Growth

For a long time economists have used long term population growth as a proxy for GDP growth – and when you consider the historic rise in global populations – especially post the industrial revolution in the 1800’s  – it is easy to think that this is headed in only one direction. As the graph shows, nothing could be further from the truth if the annual growth rate is considered.

World Population 1750-2015 and projections until 2100

updated-world-population-growth-1750-2100-768x538

Source: Our World in Data

Of course this is all very long term – but it does serve to complement short term concerns about the impact of Brexit, the rise of protectionism and other mooted barriers to growth opportunities. And the concern over future growth reflects an implied view of historic growth – that the market opportunity will somehow suggest itself. From the industrial revolution onwards, through increasing globalisation and the economic rise of Australasia and South America, opportunities have continued to flow over the last couple of centuries. But several years ago a KPMG review of the fund management business pointed out that irrespective of whether or not Gen Y ever developed the investment habits of their baby boomer parents, their financial situation and hence their investment opportunity was likely to be very different from that of the second half of the twentieth century. A salutary reminder that markets shift, and a point not restricted to the investment sector.

But that doesn’t mean that growth isn’t available – simply that different mechanics are needed to achieve it.  I can’t think of a clearer instance of the problems of assuming that the future of any business lies in incrementing yesterday’s model than in the question of growth.

If the barrier on overall success factors is structurally related – what about growth? To my mind this is much more a mindset issue. At the risk of oversimplifying, the opportunities provided by the rise of globalisation, benign trading conditions and the increasing affluence of the second part of the twentieth century has to some extent bred a risk aversion mindset – it seems to me that to think of growth, the market opportunity needs to be familiar, incremental (even if it is in a new geographic area) and above all proven and predictable. Two of the most famous examples of corporate failures – eg Kodak and Blockbuster both illustrate this reluctance to truly deviate from the known and proven. That mindset by the way is not necessarily limited to an organisation’s leadership – many public markets, investor communities and funders appear to have built their models on similar assumptions.

OK, so what? All of that is much better documented elsewhere. But to my mind it’s this risk aversion that makes growth today seem more problematic than perhaps it should be (I am however not suggesting that any growth is ‘easy’!). At least 3 potential strategies (and there are, and will be, others) are available but all require a different perspective as start point – one much more prepared to see the historic success as the least likely to succeed in tomorrow’s world and more prepared to consider unproven alternatives:

  1. Platform business model
  2. Grow & Kill
  3. Maximising the value of underutilised assets

Growth

Success criteria in a VUCA age

We live in an increasingly complex, fast moving and changing world – that’s immediately apparent. And there is an increasing body of writing about the characteristics of organisations designed to make the most of opportunities in that world (for example, Exponential Organisations). But, perhaps because it is still early days for traditional, global and multi-national organisations to come to grips with that VUCA world, there are comparatively few case studies about what those types of organisations can do to make the change, and perhaps more importantly just what it is that stops them.

Having seen many organisations in my working life, and thinking from my foresight perspective and how the trends and shifts play out, here’s what I’ve observed – no right answers but perhaps some provocations.

At the highest level, looking at the priorities of traditional organisations they have primarily been driven around 2 – performance (in the short and medium term) and growth (in the longer term). The perspective on both has almost invariably been internal – certainly in terms of action taken to drive them.

In the complex world of today, it seems to me there are two big changes to this:

  • Performance and growth still matter as much as ever, but the range of options to drive both has grown hugely – and in many cases require leadership to engage outside as much as inside. For example tactics like using User Generated Content (UGC) for marketing is less about the level of marketing department resources and more about the quality and nature of customer engagement – which will not be wholly within the control of the organisation at all.

 

UGC and ads

Source: Kleiner Perkins – Mary Meeker Internet Trends 2017

  • The need to add 2 further metrics of success in terms of agility (short and medium term) and resilience (longer term). The latter is not simply a question of financial resilience which it could be argued has always been a consideration but resilience of the business model, even of the organisation and its market niche. Both resilience and agility again require an external lens to be thoroughly understood – indeed it could be argued that the catalyst and drivers for both start externally.

Slide1Source: Change is an Opportunity Ltd

And yet – how many organisations are designed and managed to prioritise the external context rather than the internal structure? Think of the nature of the Executive – CFO, COO, Head of HR perhaps – almost all key leadership roles are about the internal resources, disciplines and activities.  I’ve mentioned this before in my post on Leading in an externally focused world.

I know when I run a foresight presentation how often the comment is made by the leadership team that they know they need to spend more time on thinking about what the world of the future looks like, but it clearly isn’t any one person’s responsibility and each is taken up with their own urgencies and pressures – so in these situations the net result is that it is constantly de-prioritised by all of them. Similarly the trends which superficially bear no relationship to the established business model are considered frequently with a detached view – interesting but, not yet at least, relevant to today’s business priorities.  It seems that the concept that disruption comes from the unknown, not the known direction, is understood in theory only.

Additionally it’s clear that the necessary response to many of the trends doesn’t fall neatly into Finance, Procurement, Sales, Operations etc (perhaps not surprisingly as the external world isn’t organised like that). The barriers then are not simply time pressure or misunderstanding but structural in nature.

Those organisations best placed to engage with all 4 success criteria of growth, performance, agility and resilience are those that have recognised (amongst many other aspects) the need for:

  • A continuing informed external perspective made available across the organisation. A truly impactful leader I met headed their organisation’s Competitive Intelligence division – and used his regular slot at their Executive to challenge the conventional and current view of their future operating environment but in a neat way that meshed with their existing approaches whilst provoking new thinking.
  • Cross-disciplinary decision making groups. The most common instance of this today is in innovation where multi-functional groups with diverse members are increasingly applied – but in reality why limit this purely to innovation?
  • The ability to demonstrate rather than tell the organisation how relevant and immediate a disruptive trend is, together with it’s potential impact on the established model – whether this is in creating an app to change perceptions of how customers could interact or the more dramatic ‘speedboat’ intrapreneur groups aiming to cannabalise the core business as at Aviva’s innovation garages.

More to follow

Leading in an externally focused world

So thinking about collaboration led me onto a favourite shift of mine which is the need to be externally focused rather than internally. I’m not just talking about ‘customer centricity’ – but about a perspective of the organisation as a set of external relationships within a network rather than focusing on the entity as the node. The picture below indicates some of these systemic relationships and their consequences

External governance

And when we look at traditional leadership structures, this systemic perspective and hence the web of relationships doesn’t readily map across – the CEO tends to be only role instinctively viewed as systemic.  Which is one reason why frequently, for example in innovation, you will see that the CEO sponsorship is a critical success factor.  And yet is that really the answer? To make the CEO the owner of all of the above?

Surely not! It seems to me that there are at least two potential routes (which are not mutually exclusive!) for the future – a redefinition of leadership roles to become more systemic and more externally focused – some organisations CDO’s (Chief Data Officer) look like a move in this direction – although they may not be consciously articulated that way. Or (and?) leadership evolves into something more of a collective activity – and one which may not sit at the ‘top’ of the organisation but much closer to the ‘coal face’ or the ecosystem it inhabits.

That kind of devolved management is increasingly being discussed – but to date I’ve seen it analysed from the OD point of view – how it relates to the internal organisation. Thinking it through from the wider net of relationships opens up the possibility of not just engaging but involving those outside the organisation as well as a much more radical perspective of what devolved management might cover

What’s there when the lights go out

sky-night-space-trees-large

Just been creating another short ‘card’ on the website – called Into the dark.  It extends the thinking on tolerance of ambiguity, triggered by a conversation with my friends at AbyI and Tim Stanyon in particular around just how far tolerance of ambiguity needs to stretch.

It is easy to recognise (not necessarily easy to put in practice) the need to become more conversant with complexity and to understand how complicated situations vary from complex. It is much less simple to follow the thinking through and conclude that if we are in a VUCA world, if change is the new normal then maybe the idea of all those targets and budgets and plans is not such a good one. All those milestones and beacons might just be taking us down the wrong path. But without them what have we got? What does happen when the lights go out?

Two current commentators have very similar views on this. Dave Snowden in his Cynefin framework suggests that Probe-Sense-Respond is the appropriate journey in the complex domain. And in Frederic Laloux’s Reinventing Organisations, several of his case study organisations have no budgets, no targets. Instead they use their evolutionary purpose to drive direction and their staff to do the right thing.

For those used to the discipline of project management, strategic planning and management reporting this really will feel like the lights going out – and yet, these companies find the way to grow and prosper, even in times of financial stress.

What cannot be underestimated however is the radical nature of the thinking here – this is not something that allows for a half way house. And removing the planning tools and targets cannot be achieved on its own. Above all, it is critical to know (not just as leaders but across the organisation) which is the right direction. Whether driven by evolutionary purpose or some more tactical objective, creating an initial action and seeing whether it progresses before iterating further cannot be undertaken as an isolated action – it has to be part of a wider context.

The issue then is how many companies are ready for this shift in thinking – and how many will require the leverage of an external event – perhaps disruption in their market? More on John Hegel’s latest paper next time

 

 

 

Curiosity in fact does not necessarily kill the cat

pexels-photo-large

My latest addition to in the Economic & Commercial section of changeisanopportunity.info is around leadership and the role of learning. I’ve been musing on tolerance of ambiguity a lot – not least because when I mention the fundamental nature of this as a leadership characteristic in my foresight sessions and workshops with clients, it resonates really well with senior teams. And yet, there seems to be very little published on it.

I was first introduced to the concept by friends at Futureworld from where I found this paper. And a few years ago I started to think about the issues of mindfulness, spirituality, aesthetic judgement and creativity not from an academic perspective but from the practical. It seemed to me that none of this was possible without the concept of a learning mindset (the ability to recognise that what we know is by no means all we need to know as well as the possibility of change) and behind that curiosity. So I was fascinated to see that a recent post and survey has recognised exactly that.

The post makes reference to how difficult it is for conventional leaders to be curious and I would echo that – in my many foresight sessions, many of the leadership teams I’ve worked with want to go straight to the ‘so what’ and even more so the ‘now what’ – the action arising. Without really showing any curiosity as to what lies behind a multitude of megatrends.

Nor do I believe that the sole reason for being curious and open minded lies only in the ability to be innovative and have new ideas. I think there is an equal and potentially opposite need to be curious for risk management purposes. After all, without curiosity to seek out what new competitors or new technologies have to offer, and the humility to expect disruption, how will organisations spot the issue until it is too late?