20 Apr 2012
Governments and business everywhere live in a state of tension. Neither behaves exactly as the other would wish. They have different agendas and different ways of meeting their goals. They need each other, but mostly don’t like each other.
In some countries, they do work reasonably well together. Some governments do try hard to create a business-friendly environment. But more often, the relationship is an uneasy one.
When a prominent business leader speaks out against his government—and more so in a country like South Africa, still struggling to escape its past, and where politicians are prickly and many are socialist or harbor deep anti-business feelings—he needs to think carefully about what will follow. The outcome is unlikely to be what he wishes for. The response from those he’s criticized will be defensive and angry. His peers in business will duck for cover. His own business may be negatively affected.
This is exactly what we now see unfolding in the drama between Reuel Khoza, non-executive chairman of Nedbank, and the ANC-led government of South Africa.
Khoza lit the match with this comment in his chairman’s statement in Nedbank’s latest (2011) annual report:
“UPHOLDING OUR CONSTITUTION
“SA is widely recognised for its liberal and enlightened constitution, yet we observe the emergence of a strange breed of leaders who are determined to undermine the rule of law and override the constitution. Our political leadership’s moral quotient is degenerating and we are fast losing the checks and balances that are necessary to prevent a recurrence of the past. This is not the accountable democracy for which generations suffered and fought.
“The integrity, health, socioeconomic soundness and prosperity of SA is the collective responsibility of all citizens, corporate or individual. We have a duty to build and develop this nation and to call to book the putative leaders who, due to sheer incapacity to deal with the complexity of 21st century governance and leadership, cannot lead.
“We have a duty to insist on strict adherence to the institutional forms that underpin our young democracy.”
The ANC/government immediately struck back at Khoza. The attacks—labelled in the media as “boorish,” “hypersentive,” “paranoid,” “personal,” “inappropriate,” and “illogical”—ensured that the matter got wide publicity, and may have done more damage to SA than anything he’d said. Various commentators called for open and polite discussion of the issues he’d raised. Khoza visited the ANC’s headquarters to discuss the matter, and the movement issued a statement afterward, saying:
“We are happy that this interaction took part in a cordial atmosphere and was fruitful.
“The meeting resolved what was perceived as a stand-off and addressed a variety of issues related to governance and business leadership.
“We are encouraged that a variety of options in terms of engagement were considered. The meeting resolved that there will be more meaningful interaction between the two parties in future.”
OK. And what now? What might “more meaningful interaction” mean? Is all forgiven? Has Khoza’s message been given short shrift or taken to heart?
Will there be further chats…or actual changes of leadership…more careful recruitment of future leaders…leadership development programs…? Is Khoza now going to back down and pretend he didn’t really mean what he said? Or will he repeat it the next time some journalist asks him if he was serious? How will he deal with questions about this matter that will surely be lobbed at him when next he speaks at a conference?
While all this was happening, Garth Griffin, outgoing chairman of Absa, wrote in his own bank’s annual report that SA needed less talk, more action. Then Nicky Newton-King, CEO of the Johannesburg Securities exchange (JSE), told the Cape Town Press Club that investors wanted certainty from markets, but Khoza’s views reflected uncertainty about the direction of South Africa’s policies.
Some people saw these as signs that “business” was starting to speak out, and hoped for more. But that’s not been the case.
While there were murmurs from the corporate sector about government being wrong to expect business to stick to business and stay out of politics, hardly anyone said Khoza was right. That was left to “outsiders” like Institute of Race Relations CEO John Kane-Berman, the indomitable Business Day letter writer, Dr Lucas Ntyintyane, and the CEO of the SA Chamber of Commerce and Industry.
Massmart CEO Grant Pattison saw Khoza’s comment as having hit a nerve because it was “too close to the truth.” But when the Sunday Times sought comment from other captains of industry, most became unavailable or refused to speak.
Corporate SA has once again been cowed.
SO WHAT EXACTLY HAS BEEN ACHIEVED?
Reuel Khoza was brave to do what he did. He stuck his head above the parapet to say what many other people think. Nick Binedell, dean of the Gordon Institute of Business Science (GIBS) said he was “a bit provocative” but “should be commended for getting the debate out in the open.”
The political climate in SA has soured badly in recent years. The national conversation has become toxic, uncivil and destructive—and will get more so in the months ahead of the ANC’s December policy conference at Mangaung, as power struggles intensify. Politicians and bureaucrats worldwide get slammed for their behavior, but ours are drawing more and more negative attention.
Relations between government and business have never been good since the 1994 transition, and are marked by mutual suspicion and distrust. While government struggles to deliver on its mandate, and desperately needs business investment and assistance, too many of its policies, actions, and words add up to a different message and have the opposite effect.
One objective of the Nedbank Group strategy is, “Becoming the public sector bank of choice.” But the threat has been made that the ANC might need to review its dealings with the bank, and with ANC cadres so firmly entrenched across the public sector, this doesn’t even need to become a formal position to have some impact.
Nedbank also aims to become the leader in business banking, and its retail unit has been performing well. But again, in both of these areas, ANC supporters may be turned off by Khoza’s criticism.
Although he opened his chairman’s statement by emphasizing the importance of sound corporate governance, Khoza then waded into risky territory—in the name of his company. Strange, given that one of Nedbank’s “Deep green aspirations” is to be “worldclass at managing risk.” And that in the risk management review in the annual report, it states:
“Nedbank Group has a strong risk culture and follows worldclass enterprisewide risk management, which aligns strategy, policies, people, processes, technology and business intelligence in order to evaluate, manage and optimise the opportunities, threats and uncertainties the group may face in its ongoing efforts to maximise sustainable shareholder value.”
So what risks has Khoza exposed the bank to? Did Old Mutual, Nedbank’s parent, know this was coming—and what was their view about it? Did Nedbank’s board have advance warning—and what inputs did the members make? Who else in the bank saw the statement before it was published?
QUESTIONS FOR THE FUTURE
Past experience has shown the ANC/government to be extremely sensitive to business statements it doesn’t like. So if one thing was guaranteed in this case, it was that the response to Khoza’s opinion would not be calm, respectful, or kind. He pulled no punches, and the fact that he had been close to the Mbeki administration was probably an added irritant.
However, some of the country’s political leaders may think carefully about what he said, and may even try to change their ways and try to get people around them to change, too.
South Africa badly needs all hands on deck, and government and business to work together to create the much vaunted “better life for all.” Now, that is either much more or much less likely. Much depends on whether government is able to tone down its anti-business signals, convince business that it really does value it, and do whatever is needed to make SA a good place to do business. Without that context, business will always be reluctant to invest, create jobs, or contribute in all the other ways that it can.
So here we have an interesting case study for business leaders—and for business schools. With some difficult questions:
- What should characterize the relationship between government and business?
- How freely and openly should business speak about national affairs?
- Should business leaders speak out personally, and under the banner of their firms, or should they leave comment to the organizations that represent them (chambers of commerce, Business Unity South Africa, the Black Business Council, the Black Management Forum, etc.)?
- Should they engage publicly with government about contentious matters, or should they do it behind closed doors?
- How should companies evaluate the risks of making statements critical of government?
- How should they manage the flak that flies when things go badly?
We live in testing, touchy times. Creating a “burning platform” might be the only way to get some things done, but it can also take you down. This saga could have a happy ending. It would be a pity if it ended in tears.
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16 Apr 2012
Managing a business of any size is a hell of a job. The world is a complex and dangerous place. Change is constant. There are surprises around every corner. And there’s unending pressure to perform through good times and bad.
Companies are complex, too. And the bigger they get, the more complex they become. Coordinating their efforts was always a challenge. But today, many firms sprawl across the world, so there are facilities, people, and many other factors to worry about. Just-in-time production, a growing amount of outsourced work, and intricate networks of suppliers all add logistical challenges. Relations with governments and regulators are of increasing concern. Investors, analysts, unions, environmentalists, lobbyists, and a host of other stakeholders all demand attention. And of course, there’s always the need to drive innovation, improvement, and cost cutting; to adopt new technologies and ways of delivering world class quality, productivity, and customer service; and to survive the daily deluge of seemingly trivial matters which may quickly explode.
Executives face a stream of dilemmas with no easy answers. Their to-do lists keep getting longer. They’re torn this way and that by people with competing agendas, and bogged down by meetings, video conferences, phone calls, e-mails, and so on. Many of them also have grueling travel schedules. Time is their scarcest resource.
It goes without saying that any war on complexity must be fought with a determined drive for simplicity. That in itself must be an ongoing effort with targets, projects, champions, regular reviews, and whatever else it might take. But on its own, it’s not enough. For there’s an over-arching problem of managers themselves creating conditions in which complexity flourishes. They introduce ideas and activities that often don’t line up, won’t produce the results they expect, and lead to unnecessary work, waste, and costs—all as a result of how they manage.
With few exceptions, they’d do well to ask themselves:
Why they so readily make life even more difficult, with management ideas, practices, and tools that in theory should help them, but in reality make little sense?
Why they keep searching for new answers to their management questions, when the answers they need are probably already well known?
Why they develop strategies that are either too vague to be useful, or too complex to explain?
Why they’re such suckers for buzzwords and bullshit when they have so much on their plates, and so many people expecting guidance from them?
These are questions that have bothered me for the past 30-odd years. During this time, I’ve read countless management books, scholarly journals, and popular articles, and talked to many of the most prominent thinkers in the field, trying to learn three things:
- How should firms compete?
- What causes some succeed over the long term, and others to fail?
- Why do some executives produce better results than others?
You’d think by now the answers would be clear and widely accepted. But apparently not. For the quest for new ones is accelerating, not slowing. Or, at least, the amount of stuff published on these matters is growing by the second. And someone is grabbing all those books off airport bookstands!
Whatever you want to know, a Google search will instantly yield tens of thousands, if not millions, of links to possible answers. Authors of business books and articles slice and dice management issues into ever narrower opinion. The internet gives voice to anyone and everyone who has anything to say about strategy, structure, organizational behavior, people management, change management, analytics, leadership, IT, systems thinking, six sigma, values, culture, presentation skills, or whatever.
With all this “expertise” to hand, it’s little wonder that firms are jammed up by initiatives, or that managers are totally shell-shocked from being bombarded with information and advice about their world and their craft. The exploding volume of management flim-flam has made managing increasingly difficult.
Executives get in their own way because they’re always looking for another answer to their management questions—a quick fix or “silver bullet”—when the answers they need are right under their noses. And to compound their problems, they radically over-complicate things, and cause much of the mess and muddle that bogs things down. They also continually introduce new initiatives—or allow others to do so—while seeing few to a sensible end. And even as the pile deepens, they chop and change their priorities so fast that their people haven’t a clue what’s going on or what they should focus on.
Put differently, only by getting back to basics, simplifying things, lightening your load, and sticking to one view of how to manage will you ever make the progress you want.
I’m willing to bet that, right now:
- you’re using management-speak that you don’t fully understand
- your strategy is a mystery to many or maybe most of your people (and possibly to you, too!)
- you struggle to turn your strategy into action
- your priorities are not really what you should be focusing on
- your people are doing things for reasons that aren’t clear to them, and don’t make sense to them
- they’re expected to use tools that they don’t grasp
- there are too many projects in your firm, many of which should never have been started, and many others past their sell-by date
- quite soon, you’ll latch onto some new management idea, and launch a flurry of new initiatives to replace the ones you haven’t properly finished
- there is a better, simpler way to get the results you want.
Sound crazy? A lot of nonsense? Well, think about this:
- When I ask company employees or participants in my business school classes why their firms’ strategies don’t work, the number one reason is, “We don’t know what the strategy is.” Many say, “We don’t have a strategy” (they probably do, but no one told them or they just weren’t paying attention).
- Companies love strategy documents. And usually, the thicker the better. I read these things for a living, and when I get to the end of many of them I have no idea who is supposed to do what. They’re heavy on detail that should have been left on a functional manager’s desk. A clutter of thoughts, lack of logic, poor structure, big words, and long sentences make them murky. So they say too much, but explain too little.
- Management tools are mostly not all they’re cracked up to be. They’re as fashionable as hemlines. As Bain Consulting’s periodic tools survey shows, usage and satisfaction scores go up and down. Besides, very few tools are truly new, based on sound research, or proven across industries, companies, or even functions; and what works at one time, in one set of conditions, may not work when things change. The catchy language that management “thinkers” use to draw attention to their recipes should be cause for suspicion.
- When a new tool is adopted, others that are already in place tend to stay there. So the pile grows. Each new idea creates a blast of activity, and sucks time, attention, and money from others. It becomes a nightmare trying to figure where to focus, how to integrate all this work, and what comes first, second, or third. And it becomes impossible to know which intervention caused what result.
- Explaining strategy is a never-ending job. I once heard a senior manager ask former GE chairman Jack Welch, “How often do you have to tell people what your strategy is?” Said Welch: “You have to explain it, and explain it, and explain it, and explain it, and explain it, until you drive yourself crazy. Because nobody is paying attention!”
So where to from here?
For starters, clarify your own point of view about what you’re trying to do. Think of strategy as the frame through which people see your company’s future. What exactly do they need to know? Answer: not much. In fact, the four things here tell the whole story.
- Framing your strategy – keep it simple, or you won’t make it work!
Get this story right, and you have a good chance of success. Get it wrong, and you make a really bad start. So keep it simple. Keep it short. Cut to the chase. Maybe, at last, your team will get the message.
And what comes next?
First, a few tools, carefully chosen, well understood, and relentlessly applied so you and your people become expert in their use. (I’ll talk more about these in a future post.) Toss out anything you don’t really, really, really understand; anything you can’t use properly; anything that doesn’t produce the results you expect. And any duplicates.
Second, make a list of all the initiatives currently in your organization. (Some will be in use, others just lurking somewhere, and probably at some cost.) Ask: what do we really need to do? Which of these initiatives helps us? What should we kill right away? Then, zap as many as you can, fast, and slam the door on new ones.
Third, keep reminding yourself—and drum it into your colleagues—that whatever approaches, methods, models,tools, or processes you go for, all work hinges on conversation. On what you talk about, how you do that, and who you involve. So make sure you talk about the right things, in the right way, to the right people.
Above all, understand that everything follows from your point of view. And the surest way to cut complexity is by avoiding it in the first place with your ideas about managing.
Life is hard. Managing is one of the toughest jobs around. There’s no point in making it harder for yourself.
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8 Apr 2012
The market shares of South Africa’s four big banks—Standard Bank, Absa, First National Bank, and Nedbank—go up and down, but with few big swings. Despite government pressure to do more for the bottom end of the market, and some stabs at doing so, all have continued to focus on their traditional middle- to upper-end customers. That, they’ve held, is where the money is.
And it’s true, that’s where the money was. But growth in that sector has slowed. Profits are under pressure. So the giants been forced to look downmarket, where there are an estimated 8 million “unbanked” and “unsecured” customers, and plenty of growth to come.
The fight will be brutal. They’re all charging into the same arena at the same time, so they’re tripping over each other. The big banks have clout, and are deadly serious about this new venture. But they’re stepping onto the home turf of two smaller banks—African Bank and Capitec—which know how to fight there.
These two operate in different niches. They’ve been growing fast, and extending their presence into new areas with appealing offerings. They’re also solidly established, and far from rolling over under the current onslaught, they now have no choice but to become even smarter and more aggressive.
The bigger of them, African Bank, hardly advertises at all, but has many years of hard-earned experience at the lower end of the market, a sophisticated approach to credit management, almost 16,000 highly motivated people, and a large pool of customers who are real fans and not just locked-in by some gimmick.
Capitec is a younger business, but its promise of simpler, cheaper, and more convenient banking has strong appeal. After initially aiming at poorer black customers, it’s now opening branches in wealthy areas and attracting whites, professionals, and suburban housewives.
There’s a classic disruption strategy at work here, as described by Harvard Business School professor Clayton Christensen:
- Incumbent firms keep improving what they’ve been doing, assuming they’ll keep customers happy by doing more of the same better. But they do lots of stuff customers don’t care about. As they add more and more bells and whistles, their costs rise and they create a “price umbrella” for upstarts.
- One or more newcomers sneak in under that umbrella. They focus on customers the dominant firms have overlooked or underserved, with products tailored precisely for “the job they want done.” Unencumbered by entrenched mindsets and legacy policies, practices, and infrastructure, they’re able to keep costs and prices low. They go unnoticed while they fine-tune their processes and build awareness, capabilities, experience, and muscle.
- Stuck with a price disadvantage and lots of baggage, the big players struggle to move downmarket. At the same time, the disruptors start moving upwards, to pick off their customers.
The current process has a way to go. The latest phase in the banking war illustrates just how hard it is to stand out in the marketplace today—and why “sustainable advantage” is for more and more companies an impossible dream. It highlights the importance of delivering a “difference” that really is different, but also that matters to customers so they’ll pay for it.
THE DELIBERATE DESTRUCTION OF DIFFERENCE
Virtually in unison, the big guys have announced a flurry of new products and services (or re-promoted existing ones), and started to move downmarket. They’re hoping for the best of several worlds: to keep customers they’ve got, while also stealing some from each other—and to snatch business from African Bank and Capitec, while also luring unbanked customers in that territory.
Since March, print media have been stuffed with one page of ads after another extolling the promises of three of the Big Four: Absa, Standard Bank, and First National Bank.
Absa promises “Better banking”:
IMMEDIATE PAYMENTS…STAMPED BANK STATEMENTS…APPLY ONLINE…SCAN AND PAY…SEND CASH AROUND THE WORLD…FREE eSTATEMENTS…CELLPHONE BANKING…CASH ACCEPTING ATMs…UNIT TRUSTS ONLINE…OPEN ACCOUNTS ONLINE…OVER 8 000 ATMs AND 900 BRANCHES…RECHARGE WITHOUT CHARGE…LOW-COST BANKING…REAL BUYING POWER…REAL CASH REWARDS…
Turn the page, and there’s Standard Bank “Moving forward:
THE CONVENIENCE OF 18 450 PLACES YOU CAN DO YOUR BANKING…HELPING CUSTOMERS SAVE UP TO 50%…ELITE BANKING COSTS R99.00 A MONTH…YOUTH…STUDENT ACHIEVER…GRADUATE AND PROFESSIONAL BANKING…ACHIEVER ELECTRONIC…PRESTIGE BANKING…PRIVATE BANKING…
And without a gap, you get First National Bank, answering its “How can we help you?” slogan with its own laundry list of promises, and its claim to be the industry innovator:
INNOVATION…VALUE…PAY2CELL…KRUGERRANDS…ONLINE FOREX…FNB LIFE COVER…SLOW LOUNGE…eBUCKS…SELF-SERVICE BANKING…INCONTACT…INSTANT ACCOUNTING…FNB BANKING APP…SHARE INVESTING…FUEL REWARDS…MULTICURRENCY ACCOUNTS…eWALLET…TABLET & SMARTPHONE OFFER…
Now, as a customer, what do you make all of this? What’s the difference—or is there really any difference? What does it mean to you? Are you impressed by this growing range of offerings? Or overwhelmed? Or perhaps you just don’t care.
The South African banking industry ranks among the healthiest in the world—thanks to tough regulation. But banks have long been accused of over-charging, lousy service, and bullying tactics. Nobody I know is excited about dealing with their bank. Nobody has ever recommended their bank to me.
As a customer myself, I have absolutely no idea what sets banks apart. I deal with them because I need to, not because I want to. They make a lot of noise, but I can’t hear what they say.
Bank strategists would do well to pay close attention to Beating The Commodity Trap by strategy professor Richard D’Aveni of the Tuck School of Business at Dartmouth. Because that’s exactly the trap they’re creating for themselves—at huge cost, and despite their desperate efforts.
Describing why firms get into a commodity trap, D’Aveni writes:
“…the reasons most companies find themselves in the trap in the first place is because they failed to innovate early enough to avoid it or they later differentiated and cut prices so much that they have exacerbated the trap.”
They’d also to well to heed to these words of Harvard Business School professor Youngme Moon in her excellent book Different:
“Competition and conformity will always be fraternally linked, for the simple reason that a race can only be run if everyone is facing the same direction.”
“…the way to think about differentiation is not as the offspring of competition, but as an escape from competition altogether.”
“There is a kind of difference that says nothing, and there is a kind of difference that speaks volumes.”
Making a “difference that speaks volumes” has always been a challenge to companies and their ad agencies. It’s getting harder as competitors crowd into a field, and as they watch and learn from each other, benchmark themselves against each other, recruit people from each other, attend the same industry events, read the same publications, buy from the same suppliers, and so on. They strive to be different, but do everything possible to look alike.
First National Bank has seized an advantage by not just re-segmenting the market, but by using product innovation as its differentiator and a character called “Steve” to grab attention in broadcast media. But how long will it be before others do the same? Technology constraints might slow some of its competitors down, but they’re sure to fix that. So the rapid reinvention of business models will continue. Future ad campaigns will surely become both more factual and more emotional.
If experience from other industries is anything to go by, the banks have started what could be a costly “race to the bottom” (and not just the bottom of the market). Together, they’re transforming their world. The best they can hope for is that none of them does anything really silly, and that the market stays reasonably stable. They also need to hope that their efforts don’t create a credit bubble and provoke their regulator to clamp down on them.
Whichever way things go, we’re about to see:
- What difference strategy can make, vs. the importance of being able to think on your feet, change direction in a blink, and run faster than your enemies.
- How important real product innovation is vs. vaguer corporate branding.
- Whether conventional forces can take on guerrilla fighters and win, and what it takes.
- How guerrillas can withstand an onslaught from multiple well-armed attackers.
There will be important lessons here for all managers, so this is a battle worth watching closely. (More on this in a coming post.)
Capitec and African Bank have given the South African banking industry a long-overdue wake-up. Now, watch the shake-up.
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4 Apr 2012
When Samsung announced in mid-2010 that to grow its business in Africa, it would design products specifically for Africa, it confirmed two facts about global competition today:
- As growth in developed markets gets more difficult, firms must seek and exploit opportunities in developing markets.
- To succeed there, they need to “act local.”
Explaining Samsung’s plan, George Ferreira, COO of Samsung Electronics SA, said:
“In line with our key value of co-prosperity, coupled with our business and development sector partnerships, we have a vision of developing technology that is built in Africa, for Africa, by Africa”…We will over the next few years be allocating more local R&D investment for further local product planning, design and development.”
A press release from the company added:
“Samsung have undertaken extensive research and development (R&D) to develop technology innovations, specific to the African consumers’ needs. These include, TVs with built in power surge protectors, triple protector technology for air conditioners to ensure durability, power surge protection and safeguarding against high temperatures and humidity, deep foam washing machines that are 70% energy efficient – saving up to 30% water use, dura-cool refrigerators with cool pack – allowing the refrigerators to stay cool without power, as well as dual-sim technology and long battery life phones with battery standby times of up to 25 days.”
According to a report on Moneyweb, “The electronics group hopes to attract the African market with a range of television and refrigeration products that are designed to withstand power surges, dust particles and humidity and camera and camcorders that are designed to take “better” pictures of dark toned people.”
In one example of how it will pursue its strategy, Samsung has teamed up with the University of Cape Town (UCT) in South Africa and Strathmore University in Kenya to develop unique mobile phone applications for Africa. Such collaboration is sure to yield ideas that the company wouldn’t develop on its own, and to speed up the time-to-market process.
However, what the electronics giant did not say was that innovations in developing markets may prove valuable in developed markets (a process known as “reverse innovation” or “frugal innovation”). This has been the experience of companies producing products as diverse as soap, tractors, and medical scanners. And innovations may include not just new products, but also processes and business models.
Innovations from developing markets give firms new opportunities in developed markets by providing simpler, cheaper products
Reverse innovation will be one of the most important trends of coming years. It opens many new opportunities for developing markets and for the companies and innovators in them. And it provides new reasons to go to places you weren’t really sold on, to invest there, and to make a deliberate effort to learn whatever you can from being there.
Champion of the movement is V.J. Govindarajan, professor of international business at Tuck School of Business at Dartmouth College, and the first professor in residence and chief innovation consultant at General Electric. His October 2009 Harvard Business Review article, “How GE is disrupting itself,” co-authored with GE chairman and CEO Jeff Immelt and Chris Trimble, another Tuck faculty member, won the McKinsey Award. His new book, Reverse Innovation (co-authored again with Trimble), will probably draw similar praise—and stoke interest in the concept. They provide many examples of how firms have gone about it, plus advice for those who want to.
In an interview with Knowledge@Wharton (April 2, 2012), Govindarajan explained some of the rationale behind the concept:
“The fundamental driver of reverse innovation is the income gap that exists between emerging markets and the developed countries. The per capita income of India, for instance, is about US$3,000, whereas it is about $50,000 in the U.S. There is no way to design a product for the American mass market and then simply adapt it and hope to capture middle India. You need to innovate for India, not simply export to India. Buyers in poor countries demand solutions on an entirely different price-performance curve. They demand new, high-tech solutions that deliver ultra-low costs and “good enough” quality.”
“Poor countries will become R&D labs for breakthrough innovations in diverse fields as housing, transportation, energy, health care, entertainment, telecommunications, financial services, clean water and many more.
Reverse innovation has the potential to transform wealth in the world. Growth in developed countries has slowed down. Much of the growth is now in developing countries. The 2008 financial crisis and the more recent debt crisis [in Europe] have only exacerbated this situation. As such, we are likely to see the center of gravity for innovation shifting from rich to poor countries.”
Questions to ask now:
- What will developing countries do to promote not just their market opportunities, but also their innovation opportunities?
- What will local firms in those countries do to take advantage of this trend?
- How will local universities and other potential partners respond?
- How can you exploit this idea?
The entire world is a learning laboratory. No place has a monopoly on ideas. Today, it’s foolish—and potentially costly and risky as well—to be myopic.
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3 Apr 2012
Harvard Business School recently announced a stand-alone course on Strategic IQ that “examines the essential concepts and practices that will help you make your organization more agile and better equipped to prosper in a changing marketplace.” This is good news, and it’s sure to be an excellent programme—but why has it taken so long? Why is strategic IQ not as big a deal for business schools, academics, authors, consultants, and conference organizers as emotional intelligence? Why has so little been said about it?
As I’ve pointed out for as long as I can remember, in articles, books, talks, business school lectures, and conversations with clients, strategic IQ is not just an essential factor in any company’s competitiveness, it’s the essential factor.
To survive and thrive in a rapidly-changing world, you need people who can think and act strategically—not just efficient drones who’re oblivious to their environment, mindlessly take orders, and just do as they’re told. But while much has been said about the importance of people, teams, empowerment, “virtual organizations,” “organizational learning,” “emergent strategy,” “the wisdom of crowds,” innovation, and so on, one key point is glossed over: without a particular set of intelligences, no one will ever be worth of the label “strategist.” And which company do you know where there is a deliberate, systematic effort to develop strategic capabilities outside of the executive ranks?
In my 1988 book The New Age Strategist, I wrote:
“…while the ‘strategist’ might be one person, or even a small team, strategy formulation is not the strict preserve of that person or group—and certainly not of top management. The fact is, because so many of a firm’s people might set off a response to environmental changes, strategic management is a task almost everyone must be involved in.”
Then, in a 1997 article titled “Questions of strategy,” I said:
“Business strategy, like every journey through life, is a learning process. The first goal of every organisation should be to raise its “strategic IQ”—the ability of every person to participate to the best of their ability in scanning the environment, providing new insights, applying their imagination, and exploring the bounds of what’s possible.”
But this led to two questions: 1) what capabilities did an individual need to be able to participate that way? and 2) how to develop them?
These were questions I wrestled with for a long time. For answers, I dug into books and journals on management, psychology, and education, talked to leaders about their growth experiences, and watched people making decisions at work. And the more I read, saw, and heard, and the more deeply I reflected on it, the more convinced I became that the answer was, in fact, both clear and simple—and right under our noses.
It lay in strategic conversation.
After pointing out, in my 2001 book, Making Sense of Strategy, that “The ‘strategic IQ’ of your firm is, literally, a life and death factor,” I went on to say:
“Most valuable human development takes place in”the school of hard knocks, not in the classroom. Most people’s growth and inspiration results from their day-to-day activities and interactions. The conversations they’re involved in shape their attitudes and aspirations, and impact on their capabilities. Yet, common practices ensure that too many individuals are constrained rather than liberated, and that only a few are able to think and act strategically.
“… In effect, people are forced to short-change their companies, because their companies cut them out of the conversational loop and limit what they can do and what they can become.
“While the ‘heavies’ engage in a ‘big conversation’ about the firm’s context, its challenges, its strategy, and so on, the majority of employees are allowed to take part only in a ‘small conversation’ which focuses narrowly on their jobs, their specific tasks, the methods they use, and the results they must get.
The strategic IQ of most firms is pathetically low—because of the way they make strategy. But you can change that fast, by immediately involving as many people as possible in your company’s ‘big conversation.’ This single step will do more than anything else to align and motivate your team, and to empower them to conquer tomorrow.”
Harvard’s new programme focuses on four intelligences:
- Rational
- Creative
- Emotional
- Social
These are undoubtedly important, but I have a different take on the matter. Let me explain it like this:
Assume you’re about to hire a consultant to help you with your strategy. You obviously want the best strategy you can get. What mental skills would you expect of the person you’re about to rely on? Surely they’d be these:
- Foresight—the ability to look ahead into the future and anticipate what lies ahead, what’s likely to happen, and how things are likely to unfold.
- Insight—the ability to cut through clutter and complexity and to understand things incisively and in a new way.
- Analysis—the ability to collect information, decipher and make sense of it, and make it useful.
- Imagination—the ability to see what others have not seen, to think “what could be” where others are content with what is.
- Synthesis—the ability to connect disparate snippets of information, different sensations and perceptions, and unrelated ideas, to give them new meaning.
- Judgment—the ability to weigh up situations, facts, feelings, opinions, and so on, and to make choices about what must be done in a way that best balances risk and reward and leads to the most desirable outcomes possible.
Now, if these are the traits you’d want in a consultant, what about the people on your own team? What should you seek in them? What should you strive to develop in them? Other capabilities? Or these ones?
Answer: these ones.
This isn’t a contest between Harvard’s list and mine. In fact, there’s a strong case for putting them together, for they work as one. But it is important to recognize that strategic thinking skills are quite different from equally critical social and emotional skills.
What happened to creative IQ, you might ask? And the answer is, it’s a product of all the six elements in my model. Creativity is a complex process. It’s not just about wacky ideas.
And rational IQ? Same thing: if the term refers to the ability to confront and deal with reality, to keep a cool head under pressure, and to make well-reasoned decisions, all of those come from the capabilities in my model. Couple those strategic thinking skills with social and emotional skills, and everything is covered.
The fact that strategic IQ has made it as a Harvard Business School course is an important breakthrough. Now, watch the “thought leadership” mob leap onto the bandwagon.
Thanks, Harvard!
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