Curated Content from 25 Years of Writing
Strategy, Organization, and LeadershipThe single event that has had the largest impact on my thinking about strategy and organization happened back in 1993, when I was visiting my soon-to-be father-in-law in Santa Fe, New Mexico. Correctly judging that I’d had my fill of museums, markets, and art galleries, he suggested I take a walk up to a place called the Santa Fe Institute. He had met some people from there, who were doing some interesting research he thought I’d find stimulating -- one of the great understatements of my life. That trip to SFI opened up the world of complexity and complex adaptive systems for me, and I’ve never looked back. Unfortunately, despite the excellent writing of people like Eric Beinhocker (I highly recommend his book The Origin of Wealth), Doyne Farmer, John Holland, and Stuart Kauffman, complex adaptive systems thinking and agent based modeling still remain outside the mainstream, and not part of the mental frameworks most people use to describe, explain and predict the world around them. I first started to write about the applications of complex adaptive systems to corporate strategy and management in 1998, in “Adaptive Organizations.”
Eight years later, based on my experience of applying complex adaptive systems frameworks in my firm’s consulting work, I wrote a longer article on complex adaptive systems and business strategy. The key point I make is that, since explanation and prediction are both extremely difficult in complex adaptive environments, adaptability (and randomness/luck) are the key drivers of success. Given that, one cannot separate strategy from organization, and they constantly interact to produce performance outcomes. More recently, perhaps reflecting the wisdom one acquires over time, I’ve written a short introduction to the timeless principles of strategy, in business, politics, and national security, and an article on leadership, failure, and complexity theory. Complex adaptive systems also place a premium on adaptability, rapid learning, and prioritization. I’ve written about this many times, for example in articles on the new basis for corporate success, setting priorities, how CEO priorities evolve with the lifecycle stage of their business, and this one about the innovation lessons I’ve learned over the years.
In the 1990s, while I was at Bristol Partners, I also wrote on resource based strategy, whether industry or company factors were more important to profitability, making successful acquisitions, and understanding the expectations inherent in your company’s stock price. More recently, based on my experience as a CEO, CFO, and director, I've written about how directors should evaluate proposed strategies.
Two other topics I've thought about for many years are performance measurement and incentives. In the case of the former, I've realized that all metrics fit into one of three categories: effectiveness (results versus goals), efficiency (scarce resources used relative to results achieved) and adaptability (relative change in effectiveness and efficiency for a given amount of change in the environment over some period of time). I've concluded, as you can see in this paper, that we tend to spend too much time on effectiveness and efficiency, and not enough on adaptability. On the topic of incentives, I have been struck by the gap between current practices and a growing body of research which finds that high powered individual incentives actually inhibit individual performance and the sharing of information within a team. Just what you need if you're trying to ensure adaptability in the face of rapid change and uncertainty!
I once spent a year doing a global turnaround and change mobilization program to help save one of the world's leading consumer electronics companies. It was a great learning experience, which helped me better understand organizational diagnosis and change management, and the foundations of effective leadership. Leadership is one of an organization’s four core management processes, along with strategy, execution and risk management. Briefly, leadership defines the purpose and goals of the organization, obtains resources and builds stakeholder relationships, and provides motivation and support to a team. Strategy is about sensemaking and design. The former seeks to identify the key elements in the situation facing a company, how they are related, and how they are likely to evolve in the future. The result is assumptions that form the basis for the design process – determining how to achieve desired goals with available means. Execution implements this strategic design, by developing objectives, metrics, plans, budgets, processes, systems, organization and controls. Finally, risk management ensures survival by identifying and assessing risks and uncertainties, providing warning of adverse changes, mitigating and transferring potential losses, and strengthening organizational resilience and adaptability.
Any attempt to evaluate leadership effectiveness presupposes an underlying set of criteria. To be sure, there is no shortage of leadership competency models in the world, most of which cover the same concepts, albeit using different words to describe them. Having studied many of these, over the years I’ve become more focused on the nature of leadership as a relationship – an honor that is bestowed upon a person by followers who are willing to place their trust in another person. My views of this have been strongly influenced by the writing of Professor Mark van Vugt on the evolution of leadership, particularly as over time human beings have increasingly competed as groups rather than as individuals (see this paper and this paper by van Vugt for more on this). Click here to download my standard speech on the essence of leadership (it's only two pages long…).
I've also learned first-hand that leadership, particularly in highly uncertain environments, where decisions must be made under time pressure, is one of the most mentally, emotionally, and physically challenging roles one can take on (apart from parenting…). To that end, I've also spent a lot of time researching and learning about the critical role played by grit, resilience, and persistence in the success and failure of individuals and teams, as well as how to develop and measure it. While I intuitively understood this from sports, my studies of recent research in this area have been very fruitful. In particular, I'd recommend Angela Duckworth's work in this area, as well as "Promoting Resilience in the U.S. Military" by RAND, and the materials prepared by the Army's Comprehensive Soldier Fitness Program, as well as its Warrior Resilience and Thriving training materials. I also strongly recommend this excellent paper by Didier Sornette and Tatyana Kovalenko on resilience in natural and social systems.
I've also spent a lot of time over the years, in both business and coaching sports, on the issue of high performing teams, including how to build, lead, and identify them. Rather than my own writing on this subject, I'd prefer to highlight my favorite quote, written by US Army Lt. General Walter Ulmer back in 1986:
"What is the essence of a 'good climate' that promotes esprit and gives birth to 'high performing units'? It is probably easier to feel or sense than to describe. It doesn't take long for most experienced people to take its measure. There is a pervasive sense of mission. There is a common agreement on what are the top priorities. There are clear standards. Competence is prized and appreciated. There is a willingness to share information. There is a sense of fair play. There is joy in teamwork. There are quick and convenient ways to attack nonsense and fix aberrations in the system. There is a sure sense of rationality and trust. The key to this climate is leadership in general, and senior leadership in particular."
While General Ulmer wrote these words in 1986, they are no less applicable today, when an increasingly complex and fast changing world needs good leaders more than ever.