Digital transformation – will CEOs ask the right questions?

When the motorcar was new, people watched with amazement initially and many could only yearn to own one. But after several decades, the car became the norm and most people could either own a car or have access to one.  Likewise, when the mobile phone first appeared in the late 1980s, people looked on with amazement, but within a 20-year period, the mobile phone became an essential accessory for a big percentage of the world’s population.

Next wave of change

We are now at the cusp of a similar quantum change, namely the digital transformation of enterprises in both private sector and government. Some of this has been emerging over the past several years, but recent developments have now placed this opportunity front and centre for enterprises. These include the explosive growth of mobile devices, the rise of big data and the rapidly emerging focus of analytics for radically improved decision making. Many enterprises are still looking on with interest, but to stay competitive or to create a sustainable model, enterprises need to act now and elevate digital transformation to a new level of urgency.

Technology itself has made extraordinary strides in the past five years and technology change over the next 10-15 years will have a profound impact for enterprises at many levels. A McKinsey report  earlier this year called “Disruptive technologies: Advances that will transform life, business, and the global economy” highlights some of the developments we can expect. By 2025, the report anticipates that some 2-3 billion more people will have access to the internet, and the automation of knowledge work will drive additional economic value of over $5 trillion. These stunning macro trends will continue to shape and re-shape the global economy

Re-inventing enterprises

But how will this impact various industries and enterprises across the economy at a more local level? In Australia, a report has just been released by IBM / NIEIR titled “Reinventing Australian
Enterprises for the
Digital Economy”. Through economic modeling to 2025, this excellent piece of analysis highlights the impact of digital transformation across the Australian economy, and across seven industry segments in particular.

It shows quite dramatically the difference between enterprises that invest and drive a strong digital transformation agenda versus those in the same industry who stand back from such investment, and take a more measured approach over the next 12 years or so. It highlights that in four industries alone the total market capitalisation gap between these “leaders” and “laggards” is some $270 billion to 2025.

The analysis of “leaders” and “laggards” in this report provides two underlying messages that are critical to enterprises going forward. One is that if enterprises don’t invest in digital transformation now, they will significantly fall behind competitors in the next 12-year period to 2025. But more importantly is the message that if enterprises don’t invest now, it may be difficult if not impossible to catch-up with industry leaders in this space even if they were determined to do so. In other words, the compounding lag with industry leaders may cause long-term damage or possible demise of the lagging enterprise.

CEOs response

CEOs have thought about the digital economy in some form, and they will rightly ask questions of their C-suite executives around the plan to address the digital economy, the timescale required and the best investment profile going forward.

But are these the right questions? Are these sufficient to shape different behaviours around digital transformation, and to inject greater urgency and focus into the debate and subsequent actions for the enterprise? CEOs will need to engage actively in the digital transformation dialogue in their enterprise, and drive three questions in particular:

1. What is the digital transformation narrative for the enterprise?

The narrative is not a plan, but rather an expression of the look and shape of the enterprise in say 2025 underpinned by digital transformation. It would typically be no more than say two pages embracing language and sentiment such as “imagine our enterprise if we reduced our customer churn by 50%” or “…imagine our enterprise if we moved from 5th position in market share to 1^st position”. This is about stretching the thinking and taking the conversation to a totally new level, and challenging the existing organisation capabilities. It is envisioning how digital transformation can take the enterprise to a new level of value to customers, employees and stakeholders.

2. What is the cost of not doing digital transformation?

This is at the heart of the competitive landscape. Opportunities lost can be not only costly in a direct sense, but also create a challenge in terms of catching up with competition. How are competitors setup to undertake digital transformation that can change the way the industry competes? It only needs one competitor to change the way business is done, such as Amazon setting up and operating a model that ultimately created terminal problems for groups like Borders.

3. What should the enterprise stop doing?

Enterprises find plenty of initiatives and projects to undertake. Even in difficult economic times, there is usually a long list of initiatives on the table competing for funds, resources and management attention. But how do they line-up against the digital transformation narrative? How do they add real value for customers, employees and stakeholders in the future? If the answer is they don’t add value or it is marginal, they should be stopped. Deciding what not to do is an important management capability so the focus can be on the items that will drive value in line with the digital transformation narrative.

The value around digital transformation needs to be clearly articulated. Enterprises will need to invest, but it is worth heeding a comment from Warren Buffett, namely “Price is what you pay – but value is what you get.”

 

The relevance of organisation design in the digital era

Organisations go through various phases of re-organising themselves. These events are often heralded as helping to get closer to customers or re-alignment of skills or a strategic re-structuring for the future. Communications teams are usually working overtime in these situations to ensure the right messages are shaped and delivered to the organisation and to the market. These events almost always occur as a new CEO is appointed so that the organisation is shaped in the way the new CEO wants to drive it.

There was a time when the organisation structure represented the way the place actually worked. That is, information and authority were both arranged hierarchically, and the flow of communications up and down the line also followed this pattern. The organisation structure was effectively the way of doing business. Flow of information from customers through to various parts of the business and back again could be slow and tortuous.

But information systems changed all that. As big systems came of age 15 or so years ago, no longer did the vertical flow of information dictate how organisations worked. Indeed, big systems meant that more information was available to more people at multiple levels. As a result, organisations changed so that integrating mechanisms across the business, cross-functional teams and the networking organisation became in vogue. The concept of the customer centric organisation emerged.

But the internet and digital era has taken this to an entirely new level, and the pace of change continues to accelerate. Information can now be accessed ubiquitously and from multiple devices from virtually any location. Organisations have become far more connected both within the formal structure and beyond its boundaries. In turn, this has provided real-time and highly visible information about customer service levels and customer sentiment, and performance measures in many areas including suppliers. This widespread connectivity today means that traditional hierarchy is somewhat superseded in the digital era.

What does this mean for the way that organisations are designed, and how does this impact the re-structuring of businesses in today’s world?

 1. Organisation design is not dead

How the organization is shaped and who reports to whom is still a vital feature of any business. This can have a powerful impact for how customers are engaged by the organisation, how decisions are made, how talent is identified and developed, and how “pay and rations” are managed. Reporting lines also play a key role in developing future leaders and creating growth opportunities through promotion and larger responsibilities.

2. Organisation design competes head-on with people connection

The organization of today operates far more around the connection of people across the business than simply the organization structure. Employees are connected not only within their organization at multiple levels, but also with outside suppliers and stakeholders. Most importantly, employees have far more information than ever before about customer service and delivery issues, and can have visibility of sentiments from customers directly via social media or chat rooms.

3. Organisation design must embrace the agility mantra

Many organisations lament the frequency of re-structuring. Indeed, we often hear the complaint that “here we go again, yet another shifting of the deck chairs”. But in reality, frequent organisation changes provide a re-fresh and new opportunities. Provided they are adding to better customer engagement in some way, directly or indirectly, they should be a regular feature of any organisation. Agility of the organisation to absorb and grow through change is an important feature of success.

Whilst organisation design may not be on quite the pedestal it occupied in years gone by, it remains an important part of the mix in the digital era.

Are you in the transactions or the solutions business – or both?

For many businesses especially in the business-to-consumer space, the volume of transactions is a key determinant of underlying performance. Whether it be the volume of items sold in a department store, or the number of new loans for a bank, or the number of tickets sold to passengers for an airline, but the common factor is the need for a base load of transactional activity. This is typically the bread and butter of the organisation, and managing these fundamentals underpins its success.

At the other end of the scale are typically business-to-business organisations whose offers are tailored solutions that are unique to each of their customers. Many project based businesses in engineering and consulting for example fit this model.

But transactional businesses can find themselves in the commodity trap. That is, they can do the transactional activity very well, but this may not be enough to be competitive or to maintain margins at a healthy level.

Enter the solutions business, or at least the business that places a strong emphasis on solutions to provide differentiation in the market. Many industries are experiencing a surge in activity around business solutions.

Solutions business in different industries

Take travel agencies as an example. This industry was challenged from the very early days of the internet. Over the past ten years in particular, the traditional lifeblood of the industry, namely sales of airline tickets, shifted heavily online and became commoditized.  Whilst this is still very much the case, we also see a growing emphasis on more of a solutions approach. As the global economy has grown and as the cost of airline travel has fallen dramatically in real terms, key players in the industry are bundling, shaping and delivering broader based offerings or solutions to customers. For instance, specialized tours or packaged adventures are in demand. Their point of difference is in bringing the component parts together easier and cheaper than a customer can do alone, and in different configurations.

Retail is also an interesting case in point. The so-called “big box” retailers in the home improvement segment do much more than sell hammers and nails. They provide solutions to many different facets of their business. For example, they might provide an offer of how to use their products to build a whole new patio or how to landscape the garden. In other words, they are not just selling the component pieces, but they are providing a broader solution to meet a bigger customer need.

Even supermarkets have quietly ventured into this space. Whilst their business is highly transactional, some organisations have leveraged the whole recipe approach including the mix and match of beverages. In other words, the customer can participate in a broader offering than simply the same old shopping list week to week.

Banks, law firms, technology organisations and many firms in the services sector have attempted to re-shape their offers to become more solutions based. The aim is to provide customers greater value and to expand market share.

The challenge of driving harder in solutions

But why is the solutions approach not more prevalent and why don’t we hear of more widespread success stories on this front? Indeed, all organizations profess to seek differentiation in some form, and to provide even better value to their customers. Moving to more of a solutions focus makes intuitive sense and has some very obvious benefits, including customer satisfaction and loyalty.

However, it is not as simple as it sounds, and there are two significant challenges to be addressed.

Brand

Any organization is seen in the eyes if its customers as having a certain brand image and profile. There is a whole science around brand management which we will not be going into here, but suffice to say that moving into a higher value space such as broader solutions can create some real questions in the eyes of customers. Indeed, it can be confusing in their eyes.

For instance, a firm that specialises in the routine preparation of tax statements for individuals and small businesses may struggle to introduce a broader solution around say tax strategy and planning. In the eyes of its clients, its core competency is very much in the transactional business of preparing tax statements. Dealing with tax planning and strategy is a different positioning in the eyes of the customer. This shift can be achieved of course, but there are challenges in how the brand is perceived and therefore how the client base will respond.

Internal management

The other factor is how the internal organization and management of the business is calibrated to accommodate both the transactional and the solutions approach. Things such as culture, performance measures and organization may well be very different.

Using the example of the tax business from above, the skills and capabilities needed to run the transaction side of the business are totally different from running the client strategy and planning side. It is very much a production line focus vs a project focus.  In addition, the performance measures would be very different as well as the type of people needed to undertake the work. In other words, the organisation in this instance would need to take re-shape the way it is structured and managed.

Value to customers is a key driver of strategy. But organisations that have a strong transactional base in their business have a challenge in how they move into more of a solutions approach, and how they can really deliver that expanded value proposition to their customers. Mixing the transactions and the solutions needs some clear thinking on the right business model and how it can be achieved.

Taking the “I” out of teams

A work colleague of mine had a nasty habit of starting conversations with comments like, “When I managed such and such..” or “I used to lead this..” or “When I was the CEO ….” or “When I saved the world ..”. Well not quite, but you can probably see my drift. He used the “I” word so much that I nicknamed him PP, which stood for the Perpendicular Pronoun (ie the letter “I”). This was perhaps a bit obtuse and he did not really get it, but it made a key point about his mindset. If you believed even half of what he said, you could be excused for feeling quite inferior.

The real problem however was that he was a menace in a team situation. Two problems in particular can emerge in such situations where a big ego is part of the team.

1. Big egos can drive people to distraction

A big ego in a team can be an annoyance and distraction to the task at hand. This occurs especially through unnecessary and repetitive stories about self-centred activities and experiences. People can quickly tire of such behaviour. Whilst teams should have a range of personalities, there is nevertheless a need for teams to work out and accommodate the different personalities represented. This does not mean that personalities need to be shut down, but it does mean that some protocols of the workings of a team need to be clearly understood. A big ego can provide a real challenge in this regard.

2. Team members can stop listening to a big ego

Even though a big ego can have some good ideas, people in the team can actually stop listening and ignore the suggestions or ideas presented. This can have unfortunate consequences as the team is not gaining the full value from one of its team members. In other words, the team cannot be high performing. Amongst other things, a team is about making the most of a diverse range of thinking and ideas, and a big ego can sub-optimize this aspect of teaming.

Naturally, people bring their egos to a team. That is human nature, and is part of how our confidence is conveyed. But the issue is how can the ego be positively managed in a team situation, and focused towards effective outcomes for the team.

A high performing team needs to deal with the big egos, and ensure that the outcomes of the team are not compromised. Assuming there is a need to keep the big ego on the team, three strategies can be employed:

Strategy #1 – Embrace and capitalize

As the saying goes, if you cannot beat them, then join them. This strategy is about using the big ego to energize and stimulate the team. In other words, it is about turning the ego into a positive. This would include language such “Tell us a bit more about your experience with such and such..” or “What can we learn from what you did at ..”. This strategy focuses on how to get the most from the positives, and integrating the big ego into the team in a positive and fulfilling way.

Strategy #2 – Tolerate but drive clear focus

This strategy is more about managing a collective tolerance of the big ego, but at the same time placing a strong focus on the outcomes and deliverables expected. This can be characterized by language such as “We want you to bring these specific inputs back to the team meeting, but leave other areas to different team members”. It is about using the big ego in specific areas of strength and making sure that a focused contribution occurs.

Strategy #3 – Quarantine and leverage

This is a risky strategy, but can work especially where more technical input is needed. In this case, the big ego operates somewhat outside of the team, but is tasked with providing specific deliverables to the team almost in a customer / supplier relationship. This has the effect of obtaining the material or contribution required, but at the same time avoiding some of the challenges in the normal team environment. The language here would be along the lines “We want you specific inputs in the following areas, and we will then decide how these will be discussed with the broader team”.

Teams are challenging at the best of times, and we all bring our egos to the table. But managing that big ego can provide team members with some real heartache and frustration, and can compromise the performance of the team. Film director Fred Durst gave this some perspective when he once said, “To walk around with an ego is a bad thing. To have confidence in yourself is a great thing.”

 

7 lessons for business from the game of golf

Golf is a global game of great popularity, and is played by people of all ages and in many diverse locations. Various sports surveys suggest that some 50-60 million people across the world play golf regularly. It is a game of great challenge, but also enjoyment. Golfers joke about the satisfaction from those few great shots or those successful holes that provides the incentive to “come back again next week”.

But golf also provides some powerful lessons on how businesses can shape or possibly defy success. Seven lessons in particular stand out.

1. Have a game plan

Golfers know that a game plan is important. Each game is different depending on a whole range of factors including weather conditions, state of the fairways, and the nature of the competition. A good golfer will determine how to play the game in advance, and for instance plan whether a more aggressive club selection is needed for the game because of prevailing conditions.

In business, most organizations will have some form of strategy, and how this strategy or game plan is articulated will vary widely. The issue however is the way that organizations relate their strategy to their day-to-day activity. They will need to flex their strategy in the shorter term to deal with changes in the market place or shifts in customers or suppliers. Having the strategy itself is no guarantee of success, but how it relates to the immediate business activities is crucial. Strategy and execution must be tightly coupled.

2. The game is not over until it is over

How many times do we see golfers getting over-confident about their final score? They may have had a good first half of the game, but the score can turn badly on just one or two strokes or one bad hole. Top players have all too often seen the winner’s trophy in sight, only to find it eluding them in the final few holes of the game.

Sales teams are often under pressure to provide updates on the status of big deals or major proposals in the pipeline. One often hears that a sale is “looking good” and that it has a strong chance of success. But in reality that could be the danger moment as complacency may emerge and snatch defeat out of the jaws of victory. The sale or the deal is not done until it is finalized, and the winner’s trophy is actually in hand.

3. The little things are what count

The score in golf is very dependent on execution and getting the little things right. Sinking that short put or chipping properly onto the green all become critical for the final score. How many times do we hear a player lament “if only I had sunk that putt on the 5^th..!”

Organizations can come unstuck on some of the little things that take on a momentum of their own. For instance, a customer service issue may go viral through social media, but not because of the seriousness of the issue per se, but because the customer felt aggrieved at the speed or nature of the response in the first place. The so-called little things in dealing with customers and other stakeholders are so important.

4. Tactical choices really matter

The tactics on each hole need to be carefully considered. The choice of club for a particular shot is most often cited as a key decision to be made. Likewise, the approach to the green is also one of those tactical choices. Should the player loft over a nasty bunker or perhaps play a safer shot shy of the bunker but a little further from the pin?

In business, executives are confronted daily with choices such as product pricing or variations, inventory issues or reactions to competition. Recruitment decisions can also be significant in this domain. Does the organization take a bold stance on pricing to a new customer or does it focus more on maintaining margin?

5. The mental game is crucial

We often hear golfers describe the mental ups and downs of the game, and the importance of the maintaining mental approach. In his book Golf is not a game of perfect, Bob Rotella points out that “Golfing potential depends primarily on a players attitude…”.

Some organizations focus their management development on simulating or practicing situations that resemble real life examples. Also, classroom style case studies have been the focus for many organizations. The blending of these two activities offers a solid approach to helping executives develop their mental capacity to react and respond. They not only can test the ability to react, but also understand how they feel and to appreciate some of the emotional journey involved in staying ahead in their business environment.

6. Don’t complain about the conditions – deal with them

Golf is played in all conditions – the wind, the rain, the heat. The conditions cannot be changed so golfers have to learn to deal with these variables, and change their game or their gear accordingly.

Conditions swirl around in a business context. Factors such the economy or changes in the industry all have a major impact on how organizations perform and indeed grow. Different competitors or behavior of the competition are also factors that have a significant impact. But organizations need to deal with these factors, and develop and execute the right mitigation strategies.

7. You are accountable for your game

Golf is one of those sports where you and you alone are responsible for the outcome. You are not reacting to a sizzling serve over the net as in tennis or a ball being hurled your way as in say baseball. The accountability starts and stops with the individual golfer.

Most organizations place a great emphasis on personal accountability. Yes teams and teamwork are essential, but in the end everyone has a significant responsibility to deliver, and to make sure their personal objectives are met. Organizations with a strong culture of personal accountability generally will be more agile and have greater ability to respond to changes in their marketplace.

In the end, golf and business are about knowing what to do and executing well. Even small improvements will make a difference. As former US President Gerald Ford once said, “I know I am getting better at golf because I am hitting fewer spectators.”

Lifting the batting average

Modern business has a particular focus on nurturing and developing people. After all, we are confronted with the so-called war for talent, growing skills shortages in some domains, and the need to manage retention levels. These are all compelling reasons for a strong and vigilant focus on people development.

But how do many organizations deal with these questions, and where do they focus their development resources?

Mostly, there is a premium placed on managing the better talent in the organization, say the top 10%. Those so-called top performers are the ones that receive significant attention in terms of mentoring, training and development. At first glance, this seems perfectly logical, and is rightly seen as a vital part of the retention strategy for organizations.

But is there another side to this story? Lets think of a sporting team, say baseball or cricket. The top batters (say three or four) will receive plenty of training and coaching. But a game will not always be won just off the back of the top batters. It is true that when the top batters all fire at the same time there is a very strong chance of the team winning. But it is also true that performance from all the other batters is vital for a successful team effort over time. All batters need to be developed to perform at least to a certain level.

The question then becomes a choice about raising the performance of the top batters or about raising the batting average of the team overall? Like many of these situations, it will come down to some blend of the two, but many coaches will favour the latter strategy of raising the overall batting average.

Organizations need to manage a similar balancing act. Yes there is a need to focus on the better talent, but if there is undue emphasis on this group, it may compromise the overall performance of the team on three fronts:

• Performance and capability may be skewed too much to the top performers, and not enough to the wider team thus comprising the overall delivery. Performance overall could be compromised.
• Those performers in the middle will greatly outnumber the top performers, but their capability gaps may not be sufficiently recognized. Alienation of the great middle may occur triggering turnover or morale issues.
• As more and more focus is placed on the top performers, it may increase the gap even further between the top performers and those in the middle. The theory is that the top performers will draw others towards their level by example and so on, but this is not automatically the case.

Lets be clear. It is crucial to reward and develop top performers. But the key issue is to ensure that all people have the right chance to play their part in lifting the batting average in their organization.

Three points of focus will help:

1. Ensure that all people have reasonable access to major development tools and initiatives.

That does not mean that everyone goes to Harvard for three months, but it does mean that people need a strong level of development across the board, and not restricted to just a narrow group. For example, mentoring for top performers only would seem to be missing potential improvement to a wider grouping in the organization.

2. Provide a clear pathway for people in the middle as to what they need to do to move up a rung or two in performance level.

This is too often neglected or under-emphasised. Performance is often seen in the context of the “rear view mirror”, rather than focusing on what can be built from the positives for future development.

3. Use the top performers more effectively to develop the middle level performers.

The top performers have a lot to offer, and their objectives should be heavily weighted to developing and mentoring middle level performers.

In this way, organizations will have stronger chance of raising the overall batting average. Remember the old adage that “all boats come up on the rising tide”.

Beware the paradox of forming project teams

The CEO assembled the team together in a large room and warmly welcomed them to the project. Preparation for this event had been building over several months, but now all was in readiness for the project to finally commence and for the organization to rapidly crank-up this long-awaited initiative. The room was filled with excitement and great anticipation. In launching this initiative, the CEO placed great emphasis on the importance of teamwork, and highlighted that the project would only succeed with a strong team.

One aspect of the modern corporation has been the explosion of teams in various forms – project teams, virtual teams, rapid deployment teams, functional teams and many more.  Many of these teams are formed for a fixed duration to deliver an outcome, and then disbanded or moved to another part of the business.

But how successful are teams in the business context, especially those focused on projects or major initiatives? Indeed for the CEO above, will future meetings with the team be positive and uplifting or will they be full of anguish and lament?

A project team is a complex being and has the capacity to deliver powerful outcomes. But fully successful projects are sadly a rarity. Various studies over the years have dissected the issues of project management and related aspects of project success. Numbers vary of course, but it is commonly understood that as little as 30% of change programmes fully deliver their expected benefits. For IT specific projects, it is often stated that perhaps only 40% of these fully deliver the expected benefits. The real point here is that the delivery of projects or initiatives in organizations falls well short of where it should be. This causes major cost blowouts, loss of momentum in the market place plus huge distraction of management time and attention.

In any discussion on project teams, there is frequent reference to governance and project management processes, tools and expectations. All this is appropriate, but not sufficient. Indeed, too much focus on the “mechanics” can blinker the team and management from seeing some of the bigger issues regarding the team’s performance.

People represent the core of the team and its success. In one sense, this is stating the obvious, but unfortunately this aspect is often not afforded the prominence it deserves.

The most critical part of the project team is its formation, and ensuring the right team members are selected and committed to the team’s success. It is a bit like building a house. If the right foundations are not in place very early, the house will be far from robust and may be at risk of collapse. In many projects, there is an apparent strong focus on the formation of the team, but lets not confuse the flurry of activity to get the project started with real emphasis on getting the right team established.

There are four driving principles in forming a team to run a major project. But each of these is a paradox in that each principle contains an apparent contradiction. It is the management of these paradoxes that is the key to success.

1. Like-minded people are needed, but diversity is important

Generally, teams will be formed around like-minded people who have similar knowledge sets or functional skills to bring to the project. They may also have experience in projects of similar size or complexity. For example, a major technology project will typically include business analysts, programmers and other technical experts that gravitate around a common area such core financials or CRM systems.

But the team needs to ensure it does not generate a “Yes Minister” type culture. It needs a diverse set of members of different backgrounds and skills. Teams need people to ask the challenging or unorthodox questions. Including team members of different functional skills or from totally different parts of the business can help in this regard.

2. Balance of skills is essential, but one capability stands out

Every team needs to have the right skills to do the task required or to at least be able to access those skills when needed. This is often challenging if many of the required skills are in strong demand. For instance, a project for new core financials in a business will need to have the full suite of skills to not only ensure that requirements are met, but also to bring into the project the appropriate best practices across the broader business spectrum.

But the capability to integrate across the team is a key requirement. Projects comprise many moving parts and can be highly complex, and the ability to integrate across the team is a key capability. Teams comprise very specific areas of activity, but success at the end of the day is to pull these together to make the project deliver. Capability in integration is an important selection criteria for team members.

3. Team leaders are important, but leadership is needed from everyone

There is always a strong emphasis on the selection of the team leader, and rightly so. Indeed, team leaders are often put through a rigorous selection process before they are confirmed in their roles.

But leadership on a project is actually for everyone. Leadership is not just about the visible aspects of the team leader chairing team meetings for example. It is about everyone looking out for colleagues and helping where needed. It is about providing mentoring to newer or younger members of the team. Leadership is also about team members calling out particular problems that might be emerging, and even better if they offer suggestions on how to solve those problems. Selecting people for projects must include consideration of their capability and track record in this regard.

4. Clear focus of effort is needed, but agility is crucial

Every project needs a very clear focus of where it is heading. This is important for the team members and the organization as a whole.

But all projects need to have some inbuilt agility to respond to changing needs or requirements. People need to have the ability to change and respond to the new circumstances. For example, a competitor may make an announcement in the market that influences the timing or expected deliverables of a project. People in teams must be selected with agility in mind, and their ability to personally accommodate such changes.

The effectiveness of teams was articulated well by Henry Ford when he said, “Coming together is a beginning, keeping together is progress, but working together is success”.

What happens when a business is under pressure

The retail CEO finished reading the morning newspaper extracts covering the release of the organization’s half-yearly results. The news was not good, and the newspaper comments were fairly blunt and unforgiving. The organization reported half yearly growth that was a full 2% points below expectations coupled with a significant tightening of margins. This was the double whammy of growth and profitability challenges. The CEO put the finishing touches to the internal communications that were about to be released.

Many organizations have experienced such a situation. The bad year or the bad quarter happens all to frequently. But equally, the responses also have a familiar ring and show a common pattern across most industries. Those responses tend to be in three groups as follows:

1. Expenses are purged

Often a travel freeze is announced almost immediately, and restrictions on discretionary costs are put in place. Classes of travel may be changed and standards of hotel accommodation may be downgraded. Much of the day-to-day business activity is subject to somewhat excruciating restrictions or controls. Some of this can be quite illogical and dysfunctional, but these actions can be very effective in terms of pure savings in the short-term.

2. People costs are put under the spotlight

A recruitment freeze may be announced and various training programmes are suspended for a period, maybe for 3 months or till a point later in the year. Costs of people development are put under the microscope such as limiting off-site or residential activities. Existing office facilities suddenly become in demand for on-site training.

3. Profit is the urgent focus

If the organization cannot grow in the short-term, then at least be very profitable. The dreaded profit improvement programme is often dusted off, and re-shaped to ensure the organization maximizes its profitability as quickly as possible. Much organizational energy is focused on this activity with the formation of task forces and action teams.

Most organizations will respond to challenging results with activities similar to those above. The precise actions will of course depend on how bad the results are, and over what period. For example, a full year of poor performance is much more significant than a single month off the boil.

All of the above responses are valid and have their place in the management of any business. Clear and firm actions are needed to bring poor results back into the black. But are they sufficient?

From a financial perspective, all of the above initiatives will deliver results, and in most cases very quickly. They represent actions that can deliver real bottom line outcomes quickly and visibly. They also help to transmit a strong message across the organization that performance must be improved, and action is happening to deliver such improvement.

But short-term cost savings are only part of the answer. No organization has “cost-saved” its way to prosperity, especially with short-term initiatives. Yes, it may have dug itself out of a hole, but that is about all. What about the longer term?

In addition to short-term fixes that may be painful but necessary, organizations need to take a hard look at their strategic performance levers to get themselves in top shape to avoid circumstances such as those faced by the retail CEO above.  Those performance levers are in four groups:

1. The value proposition

How do products, services and price all combine into a value proposition in the eyes of the customer? The organization may feel it has the best service in the market, but if customers see it differently, there is a real disconnect. Worse still, if some of this is subjected to short-term cost savings, it may make the perceptions even more problematic. The value proposition in the eyes of customers is a fundamental performance lever.

2. The cost structure

How sustainable is the cost structure in the longer term? There may be more cost-effective ways of doing business, such as outsourcing or different ways of working. Some of these avenues may be controversial, especially in the home market. For example, some jobs may need to move offshore. Cost is not just about the accounting in the profit and loss statement. It is about how the business model can survive and thrive in the longer term.

3. People capabilities

Are the right capabilities in place or do competitors have a different approach to growing and sustaining their organization capabilities? Organizations need to take a close look at their capabilities for the future. For example, if a domestic organization is seeking to expand abroad, it needs to have a very clear view and a plan to acquire and develop those capabilities.

4. Capital structure

Is the capital structure appropriate for the business and how does this drive decisions at the senior level? High gearing levels can place undue pressure back on the operations of the organization. For instance, there may be under-investment in areas like technology due to funding constraints brought about by the wrong capital structure.

For the CEO above, short-term actions are necessary and probably urgent. But the real value ultimately comes from the strategic performance levers. As the old proverb says, “Getting money is like digging with a needle – spending it is like water soaking into sand.”

How well are we developing our executives for the future?

Executive development takes a high-profile in most organizations, and is given significant attention at board level. Succession planning, mentoring, role rotation and training are all part of this mix.

One aspect that receives particular focus is external executive education. This is due to both the out-of-pocket costs and the issue of “time away from the business”. This area is typically about developing the strategic and softer skills rather than technical skills such as accounting for example. External executive education is a major industry in its own right with many hundreds of universities and other organizations competing for the corporate dollar in this area.

Take the Harvard Business School for example. In 2011, it provided open enrollment courses for some 6,700 participants. In addition, it provided 62 custom programmes for some 3,200 participants, and these custom programmes were delivered to 31 separate companies. Whilst the specific numbers will differ, there is a similar pattern across hundreds of business schools across the globe. This is lucrative business for the providers of these programmes. In graduate schools of business, it is generally acknowledged that the executive programmes provide significant profitability compared to the flagship MBA classes.

But how effective are external executive education programmes? The answer is often  “it depends.”  Indeed, the same can be said for internally developed and delivered education programmes.

On one level, we can look at overall corporate results. Assuming we accept the principle that executive education is ultimately about helping to achieve better corporate outcomes, we can use corporate results to some extent as a proxy of its effectiveness.

Well, maybe. There are many factors that impact corporate results, and we need to be careful to avoid jumping to conclusions on cause and effect. But having said that, CNN Money shows some interesting statistics regarding the performance of Fortune 500 organizations. In the period 2000 – 2010, 50 of the Fortune 500 showed total return to shareholders of between 17% and 46% annually. The top 50 in EPS (earnings per share) growth also demonstrated similar performance. These numbers are strong by any basis of comparison, and don’t forget this includes the period of the GFC in 2008/2009.

Whilst we can argue that executive education may have played a part in helping to deliver these results, that is probably as far as we can go. Drawing any stronger connection would be way too tenuous at such a macro level.

But individual corporations also face a similar challenge. How do they link and track the delivery of executive education with actual outcomes and results? This is partially overcome by participants agreeing some form of objectives upfront that can be measured both at the end of the programme and with some ongoing tracking. The key is to ensure the right issues are identified that will derive benefit from the executive education, and that the appropriate measures are agreed to drive the right outcomes. This is an important part of the value proposition for executive education. There needs to be a win-win for the organization and the individual participants.

This linkage is highlighted in an article for Bloomberg Business Week where Stephen Burnett the associate dean of executive education and professor of strategic management at the Kellogg School of Management said, “…….there should be a direct and measurable connection between executive education and business results”.

But what of the future, and how can executive education maximize real value? Four areas of emphasis are needed to deliver that value:

1. Focus executive education on the big strategic shifts

Some industries will face major strategic shifts that create the need for urgent change – for example, technology and the changes in the media industry. Other changes are at a broader level. For example, one of my previous blogs discussed business models and the future of work. These aspects are fundamental to the way organizations will function in the future. It is essential that the focus of executive education is shaped around these strategic shifts.

2. Rethink speed and flexibility in executive education

The speed of change is a much quoted challenge for executives – in their organizations, in their markets and in the global economy. Social media is a case in point, and this phenomenon is rapidly changing the consumer landscape and how buying decisions are made. Executive education needs to be very nimble to be on top of such issues with timely and relevant content.

3. Exploit the online component

The online environment provides a great opportunity to develop foundational skills in some areas so that face-to-face education can be used to build more significant capabilities. For example, online learning could be used to highlight the general fundamentals of say collaboration together with case examples to illustrate. But the specific application in the work environment and what needs to be done differently is far more suited to the face-to-face experience.

4. Lets get smarter about measures

It is very satisfying to hear someone say that the education course they just attended at some cost to the business was very useful or that it was excellent. It feels like a real value for money moment. But how will it impact the business and the individual? What will be different, why is that important and how will it be sustained? Measures need to be built into the performance management system for both the business and the individual participants, and must be assessed regularly to ensure outcomes are delivered.

Robert Louis Stevenson talked about travel being more about the journey rather than the destination. Executive education is also about a leadership journey, but it is one that needs to closely tied to clear milestones along that journey.

How exciting is your organization?

We hear lots of commentary from executives about the challenges of the workforce, and the people that work in their organizations. The war for talent, the resource squeeze, rapid turnover, staff loyalty are all terms we hear frequently. We also hear about the need for greater staff engagement. That is, how can employees be more involved emotionally with the business and with greater passion and enthusiasm.

But are we missing something in this discussion? Indeed, there is a very simple question that is worth posing, namely how exciting is your organization?

Some will say that organizations are not meant to be exciting, and on one level that may be a fair point. But it is also missing the bigger picture as to why people stay with an organization or move elsewhere. It also cuts to the issue of the motivation of people even if they do remain with an organization. Could they be “present” in person but not necessarily “here” in commitment and motivation?

Much has been written about how employees are not motivated purely by money. Exit interviews that I have conducted in my corporate life certainly attest to that, although in many cases the money factor is a very strong but not the determining factor.

What is often missing is the excitement or spark in the organization that makes people think more positively about their work environment. If they think more positively about their work (and where they work), it can be a win-win for the people and for the organization overall. In other words, they see the work place not only as a means to earn a living, but rather as a place that provides a higher level of engagement and fulfilment.

As an example, a graduate was working with a prominent global resources business. This organization was engaged in some of the world’s most interesting and exciting resource development projects. Yet the organization provided a somewhat stifling work environment for the graduate – very intense, highly bureaucratic, and deadly serious in its day-to-day conduct of business. Of course, there are good reasons for this as the organization is heavily driven by the culture of safety. This was a key success factor for the business. But for this graduate, the work environment had totally overpowered the organisation’s exciting business activities thus causing the graduate to re-think committing to the organization longer term.

Measuring the level of excitement of an organization is not a typical performance measure, but there are three questions that can provide an effective proxy, namely:

1. What does the organization celebrate with individuals?

2. What does the organization measure for individuals?

3. What does the organization value in individual people?

1. Celebrate

Does the organization celebrate a broader set of achievements beyond the periodic financial and technical results for an individual? For instance, celebrating a new and innovative process initiated by an employee could show that the organization is not just committed to delivering very important but somewhat narrow financial results, but is also focused on delivering outcomes on a wider front.

2. Measure

Are the performance measures for individuals in the business just narrow financial measures or is there a broader spectrum including people management, collaboration and so on? The trick here is to ensure that the non-financial measures are significant in profile and importance, and not just mere tokens. For instance, a realistic form of peer assessment would show that the organization is committed to a more collaborative and therefore more exciting environment.

3. Value

What does the organization really value in its employees? How far beyond the quantitative financial measures does this extend? Employees who worked beyond the call of duty on a major deadline despite disruption to personal commitments would normally be thrilled to receive a public acknowledgement of that effort. Again, it is not the money or the reward, but rather the fact that the organisation is effectively saying it really values what the employees have done.

The excitement factor in an organization does not have to mean some of the glitzy features, such as balloons in the lobby or a big Christmas Party. It is about how the organization gives its employees that little bit extra for them to say “this place is good to work for”.

Excitement in organizations has often been attributed to the technology type businesses such as Google. But over the years, many different industries have demonstrated examples of how this can work, such as some airlines, media, and some aspects of retail. There is great potential in this space for what can be done. Writer Robert Conklin was right when he said, “Dreams get you into the future and add excitement to the present”.