Sunday, July 29, 2012

Management of Loneliness: The Successful Leader’s First and Last Frontier

Leaders are those at the apex of an organization or a movement. Leaders lead, transform and manage their organizations and movements to achieve national wealth or national good, as the case may be. We have probably several thousands of leaders who brought corporations to great heights, from humble beginnings, either as professional leaders or entrepreneurial leaders. Similarly, we have several hundreds of leaders who inspired and led several social, religious, political and national movements. While corporate leadership tends to be a singularly recognized effort, leaders do need teams to strategize, execute and deliver results. Even leadership of movements of whatever nature requires a close group of stalwarts on whom the leader relies on to create the organizational vehicles, channel mass energy, manage controlled behavior and finally deliver results. Just as leadership is indispensable for directed and inspired growth, leadership team is indispensable for structured and focused delivery.

The leader and the leadership team share a unique thesis of oneness and collaboration, and yet a disturbing antithesis of divergence and conflict. The history of corporations as well as movements clearly points out to the essential feature of leadership. Several corporations lose their path of growth and talent excellence even after spirited unison of leadership teams because resonance of shared vision is diluted by dissonance of individual ambitions, of either the leader or the leadership team members. Several national movements fail to consolidate the harnessed energy of the masses once a major milestone is achieved because the leader and the team members become occupied with supra-national and sub-national considerations respectively. Leaders and the leadership teams would never want their goals and successes defeated by their own goals and successes, but ironically that seems to be a reality that the universal history teaches us.

Lonely at the top

It is often said that it is lonely at the top. It is certainly true of leaders who are at the apex positions in the organizations. While they may have closely aligned leaders at the helm of functions, business units or regions, the inner motivations as well as the intrinsic challenges are never shared with anyone. The several biographies of corporate chieftains reveal how both the types of corporate leaders, the effusive ones as well as the reclusive ones, had aspirations and agendas that had to remain embedded within them, at least partially. Interestingly, it appears as if this is not so true in the case of leaders of movements. This is attributed to the fact that movements typically require their leaders to maintain mass contact to sustain energy and support. On a closer review it would emerge that even the leaders of movements tend to be lonely, unable to share their inner visions and turmoil with their close followers. The reasons for loneliness at the top have, therefore, merited much analysis and discussion. And much of this would also be applicable, in some form or the other, to leaders of strategic business units, heads of global functions or regional heads working with the global apex leaders.

In a recent article, Harvard Business Review summarized how lonely it would be as a Chief Executive Officer (CEO) of a corporation. Echoing what every leader felt, it also said such a feeling could be especially unsettling for new leaders. More troubling is the finding that 60 to 70 percent of the CEOs find such isolation affecting their performance adversely. As leaders move up the hierarchical ladder, they have fewer touch points within the organization with staff at senior and junior levels, and in spread out locations. This distancing becomes especially true in rapidly grown start-ups. The leaders thus get drawn into a vicious cycle where it is easy to lose touch with reality. In professionally managed organizations, this risk is ostensibly somewhat mitigated, but is never eliminated as direct reports often nurture strong business unit, functional or regional perspectives with overlays of aspirations on getting to the top position based on performance differential of the respective businesses, functions or regions. Within the alignment at the top, this induces a level of latent misalignment. Leading management institutes such as Harvard, Stanford and Wharton are therefore involved in strategic management research in this important area.

Pro-dotes to loneliness

Leadership loneliness has a strong organizational logic. The CEO is charged with the responsibility of fulfilling multiple stakeholder needs, including those of investors, employees and communities. Typically, that responsibility is fulfilled through being unbiased and proactive and leading growth oriented strategies and execution, creating wealth for all the stakeholders. This requires that the CEO is equi-positioned and equi-distanced with all business units, functions and regions, deciding on inter se priorities in an objective and clinical manner. This requires that the CEO is not seen as being close to either high-performing reports or protective of low-performing reports. Much as the CEO knows that today’s stars could turn into tomorrow’s laggards, and today’s losers could be transformed as tomorrow’s winners, the dynamics of organizational visibility makes the leader maintain an equidistant position within his or her leadership team.

The other cause of loneliness is the bet on the future of his organization that the CEO, and the CEO alone, can take. While there could be in the contemporary organizations a host of departments and consultants to analyze, chart and script future options, it is typically the CEO who needs to exercise his judgment based on intrinsic intuition, experience and expertise as well as extrinsic empathy, sensitivity and responsibility. The decisions a CEO takes are, therefore, not always the ones his leadership team appreciates, individually or collectively at times. This adds to loneliness at the top. Many times, it is assumed that the board of directors helps a CEO overcome the loneliness with its sage counsel and shared vision. While such a proposition is true, the very same considerations that influence the CEO to be equidistant with his team members typically also cause the boards to exercise independence and objectivity of equidistance and equal diversity.

Antidotes to loneliness

Contemporary management thought suggests several ways to reduce the loneliness at the top. Some of these could be options to convert the disadvantage of loneliness of the apex position into an advantage of organizational transformation. Probably, the first and foremost is the recommendation for a CEO to connect with other CEO peers and like-minded leaders through appropriate national or global business forums. Interaction in such forums not only leads to sharing of mutual knowledge but also enables benchmarking of his organization in a broader environment. In India, the Confederation of Indian Industry (CII) is a perfect forum for that. The second approach would be to build an aligned, trusted and trustworthy leadership team which not only assures him of collaboration but also inspires positivity across the organization. The third approach would be to connect and network with the corporation’s ecosystem as much as possible. Regardless of the functional or business specialization one comes from, the CEO could benefit from connecting with all the internal and external stakeholders, employees and customers being the primary respective ones periodically. Annual dealer conferences, supplier meets and employee get-togethers could be a great way to accomplish that. I had, in recent times, at firsthand, a remarkable example of a global leader spreading positive vibes and boundless energy across the organization through networking by various means. The same leader demonstrates how nurturing and leveraging the charismatic side of one’s leadership personality could eliminate loneliness not only at the top but across the entire employee team.

Notwithstanding the equidistance characteristics of the Board of Directors, the Board could be a great instrument of togetherness for a CEO. The value the Board brings as a springboard to support the CEO passions and to evaluate the strategic options developed by the CEO could be immense. By building a Board whose members represent multi- industry, multi-regional and multi-cultural expertise, and engaging the Board in formal and informal meetings beyond the needs and requirements of corporate law and governance, the CEO would be able to fend off the top level loneliness syndrome. Some literature also suggests having an industry veteran, management guru or leadership philosopher as a coach or mentor, especially for the first-time CEOs, entrepreneurial CEOs who grew their organizations rapidly and to CEOs who are required to take complex and painful decisions. The later class of coaches also help the leaders overcome their frailties if any, resolve the conflicts that are inevitable and explore the latent strengths for the common good. Balancing professional and personal life as well as harmonizing business and social responsibilities are two other powerful ways to reduce, if not eliminate, the top level loneliness.

Success mantra

Apex leadership has in its control, by and large, the greatest antidote to loneliness. Success of the corporation or the entity the CEO heads, or articulating the pathway to success, is the most effective way to inspire, and interact with, the larger organization. Great leaders who prime success are unlikely to be lonely as they share their success with the teams and followers. Great leaders also do successful things with, rather than without, the followers; they typically invite and motivate, rather than force and control the teams on the journey - as a result they are unlikely to be lonely. Great leaders grow the businesses continuously with their reports, ensuring that there is always room at the top for capable and successful potential leaders. Great leaders also do not let success become the barrier between them and the broader organization; they are always humble and curious, and continuously find ways and means to stay connected and inspire as well as get inspired by the rest of the organization. And finally -this is the most difficult part - great leaders display focus and courage unequivocally and take gutsy but calculated risks for their organizations and own up for the executing teams, while ensuring high level of competency and commitment in the organization.

Posted by Dr CB Rao on July 29, 2012

Sunday, July 15, 2012

Specification Envelopes and Industry Frontiers: The New Drivers for Business Unbounded

For several decades, the products to make and the markets to serve have been the bedrock of all strategic plans. Strategic decisions of integration and diversification have, for long, been triggered or supported by individual product-market decisions. Four megatrends have, of late, been queering the pitch for simplistic product-market analysis, and conventional strategic planning. These are: enhanced level of competition marked by expanding number of entrants, rapidly saturating markets, exponentially evolving technologies and increasing desire of customers for differentiation. These four megatrends have rendered conventional methods of strategic planning, and functional cascading of strategies inefficient and ineffective, relative to the futuristic competitive requirements. This is mainly because of the structural rigidity and financial conservatism that drive most strategic planning processes, despite the desire of the firms to practice game changing theorems.

The conventional strategic planning is, in many ways, dictated by the state of a firm’s evolution in terms of the maturity and competitiveness of its core functions, and the visionary drive in the apex and functional leadership. More often than not, however, individual functional brilliance cannot by itself drive strategic brilliance in terms of handling the megatrends. It verily requires a corporate culture which always looks for the first opportunity to proactively raise barriers to entry, the next boundary to expand the markets, the likely future of technological innovation and the eagerness to serve its customers in a differentiated manner. These four capabilities together are the new competencies required of a firm to successfully ride the megatrends. As with everything, actions of the individual firms that are aimed at managing the megatrends constitute also the industry maturity, dictating in turn newer strategic actions to handle the megatrends more successfully.

Obsolescence redefined

The conventional strategist made his strategic choices on two fundamental parameters of obsolescence and innovation; both of these typically being the same side of the coin. An essential question for the new age strategist is whether the concept of obsolescence exists any longer. The question may appear counterintuitive but is very relevant given that the fundamental ways in which most products serve their customers have not changed. For example, a pen continues to be a writing instrument to capture one’s thoughts, a suitcase continues to be the travel companion to hold personal effects, a house continues to be a dwelling unit to provide shelter, an automobile continues to be a mover of people and cargo, a boiler continues to generate steam and a television continues to broadcast images. There can be scores of such examples that establish that nothing has indeed changed in fundamental product drivers. On the other hand, several products that are expected to become obsolete have made a strong comeback, be it a radio, watch or camera, each of which continues to fulfill the original purpose of invention.

One way to address the apparent enigma is to postulate that products may become obsolete but human needs will never. As long as a human being is governed by the five fundamental sensory attributes (see, hear, touch, taste and smell, that trigger human experiences) and certain gross and fine motor skills (such as movement and coordination that need to be enhanced or utilized) all product development will continue to cater to these fundamental human attributes and skills, satisfying as well as leveraging them in an increasing measure. As new technologies get developed and integrated into product design and manufacture, the way the products fulfill the human needs becomes more evolved. At an extreme, new technologies would mimic the fundamental human attributes and skills to achieve certain fundamental shift in the manner how humans would put their faculties to use. Pilotless planes, driverless cars, robotic surgical knives, and completely automated factories are some examples.

Specification envelopes

Working from the previous postulate, the follow-up question is whether the industry boundaries are changing or whether the product specifications are getting merely upgraded or expanded, all the while seeking to meet the established needs individually or in combinations. The answer to the question is a clear positive, whichever way the product-need combinations are analyzed. A watch whose goal at one time was merely to provide current time through mechanical movements has undergone tremendous change in specifications to include battery and solar drives, dual and multiple time zones, and chronograph and compass to achieve enhanced functionality. With newer materials and precious metals incorporated, the watch has also moved from being a functional accessory to becoming an accessory of esteem and prestige. Similar analysis can be made of any product which, while fulfilling several of the previously individualized needs in contemporary combinations, have also become lifestyle statements of human, business or industrial life.

It would appear, therefore, that a concept of ‘specification envelope’ is a well- validated hypothesis of what drives industry evolution and corporate strategy. The more are the technologies integrated in a product the more would be the customer needs that can be catered to in combination. The larger the specification envelope of a product or a firm, the greater would be the capability to serve the customers better (both in terms of sharpness and diversity), the ability to deepen and expand markets and, as a consequence, drive up scale and scope of the business for a firm. There is one pitfall, however, in assuming that determination of the right specification envelope (many times assumed to be simply a larger envelope) would be a surrogate for the right industry to operate in. This is because consumer needs are no longer fulfilled as a point of use; these are fulfilled as part of a systemic transformation of the paradigm of need fulfillment for better consumer satisfaction on one hand and better business efficiency on the other.

Industry frontiers

The typical firm is now required to take the concept of specification envelope as a given essential. The firm, however, is also required to constantly redefine the industry in which the firm should seek to operate. This strategic decision is larger than the strategic decision of product upgradation, market segmentation or market aggregation, typically addressed by the specification envelope concept. This strategic decision is also larger than the strategic decision of which businesses to operate in and how to operate, typically addressed by integration or diversification analysis. Rather, the question is whether the strategist would need to be constrained (or empowered) by his or hers firm’s functional or cultural thought processes so much so that he or she fails (or, succeeds) to recognize the megatrends. The answer to this lies in the firm viewing need fulfillment as an ecosystem phenomenon rather than as a customer-firm transaction. Megatrends, typically, overwhelm the firms when they spread across a social, industrial or economic system. The conventional view of strategy that it should be confined within the well-defined boundary of the industry needs to be challenged at least annually by the chief executive officers, functional leaders and strategic heads.

It is quite possible that multiple firms could view the same industry from different perspectives. Becton Dickinson (BD), the world leader in syringes, needles and insulin pen micro needles has thought it fit to remain as a component and an accessories player for injectable drugs, more so for specialized and increasingly popular insulin pens. BD has never thought it appropriate to move into the sourcing, manufacture or marketing of insulins. On the other hand, Novo Nordisk (NN), the world leader in injectable insulin drugs has thought it appropriate to have its own insulin pens and needles. Neither BD nor NN has deemed it appropriate to be in the business of diabetes diagnosis or blood sugar measurement devices, which is left to the likes of Johnson & Johnson (J&J). In the context of the topic of industry definition being discussed in this blog post, the issue is not how the industry to operate is defined by firms. In this case, the industry to operate in is defined in three different ways by the three leading firms, although anchored around in one area of diabetes management. The submission of this blog post is that such industry definitions miss the megatrend that could be emerging in total diabetes management, from genetic marking and stem cell treatment to day to day diabetes diagnosis and management by all ways that are possible. As a start, the phrase ‘industry boundary’ would need to be replaced by the phrase ‘industry frontier’.

Business unbounded

Once the human needs are viewed from a systemic perspective, it becomes easy to appreciate that the traditional industry boundaries are resultants of tunnel vision and structured strategies laboring under the constraints of past capabilities. On the other hand, a systemic view unleashes the imagination to seek new frontiers of industry, and eventually an industry and a business that are unbounded. The current wave of integrating computing devices, communication devices, cloud storage, cloud computing, application development and social networking is a vivid example of how several industries hitherto seen to be different are brought under one mega industry of seamless computing, connectivity, communication, entertainment and socialization. From education to employment, many others also get added to the paradigm. As a result of taking such an approach, Apple has been able to gain distinct competitive lead in the journey of unbounded business. And, a few others including Microsoft are seeking to share such competitive lead. In this journey of unbounded business, what were once supportive or unrelated technologies tend to become related, and even core technologies as firms move forward on their “business unbounded” mission.

The potential for the concept of business unbounded is simply enormous. A seemingly worrisome threat of saturated market can be converted into unbounded business potentialities by firms. For example, L&T which is a construction giant of India executing all types of infrastructural projects, from highways to metro rails, and from residential townships to industrial parks can discover unbounded business through an innovative goal of building integrated intelligent cities of the future. In the ultimate analysis, all mega corporations would have only one goal – that of serving life. It is no wonder, therefore, that Toyota sees as much future in building intelligent and ecologically friendly homes as in maintaining its global leadership in automobiles, the latter increasingly through environmentally friendly electric and hybrid vehicles. Similarly, Samsung could be foreseeing a merger of all of its electronic device and chip technologies with healthcare, among others, leading to an apparently surprising foray by the firm into biologic drugs. While all firms may not be able to pursue exotic frontiers dedicated to total life management, virtually all firms can discover huge untapped potentialities in the domains and markets they serve by opting to drive for specification envelopes than getting limited by specification updates, and more fundamentally by seeking to pursue broader industry frontiers than getting constrained by established industry boundaries.

Posted by Dr CB Rao on July 15, 2012

Sunday, July 8, 2012

From Incremental Growth to Breakthrough Development: A Paradigm Shift for Indian Economic Planning

Post-independence India has been a pioneer in establishing a cycle of five year national economic planning which spelt out a strategic approach to allocation of resources by the Central and State governments on various projects, including their execution and review by various governmental agencies. The five year planning process is managed by the Planning Commission. Starting in 1951, the five year planning process has so far seen eleven cycles, with the eleventh five-year plan (2007-2012) having just concluded. The economic planning process has been helpful for the Indian economic planners in the socialistic command economy regime that prevailed till 1992, the year of economic realization which ushered in massive increase in private and foreign investments. From a total budget of Rs 23,560 million that the first five year plan entailed, the plan budgets, central, states and union territories, steadily grew over the decades to reach Rs 36,447,180 million, constituting nearly 14 percent of GDP.

Despite the steady growth in the profile of financial investments under the economic planning process, the economic growth and infrastructure development have failed to lead the kind of quantitative and qualitative development that are required of India’s emergence as an economic superpower. One of the reasons could be the anxiety of the Planning Commission to view egalitarian issues through economic lenses and vice versa. In the eleventh plan document spanning 386 pages, only 11 pages were devoted for infrastructure development while thematic issues such as employment, social justice, innovation, technology, spatial development, regional imbalances, environment, climate change, governance, consumer protection and competition policy were covered in about 200 pages. This cannot be faulted per se; probably needs to be even welcomed as the Commission’s commitment to inclusive growth. Without getting biased by the current planning paradigm, however, we need to analyze why the economic planning process is yet to deliver resoundingly for India an assured measure of global competitiveness across the board and a quality of life that is sustainable even for indigent sections of the population.

The long project cycle

Economic planning for a country is not the same in scale or scope as strategic planning for a firm. It may be appropriate to visualize a firm’s transformation in five year cycles but it is probably inadequate to visualize an economy’s progress in five year cycles. The fundamental lacuna in India’s economic planning process relates to the incremental visualization in steps of five years. Some State governments have, in fact, been quick to recognize this and launch 10, 15 or 20 year visions. A durable framework for strategic economic development and asset creation can emerge only when the central and state plans are synchronized in a much longer time frame of at least 10 to 15 years at least. The strength of today’s developed world would lie in their development of infrastructure projects that would take a decade or two to build but would last several generational lifetimes. Whether it is the labyrinth of highly intricate and synchronized underground and on or over ground metro rail systems of Tokyo and London or the elaborate national and state highway systems of the USA, the ability to visualize breakthrough projects of benefit for future centuries is the hallmark of enlightened economic planning.

Given India’s aspirations, and potential, for emergence as the third largest economic power, planning cycles have to be reasonably long. This, coupled with the fact that public sector and infrastructure projects in India are beset by significant delays, dictates the need for planning with at least a 15 to 20 year planning horizon. It is not unusual in India for projects taken up under the aegis of a five year plan remain not only incomplete at the end of the five year plan but also found to be insufficient in the context of population and economic growth dynamics. Airport modernization in the four metropolitan cities is a classic example of development being too little in scale and scope and too late in completion, and necessitating in all cases the need to commence work on new airports. The advantage of a really long range planning framework is that economic projects which are to meet the requirements of future generations are conceived with appropriate scale and scope as well as investment, and understanding of the payback periods.

Incremental versus breakthrough

In economic planning of developing economies which requires allocation of scarce resources on a number of conflicting priorities across urban and rural spectra it is easy and even often compelling to spread resources on projects that meet pending needs, not even current needs. Incremental growth, which mostly is also inadequate often, is the usual prescription. The golden quadrilateral of highways is a good example of how long term planning can create economic assets useful for generations. Yet, when it comes to bullet trains not more than two inter-city sectors are being considered as opposed to the need for a national bullet train grid which could dramatically transform the social, industrial and economic connectivity in this vast nation. There are several areas which lend themselves to the incremental versus breakthrough dilemma, with ideal choices needing to be in favor of breakthrough development. Examples abound not only in infrastructure like roads, ports, airports, railways, airways, shipping and highways but also in social sectors such as healthcare, education, irrigation, public distribution and housing, to name a few.

Breakthrough development requires, fundamentally, modeling of future population and demographic trends and economic parameters that can support the GDP growth targets in time spans ranging from ten to twenty years. In the healthcare sector, for example, the current network of government run general hospitals would be grossly inadequate when the rapid extension of metropolitan areas is factored in. Breakthrough development would require not only doubling or trebling of bed capacity in the existing general hospitals but also potentially setting up of at least four new general hospitals in each of the northern, southern, eastern and western peripheries of each expanding city. Similarly, each of the economic and social infrastructure sectors requires breakthrough concepts. In the infrastructure area, projects must be set up to lead economic and social development. In the field of ports, for example, it could be setting up of a port for every 200 kilometers of coastline. In the field of education, for example, it could be a Kendriya Vidyalaya in each town, an institute of higher research in each state and as many IITs and IIMs as there are states of India.

Breakthrough is a mindset

Breakthrough is essentially a matter of mindset. I can recall a day two decades ago when I was asked to mention, as a strategic planner, what I would do to reverse the low market share position in truck segment of my firm. I said that the firm should offer air-conditioned factory built cabs. Obviously, the suggestion was received with shock given the reluctance of the firm to be able to offer even a front-end structure. Today, twenty years later, most truck majors are willing to offer fully-built trucks with air-conditioned cabs as a competitive offering. In a similar manner Volvo rewrote the nature of inter-city passenger transport diligently over two decades through its high performance buses. These are just two examples of how proactive and innovative mindset would advance progress through breakthrough concepts. Planners, in terms of choices, may simply wonder at the amazing progress of Tokyo, Shanghai or Dubai but conclude it as inappropriate for India, or create our own tapestry of Chinese type urban development and Japanese type rural development. Whichever route is taken, it is the passion and commitment of the decision makers to progress that determines how differentiated the future would be.

An essential component of the breakthrough mindset relates to the deployment of advanced technology and innovative ways of execution. India has been a pioneer in the use of electronic voting machines in the highly spread-out national and state elections, at a global level even compared to advanced nations. India has been implementing a project of ensuring a UID to all of its 1.3 billion plus population, which are no mean examples of deploying technology. This progressive mindset with interconnectivity across all regions and sectors needs to be deployed in all aspects of infrastructure. Given the will, superior technology with lower costs can be achieved by India. The CEO of Renault-Nissan, for example, had gone on record that he had come to establish car manufacturing plant in India not merely for market but more for the capability of engineers to design and engineer modern projects at lower costs. This competitiveness should be applicable to a host of sectors as well. There should be a technology planning cell as part of the planning commission infrastructure in India to be able to integrate technology in national projects.

Collaboration is the key

Epoch-making transformation needs total alignment in the national setting. It is not sufficient to conceive of individual projects and hope that they would deliver as uncoordinated initiatives by Central or State governments and in public sector or private sector. Spatial planning, connectivity planning, services requirements analysis, and infrastructure development must be undertaken as a prior condition of any development. If political and regional differences are overcome asset creation of the best standards can take place to cater to the needs of current and future generations. Collaboration should also include arrangements with foreign governments and entities to bring the best of technologies and processes as well as expertise to India. Policies related to induction of the best of technologies in uncovered sectors such as airways, retail, insurance, and several other infrastructure sectors need to be formulated.

Moving from incremental growth to breakthrough development requires all-round collaboration amongst all stake holders. The first step is to move from a five year planning concept to a fifteen year (if not a twenty year) planning concept and also expand planning commission as a collaborating body of all stakeholders, central and state governments with expert support from public and private sector corporations and linkages with new technologies and expertise of whatever origin, not found but required in India. In doing so, however, the dilemma would be the classic choice between centralization and decentralization of planning. From the perspectives of the big picture visualization, strategic direction, center-state coordination, integration of technologies, resource mobilization and allocation, external collaborations, definition of strategic projects and thematic goals centralization is required. From the perspective of state level value propositions, detailing of projects and their execution, people and skill development, leading social infrastructure and customizing various initiatives to the specific needs of the individual states, decentralization would be required.

Posted by Dr CB Rao on July 8, 2012