The Business Book

START SMALL, THINK BIG 49 See also: Beating the odds at start-up 20–21 ■ Take the second step 43 ■ Reinventing and adapting 52–57 ■ The Greiner curve 58–61 ■ The weightless start-up 62–63 ■ Beware the yes-men 74–75 ■ The capability maturity model 218–19 It is the structure of the Companies must look organization, rather than the to the experience employees alone, which holds of middle managers the key to improving the for growth. quality of output. This requires As a business W. Edwards Deming experienced handling. matures and grows it will require systems, US business professor (1900–93) procedures, and protocols. way to the comfort of habit, and Companies must balance Those systems are the in ever-dynamic markets habit structure with purview of middle can too easily lead to stasis and flexibility. stagnation. The danger for management. management is that, as US investor Warren Buffet warned, “chains of But too much habit are too light to be felt until process can stifle they are too heavy to be broken.” innovation and, Middle management therefore, growth. The importance of middle management was described by transportation and communication As standardization and mass business historian Alfred Chandler allowed firms to grow beyond the production emerged in the early 20th in his 1977 text, The Visible Hand, immediate gaze of friends or family, century, the role of management a play on economist Adam Smith’s and beyond the immediate locale. grew. Business was taking place on “invisible hand” metaphor, which But to prosper in this new an increasingly global scale. Even explains the self-regulating forces environment, companies needed before mechanization, coordination of the market. Chandler noted that more rigorous processes and from managers enabled mass before 1850, family firms dominated structures. The increasing production. Standardization turned business in the USA. These firms geographic scope and size of management into a science, and had poor communication networks businesses required new levels of managers into a vital cog in the and limited access to educated coordination and communication. organizational machine. staff, so rarely grew beyond groups Businesses had grown too unwieldy of family and friends who could be for one person to manage; they Enablers and enterprise educated, trained, and trusted to required the oversight of a team of In a 2007 Harvard Business Review manage the business. people. This marked the emergence article “The Process Audit,” US and rise of the professional manager. businessman Michael Hammer ❯❯ However, with the growth of national railroad networks in the 1850s, the management landscape began to change. Improvements in

50 KEEP EVOLVING BUSINESS PRACTICE summarized the science of Japan for dry beer and allowing the Middle management as management (which is essentially company to capture more market a technology enables the the management of business share. Similarly, a group of Motorola organization as we know it. process) into two factors: enablers middle managers was lauded for and enterprise capabilities. successfully developing a new Alfred Chandler Enterprise capabilities stem from wireless digital system for a client senior management, and include in under one year (the process US business historian (1918–2007) culture, tight governance usually takes two to three years). mechanisms, and strategic vision. lessons learned through business Enablers, however, are the task of Sitting between senior leaders experience. The true science of middle management. They include and operational staff, middle management is the conversion of design, infrastructure, process, managers are the communications experience into repeatable and protocol, responsibilities, and conduit through which executives reliable process—today’s problems performance management. The remain attuned to day-to-day become tomorrow’s processes and enablers turn vision into reality. business and personnel issues. next year’s capabilities. Middle managers, as the Asahi and Realizing the vision Motorola examples show, are often Process is the “stuff” of Hammer claimed that while the at the heart of corporate inspiration management. Business processes aspiration for business growth and perspiration—they generate are essential to maintaining order; might come out of the boardroom, ideas and they work to realize ideas like a country’s rail system and the it is a company’s infrastructure— in practice. Middle management rules that accompany it, processes designed and implemented by is also the driver of functional are the infrastructure around which middle management—that makes efficiency: improvements in cost, a company organizes. Business growth possible. Vision without quality, speed, and reliability are practice must evolve as the business infrastructure is just a dream—it delivered by middle management grows from a single outlet to a chain, cannot become a reality. Leaders and the processes it introduces. from one staff member to many, of growing companies know that, and from national to multinational. regardless of their own aspirations, Growing the business the building blocks of growth are As a business evolves, so must the laid by middle management. management processes that enable it. Whereas initial stages of growth At the Japanese brewer Asahi, rely on individual initiative and for example, it was a team of entrepreneurial spirit, evolving middle managers who developed ad-hoc practices into sustainable Super Dry Beer, starting a craze in growth needs to be based on Cath Kidston English fashion designer, author, she had to buy her stock and entrepreneur Catherine carefully, mixing her own fabrics Kidston was born in 1958. Raised and wallpaper with items from with her three siblings near tag sales and fabric from eastern Andover in Hampshire, she was Europe. Gingham ordered from educated at a number of English Europe arrived already made boarding schools, before moving into duvet covers and to London at 18. pillowcases, rather than as a fabric bolt. Kidston realized she After working as a store would have to improvise, so assistant, she ran a vintage curtain decided to “cut it up and make business with a friend on London’s it into other things.” She kept King’s Road for five years. In 1992 some of the bedding, but altered she sold the business and a year most items into products such later opened a store selling vintage as toiletry bags. The Cath home goods, wallpaper, and fabric. Kidston brand was born. With about $23,000 in her pocket,

START SMALL, THINK BIG 51 The development of infrastructure Enablers are the realm of middle managers, Middle and the strength of a new layer of according to Michael Hammer’s analysis of the managers middle management were key science of management. When implemented factors in the evolution of UK retailer and maintained efficiently, they fosterProtocol Cath Kidston from a single store growth and turn the vision of in 1993 to more than 120 global senior executives into reality. branches and concessions by 2013, with stores throughout Europe and Process Asia, and plans to expand into Design North America. Widely renowned PerformancIenmfrRaaesnstparogunecsmitbuielrinetites for its vintage fabrics, wallpapers, and brightly painted junk furniture, down, stifling innovation and have since helped Renault Samsung Kidston’s initial growth, as is hindering growth. As markets and Motors gain a footing within the common with many single-founder technology move ever faster, South Korean automotive market. start-ups, was slow. In the early process must not blind managers to days, monthly accounts took six opportunity, and systems must not Business leaders dismiss the weeks to prepare and clashes restrict strategic agility. For value of middle management, and between IT systems caused issues example, Motorola continued to the value of process, at their peril. with cash-flow projections and invest in satellite technology Without middle managers who are supply-chain management. It took throughout the 1990s even after able to evolve a leader’s vision into nine years to open a second branch, competitors had switched to reality, many businesses would be and another two before the third. cheaper, more effective ground- stuck like those of the pre-railroad based cell towers. era, destined to remain small, local, Following a buy out in 2010, and family run. It is the science of Cath Kidston became partly owned Habit can also twist logic. So management that enables business by a US private-equity group, with habitual, for example, were the evolution and growth. ■ Kidston herself retaining about 20 claims of ethical behavior from percent of stock. As expansion took Dennis Kozlowski, CEO of Swiss If you can’t describe hold, the company started to move security company Tyco International, what you are doing from ad-hoc processes to a more that he seemed able to divorce the as a process, you don’t planned approach. Specialized reality of his own behavior from his know what you’re doing. managers and consultants were rhetoric—in 2005 he was convicted W. Edwards Deming brought in to help build capacity for of corporate fraud. Habit can also growth. New departments were lead to hubris. Buoyed by his added, including design, buying, business’s accomplishment in and merchandising, and systems electronics, in 1994 Samsung CEO were introduced. Most importantly, Lee Kun-Hee believed that the middle management gained same approach would lead to experience of what it takes to open success in the car market, but the and run a new store. The lessons venture struggled and was rescued from earlier mistakes were in 2000 by Renault. The experience integrated into procedures and (and habits) of Renault’s managers policies; by building on experience, every new store opening became easier than the last. Excess and habit The dangers of processes and of hierarchy (if it becomes excessive) are that they may begin to grip the organization too tightly. Protocol and bureaucracy can wear people

52 A CORPORATION IS A LIVING ORGANISM IT HAS TO CONTINUE TO SHED ITS SKIN REINVENTING AND ADAPTING

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54 REINVENTING AND ADAPTING IN CONTEXT J ust as human beings are The reinvention of daily life organisms that grow, means marching off the FOCUS change, and adapt, so do edge of our maps. Process and product successful businesses. In 1970, the Bob Black US futurist Alvin Toffler published KEY DATES Future Shock, a book that predicted US activist (1951–) 1962 US professor Everett the coming phenomenon of “a Rogers writes Diffusion of perception of too much change In 1989, US computer scientist Innovations, showing how in too short a period of time.” The Alan Kay claimed that it took 10 innovation moves through pace of change, he said, would also years for an innovation to go from social systems. spread to the world of business, as the laboratory to everyday life, but companies were forced to adapt by 2006 Twitter had managed to 1983 US business consultant their products and processes to cut this down to just four years. Julien Phillips publishes the maintain advantage in an Products can now be bought online first change-management increasingly competitive market. from anywhere in the world, and model in the journal Human customer feedback is instant and Resource Management. Toffler’s ideas of the effects of global. The challenge for companies rapid technological change were to adapt and reinvent is huge. 1985 In Innovation and viewed at the time as far-fetched, Entrepreneurship, Peter but with the invention of computers Products and processes Drucker describes the best and the Internet, change has The personal and business approach to managing change accelerated even more rapidly than landscape has changed so radically as one that “always searches he predicted. Toffler presciently since the 1960s that no industry or for change, responds to it, claimed that we would live in a corporation has proved immune to and exploits it.” state of “high transience,” in which we would give ideas, organizations, 1993 US change expert Daryl and even relationships an ever- Conner uses the metaphor of shorter amount of our time. Social “the burning platform” to media websites are witness to this describe the high cost of a idea in action, providing a platform business that stays the same. for the new ways we have begun relating to one another; they also demonstrate new ways of starting, growing, and building businesses. Markets are never static— Businesses must respond …in thinking, product, change is inevitable to change through and process. and continuous. innovation… Adaptation This flexibility allows and reinvention companies to respond to the are necessary market and gives them for business a competitive edge. survival.

START SMALL, THINK BIG 55 See also: Gaining an edge 32–39 ■ Keep evolving business practice 48–51 ■ Creativity and invention 72–73 ■ Thinking outside the box 88–89 ■ Changing the game 92–99 ■ Avoiding complacency 194–201 its effects. Consider, for example, Apple iTunes store offered 60,000 Product adaptation in the music the music and movie industries. movies across 119 countries, and industry demonstrates the steady use of New technology has completely, 35 million songs. new technology—from gramophone to and very rapidly, changed the vinyl, cassette, CD, minidisc, and MP3 way that movies and music are Innovative methods digital music file—as companies have purchased and consumed. For the Process adaptation involves finding sought to broaden the market for music. big movie and music businesses new ways to do things; it involves (and all their associated suppliers introducing or removing processes. and producers), survival has Competition from online sales and required a high level of reinvention pirate streaming continue to affect and adaptation. movie distribution companies such as Netflix. The response of this This reinvention has come in the highly popular video streaming form of both new products and new service was to make all the episodes processes. Product adaptation of one television series (House involves updates and redesign— of Cards) available for download essentially, innovation and simultaneously; the rationale being invention. The movie industry has that the risk of piracy would be undergone many transformations lower if consumers were able to since the early days of black-and- legally buy all episodes at once. white moving pictures, or “movies.” It has reinvented itself through For Netflix this bold strategy was technology (from adding sound to not just a radical new process; it was creating “impossible” computer- also an adaptation of the company’s generated images); marketing entire business model. Still in the devices, such as monthly access adolescent stages of growth, in 2012 cards; events, such as outdoor Netflix was primarily an online screenings; and the growth of the streaming service, but for House of multiplex to multiply visitor Cards it entered the world of numbers and reduce turnaround production. By producing and times. The newest product aimed distributing, Netflix was able to at luring viewers away from illegal capture more profit and gain more downloads and back into movie control over content. Netflix did not ❯❯ houses is Stereoscopic-3D—itself a reinvention of an older idea. Excellent companies don’t believe in excellence—only in Around the turn of the 21st century, the music industry was constant improvement also struggling because of the drop and constant change. in sales of CDs, and began to refocus on live music and merchandise. Tom Peters However, both the music and movie industries found new life through US business expert (1942–) digitization, such as Apple’s iPod and iTunes. This revolutionary combination of product and process—Apple’s hardware and software—made legal downloads of music and movies more attractive than illegal versions. In 2013 the

56 REINVENTING AND ADAPTING know if the House of Cards internal systems allowed the Those who initiate change experiment would work. It did know, company to exploit global sales will have a better opportunity however, that in order to maintain opportunities. In 1994, due to the the momentum of early growth, it brand’s growing popularity, demand to manage the change needed to adapt and reinvent—in far exceeded manufacturing that is inevitable. this case reinvention as television capability. Poor planning and producers as well as distributors. coordination led to delayed William (“Bill”) Pollard production and lost sales. The Internal changes solution was a reinvention of internal US businessman (1938–) Reinvention and adaptation can also systems based around an integrated be internally focused on systems, IT system. The product itself—the industry. The company began with recurrent tasks, or operational classic “1460” eight-laced leather black-and-white televisions and activities. Whether improvement of boot—changed very little, although moved into home appliances during this type is based on data from more designs were later added to the 1970s. In the 1980s, production formal process improvement the product range. The key change grew to PCs and semiconductors. frameworks (such as Total Quality was the adaptation of internal Management) or simply on the processes, which ensured supply In 1986, Samsung released its experience and intuition of could match demand. first car phone, the SC-100. The managers, internal process product was a disaster—the quality adaptation allows companies to Adapting in a recession was so poor that many customers maximize revenue while also Internal process adaptation is even complained. This reputation for poor reducing costs. more important in markets where quality blighted Samsung for much demand is static or falling. of its early life, since consumers The McDonalds McSnack Wrap, Operational efficiencies, rather regarded its goods as inferior to for example, takes staff only 21 than revenue growth, are the key premium Japanese products. seconds to make—the shorter the to profit. For insurance companies, preparation time, the greater the for example, scope for new product On June 7, 1993, chairman Lee number of customers that can be adaptation is limited, so competition Kun-Hee gathered senior Samsung served by the fewest staff. At R is price-based—especially in a executives and declared that the Griggs Group Ltd, manufacturer of recession, when customers are company needed to reinvent itself. Dr. Martens shoes, a reinvention of particularly price sensitive. The key His famous instruction “Change to maintaining profitability while everything except your wife and Dr. Martens footwear grew from a remaining price competitive is children” shows how seriously he niche fashion item to an international continual process improvement— took the situation. Lee also mainstream hit within a matter of years. the reinvention of internal systems recognized shifting market R Griggs, the brand’s producer, had to that deliver the same product to dynamics, telling colleagues that reinvent processes to match demand. customers, but at a lower cost and, the company needed to “produce therefore, increased profitability. cell phones comparable to Motorola’s The days of the door-to-door by 1994 ... or Samsung will insurance salesperson have long disengage itself from the cell-phone since been replaced by telesales business.” The “new management” and an e-commerce approach. initiative that followed, supported by product and process innovation, Reinventing the company put the emphasis on the quality A notable company that has and innovation that Samsung is successfully reinvented itself is now renowned for, and galvanized Samsung Electronics. Established in 1969, Samsung Electronics is a subsidiary of the Samsung Group, which aimed to exploit opportunities in the emerging technology

START SMALL, THINK BIG 57 When processes evolve they may create new jobs or cause existing ones to disappear. The manual switchboards of the old ztelephone system were soon replaced by faster, automatic ones. its foundation for future growth. Samsung’s transformation was not yet complete, however—the Asian financial crisis of the late 1990s forced the company to reinvent itself yet again. Adapting its process turned Samsung into a more market-focused and consumer- friendly brand. Since then the company’s efforts, particularly in the cell-phone industry, have been based on constant attrition, reinvention, and adaptation. Long-term survival tasks are automated and fulfilled by a continual process. Social media, Few businesses survive without computers and robots. Promotions for example, has created a market adaptation or reinvention. Products have also adapted to fit changed shift that has required businesses of such as Kellogg’s Cornflakes and consumer demographics, globalized all types to adapt; even record labels Heinz Beans—products that have markets, and customer preferences. now embrace the promotional value not changed in decades—are rare. Even established brands cannot of websites such as YouTube. Even when a product has not avoid reinvention. changed, many of the processes The ecosystem in which a used in its manufacture, Truly successful business business operates is rarely, if ever, distribution, and marketing have transformation is rarely due solely to static. Corporations exist in these altered dramatically. The factories discovering and commercializing ecosystems as living organisms of 100 or 50 years ago were very bold new ideas, technologies, and that must adapt to survive; great different than today’s, where many products. The most successful leaders know that failure to adapt businesses know that reinvention is leads to extinction. ■ Lee Kun-Hee Born on January 9, 1942, Lee has been transformed from a Kun-Hee is Chairman of the South Korean budget brand into a Korean conglomerate Samsung. major international force and, Holding an economics degree from alongside Sony, is one of the Waseda University in Tokyo, world’s most prominent Japan, and an MBA from George Asian businesses. Samsung Washington University in the US, Electronics, the conglomerate’s Lee Kun-Hee joined the Samsung most famous subsidiary, Group in 1968 and succeeded is a leading developer of his father as Chairman on semiconductors, TV screens, December 1, 1987. and cell phones—with its smartphones even outselling Samsung is the quintessential the iPhone in many markets. example of a chaebol, a uniquely Korean conglomerate that mixes The Forbes 2013 Rich List Confucian values with family ties recorded Lee as the world’s and government influence. Under 69th richest billionaire, and Lee’s stewardship, the company the richest Korean.

58 IN CONTEXT WITHOUT CONTINUAL FOCUS GROWTH AND Business growth PROGRESS, SUCCESS HAS NO MEANING KEY DATES 1972 Larry Greiner outlines THE GREINER CURVE five stages of business growth, and their related crises, in “Evolution and Revolution as Organizations Grow.” 1988 Macedonian business expert Ichak Adizes writes Corporate Lifecycles, in which he describes the growth of corporations as a series of five “S” curves. 1994 Professor David Storey claims that all forms of “stage” models have limitations. He suggests looking at growth through categories of companies instead: failures, trundlers, and flyers. 1998 In a reprint of his 1972 article, Greiner updates his theory and adds a sixth stage to the Curve. A side from the financial rewards that they offer to entrepreneurs, start-ups can be exciting places to work. Amid the chaos, continual change, ever-evolving policies and procedures, and the abundance of work required, these environments buzz with energy, initiative, and ideas. But as business growth places increasing pressure on people and systems, excitement can turn into frustration. Periods of chaos often occur in a start-up’s early life. As it matures, the new business will pass through various conceptual thresholds. In 1972 Larry Greiner identified these as “crises of growth,” which he

START SMALL, THINK BIG 59 See also: Beating the odds at start-up 20–21 ■ Take the second step 43 ■ How fast to grow 44–45 ■ From entrepreneur to leader 46–47 ■ Keep evolving business practice 48–51 ■ The weightless start-up 62–63 Start-ups are ...but growth These crises are exciting places brings inevitable predictable and can be managed by using to work... crises. the Greiner Curve. illustrated on a graph that came will be required (perhaps from banks many cases the original founders to be known as the Greiner Curve. or venture capitalists), and the need have neither the skills nor the desire He noticed that companies of all for formal systems and procedures to take on more formal leadership. types go through periods of growth increases. The founders—who In 2002, chef Jamie Oliver founded followed by inevitable crises, when are likely to be technically or Fifteen, a chain of restaurants that major organizational change is entrepreneurially oriented—find also provide training opportunities needed to maintain momentum. themselves faced with their first for disadvantaged young people. crisis, as they become burdened by As the chain grew, he handed over Stages of growth management responsibilities that the management to a CEO, so that Greiner initially identified five they are ill-equipped to deal with. he could return to doing what he stages of growth, but later added This first crisis is therefore one of does best: being a commercially a sixth. The first of these stages is leadership: who will lead the successful celebrity chef. “growth through creativity.” During company out of confusion and solve this stage, the start-up is small and the new management problems? Under professional managers, growth is fueled by the enthusiasm business growth continues in of its founders. Management Change of leadership required for an environment of more formal procedures, communications—and phase two may only be a question of structures and budgets, and with even interactions with customers— internal reorganization and a change the establishment of separate are usually informal and ad hoc. in style, abandoning the casualness functions, such as production However, as more staff joins and of the company’s early days in favor and marketing. This is the second production expands, more capital of greater formality and more rigid stage of growth, known as “growth systems and procedures. But in through direction.” As the new ❯❯ The Greiner Curve Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 illustrates the six Growth Growth Growth Growth Growth Growth stages of growth that through through through through through through any company might creativity direction delegation coordination collaboration alliances undergo during its development. Each SIZE OF ORGANIZATION Crisis 5: growth phase Growth generates a crisis, the resolution of Crisis 4: which leads to the Red tape next growth stage. Crisis 3: Control Crisis 2: Autonomy Crisis 1: Leadership TIME

60 THE GREINER CURVE manager takes responsibility for One can choose to free. All businesses, of all sizes, direction, mid-level supervisors or go back towards safety or and regardless of growth aspirations, managers act more as functional forward towards growth.   will face uncertainties and specialists, but after a while they challenges. It does mean, however, begin to demand more freedom Abraham Maslow that the business will avoid the to make decisions, leading to the requirements of the next stage: second crisis: “autonomy.” This crisis US psychologist (1908–70) “growth through coordination.” can be solved by freeing the mid- level managers from bureaucracy entrepreneurs start a small company During this fourth stage, and allowing the company to to escape the stresses, politics, and increasing centralization is achieve “growth through delegation” office-bound purgatory of corporate common. By this time the company —Greiner’s third stage of growth. life and so, for them, it may make may be relatively large, with Unburdened by the need to manage sense to limit growth at this stage. operations controlled through a day-to-day issues, senior head office. The company may management can shift its attention Other entrepreneurs—such as appoint executives with experience to strategy and long-term growth. Virgin chief, Richard Branson—are of managing large, diverse enthused by the early phases in the businesses and introduce standard Stay small or grow? life of a new business, but become operating procedures. At this point a start-up faces bored as the bureaucratic demands perhaps the biggest crisis of all: a increase. Branson likes to guide a However, the introduction of crisis of control. The founders or business through its start-up phase standard policies eventually leads senior management may find it then hand it over to professional to the next crisis: a “red-tape hard to give up responsibility for managers, so he can move on to crisis,” in which increasing decision making, even to trusted new, more exciting, projects. bureaucracy stifles operations, boards. When this happens, the Choosing to remain small does not and growth falters as a result. founder may decide to remain mean that a business will be crisis- small—in essence, to limit growth A return to informality to the extent of their own control. Organizations Grow”, is regarded Paradoxically, the fifth stage, as an all-time classic. Greiner “growth through collaboration,” Such decisions are laudable. Not has acted as a consultant to requires, in part, a return to the all companies can be global and all- companies and government earlier days of flexibility. Systems conquering, and in fact, small- and agencies in the US and abroad, allow greater spontaneity, medium-sized enterprises dominate such as Coca-Cola, Merck, teamwork is introduced, and matrix the business landscape. Some Andersen Consulting, Times (network) structures are used to Mirror Company, and KinderCare. recapture the collaborative nature Larry Greiner of a start-up—in other words, the Key works organization tries to operate like a Larry Greiner is a professor of lean, creative company once again. management and organization 1972 “Evolution and Revolution at the University of Southern as Organizations Grow” Once this has been attained, California, US. He received a BA 1998 Power and Organization the next crisis relates to the limits degree from the University of Development of internal growth. Under pressure Kansas, and an MBA and 1999 New CEOs and Strategic from shareholders to continually doctorate from Harvard Change, Across Industries improve returns, further growth Business School. can only be achieved by developing partnerships with complementary Greiner is the author of organizations. By this sixth stage numerous publications on the a company is already big, possibly growth and development of very big. “Growth through organizations, management alliances” therefore suggests that consulting, and strategic expansion will continue through change. His 1972 article, mergers, outsourcing, or joint “Evolution and Revolution as ventures—the company needs to look beyond its own internal

START SMALL, THINK BIG 61 Spotify CEO Daniel Ek worked with co-founder Martin Lorentzon to build a large but agile company. It avoids Greiner’s growth problems by working in small squads overseen by “tribes.” capabilities, and the capacity of In this regard, the various crises as a start-up business. Mirroring its core markets, and seek identified by the Greiner Curve can the benefits enjoyed by companies external growth. be seen as natural transitions. An in Greiner’s first stage, every squad organization must manage its way is fully autonomous, has direct The actual rate of growth— through such transitions and contact with its stakeholders, in terms of customer numbers, growing pains as it continually and operates with minimal revenue, or profits—within each defines and redefines the scope of its dependency on other squads. phase of the Greiner Curve will operations, its values, and its overall vary, depending on the individual purpose. As Benjamin Franklin To deal with the various crises company. Organizations such as observed, “without continual of growth (such as autonomy and Facebook were already large by the growth and progress, such words red-tape), related squads are time they started to face crises of as improvement, achievement, and grouped into “tribes.” The function delegation and control. Others may success have no meaning.” of the tribe is to support and enable remain small for many years, the activities of each squad, in perhaps never even reaching Large but agile essence mirroring the role of the leadership-crisis stage. One company that seems to have venture capitalists in incubating heeded the lessons of the Greiner new start-ups. The operation is Using the Greiner Curve Curve is the Internet music- kept small and agile by limiting the Knowledge of the Greiner Curve streaming service, Spotify. The head count for each tribe to 100. can help start-up founders to organization’s Swedish founders, predict and manage the inevitable Daniel Ek and Martin Lorentzon, Spotify appears to have managed crises of growth. Even when knew at the company’s inception to maintain a balance between the enjoying the heady days of early in 2008 that their aim was growth. benefits of growth and the feel-good growth, entrepreneurs need to be They also knew that they were not elements of a start-up. The founders mindful of the steps required to willing to compromise the benefits nevertheless admit that the system build the business further. They that accompany the excitement is not flawless, and as the demand must put structures in place as of a start-up business. for an organization-wide strategy soon as possible; the earlier that grows, it may be that even Spotify formal systems and professional Spotify organizes itself around will not escape the crises of growth management are introduced, the project-based teams, called predicted by the Greiner Curve. ■ less they will be resented and “squads.” The organization is resisted, and the stronger the divided into small clusters of All growth depends upon foundations for continued growth. squads, with each squad running activity. There is no development physically or intellectually without effort, and effort means work. Calvin Coolidge US former President (1872–1933)

62 IF YOU BELIEVE IN SOMETHING, WORK NIGHTS AND WEEKENDS— IT WON’T FEEL LIKE WORK THE WEIGHTLESS START-UP IN CONTEXT Many start-ups require skill, S tarting a business requires not capital outlay. almost boundless energy, FOCUS unwavering commitment, Start-ups In a weightless start-up, and the resilience to deal with risk. the risk is time, But increasingly, the commercial KEY DATES not money. potential of the Internet is allowing 1923 Walt Disney starts a growing number of “weightless” making professional cartoons The work can be done start-ups to take flight. These in his uncle Robert’s garage. initially on weekends and ventures are low on financial resources, but high on individual 1976 The first 50 Apple evenings, but... skill and the investment of time computers are built in the to bring an idea to fruition. spare room of Steve Jobs’s ...if you believe in parents’ house. A few months what you’re doing, Personal passion is an essential later Apple moved “upscale” ingredient in a successful start-up. to his parents’ garage. it won’t feel As Kevin Rose, founder of Internet like work. start-ups Digg, Revision3, and Milk, 1978 Indian master brewer put it: “If you believe in something, Kiran Mazumdar-Shaw founds work nights and weekends—it biotechnology company, won’t feel like work.” Even global Biocon, in the garage of her greats such as Nestlé foods and rented house in Bangalore, Siemens electronics grew from the India. dreams and aspirations of a small group of people. These entrepreneurs 2004 Kevin Rose quits his faced the risk of a new business television job to found Digg, a because they deeply believed in news aggregator website that something, and were driven to attracts 38 million users a realize their dream, despite long month during its peak. The hours, stress, and, often, a string “office” is his bedroom. of failures large or small. These are quickly forgotten when people are doing something they love. Traditionally, the main barriers to enterprise were time and capital. Entrepreneurs from nonwealthy

START SMALL, THINK BIG 63 See also: Beating the odds at start-up 20–21 ■ Luck (and how to get lucky) 42 ■ Hewlett-Packard The Greiner curve 58–61 ■ Changing the game 92–99 ■ Small is beautiful 172–77 Bill Hewlett, born 1913, and Hewlett-Packard (HP) began life in These micropreneurs, who sell Dave Packard, born 1912, were Dave Packard’s garage. The company everything from homemade fashion close friends who graduated has restored the garage, which in 1987 items to antiques and secondhand as electrical engineers from was named a California landmark as electronics, are risking very little Stanford University. After his “the birthplace of Silicon Valley.” other than their own time—the marriage, Packard moved into capital outlay can be as much or as an apartment in Palo Alto, backgrounds usually needed a full- little as they are willing to risk. The California, with his wife, while time job to meet the living costs micropreneur’s skill lies in spotting Hewlett camped out in a shed of themselves and their families. the right opportunity. In this way on the grounds. A garage Without sufficient savings, few the business can be as small or belonging to the property people could risk a new business large as time, and desire, allows. became a decidedly low-tech venture in the 20th century, but workshop. From 1938 to 1939 today, starting a business is easier. For those who aspire to more the garage served as home, than running a business as a part- think tank, lab, office, and Micropreneurism time hobby, the lean start-up path production department. Bill and In the mid-2000s, the notion of a is well trodden. Large companies David developed the 200A and micropreneur began to emerge. This such as Hewlett-Packard and 200B audio oscillators, which was an individual who ran a very Indian biotech Biocon both started became Hewlett-Packard’s small business, often in addition to in their founders’ garages. Passion first products. full-time employment. The concept was key—with very limited capital, gained popularity alongside the rise essential equipment was begged Believed to be the first US of e-commerce, which made it and borrowed; friends and family technology company to launch possible to launch a commercial were used as (free) staff; and sleep in a garage, Hewlett-Packard website and manage it nights and was sacrificed. The main resources was founded by the two weekends. Sales platforms, such as were time, skill, and tenacity. friends on an investment of those provided by eBay and the just $538. Today the Chinese online marketplace Taobao, The path is not straightforward, organization is one of the made it even easier, since they however, and requires a deep world’s largest technology dispensed with the need for a commitment, often in the face companies, with sales in website or payment systems. of failure. As Jeff Bezos warned, excess of $27 billion in 2012. “invention requires a long-term The garage is designated a willingness to be misunderstood.” ■ historic landmark and is listed on the United States National Register of Historic Places. You have to really believe in yourself and know that, in the worst-case scenario, if it doesn’t work out, you still built something really cool. Kevin Rose

LIGHTIN THE FIR LEADERSHIP AND HUMAN RESOURCES

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66 INTRODUCTION G rowth from a small start-up the most of their talent. In other Mintzberg noted that none of these to a large multinational words, leadership is about creating roles is exclusive or privileged. company cannot be capacity in others. It is about Leading well often involves shifting achieved without leaders who are imagining the future, determining seamlessly between leadership and passionate about their business strategic direction, and aligning management, and knowing when, and who are inspirational to their the organization and its people to contextually, each role is most staff. Leading a business is, at its a particular vision. appropriate to adopt. core, about harnessing the power of people. Leaders and managers Creating the organizational The very best leaders, as Steve capacity for continued success also One popular business aphorism Jobs said, “put a dent in the means putting together teams and claims that “there are no business universe.” These leaders are not managing talent. An effective team problems, only people problems.” bound by convention; they are able is a powerful thing. Individuals Managing people is not easy; every to think outside the box, embracing perform better in teams; they are organization is a collection of one-of-a-kind ideas that disrupt the more productive and more individuals, each with their own status quo in their favor. In today’s innovative. Teams can also be self- philosophies, vulnerabilities, hypercompetitive markets, the managing; individuals support drives, strengths, and weaknesses. leaders we celebrate do not only each other and strive not to let the Effective leadership embraces outthink, outsmart, and outcompete team down. Effective teams require these differences and creates a their rivals, they disrupt entire less supervision and less direction culture in which people can make industries. They change the game. than individuals, and performance is guided by group norms, not by Good leadership consists Rarely, though, do leaders one individual’s expectations. of showing average people achieve greatness alone. Leaders rely on managers. While leadership It is not surprising, then, that how to do the work of is about vision, management is great organizations recognize the superior people. about process, planning, budgeting, value of teams. Google, for example, structuring, and staffing—tasks designs workstations so that staff J. D. Rockefeller that help an organization to keep can easily collaborate. “Hangout doing what it does. In The spaces” are adorned with funky US industrialist (1839–1937) Manager’s Job (1975), Henry furniture and supplied with food to Mintzberg identified three broad allow teams to work and socialize. management roles: informational Leaders at Google want employees (managing by information); to interact; they recognize that by interpersonal (managing through encouraging teamwork, employees people); and decisional (managing enjoy greater job satisfaction and through action). Importantly, creativity, and as a result, innovation rises. To the benefit of

LIGHTING THE FIRE 67 its staff and its bottom line, Google is littered with examples of leaders The best leaders accept that they knows that the best workplaces feel who, blinded by success, leapt into are not gods of management, and like playgrounds—places where ill-conceived initiatives or made that, in fact, occasionally being people can imagine and invent. “bet-the-farm” decisions that told “no” can be more important proved disastrous. “Deal fever” than always hearing “yes.” Satisfaction and challenge can mean that warning signs are Creating an organizational culture ignored by leaders who feel they Emotionally intelligent that embraces teamwork and can do no wrong. Successful Creating a culture where this kind encourages creativity helps leaders, however, know that they of challenge is the norm depends companies address the perennial must fight against the illusion of upon diversity. In companies question: “is money the motivator?” invulnerability. They also realize with employees from diverse Most find the answer is “no.” Higher the dangers of wanting to be liked backgrounds, where gender, race, pay might encourage an individual or to conform. Great leaders know and age are balanced, the different to take a new job, it might encourage that they must guard against perspectives mean decisions are people to move a little faster or to groupthink and “yes-man” more likely to be questioned. work a little harder, but people soon mentalities in themselves and forget about the money and start to others, because such approaches Perhaps most importantly then, focus on other things—such as job leave decisions unchallenged, and and as recent research indicates, satisfaction, challenge, and respect allow ill-judged projects to proceed the single most important trait for from managers. Virgin Atlantic without sufficient due diligence. successful leaders is emotional airline, for example, is not known as intelligence. In his bestselling book, one of the highest payers, but is Everyone experiences tough Emotional Intelligence (1995), Daniel regarded as a great place to work. times; it is a measure of your Goleman describes five domains of determination and dedication Emotional Intelligence (EQ): knowing A strong organizational culture your emotions; managing them; is, therefore, essential to success. how you deal with them. motivating yourself; recognizing Through tradition, history, and Lakshmi Mittal and understanding other people’s structure, companies build a sense emotions; and managing of identity—a unique personality Indian entrepreneur (1950–) relationships. Without EQ, a leader defined by the characteristic can be technically brilliant and full rituals, beliefs, stories, meanings, of great ideas, but still ineffective. values, norms, and language that This is because a sole trader may determine the way in which be able to survive on intuition “things are done around here.” alone, but as soon as someone else is employed, EQ becomes key. Importantly for leaders, Lighting the fire means keeping managing people also means the sparks flying for everyone. ■ managing oneself. Business history

68 MANAGERS DO THINGS RIGHT, LEADERS DO THE RIGHT THINGS LEADING WELL IN CONTEXT Leaders develop a vision They conquer in any for the organization. context—even in the most FOCUS Organizational roles turbulent of times. KEY DATES ...that managers then Leaders advocate change 1977 US professor Abraham implement to make a new, and new approaches... Zaleznik writes an article asking “Managers and stable environment. Leaders: Are They Different?” Managers do things right, 1985 In Leaders: Strategies for leaders do the right things. Taking Charge, Warren Bennis and Burt Nanus suggest four G ood managers do not 1985, “managers do things right; leadership strategies to help necessarily make good leaders do the right thing.” Leaders leaders do the right things. leaders, and good leaders “conquer” their surroundings—the can be poor managers. This is competitive environment—through 1990 US leadership expert because the two jobs are not vision and strategy, and it is the John Kotter publishes What the same, despite sharing similar role of managers to then implement Leaders Really Do. characteristics—principally the these strategies effectively. need to drive human (and therefore 1997 Robert House and Ram organizational) capacity. As Warren Effective management is crucial Aditya claim that management Bennis and Burt Nanus noted in to organizational success. It takes consists of implementing the care of processes, planning, vision and direction provided by leaders. 2005 Warren Bennis publishes Reinventing Leadership: Strategies to Empower the Organization.

LIGHTING THE FIRE 69 See also: The value of teams 70–71 ■ Gods of management 76–77 ■ Effective leadership 78–79 ■ Organizing teams and talent 80–85 ■ Develop emotional intelligence 110–11 ■ Mintzberg’s management roles 112–13 budgeting, structure, and staffing; regarded leaders—such as Jack tasks that help an organization to Welch of General Electric, Steve keep doing what it does. Without Jobs of Apple, and Jill Abramson management, no matter how well of The New York Times—have led, an organization would been well documented. disintegrate into disorganized chaos. However, management Leaders have to be brave in is not leadership—it will not lead the face of uncertainty, standing the company in new directions. firmly behind their vision for the company. They need to hold staff Decisive leadership accountable when things do not In 1990, John Kotter argued that go as planned, and make difficult leadership is about dealing with decisions about who to hire or change and developing a vision fire in order to develop an for the organization, often within organizational culture capable turbulent times. Leaders then of achieving their strategic vision. communicate their vision to the rest of the company, and motivate The next generation Jill Abramson was the first woman staff—especially managers—to Truly great leaders know that they to become executive editor of The New act in ways that will bring about will not be around forever, and one of York Times. She found that unpopularity the required change. Leadership their most important tasks is to hire, came “with the territory,” as Times’ is about setting the agenda and train, and nurture their successor. chairman Arthur Sulzberger had warned. empowering people to produce They lead well by making sure useful change. somebody is ready and waiting to It is common practice in many take over from them. Nine years companies to privilege leadership “Leading well” does not always before his retirement, General over management, but it is unwise. mean making people happy; Electric CEO Jack Welch said, “from Great organizations value both: likability and success rarely go now on, choosing my successor is leaders who can spot opportunities, together. The direct, tough, and the most important decision I’ll and managers who can make those sometimes even rude leadership make. It occupies a considerable opportunities a reality. ■ styles of some of the most highly amount of thought almost every day.” Blending leadership and management Leadership is lifting a person’s Inspirational leadership skills immediately. When he first took vision to high sights, raising are the hallmark of Portuguese over Chelsea Football Club in their performance to a higher soccer coach José Mourinho. London, England, he called a standard, building a personality His teams won two European team meeting and urged any beyond its normal limitations. Cups and 14 trophies in eight naysayers to speak up, or stay years, elevating him to sit silent from then on. He learned Peter Drucker alongside some of the greats his management skills from of soccer management. Bobby Robson and Louis van US management consultant Gaal, for whom he worked as Successful sports teams, an assistant coach and translator (1909–2005) like great organizations, are at the Spanish soccer team FC a blend of good management Barcelona. Under their guidance and good leadership, and he also learned how to study Mourinho achieves the rare opponents, form strategies, and feat of excelling in both. As build strong, winning teams. a leader, he makes his mark

70 NONE OF US IS AS SMART AS ALL OF US THE VALUE OF TEAMS IN CONTEXT Human beings Teams help to like to belong. generate a sense FOCUS Teamwork of place and counter anomie. KEY DATES 1924–1932 The Hawthorne None of us Studies, conducted by is as smart Elton Mayo, highlight the as all of us. importance of groups in affecting the behavior Organizations Successful teams of individuals at work. can be thought of provide an as a collection 1930s The Human Relations environment Movement is sparked by Mayo’s of teams. for new ideas. work. It proposes that worker satisfaction and productivity W e might complain about and familiarity of belonging to a depend on careful management routine and familiarity, group helps people to avoid anomie, and consideration of groups. but research shows and find security and purpose. that human beings have an innate 1940s As a result of Abraham need for some degree of stability. The existence of groups serves Maslow’s findings, and Without rules, norms, values, and two purposes. Organizations, and the earlier work of Mayo, expectations, people begin to feel the groups within them, can be businesses begin to recognize anxious, rootless, and confused. seen as an expression of the human the value of teamwork. This is termed “anomie,” and it is desire to belong. As psychologist the reason that humans often self- Abraham Maslow identified in his 21st century Workplace organize into groups. The routine 1943 paper “A Theory of Human design moves from the solo Motivation”, groups give us a sense workspaces and closed offices of the 20th century to open layouts that encourage collaborative working.

LIGHTING THE FIRE 71 See also: Creativity and invention 72–73 ■ Organizing teams and talent 80–85 ■ Make the most of your talent 86–87 ■ Organizational culture 104–09 ■ Avoid groupthink 114 ■ The value of diversity 115 of belonging. Maslow believed will increase an individual’s security Cisco Systems uses workspaces that that there is a hierarchy of human and encourage collaborative, can be transformed from small groups needs; once we have met the most creative, work—as US management of work pods to large open spaces for basic of needs—the physiological expert Ken Blanchard said, “none of conferences. Cisco aims to be flexible for ones, such as hunger and thirst— us is as smart as all of us.” In turn, connectivity and a sense of community. we progress to the next: security. commitment toward a project When these needs are satisfied, creates ties that strengthen the bond the “Connected Workplace”, which we move to the third basic need: between individuals and, ultimately, offers employees great flexibility in a sense of belonging. Once this the company’s communal purpose. working practice and environment, is met, we will proceed toward while ensuring that they always increasing self-esteem through Places to belong feel part of the Cisco community. achievement, and ultimately Great organizations recognize the toward self-actualization, by using value of teams and the importance Business success is rarely our inner talents with creativity. of the working environment. Cisco achieved through individual genius, Systems, the Internet infrastructure and the greatest leaders are those When Maslow’s theory is company, has created what it calls who recognize the value of applied to the workplace, working maximizing talent through teams. ■ in groups and gaining a sense of belonging make employees more effective. With the need to belong already addressed, individuals are able to focus on other things, such as a desire for achievement and the practicing of inner talents. In this way, the movement through the stages of satisfying needs can benefit a company. Free from anomie, groups are places where human beings, and therefore ideas, can flourish. Teams that are carefully chosen and supervised Abraham Maslow The American psychologist you can be.” Contrary to many Abraham Maslow was born in of his peers, Maslow focused on 1908. He grew up in Brooklyn, the positive side of mental health. New York, and earned a degree, The hierarchy of human needs, masters, and PhD in psychology which Maslow outlined in “A from the University of Wisconsin. Theory of Human Motivation”, Maslow started his career as a remains influential even today teacher, working at Brooklyn in fields as diverse as social College from 1937 to 1951, after work and management theory. which he became chair of the psychology department at Key works Brandeis University, US. Here he met Kurt Goldstein, the originator 1943 “A Theory of Human of the idea of self-actualization, Motivation” and Maslow became fascinated 1954 Motivation and Personality with the path of human 1962 Toward a Psychology development toward “being all of Being

72 INNOVATION MUST BE INVASIVE AND PERPETUAL: EVERYONE, EVERYWHERE, ALL OF THE TIME CREATIVITY AND INVENTION IN CONTEXT O ur fondest childhood Like the playgrounds of our memories are often those childhoods though, companies that FOCUS that involve the freedom embrace creativity and innovation Creativity of play, and the unbridled use of as “invasive and perpetual”—as imagination to create and live out consultant Stephen Shapiro puts KEY DATES fantasies. As human beings we it—are exciting places to be. 17th century Polish poet never lose the inner joy of creativity, Google, Facebook, and Procter & Maciej Kazimierz Sarbiewski but it tends to be suppresed by the Gamble, for example, are renowned applies the word “creativity” responsibilities of adult life—we for hiring and nurturing creative to human activity. For more trade the playground for the office. people, and for rewarding than a century and a half, the idea of human creativity is The desire to create As children, creativity resisted—“creation” is and invent is deeply comes naturally... reserved for describing embedded in all of us. God’s creative act. For businesses, ...but for many adults, 1970s Influenced by the work establishing a climate it has to be of psychologists Abraham of perpetual creativity worked at. Maslow and Frederick Herzberg on the subject of motivates staff... motivation, businesses begin to design jobs that allow ...and improves the company’s employees space for competitiveness. creative freedom. 2010 IBM lists creativity as the most sought-after trait in business leaders. 2013 Bruce Nussbaum’s book Creative Intelligence states that creativity is the greatest source of economic value.

LIGHTING THE FIRE 73 See also: Stand out in the market 28–31 ■ Gaining an edge 32–39 ■ Thinking outside the box 88–89 ■ Changing the game 92–99 imagination and invention. They often work harder, longer, and more Emma Hill attract thousands of applicants as productively, yielding innovative a result. Moreover, creativity is not solutions to problems, new cost- UK-born fashion designer only a potential source for ideas saving processes, or profitable Emma Hill studied at the that can yield economic value, but new products. Wimbledon School of Art in is a vital asset for individuals and 1989 before graduating from companies operating in increasingly So significant is the competitive Ravensbourne College of changeable global markets. edge that can be gained that a 2010 Design and Communication IBM survey listed creativity as the in 1992. Starting her fashion Defining creativity most sought-after trait in leaders. career at luxury brand Creativity involves the generation When it was announced that the Burberry, Hill also worked for of ideas, alternatives, or possibilities, Creative Director of Mulberry, UK retailer Marks & Spencer, and the consideration of situations Emma Hill—who was largely US fashion designer Marc or problems in novel ways. Invention credited with the fashion label’s Jacobs, and US retailer Gap, is the practical application of renaissance—was stepping down before moving to Mulberry— creative thought. When successfully in 2013, the company’s shares fell which has stores in Europe, realized, creativity and invention by more than 9 percent. As Steve US, Asia, and Australia—as are highly motivating. They allow Jobs proved at Apple, “thinking Creative Director in 2007. us to combine our innate desire for differently” is not just cool or autonomy, purpose, and mastery. quirky—it matters to staff, to At Mulberry, Hill’s creative They also produce a sense of customers, and to investors. talent for designing handbags achievement, which is a key element carried by the likes of model in what Abraham Maslow described Fostering creativity Kate Moss and musician Lana as the “Higher Order Needs” of The challenge is for companies to Del Rey resulted in waiting motivation—the factors that allow us balance creativity with financial lists for purchases. Thanks to feel value and self-actualization. prudence. Unbridled creativity to her expansion of the brand rarely leads to commercial success, into small leather goods For businesses, establishing yet businesses are required to (such as brightly colored card a climate of creativity has the dual make profits in order to survive. holders) in order to appeal benefit of enhancing employee to the more price-conscious satisfaction and improving its For Mulberry, it was a clash of end of the market, the brand competitiveness. Excited by the these values that resulted in Hill’s enjoyed stellar growth. When pursuit of invention, employees will departure. When the joined she joined Mulberry the company in 2007, Hill was company’s shares had stood at When you innovate, you’ve responsible for some of the label’s $1.78 (111 pence); at the time got to be prepared for biggest hits—notably its Alexa and of her departure in 2013 they everyone telling you Bayswater handbags—and were worth nearly 10 times as you’re nuts. presided over a period of significant much. In 2010, thanks to Emma Larry Ellison innovation and growth. In 2013 Hill’s work, Mulberry won the though, with sales falling, the “Best Designer Brand” prize at US co-founder, Oracle Corp. (1944–) brand’s management decided it the British Fashion Awards. needed a new creative direction— even the most creative brands feel the need for reinvention. As creative organizations know, to the benefit of their staff and the bottom line, creativity and invention—by everyone, everywhere, and all of the time—are vital ingredients for business success. ■

74 DISSENT ADDS SPICE, SPIRIT, AND AN INVIGORATING QUALITY BEWARE THE YES-MEN IN CONTEXT If managers F or many employees, are only brought working within an FOCUS organization means forever Behavioral management good news... saying “yes.” Fearful of losing their jobs, eager to please, and ambitious KEY DATES ...they are forced to make for promotion, subordinates are 1992 Indian economist Abhijit decisions based on incomplete often happy to pass on good news, V Banerjee looks at how but reluctant to deliver bad news. decision makers refer to the or inaccurate information. This might be good for their choices made by previous manager’s ego but it can be decision makers for guidance, Leaders should beware damaging for the business—if in his book A Simple Model of “the yes-men” bad news is hidden, managers lack Herd Behavior. vital information and can make and embrace constructive bad decisions as a consequence. 1993 US economist Canice conflict in their companies. Prendergast writes A Theory of This can happen at the highest Yes Men, identifying the Sometimes “no” levels with catastrophic results. tendency of subordinates to is ultimately more A Financial Services Report in agree with their superiors useful than “yes.” 2012 on the Royal Bank of Scotland as a “market failure.” (RBS) suggested that the bank’s failure in 2008 was, in part, due to 1997 US psycholinguistics “a lack of effective challenge by the expert Suzette Elgin writes board and senior managers to the How to Disagree without Being CEO’s proposals, resulting in risks Disagreeable. being overlooked and strategic mistakes being made.” 2000s Leadership theory encourages leaders to embrace A tolerant business culture constructive conflict as a Being an effective leader involves healthy, and necessary, part recognizing that it is impossible to of the business environment. be right all of the time. Seeking, and graciously accepting, critical feedback from trusted colleagues can help maintain a balanced perspective. The challenge for

LIGHTING THE FIRE 75 See also: The value of teams 70–71 ■ Hubris and nemesis 100–03 ■ Effective leadership 78–79 ■ Ignoring the herd 146–49 ■ Learning from failure 164–65 ■ Avoiding complacency 194–201 ■ Creating an ethical culture 224–27 In an organization where are those who are courageous innovation happens, very often and caring enough to tell the truth, no matter how bad it might be. people ignore orders. Robert Sutton For employees, delivering bad news is a skill in itself. It is better US professor of management if the news comes with a proposed solution attached, and with causes of the problem acknowledged rather than ignored. The news should be delivered promptly; the sooner a problem is identified, the sooner it can be solved, and the better a manager’s reaction is likely to be. leaders is to create an environment Testing your ideas Saying yes to every task and giving where bad news is tolerated, and Jean Paul Getty, founder of the only good news to a leader might result even encouraged. If leaders react to Getty Oil Company, recognized in popularity, but will soon overload unwelcome news without the value of outspoken employees, the employee and risks blinded screaming or recrimination, staff is claiming that “dissent adds spice, decision making by the leader. more likely to be confident about spirit, and an invigorating quality.” delivering it. Good leaders tend to Management teams that can address the problem, rather than Ken Olsen, founder of Digital challenge each other’s thinking simply apportioning blame, helping Equipment Corporation, built develop a richer understanding of to prevent a repeat scenario. dissent into company culture, using strategic options, and, ultimately, debate and conflict resolution as the make better decisions. The best An important way of preventing primary ways of decision making. business leaders attempt to a yes-men culture is to create a Jack Welch, CEO of General Electric harness criticism and debate. culture of collective responsibility. (GE), encouraged no-holds-barred If everybody is saying “yes,” Often, the most valuable employees debates, saying, “if the idea can’t something is seriously wrong. ■ survive a spirited argument, the marketplace will surely kill it.” Jean Paul Getty Jean Paul Getty was born in buy several oil companies and Minneapolis in 1892. His father build these into a pyramid of was a lawyer who moved into the corporations, with the Getty Oil oil business in 1903. Getty studied Company at the top. In 1949, he at universities in the US and UK purchased a 60-year concession before joining his father’s in a tract of land between Saudi business, The Minnehoma Oil Arabia and Kuwait that was Company. He set out to make a thought to be barren of any oil. million dollars within his first two His company struck oil in years, and did so by buying and massive quantities in 1953, selling oil leases. making Getty a billionaire. He died in 1976 at the age of 83. Because Getty married five times, his disapproving father Key works bequeathed him only $500,000 from his $10-million estate. 1953 My Life and Fortunes Undeterred, Getty combined this 1965 How to be Rich with his own amassed earnings to

76 NO GREAT MANAGER OR LEADER EVER FELL FROM HEAVEN GODS OF MANAGEMENT IN CONTEXT I n his influential 1978 book who have the expertise to solve Gods of Management, Charles problems. In Dionysus’s “existential FOCUS Handy used the allegory of the culture,” the organization exists to Organizational dynamics gods of ancient Greece to describe support the individual’s needs. the nature of organizations. Handy KEY DATES proposed that four management Handy’s typology provided an 20th century Typologies styles could be identified, a entirely new and original method emerge to help management combination of which are likely to for managers to analyze a thinkers sort organizations into be present in every organization. company’s dynamics, and to identifiable classifications, and Zeus represents the “club culture,” understand culturally embedded individuals into distinct types. in which relationships with the behaviors, biases, and beliefs. What motivates each person is leader are more important than However, it soon became clear that thought to be determined by formal titles or positions. Apollo’s because organizations are vast and their “type.” “role culture” is defined by diverse entities, and are seldom functions, divisions, rules, and static, organizational behavior 1978 Charles Handy’s Gods rationality. In Athena’s “task evolves over time. Under pressure of Management proposes culture,” power lies within teams externally and internally, most that understanding which companies operate in a constant classification an organization fits into is key to understanding Handy’s Gods of ...but organizations are the type of people it contains Management reveals complex at institutional and, thus, the way to lead them. different types of and the individual level. organizational dynamic... 1989 In The Age of Unreason, Handy puts forward the theory Therfore, typologies can Effective leadership requires of the Shamrock Organization. still be helpful for God-like omniscience, but no great leader ever fell 21st century Management understanding organizational thinking increasingly and individual complexity. from heaven. acknowledges that stylistic typologies are just one of many methods of understanding and managing companies and staff.

See also: Leading well 68–69 ■ Effective leadership 78–79 ■ Organizational LIGHTING THE FIRE 77 culture 104–09 ■ Mintzberg’s management roles 112–13 Charles Handy Zeus— Apollo— Club Culture Role Culture Professor Charles Handy, born As the ruler of the Greek gods, Apollo was the god of order and in 1932, is Britain’s best- Zeus was at the center of power and rules. Successful in times of stability, known management guru. influence. Club cultures are built on role cultures tend to flounder when After graduating from Oxford affinity; proximity to the center of rapid change is required. Insurance University he joined the the club reflects an individual’s companies are among those Massachusetts Institute of standing within it. Investment typically led along Apollonian Technology in 1965, moving banks often have dominant to the London Business School club cultures. principles. (LBS) in 1967 to run the only Sloan School of Management Charles Handy’s program outside the USA. Gods of Handy’s challenging ideas, articulate style, and use of Management provocative imagery—such as his text The Empty Raincoat, Athena— Dionysus— a critique of the “impersonal Task Culture Person Culture mechanics of business Athena, the goddess of wisdom, Dionysus, the god of wine, stood organizations”—set him apart was a problem-solver. Task cultures for individual freedom. In person from his contemporaries. thrive where innovation is required, cultures, professional opinion is Handy sees himself as a social but struggle with routine. privileged and management is seen philosopher rather than Advertising agencies and as an unnecessary burden. management guru—his consultancies often display Professional service companies, writings, he believes, are task cultures. such as legal firms, mirror commentaries rather than Dionysian cultures. manuals for success. His opinions have influenced business thinking for decades. Key works 1976 Understanding Organizations 1978 Gods of Management  1994 The Empty Raincoat state of flux—they adapt and year may not motivate them the The job of leadership is to align these change in unforeseen, unplanned, next. When a company consists of a differences toward a common, and unpredictable ways. staff of thousands, it is clear that organizational goal. people, and therefore organizations, Accounting for complexity are more complex than the stylistic Organizational dynamics are Organizational complexity is often Gods of Management suggest. important because people matter. measured by the number of Typologies only take a leader so far. countries a company operates in, Handy later wrote of the Leaders must recognize that each or the number of brands under a Shamrock Organization—a flexible employee perceives the company manager’s control. Such organization made of core employees, differently, and has unique drivers institutional complexity is not peripheral outsourced staff, and an (and barriers) to effectiveness. As insignificant; it pales though external, flexible work force. Each US businessman Tom Northup compared to individual complexity. category of worker has a different said, great leaders do not “fall from For example, something novel that commitment to the organization, a heaven,” but God-like omniscience motivated a member of staff one different understanding of its vision, is a useful—albeit unreachable— and their own motivations for work. goal to strive for. ■

78 A LEADER IS ONE WHO KNOWS THE WAY, GOES THE WAY, AND SHOWS THE WAY EFFECTIVE LEADERSHIP IN CONTEXT Effective leadership A leader’s charisma alone builds capacity is not enough. Effective FOCUS in others. leadership requires the Leadership Effective leadership establishment of... KEY DATES requires action from 1520s Italian diplomat Niccolò the leader, not just ...integrity, trust, Macchiavelli’s The Prince empathy, and discusses the perils of brainpower. empowerment. leadership in political life. F or centuries scholars have example, Henry Ford was renowned 1916 French executive Henri attempted to determine for his charismatic leadership Fayol’s work General and the definitive styles, style—there is a danger that Industrial Management defines characteristics, and personality rhetoric can exceed reality. Rather a leader as someone who traits of great leaders. Yet, despite than empowering their employees, “should possess and infuse thousands of studies, effective charismatic leaders often into those around him courage leadership remains a subject of micromanage tasks and prevent to accept responsibility.” debate. However, one common their staff from gaining a sense of theme is that effective leadership achievement from their work. 1950s and 60s The requires action, not just intellect. Charismatic leaders are often authoritative “Command and heralded as champions of Control” school of management Leaders cannot simply rely on organizational success, but that becomes popular. Charismatic charisma. While charismatic charm can be a blessing and leaders dominate organizations leadership has its place—for through force of personality. 1980s and 90s Leadership thinkers, such as US professor Warren Bennis, encourage a leadership style based on integrity, trust, and the ability to build an organization’s capacity for change.

LIGHTING THE FIRE 79 See also: Leading well 68–69 ■ Gods of management 76–77 ■ Changing the game 92–99 ■ Develop emotional intelligence 110–11 ■ Mintzberg’s management roles 112–13 Actively participating in business Renault and Nissan. Within a Carlos Ghosn life, from the boardroom to the factory year of his appointment in 1999, floor, is vital for effective leadership. Ghosn returned Nissan to Born in 1954, Carlos Ghosn, Carlos Ghosn visited car assembly lines profitability and was credited with a French-Lebanese Brazilian, to build integrity and trust with staff. saving the company from collapse. started his career with This proved to be one of the most Michelin, moved to Renault a curse—the void created by the dramatic turnarounds in modern in 1996, and was appointed departure of a charismatic leader business history. the CEO of Nissan in 1999 can be hard to fill. It may flatter the following Renault’s purchase ego to be proclaimed a hero, but Among the leadership traits of a substantial stake in the great leaders know that success that contribute to Ghosn’s ailing Japanese company. At involves building long-term effectiveness is his belief that the time, Nissan’s debts had organizational capacity that will leadership is learned “by doing.” reached $20 billion and only outlast their own tenure. On joining Nissan as CEO he three of its 48 car models were walked around every factory, generating a profit. Promising Keys to effectiveness meeting and shaking hands with to resign if the company did To be effective, a leader must be every employee. To this day he not reach profitability by the confident and secure, and at the remains a common sight on factory end of the year, he defied same time open and empathetic. floors. Integrity and trust, Ghosn Japanese business etiquette, Effective leadership involves the believes, are built when leaders are cut 21,000 jobs, and closed ability to create capacity in others seen to be willing to “get their unprofitable domestic plants. through the process of interacting, hands dirty” and remain in touch Within three years Nissan informing, listening, developing, with the factory floor of the business. became one of the most and trust-forming. Credibility of profitable automakers, with the leader is achieved through Empowering staff operating margins of higher collaboration, not domination. Leaders must communicate a strong than 9 percent—more than Central to effective leadership is vision but, above all, they must twice the industry average. empowerment—the art of enabling empower staff to make decisions other people to get things done. themselves. In large, diverse Having presided over what organizations a leader cannot, and has been described as one of One of the most effective should not, make all the decisions— the greatest turnarounds in contemporary business leaders is helping others to understand the business history, Ghosn was Carlos Ghosn, CEO of car makers necessity for change, and giving named “the hardest-working them the tools to manage that man in the global car business” change is key to the leader’s role. by Forbes magazine in 2011. The success of Nissan is also attributed to Ghosn’s ability to The universe rewards manage cross-cultural teams. action, not thought. Leaders, Ghosn suggests, require Russell Bishop the ability to listen and to empathize, not just with employees from their US executive coach own countries, but also with people from different countries and cultures. Ghosn’s insights illustrate that effective leadership requires putting vision into action. Achieving this requires more than just rhetoric: effective leaders must “talk the talk” and “walk the walk.” ■

80 TEAMWORK IS THE FUEL THAT ALLOWS COMMON PEOPLE TO ATTAIN UNCOMMON RESULTS ORGANIZING TEAMS AND TALENT

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82 ORGANIZING TEAMS AND TALENT IN CONTEXT E ffective teams are the key Members of a team seek out to great organizations. certain roles and they perform FOCUS This is especially true in Teamwork business, where teamwork merges most effectively in the ones individual talent into something that are most natural to them. KEY DATES greater than the sum of its parts, 1965 US professor Bruce enabling “common people to attain Meredith Belbin Tuckman proposes that teams uncommon results” in the words of go through five stages: US industrialist Andrew Carnegie. in profit, and improved job forming, storming, norming, satisfaction. In Honeywell’s performing, and adjourning. Manufacturing companies in commercial flight division in Europe and the US began to explore Minneapolis, for example, teamwork 1981 British management the idea of teamwork in the 1960s was credited with achieving an theorist Meredith Belbin and 1970s, in response to the 80 percent market share in flight writes Management Teams: success of Japanese team-based and navigation systems—and for Why they succeed or fail, working methods such as kaizen generating profits that were describing nine distinct (staff are responsible for a company’s 200 percent higher than projections. roles that are essential to continuous improvement) and team success. “quality circles” (groups of staff Teams succeed because they tasked with improving quality). In provide an environment where 1992 Peter Drucker describes the 1980s, as many companies weaknesses can be balanced out three kinds of team in “There’s adopted “total quality management” and individual strengths multiplied. more than one kind of team,” (organization-wide quality), Teams also safeguard against published in The Wall teamwork began to spread beyond individual shortcomings, such as Street Journal. its genesis in manufacturing. underperformance and personal Today, it would be rare to find an agendas. Projects are more likely to 1993 Jon Katzenbach and organization, of any type or size, stay on track when peers support Douglas Smith write The that did not value teamwork. each other and review each other’s Wisdom of Teams, claiming and the team’s work. Teams also that forming a team leads to The benefits of teamwork create an environment that most greater success than Teamwork has been credited with people enjoy. The security of a group individual efforts. bringing about substantial makes each individual feel less reductions in absenteeism, lower exposed and, in turn, more likely to Meredith Belbin staff turnover, significant increases take risks, be more creative, and therefore be better able to perform. Meredith Belbin was born in consultant. Belbin studied Beckenham, UK, in 1926. He teamwork in the UK, US, and Storming and norming earned a degree in Classics at Australia, and in 1981 wrote Effective teams take time to the University of Cambridge, and Management Teams: Why they develop. It is rare that a group of then a doctorate in psychology, succeed or fail, which became people can come together and during which he did research on one of the world’s best-selling begin to perform immediately; most the importance of teamwork. He management books. Belbin has teams go through a series of stages then took a research fellowship advised the US government, the before effectiveness is achieved. at Cranfield—where he studied European Union, companies and Bruce Tuckman, a US professor of the benefits of ergonomics public service bodies. (designing tools and systems that fit best with people’s needs) Key works and improving efficiency in production lines—before 1981 Management Teams: Why becoming a management they succeed or fail 1993 Team Roles At Work 2000 Beyond the Team

LIGHTING THE FIRE 83 See also: Leading well 68–69 ■ The value of teams 70–71 ■ Effective leadership 78–79 ■ Make the most of your talent 86–87 ■ Organizational culture 104–09 ■ Avoid groupthink 114 ■ The value of diversity 115 ■ Kaizen 302–09 educational psychology, described work because the most effective setting the right tone is essential. these stages as forming, storming, teams are those where members The tone should not be too norming, performing, and trust one another, share a strong casual—teams perform better adjourning. During forming, the sense of group identity, and have when challenged, so a sense of group comes together, and confidence in their effectiveness urgency needs to be imparted. members get to know one other. It as a team. then moves into a storming stage, The team should agree on clear where members challenge each Effective team building rules for group behavior and norms, other for coveted group roles, and In 2005, US researchers Jon and meet often, both formally and group processes begin to emerge Katzenbach and Douglas Smith informally. If possible, the team through trial and error. The middle identified a series of factors that should be allowed to enjoy some stage—norming—marks a period seem to be essential for effective early success; a few easy wins of calm, where agreement is teamwork. First, team members early on has been found to boost reached on roles, processes, and must be chosen for their skills, not performance later. Likewise, group norms. By the fourth stage, their personality. The team then the group—and its individual members have become familiar needs to get off to a good start; members—needs to be lavished with each other, with their roles, with praise. Continuing motivation ❯❯ and with the processes involved. At this stage, team performance Teams produce Mutual support Teams provide hits its most effective level. Once more creative encourages team an environment their work is done, the group moves to adjourning, or disbanding. solutions to members to to manage problems. reach their talent. Businesses are eager for teams potential. to move quickly through the early Individual Teams provide stages, reaching “performing” as shortcomings Effective teams security, so soon as possible. This is why are balanced provide synergy. companies invest so much in team- out in a team. members feel free building activities, where teams 2+2=5 to take risks. face and solve artificial challenges, often in a different environment. Teams Many companies also use the establish architecture of their building to positive group encourage team interaction. For norms that example, at Pixar, the movie encourage animation studio based in openness and California, the cafeteria, meeting flexibility. rooms, employee mail boxes, and bathrooms are located around a centralized atrium designed for collaborative working. The building design and layout encourages members of teams to meet and interact with one another, even when they are based in different departments within the company. Research has shown that team- building activities and collaborative work spaces help to improve team

84 ORGANIZING TEAMS AND TALENT Belbin Team Inventory is encouraged by new challenges, since they help to keep the work Team role Talent Weakness fresh and engaging. Plant Successful roles Creative, unconventional Not good at managing Individuals offer different talents thinker who excels at (or communicating with) and attributes, and these need to solving problems be taken into account when putting less creative people together teams. UK management theorist Meredith Belbin claims Resource Communicative extrovert Loses interest once initial there are nine distinct roles within investigator who develops contacts and enthusiasm has passed a team that are essential to team success, and that the key to a well- explores opportunities organized team is balance. For example, Belbin found that teams Coordinator Mature, confident person Can be manipulative and without Plants (creative, who is able to clarify goals appear aloof unconventional thinkers) struggle Shaper to come up with ideas; but if there and promote decision are too many Plants, idea generation Monitor/ making starts to take precedence over evaluator action. Similarly, if there is no Teamworker Dynamic, outgoing, highly Prone to provocation and Shaper (a dynamic, driven person strung person who will short-lived bursts of temper who pushes the group toward Implementer challenge, pressure, and decisions), teams lack drive and direction. But in a team with too Completer/ find ways around obstacles many Shapers, arguments occur finisher frequently and will lower morale. Sober, strategic, discerning Lacks drive and ability to Specialist person able to see and inspire others Now an established business tool, the Belbin Team Inventory is judge options objectively frequently used by companies to maximize team effectiveness. Social, mild, perceptive and Indecisive in crunch However, many companies make the accommodating, this situations mistake of using it after teams have been formed; to work successfully, it teamworker averts friction must be used before creating a team. Disciplined, reliable, Somewhat inflexible, slow Managing talent conservative, efficient to respond to new Sir Alex Ferguson, former manager person who can turn ideas possibilities of Manchester United, one of the into practical actions world’s best-known soccer teams, is a master of building winning Painstaking, conscientious Inclined to worry unduly, teams over and again, and his person who is always able reluctant to delegate methods can be applied to the business environment. His team to meet deadlines was bonded by a strong sense of shared mission—a desire to win. Single-minded, dedicated Contributes only on Players were cohesive on the field, self-starter who brings a narrow front because Ferguson demanded knowledge or technical cohesiveness off the field. An exceptional team culture ran skills that are in rare supply through the veins of every player

LIGHTING THE FIRE 85 Teams develop direction, because talented people often contributions. In The Wisdom momentum, and commitment resist being managed, and it of Teams, Jon Katzenbach and can be difficult to find challenges Douglas Smith defined a team as by working to shape a that keep them sufficiently “a small number of people with meaningful purpose. motivated, while at the same complementary skills who are Jon R. Katzenbach time aligned with organizational committed to a common purpose, Douglas K. Smith goals. However, teams provide set of performance goals, and an environment where talent can approach, for which they hold and every staff member. Ferguson thrive. By giving talented staff themselves mutually accountable.” realized the value of positive group teams to manage, or—although No individual is responsible for norms. He was, for example, one risky—grouping talent together success or failure, because no one of the first managers to ban the in teams, it is possible to stretch acts alone. Teamwork encourages consumption of alcohol. Moreover, even the most gifted member of listening, responding constructively alongside a host of team-building staff. Teams provide a framework to the views of others, providing activities—quizzes on the team and value system to which all support, and recognizing the bus, for example—he demanded members, however skilled or interests, skills, and achievements ferocious loyalty. Players could talented, must adhere. of the other team members. expect unfailing public support from Ferguson and the team. Equally, Collective products Most successful teams are players were expected to observe a Businesses, like sports teams, formed in response to a perceived code of media silence in regard to face performance challenges for threat or opportunity. When these teammates. Anyone breaching this which teams are a powerful arise, the role of senior leaders is to team ethic was quickly ousted. solution. This is because teams organize teams with clear purpose, are not simply a group of people balanced membership, disciplined Team management often who work together; they are judged procedures, and strong bonds, involves dealing with large egos not by individual performance, while giving them enough and highly talented people. Ferguson but by their “collective work flexibility to develop their own recognized that it was folly to rein products.” These are the pieces timing and approach. By doing so, in significant talent—players Eric of work—which might be products, leaders create environments where Cantona and Cristiano Ronaldo surveys, or experiments—that individuals—and therefore the were both encouraged to express come about as a result of joint organization—are able to succeed their soccer-playing flair—but he and flourish. ■ also transferred highly skilled players who felt themselves to be more important than the team. Talent management is a source of frustration for many executives, Flying geese demonstrate the power of teamwork. By flying together, each one reduces air resistance for the ones behind. They rotate leadership and “talk” continuously by honking.

86 LEADERS ALLOW GREAT PEOPLE TO DO THE WORK THEY WERE BORN TO DO MAKE THE MOST OF YOUR TALENT IN CONTEXT S taff in many organizations 2012 Global Work force Study only reports feeling undervalued, 35 percent of employees reported FOCUS overstretched, and forced to engagement with their jobs, Work-force effectiveness work in areas beyond its competence. revealing a disconnect with what Because of this they feel ineffective employers want and what employees KEY DATES —they want to work better, but feel are willing to give. Studies have 1959 US psychologist that the organization is constraining found engaged employees—those Frederick Herzberg defines them. The best companies allow devoted to their jobs and committed factors in job satisfaction in his staff to build careers around what to the company’s values—are study The Motivation to Work. they excel at—in leadership expert significantly more productive, Warren Bennis’s words “to do the provide better customer service, 1960 In his book The Human work they were born to do.” and outperform those who are less Side of Enterprise, US engaged. But many companies treat academic Douglas McGregor Contemporary organizations, staff as little more than pieces on proposes Theory Y, urging faced with dynamic, fast-moving an organizational chessboard that companies to adopt a markets, favor employees who are can be moved around at will. participatory management flexible and multiskilled. Yet in a style that motivates workers to strive to achieve their potential. Effective people create effective organizations. 1989 US management guru Great leaders allow great people Rosabeth Moss Kanter’s to excel at what they do well. When Giants Learn to Dance suggests that employees are most productive when empowered to make their own decisions. They value the factory floor as much as the shareholders.

LIGHTING THE FIRE 87 See also: Leading well 68–69 ■ Creativity and invention 72–73 ■ Effective leadership 78–79 ■ Organizing teams and talent 80–85 ■ Is money the motivator? 90–91 Google’s innovative, dynamic culture, underachievement. Consequently, up to the shareholders. Companies in which staff are encouraged to work equipping employees with the tools that value effectiveness over to their strengths and explore projects to develop effective habits can lead to volume, and performance over that they are passionate about, is one of more effective performance, happier, presenteeism (when staff works the reasons for the company’s success. more productive staff, and, in turn, despite illness, instead of taking improve a company’s results. sick leave) often find themselves In his two-factor theory, US at the top of best-employer lists. psychologist and management Working better, not harder Leaders of these companies realize thinker Frederick Herzberg identified Google, borrowing from a practice that shareholder value is driven by a sense of achievement as being introduced by US conglomerate 3M staff performance; allowing staff closely linked to motivation to work. in 1948, encourages staff to spend to build careers around what they Effectiveness is intrinsically 20 percent of their time on projects excel at is good for employees and rewarding; even the most generous of their own choosing. Rather than the bottom line. ■ salary cannot, over the long term, distract from directed projects, replace the satisfaction of a job well Google found that their staff works The man who does not done. The same generous salary will better on all tasks—when people are work for the love of work, but not offset the dissatisfaction of passionate about their work, it does not feel like work. Such discretionary only for money, is likely to effort, the willingness of employees neither make money nor to “go the extra mile,” can be the difference between good and great. find much fun in life. Great businesses focus on getting Charles M. Schwab the best out of people, not the most out of them. Gmail, one of Google’s US industrialist (1862–1939) most popular products, is a result of the company’s 20-percent time. Enabling staff to work better, not harder, requires an enlightened leadership approach that looks down to the factory floor as well as Warren Bennis Born on March 8, 1925, Warren studies, Bennis was named one Bennis is an American scholar, of the ten greatest influencers organizational consultant, and on business thinking by management author. Enlisting BusinessWeek magazine in in the US Army in 1943, Bennis 2007. The Financial Times lists was one of the youngest infantry his classic 1985 book Leaders officers to serve in World War II, as one of the top 50 business and was awarded the Purple books of all time. Heart and Bronze Star for service in action. After leaving the Key works military, Bennis studied at Antioch College, Ohio, and later became 1985 Leaders: Strategies for a professor at the Massachusetts Taking Charge Institute of Technology’s Sloan 1997 Why Leaders Can’t Lead: School of Management. Widely The Unconscious Conspiracy regarded as the pioneer of the Continues contemporary field of leadership 2009 On Becoming a Leader

88 THE WAY FORWARD MAY NOT BE TO GO FORWARD THINKING OUTSIDE THE BOX IN CONTEXT T he competitive pressures old environment. To avoid this, the that businesses face are idea of “thinking outside the box” FOCUS constantly in flux: new ideas is used to challenge precepts and Innovation and disruptive technologies emerge, assumptions—to consider that the economic power of countries sometimes, the way to move KEY DATES shifts, and market dynamics forward is not to move forward at all. 1914 The nine-dots puzzle change. Yet business history is is published in Sam Loyd’s littered with companies that The idea of thinking outside the Cyclopedia of Puzzles. ignored change and pushed forward box emerged in the 1960s and is with flawed strategies based on the based on the nine-dots puzzle, a 1967 Edward de Bono coins game that was used by management the term “lateral thinking” to describe the process of the Markets are dynamic; “horizontal imagination,” technologies and competitive which has a broad sweep but is unconcerned with detail. pressures change. 1970s There is a surge of For businesses to survive, management consultants leaders must motivate staff encouraging creativity. to avoid fixed thinking. Strategic thinking is said to embrace retrenchment and retreat. 2012 Jeff Bezos of Amazon claims that ”if you’re inventing and pioneering, you have to be willing to be misunderstood for long periods of time.” Thinking outside the box Sometimes the way is a leadership tool that to move forward encourages creative is not to move responses to problems. forward at all.

LIGHTING THE FIRE 89 See also: Gaining an edge 32–39 ■ Keep evolving business practice 48–51 ■ Creativity and invention 72–73 ■ Changing the game 92–99 ■ Forecasting 278–79 ■ Feedback and innovation 312–13 The nine-dots puzzle challenges players to connect the nine dots with four straight lines or less, without lifting pen from paper or tracing the same line twice. The solution involves drawing lines “outside the box.” Nintendo’s Wii console is a product Zuckerburg’s hugely successful price and increasingly of lateral thinking. Rather than taking Facebook. The future survival of sophisticated games, the Nintendo on their industry rivals head on, the MySpace depended on new Wii created a whole new market. Its Wii’s designers redefined gaming thinking—it turned its business unique player interface—with a as a family-friendly, social activity. around by successfully refocusing range of handheld, wireless on a core market of creative music controllers—and focus on group- consultants to encourage lateral professionals, leaving the social- based gaming made it family- thinking. Several of its solutions media mass-market to Facebook. friendly; suddenly gaming was a involved drawing lines that were social activity for gamers of all ages literally outside the puzzle’s box. Other companies have and experience levels. The console The phrase was adopted to represent employed leaders with a more quickly outsold the competition in any kind of creative thinking that radical approach to guide them almost every territory. goes beyond the obvious. Today, through fast-changing times. thinking outside the box represents Nintendo’s response to the Leaders taking this kind of “bold innovation, the need to be aware of technological superiority of the retreat” willingly cede technological market changes, and the need to X-Box and Playstation, for example, advantage or market position to the avoid fixed ways of thinking. was to think differently. Instead of dominant player, pursuing instead competing on the usual grounds of less vulnerable (and often more The bold retreat profitable) market positions. Linear thinking—the opposite of BT should have invented thinking outside the box—has been Skype. But they didn’t Rethinking the box responsible for the downfall of Some business leaders believe that many businesses. MySpace, a because the concept of a free even creative thinkers may take website that dominated the online platform totally disrupts their certain things—such as social-media market in the early organizational structure—for 2000s, is an example of a business business model. granted. They are therefore that fell victim to strategic Alan Moore encouraging their staff to think retrenchment—sticking to a failing literally “beyond the building” for strategy rather than adapting to US systems expert new ideas. Procter & Gamble CEO new competition or a changing A G Lafley sent employees to live marketplace. Purchased by News temporarily in the homes of Corp for $580 millon in 2005, the consumers to better understand business was sold in 2011 for $35 their needs and identify product million, having failed to match the opportunities. The box itself, it creative vision of Mark seems, is perhaps a distraction. ■

90 THE MORE A PERSON CAN DO, THE MORE YOU CAN MOTIVATE THEM IS MONEY THE MOTIVATOR? IN CONTEXT When present, If poorly managed, motivators—such as hygiene factors—such as FOCUS recognition, professional pay, conditions, supervision, Motivation growth, and responsibility— and security—can increase can contribute to job KEY DATES job dissatisfaction. 1914 Henry Ford doubles satisfaction. wages at Ford Motor Company in an effort to reduce labor Money matters, but workplace motivation is much turnover. Thousands apply more complex than financial reward alone. for jobs with the company. I f you were paid more, would Herzberg began to study workplace 1959 Fredrick Herzberg you work harder? The answer motivation in the 1950s while proposes his theory that is probably partly yes, and teaching at Case Western Reserve “motivators” and “hygiene partly no. Higher pay might University, OH. In 1959 he proposed factors” lead to satisfaction encourage you to move to a new job the “two-factor theory”—that a or dissatisfaction at work. He or to work a little faster or harder, series of “motivators” encourage job stresses that pay demotivates, but this focus is soon eroded—or satisfaction, while aspects of work but it does not motivate. equally, magnified—by other factors, termed “hygiene factors” contribute such as job satisfaction, respect to dissatisfaction in the workplace 2000s “Best Employer” lists from managers, and the challenge if they are poorly managed. reveal that the highest ranked presented by the work itself. companies are often not those Removing dissatisfaction offering the biggest salaries. Financial gain can move us Hygiene factors include working to do things, but motivation is more conditions, job security, relationships 2012 Fortune magazine cites complex than money alone. US with other workers, and salary. Google as the best organization psychologist Professor Frederick to work for in the US, and it also tops the list of employers in developing countries, including India. High salaries and a range of perks contribute to staff satisfaction.

See also: Leading well 68–69 ■ The value of teams 70–71 ■ Creativity and LIGHTING THE FIRE 91 invention 72–73 ■ Effective leadership 78–79 ■ Make the most of your talent 86–87 Frederick Herzberg JOB DISSATISFACTION JOB SATISFACTION US psychologist Frederick Company policy and Achievement Herzberg was born on April administration Recognition 18, 1923. He attended City Supervision Work itself College of New York and later Relationship with supervisor Responsibility held a professorship at the Work conditions Advancement University of Utah, USA. Salary Growth Herzberg’s service in the Relationship with peers US Army, in particular his Personal life Herzberg’s two-factor observation of conditions Relationship with subordinates theory illustrates the at the Dachau concentration Status dichotomy of workplace camp in Germany during Security motivation—that for the World War II, is thought to most part, job satisfaction have inspired his interest derives from fulfilment of in motivational theory. a different set of factors (“motivators”) than those Challenging the notion that cause dissatisfaction that workers are driven only (“hygiene factors”). by money and other benefits, Herzberg suggested that Motivators achievement and recognition Hygiene factors are powerful motivators. He believed that managers should create safe, happy workplaces and make tasks interesting, challenging, and rewarding. His work influenced a generation of managers. Key works Motivators include recognition, increase job satisfaction, but when 1959 The Motivation to Work responsibility, the opportunity for lacking, actually only result in low 1968 One More Time: How do advancement, a sense of personal levels of employee dissatisfaction. you Motivate Employees? achievement, and potential for 1976 The Managerial Choice: growth—as Herzberg put it “the Motivators in practice To Be Efficient and to Be more a person can do,” the more Herzberg’s findings are significant Human easily they can be motivated. for business leaders. The two-factor theory proposes that job design is environment and flexible working Herzberg argued that job crucial—it must create conditions policies. Initiatives such as the dissatisfaction is as important in which employees can feel a sense “friends and family contract”—in as satisfaction. He believed that of achievement, enjoy responsibility, which employees from the same unless hygiene factors were well and gain recognition for their work. family or friendship group can cover managed, no matter how good the Levels of pay may be important for each other’s shifts—give staff a motivators, staff would not be recruitment and retention, but it sense of shared responsibility, and inclined to work hard. They would, is less important in encouraging enhance loyalty to the company. he suggested, be so dissatisfied as staff to work effectively. to be demotivated. He also believed The top-paying companies are that hygiene factors do not, in Every day, thousands of people rarely ranked as the best employers. themselves, motivate; but when around the world apply for jobs at Money matters, but job satisfaction, fulfilled, they reduce dissatisfaction fast-food outlet McDonald’s. career advancement, management and provide a foundation for Frequently rated at the top of “best attitude, and personal relations are motivation. On the other hand, employer” lists, the chain is popular the workplace factors that most motivators have great potential to because of a friendly working motivate us to work harder. ■

BE AN ENZYME— A CATALYST FOR CHANGE CHANGING THE GAME



94 CHANGING THE GAME IN CONTEXT T he business people we I want to put a dent remember are those who in the universe. FOCUS do things differently— Steve Jobs Innovation people such as Facebook CEO Sheryl Sandberg, US investor Thinking one step ahead of KEY DATES Warren Buffett, Hong Kong business customers and competitors disrupts 1997 US professor Clayton M. magnate Stanley Ho, British the status quo in a business’s favor. Christensen introduces the entrepreneur Richard Branson, concept of “disruptive and US media giant Oprah Winfrey. Disruptive innovation technologies”—major and Similarly, the companies we Harvard Business School scholar unforeseen technological remember are those whose products Clayton Christensen identified advances that cause companies and services stand out. Companies two types of technology that can to redefine how they operate. that shuffle along with the crowd, influence businesses: ”sustaining doing the same thing in the same technologies,” or advances in 2000s Global Positioning old way, are soon forgotten; those technology that help companies System (GPS) navigational that disrupt industries and change make gradual improvements to technology emerges as a the game are celebrated, sometimes product performance; and disruptive innovation in a even idolized. “disruptive technologies,” radical range of industries, from travel advances in technology that disrupt and fitness to recreation and In today’s global market, the industry and force companies to smartphone applications. competition is fierce and every rethink their entire mode of being. percentage point of market share is Christensen later changed the term 2014 US professor of business hard fought and precious. Operating “disruptive technology” to administration David in these markets is often a zero-sum McAdams writes Game- game: competition drives prices Changer: Game Theory and the down and costs up. Gaining a Art of Transforming Strategic significant competitive advantage Situations. McAdams uggests requires more than gradual that game-changers are those improvement, it demands radical who are “determined enough and disruptive shifts—if you cannot to change the game to their win the game, move the goalposts. own advantage.” Redefining the rules and boundaries of an industry is the essence of game-changing business strategy. Steve Jobs Entrepreneur and inventor fate, Apple bought NeXT in 1996 Steven Paul Jobs was born on and Jobs returned to Apple later February 24, 1955 in San that year, becoming CEO in Francisco, California, US. In 1976, 1997. In 1998 Jobs launched the at the age of 21, he and Steve iconic iMac computer and went Wozniak started Apple Computers on to preside over one of the (from the garage in Jobs’s home). most famous corporate The business went public in 1980, renaissances in history. Under with a market value of $1.2 billion. his guidance, Apple led the way with innovative product design In 1985, after disagreements and technology to become one with the board, Jobs was fired of the most valuable technology by recently appointed CEO John businesses in the world. Sculley. Jobs nevertheless went on to found NeXT Computer and In 2010, Steve Jobs was 61st invest in Pixar Animation Studios, in Time Magazine’s “100 People which was to become hugely who Changed the World.” successful. In a twist of corporate He died on October 5, 2011.

LIGHTING THE FIRE 95 See also: Stand out in the market 28–31 ■ Gaining an edge 32–39 ■ Creativity and invention 72–73 ■ Thinking outside the box 88–89 ■ Leading the market 166–69 ■ The value chain 216–17 ■ Creating a brand 258–63 Today’s markets are ...and increasingly Gradual change increasingly global... competitive. can only bring gradual improvement to a company. They are ...they redefine the But successful leaders catalysts markets in which embrace radical, for change. they operate. disruptive thinking... “disruptive innovation” to reflect need for a product, even before with the new market segment. the fact that it is not so much customers realize such a need The German company Siemens, technology itself that is disruptive exists, and opens up new, for example, built the world’s first as how that technology is applied. untapped markets with significant electric elevator in 1880, and in first-mover advantages—not least 1881 provided power for the world’s One such product that has of which is brand association first electric street lights (in changed the game by adapting technology for new purposes is GlowCap. A screw-on top that can be attached to prescription medicine containers, GlowCap contains a glowing LED and audio alert that signal when medication should be taken. It also connects via Wi-Fi to the user’s smartphone, sending a text message or an email alert if a dose is missed. Like many game changers, it utilizes lateral thinking to present a solution to an existing problem, effectively meeting the consumer’s needs. Disruptive innovation creates the The Crystal is one of the world’s most sustainable buildings. Built in the UK by Siemens, it symbolizes the spirit of innovation that has been the hallmark of the company since the 1880s.

96 CHANGING THE GAME PERFORMANCE Overperformance of existing product creates a gap for a Disruptive innovation refers to new, “disruptive” product an innovation that transforms the Point of overperformance market. When an existing product boasts more features or services TIME than customers require, it may become too complex or difficult to use. As the gap between the existing product’s performance and customer requirement grows, it creates a gap in the market that can be exploited by a new, “disruptive” product. Over time, the new product can redefine the market. Performance demand of mainstream consumers Mean performance demand Existing company/ product New “disruptive” company/product Godalming, England). More recent industry, the music industry, the unlikely to have shifted the market game-changing products in cell-phone industry, and the tablet- very far—true game changers raise lighting, energy, transportation, computer industry. eyebrows and prompt questions. and healthcare have ensured that the Siemens name is associated Apple’s iMac, with its focus Interfacing technologies with quality and innovation. on user-friendly design and The iPod was a cross between the software, made a significant early crop of low-storage MP3 Leaders like the company’s impact on the personal computer players and the large, hard-drive- founder, Werner von Siemens— industry. However, Apple’s first based players that provided several those with the vision and courage major game changer was the iPod, gigabytes of storage. Amid a sea of to pursue game-changing first introduced in 2001. The bland competing products, the iPod strategies—are, however, all too product was met with scepticism— stood out thanks to its stylish and rare. It takes great courage to break but this, according to Christensen, distinctive design. It was small, easy from tradition; and charisma and is a classic reaction to a game to use, and came with the promise conviction to lead individuals, changer. A product that is accepted of “1,000 songs in your pocket.” organizations, and entire industries at first glance as a “winner” is away from the status quo. Success The real disrupter, however, was is met with reward and celebration; You cannot lead the combined power of the iPod failure with ridicule and scorn. from the crowd. and its software interface, iTunes. For would-be game changers, the Margaret Thatcher Customers could now access a line between fame and infamy is huge amount of music from one often thin. UK former Prime Minister (1925–2013) place, buy it, download it, and “sync” music from their computer Rewriting the rules to their devices with ease. The Another company that has changed iPod could also be charged while the game in its favor, on several syncing. The fact that we now occasions, is Apple. Under the take such features for granted guidance of its co-founder and demonstrates the extent to which CEO, Steve Jobs, the organization Apple transformed the market disrupted the desktop computer for personal-music devices.

LIGHTING THE FIRE 97 The iTunes Music Store (now the The iTunes Store and the iPod It’s kind of fun to do iTunes Store) redefined the music system, quite simply, worked for the impossible. industry in 2003. At the time, digital consumers, who had been baffled Walt Disney music piracy was on the rise; record by the many MP3 players and online labels were fighting against digital methods of finding music. Apple US entrepreneur (1901–1966) distribution for fear of losing control simplified the process, and made and further damaging already its solution aesthetically appealing called the iPhone “a revolutionary declining revenues. Jobs exploited at the same time. By 2013, its product,” claiming it was “five the record executives’ nervousness strategy had brought sales of around years’ ahead of any other cell to his advantage, offering people a 400 million iPods and more than phone.” His words were prophetic: way to purchase music legally but 25 billion iTunes Store downloads. for some years after, the iPhone easily and instantly. remained the standard against Continually game-changing which all other cell phones Apple’s software changed the Such radical disruption, if achieved were assessed and defined. music industry’s business model only once, could be put down to forever. In addition to changing the good luck, but true game changers Shortly before his death in 2011, way we access and listen to music, are those who persistently seek Jobs did it again—this time with iTunes enabled people to buy single to separate themselves from the the iPad. Launched in April 2010, tracks from albums. Artists no competition. Steve Jobs was not to confusion and some cynicism, longer needed to slave for months content merely to have changed the the iPad came to (re)define the on albums, but could release a music industry: in 2007 he turned industry. It extended access to steady stream of singles instead. his attention to the cell-phone technology beyond its accepted Consumers no longer felt trapped industry. Cell phones had been business, educational, and ❯❯ into album purchases and felt less getting smarter for a while, but the need to search for free, pirated iPhone was a giant leap forward. downloads in place of legal versions. Offering users access to a suite of computer-like applications and, The Apple logo has become a global in particular, seamless Internet emblem of the modern age—an access, it was an instant hit. The indication of the extent to which real breakthrough was the iPhone’s the organization has revolutionized touch-screen technology. Jobs technology and product development.

98 CHANGING THE GAME What today seems odd, change.” But to be truly successful, Problems cannot be unnecessary, offbeat—maybe and to outlive the tenure of a highly solved at the same level driven leader, the desire to disrupt even outrageous—may must be pervasive. The energy, of awareness that prove integral to solving innovation, and courage required created them. to repeatedly disrupt industries tomorrow’s problems. must be deeply ingrained in the Albert Einstein Pierre Omidyar corporate culture, which must also allow for flexibility to change. German-born physicist (1879–1955) desktop-bound roots, in a format that few, at first, expected to be In the case of eBay, Omidyar users to do most of the work. These popular. The iPad ushered in realized that the future was features nevertheless ensured a new era of computing, and unpredictable and nonlinear, that eBay evolved not only around remains, even in an increasingly and decided to structure his new Omidyar’s ideas and energy, but crowded tablet-computer market- venture with the approach of a also around the requirements of the place, the industry standard. software engineer (his former job), entire eBay community. “who has learned to strive for Corporate culture flexibility in design.” While a Embracing failure Apple has changed the game so software program might seem However, such deeply embedded significantly that the brand has initially to provide more than its game-changing mentality is rare. entered the cultural zeitgeist: its customers need, this is what gives Heroic leaders—game changers and products are seen everywhere— it the flexibility to change and risk takers—are difficult to find and from coffee shops and classrooms “prepare for the unexpected.” even more difficult to replace. With to television shows. Apple’s Ebay’s self-sustaining system fewer than one in ten new product technology has made its products required little intervention and was ideas making it to market, people ubiquitous and its customers able to adapt and grow according fanatically brand loyal. With such a to customer needs. Its design competitive edge, it is no surprise effectively embedded disruption that the company’s prices are able within the core structure. The idea to sit well above industry averages. of allowing users to rate each other was both new and risky—as was But the challenge for any a business model that required organization is to ensure that such game-changing mentality informs the spirit of the whole company. As French businessman Pierre Omidyar, founder of the online auction site eBay, suggests, a leader must be “a catalyst for Pierre Omidyar, chairman and founder of the popular auction site eBay, has embedded the desire for innovation and dramatic change within his company’s corporate culture.