Leadership and The 4 Most Important Words - Tom Peters

The following Tom Peters article from 2004 is more relevant than ever as we eek our way out of the most devastating downturn in history. Tom's advice is so simple one could easily over look it. Perhaps the primary reason most leaders and managers do. There isn't any new age nuance here. 

I suggest testing the veracity of these four words immediately. For many organizations this could be the “Ah Ha” of break even points. Jim

 

"I started blogging in June of 2004, and the best part of it, frankly, is the wonderful

comments that come from India at 1 a.m. or come from anywhere. And one morning

when I logged on, I had gotten a lovely comment from a guy by the name of Dave

Wheeler. And it went like this: “What are the four most important words in an

organization?”

 

And the four words were: What. Do. You. Think.

 

And I thought about it and I thought, “My God. This is just bloody amazing.” What does 

What Do You Think mean? What Do You Think, when you say it to me, means: You are 

a person of value who has an opinion that I want to hear. And so, I’ve started taking it to 

its ultimate extreme and saying, “Okay, I want you to keep a little scorecard. Keep it in 

your pocket, wherever else. How many times” —and I do, everybody’s watching this—

“how many times in the course of a day do you say—not five words, not three words, not 

10 words—What Do You Think?”

 

You know, we hear this about empowerment and that about empowerment and this 

program and that program and this training course and that training course. I would

argue, in the world of engaging people, nothing is better than the four words: What Do

You Think? Try it. Count it. Measure yourself. See what happens. TP

If you are in need of new growth ideas and a riveting speaker hire Jim Woods immediately. For fees and availability contact Jim at 719-266-6703 or email.

 

 

How strategists lead: Cynthia A. Montgomery

Seven years ago, I changed the focus of my strategy teaching at the Harvard Business School. After instructing MBAs for most of the previous quarter-century, I began teaching the accomplished executives and entrepreneurs who participate in Harvard’s flagship programs for business owners and leaders.

Shifting the center of my teaching to executive education changed the way I teach and write about strategy. I’ve been struck by how often executives, even experienced ones, get tripped up: they become so interested in the potential of new ventures, for example, that they underestimate harsh competitive realities or overlook how interrelated strategy and execution are. I’ve also learned, in conversations between class sessions (as well as in my work as a board director and corporate adviser) about the limits of analysis, the importance of being ready to reinvent a business, and the ongoing responsibility of leading strategy.

All of this learning speaks to the role of the strategist—as a meaning maker for companies, as a voice of reason, and as an operator. The richness of these roles, and their deep interconnections, underscore the fact that strategy is much more than a detached analytical exercise. Analysis has merit, to be sure, but it will never make strategy the vibrant core that animates everything a company is and does.

The strategist as meaning maker

I’ve taken to asking executives to list three words that come to mind when they hear the wordstrategy. Collectively, they have produced 109 words, frequently giving top billing to plan, direction, and competitive advantage. In more than 2,000 responses, only 2 had anything to do with people: one said leadership, another visionary. No one has ever mentioned strategist.

Downplaying the link between a leader and a strategy, or failing to recognize it at all, is a dangerous oversight that I tried to start remedying in a Harvard Business Review article four years ago and in my new book, The Strategist, whose thinking this article extends.¹ After all, defining what an organization will be, and why and to whom that will matter, is at the heart of a leader’s role. Those who hope to sustain a strategic perspective must be ready to confront this basic challenge. It is perhaps easiest to see in single-business companies serving well-defined markets and building business models suited to particular competitive contexts. I know from experience, though, that the challenge is equally relevant at the top of diversified multinationals.

What is it, after all, that makes the whole of a company greater than the sum of its parts—and how do its systems and processes add value to the businesses within the fold? Nobel laureate Ronald Coase posed the problem this way: “The question which arises is whether it is possible to study the forces which determine the size of the firm. Why does the entrepreneur not organize one less transaction or one more?”² These are largely the same questions: are the extra layers what justifies the existence of this complex firm? If so, why can’t the market take care of such transactions on its own? If there’s more to a company’s story, what is it, really?

In the last three decades, as strategy has moved to become a science, we have allowed these fundamental questions to slip away. We need to bring them back. It is the leader—the strategist as meaning maker—who must make the vital choices that determine a company’s very identity, who says, “This is our purpose, not that. This is who we will be. This is why our customers and clients will prefer a world with us rather than without us.” Others, inside and outside a company, will contribute in meaningful ways, but in the end it is the leader who bears responsibility for the choices that are made and indeed for the fact that choices are made at all.

The strategist as voice of reason

Bold, visionary leaders who have the confidence to take their companies in exciting new directions are widely admired—and confidence is a key part of strategy and leadership. But confidence can balloon into overconfidence, which seems to come naturally to many successful entrepreneurs and senior managers who see themselves as action-oriented problem solvers.³

I see overconfidence in senior executives in class when I ask them to weigh the pros and cons of entering the furniture-manufacturing business. Over the years, a number of highly regarded, well-run companies—including Beatrice Foods, Burlington Industries, Champion, Consolidated Foods, General Housewares, Gulf + Western, Intermark, Ludlow, Masco, Mead, and Scott Paper—have tried to find fortune in the business, which traditionally has been characterized by high transportation costs, low productivity, eroding prices, slow growth, and low returns. It’s also been highly fragmented. In the mid-1980s, for example, more than 2,500 manufacturers competed, with 80 percent of sales coming from the biggest 400 of them. Substitutes abound, and there is a lot of competition for the customer’s dollar. Competitors quickly knock off innovations and new designs, and the industry is riddled with inefficiencies, extreme product variety, and long lead times that frustrate customers. Consumer research shows that many adults can’t name a single furniture brand. The industry does little advertising.

By at least a two-to-one margin, the senior executives in my classes typically are energized, not intimidated, by these challenges. Most argue, in effect, that where there’s challenge there’s opportunity. If it were an easy business, they say, someone else would already have seized the opportunity; this is a chance to bring money, sophistication, and discipline to a fragmented, unsophisticated, and chaotic industry. As the list above shows, my students are far from alone: with great expectations and high hopes of success, a number of well-managed companies over the years have jumped in with the intention of reshaping the industry through the infusion of professional management.

All those companies, though, have since left the business—providing an important reminder that the competitive forces at work in your industry determine some (and perhaps much) of your company’s performance. These competitive forces are beyond the control of most individual companies and their managers. They’re what you inherit, a reality you have to deal with. It’s not that a company can never change them, but in most cases that’s very difficult to do. The strategist must understand such forces, how they affect the playing field where competition takes place, and the likelihood that his or her plan has what it takes to flourish in those circumstances. Crucial, of course, is having a difference that matters in the industry. In furniture—an industry ruled more by fashion than function—it’s extremely challenging to uncover an advantage strong enough to counter the gravitational pull of the industry’s unattractive competitive forces. IKEA did it, but not by disregarding industry forces; rather, the company created a new niche for itself and brought a new economic model to the furniture industry.

A leader must serve as a voice of reason when a bold strategy to reshape an industry’s forces actually reflects indifference to them. Time and again, I’ve seen division heads, group heads, and even chief executives dutifully acknowledge competitive forces, make a few high-level comments, and then quickly move on to lay out their plans—without ever squarely confronting the implications of the forces they’ve just noted. Strategic planning has become more of a “check the box” exercise than a brutally frank and open confrontation of the facts.

The strategist as operator

A great strategy, in short, is not a dream or a lofty idea, but rather the bridge between the economics of a market, the ideas at the core of a business, and action. To be sound, that bridge must rest on a foundation of clarity and realism, and it also needs a real operating sensibility. Every year, early in the term, someone in class always wants to engage the group in a discussion about what’s more important: strategy or execution. In my view, this is a false dichotomy and a wrongheaded debate that the students themselves have to resolve, and I let them have a go at it.

I always bring that discussion up again at the end of the course, when we talk about Domenico De Sole’s tenure at Italian fashion eminence Gucci Group.⁴ De Sole, a tax attorney, was tapped for the company’s top job in 1995, following years of plummeting sales and mounting losses in the aftermath of unbridled licensing that had plastered Gucci’s name and distinctive red-and-green logo on everything from sneakers to packs of playing cards to whiskey—in fact, on 22,000 different products—making Gucci a “cheapened and over-exposed brand.”

De Sole started by summoning every Gucci manager worldwide to a meeting in Florence. Instead of telling managers what he thought Gucci should be, De Sole asked them to look closely at the business and tell him what was selling and what wasn’t. He wanted to tackle the question “not by philosophy, but by data”—bringing strategy in line with experience rather than relying on intuition. The data were eye opening. Some of Gucci’s greatest recent successes had come from its few trendier, seasonal fashion items, and the traditional customer—the woman who cherished style, not fashion, and who wanted a classic item she would buy once and keep for a lifetime—had not come back to Gucci.

De Sole and his team, especially lead designer Tom Ford, weighed the evidence and concluded that they would follow the data and position the company in the upper middle of the designer market: luxury aimed at the masses. To complement its leather goods, Ford designed original, trendy—and, above all, exciting—ready-to-wear clothing each year, not as the company’s mainstay, but as its draw. The increased focus on fashion would help the world forget all those counterfeit bags and the Gucci toilet paper. It would propel the company toward a new brand identity, generating the kind of excitement that would bring new customers into Gucci stores, where they would also buy high-margin handbags and accessories. To support the new fashion and brand strategies, De Sole and his team doubled advertising spending, modernized stores, and upgraded customer support. Unseen but no less important to the strategy’s success was Gucci’s supply chain. De Sole personally drove the back roads of Tuscany to pick the best 25 suppliers, and the company provided them with financial and technical support while simultaneously boosting the efficiency of its logistics. Costs fell and flexibility rose.

In effect, everything De Sole and Ford did—in design, product lineup, pricing, marketing, distribution, manufacturing, and logistics, not to mention organizational culture and management—was tightly coordinated, internally consistent, and interlocking. This was a system of resources and activities that worked together and reinforced each other, all aimed at producing products that were fashion forward, high quality, and good value.

It is easy to see the beauty of such a system of value creation once it’s constructed, but constructing it isn’t often an easy or a beautiful process. The decisions embedded in such systems are often gutsy choices. For every moving part in the Gucci universe, De Sole faced a strictly binary decision: either it advanced the cause of fashion-forwardness, high quality, and good value—or it did not and was rebuilt. Strategists call such choices identity-conferring commitments. They are central to what an organization is or wants to be and reflect what it stands for.

When I ask executives at the end of this class, “Where does strategy end and execution begin?” there isn’t a clear answer—and that’s as it should be. What could be more desirable than a well-conceived strategy that flows without a ripple into execution? Yet I know from working with thousands of organizations just how rare it is to find a carefully honed system that really delivers. You and every leader of a company must ask yourself whether you have one—and if you don’t, take the responsibility to build it. The only way a company will deliver on its promises, in short, is if its strategists can think like operators.

A never-ending task

Achieving and maintaining strategic momentum is a challenge that confronts an organization and its leader every day of their entwined existence. It’s a challenge that involves multiple choices over time—and, on occasion, one or two big choices. Very rare is the leader who will not, at some point in his or her career, have to overhaul a company’s strategy in perhaps dramatic ways. Sometimes, facing that inevitability brings moments of epiphany: “eureka” flashes of insight that ignite dazzling new ways of thinking about an enterprise, its purpose, its potential. I have witnessed some of these moments as managers reconceptualized what their organizations do and are capable of doing. These episodes are inspiring—and can become catalytic.

At other times, facing an overhaul can be wrenching, particularly if a company has a set of complex businesses that need to be taken apart or a purpose that has run its course. More than one CEO—men and women coming to grips with what their organizations are and what they want them to become—has described this challenge as an intense personal struggle, often the toughest thing they’ve done.

Yet those same people often say that the experience was one of the most rewarding of their whole lives. It can be profoundly liberating as a kind of corporate rebirth or creation. One CEO described his own experience: “I love our business, our people, the challenges, the fact that other people get deep benefits from what we sell,” he said. “Even so, in the coming years I can see that we will need to go in a new direction, and that will mean selling off parts of the business. The market has gotten too competitive, and we don’t make the margins we used to.” He winced as he admitted this. Then he lowered his voice and added something surprising. “At a fundamental level, though, it’s changes like this that keep us fresh and keep me going. While it can be painful when it happens, in the long run I wouldn’t want to lead a company that didn’t reinvent itself.” via Mckinsey

About the Author

Cynthia Montgomery is the Timken Professor of Business Administration at Harvard Business School, where she’s been on the faculty for 20 years, and past chair of the school’s Strategy Unit.

Elements of this article were adapted from Cynthia Montgomery’s The Strategist: Be the Leader Your Business Needs (New York, NY: HarperCollins, 2012).

How Turn Your Business Around in The Downturn

The range of possible futures confronting business is great. Companies that nurture flexibility, awareness, and resiliency are more likely to survive the crisis, and even to prosper.

 

The future of capitalism is here, and it’s not what any of us expected. With breathtaking speed, in the autumn of 2008 the credit markets ceased functioning normally, governments around the world began nationalizing financial systems and considering bailouts of other troubled industries, and major independent US investment banks disappeared or became bank holding companies. Meanwhile, currency values, as well as oil and other commodity prices, lurched wildly, while housing prices in Spain, the United Kingdom, the United States, and elsewhere continued to slide.

As consumers batten down the hatches and the global economy slows, senior executives confront a more profoundly uncertain business environment than most of them have ever faced. Uncertainty surrounds not only the downturn’s depth and duration—though these are decidedly big unknowns—but also the very future of a global economic order until recently characterized by free-flowing capital and trade and by ever-deepening economic ties. A few months ago, the only challenges to this global system seemed to be external ones like climate change, terrorism, and war. Now, every day brings news that makes all of us wonder if the system itself will survive.

The task of business leaders must be to overcome the paralysis that dooms any organization and to begin shaping the future. One starting point is to take stock of what they do know about their industries and the surrounding economic environment; such an understanding will probably suggest needed changes in strategy. Even then, enormous uncertainty will remain, particularly about how governments will behave and how the global real economy and financial system will interact. All these factors, taken together, will determine whether we face just a few declining quarters, a severe global recession, or something in between.

Uncertainty of this magnitude will leave some leaders lost in the fog. To avoid impulsive, uncoordinated, and ultimately ineffective responses, companies must evaluate an unusually broad set of macroeconomic outcomes and strategic responses and then act to make themselves more flexible, aware, and resilient.

Strengthening these organizational muscles will allow companies not only to survive but also to seize the extraordinary opportunities that arise during periods of vast uncertainty. It was during the recessionary 1870s that Rockefeller and Carnegie began grabbing dominant positions in the emerging oil and steel industries by taking advantage of new refining and steel production technologies and of the weakness of competitors. A century later, also in a difficult economy, Warren Buffett converted a struggling textile company called Berkshire Hathaway into a source of funds for far-flung investments.

What we know

The financial electricity that drives our global economy is not working well. Turning it back on isn’t just a matter of flicking a switch, as central banks and governments have tried to do by providing liquidity, guaranteeing debt, and injecting capital into banks. We must repair the grid itself significantly, and this will require coordinated global action.

By the grid, we mean the global capital market, which evolved over a 35 year period following the breakdown of the Bretton Woods accord, in the 1970s. No one designed the global capital market, but it has been a boon to humanity, stimulating globalization and growth by enabling the free international flow of capital and trade. The financial crisis of 2008 severely damaged this useful system. Through greed, neglect, or ignorance, the participants abused it until they broke some of its basic mechanisms.

The implications are far reaching. Most obviously, congestion in the global capital market is exacerbating the US domestic credit crisis. That crisis has spread globally, hitting Europe especially hard. Banks until recently have been scrambling for deposits to replace sources of funding such as direct-issue commercial paper, medium-term notes, and asset-backed paper. The search for deposits is required to finance existing loans, and borrowers will need significantly more of them because all but the strongest have, like the banks, lost access to the securities markets. The US government, in particular, has aggressively tried to address this problem through huge liquidity programs, such as the purchase of mortgage- and other asset-backed securities. But it remains to be seen how effective those efforts will be in mitigating the credit crunch.

The global capital market crisis worsens this credit crunch by sending into reverse the dynamic of cross-border investment and trade flows. A dollar of capital must finance every dollar of trade, so the global capital market has stimulated the international exchange of goods and services. It has facilitated cross-border investments—in intellectual property, talent, brands, and networks—that help economies and companies grow and profit, and it has enabled the companies that make such investments to repatriate their profits. In short, global integration and growth will revive only if the global capital market does. Yet it has sustained a body blow that will have repercussions for years, even if international leaders make the necessary long-term adjustments.

The changing role of government

Since September 2008, governments have assumed a dramatically expanded role in financial markets. Policy makers have gone to great lengths to stabilize them, to support individual companies whose failure might pose systemic risks, and to prevent a deep economic downturn. We can expect higher tax rates to pay for these moves, as well as for the reregulation of finance and many other sectors. In short, governments will have their hand in industry to an extent few imagined possible only recently.

That’s not all. Protectionism and nationalism will probably feature more prominently in policy debates. We may see not only old-style populist anger against business, high executive compensation, and layoffs but also the emergence of authoritarian populist movements. Already-dilatory trade discussions will encounter renewed resistance. Although greater global coordination is sorely needed, national political pressures will make it hard to achieve. All this will constrain some business activities but also opens the door to new ventures that depend upon collaboration between the public and private sectors.

Deleveraging

The cheap credit of the past few years most likely won’t return for a long time. For many households, this will mean reducing consumption and postponing retirement; for financial institutions—increasingly, bank holding companies—much higher capital requirements, less freedom to operate and innovate, and probably lower profitability; for governments, even more limited resources for health care, education, pensions, infrastructure, the environment, and security; and for corporations, a different role for capital. More broadly, for many companies the high returns and rapid growth of recent years rested on cheap credit, so deleveraging means that expectations of baseline profitability and economic growth, as well as shareholder returns, must all be seriously recalibrated.

New business models and industry restructuring

Companies engaging with the capital markets will encounter funders who are less tolerant of risk, a reduced ability to hedge it, and greater volatility. Hardest hit will be business models premised on high leverage, consumer credit, large customer-financing operations, or high levels of working capital. Businesses with long or inflexible production cycles or very long-term investment requirements will find it especially difficult to manage their funding. Some won’t make it, so industries will restructure. Corporate leaders already recognize this: in a McKinsey Quarterlyexecutive survey launched the day after the US presidential election, 54 percent of the respondents expected their industries to consolidate.

These are all truths we know. They require a significant shift in thinking about government as a stakeholder, the value talent creates when it is harder to leverage, how to conserve capital, and strategies for sound risk taking—among other things.

What we don’t know

Yet there is much that we don’t know, and won’t for some time: how well will governments work together to develop effective regulatory, trade, fiscal, and monetary policies; what will these responses mean for the long-term health of the global capital market; how will its health or weakness influence the pace and extent of change in areas such as the economic role of government, financial leverage, and business models; and what will all this imply for globalization and economic growth?

Although these questions won’t be answered in the short or even the medium term, decisions made in the immediate future are critical, for they will influence how well organizations manage themselves now and compete over the longer haul. The winners will be companies that make thoughtful choices—despite the complexity, confusion, and uncertainty—by assessing alternative scenarios honestly, considering their implications, and preparing accordingly.

In particular, organizations must think expansively about the possibilities. Even in more normal times, the range of outcomes most companies consider is too narrow. The assumptions used for budgeting and business planning are often modest variations on baseline projections whose major assumptions often are not presented explicitly. Many such budgets and plans are soon overtaken by events. In good times, that matters little because companies continually adapt to the environment, and budgets usually build in conservative assumptions so managers can beat their numbers.

But these are not normal times: the range of potential outcomes—the uncertainty surrounding the global credit crisis and the global recession—is so large that many companies may not survive. We can capture this wide range of outcomes in four scenarios. 

 

 

This research, focusing on the United States, the center of the storm, suggests that if capital markets rebound quickly, GDP would be 2.9 percentage points lower than it would have been if trend growth had continued over the next two years. If financial markets take longer to recover, as the middle two scenarios envision, US GDP growth could fall 4.7 to 6.7 percentage points from trend over the same period. At the “long freeze” end of the spectrum, Japan’s “lost decade” shaved 18 percentage points from GDP compared with its previous growth trend.

Regenerated global momentum

In the most optimistic scenario, government action revives the global credit system—the massive stimulus packages and aggressive monetary policies already adopted keep the global recession from lasting very long or being very deep. Globalization stays on course: trade and capital flows resume quickly, and the developed and emerging economies continue to integrate as confidence rebounds quickly.

Battered but resilient

In the second scenario, government-wrought improvements in the global credit and capital market are more than offset—for 18 months or more—by the impact of the global recession, which leads to further credit losses and to distrust of cross-border counterparties. Although the recession could be longer and deeper than any in the past 70 years, government action works, and the global capital and credit markets gradually recover. Global confidence, though shaken, does rebound, and trade and capital flows revive moderately. Globalization slowly gets back on course.

Stalled globalization

In the third scenario, the global recession is significant, but its intensity varies greatly from nation to nation—in particular, China and the United States prove surprisingly resilient. The integration of the world’s economies, however, stalls as continuing fear of counterparties makes the global capital market less integrated. Trade flows and capital flows decline and then stagnate. The regulatory regime holds the system together, but various governments overregulate lending and risk, so the world’s banking system becomes “oversafe.” Credit remains expensive and hard to get. As attitudes become more defensive and nationalistic, growth is relatively slow.

The long freeze

Under the final scenario, the global recession lasts more than five years (as Japan’s did in the 1990s) because of ineffective regulatory, fiscal, and monetary policy. Economies everywhere stagnate; overregulation and fear keep the global credit and capital markets closed. Trade and capital flows continue to decline for years as globalization goes into reverse, and the psychology of nations becomes much more defensive and nationalistic.

Leading through uncertainty

These descriptions are intentionally stylized to enliven them; many permutations are possible. Scenarios for any company and industry should of course be tailored to individual circumstances. What we hope to illustrate is the importance for strategists of considering previously unthinkable outcomes, such as the rollback of globalization. Unappealing as three of the four scenarios may be, any company that sets its strategy without taking all of them into account is flying blind.

So executives need a way of operating that’s suited to the most uncertain business environment since the 1930s. They need greater flexibility to create strategic and tactical options they can use defensively and offensively as conditions change. They need a sharper awareness of their own and their competitors’ positions. And they need to make their organizations more resilient.

Most companies acted immediately in the autumn of 2008 when credit markets locked up: they cut discretionary spending, slowed investment, managed cash flows aggressively, laid off employees, shored up financing sources, and built capital by cutting dividends, raising equity, and so forth. While prudent, these actions probably won’t produce the short-term earnings that analysts expect, at least for most companies. In fact, it’s time they abandoned the idea that they can reliably deliver predictable earnings. Quarterly performance is no longer the objective, which must now be to ensure the long-term survival and health of the enterprise.

More flexible

Companies must now take a more flexible approach to planning: each of them should develop several coherent, multipronged strategic-action plans, not just one. Every plan should embrace all of the functions, business units, and geographies of a company and show how it can make the most of a specific economic environment.

These plans can’t be academic exercises; executives must be ready to pursue any of them—quickly—as the future unfolds. In fact, the broad range of plausible outcomes in today’s business environment calls for a “just in time” approach to strategy setting, risk taking, and resource allocation by senior executives. A company’s 10 to 20 top managers, for example, might have weekly or even daily “all hands on deck” meetings to exchange information and make fast operational decisions.

Greater flexibility also means developing as many options as possible that can be exercised either when trigger events occur or the future becomes more certain. Often, options will be offensive moves. Which acquisitions could be attractive on what terms, for instance, and how much capital and management capacity would be required? What new products best fit different scenarios? If one or more major competitors should falter, how will the company react? In which markets can it gain share?

As companies prepare for such opportunities, they should also create options to maintain good health under difficult circumstances. If capital market breakdowns make global sourcing too risky, for example, companies that restructure their supply chains quickly will be in much better shape. If changes in the global economy could make a certain kind of business unit obsolete, it’s critical to finish all the preparatory work needed to sell it before every company with that kind of unit reaches the same conclusion.

A crisis tends to surface options—such as how to slash structural costs while minimizing damage to long-term competitiveness—that organizations ordinarily wouldn’t consider. Unless executives evaluate their options early on, they could later find themselves moving with too little information or preparation and therefore make faulty decisions, delay action, or forgo options altogether.

More aware

As problems with credit destroy and remake business models and market volatility whipsaws valuations, companies desperately need to understand how their revenues, costs, profits, cash flows, risks, and balance sheets will fare under different scenarios. With that information, executives can plan for the worst even as they hope for the best. If the recession lasted more than five years, for example, could the company survive? Is it prepared for the bankruptcy of major customers? Could it halve capital spending quickly? The answers should help companies to be better prepared and to recognize, as early as possible, which scenario is developing. That is critical knowledge in a crisis, when lead times disappear quickly and companies can seize the initiative only if they act before the entire world understands the probable outcome.

Better business intelligence promotes faster, more effective decision making as well. Companies can often gain insights into the potential moves of competitors by weighing news reports about their activities, stock analyst reports, and private information gathered by talking to customers and suppliers. Such intelligence is always important; in a crisis it can make the difference between missing opportunities to buy distressed assets and leaping in to snare them.

To get this kind of business intelligence, companies need a network, typically led by someone with strong support from the top. This executive’s mandate should include creating “eyes and ears” across businesses and geographies in particular areas of focus (such as the competition’s response to the crisis), as well as gathering and exchanging information. A network is critical because information is most useful if it moves not just vertically, up and down the organization, but also horizontally. Salespeople in a network, for example, should exchange knowledge about what’s working in economically distressed regions so that employees can help each other.

Assembling bits of information, facts, and anecdotes helps companies to make sense of what’s happening in an industry. Say, for example, that a supplier says it has no difficulties with funding, though first-hand knowledge from other sources indicates that the company is struggling to meet its payroll. Such warnings can allow executives to get a full picture much more quickly than they could by sitting in their offices and interacting only with direct subordinates.

More resilient

A crisis is a chance to break ingrained structures and behaviors that sap the productivity and effectiveness of many organizations. Such moves aren’t a short-term crisis response—they often take a year or more to pay dividends—but are valuable in any scenario and could help a company survive if hard times persist. Although employees may dislike this approach, most will understand why management aims to make the organization more effective.

This may, for example, be the time to destroy the vertical organizational structures, retrofitted with ad hoc and matrix overlays, that encumber companies large and small. Such structures can burden professionals with several competing bosses. Internecine battles and unclear decisions are common. Turf wars between product, sales, and geographic managers kill promising projects. Searches for information aren’t productive, and countless hours are wasted on pointless e-mails, telephone calls, and meetings.

Experience shows that streamlining an organization to define roles and the way those who hold them collaborate can greatly improve its effectiveness and decision making. When jobs must be eliminated, the cuts mostly reduce unproductive complexity rather than valuable work. As Matthew Guthridge, John R. McPherson, and William J. Wolf point out in “Smart cost-cutting in the downturn: Upgrading talent” (available on December 4), Cisco took that approach in shedding 8,500 jobs in 2001. When the company redesigned roles and responsibilities to improve cooperation among functions and reduce duplication of effort, talented employees were more satisfied in a more collaborative workplace.

In fact, many functional areas offer big opportunities: greater effectiveness, lower fixed costs, freed-up capital, and reduced risk. This could be the moment to redefine and reprioritize the use of IT to increase its impact and cut its cost. Other companies could seize the moment to control inventory; to reexamine their cash flow management, including payments and receivables; or to change the mix of marketing vehicles and sales models in response to the rising cost of traditional media and the growing effectiveness of new ones. 

As customer preferences change, competitors falter, opportunities to gain distressed assets emerge, and governments shift from crisis control to economic stimulus, the next year or two will probably produce new laggards, leaders, and industry dynamics. The future will belong to companies whose senior executives remain calm, carefully assess their options, and nurture the flexibility, awareness, and resiliency needed to deal with whatever the world throws at them. 

 Provocative. Engaging. Riveting. Memorable. HIRE JIM WOODS TO SPEAK WITH YOUR ORAGANIZATION.   

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How To Survive The Crisis and Lead Through Uncertainty

The range of possible futures confronting business is great. Companies that nurture flexibility, awareness, and resiliency are more likely to survive the crisis, and even to prosper.

The future of capitalism is here, and it’s not what any of us expected. With breathtaking speed, in the autumn of 2008 the credit markets ceased functioning normally, governments around the world began nationalizing financial systems and considering bailouts of other troubled industries, and major independent US investment banks disappeared or became bank holding companies. Meanwhile, currency values, as well as oil and other commodity prices, lurched wildly, while housing prices in Spain, the United Kingdom, the United States, and elsewhere continued to slide.

As consumers batten down the hatches and the global economy slows, senior executives confront a more profoundly uncertain business environment than most of them have ever faced. Uncertainty surrounds not only the downturn’s depth and duration—though these are decidedly big unknowns—but also the very future of a global economic order until recently characterized by free-flowing capital and trade and by ever-deepening economic ties. A few months ago, the only challenges to this global system seemed to be external ones like climate change, terrorism, and war. Now, every day brings news that makes all of us wonder if the system itself will survive.

The task of business leaders must be to overcome the paralysis that dooms any organization and to begin shaping the future. One starting point is to take stock of what they do know about their industries and the surrounding economic environment; such an understanding will probably suggest needed changes in strategy. Even then, enormous uncertainty will remain, particularly about how governments will behave and how the global real economy and financial system will interact. All these factors, taken together, will determine whether we face just a few declining quarters, a severe global recession, or something in between.

Uncertainty of this magnitude will leave some leaders lost in the fog. To avoid impulsive, uncoordinated, and ultimately ineffective responses, companies must evaluate an unusually broad set of macroeconomic outcomes and strategic responses and then act to make themselves more flexible, aware, and resilient.

Strengthening these organizational muscles will allow companies not only to survive but also to seize the extraordinary opportunities that arise during periods of vast uncertainty. It was during the recessionary 1870s that Rockefeller and Carnegie began grabbing dominant positions in the emerging oil and steel industries by taking advantage of new refining and steel production technologies and of the weakness of competitors. A century later, also in a difficult economy, Warren Buffett converted a struggling textile company called Berkshire Hathaway into a source of funds for far-flung investments.

What we know

The financial electricity that drives our global economy is not working well. Turning it back on isn’t just a matter of flicking a switch, as central banks and governments have tried to do by providing liquidity, guaranteeing debt, and injecting capital into banks. We must repair the grid itself significantly, and this will require coordinated global action.

By the grid, we mean the global capital market, which evolved over a 35 year period following the breakdown of the Bretton Woods accord, in the 1970s. No one designed the global capital market, but it has been a boon to humanity, stimulating globalization and growth by enabling the free international flow of capital and trade. The financial crisis of 2008 severely damaged this useful system. Through greed, neglect, or ignorance, the participants abused it until they broke some of its basic mechanisms.

The implications are far reaching. Most obviously, congestion in the global capital market is exacerbating the US domestic credit crisis. That crisis has spread globally, hitting Europe especially hard. Banks until recently have been scrambling for deposits to replace sources of funding such as direct-issue commercial paper, medium-term notes, and asset-backed paper. The search for deposits is required to finance existing loans, and borrowers will need significantly more of them because all but the strongest have, like the banks, lost access to the securities markets. The US government, in particular, has aggressively tried to address this problem through huge liquidity programs, such as the purchase of mortgage- and other asset-backed securities. But it remains to be seen how effective those efforts will be in mitigating the credit crunch.

The global capital market crisis worsens this credit crunch by sending into reverse the dynamic of cross-border investment and trade flows. A dollar of capital must finance every dollar of trade, so the global capital market has stimulated the international exchange of goods and services. It has facilitated cross-border investments—in intellectual property, talent, brands, and networks—that help economies and companies grow and profit, and it has enabled the companies that make such investments to repatriate their profits. In short, global integration and growth will revive only if the global capital market does. Yet it has sustained a body blow that will have repercussions for years, even if international leaders make the necessary long-term adjustments.

The changing role of government

Since September 2008, governments have assumed a dramatically expanded role in financial markets. Policy makers have gone to great lengths to stabilize them, to support individual companies whose failure might pose systemic risks, and to prevent a deep economic downturn. We can expect higher tax rates to pay for these moves, as well as for the reregulation of finance and many other sectors. In short, governments will have their hand in industry to an extent few imagined possible only recently.

That’s not all. Protectionism and nationalism will probably feature more prominently in policy debates. We may see not only old-style populist anger against business, high executive compensation, and layoffs but also the emergence of authoritarian populist movements. Already-dilatory trade discussions will encounter renewed resistance. Although greater global coordination is sorely needed, national political pressures will make it hard to achieve. All this will constrain some business activities but also opens the door to new ventures that depend upon collaboration between the public and private sectors.

Deleveraging

The cheap credit of the past few years most likely won’t return for a long time. For many households, this will mean reducing consumption and postponing retirement; for financial institutions—increasingly, bank holding companies—much higher capital requirements, less freedom to operate and innovate, and probably lower profitability; for governments, even more limited resources for health care, education, pensions, infrastructure, the environment, and security; and for corporations, a different role for capital. More broadly, for many companies the high returns and rapid growth of recent years rested on cheap credit, so deleveraging means that expectations of baseline profitability and economic growth, as well as shareholder returns, must all be seriously recalibrated.

New business models and industry restructuring

Companies engaging with the capital markets will encounter funders who are less tolerant of risk, a reduced ability to hedge it, and greater volatility. Hardest hit will be business models premised on high leverage, consumer credit, large customer-financing operations, or high levels of working capital. Businesses with long or inflexible production cycles or very long-term investment requirements will find it especially difficult to manage their funding. Some won’t make it, so industries will restructure. Corporate leaders already recognize this: in a McKinsey Quarterlyexecutive survey launched the day after the US presidential election, 54 percent of the respondents expected their industries to consolidate.

These are all truths we know. They require a significant shift in thinking about government as a stakeholder, the value talent creates when it is harder to leverage, how to conserve capital, and strategies for sound risk taking—among other things.

What we don’t know

Yet there is much that we don’t know, and won’t for some time: how well will governments work together to develop effective regulatory, trade, fiscal, and monetary policies; what will these responses mean for the long-term health of the global capital market; how will its health or weakness influence the pace and extent of change in areas such as the economic role of government, financial leverage, and business models; and what will all this imply for globalization and economic growth?

Although these questions won’t be answered in the short or even the medium term, decisions made in the immediate future are critical, for they will influence how well organizations manage themselves now and compete over the longer haul. The winners will be companies that make thoughtful choices—despite the complexity, confusion, and uncertainty—by assessing alternative scenarios honestly, considering their implications, and preparing accordingly.

In particular, organizations must think expansively about the possibilities. Even in more normal times, the range of outcomes most companies consider is too narrow. The assumptions used for budgeting and business planning are often modest variations on baseline projections whose major assumptions often are not presented explicitly. Many such budgets and plans are soon overtaken by events. In good times, that matters little because companies continually adapt to the environment, and budgets usually build in conservative assumptions so managers can beat their numbers.

But these are not normal times: the range of potential outcomes—the uncertainty surrounding the global credit crisis and the global recession—is so large that many companies may not survive. We can capture this wide range of outcomes in four scenarios. 

This research, focusing on the United States, the center of the storm, suggests that if capital markets rebound quickly, GDP would be 2.9 percentage points lower than it would have been if trend growth had continued over the next two years. If financial markets take longer to recover, as the middle two scenarios envision, US GDP growth could fall 4.7 to 6.7 percentage points from trend over the same period. At the “long freeze” end of the spectrum, Japan’s “lost decade” shaved 18 percentage points from GDP compared with its previous growth trend.

Regenerated global momentum

In the most optimistic scenario, government action revives the global credit system—the massive stimulus packages and aggressive monetary policies already adopted keep the global recession from lasting very long or being very deep. Globalization stays on course: trade and capital flows resume quickly, and the developed and emerging economies continue to integrate as confidence rebounds quickly.

Battered but resilient

In the second scenario, government-wrought improvements in the global credit and capital market are more than offset—for 18 months or more—by the impact of the global recession, which leads to further credit losses and to distrust of cross-border counterparties. Although the recession could be longer and deeper than any in the past 70 years, government action works, and the global capital and credit markets gradually recover. Global confidence, though shaken, does rebound, and trade and capital flows revive moderately. Globalization slowly gets back on course.

Stalled globalization

In the third scenario, the global recession is significant, but its intensity varies greatly from nation to nation—in particular, China and the United States prove surprisingly resilient. The integration of the world’s economies, however, stalls as continuing fear of counterparties makes the global capital market less integrated. Trade flows and capital flows decline and then stagnate. The regulatory regime holds the system together, but various governments overregulate lending and risk, so the world’s banking system becomes “oversafe.” Credit remains expensive and hard to get. As attitudes become more defensive and nationalistic, growth is relatively slow.

The long freeze

Under the final scenario, the global recession lasts more than five years (as Japan’s did in the 1990s) because of ineffective regulatory, fiscal, and monetary policy. Economies everywhere stagnate; overregulation and fear keep the global credit and capital markets closed. Trade and capital flows continue to decline for years as globalization goes into reverse, and the psychology of nations becomes much more defensive and nationalistic.

Leading through uncertainty

These descriptions are intentionally stylized to enliven them; many permutations are possible. Scenarios for any company and industry should of course be tailored to individual circumstances. What we hope to illustrate is the importance for strategists of considering previously unthinkable outcomes, such as the rollback of globalization. Unappealing as three of the four scenarios may be, any company that sets its strategy without taking all of them into account is flying blind.

So executives need a way of operating that’s suited to the most uncertain business environment since the 1930s. They need greater flexibility to create strategic and tactical options they can use defensively and offensively as conditions change. They need a sharper awareness of their own and their competitors’ positions. And they need to make their organizations more resilient.

Most companies acted immediately in the autumn of 2008 when credit markets locked up: they cut discretionary spending, slowed investment, managed cash flows aggressively, laid off employees, shored up financing sources, and built capital by cutting dividends, raising equity, and so forth. While prudent, these actions probably won’t produce the short-term earnings that analysts expect, at least for most companies. In fact, it’s time they abandoned the idea that they can reliably deliver predictable earnings. Quarterly performance is no longer the objective, which must now be to ensure the long-term survival and health of the enterprise.

More flexible

Companies must now take a more flexible approach to planning: each of them should develop several coherent, multipronged strategic-action plans, not just one. Every plan should embrace all of the functions, business units, and geographies of a company and show how it can make the most of a specific economic environment.

These plans can’t be academic exercises; executives must be ready to pursue any of them—quickly—as the future unfolds. In fact, the broad range of plausible outcomes in today’s business environment calls for a “just in time” approach to strategy setting, risk taking, and resource allocation by senior executives. A company’s 10 to 20 top managers, for example, might have weekly or even daily “all hands on deck” meetings to exchange information and make fast operational decisions.

Greater flexibility also means developing as many options as possible that can be exercised either when trigger events occur or the future becomes more certain. Often, options will be offensive moves. Which acquisitions could be attractive on what terms, for instance, and how much capital and management capacity would be required? What new products best fit different scenarios? If one or more major competitors should falter, how will the company react? In which markets can it gain share?

As companies prepare for such opportunities, they should also create options to maintain good health under difficult circumstances. If capital market breakdowns make global sourcing too risky, for example, companies that restructure their supply chains quickly will be in much better shape. If changes in the global economy could make a certain kind of business unit obsolete, it’s critical to finish all the preparatory work needed to sell it before every company with that kind of unit reaches the same conclusion.

A crisis tends to surface options—such as how to slash structural costs while minimizing damage to long-term competitiveness—that organizations ordinarily wouldn’t consider. Unless executives evaluate their options early on, they could later find themselves moving with too little information or preparation and therefore make faulty decisions, delay action, or forgo options altogether.

More aware

As problems with credit destroy and remake business models and market volatility whipsaws valuations, companies desperately need to understand how their revenues, costs, profits, cash flows, risks, and balance sheets will fare under different scenarios. With that information, executives can plan for the worst even as they hope for the best. If the recession lasted more than five years, for example, could the company survive? Is it prepared for the bankruptcy of major customers? Could it halve capital spending quickly? The answers should help companies to be better prepared and to recognize, as early as possible, which scenario is developing. That is critical knowledge in a crisis, when lead times disappear quickly and companies can seize the initiative only if they act before the entire world understands the probable outcome.

Better business intelligence promotes faster, more effective decision making as well. Companies can often gain insights into the potential moves of competitors by weighing news reports about their activities, stock analyst reports, and private information gathered by talking to customers and suppliers. Such intelligence is always important; in a crisis it can make the difference between missing opportunities to buy distressed assets and leaping in to snare them.

To get this kind of business intelligence, companies need a network, typically led by someone with strong support from the top. This executive’s mandate should include creating “eyes and ears” across businesses and geographies in particular areas of focus (such as the competition’s response to the crisis), as well as gathering and exchanging information. A network is critical because information is most useful if it moves not just vertically, up and down the organization, but also horizontally. Salespeople in a network, for example, should exchange knowledge about what’s working in economically distressed regions so that employees can help each other.

Assembling bits of information, facts, and anecdotes helps companies to make sense of what’s happening in an industry. Say, for example, that a supplier says it has no difficulties with funding, though first-hand knowledge from other sources indicates that the company is struggling to meet its payroll. Such warnings can allow executives to get a full picture much more quickly than they could by sitting in their offices and interacting only with direct subordinates.

More resilient

A crisis is a chance to break ingrained structures and behaviors that sap the productivity and effectiveness of many organizations. Such moves aren’t a short-term crisis response—they often take a year or more to pay dividends—but are valuable in any scenario and could help a company survive if hard times persist. Although employees may dislike this approach, most will understand why management aims to make the organization more effective.

This may, for example, be the time to destroy the vertical organizational structures, retrofitted with ad hoc and matrix overlays, that encumber companies large and small. Such structures can burden professionals with several competing bosses. Internecine battles and unclear decisions are common. Turf wars between product, sales, and geographic managers kill promising projects. Searches for information aren’t productive, and countless hours are wasted on pointless e-mails, telephone calls, and meetings.

Experience shows that streamlining an organization to define roles and the way those who hold them collaborate can greatly improve its effectiveness and decision making. When jobs must be eliminated, the cuts mostly reduce unproductive complexity rather than valuable work. As Matthew Guthridge, John R. McPherson, and William J. Wolf point out in “Smart cost-cutting in the downturn: Upgrading talent” (available on December 4), Cisco took that approach in shedding 8,500 jobs in 2001. When the company redesigned roles and responsibilities to improve cooperation among functions and reduce duplication of effort, talented employees were more satisfied in a more collaborative workplace.

In fact, many functional areas offer big opportunities: greater effectiveness, lower fixed costs, freed-up capital, and reduced risk. This could be the moment to redefine and reprioritize the use of IT to increase its impact and cut its cost. Other companies could seize the moment to control inventory; to reexamine their cash flow management, including payments and receivables; or to change the mix of marketing vehicles and sales models in response to the rising cost of traditional media and the growing effectiveness of new ones.¹

As customer preferences change, competitors falter, opportunities to gain distressed assets emerge, and governments shift from crisis control to economic stimulus, the next year or two will probably produce new laggards, leaders, and industry dynamics. The future will belong to companies whose senior executives remain calm, carefully assess their options, and nurture the flexibility, awareness, and resiliency needed to deal with whatever the world throws at them.  Lowell Bryan is a director in McKinsey’s New York office, and Diana Farrell is director of the McKinsey Global Institute.

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Jim Woods is principal and founder of InnoThink Group. Jim is a business turnaround expert. His story is riveting. He has worked with government, U.S. Army, MITRE Corporation, Pitney Bowes, Whirlpool, and 3M. Jim’s business experiences, extensive research on competitive strategy and innovation have given him a fresh perspective on improving individual and organizational performance. Jim is a prolific speaker on strategic innovation, creative leadership, uncertainty and competitive strategy. Speak with us for consulting or speaking engagements call 719-266-6703 or click here for more information. 

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Can You Turnaround Groupthink to Innovate Properly?

 

It can be difficult to know how well a team is getting along or operating under the cloak of fear; suppressed dissent or Groupthink. Have you ever been in a meeting where the boss says, “Does anyone have a comment? Does anyone disagree?” Silence ensues.

Then the deadly, “Okay, silence is consent, you know.” The boss then moves on to other business. Months later. Another meeting. The boss pounds the table furiously. “Why isn’t anything happening? We had complete buy-in last quarter.” No one says anything. No doubt you’ve had this occur.

Warren Bennis found in a study that 70% of employees say nothing rather correct their superiors. This includes up to and including the likelihood of their committing grievous mistakes.

A study of the decision-making of the Kennedy Administration during the Bay of Pigs invasion concluded the disaster proceeded because of groupthink. Those with doubts remained silent. Groupthink can lead an organization down the path of mediocrity and obscurity. Where decisions become blame of circumstances by inerrant managers and pseudo leaders. Dissent and negative thinking considered subversive, can under appropriate managers and leaders prove innovative garnering substantial competitive advantage.

via excellenceininnovationblog.posterous.com

Innovation may be the buzz word, but it’s no panacea

Innovation may be the buzz word, but it’s no panacea. Professor Morten Hansen and Jim Collins’ new book “Great by Choice” shows what else you need to stay alive and ahead of the rest.

What separates the winners from the losers? The great from the failed? The successes from the also-rans? According to INSEAD professor of entrepreneurship Morten Hansen, it’s not luck, it’s not birthright, it’s not the fast-paced computer age, it’s not “innovation” and it’s not – despite what everyone says – the current economic recession.

“You would expect that in a world that is changing constantly around you that what you ought to do is to morph into the next thing and the next thing and so on,” says Hansen. “But what we found in our research is that winners in the industries that we studied followed a path of consistent pacing. And in the long run, that is what paid off, even in chaotic industries.”

Hansen and co-author Jim Collins studied 14 companies dating back 30 years to create “Great by Choice” (HarperBusiness), the sequel to Collins’ “Good to Great” detailing the cutting edge in business achievement.

Using ‘qualitative match pair research,’ Hansen and Collins identified turbulent disruptive industries (such as bio-tech and airlines) and looked at which firms had performed best financially over an extended period of time. They then paired these ‘winners’ with comparable companies in the same industry and analysed why success and failure occurred.

“Think about two companies starting out running a marathon in the late 1970’s: you have two companies starting at the same time running the marathon together and one is ahead and winning by a lot, and the other is running on an average speed,” explains Hansen. “And the question is: what explains the difference in performance?”

The 20 mile march technique

Hansen compares the ability to hit the target regardless of obstacles with the “20 Mile March.” It’s a simple strategy: you pace yourself, going a set number of miles per day no matter what the circumstances, good or bad. You use self-imposed restraints; discipline but not restriction. This is what Hansen believes is behind the success of Southwest Airlines – the only U.S. airline to reach something akin to greatness in the past turbulent 30 years.

 

“Southwest followed the same principles as the 20 Mile March. The way they became nationally dominant was because they followed a path of opening about four new cities every year,” Hansen explains. “So in bad years – four cities; in the good years – four cities. One year in the 1990’s there were one hundred cities that wanted Southwest to fly to them, because it is good for business. How many did they open in that year? Four. That 20 Mile March is what paid off for them.”

The book paints a picture of a sort of corporate lonesome cowboy, following his own path despite distractions along the way, remaining aloof from the siren call of popularity, beating his industry peers by a multiple of ten over a 30-year period (yes, ten times in terms of shareholder returns over 30 years – Hansen and Collins dub them “Ten Xers”). But this is not to say he is impervious to his surroundings, or even to luck.

Paranoia can be productive

“What we found,” says Hansen, “is that this idea of pacing yourself was combined with another quality, which we call a leadership quality of ‘productive paranoia.’ By that we mean that some of the winners we selected – such as Bill Gates (Microsoft) or Andy Grove (Intel) were hyper-vigilant about the environment they were in. What are the threats that could hit them? What are the bad storms which could come their way? These leaders had their sensors up; they didn’t know when or in what form the bad times would come or in what shape: it could be a collapse in demand, it could be regulatory change, it could be an industry recession. And they prepared. Both Bill Gates and Andy Grove built up a large amount of cash on the balance sheet – that was one way to prepare for the storm.”

Then there’s the big question of ‘luck.’ Hansen and Collins analysed that, too. Perhaps the 10Xers were just luckier. “We found that the winners and the non-winners had the same amount of luck, good and bad,” Hansen explains. So it can’t be just luck alone that explains the difference. You have to do something with the luck that comes your way. You can’t squander it. You have to execute brilliantly in the moment. “So the winners saw not only tough times ahead, they also foresaw a certain amount of luck and were prepared for that, too. When that luck came their way, they disrupted their plans and they executed brilliantly to get the maximum return on that luck. So it’s not how much luck you get; it’s the return you get on that luck.”

Overall, Hansen’s book puts pay to the idea that innovation is the be-all and end-all of the future. The greatest innovator isn’t necessarily the biggest winner. Once you achieve an ‘innovation threshold’ that puts you in the top tier of your industry and you are playing with the big guys, it does no good to be even more innovative.

Innovation is not enough

“Once you reach a threshold in your industry, there doesn’t seem to be a bigger payoff,” avers Hansen. “It’s just a ticket to play. What we found that you need in combination with that innovation is discipline. The combination of having discipline and being creative – that is the hard part. Few companies or people can do that.”
Intel, he says, is one such company, exemplified by its slogan ‘Intel Delivers.’ Hansen continues, “That slogan means ‘We are disciplined. We can scale up the innovation. We can deliver at large volume, at good quality and in time.’ So you’ve got creativity and discipline. ‘Intel delivers’ is a more apt description of their advantage than ‘Intel innovates’.”

And what did Hansen himself learn from his research? “A personal learning for me was around the question of ‘luck.’ You can’t just say “Well I didn’t get lucky,” or “Somebody else got lucky. Or maybe I got lucky.” It is not what matters in the end. We all get a lot of luck, but that does not make one win and others lose. It is what you do with the luck you get in life that counts—your return on luck.”

He is also convinced business finds itself in a new world. “I believe the business world is never going to return to an era of stability” he opines. “And because of that we live in a permanent state of uncertainty and turbulence. And therefore we need new leadership principles that are relevant for this new kind of business era.”

Great By Choice, Uncertainty, Chaos, and Luck – Why Some Thrive Despite Them All, by Jim Collins and Morten T. Hansen; Published by Harper Business/Harper Collins Publishers. www.harpercollins.com. via knowledge.insead.edu by Shellie Karabell