The challenge of making it happen l London Business School

good afternoon and the very first thing to say is what a pleasure it is to see a lot of familiar faces for those of you who'd not met me before I'll just say a little bit about my own my own background and I was reminded of this because I was recently at a 30 year reunion from my own MBA program 30 years and what I did after finishing my MBA in the US was to follow a well-trodden path into strategy consulting are there any strategy consultants current ones passed and reformed ones here in the room apart from me we've got we've got a number of a number of strategy sinners or Saints here in the room on the consulting side what a lot of consultants of course do after a while is to roll up their sleeves and move across the Great Divide and instead of selling advice and become buyers of advice I moved into industry as group strategy director for a large multinational firm and I have to say it was the perfect opportunity to get my revenge on my former colleague from the Boston Consulting Group's that happened who are desperate to sell me very high-priced advice which I was able to beat down ruthlessly and then and then in more recent times and more recent time so I've been here with with all of you as a strategy professor here at here at London Business School now when we come back to what strategy should be about at least on a good day it should be all around the question what next and what we would love as strategists would be able to realize those hopes of writing the next wave of performance or even making that wave and we'd also like to be able to banish those fears and fundamentally that's the central question that we're looking to address as strategy people back in the day and what strategy people did was very much focused on formulating strategy it was very much around the the great strategic idea the answer to the question what are we going to do my colleagues I've kept in touch with at BCG at Boston Consulting Group now say that what we called in in the day 30 years ago the strategy is now just the proposal it's now just the proposal you have to do the work they were saying in order to get the work and because the answer to the question where will advantage come from how will we banish those fears and realize the hopes is perhaps less now to do with the way in which we formulate strategy and more down to the way in which we execute execute which is the the theme I hope we can explore but let's personalize it because if unless I've spent my entire career pretty much 30 years of it in the strategy field I feel pretty strongly about strategy questions um but what about all of us for example one way or another how much time do any of us in the room currently spend on anything to do with strategy how many of us would say we spend a lot of our time formulating strategy sure that show of hands very interesting very interesting for a strategy professor who might have been teaching lots of good courses on strategy formulation that looked to me like how many hands went up and again it was around a loaded question what does a lot of time mean but right but I don't think we had more than a dozen hands going up how many of us in the room spent a lot of our time executing strategy show of hands now look around so that does that does rather point doesn't it to what should be the balance in the curriculum in other words emphasis on the what yes 12 people put their hands up but when we come back to the how that's universal round the room and over the next five years looking ahead how many of us would expect to spend less time on anything to do with strategy more time show of hands and do you expect strategy to get easier or harder as you look ahead who'd say why why who'd like Church we'd like to kick us off why harder complexity complexity if we define it it's all about interconnectedness more connections it's become a much more connected world on multiple dimensions therefore much more complex I do a lot of work with some of the larger global professional service firms but also in the London Business School context with them a range of firms large small who come through our doors on our executive education programs and pretty much universally the answer to the question will what got us here get us there is no because of the way in which context has been changing how many of us in the room enjoy sailing we have any sailors oh I've got a lot of sailors excellent so what's happening in the picture we've got the spinnaker up and we would only put the spinnaker up if we had a good steady relatively gentle tailwind and again without wanting to try overdo the metaphor it may be that these are the conditions in which a number of us a number of our leaders a number of our organizations came of age there's an economist that a number of you will have come across Mervyn King and who is running the Bank of England was deputy governor was part running the Bank of England who talked about the Great Moderation and the Great Moderation according to Mervyn was the period which began in roughly 1989 and ran for nearly two decades in which measures of volatility by just about every count got greatly compressed in other words and we were finding that there was the same steady wind behind all of our boats and we could see out into the distance in this picture because it's rather a nice day of course then the weather changed didn't it how many of us believe that term gentle tail winds are about to return that's called a rhetorical question my G you have to be very very careful with forecasts and I can't resist here stealing a line from a very good friend and colleague of mine who I'm sure many of you know Andrew Scott macro economist who indeed worked very closely with Mervyn King at the time the notion of the Great Moderation was being formulated and and some of you may have been been been taught by Andrew the three rules of forecasting rule number one if you make a forecast never give a number you can say it's going to go up or it'll go down if you give a number you never give a date because one day you'll be proved right whatever you said this is sometimes called the stop clock theory of forecasting and we've seen a lot of use of that made recently by British politicians and the third rule of forecasting is if you give a number and a date then never come back now in your organization's I'm sure you'll talk about a range of mega trends which are shaping the future and of course the picture in emerging markets which many of us would have been lightly optimistic about as drivers of growth a few years back looks and looks rather rocky at the moment but it would be ridiculous to say that there's no Headroom for growths left in China India and Brazil it's much more a question of when we see the return but of course it's going to be a very rocky ride isn't it we're not going to be looking at smooth patterns of growth in emerging markets there'll be many capacity bottlenecks it's going to be a stock go process or a go stop go back go forward process in other words we're looking at a pattern of growth looking ahead but probably highly disruptive growth we see social transformation this is a McKinsey forecast looking at a more than doubling of what they call the global middle class and we could continue to extend the list but fundamentally all of those we could regard as being drivers of growth but at the same time drivers of growth and disruption there's some interesting work that's been done at Harvard on volatility looking at the dispersion of profitability between firms in given sectors across cycles and what stands out is what we might intuitively expect which is to say that in the era of the Great Moderation the Great Moderation when there was the gentle wind coming from behind propelling all boats pretty much evenly the variance of profitability became very low in other words the gap between winners and losers in given sectors became much less than in periods of high volatility higher volatility much more dispersion of profitability much bigger gap between the winners and the losers all around the opportunities and threats and who's going to seize them or avoid them first and fastest so the holy grail of strategy was always sustainable competitive advantage and what's the issue here not that competitive advantage is irrelevant but that much of what we used to rely on if we come back to some of the classic language of strategy we talk about the the ability to succeed because we create value we capture value at the same time and this is suggesting that the rules for value capture and value creation are going to be changing much faster so a given competitive advantage will not be to the same extent of rock on which we can build our whole corporate edifice a lot of the work I'm doing with professional service firms is exactly around this which is welcome to a different world welcome to a different world we may as magic circle firms in law have felt that we had a rock-solid advantage customer lock-in but in fact even the nature of what the legal sector is is starting to converge convergence volatility which those of you who put your hands up have been dealing with and for many a year and also now come right to the fore for all of us sustainable competitive Vantage I think we now have to talk about transient competitive advantage so the issue then is how we renew so back to the sailing conditions where's the wind coming from now over the last three plus years we've been running a research initiative which is also a learning initiative on where advantage might lie in terms of how we how we execute so we run a one-week executive open program we typically take about thirty senior middle managers time and as well as running a course we also collect data what we do is to ask each participant ahead of time ahead of time to carry out a 360 degree survey on effectively on execution in their own organization around some themes which I'll share with you very shortly so effectively this is allowing us to identify execution bottlenecks to see what patterns can be seen across different sectors looking up what might make it really difficult in this more turbulent world to get our crew to move fast across the deck of that boat and pick up the sounds of the waves breaking on the rocks in the distance from the old days there are some myths or let's say biases where we're going to be kinda in strategy execution which we believe need to be countered the first myth that we are looking to tackle is the idea that execution is really about vertical alignment so here's the golden thread where we define the strategy the vision if you like it gets embedded in the plan we would then define kpi's individual and team objectives and then we don't provide some feedback on performance does anyone lived in an execution model of this kind now let's let's be clear there is a place for vertical alignment and what we're talking about here is undue emphasis in one organization I work with they talk about cascading the strategy have you ever heard that term cascading the strategy I find it's very interesting to examine these metaphors that we use in business life what in real life as a cascade it's a waterfall what direction does the water go in and if you're standing underneath the waterfall you'll get very wet and rather annoyed so so immediately there's questions about reversal of the flow but there is a such a strong bias in so many organizations towards this and what we believe is that it comes from an underlying view of hierarchy because if we think of a firm as a hierarchy then very naturally we'll think of execution as vertical alignment because we'll have been relying essentially on organization design to do the job for us now we've already identified one concern one concern which is this is all one-way but what else might be an immediate concern that leaks out just as we look at this what's missing yeah so here we're asking questions about horizontal coordination how how are we making those links across not just the links down the vertical chain which starts to be crucial doesn't it if we're looking to create solutions which typically involve connecting different product and service arenas it starts to be crucial for innovation which typically is about boundary crossing and indeed if we're if we're missing horizontal coordination at that level then we may find that our ability for example to work with others become severely limited but using a different lens we asked ourselves what would it be like if we saw the organization as being predicated not so much on power but on commitments promises and those what you've got here on the screen is simply a download from Facebook you can plot your map of relationships as Facebook would see them pretty easily any relationship that has any meaning carries with it some degree of commitment which is about promises and it's about promises that bring about trust and it could well be that the crucial carriers of performance commitments in our organization have very little to do with the formal hierarchy and of course those commitments would go beyond firm boundaries and we'd already touched on this how many of us in the room know a RM based in Cambridge I find us a fascinating organization it's one of the UK's rather rare technology success stories if you have an iPhone or a samsung galaxy or any handheld device inside its you will have a RM technology effectively a RM technology arm technology is all about the chipset that governs power consumption and enables low power consumption so you don't have to have one of those huge batteries that you see in movies about mobile phones from the 1980s and your phone doesn't burst into flames as it might with high power consumption so a RM indeed do create these designs but it goes much further than that because erm around those designs create and manage an ecosystem and it's an ecosystem which in many cases involves no transactions no money is changing hands however the effective coordination and cooperation of those ecosystem members is absolutely critical for a RM success and but none of them actually work for a RM in other words we've moved beyond if you like the hierarchical model to one which is about an influence so the OEMs might for example be Apple and so then the question would be just how good a job are we doing at the horizontal dimension of alignment not just within our organization but beyond its walls because I'd argue that many of us if we're going to succeed in this world of transient competitive advantage will indeed need to be highly effective in working swiftly with others outside our own boundaries so we'd mentioned that everyone coming on that program executing strategy for results completes a 360 degree survey and one of the questions is who can I rely on who delivers the goods I can rely on X to do what he or she says they will all of the time or most of the time and it turns out that people can rely on their boss about 85% of the time direct reports about 83% probably because they wouldn't stay direct reports for very long if the score was rather lower than this but then when we come to colleagues and we're talking here about colleagues in other units and partners partners meaning partner organizations oops then when we're talking we're talking about some a much lower degree of reliability now just stress this is aggregate data and it's nuts to get even more interesting when you when you break it down when you break it down by sector and by geography but it's coming out of roughly now 8,000 respondents from about some three hundred three hundred companies and if we do need horizontal alignment this starts to raise some very important questions in terms of what we're doing or not doing now and from our own personal experience what happens when we can't rely on our colleagues DIY does that ring bells around the room now what else might we do you're not getting any cooperation from him and it's a crucial project and you know you're going to be judged on the success of that project he doesn't elect for you what would you do ah right so this we call escalation escalation which in some organizations seems to become a primary strategy execution tool for that reason so as we escalate to his boss then you're going to escalate to her boss presumably and then they'll escalate to their bosses and then life in the boardroom is going to start to get really depressing because what we'll be doing up there in the boardroom on the executive committee is dealing with these endless endless escalations and a bad day what we might do in order to deal with this is to say I've had enough of the escalations so now we're going to have a proper plan to deal with it which makes it absolutely clear what everyone's job is and what they're inspected to contribute the problem I believe the correct term quotes from Count von Malka who reformed the Prussian army is no plan and survives first contact with the enemy and so again we won't be able to address this by relying on the plan will we so then the question might go further which is what is fundamentally our execution challenge and this we believe is one of the major sources of confusion which is to say in some cases the important challenge is coordinating across units but not always for example if we're trying to do a turnaround disaggregation may be very important it's no coincidence that PE has its private equity houses that essentially look to do turnarounds look to keep units very separate not least because eventually we want to sell them and we don't want to have created a tangled web which will make it extraordinarily difficult to unplug an invested business the question there is as we coordinate more effectively across units do we also then become somewhat less flexible in terms of being able to adapt to shifting circumstances so one of the key questions is which of these is going to be most important because all of them are in fact in tension it's not going to be possible realistically at a given point in time to be a superstar on all three of those dimensions could be that the balance shifts over time Nakia not the old nokia but the new nokia and the old Nokia Siemens Networks as it were and the leadership challenge there was to call the change which is to say the execution priority has been during the darkest days of Nokia's under performance has been indeed all about vertical alignment but now now we've done the Alcatel deal and what we're looking to do is to shift gear because coordination across what we've created without Cattell nuisance the solutions might we we might be providing has become the crucial piece so for any of us in the room it might be worth keeping in mind that question what is the execution challenge primarily now in our organizations and how might we how might we see that shifting as we look ahead here are a few more myths the third one might strike you as odd because a lot of organizations put huge efforts in communicating strategy one senior middle manager of a company that'll be nameless said actually he needs to understand the strategy said I need to understand the strategy but it's my job not just to pass on the PowerPoint it's my job to translate the strategy into a set of executable priorities because the issue is not have I seen the bubble charts and the two-by-two matrices nor is it about some level of understanding about how we're here to make the world a better place important as that is from the standpoint of emotional Bayan but my question if you want me to execute your strategies just what is it that you want me to do and why does it matter and who else does it matter to so in other words if we're coming back to the question of coordination the horizontal coordination again back to what you want me to do who do you really want me to do it with so this would then come back to the theme of priorities that say priorities rather than the strategy and the organization's we were working with pretty much all have employee engagement surveys and often the employee engagement surveys have something like what we see in the top box here do you agree with the statement I am clear on the firm's top priorities and then what we find from the sample is that 84 percent of managers agree with that statement we asked the same managers to list the company's five top priorities actually it was the priorities for their own unit less than half of two of half a direct reports could list two of the five this by the way might be a very interesting exercise for any of us to carry out because even before we get to the how do you want me to do it and with whom and just what might those priorities be and without wanting to to be awfully depressing and we kind of made it a little bit easier rather than top five how many of you can get the top three and again in this sample of now 8,000 people or there abouts coming from some illustrious companies which might even be represented in this room who knows we were finding that if you just made it one priority you'd get a somewhat higher hit rate and you saw on the slide a little earlier that rather forbidding German character count font Malka who reformed the Prussian army after a disastrous defeats at the hands of the French who are they who are the French people here in the room excellent so so this was the Battle of Vienna the Battle of Vienna and you have the Pont Yahya by the Eiffel Tower I believe and this was where Napoleon defeated the best army in Europe the Prussians because they were they the best trend they could march in time better than any other army they could shoot more accurately they were the best but they were smashed and in the in the examination of the ashes that followed an insight which was a very important insight not just for military history buffs but in this context around the quality of commitment was that the Prussian army had been trained very much on the basis of what Bob Mollica called be fails tactic befell translates from the German as an order biffle's tactic so the notion was that you'd be given an order and you'd pass it down the line and the problem then arises in the fog of war when the chain of command is broken as a sensible soldier what you do when no more orders are coming you stop you wait you wait so the question was could we move in terms of the nature of the commitment was being asked from biffle's tactic to after Ike's tactic which when the ostrog would be much more defined as the still an element of command in it but it's the level of purpose it's providing the reason why so if we understand the reason why and if we have been trained to understand the reason why then when the chain of command is broken what might we be able to do think think and adapt also we learn the skill of not cluttering our subordinates with too many commands in other words we'd be able to ensure a much better signal-to-noise ratio and those reforms around our struct act eek were fundamental in re-energizing that particular organization with somewhat mixed blessings and some decades later of course but it would come back again for us today question when we're talking of priorities do we have an understanding of the what and are we providing some tools for the how and have we also addressed the why because let's be clear in turbulent environments we're not going to get it right all the time are we but what we do want is to have large numbers of people assuming that our organization has large numbers of people or our ecosystem contains large number of people making more or less the right decisions most of the time and given the challenges of turbulence if we can pull that one off then we will have built a very powerful and much more sustainable source of competitive advantage now here's a fourth miss sometimes execution I've found gets confused with operational excellence operational excellence is doing the thing right but as well as doing the thing right there's the question of doing the right thing doing the right thing which brings us into the theme of resource allocation and this chart may be a bit of a sight test for those of you at the back but it's a summary of what to me at least is some very interesting done by Steven Holl at McKinsey looking at the implications of dynamically allocating resources from year to year or simply sitting on your hands as a resource allocator so the comparison is to do with the degree to which your allocation of capex capital expenditure is essentially the same as what you've got last year if that's the case the correlation index will be up at one the lower it is on that chart the more we find that you won't necessarily have the resources that you had allocated last year this is about capital spending but it could be about IT and it could be about talent and from this survey which is called how to put your money where your strategy is and the evidence is that if you are not a dynamic resource allocator then your performance measured here is TSR total shareholder returns is likely to suffer so not surprising as new opportunities and new threats emerge the question again is you know are we biting the bullet in terms of having the tough conversations about resource reallocation because again this is a line taken from Stephen in many companies investments like war which is to say it's easy to start one and in their survey in the McKinsey survey typically middle managers said not much of a problem getting hold of resources particularly if we built up a Bank of credibility over chart over time but what is the problem with war it may be easy to start one but very difficult to get out of one so here was the crucial question around exiting too slowly or struggling to exit and it's not just about the waste of resources but it's also about the emotional wear and tear so you've got some initiative which should have been painlessly put to sleep years ago but it's someone's baby and you're the person who's now got to say I'm sorry it's an ugly bed which again again starts to come down to the kind of discipline that we're going to need that we're going to need as that as that chan portfolio of opportunities new opportunities and new dangers and starts to shift now performance culture how many of us how many of us in the room would like to have a performance culture in their organizations so we reward performance show of hands we like that because we want people to score those goals don't we if the challenge is fundamentally vertical alignment vertical alignment then what we typically call the performance culture where we're rewarding individual performance down the hierarchy could make perfect sense but what we found again in our survey in our execution survey were some disturbing results so for example considering adaptation of the eighth roughly 8,000 managers in the survey more than half were saying that experimentation and failure had hurt their career at least to some degree that ring does then when it comes down to coordination 15% was saying that issues got addressed promptly if it hit their numbers but otherwise if you want to follow the gypsy's warning get your own job done first before you start collaborating with others and then 2/3 regardless by the way of whether or not this was identified as the challenge or that but 2/3 of the people in the sample was saying that individual performance was the top driver of promotion decisions so again we would want to come back to the classic question what are we really seeking to achieve then what are we really seeking to measure then what we're really seeking to reward here's the final one the problem you don't you don't what we're after here is identifying what we've been calling the distributed leaders in the organizations of those who are coming on this program and taking the survey and I like I like the last one Steve Jobs this test which is if you are leaving for a new company and could take a hundred people from your current company who would they be the importance of this is that the distributive leaders back to that web that network of commitments are those who are commanding the key nodes they're often the cross pollinators if we're talking about the translation of the strategy into executable priorities they will very often be those who are doing that they will be the people who in factor effectively collaborating with other distributed leaders across your organization if we've got the the Watson the why and the how of the priorities clear so again where we might find once more in a highly turbulent environment execution falling down is where we've simply looked at the organic ROM from the top rather than identifying who were the holders not necessarily of organizational power from a structural sense but who are the holders of influence so so just in summary if we're if we're looking at the relatively new world which is not a new world for many of you in the tech sector where volatility and uncertainty and complexity ambiguity the VUCA world has been around for a while but more and more of us I believe if we're not doing so already we'll have to ask ourselves just to what extent are we building an execution advantage by moving from what may have served us perfectly well when we had the wind behind us and the spinnaker on our boat up to what's now going to service I hope in a world that's much more much more turbulent if it is a world that we've got to discover progressively rather than thinking about the linear approach to strategy my colleague Don Don Sal talks about replacing lines with loops and the the notion of this Luke is that the first part of it is about making sense making sense of an ambiguous situation then from making sense the question is making choices what are we going to do not do what we're going to stop doing from choice we come to commitment which is all about the tough discipline that means that the choice we've actually made really has some teeth what do we have to do with the top left close the loop so this is where we're making revisions and the key here the key here to my mind and this is back to the the leadership challenge is that these are very different conversations they're very different conversations let's remember unless we're at the sharp edge in our organisations where we're physically coding software or using screwdrivers and hammers the only tools we have are words when we're making choices this is where we want to have a debate a debate with people taking up a position and arguing forage and defending it when we want to make it happen the debate is over and this is about what's the nature of your commitment is there a good promise happening here conversely is there a good ask the tone when we're making revisions the wheels have come off the wagon didn't work out as expected what's the worst thing we can do at that point the blame game the blame game way back and the Boston Consulting Group where I worked at a tool that they call the experience curve and the notion was that as you gained experience you'd improve on cost or on technological discovery you've moved down the experience curve but if you indulged in the blame game what would be the slope of the experience curve you'll be absolutely flat because they've been no learning and therefore no competitive advantage at the final point is really this when we come back to success is it about the hand we had dealt worst about the way we play the hand and the sessions being them really pushing very hard for the way we play the hand to be the source of competitive advantage rather than market position the resource-based view that you took in in your core strategy course at lbs so I hope I hope this has been useful and interesting and I have to say it's been a real pleasure to reconnect wonderful to have you back

Channel: London Business School

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Keywords: london business school, lbs, Dominic Houlder, strategy, entrepreneurship, executive education, executing strategy for results

Id: bz-37FePEO8

Length: 37min 50sec (2270 seconds)

Published: Wed Oct 19 2016