Sound far-fetched? Of course, if you don’t tell anyone about your strategy it is unlikely to become reality. How can you galvanize people if they don’t actually know what the strategy is?

Yet, this is what happens repeatedly in organizations. The creation of strategy is something which business schools, consultants, coaches and advisors have mastered. In contrast, actually communicating the strategy to the world is something which tends to be left to minions or to forces of nature. CEOs don’t put the strategy documents into a drawer and then forget about them, but sometimes they might as well have done.

In many organizations fundamental questions remain hanging in the air mysteriously. What is a company’s mission? And what is its strategy to win in the market? Basic questions, but ones which often go unanswered by some of the world’s leading corporations.

Research by ECSI Consulting looked at the top 50 companies in the Fortune 500 ranking of US companies. It examined how the companies communicated their mission and strategies in their annual reports and websites.

The research found that vagueness, inconsistency and elusiveness are the reality – worrying news for any investors seeking to find out more about a company before investing or for potential employees of these corporate giants trying to learn more about the companies.

“The results are disturbing for investors, employees and many others,” says

Alessandro Di Fiore of ECSI (who we featured on the Thinkers50 Radar for 2016). “How can companies and their leaders be held to account if their purpose and the strategies they are seeking to execute are not clearly and consistently communicated?”

While 94 per cent included their mission statement on their website, only half of the companies included their mission statement in their annual report.

Strategies are similarly difficult to pin down, i.e. a clear statement on how the company is going to win in the market and gain clients. A total of 58 per cent of the companies included their strategy in their annual report. But only a mere 12 per cent included a dedicated, clearly articulated strategy section. On websites, 54 per cent included some kind of strategy description.

Strangely perhaps, the most elusive sector is the high-tech world of computing, ICT and telecoms. Here companies appear unwilling to be bound by static guidelines or held hostage by public statements of strategy. Perhaps the logic is that the tech world is moving so quickly that any notion of strategy is likely to be proved worthless, better to be opportunistically vague about your intent.

But it‘s not only the fact that information is notable by its absence. When companies do share details of their missions and strategies, the results are often underwhelming.

The obvious is often re-stated with buzzwords added to suggest industry know-how. Goals, such as “creating competitive advantage” or “being innovative”, are routinely mistaken for strategy. And there is a repetitive focus on “maximizing shareholder value”, “delivering profitable growth” and so on.

“A good strategy description should answer three fundamental questions,” says Alessandro Di Fiore. “How are we going to win in the market? How we are different? And why is that difference relevant for our existing and potential customers?”

But vagueness rules in many annual reports. Strategy statements are usually unable to answer the question: “How is the company going to win in the market and attract customers?” The insurance giant AIG, for example, states: “Our strategy is focused on enhancing the value and competitive position of our insurance businesses and investing our capital where we can achieve attractive risk-adjusted returns, while maintaining strong levels of liquidity and capital.”

Others make elusiveness their strategy. Apple is notably reticent while Walgreens, the drug store chain, chooses to brazen it out with the simple statement: “We do not provide detailed information on specific topics, such as our corporate strategy.”

Some companies do meet the strategic clarity challenge. “Our strategy is to provide our members with a broad range of high quality merchandise at prices consistently lower than they can obtain elsewhere,” says Costco while Microsoft says its strategy is to “build best-in-class platforms and productivity services for a mobile-first, cloud-first world”.

“A strategy should be able to be distilled down to 15 compelling, meaningful and memorable words articulating how we are going to win in the marketplace,” says Alessandro di Fiore. “It needs then to be communicated clearly and consistently inside and outside. This research suggests there is still a long way to go for this to be achieved. Even on the most fundamental company’s document for all stakeholders – the Annual Report – there are gaps”.

You might say that annual reports and website information is for the external world and that companies may well be communicating their strategies brilliantly internally. This may be so in some organizations, but it seems unlikely. Vagueness and obfuscation are habitual and cultural. Where would you like to work? Where would you choose to invest your money? In a company which clearly and repeatedly articulates its mission and strategy or one which does not?

There is little doubt that communication issues are set to become ever more important as information becomes ever more pervasive and instantly communicated. There is no place to hide.

Talking with Columbia Business School’s Rita McGrath, this is what she observed: “The difference in leadership behaviour that you’re going to be seeing is an emphasis much more on information travelling fast. So I use the example of Ford and Alan Mulally, when he was CEO at Ford, who basically said, you can’t manage a secret. So we’re going to see a lot less of the management of, bring me the numbers, hit the goals, don’t bring me bad news, don’t bring me a problem that you don’t have a solution to. That kind of management, which works really well when things are stable, we’re going to see that going away.

“We’re going to see a lot more leadership that involves influencing people and getting people engaged. We’re going to see much more candour, much more emphasis on being realistic and also much more emphasis on keeping individuals and networks engaged, because in the past you used to be able to say a hierarchical reward was going to be the thing, so you start off at level 14 and you end up at level two and that’s Nirvana. I think we will see much less of that in how we manage careers in the future or how leaders engage people in the future.” The twenty-first century is a time of transparent, instant communication – and that applies to your organization’s strategy.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.

In this turning and turbulent world, such unpredictable, unstable, interconnected and dynamic conditions change the very nature of change.

First and foremost, change moves from being a one off programme that can be initiated, implemented, and then put aside as you return to a new stability; to an ongoing changing phenomenon, in which survival requires you to be in a continual state of adaptation to new contexts. For sure there will still be a need for set piece change, such as an acquisition, a new brand launch, or an IT system change. Yet the emphasis has now shifted from viewing change as an episode to acknowledging it is an endemic phenomenon. This switch from change to changing, from noun to gerund, places a high premium on leaders who can build change capability in their institutions and foster it as an ongoing emergent process. The primary task of top leaders in today’s unpredictable world is not to come up with the definitive grand plan for the future, but to create in society the capacity to be constantly in innovation and adjustment, as today’s solution can look quickly outmoded.

Second, it is clear that the world is increasingly a globally interconnected place, in which change no longer lies within your personal control. Be it a result of social media, technology innovation, global migration or geopolitical union (or uncoupling as in Brexit), it is far less easy today to isolate causality for an event to just one location. You try to pull up the plant yet see that its roots are extensively connected to its neighbouring beds. Systemic and complex issues require a commensurate type of response. In such a world, the leadership of change requires a willingness to collaborate across traditional boundaries and to see the world as a connected ecosystem, underpinned by a deep capacity to hold an appreciation for the whole of existence over the selective promotion of certain beliefs or interests.

Finally, the new disruptive nature of change sharpens our attention to its process and its consequence. Given the increasingly high cost of failing to adapt to today’s changing context – including our planet’s very survival – I believe it’s no longer good enough for leaders to bring about change without equal consideration for how to implement it. Too often I see leaders only attend to what has to be done, without any consideration for how to bring this about. I will go even further and say it is irresponsible to be a leader today if you are not prepared to examine and adapt your own response to these changing contexts. How you do change fundamentally determines where you end up.

So, change is now ongoing, endemic and not directly controllable. As the price tag for failure becomes ever more expensive, leadership is the essential capability. I have repeatedly shown through my own research that high quality leadership is the single biggest determinant of successful change outcomes. Yet while the need to master it rises in importance, we are also repeatedly reminded that most change efforts do in fact fail as the inherent difficulties faced in their implementation remain. Somehow, we are not learning from the lessons of experience. Now, more than ever, is the time to rectify that.

About the author

Deborah Rowland (deborahrowland.com) has led change in major global organizations including Shell, Gucci, BBC Worldwide and PepsiCo where she was Vice President of Organizational & Management Development. Her 2017 book, Still Moving, is based on groundbreaking research into the realities of managing change.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.

Other catastrophes aren’t physical but digital. When the markets opened on August 1, 2012, the Knight Capital Group was one of Wall Street’s largest traders, but less than an hour later the company was on the brink of collapse. A software glitch had caused the firm’s trading system to go haywire and flood the market with four million unintended orders, resulting in Knight Capital acquiring several billion dollars in unwanted positions. When the firm eventually sold back those stocks, it had lost $460 million — roughly $200,000 per each second of the trading meltdown. By the next day, three-quarters of Knight Capital’s market value had been erased. The firm scrambled to avoid collapse and was eventually acquired by a competitor.

Disasters like BP’s oil spill and Knight Capital’s trading meltdown can threaten the very existence of even the largest of corporations. And such failures aren’t limited to high-stakes, exotic domains like deep-water drilling and electronic trading. From food-safety accidents in restaurant chains to defect recalls affecting car manufacturers, failures abound in ordinary industries and can devastate profits, trigger legal actions, and cause lasting reputational damage.

To make matters worse, these dangers are increasing, according to many business leaders. In a recent survey of more than 1,000 executives in a wide range of industries, nearly 60 per cent reported that the volume and complexity of the risks their organizations face have increased substantially in the past half- decade. At the same time, only a minority reported that their organization had implemented a complete firm-wide process for enterprise risk management.

So, what can executives do to reduce the risk of catastrophic failures in their organizations? Traditional risk management steps — such as instituting rules and controls, scenario planning, and bringing in additional experts — can be quite helpful, but they have their limitations as the complexity increases. For example, a rule-based approach — identifying the things that could go wrong, instituting procedures to prevent them, and enforcing those procedures through monitoring — often fails to capture the breadth of potential risks and may instead foster a punitive culture that causes people to conceal risks. The use of scenario planning to identify risks is a more sophisticated approach, but it has problems of its own, sometimes leading decision makers to focus on a potentially narrow set of risks and responses based on scenarios that are vivid and easy to imagine. All too often, scenario planning also fails to capture the messy complexity of interconnected systems and organizations, as well as the chaos and fallibility of crisis responses. Research in numerous industries likewise reveals fundamental limits of relying on expert ability. For example, teams dominated by subject-matter experts are often vulnerable to group overconfidence and might suppress valuable input from non-expert skeptics. Such group dynamics are especially likely to yield bad outcomes in complex and uncertain environments. At the same time, researchers are increasingly uncovering other interventions that can improve decisions, strengthen complex systems, and reduce catastrophic risks. In our book, Meltdown: Why Our Systems Fail and What We Can Do About It, Chris Clearfield and I discuss several best practices in depth; here’s a summary of a few of them:

1. Learn from incidents. In complex systems, it’s impossible to predict all of the possible paths to catastrophe. But even so, there are often emerging signals that can bring to light any interactions and risks that might otherwise be unexpected and hidden. Indeed, a timeline of the weeks and months leading up to a major failure is often a history of smaller failures, near misses, glaring irregularities, and other indications that something might be amiss. Incident tracking is a powerful way to learn from such signals, and there are notable success cases. In healthcare and aviation, for example, effective incident reporting systems help managers sort through the overwhelming haystack of possible warning signs to identify sources of potentially catastrophic errors. In recent years, such systems have proliferated in other industries as well. But these systems are effective only if employees feel safe enough to report issues and if the output is actually used to generate insights and effect change. To do so, it’s essential to designate a specific group, with sufficient understanding of operational concerns, to sort through, analyze, and prioritize incoming information. In the absence of this, insights can be lost even when critical data are available. Moreover, once information is recorded and analyzed, people must use it to generate insights about the root causes of those incidents and to fix problems without delay, rather than simply relegating it to a risk report. Emerging insights can then be disseminated throughout the organization. When used in this way, incident reporting systems can enable decision makers to anomalize, that is, to treat minor errors and lapses as distinctive and potentially significant details rather than as normal, familiar events.

2. Encourage dissent. Insiders often have serious reservations about the decisions or procedures in place well before a major accident, but they either fail to share these concerns or are ignored by Many of those who observe these indications – typically, employees on the front lines – feel uncomfortable disclosing errors, expressing dissenting views, and questioning established procedures. To counter these tendencies, it’s important for leaders to cultivate what researcher Amy Edmondson calls psychological safety: a shared belief among team members that the group will not admonish or penalize individuals for speaking up and challenging established procedures or widely held views. Psychological safety requires a climate in which team members trust and respect one another regardless of differences in their formal status. Research has shown that, through their words and actions, executives can do a great deal to foster psychological safety in a team or even within an entire organization. This requires that leaders credibly signal that they are willing to consider and address challenging questions and dissenting voices openly and productively, rather than defensively. These kinds of leadership behaviours help demonstrate that it’s safe to raise questions, to admit mistakes, and to disagree with the team’s consensus – critical steps in understanding where hidden dangers might be lurking in a complex system.
3. Use structured decision tools. One way to reduce the number of small errors that might cascade into larger failures is to mitigate the effect of cognitive biases in decision making. The use of structured decision tools, rather than intuitive thinking, can lessen the influence of some of those biases. Cognitive psychologists, for example, have proposed a list of questions that executives can use to detect and minimize the effect of cognitive biases when making major decisions based on a recommendation from their team. For example, is the worst case bad enough? Were dissenting opinions adequately explored? And could the diagnosis of the situation have been overly influenced by salient analogies? Many of these questions are quite straightforward and seemingly obvious but, in practice, they are rarely raised explicitly. A checklist ensures that these questions are actually considered, thus helping executives to apply quality control to their decisions. Similarly, decision tools can also reduce the effect of cognitive biases in predictions. For instance, a simple tool called Subjective Probability Interval EStimates (SPIES) has been shown to produce less overconfident estimates than do unstructured, intuitive forecasting approaches.
4. Diversify teams. Teams composed of individuals with diverse professional backgrounds and expertise can be an effective risk management strategy. Research on bank boards, for example, suggests that banks with some non-expert directors – those with a background in other fields such as in law, the public sector, or the military – tend to be less likely to fail than banks with directors who all come from a banking background. It seems that having a mix of industry experts and non-experts can serve as effective safeguard against overconfidence on a board. These outsiders often raise inconvenient questions and force bankers on the board to justify their proposals and explain why formerly unacceptable risks might have become acceptable. In addition, even surface-level diversity – diversity in team members’ visible characteristics like sex, age, and race – might help reduce the overconfidence of decision makers. Recent research, for example, suggests that the mere presence of ethnic diversity can reduce overconfidence in the actions of others, thus fostering greater scrutiny and more deliberate thinking.
5. Conduct risk reviews. A risk review is a structured audit of an organization by external investigators who gather qualitative and quantitative data to uncover hidden and unexpected risks to the organization. The investigators, who are typically independent experts on risk management in complex systems and organizations, begin the review by conducting confidential interviews with a variety of personnel at different levels in the organizational hierarchy, from higher-level executives to junior employees working on the front lines. The goal of these interviews is to reveal potential risks that might not be visible at a given hierarchical level or within a particular organizational silo. The interviews can also provide an indication of the willingness of employees to share their concerns and dissenting opinions with supervisors. Next, to examine the most important issues raised in the confidential interview process, the investigators gather additional qualitative or quantitative data from surveys, additional interviews, or the organization’s archives. Because a risk review leverages independent generalist experts and cuts across hierarchical and bureaucratic boundaries within the organization, it’s particularly suitable for uncovering risks that are created by internal decision- making processes and organizational structures.It’s also an effective guard against risk creep. Although the gradual slide toward increasingly risky practices tends to be imperceptible to insiders, outsiders can often recognize it and help ensure that unacceptable risks are challenged and mitigated. Of course, a risk review will only be effective if executives are open to the investigators’ conclusions, even if that information might occasionally be uncomfortable, disconcerting, and perhaps painful to hear. Otherwise the investigators’ main advantage – their independent external perspective, allowing them to question industry and company assumptions and conventional practices, to poke holes in arguments, and to disagree with the existing consensus – can easily be lost.
6. Develop more realistic contingency plans. It’s essential for organizations to develop robust crisis planning and response capabilities. During that process, executives need to recognize that estimates for worst-case scenarios are often explicitly or implicitly built from information that is biased by observations of recent orderly behaviour and the assumption that the mitigations outlined in a crisis response plan will actually work. To identify possible planning failures, decision makers can rely on independent outsiders to stress-test critical estimates in plans, to explore extreme scenarios, and to challenge optimistic assumptions about organizational performance during a crisis. This can lead to more realistic worst-case scenarios and the development of crisis response plans that are more robust. To avoid the pitfall of illusory redundancy, managers should carefully assess whether their backup plans are susceptible to the same risks as their regular operations. Rather than quickly narrowing their focus to the technical merits and challenges of a particular solution, executives should define the broad goals of the intended redundancy and identify counterexamples for which backup measures might also be vulnerable. The goal is for people to shift their perspective and see redundancy as a vulnerable part of the system rather than as an invincible panacea.

These recommendations are not rocket science. They also don’t require large financial investments or expensive technologies. That, however, does not mean that they are easy to implement. Indeed, getting organizations to heed dissenting voices, learn from small anomalies, and open themselves to independent scrutiny can be a difficult leadership challenge. And it’s often extremely hard to change deeply ingrained routines for planning and decision making.

The good news is that these interventions don’t necessarily clash with other key organizational priorities. Although it may seem that paying more attention to risk reduction, accident prevention, and safety will necessarily undermine a firm’s focus on innovation and profits, the above-described solutions can actually enhance multiple organizational objectives. Team psychological safety, for example, is not only an effective safeguard against catastrophic risks but also a critical factor in the effectiveness and creativity of teams, as recent research at Google has revealed. Similarly, interventions that minimize the effect of cognitive biases in decision-making can not only reduce catastrophic risks but might also increase investment returns as well. Better management of catastrophic risks, it seems, can also lead to better management more generally.

About the author

András Tilcsik, who is Hungarian-born, holds the Canada Research Chair in Strategy, Organizations, and Society at the Rotman School of Management and is a faculty fellow at the Michael Lee-Chin Family Institute for Corporate Citizenship. In 2015, he and Chris Clearfield won the Bracken Bower Prize from McKinsey and the Financial Times, given to the best business book proposal by scholars under 35. The book, Meltdown: Why Our Systems Fail and What We Can Do About It is forthcoming (Penguin, 2018). Tilcsik was shortlisted for the 2017 Thinkers50/Brightline Initiative Strategy Award.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond. A version of this article originally appeared as “Managing the Risk of Catastrophic Failure” in Survive and Thrive: Winning Against Strategic Threats to Your Business (edited by Joshua Gans and Sarah Kaplan), Dog Ear Publishing, 2017. Reprinted by permission.

Throughout this period, we have run a strategic execution exercise with executive groups focused on managing new, uncertain and complex situations. The exercise requires the group to formulate and execute a strategy to achieve a specified outcome, against the clock.

Received wisdom is that the more diverse the teams (in terms of age, ethnicity, and gender), the more creative and productive they are likely to be. But, in our exercise some groups fared exceptionally well and others incredibly badly, regardless of their apparent diversity. This was corroborated when we looked at the data; we found no correlation between successful outcomes in the execution of the exercise and diversity in the executive teams.

When there is so much focus on the importance of diversity in problem solving we were intrigued by these results. If not diversity, then what accounted for such variability in performance? We wanted to understand what led some groups to succeed and others to crash and burn. This led us to consider differences that go beyond gender, ethnicity or age. Differences referred to under the heading of cognitive diversity.

Cognitive diversity has been defined as differences in perspective or information processing styles. It is not predicted by factors such as gender, ethnicity or age. Here we are interested in a specific aspect of cognitive diversity, how individuals think about and engage with new, uncertain and complex situations. We call this kind of cognitive diversity ‘thinkversity’.

The AEM Cube®, a tool developed by Peter Roberson, a psychiatrist and business consultant, assesses differences in the way people approach change. It measures:

• Knowledge processing: The extent to which individuals prefer to consolidate and deploy existing knowledge, or prefer to generate new knowledge, when facing new situations
• Perspective: The extent to which individuals prefer to deploy their own expertise, or prefer to orchestrate the ideas and expertise of others, when facing new situations

We used this tool to measure the different levels of thinkversity in teams undertaking the strategic execution exercise. Our analysis across six teams who undertook the exercise shows a significant correlation between high thinkversity and high performance in the exercise.

Intuitively this makes sense. Tackling new challenges requires a balance between applying what we know and discovering what we don’t know that might be useful. It also requires individual application of specialized expertise and the ability to step back and look at the bigger picture.

A high degree of thinkversity generates accelerated learning and performance in the face of new uncertain and complex situations, as in the case of the execution problem we set for our executives. These cognitive preferences are established when we are young. They are independent of our education, our culture and other social conditioning. Two things about thinkversity make it particularly easy to overlook:

1.   Thinkversity is less visible

First, it is less visible than ethnic and gender diversity, for example.

Being a man or woman, from a different culture or of a different generation, gives no clue as to how that person might process information, engage with or respond to change. We cannot easily detect thinkversity from the outside. It cannot be predicted or easily orchestrated. The very fact that thinkversity is an internal difference requires us to work hard to surface it and harness the benefits.

2.   Cultural barriers to thinkversity

The second factor that contributes to thinkversity being overlooked is that we create cultural barriers that restrict the degree of thinkversity, even when we don’t mean to.

We are familiar with the saying ‘we recruit in our own image’, but this bias doesn’t end with our formal recruitment processes. We continue to gravitate towards the people who think and express themselves in a similar way to ourselves. As a result, we often end up in like-minded teams. When this happens, we have functional bias and low thinkversity.

Functional bias is a problem for teams facing new uncertain and complex situations because with little thinkversity the ability to see things differently, engage in different ways (e.g. experiment, versus analyzing) and create new options, are limited. Similarly, when organizations initiate change programmes they often seek out and identify ‘advocates’ or ‘change agents’ to support activities. Those selected often have a similar approach to change. This lack of thinkversity has two impacts. First, it reduces the opportunity to strengthen the proposition with input from people who think differently. Second, it fails to represent the thinkversity of the employee population reducing the impact of engagement initiatives often spearheaded by change agents.

If you look for it, thinkversity is all around but people like to fit in and are cautious about sticking their necks out. When we have a strong homogenous culture (e.g. an engineering culture, an operational culture, or a relationship culture), we stifle the natural thinkversity in groups through the pressure to conform.

There is much talk of authentic leadership, i.e. being yourself. Perhaps it is even more important that leaders focus on enabling others to be themselves as opposed to homogenised holograms generated from the generic competency frameworks leaders put in place.

Psychological safety

If thinkversity is what we need to succeed in dealing with new, uncertain and complex situations, we need to overcome cultural barriers and encourage people to reveal and deploy their thinkversity. We need to recognize the expression of authentic drives and responses, instincts and preferences; to make it safe to be yourself, to try, to fail and try again. Far more important than to have all the answers, creating psychological safety is the prime responsibility of today’s leaders.

Three principles to enhance your thinkversity

• Makes sure your recruitment processes identify difference and recruit for thinkversity
• When facing a new, uncertain complex situation, and everyone agrees on what to do, find someone who disagrees and cherish them
• Focus on creating a psychologically safe environment where everyone, including the leader, can openly contribute their perspectives, experiences and vulnerabilities

About the authors

Alison Reynolds (alison.reynolds@ashridge.hult.edu) is a member of faculty at the UK’s Ashridge Business School where she works with executive groups in the field of leadership development, strategy execution and organization development.

David Lewis (dlewis@london.edu) is Programme Director of London Business School’s Senior Executive Programme and teaches on strategy execution and leading in uncertainty. He is co-founder of a research company focusing on developing tools to enhance individual, team and organization performance through better interaction.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.

Engineers at the company came down squarely on the side of analog. Digital, they pointed out, was simply inferior to analog as a medium for storing and transmitting audio. After all, it stripped away 60 per cent of the information contained in the original analog message.

What those engineers couldn’t see was that, for most listeners, digital technology’s advantages far outweighed the often undetectable losses from digitization. That’s partly because they had spent much of their lives building up their expertise in analog technology. A shift to digital would require them to learn a great deal from scratch. So it was easier to see the negatives than the positives. The end result was that Motorola’s conversion to digital took much longer than it needed to. The company lost its leadership of the very industry that it had invented back in 1973. And it wasn’t alone – another audio leader, Sony, similarly lost market share in electronics because of its analog bias.

An equivalent challenge is now looming for companies in many industries. 3D printing, or “additive manufacturing,” essentially digitizes the production process. Like digital audio in the 1980s, this young technology has some drawbacks compared to conventional “subtractive” manufacturing. But as I explained in a Harvard Business Review article, the flexibility and versatility it offers will eventually make it the preferred choice for companies in many industries. And the opportunities to combine parts, reduce inventory costs, and earn a premium price for customization often compensate for the higher direct costs of 3D printing.

I recently attended a private conference with panels led by manufacturing experts from multi-billion dollar firms. One after another they explained why 3D printing wasn’t ready for high-volume manufacturing in their industry. They feared problems with durability and strength, not to mention customer reactions to the horror of discovering that their products were printed. (It was as though they’d never heard of Walmart, whose profitability depended on selling products from overseas factories with lower quality standards.)

Then a young woman shook things up. She got up to the podium and said, “It’s a good thing I never met any of you before. Otherwise my firm wouldn’t have made $40 million last year. You are so busy looking at what 3D printing can’t do that you’re ignoring what it can do!”

While her competitors had dismissed additive manufacturing because it couldn’t (at that point) print an entire product, she had focused on just one element of the product. Her firm ramped up from 100 customized parts to 10,000 in just one year. It is now expanding into other parts, and will soon be able to offer customization of the overall product at a premium price. As the company moves down the learning curve and costs come down, the savings from reduced waste, inventory, and assembly labor will even make it competitive for the mass production segment of the market.

Her secret is a process I call “Just Say Yes”: Listen to what your engineers say, then put them to work solving those problems one by one, even if the solutions aren’t immediately apparent. Just say yes is much like Gene Krantz’s famous command, “Failure is not an option,” when faced with the Apollo 13 crisis that nearly killed three astronauts on the way to the moon. Here’s the process in four steps:

1. Gather knowledge from the outside. Don’t rely solely on your in-house engineers – some of them are likely to be guardians of the status quo. Reach out to additive manufacturing printer and software providers, and your industry associations, to see what already exists for your product categories. Talk to universities and governmental laboratories to learn about the current state of 3D printing and how well it performs on the materials and attributes that your customers prefer – not just the ones you have always provided. Include your staff engineers on the learning teams but make sure they don’t dominate the discussion.
2. Move one baby step at time. Build expertise and reduce internal resistance through incremental experiments, exploring and adjusting to new technological development as you go. Engineers love challenges, so internally you can set up tiny, non-threatening pilot programmes and see where these take Always listen to skeptics and take the problems seriously, but project confidence that the kinks will be worked out over time.
3. Focus and prioritize. No firm can explore the many possibilities of additive manufacturing all at once. So you’ll want to start with the most promising and feasible choices first, and build up small wins. But don’t expect a carefully planned sequence of development. As technology and the industry ecosystems develop, you may well adjust your priorities as you meet various milestones.
4. Keep an eye on the long run. Especially for large companies, the goal is to revamp the industry’s value chain and ecosystem to reduce total costs of the value chain and especially your firm. So look for opportunities to develop or support an emerging software platform or superior printer technology. Your explorations should have a logical, cohesive, long-term goal of pulling together the initiatives into an integrated 3D-printing-based manufacturing system.

With enough encouragement, you’ll see 3D printing champions emerge in your organization to help drive the process forward and build momentum. Some people (and organizations) won’t be able to embrace the technology in time and will be passed by. If you keep Motorola and Sony in mind, you won’t be one of them.

About the author

Richard D’Aveni is the Bakala Professor of Strategy at Dartmouth College’s Tuck School of Business.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond. This blog was originally published online by Harvard Business Review.

will powerfully differentiate a company from its competitors – in the market for customers and talent. More fundamentally, as organizations face stronger cross winds, with high levels of volatility in every area of corporate activity, the what and how will need to change frequently. This leaves purpose – the answer to the question why – as the primary compass for navigating key decisions.

Companies need to constantly ask themelves five key questions:

1: Is your purpose worth defending?

Not if it’s just a set of words. Statements of purpose often float upwards into fluffy, generic moral injunctions, or land heavily as marketing slogans and value propositions. The sweet spot is where a definition of purpose brings value and values together. It must be a business purpose – that is, built around what the organization can deliver – but its roots must be in morality, in the sense of being outward looking and being of service to others: consumers, society, and employees, not just shareholders.

Purpose is often buried in an organization’s history and the memories of its founders. Nestlé was founded to save the life of a baby. Soichiro Honda and his business partner Takeo Fujisawa founded their company to restore Japanese pride in engineering, rather than military achievement. Sam Walton looked to bring value to out-of-the-way places.

The stories that employees tell each other about their history – especially foundation stories – are potent carriers of the purpose that is worth defending: much more so than the products of corporate identity consultants.

A worthwhile purpose leads to action. Ove Arup, founder of the global engineering and architecture practice, wrote “The Key Speech”, which to this day is mandatory reading for all new employees. The speech sets out Arup’s purpose to advance excellence in engineering – and to turn down any project, however lucrative, which fails to advance that aim. Arup’s purpose is both bold and practical, organizational and personal. For example, it warns employees to expect only second quartile remuneration, but unparalleled access to knowledge for their own development. Arup’s governance lends steel to its purpose: Ove Arup gave all his equity to the Arup Foundation, which owns the firm and whose objective is the advancement of excellence.

Undoubtedly, a purpose worth defending brings dilemmas. A company for example, could set its core purpose as delivering fresh and nutritious food to enhance people’s health. Would the acquisition of a fast food burger business go beyond those boundaries? If the purpose is meaningful, consumers – and ultimately employees – will respond with anger or disengagement if top executives subvert it.

2: Are you communicating your purpose?

It’s not the words that count; it’s what they do. Far too much time, energy and money is devoted to word-smithing slogans. Slogans won’t carry a purpose, but stories will. The CEO needs to be the Chief Storytelling Officer, inspiring managers who retell the stories of foundation, hard choices, dilemmas, conflicts and victories that build the organization’s mythology.

This often requires skills which may be new to many corporate chiefs, but it is essential to develop them. The story need not be slick, and the telling doesn’t have to be charismatic. The point is that it is authentic, in the sense of belonging to the organization and those who have lived within it, rather than being just the property of the top team or, worse, their advisers.

Communication needs a good listener as well as a good story teller: can your organization listen? It’s hard to listen to a story told at the wrong organizational level. At Blue Circle Industries, a global construction materials business that is now part of Lafarge Holcim, top management struggled to communicate a purpose that could resonate across all parts of its highly diversified portfolio. The search for common ground led to a very generic statement of purpose. This focused on delivering shareholder value and was wrapped in the familiar moral grandstanding of prizing integrity, creativity and so on. The statement of purpose was relevant only at the level of the holding company. It failed to register in the ears of those delivering customer value across the range of different contexts in the company.

And the timing needs to be right. The organization needs to be ready to hear about purpose. When Harvey Golub was turning round American Express in the 1990s, he famously said that if he had tried to communicate a sense of purpose he would have seemed to have arrived from the planet Mars. Ultimately the company’s purpose was to become the world’s most respected service brand, but when AmEx was in deep trouble with a brand sinking rapidly what was needed was not so much a statement of purpose as a set of clear, concrete, credible priorities for action. In this case, introspection around purpose would have lacked any credibility, and execution around the basics of cost management and integration had to be at the top of the agenda, for at least Golub’s first two years.

3: What’s fixed and what’s up for grabs?

The definition of the business you are in can change over time, sometimes dramatically. Diageo, the global drinks company, had its roots in the Grand Met-Guinness merger. Grand Met – at the time of the merger already a prominent drinks business – had very different origins. Its founder, Maxwell Joseph, began in the hotels business in the 1940s, progressing through property trading into dairies, restaurants, pubs and so into liquor. Curiously, at the same time, the Bass Group evolved in the opposite direction: from brewing into hotels.

Within a business, the strategy can and will change – at an increasing velocity as we move further into a complex and uncertain future.

What does that mean for purpose? Purpose is not the same as business definition nor the same as strategy – but both of these are an expression of what the business stands for. So, as your company navigates changes in strategy and portfolio composition do not fail to re-examine your purpose: to what extent are you reaching its limits? A big mistake is to assume that purpose is fixed for all time: only a generic purpose can be unchanging.

When business environments change dramatically, or when organizations lose their way, studying and understanding the past can be very instructive. The twists and turns of strategy and business definition over the years prove excellent material for questioning and rediscovering what your purpose was in hindsight, and where you might have strayed from it. This, in turn, enables a corrective, future facing perspective on purpose.

Minding the past allows us to recall times of particularly strong (or weak) stakeholder engagement and what drove it. Considering key turning points in the organization’s history can expose deeply embedded patterns of behaviour. The early history of Honda, for example, is replete with stories of failure and the unexpected. Honda’s legendary US market entry in the late 1950s was not the result of a planned strategy but apparent accident. The preferred product category failed and small, lightweight motorbikes – that nobody at Honda intended to sell in the US, but which executives had kept for their personal use – were spotted by a Sears buyer. Those stories point to and bring to life a purpose of transformation through learning, persistence and a non-punitive culture.

4: Have you planned for your purpose being subverted?

Subversion typically comes from short term pressures. Fundamental commitments may well be jettisoned to address a crisis or make up for shortfalls against immediate performance promises. The price is a loss of credibility across key stakeholder groups. As those pressures will inevitably come, it is important to plan for them.

One key is to create watchdogs, who will bark loudly when purpose is violated. The Hershey Foundation, for example, recruited John Scharffenberger to act as the company’s guardian and ambassador to cocoa growers in West Africa. Scharffenberger had sold Hershey his eponymous boutique, ethical chocolate brand. As well as the product, Hershey sought to retain this distinctive voice as a forceful reminder to the company of what it stood for. Similarly, the accounting firm PwC retains the firm’s wisest elders after retirement on the firm’s supervisory boards, as custodians of purpose in the context of a partnerial culture.

Looking to past commitments can help to anchor your organization’s purpose: so can looking to the future, as emerging trends will reinforce or challenge it. Reverse mentoring from outsiders is also useful. Credible youngsters can hold your statement of purpose up to the scrutiny of stakeholders. Ask them to imagine and tell the story of your organization’s (hypothetical) “death”, and co-create the story of its “rebirth”.

5: Is the organization’s purpose connected to your own?

Buddhist tradition speaks of the Buddha’s teaching on rebirth. He compared this to a flame being passed from candle to candle. The flame is different, but also the same. So it is with purpose across the generations. As a leader, you are the channel for your organization’s purpose and if it fails to connect with you it can hardly connect with others.

The corporate purpose answers the organization’s “why?” question; but what about your own? What is the link between your personal story and the story told about your company? One key to ensuring connection is to focus on your legacy. The legacy of purpose bears your personal imprint as a leader. As you pass it on, it will change but retain its roots in what you contributed and in what earlier generations brought to you.

These measures for monitoring purpose have to be combined with strong governance processes to ensure that the company stays on track. In this context, an important point to be kept in mind is the gap which frequently appears between short and long-term strategy. Most companies are good at articulating a long-term vision and strategy, based on the company purpose, they are also good at developing robust processes to ensure that short term deliverables enable them to meet financial KPIs. Where companies tend to fall short is in the medium term strategy, to bridge the short term and the long term.

About the authors

Dominic Houlder is an Adjunct Professor of Strategic and International Management at London Business School.

Nandu Nandkishore is an Executive Fellow at London Business School. Previously he was an executive board director of Nestlé S.A.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond. This is an edited version of an article which first appeared in the online edition of the Harvard Business Review.

Being responsible for the company’s global transformation management office is a big job.

It’s a very interesting role. I report to the Chairman and CEO of the company. He personally asked me to help with the development and execution of the overall plan. It’s motivating and a huge learning opportunity.

What are your foundation beliefs about how transformation works, or needs to work, in a global company like BMS?

The first thing to realize is that strategy on its own won’t transform an organization. The second element is culture. If you put strategy and culture together that will equal success. The culture element needs a similar weighting to the strategy element. People create and evolve the culture of an organization, its DNA. Strategy is the what and the people side of the equation is the how.

One thing I see people struggling with in organizations is the new normal of constant change. This is driven by the external environment where there is a huge amount of activity – think of the rise of political uncertainty, the growth of the digital economy and so on. Internally you can dial up or down the change component in terms of your specific needs, areas of focus and what you want to prioritize. But the point is that constant change is here to stay. So how do you equip the leaders and employees of the company to not only manage the change, but also to flourish in it? I think of this in a positive way as embracing change and how you drive an organization to be ready for any change. It is a matter of becoming a resilient organization, but also one characterized by agility, the ability to act very quickly depending on how these constant change issues come at you.

Another component is change fatigue. It is not so much the physical side of the equation – working 12 hours rather than ten hours today – it is the emotional component. All of these things have an impact on the emotional well-being of employees. I’m used to working a lot of hours, but sometimes I feel like a sponge under a leaking tap which is dripping constantly. You are continually absorbing negative energy from the rest of the organization as people complain that you are trying to achieve too much too soon, they can’t do it and so on. All this negative energy comes your way so you have to step back, not take it personally, and take the opportunity to metaphorically ring the sponge out.

This emotional component to transformation people sometimes under-estimate. It is very easy to make decisions from a strategic perspective about what you want to do, but execution is always very challenging and has an emotional component.

What are the other key elements of making transformation a reality rather than simply a strategy?

First, to drive successful strategy implementation it has to be leader led. There has to be a personal commitment from the CEO of the company. The whole management team at the most senior level of the company must have a personal commitment to make the transformation work.

Second, there needs to be clarity around where you are as an organization and where the organization needs to go and where it needs to grow. You have to be able to paint that picture and to articulate it consistently and appropriately to different levels – board level, senior management level and employee level.

Third, there has to be ruthless prioritization of the critical value drivers of what will be a multi-year programme. There has to be very tangible and specific objectives and accountability for who owns the value drivers.

You have to continually prioritize. There are always competing activities which are ongoing in any organization – the launch of new products, other initiatives in other parts of the company, different functions wanting to do things with a different view of what they want to prioritize. This requires you to look at the enterprise level, at the overall amount of activities that are going on, and do an initiative prioritization assessment once or twice a year. This makes sure you understand where the big value drivers are and that they are properly resourced and prioritized.

Fourth, communicate, communicate, and communicate. There are really tough parts of any transformation which you have to communicate. People, even at the leadership level, often don’t like to talk about the less positive side of the transformation. It is easy to say that you’re designing and creating a new organization, you’re building new capabilities and that is a very important part of driving value. It is much harder to communicate that, to fund the transformation you have to cut back on resources in other parts of the organization, and you are going to let go of some of your colleagues. Of course, this is hard, but if you want people to come with you on the transformation journey you need to communicate with them constantly

Any person can deal with certainty but it is when there is uncertainty that there is a challenge. That is the nature of the beast. If you don’t have certainty it creates a lot of churn. It is okay to say, ‘This is what we know today, but we don’t know this because we’re still working on it. As soon as we know, we’ll bring you into the loop and communicate in an open way.’ That sort of open communication goes a long way.

Related to this, for me personally there are couple of North Stars which I think are key to me being successful in this role. The first is to stay true to the original design principles. If you put a huge effort into creating a vision of where you want to go, you need to stay true to that. People tend to make compromises or to start minimizing some of the bold thinking. This can cause a huge amount of value leakage from the programme. You have to be very disciplined about sticking to the original design principles.

The second personal thing for me is to treat people with respect and dignity. In transformation programmes there is a financial component and a workforce reduction element. You have to treat people fairly and with respect, you need to take into consideration the personal circumstances of people.

These are things that as the leader of this transformation are always in the back of my mind.

The final thing is to always put your best talent on critical initiatives and make sure that you reward them accordingly, but more importantly make sure that they will have roles after the completion of the assignment. If you compromise on that you will get a sub-optimal outcome. People are often very reluctant to free up talent so leaders have to provide people with the motivation to get involved and to offer them future opportunities to learn and grow.

What have you learnt in this role?

First, there is never a perfect plan, there are always bumps in the road. It’s important to recognize that up front so that when the bumps arrive you have the right data and information to make an informed discussion around the topic and then conclude the best steps moving forward. At the same time you don’t want to stifle the original bold inspirational thinking.

The second thing goes back to leader-led change: the CEO of any company has to appreciate that their decisions are vital in achieving success. They need to live with their decisions and not to become frustrated if the organization doesn’t react as quickly or if different parts of the organization move at different speeds. Having said that, relentless focus and follow through is a must.

Is it easier to achieve transformation as an insider in the organization or does it require an external appointment?

When you are establishing the need for the programme, to establish and identify what the burning platform is, it is always useful to get an external perspective so that you can benchmark data or identify the latest trends in the industry and so on. Some of the big consulting firms, like BCG and McKinsey, have enormous databases and experience so it is useful to have some involvement from them in order to benchmark, to run ideation sessions and to understand what the programme could look like.

When it comes to implementation, it has to be a much more company-owned effort. Internal talent must be made available. You can always augment that with external resources – such as additional project managers or a communications specialist – if there is a very specific thing you want to implement which requires a subject matter expert which you don’t have in house

During the phase including the benchmarking, ideation and coming up with aspirational goals you have to make sure that there is a good database and information trail. Consultants come and go so you have to be very sure and clear on the documentation which serves as a base for your programme. Data can be your biggest enemy or your best friend. Good data enables informed decisions and clarity on accountability. But, if you don’t have good data people tend to hide behind it.

Is your finance background an advantage in this role?

I do have a finance background and have also been involved in mergers and acquisitions at my prior company. But I am not a traditional bean counter in that I have an enormous passion for people and culture. It is so important to have the right people and to be able to engage people. If you get the right team together – a diverse group of individuals who think very differently and who help each other – it is amazing what they can achieve.

When it comes to implementation it boils down to people – whether it is understanding their context, where are they in their careers or what motivates them. If you don’t crack the people code transformation programmes do not succeed or will deliver suboptimal results.

Are you fighting against human nature in that people will never really have an appetite for change, especially continuous change?

People don’t like change because it takes them out of their comfort zone. But, if there is a compelling business case for change people can rally behind it. For example, in our line of business we sometimes have huge patent cliffs. Overnight we can lose billions of annual revenue. There is huge unmet medical need for millions of patients across the globe. Up-investing in our R&D pipeline and speed to our patients require resource trade off choices. Those examples are very easy to explain to people.

It is much more difficult to start challenging a successful organization to have a continuous improvement mindset.

What stage is BMS in its transformation journey?

Let me separate that into the what and how. What covers what we want to do in the different parts of the organization and different parts of the organization are on different timelines their journey. In some areas you can achieve transformation very quickly. In others less so. When you are re-engineering entire processes, enabled by technology, in a global company these are multi-year marathons requiring different level of energy. You have to think about how you can engage people in a multi-year transformation.

A holistic transformation across the entire enterprise demands energy, focus and effort from the leadership in order to make sure the right outcome is achieved. And, if you don’t put some metrics and governance in place there is the danger that things will creep back and then in a few years time you will be back where you started

The how is more difficult because that gets into the people side of the equation. Do you have the right capabilities starting at the leadership level? Where are you with the culture of the organization? Where are you trying to take it? You are always trying to advance your people investing in them, so culture change is ongoing, always. And it’s important because it’s what gets you sustainable results. Being purposeful about culture, defining it and modeling it at the top is critical. They key, too, is rewarding people, in big and small ways, for working in new ways that drive the new culture, and making it something you experience everywhere, all the time. Culture is how you get even greater results. It’s not just the soft stuff, though many companies think of it that way. Culture is a critical component of strategic execution.

Finally, it is good practice to pause periodically and assess the initial vision for the transformation relative to actions taken and current trajectory, making course corrections as necessary.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.

Most CEOs are smart people. Nor is it good fortune. In life and business luck tends to even out over a life or a career.

No, what separates the great from the merely good is the ability to make judgements. Great leaders have the capacity to speedily and decisively reach conclusions and act upon them.

Think of Steve Jobs. When he returned to Apple it was a mess. The emphasis had been on developing more and more products. Apple was selling printers in partnership with Hewlett Packard and making next to no money on them. Focus had been lost and managers were increasingly addicted to elaborate PowerPoint presentations. Jobs cut the numbers of models and products. He drew a simple two-by-two diagram and said the company needed a product in each quadrant. He banned PowerPoint. When he discovered the realities of the partnership with HP, Jobs left the meeting and called the head of HP to cancel the arrangement.

Steve Jobs was highly resistant to quantitative research. Apple was built on insights rather than analytics.

The capability to generate and apply insights and qualitative judgments to innovation is a key competitive advantage – or, at least, should be.

The trouble is that most companies use a number-driven approach to innovation. Companies invest heavily in developing analytical skills. In recent years, investments have poured into analytics and big data to increase organizational analytical power. Innovation processes have been re-engineered, or over-engineered, with stage-gate processes equipped with financial evaluation tools to support the go/no go decisions and the release of resources at each stage. In their search for numbers, analysts look for benchmarks, from which they can extrapolate impressive-looking business cases and forecasts. Before you know it, the decision has been taken and the company committed to a me- too innovation.

The result is that qualitative perceptions don’t get an airing. Strategy and innovation should not be a mere exercise of analytical power, but a qualitative process in which the analysis serves insights born out of individual observation and reflection, rather than the other way round.

Why do business leaders struggle so much in incorporating qualitative judgment into their innovation decisions? Our research uncovered two main causes.

First, is what can be called Schumpeter’s bias, after the famous economist Joseph Schumpeter theory of creative destruction. We all pay lip service to Schumpeter’s vision of the lone and creative entrepreneur. This image is so entrenched that people unconsciously tend to believe that the magic of an insight is not replicable. Many business leaders believe that we depend on “individual” genetic talent. But scientific evidence of the last 30 years proves just the opposite.

A famous study on identical twins aged between 15 and 22 years found that while 80 per cent of IQ differences were attributable to genetics, only around 30 per cent of the performance on creativity tests could be explained that way. Many of the traits we assume to be genetically determined are in fact the product of one’s environment. That’s a tremendously significant finding in support of the idea that we can work on learning and improving our creativity.

Of course, not every child will be a Leonardo da Vinci, nor will every young manager be a Steve Jobs. But people who point to that fact are missing the one really important truth about creativity: there’s two types of creativity. Creativity as in genius (the big C) and creativity as in attitude, thinking ability and mindset (the little c). We tend to muddle these two quite different sorts of creativity.

For example, if you dig into the back-story of Apple, you’ll soon realize that it wasn’t all about Steve Jobs. He was actually wrong a lot of the time. If it had been entirely up to him, Apple would have never opened the App Store. What made Apple great was the combination of Jobs’ genius with the little c of the people he worked with and who weren’t afraid to express their own ideas. Jobs understood that as well — not, perhaps, in his first spell at the company, but certainly in his second. When asked what he thought was his most important creation, rather than mentioning the iPod or iPhone, Jobs said it was Apple, the company. He claimed that “making an enduring company was both harder and more important than making a great product.”

Arguably, little c creativity is more critical in business than big C.

The second element at work is discomfort with qualitative judgments. Measuring is comforting. Companies, mostly large ones, need to maintain some kind of control over processes, and playing the management-by-numbers-game makes decision makers feel more confident. Moreover, the act of measurement is generally seen as a guarantee of unbiased results. Enraptured by the Holy Grail of quantitative analysis, business leaders are so obsessed by numbers that they rarely question their guidance. Preoccupied with issues such as predictability and control, they have become increasingly suspicious of qualitative perceptions. However comforting it might be to stick with what you can measure, leadership isn’t about feeling comfortable. It’s about catching opportunities as they occur, even when the numbers suggest otherwise.

Consider the story of Nespresso by Nestlè, which has become Europe’s leading brand of premium-portioned coffee. Nespresso machines brew espresso from coffee aluminum capsules, a type of pre-apportioned single-use container of various high-quality coffees and flavourings. The Nespresso brand took off when it stopped targeting offices and started marketing itself to households. Behavioural evidence on how households would respond to the new concept was poor and suggested that consumers’ intentions to purchase did not meet quantitative threshold requirements set by market research protocols at Nestlè. Jean-Paul Gaillard, a young marketing head of Nespresso at the time, believed strongly in the product and thanks to his skillful interpretation of the data convinced the company to take the risk. If he had only listened to quantitative research, the concept would have never got off the ground.

Analysis is useful. No question. But, the reality is that judgement is the driving power behind innovation.

About the author

Alessandro Di Fiore is the founder and CEO of the European Centre for Strategic Innovation (www.ecsi-consulting.com) and chairman of Harvard Business Review Italia.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.

The “Agile Manifesto”, created in 2001 by 17 software engineers in Utah, codified some principles of software development such as “individuals and interactions over processes and tools”, “responding to change over following a plan” and “working software over comprehensive documentation”. These principles make sense, but they appear more operational and relevant to software development than assuaging the concerns of the strategist wondering how agile their organization is or what agile actually means from a strategic point of view.

In my work with organizations including NASA’s Johnson Space Center, I have developed a framework that can help to pin down agility for strategists and leaders. In 2014 the Johnson Space Center initiated a programme referred to as JSC 2.0 that aims to make the Center “more lean, agile and adaptive to change”. I created the SLO framework as a way to spur strategic conversations about what agility might mean and entail.

From the strategist’s point of view, agility is about one of the central challenges of organizations: adapting to changing circumstances. Leaders should be able to sense signals, evaluate them and take initiative; re-configure the organization accordingly and in alignment with the strategy, also subject to amendment as needed. Each of the three elements of strategy, leadership and organization (hence the SLO framework) is necessary but not sufficient; only synergy among the three can enable a company to be truly agile.

Agile leaders are those who can raise their perspective from the day-to-day, sense signals, reflect on the implications of those signals, and then spur initiatives to drive their organization to do what’s needed. A variety of organizational features such as routines, worldviews and sunk costs continuously operate against this process.

In this sense agile leaders are champions of questioning accepted truths. Elon Musk may be the archetype of such a leader. His initiatives in space exploration, electronic vehicles, solar energy and even tunnel-building in cities reveal his ability to read signals of what is needed and what is possible, work out the implications and then lead initiatives to take things forward, doing so in novel ways and surmounting obstacles that would stop others in their tracks.

From a strategic perspective, agile organizations are able to overcome inertia and reshape their business models, balance change and stability, and build inter-organizational networks to push forward learning and influence their environments. Re-shaping business models is most often a long-term task that entails ongoing commitment. IBM’s long-term shifts from a hardware producer to a solutions provider and currently to a “cognitive solutions and cloud platform provider” is one example. GE’s various strategic shifts over the decades, such as portfolio re-shaping, the move from a manufacturing focus to service businesses, and currently its focus on becoming a digital enterprise, is another. At a strategic level agility does not have to be immediate, and indeed it cannot be for large corporations. It takes time to change the direction of a steamer. Corporations require both periodic strategic changes over time, while at the same time re- configuring their operations to maintain efficiency and responsiveness; one manifestation of the elusive capability of ambidexterity.

Finally, organizational agility requires experimentation, cross-functional collaboration, re-allocation of resources to support exploration, learning, as well as active un-learning of routines and processes that are no longer relevant. Alphabet may be the archetype of an agile organization. A multitude of experiments take place; some fail (Google Glass, Dodgeball), some go on to create new multi-billion dollar markets (Google Search, Google Play), and some are emerging, showing immense promise (DeepMind, that will support a multitude of offerings supported by AI). Alphabet learns and also unlearns, shutting down experiments that don’t show results and reallocates resources to those that do. At any time, many flowers are allowed to bloom, and some of those will fill the valley.

The framework, right, can allow strategists to evaluate their company’s agility levels and pinpoint where attention should be focused. The elements of the framework can spur strategic conversations about agility by asking the right questions about essential capabilities. These nine elements fit together like a jigsaw puzzle. Take one out, and the likelihood of achieving agility is diminished. The synergy across these components is what can lead to results. This framework boils down several agility-related concepts to their essence, in a way that can help strategists and leaders pin down what it means, evaluate their organization, and take action.

About the author

Loizos Heracleous is a professor of strategy at Warwick Business School and an associate fellow at Green Templeton College, University of Oxford. He earned his PhD from the University of Cambridge. He is the author of several books and co-editor of Agility.X (Cambridge University Press, 2018). More information about Loizos can be found at www.heracleous.org and @Strategizing.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.

The true differentiator between winners and losers turned out to be how well the strategy was executed.

The data on this were fairly compelling, and it turns out the trend extends beyond banking. A Conference Board CEO Survey identified execution capability as the critical challenge facing today’s business leaders. No one seems to disagree on the importance of execution, but a study by Bain & Company found that only about 15 per cent of companies truly have what we might call “high- performance organizations” (62 per cent are rated merely adequate, and a surprising 23 per cent actually have organizations that hold them back). Harvard Business School’s John Kotter reinforced this concern, noting that 70 per cent of all strategic initiatives fail because of poor execution. Only 37 per cent of companies report that they are very good when it comes to execution (HBR survey, 2010).

Add it all up, and the conclusion seems to be glaringly obvious: (1) Execution is important both strategically and operationally, (2) many of us, regardless of industry sector, need to get better at it and (3) it is a leading cause for concern among CEOs.

Three lessons about execution

Over the past few years, we’ve been on a journey to focus on execution capability. And we’ve learned three important lessons along the way. First, although most everyone seems to agree that execution is critical, there is far less agreement on what is required to achieve it. Former Honeywell CEO Larry Bossidy noted in his book Execution that people believe they understand execution – “it’s about getting things done” – but when asked how they get things done, “the dialogue goes rapidly downhill”.

The second lesson we’ve learned is that moving from theory to practice can be just as challenging. One of our priorities for the project has been to identify a set of core metrics that allows us to assess a business unit’s execution capability. To be candid, our goal has never been to zero in on every isolated element that affects performance. There’s value in that approach, of course, but exhaustive measurement would likely lead to a cacophony of metrics that most CEOs would find unusable.

Third, we’ve learned that most metrics are primarily descriptive, much like a racecar’s dashboard — they provide useful information, but in and of themselves they may not prevent accidents, maneuver around obstacles, or propel the car forward. We have adopted the metaphor of a navigation/guidance system that helps us make the right decisions, improves responsiveness, and accelerates growth and profitability. Over the past few years, we’ve been able to frame more clearly what execution excellence entails, but more importantly, we’re learning what it requires.

The 4A Framework of Execution Capability

So where do we start? At the end of the day, the performance of organizations depends on building an architecture that supports the collective abilities of individuals aligned toward achieving strategic outcomes. There are many important elements underlying execution excellence, but we focus on four: alignment, ability, architecture and agility.

The 4A model is not composed of four independent factors — they are integrally related, interdependent and mutually causal. Larry Bossidy and Ram Charan argued that “execution is a discipline,” and we would not disagree. At the same time, we find it useful to think of execution capability more fundamentally as building the firm’s resource base to energize performance. As shown in Figure 1, this is a system that combines human capital and organizational capital and that generates both potential and kinetic energy.

Ironically, we often refer to people and organizations as “resources,” but less as sources of energy. In his work with senior executive teams, Jim Clawson emphasizes that “leadership is about managing energy, first in yourself and then in those around you.” The same logic applies to strategy execution. Executives need to build the “ability” and “architecture” factors as sources of potential energy – the human potential and organizational potential that determine the firm’s capacity to execute. At the same time, they need to foster “alignment” and “agility” as sources of kinetic energy — vitality that propels the firm into action. Alignment energizes performance by focusing and concentrating human resources. Agility energizes execution by channeling and accelerating it toward value-adding activities. Ask any leader with responsibility for strategy execution and he or she will tell you, “Resources are important; managing energy is essential.”

Alignment: Focusing energy toward breakthrough performance

The sine qua non of execution capability is alignment. Organizations only exist because people can achieve more together than on their own. Alignment provides coherence, focus, energy and resilience in the face of change. And, not surprisingly, lack of alignment is a key source of divergent interests, conflict, dispersion and decay.

Three underlying elements in our model focus on the cognitive, affective and operational aspects of alignment:

Clear strategic intent

The clarity with which firms’ strategy is devised, articulated, and communicated does make a difference. Two decades ago, Michael Treacy and Fred Wiersema described in their book, The Discipline of Market Leaders, that 75 per cent of the executive teams they studied could not clearly articulate their value proposition. The same can probably be said today, and, without a shared purpose, strategic intent and articulated strategy, it is difficult to establish a focal point for collective action and performance.

Shared performance expectations and culture

As the underlying foundation of the organization’s culture, shared expectations serve both as points of aspired behavior and guardrails for acceptable action. But in the context of execution, shared expectations have to be operationalized as concrete behaviors driving performance, or else they get lost in the sea of good intentions and soft ideas.

Accountability for results

Many of those we work with assume that emphasis on accountability is a reaction to employee shirking. We think of the term more literally as “account” and “ability” combined. Without the ability to account for results toward a goal, it is difficult to create much focus for action or energize commitment toward it. Accountability requires establishing a set of performance metrics, feedback processes and shared outcomes (rewards) for performance.

Ability: Building human potential

People are an organization’s greatest asset (there, we’ve promulgated the cliché). But the truth is that many organizations have faltered while burgeoning with talented people. And, if we were brutally honest, we’d admit that organizations traditionally have worked to take people out of the production equation in order to improve execution, preferring to substitute technologies for humans. But in the contemporary setting, where knowledge is a vital ingredient for both efficiency and effectiveness, that would be a mistake.

We focus on three aspects of an organization’s human capital:

Talent capacity

Like any capital investment, the “make or buy” decisions for talent require tough choices about where payoffs will be greatest. Because HR budgets are often the first to be cut in difficult times, fewer dollars means more scrutinized investment. The priority with regard to execution is generating more high performers, particularly in critical roles.

Leadership bench

Leadership, beyond talent alone, often comes down to mobilizing excellence through others. Cultivating leaders requires longer lead times, of course, and therefore more enduring investment. As Wayne Gretzky, the great talent guru, said, “Skate to where the puck is going to be.”

Engagement and collaboration

An organization’s ability to execute ultimately depends on more than the skills of individuals or human capital. It extends to the social capital as well, the value of relationships and collaboration that drive collective achievement.

Architecture: Designing organizational capability

The design of organizations makes a big difference in terms of reliability, scalability and continuity of performance. So in terms of strategy execution, the organizational architecture is critical for managing resource flows, information availability, decision-making and process. We focus on three key aspects of the organization’s architecture:

Simplified Structures

Although the adage “structure follows strategy” probably still applies, in terms of execution capability, the key is to simplify structures to eliminate needless complexity. The two fundamental purposes for structure are: (1) Delineate lines of authority and decision rights, and (2) improve channels of coordination and communication.

Information system access/utilization

It may come as no surprise that knowledge management is viewed by executives as the most important source of potential productivity gains over the next 15 years (Economist Intelligence Unit, 2006). The role of information technology affects execution capability in three principal ways: (1) operational, (2) relational and (3) transformational.

Streamlined processes

Technology investment without corresponding process redesign is like “paving cow paths.” A whole cottage industry has arisen around the principles of process improvement and execution. At a minimum, execution is improved when processes and standard work are clearly defined, process owners are known and accountable, and measurement systems are used as a basis for decision-making.

Agility: Channeling value-added learning

There is an apocryphal story of Albert Einstein giving his assistant an exam to distribute to his graduate students. “But Professor Einstein,” she said, “these are the same questions as last year.” Einstein allegedly replied, “It’s all right, the questions are the same, but the answers are different.”

In high velocity environments, questions about growth, profitability, innovation, and the like may remain constant. But the answers may change rapidly. The key to execution increasingly depends on being agile, nimble, and proactive in the face of change and discontinuity. We focus on three requirements of agility for strategy execution, each of which provides a more proximal indicator of firm performance:

Customer and stakeholder connectivity

The importance of customer engagement might be overlooked if we assume that execution is a strictly internally focused capability. One of the worst things a company can do is to give into “chin down” management. In an effort to get the most from themselves and their people, too many managers will erroneously concentrate on the work in front of them and miss what is around them.

The primary attention needs to remain on the customer, but also attend to other relevant stakeholders in the environment. Where are the faint signals that could define the future? The engagement needs to be active, not passive; probing the environment to see how it responds.

Innovation and organization learning

Agile companies approach execution in terms rapid response, small experiments, rapid testing and learning, and flexible resource allocation. These need not be ‘bet the company’ investments, but perhaps are small experiments to learn. The more of these experiments, the more the organization begins to resemble an ecosystem of possible futures. And more variety in the ecosystem increases the likelihood of survival. Experts in the field of innovation make a distinction between two types of organizational learning: (1) exploration, which is going into new domains, and (2) exploitation, which is deeper learning within the current domain. Without developing deeper expertise in current product/service domains, a firm’s execution capability will stall.

Strengthen the core

Any athlete will tell you that agility requires core strength. The core of an organization, obviously, is the central capabilities for value creation. Ironically, one might presume that agility would benefit from flexibility and not investing too much in one area. Just the opposite is true; organizations that invest consistently in the core knowledge have a basis of strength to respond to the market Conversely, an organization with a weak core has a difficult time pivoting to anything (opportunities or threats).

About the authors

Scott A Snell holds the E Thayer Bigelow Research Chair and is the former Senior Associate Dean for Executive Education at the University of Virginia’s Darden School of Business.

Kenneth J Carrig is Chief Human Resources Officer at SunTrust.

This is an adapted version of their paper “In Search of Execution,” included in View From the Top: Leveraging Human Capital to Create Value (Society for Human Resource Management).

Resources

• Bossidy, Larry & Charan, Ram, Execution, Crown Business, 2002.
• Clawson, James G, Level Three Leadership (third edition), Prentice Hall, 2005. Treacy, Michael and Wiersema, Fred, The Discipline of Market Leaders, Basic Books, 1995.

This is an excerpt from Strategy@Work, a Brightline and Thinkers50 collaboration bringing together the very best thinking and insights in the field of strategy and beyond.