Most successful companies claim they compete on competence. Their talented people are the difference between inglorious failure and glorious success. But, the stark truth is we’re all becoming increasingly ignorant. Like it or not, there’s a widening gap between what we know and what you know.
Look around. Close to 7 billion people inhabit our planet (up from 2.5 billion in 1950). We all know somewhat different things. And let’s face it, most Europeans and Americans don’t have a clue about neither who’s the Prime Minister of India nor who’s topping the pop-charts in China. The fact that academia is ever more specialized also matters. Think balkanization. Right now, there are in the excess of 40 separate academic disciplines. Counting all sub-disciplines would take us way into the hundreds. What about majoring in Feminist Geography? Each sub-discipline has its own vocabulary, its own journals, its own conferences, etc. Then, consider the globalization of education. China already has twice as many university graduates per year as compared to the United States.
The result? Wherever you look, what man knows is expanding at an incredible rate, but what a single individual knows is declining as a share of total knowledge. No person can control but a very small fraction of all the competence that currently exists. We’re all Homer Simpson now.
On top of that, the business world just got even more complicated. In the global village, things are interdependent to an extent never previously witnessed. Just about anything seems to depend on everything. Think spiders-web. Economical, technological, physical and political linkages know no boundaries. Think swine-flu and the credit crisis. Think supply-chain management Wal-Mart style.
Unfortunately, most people respond to the extreme challenges caused by competence shortage and excess complexity by thinking me instead of we. Rather than considering the future, a majority settle for focusing on what’s happening now. Way too many organizations are therefore permeated by a destructive “menow-logic” of reduction – often reinforced by short-term oriented individual bonus schemes. This reaction isn’t sustainable.
To stand a chance of truly turning up after the downturn, we must radically rethink the traditional recipes for business success. The best leaders are currently responding by applying a more constructive logic of PLUS – moving far beyond the obsession on the single person, the present and the existing paradigm of management. Here, I will share three such +factors with you; three ideas that boost expansion by looking past the individual, what’s instant and merely intellectual.
The Enterprise+
In my neck of the woods, Christmas is around the corner. Whether you are celebrating it or not, here’s a piece of advice. If you’ve stopped believing in Santa Clause, you may as well give up your faith in centralized, hierarchical structures. The knowledge required to enhance competitiveness is just too dispersed and fragmented to be concentrated to the mind of one person (in the corner office on the top-floor of a headquarters building). The enterprise plus requires a shift in organizing logic from me to we. The best companies already profit from the wisdom of crowds by mimicking the principles of self-organizing systems
Consider the track-record of large corporations during the previous century. Research shows that of the Forbes 100 class of 1917 (the 100 largest companies in the US back then), only one firm managed to beat the market index; General Electric. Implications? Well, most execs that I talk to would love to benchmark GE; take a trip to their training centre in Crottonville or do an interview with legendary CEO Jack Welch – a man who once described hierarchy as an organization with its face toward the CEO and its ass toward the customer. Fine, but what about learning from the institutional form that beat the crap out of the corporations? The market actually won 99 times out of a 100. Where should we go? Anyone got the address to the head office of the market? A nifty little phone number? Perhaps we should visit www.markets.com? The reality is that the market doesn’t have one centre, but many. It is based on a radically different principle of distributed intelligence (and ignorance).
Now, look at some recent success-cases in business. Linux – the open-source Microsoft challenger, Wikipedia – with its user generated content, and World of Warcraft – the multi-player on-line role-playing game with more than 11.5 million monthly subscribers, are all based on a similar philosophy of distributed brainpower. I’m of course perfectly aware of the fact that crowd-sourcing, free encyclopedias or avatar Orcs and Trolls may not constitute the solid evidence that make converts out of the blindest believers in bureaucracy. So, let’s proceed by taking a look at one of the world’s most admired corporations; Google.
In a recent interview, its CEO, Eric Schmidt, was asked why he has as many as 50-60 people reporting to him. His response; “If you get enough direct reports, then you can’t manage them. That was the goal.” Purposefully, he has put himself in a position where even the slightest effort to run the company in a traditional way would make him go nuts. Why? I think he knows that the critical questions and answers that determine the future of Google don’t reside in his mind (at least not all of them), but rather rest with talent throughout the entire corporate landscape and beyond. This doesn’t mean that Eric plays a less important role at Google. On the contrary, he plays a pivotal part, but also a very different one. He has to draw upon all the diversity that exists within the organization, create a discussion and make sure that it’s a debate with a deadline.
The organizing logic and leadership paradigm at Google and many other hyper-innovative organizations are based on notions that conventional managerial wisdom is anti-evolutionary and ultimately results in economic euthanasia. Interestingly, the road to enabling self-organization resembles the one to a happy marriage (not that I’m a self-proclaimed expert on neither). Here are four principles to guide your efforts (I’ve omitted the obvious one of passion which should be self-evident in both a marital and a corporate context???):
- People: Just like in a marriage, recruitment matters. Why else do you think Larry and Sergey at Google or Jack at GE spent so much time on people issues? Don’t relegate talent attraction to a secluded part of the HR-function and don’t hire clones. Productive diversity is key.
- Purpose: Some people marry out of love, others out of convenience. I guess any purpose is OK so long as both parties agree on it. The same goes for corporations, with the additional requirement that ideally the purpose should also differentiate you from the rest of the pack.
- Perspective: A Master-Servant type of marriage may function but it rarely leads to much development. Dito for companies. Different voices must be heard.
- Process-platform: In a self-organizing firm, the kitchen-table of the marriage is replaced by an advanced infostructure + extensive travelling and rotation of people across borders.
The Entrepreneurial+
When the future is too complicated to be predicted it must be created. The world is so full of surprises that it can’t be controlled. Three years ago, how many of you would have predicted that the new President of the United States of America would be a young, African-American man, with the middle-name Hussein?
To survive, we all need to do exactly two things; exploit our current competitive advantages while constantly also creating new ones for tomorrow. IBM moved from main frames to PCs to consulting. Google progressed from search engine to ad retailer to digital service provider. Picasso went from blue to rose, from African-inspired painting to cubism over to neoclassicism and surrealism to reproductions of the other great masters of art. And Madonna – the ultimate chameleon - re-invents herself every two years.
Most corporations fail in innovation rather than exploitation. Not only the history of pop-music is littered with examples of one hit wonders, like Rick Dee’s Disco Duck from the 1970s or (for those a little younger) the absolutely unforgettable Ice Ice Baby by Vanilla Ice that topped the charts in 1990. The same is largely true also for the business community. Far too many organizations end up in the elephant graveyard because they fail to come up with the sequel to their original blockbuster.
This also explains why modern corporations are so dependent on people who can think differently. When I ask executives about what they are looking for in tomorrow’s employees, more or less regardless of industry and geography in unison they mention traits such as; creative, self-motivated, power of initiative, etc. OK, I say, and once you have them inside the company, what will you expose them to? Management, they whisper kind of bashfully.
According to Wikipedia, “Management” (from Old French management “the art of conducting, directing”, from Latin manu agere “to lead by the hand”) characterizes the process of leading and directing all or part of an organization, often a business, through the deployment and manipulation of resources (human, financial, material, intellectual or intangible)”. I prefer a different definition. It’s fair to say that during the 20th century, management was largely defined as the art and science of stamping out deviance – primarily negative deviance, but if a couple of positive deviants were killed in the process that was a sacrifice which most executives were willing to make in the name of professional management. Here’s the problem. Management merely tells you how to become a little bit better at that which you’re already pretty darn good at. It ensures efficiency today but not future relevance.
The leadership implication of the “variation extermination paradigm” was that we turned our attention to the weaknesses of people. Our entire society, including most corporations, was obsessed with turning minuses into zeros – super-zeros, but still zeroes. Ironically, many managers still spend 80 per cent of their time and attention on the 20 per cent of the businesses, products or people that are the worst performers – the M&M’s of business - Mega-Minuses.
Yet, we all know that peak performance must be based on our plusses – individual and corporate. Or as Peter Drucker put it: “A person can perform only from strengths. One cannot build performance on weaknesses, let alone on something one cannot do at all.” If you are born tone-death, not even 350 years of practice will turn you into the next Luciano Pavarotti. Or, if you like me, happened to be born with your left foot on the right leg, no amount of training will land you a contract with Spanish football-club FC Barcelona. The new paradigm for 21st century entrepreneurial+ corporation must therefore be preemptive instead of curative. Play the plusses. Eric Schmidt of Google is already using positive deviance to his advantage. What about you? Remember that anyone who’s ever done anything the slightest bit innovative and amazing has also been a positive deviant – from Leonardo Da Vinci to Steve Jobs.
The Emotional+
So far, I’ve argued that we can deal with the ignorance-interdependence challenge by building organizations that utilize diverse and distributed clusters of “core competents” – the Jagger and Richards of the corporate world - capable of creating the future. But what if the sources underlying competitiveness are truly shifting? Historically, they always have. A market economy evolves. Once upon a time, wealth was created by controlling physical capital - in the form of minerals, oil-wells, forests and fields. The money was in mines not minds. Then, financial capital became the big thing. And recently, in Nerdworld, we celebrated intellectual capital.
This is my prediction for the future. Access to advanced know-how is now mandatory. Yet, not all the intellectual capital in the world will provide you with a sustainable competitive advantage. The next challenge is to utilize the full potential of also the emotional capital of the firm. Emotional engagement is a two-step process focused on getting access to the discretionary effort that makes a person, a team or an entire company about two to three percent better. And in a world where the winner sometimes takes all, those few percentage points can make a heck of a difference.
The first step in moving beyond competing on competence means boosting the psychological capital of the firm. Mood matters. Trust me. While research shows that the education and experience of people explain some 28% of the variation that we find in work related performance, studies also suggest that confidence – the belief in your own ability - account for approximately 38% of the variance. Add to that the impact of hope, optimism and resiliency, and the massive influence of positive energy becomes even clearer.
Look no further than yourself. Can you wash up after dinner? Probably. But do you love to do the dishes? Less likely. Would you love to be able to play soccer like David Beckham? Sure. Can you – be honest now? Peak performance is about combining high skill and high will. Research indicates that it takes about 10,000 hours of practice to get really good at something. So, unless your colleagues are masochist it makes sense to let them work on stuff that they love.
The best leaders spend a lot and time and effort mass-customizing the employee deal – opening up for positive deviance by carefully managing all critical relationships individually. At the whacky and highly successful Brazilian company Semco, run by the maverick Ricardo Semler, there are more than 10 different ways to get paid – ranging from a fixed salary to stock options, royalties and bonus schemes, all of which can be combined in various ways. Employees evaluate their bosses. Semler has also established a profit-sharing system and insists that the financials are published internally, so that everyone can see how the firm is doing. At Semco, employee turnover is about 1 percent. Everything can be individualized – anything from office furniture to incentives. Personalization is the key to effective people leadership. Case closed.
The second step in ensuring emotional engagement is based on the realization that people are not only individualistic creatures. People can be extraordinarily courageous and committed only when they have something to believe in. Future success requires fantasy+feelings+faith. The greatest companies build massive levels of social capital in the form of a “corporate religion” giving the organizational tribe a clear direction and guaranteeing co-ordinated action. This is not the time and place to describe in detail the seven dimensions that we find in the best business bibles. Instead, here’s a list of these elements and some questions with a patented impact on the competitiveness of any organization:
- Ideological – Your Dream: Do you have a dream, or just five year plans?
- Mythical – Your Stories: Do you have a CSO – a Chief Storytelling Officer?
- Ritual – Your Ceremonies: Do you hold celebrate success?
- Ethical – Your Values: Do you hire for attitude?
- Emotional – Your Experience: Do you have personalized EVPs – Employee Value Propositions?
- Material – Your Things: Do you have a place enabling talent to play at work?
- Organizational – Your Structures: Do you have systems enabling collective intelligence?
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Let me leave you with a final note of optimism. If you aspire, inspire and perspire to lead your team through challenges, there’s light at the end of the tunnel. Get people to think differently, feel differently and do differently; and you can’t avoid making a positive difference.
