The Global CEO Outlook (KPMG 2016) explores the strategic dilemmas leaders worldwide are grappling with today and reveals a certain mood: real, transformational, change is either “now or never” with many CEOs expecting their organisations to become “significantly different within the next 3 years.” Yet old dangers continue to lurk.
Seventy percent of change and transformation initiatives continue to fail with methodologies stuck in a pre-digital era. Continued efforts to reverse engineer ‘ideal’ future states in a volatile and complex world promise little improvement on these failure rates. Far from trying to anticipate what might happen CEOs must start increasing their awareness of what is happening in order to disrupt emerging threats, exploit opportunities and accelerate evolutionary growth.
The challenges facing entire industries are unlike any they’ve faced before. Consulting a major banking client on a communications program a Dutch consultancy contact of mine recognised that “due to the financial crisis, the reputation of the financial sector has been subject to extreme change. In the space of a few months the beauty transformed into a beast.” What do you do when your industry is suddenly felt to be perverse - how do you cope when the lessons of the past provide scant guidance?
As leaders increasingly “recognise that they are now handling issues that they have never grappled with before” they see that fresh approaches are needed. An example of such an approach came from a Russian oligarch I worked with following the 2008 crisis, who actively engaged his own diverse panel of experts to scan the horizon for emerging waves he could rise with, then get off before they crashed. Accessing unstructured, distributed cognition (the ‘wisdom of crowds’) in this way builds on a powerful concept: “the future is already here — it's just not very evenly distributed”
Despite the disruption CEOs remain “increasingly optimistic that they can transform their organisation[s] to enable [them] to capture the opportunity that the future holds.” Yet this new, uncertain world is witnessing record levels of corporate churn: while 50 years ago the average lifespan of a S&P 500 company was 60 years, today it’s just 18. And the KPMG Global CEO Outlook found that the less experienced CEOs are the ones who are less concerned about disruption potential, confident they have the strategies to navigate it.
Perhaps never have Mark Twain’s words of caution been more apt:
‘It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.’
We’re going to solve the most difficult problem your organisation has. And we’re going to do it without any investment. We’re also going to leverage the best untapped resources you’ve got. And we’ll do all this without creating extra work for you, the leader.
The catch is you must be able to handle the truth of what we reveal to you. And not every leader can. Many prefer to appear certain even if wrong, rather than being right if it means seeming uncertain. It seems to be a political thing.
But if you’re a secure leader and can handle truth in all it’s glorious messiness then we can help unpack the issues keeping you awake at night and deal effectively with them.
Don’t be so sure …
I made this exact offer to an executive at a major organisation. ‘Yes this is a major problem we haven’t been able to solve’ he replied. ‘Yes’ he also said in response to a demonstration, ‘I can how it works. But …’ he declared ‘budgets are a problem.’ A common refrain!
So I offered it for free.
I’m still waiting…
Budgets aren’t really his problem. Power is. He’s putting fires out everywhere with the tools he’s already got and their ineffectiveness makes him busy - and this provides an illusion of value. But now a leader in a rival industry - who can handle the truth - is starting to do it? What effect will this have on our reluctant executive? Is he better at playing catch up than early adopting?
Don’t let this happen to you. Tell us what your problem is … we’ll show you how we can help.
Russia Direct recently ran an interview with Oleg Buklemishev, former assistant to the Finance Minister and Prime Minister of Russia, where he explained what needed to happen for the Russian economy to start growing again. Though the article contains great insights it fails to address the most critical questions of all - how can businesses can do anything about this at the local level?
Learning to see
“During a crisis" the article starts "it's possible to see clearly what one’s weaknesses are, and even at the current stage, Russia can actually turn itself into a new and successful economy”
Arguably, the biggest problem for Russia with the 2008 crises was that it was over too soon. The Russian economy this century was a ‘tornado’ and even turkeys fly in them. When the challenges of 2009 arrived it triggered many cold hard stares at the real (in)capabilities of Russian businesses (I spent the year at the heart of one large Russian business doing this). Yet, by 2010 ‘green shoots’ of recovery conned people back into the mindset that one only needed to ‘turn up and take the money lying on the table’ again (as one executive described it to me). So, the economy didn’t reform or diversify (again): Russia wasted its crisis.
However, the current L-shaped crisis engulfing Russia doesn’t appear to have an exit any time soon. Though no-one really knows where the oil price will be in 12 months the fundamentals clearly aren’t good  and, as this time last year showed, whither oil goes the Ruble follows. This uncertainty is placing immense pressure on businesses and while some - without the aid of 200kph winds - will go to the wall, others will learn how to adapt and prosper. The question is - which one will your business be?
For many business leaders the insurmountable challenge today is ‘how can we try something different when we don’t have any spare resources?’
Starvation of resources - like pressure - is a necessary but insufficient pre-condition for breakthrough growth. The status quo of incremental improvement is only challenged when the external environment makes that change non-negotiable. Further, it’s only a mis-match between ‘current’ and ‘required’ capabilities that triggers fresh ways of doing things. Without crises we would never need do anything differently, for we'd have enough resources to justify doing things the way we’d always done them.
Crises are nature's way of telling you it’s time to evolve
Russia has been hit by some of the biggest crisis to hit any country (outside of a war on its territory) in recent history (1991, 1998, 2008, 2014) and, while calls to diversify the economy have continually been made from the very top, it’s probably only from the bottom that the meaningful change that will turn Russia into a new and successful economy can happen. So, taking Mr. Buklemishev’s interview as a starting point, this blog over the next few issues will explore in more detail what businesses can do about the challenges they face today - not in spite of the pressure and absence of resources, but because of them.
If any of the ideas in this series interests you please contact me at firstname.lastname@example.org for a discussion about how you can apply them to help your business adapt better to the current realities of this market.
A fourth mobile operator will launch in Moscow this month, jump-starting a price war by ‘aggressively undercutting its rivals.’ If you're in Moscow you may have seen the billboards?
Good news for consumers, if the expected 30% price fall materialises. Less good for the established mobile operators. Their ‘cozy’ world is about to be disrupted as dissatisfied customers - one-fifth of the entire market - exit through their doors first.
Are the big boys worried? Apparently not. Aside from their infrastructure advantage they are confident that ‘client loyalty’ will ensure they withstand any threat. But are they right?
As Mark Twain (is often wrongly attributed to have) put it “It ain’t what we don’t know that gets us into trouble, but what we think for sure that just ain’t so!”
Claims of customer loyalty are not idle boasts. Russia’s telecoms industry has some of the sharpest marketing professionals in the game (witness Beeline’s rapid ascent from obscurity to global brand). They will all have hard evidence, drawn from years of customer research, that suggests the Tele2 threat is nothing for them to lose sleep over.
But what if all their data is wrong?
CFO pressure forced marketing departments to rapidly improve over the last decade. Campaigns are now run with one eye to their return on investment. The focus on hard data has pulled marketing away from its core purpose - understanding why people behave the way they do.
A few years ago Starbucks wanted to understand which customers drank which coffees in its shops. When buying coffee customers were incentivised to fill out a short questionnaire asking their age, occupation and ‘how do you have your coffee?’
On most measures the campaign was a success - except one. The results were confusing. Most people had said they have their coffee black, but the point-of-sales systems were showing that almost no-one has black coffee in their shops. Something was wrong.
The answer is that it’s our perception about how humans behave that is wrong.
In contrast to the default thinking of conventional economists and management theorists, humans are not rational, self-interested actors in full possession of perfect information. When asked for what we do, (or what we think we do), we are utterly unreliable (e.g. we like our coffee black, but don’t order that).
When asked a question by someone face to face we consciously or sub-consciously gift the answers we think people want to hear, or game the system to project how we want to be seen. It’s one of the reasons focus groups are fatefully flawed in minutes.
‘Do I love your brand?’ Well, I don’t want to disappoint you so, ok i’ll say it. Am I satisfied with your offering? Well, sometimes I am, sometimes I’m not - how do I record that on a 5 point scale? (Most people will discover a safe score, which is why your customer satisfaction scores probably hover around a 4 on a 5 point scale or 7 on a 10 point scale).
So Starbucks changed their question to ‘how did you have your coffee today.’ Removing opinion (and therefore bias) from responses they focused customers on their experience. The result was a set of figures that bore a close resemblance to the hard numbers coming out of the cash registers.
The only true test of customer loyalty is how people act: did they sign on again, then they’re loyal, at least for now. True tests of customer loyalty are how people act, NOT how people tell you they will act.
So, if the telecom majors are confident that customer loyalty (rather than customer inertia) will deflect the competitive threat of Tele2, but those numbers are built on people’s opinions - then it may be time to re-think. The future isn’t just an extension of the past.
Establishing a weak signal detection unit will provide real-time experience (not opinion) based evidence of emerging shifts in attitudes and behaviours. This will support timely responses if the market dies start to be disrupted on price.
Make sure you’re not caught out by what you thought you knew for sure, but that just isn’t so!
In a complex and crisis-ridden world ‘lessons of the past' are unreliable guides for future action. While ‘management by objectives’ doesn’t equip organisations with the agility or awareness to respond to emergent threats and opportunities. Yet, management thinking 1.0 and 2.0 still dominate organisations today.
1.0 Scientific Management - views the organisation as a machine and its people as component parts. Their work can be commanded and controlled through rigorous automation and focus on efficiency. The result are economies of scale that dominated management thinking for much of the 20th century.
2.0 Business Process Re-engineering - challenged the status quo, demonstrating that organisations could define future outcomes and goals, or values and behaviours for staff to adopt. While scalable information and communication technology could drive improved performance through metrics. This is the dominant management thinking of today.
Management 2.0 has a fundamental flaw - it sees the world as a predictable place
In 1994 Leading Change was published in which Prof. John Kotter highlighted a damning statistic: 70% of all change management programs fail. Yet, despite an assembly line of case studies and continuous BPR improvements in two decades since this figure hasn't improved. For organisations are collections of people and people are rarely interested in having change done to them. So faced with a need to 'adapt or die' business leaders today face a stark choice:
Find a way to do Management 2.0 better or find a more appropriate approach
Management 3.0 Sensemaking is a naturalised approach to leading in times of change. Rather than projecting an idealised future it seeks to understand and manage the evolutionary potential of the present. It puts people first - rather than processes - and taps into mass collaboration to bring the collective intelligence of the entire organisation (and beyond) into play. In short, management 3.0 replicates how the human brain - the most effective adaptive tool in the world - works rather than imitating the machines it creates.
Management 3.0 is already here and it will favour those quickest to adapt.
Shape the Future
Don't just adapt to it