[MUSIC] Greetings from New York City and Columbia
Business School Executive Education. My name is Scott Gardner.
I'm very happy to be back again with Professor Willie Pietersen for his
newest webinar Five Keys to Success for the Strategic Leader. Before I introduce Willie, I would like to
go over just a few key logistics as you will see on your screen right now. A recording will be made
available after the webinar. If you'd like to tweet about the webinar,
please use our #CBSExecED. And finally, please upload your questions
throughout the webinar in the Q&A Box, and we'll get to as many of those as
possible in the last ten minutes. Thank you. So it's my pleasure to
introduce Willie Pietersen. He was born and raised in South Africa, where he received a road
scholarship to Oxford University. His three career iterations started
with practicing law in South Africa, followed by 20 years as the CEO of such
international companies as Lever Foods, Seagram USA, Tropicana, and
Sterling Winthrop Consumer Health Group. Finally, in 1998, he joined Columbia Business School as the
Professor of the Practice of Management. He is also currently
the Faculty Director of the Implementing Winning Strategies
Executive Education Program. Which I believe is running June and
November this year in New York City. >> That's good, that's right, yeah. >> He also is the author of Strategic Learning. So it's great to be with you Willie, I'm happy to be here with you.
>> Thank you, Scott. Thank you for the introduction. Welcome to everybody who signed up for
this webinar. It's my pleasure to
interact with you here. >> Willie as I said in previous webinar, you have a very, very,
very unusual background. First, as a lawyer, then a CEO for
20 years, and then now, as a professor at Colombia for
the past 20 years. How has your background as
a practitioner influenced your thinking? >> Yeah, to a very large degree and I feel very privileged Scott to have
worked in these big learning laboratories if you like. First as a lawyer, then as a corporate
executive and now at Columbia. And if I think back on the synergy between
them, how they build on each other, it's an interesting kind of journey. As a practitioner of course,
the driving force is to deliver results. It's the bottom line,
it's the sales number, it's meeting the quarterly result,
etc., etc. Not a lot of time for abstract theory. But now that I've come to Columbia, this
20 years it's been a wonderful experience. I've gained a lot of respect for theory. But with a big condition,
a big rider, and that is this. That I belong to the pragmatist
school of thinking. Which says that the test of a good
theory is it's usefulness and practice.
>> Right. >> So my idea is that good theories much have problem solving power. Now, where I work at Columbia, given this
background as a combination of experience, is at the intersection between theory and
practice. So I'm always searching for
what I call ideas with energy. And then finding good practical frameworks
for translating them into action. So it's a kind of an incite to action mode of thinking.
>> All right.
>> That I'm doing. >> I like that, so my question would be how did you come up with these five
keys to success above all the others? And then what I'd like to know
is did the answer surprise you? >> Absolutely, they did actually surprise me. I went into it with an open mind,
and the trigger for this was the fact that whenever I have
a meeting with corporate executives, I like to ask them at the outset, what are
the big challenges that you face that we can talk about, have a conversation about? And the most common answer
I get is about disruption. >> Yes. >> They're saying disruption is threatening our survival. And then they offer a generalization. I say, well,
what do you mean by disruption? And they say, well, technology. And well, let's explore that a little bit. And then the conversation goes into
things like artificial intelligence, Big Data, robotics, Cloud computing,
mobile technology and these are all big things
are producing new threats and opportunities that are a big challenge for
us. And then I pondered this
because that's a common answer, and for me that triggered a question. This is the disruptive world of
change that is the reality of today. >> Right. >> And it's probably gonna accelerate. And there's gonna be bigger and
bigger challenges for us to face. The big question for me is,
what are the most important, most powerful leadership
ideas that will drive success in the face of
change of this kind? That was the question that I asked myself. Then as I pondered it and explored it,
and here was the surprise. None of the ideas that I wrote down
as I filtered through this and sifted through my thinking, none of them is new.
>> They're not new, but they are the most important in the sense
that they are the most powerful ideas for driving long term success in the face of
discontinuity, disruption, and change. And then I step back and
said well these are familiar but they're not strongly applied. So I think there's an element
here of neglect, and maybe lip service to these things.
>> Right. >> And what I think corporate America faces here, for
corporations worldwide, is a gap. And maybe the gap is growing. It's not enough to be knowledgeable
about these, or even to do them, there are challenges to excel at them.
>> Right. >> So as we go through them I just want to suggest to the audience
that we have here today. They'll be familiar too, I'm sure. But the question I'm
asking you to pose for yourselves as we go
through this one by one. Are you really excelling at these? Do you have hard wired
processes in your business? Or not for profit organizations. We'll mobilize these ideas and
create success view in an enduring way. So that's the idea.
>> Wonderful, so let's go through them one by one.
>> Sure. >> Let's start with number one. As you'll see on your screen right now,
in future our only sustainable competitive advantage will be our ability
to learn faster than our competitors. I like this, but I think for
many people who are watching right now, the word learning is a broad
term with enormous connotations. And so, can you pinpoint the specific
type of learning you mean and is there a concrete process for it?
>> Absolutely, there needs to be, otherwise it's just an exultation, let's be a learning organization.
>> Right. >> It's a nice little buzz word. No, we do need to have hard wired
practices to help us do this effectively. But just to go back a little bit in time, this idea was put forward more strongly by
a guy called Arie de Geus, an article he wrote called The Living Company.
>> Right. >> When he made this particular statement. And I was very taken by this idea even
as a CEO and realized that there was a big idea here in an environment
that's changing more and more rapidly. So I think the underlying thought is
the crucial thing here and it's this. That if we're looking for competitive
advantage cause that's the name of the game at the end of the day
in a competitive world. We're seeking competitive advantage, but we're seeking something that's
sustainable as a competitive advantage? We have to come to a hard-nosed
conclusion, and that is that competitive advantage cannot rest on a particular
product or business model. These are very quickly
overtaken by events. And need to be reinvented
in some kind of a way. So I think de Geus' idea here
which I think is crucial. Is that we need to, there's a shift in our mindset that we
need to make that I thin is crucial. That the understanding of
competitive advantage is this, it's not a product, it's not a service. Sustainable competitive advantage
is an organizational capability. To build an adaptive organization
through processes that enable us to continuously learn and renew our
organization as the environment shifts. And we are unable to do this,
we can contend with change. Now, so that's a big idea. It is this shift from product based
competitive advantage to organizational capacity is a big a idea. But you don't build that by just recognizing the idea.
>> Right. >> So, I came back to this issue of being pragmatic in my approach and
designed a process to get this done. It's called strategic learning,
and I'd like to put it up here and briefly talk through it as
a kind of a core process. So this is a process that if you like
represents a shift of gear from strategy as planning, to strategy as learning.
>> Right. >> It involves four steps that move in a cycle. Step one is learn,
conduct a situation analysis, understand the external environment,
the needs of your customers. Step two is then to focus by
taking those insights to determine where you will compete and
how you will win. The third step is to align the entire
organization behind your strategy and galvanize [CROSSTALK]
>> Very important step, yeah. [LAUGH]
>> Very important step, that step of alignment. And a lot of it involves people and
their commitment to the strategy. Fourth step is to implement faster and
better than your competitors do. And then there's a learning loop
back to the situation analysis. And the reason for that is that the
external environment won't stop changing. So we can't stop learning.
>> Right? >> If you make this just seasonal and say, well, I'll do this maybe once a year. And the environmental's gonna stop for me
until I do it next time, you're gonna fall behind and that gap will widen.
>> Right. >> So that's the idea. >> Now, just one final thought on this though, this idea of
creating a living company. This organizational capability to
adapt through learning and renewal. Can't rest on a single process. It needs to be embedded in the culture and
behaviors and practices of the organization and diffused
in that kind of way through after action reviews, regular quarterly retreats,
ongoing examinations of customer needs, etc.
>> Right. Well, I think, when I've looked
at this with you over the years, the biggest word I get is the ongoing. And the mistake I see the companies make
is to make it sort of a singular event and it just sort of gets put in the closet for
the year and their very proud
>> It's the season [CROSSTALK]. When the season's over, we-
>> We go back to what we do before. >> Very operational. >> Wonderful. >> The military actually get it right. When they say strategy is a process
of ongoing assessment and reassessment as the organization shifts.
>> And that's very, that is, that will assist with
the buy-in from the entire, the culture creation- >> Absolutely.
>> Is that. Should we move on to number two?
>> Let's move on to number two.
>> Sure. >> Okay, so we're putting this up on the screen for you now.
>> Number two, success means putting the customer
at the center of business decisions. And, I often come back in our
discussions to that word, intention, as a source of guidance, and organizations,
and for life for that matter. This lesson seems to me to be a North
Star, or a lighthouse in the fog, type of lesson for organizations would you agree?
>> Absolutely do agree. This is one of these buzz words,
and I hear it over and over. People are having meetings,
and they say well, let's look at it from
the customer point of view. Customer point of view as if there's
some kind of peace mental gymnastics we're not used to doing. Let's try and do this. My mind goes back to my experience as
a young brand manager at Unilever, learning my way forward. And I was obsessed with
the product features of my brand. So I did a presentation with my boss
saying that these are the particular attributes of my brand that
I think are very important. And he stopped me, and he said stop,
you're getting this all wrong. People don't buy attributes. People looking for
solutions to their needs. They want to satisfy their needs. Your thinking is back to front
>> Mm. >> You're thinking inside out. >> Yes. >> You've got to think outside in. So your product that you're
offering is a vehicle for delivering benefits to customers. Think benefits, you gave me an article. It was a Theodore Levitt article. It was a wonderful article called Marketing Myopia.
>> Right. >> And in Marketing Myopia, Levitt makes the point very strongly that,
and uses the railroads as an example, that products are just a means
of delivering benefits. And he says, the railroads got
into trouble because they thought they were in the railroad business. Well, what are people looking for,
it's not a ride on a railway. Crack looking for transportation.
>> Right. >> Well they were in the transportation business, not the railroad business. They didn't recognize this. So, as a very important kind of thing,
here is an example Hallmark Cards. I love this example and
here's their winning proposition. We help people connect
with one another and give voice to their feelings.
>> Yeah. >> Now let's just examine that for a minute, the benefit that's been
offered here is human connection. The count of just a vehicle for
doing that. >> That's just a vehicle. >> So that's the ultimate benefit. Now an important point that Levitt
made is that there's no such a thing as a commodity.
>> Right? >> At either end of any transaction is human beings and
the way the service system Levitt becomes the key benefit.
>> Right. >> Now if you look at Amazon's retail business for example,
not a single unique product. So it's really the quality, speed, and convenience of its service- >> Right.
>> That matters >> The benefit. >> The benefit. >> And even with Hallmark cards if you think about the fact that When people stop
sending cards, if that is their intention, then they can adjust.
>> Yeah, absolutely. >> They can be flexible. Just in the interest of time,
let's move on to number three. >> Yes number three. >> Strategy is about achieving differentiation
by making choices. And as I said, I believe this can be a
very difficult lesson for leaders because of many emotional elements.
>> Yeah. >> That tribute of your company of. Such as fear of change, admittance
of maybe past possible failures, human capital element. Is this true?
>> Absolutely true. I mean making choices is
an agonizing thing actually. It's no easy thing but
if you go back to fundamentals again and think about strategy which is a concept
largely, widely misunderstood. There's only one reason why we need to
have a strategy in the first place. And that is the reality
of limited resources. This forces us to make choices on how
we will concentrate those resources on the few things that will
drive competitive advantage. So at the end of the day,
it is about making choices. Now we get into this
difficulty choice making if in limited resources in choice making It
confronts you with those zeroes someday. Every additional thing you choose to
do subtract energy, and effort, and attention from everything else you do.
>> Right. >> So you have to be able to subtract before multiplying, so
choice making is very largely a question of what you will give
up to active sacrifice. Now let's look at the choices we need
to make when we [COUGH] do a strategy. There's kind of three questions
we need to answer and that's really the essence of a strategy. And if we don't have good answers to these
three questions we really don't have a strategy is where we compete and
what is our aim? And where will we not compete? Second one is how will we
win the competition for value creation in our chosen arenas? And the third one is what will be
our key priorities for success. That's the guts of our strategy. Everything that we do in the organization
must flow from the answers to those and cascade down. Now, if you look at that middle bullet
there, a very important point emerges. Strategy is about winning,
not just about competing. So I get dismayed when I hear
organizations talk about value proposition. That's a kind of a bland statement. And it misses the biggest question of all,
which is, how much value? We're in a competitive world and winning the game is creating a measurable
margin of difference in the value that we offer customers that gives
them a compelling reason to choose us. Now, there are only two ways of being
unique, which are about differentiation. First way is doing something
that nobody else is doing. That doesn't last very long,
people copy you. And the second way is really equally
important which is doing what everybody else is trying to do but doing it materially better
in the eyes of the customer. So let me just offer two
quick examples of that here. This is Google's search business, so if you look at this there
are three very big words here. We organize the world's information,
we make universally accessible and make it useful. Now, of course, other companies
are trying to do that as well but Google are way in front because they
do that better than anybody else with a measurable margin of difference.
>> Right. >> So it gives a comparing reason to choose Google. I love the one for The Economist. I love it for its brevity and
for the core of the idea. We're not just reporters. We explain the world to our readers. Now, it's my favorite weekly magazine and I buy it because of this
interpretive element that does this. And we step back from those two. We come back to the point again. Step back and
you look at each of those and you say, there's a benefit that I'm buying-
>> Right. >> From the customer's point of view.
>> Right. >> So it illustrates that point again. >> That's great. All right, let's move on to number four.
>> Yes. >> Leaders must be able to simplify a complex world. So many leaders know this lesson is
much easier [LAUGH] said that done. But it's absolutely paramount to
the success of an organization. And we know that if a company is riddled
with complexity, that is magnified enormously out to the customer.
>> Yeah, and the world is become more and more complex. And if you think about leadership,
a sorta overriding capability of effective leadership is to be able
to simplify, not over-simplify, but simplify an increasingly
complex world. Now, simplification sounds
like a shortcut, and we just find a kind of a way
to sorta express this quickly. It's not at all.
>> No. >> It's very hard work. Simplification is enormously hard work. And you can get there very quickly,
but it's essential leadership work. There's a great story of a Supreme Court
Judge called Oliver Wendell Holmes. A lawyer was arguing a case before him,
and was giving a very complex argument,
but Holmes stopped him. And said, I can't follow you,
you're being far too complicated here. And my IQ was okay, so
I've gotta take the blame for this.
>> [LAUGH] Yep. >> And the liar said, I don't want to give you
a superficial answer. I don't want to distort the truth. Holmes' answer was a classic, and he said, I don't give a fig for
simplicity on this side of complexity. But I give my life for
simplicity on this side of complexity. I'm giving you a 45 minute break,
go work to the complexly, bring me simplicity on the other side. Now, there's a famous guy who's
a chef called Marco Pierre White. He's a British chef who got
the three Michelin stars for his excellence in cuisine,
brought a number of restaurants that make chaotic things.
>> Right. >> And he developed this little credo for running a set of restaurants. And I think this is good credo for all of us to think about.
>> I like that. >> Complexity creates confusion, confusion creates inconsistency,
that's the problem with it. And inconsistency creates failure. So this issue of being, go for simplicity.
>> Right. >> That's very important. >> I agree and I think that those last three words of
that confusion inconsistency failure to the customer, that's their consumption chain.
>> Correct. [CROSSTALK]
>> That's the assumption chain. >> That's a great point. >> All right, so we moved to number five. >> Moved to number five. Last one.
>> To move people at the deepest level, you need compelling stories, and as you know,
this lesson is very close to my heart. As someone who teaches public speaking, I believe in the power of
the leadership narrative. And again, do you think this lesson
goes back to defining the EQ or the emotional intelligence of a leader?
>> It does indeed because if you don't tune into your people and tune into what
their needs, thoughts, fears, hopes, and expectations are,
you can't expect to lead. So this EQ factor is a key determinate
of leadership effectiveness. So if you think again and
bring it back to the idea of a strategy, if you want to distill in the very,
very simple way like I said before, the document itself is important because
you need to have a frame of reference, but it should never be longer
than ten pages to simplify it. But that's not where it ends. The final deliverable of
a strategy is not just a document. People don't follow documents.
>> Right. >> They follow leaders and they follow ideas. So the big thing is to translate
the document into a compelling leadership message that
wins the hearts and minds of people, that explains
the strategy and the reason why. So I think great leadership is
always about a powerful narrative. Some kinda the bigger the change,
the more important the story becomes. The critical thing, as Peter Drucker said, the task of a leader is to be
the trumpet that sounds the clear sound. 3M is a great example of
this as a company, 3M. They've gotten completely away from
presenting strategy in PowerPoint presentations with bullet points. And they express their
strategy now as a narrative. They explains the entire logic,
where everybody fits in, what's expected of them, what success
looks like, etc., as a narrative. And I just wanted to put
this statement up here. We really need to become great storytellers as leaders.
>> Right. >> Just in ad hoc way that expressed their strategy and
these are the elements of a good story. I just give this example,
Bill Clinton, when he was president became very frustrated when,
they had meetings in the Oval Office but between competing points of view, right?
>> Right. >> And the meetings became disfunctional, disorganized. And he'd stop them and say,
come on, folk, let's settle down, solve the problem,
we're serving the American voter. And it didn't work, so
he got a moon rock from NASA, put it on the table in
the middle of the room. Next time there was disfunction and
things went out of control he said, stop, you see that rock? It's 3.6 billion years old, and
we're just passing through, settle down, collaborate, solve the problem. And he says, it worked every time. So that was kinda brilliant use of symbolism-
>> Right. >> That he invoked. We're here for a short time, there's a great big span of time
in the universe, so to speak. So I mean the bottom line for
us here is, stories create meaning and people aren't in search of meaning
in their lives and in their workplace. Great leaders make meaning through stories
and what we've allowed to happen more and more is for the deadening effect
of PowerPoint presentations to take the place of an effective narrative.
>> Right. >> And I think we should rethink that. >> Well and I'd also say that these
stories from a leader also show that the leader
understands the human element of a company.
>> Yes. >> There's sort of a relatability. So there's a leader, there's inspiration,
but then there's also, I know what's happening, I know what
you're going through and I'm with you. >> I understand. >> Where PowerPoint doesn't [CROSSTALK] [LAUGH]
>> And there's no greater human experience
than the experience of being understood. So when employees feel that,
it's a big motivator. >> It's a big motivator. All right, well, we have some time now for
some questions that have come in. Would you like to take those for you?
>> Sure, absolutely. >> Okay, the first question is from Amy. What is the biggest impediment to
doing these things systematically? >> Okay, it's the absence of hardwired processes. In complex organizations that are global
and have a number of functions underneath them, the way that work happens
is through business processes. So whenever we define
something truly important the question to ask ourselves is how we
will turn this into a business process, that is on-going and
is shared across the organization. Well, the common language, a common set
of concepts that we all understand and use, and applies a process. Now, strategic learning
which I showed earlier on. It is an example of a process like that. That's the way works happens
not just through exhortation. Let's think about the customer. What are we doing by way of
understanding customer needs? Doing a hierarchy of needs
analysis that we all do systemically.
>> Right. >> Deepen our understanding of customers. So these kinds of frameworks,
practical frameworks, other way that work gets done.
>> And how do you insert that into the culture? What is it? What things did you do to make
sure that was part of the culture? >> Whenever there was a meeting where about competing more effectively, and
I was running businesses that had brands, my question would be, start the meeting, what do you understand about the needs
of the customers we seek to serve, who are they?
>> Right. >> What have you done to explain their most important needs?
>> Right. >> What are our competitors doing our rivals doing to meet
those needs better than us. What are the key factor
that differentiates us and gives our customers a compelling
reason to choose us. Now, there's a kind of flow of thinking. Next time around,
nobody's gonna come to the meeting unprepared-
>> Right. >> For those questions, because there they are. And it's kind of our thing is a little bit
like Sam Palmisano, who is the CEO of IBM, prior to the current one, who said to
these organizations, there are always four questions that every executive must be
able to answer in every meeting we have. Number one, why should customers
choose to do business with us? They have choices. Number two, why should investors
choose to give us their money? They have choices. Number three,
why should employees seek to work for us? The best of them are volunteers. Number four,
why should communities welcome us? In their midst and he kept driving those
questions and the narrative followed. And the processes to
provide good answers of those questions flowed from that approach.
>> Right, and it shouldn't just be in meetings, right? It should be somehow-
>> Pervasive. >> Pervasive all around the company.
>> Correct. >> Whether it's visually you're seeing these questions,
it means something to me to inspire, not just, I'm preparing for a meeting. But this is how I'm living my daily life.
>> That's correct.
>> [LAUGH] Right? >> Absolutely. I worked a lot with Erickson in the past,
and I was working with them in Turkey. And they were striving to bring the customer into the picture
in their conversation. So how can we do this effectively? And the customer for
them was big telephone operators. Suggestion I made to them, a very
pragmatic one, is get a photographer to go and take photographs of the real
people who work in their system. Mary and Fred and Joe and Cynthia
take photographs of them, put them on the wall in every conference room and your
lobby, rotate those every three months. And interview them briefly,
underneath that have a brief inscription, what do I expect from Erikson? Now, you can never escape the customer. When you're sitting in a conference room,
you're looking at the customers all around you, and they're looking at you.
>> Yeah. >> And they're speaking to you. Now, just that bit of symbolism,
like the moon rock and rotating it every three months
was a constant reminder that we serve customers.
>> Right. >> And what we owe them is a set of benefits that are better
than the competition. >> Exactly, and it focuses intention. >> Focuses intention. >> Constant focus on. All right, let's take another question
from Jeff, what are the differences between the for-profit world and
the not-for-profit world. And I know you don't like that phrase so-
>> Yeah. >> The not-for-profit world. >> Yeah, I don't like that phrase not for profit cuz it's weird. It kinda defines what you do
in terms of what you don't do. So I always say to folk when I go to
a social occasion and people say, hello, I'd like to meet you. What's your name? I don't say I'm not Tom. I say I'm Willie.
>> Right. [LAUGH]
>> So to define yourself [LAUGH] in
that kinda negative is weird. So I invite non-profits to change
their language from being not for profit to for benefit. Now that leads to a whole
different way of thinking. Who are the beneficiaries I seek to serve? What are their most important needs? How am I serving those needs? You don't get that kinda conversation
from saying I'm not for profit, I'm trying to avoid a profit here.
>> Right. >> And broadly speaking it's the same. Except it's not the drive for
superior financial returns but for a sufficient bottom line, if you like. Or gain at the bottom to be able
to reinvest in yourself over time. So there is a set of
financial disciplines. But the whole idea is to reinvest in
the organization in service of its beneficiaries. Otherwise, it's the same thing. You said it, so
you exist in order to create benefits for somebody outside the organization.
>> Great. Well, Willie, this has been really
wonderful, and just really quickly if you can just give me, this is from Dennis,
which quadrant is the most difficult on this strategic learning cycle that you
found people have had the most difficult? Just of the top of your head.
>> Boy. I mean, there's ethically all the way. I would say the situation analysis
because people produce a lot of data. But the idea is to produce insight, and
that's where the competition really is. >> Not data, insight. >> Not data, insight. You've got to work through,
like Oliver Wendell Holmes said, work through the data,
work through the pile of rubble. Come out of the other end with
four to six critical insights I call the brutal truths,
that enable you to find your challenge. And then your winning proposition. That's a tough game. But as the military set always emphasizes
intelligence precedes operations and if your intelligence is poor,
a lot of people will die and they'll be your own people.
>> Right. >> Very difficult thing to pull off. >> It's very difficult [CROSSTALK] >> But it's done through practice. Over and over and get better at it.
>> Well, your best work is a habit, right?
>> Correct, exactly.
>> Well, ladies and gentlemen, thank you very much for joining us today,
it was a pleasure to be with you. Willie, it is always
wonderful to be with you. >> Thank you, Scott, thank you, everybody, for joining in, it's been a pleasure.
>> Thank you.
