is critical if you are going to preserve the core, while stimulating progress.

Good Enough Never Is:
A critical question at Visionary Companies is, How can we do better tomorrow than we have done today? Visionary Companies are tremendously demanding of themselves, i.e. they have very high standards.
Willard Marriott adapted what we’d call continuous improvement principles soon after opening his first AW Root Beer stand. Comfort is not the objective in Visionary Companies, they install powerful mechanisms to increase discomfort and stimulate change before the external environment demands it. They worry about becoming fat, lazy and complacent. Examples of mechanisms used to challenge complacency:

  • The brand structure at P&G
  • Merck consciously yields market share as products become older and less profitable
  • Motorola stops funding products that stop improving Comparison companies much more frequently take the easy road, milking successful products. Visionary Companies are much more likely to invest in the future. In all eight pairs where there was data, the Visionary Companies invested more in R&D. The Visionary Companies invested 30% more in R&D than the comparison companies. They also invested much more in human capital. They were much more likely to be early adopters of new ideas and technology. They give a good example of how Philip Morris reinvested in their future trying to become number one, while RJ Nabisco executives were spending money on self aggrandizing monuments to themselves (excellent example of personalized power at work).
    In 16 of 18 companies the Visionary Companies drove themselves harder for self improvement. They use the parable of the Black Belt to explain this ongoing quest for self improvement. The question posed to a would be holder of the black belt is, What is the essential meaning of the Black Belt? The person receiving the Black Belt must understand that they are at a beginning, not the end of a journey. The journey is a journey of never ending quest for self improvement and understanding.
    The End of the Beginning:
    To become a Visionary Company you must align objectives, strategies, policies and mechanisms within the company. You never really attain full alignment. Sweat the small stuff that paints a total picture of alignment. Cluster mechanisms to create alignment. don’t shot gun mechanisms. That is, cluster reinforcing mechanisms together to deliver a powerful punch. Be guided by your own compass in creating your great company. Ask not whether this practice is good, but whether its fits with our own ideology and ambitions. Obliterate misalignments.
    • Be a clock builder not a time teller, that is, an architect
    • Embrace the genius of the “and”
    • Preserve the core, while stimulating progress
    • Seek consistent alignment.

    People at all levels can help build a Visionary Company.

    Where to begin in building a Visionary Company? 

    First understand your core ideology and then build a worthwhile purpose.
    Put in place BHAG’s and mechanisms to stimulate progress.
    Then align the organization. The biggest mistake managers make is failing to get alignment.



A Blueprint for Driving Profitable Growth


Rather than seek increased revenues and profits by expanding products and markets, companies should follow a seven-step strategy for achieving more with less.

Faced with economic headwinds, many global corporations are struggling to grow their businesses profitably. In the consumer packaged goods business, for example, the worldwide recession has hurt premium brands as consumers have traded down to cheaper brands, private labels, or generics. In the retailing business, same-store sales are flat or declining for numerous companies. Meanwhile, many business leaders continue to seek growth by extending their existing product lines and brands, as well as by entering new geographic regions. After all, growth is supposed to be about “more” — more products on the shelf, more categories, more brands, and more markets.
However, this approach is exactly the opposite of what business leaders should do to drive increased revenues and profits. A typical “growth through more” strategy diffuses the organization’s efforts. It increases the complexity of the organization and its operations. We have found that “growth through less,” or more precisely “growth through focus,” is the best prescription for growth, regardless of the economic environment. This conclusion is based on our own experience in three well-known companies — Kraft Foods, Unilever, and Fonterra Brands (a dairy products business based in New Zealand) — on three continents over 10 years. In all three cases, a deliberate strategy of focusing on a few markets, brands, and categories produced impressive revenue and profit expansion. We have learned that seemingly mature businesses can be energized by making fewer but larger bets and by focusing relentlessly on executing a simple but powerful vision.
Growth through focus is not as easy as choosing what strategic bets to make. Rather, it requires the leadership team to follow a systematic approach that spans everything from strategy and vision to execution and measurement. We propose a framework that consists of seven steps that an organization must go through in its quest for growth through focus. Our framework is grounded in three key ideas: focus in strategy, simplicity in communication, and empowerment in execution………

Growth and the Winemaker’s Logic

To understand the logic behind growth through focus, consider what winemakers know about getting the best out of grapevines. Grapevines are very vigorous. With abundant water and nutrients in the soil, they tend to grow into large, leafy plants. However, overly vigorous vines produce lower-quality wine and smaller crops. When growing conditions are too rich, grapevines grow more leaves and become tangled. Leaves take nutrients away from grapes, which contain the seeds for future growth, and create shade, which inhibits ripening. To improve the quality of grapes, winemakers carefully prune grapevines and remove excess bunches of grapes to reduce yields. The remaining bunches ripen more fully and ultimately produce more concentrated wine.

Many companies, in effect, behave like inattentive vintners. Growth initiatives are often overstimulated with money and leadership attention. The result is lots of activity and a large number of growth projects, and this activity often does not correlate with outcomes. Quantity does not mean quality. To improve the quality of growth, business leaders need to cut back on marginal products, brands, and markets so that they have a better chance of winning in their chosen areas of focus.
Following the winemaker’s logic, company leaders must overturn conventional thinking about how to manage the organization, processes, and people for growth. (See the exhibit.) For example, a conventional core belief about growth is that companies need to extend their product lines and brands and to expand their categories and markets. Leaders hope that the more arrows they have in their quiver and the more targets they have to shoot at, the more bull’s-eyes they will score. But in reality, growth often comes from fewer but stronger arrows aimed at fewer targets. The engines of growth are focus (fewer brands, fewer categories, and fewer markets) and simplicity (simple vision, simplified execution, and simpler organizational designs). Conventional thinking also assumes that although complexity adds cost and makes the organization less agile, it is inevitable in a large global company. But complexity is an avoidable enemy of growth if you know what you are doing.
The logic of growth through focus also suggests a very different view on planning and leadership. Many companies tend to make long-term strategic plans, but they often have a short attention span in execution. CEOs and business leaders get seduced by doing something new and different well before the strategy has had time to play out. We recommend the reverse: Plan quickly and then stay the course for a long time, as long as five years. Leaders should resist the temptation to change strategies too often.

Seven Steps in Growth through Focus

Our experience suggests that growth through focus requires the organization to progress systematically through a set of seven steps: discovery, strategy, vision, people, execution, organization, and metrics. Taken together, they represent a powerful formula for driving profitable growth.

1. Discovery: Figure Out What Works

Science fiction author William Gibson observed, “The future is already here. It’s just not very evenly distributed.” And so it is with excellence. All large companies have pockets of excellent growth performance. The first step in the growth journey is to discover what is working well and where the company is already winning. These pockets of excellence help identify focus areas for growth. An effective way to uncover what works is to conduct a series of workshops with the top leaders from the company.
At Unilever’s Lipton beverages business, the process began at Colworth House, the company’s R&D center in the United Kingdom. The top 100 leaders of Unilever beverages from around the world were invited to a workshop in 2000, whose agenda was to build upon what was working well in specific markets and to scale the success across other geographies. One year later, this was followed by a “10 in 10” workshop in Brussels to discuss how to achieve sales of US$10 billion within 10 years in these markets and to imagine the future of Lipton as seen through the eyes of Unilever’s major competitors.
In Kraft Foods’ international business, the growth process kicked off in 2007 with seven workshops in six locations around the world, each including about 20 of the company’s regional business leaders. The agenda was open-ended, with the top leaders taking a backseat to prevent their rank from impeding the flow of ideas and insights. An external facilitator ensured that collective experience was gathered objectively. The workshops focused on what worked rather than on what did not work, because it is easier to build on what is working than to fix what isn’t working. To ensure a customer focus, workshops included extensive immersion with consumers and customers to provide insights into behavior, needs, and problems. This kind of immersion generates insights in ways that quantitative market research never can.
A few themes began to emerge from the workshops. Kraft Foods had excellent people, but their insights and ideas had been getting lost because of geographic dispersion, and their potential was not being fully realized. The company’s iconic brands had been built over many years, but several were underperforming. The planning process had tended to focus internally instead of externally, and had looked backward rather than forward. There was a lot of emphasis on analyzing what happened instead of figuring out what needed to be done. The conclusion was clear. The company urgently needed to establish clear priorities and accountability at a global, regional, and local level.
At the outset, the discovery process should be inclusive and democratic. It is important to involve key stakeholders within the company, particularly those who can make a valuable contribution and those who have the influence to get the masses of employees behind them. In addition, great insights often come from engaging with suppliers, creative and media agencies, and consultants who have worked with the company for a long time. On the other end of the spectrum, it is also important to listen to people who push back — and to manage dissent. As the process goes on and the framework and vision are agreed upon, debate on the strategic framework should cease and the emphasis should switch to execution.

2. Strategy: Focus through Lenses

The discovery process produces a set of success themes. In the second step, these themes need to be clustered and prioritized to define the focused bets that the company should make. Narrowing the focus is essential in order to concentrate resources on areas where the company has the best chances of winning. To take an analogy from photography, sharpening the focus on an object requires a telephoto lens that homes in on the subject while de-emphasizing background objects. Similarly, we have found that strategic focus requires lenses through which a company can look at its businesses. Lenses can be categories that the company is doing well in, brands that are performing well, geographies that are doing a stellar job, and platforms (like wellness or bone health in healthcare) that can serve to unify the company’s products and brands.
Consider the experience at Fonterra Brands. Through the discovery process, the company used two lenses — a product platform and a distribution channel. Using the platform lens, Fonterra identified osteoporosis as a key platform to bet on, based on its expertise in bone-health products. To pursue leadership on this platform, Fonterra entered into a partnership with GE Healthcare’s Lunar business to tackle the growing global health problem of osteoporosis using Fonterra’s Anlene bone-health products and GE Healthcare’s bone density technology. The partnership’s first initiative was the Anlene Bone Health Check, which provided free bone density screenings to millions of people in nine countries in Asia.
Using the second lens, Fonterra bet on the food-service channel as a key to its future growth. The outcome was a focused business called Fonterra Foodservices, which offers a complete suite of dairy products and tailored solutions for food-service professionals. Focusing through the distribution channel lens led to the strategy of creating a single “cow to customer” integrated business.
During the focusing process, each lens may produce several possible opportunities. These opportunities should be prioritized according to two criteria: the expected impact of the initiatives and the effort required. This exercise should result in a one-page preliminary plan that lists priorities for each lens. This preliminary plan should then go through several rounds of iteration with the input of key stakeholders. To improve the framework’s odds of adoption, it is important to involve as many of these stakeholders as possible in “owning” the outcome.
Once you find out what works, you can focus on it and scale the success to other markets, products, and brands. In the Unilever workshops, the company discovered that Lipton Portugal and Lipton Arabia were performing consistently well over time. Diving deeper into the reasons for this standout performance, the company found an interesting theme. In both markets, Lipton had been successful because it competed in the broad beverages market rather than limiting itself to the tea category. Further, in these markets, Lipton had done an excellent job of adapting its products to local tastes. For instance, Portugal had a successful iced tea business, whereas Arabia represented a successful hot tea market, despite the fact that Arabian countries have hot climates. The idea of taking a broader view of the business while remaining relevant to local tastes could be applied to Lipton’s other markets and categories.

3. Vision: Find a Simple Hook

Once the focus areas have been defined, the findings need to be summarized in a compelling yet simple vision. The vision serves as a rallying cry for the organization to align its efforts behind a clearly understood goal. Too frequently, the business strategies of large corporations are poorly understood outside the corporate headquarters and beyond the senior leadership of the company. To get everyone in the organization behind the strategy, it is vital to communicate the strategy across all levels and functions in the organization. This is the role that the vision plays.
To make the vision compelling yet easy to understand, we recommend creating a “hook.” The hook should be kept consistent over time and across customer touch points. It can be a color, a number, an acronym, a phrase, or a symbol. At Fonterra, the rallying cries were “Winning through Brands” and “Dairy for Life.” The vision embodied two themes: farmers’ pride (Fonterra is a cooperative owned by farmers) and the company’s emphasis on natural products, captured through the blue and green color of the company’s logo and merchandising. At Kraft International, the vision was expressed in numbers — “the 5-10-10 strategy,” which meant winning by focusing on five categories, 10 brands, and 10 markets. At Lipton, the vision was “Paint the World Yellow with Lipton.” The brand’s characteristic color signified brightness and sunshine, and stood for a broader Lipton beverage experience than just a cup of tea.
Once a vision is chosen, it needs to be launched with a bang through a seminal event designed to inspire the team. For Kraft Foods’ international business, the top 100 leaders were brought together on the 99th floor of the Willis (formerly Sears) Tower in Chicago in May 2007. The event kicked off with awards for teams around the world that recognized great work in various categories. Awards can set a positive tone, instill a can-do attitude, and make people feel like winners. At Lipton, the kickoff event was held at Colworth House, the 18th-century mansion at Colworth Science Park, where everything was painted yellow — including the lawn in front of the building. The theme “Paint the World Yellow with Lipton” was brought to life through winning stories from successful markets.
In communicating the vision, pictures are often worth a thousand words or PowerPoint slides. Simple visuals that depict the “from–to” journey can serve as powerful communication tools. Lipton used two visuals to bring the transformation journey to life — a picture of Audrey Hepburn, representing the Lipton brand as it was (classic, aristocratic, reserved), and a picture of Cameron Diaz, representing the new Lipton (bright, sunny, vibrant).

4. People: Unleash the Potential

Once the vision and strategy have been defined and powerfully communicated, the next step is to find the right people and to place disproportionate resources in their hands. The right people need to be placed in all functions — supply chain, R&D, marketing and sales — to ensure that you have the skills to win. Selecting those people requires a rigorous process of matching skills with the needs of the business. For instance, if the strategy involves focusing on a specific channel or set of brands, you need to find people who have expertise in the relevant channels and brands and put them in charge.
In Kraft Foods’ international business, significant changes were made in the top leadership. Less than two years after launching the transformation initiative, two-thirds of the top 30 leaders were new to their roles. Many of the new leaders came from within Kraft Foods. Some were hired externally, and some came from the successful acquisition of Groupe Danone’s biscuit business in November 2007. Similarly, at Lipton, a number of managers were hired from leading companies in the beverage industry (Coke, Pepsi, Schweppes) to augment the traditional grocery skills within Unilever.
Once new leaders are appointed, they need to be given the freedom to operate within the strategic framework so that their potential can be truly unleashed. Leaders should be challenged to act as entrepreneurs within large companies that have traditionally been perceived as process-driven and bureaucratic. In our experience, the biggest enemy of creativity and imagination in large companies is the budget. Resource constraints, real or perceived, limit the imagination of business leaders and prevent them from thinking creatively. To liberate people from these constraints, we recommend a counterintuitive approach: Give people huge targets and empower them with virtually unlimited resources. The targets should represent a quantum leap from historical results. Although it may seem that unlimited resources would encourage profligate spending, business leaders have a strong incentive to spend wisely, because they do need to deliver profits and margins, not just revenue increases. When leaders are asked to act like owners, they behave with an amazing sense of responsibility and often arrive at sensible trade-offs among risks, rewards, and resources. It is important that leaders not be penalized for failure unless they consistently fail to learn from experience.
Unleashing the potential of people also involves identifying and nurturing tomorrow’s growth leaders. During Kraft Foods’ transformation journey, a formal program called the Winners’ Circle was created to recognize and reward performance and potential in the international business. This program was designed after benchmarking against some of the world’s best companies. Rising stars from around the globe were nominated through a rigorous selection process, and the Winners’ Circle members were inducted into a leadership program designed to build their capabilities. Today, their career progress is carefully monitored and they are selected for challenging growth assignments across the company. The program has generated tremendous buzz within Kraft Foods because of its richness and depth.

5. Execution: Clarify and Delegate

With the discovery, strategy, vision, and people in place, the next challenge is execution. This is the most important step in the journey, and it is also the most difficult. Execution has two key elements. First, everyone needs to be clear about who will do what, to avoid ambiguity about roles and responsibilities. Second, decision making needs to be moved closer to customers and consumers so that the people responsible for results have the operating freedom they need. Most organizations have a mistaken conviction that the leadership team has superior knowledge on every subject. This belief conditions managers to assume that success lies in pleasing the leadership team rather than in winning in the market.
Kraft Foods found that the organization had become such a complex matrix that accountability was fragmented across functions, markets, and business units, yet decision making had become highly centralized. Decisions such as product pricing were being made at corporate headquarters, which took longer and excluded the rich knowledge and context of local markets. Even such routine decisions as the pricing of coffee in Germany were made at the corporate headquarters in Northfield, Ill.! This was changed to give business leaders the freedom to make decisions that would allow them to compete effectively in their markets. The role of corporate headquarters was made more strategic and less operational. Certain decisions involving food safety and purchasing were still kept centralized because they had to be made on a large scale, as opposed to those that demanded intimacy with local consumers and customers. These changes have had a profound effect in making the organization more nimble.
To accelerate execution, we recommend a strong bias for action. Business leaders should demand a dramatic reduction in internal documents and meetings. In our experience, too many meetings and documents foster analysis paralysis, promote internal focus versus external focus, and emphasize the past over the future. Much of the documentation is generated to please senior management, with endless hours spent on “wordsmithing” and editing. For the most part, we suggest a “no PowerPoint” policy in presentations; meetings are often far more productive if they focus on discussion based on pre-reading. Numbers may help tell the story, but too often, we find that numbers become the story and the big picture gets lost.

6. Organization: Build Collaborative Networks

Growth initiatives rarely fit within organizational silos of function, geography, and business unit. Rather, they need to be managed by creating communities and networks across the company, formal as well as informal. At Kraft Foods, certain networks, such as R&D, have always been strong. However, as business units were pushed to take P&L responsibility, it was important to set up collaborative networks to ensure that the best people with the best ideas were connected to leverage expertise and scale. Kraft Foods set up global category teams consisting of executives drawn from different functions and geographies to manage global brands, innovation, and supply chains across markets. Each team follows the approach that works best for its brand or category in terms of what needs to be done by whom, globally or locally.
Consider the example of Oreo cookies, one of Kraft Foods’ billion-dollar brands. Oreo was a strong brand in the United States but had historically been weak in the rest of the world. One reason was the assumption that what was good for Oreo in the U.S. was also good in China, the U.K., and elsewhere. The company learned from experience that this was not the case. To grow the brand in China, Oreo cookies were made less sweet to suit local consumer tastes. Oreo packages were made smaller, and new forms, like wafers, were introduced. Heavy emphasis was placed on local promotions and on-the-ground marketing activities unique to China. This localization, however, was carried out within the global brand positioning for Oreo. After implementation of the new strategy, Oreo became the market leader in China, and the Oreo business outside the U.S. began growing about 30 percent per year. Through the global category teams, Kraft Foods now has an energized, highly motivated community of employees around the world who sleep and dream Oreo.
This approach of matching skills with priorities and connecting communities to get the best mix of global and local ideas, within a clearly defined strategy, has a powerful effect in leveraging scale and expertise.

7. Metrics: Manage Numbers and Tell Stories

As the execution and organization processes get under way, it is important to keep score. Scorecards should be objective, and they should be kept simple. Overly complex metrics take attention away from the measures that really matter and can obfuscate execution priorities. At Kraft Foods, Chairman and CEO Irene Rosenfeld asked that the businesses create a one-page scorecard system that included three key measures — sales, profits, and cash flow. These three measures were made the basis for bonuses to all employees. This simple scorecard dramatically reduced reporting complexity and created clear accountability for results. Kraft Foods’ international business also uses a single-page scorecard to monitor the progress of the 5-10-10 strategy. Simplicity begets focus, because everyone knows what numbers the executives are looking at.
Managing growth requires a focus on numbers, but numbers alone are not enough. Storytelling is a powerful tool for propagating the culture of winning in the organization. A conscious effort should be made to write up and disseminate success stories from around the world. Leadership should make it a point at every large internal meeting to put successful people on the stage to share their stories with their colleagues. Success stories become part of the culture, and successful people become heroes in the eyes of their peers and managers. Moreover, highlighting the achievements of successful teams creates “positive shame”; the teams that are not on the stage feel strong peer pressure. This positive pressure is far more effective than the “negative shame” that would be created if the less-successful teams were berated in reviews.

Avoiding the Traps

With any transformation initiative, there are pitfalls to avoid and hurdles to overcome on the way to success. Here are a few to keep in mind in implementing growth through focus.
One common pitfall is to seek to build scale before fixing underlying problems. In choosing the markets and categories to focus on, for example, it is easy to get seduced by the size of the opportunity. Most large companies covet the hundreds of millions of consumers in emerging markets such as China, India, and Brazil. And they quote the minuscule per capita consumption of their products as an indicator of vast untapped potential. To convert potential into actual revenues and profits, however, you first need a business model that works. You must have the distribution reach, the supply chain, the manufacturing capabilities, and the right products before you can scale the business. Kraft Foods was in China for many years and had set ambitious targets that it did not achieve. In reality, the model was not working and the business was losing money. Scaling up the model simply made things worse. To fix this problem, Kraft Foods redesigned its business model, integrated its business with the acquired Danone biscuits unit, and got the appropriate talent on the ground. Only then did Kraft Foods’ business in China begin to grow and make money.
Another potential trap in implementing growth through focus is neglecting or mismanaging the parts of the business that do not fall within the core focus areas. This is the “tail” of your business — products, brands, categories, and markets that do not make it to the priority list. Consider, for example, the brand portfolio. Most large companies have hundreds of brands, but only a few will make it to the priority list. So what should you do with the rest? Simply cutting off the tail can be disastrous, because the decline of the tail is often faster than the growth of the core. Further, the non-core businesses often have fixed costs that are linked to the core businesses. Finally, cutting and divesting can have a huge demoralizing effect, because people often have strong emotional ties to some of these businesses.
What you need is a clear plan to manage the tail. We find it helpful to cluster the non-core businesses into two buckets — “milk or divest” and “local jewels.” The two buckets need very different management approaches. The first category includes businesses that do not make money and have no hope of making money, despite repeated promises of future turnarounds. These need to be divested over a defined time frame. Fonterra Brands exited markets such as Mexico and Egypt where the business had not performed well for some time, which freed valuable resources that could be redeployed to grow the core businesses. Local jewels are successful local businesses that can be retained in the portfolio but managed at arm’s length by local teams, leaving the global teams to focus on the core businesses. At Kraft Foods, the company found a number of such jewels that are now managed locally, but still help to provide scale in manufacturing and distribution. These businesses should be left to determine their own destiny but should be held accountable for revenues, margins, and cash flow.
Too often, when companies rationalize and focus, they slash expenses across the board. Two areas that take the brunt of cost cutting are people-related expenses (recruitment, training, travel) and brand advertising. However, talent and brands are the two most valuable assets for driving growth. We recommend increasing investments in hiring and developing talent, even ahead of the company’s needs. We also recommend increasing investments in building brands. The good news is that the growth-through-focus approach yields significant cost savings through elimination of management layers, reduction of overhead, and elimination of marginal businesses. Focus frees up resources that can be used to invest in the future.
Once a strategic direction has been established, it is important to stay the course until the strategy has been fully implemented. We find that large companies suffer from “corporate attention deficit disorder” — they tend to search for new strategies every few years, particularly after a change in leadership. But growth through focus requires patience and perseverance. In our experience, the transformation process takes as long as five years to play out. Leaders should resist the temptation to go for the “next big thing” in strategy peddled by management consulting firms and management gurus. Change for the sake of change merely produces a loss of momentum.
Finally, keeping a positive tone is vital to the success of growth through focus. It is very easy to slip into a negative spiral that can destroy morale and derail the transformation initiative. Although you do need to face the facts and make the difficult decisions, it is important to keep a positive tone and to promote a can-do attitude among employees. The energy that comes from winning is infectious. It inspires people to achieve goals that they have never before considered possible. Leaders should act as evangelists and cheerleaders, spreading the positive energy and making sure the teams are having fun at winning.
The sun generates a tremendous amount of energy, but it gives us only a warm glow. By contrast, a laser beam that uses a few kilowatts of energy can cut through metal. Such is the power of focus. If you are running a large global business with a big portfolio of brands, products, and markets, adding to your portfolio is likely to create more complexity than growth. To win in your businesses, you must harness the power of focus. By following the seven steps in our blueprint, business leaders can drive profitable growth even in difficult economic times. 

Building Scale for Focus: A Tale of Two Acquisitions

Growth through focus involves a reduction in the number of products, categories, brands, and markets that the company should focus on. But it also demands an increase in the scale of the businesses that the company chooses to focus on. Scale can be generated by building on the brand and product assets that the company has in its portfolio through organic growth. However, organic growth may not be enough to get to the required scale, particularly when the company is betting on markets or categories in which it is not a market leader. Further, in some emerging markets, building distribution networks from scratch is a Herculean task. This is where acquisitions play an important role in the growth-through-focus approach. They can help the company acquire scale in its chosen domains. The acquisition strategy should be driven by the focus strategy, and a clear logic should link the acquisition to the strategic framework for growth.
Consider Kraft Foods. The company had chosen biscuits and chocolates as two of the categories it wanted to focus on. It had also determined that markets like India, China, Brazil, Russia, and Mexico would be important for the company in the future. However, it lacked the scale, the brands, and the distribution networks it needed to compete globally in these categories and these markets.
Using this focus strategy, Kraft Foods identified two key acquisitions — the global biscuit business of Groupe Danone and Cadbury PLC, the U.K.-based confectionery company. In November 2007, Kraft Foods acquired the global biscuit business of Groupe Danone for US$7.8 billion. After this acquisition, Kraft Foods’ biscuits business accounted for 20 percent of the company’s revenue and catapulted Kraft Foods into the leading position in this category across the world. More importantly, it gave Kraft Foods an engine for faster growth in emerging markets. And in February 2010, Kraft Foods completed the acquisition of Cadbury for $19.5 billion, which has made the company a global powerhouse in snacks, confectionery, and quick meals. Kraft Foods now has access to Cadbury’s strong international distribution networks, which will allow it to penetrate deeper into emerging markets.

The focus lenses chosen in the second step of our approach can be used to identify and prioritize acquisition targets. In the case of Kraft Foods, the Danone biscuits and Cadbury business were attractive targets because they represented a triple win on the 5-10-10 scorecard — priority categories, strong brands, and strong presence in the key markets that Kraft Foods had decided to focus on. Further, these acquisitions brought in talent and a diversity of culture that will be a powerful asset for Kraft Foods as it grows its international business.
strategy and business

Author Profiles:

  • Sanjay Khosla is president of Developing Markets and Global Categories for Kraft Foods. He has more than three decades of leadership experience in global consumer packaged goods companies and has lived and worked around the world.
  • Mohanbir Sawhney is the Robert R. McCormick Tribune Foundation Clinical Professor of Technology and director of the Center for Research in Technology and Innovation at Northwestern University’s Kellogg School of Management. He has coauthored five books and many articles on marketing, technology, and innovation.

The Fivefold Agenda of the Enterprise of the Future


According to IBM Global CEO Study titled “The Enterprise of the Future”. “Disruptive by Nature” is the fourth of the five characteristics that define the Enterprise of the Future.

Business processes, as well as some products and services, are becoming more virtual. New delivery channels and electronic methods of distribution are overturning traditional industry conventions. And these advances are not just changing the way individual companies work — they’re creating entirely new industries according to the survey.

Bottom line is simple. If the company is not ‘disruptive by nature’ it will be very difficult avoid commoditizing of its products or services. Future organizations cannot just capitalize on existing product advantage they possess. They need to continually look for ways to disrupt their own products and services. If they are not willing to do it, it’s quite likely that their competitors will be working on those products substitutes.

According to the study, The Enterprise of the future is:

1) Hungry for change: The Enterprise of the Future is capable of changing quickly and successfully. Instead of merely responding to trends, it shapes and leads them. ip info Market and industry shifts are a chance to move ahead of the competitions

2) Innovate Beyond Customer Imagination: The Enterprise of the Future surpasses the expectations of increasingly demanding customers. Deep collaborative relationships allow it to surprise customers with innovations that make both its customers and its own business more successful.

3) Globally Integrated: The Enterprise of the Future is integrating to take advantage of today’s global economy. Its business is strategically designed to access the best capabilities, knowledge and assets from wherever they reside in the world and apply them wherever required in the world.

4) Disruptive by Nature: The Enterprise of the Future radically challenges its business model, disrupting the basis of competition. It shifts the value proposition, overturns traditional delivery approaches and, as soon as opportunities arise, reinvents itself and its entire industry.

5) Genuine, Not Just Generous: The Enterprise of the Future goes beyond philanthropy and compliance and reflects genuine concern for society in all actions and decisions


Post-Recession Ways of Thinking Ahead in Business

  •     Identifying Opportunities & Mobilizing Knowledge Resources: Strategic planning and investment for competitiveness
  •     Creating actionable and achievable plans
  •     Providing ongoing analysis and benchmarking
  •     Aligning Incentives and Investments
  •     Bridging Sustainability and Economic Development: New policies for a changing world
  •     Enterprise Design Coordination – Adaptive Business Processes and Workflows
  •     Dynamic Resource Management
  •     Intelligent Business Decision Support
  •     Event-Driven Planning and Scheduling
  •     Leadership refocused with new strategy and cohesive vision
  •     Strategic plans created for the global marketplace
  •     Supply chains streamlined
  •     Products redefined
  •     New markets targeted
  •     Cost-saving measures developed
  •     Silos leveled & Teams aligned

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The 3 key elements & the 8 key aspects of mindfulness meditation


Our modern world has become unbalanced, with little time allocated for just “being” and reflection.  Mindfulness can restore that balance to leaders and workplaces. Mindfulness, practiced  in organizations, can be a powerful antidote to the fear and aggression build-ups.
High-performance organizations, such as  Apple, Procter and Gamble, Unilever, Raytheon, Microsoft, SAP, NortelNetworks, Comcast, Yahoo, Google, eBay are offering employees classes in mindful meditation and senior executives such as Bill Ford Jr., Michael Stephen, Robert Shapiro and Michael Rennie practice regular mindful mediation as part of their leadership-enhancement routines.


Mindfulness can restore balance to leaders and workplaces

Research contests that  mindfulness-enhanced traits include the capacity to suspend judgments, to act in awareness of our moment-to-moment experience, to attain emotional equilibrium.
Jon Kabat-Zinn, founder of the Mindfulness-Based Stress Reduction Clinic at the University of Massachusetts Medical School, describes mindfulness as “paying attention in a particular way, on purpose, in the present moment and non-judgmentally.” Other definitions are: “bringing one’s complete attention to the present experience on a moment-to-moment basis,” and  “it includes a quality of compassion, acceptance and loving-kindness.”

David Rock, writing in Psychology Today argues that “busy people who run our companies and institutions …tend to spend little time thinking about themselves and other people, but a lot of time thinking about strategy, data and systems. As a result the circuits involved in thinking about oneself and other people, the medial prefrontal cortex, tend to be not too well developed.” Rock says “speaking to an executive about mindfulness can be a bit like speaking to a classical musician about jazz.”

The three fundamental elements of mindfulness are:

  • objectivity,
  • openness, and
  • observation

All together, create a threefold that enable the mind to become conscious of its mechanics and liberate it from its preoccupations of indecisiveness.

Staying Creative Under Pressure


John Baldoni  a leadership consultant,and author of eight books, including Lead Your Boss, The Subtle Art of Managing Up, contests that creating urgency to save a sinking ship is imperative. Working long hours to do so is also critical, but working day after day for months on end without a break is a bad idea. When a team is crashing on a deadline, pulling together can be energizing. But when there is no deadline in sight, the long hours exact vengeance in the form of loss of energy as well as diminished commitment. Managers do not become more creative by working harder; they burnout more quickly. You need give people a break from the day to day flow of work.

Here are some suggestions for sustaining performance under pressure…

Set standards. The team leader must make it clear that during the crisis people are expected to assume a greater work load. The leader sets the example by taking more than his fair share of the work. Part of that work means being there for his team. At the same time, the leader does not need to decide how individuals must work. Often employees can decide how best to do their jobs. For example, mandatory meetings are fine, but every meeting need not be mandatory.
Get a buddy. One way to work smarter is to do what I have seen efficient organizations do. Team up with a co-worker to cover for you, not simply on vacations but also during times you will be out of the office. If your buddy is junior to you, then it can be a development opportunity. The leader can also buddy with a colleague or boss to stand in for him, too. Many organizations preach team as in collaboration but too few take advantage of treating teammates as partners. You can do more when individuals work together.
Mandate fresh air time. Get out of the office from time to time. This can be as simple as going out for lunch, or taking a walk in the afternoon. Clock time in the gym, too. Fitness is essential for tackling a heavy workload. The leader also sets the tone by making time for himself. When the team sees the boss taking a break (mental or physical), it gives the team permission to do likewise. Without the leader’s example, no one will follow through on making time for self.
Clocking long hours is not reserved for the corporate suite. Working in government, or even in the highest office in the land — the White House — can be grueling. President Obama vowed to make his administration family friendly, but as his chief of staff, Rahm Emmanuel quips, “It’s friendly to your [Obama] family.” As a result many staffers, as reported in the New York Times, are feeling stressed chiefly because they miss time with their families. Continued long stretches of working extraordinary hours will cause talented people to leave early.
Taking breaks is not the same as doing business as usual. It is an acknowledgement that people are your most valuable resource. They need rest and relaxation as well as an opportunity to reconnect with their families. Rather than diminish urgency, it heightens it. Getting outside of the bubble of work allows the mind and body to recharge and be better prepared to face the gauntlet of challenges that lie ahead.

21 Powerful Ways to Motivate Yourself When You’re in a Slump


Slumps can be devastating. They can take an otherwise productive, happy person and reduce him to a lethargic, depressed, indifferent person.

So what do you do?
If you’re like most people, you take a break from all of your projects and aspirations.
And you spend some time feeling depressed and indifferent to progress.

After a few weeks or months have passed, you exit your slump, but you do so very aware of how much time you’ve lost and how many opportunities you’ve forgone.

In the remainder of this guide, I’m going to help you to avoid that scenario. Instead of losing weeks or months to this slump or the next slump, you’re going to learn 21 ways to re-motivate yourself, refocus your life and goals, become happy and productive; and leave this slump in the distant past.
1. Take Action. Before you landed in this slump, you had goals, dreams, and lists of things you needed to do to accomplish them. At some point, you lost confidence in these ideas and stopped working on your projects and carrying out your dreams.
Well, it’s time to pursue those dreams once again. And you can do so by taking action. Ignore your feelings of lethargy and indifference and focus on making tangible progress. As you start checking things off of your “to do” list, you’ll feel better about yourself and the possibility of accomplishing your goals.
2. Ratchet Up Your Efforts. Working hard does not guarantee that you will accomplish your goals. But not working hard will undoubtedly ensure that you do not.
Be mindful of this when you’re deciding what to do for the day. Don’t simply drift along, waiting for your projects to make sense of themselves. Take control, make plans, and move towards them each day.
3. Pay Attention to People Who Have Succeeded. Just because someone else succeeded doesn’t mean you will. But it can provide a motivational example of path to your goal that has worked for someone else.
So, cast aside your doubts, stop telling yourself that you can’t do what others did–and instead take their examples for what they are: a source of inspiration and hope. And, most importantly, a means to get out of your slump.
4. Learn by Doing. If you’re faced with a complicated decision with no clear answer, one of the best ways you can move forward is to simply do, rather than thinking.
What do I mean by this? Instead of persevering on the decision, pick one of the options in front of you; and move forward with your best effort to make it work.
If you fail ultimately, at least you can eliminate that path as a dead-end and then move forward with the other path.
5. Avoid Over-thinking. Thinking hard and carefully about many things is critical to success, but if taken to an extreme, it can become pathological. It can paralyze talented, driven individuals; and prevent them from attaining the success they would otherwise have.
So, next time you find yourself paralyzed by a decision, stop over-analyzing the situation–and just pick one path or the other.
6. Re-organize Your Work Area. No matter what you do, it’s always a good idea to have everything you need organized and within close reach. Re-organize your work area, so that it is a productive environment, rather than a sprawling, disorganized heap of documents.
7. Start Afresh. One frequent source of slumps is boredom. If you’re unhappy with your current routine, it may affect your ability to work and to accomplish your goals. Consider switching your daily routine to something new that excites you and motivates you to accomplish new things.
8. Reward Yourself. Surprisingly, slumps are very common among those who work hard. Why? Because, eventually they hit a wall, can’t figure out how to get around it, and keep working until they’re thoroughly burnt out and frazzled.
So, don’t do this. Set specific goals, accomplish them, and then reward yourself by taking the rest of the night off to relax. When you come back to your work, you’ll be happy and refreshed.
9. Visit a New Place. Instead of mindlessly chugging along with your daily route, break free and visit a new place. Take a drive to the beach or to a lake. Take a walk through the woods. Drive somewhere new and relaxing. Experience the small pleasures in life to demonstrate to yourself that there are reasons to move forward, to make progress, and to indulge in life.
10. Refocus Yourself. Slumps tend to make life feel unclear, unfocused, and pointless. Take some time to refocus yourself, re-think your aspirations, and decide what goals to keep and what goals to discard.
11. Schedule Things, Rather than Letting Things Happen to You. Don’t allow your schedule to morph into an unpredictable, unmanageable blob. Take the time to record things you need to do, schedule them into your life, and tend to them carefully. This is not only a good way to prevent disasters, but also to commit yourself to getting work done.
12. Physical Activity. The cause of slumps is not always or entirely psychological. In many cases, complacency and a lack of physical exercise can leave us in a mental fog. One cure for this problem is to get some vigorous exercise. Not only will it get your blood pumping and make your thoughts clearer, but it will also release endorphins, making you feel happy and more satisfied with your life and goals.
13. Eliminate Negative Thoughts. Skepticism and self-doubt are healthy when applied in moderation, but when they prevent you from achieving your goals, it may be time to reign them in. If you constantly find yourself doubting that you an accomplish something, instead re-direct your thoughts towards considering how you can accomplish it.
14. Challenge Yourself to Accomplish Something New. If you find yourself repeating the same tasks on a daily basis, you may become bored and complacent. Find ways to challenge yourself–for instance, by seeing whether you can do some task in half the amount of time–so that you engage your work and goals, rather than becoming indifferent to them.
15. Create Artificial Scarcity. Most people work best when they have no other choice. When that project is due in two days, you buckle down, stay focused, and get it done. But one week before that, you probably sat in front of the computer, “working” on it, but truly got very little accomplished.
Next time, start on the project later, rather than sooner. Save that extra time when you wouldn’t really be working to do something fun and refreshing.
16. Change Your Diet. Another frequent cause of “slumps” is diet. If you find your busy schedule forcing you into an unhealthy diet that causes you to put on weight and feel sluggish, put an end to it immediately. Not only will this help you physically, but it will help you to avoid the mental and emotional burden that comes with weight gain and unhealthy eating.
17. Spend a Day to Improve Your Productivity. Hard work isn’t the only ingredient in success. Another critical component is productivity. You can think about productivity as the amount you accomplish in each hour. So, spend an afternoon or even a full day figuring out how you can be more productive. This might simply mean re-arranging your filing cabinet or learning how to use certain programs on your computer better.
18. Simplify Your Goals. It’s often easy to convince ourselves that our goals have to be complicated and hard to achieve. But it many cases, there are achievable, simple goals that are still very desirable. So, take some time to decide whether you can make your goals clearer, simpler, and easier to attain.
19. Take the Path of Least Resistance. Instead of taking the path you think you “should take” or “ought to take,” instead focus on what paths cause the fewest problems and present the fewest challenges. If you can find and exploit these paths, you’ll save yourself time and make it easier to finish what you set out to do.
20. Sleep More. Many hard-working individuals whip themselves up into a frenzy; and convince themselves that they should never stop working. When taken to an extreme, this can be very detrimental to their goals. Keep this in mind when deciding whether to go to sleep or to keep working late into the night. If you don’t sleep, you might get more done tonight, but you’ll definitely be tired and get less done tomorrow. So go to sleep and come back refreshed tomorrow.
21. Make an Effort to Learn from Others. Rather than always focusing on your own stories and struggles, make a concerted effort to truly understand other people and their daily trials. Learn from them, absorb their stories, and use them to motivate yourself.
No matter how depressed and indifferent you feel right now, you have the capabilities to break out of your slump. You have 21 different ways in which you can do it. It’s just a matter of taking a handful of them, living by them on a daily basis, and pushing forward.
So, don’t let your slump get the best of you. Reclaim your career, your family life, your goals, your aspirations, and your hunger for new and challenging experiences. Leave this slump in your past; and return to your productive, happy life.

Three Key Questions to Foster Competitive Advantage


James Heskett, a Baker Foundation Professor, Emeritus, at Harvard Business School, examined the degree to which strategy, execution, and culture contribute to organizational success, via 3 key questions that reflect all aspects of competitive sucess:

1. If your organization’s performance (operating income) = 100%, roughly what percentage is accounted for by the quality of the organization’s strategy (clients we target; products, services and results we offer; the way we organize and compensate people, etc.) vs. seo data the quality of the organization’s execution of its strategy (the quality of our people, work, processes, decisions, etc.)?2. If your organization’s strategy = 100%, roughly what proportion of its effectiveness is dependent upon and accounted for by the organization’s culture (widely-shared values, beliefs, behaviors, rites and rituals, etc.)?3. If the execution of your organization’s strategy = 100%, roughly what proportion of its effectiveness is dependent upon and accounted for by the organization’s culture?

The traits of of Emerging Leaders


Key points for spotting emerging leaders:

  • individuals who consistently deliver ambitious results for the company
  • individuals who consistently demonstrate the ability to grow, adapt, and be more flexible than their other top performing peers
  • individuals who ask for opportunity and expand their capacity of operation and influence
  • individuals who take things to the next level (ie: imagination, creativity, product futures etc)
  • individuals who have strong powers of observation, judgment, reactions that are spot on
  • individuals who are clear thinkers and have a point-of-view that may be counter to the trend, and finally
  • individuals who ask questions that are insightful that get the thought process into a creative frenzy.

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Thinking Ahead Visions: The Leadership Circle


“Leaders get the best out of followers and followers get the best out of leaders,” says Manfred Kets De Vries, Clinical Professor of Leadership Development at INSEAD.

The connection between leaders and their staff is only one of many circular connections he sees.

The challenge for leaders multiplies as organisations get bigger and as globalisation makes companies more diverse and more virtual.  “It’s very hard to manage large organisations, things become so enormous,” he said in an interview with INSEAD Knowledge.
Another circular challenge for leaders is to keep an organisation growing over generations. “To me, the real test of a leader is how well his or her successor does, and very few leaders pass that test,” he says.
Leaders have to help people re-invent their organisations. Kets De Vries imagines this as an ancient mythical serpent that swallows its tail but is constantly reborn in a circular connection.
To complete that circle, leaders are required to leverage their vision and their skills to create sustainable, results-oriented organisations. He believes group or team coaching is one of the most effective ways of achieving that long-term success.
Kets De Vries, the Director of INSEAD’s Global Leadership Centre, recently won a lifetime achievement award from the International Leadership Association for his contributions to the study of leadership. It was the first time the prestigious organisation had given the awards.
His extensive work in coaching business leaders has led him to believe that leaders need greater self-awareness: “Many executives don’t know themselves very well.” Some know the issues but they don’t know how to shift direction. Kets De Vries says for those executives it’s very difficult to set the right goals and get people to buy into your values and goals.
“Leaders need to help people think outside of the box,” he says, adding:  “When you are riding on a dead horse the best thing is to dismount. Many people try to keep on riding the dead horse, but you have to do something different.”

That requires teams of good leaders not just a single strong executive in any successful organisation. “Leadership is a team sport,” he says. That team needs to have clear goals and values. The leadership teams that are most successful know how to get people to buy into those values and practice those values.
Leaders, he believes, should strive to create better places to work. Kets De Vries argues that isn’t just an altruistic notion. Work today is complicated by rapidly changing technology, virtual working teams separated by cultural and geographical differences and the challenges for individuals of managing their own careers.
Workers want jobs that make them want to come to work everyday and that should be an important goal for any executive.
Leaders who make a deep connection with their employees will succeed, he says.  They lead in ways that are symbolic – as well as literal – to create organisations where people feel like they can and should do their best.
“You have to get people’s hearts and minds and get them to buy into the DNA of an organisation,” he says.

Thinking Ahead Insights: Managing the present from the future

  • Assemble a critical mass of key stakeholders.
  1. Many more than just the top 8 to 10 leaders.
  2. Should include key technologists and leading process engineers.
  3. Group should be sufficiently diverse to ensure conflict, which will get issues on the table so they can be resolved.
  4. Have to decide how it’s going to happen.
  • Do an organizational audit to generate a complete picture of how the organization really works.
  1. Understand the competitive situation.
  2. Reveal barriers to moving from “as is” to the future.
  3. Core values.
  4. Key systems.
  5. Strategic assumptions.
  6. Core competencies, etc.
  • Create urgency.
  1. A threat that everyone perceives, but no one is willing to talk about, is most debilitating to an organization
  2. Book of Five Rings  Japanese guide for samurai warriors. Written four centuries ago, directs the samurai to visualize his own death in the most graphic detail before going into battle. Idea being, once you have experienced death, there is not a lot left to fear: one can then fight with abandon.
  3. This helps explain the value of discussion about not changing and the dire consequences to a company in a difficult business situation.
  • Harnessing contention.
  1. Conflict jump-starts the creative process.
  2. Most companies suppress contention.
  3. Control kills invention, learning and commitment.
  4. Emotions often accompany creative tension, and they are often unpleasant.
  5. Intel plays rugby; your ability at Intel to take direct, hard-hitting disagreement is a sign of fitness.
  6. Many excellent companies build conflict into their designs.
  • Induce organizational breakdowns that foster out-of-the-box thinking and solutions.
  1. Breakdowns should happen by design, not accident.
  2. In trying to manage back from the future, concrete tasks will have to be undertaken; continuing on the current path will not get you there. Often you don’t know how to make these tasks occur. This will generate breakdowns, which can generate out-of-the-box thinking and solutions, if the situation is managed/lead correctly. ip info . Continuous open dialogue is key to working through breakdowns.
  3. Setting impossible deadlines is another way to encourage breakdowns and out-of-the-box thinking


Insights from: “The Reinvention Roller Coaster: Risking the Present for a Powerful Future.” By Tracy Goss, Richard Pascale and Anthony Athos.

Make Great Leadership Decisions

Why do leaders fail?
They make bad decisions.
And in some cases they compound bad decision upon bad decision.

The truth is that even leaders who don’t fail make bad decisions from time-to-time. Those leaders who avoid making decisions solely for fear of making a bad decision, or conversely those that make decisions just for the sake of making a decision will likely not last long. The fact of the matter is that senior executives who rise to the C-suite do so largely based upon their ability to consistently make sound decisions.

Making sound decisions is a skill set that needs to be developed like any other. The first key in understanding how to make great decisions is learning how to synthesize the overwhelming amount incoming information leaders must deal with on a daily basis, while making the best decisions possible in a timely fashion. The key to dealing with the volumenous amounts of infomation is as simple as becoming discerning surrounding the filtering of various inputs.
Understanding that a hierarchy of knowledge exists is critically important when attempting to make prudent decisions. Put simply…not all inputs should weigh equally in one’s decisioning process. By developing a qualitative and quantitative filtering mechanism for your decisioning process you can make better decisions in a shorter period of time.

The hierarchy of knowledge is as follows:

  • Gut Instincts: This is an experiential and/or emotional filter that may often times have no current underpinning of hard analytical support. That said, in absence of other decisioning filters it can sometimes be all a person has to go on when making a decision. Even when more refined analytics are available, your instincts can often provide a very valuable gut check against the reasonability or bias of other inputs. The big take away here is that intuitive decisioning can be refined and improved. My advice is to actually work at becoming very discerning.
  • Data: Raw data is comprised of disparate facts, statistics, or random inputs that in-and-of-themselves hold little value. Making conclusions based on data in its raw form will lead to flawed decisions based on incomplete data sets.
  • Information: Information is simply an evolved, or more complete data set. Information is therefore derived from a collection of processed data where context and meaning have been added to disparate facts which allow for a more thorough analysis.
  • Knowledge: Knowledge is information that has been refined by analysis such that it has been assimilated, tested and/or validated. Most importantly, knowledge is actionable with a high degree of accuracy because proof of concept exists.

Even though people often treat theory as knowledge, and opinion as fact, they are not one in the same. I have witnessed many a savvy executive blur the lines between fact and fiction resulting in an ill advised decision when decisions are made under extreme pressure and outside of a sound decisioning framework. Decisions made at the gut instinct or data level can be made quickly, but offer a higher level of risk. Decisioning at the information level affords a higher degree of risk management, but are still not as safe as those decisions based upon actionable knowledge.
Another aspect that needs to be factored into the decisioning process is the source of the input. I believe it was Cyrus the Great who said “diversity in counsel, unity in command” meaning that good leaders seek the counsel of others, but maintain command control over the final decision. While most successful leaders subscribe to this theory, the real question in not whether you should seek counsel, but in fact where, and how much counsel you should seek. You see more input, or the wrong input, doesn’t necessarily add value to a decisioning process. Volume for the sake of volume will only tend to confuse matters, and seeking input from sources that can’t offer significant contributions is likely a waste of time. Two other issues that should be considered in your decisioning process as they relate to the source of input are as follows:

  1. Credibility: What is the track record of your source? Is the source reliable and credible? Are they delivering data, information or knowledge? Will the source tell you what you want to hear, what they want you to hear, or will they provide the unedited version of cold hard truth?
  2. Bias: Are there any hidden and/or competing agendas that are coloring the input being received? Is the input being provided for the benefit of the source or the benefit of the enterprise?

The complexity of the current business landscape, combined with ever increasing expectations of performance, and the speed at which decisions must be made, are a potential recipe for disaster for today’s executive unless a defined methodology for decisioning is put into place. If you incorporate the following metrics into your decisioning framework you will minimize the chances of making a bad decision:

  1. Perform a Situation Analysis: What is motivating the need for a decision? What would happen if no decision is made? Who will the decision impact (both directly and indirectly)? What data, analytics, research, or supporting information do you have to validate the inclinations driving your decision?
  2. Subject your Decision to Public Scrutiny: There are no private decisions. Sooner or later the details surrounding any decision will likely come out. If your decision were printed on the front page of the newspaper how would you feel? What would your family think of your decision? How would your shareholders and employees feel about your decision? Have you sought counsel and/or feedback before making your decision?
  3. Conduct a Cost/Benefit Analysis: Do the potential benefits derived from the decision justify the expected costs? What if the costs exceed projections, and the benefits fall short of projections?
  4. Assess the Risk/Reward Ratio: What are all the possible rewards, and when contrasted with all the potential risks are the odds in your favor, or are they stacked against you?
  5. Assess Whether it is the Right Thing To Do: Standing behind decisions that everyone supports doesn’t particularly require a lot of chutzpah. On the other hand, standing behind what one believes is the right decision in the face of tremendous controversy is the stuff great leaders are made of. My wife has always told me that “you can’t go wrong by going right,” and as usual I find her advice to be spot on…Never compromise you value system, your character, or your integrity.
  6. Make The Decision: Perhaps most importantly you must have a bias toward action, and be willing to make the decision. Moreover as a CEO you must learn to make the best decision possible even if you possess an incomplete data set. Don’t fall prey to analysis paralysis, but rather make the best decision possible with the information at hand using some of the methods mentioned above. Opportunities and not static, and the law of diminishing returns applies to most opportunities in that the longer you wait to seize the opportunity the smaller the return typically is. In fact, more likely is the case that the opportunity will completely evaporate if you wait too long to seize it.

By Mike Myatt, Chief Strategy Officer, N2growth

How IT can play a key role in developing corporate strategy


Charlie Feld, the former CIO of Frito-Lay and a pioneer in his field, explains how IT can play a key role in developing corporate strategy.

Charles (“Charlie”) Feld began his career in information technology leadership at IBM in 1966, back in the days of the mainframe and whirring tape drives, when IT was separated from the rest of the business by the proverbial glass wall. Since then, he has seen vast changes in both the technology that underpins how businesses operate and in how IT and its relationship with the business are managed. He has contributed greatly to those changes, most notably as CIO of Frito-Lay Inc. in the 1980s, where he pioneered the use of wireless handheld devices that enabled delivery people to constantly update sales figures from the road. Today, he is a leading advocate of the evolution of IT from a provider of services to an enabler of overall strategy, especially when innovative uses of technology can transform the way a business operates.
Following his work at Frito-Lay, Feld developed a general framework for IT-enabled business transformation. This led to his founding of a consultancy called the Feld Group in 1992 (it was subsequently purchased by EDS in 2004, became part of Hewlett-Packard Company in 2008, and is now independent again). That framework, and its related management techniques, has been the basis of his approach ever since, and it forms the basis of his new book, Blind Spot: A Leader’s Guide to IT-Enabled Business Transformation (Olive Press, 2010). The Feld Group’s research arm, called the Center for IT Leadership, has championed a strategic role for IT in business transformation, and the role of the CIO as a leader in that transformation. This view of IT leadership is validated by experience at companies as diverse as BNSF Railway, Southwest Airlines, Delta Air Lines, Coca-Cola, WellPoint, and CBS.
Feld’s ideas have particular resonance today. As computing infrastructure and interface design continue to evolve, it is crucial for IT leaders to find a viable pattern for strong leadership, to build their own leadership capabilities, and ultimately, to ensure that their specialized knowledge is integrated with real-world experience in multiple aspects of the business.
Feld recently sat down with strategy+business to discuss a wide-ranging set of topics, including his transformation framework, the proper career path for CIOs, and how to encourage top executives to mentor the leaders of the future.
S+B: What was your purpose in writing Blind Spot?
My goal was to reenergize the dialogue around the strategic role of the chief information officer. I wanted to help CIOs and their counterparts throughout the executive team who are currently working on IT-enabled transformations. And I wanted to continue my contribution to the creation of the next generation of IT leaders. I believe that IT leadership will be one of the most exciting and critical corporate roles of the next 20 years.
Companies have tried taking their best technicians and putting them in charge of IT. That has worked, but only in some cases. They’ve also tried taking the best business executives and putting them in charge, and that has been spotty, at best. There is no simple solution. World-class CIOs must excel at the intersection of business and IT. In other words, they must become true renaissance leaders.
Many executives are beginning to develop a passion for this intersection. However, there’s no generally accepted framework in business and IT for learning, assessing, and measuring IT results, as there are in professions such as engineering, manufacturing, and finance. The CIO profession is still relatively new, and each individual learns on the job, through trial and error.
At the same time, technology has matured phenomenally over the last 50 years — much more rapidly than other functions. To go from wired boards to the kind of stuff we have now in just 50 years is spectacular. But the framework that businesses now need to harness, leverage, and manage this new type of IT — for communicating its potential, measuring its value, and making sure they get results — has not developed at the same pace at most companies.

Business leaders see Google and iPhones in use in their personal lives. They see really bright consultants, offshore firms, and software engineers developing powerful new tools. But when they go to their offices, they’re living with 30-year-old technology. They can’t understand why they can’t have what they see outside. These same business leaders would certainly understand the investment of time and money required to modernize their fleet or manufacturing equipment, as well as the benefits of doing so. But there is a lack of understanding about what is required to modernize IT systems. Instead, the CIO often gets berated. That is a common blind spot.
Being closely connected with business strategy is critically important. At Frito-Lay, we developed our own framework for IT-related change projects. It was based on the notion that we had to justify anything we did with IT in terms of the company’s overall strategy. We had to specify how we would use it, what it meant for the business, and how we would manage it. This was before people used words like alignment.
Driving Change through IT
S+B: What did your framework consist of?
It was built around four basic questions for leaders who are using IT to drive change: Why? (Why do anything?) What? (What will we do?) How? (How will we do it?) and Who? (Who will lead and manage the change?). It took a couple of years to develop the framework at Frito-Lay and several years to execute the transformation. (See Exhibit 1.)

The first stage, strategy, typically lasts about 90 days. You articulate a future-state plan and assess the skills, structures, and leadership abilities within the IT and technology group. You proceed from there in a very structured way, in 90-day increments, to planning the details and repositioning the organization — a stage we called the turn — to getting up and running with the new way of working, to hitting your stride and accelerating the change, and then to industrializing the new approach. The goal is to have the organization’s “muscle memory” rewired in order to accelerate results with consistency over time.
The framework worked great at Frito-Lay. The culture at Frito-Lay was very professional. Everybody in the company, including the executive team, grew up with this kind of discipline, structure, and culture. As new people came in, they learned and embraced it. We accomplished some really good things. But I didn’t know if what we had done and how we had done it at Frito-Lay were generally applicable to other businesses.
When I left in 1992 and started my own firm, the Feld Group, I convinced myself that just about any smart business executive at any company would understand the framework. And for the most part, IT people understood the principles. We started sharing this with companies and building teams of four or five highly skilled and experienced people from the Feld Group to help. That proved that the framework was generally applicable if executed and championed by a few strong IT leaders. It was successful, but not very scalable.
My mission now is to convey my experiences, ideas, and framework in a way that’s much more scalable. I’d like to do that by enabling current business and IT leaders to think and lead in ways that I’ve found to be effective and by helping to develop the next generation of business and IT leadership. My focus will be an open source approach — collaborative, open, and focused on enabling others. In other words, the model has IT leaders building and improving the framework, helping each other by expanding the body of learning from our first 40 years.

S+B: Do you see this kind of framework as applicable to any functional business problem, or is it strictly for IT?
The point is to enable CIOs to make their role wider. They must think of themselves, and be thought of by others in their organization, as a systems leader and an integrator, not just a technology leader. I know this is subtle, but it’s a critical difference required for them to help their companies realize the potential that IT could have if they use it well.
Both executive teams and IT organizations themselves have, in many cases, given up on the notion that IT is really important. They’re in the Nick Carr camp and believe “IT Doesn’t Matter” [the title of Carr’s May 2003 Harvard Business Review article about the commoditization of computer capabilities], and believe that you can just outsource information technology, forget about it, and it will be fine.
S+B: You’re suggesting that as companies outsource their computer systems and lower investments, the distinctive value of IT has diminished. It becomes a utility, just keeping the lights on.
And unfortunately, this kind of thinking doesn’t come to grips with the realities of growth: that a 21st-century business model requires a modern systems model. Customers demand it, operational excellence leverages it, and speed and innovation require it. If your company has been around for 40 years, unless you’ve been on a transformational journey for both business and IT, your systems evolution will leave you with a level of complexity in your data, interfaces, and platforms that makes IT slow and expensive. Therefore, if you want some new features, the cost and speed-to-market are a disadvantage. There is nothing quick about these systems. And customers hate dealing with your complexity.
The ideas that got us to this state weren’t bad. They were the best ideas of their time. You can go through the history of your system, and see why its designers did what they did. That was simply the state of the art in the 1980s and 1990s. Senior executives can be frustrated, but they need to understand the context that got us there.
S+B: How should today’s CIO at a Fortune 500 company build a case for transformation now?
To some extent, it depends on the situation. This framework can be used in a turnaround situation, in a moment of big business change (like a merger or a bankruptcy), or in an effort to take the business and IT to the next level. It’s easier for a new CIO, who can say, “Look, let’s establish where we are so that we can measure our progress.” A CIO who has been there for 10 years probably won’t have the same opportunity and will have to make a stronger move.
The first step is to establish a clear view of your current state. What is it about this system that impedes your speed-to-market, desired customer experience, economics, or supply chain leverage? You have to ask and answer the question, Why do anything? To justify the future, you’ve got to be able to describe the end state you could construct if you were unconstrained. That gives you an answer to the question, “What will we do?” If you have an honest and accurate assessment of the current state, a compelling “why,” and a vision for “what” you could build, you can begin to change the dialogue about IT in a matter of months.
In every company I’ve seen, people have been willing to spend money. But they’re not always spending it right. If somebody wrote you a check for $1 billion, you still couldn’t rip the old system out and replace it all at once. Even if you’re implementing a big transformational system, you need to do it in phases. So the “how” becomes the next part of the dialogue. In a way, it’s like urban renewal. You’ve got to connect it back to everything else because you’ve got to live in the city while you’re rebuilding it.

S+B: It sounds like the timing is governed by the business itself — the ability of the business to absorb the change, or the business need.
Or the affordability. Here is a way to think about an IT transformation. If I outsourced my IT and freed up 20 percent of my spending, I’d reinvest it. I wouldn’t just take it off the table. Therefore, unless you have a context — a place to go and an idea of what to reinvest in — within which to have this conversation with the executive committee and the board, you are probably just cutting costs.
However, if you have a multiyear plan, you will get closer to your vision each year. In fact, you’d be amazed at what you can get done in two to four years. From there, you will need to sustain and build on this success. You do this by industrializing the new way of doing things and by periodically reviewing and recalibrating your strategy. This will move you forward, toward a continuous renewal strategy, much as you would experience with your plant and fleet equipment.
S+B: How does a CIO gain the credibility to lead this way?
First of all, I believe that chief information officer is a misleading title. The role is not just about information or technology. It’s about systems and integration. You could still call it the “CIO,” but the mental model should be “chief integration officer.” The most important skills are to be a systems thinker and to be able to see the system that is the company.
This is made difficult by the tactical pressure of today’s business environment. Projects are in many cases an endless stream of work orders coming from the middle of the organization. You are constantly driven to build functional solutions, which inevitably don’t fit together. In an airline, for instance, if you optimize the gate schedules you cause problems in maintenance. If you optimize maintenance, you cause problems in flight ops. Whose job is it, if not the COO’s and the CIO’s, to make sure the whole system works — for customers, for employees, and for shareholders? In many cases, fixing the “seams” between functions gives you more value than fixing problems in any individual department.
A good way to think about systems thinking was articulated in Peter Senge’s The Fifth Discipline: The Art and Practice of the Learning Organization [Doubleday/Currency, 1990]. When things get complicated, you can learn through analysis — breaking down the problem into digestible components. But, as things get faster and more complex still, you have to learn from dynamics — seeing how the patterns evolve over time. To be a good IT systems person, you’ve got to have experience and an analytical mind, but to be a great IT leader, you’ve also got to be able to see dynamic patterns. Otherwise, you’ll keep building structures and programs that don’t connect to the larger ecosystem of your company: including customers, employees, suppliers, partners, and others.
Career Path for a Visionary CIO
S+B: You’re implying that the CIO needs to be a visionary who can convince people of the value of a bold direction.
This is a big, exciting, difficult, and critical role, pivotal to the future of large companies. I think about two major groups I’d like to help with this challenge and opportunity — the business and IT leaders who are in place today, and the future generation of leaders for whom the challenges could be even bigger down the road.
If I had a CIO role in a major enterprise today, I’d certainly be reaching out for help and collaboration. No matter how good you have been or think you are, things are changing so rapidly that good executives need to be open to others’ ideas, frameworks, tools, and experiences, and must constantly strive to develop their leaders. This type of 21st-century mind-set will help them in their jobs, help their departments, help their companies, and help the profession of CIOs.

A lot of smart and driven people are in position to take leadership. But again, this is hard, mission-critical stuff. Our profession is still young, and it lacks the necessary framework and truly strategic best practices. I think we can change that over the next decade.
The bigger challenge, and perhaps the bigger impact over time, lies in the development of the next generation of leaders — both on the business side and in IT leadership roles. We need versatile, multidisciplinary, multicultural leaders who can think strategically about systems and patterns and who can take leadership of an organization and drive execution.
If you’re at a company that doesn’t develop this sort of leader deliberately, you need to foster that effort more deliberately. In most companies, people come into the IT function and stay there for 20 years, as opposed to being moved about and given different experiences and a wider aperture. You’ve got to make investments in future high-potential leaders.
There are only two things you can’t teach people: IQ and a work ethic. People either have them or they don’t. But you can improve people’s contributions by improving their experiences and their perspective. The challenge is to take really bright people who know a lot, who work hard and are frustrated, and open them up to new experiences. Things look different from different angles.
If you want to get people to understand the business of a railroad, put them in the yards. Not as a management trainee; let them go work in the yard. If you’re at Home Depot, let your high-potential people work in the store for a couple of years. Make investments in them. If you have a really good young business leader in the planning department, put him or her in IT to learn the technology. Think of the role of IT and the development of your people as a whole system. Culture, performance, and leadership are all interwoven.
S+B: Can you illustrate this idea of talent development within an IT context?
Sure. If somebody is a mainframe information management systems developer working on the distribution system for 20 years, he or she is not going to have a broad enough perspective to be an IT leader. If you want to improve the capabilities of such people, you’ve got to give them more and different experiences. You have to plan their career cycle — what you assign them to and how you control their movement — particularly if they’re high performers with high potential. If they’ve been working on operational systems for two years, they need to work on customer systems next.
Tom Nealon, now the CIO of JCPenney, used to be the CIO of Southwest Airlines. Before that, he was the CIO at Frito-Lay. When he joined Frito-Lay out of college, he spent a couple of years in computer operations, then four or five in systems development, and a couple of years in systems engineering. Then Tom moved out of IT on a round trip to the financial planning department for two years. Within 10 years, he had developed into a well-rounded leader who had seen the business from different places. He’d been a user, so now he knew why IT frustrates people. He’d been in operations, so he knew what a poorly designed system looks like, and what to do when you get a call in the middle of the night and there’s no documentation. It made him better at everything. At 32 years old, Tom was ready to become a vice president. By his mid-30s, he was Frito’s CIO.
If you’re in an organization where talent management, performance management, recruiting, and project staffing are all integrated into a vibrant workforce management system, you can have a great career progression without moving from one company to another.To make this work, you’ve got to have a culture in which team leaders are willing to let people go and are proud of the fact that the next technical leader or vice president may emerge from their part of the company. In addition, you have to back that up with muscle. If you, as a business leader, try to take someone from a team to get this broader experience, and the team leader says, “You can’t have them. I don’t have a replacement for them,” you have to be able to say, ”OK, you’ve got another six months. But after that, this person’s moving.” It should be a badge of honor for an executive to have developed a lot of people around the company.
You also need a model for high-performing technical specialists who love what they do as part of a team. Not everyone wants to be the CIO. Great teams are the source of great execution and innovation. You need a culture in which people feel that what’s most important is whether the company wins or loses. Most people want to do well because of their peer relationships, not because of their bonuses. If you’re a database or a security specialist and you’ve got application teams depending on you, you don’t want to let them down. That’s a cultural thing.S+B: Are you suggesting that individual incentives don’t work?
They are part of it, but not the main factor. You also need team-oriented incentives. Companies should base a large percentage of senior leaders’ performance reviews on how they lead, manage, and develop people. You sometimes have to base half their bonus on these factors at the beginning, to get their attention. They still get a pay increase if they deliver their projects. But, if you’re an executive, and the company has to keep looking outside for new people because you haven’t developed your team, then why should you get a bonus? For sure, you’re expected to get your projects done. But what assets did you leave behind?S+B: In summary, what is your outlook for the IT profession? You have a lot of knowledge and optimism. But we all know CIOs face big challenges today and going forward.
The reason I am optimistic about the future of the contribution of CIOs and IT in general in the 21st century is that successful businesses and governments will require modern IT systems and technology. Therefore, the demand for business and IT leadership is becoming critical. I also believe that the supply of highly talented, energetic young people will continue to increase. People who have grown up in an always-on world will have a passion to be the builders of the future. The need is to leverage the knowledge gained during the first 40 years of this young profession and help accelerate their experiences. My personal goal is to contribute in any way I can.

strategy and business

Author Profiles:

  • Mike Cooke is a partner with Booz & Company based in Chicago. He focuses on information technology strategy and effectiveness in the automotive, aircraft, and consumer products industries.
  • Edward Baker, a longtime business and technology journalist, is a contributing editor of strategy+business.

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Are the most effective leaders introverts or extraverts?

Conventional wisdom tells us that leaders are the men and women who stand up, speak out, give orders, make plans and are generally the most dominant, outgoing people in a group.

But that is not always the case, according to new research on leadership and group dynamics from Wharton management professor Adam Grant and two colleagues, who challenge the assumption that the most effective leaders are extraverts.

Learn More > Analyzing Effective Leaders: Why Extraverts Are Not Always the Most Successful Bosses

costa rica . seo data ip info .

Think Big – Leadership Revival


When leaders use their influence to overpower people for selfish gain, they become less effective. Good leaders understand that influence is power and that how they handle power will affect their impact and results. The more you understand influence, the better you are able to maximize it for the benefit of those you lead—which in turn benefits you as well.

Jeremie Kubicek is the author of the newly released book, Leadership is Dead: How Influence is Reviving It. He is the CEO of GiANT Impact, a leader development company whose focus is to awaken leaders by raising their capacity to lead. Understanding influence is what makes leadership come alive, and here are five ways that Jeremie says that you can amplify your leadership abilities:

  1. Aim high. If your employees think that the goal of your organization is to make money so that you can buy a second home, they will not do their best work. People want to work for larger visions than bank accounts—especially your bank account. website traffic . Instead, aim high and aspire to make the world a better place to energize everyone.
  2. Be for others. People want to know you have their best interests at heart, too. The problem is that many leaders are primarily for themselves. seo data Or, at least that is what they show. Employees ask themselves if you are for them or only for yourself. Once they think that you’re only looking out for No. 1, they will label you and changing that label is difficult.
  3. Lead yourself. The starting point of effective leadership is to lead yourself; it is called self-awareness. To lead yourself you must know yourself—your tendencies, capacity constraints, strengths and weaknesses. When people see that you can lead yourself, then they will trust that you have the ability to lead them.
  4. Be intentional. Accidental leadership is not a good strategy. Being intentional means that you have a plan to achieve the organization’s goals. In particular, being intentional with relationships takes time, so think about how you want key employees to grow. Think about what you want the team to be focused on at the next meeting. Make intentionality a part of your culture.
  5. Look at the big picture. When we teach ourselves to think big, we enable ourselves to gain perspective. Then we can look at the big picture and make decisions that benefit the entire team. If we only look at one issue at a time, then we miss the benefit of seeing things from a different perspective. When we think bigger, we benefit ourselves and others.

According to Kubicek, leadership typically dies over time when a leader becomes more and more self-absorbed and focused solely on his or her own personal agenda. These five points are ways to counter death and begin giving your leadership new life. When leadership comes alive, so does the organization and the team.

You can learn more from Kubicek at his website or learn more about his book at Leadership Is Dead

What is Innovation?


First published on by the talented Rafa Galeano. seo data . ip info .

Creativity at Work


Jeff DeGraff is a visionary in the field of Innovation and Creativity.

The long list of companies and organizations who have sought his advice includes GE, Eaton, Coca Cola, the FBI, Telemundo, Pfizer, and many more. His breakthrough methods for the systematic development of innovation, applying innovation to the practice of leadership, and monetizing innovation, coupled with his dynamic and personal style, have made him a leader in the field. He has also championed hands-on action learning by establishing Innovatrium, an innovation laboratory across the street from the Ross School of Business, University of Michigan, where he serves as a Clinical Professor. Innovatrium is the future of business education, where business leaders, professors and students collaborate to solve real world interdisciplinary problems. ip info . Jeff is also a renowned speaker and has given keynote speeches in national and international conferences for GE, Visa, American Airlines, and many others. seo data . His books, including “Creativity at Work” and “Leading Innovation” have been used as Innovation playbooks by many Fortune 500 companies.

For more information visit

3 Paths to Open Innovation


To build your capabilities and cast a wider net for ideas, you must figure out which of the three types of innovation strategies you already have — and design your R&D approach accordingly.


Finding and developing good ideas is what corporate innovation strategy is all about. That’s why the concept referred to as open innovation has dominated so many discussions about research and development during the past decade. The logic is unassailable: Every company and every line of business within a company can benefit from looking outside its organizational boundaries for innovative business ideas, for collaboration in developing those ideas, and for validation of those ideas in the real world of consumers. It is nearly impossible to be consistently smarter than the rest of the world; tapping into new sources of business ideas can be a powerful exercise for overcoming this challenge.

Moreover, the benefits of actively pursuing open innovation have been clearly demonstrated. Booz & Company’s research shows that companies with robust open innovation capabilities — including strong technology-scouting practices and cross-boundary collaboration — are seven times as effective as firms with weak capabilities, and twice as effective as those with moderate capabilities, in generating returns on their overall R&D project investment portfolio. Some companies, most notably Procter & Gamble, have maintained leadership in their industries through renowned open innovation strategies, building links between inside groups and outsiders such as customers, inventors, academics, and even competitors.

But many companies have embraced open innovation only to conclude that it doesn’t work for them. Often they take it on as a panacea for innovation ills. They then discover that putting processes in place to find, capture, and commercialize business ideas, and creating a corporate culture that promotes and protects collaboration, are not easy tasks. The problem is not the concept: Good ideas can be found outside the R&D lab, and this type of research and development strategy can be made to work. The primary problem is not even the “not invented here” form of innovation culture that is blamed for blocking outside ideas in many companies. In truth, many companies are willing to build an innovation culture that is open to the ideas of outsiders, but it isn’t always obvious how to make the shift.

The basic problem is the isolation between open innovation and a company’s current R&D strategy. Most companies already have a basic, ingrained approach to innovation, tied tightly not just to generating ideas (which is comparatively easy) but to developing and executing them (which is the hard, value-creating part of innovation). In short, if you are looking to build an open innovation practice, it will work only when you match your company’s efforts to look outside with the capabilities you already have on the inside. To do that, you must recognize the kind of R&D system you already have in place — and treat it as your strategic core.

A Trio of R&D Strategies

Every year, Booz & Company surveys data on R&D spending and performance for 1,000 publicly held companies around the world — those with the highest annual budgets. This study, the “Global Innovation 1000,” has yielded a number of insights about the best way to design an innovation strategy. Among them is the recognition that successful companies tend to choose one of three distinct approaches. They become Need Seekers, Technology Drivers, or Market Readers, and that choice, in turn, determines how they can succeed.

A Need Seeker strategy directly engages current and potential customers to better capture their unarticulated needs, shapes new products and services, and strives to make the company the first to market with those new offerings. An example is Stanley Black & Decker Inc.’s DeWalt division, a maker of power tools for professionals, which regularly sends members of its R&D group out to construction sites to research builders’ needs, observe construction crews in action, and test new products with them.

A Technology Driver strategy follows the direction suggested by the company’s technological capabilities, leveraging its investment in research and development to drive both breakthrough innovation and incremental change, often seeking to solve customers’ unarticulated needs with new technology. An example is the German technology giant Siemens AG, which spends 5 percent of its overall R&D budget on planning for the long term, and develops detailed technology road maps within individual business units.

A Market Reader strategy monitors customers and competitors with equal care, but the company maintains a more cautious approach, focusing largely on creating value through incremental change and being a “fast follower” of proven concepts. An example is the Visteon Corporation, which conducts well-designed research into market trends before investing in new innovations — such as reconfigurable digital displays for cars — but is prepared to move with full force and rapid speed when it discovers demand.

Research suggests that the three strategies deliver comparable financial success if tightly aligned with a company’s overall business strategy. But it also demonstrates that each of these innovation models requires a distinct set of innovation capabilities to succeed. (See Exhibit 1.)

In light of these findings, companies that develop the appropriate innovation strategy must align it with their overall corporate goals and assemble a cohesive set of capabilities to gain a clear financial advantage. The key isn’t to be good at everything, but rather to excel at what matters most to your success.

That’s why open innovation is a critical capability only for Need Seekers and Technology Drivers. These companies rely on being early to market, with innovations rooted in either the latest technology or new customer insight. Need Seekers are continuously looking for ideas, often from customers, to drive incremental improvements in their products as well as to spur entirely new offerings. Technology Drivers depend heavily on developing new, often untested, technologies that can be converted into products. Their success depends not just on importing fresh ideas from a wide variety of sources, but also on ensuring that the products that they do go on to develop will ultimately succeed in the marketplace.

And Market Readers? These companies have built their strategy around a fast-follower model. They should focus on being strong in other capabilities, particularly in the stages of product development and commercialization.

Establishing Open Execution

Few companies have the wherewithal to develop enough new products and services to keep growing in an increasingly competitive business climate. One thing is certain: A scattershot approach to open innovation will not succeed. If you are seriously interested in open innovation, you will need to establish a systematic process for capturing the best ideas, whether from within or outside your company, and focus on the specific set of capabilities needed to capture, develop, and commercialize the good ideas that surface. Open innovation, like any key capability, can keep you one step ahead of the competition, but only if it is approached with rigor and seriousness of purpose.

Reaping the full benefits of open innovation is no easy task, especially for companies that have yet to venture into this often complex and tricky domain. We typically divide the effort into five activity areas, which are addressed concurrently: organization, external relationships, culture, processes and tools, and incentives.

Organization. No open innovation effort will succeed without the involvement of a senior-level executive to champion the program. An innovation office with access to a dedicated innovation fund should be established under his or her auspices. The office’s mission should be to seek out new ideas, and the office should put together two kinds of teams: some dedicated to developing and managing relationships with external partners; others, chosen from different business units, to organize cross-functional innovation processes.

External relationships. The key to successful open innovation lies in establishing strong relationships with outside partners — whether they be universities, other companies, or even independent inventors and consumers — and developing systematic processes for surfacing and vetting ideas. Adequate intellectual property (IP) policies must be agreed on, policies that allow for the proper licensing of external ideas and make clear the conditions under which external partners can use that IP. But it is critical to ensure that such protections are not allowed to become legal handcuffs that restrict opportunities via an excessive aversion to risk.

Culture. Promoting open innovation may present a set of internal challenges. Companies that struggle to innovate, especially Technology Drivers, tend to lack a truly collaborative cross-functional environment. Success depends on fostering a culture that expects and rewards the free exchange of ideas across divisions and geographies, making it easy to disseminate ideas and gain access to ideas from other groups. You can’t do this by fiat; a decree that “from now on, we will be open to new ideas and experimentation” will be ignored. To build a collaborative culture and move away from the not-invented-here syndrome, start by changing behaviors; attitudes will follow. Companies that do this well have typically established a team for designing new practices. For example, the team might design and establish an active internal venture capital investment scheme, to review ideas quickly and then move right away to vetting and acting upon them if they are worthwhile. This in itself will give innovators better reasons to share their ideas.

Processes and tools. Companies that make the most of open innovation are highly disciplined in their own use of technology, and in their process innovation. They communicate frequently and use consistent processes, backed up with simple, flexible IT tools, to track new ideas, select the best ideas, manage the development stage, and link R&D with other functions such as marketing and manufacturing. Some companies are turning to social media tools to promote internal and external collaboration.

Incentives. Once discovered, good ideas need to be captured effectively. Creating solutions that benefit both you and your partners is critical to successfully developing external ideas. Internal budgets for divisions and functions should be tied in part to those areas’ innovation efforts, as should individual incentives. This will require a process for developing and tracking key innovation metrics.

Each of the three types of companies has its own approach to these activities, and gains leverage from them in a different way. For example, Need Seekers may convene cross-functional groups that can integrate their separate ideas into common innovation practices. That might not work so well for Technology Drivers, which are typically working with highly specialized and intensive R&D practices, and which may need intensive ways to train their marketing teams and bring them on board (and which may have outsourced manufacturing altogether). Although the details will vary, the basic message is clear: Companies have an enormous amount to gain from open innovation. They will, however, realize those gains only if they think of this new approach as an innate part of their distinctive R&D skill — a capability that, in the end, gives them a distinctive edge.

strategy and business

Author Profiles:

  • Barry Jaruzelski is a partner with Booz & Company based in Florham Park, N.J., and is the global leader of the firm’s innovation practice. He focuses on the high-technology and industrial sectors, and specializes in corporate and product strategy.
  • Richard Holman is a Booz & Company principal based in Florham Park, N.J., and a leader of the firm’s innovation practice. He specializes in highly engineered product industries such as aerospace and high technology.
  • This article was adapted from “Casting a Wide Net: Building the Capabilities for Open Innovation,” (PDF) by Barry Jaruzelski and Richard Holman, Ivey Business Journal, March/April 2011.

3M’s Open Innovation – Collaborative culture and innovation leadership


Fred J. Palensky, chief technology officer at one of the world’s most innovative companies, explains how to foster the ongoing cross-pollination of ideas.

As part of Booz & Company’s annual study of the innovation strategies of the world’s highest-spending companies on R&D, the firm conducted a survey that asked senior innovation executives to vote for the world’s most innovative company. (See “The Global Innovation 1000: How the Top Innovators Keep Winning,” by Barry Jaruzelski and Kevin Dehoff, s+b.) The third most frequently cited innovation leader was 3M, right behind Apple and Google. That came as no surprise, given 3M’s track record of developing smart, successful new products.

3M’s ability to keep churning out new innovations is very much dependent on the company’s long-standing commitment to open innovation, both internal and external. We recently spoke with Fred J. Palensky, 3M’s chief technology officer, who discussed the many ways his company creates and develops ideas through open innovation, and explained why its highly collaborative culture and innovation leadership are essential to the process.

S+B: Can you describe how 3M’s open innovation processes are organized?
The reason 3M is what it is today — a company that has developed organically across consumer, electronic, transportation, industrial, safety, security and display, and electronic markets — is our shared, leveraged technology and innovation model. We assume that technologies and technological capabilities have no boundaries or barriers. Any product or manufacturing technology is available to any business in any industry in any geography around the world.

As the company’s senior technology executive, I’m responsible for the corporate research laboratories. I represent the entire technical community at 3M, which includes about 10,000 R&D people in 73 labs around the world. About 15 to 20 percent of those people work in corporate research, which is responsible for developing, transmitting, and supporting technologies throughout the company. I also head up the corporate technical operations committee, or CTOC, which ensures the development, health, sustainability, and transmission of 3M’s tech capabilities across all the businesses, geographies, and industries in which we operate.

We have 63 full-scale operating businesses in dozens of industries in more than 70 countries around the world. Each one of those businesses conducts its own research, while maintaining connections with all the other R&D operations throughout the company.

S+B: What enables the cross-pollination of ideas?
PALENSKY: We believe that no one business has everything it needs to conduct business in its marketplace without leveraging the rest of the company. So every single technical employee in the company has dual citizenship — they’re part of a particular business, lab, or country, and part of the 3M global technical community. We don’t restrict people from moving from one business to another, from one industry to another, or across country boundaries. Most of the people who run the businesses, the country offices, and the labs have been in five or six or 10 different parts of the company before. They’ve grown up inside the 3M culture. I myself have been at 3M for 34 years, and I’ve had 14 different jobs in five different industries and three different countries. I like to think of it as a movement of people and ideas that’s not mandated but officially endorsed.

S+B: 3M also has an active external open innovation program. Can you describe it?
PALENSKY: Our corporate labs are continually bringing in new employees and technologies from universities and other sources. And we collaborate closely with customers. We have 30 customer technology centers around the world, where our technical and marketing employees meet with customers and expose them to the full range of 3M technology platforms. We ask them what their technical issues, problems, and opportunities are, and whether any of 3M’s many different technologies can help them. The constant technical interaction is critical in creating new innovations.

S+B: Can you discuss a specific product that arose out of 3M’s open innovation process?
PALENSKY: Really, all of them. To take one example, we just introduced an entirely new kind of sandpaper — shaped, fine-grained, self-sharpening, structured abrasives. The mineral technology came from the abrasives division, some of the shape technology came from optical systems, coating technologies came from the tape division, and mathematical modeling and fracture analysis came from the corporate research center. Altogether, the abrasives division used seven different technologies to create the product, only two of which came from the division itself.

S+B: What role does culture play in sustaining open innovation at 3M?
PALENSKY: I think our success is driven much more by culture than it is by structure or organization. We’ve been practicing open innovation at 3M throughout our history. The company started out making sandpaper, and our salesmen sold our products to all kinds of people. When they visited auto-body shops, they watched workers struggle to paint fine lines and borders. So the salesmen went back to the office and talked about the problem. That was the beginning of our masking tape business. That’s the culture that has sustained us ever since.

But we also actively support that culture. All of our technical people at the corporate labs dedicate about 15 percent of their efforts toward programs, interactions, learning, and teaching in areas outside their particular responsibilities. In addition to the various programs we’re developing at the corporate labs, we are working on more than 300 joint programs with various divisions and businesses. So, in addition to their corporate responsibilities, everyone is also a member of a team that is working alongside division members in either technology transfer or new product development projects.

All of this creates a community of collaboration, and it ensures that everybody has some skin in the innovation game. And because our senior leaders have grown up in this culture, they continue to nurture and protect this highly collaborative, enterprising environment. Cultures are unique and extraordinarily difficult to duplicate. And it takes a real effort to sustain them.

strategy and business

Author Profiles:

  • Barry Jaruzelski is a partner with Booz & Company in Florham Park, N.J., and is the global leader of the firm’s innovation practice. He has spent more than 20 years working with high-tech and industrial clients on corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.
  • Richard Holman is a principal with Booz & Company based in Florham Park, N.J. He is a leader of the firm’s global innovation practice, specializing in fields with highly engineered products, such as aerospace, industrial, and high tech.
  • Edward Baker, former editor of CIO Insight magazine, is a contributing editor to strategy+business.
  • This interview was originally published as part of “Casting a Wide Net: Building the Capabilities for Open Innovation,” by Jaruzelski and Holman, Ivey Business Journal, March/April 2011.

The Case for Performance Reviews


How Performance Reviews Pay Off

Sometimes, the least productive workers will bounce back the most.

Title: Driven by Social Comparisons: How Feedback about Coworkers’ Effort Influences Individual Productivity (PDF)

Authors: Francesca Gino (Harvard Business School) and Bradley R. Staats (University of North Carolina at Chapel Hill)

This paper examines the impact of performance reviews on productivity, and finds that feedback delivered on a regular basis, whether positive or negative, tends to result in improved performance. On a short-term basis, though, the impact varies, sometimes in ways that are counter-intuitive: Positive reviews, for example, do little to boost productivity, and negative reviews that are somewhat vague and indirect cause performance to fall off, but reviews that are directly negative cause productivity to leap. The research offers guidance to managers concerning the pitfalls and potential benefits in framing their messages in reviews, and suggests there is a need to provide feedback on a frequent basis.

In an ideal scenario, employees would be evaluated through the use of objective standards, but as the researchers point out, in organizational settings this is rarely possible. Instead, the very nature of performance feedback promotes what they call social comparison processes, as employees are informed about their performance relative to that of their co-workers. In this study, employees were not told their exact ranking, or that of their co-workers, but were informed where they stood in relation to either the “bottom 10” or “top 10” in terms of productivity.

The researchers conducted their experiment at APLUS, the consumer finance subsidiary of Shinsei Bank, a medium-sized Japanese bank. The 70 employees in the study performed largely repetitive tasks: They entered information from customer applications into a central data system. Their salary was not linked to their performance, and they had no specific goals to meet, which enabled the researchers to weigh the effects of performance feedback in an incentive-free context.

At the beginning of the monthlong study, the workers were split into three groups. One received negative feedback on a daily basis, a second received positive feedback on a daily basis, and the third, acting as the control group, received no feedback. The groups were randomly chosen without regard to past performance — in fact, none of the workers had ever before received a performance review from the company. Over the course of the month, the researchers analyzed more than 480,000 data-entering transactions performed by the three groups. By tracking the completion times and accuracy of the employees’ efforts, the researchers were able to measure daily changes in productivity for each of the workers.

Employees in the “negative” group were told they fell into the bottom 10 if, in fact, that was the case that day (what the researchers called direct feedback) or that they were not in the bottom 10 (an indirect approach that implied poor performance). In other words, even the best-performing employees in the negative group would get indirect negative feedback and know only that they were not ranked near the bottom. Similarly, employees in the “positive” group were told that they ranked in the top 10 or that they were not in the top 10.

On a day-to-day basis, the researchers found that neither form of positive feedback had much effect on productivity. Bad reviews, however, carried far more significance. When workers first received direct negative feedback, their performance jumped 13.6 percent, on average, the next day. But when employees first received an indirect negative review, they faltered, dropping an average of 17 percent in productivity the following day. ip info . The difference, say the researchers, is that those in the bottom 10 were motivated to improve by the shame they felt, whereas those who were not in the bottom 10 simply felt relief.

In the long term, however, all forms of the performance feedback used in the study helped. The researchers found that both groups receiving feedback boosted their performance over the course of the month in comparison with the control group; the positive group’s productivity was up approximately 20 percent and the negative group’s about 30 percent. So although couching an employee’s performance review in positive terms may not make a difference the next day, it will over time. And whereas giving an employee indirect negative feedback can hurt performance in the short term, over the long term it’s still better than no criticism at all.

The researchers acknowledge that the study’s setting — a Japanese bank — may raise questions about whether the results are widely applicable. Because reputation and saving face are particularly important in Japan, employees there might react more strongly to criticism than workers in other societies. But the authors point out that the feedback was private and did not include specific rankings. In addition, because the company had no history of laying off employees for inadequate performance and offered no bonuses for working harder, the researchers could focus solely on the effects of the feedback itself. These two factors make the findings relevant beyond Japan, the researchers say. The researchers also believe the findings are applicable beyond job settings that are highly routine and quantifiable.

The results show that although regular feedback can improve worker performance over time, the pace of change can vary. Managers shouldn’t expect to see an immediate increase in productivity from their best workers. As for the rest, indirect praise isn’t likely to produce an immediate uptick, and indirect criticism may actually make things worse for a while. Telling underperforming employees that they are in the bottom segment — which, of course, could be defined more broadly than the “bottom 10” — offers the best chance of getting a quick and dramatic improvement.

Bottom Line:
Managers should consistently tell their employees where they stand: Whether presented in positive or negative terms, feedback tends to improve performance over time. In the short term, the biggest improvement may come from workers who are told they are in the bottom rankings.

Publisher: Harvard Business School Working Paper No. 11-078

Get Your Brain More Creative


Can you make yourself more creative?

According to Shelley Carson, author of the new book Your Creative Brain: Seven Steps to Maximize Imagination, Productivity, and Innovation in Your Life, you can.

In a recent conversation with the Boston Globe, Carson, who has a PhD in psychology from Harvard University and teaches at Harvard Extension School, noted these three things: “In the business world, creativity is now the number-one quality that head hunters are looking for in top-level chief executives. Most of the elite business schools in the country now have courses on creativity, and many Fortune 500 companies have hired creativity consultants.”
It’s possible, she says, for creativity-challenged people to use “biofeedback programs and other types of cognitive behavioral research” to change brain activation patterns to “mimic the brain activation of highly creative people.”
“What we have found in recent years in the neuroscience of creativity is that highly creative people tend to activate certain neural patterns in their brain when they are solving a creative problem or doing creative work,” she told the Globe.
Creativity and control are closely linked, she says. “I subscribe to the cognitive disinhibition theory of creativity,” Carson said. “A lot of people are really afraid to turn down the volume on the executive function part of their brain. They want control over their cognitive awareness and their mental workspace. It’s very difficult for them to relinquish that control and say to the guys back there in research and development, throw at me what you’ve got.”
An interview with Carson posted at her website gives a little more detail about this idea that you can make your brain more open to new material:

What do you think are the greatest challenges for people who want to get more creative?
Everyone has a built-in censoring system in their brains that filters thoughts, images, and memories, and stimuli from the outside world before they reach conscious awareness. Our censoring system keeps us focused on our current goals and on information that prior learning has taught us is “appropriate.” Learning to loosen up this mental filtering system to allow more novel ideas and stimuli into conscious awareness is one of the biggest challenges for people who don’t think of themselves as creative. In Your Creative Brain, I provide a lot of information on how to loosen the censoring system so that ideas can flow more fluently.

Does every brain really have the potential to be creative?
Yes! While it’s true that some brains are naturally more inclined toward creative ideation than others, all brains have a marvelous ability to continually change and develop. Research has shown that people who are naturally highly creative can switch between various brain activation patterns more easily than those who are less naturally creative. However, this is a skill that can be practiced and learned. Although it may not make an Einstein out of everyone, practice and exercise can definitely make any brain more creative.