The answer to this question is, surprisingly, simple.  It isn’t lack of any of these:  innovation, new gadgets, time to market or bad customer experience.  It is simply this: when majority of a firm’s employees fail to see the big picture, firms fail.

When was the last time you heard any of this in your office: “But we have done it this way for a long time”, “this is the way it works here”, “we reject anything that doesn’t work our way”, “our culture will reject this”, “we don’t like disruption”, “we are believers in incremental change, not disruptive change”, “we know how to do it, we have been successful before”.

When you are caught in the weeds, in your own silos, it’s easy to miss the big picture.  Seeing the big picture helps answer why do something different.  It gives us the reason for change.  A few employees hacking away on the side on incremental changes is good but that doesn’t replace the big picture thinking that everyone in the firm needs.  Change has to come from within, from everywhere.

 

Have you come across the Answer First method of communication?  In the corporate world, you are often coached to ‘get to the point’, ‘get to the answer first’, ‘synthesize and summarize’ and other communication techniques to get past limited executive attention. Part of the problem with the method is, it can result in poor decision-making contrary to what it is actually supposed to help.

Here’s why: by saying the answer first,  the ability to both communicate the background to the client so the client can  understand the problem scenario, and engage the client in participatory solution analysis  are lost.  The result of the answer first approach is, your client picks what they heard first and go on to make decisions without debate or deliberation.  By presenting the answer first you have removed the client’s ability to independently examine the situation and arrive at his/her own ideas of what could be the problem-solution.  Below is an anti-pattern to that style of communication.

Next time some executive asks you for the 1 min summary and you know it requires more than a minute to understand and explore the idea at hand, stand your ground and say you can’t explain it in one minute but you need more time.  If your executive really cares about the subject, is curious about  your ideas, chances are he or she will come back to you with more time.

Clay Christensen explains how he stood his ground with Andy Grove of Intel.  The outcome, as we all know today is remarkable:

Before I published The Innovator’s Dilemma, I got a call from Andrew Grove, then the chairman of Intel. He had read one of my early papers about disruptive technology, and he asked if I could talk to his direct reports and explain my research and what it implied for Intel. Excited, I flew to Silicon Valley and showed up at the appointed time, only to have Grove say, “Look, stuff has happened. We have only 10 minutes for you. Tell us what your model of disruption means for Intel.” I said that I couldn’t—that I needed a full 30 minutes to explain the model, because only with it as context would any comments about Intel make sense. Ten minutes into my explanation, Grove interrupted: “Look, I’ve got your model. Just tell us what it means for Intel.”

I insisted that I needed 10 more minutes to describe how the process of disruption had worked its way through a very different industry, steel, so that he and his team could understand how disruption worked. I told the story of how Nucor and other steel minimills had begun by attacking the lowest end of the market—steel reinforcing bars, or rebar—and later moved up toward the high end, undercutting the traditional steel mills.

When I finished the minimill story, Grove said, “OK, I get it. What it means for Intel is…,” and then went on to articulate what would become the company’s strategy for going to the bottom of the market to launch the Celeron processor.

I’ve thought about that a million times since. If I had been suckered into telling Andy Grove what he should think about the microprocessor business, I’d have been killed. But instead of telling him what to think, I taught him how to think—and then he reached what I felt was the correct decision on his own.

Executives that put ‘listening’ as their priority, engage in the deliberative process of decision-making.  Those that have very little attention end up running on hamster wheels – lot of churn, but no movement.  When it comes to execution, they realize they lack the necessary information  or the courage to make the right decisions or end up making bad decisions.  After all, they had avoided the understanding of the real problem all along due to ignorance or arrogance.  Either way it is unhealthy for the organization.

Next time you are in an executive meeting, pay attention to how the meeting is conducted.   Observe what the executive attention span is.  How many minutes do they spend talking and how many minutes listening and to whom.  What kind of questions do your executives ask?  Do they spend time listening and learning or do they spend time talking down to you.

If you want to change the culture of your organization’s decision-making style, insist on getting more time with your executives to walk through problem scenarios instead of elevator pitches of the Answer First mode.  Elevator pitches are not for every situation.

 

I caught up with some reading on Microsoft Surface.  Somewhere I read this funny quip – “the Surface has no depth!”.  Three interesting stories on Microsoft this week:

First is a Charlie Rose interview with Bill Gates.  The first 30 mins of the interview is a discussion about poverty and healthcare in India and how the Gates foundation is working to fix the problems there.  The remaining portion of the interview is about Microsoft and Gates’ view of things. Watch the interview here: http://www.charlierose.com/view/interview/12436

The second one is a Vanity Fair article I came across in GigaOM Founder Om Malik’s pithy post.  You can read the Vanity Fair article here: http://www.vanityfair.com/online/daily/2012/07/microsoft-downfall-emails-steve-ballmer. It dwells on “Stack ranking” as a HR performance assessment tool at Microsoft. If you scroll through the comments section you can see comments from some Microsoft employees.

The third one is about how Apple’s assault on Windows dominance and the resulting industry structure, is opening the door for market participants.  Read the article and comments at: http://www.asymco.com/2012/07/04/the-building-and-dismantling-of-the-windows-advantage

Some of the commenters to the above two posts took a very defensive position against the authors reminding how much value Microsoft has created over the last 30 years.  Microsoft has indeed created enormous amount of wealth over the last several decades.  So have many of the iconic firms that have had dominant share of the market in their respective industries.  They created wealth for their owners, the shareholders, the employees and the communities they served.  But the question at hand isn’t whether these firms served their purpose well for a period of time. The critical question is, did the managers at these firms foresee and respond to market and technology shifts correctly?  Is the reason for their failure to seize opportunities  simply a case of the Innovator’s Dilemma or Creative Destruction in play.   Or is it also about managerial arrogance, delusion and ineffectiveness?  The last question is particularly interesting for students of business and aspiring leaders.

Bonus read – this Business Week column by Clay Christensen: http://www.businessweek.com/articles/2012-05-14/message-to-managers-your-strategy-is-not-what-you-say-it-is.  It’s an adaptation from his recent book, How will you measure your life:

“The danger for high-achieving people is that they’ll unconsciously allocate their resources to activities that yield the most immediate, tangible accomplishments. This is often in their careers, as this domain of their lives provides the most concrete evidence that they are moving forward. They ship a product, finish a design, help an employee, close a sale, teach a class, win a case, publish a paper, get paid, get promoted. They prioritize tasks that give them immediate returns—such as a promotion, a raise, or a bonus—rather than those that require long-term work.”

 

People buy products and services, not PowerPoints.  So, if a majority of your time is spent in a cube making PowerPoints, you are making stuff up, not making stuff.

Of course, the Dilbert bosses in your organization might have delusions about their net worth based on the PowerPoints they pitch.  Don’t fool yourself.

 

If you have been following the news lately – two CEO actions might rank at the top of the absurdity with which CEOs in corporate America act without thinking.

HP’s CEO Leo Apotheker announced HP was exiting the PC business without a plan on what HP was going to do with the business or its customers.  Reed Hastings announced Netflix was going to split into two companies against consumer criticism over its recent pricing changes.

A systemic problem

You could overlook these actions as one-off errors.  I would argue these are actually systemic problems in how decisions are made in corporate America.  When you have boards that are ineffective, advisers (consulting firms) that produce nothing but PowerPoints loaded with graphs and charts from freshly minted MBAs with no real world experience or insight, and partners busy selling business, a culture where CEOs are expected to be corporate saviors, you end up with too much power in the hands of one person or group of people who lack empathy and a systemic understanding of their decisions and impact.

The way we have dysfunctional organizations structured today is the following – lots of powerless doers and a hierarchy of powerful decision makers.  The doers actually go and get real work done.  The decision makers simply make decisions with no understanding of action or result.  These are the wordsmiths and spin factory engines that feed the media and the public with hastily made PowerPoints and press briefs created by PR factories dedicated to the cause of the corporation.

Back to the question on Apotheker and Hastings.  Why did they act this way?  Was it lack of empathy for their users?  Was it because they lack the ability to listen? Was it because they had poor advice?  Was it because their leadership team was ineffective?  What motivates people to make such hasty and bad decisions?  Is it power?

In fact, Hastings decision seemed so hasty (no pun intended) that Netflix didn’t even check for the ownership of Twitter account Qwikster or an effort to acquire it before making the announcement.

I want to point two resources that speak on power, corruption and empathy worth looking at in this context:

Exhibit A is a recent article in Wired magazine – How Power Corrupts? It concludes:

The larger lesson is that Foucault had a point: The dynamics of power can profoundly influence how we think. When we climb the ladder of status, our inner arguments get warped and our natural sympathy for others is vanquished. Instead of fretting about the effects of our actions, we just go ahead and act. We deserve what we want. And how dare they resist. Don’t they know who we are?

Exhibit B is a book by Harvard Business School professor Rakesh Khurana – Searching for a Corporate Savior: The irrational quest for charismatic CEOs.  Rather than write my own review of this book, let me quote the top reader review on Amazon for this book :

A brutally honest look at what is wrong with how CEOs are chosen in America today. I read an advance copy of this book and could not believe it was allowed to go to press. Dr. Khurana certainly has put his professional aspirations on the line to be so bold, but this is the kind of book that makes a difference in the world.

This book presents what I considered some amazing and enlightening information not normally available to ordinary people. We can read about the stupefying emoluments, titanic disasters, and spectacular firings of CEOs in the popular press, but it is hard to find out the inner workings of how these people got into these positions of influence to begin with. Many of the academic treatises on management I have read seem like distant observations from an ivory tower. Refreshingly, parts of this book sounded to me like the information came from furtive phone calls late at night.

Of course, part of the problem is that the foxes are already in charge of the chicken coop. I, too, would recommend this book to members of corporate boards responsible for the performance of top executives. There are plenty of brilliant executives who should be promoted based upon sound character and true leadership ability. Everyone knows that in many cases this is not happening, but Dr. Khurana has identified the defective process that underlies the problem. It is up to boards of directors to learn about and correct their mistakes.

The final page of the book uses an analogy from the Wizard of Oz about drawing back the curtain to shed light on the inner workings of power, and Dr. Khurana has done a good job of this. His book is to CEO succession as Sinclair Lewis’ “The Jungle” was to the meat packing industry–it will turn your stomach and make you cry out for change if you read it.

Let’s not forget that there are managers  that handled similar circumstances with much better outcomes not just for the companies or its shareholders, but for the users, customers and the larger market as a whole.  IBM exited the PC business gracefully with a clear plan.  Google and VMware raised prices recently but acted responsibly against user backlash.  How often do we see these kind of actions?

So what is the solution?

The solution isn’t more regulation or oversight.  That is just putting more watchers instead of doers.  What we need is a radical change in corporate culture.  A culture of transparency, empathetic and systemic understanding of problems, decisions and impacts, inclusive and collaborative decision-making across the entire organization.

Unless we change organizational design, flattening meaningless structures, hierarchies and letting people who do the work make the decisions collaboratively and transparently, we will see these managerial overheads bring down value quickly and irreversibly.

 

Are you an executive at a large corporation looking to reduce your external consulting bill?  Here’s an idea worth pursuing.  Encourage courage.  Yes, empower your employees to speak up.

Three main reasons why you hire external consultants for a project:

1. Employees don’t have the time to do the project as they are busy doing their day to day work [hiring more employees just for that one project may be expensive]
2. The project is specialized and outside the scope of employee skills [core vs non-core activity]
3. You need objective, unbiased analysis

The first two above are classic cases for outsourcing, but it is the really the third that needs work.

Executives that surround themselves with lots of yes men, or patronize a culture of  penalizing dissent also spend a lot of time and money on external consultants.  It is costly  to go to an external consulting team to tell you what’s wrong with your business when you might as well walk down the aisle in your office and ask your employees what’s going on.

The heart of the matter is courage.  Hire people that have courage to express their ideas without retribution, no matter who the audience is.  Even more importantly hire executives who have the courage to listen for ideas from everyone and everywhere.