Tuesday, February 26, 2013

Global Leadership- A 100th Entry Milestone

This blog is the 100th entry since I started this effort eleven months ago.  I realize the blog is arranged chronologically.  To assist those who may have newly joined the readership or who would welcome a table of contents by subject, I've decided to highlight some of the series I've done over the last year.  To find any particular entry, go to the bottom of the right side of the blog and you will see the "blog archive".  All of the blogs highlighted below are 2012.  If you click on "2012" the months will then be shown and you can find a particular entry on a specific date.  Enjoy.

Global Standardization and Its Challenges
"The Case for Global Standardization" 13 March
"Why is Standardization So Hard?"     14 March
"Why People Don't Like Standardization"-15 March
"Standardization:  What's A Leader To do?"- 16 March
"The Trap of Customization"                 -20 March
"Standardization as a Source of Innovation" 21 March

Diversity and Inclusion
"Understand and be able to articulate the business case for Diversity"- 23 March
" Deepen your Cultural Awareness" - 26/27 March
" Build a diverse team"-  28 March, 10/11 April
" Manage divergent conversations"-  12 April
" Converge the divergent conversation" 16 April

Mastering Technology
"Overview"- 19 April
"Mastering Technology I-The 24/7 challenge"-23 April
"Mastering Technology II- Email Management"-24 April
"Mastering Technology III-The Large Scale Audience"- 26 April

Errors, Misjudgments and Dishonesty 
"Impact on those left behind"- 6 July
"Picking up the pieces" -  10 July, 30 July
"Distinguishing among blameless error, blameful error, and dishonesty"- 17 July
"Human Frailty" - 19 July
"Creating a High Reliability Environment"- 23,24,26,27 July
"Dishonesty: Lessons from Locksmiths"- 7 August
"Black Swans-High Impact, Low Probability Events" - 27 August

Global Leadership and the Large Scale Enterprise- An ExxonMobil Example
"Operational Excellence and Project Execution"- 17 Sept
"Sustaining Growth"                                           - 18 Sept
" Growth and Strategic Choices"                        - 19/20 Sept
"Anticipation and the Time Horizon"                 - 25 Sept
"Safety"                                                                -26 Sept
"Security"                                                             -16 October


Monday, February 25, 2013

"We are all prisoners of our own experiences": Sorting Out the Signal from the Noise.

I've referred to Nate Silver's book "The Signal and The Noise" a couple of times in the last few postings.  Although Silver's book is fundamentally about using data to make predictions, I believe it is an important contribution to a very important leadership skill..that of critical thinking.

Silver has gained notoriety in the USA for his ability to accurately predict the outcomes of US elections.  A simple summary of the book's contents would be he describes how we select data, interpret data, evaluate risk and uncertainty and how we use data to make decisions and predictions.  In addition to political forecasts, he uses a wide variety of entertaining examples including US professional baseball, hurricane prediction, earthquake prediction, economic forecasts, weather forecasts, climate change, chess and poker to make his points.  For those who love quantitative analysis, there are an abundance of "crunchy" data-driven examples.

Although leaders aren't necessarily in the "forecasting business" in the same way a weather forecaster or a political pollster is, anticipation is an important leadership function.  The larger the organization and the more senior the leader the longer the time horizon requiring some level of forecasting.

In addition to the "correlation does not imply causation" point I made in the last blog here are some examples from the book especially pertinent to leaders:

On data selection:
"The story the data tells us is often the one we'd like to hear, and we usually make sure it has a happy ending"

"The blind spots in our thinking are usually of our own making and they can get worse as we get older"

"We tend to latch on to data that supports our theory"

"When we can't fit a square peg into a round hole we usually blame the peg"

"We all have beliefs and biases, forged from some combination of our experiences, our values, our knowledge and perhaps our political or professional agenda"

"We will never make perfectly objective predictions.  They will always be tainted by a subjective point of view."

On confidence:

"Over-confidence is a huge problem in any field in which prediction is involved"

"We must accept the fallibility of our judgment if we are to come to more accurate predictions"

"Most of us are over confident when we make predictions"

"In many walks of life, expressions of uncertainty are interpreted as a sign of weakness"

"We often mistake the unfamiliar for the improbable."

"When a prediction about a complex phenomenon is expressed with a great deal of confidence, it may be a sign the forecaster has not thought through the problem carefully."

The leadership lessons and tips that emerge from these insights:

Critical thinking is a skill that comes from practice...it isn't a God-given talent or the product of a massive intellect.  Some tips on practice:

-State your own assumptions as well as challenging those of others.  
-Publicly test your  assumptions and beliefs.  "This is my experience which led me to this opinion".  "What's your reaction to what I'm saying?"   
-Inquire of others..."Help me understand" "What causes you to conclude?" "I'm coming to a different conclusion", "Say more about this" "Is there an alternative explanation?"


Wednesday, February 20, 2013

Correlation Does Not Imply Causation-Finding the Balance between Curiosity and Skepticism

Currently there is a beer commercial that often airs on televised sporting events in the US. In this commercial some of the fans in attendance convince a fellow fan that if they all point their beer bottle labels at the field goal kicker it will create a force field that will ensure the kick is successful. When the kick is successful, the fans stand up and cheer, including the newly convinced fan with a slightly bewildered look on his face. The Stevie Wonder song "Superstition" plays while a narrator says "It's only weird if it doesn't work." This commercial is a humorous illustration of the "correlation doe not imply causation" principle. As Nate Silver explains in his book The Signal and the Noise  "Just because two variables have a relationship to each other does not mean that one causes the other."

It's a simple logic error but an easy one to make. Today I heard a speaker make exactly the same kind of logic error...implying causation because between related variables...on a much more serious subject than beer labels and football kicks.

I attended a luncheon today with the members of one of my network of colleagues.  The guest speaker presented a theory about a fairly complicated series of events over the last ten years.  Of course he didn't present it as a theory but more as fact....the result of his ability to stitch together a pattern from a large amount of data.  The presentation also had a undertone...a theme really... of conspiracy.  I long ago became skeptical of conspiracy theorists, and today was no exception.

The speaker very convincingly weaved together a narrative connecting seemingly unconnected things.  Not only did he have a story to tell but he was impressive in his ability to present data to support his point of view and to imply connections among the data points.  I could tell he was having an impact on the audience and the post luncheon comments reinforced my perception...."Wow, that was amazing!"  "It's a frightening this has been happening and no one noticed" "The politicians and press don't want this revealed."

Needless to say, I left the meeting disturbed...as much at how easily my fellow attendees accepted his theory...as I was about the theory itself.  It wasn't that attendees found the story compelling.  What bothered me was the total lack of skepticism.  I think this problem...how to react to a well presented, data supported story, has broad applications and should be of interest to leaders. 

We all have beliefs and biases... mental models... of how the world works.  Mental models aren't good or bad.  They help us make sense of a complicated world with more data than any one person can absorb.  The problem isn't the model, it's what the model does.  It allows information in that supports our model and rejects data that doesn't fit the model.  As Silver says "The story the data tells us is often the one we'd like to hear..."

The lesson for the leader is whenever someone tells a compelling story supported by data and presented passionately...especially when it is presented passionately.....put your skeptical antenna up.  The leader also has to be willing to challenge their own mental models. It could be that the leader's reflexive skepticism is because the data doesn't fit their own mental model.  
Great leaders find the balance between curiosity and skepticism.  Refined engagement skills help in either instance...Challenge assumptions, but also inquire..."Help me understand"   "What causes you to conclude?" "I'm coming to a different conclusion", "Say more about this" Is there an alternative explanation?"


Friday, February 15, 2013

Discontinuous Change and the Leader-Part IV-Building Capability

When there is a major strategic shift in a business....from pure brick-and-mortar banking to one that includes electronic banking...or from oil and gas production to renewable energy...or from running bookstores to operating an on-line, downloadable electronic library as examples... a very different set of capabilities and skills is often required.  In some respects, identifying the opportunity is the easy part.  Building the capability to exploit the opportunity is where the real business value lies.

One approach is to build the capability organically.  By that I mean broaden the portfolio of the existing business to include the new opportunity.  This approach also means re-skilling existing staff and often brings a significant change management challenge.  In addition to or in lieu of re-skilling existing staff one might consider external hiring from successful companies in the new area.  Often, putting a young high-potential leader in charge is another way to bring energy to the effort and attract internal talent.  Convincing high potential staff to take a career risk has its own challenges.

Another approach is to set up an entirely autonomous business unit where those capabilities can be organically built, organizational norms established and new values reinforced if necessary...establish a different culture or sub-culture if you will.

Another alternative, probably the fastest, is through mergers and acquisitions...basically go out and buy the capability that someone else has already established.  This too can be tricky.  Often the company being acquired is a start-up where the employees sacrifice salary for a large equity stake in the company.  When the start-up is acquired, keeping staff who have just become wealthy can be a challenge.  This is why retention agreements of key staff are often a key acquisition negotiating point.

All of this to say, the leader has to be thoughtful and purposeful about how they will build the new capability to deliver....it doesn't happen automatically as a result of identifying a new high-value opportunity.

Wednesday, February 13, 2013

Discontinuous Change and the Leader-Part III-Identifying Opportunities

In part I of this series on discontinuous change and leadership, I used examples to demonstrate how leaders can re-frame their business to grow and remain competitive. In part II,  I identified the central challenges of re-framing a business...bridging skill gaps, building capability and the change management required to succeed. In this third entry, I want to talk about how to identify the opportunities in the first place.

In retrospect, some of the business re-framing I've described seem simple or obvious or the result of a brilliant flash of insight.  Actually, there is always a huge element of uncertainty about the direction a business should pursue.  As Nicholas Singer writes in The Signal and the Noise, "...the big ideas don't necessarily start out that way.  It's more often with small, incremental, and sometimes even accidental steps that we make progress."

The best, most comprehensive way to think about this I've found is in the book Innovation Tournaments:  Creating and Selecting Exceptional Opportunities by Christian Terweisch and Karl Ulrich.  I was exposed to their work while serving on the Wharton Executive Education Advisory Board.  The central idea of tournaments is that you "begin with a relatively large number of 'contestants' and apply filters in a series of rounds to identify 'winners'."  "Contestants" compete but only the fittest survive.  Some current popular television shows American Idol, Britain's Got Talent, The X factor and The Voice  all use a "tournament" format to identify the best prospects. 

Surprisingly to some, fields as diverse as new drug development, the energy business, and entertainment all use some form of a "tournament" to identify both incremental and game-changing opportunities.  To use an example from one of my most recent work experiences, no one really knows which of the renewable energy sources will be most important in the energy mix of the future...solar, hydrogen, wind, or biofuels.  Today, all the major energy companies are experimenting...conducting their own tournament if you will...to determine the which of those technologies will be important to their future growth.

My point of this blog is that if you are a business leader and you haven't been struck by some game-changing insight for your business, not to worry.... business re-framing isn't about a blinding flash of brilliance that is the sole province of exceptionally talented leaders.  It's more often about having a deliberate process to evaluate and experiment with emerging opportunities....the kind of process any leader can employ.  


Tuesday, February 12, 2013

Abraham Lincoln and Decision Making

The focus of this blog is leadership in a global context.  As such I try to use examples from my own experiences leading global teams, examples from multiple cultures or suggest leadership lessons that I believe to be universal. Although today's focus is a US example, I believe it falls into the category of a universal leadership lesson.

Today in the United States we celebrate the birthday of 19th Century US President, Abraham Lincoln.  Lincoln is widely regarded by historians as one of the most effectivet two or three of the forty-four men who have been elected to that office.

Professor Michael Roberto's leadership blog for today eloquently identifies some important leadership behaviors around decision making and the move to implementation from one of Lincoln's key decisions.  Michael highlights the importance of the sense of "fairness" that is important in decision making and then what great leaders do AFTER a decision is made.  I highly recommend the full text of Michael's blog provided at the link.  

Monday, February 11, 2013

Discontinuous Change and the Role of Leaders-Part II

About 15 years ago, in my brief exposure to the banking industry, there was a lot of concern and curiosity about how the Internet was going to affect the banking business.  Based on what's happened over the last 15 years, it's hard to remember that the commercial use of the Internet was in it's very early days then.

Although ATM's were already present, the idea of on-line personal banking or self-directed investing through platforms like eTrade was almost unknown. In one session, several of us were trying to convince a group of bank leaders that the Internet would have a transformative effect on their business model.  After some half-hearted attempts to convince us people really enjoyed standing in line at brick-and-mortar banks for routine transactions or paying high brokerage fees for information that was readily available to everyone, one man summarized the problem.  I'll paraphrase from my memory.

"I've been in the financial services business for my entire career.  I started out as a repo man repossessing cars off of hockey lots at 4 in the morning.  I know enough about the financial services business to believe that you guys are probably right, but here's my problem.  If I'm to be a banker in this new world I have to change the way I think about just about everything.  It requires building of skills and capabilities neither me nor any of my staff have right now.  I'm 55 years old and I don't have time to build a whole new skill set. This Internet thing will take some time to develop and in the meantime the bank is going to continue to need me and people like me.  I'll leave electronic banking thing to others, and count on the bank to take care of me when they don't need guys like me anymore"

His story is the essence of the leadership challenge.  It's not enough for a visionary leader to say "We're not in the railroad business, we're in the transportation business" or  "We're not in the soft drink business we're in the liquid consumables business" or "We're not in the motion picture business, we're in the entertainment business".  Seeing the business in a completely different way also often means a completely different skill set and collective capabilities.  Building those capabilities doesn't happen magically because the leader describes the business differently and it's not often easy for a workforce to pivot to a new model.  In Part III of this series on Discontinuous Change, I'll explore what the leader can do to make the kind of shift required.

Friday, February 8, 2013

Discontinuous change and the Role of Leaders

During a recent brief holiday, I visited a whaling museum.  This museum chronicled every aspect of the development of the whaling industry from the late 1700's to it's decline in the late 1800's.  This museum made it clear that the whaling industry declined, not because of an exhaustion of a finite resource or environmental concerns. Although baleen, the fingernail-like material that comprises the jawbone, was used in the production of collar stays, buggy whips, parasol ribs and corset stays, the decline of the whaling business wasn't driven by a decline in demand for these products.. It was due to the discovery of of oil.  The primary financial driver of the whaling business was the demand for whale oil derivatives as a source of light.  Petroleum replaced whale oil as a source of light and the whaling business largely disappeared.

Conversely, those in the petroleum business in the late 1800's faced a similar challenge as electricity replaced petroleum as a source of artificial light.  They were able to shift their focus from being in the "artificial light business" to being in the energy business supporting the development of the internal combustion engine and the shift from coal to oil in large scale shipping.

The classic example of this challenge often cited is becoming obsolete like those who were in the "buggy whip" business in the 1920's.  More recently, Roberto Goizueta as CEO of Coca-Cola drove a shift to acquire a greater share of the "liquid consumable market" rather than just the "soft drink market". This has led them to develop "a wide choice of products so people can decide which of our beverages best meet their needs and lifestyle"

Theodore Levitt, in a classic titled "Marketing Myopia" makes the case that these dramatic changes don't have to be catastrophic for a business.  He uses examples of railroads declining not because of the automobile but because their leaders could not see themselves more broadly in the transportation business.  Or Hollywood producers who were overtaken by television because they saw themselves as in the motion picture business rather than the entertainment business.  I've attached a link to a 20 page excerpt of his ground breaking work.  The book itself is only 90 pages long, available in paper back thru Amazon and well worth the short read.

Levitt's point, and mine, is that leaders make a difference.  Businesses and enterprises can be affected by shifts in technology, or market saturation but their growth and sustainability is dependant on leadership...not inevitable consequences of developments beyond their control.