Seeing Around Corners

by Rita McGrath

  Have Fun

  One program Robots & Pencils invests in is called FunLabs. This is a direct expression of the idea of crescive leadership. As the company says, in FunLabs “internal teams work on self-directed hypotheses focused on new and frontier technologies.” It is a cohort-based model, in which employees are deeply engaged in identifying technological inflection point possibilities they might work on. It is one way Robots & Pencils tries to stay on the cutting edge of what is coming next for their clients.

  The process begins with a “considerations report.” Every person at Robots & Pencils has the opportunity to provide input to the report on “frontier technologies and trends that look to be game-changers, what our talent is interested in diving into, and what we think will benefit our clients.” The considerations report next goes to a FunLabs committee, a group that is freshly composed for each FunLabs cycle. The committee’s task is to come up with three potential technologies or themes that they believe FunLabs should focus on for the next cycle. This is called the “outcomes menu.”

  Every employee has four weeks to put forward specific ideas for experiments that could be carried out based on the outcomes menu. The proposals are narrowed down to the top three ideas. The finalists then pitch their ideas in short, peppy presentations. The pitches are subject to a vote by the entire company. Rather than the vote being a beauty contest, there is a fairly nuanced voting structure. People who have been with the company longer get votes that carry more weight. Voting also takes into account whether the employees believe in the idea sufficiently strongly that they would leave current projects for the chance to work on it.

  Once the selection process is complete, a team of three is located in the lab for sixteen weeks to conduct the experiment. After that, the team is expected to share what they have learned through blogs, demonstrations, and a quarterly “learnings report.”

  Notice how this process reaches right out to the edges of the firm to gain insight, engagement, and inspiration, and how little of it is driven from the top down. Senior leadership does set the general goals, but key individuals and the voting process define what the actual projects will be.

  The first FunLabs venture was a product called Missions, which allows ordinary people to program workflows in Slack, the team collaboration tool that is increasingly used to provide what Gisbert Rühl has called “non-hierarchical communication” (see Chapter 7). Missions proved so compelling that Slack eventually acquired the product from Robots & Pencils, together with the team that built it.

  Here’s another interesting twist on conventional management practice: the employees who left Robots & Pencils to join Slack were offered an open door should they ever decide to return. No interviews, no application process, just the chance to come back to the company if and when that might make sense for them. In the meantime, the team is considered to be on “venture leave.”

  Moving on from the original articulation of what crescive leaders do, we can begin to define the practices that such individuals use to help their organizations navigate strategic inflection points.

  Articulate a General Strategic Direction to Guide the Firm Through Inflection Points

  Given the amount of change and disruption in the business environment, some have concluded that the entire enterprise of formulating strategy is to some extent futile. But my research suggests that a core strategy is more important now than ever before, as without real clarity on strategy and priorities, the crescive approach will disintegrate into rudderless activity.

  Let’s consider a potential inflection point that is gathering significant interest at the moment. Larry Fink, founder and CEO of BlackRock and the manager of over $6.3 trillion in assets, sent a much-talked-about letter to numerous CEOs in January of 2018. In it, he said that companies must “make a positive difference” to society and that he intended to hold their leaders accountable. Andrew Ross Sorkin of the New York Times termed the letter “an inflection point in the long-simmering argument over the state of global capitalism.”

  Fink announced that going forward, BlackRock would be investing in such a way that would take into account the long-range impact on society created by the companies they invest in. Fink is among a growing group of observers who decry economic short-termism by public companies. One idea in particular is being criticized as particularly unhealthy for capitalism in its current form, and that is the notion that companies should be run only in the interest of generating financial returns to their investors. I mentioned the practice of stock buybacks utilizing resources that are then not available for innovation in Chapter 7. The larger issue—the idea that investors are the only stakeholders that matter—is coming under increasing fire. It is being blamed for thwarting investment not only in innovation but also in people development and community creation. It has been blamed for the potential “end of the modern political order” by no less an expert than Martin Wolf of the Financial Times. The instruments used to implement the “shareholder-first” perspective, such as share repurchases, lavish stock-related executive compensation, and extracting as much profitability from existing assets as possible, have also been widely criticized for distorting market pricing and rewarding executives and investors to the detriment of others, such as long-term employees, who have a stake in what happens to companies.

  While the exact policies BlackRock is proposing are not spelled out in Fink’s letter, it is clear that investors are now paying attention. As guidance, the firm posted on its website a document that lays out the questions it may well be asking in meetings with management teams and boards. Note that BlackRock is not telling companies to take a specific action. Rather, it is attempting to put this issue on the agenda of its conversations with CEOs and other investors. Strategically, in other words, firms that desire BlackRock’s support need to have topics such as human capital management up front and center in terms of what they are paying attention to.

  Note the way in which the strategy has been executed. Yes, BlackRock has said that social purpose is important, but it has not dictated what ways it should show up in company strategies. That is up to the individual CEOs with whom the company wants to have strategic conversations.

  Interestingly, given the earlier discussion about women’s ways of leading and the importance of diverse perspectives in strategic thinking, one of BlackRock’s ambitions is to see that the companies it invests in put in place rigorous policies and practices to genuinely promote a diverse agenda.

  Maintain the Openness of the Organization to New and Discrepant Information

  Andy Grove articulated this point in his original work on strategic inflection points. Before the pattern is clear, he said, you have to let a certain amount of chaos reign. Lots of inputs, lots of ideas, and lots of arguments are essential. Only after you have sufficient information (the weak signals have become strong enough) should you coalesce the organization around a selected strategic path.

  Absolute candor—and the willingness to confront unpleasant information—is crucial here. Wishing things were different is a recipe for corporate disaster. A colleague of mine calls this “nostalgia as business strategy.” Skillful leaders recognize, as Alan Mulally of Ford is fond of saying, that “you can’t manage a secret.”

  Experts such as Ram Charan, Don Sull, and Nassim Nicholas Taleb have proposed similar reasons why candor is essential to anticipating a change that could be significant. Charan and Sull agree that leaders should search for the presence of anomalies—events that occur outside the expected range. Taking in lots of information is seen as critical to seeing emergent patterns. Taleb points out an interesting approach to getting high-quality information: “Don’t take advice from those who are not at risk” for the consequences of a possible inflection point.

  High-performing CEOs are unanimously alike in this one thing: they insist on total candor and brutal truth, even if it challenges their previously held assumptions. No, make that especially if it challenges their previously held assumptions. Andy Gr
ove (Intel), Lou Gerstner (IBM), and Alan Mulally (Ford) have all stressed in their management writings just how important this is.

  Crescive leaders listen to alarmists—those people who occasionally are dismissed as Cassandras for conveying bad news. Instead of immediately dismissing them, we should think of them instead as “helpful Cassandras,” who broaden the range of outcomes we are considering or who are exposed to subtle or key inputs that are different from those we normally see. The furor surrounding Facebook’s sale of users’ private data to advertisers and those who want to target individuals was not only anticipated but widely discussed by people like Danah Boyd years before it became public knowledge—as far back as 2006!

  Push Decision-Making as Close to the Edges as Possible

  General Stanley McChrystal is widely credited with having transformed the way US intelligence forces do their work. In his book Team of Teams, he describes how in the fight against Al Qaeda, even the military had to discover a different way of leading than the usual “command-and-control” that was their historical norm. He writes, “The wisest decisions are made by those closest to the problem—regardless of their seniority.”

  McChrystal has found that the answer to how senior leaders can become comfortable with the loss of control is by helping their teams develop shared consciousness. As he has said, “This means getting to a point where you trust almost anyone to make decisions on their own because you believe they have the same information and objectives you do.”

  Note how consistently this echoes Gail Goodman’s observations about how having an aligned team allows progress to move faster.

  Use Your Own Agenda and Networks to Make Lasting Changes

  Brian Murray, CEO of the publisher HarperCollins, recalls a flash of insight he had at the Frankfurt Book Fair in the 2002 time frame. He suddenly realized that once data and products could be digitized, the economics of the publishing business would be forever changed. As he put it in 2017,

  All of a sudden I realized that there was a sea change that was going to happen. I didn’t know how it was going to unfold, but that was one crystal clear memory . . . Digitization is still misunderstood. I don’t think our economy, our country, and corporations understand the impact of digital economics. Once you go to zero variable costs, everything changes. And so books, of all the media, being the smallest file that exists and the easiest to transmit, even at the time back then, you could see that there was going to be a fundamental shift in the business for book publishers . . . How can we survive and thrive as those ecosystems were being built up around us? There wasn’t an off-site, we didn’t get everybody in the room and groupthink it together, it was incremental over many years of trying to figure out how do you position the company and protect the company’s core business for an unknown future that was going to have a heavy digital component.

  Notice the language here: “it was incremental over many years.” Even though the insight that sparked the strategic activity arrived in a flash, the organizational transition to respond to it was an incremental, adaptive activity.

  Build Aligned and Trusting Teams That Can Move Quickly

  Alan Mulally’s management system has been meticulously documented, so I won’t spend much time on it here. The core of the system, though, was Mulally’s famous practice of having weekly review meetings at which team members were expected to reveal and work out problems they might be encountering in the business. As Mulally has said, the magic of this approach lies not in the weekly meeting, but in the cultural norms he insisted on.

  At a conference coordinated by the well-known executive coach Marshall Goldsmith in 2015, Mulally distributed a handout listing the guiding principles of a framework he calls “working together”:

  People first

  Everyone is included

  Compelling vision, comprehensive strategy, relentless implementation

  Clear performance goals

  One plan

  Facts and data

  Everyone knows the plan, the status and areas that need special attention

  Propose a plan, “find-a-way” attitude

  Respect, listen, help and appreciate each other

  Emotional resilience—trust the process

  Have fun . . . enjoy the journey and each other

  Note how similar these ideas are to the leadership principles mentioned throughout this book. Gail Goodman’s insistence that how executives “team,” rather than who they are, is important and Satya Nadella’s insight that Microsoft’s internally competitive norms required an overhaul are two examples.

  Simplify and Create a Rallying Cry

  As mentioned earlier, Sharon Price John stepped into the CEO role at Build-A-Bear Workshop at a pivotal time for the firm. For those not familiar with Build-A-Bear, it was a brilliant entrepreneurial startup. Founded by Maxine Clark in 1997, it was one of the first companies to create the concept of experiential retail. Clark had risen to the rank of president of Payless ShoeSource and, like many leaders who go through personal inflection points, over time realized that the “spark” was no longer there. So she left Payless and began to look for a new idea. The inspiration came, suitably enough, from a shopping trip with a child of a friend of hers. As she described it in a 2012 interview,

  One day, I was shopping with Katie Burkhardt, the daughter of one of my good friends, and her brother Jack, who collected Ty Beanie Babies. When we couldn’t find anything new, Katie picked up a Beanie Baby and said we could make one. She meant we could go home and make the small bears, but I heard something different. Her words gave me the idea to create a company that would allow people to create their own customized stuffed animals. I did some research and began putting together a plan.

  Build-A-Bear Workshop was incredibly successful in an era when conventional toy stores (KB Toys, FAO Schwarz, Child World, Zany Brainy, and so on) were closing and sales of toys were becoming concentrated in the Walmarts, Targets, and, yes, Toys “R” Uses of the world. But the Great Recession hurt it badly, and the company was at an inflection point. In 2013, Clark announced her intention to retire from her position as “Chief Executive Bear,” while remaining on the board of directors to provide continuity. Sharon Price John was hired as CEO in 2013.

  As John described at our Women in Leadership class in 2016, she framed the journey of being a turnaround CEO with the acronym SPARK:

  S: See it. Envisioning.

  P: Plan it.

  A: Action it.

  R: Repeat it.

  K: Keep the faith.

  Throughout this book, I have shown how seeing around corners, envisioning what could be, is where navigating inflection points begins. For John, the “seeing” has to become an “authentic and inspiring vision . . . You have to be able to tell the story about this business and why it exists,” she told the class. Build-A-Bear, she concluded, was in the business of selling memories—but it could also be more. The “more” was key to the company looking into a bigger presence in tourist locations, leveraging popular children’s attractions like the movie Frozen, extending the brand beyond its stores, and doing more to appeal to boys (and even grown-ups).

  In terms of “planning,” she used the upcoming twentieth anniversary of the brand in 2017 as a pivot point to attract the attention of the rest of the organization. She said of her team, “They believe they change kids’ lives. At the twenty-year mark, we’re going to be prepared for the next twenty years. In our twentieth year, our goal is to have our best year ever. I don’t know what that is yet, but we will make it happen.”

  The “action it” part of her acronym is difficult. As I have acknowledged throughout this book, it’s not enough to see the problems or inflection points; the critical ingredient of powering through them is to get the organization to do something about them, when most of the time people would prefer not to. To address this issue, John created a short mantra, which she called SDSS, short for “Stop doing stupid stuff.” If something doesn’t have value, in other words, stop d
oing it so that you can free up time for more important activities.

  Her lever to get the organization focused was a goal she announced when she first arrived. The company was losing something like $380 million a year. She said, “We are going to make a dollar” this year. The effect, she told the Women in Leadership class in 2016, was “magical. Everyone thought to themselves, ‘Well, I’m not going to be the person who spends that last dollar.’ We did it. We climbed back out, we broke even, and we were able to provide bonuses to people for their hard work.”

  Having achieved this first success, however, the organization could have lost momentum. The low-hanging and easy-to-understand things had been accomplished, and the path ahead was going to be much more difficult. At an all-hands meeting, John had one of the finance guys dress head to toe in a Gumby costume, symbolizing the need to be flexible, adaptive, and able to mold the situation.

  And, of course, there was endless “repetition” of these common themes. As John says, it isn’t so much that people resist what you’re trying to do, it’s that it is difficult to implement new behaviors that challenge longtime, taken-for-granted assumptions.

  Finally, John always “kept the faith” that it would be both possible and worthwhile to make these changes.

  Wartime Versus Peacetime CEOs

  As someone who is not so much a leadership expert as a strategy and innovation scholar, I have found the proliferation of leadership models in classic management texts to be rather frustrating. There is certainly no one best way of leading, no one personality that works best under all circumstances, no one leadership style that makes the most sense. And, of course, all our thoughts on leadership are colored by the “Halo Effect”—drawing conclusions about what works by seeing what has succeeded in the past, without remembering that it is entirely possible to follow the wrong practices and succeed anyway, or to do everything right and nonetheless fail. Exhibit A at the moment is the unexpected downfall of Carlos Ghosn, former CEO of Nissan, a leader who was lionized for years, but who suffered a stunning and sudden fall from grace in 2018 under allegations of financial misconduct.