Can you ski the face?

Val d’Isère, a resort in the French Alps, is widely known as providing some of the world’s finest skiing. It has a permanent population of 1500 and a capacity for 14 000 visitors. The employees in hotels, restaurants, shops and skiing facilities are multilingual and friendly.

Skiers are always greeted by welcoming smiles and pleasant words as they board the lifts, even at peak times. Although it is in France, it is not a ‘French’ resort. Visitors come from all around the world – in the bars and on the slopes, you will hear more English, German, Dutch, Italian, Spanish, Portuguese, Russian, Swedish and Norwegian being spoken than you will French.

The town is increasingly known simply as ‘Val’ because this is easier to communicate in a multiplicity of languages. Everything is low key, but the whole town seems to vibrate with the energy of internal momentum. There’s a ‘feel’ to the place that makes it different and somehow exceptional in comparison to most other resorts. But all of this marks a tremendous change.

Until the 1990s, Val was oriented toward ‘real skiers’ – hardly surprising, since it is the hometown of several champions, including the great Jean-Claude Killy, winner of three gold medals in the 1968 Winter Olympics. Most of its ski slopes were extremely challenging, the buildings were not maintained, the accommodation was limited and the locals tended to be clannish and cold toward visitors. The dominant attitude was, ‘This place is for real skiers. If you can’t make it down the Face’ – the Olympic slope, one of the world’s most difficult – ‘you don’t belong here.’

It’s hard to believe this when you experience the friendly, relaxed, international atmosphere of the place today. How did such a tremendous transformation happen in just a decade? The moving forces were political will and ambition. The mayor recruited a new chief for the town’s tourism office, Michel Giraudy, who had headed up tourism at a competing and highly successful upmarket ski resort, Courchevel.

Giraudy understood that change would occur only if he could convince all the resort’s different stakeholders to commit to it. He provided leadership that persuaded local hoteliers, restaurateurs and merchants – as well as ski-slope staff and tour operators – to join in an overarching project of improving the resort’s offering to customers. Together, over those 10 years they created the enormous momentum and sustainable, profitable growth that today you can almost sniff in the air from one end of the town to the other.¹

Generating and directing momentum

Many excellent books have been written on leadership – Peter Drucker on the skills of managers, John Kotter on leading change, Ram Charan on the CEO’s job, Henry Mintzberg on organizations and Manfred Kets de Vries on the psychology of leadership, to mention just a few.² This chapter takes a specific view. It focuses on the leadership required to take a firm on the customer-based pathway to exceptional growth – the sort of leadership that Michel Giraudy provided in Val d’Isère. We call it ‘momentum leadership’.

By definition, momentum needs direction. Without focus, the human energy in a business dissipates and never reaches the critical point at which its power starts to gather pace. It’s not easy, though, to provide direction and focus for today’s complex organizations, with their tens of thousands of employees working in myriad different locations. How do you go about managing the differing, and frequently opposing, demands of multiple stakeholders and bring all their energies together into a common engagement? It requires some very special kinds of leaders – ‘momentum leaders’.

Of course, a company’s culture, reflexes and momentum are first heavily influenced by the behaviour and attributes of its senior managers. But then, their momentum leadership has to reverberate in all levels of the organization, from the very top right down through its management and to team leaders.

In the light of this imperative, questions need to be asked of managers at every level and in every function of the business, to determine if they have the competences required to deliver momentum leadership. Do they understand customers? Do they inspire customer discovery? Do they display proper values and lead by example? Do they create customer momentum? Do they create internal momentum?

The challenge facing leaders today is to mobilize both inside and out, to integrate the external with the internal. Everything needs to be coherent, aligned and focused on momentum strategy, on originating additional value, whether that value be for the customer, the employee or any other stakeholder. All leaders must constantly seek to build and maintain momentum, both within and without.

The momentum leadership ladder

Well, just how do we define momentum leadership in brief? It is the ability to realize the unlimited potential that momentum strategy offers. As always in this world, some people perform better than others. Some have it in an innate way, others have to acquire it – but all can improve it.

During our experience in helping leaders to implement momentum strategy, we have found it especially useful to create a momentum leadership ladder, organized into levels from one to five stars, as shown in Figure 13.1.

Figure 13.1  The five-level momentum leadership ladder

This is certainly not another tool for evaluating executive performance and to bang on the heads of those who underdeliver. Instead, this is a tool for personal development in terms of a specific crucial competency – momentum leadership. We have found it particularly useful as a complement to the momentum strategy framework. It helps executives to focus on their personal progress in leading their organization in exploring the various avenues of organic growth. One- and two-star momentum leadership is outlined briefly below. After that, we will view three-, four and five-star leadership in more detail and with examples.

A one-star momentum leader is already a high performer compared to most. He or she recognizes that customer awareness has an impact on efficient, organic, sustainable growth. We can all think of many leaders who have been successful, at least in the short term, without demonstrating this level of momentum leadership. These zero-star leaders lack an appreciation of the importance of value origination and do not harness the power and sustainability that momentum strategy can provide. Instead, they concentrate on mergers and acquisitions, cost-cutting or boosting the top line in the short term. These are essential activities, but this is not a sustainable way to lead a firm for the long term. Sooner or later, depending on the competitive environment, their organizations will struggle to grow profitably.

Sometimes, it is even worse and some leaders are so lacking in respect and sensitivity for their customers that their attitude can lead to major value destruction. A notorious example was the British high-street jewellery chain Ratners. The brand was destroyed overnight when CEO Gerald Ratner gave a speech that was reported in the Financial Times then relayed by the popular press. At a professional conference, he said to his fellow business executives: ‘We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, How can you sell this for such a low price? I say, because it’s total crap.’³

When we approach leaders deserving of stars, their commitment to customer-based growth rises considerably. One-star momentum leadership describes leaders who have developed an awareness of the importance of being customer-focused, but without translating this awareness into a set of actions. They have respect for their customers and have made their organization aware of their importance. This is already a great step toward creating growth. This is why such leaders deserve one star and a place on the momentum leadership ladder.

Going a step further, two-star momentum leadership defines leaders who have launched several successful customer-focused actions that have succeeded in improving the customer experience with the firm and its products. These actions are not yet part of a coherent strategy. It’s patchy, it’s work-in-progress – they may be training their front-line staff about the importance of customers, but it isn’t tied into a larger project. They may be conducting customer satisfaction surveys, but the measurements do not link with wider business goals or correspond precisely with the high equity customers they serve. At this stage, a leader succeeds in obtaining some customer traction but has not yet been able to translate this into momentum.

As managers become more advanced and more coherent about momentum strategy, they progress to three- and four-star momentum leadership, while some – a select few – achieve five stars.

So how can you rise further up the ladder of momentum leadership? By following the roadmap of momentum strategy and exploiting the pathways for exceptional growth that we have explored in earlier chapters. Momentum leadership involves energizing and channelling these efforts, and ultimately, harnessing the active support of all other stakeholders.

✰✰✰ Momentum leadership

Leaders who deserve three momentum leadership stars have established customer momentum. They have placed customers at the centre of all their activity, so much so that they have created momentum and sustainable growth.

Customer momentum can be achieved by implementing the framework that we described in Chapters 4 to 11, from compelling insights to vibrant engagement. In small businesses, customer momentum is really total momentum. The number of employees is small and they will be enthusiastically mobilized by customer success. This is why it is easier to single out three-star momentum leadership by looking at small operations.

Take a look again at Skype, an excellent example of three-star momentum leadership. Its founders, Niklas Zennström and Janus Friis, knew and understood their audience and saw the need for a new telecommunications model. They understood the importance of value origination.

They observed the streams of people spending hours on their computers using broadband. This was a generation with new values, notably convinced that all sorts of things ought to be free, because that’s what the Internet had taught them. Skype’s leaders understood that these customers regarded the value of products and services differently – they were resistant to exploitation by old-fashioned incumbents of quasi-monopolistic situations.

Importantly, Zennström and Friis understood that although these customers were unwilling to pay much (or anything at all) for online services, they were a valuable audience. They were customers with equity because they spent a lot of time online. They were networked and they were keen and quick to recommend good products by word of mouth.

This is how Niklas Zennström explained the creation of Skype’s momentum: ‘The model for us is viral growth. We try to get as many people as possible to use Skype for free and then some of them become paying users. We are not pushing it because it is a network effect. If you push too hard to convert free users to paying users, you limit growth. It is like putting too much charcoal on a barbecue.’⁴

How does the design of Skype fit its execution? Very nicely indeed. Its customers are satisfied because the service is convenient and low-cost. As far as customer retention is concerned, initiates of the targeted customer group stick there forever. Once Skype is installed on their machines, why would they switch? Their friends use it too. They are engaged customers. Friends tell friends because they want to communicate with them for free, using Skype. The word of mouth passes. The circle enlarges. The virus has taken hold.

Skype has real customer momentum, and its leaders have displayed the competences for three-star momentum leadership. The firm’s user growth has been explosive and sustained, which explains why eBay was prepared to pay more than $3 billion for the company – a price based on a dynamite argument: the compelling equity in that network of 53 million users making free Internet phone calls. Zennström and Friis have definitely been three-star momentum leaders.

In large organizations, three-star momentum leaders can also be found at many levels, from product managers to CEOs. They have been able to create exceptional growth through compelling design, power offers and vibrant execution. Behind products that have had a successful launch and sustainable growth is often a customer champion with leadership skills, a three-star momentum leader. But in a large organization, real sustainable customer momentum beyond a specific product also requires internal momentum. This takes us to the next level of momentum leadership.

✰✰✰✰ Momentum leadership

As companies grow, they need to be able to mobilize ever-greater numbers of employees around the same customer-focused goals that drove their early growth. In addition to customer momentum, four-star momentum leaders have also achieved internal momentum, as described in the previous chapter. They appreciate how important value origination is for customers and employees alike.⁵ Customer momentum and employee momentum⁶ fuel each other, creating a feedback effect that generates a result greater than the sum of their individual parts, as represented in Figure 13.2.⁷ But the two must be in balance. Imagine these two engines of momentum as a pair of giant rollers – provided they are running with equal energy their combined power will be enormous, but if they are out of synch the slower one will be a drag on the performance of the faster one.

Figure 13.2  Momentum synergy

How four-star momentum leaders build synergy between customer momentum and internal momentum.

Compared with small businesses, it is much more challenging for large organizations to emotionally engage employees for growth, but it is a crucial task of leadership – internal momentum is essential to maintaining customer momentum over time. Many established companies have grappled with this problem. Lacking internal momentum, their growth is directly limited to the success of specific products – and this limited momentum is restricted to the life cycle of its product portfolio. It is a common occurrence in the pharmaceutical industry. Roche, for instance, prospered with the success of Valium and then stalled for a period. SmithKline similarly prospered with Tagamet before struggling and merging with Glaxo. In contrast, the previous chapter illustrated how Johnson & Johnson’s exemplary internal momentum enabled it to bounce back after the Tylenol crisis.

Creating and maintaining internal momentum is essential for large firms. Indeed, losing it often signals the beginning of a firm’s downfall.

Leadership in a modern organization is not the same as it was 50 years ago. There has been a major evolution. In today’s world, employees and customers have equal access to information, and both enjoy the freedom to walk away from a company.

Four-star momentum leaders recognize that success lies in the ability to convince both customers and employees. They know that they are at the intersection of two different markets – the internal and the external. In both cases it’s not about imposing one’s will but, rather, about influencing these different stakeholders in order to keep the momentum going. This requires a capability to understand, design and execute power offers for both of these markets that they have to lead.

When A.G. Lafley became chief executive of Procter & Gamble in June 2000, he had a lot of persuading to do. Under his predecessor, Durk Jager, the company had issued three profit warnings in just four months. Eventually, Jager was fired for ‘pushing too hard’ – a more persuasive approach was required. From 2000 to 2004, led by Lafley, P&G’s profits leaped by almost 70 per cent.

Lafley’s tenure saw him overhauling and managing both internal and external expectations. There was no single dramatic event responsible for boosting the company’s fortunes in this period but, rather, a series of small, interlocking changes.

Lafley recognized that P&G’s internal culture had fallen into complacency, and that deep change was needed to transform it. However, he didn’t change everything. Beginning with P&G’s values, he said, ‘Here’s what’s not going to change.’ He cited corporate values such as integrity, trust and passion for winning. Then he went on to detail what would change.

He focused the company mission on its core business and communicated his reasoning to employees, painstakingly and carefully. It was not just slogans. He detailed precisely what this meant, how and where. He made dead sure that everyone understood what P&G’s core business was in terms of economics, growth and return on investment.

Many CEOs fall into the trap of communicating meaningless information to their employees, shot through with management-speak and pitched at a level so far removed from employees’ responsibilities that it fails to connect. Not so Lafley. He spoke in plain language that everyone could understand.

He defined P&G’s core aspirations in terms of its markets, categories, brands, technologies and capabilities – and focused the company’s first efforts entirely on that. As he explained, ‘If I’d stopped at “We’re going to refocus on the company’s core businesses” that wouldn’t have been good enough. You get questions. Well, I’m in home care. Is that a core business? No. What does it have to do to become a core business? It has to be a global leader in its industry. It has to have the best structural economics in its industry. It has to be able to grow consistently at a certain rate. It has to be able to deliver a certain cash flow return on investment. So then business leaders understand what it takes to become a core business.’⁸

The transformation of P&G’s corporate culture created internal momentum. At the same time, Lafley’s determination to return the company to a stronger customer orientation fuelled a customer momentum as well. Several successful new products have helped to power P&G along. And the successful acquisition and integration of Gillette has probably been helped by and contributed to both the internal and external momentum led by A.G. Lafley.

The longer version of P&G’s turnaround is, inevitably, more detailed. But the key elements are simple. Lafley’s ability to power both internal and customer momentum is what makes four-star momentum leadership. The ability to sell ideas both inside and outside in order to obtain momentum is crucial for leaders who wish to progress on the journey to sustainable, profitable growth.

✰✰✰✰✰ Momentum leadership

This is the top, the rarest and the most prized. Five-star momentum leaders are aware of their internal and external customers, but they are also able to master even more complexity. They know that everything exposed so far in this book about customers and employees can be applied to every other stakeholder. These lessons are as relevant for shareholders, financial analysts, media, trade unions, distributors, suppliers, government and communities as they are for employees and customers. In fact, they apply to the whole galaxy of stakeholders, as illustrated in Figure 13.3. Each of these stakeholders is a potential source of momentum, and each requires a specific value origination approach to get that momentum going.

Figure 13.3  The momentum galaxy

Richard Branson of Virgin Atlantic has always been acutely aware of treating his various different stakeholders like customers. One of his greatest fears as a successful entrepreneur is to lose momentum as his company gets bigger and bigger. Virgin’s relationship with the press, for example, is enviable, but this is because the company understands what journalists need as customers.

Virgin understands what journalists value as well as it understands what customers and employees value. Not all journalists are the same, but most of them cherish news above all else. News driven by innovation is best of all and that’s why Virgin has dominated the headlines so often. It is no coincidence that innovation also drives customers, and that is what also makes employees’ lives more interesting and fulfilling.

Most leaders fall short of momentum leadership’s fifth star. They may be aware of the importance of creating customer and internal momentum, but somehow they don’t extend this process to other, less obvious, stakeholders. This can lead to trouble for them and their companies, and it is most likely to be revealed when least expected. As mentioned earlier, an organization’s character comes to light in a crisis. A crisis is when a good reflex by a leader can create and perpetuate momentum, and when a poor or inappropriate one can significantly destroy value.

Not even the world’s largest corporations are immune to value destruction through bad reflexes, as Shell chairman Philip Watts discovered to his cost during his handling of a crisis on 9 January 2004. On that day, Shell – ranked as the world’s tenth biggest company in terms of market value – announced in a conference call with the financial community that one-fifth of the oil and gas reserves booked on its accounts were not ‘proved’. This was a major disaster for the company – its share price plummeted by more than 9 per cent that very day.⁹

The bad news was compounded by outrage among investors and journalists that such important information had been announced by Shell’s chief financial officer rather than by the chairman himself. This was a serious leadership failure, ignoring the needs, feelings and emotions of these crucial stakeholder groups. The chairman’s absence was an extraordinarily poor reflex that inevitably led to the question: If this is how the chairman treats the owners of the company, how do other Shell managers treat customers, employees and other partners of the firm?

Financial analysts and journalists were so deeply offended by the chairman’s cavalier attitude toward such a major announcement that they called for his resignation. One month later, on 5 February, Shell organized a meeting with reporters and industry specialists at which Watts apologized for his absence in the conference call. ‘I regret it, and I am sorry,’ he said. ‘I got it wrong.’

At issue in this case was not only the announcement of reduced reserves but the boss’s attitude. It is impossible to calculate exactly how much value was destroyed by the mishandled news conference but when, less than two months later, Watts was forced to resign, Shell’s share price rose 2 per cent. How much was this 2 per cent worth? More than $3 billion in market capitalization.

Now let us return to Val d’Isère. The rise of this ski resort demonstrates the impetus to be gained from understanding the importance of appreciating the concerns of multiple stakeholders. The station’s success is the culmination of five-star momentum leadership.

How did it happen? Michel Giraudy brought some remarkably useful experience with him when he arrived. As a young man, he had been a ski instructor and then went on to a successful career at Club Med, where he joined, what was then, a first-rate customer-oriented culture. But more importantly, he understood that he could make change happen only if he could convince all of Val d’Isère’s different stakeholders to go along with him – he would have to persuade them that it was in their interest.

He set up extensive consultations while at the same time persuading the town to renovate its own buildings on the main square, most strikingly by facing the old structures with local granite. This elegant design became the model for the rest of the town. Hotel owners and merchants followed suit and upgraded their facades and facilities.

The hardest part was convincing local staff to make the ski runs easier. Here, Giraudy was messing with the heart of Val’s elitist skiing culture. He called in professionals to survey the slopes, assess changes to be made and to demonstrate the value of grooming them more for the average skier – not exactly ‘snow bunnies’ but no longer just professional downhillers. The skiing area was expanded and extended, then linked with the neighbouring station of Tignes to create the world-renowned ‘Killy Space’, designed by the Olympic champion himself.

At Giraudy’s urging, local merchants trekked once a year to tourist stations abroad to observe world-class tourism standards and pick up new ideas. The town got external stakeholders involved by bringing in tour operators and travel agencies for specially organized workshops.

Despite simplifying certain runs, Val d’Isère has maintained its Olympic-level sporting facilities, and the locals are prouder than ever of their town. It has remained the site of many top international competitions, including the 2009 world ski championships. Civic values are strong and evidence of customer momentum is everywhere. Over the past 10 years, the capacity in the number of beds has not actually increased all that much – the winter season counts about 300 000 visitors staying for an average of one week – but hotels enjoy an occupancy rate of 80 per cent and a retention rate of 50 per cent, unusually high for this branch of the tourism industry.

Furthermore, as the quality level increased so did prices. Val is now a very rich village – five-star momentum leadership has created value for all its stakeholders. The entire town has learned to be sophisticated in its reflexes toward stakeholders, each one slightly different according to its category – individual visitors, tour operators, travel agencies, journalists or others.

It is much harder to calculate the value of a whole resort than of a single corporation, but a conservative guess suggests that the momentum created through Giraudy’s leadership has engineered a change in clientele that has been worth a 20 per cent price premium on accommodation and related expenses alone. On the basis of average spending statistics, this suggests an increase in aggregate turnover of $100 million per ski season.

This does not take into account other tourist spending, the increase in property values or the financial impact of the new jobs that have been created. The future looks shiny, but Val must make sure its success does not lead to arrogance and complacency. All momentum-powered organizations face this same danger.

Like the pursuit of sustainable, profitable growth itself, momentum leadership is a journey, not a destination. Leaders can always improve, even if they’ve reached the dizzy five-star heights. Hubris can strike at any moment. Even the best can fall into it and forget those they are supposed to be serving.

Tips for aspiring momentum leaders

The point of our momentum leadership ladder is to emphasize that leadership is a journey, and that every leader can and should improve. The best firms and the best leaders never arrive at a destination, because they are perpetually voyaging and seeking. The examples of Shell and Val d’Isère prove that the best way to get a sense of where leaders are going is by observing their actions rather than their speeches, memos or other documents. And the most revealing actions are those that are spontaneous and result from reflexes.

One effective way to build proper reflexes and to learn the skills of leadership is to study the lives and actions of great leaders. To provide guidance in this continuous learning experience, we have created a select ‘Hall of Fame’ of five-star momentum leaders, displayed in Figure 13.4. Although this tribute is presented alphabetically, we would single out Sam Walton, the late founder and chairman of Wal-Mart, and place him at the top for his multiple competences and the impact and duration of the momentum he created.

Figure 13.4  The Hall of Fame of five-star momentum leaders¹⁰

In only 30 years, Walton built the world’s largest retail operation, becoming the country’s richest man with a personal fortune in excess of $36 billion. When he died in 1992 at age 74, he left a retail legacy that struck fear in the hearts of Wal-Mart’s competitors all over the world. Regardless of how the company has evolved since, that is one heck of an achievement.¹¹

Leadership has many facets. We are frequently asked to present our views on the most important dimensions of momentum leadership. Building external and internal momentum is the proof of their leadership, of course, but we can offer five tips for managers on their journey toward momentum leadership stars. We illustrate this final piece of advice with some of the achievements of Sam Walton.

It starts with you

The final step in the process is the only one that’s entirely up to you. People who are serving customers and building exceptional internal and external momentum deserve, and need, an exceptional momentum leader. That’s you. The job isn’t easy, but the potential achievements and satisfactions are immense.

This book has presented a new business model and demonstrated a systematic way for firms to operate within it to deliver exceptional growth. This approach creates an external momentum based on customers and an internal momentum based on employees. In this chapter, we have focused on the implications of this momentum model for leadership. These are the guiding principles that we have presented.

• Managers have a dual role – to lead outside and to lead inside – to create an internal and an external momentum. These two forces are synergistic. They are the most efficient way of building sustainable, profitable growth.
• Beyond customers and employees, great leaders obtain momentum from all stakeholders, including suppliers, media, governments, local communities, financial analysts and shareholders.
• Competences for momentum leadership progress through five levels – customer awareness, customer experience, customer momentum, internal momentum and all-stakeholder momentum.
• The Hall of Fame of momentum leadership offers valuable lessons to learn from those who have been able to create exceptional growth over extended periods of time.
• Beyond building external and internal momentum, our top five tips for developing momentum leadership are to commit to building momentum through value origination, to practise momentum principles continuously with your contacts, to have respect for people, to spend quality time with customers, employees and other stakeholders and to be momentum-consistent over time and through your actions.

Great leaders must fix on a vision that is motivating, master the roadmap to reach it and guide the organization to deliver it. The purpose of this book is to help you achieve just that with the new model of momentum strategy. It has provided you with an ambitious vision for creating exceptional growth based on value origination and momentum strategy. It has described the eight steps through which this vision can be implemented systematically. It has concluded by focusing on how to mobilize employees and other stakeholders to deliver the ambitious objectives of this vision.

As we will emphasize in the epilogue, the most important point of momentum is the opportunity that is right there before you. You must not miss it.