Thursday, 12 November 2015 10:16
Chris MacDonald Business Ethics Blog @Canadian Business - "Valeant Pharmaceuticals has suffered a crisis of trust over the last few weeks. More specifically, the trust that investors had in the company was substantially diminished in the wake of revelations that Valeant had an unclear but apparently too-cozy relationship with specialty pharmacy called Philidor. The loss in trust in this case was quite concrete, measured by a substantial drop in the company’s share price.
The source of this loss of trust was, as is generally the case, a question about the company’s ethics.
Doing business in the long run absolutely requires ethics. At the very least, doing business requires a degree of mutual respect, embodied in our commitment to getting things from others by offering them what we think they want in return. It also requires a commitment to basic honesty, and a commitment to honour our contracts. These ethical basics are essential because they are the foundation of trust. And if you don’t trust someone—at some level—you’re just not going to do business with them.
If trust enables business, then trust has a real value, in real dollars and cents. So what, then, is the dollar value of trust? I estimate the dollar value of trust, within the global economy, at roughly $102 trillion—in other words, the entire nominal Gross World Product for 2014. Without trust, all commerce on the planet would literally grind to a halt.
The fact that trust is crucial in markets is evidenced by the fact that businesses have come up with such a dizzying array of mechanisms designed to generate trust—everything from brands (which carry reputations) through to warranties, return policies, endorsements and third-party guarantors.
But what exactly is trust? What does it mean to trust someone? Functionally, it’s an expectation that someone will behave in certain ways. Trust is also an attitude—part calculation, part emotion—that involves an expectation of goodwill, or at least good behaviour. It is an expectation that the other party to a transaction will not do us harm. As my friend and fellow philosopher Daryl Koehn once put it, trust is a mean between paranoia and foolish faith.
But what happens when trust is broken? How can a company like Valeant (or Volkswagen, for that matter) regain the trust of consumers and the investing public? There are many ways to rebuild trust, and none of them is quick.
A company that has lost the trust of the investing public is likely going to need to show a consistent pattern of trustworthy behaviour over a substantial period of time. And the focus, here, is on the showing. CEO Michael Pearson has said how important ethics is to the company. And—present appearances aside—that may well be true. But in the light of the current wave of mistrust, the company is going to need to do more. It is going to need to engage in substantial disclosures, far beyond detailing the nature of its relationship with Philidor. In the face of a failure of disclosure, the company may well find that that it needs to engage in more disclosure than any company—even one with nothing to hide—would be fully comfortable with."
The question is, how do organisations diagnose where it has gone wrong in the first place and have specific insights into how the organisation and individuals within them feel.
Monday, 02 November 2015 10:18
Having 'consulted' for many years in a plethora of organisations from commercial through to public service and charity on areas from leadership, through team working and subsequently high performance cultures, I am left with some common threads that seem to always be present in those that work most effectively.
What actually are organisations (whether from Commercial FTSE 100s or Church)?
Perhaps it's better to look at them as a 'system' constructed by its members through the interaction of its members. So to be a bit off-the-wall, an organization is just a thought, not a thing. An imaginary construct of what is happening. Fundamentally it works because on the whole people come to work each day to do tasks that, should they agree locally it is right to do and this extends out throughout the whole group, it all works as a whole rather than by 'divine direction' from the physical top.
If leaders do decide what we do and set the vision, then why are we here now? Would they have designed the current position for any one of their organisations? NO.
So, the organisation emerges. The effective partnership emerges.
Ultimately, if individuals interact positively and agree what they do is right, this affects others near them and the overall thing creates patterns that appear coherent and effective – known therefore as emergence – though one has to accept somewhat unpredictable.
Ethics and the critical role it plays in leadership success.
One critical facet to include of course is the issue of ethics – not so much ethics of the whole organisation, but the ethics of each person in the individual decisions at the most local of levels (1-2-1) through the individual actions we take.
Let's face it, ethics form the basis of trust, and trust is only gained through actions (I see what you do – so you mean it, but only believe you when you repeat it consistently over time).
So the big question is, what do you do if you know this or understand this construct and want to influence and effect good leadership or leadership for good?
Leadership therefore in our context is NOT a 'heroic figure', but more all about the local interactions between human beings. Too many people are pre-occupied with the 'game' and not thinking how to decide what is best, so are engaged in 'politics, persuasion and negotiation' rather than what actually the whole thing is aiming to achieve. So for effective leadership we should stop thinking of pre-designed solutions or ultimate master plans, but more how to influence the 'group' in the 'right direction'.
Excellent leadership (which is in my mind a social phenomenon arising through the interaction between people) is where others recognise you lead and you recognise their roles. Leadership is therefore co-created.
Ethical Leaders therefore must:
Ethical Leaders therefore have to:
So, I agree with those that say selection and training of leaders is essential. That same training should open leaders' minds to all these insights and help them understand how to manage this uncertainty, while finding the way forward for themselves and for the group as a whole. We have a portfolio of products and services that can affect leadership for good in your organisation. Should you wish to know more, or even put something in place for your leaders, Entrusted can help you put the right things in place.
Thursday, 01 October 2015 13:03
Changes conjure up many feelings and emotions - excitement, anticipation and happiness, but change can often herald reservation, concern, even fear.
While many leaders extol the benefits of change, not everyone shares that enthusiasm.
A client outlined the challenge he saw in taking on his new role as CEO. This challenge revolved around the level of fear he sensed throughout his new organisation. Phrases like "I can see the fear in their eyes" and "deep reservations about the future ahead" were quoted. There will be many reasons for these behaviours a nd this leader faced them as his prime challenge. Without commitment to the journey of necessary change throughout the organisation, he was "on a hiding to nothing".
Poor leadership can give rise to fear. Leaders define, affect and influence the culture of an organisation way beyond their own imagination. Some have no idea of the level of influence their behaviour has on others, not only on their direct reports, but through them on the whole organisation.
Resistance to change can also be due to;
Every organisation must evolve, adapt and remain sensitive to changes in its industry and others which can undermine what was once a stable and sustainable market. Often leaders read the situation correctly, but then act to bring about change in a way that destroys the very foundations that brought success to the organisation and would have served it well into the future, if only channelled correctly.
So, back to my client. What could he have done? In this instance it was a case of acknowledgement. Acknowledgement of what has passed, how his predecessor in attempting to do the right thing – did wrong. Not wrong in realising that change was necessary, but rather in misunderstanding how to deliver change.
History plays a part in defining the behaviours of an organisation "the way we do things around here", and some recognised capability for change. The very success built into the DNA of the organisation that brought it to the current position, that same DNA would if handled correctly, deliver future success in the 'brave new world'. Listening to those who have seen the journey to this point and asking them the right questions such as "What have you learnt when facing this or that challenge in the past"? and "Which solutions worked, which didn't and why was this the case"? Getting under the skin of the what, why and how the organisation responds to the new, what constitutes the resilience amongst the teams and capability to adapt, change and renew - this is key.
Having listened, questioned and understood, it is as vital to acknowledge that history - the strength that has helped so far - and open the dialogue about what the future holds, what part each person thinks they can play and what do they see as the evolution necessary to meet the future.
None of this should detract from the crucial role any leader plays in doing his or her own strategic thinking, market analysis and all the other critical 'outward looking' actions. The real talent comes in performing the merger of listening and acknowledging within, with diagnosing and refining the challenges and opportunities without. This results in change for good, lessening the fear.
Fundamental to overcoming resistance to change is the building of trust. We can help with this. Contact – firstname.lastname@example.org
Monday, 03 August 2015 08:17
Within the film industry, George Lucas had a great reputation, built partly on his success with Star Wars. As the story goes, wisely he outsourced the original Star Wars sequels to a capable group of screenwriters and directors. Despite the massive success of Empire Strikes Back and Return of the Jedi, ego and reputation meant he then opted to fly solo as a writer, director, and producer of the prequel trilogy. The resulting films proved that the director had absolutely no understanding of what audiences wanted from the franchise and by neglecting to reflect on what audiences loved about the franchise, Lucas created three boring films that barely qualified as action figure commercials nor made any return on investment.
There are strange, but often repeated outcomes that appear when the board of an organization appoints a leader with a known reputation, who fundamentally isn't up for the challenge itself, but rather approaches their role with total selfishness.
Reputation is a mercurial aspect of perceived successful individuals. Such is the nature of reputation it prompts a discussion and blog in itself... for another time. Suffice to say, in such instances as this it rests on delivering an outcome, often change, that a board considers the holder is able to bring to their own challenge 'at home'. Of course this presupposes the conditions both internal and external match theirs at that time and place, which of course can, and never will, be the same. Yet here they are appointed to the role.
So what are the outcomes of such actions? Firstly, single-minded, selfish individuals are only fuelled in their excess through each and every move, appointment and often increased reward package. Their power knows no bounds. So, to their actions and the long term effects: Change is brought about and while short term leading to perceived success, long term a change takes place in the soul. Soul of individuals, mores and culture.
Short term EBITDA, profit, growth and value appear enhanced, yet underneath a deterioration is happening. Deterioration is the ability of the organization to continually deliver cost savings, increased individual and group productivity and most of all limited creativity.
While these outcomes do not show up in the near horizon of 3-5 year plans, this does not seem to matter either to the incumbent leader nor the board. The inevitable results: Change in the leader. They move on to another challenge, fuelled by their own perceived self-worth and in many instances a knowledge that it is the 'right time' to move on (perhaps before being found out).
For a moment though let us consider what happens inside the organization. A common conversation revolves around 'sitting it out, change is inevitable and while this is the current way, hopefully the soul will prevail'. Of course this is seldom the outcome and instead another change takes place as those that have ability and resolve chose to find employment that offers values and beliefs similar to their own. Others fight to survive by adopting the prevailing behaviours in this 'new order' that can provide them short term success, but actually, in long term, affects their own sense of balance and fulfilment. In terms of delivery, whether achieving targets, results and sustainable creativity and innovation, sadly efforts, campaigns and initiatives fail. Not immediately, but rather they end up being sub-optimal and limited in their sustainability as mentioned. This is mainly as a result of staff not really being committed heart and soul to what the leader really wants, as demonstrated by his or her actions and selfish intent.
What can be done? In truth, this conundrum is best resolved through a combination of decisions and actions, namely;
Board members define what they want from a new CEO. This definition has to include;
Notwithstanding all the above, it is fair to say that these core insights not only apply to the appointment of CEOs, but equally to Directors and leaders throughout organisations. It is simply that the scale of risk and potential long term damage to the organization is greater the higher 'up the food chain' one goes.
Tuesday, 14 July 2015 11:25
I remember when the Bee Gees released the song "Jive talkin'" in 1975. Oh those halcyon days as a teenager with no cares in the world, enjoying school (I actually really did!), and that enjoyment in life extended to most things including sports and playing football that summer in the streets of north London where I lived. Good times indeed. Truth is that at that time I didn't realise what the words really meant to the song, but sensed it was something about double talking and being misunderstood.
Anyway, it was only the other day while working with a client I asked a question to explore further with her why an excellent initiative to bring about innovative solutions to enhance business performance and productivity had floundered. It transpired she had taken the lead in offering to co-ordinate the work we had begun with her team and draw together their support – offered publicly at the time – to return to a final event and share the outcomes. Sadly she announced the initiative had not delivered as expected, although on the original day everyone was both enthused and enjoyed the work. Indeed, they came up with many robust ideas and potential ways of delivering the solutions, but when it came to working with her to bring them into practice she found everyone had a reason not to either reply, commit or even take their level of responsibility, declaring in most instances that they were either too busy or felt their personal priorities took precedence.
While this short synopsis spares any further details to save exposing anyone, it is fair to say these sorts of outcomes are not uncommon. Why do so many initiatives, plans and stated actions, whether around cost-savings, increased productivity or simply improved customer service, flounder?
What is it about making promises when the spirits are high only to back down, finding excuses or simply avoiding doing what we said we would do? It all sounds like "Jive talkin'" to me.
Truth is it doesn't have to be that way. By developing real trust within a team through open dialogue, conversations and discussions that really say what we think and think what we say, followed by doing what we say, consistently, things can be different, promises fulfilled and success achieved beyond the norm. All these simple, yet necessary actions will fundamentally serve as the true building blocks to sustainable trust in relationships, teams and organisations.
Have you had similar experiences? What worked and what actions complement the fundamental principle of trust?
Friday, 03 July 2015 07:26
For this “Thought for Today” I felt a new approach was needed, so I have taken the liberty of providing you first with a short synopsis of a much wider and enjoyable article written by Sally Helgesen. The full article follows later.
First, a leader needs to create opportunities to build and connect with alternate constituencies in meaningful yet powerful symbolic ways in order to counterbalance vested interests nearer to hand.
Second, rather than telling others that they need to change their ways, a leader seeking transformation must instead personally model a radically open style of leadership that sets the tone for what he or she wants to see happen.
“Transformed people transform people”. St. Francis
Organisations can only be transformed when the people who comprise them are transformed, and people are changed by individuals who engage them at the level of spirit.
“Only people of the spirit change things. The rest of us just rearrange them.”
The insightful quote wasn’t uttered by a religious figure, or by a touchy-feely New Age philosopher. Rather, it came from one of the most wilful and domineering figures ever to strut across the human stage: Napoleon.
The conqueror of Europe, whose dominion did indeed prove short-lived, was sufficiently clear-eyed to recognize the transitory nature of his military and political triumphs. But leaders today are often less astute. Although transformation has become a kind of Holy Grail in many organizations, it’s often viewed as an engineering or structural challenge that can be executed from the top: Get all the design elements right, and transformation is sure to follow.
The reality is that meaningful, lasting change occurs only when a critical mass of people throughout an enterprise — not all of them, but a sufficient number — begin to approach their work and commitments in a whole new way. Sustained transformation requires transformed people, as Lou Gerstner recognized when he noted that a reborn IBM could not be run by “the guys in white shirts” who had long defined the company’s culture. Gerstner, who ran Big Blue from 1993 to 2002, began the necessary work of supporting and engaging different people and the same people in different ways. By doing so, he was able to transform IBM from a complacent manufacturer of computer hardware into a more nimble and profitable provider of computing solutions, including services.
Such engagement does not happen by fiat, by a leader decreeing it must be so, although we continue to see leaders who stubbornly go down this path. My own favorite example, is former Hewlett Packard CEO Leo Apotheker’s sudden August 2011 announcement that the entire company — all 300,000-plus people — would on one specified day in September abandon their traditional business model, seize new terrain, and alter their modus operandi. Apotheker’s own tenure lasted about three weeks after this grandiose “Day One” declaration, which sowed confusion and despair in the ranks. The annals of business failure are littered with similar disasters. In the real world, people don’t change because the CEO tells them they must do so overnight.
Sometimes leaders do try to broadly engage people in a change effort, only to find their efforts stymied by entrenched interests or silos at senior levels. One classic example from business history was New United Motors Manufacturing, Inc., (NUMMI) an ill-fated partnership struck in 1984 between General Motors and Toyota. Based in Fremont, California, NUMMI was an effort to help frontline GM workers and supervisors learn the principles of lean manufacturing and the legendary Toyota production system (TPS) first-hand. Though the venture proved transformative for individual participants and resulted in vastly improved quality for the vehicles coming off the assembly line, GM didn’t change much as an organization as a result. The reason? Positional leaders outside the plant saw NUMMI’s innovation as a threat to their way of doing business. The Fremont plant was ultimately shut down in 2010, a year after GM filed for bankruptcy. (In a wonderfully ironic footnote, the old NUMMI site is today owned and operated by Tesla Motors.)
I’ve been thinking a lot about how transformations succeed and fail as I follow the fascinating efforts of Pope Francis to reinvigorate one of the few 2,000-year-old institutions on earth. The Catholic Church as an organization has provided the very prototype of top-down hierarchy since the early Middle Ages, so opening it up structurally is a particularly daunting task. What’s remarkable is the agility with which this Pope, who assumed his post in 2013 after the unprecedented resignation of a long-time Vatican power player who had become paralyzed in his role, approaches the difficult-to-reconcile tasks of re-engaging a broad spectrum of grassroots believers at the level of spirit and imagination while also seeking to curb the power of an entrenched bureaucracy that views itself as the true arbiter of church culture.
In moving on both fronts simultaneously, the Pope reveals his understanding of the two-step methodology required if sustained transformation is to flourish. First, a leader needs to create opportunities to build and connect with alternate constituencies in meaningful yet powerful symbolic ways in order to counterbalance vested interests nearer to hand. This approach was most vividly demonstrated in Francis’s drive to canonize Oscar Romero, the murdered bishop of El Salvador; the move had been blocked by the Roman Curia, the administrative arm of the Vatican, for 35 years. Soon after his installation, Pope Francis — the first South American to lead the church — embraced the effort, creating a groundswell of support across Latin America that included peasant villages, political allies, and advocates of liberation theology who had been marginalized or even banished from the church. In doing so, the Pope created a counterweight to those curial princes in Rome who had viewed the effort as a threat to their personal fiefs and positional power. In May, Romero was beatified — the penultimate step to formal sainthood.
Second, rather than telling others that they need to change their ways, a leader seeking transformation must instead personally model a radically open style of leadership that sets the tone for what he or she wants to see happen. In this spirit, the Pope remained in his modest Jesuit rooming house during his transition instead of moving into the palatial apartment prepared for him. He insisted on personally paying the fee at the desk upon leaving instead of having a retainer take care of it. He wore simple white robes and a skullcap at his investiture instead of the elaborate brocaded cape expected, and he rejected the scarlet slippers that had become a papal trademark. And most famously, he washed the feet of prisoners, including women and Muslims, at his first Holy Thursday service.
By acting as a simple, even humble priest from Day One of his papacy, the Pope demonstrated his understanding of the basic insight of the saint whose name he took upon investiture: transformed people transform people. This is a truth leaders miss when they imagine their positional power alone can compel lasting change. Organiz ations can only be transformed when the people who comprise them are transformed, and people are changed by individuals who engage them at the level of spirit.
This particular transformation effort isn’t finished, of course, and the forces of resistance can be wily and patient. As one senior curial official recently confided to long-term Vatican correspondent John Allen, “Bergoglio [Pope Francis] won’t be here forever, but we will.” That’s an extraordinarily bald and confident statement of faith on the irresistible nature of positional and bureaucratic power in an institution whose purpose, as Francis reminds us, is supposed to be pastoral. But if Napoleon is proved right yet again, the triumph of inertia is likely to be brief.
Monday, 22 June 2015 13:04
Tuesday, 30 September 2014 10:55
The seasons change, life is constant change and work... well you don't need me to tell you!
We all look for some certainties in life. This includes aspects of our work life where we feel 'assured', and this is no more relevant than in the behaviours and skills of our leaders and in you as a leader of others.
I just read this short, but insightful article by Heidi Grant Halvorson which encapsulates firstly, why trust is so important a consideration for leaders and, secondly, a number of strategies you might want to consciously consider about yourself:
by Heidi Grant Halvorson
The question "Can I trust you?" is always on our minds whenever we interact with other people (particularly when we meet them for the first time) though we usually aren't consciously aware of asking it. Studies suggest that in order to figure out whether or not someone is trustworthy, we analyze their words and deeds to find answers to two questions: "Do you have good intentions toward me—are you a friend or a foe?" and "Do you have what it takes to act on those intentions?"
So how do we find the answers? Decades of research show that we are all highly tuned-in to the warmth and competence of those around us. Warmth is being friendly, kind, loyal, and empathetic. It is taken as evidence that you have good intentions toward others. Your competence—being intelligent, creative, skilled, effective—is taken as evidence that you can act on your intentions if you want to. Competent people are therefore valuable allies or potent enemies. Less competent people are objects of compassion, or scorn.
When your team trusts you as a leader, it increases commitment to team goals. Communication improves, and ideas flow more freely, increasing creativity and productivity. Perhaps most important, in the hands of a trusted leader, employees are more comfortable with change and more willing to embrace a new vision. When your team doesn't trust you, you don't get their best effort. You'll then find yourself unable to inspire, influence, and create real change—an ineffective leader.
We can all agree that trust is good. The problem, however, is that we are so eager to prove that we "know what we're doing" as leaders that we neglect the arguably more important part of the trust formula: proving that we will act with our colleagues' interests in mind. In other words, trust is an afterthought.
Harvard Business School professor Amy Cuddy, author of many of the key studies on trust and leadership, has argued that when you project competence before warmth, you run the risk of appearing cold and eliciting fear from your employees. They might respect you, but fearful employees are rarely able to work at their best. And you certainly can't blame them for wanting to jump ship once an offer to work for someone who doesn't make them constantly anxious comes along.
In a nutshell, being competent is certainly important, but it must be coupled with the sense that you have your employees' welfare and interests in mind and that what they experience matters to you. Think about how you can use the following strategies to up your trust quotient:
Make eye contact, and hold it—both when you are speaking and listening. Nod from time to time to show you are understanding what's being said to you (and if you don't understand, ask). Smile, especially when they do. And above all else, really focus and internalize what is being said to you—everyone needs to feel that they have been heard, even when you can't give them what they are asking for.
Human beings have a deeply-rooted tendency toward reciprocity. We are naturally inclined to want to do favours, give gifts, and work to promote those who have done these things for us in the past. And the same holds true when it comes to trust—we are more likely to feel we can trust someone who has trusted us first. So assign tasks and projects that reflect this trust. Socially, share personal (but appropriate!) stories, talk about your struggles and challenges, let them see your fallible, human side. Allowing yourself to be a bit vulnerable is a great way to project warmth.
As a leader it's easy to have a laser-like focus on the tasks at hand. But take the time to mentally put yourself in your employees' shoes, to really try to grasp their perspective. Use phrases like "I imagine you must have felt..." to convey that empathy directly.
All that said, if you just aren't the warm-and-fuzzy type, and maybe talking about "feelings" makes you uncomfortable, fear not. Evidence suggests that the moral character aspects of warmth—the sense that you are fair, principled, courageous, and honest—are also highly effective for establishing trust. In other words, to get your employees to trust you, be someone they can always count on to do the right thing.
My learning from this, combined with personal observations of leaders and teams over the last 16 years, is that in truth it is easy to spot leaders who are not sincere in their care for others and personal mindfulness and to really 'do it right', honest reflection on your leadership style and skills is critical.
In using the learning from this article the key issue is not to apply each and all these strategies, but more to work to infuse this thinking and practice into your personal 'norm'.
I will be returning to this theme over the autumn and in the meantime, How about you? How have great leaders earned your trust?
Thursday, 12 April 2012 09:49
In these tough and turbulent times all leaders need to look very closely at not only themselves, but also those around them and make hard, challenging decisions that may well be actually about the survival of the business.
It's not often you get to see the deliberations and the acting out of this process, but below I have pulled together an insight into something happening right now.
Nokia CEO Stephen Elop rallies troops in brutally honest 'burning platform' memo to ALL Nokia 60,000 global employees
There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform's edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.
As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a "burning platform," and he needed to make a choice.
He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times – his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a "burning platform" caused a radical change in his behaviour.
We too, are standing on a "burning platform," and we must decide how we are going to change our behaviour.
Over the past few months, I've shared with you what I've heard from our shareholders, operators, developers, suppliers and from you. Today, I'm going to share what I've learned and what I have come to believe.
I have learned that we are standing on a burning platform.
And, we have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us.
For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.
In 2008, Apple's market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.
And then, there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry's innovation to its core.
Let's not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally – taking share from us in emerging markets.
While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.
The first iPhone shipped in 2007, and we still don't have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.
We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.
At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.
At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, "the time that it takes us to polish a PowerPoint presentation." They are fast, they are cheap, and they are challenging us.
And the truly perplexing aspect is that we're not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.
The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem. This means we're going to have to decide how we either build, catalyse or join an ecosystem.
This is one of the decisions we need to make. In the meantime, we've lost market share, we've lost mind share and we've lost time.
On Tuesday, Standard & Poor's informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody's took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.
Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It's also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.
How did we get to this point? Why did we fall behind when the world around us evolved?
This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally.
Nokia, our platform is burning.
We are working on a path forward — a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But, I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.
The burning platform, upon which the man found himself, caused the man to shift his behaviour, and take a bold and brave step into an uncertain future. He was able to tell his story. Now, we have a great opportunity to do the same.
I have also found some feedback about the above memo from an employee within Nokia which reads:
I can't comment too much as I work for Nokia but I read the original memo – it was front page of the intranet and I've seen Mr Elop speak. He really is an excellent speaker, honest, intelligent, engaging and has taken the temperature of Nokia at all levels – I.e. Not just senior management. He uses social media to talk directly to 60,000 global employees, he blogs and he invites and answers emails. Quite honestly, Nokia couldn't have a better CEO for the turbulent and fast changing environment in technology sectors.
Indeed, what's happened next in this real life 'Leadership in Crisis' challenge was discussed by Matt Warman, Consumer Technology Editor, The Telegraph who wrote on 12 Feb 2011
So when Nokia's new chief executive Stephen Elop stood on a stage at London's Intercontinental Hotel to announce that Microsoft would be Nokia's new partner for smartphones, he was not talking to the punters in Carphone Warehouse. This was an announcement aimed squarely at the stock market. Nokia's share price plunged by 13 per cent.
In essence, Mr Elop's decision acknowledged, however, what every interested amateur has known for two years: Nokia's current phones are already outdated and the company was treading a long and winding road to obscurity. In a quickening technology cycle, a company's lifespan is getting ever shorter, and constant reinvention is a necessity.
Mr Elop said that the company had talked extensively to Google, the other candidate for a deal, but that there was insufficient opportunity for Nokia to "differentiate" its products from others such as those made by Motorola – a Google-only smartphone manufacturer – or HTC or Samsung. There was also, with Google's strength in mapping, little chance for Nokia to get much out of its own strength in maps.
So Mr Elop acknowledged that Google didn't need Nokia, and that Nokia could not add much to Google. Looking at Windows Phone 7, however, Nokia can offer Microsoft's offering a much needed focus on hardware, he said, and it can also enhance the mapping powers of Microsoft's Bing search engine. Although Nokia will have to pay Microsoft a licence fee, it will also have new access to potential revenue streams, such as advertising.
So Nokia's pact with Microsoft was not really a choice. Earlier this week, Mr Elop wrote an internal memo comparing his company to a man standing on a burning oil platform: by jumping into the icy waters of the sea, the man saved his life, he said. What's most revealing about that analogy
Mr Elop's analysis of his problems, therefore, is astute. The changes that need to be made to Nokia seem to be in progress: Marko Ahtisaari, the company's head of design, now reports directly to Elop, for instance.
But that's not to say there are not still profound problems: it had pinned its hopes on MeeGo, which was a new operating system being developed in partnership with Intel. It was so bad it had become an industry joke, yet Mr Elop said yesterday that the Nokia engineers who had built it would be the ones who would build the future of Nokia and plan the next "major disruption" in the technology industry.
Later, Mr Elop said to analysts and investors that doing a deal with Google would have felt "a little bit like giving up and not enough like fighting back". Yesterday, as rumours of a cheaper iPhone model spread, a prominent investor said that "Nokia is taking the risk; Microsoft get the free upside. Meanwhile, Apple takes the middle market and the Chinese the low end. RIP Nokia".
That nightmare scenario may not happen – Mr Elop certainly knows what he's dealing with. More than 1.3 billion people today use a Nokia device – now the company will focus on "the next billion". David McQueen, principal analyst at Informa, said "The more competition there is in the smartphone space, the greater the innovation, the better the devices that emerge. Ultimately it will be users who choose what phones they want to buy." So far, fewer people are choosing Nokia or Microsoft than the two companies need. Mr Elop acknowledged that he was "taking a bet".
He's a brave man, gambling with billions.
While this was interesting to read, yesterday a posting from Michael Schrage, a research fellow at MIT Sloan School's Centre for Digital Business provides a certain (American) take on the current dilemma for Nokia.
Nokia's technology isn't a root cause of its current crisis. Don't blame its engineers and designers either. The company still knows how to innovate. There's a simpler and more strategic explanation for why this once-perennial market leader became second-rate.
Nokia ignored America. The company simply refused to compete energetically, ingeniously and respectfully in the U.S. America was treated as an innovation afterthought. Nokia tried to get away with preserving its market dominance in Europe and growing its leadership in Asia. The richest country in the world was, literally and figuratively, a third-class priority for the Finnish giant.
In scarcely five years, the disruptive emergence of Apple's iPhone and Google's Android revealed the magnitude of this strategic blunder. You can't be a genuine global innovator if you're a loser in America. Look at the numbers: From 2009 to 2010, Nokia's global share of the smartphone market dropped from almost 47% to roughly 38%. Nokia's North America numbers are even more eye-opening: Those numbers dropped from not quite 3.5% to under 3%. Nokia is barely a marginal smartphone player in America, where it accounts for barely 7% of Nokia's smartphone business. That's made the U.S. a poor platform for innovation.
The iPhone's global share now approaches 16%. Android's global smartphone share has shot from 4% in 2009 to almost 23% in 2010. In the U.S., their shares are 24% and 39% respectively. Each of Nokia's most ruthless rivals has roughly 10 times more share of America's market than it does.
Although China, India, and Latin America are undeniably huge potential markets, companies ignore the world's richest country, its consumers, and its innovators at their peril. Nokia's unwillingness or inability to bring its best game to America has undermined its brand as both a technical and market leader. Marginalizing America allowed two of Nokia's most dangerous competitors to swiftly, safely, and smartly out-innovate it.
If an American global market leader treated India, China, or Brazil so dismissively, its top management would (rightly) be excoriated as insular and arrogant. But Nokia's strategic choices have left it with a comparable outcome: an inability to learn, grow or profit in a market demonstrably hungry for mobile innovation. Behaving as if America doesn't matter takes a peculiar ignorance or arrogance. It's not an accident that Nokia'a (relatively) new CEO is a Noth American.
While celebrating 'reverse innovation' as a way to import novelty into posi-industrial markets may be popular and politically correct, America's entrepreneurs and consumers surely deserve at least as much attention as their Asian and European counterparts. America's wealth of ideas remains greater than the wealth of its households. Only a foolish firm thinks otherwise.
Nokia's new deal with Microsoft may or may not be the beginning of an essential turnaround. But the larger lesson here goes well beyond mobile technology and underserved geography. Real leaders do well wherever there's real competition. They don't de facto abandon the world's wealthiest markets because they think they can do better elsewhere. Most important, they respect the inarguable reality that, while global innovators can emerge from anywhere, they are still most likely to emerge from the place where Google, Apple, and Facebook began. Techno-entrepreneurs who want to win in the world still need to win in America.
It's interesting to reflect on the author's view of the world or indeed the whole issue of totally disruptive technologies that may yet come from the Far East?
The important messages throughout this story still stand the test of time and as importantly really do matter to large corporate organisations no matter what industry in any country.
This real life story continues...
While these are extracts following a story – it goes without saying that none of us really knows the true/full picture. However, the issues, responses and how the crisis is played out on a global arena are parallels and lessons for each of us, should a similar leadership 'crisis' arise. I would be very interested in your personal views on 'leadership in crisis' and any similar experiences.
Wednesday, 18 December 2013 10:36
A perennial question I am asked is "How can I do all I need to do when there isn't enough time?" Followed by, "I just wish I had time to focus on improving my personal performance."
Well the old adage of appyling the Pareto rule still stands the test of time. A study published in the Psychological Review looking at the difference between good and the bet performers showed focused practice makes perfect!
Summary of the findings published in the Business Insider reads:
Try this for a day: don't answer every phone call. Stop checking your email every two minutes. And leave work early. You'll be astounded at how much more you'll get done.
According to a study published in the Psychological Review conducted by Dr. K. Anders Ericcson, the key to great success is working harder in short bursts of time. Then give yourself a break before getting back to work.
The trick is staying focused. Ericsson and his team evaluated a group of musicians to find out what the "excellent" players were doing differently. They found that violinists who practiced more deliberately, say for 4 hours, accomplished more than others who slaved away for 7 hours. The best performers set goals for their practice sessions and required themselves to take breaks.
Looking at the chart, you can see that the best violin students practiced with greater intensity just before the lunch hour and then took a break before starting up again at 4 p.m. — whereas the other students practiced more steadily throughout the entire day.
The researchers found that successful people in other professions had similar habits:
"While completing a novel, famous authors tend to write only for 4 hours during the morning, leaving the rest of the day for rest and recuperation. Hence successful authors, who can control their work habits and are motivated to optimize their productivity, limit their most important intellectual activity to a fixed daily amount when working on projects requiring long periods of time to complete."
While this may be alright for those working in the arts, it does have very really and tangible application to those in business. it's not that you should save your energy for 3pm or fixed times stated, but more knowing how best you work, combined with application in the time you do use.
Timothy Ferriss gives similar advice in his New York Times bestseller, The 4-Hour Workweek. He stresses the Pareto principle, or the 80/20 law, which is that 80 percent of outputs come from 20 percent of inputs. So stay focused, and you'll do more in less time.
To immerse yourself in this area and find some practical and helpful insights into achieving excellence and the power of practice, I would highly recommend Matthew Syed's book: Bounce.
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