Transformational leadership is a style of management that many people wish to achieve and businesses often seek out candidates displaying this talent.
People exhibiting transformational leadership typically focus on revolutionary change within organisations based on a commitment to the company’s vision and strategy.
The late Bernard Bass, a professor emeritus in the School of Management at Binghamton University, highlighted four characteristics of transformational leaders.
This list of commonly cited abilities can help enterprises to identify individuals suitable for transformational leadership development opportunities.
1. Idealised influence
One of the key ways transformational leaders inspire change is to engender trust and loyalty among followers through charisma and positive behaviour.
Creating this sense of idealised influence in the workforce can be achieved in a number of ways, including leading by example, articulating a vision and explaining how to reach goals.
Having high ethical and moral values – and displaying them in dealings with staff – is also a characteristic of transformational leaders. Seen as role models, these individuals have the confidence of staff, who will typically respect their decisions and strategies.
2. Intellectual stimulation
Spurring innovation and effecting change requires staff to re-examine entrenched beliefs, notions and processes. Only then can radical new initiatives be introduced.
Transformational leaders create an environment of intellectual stimulation, where employees’ awareness of business issues is developed and encouraged.
Creativity is the key to success and staff are given guidance on how to optimise their problem-solving capabilities, including lateral-thinking exercises.
Managers tend to foster a climate where new ideas can be explored in a supportive, collaborative atmosphere, without fear of punishment or ridicule.
3. Individualised consideration
Transformational leaders have a tendency to prioritise an individualised view of the workforce. In other words, they treat each staff member as a separate person with their own skills, talents and motivations.
Taking this into account helps leaders to select roles for employees that are best suited to their capabilities, which enables staff to reach personal goals more easily.
Leaders can achieve this in a number of ways, including listening to personnel closely, praising positive performances, publicly recognising achievements and privately thanking staff for outstanding contributions. Some managers may also take on a coaching or mentoring role to help colleagues develop further.
4. Inspirational motivation
Keeping people inspired is often what gets the creative juices flowing, which is vital for transformational leaders looking to make large-scale changes to business operations.
Common motivational tactics include encouraging teamwork, articulating the company vision in a way that appeals to an employee’s own objectives and developing a shared goal that provides meaning to daily tasks.
Transformational leaders typically create an atmosphere where followers are inspired to become an intrinsic part of the brand’s culture and vision. They set high standards, which gives people tough – yet achievable – targets that boost productivity, while providing a sense of fulfilment.
Every business leader will be familiar with the notion that the corporate world is changing rapidly – faster than at any other time in human history. Faced with this evolving landscape, CEOs now need to think about how they are handling this change to position their company for future growth.
Of course, navigating this landscape also calls for leaders to evaluate their own skill set and determining whether or not they have what it takes to lead a business through a significant change.
Getting the change process right
The pace of change within a company has obviously increased, placing new pressures on organisations to adapt. Rather than simply evolving over time, many businesses are now treating widespread organisational change as an ongoing, permanent process.
While this is certainly the new reality for companies, that doesn’t mean business leaders are responding fast enough. A recent study from McKinsey and Company found that 60 per cent of respondents within businesses have seen an organisational redesign in the last two years, while 85 per cent have experienced one in the last three.
Even though organisational redesigns are occurring regularly, the ability of companies to achieve their outcomes is still muted, with the study suggesting only a quarter of organisational redesigns achieve their stated objectives.
To address this, McKinsey suggested the following nine steps to help navigate this process:
1. Focus first on the longer-term strategic aspirations
2. Take time to survey the scene
3. Be structured about selecting the right blueprint
4. Go beyond lines and boxes
5. Be rigorous about drafting in talent
6. Identify the necessary mind-set shifts – and change those mind-sets
7. Establish metrics that measure short- and long-term success
8. Make sure business leaders communicate
9. Manage the transitional risks
While each of these offers a different angle that companies can use, among the most important steps is step eight – communication from business leaders. Fortunately, this is also the area where CEOs can most directly affect the success of a change strategy.
Managing change from the C-Suite
For leaders that are committed to improving their change management processes, there are a number of steps they can take to begin this process.
Among the most important comes from recognising current limitations imposed by existing workloads and then taking steps to address these so that staff can commit to a major shift in corporate direction.
In fact, research by the Corporate Executive Board found that 88 per cent of workers have seen their workload increase to the point where they are unwilling to put in more work to met organisational objectives.
There are a few other features that can also set a strong change management effort apart from the rest. The Harvard Business Review suggested that staff workloads are just one of four parts of the equation, with the remaining three covering project duration, commitment from senior management and the technical capabilities of the teams involved.
Put simply, companies that embark on short change management strategies, with buy-in from the C-Suite and a highly technical staff who also have the time to commit to a project achieve the strongest results. Those with the opposite qualities on the other hand, proved more likely to fail in the research.
Change management the sign of a strong company
While leading a company through a major organisational change places new pressures on a CEO, there are benefits that come from getting this process right. Business leaders that can actually achieve their stated goals will be able to set their company up for future growth, while standing apart from their competition.
With research from the Project Management Institute last year finding only 18 per cent of companies are successful at leading change initiatives, the opportunities for companies that can make this change will be in a much stronger position long-term.
Collaboration: having been bandied about the boardroom for decades, it nonetheless remains an enigmatic concept in business today. Is it merely one of those hackneyed buzzwords that are so heavily frowned upon on CVs and company mission statements, or rather an incredibly relevant concept that applies to the modern organisation?
Businesses of all size and shape today will do well to ensure collaboration is still a major priority – and the onus, no doubt, falls on the organisation’s leader. This seems to hold true across the world, at least according to an extensive global study led by CEO and author John Gerzema.
In the study, researchers polled 64,000 individuals across 13 countries on the qualities they believed led to successful leaders and businesses. One of the most prominent insights garnered in the study was that most people wanted their leaders to be more collaborative, with this trait ranking among the highest, along the likes of flexibility and selflessness.
In fact, an overwhelming 84 per cent believed that greater collaboration and sharing of credit are essential to a successful modern career. So what does this mean for those sitting at the top of businesses today?
It means it’s time to take collaborative leadership seriously, if you aren’t doing so already.
What does it really mean to be a collaborative leader?
The importance of collaboration aside, it can be difficult to pinpoint exactly what it means and entails, especially in a leadership context.
It’s worth having a look around to see how different people define collaborative leadership. According to an infographic from the Collaborative Lead Training Co., the workplace is evolving towards a more collaborative future and thus redefining leadership.
The infographic lays out eight key differences between traditional leadership and collaborative leadership. Among these are the notions that in contrast with the traditional model, collaborative leadership:
- Believes power is greatest in a collective team, rather than coming from a position of authority
- Openly shares information and knowledge, rather than imposing ownership on it
- Elicits suggestions and ideas from across the team – all the time
- Empowers the team with immediate time and resources, rather than providing these only when necessary
As can be seen from the infographic’s suggestions, a collaborative leader is one who embraces a ‘flatter’ organisational structure, sharing authority and accountability around the team instead of hoarding it themselves.
Additionally, in an April 17 2013 HRZone article, leadership consultants David Archer and Alex Cameron said there are three essential skills and three essential attitudes behind a collaborative leader. Even if a leader possesses the three skills, they will not be able to be fully collaborative if they don’t have the attitudes to match.
According to Archer and Cameron, the three vital skills for collaborative leadership are mediation, influencing and engaging others. Collaborative leaders, they say, are adept at addressing and resolving conflicts the moment they arise. In addition, they are skilled at influencing peers based on the organisation’s culture – which is a critical skill to have if they hope to share control and leadership.
Lastly, engagement and relationship building are essential qualities for a collaborative leader, and this involves clear communication.
So, what are the attitudes that accompany these crucial skills? Archer and Cameron outline agility, patience and empathy as the mindsets that leaders should adopt if they wish to be collaborative.
It is clear that there are some common threads that unite the schools of thought around collaborative leadership. Leaders attempting to follow this model should place emphasis on the team rather than the individual, promote a flat and open company structure and empower their employees. This should be backed up with quick-thinking and the ability to take others’ points of view.
Why it pays to be collaborative
But why is collaborative leadership so important? Especially in the modern business world, where technology is exponentially growing in prevalence and reshaping traditional interpersonal communication, adopting a collaborative culture is essential.
This was pointed out by Carol Kinsey Goman in a February 13 2014 Forbes article. Ms Goman stresses that the dreaded silo mentality is holding back countless organisations today, and not sharing information around the company can essentially “kill” it.
As a recent study by Interaction Associates suggests, not embracing collaborative leadership can also hurt your company’s bottom line. The group conducted a study on what impacts the confluence of leadership, collaboration and trust can have on a business – including its financial performance.
In the study, Interaction Associates ranked more than 150 companies based on how well they embodied these three components. It found that those considered strong across the three traits demonstrated superior financial results – for example, their P/E ratios were 28.5 per cent higher on average for those classed as weak.
Collaboration is not just a vague ideal that companies should aim for – it is a very real concept with tangible results, and it’s time to embed this into your leadership today.
Innovation has become an area in which CEOs cannot afford to ignore. The importance of innovation has become a major area for senior executives to address as they look to improve their performance.
The result is that many executives now see the ability to formulate and implement an effective innovation policy as one of the most important aspects of their leadership development.
According to the Australian Bureau of Statistics (ABS), investments in innovation are now widespread throughout the country’s economy. In most recent figures, the ABS revealed 36 per cent of companies had introduced new innovations in 2012-13, while a further 22.8 per cent stated they were still in the process of developing new products and services.
However, innovation is also an area senior executives are struggling to align with company strategy, making it harder for companies to combine their development efforts with internal processes.
This was the finding from a recent study from Strategy&, formerly Booz and Company and part of PricewaterhouseCoopers.
The organisation’s research found that aligning company strategy with innovation is a major concern for companies in coming years, with 20 per cent stating this is the largest obstacle for a successful innovation policy.
A further 14 per cent are concerned about trying to incorporate company culture into their innovation policies, while 13 per cent are looking to build an external innovation network that could improve their performance.
The research found that product innovation is no longer the main area for companies to address, with the majority of research and development spending set to shift away from goods and towards services in the future.
Organisations are also beginning to prioritise radical innovations amongst new products, rather than investing in incrementally improving an existing product or service, according to Barry Jaruzelski, senior analyst at Strategy&.
“With the healthier market conditions, it is not surprising that business leaders say they plan to focus more on big breakthroughs. This will require companies to build new capabilities, an effort which they must not underestimate,” said Mr Jaruzelski.
“It’s not by planning or shifting spending alone that they will achieve this.”
Clearly there are weaknesses in the current approach towards innovation, meaning CEOs are going to need to spend more time aligning strategy with the development of new products and services.
How do different organisations approach strategy and innovation?
Innovation is usually assumed to be a single process, but in fact it will take different forms depending on the composition of an organisation and the different strategies that are in play.
That is the finding from a further research project from Strategy&. The organisation has formulated three unique forms that businesses can take when developing an innovation strategy.
- Needs seekers – companies that use customer insights to drive their performance, finding innovative products that are specifically tailored to the needs of the customer.
- Market readers – companies that are adept at reading shifts in their industry, and will then invest their research and development efforts into areas that are consistent with shifts in the marketplace.
- Technology drivers – companies that are the most committed to out-of-the-box innovation strategies, relying on new developments and product offerings to offer something new to their customers.
Each of these different approaches to innovation require organisation-wide cohesion, which can then be applied to the specific product innovations that a company is pursuing. Strategy& also suggested that each of these models comes with a unique approach to the innovation process, with each being driven by different stakeholders within a business.
Strategy, not financing the key to effective innovation
Finally, one of the biggest mistakes CEOs can make is to assume that innovation is simply a financial exercise and that by increasing funding into a certain area they will be able to develop new products and services.
A study from the Harvard Business Review (HBR) suggests that the opposite is actually true – organisations that reduce their expenditure in research and development can actually see a greater return from their investments than those with a large budget for pursuing new products.
Using the case study of CISCO, the research suggested that innovation within an organisation consists of two different processes – explorative innovation and exploitative.
The first relates to a company’s ability to pursue big-picture thinking and develop products that are radically different to anything currently on the market. Exploitative research on the other hand, focuses on commercialising existing processes and driving new growth within an organisation.
Importantly, exploitative innovation doesn’t require a significant investment, and can often yield a greater immediate return for a business than explorative research and development.
In the case of CISCO, the researchers found that although overall investment in innovation declined in the early 2000s, the company’s output of patents – i.e. its exploitative innovation – actually increased.
Even more, successful organisations are those that can quickly change gear between these two different forms of innovation. By quickly shifting between philosophies, organisations were able to pursue the greatest number of new products and services.
Strategy underlying innovation
So how does organisational strategy factor into these findings? Well, firstly it illustrates how important company processes and management styles are for supporting research and development within a business.
Building and embedding this flexibility into the way a company approaches its internal processes is a major challenge for CEOs, especially as they look to develop a competitive organisation. Fortunately, the HBR research shows that developing the right strategy is more effective than simply expanding the budget for further innovation.
The research emphasised that effective leadership was essential for managing the strategic shift between the two forms of innovation.
“Visionary leadership is also about helping the company overcome inertia so that it can shift effectively from one frame of mind to another when the time comes. Few companies pivot easily, but those that do position themselves to ride wave after lucrative wave of exploratory, then exploitative, R&D,” stated the HBR authors.
As innovation becomes an increasingly important business function, effective CEOs are going to have to consider how they can align company strategy with innovation initiatives to drive greater value in their company.
This report is intended to stimulate the kind of strategic thinking busy business owners and managers often find hard to make the time for, in the midst of the jungle of demands that most established businesses battle with on a daily basis. Steven Covey put it in the Important, Not Urgent quadrant. However, with the rate of change we’re experiencing, if we don’t all spend some time in that quadrant, we’re likely to find someone else in the jungle will push it into the Urgent quadrant, in the not too distant future, whether we like it or not.
Upstarts, by the way, are what Startups get called when you’re on the receiving end of their disruptions. So why, if you are a well-established business, generating good cash flow, might you be unable to see that some far less established business, with quite possibly less technically advanced products or services, is about to eat your lunch?
According to Cyril Bouquet and Chloe Renault from the prestigious IMD business school in Lausanne, there are 3 things going on:
You’ve become ‘prisoner’ to the system you’re operating in.
You’re in denial.
You’re not innovating. Well, not enough, anyway.
Let’s look at some examples. The taxi industry had a system that was so ingrained it was unconscious to them, so they were unable to imagine a whole new way of operating. Enter Uber. Customer satisfaction with taxis, with few exceptions, was low, but for decades they had the hire car market locked up and so became imprisoned by their own assumption nothing was going to change their world. And even when Uber arrived, both drivers and taxi companies were in denial and couldn’t understand why customers were flocking to an alternative. Uber used the same technology that taxis could have used to locate cars and inform passengers of arrival and route, to automate payment and rate drivers etc., but there was no innovation going on of note within the taxi industry.
Blockbuster videos knew about Netflix but considered them unable to compete with their stranglehold on the video hire market. Blockbuster even turned down the chance to buy Netflix for just $20m. Video stores were hooked on a business model that earned them the total cost of their videos after just a few night’s late fees. In fact, the creator of Netflix, Reed Hastings, got going after being stung $40 for his late return of Apollo 13. Kodak, whose own scientists invented digital photography, was so in love with their business model, based on a virtual monopoly of film sales, that they couldn’t contemplate doing business another way.
All these businesses and many more were prisoners of their own device, couldn’t see the need for change and weren’t looking for new ways to charm their customers.
Of course, it’s human nature when you’ve found a winning formula, to stick to it and not to want to throw it over for a new model that might not work yet. And any sound management or board of directors is going to look sideways at a business case that puts their cash cow at risk to explore something foreign to their customers and employees that can’t reliably forecast what the ROI might be.
Established businesses are set up to execute a well-understood business plan, with well-understood products, or services, to well-understood customers.
Startups, on the other hand, are exploring who their customers are, what their problems and desires are, how to satisfy them, with new products or services that are still in development, what business model to use and how to make money from the enterprise.
This is a process that doesn’t readily blend with an existing operation that is focussed on the next quarter’s results, trying desperately to increase sales by 5% and decrease costs by 5%.
And yet if you want really game-changing innovations of the kind that can transform your business, or prevent you from being the next statistic in the global disruption trend, then you need to consider how to take some of the methods Startups use to develop those innovations.
We’re not talking here about incremental innovations. The kind that can be gleaned from suggestion boxes, surveys of employees or customers, or simply an intelligent engineering based consideration of how to improve your product or service for next year’s model. Those improvements are important and necessary – once you are onto a winning formula. What we’re discussing is how and when to find the next quite different winning formula.
Take Apple as an example. Their invention of the first smartphone was a game-changing new formula that disrupted the phone market and led to business breaking problems for the previous dominant players, Nokia and even Blackberry, who themselves had disrupted the market. However, once they had introduced the smartphone, Apple’s annual updates, though important, can be considered to be incremental. Apple was also willing to disrupt their own winning formula for the iPod, which put ‘a 1000 songs in their customer’s pocket,’ with the creation of the iPhone. In this way, while iPod sales plummeted, they continued to capture music hungry customers, as well as a whole new market who were delighted to find the iPhone put ‘a computer in their pocket.’
Innovations that grow your business by 800%, as the iPhone did for Apple, take fresh thinking.
We call it Unicorn Thinking.
We’re not talking about the magical kind of unicorns, although the kind of innovations that result might seem like magic to competitors and delighted customers alike. We’re talking about the thinking that leads to private Startups growing to valuations in excess of $1 billion. At the end of 2017, there were 197 such companies, known as Unicorns, according to a survey from CB Insights. You’ll be familiar with some of the better-known ones, such as Airbnb, Canva, Dropbox, Pinterest, Slack, SpaceX, Spotify, Stripe, WeWork, and Xiaomi.
Australian software enabling company Atlassian was a Unicorn before it floated on Nasdaq for $10 billion. So were the tech giants of today, colloquially known as FAANG – Facebook, Amazon, Alphabet (Google), Netflix and Apple. Of course, these stocks have moved a long way from being Startups, but in most cases, they are still drawing on what they learned about developing game-changing innovations to continue to grow their businesses.
We believe virtually all businesses can benefit from putting some resources into understanding how these kinds of Startups developed their innovations.
In our view, there are 6 main steps.
But first, here’s where not to start. With an idea.
Most people will jump to an idea and then look for supporting justification. Again, that’s just human nature. So, if you have ‘a good idea’ already, try to park it for a while and start back with your target customer’s desires and no preconceived ideas on how to satisfy them.
Here are the steps:
Find an important unsolved problem
Ignore the competition and start over with a blank slate
Imagine the ideal solution regardless of accepted wisdom, or obstacles
Search emerging technologies for ways to do what wasn’t possible before
Make the simplest possible prototype and test with customers
Use feedback to improve it multiple times before production
Make a business case with reverse income assumptions
The world’s capitalist system basically operates by generating products and services that persuade customers they will solve their problems or fulfill their desires. The trick though is how to discover an unsolved problem and a fresh and better way to do solve it.
Unicorns use Design Thinking processes to explore it.
Design thinking stems from the way designers investigate solutions to problems in a human-centric manner. It’s found a strong following outside of pure design circles in recent years, because the method can be broadly applied to solving complex problems, including business problems of most kinds. The UK Design Council coined the term the double diamond to describe how you initially diverge from an assumed problem to explore, then converge to define the key issue, then diverge again to explore possible solutions, before testing and feedback helps to converge and deliver a specific solution.
Don’t rush to conclusions on what your customer problems are. Empathise and explore what’s really going on for customers in the setting of their lives and work, before defining their most critical issue and developing a solution that emphasizes the customer experience.
Sometimes the problem you begin with turns out not to be the critical problem you need to solve.
I had my own experience of innately using this process many years ago when working as a marketing consultant. I was commissioned by the advertising agency for Qantas domestic, or TAA as they then were known, to come up with a new ad campaign to differentiate them from Ansett, their fierce rival at the time. In those days planes were divided into First Class and Economy. I started my assignment by spending a week flying around the country in both TAA and Ansett and seeing what the travel experience was like for various customers.
It soon became apparent there were two main groups of travelers in Economy. People flying for business reasons, who wanted to get there on time in a rested state of mind ready for a busy working day. And people who were traveling for social reasons, often going on holidays, who wanted to start their holiday fun the moment they got on the plane. It quickly dawned on me they needed to be treated differently. So, the problem I went in with, to write an ad campaign, became redefined as a challenge to reconfigure the cabin and the in-flight experience.
I recommended that Economy should be split into Business Class, up the front, with passenger entering via the front stairs to an oasis of peace and calm and Holiday Class, at the back with passengers entering from the rear stairs to a livelier reception. After a while, they implemented Business Class but missed what I thought was another good opportunity to create a Holiday Class experience.
Starting over from first principles.
Elon Musk, the co-founder of PayPal, and founder of Tesla and SpaceX, recommends starting by going back to a clean sheet of paper and first principles. Here’s how he describes it.
“Historically, all rockets have been expensive, so therefore, in the future, all rockets will be expensive. But, actually, that’s not true.
If you say, what is a rocket made of? It’s made of aluminum, titanium, copper, carbon fibre. And you can break it down and say, what is the raw material cost of all these components? If you have them stacked on the floor and could wave a magic wand so that the cost of rearranging the atoms was zero, then what would the cost of the rocket be? And I was like, wow, okay, it’s really small – it’s like 2% of what a rocket costs.
So clearly it would be in how the atoms are arranged – so you’ve got to figure out how can we get the atoms in the right shape much more efficiently. And so, I had a series of meetings on Saturdays with people, some of whom were still working at the big aerospace companies, just to try to figure out if there’s some catch here that I’m not appreciating. And I couldn’t figure it out. There doesn’t seem to be any catch.
So, I started SpaceX.”
Elon also reasoned he could cut the cost of space travel by 90% if he could make rockets reusable, enabling them to land safely, rather than tossing them into the sea, so to speak. That took several very expensive failures to get right, but he and his team finally succeeded.
Instead of assuming things have to be done the way they always have been, start from scratch and imagine new possibilities that will empower you to achieve your mission.
Test your value proposition, then your prototype and only then your market.
It seems extraordinary, but true that the most common reason new products fail is that nobody wants to buy them. Unicorn companies have learned they need to test their assumptions at every step of the way.
First of all, they need to be tested in what Steve Blank termed a Customer Discovery Process in his book, The Startup Owner’s Manual. Steve and Eric Reis who recently updated his thoughts in his book, The Startup Way, realised the startup journey often failed because enthusiastic entrepreneurs rushed their ideas into production and launched them without thoroughly testing their reception with the target market first.
Even global companies can fall into this trap as I found out when I was working for the British pharmaceutical company GSK, or Glaxo as they then were. At the time Valium, made to treat anxiety by Hoffman La Roche, was the biggest selling drug in the world, selling over 2 billion tablets a year, however within Glaxo it was considered to have a problem, in that it had the side effect of making people sleepy. So, Glaxo chemists set out to see if they could make a benzodiazepine analog, in effect a chemical cousin of Valium, with less of a soporific effect. They succeeded and spent some years and many millions getting it through clinical trials to show it was as effective as Valium at reducing anxiety, with less of the soporific side effect. However, when we launched it in Australia, sales were very disappointing. Initially they thought the marketing was at fault so that was rejigged, but still, the sales were slow. So finally, they sent a market research firm out to interview GPs to ask why they weren’t prescribing this great new drug. The answer came back, “Well if someone comes in with anxiety serious enough to warrant treatment it’s not such a bad thing if they end up napping during the day and getting an undisturbed sleep at night.”
So, it’s clearly a better idea to test these things before spending years and millions launching the product. The Lean Launch Method and the Business Canvas provide tools to test first your ideas and then your prototypes, for your new products and services, and also your new business models. This is usually a challenging process. Steve Blank said no business idea survives its first encounter with a customer. Or as Mike Tyson put it, “Everybody has a plan until they get punched in the mouth.” It’s better to take your punches early. Fortunately, there are now quite well-established protocols for testing your hypotheses before you lock in your blueprint.
Sprinting to the finish line.
Getting your new product developed used to be guided by spreadsheets and Gantt charts with finely constructed critical paths. That is still appropriate for a well-understood process, but for an innovation that breaks new ground for your company, you’re better off using what has become known as Agile Project Management. Innovations necessarily involve experimenting and that necessarily involves surprises, both of failure and success. But they cannot be rigorously plotted on a Gantt chart. Instead, they are best tackled as a series of Sprints with a small co-operative team accepting it’s a fast learning exercise, with frequent check-ins on feedback and what remains outstanding in the work plan.
The Innovator’s Business Case.
As fabulous as your innovation may be, it probably still has to pass the screening of a diligent, if not skeptical board of directors, or in a smaller company the CFO and key investors. Discovery-driven planning uses a reverse income statement to address this problem.
Wharton’s Ian MacMillan and Columbia’s Rita Gunther McGrath developed a system they called “discovery-driven planning” in their book, The Entrepreneurial Mindset. “Discovery-driven planning acknowledges that at the start of a new venture, little is known and much is assumed.” They contrast this with conventional, “platform-based” planning, in which “assumptions underlying a plan are treated as facts – givens to be baked into the plan – rather than as best-guess estimates to be tested and questioned.”
Startups used to write long Business Plans of 50 to 100 pages with reams of financial projections forecasting what the income and expenses would be 5 years into the future, or even went further to generate a Net Present Value for the company from a discounted cash flow analysis of the effective life of a company’s core assets. Investors and Directors would then beat up the CEO if these fanciful projections weren’t met with some exactitude. I know, because I went through it with a biotech company I took to an IPO on the ASX as CEO. The reality is of course that a Startup is in an exploratory stage and doesn’t know exactly what profit or losses it will make. The same is true for a truly new endeavour inside a large established business.
However, you still need some sensible method of assessing commercial viability.
The key to using discovery-driven planning is to list and honestly test the key assumptions you are making that underlie the belief the new venture will be profitable. Rather than pretending all will go to plan the reality is accepted that some assumptions will be proved wrong and that you expect some surprises as the business develops. But by laying out the assumptions you are checking and adapting as you proceed.
The reverse income statement, rather than starting with income and cost forecasts to see what profit or loss that generates, begins instead with the required profit after a period of time and then sees what costs are tolerable in order to achieve it. The focus then shifts to the creative challenge of how to produce the product or service within those costs. The same challenge is set for creatively achieving the necessary revenue. Required profits equals necessary revenue minus allowable costs. With this approach, the emphasis shifts from being right, or being blamed for not meeting forecasts, to being creative as a team, in order to meet the cost and revenue challenges, while openly and transparently checking whether or not key assumptions are holding up as the adventure unfolds.
Mapping your own areas of disruption risk
Unicorn Thinking is a very useful set of tools for developing major innovations, however, how do you know in the shorter term in what areas of your business you might be at risk and what you can do to defend yourself? Customers tend not to desert companies who are hitting their mark in 8 key areas of business.
One of these key areas is Intrinsic Brand Value. Are you competing on price, as a commodity, or are your customers willing to pay more to get your brand? The goal of branding is to allow your product to be sold for more than competitors with similar products.
Rolls Royce is owned by BMW. The Rolls Royce Ghost is built on a modified version of the BMW 7 series platform and shares a modified version of the 7 series V12 engine. No doubt there are refinements with the Rolls, but it’s substantially the intrinsic perceived value that allows it to be sold for 3 times as much as the BMW. Apple iPhones sell at a premium to their competition. Blind taste tests of different whiskeys, conducted by Dr. Stephen Chadwick and Dr. Hugh Dudley, both surgeons at St. Mary’s Hospital and Medical School in London, showed that most people can’t tell the difference between single malts and cheaper blends without the knowledge of which one they’re drinking. As advertising guru, David Ogilvy said, “They’re tasting images.”
Whether you’re at risk of having your market disrupted may depend on how firmly your customers have bought into a belief in your intrinsic value. Customers can’t always be fooled, of course. The perceived intrinsic value must be backed up by exceptional user experience to maintain leadership. As Clay Christensen explained in the Innovators Dilemma, with innovations such as smaller disc drives, their initial inferiority led them to be dismissed by the dominant players. But, it was also the lack of intrinsic brand value with older formats that meant customers had no compunction in buying the cheaper product as soon as the improving performance got within range of the existing devices.
Building intrinsic brand value provides not only higher profit margins, but also higher safety margins against disruptive newcomers.
Author: Tom Williams, Principal of InnovationConsult : www.innovationconsult.com.au/
The ‘Future of Work’ is a phrase we can’t escape. For more than five years it’s been a topic of intense focus and speculation from CEOs to the frontline.
While much of the discussion has focused on disruptive economic and technological forces, such as diversified international trade, AI and automation, that will change the way we work, few have been talking about how the people are changing.
A physical workplace manned by a predominantly permanent, full-time workforce, that delivered consistent revenue and predictable profit margins has been the traditional business model for most organisations. While it may have worked for so many for so long, it won’t anymore.
Leaders must address the fact that the face of today’s workforce looks significantly different to a decade ago, with up to five generations of employees all now working under the same roof.
While all employees are unique in their ability and skill set, there are a few characteristics that unite many of today’s workers.
Let’s take freedom and balance for example. For most, money is no longer the be-all and end-all; many of today’s workers care more about flexibility and work-life balance.
While the perception of what equals flexibility differs from person-to-person, the majority of employees know that their jobs could be done from anywhere; all that’s needed is a good internet.
Equally important is control and motivation. Today’s workers want to be the masters of their own destiny. There is an emerging proportion of the workforce emerging who are curious and ambitious individuals, driven to build a successful career for themselves. These workers want to do better, be better, achieve higher and make an impact on the world around them.
It’s clear that the workforce is evolving; the desires and attitudes of Australian employees are changing. The roles of today’s workers are multi-faceted and evolving constantly over time.
While workers crave both control and balance in their careers, some leaders have been less than enthusiastic to embrace this new way of working; partly because many are still married to the concept that work is a place, not an activity.
Leaders can no longer view their employee’s participation in the workforce with a ‘status quo’ attitude but must learn to embrace new career structures.
This idea is not to be balked at, nor is it to be feared. Doing nothing could do more harm than good, and maintaining a business-as-usual perspective is no longer enough for a workforce that is demanding change.
Businesses that have already embraced change to create sustainable, agile workforces are attracting high-quality talent, unlocking hidden potential, fuelling innovation and, most importantly, driving productivity and business growth.
Originally published in The Australian.
Stephanie Christopher is CEO at The Executive Connection, the world’s #1 CEO network with over 22,000 members in 16 countries
So, what do top performing leaders have in common? They’ve all received some form of mentoring throughout their careers to get them where they are today.
In fact, Harvard Business Review surveyed45 CEOs who had formal mentoring in place, and found that ‘71% said they were certain that company performance had improved as a result. Strong majorities reported that they were making better decisions (69%) and more capably fulfilling stakeholder expectations (76%).
While it’s certainly not a new concept in the business world, but it can be lonely at the top and many leaders find it challenging to know how they’re performing – and what exactly they need to do to be more effective in their role.
As a business leader you have to frequently make decisions concerning matters that have never before been undertaken. In such high-stakes conditions, leaders require wise mentoring with apparent rules of engagement to ensure total confidentiality.
Finding the right mentor can sometimes be the difference between success and failure. By working with a mentor, leaders are able to benchmark how they’re performing as well as be held accountable from a wise role model, someone with genuine guidance based on true-life experiences.
Here’s how some of our top performing members benefited in key areas of their business from having a mentor:
Transitioning into the C-suite
There are a number of challenges involved in transitioning from a functional executive into the C-suite. By engaging with a mentor who has personally experienced such transitions, new leaders can gain access to perspectives that are uniquely contextualised and personalised. These ongoing relationships are often one of the most important when it comes to giving leaders the confidence to tackle new issues as they arise, particularly in areas that fall outside their core expertise and experience.
This is exactly why Director of Save Sight Institute and Professor of Ophthalmology at the University of Sydney Peter McCluskey, was drawn to seeking an experienced mentor.
‘I look after a lot of people, a lot of students and do a lot of administration, plus working as an eye doctor, a researcher and a teacher. Moving to this role was a big, big change and involved a lot of learning on the fly.’
‘TEC has really been a fabulous sounding board for helping me make sure I understand what the problems are that I was facing with personnel, strategy and implementation,’ Peter explained.
As someone who transitioned into a Director role from a research and teaching background, Peter wanted to ensure he had the right skill set, outlook and thought processes to successfully lead the institute, which is where mentoring made a measurable difference.
Building and retaining top talent
One of the many challenges affecting businesses regardless of the industry in which they operate is building and retaining top talent.
Managing Partner of Marsh & Partners Bronwyn Condon found that both external and internal mentoring is essential for retaining and developing employees throughout the firm.
‘We have a mentoring program within the firm where we ensure accounting graduates are getting to whatever level they need,’ Bronwyn explained. ‘Beyond that is when I get involved directly. That means ensuring they can move from an accountant to a manager role and eventually a partner.’
Bronwyn has experienced firsthand the impact of this talent strategy in action, with a number of different employees advancing their careers within the firm. ‘We’ve got a lot of people who have been here for 10, 12 years who have worked their way up to the manager level. They wouldn’t be here if we didn’t have a strong mentor process in place.’
Having the right mentor that understands the importance of a talent strategy is crucial to business success, and leaders who can implement this strategy will set the organisation up for future growth.
Mentoring extends across the C-suite
Traditionally, mentoring is viewed as a one-on-one connection. While this is a still a valuable way to pass on insight, there’s also merit in extending this connection and bringing it into a group situation. Spending time with a group of senior executives, who share similar experience, insights and challenges associated with their respective industries helps to broaden and develop leadership perspective.
That was certainly the case for WBP Property Group CEO, Greville Pabst. Greville believes that the group connection is one of the most important parts of his mentoring experience. By attending both his monthly one-on-one mentoring session and meeting with his peer network of senior executives, Greville is able to project his ideas and refocus.
‘Not only do I have an experienced business mentor, I also have sixteen or seventeen other CEOs that I can talk to,’ Greville said. ‘We can all speak in trust and with confidence and I just think that is a really understated resource that TEC brings to its members.’
Greville explained that a key component of his mentoring experiences is the ability to help keep him grounded, ensuring his ideas and aspirations remain realistic for the future. On top of this, the members’ diversity means that no two opinions are the same.
‘We keep each other very accountable, that’s for sure. We have a vast wealth of experience from all walks of life. It’s been a great learning experience for me’ Greville explained.
Mentoring remains a valuable and versatile method of enhancing business success and ensuring leaders have the confidence, skills and knowledge necessary to make key business decisions. When business leaders fail to seek outsider input for support, their companies can suffer.
As a key executive in an organisation, you want to make your mark. You want to contribute significantly to the overall mission and growth of the organisation and earn the respect of the CEO or Managing Director, as well as the respect of the people who report to you.
Chances are you’ll be shouldering considerable responsibility and making decisions that affect the future of the organisation and the lives of the people who work with you. And, as with any leadership position, there are always challenges. The thing is, you can’t go running to the CEO every time there’s an issue. To start with, they’re more than busy enough without having to weigh into your issues; and secondly, what aspiring leader wants to be seen as incapable of handling situations that leaders face every day?
Perhaps you have a prickly staff member whose performance has dropped significantly over the last six months and you need to tackle an honest conversation with them. Perhaps you have a progressive idea for meeting your sales target, but want to test its robustness before you pitch it higher up. Perhaps one of your peers is making it difficult for your team to deliver to the expected standard and you need to “call” their behaviour. Or perhaps there’s a new process that is impacting negatively on your department, but challenging it is politically sensitive because its owner has the ear of the CEO.
Whatever the issue, you need a sounding board. As an influential CEO once said to me, “The worst decision I ever made was the one made by a committee of one – me!”
You need someone (or several someones) who will challenge your thinking and play Devil’s Advocate to help you see things from a different perspective. You need to tap into others’ experience when you’re faced with a situation you’ve never encountered before. It makes sense to call on the wisdom of others. The trouble is, whose wisdom do you call on?
You may decide to talk it through with your significant other or a family member. They may or may not have the necessary business acumen, but two things are for sure: they want you to succeed and they don’t want you to get hurt. But the trouble is, they have a natural bias. And because they love you, frequently they won’t tell you it the way it really is. They don’t want to hurt you; they don’t want to hurt your feelings. As a result, they’re not likely to really challenge your thinking or look for the flaws in your argument.
Alternately, you may feel safe enough bouncing ideas around with your colleagues…until the day something confidential finds it way into the greater populace at work, or until your idea is served up to the CEO by someone else as their own. And what will they think of you if you keep going to them for advice?
You may chat to your friends and mates outside of work about it, but do they really understand your role, your industry, your politics or the particular sensitivity of the issue? Besides, you won’t be considered such good company if they have to listen to you talking about work all the time!
Being in a leadership position is a challenge and it can be isolating. It’s also very easy to miss opportunities or reap a sub-optimal result when decisions are made by that “committee of one”. We are often best served by bouncing ideas around with others, but when you can’t go to the CEO, where do you go?
A radical change to business structures is leaking out of Silicon Valley and spreading through Australia and beyond. It even has a name: holacracy. Atlassian has scrapped its managers and so have Canva.
The tenets of holacracy are simple: authority and decision-making rests with the team that is actually doing the work, not with the boss. Employees, the theory goes, spend their work hours getting work done instead of seeking management approval for every small change in direction.
But before you scrap your managers, consider the following instead:
1. Find a career management platform that works for both the individual and the business
The traditional performance review process is broken. Most organisations in Australia have invested in expensive outdated ‘talent management’ systems that reflect what the organisation wants from its employees, to ‘manage’ them. Today, this approach simply doesn’t work. ‘Talent’ can’t be managed. The role an individual was hired to do six months ago, isn’t necessarily the role that person is doing today. With a younger generation of workers coming through, they want to take control of their own career and not have an organisation dictate to them the path they need to take to progress. Cloud based platforms such as PlanDo enable both the individual and organisation to have an ‘adult to adult’ conversation about career development, giving more control to the individual while still providing the ‘manager’ or ‘leader’ with greater visibility of the individual’s career goals and how they’re progressing.
2. Drop the ‘manager’ tag and replace with ‘leader’
Rather than scrapping managers altogether, replace them with ‘leaders’. Today, we don’t want or need to be ‘managed’. Research has proved that giving people accountability for their actions, increases engagement and loyalty towards organisations. By giving authority to individuals to be able to make decisions, not only empowers them but increases efficiency for the organisation, reducing the chance of bottlenecks.
3. Give more feedback more often
Instead of having to make team members wait for 12 months for their review, over a 3 hour meeting, organisations need to provide more feedback more often. This feedback shouldn’t just come from ‘managers’ or ‘leaders’ as they should be known, it should be from more than one person – peers, mentors whomever the individual chooses. That way, a more complete picture can be built of the individual’s progress and a different perspective can be provided.
4. Set goals and objectives between individuals and leaders
It’s important for you to set goals and objectives together with your team members. Ask them how they can contribute to achieve the goals your organisation has set. Again, it comes down to ownership and if the individual has suggested a goal or objective, they’re much more likely to achieve it, than if they’re given one.
5. Let the individual take responsibility for his/her career development
Finally, helping your team members with their career progression is not all down to you, the employer. Competition is fierce in many industries in Australia to attract the best talent and then once you have those individuals, it’s a common misconception that it’s down to you to nurture them and outline a path for progression. Wrong. Today, this is a shared responsibility. The individual is responsible for their own career, ensuring their experience and skills are documented and taken with them to their next employer.
So before you scrap your managers altogether, adopt ‘leaders’ instead and give individuals more responsibility to self-direct their own careers. Equipping your people with tools and technology that facilitate regular conversation works well from both sides. For leaders, it’s timely information about where your people are going and how they’re tracking. For individuals, they’ll value the opportunity to gain regular feedback and take more control over their career. Do that well, and engagement and work satisfaction will soar.
The Prime Minister might have just announced plans for more people to come to Australia under entrepreneur visas, as part of his ‘Innovation Statement’ but that isn’t going to help the majority of HR professionals looking to hire and engage their best talent next year.
The reality is that if you thought 2015 was tough keeping the energy and attention of your best talent, it’s going to get tougher in 2016. Many companies talk about the benefits they offer their employees, the perks, the flexibility and the competitive remuneration packages, but providing individuals with a clear career path and enabling them fulfill their career goals, aligned to your own, needs to be high, if not top on the list.
For too long the systems and processes that HR professionals use reflect the organisation’s goals, not the individual’s. They present HR professionals with a huge administrative burden and don’t reflect the changing nature of the work environment. How many businesses do you know make decisions on an annual basis anymore? Indeed, HR professionals may be hiring for a role today, but that role could be completely different in a few months’ time.
Together with the changing work environment, the casualisation of labour, the increase in contractors rather than employees and the millennial mindset of wanting to work in a number of different organisations rather than sticking with one over the long-term, HR professionals need new tools to retain talent in 2016.
I’m not talking ‘retention’ here, we’re going far further upstream. We think the magic happens with how we enable autonomy and the impact of great performance and engagement.
If you want to engage your top performers next year, you need to consider the following:
1. How often do you or your leaders ‘check-in’ with your team members?
Instead of having to make team members wait for 12 months for their review, smart organisations will provide more feedback more often. This feedback shouldn’t just come from ‘managers’ or ‘leaders’ as they should be known, it should be from more than one person – peers, mentors whomever the individual chooses. That way, a more complete picture can be built of the individual’s progress and a different perspective can be provided. Recent research shows that peer feedback is particularly effective in motivating team members to consistently perform at their best.
2. Are the individuals that work for your organisation self-directed?
Has your organisation given your team members an opportunity to talk about their career goals and what they want to do? It’s important for your leaders to set goals and objectives together with individuals. Ask them how they can contribute to achieve the goals your organisation has set. Again, it comes down to ownership and accountability, and if the individual has suggested a goal or objective, they’re much more likely to achieve it, than if they’re given one. The new world of work demands a responsiveness and agile that’s internally derived.
3. Does your performance review process need an overhaul?
Is it too long? Too cumbersome? A box ticking exercise? Some organisations such as Accenture and Deloitte are scrapping them altogether. There are cloud based career management systems available, such as PlanDo that are more intuitive, less expensive and really help HR professionals retain their key talent. It’s about HR professionals and leaders across the business having access to the right tools for the changing work environment.
4. Are you having quality career conversations?
Ask yourself if the tools you’re using today encourage quality conversations between ‘leaders’ and ‘individuals’ in your organisation. Standard performance systems encourage managers to only talk to their people about growth once or twice a year. Most organisations in Australia have invested in expensive outdated ‘talent management’ systems that reflect what the organisation wants from its employees, to ‘manage’ them. Today, this approach simply doesn’t work. ‘Talent’ can’t be managed. With a younger generation of workers coming through, they want to take control of their own career and not have an organisation dictate to them the path they need to take to progress. Managers are rapidly evolving into leader coaches and as such, they’ll also be wanting easy access to simple and effective tools that facilitate great conversations.
Finally, helping your team members with their career progression is not all down to you. Competition is fierce in many industries in Australia to attract the best talent and then once you have those individuals, it’s a common misconception that it’s down to HR professionals to nurture individuals and outline a path for progression. Wrong. Today, this is a shared responsibility. It’s about co-careering which means aligned values, purpose and goals. Building strengths, skills and ensuring there’s a great ‘fit’ is was matters more and more. At the end of the day, the individual is responsible for their own career, ensuring their experience and skills are documented and taken with them to their next employer.