Thought Partner

Today I spent some time talking with a successful young executive who is at a wonderful inflection point in his career. He is at the point where he recognizes that the basis for his success to date is not necessarily going to fulfill his aspirations going forward.  He probably could keep doing what he has been doing and continue to pull down a good six figure income for years to come, but he is looking for more.  He wants to see what his organization can accomplish if he discovers what he does not yet know about leading. What a remarkable desire!

This got me thinking about the difference between leading as giving direction, leading as creating space and leading as developing people.  There are times when a leader provides direction: by establishing goals, requiring standards be met or processes followed. This is the more managerial aspect of leading.  Then there is creating space: this is more about establishing the conditions in which people work, not just physically, but philosophically.  The values, purpose and mission of an organization are part of creating space.  

Yet another aspect of creating space is letting the organization operate without your intervening.  A leader who continually inserts himself when things are not happening the way he would do them misses the chance to see how people will adjust to mistakes.  It's hard sometimes for a hands-on leader who came up through the ranks to let people discover their own problem solving capabilities in the face of challenge or failure.  Yet this is how people develop, isn't it?  Of course a leader cannot let things go off the rails, but sometimes it's useful to let them get up on two wheels once in a while.

Which leads to a third aspect of leading: developing people.  People develop when they are stretched, not too far, but enough to feel the discomfort of it all.  Connected with the idea of creating space is the idea of providing people with the opportunity to stretch. For a hands on leader, this sometimes means sitting on your hands and watching as people adjust and grow to meet the challenges you've allowed them to face.  Challenges themselves are sometimes developmental, and combined with an opportunity to reflect with a mentoring senior leader, challenges can provide career defining lessons.

I'm interested to hear what you think about these ideas. 

Justin Scheck reported on WSJ.com today that HP CEO, Mark Hurd has commissioned a plan to combine HP's PC unit run by Todd Bradley and the Printer unit run by VJ Joshi.  While the Printer business has over the past 10-15 years produced the lion's share of the company's profits, revenues have begun to flatten out as consumers print less.  According to the WSJ.com article, in HP's fiscal quarter ended July 31, PCs produced $8.43 billion in revenue and $386 million in earnings, or 12% of HPs total profits.  Printer and ink revenue for the same period was $5.66 billion, yielding nearly a billion in profits for the quarter, 12% of HPs total.  Clearly printers are still a great business for HP.

So why the reorganization? One explanation is that Hurd is continuing to put his own team together at the top.  While this may well be part of the explanation, I suspect that there are strategic forces at play here as well.  As the price of PCs come down, companies like HP and Dell are making a variety of moves to diversify their business portfolios.  HP's acquisition of EDS and Dell's of Perot Systems are part of this move.  HP is also active in large enterprise and production printing.  This reorganization may well be about the consumer market and its close cousin, the small office, home office market.  On the consumer end, however Apple has set the standard for packaging hardware with software and content (iLife, iTunes, etc).  HP may be looking to combine PC and Printing strategies into a package of offerings that will enable the company to stake out territory in the consumer space as PCs morph into netbooks, handhelds and so forth. 

Hardware increasingly needs to provide valuable access to content in order to be differentiated. Printing is one mode for information sharing, which is increasingly unnecessary, especially for young consumers.  If printing begins to go the way of film, then the race will be on to find ways to keep users engaged with HP devices.  A transition approach that more closely integrates the user experience of sending a document to a printer with sending an image to Facebook, or a video to YouTube might be a start at redefining printing as a service.  If the user experience is the new competitive battleground, then hardware and software design must work together to make that experience one that is brandable and differentiated. It's harder to pull off this integration when organizations are siloed.

 I could be wrong.  What do you think about this theory?

 

With its announcement today of an agreement to acquire Affiliated Computer Services, Xerox has made the leap to dramatically increase the services component of its revenue mix.  Up to this point, the company has expanded its consulting and managed services business primarily via organic growth.  Its more recent acquisitions have expanded its distribution network aimed at medium sized businesses.  The ACS deal will nearly double the service revenues of Xerox.  This move is very likely to alter the culture of Xerox which has traditionally been dominated by an equipment sales organization and "big iron" engineering.  Xerox Global Services, its consulting and services division, has made a good start of shifting the approach to the global large enterprise market toward solutions.  This move will accelerate that strategy.

It's interesting to see this announcement in the week following Dell's acquisition of Perot Systems.  This move has been seen as a follow-on response to HP's acquisition of EDS last year.  These players already have access to the CIO suite in a way that Xerox has not enjoyed, given its absence from the pc and server markets.  It will be interesting to see whether Xerox establishes any agreements with other hardware companies so as to match up with capabilities offered by HP.

 The announcement said that the deal is expected to be accretive (as contrasted with dilutive) to earnings within the first year.  ACS's revenues have been solid and profitable even through the recent downturn.  This should improve the quality of Xerox's earnings over time.  It indicates that Xerox expects to be able to sell hardware and services into existing ACS relationships.

So this move looks to me to be a big bet in some ways (size of the deal, cultural & systems integration questions), and yet a no regrets move in others (revenue and earnings quality, extension of an existing service strategy).  

What do you think?

I'm standing at my desk with my friend and IT maven, Peter Brunnengraber trying to work out how to get Twitter to publish new blog entries from Thoughtpartner. We'll let you know how it goes! Hang on!

This morning I did a quick google search to find out the top 10 challenges that CIOs are facing. InformationWeek had a nice list. The fourth item on the list caught my attention: Tomorrow's CIO: The Qualifications. According to a survey of CIOs from May 2008, the top qualifications, in order are:
- Leadership
- Ability to execute/meet deadlines
- Collaboration/communication
- Vision
- Innovation
- Team building
- Consensus building
- Technical breadth and depth

What struck survey author, John Soat and others who commented about this survey was how low on the list technical skill landed!

This looks to me like a list of qualifications for any C-Level executive in this day and age. Technical knowledge ought to at least make the list for any executive today. Being able to clearly define the strategic priority for applying technology, rally a consensus across diverse functional interests, foster teamwork and collaboration to get stuff done and create an environment in which teams learn from failures and produce innovation out of setbacks; all these add up to qualifications for the executive of today!

What would you add to this list?

15 years ago, I spent a lot of time with product development teams that were trying to reduce the cycle time for new product introductions. I recall at the time that one of my clients was scrambling to reduce the time it took to get a product from concept to market from 36 months down to 18 months. Yesterday I spoke with an executive from the same company who told me that the life cycle for these product has now shrunk from what was 24 to 36 months a few years ago down to 18 months today! Think about that! What was the high bar for development time 15 years ago is now the life cycle for a product!

It's the emergence of value networks, especially in the far east as well as a global design, prototyping and distribution network that makes this searing acceleration possible. And this client is now able to turn out a new design and get it to market fast enough and at a cost that still allows it to make profits in a compressed 18 month S-curve!

I feel old!

What does it mean when a company has to sign three separate integrity agreements over the course of 7 years?

As reported in today's Wall Street Journal,
"Pfizer agreed to pay another $1 billion to resolve whistleblower complaints that it illegally promoted Bextra, Geodon, the antibiotic Zyvox and the epilepsy drug Lyrica. The fine also resolves allegations that Pfizer treated doctors to meals, paid them for speaking engagements and subsidized their travel to induce them to prescribe off-label uses for those four drugs and nine others.

The settlement is the third in which Pfizer signed a "corporate integrity" agreement pledging to clean up its drug-marketing practices. It signed the agreements in 2002 over Lipitor and in 2004 over epilepsy drug Neurontin. Under the latest agreement, Pfizer will have to create a mechanism for doctors to report questionable conduct by Pfizer sales representatives."

I think it means that there are deeply embedded values, assumptions, incentives and practices that lead predictably to breaches of integrity. Leading the way out of this will require more than pledges. It will take a thoroughgoing, multi-pronged transformation strategy that touches all the people systems in this enterprise. Pfizer is not the only drug company facing these problems, which should also tell us something about the culture of the industry and the health care system.

In the past few days there have been two announcements of outrageous abuse of trust, one political, the other financial. Illinois Governor, Rod Blagojevich was arrested on charges of corruption for allegedly attempting to sell the appointment to the Senate seat being vacated by President elect Obama. If true, this is a mind-bogglingly cynical violation of the basic assumptions of representative government. The problem is that this cynical act follows a series of violations (most recently the conviction of Alaska Senator Ted Stevens for taking bribes) that seem to have stunted our sense of outrage!

The second announcement of the week was that the investment manager and former head of NASDAQ, Bernard Madoff bilked investors out of a total $50 billion in a ponzi scheme. Following on the broad financial collapse caused by the sub-prime mortgage crisis, the public again seems to be numb to outrage.

The New York Times columnist and former talk show host, Dick Cavett referred to Blogojevich as a "sociopath" and cited psychological research indicating how difficult it can be to identify such a personality in advance a crime that makes it obvious. This may explain how the Illinois electorate came to vote in such a character, but does it explain Stevens? What about Abramoff? Tom Delay? Scooter Libby? Charlie Rangel? The list goes on and on! Are these all sociopaths?

Corruption is at the center of the sub-prime meltdown,which is at the heart of the current financial crisis that our Treasury Department and Federal Reserve are attempting to remedy with vast amounts taxpayer dollars. The cost is enormous and multigenerational.

We are talking about more than just a few bad apples. Bernie Ebbers of MCI, Dennis Kozlowski of Tyco, Jeff Skilling of Enron: these are three of the poster boys of corporate scandal whose crimes cost shareholders, employees and communities billions.

Here's the thing. We can focus on the scoundrels, but this takes attention away from the fact the people elected Blagojevich, Stevens, DeLay. Boards hired Ebbers and Skilling. Managers and staffers worked for these men. In other words, people were complicit in the hiring, election, promotion and ongoing enablement of these corrupt individuals. It is important to recognize this or else we are likely to buy the notion that we are innocent victims of smooth talking charlatans. A more empowering notion is that we have been complacently turning over responsibility for important leadership roles to people who do not deserve our trust. We'd better indict ourselves if we want to have any hope of regaining control of our political process and the governance of our major institutions. How? Speak up!! Anyone who sees activity that is dishonest, self dealing or otherwise corrupt has a responsibility as a citizen, as an employee, a coworker, a fellow human being, to point it out. The cost of not doing so as we have all seen, can be astronomical!!

Recently, one of my clients recounted a breakdown with a customer that led to a deeper relationship and a strengthening of my client's reputation. While the underlying issue did cause a problem for the customer, the way my client handled the breakdown demonstrated his company's commitment to service and willingness to take full responsibility for mistakes. The customer also revealed information about the technical details behind the breakdown that told my client there were weaknesses in his delivery process that would predictably produce this sort of problem again if not addressed. By owning the issue, apologizing and offering a month of free service, my client increased the loyalty of his customer, gained valuable information about his process and more than likely extended a reputation for great service further out into his market.

Here's a useful article that appeared today in the Wall Street Journal on this topic.

A good friend of mine who recently joined a division of a well known Fortune 100 company wrote me with this question.

What I am struggling with is how to change culture in
an enviroment that is financial sound. By this I mean profits are
great but money covers many ills. How do I get the "veterans" to
understand that past performance is no indicator of future success?
Global competition and global partnerships, the impact of the internet
on any communication business, and the fact that very few view
leadership as a topic of study and discussion all concern me.

Being new to a company carries with it the blessings and the curses of having an outsider's eyes. On the one hand, you can see what has long ago become transparent to the long tenured managers: values, attitudes and assumptions about the business. In other words, the culture. On the other hand, being a newbie also means that the culture is learning you while you are learning it. Cultures function to maintain a certain level of consistency in behavior. So how does someone new share the unique insights about the business environment that come from not having grown up in one particular company without sounding arrogant or paranoid.

Here are a some ideas:
One of the concepts often used in culture change discussions is the "burning platform". This metaphor came from an actual incident when a North Sea oil rig caught fire. One worker found himself caught between a certain death by burning and a probable death by jumping the 100 feet into the cold North Sea. What would get someone to jump 100 feet off a tower? The fact that the tower is burning. In this case, the worker lived, saving his own life and giving us the metaphor!

So what about when the tower is not burning? There is nothing compelling to move away from. So you need something even more attractive to move toward and you need ways of moving that way that are easy for people to adopt. I don't recommend starting a fire.

Another approach is to make the invisible visible. In a successful business, there are many things working. It may be apparent to people what's working well and why, or it may be completely transparent to them. A simple question, "what explains our success?" can get an inquiry going on the assumptions people in the business hold about success. Is it our technology? Is it the lack of competition? Is it our customer service? How do we know? An advantage of this approach is that it appreciates the success rather than focusing on the negative.

Another approach is to create even bigger goals. Given the success we are having, what would it take to break through to a whole new level? The task here could be to point out that the success we are having is noticeable to our current competitors and to potential new entrants. If new players wanted to come into the market, what would we do to make that harder for them?

Another idea is to create some small groups of up and coming players who want an interesting challenge for their own career development. Give these younger leaders a chance to go after an opportunity that the company has not pursued successfully. Whatever results they create, mine the learning. These younger leaders can be the "Lewis and Clarks" of your company.

I'll be interested to hear other ideas you might have.

According to the Wall Street Journal, Hewlett Packard announced today that it will acquire IT services provider, EDS for $13.9 billion or $25 per share. The acquisition will double the size of HP's own services business and is intended to position it more strongly against IBM. The move will vault HP into second place in market share for IT services, however even after the merger, IBM will maintain a roughly 2% market share advantage.

Early comments about the move highlight the cultural differences between the two companies. Interestingly, the announcement states that EDS will remain headquartered in Plano, Texas with the current CEO, Ron Rittenmeyer, reporting to HP CEO, Mark Hurd, rather than to HP's head of services, Ann Livermore. This reporting structure may be intended to buy some time for determining how and how much to integrate the two service businesses.

Depending on which figures you look at, mergers of this type fail to achieve their intended goals between 70 and 85% of the time. The most often cited reason for this is failure to integrate the cultures. EDS was founded by the iconoclastic, hard charging entrepreneur, Ross Perot. He sold the company to GM in the 1980's and took a seat on the GM board for a short time. He and Roger Smith could not see eye to eye however and he soon left. GM later spun off EDS. HP's founding culture is famous for it's collaboration, congeniality and grow leadership from within philosophy. The acquisition of Compaq in 2002 cost Carly Fiorina her job and has taken Mark Hurd several years to make work.

This acquisition will be a major test of executive leadership. It makes sense to try to achieve this kind of scale as global IT organizations outsource more of their operations. Organic growth, or multiple smaller acquisitions could take too long. On the other hand, it's hard to imagine that EDS will remain a semi-autonomous unit of HP indefinitely. At some point, Hurd will want to integrate his two services units and at that stage the issue of culture will come to the forefront. The services business, is in some ways a new way to go to market for a hardware provider like HP. To make that work, however, there must be a customer philosophy that maintains a level of independence and objectivity about hardware recommendations. How hardware neutral EDS and hardware interested HP make this marriage work will be fascinating to watch.

My friend Kostas Peters, a great consultant in the area of marketing and sales management recently asked about how to get the right talent into the right positions. He used author Jim Collins' expression, "getting the right people on the bus". I see this as a matter of four levels of context: the core philosophy of the business, the strategy, competency management and talent attraction, development and retention.

Without a well defined core philosophy, including clearly defined values, it hardly matters what kinds of people we bring into our organization. Once you define a core philosophy, it serves as a filter for attraction and selecting people. The core philosophy shapes the brand of the business and the people you hire must embody this brand.

The strategy incorporates the way that people are deployed to carry out the activities of the business and relative value of human capital to other kinds of capital within the the concept of the business. Consulting companies, Law firms, Hospitals and Universities, for example have a very high relative human capital intensity as compared to say steel mills. So when people are key asset in the strategy, the core philosophy ought to back this up.

Competency management includes describing the key skills that are essential to executing the strategy and the sourcing and development processes for ensuring these competencies are always available and refreshed. This connects directly to the next context, talent attraction, development and retention. This obviously includes recruiting, training, development, compensation and quality of work life.

So to get to Kostas' question, the way you get the right people on the bus is to define what the bus is, where it's going, what you want and expect and need from people on the bus, where you want them to sit and how you want them to behave and interact, what they can count on from you, from the organization and from each other, how you'll reward and promote their growth and so on. It's a holistic process and one that the CEO ought to have a visceral understanding of, supported by the head of human resources and all the other key leaders.

In the current issue of Fortune, Geoff Colvin warns that we in U.S. business have a mere 7 years to learn Mandarin. He argues that the cost advantages and quality differential that Chinese product and service providers have and are closing on U.S. competitors makes it a virtual certainty that they'll achieve domination over our economy in short order. Unless we are in a location specific service industry (plumbing, haircuts, emergency medicine) it looks like he could be right! Silicon Valley and Wall Street could be serious losers and the U.S. would thereby lose high paying jobs, influence in capital markets and technological leadership. But, of course saying stuff like this sells magazines too!

The obvious implication is that the U.S. faces a competitive crisis viz a viz the Chinese. Yet we are China's biggest customer! Could it be that our collective decisions as consumers are leading to our own demise, by providing China with the income necessary to fund technological superiority? I'm writing these words on a MacBook Pro which, though I bought it from Apple, was manufactured in China, via a value network that extends throughout Southeast Asia.

Why does the Chinese company that organized and managed that value network and the manufacturing and assembly process need Apple? Simple! Not only did Apple designers and engineers conceive the product I am using, they also conceived the look, feel operating system, application suite and the manner in which these hang together to create an experience for me. This is what differentiates Apple from Dell, HP, Microsoft, Lenovo and any other PC maker. Could the chinese supplier develop this kind of design aesthetic and engineering capability. Probably so, but probably not without Americans involved. Just as Americans would be unlikely to develop products, services and experiences that would be uniquely appealing to a Chinese audience. Apple's brand is not strictly American, yet there is an inseparably American aspect to the brand and to the process through which it has been created.

The point is that there will remain cultural differences for some time to come and these differences provide a basis for differentiated competition. If companies focus only on cost-based competition, they will lose to firms in developing countries like China. The same will hold true for investment banks, pharmaceutical companies, other high tech companies and even business schools. If a chinese, indian or bulgarian company can provide the service or product cheaper and cost is the primary basis of competition, then U.S. firms will lose. But, cost is not the only basis. Differentation strategies based on quality, customer knowledge, speed and innovation are also available.

True we need to keep investing in a high quality education system to be able to effectively execute these kinds of differentiation strategies. Failing to do so is one way that we could lose the race. For some interesting reading on competitive advantage at the level of nations, check out Michael Porter's Diamond Model at valuebasedmanagement.net