CEOs Should Be More Like NFL Quarterbacks

Roger Martin

Here is an excerpt from an article written by Roger Martin for the Harvard Business Review blog. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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When Auburn’s Cam Newton was picked by the Carolina Panthers as the first overall selection in Thursday’s NFL Draft, he became the eighth quarterback to go number one in the last 10 years. While not all of those picks have worked out swimmingly for the teams in questions (see: JaMarcus Russell and the Oakland Raiders) the trend speaks to the allure of the superstar QB. Great NFL quarterbacks, like Tom Brady, Drew Brees and Aaron Rodgers, are a valuable commodity; they are the field generals that can lead their teams to Super Bowl victories.

By and large, NFL starting quarterbacks are tough, leaderly, and proud. They stare down blitzing linebackers and fleet-footed cornerbacks on the field and face a sea of microphones immediately after the game, win or lose. Those postgame press conferences can make for compelling viewing. In a win, the QB gives credit to his coach, his teammates, and notes the schemes and plays that made it possible. In defeat, he typically faults his own performance and tips his hat to the play of the opposing team.

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Why is it that what is inconceivable in football is standard in business? The answer is that compensation is largely based in the expectations market in business and is strictly based in the real market in football. CEOs have a large portion of their compensation based on the performance of their company in the stock market, so CEOs spend their time shaping and responding to expectations. Quarterbacks have no part of their compensation based on the performance of their team against the point spread, so they focus completely on winning games.

Football has figured this out a lot better than has business. Football focuses its key players on the real game; business focuses its key players on the expectations game. Football gets 100% useful activity from its key players; business has them engaging plenty of their time in non-value-adding activities, like talking to analysts. It is time business learned a few things from football.

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To read the complete article, please click here.

Roger Martin is the Dean of the Rotman School of Management and the author of The Opposable Mind: Winning Through Integrative Thinking, The Design of Business: How Design Thinking is the Next Competitive Advantage (Harvard Business Press, 2009), and his new book, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL.

How to Successfully Manage Opposing Strategies

Roger Martin

Here is an excerpt from an article written by Roger Martin for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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In my last blog I described how in some situations you can combine two strategic logics to create a best of both by “doubling down.” In this integrative approach you produce the key benefit of the one logic by heavily emphasizing a key component of the other.

The second way to combine two logics is to disassemble the problem in such a way as to enable the use of both logics simultaneously.

This is what Bruce Kuwabara, principal of the architectural firm Kuwabara Payne McKenna Blumberg Architects did when he led the design team that faced a trade-off of opposing strategy logics in designing the new head office for Manitoba Hydro — a building that went on to win the prestigious award for the Best Tall Building in the Americas in 2009 by the Council on Tall Buildings and Urban Habitat.

The client had two different and potentially conflicting goals for the building. On the one hand they wanted a high level of energy efficiency in order to demonstrate Manitoba Hydro’s commitment to conservation and sustainability. On the other hand they also wanted a livable and enjoyable building for Manitoba Hydro’s workers.

But these translated into difficult opposing strategies for Kuwabara. Conventionally, high energy efficiency called for keeping the same air in the building so that it could be raised or lowered to the desirable temperature once and then kept there.

Recycling air in an energy efficient building could only be feasible if the external air was more or less the same temperature as the internal — hardly the case in Winnipeg, a city famous for its deadly cold winters and ripping hot summers.
A livable, enjoyable building called for exactly the opposite: loads and loads of fresh air, with each batch requiring heating or cooling to get it to the right temperature, which in a place like Winnipeg would be expensive.

Kuwabara, working with Thomas Auer who was the energy engineer for the project, realized pretty quickly that you couldn’t achieve both goals if, like most architects, you considered Heating, Ventilation and Air Conditioning (HVAC) as a single system: if your HVAC system brought in a lot of fresh air, it would be expending energy at a fierce rate heating and cooling it; if instead your HVAC system brought in little fresh air, it would save lots of energy but would produce a stale air environment.

So Kuwabara’s team asked the question: Did HVAC have to be one system? Or could V be considered distinctly from H&AC? And if so, could the optimizing models for each co-exist in one building?
As soon as the self-imposed constraint of a single system HVAC went away, intriguing possibilities emerged.

On H&AC, Kuwabara’s team went with state of the art geothermal — with water from deep below the building flowing through exposed pipes in the ceiling stabs kept at 65 degrees Fahrenheit constantly. This keeps the heating and cooling down to a minimum — with almost no use of energy.

On ventilation, the team utilized the strong and consistent south wind in Winnipeg to their advantage by constructing the building around three south-facing atriums, the lowest of which draws in massive quantities of fresh air. The atriums — soon to get the nickname the “lungs of the building” — were designed for the fresh air to disperse through the building, drawn under the raised floors of the office space by fans and dispersed by opening grills in the floors of the office space.

When the incoming air is cooler than target, it requires a modest amount of heating by small fan coil units. It then rises slowly and warms more as it rises, elevated in temperature by the people and computers. At the top, it is captured by the system and re-circulated into the parking garage to heat it.

When the incoming air is hotter than target, the radiant geothermal system keeps the air cool enough. But in these circumstances, it rises quickly and is exhausted directly out of the building through a solar chimney.

The result is a massively efficient building with 100% fresh air — no re-circulation — hence the building award. This was only possible with an integrative move: the disassembly of V from H&AC that enabled the utilization of both opposing models at the same time.

Do you have a “V” in your strategic plans that should be re-examined with similarly fresh lenses?

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Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada. He is the author of The Opposable Mind: Winning Through Integrative Thinking and, more recently, The Design of Business: How Design Thinking is the Next Competitive Advantage, both published by Harvard Business Press.

A smart example of an integrative strategy

Roger Martin

Here is an excerpt from an article written by Roger Martin for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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In previous posts I have argued that a logical trap to which we easily succumb is to take two opposing but logically-sound IF/THEN/BUT chains and mash them into one logically flawed IF/THEN/AND chain with disastrous results.

But it is possible to combine two logical structures to build a better, integrative model. What it takes is to go deeper into the logic of the conflicting IF/THEN/BUT causal chains to understand ‘the thinking behind the thinking.’

An example of this integrative approach comes to us from Piers Handling, who runs the Toronto International Film Festival. When he took the helm, it was not even the #1 film festival in Canada. Under his leadership it now vies with Cannes.

Before Piers, most successful film festivals (including Cannes) operated on the basis of the following simple conditional relationship:

1) IF you create exclusivity, THEN you will generate buzz (i.e. media interest), making the industry want to attend BUT the local community is all but shut out from the fun.

In this structure, the festival invites a small number of films to participate and has a jury of insiders award a prize to one of the ‘special few’. The presence of the stars and the announcement of a big award draw media attention to the films and make the industry happy. But the local community has to stay behind the velvet ropes and be content with no more than a movie star sighting or two.

There is also a second type of festival, predicated on an alternative string of conditional logic:

2) IF you create inclusivity, THEN you will develop a community of local film lovers, plus a vibrant local industry BUT the broader industry will be far less interested in attending your festival.

This second model had been the foundation of the Toronto festival from its inception. In this case, the festival works to be as inclusive as possible, engaging with the local community and nurturing a passion for film within it.

This creates a strong local base of filmgoers and volunteers, but there isn’t much reason for the industry to pay attention.

Had Handling failed to understand the causal logic at play, he might have just assumed away the problem and tried to mash the two models together without questioning to what extent such a move was possible.

Instead, he and his team took a deeper look and asked: Who matters to the festival, and what do they want? Audiences want to see films they’ll love and maybe catch sight of Brad Pitt; stars want media attention for their films; sponsors want exposure and access to an audience; media want a story to cover; and the industry wants a financial incentive — a real reason to attend.

In these incentives, Handling saw a way to leverage causal relationships that all the other festivals had missed. The industry attends Cannes because of the buzz generated by the Palme D’Or. But the top prize at Cannes is ultimately a hollow one. The last five winners of the Palme D’or, including l’Enfant and The Wind that Shakes the Barley, have gone on to average just $16.5 million at the box office worldwide. This is because the winners are picked by a small group of insiders who have no real predictive power. Here, Toronto had an advantage that Cannes and Sundance didn’t have: a massive local community of film lovers that look (and spend) an awful lot like the rest of the North American movie marketplace.

Handling knew that he needed to leverage the similarity between the Toronto audience and the rest of the world to provide a financial incentive to the industry and to create a story for the media and coverage for stars. But how?

It was through the People’s Choice Award, which was already in the Festival’s repertoire but not placed front and centre. Handling recognized that the People’s Choice Award was a signal to producers and distributors of what would really sell in the commercial market; if it became a centerpiece of the Festival, it would create a story for the media and a draw for the stars.

And it turned out that he couldn’t have been more right. The People’s Choice Award has since become a globally recognized laurel. Why? The last five winners of the People’s Choice award at Toronto, including Slumdog Millionaire and Precious, went on to earn a whopping average of $103 million and a slew of Oscar nominations.

Because he recognized that success amongst the crowds in Toronto could be a predictor of a film’s success more broadly, Handling was able to realize the greatest benefit of the inclusive model — a large and engaged audience — to deliver the greatest benefit of the exclusive model — buzz (and through buzz, industry engagement).

The growth of the Toronto International Film Festival aptly demonstrates the gains that are possible when we dig into competing causal logics, seeking a way to integrate them thoughtfully and strategically, rather than mashing them together without insight or analysis. More on the technique Handling used next time…

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Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada. He is the author of The Design of Business: How Design Thinking is the Next Competitive Advantage (Harvard Business Press, 2009).

Roger Martin on why management is not a profession — but it can be taught

Here is an excerpt from an article written by Roger Martin for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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Richard Barker makes several interesting and important points in his July-August 2010 HBR article, “No, Management is not a Profession.” [Please click here] I have a lot of sympathy with his views. I agree with him that management is not a profession and that it would be very hard to turn it into a profession like medicine or law.

Barker’s argument that management is not a profession is based on information asymmetry, “the mark of a true profession”. In other words, for someone to be a professional they have to know some things that only a few, carefully trained people know. I think this is a piece of the puzzle but I also link the existence of a profession to a particular regulatory context.

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So my basic calculus is as follows: If quality can’t be determined in advance and cost of failure is high, the market in question will attract regulation. And if the product/service is delivered by a single identifiable individual, it will become a regulated profession. If it doesn’t attract regulation, it doesn’t matter a whit whether an activity is deemed by its participants to be a ‘profession.’

Based on this calculus, management isn’t and won’t anytime soon be a profession. It’s true that quality is hard to determine in advance. But, despite a few highly public debacles, the cost of failure is not considered to be high. More often than not a bad manager is thought to cause short term damage from which the company in question can recover after the bad manager is fired. Management also tends to be a group activity rather than an individual one. Failure is seen as the product of a team of managers doing a poor job in concert, rather than the product of one manager. Of course, CEOs get singled out for disproportionate blame. But the question is not whether being a CEO should be a profession but rather whether management should be a profession.

I am in wholehearted agreement with Barker when he argues that: “The skill of integration distinguishes managers and is at the heart of why business education should differ from professional education.” I also agree with his view that this isn’t taught in business schools almost (but not quite) without exception. But I part company with Barker on his assertion that: “The key here is to recognize that integration is not taught but learned.”

Here he falls prey to a logical fallacy that I experience every day in my world, the world of business education — and that is the view that because something is untaught, it is unteachable. It’s a handy argument, of course, because it enables virtually the entire management education industry to sit on its hands and continue to teach easy stuff they’ve taught for the past fifty years.

I believe that integration is absolutely teachable and that is the challenge we set ourselves at the Rotman School of Management [click here]. Success will not be easy; it requires rigorous advances in management theory and smart pedagogical development to bring those advances to life in the classroom. If we and other business schools can get there, if we can demonstrate to the world that the inability to integrate is the prime cause of managerial failure, then perhaps management could move toward being a profession in which people could be tested and certified on their ability to think integratively. Still, let’s not run before we can walk.

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To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada. He is the author of The Design of Business: How Design Thinking is the Next Competitive Advantage (Harvard Business Press, 2009).

Roger Martin suggests five questions that will help build a strategy

Roger Martin

Here is an excerpt from article written by Roger Martin for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please visit dailyalert@email.harvardbusiness.org.

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People make strategy much harder than it needs to be. For some, the problem is that they focus too much on the tools: environmental scans, SWOT analyses, customer analyses, competitor analyses, financial modeling, and so on. Other people get into trouble because they think it’s all about the broad, conceptual, future-oriented, big picture stuff — not to be confused with tactics. Still other times, people think that strategy is what happens when we think about changing directions.

The reality is that strategy is at some level about all those things, and you can’t do a satisfactory job with your analysis alone, or your big picture alone, or your changes alone. You have to do a bit of work on all of them.

That’s actually a lot easier that it sounds. My preferred approach is to treat strategy-making as developing a set of answers to five interlinked questions. The questions — which cascade logically from the first to the last — are as follows:

• What are our broad aspirations for our organization & the concrete goals against which we can measure our progress?

• Across the potential field available to us, where will we choose to play and not play?

• In our chosen place to play, how will we choose to win against the competitors there?

• What capabilities are necessary to build and maintain to win in our chosen manner?

• What management systems are necessary to operate to build and maintain the key capabilities?

The trick is to have five answers that are consistent with one another and actually reinforce one another. Aspirations & Goals to be a great international player and a Where to Play response that is domestic doesn’t match well with a How to Win on the basis of proprietary R&D — because the competitors with global aspirations will almost certainly out-invest and outflank you. Winning on the basis of superior distribution is unlikely to happen if you don’t have a concrete plan to build the capabilities and a management system to maintain them.

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To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please visit dailyalert@email.harvardbusiness.org.

Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada. He is the author of four books, including The Opposable Mind: Winning Through Integrative Thinking and then The Design of Business: How Design Thinking is the Next Competitive Advantage, both published by Harvard Business Press.

Roger Martin on the “eureka moment” with strategy

Roger Martin

Here is an excerpt from article written by Roger Martin for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Daily Alerts, please visit dailyalert@email.harvardbusiness.org.

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Do you find that company strategy meetings often descend into adversarial position-taking? Many people complain to me that it’s the single biggest block to strategy-making that they encounter. But getting around that block is a lot easier than you might think. The solution lies simply in posing a single question, which I believe is the most important question in strategy.

I discovered the question about 15 years ago in Rhinelander, Wisconsin, a town of 7,500 inhabitants equidistant from Green Bay, Wisconsin and Duluth, Minnesota. We had a group of about 10 executives from a mining company in a conference room, split evenly between mine management and executives from head office in Toronto. Everybody had an opinion — i.e. what was true — but given the wide array of experiences, technical knowledge, and organizational interests, those opinions were all over the map. We quickly descended into adversarial position-taking and I could tell it was going nowhere.

Then an idea popped into my head. Rather than have them talk about what they thought was true, ask them to specify what would have to be true for the option on the table to be a fantastic choice. It was magic. Clashing views turned into collaboration on really understanding the logic of the options.

For all the options, the participants were perfectly happy to contribute to laying out the logic of what would have to be true in a cooperative way, instead of insisting on what was true in an adversarial way. By the end of the day, we had the group’s agreement on what had to be true for each of the five options for it to be the very best choice. And we had a plan for analyzing the items that were most important to hold true, but about which the group had the most reservations. The group was game to have those specific items analyzed and then come back and make the decision based on the structuring of the choices we had just carried out.

I was so struck by how well the group worked together when I didn’t let them dwell on what they thought to be true and asked them to focus on what would have to be true that from that moment on, that question became the single most important in my strategy work.

Why is it so important? The central reason is that it allows managers to step back from their beliefs and contemplate the possibility that they might not be entirely correct.

If you think an idea is the wrong way to approach a problem and someone asks you if you think it’s the right way, you’ll reply “no” and defend that answer against all comers. But if someone asks you to figure out what would have to be true for that approach to work, your frame of thinking changes. No one is asking you to take a stand on the idea, just to focus on what would have to be true for that idea to work. This subtle shift gives people a way to back away from their beliefs and allow exploration by which they give themselves the opportunity to learn something new.

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To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Daily Alerts, please visit dailyalert@email.harvardbusiness.org.

Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada. He is the author of The Design of Business: How Design Thinking is the Next Competitive Advantage (Harvard Business Press, 2009).