Jugaad Innovation

“Deep scarcity, major demographic shifts, rapid technological change and accelerating globalisation are creating the most complex business environment since the Industrial Revolution.”  Meanwhile, Western organizations have been “institutionalizing” innovation (think R&D processes) that has led to a “structured” approach to innovation which has “three clear limitations: it is too expensive and resource consuming, it lacks flexibility and it is elitist and insular.” This from Radjou et al., in their 2012 book “Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth” (Jossey-Bass).

The authors’ proposed solution for Western organizations to innovate “faster, better, cheaper” in the contemporary environment is “Jugaad” innovation. Jugaad is “a Hindi word meaning an innovative fix; an improvised solution born from ingenuity and cleverness; resourceful.” (It can be loosely equated with “D-I-Y” in America and “Système D” in France.)  Based on extensive research both in emerging economies and elsewhere, the authors identified the “universal” principles of Jugaad so that this “improvisional and frugal art of responding to complexity” can be applied anywhere.

Here are the principles of Jugaad innovation followed by further considerations (“et alors”)

Jugaad Innovation

The authors found that “Jugaad can be distilled into six guiding principles, which anchor the six practices of highly effective innovators in complex settings…” The six principles are:

Seek Opportunity in Adversity

If there is a harsh constraint, it can be looked on as an “invitation to innovate.” It is reframing the perspective to redesign, re-engineer or rethink the business model.

Do More with Less

Work with what you have; do not try to work with what you do not yet have. The essence of frugality is to be “highly resourceful in the face of scarcity.” 

Think and Act Flexibly

The mindset required is that of one who “constantly questions the status quo, keeps all options open, and transforms existing products, services and business models.”

Keep it Simple

It isn’t about “seeking sophistication or perfection by over-engineering products, but rather about developing a ‘good enough’ solution that gets the job done.”

Include the Margin

Hitherto, the focus has been on “mainstream” customers; now “jugaad entrepreneurs intentionally seek out marginal, underserved customers…” Solutions have to be affordable by the target.

Follow Your Heart

Knowing your customers and your product intimately, market research and focus groups might not be necessary: the mindset required is that of those who “trust and follow their hearts.”

Et alors

The above is only the headlines; the book then elaborates with many excellent examples of how these principles have been and can be achieved. Principally however, in an organizational context (rather than an environment as large as a market itself) the key drivers appear to be autonomy and delegation. The authors cite Haier whose CEO has made the “organizational structures flat, thus empowering frontline employees to swiftly sense and respond to changes in customer demand…” Most directors of centrally-controlled large Fortune 500 companies would love their staff to do “more with less” and perhaps “seek opportunity in adversity”; but who amongst those in power actually give “space” to others in the organization to just do a ‘good enough’ job, to “think and act flexibly” and to “follow your heart”? If the leaders want their corporation to survive and even flourish in the “most complex business environment since the Industrial Revolution”, it might be prudent to consider more delegation and more autonomy!

An Integrated Approach to Change

Change in business is often focused on the short-term with the objective of creating economic value for shareholders as quickly as possible; or sometimes focused on the long-term with the objective of patiently building the corporate culture. As 70% of change initiatives fail, the authors of “Cracking the Code of Change” (HBR, 2000) suggest that managers need to grasp the two basic theories of change and then “carefully and simultaneously balance these very different approaches.”

 

Here’s how to take an integrated approach to change followed by further considerations (“et alors”).

 

An Integrated Approach to Change

 

All changes in business can be compared along six dimensions for which theory “E” (emphasizing short-term economic value) can be balanced with theory “O” (emphasizing long-term organizational culture). Here are the six dimensions:

 

Goals

 

E:  Maximize shareholder value
O:  Develop organizational capabilities
E+O: Explicitly embrace the paradox between economic value and organizational capability

 

Leadership

 

E:  Manage change from the top down
O:  Encourage participation from the bottom up
E+O:  Set direction from the top and engage people below

 

Focus

 

E:  Emphasize structure and systems
O:  Build up corporate culture: employees’ behavior and attitudes
E+O:  Focus simultaneously on the hard (structures and systems) and the soft (corporate culture)

 

Process

 

E:  Plan and establish programs
O:  Experiment and evolve
E+O:  Plan for spontaneity

 

Reward System

 

E:  Motivate through financial incentives
O:  Motivate through commitment – use pay as fair exchange
E+O:  Use incentives to reinforce change but not to drive it

 

Use of consultants

 

E:  Consultants analyse the problems and shape solutions
O:  Consultants support management in shaping their own solutions
E+O:  Consultants are expert resources who empower employees

 

Et alors

 

As ever, it is always easier said than done! There are two things here: one is easy, one is challenging. What is easy is that the combination of the two theories is not that complicated: the key message is that change agents should not focus on just theory “E” or “O” but give due consideration to both – the combination is not so much a “new” path, but both “paths”. What is challenging is the same thing: that the combination of the two theories is very difficult! This is the very essence of the theory (under goals) that there is a paradox between the short-term economics and the long-term capabilities of the organizations. Day-to-day demands often distract the manager from the longer-term perspective; whilst long-term organizational strategies often appear to be in conflict with short-term economics. Achieving “integrated” change requires acceptance of this tension and promoting it (i.e. including both change theories) and then carefully managing that tension!

 

 

Business Model Generation

It is unlikely that the competitive advantage of any business will last forever. Accordingly, you need to know exactly how your business is positioned and how it fits with the context and environment. In order to facilitate such a regular strategic review, there is a very good business model “generator” which has been developed through collaborative efforts and published in a book called “Business Model Generation” by Alexander Osterwalder and Yves Pigneur (John Wiley & Sons, 2010). It gives a brilliantly concise overview of a business so that you can build your own model to see where and how you are adding value; and in so doing consider where you might need to best focus your efforts, both now and in the future.

Here’s the business model generator along with further considerations below (“et alors”)

Business Model Generation

As illustrated below, the pro-forma is in 9 parts surrounding the key “value proposition”. On the right is the customer whose interface with the value proposition is the “customer relationships” and the “channels”. These are related to the revenue streams. On the left are the “key partners” who are connected to the value proposition through “key activities” and “key resources”. These are related to the cost structure.

Key Partners	Key Activities	Value Proposition		Customer Relationships	Customer Segments
	Key Resources			Channels
Cost Structure			Revenue Streams

Here’s the various sections in detail:

Value proposition

This is why customers come to you. Create value by inventing something new; improve your product’s “performance”; or “differentiate” your offer to specific needs.

Customer segments

This is all about positioning. “Mass” markets and “niche” markets require different approaches, while “segmented” customer bases share similarities, but with differing needs.

Channels

Select the best “customer touch points” to communicate value and to distribute and sell your products and services. What is the channel e.g. internet, B2B2C, B2G, wholesale…?

Customer relationships

Establish different ways to serve distinct market segments: is the focus on mass produced commodities or on personalized service?

Revenue streams

Capturing income, each type of revenue stream may demand a different “pricing mechanism,” either a “fixed” price or a “dynamic,” negotiated price.

Key partnerships

Consider supplier links, “coopetition”, joint ventures and “strategic alliances”; along with outsourcing and subcontracting.

Key resources

Assets are “physical, financial, intellectual or human” depending on what the business is. Remember that key resources may be “owned or leased”.

Key activities

What do you actually do to capture the profit? Produce an item, provide services/solutions, manage processes?

Cost structure

“Cost-driven” or “value-driven”?  Outlays represent “fixed and variable” expenses. Consider economies of scale and “scope” from large-scale production and distribution.

Et alors

The idea is that using this template you can see where your business model adds value and also where it might not add value. Such a review applied to a private banking business might (for example) highlight that customer relationships are the most “value added” part of the value proposition which therefore need to be focused on; whereas operations could be outsourced.

The model can also be used to compare your business to that of competitors to see where there might be an opportunity or a threat. It might also assist a review of the possible temporary nature of your current “value-add”. This might highlight other parts of your business that could add value in future or even right now (eg. UPS with their offer to manage other companies’ logistics).

The key is as the authors say “virtually all business models eventually become obsolete, so proactive companies actively conceive and pursue new models. One side benefit of continual business-model design and redesign is a healthy lack of respect for long-held assumptions.” Each of the 9 sections of your business model is subject to continual repair and renewal! Keep reviewing!

Leading by Networking

Talking to Mike Barry, of the D-School at Stanford University this week, we reflected on what a leader needs to make innovation happen in a large organization. In summary, the keyword was networking: both to receive information so as to assess what “can” be done (rather than what might be done); and then to influence others to make changes happen even when faced with uncertainty. Taking this further I wondered what type of network might be best for a leader to effect innovation and/or make changes. According to Battilana et al., “it depends”, but in their HBR article the authors give clear guidance as to what network types can improve the leader’s chance of innovating: “The Network Secrets of Great Change Agents” (July 2013).

Here’s how to lead by networking along with further implications (“et alors”):

Leading by Networking

The authors focused their research on finding effective change agents in large organizations and then mapping their success to the type and nature of the network they had. The predictors of the change agents’ success were the following:

Central

Change agents who are central in their organization’s informal network “have a clear advantage”, regardless of their position in the formal hierarchy.

Review your network. If you are not central (like a “hub” with many “spokes” spanning 360°), either develop your network and/or engage someone who is in order to achieve the change.

Bridge (for Dramatic Changes)

When the person’s network contacts are not connected to each other, the person makes the bridge between disparate individuals and groups. This proves best for making “dramatic” changes.

If you are proposing divergent change which disrupts existing practices then make sure your network is a “bridging” type or “appoint a co-chair whose relationships offer a better fit”.

Cohesion (for Minor Changes)

When the person’s network is cohesive (i.e. contacts are also connected to each other), the ease of facilitating communication and building trust proves ideal for making “minor” changes.

Once the change proposal is “out”, a cohesive network either tends to fully cooperate or to form a coalition against the change; hence the suitability for minor rather than dramatic changes.

Closeness to other influencers

Defining closeness in terms of “mutual trust, liking and a sense of social obligation”, being close to “change endorsers” proved to have no impact on the success of either dramatic or minor changes; but being close to “fence-sitters” had high impact on the success of either type of change.

Being close to “change resistors” impacted success for minor changes; however closeness had no impact on the success of dramatic changes (since when resistors perceive a significant threat they are typically difficult to influence otherwise).

Et alors

So it really does depend! Innovation comes in many shapes and forms from incremental adaptive changes to large and singular disruptions. These changes can be best managed according to the type of network the leader has; however if we change the frame of reference from “network” to “ecosystem” then the position of the leader in the “ecosystem” is by no means leader-centric! The leader is part of a larger ecosystem and will accordingly have to adapt to the environment which might be impacted by the local culture (national or organizational). Some cultures might be collegiate and group-orientated whereas others might be competitive and individual-focused. The former might lend itself to “cohesive” networks; the latter to “bridging” networks. Therefore in turn, and despite the best efforts of the leader, in collegiate and group-orientated cultures, innovation and change might only occur on an incremental, gradual and “minor” basis; whereas in competitive and individual-focused cultures, innovation and change might happen more often as large and singular disruptions!

Organisational Rigidities

Claudio Feser, an executive at McKinsey consulting, started researching corporate longevity and found that 50% of all publically listed companies die within 10 years; only 15% reach 30 years; and only 5% achieve their 50^th anniversary. Further research focused on this 5% whom he referred to as “serial innovators” – those who were continually able to adapt and change in order to survive. In his book, “Serial Innovators: Firms that Change the World” (John Wiley & Sons, 2011) he identifies organisational rigidities that can lead to the demise of most firms and also details how the “serial innovators” overcome these rigidities in order to change, grow and prosper.

Here’s a summary of organisational rigidities along with further implications (“et alors”):

Organisational Rigidities

As companies age, they develop rigidities which block them from changing and adapting. Managers therefore need to overcome the following five rigidities:

1.       Hierarchical Bureaucracy

Whilst hierarchical organisations can have their merits, ossification can take place when the organisation turns into a bureaucracy. Symptoms may include centralisation of decisions with little delegation of responsibility and “excess layers of management that slow their operations.”

To create an “adaptive organisation” 1/ “positively frame the vision” seeing the future in an optimistic way whilst dealing with the issues of today; and 2/ carve out separate and autonomous units which can become “self-managed performance cells.”

2.       Loss of purpose

When companies become rigidly mired in the past, “paralysed [and] blind to the changes necessary to survive” then a sense of purpose can be lost. Without a sense of purpose, staff lose their sense of belonging along with their drive to achieve.

“Cultivate the desire to make a difference” – fulfil people’s yearning to give to a greater cause and serve all stakeholders as well as the shareholders. Use motivational stories to engage staff and include altruistic objectives in the firm’s mission.

3.       Change-resistant corporate culture

After a certain time it is not just the rules and regulations that define what can and cannot be done but also the corporate culture. Whilst a strong culture can be beneficial if it is strategically aligned and adaptive, it can otherwise cause a change-resistant rigidity.

“Cultivate a culture that fosters execution” – promote values and “norms” that encourage achievement, along with creativity and new ways of thinking. When changes are proposed, instead of asking the question “why?” start asking the question “why not?”

4.       Poor incentives

Purely monetary incentives can act as a rigidity as they tend to neither inspire nor retain staff for the long-term. Monetary rewards can “deter staff from cooperating, undermine ‘moral behaviour’ and even encourage deceit.”

Balance financial and non-financial rewards and invest in staff development. Non-financial rewards need to be managed positively and visibly. Motivation can be increased through social recognition and performance feedback.

5.       Adherence to the status quo

Some firms have “defining capabilities” in operations, abilities or specific assets; however these advantages can become restraints by tying the firm to the past and fossilising a “status quo”. This limits the firm’s ability to react to both opportunities and threats.

Two steps are required to overcome this: 1/ top executives need to have a strong desire to learn and “share diverse philosophical approaches”; and 2/ “invest in capabilities” – adapt readily to the pursuit of opportunities and have strategies in place to add to core competencies.

Et alors

The author appears to presuppose that the readers have the power to make sweeping organisational changes and accordingly, at first glance, some of the advice might appear to be “easier said than done”! So what do you do if, as a middle manager, you find yourself in a rigid organisation? Firstly you can positively frame your own vision for your own followers and you can also protect them from the worst “excesses” of the “hierarchical bureaucracy” by fully empowering them: make them a “self-managed performance cell”! Secondly, with all the other rigidities, adopt the same approach: make a clear distinction between today and tomorrow and focus your followers on the tomorrow you wish to create: communicate a motivating sense of purpose; ask “why not?” rather than “why?”; develop your staff through feedback, coaching and training; never stop learning, promote diversity in all its forms and keep an eye on the opportunities and threats arising outside the organisation. You don’t actually have to be the CEO to do this: you can start today!

Innovative Behaviours

Having attended a “Myers Briggs Type Indicator (MBTI®) Step II” course this week I came across the behaviours that are often expressed by people with preferences for the “sensing” perceiving function and the opposite “intuition” perceiving function. This is what differentiates “step II” from “step I” as there might be what are called in- or out-of-preference behaviours expressed even though the underlying type preference remains constant. It made me wonder which of the behaviours would be most related to innovation and if any correlate with leadership behaviours…

Here’s a summary of the different behaviours followed by further implications (“et alors”):

Innovative behaviours

Within the perceiving function dichotomy of “sensing” or “intuition” preferences, there are five “facets” of behaviour relating to perceiving or gathering information:

Concrete vs Abstract (how attention is focused and on what)

Concrete people tend to notice and trust the facts and what is actually present and need to know enough facts before proceeding; whereas…

… Abstract people tend to make inferences and look for meaning beyond the original facts. Accordingly they enjoy brainstorming.

Realistic vs Imaginative (how information is used)

Realistic people tend to have a common-sense perspective and seek common-sense solutions, looking for efficiencies in everything they do; whereas…

… Imaginative people tend to value and enjoy creativity for its own sake, imagining models, products and theories and then looking for supporting facts.

Practical vs Conceptual (how ideas are used)

Practical people tend to want ideas to be applied valuing practical endeavours with tangible outcomes; whereas…

… Conceptual people tend to be excited by ideas themselves, enjoying intellectual, scholarly discussions and appreciate the intangible.

Experiential vs Theoretical (ways to find patterns and make meaning)

Experiential people tend to learn best by doing and need to experience something new before they believe it works; whereas…

… Theoretical people tend to learn best by placing new information in a theoretical framework and understand the world through abstract theories and principles.

Traditional vs Original (value of social context and conditions)

Traditional people tend to need change to be connected to what is known and occur gradually, wanting to do what is socially acceptable and not stand out from the crowd; whereas…

… Original people tend to devise original ways of doing things to stay motivated wanting to do what is different and to stand out from the crowd.

Et alors?

It would be easy to say that it was one pole of behaviours or the other which corresponds “best” to innovative behaviours; but in fact it is neither. Whilst no behaviour is better or worse than the other, the whole principle of type-dynamics and development is balance. In a team environment it is recommended to not have too many members with a preference for sensing or intuition as the team might collectively miss either the big picture or the details respectively in any given situation. Innovation is more likely to be found when either an individual can bridge the opposite behaviours or collectively the team can make the links. Innovation can be found when imaginative creativity can be channelled into practical reality. Creative thinking which adds value in a corporate context can be conceptual, theoretical and abstract but it also needs to be realistic, practical and concrete!

Leaders tend to have a preference for the “intuition” perceiving type. (This is the only one of the two functions and two attitudes which appears to show any such correlation.) Are leaders more innovative per se? Not necessarily, but they can lead their teams to be more innovative through achieving preference balance within their teams. On the other “side” of the preference, age is strongly correlated with “sensing”: the idea is that the underlying preferences might not change, but behaviours might evolve with a significant majority of the population exhibiting at least one “out-of-preference” behaviour. Leaders should note this if they wish to at least enhance the chance of achieving innovation in their teams: whilst they themselves might provide the intuition, they should make sure someone else provides the sensing. Age might well be another part of the team diversity equation!

How Leaders Accelerate Change

John Kotter, the Konosuke Matsushita Professor of Leadership, Emeritus at Harvard Business School and author of 17 books including the seminal “leading change” has just published a new article on change management which is likely to become something leaders will refer back to for years to come: “Accelerate!” HBR, November 2012. In it he not only draws on his own “leading change” material but also that of Porter, Christensen and Kahneman to propose a solution to the dilemma that companies today “must constantly seek competitive advantage without disrupting daily operations”.

His theory is that traditional hierarchies and managerial processes are very good at addressing the daily demands of running a company; however “what they do not do well is identify the most important hazards and opportunities early enough, formulate creative strategic initiatives nimbly enough, and implement them fast enough”. He therefore proposes that two systems should operate in concert: one the “rational” hierarchy; the other a “more emotional” network. The latter is based on his eight-step change method but importantly, in the network, the steps become “accelerators”.

The network ensures that the accelerators are current and always at work (rather than being used in a rigid and sequential way); and instead of change being driven by one small powerful group, the accelerators “pull in as many people as possible from throughout the organisation to form a ‘volunteer army’”. This network approach overcomes the two principal change resistors found in a hierarchy: 1/ political: managers being “loath to take chances without permission from their superiors”; and 2/ cultural: people “cling to their habits and fear loss of power and stature.”

Here’s how to accelerate change along with further implications (“et alors”):

How Leaders Accelerate Change

According to Kotter, “mounting complexity and rapid change create strategic challenges that even a souped-up hierarchy can’t handle. That’s why the dual operating system – a management-driven hierarchy working in concert with a strategic network – works so remarkably well”. The dual operating system has five principles:

Many change agents, not just a few

To move “faster and further, you need to pull more people than ever into the strategic change game”, but in a way that is economically feasible. 10% of managers and employees at any one time is proposed by Kotter as both “plenty and possible”.

A “want-to” not just a “have-to” mindset

To mobilise a “voluntary army” people have to want to be change agents and must be given permission to do so. The spirit of volunteerism (the desire to work with others for a “shared purpose”) “energises” the network.

Head and heart, not just head

In order to engage management and staff in the change network, you must “speak to their genuine desire to contribute to positive change and to take an enterprise in strategically smart ways into a better future, giving greater meaning and purpose to their work.”

More leadership, not just more management

The hierarchy needs competent management; the strategy network needs lots of leadership. It’s “all about vision, opportunity, agility, inspired action, and celebration – not project management, budget reviews, reporting relationships, compensation and accountability to a plan.”

Two systems, one organisation

The dual operating system is not two silos: “the network and the hierarchy must be inseparable with a constant flow of information and activity between them – an approach that works in part because the volunteers in the network all work within the hierarchy.”

Et alors?

It is quite possible that this “win-win” solution will become the defining hallmark of corporate strategic change initiatives from now on! Its simplicity is beguiling and it solves the ultimate change-management question: how to effect change without having to change the hierarchy itself! However, the idea of a hierarchy being staffed by managers whilst simultaneously super-motivated and highly-engaged leaders form volunteer armies with a sense of purpose to effect change highlights one key point which should not be overlooked: at least someone in the hierarchy (very near the top) must have sufficient leadership (and management) capabilities to introduce, promote and sponsor such a change-network! Without that initial “birth” of the network from the hierarchy, the hierarchy is at risk at remaining just that!

From a Human Resources point of view, what Kotter is proposing might be the new, modern and collective version of the now old-fashioned concept of individual “garage-time”? Hitherto, in an attempt to foster innovation, many companies permitted employees to spend 10-20% of their work time on individual projects on the understanding that any resulting innovations would become the property of the company. 3M had its famous “post-it” product succeed in such a way, but that is now an old story. Google recently revitalised the idea and coined the term “garage time” but insiders insist that it is no longer a genuine offer and publically the corporation no longer promotes it. When it was fashionable, it was billed as a key offer to attract, motivate and retain staff. Now perhaps organisations should offer collective “change time” for those willing to work together on strategic change initiatives?

Staying with HR, from a learning and development point of view, this is both a fantastic opportunity and a reflection of what already happens in many large organisations. As part of a leadership development course, many corporate universities offer “action-learning” projects which in a way work exactly like Kotter’s proposed “volunteer armies” not necessarily effecting change but at least studying and proposing change under the tutelage of a senior sponsor. Not only do the diverse leaders from all parts of the organisation come together and work in a team getting to learn about the challenges of change management and developing as leaders; but also, if the proposed projects are strategic in nature then the organisation itself can gain fast insight into the changes that are needed to maintain a competitive advantage without disrupting daily operations!

Creativity and Leadership

In a changing world not only do organizations need to innovate to survive, they need to innovate quicker than the competition. Creativity is essential for innovation but is very difficult to manage; indeed many leaders consider it too elusive and intangible to be managed. So says Amabile et al., in their October 2008 HBR article “Creativity and the role of the leader”, reprint R0810G. Following a Harvard Business School colloquium on the subject, the authors summarize that “you can’t manage creativity, but you can manage for creativity.” In order to enhance organizational creativity, leaders should therefore consider three key practices.

Here’s how to enhance organizational creativity followed by further implications (“et alors”).

Creativity and Leadership

The recommendations for leaders to foster the conditions in which creativity flourish are as follows:

Elicit ideas from all ranks

·         Stop thinking that you have the best ideas; most of the best ideas come from the “ranks”.

·         Make it safe to fail: stress the goal is to experiment constantly, and learn early from failure.

·         Motivate people by giving positive feedback, asking questions and encouraging the team.

Open up to diverse perspectives

·         Recruit and develop diverse staff: diversity enhances creativity.

·         Get people of different disciplines, backgrounds and expertise to share their thinking.

·         Avoid suppressing all or parts of people’s identity.

Correctly impose controls

·         Don’t impose controls during the “discovery” phase of ideas. Brainstorm openly.

·         Protect those doing creative work from conformist forces within the organization.

·         Create a filtering mechanism in the commercial phase, possibly using third parties.

Et alors

An engineering professor at this colloquium noted that most companies have hierarchical structures and differences in status among people impede the exchange of ideas. If the hierarchy is maintained but leaders want to overcome this challenge (and implement the above practices), the same professor suggested two solutions: 1/ in the longer term, the reward system has to be changed: those who are rewarded should be those who help others succeed; and 2/ in the immediate, management’s mission should be to get people to “shut up” and listen when appropriate. Indeed with the demands of day-to-day management and exigencies of operational excellence, talent development and listening are often overlooked…

Various research concludes that a culture of assimilation reduces heterogeneity and leads to “groupthink”, hence the recommendation to avoid suppressing people’s identity; however even suppressing parts of people’s identity can be detrimental to creativity. Research demonstrated that persons with higher identity “integration” (e.g. being female and an engineer) displayed higher levels of creativity. The implication is that if leaders can encourage identity integration (where for example women can be women and engineers, not just engineers) then people may be more innovative. Hence the recommendation to avoid suppressing (even) parts of people’s identity!

How to Communicate as a Leader

“The command and control approach to management has in recent years become less and less viable. Globalisation, new technologies, and changes in how companies create value and interact with customers have sharply reduced the efficacy of a purely top-down model of leadership.” This is according to Groysberg and Slind in their article “Leadership is a Conversation: How to improve employee engagement and alignment in today’s flatter, more networked organisations”, June 2012, Harvard Business Review.

Their central argument is that leadership should be a dialogue rather than a monologue. Whilst this presents a challenge for the “old corporate” model of leadership communication, it is now also an opportunity in the “new organisational” model. Due to technical advances, there are more means available to have these conversations; however the new leader has to be more engaging with staff because the new technology blurs the frontier between the organisation and the public.

Here’s how to move from the old style to the new style of communication along with further implications (“et alors”)

How to Communicate as a Leader

The authors suggest that there are four main elements of organisational “conversations” with each having implications as to how the leader should communicate:

Intimacy (how leaders relate to employees)

·         Whereas in the old corporation, information was primarily top-down and formal;

·         … in the new organisation, leaders communicate personally and directly. Informal, leaders place emphasis on trust and authenticity.

Interactivity (how leaders trust communication channels)

·         Whereas in the old corporation, messages were broadcast with a predominance of newsletters, memos and speeches;

·         … in the new organisation, leaders talk with employees not to them with an emphasis on face-to-face dialogue.

Inclusion (how leaders develop organisational content)

·         Whereas in the old corporation, top executives controlled messaging and employees were “passive” consumers of information;

·         ... in the new organisation, leaders emphasise content over control and employees become “active” consumers of information.

Intentionality (how leaders convey strategy)

·         Whereas in the old corporation, communication was fragmented, reactive and ad-hoc with leaders using “assertion” to achieve strategic alignment;

·         … in the new organisation, leaders have a clear over-arching agenda which is clearly explained to employees and strategy starts to evolve in a bottom-up fashion.

Et alors?

There may be many leaders who find themselves in an “old corporation” but wish to be in a “new organisation”. Making the change from the old to the new could take time as this would be a cultural change. There is however the possibility for any leader becoming the bridge between two worlds: above, the old corporation; below, the new organisation. The “transitionary” leader who wishes to change the culture would for some time have to maintain a challenging position of having to “suffer” the old from “above” whilst simultaneously “benefitting” the new organisation “below”.

The authors’ recommendations for communication are very valuable for any leader; however they are immediately applicable in an American culture. Elsewhere, they might be more difficult to implement since, as in some cultures for example, employees are sometimes meant to be nothing but passive or “reactive”. Nevertheless, in most cultures, and as the authors assert, dialogue rather than monologue increases individual’s engagement and commitment. Similarly, no one is as clever as everyone: if not everyone’s voice can be heard, where will the new ideas come from?

Leadership in a Global Context

One article and one survey result, both coming from McKinsey Quarterly, highlight the need for diversity and leadership particularly when operating globally. In the article “Is there a payoff from top team diversity” April 2012, Barta et al., conclude from their studies that between 2008 and 2010, companies with more diverse teams were also top financial performers. Studying return on equity (RoE) and the earnings (EBIT) of 180 companies from France, Germany, the UK and the USA and comparing them with the number of women and foreign nationals on senior teams, they found that companies in the top quartile of executive-board diversity had an average of 53% greater RoE and 14% higher EBIT than those of the least diverse companies.

In the survey of 4,666 executives at global companies, Acquila et al., conclude in “Managing at global scale” June 2012, that the respondents are “satisfied with their organisation’s overall capabilities but see room to improve in innovation and motivation. Better leaders are key.” Regardless of the company type or current performance, respondents indicated that “developing leaders who are culturally and functionally proficient across regions is a key to more effective multiregional operations.” Whilst reviewing the survey results for local strengths, organic growth advantages, and operational scale, the survey also focused on how executives thought that operations could be improved.

Here’s a summary of ways to improve operations followed by further implications (“et alors”):

Leadership in a Global Context

The top six suggestions by percentage of respondents who selected each statement as a way to make their organisation’s operations more effective are:

1.       Develop leaders who are culturally and functionally proficient across regions

2.       Improve formal and informal networks to maximise use of expertise across divisions and/or regions

3.       Drive innovation more effectively across regions and divisions

4.       Adapt organisational structure to improve balance between global standardisation and local responsiveness

5.       Strengthen performance culture and performance-management practices

6.       Build capabilities in a few key value creating processes and roll them out globally

Et alors?

Some of these are easier said than done (such as “driving” innovation); some are classic global/local dilemmas which are always a challenge (such as points number four and six); and some are more visionary than concrete (such as points two and five). However, they all come under the context of “global” leadership and the first point clearly summarises it with a feasible objective. As the authors state, better “leaders” are key when operating globally. What the respondents appear to want is more culturally “proficient” leaders who can effectively work across different national and corporate cultures. This desired improvement appeared to apply to all companies including those who were already succeeding with a global strategy. For a global company, besides education, exposure and experience, cultural proficiency amongst leaders might be more easily achieved by having a diverse talent pool from which to identify, select and develop leaders. Leadership and diversity appear to go hand-in-hand in a global context.

As the authors of the first article mention themselves, even though they have highlighted the correlation between diversity and performance, they cannot be certain of a causal link. For example, it might be that successful companies have more time and resources to dedicate to ensuring they are diverse rather than diversity being the cause of greater success. There is also the interesting case of France where contrary to the other countries in the study, for the more diverse companies the RoE was 6% less (whereas, like the other countries, the EBIT was still greater)! How could that be? Perhaps it is the French corporate focus on savoir-faire rather than savoir-etre whereas many other cultures rely on a mix of the two to ensure enhanced business performance with greater diversity mainly contributing to the latter rather than the former.

The other hypothesis is that the French culture is so strong that it is “immune” to diversity! The assumption in France is that non-French nationals arriving to work in France will have to “adapt” to the local culture in order to integrate. However, in cultural terms, a better interpretation of the word “adaptation” is most probably “assimilation”. The real expectation is that the foreigner will become completely assimilated into the French culture. Notwithstanding the relative merits (or not) of this philosophy, the end result is that by the time the non-French national is assimilated, all the possible benefits of diversity in terms of performance (for example, different and broader perspectives) are completely neutralised. Better leadership might be the solution! Not only might the operational performance of French companies operating globally be improved, but so too might the benefits of diversity be leveraged. Leadership and diversity appear to go hand-in-hand in a global context!

Mistaken Beliefs Leaders Have About Innovation

On the premise that the world is changing and innovation is a necessity just to survive, many organisations pose the question, “how” can we innovate? In particular, organisations might look to their leaders to achieve innovation. Breaking silos, bringing people together, sponsoring and effecting change, nurturing creativity, developing talent and leveraging diversity are all things that you might expect from a leader which might also contribute to innovation. But is there a direct link between leadership and innovation?

To answer that, it can be seen from a slightly different perspective that if leadership is not done well, innovation might “suffer” as a consequence. This angle was elaborated on in article by F. Vermeulen in the latest Business Strategy Review (London Business School, 2011, Vol 22, No 4) which highlighted “Five Mistaken Beliefs Business Leaders Have about Innovation”.  The case in point is that even though innovation has been looked at from “every conceivable” angle, the same leadership mistakes are often repeated which “hamper rather than induce” innovation.

Here’s a summary followed by further implications (“et alors”).

Mistaken Beliefs Leaders Have About Innovation

Believing the numbers

·         The mistake is to insist on the “numbers” (e.g. market size, NPV etc)

·         If something is truly innovative, it is impossible to reliably produce numbers

Believing success has been attained

·         The mistake is the “success trap” – believing success is permanent and ignoring innovation

·         The business context also changes and continuing adaptation is needed to survive

Believing they know the competition

·         The mistake is to think that similar companies are the most important competitors

·         The most “threatening” innovation often comes from an “adjacent” angle

Believing that because it’s always been done this way, then “this” is the best way

·         The mistake it to keep doing things as before even when circumstances change

·         The greatest innovations often come from challenging industry conventions

Believing the customer

·         The mistake is to think that consumer research is useful for truly innovative ideas

·         If you want to be really innovative, you have to be leading the customers

Et alors?

It appears that the leaders can do a lot to “kill” innovation just by resorting to classic “management” behaviours. The first point to note regarding leadership and innovation is that leaders should be well connected with the outside world and not just focused on their product, their business and their organisation. Imagine doing a simple “Strengths, Weaknesses, Opportunities, Threats” analysis with only an internal perspective – it is likely that the result would focus mainly on the strengths! Secondly, by looking outside the organisation, leaders can make sure the organisation is at least adaptive. Finally, there has to be a corporate culture which “permits” innovation. One of the companies best known for innovation, 3M, allows employees to spend 15% of their time just exploring ideas which they think might be important. In other companies where innovation has been a “success”, there is a culture of tolerating failure.

I recently came across a business innovation which must have come from an organisational culture which does not make the above mistakes regarding innovation. Despite email, there is still the need to send (usually formal) letters; but typing it, printing it, signing it, then putting it in an envelope, addressing and stamping it and delivering the said letter to the post box is all a cost to the user. The innovation is that the post office now proposes an online service: upload your letter and digital signature and the post office will print it, put it in an envelope, address it and deliver it by the next morning! This innovation was probably “ahead” of customer expectations and must have been approved without too much reference to numbers – it is experimental! It could be argued that the post office has to innovate to survive, but then don’t all organisations?