8. From Vision to Results: The Leadership Agenda

What Is Leadership?

Leadership is often confused with personality and management style. Many business books—and executive memoirs—adopt a Hollywood model of the leader as charismatic hero, flamboyant communicator, brave lone ranger, and fierce warrior. It's Gary Cooper as the Marshall standing alone against the outlaws in High Noon. But that metaphor presumes that you think leadership is about killing the competition. Such leaders fight battles and then disappear into the sunset, their job done. If only it were so simple and so exciting!

Business leadership includes personality and style, but great business leaders are also measured by their credibility, communication, and commitment to a mission. What differentiates great business leaders is their ability to see the future and create a path from here to there.

The word that crops up again and again in business books is "reality": identifying the business growth path, starting the journey, and providing maps and supplies to the team. Writer Noel Tichy states it thusly:¹

"Leaders stage revolutions. They (1) see reality: size up the situation as it really is, and (2) mobilize the appropriate resources. That is a lot harder than it sounds. Seeing reality means removing the filters that screen out the things they might not want to see, acknowledge their own and their companies' shortcomings, and accept the need to change."

Tichy observes that company founders often see realities better than their competitors: Fred Smith saw the new reality of massive demand for package shipments in the emerging global marketplace. Competitors fretted about the difficulties and cost of updating existing delivery platforms; Smith built a unique new platform with Federal Express. Sam Walton anticipated the shift of retailing from department stores and low-quality discount stores to localized outlets in rural settings and created Wal-Mart. Herb Kelleher saw the opportunity to challenge the expensive airline hub strategy and radically cut both costs and prices by using a different strategy, leading Southwest Airlines to explosive growth. We would say that these leaders all had a sense of their new "reality" and did something about it.

Leadership is all about seeing and defining reality. The linked forces of competitive intensity, business componentization, and value webs are the way the world is moving—and moving very fast. Yet less than 10 percent of company executives see this reality when they view their business landscape. For many senior and middle managers, the ideas of components, platforms, value webs, and enterprise productivity are not at all obvious and conflict with their own experience and roles in the organization.

If this is the coming reality—and we certainly think it is—then someone right at the top of the organization has to get the message out and set a corporate direction for responding to, instead of ignoring or avoiding, reality. Leaders translate their vision, whether as the environmental forces of competitive intensity, the opportunity of growth platforms, or a unique vision of new modes of business, into organizational vision, governance, and mobilization.

In a nutshell, leaders make reality for the business.

Making the Right Leadership Moves

In previous chapters, we focused on the "why" and "what" of letting go to grow: the ecosystem drivers, the platform imperative, and the new value webs of modern business. Now let's spend some time exploring the all-important "how": how to reinvent your company as an innovative, growth business regardless of where your firm is now positioned.

There are two key leadership roles: The first is to articulate the vision of the company—the "why change." The second is to link that vision to execution through management, measurement, and governance systems that create highly visible recognition and reward for those who model the new behaviors.

• Articulate the vision—Leaders must articulate both the vision and need for change. That vision must be clear, consistent, and repeatable, and leaders must provide visible support for change—communicating consistently and often, and listening always. This sends a clear signal to the business that through governance, platform architectures, and accelerated local initiatives, the change becomes obvious. Leadership means intervening in what Jack Welch calls the "social architecture" of the firm; it interrupts business as usual with business unusual.

• Link vision to execution—The policies, principles, mandates, and enablers that provide the frameworks for taking the initiative to all levels of the organization are critical. Call this the management system, the governance model, or the "Big Rules," if you want. But big rules must be accompanied by cross-organizational improvements, execution, and reward and recognition systems that overtly reinforce the desired change.

Leadership no longer means command and control. It no longer means "my values" but rather shared values. It means collaboration, empowerment, and the ability to enable decision making in the business—any business—to occur closer to the customer. Although the leader's vision can be delivered vertically, it will only drive growth if it is accepted and implemented horizontally, across the organization.

Articulating the Vision Through Shared Values

IBM does business in over 170 countries worldwide, and it faces some uniquely modern challenges: 40 percent of its workforce is mobile, and more then half of its staff has been employed at IBM for less than five years.

Sam Palmisano recognized that a major change was approaching in the IT industry when he accepted the CEO position in 2002. The industry was splitting into two growth areas: low-cost, undifferentiated products and high-value integration based on innovation and focused on a complete transformation of the enterprise.

For commodity suppliers, growth would come from a stripped-down business model that valued speed and ceaselessly lowered cost. For enterprise providers, growth would come through innovation, client intimacy, and integrated solutions. IBM chose the enterprise space, focused on the idea that the company was at its best when creating value that clients could not get from anyone else. To succeed in this space required a dedication to leading-edge technology, services, expertise, and intellectual capital, and the integration of those capabilities to provide a competitive advantage to customers. By focusing on the value-add space, IBM generates superior returns when compared to the overall IT industry and commands a leadership position in its selected businesses.

For Palmisano, leadership execution meant letting go of historical corporate beliefs and driving the creation of a new set of company values that position IBM as a leader in this new industry space. He saw the new reality for IBM, but the task was to communicate this vision across the business.

In July 2003, Palmisano opened up IBM's corporate intranet to a companywide "jam," a discussion of IBM's values. Palmisano didn't create a task force, didn't ask his senior management team to produce a set of recommendations, and didn't hire an outside business guru. Instead, to ensure relevance, credibility, and acceptance, he went directly to IBM's 320,000 employees and asked them to identify what they thought IBM's values should be.

All IBM employees were invited to examine their relationship with the company and with each other. The discussion raged online over four days, ranging from direct criticism to constructive debate, and the employees gradually shaped and committed to three values that define and guide the company into the future:

• Dedication to every client's success
• Innovation that matters—for IBM and for the world
• Trust and personal responsibility in all relationships

"You had to put your ego aside—not an easy thing for a CEO to do—and realize that this was the best thing that could have happened." said Palmisano. "You could say, 'I've unleashed this incredible negative energy.' Or you could say, 'I now have this incredible mandate to drive even more change in the company.'"

"How do you channel this diverse and constantly changing array of talent and experience into a common purpose? How do you get people to passionately pursue that purpose?" asks Palmisano. "You could employ all kinds of traditional management processes. But they wouldn't work at IBM—or, I would argue, at an increasing number of twenty-first century companies. You can't impose command-and-control mechanisms on a large, highly professional workforce. The CEO can't say to them, 'Get in line and follow me.' Or 'I've decided what your values are.' You lay out the opportunity to become a great company again—the greatest in the world. And you hope people feel the same need, the urgency you do, to get there. I think IBMers today do feel that urgency. Maybe the jam's greatest contribution was to make that fact unambiguously clear to all of us, very visibly, in public."²

This IBM "jam" led directly to a new set of management systems and rewards that include employee ideas and are driving visible change in how IBM works both with clients and internally. Fundamental policies have been changed within the organization, including driving pricing decisions closer to the client. IBM's fast-growing services teams are now refocused on client satisfaction with their solutions, not solely on how many deals the team closes, encouraging client intimacy over aggressive sales efforts.

To retain its leadership position in the technology industry and ensure it is a critical component of its value webs, IBM faces the same challenge that many other firms must wrestle with: letting go of unhealthy, unproductive elements of corporate culture to allow the firm to grow. Leadership is about listening, about letting go of control and creating a shared sense of collaboration for the greater good of the firm.

Execution Through Collaboration

Culture is the number-one issue discussed in strategy meetings, whether they're the largest enterprise in the world or the smallest. The questions are always the same, too: "How do we change our entrenched culture?" "How do we drive change that will enable a competitive edge, get us to market faster, or develop deeper relationships with our clients and teammates?"

Collaboration is the competitive edge. All the major business movements of the past decade have sought to foster collaboration, but the reality of too many organizations is still built around a command-and-control management structure with carefully guarded territory and information, hidden internal competition, and limited coordination ability. There is plenty of coordination built upon communication, the transmitting of information, but very few business components based on collaboration, the act of shared creation and discovery.

The challenge is that to see maximal value, creation and collaboration must go together. In the arts, sciences, sports, government, politics, and business, everyday innovation rests on collaboration.

Collaboration is a hard skill to foster at the personal level and even harder to promote and encourage as the focus expands to groups, business units, the enterprise, and the full range of value webs. Further, collaboration is not a wishy-washy search for agreement but a tough-minded process, resting on trust in each other's reliability and commitment. Good intentions are not enough; your teams need to have the confidence that they can count on each other. It demands argument and, yes, creative conflict. It demands that someone take the risk and call the meeting. Collaboration also demands that leaders not only model, but reward this behavior.

As the innovation economy flourishes, companies are moving from value derived from assets to value based on the knowledge of its people. Industrial age thinking about culture just does not cut it in the post-industrial age.

Teams and individuals must openly combine knowledge, experience, and expertise: It is this alchemy that drives breakthrough innovation.

The effects of collaboration are even more dramatic when individuals, teams, and even enterprises work outside of their own business areas. Most organizations know how to collaborate in an emergency, in a crisis. They do it instinctively because they know that crisis collaboration is imperative for the survival of the business. However, it's the ad hoc, everyday collaboration that needs to be fostered and rewarded to ensure the long-term growth of the business. The ability of leaders to infuse collaboration into the business will have a dramatic effect on the rate and pace at which the organization transforms itself. Indeed, the level of collaboration will end up as either an accelerator or decelerator of growth.

The most famous scientific and artistic partnerships, such as James Watson and Francis Crick or John Lennon and Paul McCartney, were always on the edge of hostility; they collaborated because they knew that they would produce better results together than by working separately.

Collaborators often have differing interests. Companies that are growth leaders in collaborative supply chain management are still buyers and sellers looking to maximize their own operations. Within companies, people have a legitimate concern that collaboration may put their own job at risk. But there's no way to stop the tide: The more that collaboration centers on innovation, the more that collaborators must share their intellectual capital.

Because collaboration is so difficult to build and institutionalize, so intimately linked to creativity, and so core to the relationship building needed for value web expansion, it is a firms' competitive edge in the Innovation Economy. The commoditization cycle will invariably drive you away from collaboration, because a commodity marketplace is intensely transaction-focused—a buyer-seller competition. We cannot emphasize enough the necessity of your search for this competitive edge. All leading companies will put this theory to use, not just memorialize it in their vision and values statements.

Leadership in Action

To illustrate leadership in action, let's revisit General Electric, Procter & Gamble, and Amazon to consider the role of leadership in their growth strategies. In each instance, we'll explain how the link from idea to action occurred via the leader championing change and the implementation of new, relevant big rules and governance.

General Electric

The classic big rule was the one stated by CEO Jack Welch in 1981: "Fix, Sell, or Close." An excellent leader, he used this rule to champion his vision of GE either being number one or two in a market, or withdrawing. The famous three circle chart shown in Figure 8.1 captures this thinking. "Any business outside the circles, I told [my wife] Caroline, we would fix, sell, or close."³

Figure 8.1 Jack Welch's vision for a new GE.

In the late 1980s, Jack Welch began to work on the social architecture of GE because "a company can boost productivity by restructuring, removing bureaucracy, and downsizing, but cannot sustain high productivity without cultural change." Speed, simplicity, and self-confidence were the core elements of the new GE.

Between 1989 and 1992, GE launched three cultural initiatives called Work Out, Boundaryless Company, and Stretch Goals. By working on the social architecture, Welch was able to transform the inherently dynamic process of governance.

Between 1987 and 1999, Jack also championed services, globalization, Six Sigma, and e-business initiatives. These were launched into the GE "operating system," an annual cycle where new ideas are introduced and allocated resources, executive focus, key metrics, and reviews throughout the year.

The e-business initiative spawned GE's current move toward componentization. In working to fulfill Welch's vision of buying and selling online, GE business units quickly recognized the value of simplifying the back-office processes, which directly stimulated today's efforts to simplify, centralize, and create common back-office processes across their enterprise.

Procter & Gamble

CEO A.G. Lafley's stated vision is that Procter & Gamble will only do what it does best, and that half of all new products should originate outside P&G. As he explained, "innovation and discovery are likely to come from anywhere. What P&G is really good at is developing innovations and commercializing them. So what I said is, 'We need an open marketplace.' We're probably as good as the next guy at inventing. But we are not absolutely and positively better than everybody else at inventing."⁴

Lafley's plan for outsourcing is simply that if it is not a core competence, the new P&G won't do it. P&G has now outsourced Ivory Soap manufacturing, IT operations, and HR administration. A.G. Lafley is championing change in a dramatic way, with both the corporate vision and the big rules. Requiring that half of all new products originate outside the firm is very much the type of strategic change we are evangelizing herein.

But change isn't about steamrolling over existing culture either. Lafley's goal is to preserve "the core of the culture and pull people where I wanted to go. I enrolled them in change. I didn't tell them."⁵

Amazon.com

CEO Jeff Bezos has led Amazon into a commoditized market through a compelling picture of a practical, attractive, and profitable future. His guiding principles are that customers will be able to find, discover, and buy anything online and that Amazon will be the most customer-centric company online. That is a very different principle than stating that customers will be able to buy anything online, that customers will be able to buy anything stored in our distribution centers, or that Amazon will always have the lowest prices.

Bezos expanded on what he believes is required to become the most customer-centric online player:⁶

"Three things: listen, invent, and personalize. Listen to what customers want, and figure out how to give it to them. The second thing we do is invent for customers, because it's not the customer's job to invent for themselves. The third thing is to personalize. This is the newest part of customer at the center. And we're talking about putting each customer at the center of his/her universe. If we have 17 million customers, we should have 17 million stores."

Many of Amazon's innovations emerge from the deceptively simple mantra of listen, invent, personalize. One example is One-Click, its highly componentized technology platform entirely built on open standards and interfaces.

Bezos's guiding principles continue to lead the company's strategic direction with market prioritization, geographic expansion, and organizational and technical architecture. They are the basis for such big rules as the Amazon mandate that all processes must have "clean" interfaces. They also enable the componentization of alliances: "We won't use our digital business platform to build the Earth's most customer-centric company alone—we'll do it with thousands of partners of all sizes."⁷

Today the interplay between vision, big rules, governance, initiatives, and enterprise productivity is much more iterative. In January 2000, the executive team made the decision to display goods sold by all Amazon sellers in a completely integrated fashion. They called this concept a "single store" and neatly integrated its componentization process for the customer.

The introduction of free shipping on all purchases over a certain amount was another important initiative. Amazon's own metrics on growth and margins made it clear that lowering prices and all associated costs were key to continuous profitable growth. This led Amazon's continuous drive for efficiency as a critical component of growth innovation. Amazon's leadership empowerment strategy integrates its vision, rules, and metrics and sets the stage for Amazon's internal governance and business structure. Just as importantly, this concept was not part of Bezos's initial vision but the result of well-coordinated, open communications up and down the management hierarchy.

Amazon would not have moved along the path to being highly componentized without its leadership principles, and it could not have done so without a platform that coordinates so many technical, business, and organizational components.

"Developing good business direction is not magic; it's a tough and sometimes exhausting process of gathering and analyzing information. Many of the best visions are not brilliantly innovative but have an almost mundane quality, often consisting of ideas that are already well known."⁸ We add this thought: The leader spots the direction the world is moving, locates an opportunity for the firm, and creates the new reality for the organization. It is mundane, in the sense of 'down to earth, relating to reality.'"

Summary

The best corporate restructuring in the world won't matter unless there's leadership from the executive team, and a clear message being sent to the management and staff that these changes are critical to the long-term health and survival of the company. Leadership is about seeing and, yes, defining reality, both for the company and the shareholders. That's why we believe that there are two key leadership roles: articulating the vision and linking vision to execution by ensuring that your personal actions and companywide rewards encourage desired behaviors and efforts by your team.