Serial Innovators: A book review by Bob Morris

Serial Innovators: Firms That Change the World
Claudio Feser
John Wiley & Sons (2012)

How and why continuous innovation and adaptation can help an organization “live” longer

What we have here is a “hybrid” narrative that develops on two separate but interdependent levels: a fictional account that focuses on Carl Berger (CEO of American Health Devices or AHD) and Claudio Feser’s exposition of a core thesis that continuous innovation and adaptation can help an organization “live” longer. Only a few years ago, these were corporate equivalents of thriving organisms: Bethlehem Steel, British Leyland, Commodore, Digital Equipment Corporation, Enron, General Foods, Lehman Brothers, Pan Am, Polaroid, RCA, Texaco, TWA, Union Carbide, Uniroyal, Westinghouse, and WorldCom. Today? All gone. And keep in mind, this is only a partial list of organizational fatalities. Of the Top 50 in 1960, only 13 are among the Top 50 in 2010. As for the other 37, 23 have either filed for bankruptcy or been acquired.  The remaining 14 are well-known but endangered.

Frankly, I am much less interested in fictional accounts (however well-told in narrative form with setting, characters, plot, conflicts, etc.) than I am in research-driven revelations based on real-world situations. Feser is a highly-skilled storyteller, to be sure, but I now focus on what he has to say about extending corporate longevity. Here are some of the passages that caught my eye in Chapters 1-5:

o  Daniel Kahneman and Amos Tversky’s pioneering research on three heuristics of judgment (anchoring, availability, and representativeness), Pages 27-29
o  Mental biases (framing, optimism, loss aversion, and status quo) and the rigidities of bounded rationality, Pages 29-32
o The Theory of Self-Efficacy Beliefs (i.e. task-specific self-confidence), Pages 40-45
o  Plasticity, learning, and behavioral change, Pages 61-63
o  Large-scale rewiring of brains, Pages 63-65

And then in Chapter 13:

o  The role of a company’s leaders during its transformation, Pages 161-162
o Two elements of Feser’s concept of developing a leadership legacy: (1) “building an organization that builds human passion, self-confidence, values and capabilities,” and (2) building an organization that “has a positive impact on society…one that – with its mission, values, and scale – continuously invents new products and services that make life healthier, better, safer; an organization that can change the world,” Pages 163-164

As I reviewed the material in the Appendix, “Analysis of the Top 50 U.S. Firms of 1960,” and learned what has since become of them, I was reminded of an observation by Ecclesiastes, “To every thing there is a season, and a time for every purpose under heaven.” However, as Charles Darwin’s research on what is now referred to as “natural selection” suggests, organisms – be they organizational or natural – either adapt or perish. Moreover, in recent years, adaption has required constant (“serial” and serious) innovation just to survive.

Although a world-class pragmatist, Feser has high-hopes and great expectations, indeed a rock-solid faith, that almost any organization can not only survive but thrive if (HUGE “if”) its leaders focus their thoughts and actions on what really matters, on doing good, on helping others grow. Yes, profitability is highly desirable and must be achieved and then sustained…but while “building institutions that develop passionate, principled, self-confident, learning individuals” who also do good, whose collective and collaborative initiatives “can have an impact on society.”

As for Carl Berger, good news. Everything eventually turned out well. The details of his story are best revealed within the narrative, in context. However, I do want to say I agree with Claudio Feser that Berger provides a compelling example of a young business leader who overcomes major challenges (including cancer), one who reminds us that we really can “live a life that matters, a life in which we can make a difference.”

Justin Fox recommends “embracing uncertainty rather than whining about it”

Justin Fox

Here is an excerpt from an article written by Justin Fox 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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American business leaders have been complaining a lot lately that uncertainty is keeping them from investing and the economy from fully rebounding. Partly this is a political complaint [click here], with the somewhat less-than-politically-neutral U.S. Chamber of Commerce taking the lead [click here]. The argument is that the ambitious legislative agenda of the Obama administration and the Democratic Congress are making it hard for businesses to know what sort of environment they’ll be operating in a couple years down the road.

It is true that a government that is constantly changing the rules makes it harder for businesses and individuals to make investment decisions. But when a party takes control of the White House and both houses of Congress for the first time in 16 years, in the aftermath of an epic financial crisis, you’ve got to expect a certain amount of rule changing — and what we’ve gotten so far certainly isn’t more ambitious than what an informed observer would have forecast in autumn 2008. Plus, the really big uncertainties facing the economy at the moment — are we about to fall back into recession? will housing prices ever start rising again? — aren’t directly the doing of lawmakers.

The economic outlook is extremely uncertain. I’ve heard the we-don’t-know-which-way-things-are-headed gripe recently from executives who don’t have any political axe to grind. Making things even harder at many big companies are directors who, with the Lehman and AIG debacles fresh in their memories and the Enron and Worldcom ones far from forgotten, have become extremely risk averse.

And the current economic turmoil may be just the beginning. I sat in on a discussion on climate change at the Techonomy conference in California Thursday morning, and the possible medium-term scenarios bandied about ranged from a tropical planet with crocodiles at the North Pole to a new ice age brought on by pumping too much sulfur into the upper atmosphere in an attempt to cool the climate. Now that’s uncertainty.

So yes, there’s an awful lot that’s unknown out there. But think about the feelings of relative economic certainty and confidence that prevailed in 2006, or in 1999. They turn out to have been entirely misplaced. It’s the investments made in boom times like that which end up losing people the most money and sending the most companies into Chapter 11. Investing right now may seem scary and dangerous, but chances are that it’s a lot less dangerous than investing three or four years ago.

Plus, investing in the face of uncertainty is what entrepreneurs do. In economist Frank Knight’s classic account [click here], this is the only sustainable source of profit in a competitive economy. More uncertainty = more potential for big profits.

That’s the general attitude at Techonomy, a new event in the mountains north of Lake Tahoe that has attracted an impressive crowd of technologists/optimists, some of them multi-billionaires thanks to their past boldness (or obliviousness, if you prefer) in the face of uncertainty. Their techno-utopianism can come across as naive and on occasion a little silly — an attendee at one session on bio-engineering said the general tone reminded her of the “atoms for peace” enthusiasm of the 1950s. But it’s a lot more attractive (and economically useful) than whining about uncertainty.

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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.

Justin Fox is editorial director of the Harvard Business Review Group and author of The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street.

Pat Zigarmi and Randy Conley on leadership behaviors that inspire trust

Here is some excellent material provided in the latest issue of the Ignite! Newsletter published by the Ken Blanchard Companies. To sign up for a free subscription, please click here.

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Trust is in need of some serious repair these days. The cumulative negative effects of big corporate trustbusters such as Enron and WorldCom, plus the self-centered greed of some Wall Street firms have stirred up cynicism and destroyed confidence. On top of that, the economic pressures brought on by the recent recession, the fall of the stock market, and the need to make massive federal and state budget cuts have only reinforced the sense of distrust that people have about organizations.

As a result, rebuilding trust has become a top priority for companies that are looking to break out of the negativity that has become pervasive in many organizations. According to Dr. Pat Zigarmi, Founding Associate of The Ken Blanchard Companies, and Randy Conley, the Trust Practice Leader at Blanchard, a self-centered, “What’s in it for me” attitude robs an organization of the best that employees have to offer. When employees perceive that an organization—or its leaders—are less than forthcoming, employees become unwilling to contribute any discretionary energy or make any commitments to their organization’s well-being beyond the absolute minimum.

As Zigarmi explains, “This lack of trust creates cynicism, doubt, and anxiety that leads to “time off-task” speculation and generally low energy and productivity. When people don’t trust their leaders, they don’t come toward something; they pull back and withdraw instead. They doubt rather than cooperate.”

Conley adds that, “Often, the result is that employees will stay with the organization and do their job because they need a paycheck, but not much more. It becomes purely a transactional relationship with employees asking themselves, “If the organization does not do right by me, why should I do right by them?”

Four Areas to Focus On

For leaders looking to turn things around in their organization, Zigarmi and Conley recommend that leaders take a hard look in the mirror and examine their own behaviors; are they being trustworthy? Is there transparency and honesty with people at all levels of the organization?

There are four key areas that leaders have to be aware of when they are looking at building or restoring trust with the people they lead.

[Here are the first two.]

ABLE is about demonstrating competence. Do the leaders know how to get the job done? Are they able to produce results? Do they have the skills to make things happen—including knowing the organization and equipping people with the resources and information they need to get their job done?

BELIEVABLE means acting with integrity. Leaders have to be honest in their dealings with people. In practical terms, this means creating and following fair processes. People need to feel that they are being treated equitably. It doesn’t necessarily mean that everyone has to be treated the same way in all circumstances, but it does mean that people are being treated appropriately and justly based on their own unique circumstances. Believability is also about acting in a consistent, values-driven manner that reassures employees that they can rely on their leaders.

As Zigarmi explains, “By using the Able, Believable, Connected and Dependable (ABCD) model we can help people create action plans in order to repair damaged relationships where trust has been broken.”

People Want to Give Their Best

Zigarmi and Conley have learned that when people believe that they are working for trustworthy leaders, they are willing to invest their talents in making a difference in an organization. People who feel more connected will invest more of themselves in their work. High trust levels lead to a greater sense of self-responsibility, greater interpersonal insight, and more collective action toward achieving common goals.

As Zigarmi summarizes, “Trustworthy leaders enjoy the benefits of seeing employees stretching more, pushing more limits, and volunteering more. When leaders create a high trust environment that is consistent over time, collaboration increases and organizations leap forward. That’s what a high trust environment can bring to you and your organization.”

Bill George on the new 21st century leaders

Here is an excerpt from article written by Bill George 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.

(Editor’s note: This post is part of a six-week blog series on how leadership might look in the future. The conversations generated by these posts will help shape the agenda of a symposium on the topic in June 2010, hosted by HBS’s Nitin Nohria, Rakesh Kharana, and Scott Snook.)

During the last half of the 20th century, business leadership became an elite profession, dominated by managers who ruled their enterprises from the top down. Influenced by two World Wars and the Depression, organizational hierarchies were structured along military lines, with multi-layered structures to establish control through rules and processes. People climbed the ranks in search of power, status, money and perquisites, as described in William H. Whyte’s 1956 classic, The Organization Man, and Sloan Wilson’s 1955 novel, The Man in the Gray Flannel Suit.

In the last quarter of the twentieth century the stock market became increasingly short-term, causing corporate leaders to concentrate on quarterly earnings, often to the exclusion of long-term growth. In the past decade it all blew up, from the ethical scandals exposed by Enron and WorldCom to the Wall Street meltdown. As a result, people lost trust in business leaders to build sustainable institutions instead of serving themselves and short-term shareholders.

What happened? The hierarchical model simply doesn’t work anymore. The craftsman-apprentice model has been replaced by learning organizations, filled with knowledge workers who don’t respond to “top down” leadership. Seeking opportunities to lead, young people are unwilling to spend ten years waiting in line. Most important, people are searching for genuine satisfaction and meaning from their work, not just money. For example, Medtronic’s 38,000 employees are motivated by the company’s mission of “restoring people to full life and health.”

In response to these changes, a new generation of leaders is reshaping the best-led global companies. Authentic leaders focused on customers are replacing hierarchical leaders that focus on serving short-term shareholders. Typical of these leaders is Unilever CEO Paul Polman, who recently told the Financial Times, “I don’t work for the shareholder. I work for consumers and my customers.”

In the 21st century the most successful leaders will focus on sustaining superior performance by aligning people around mission and values and empowering leaders at all levels, while concentrating on serving customers and collaborating throughout the organization.

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The ultimate measure of effectiveness for leaders is the ability to sustain superior results over an extended period of time. Organizations filled with aligned, empowered and collaborative employees focused on serving customers will outperform hierarchical organizations every time. Top-down leaders may achieve near-term results, but only authentic leaders can galvanize the entire organization to sustain long-term performance.

We need them to rebuild the trust that has been lost in capitalism.

Bill George is professor of management practice at Harvard Business School, the author of four best-selling books on leadership, including True North, and the former chair and CEO of Medtronic.

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(Editor’s note: This post is part of a six-week blog series on how leadership might look in the future. The conversations generated by these posts will help shape the agenda of a symposium on the topic in June 2010, hosted by HBS’s Nitin Nohria, Rakesh Kharana, and Scott Snook.)

Some of the ideas contained in this article appeared in Bill George’s March article on WSJ.com, The New Leaders: Collaborative, Not Commanding.

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.