At a recent NFL meeting about the anthem protests, Houston Texans owner Robert McNair warned his fellow owners that the league should avoid having “inmates running the prison.” Besides mangling the common phrase about “inmates running the asylum,” the racial undertones of the comment caused an uproar.
McNair quickly apologized and explained that he wasn’t referring to players, but league staff who he felt were making decisions without adequately consulting owners. Still, leaving political and moral issues aside, McNair’s comment raises important issues about governance in an increasingly complex world.
As Moisés Naím pointed out in The End of Power, today “power is easier to get but harder to use or keep.” So leaders are faced with a significant challenge. How to guide and shape an organization in an age of diminished power? The answer, unfortunately for McNair, is to acknowledge that the inmates really do run the asylum and leverage new sources of power.
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The Gartner Hype Cycle shows a remarkably consistent pattern. A new technology is first ignored, then begins to show promise and expectations get inflated beyond any realistic assessment of value. That leads to disillusionment and the technology is almost forgotten until, some years later, it begins to make a true competitive impact.
What makes the Hype Cycle so pervasive is that it is, essentially, a pattern based on our obsession with patterns and stories, which is so universal that there is a whole branch of mathematics devoted to it. Our love of patterns is so great, in fact, that once we notice one we are often unable to disregard it.
The concept isn’t limited to the technologies Gartner follows. At any given time there are a variety of trends and business ideas getting hyped. That’s a problem because an enormous amount of time and energy is wasted when a trend is at maximum hype. Right now there are three major trends you need to watch out for if you don’t want to get caught in the cycle.
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Every leader tries to keep things simple and predictable. You hire good people, treat them well, give them clear objectives and do your best to stay out of their way. If you do your homework, plan things well and your people execute efficiently, everything should go off without a hitch. Or so the thinking goes.
Yet reality often intrudes on even the best laid plans. Technology evolves, customer tastes change and competitors release new offerings. Before you know it, your simple model becomes dizzyingly complex and your organization is struggling to coordinate a response to a rapidly changing marketplace.
The truth is that we need to manage for complexity, not simplicity and many organizations are poorly fit to adapt. The answer does not lie in better planning or execution, but greater empowerment. We need to shift our organizations from hierarchies to networks and learn how to facilitate horizontal connections across the enterprise at an operational cadence.
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A recent McKinsey report found that while 84% of corporate executives think that innovation is key to achieving growth objectives, only 6% are satisfied with the innovation performance of their firm. That’s quite a mismatch and it’s hard to imagine that a success rate that low would be tolerated in any other business function.
One reason for the paltry performance is that while other business areas, like marketing or finance, are considered to be core functions, innovation is often considered to be something that’s “nice to have” rather than essential. Yet another more pervasive reason is that senior executives are trained as operators, not innovators.
There’s a fundamental conflict between innovation and optimizing an existing operation. While the execution of a conventional strategy lends itself to linear progress and clear benchmarks, innovation often proceeds by s-curves, moving at a slow crawl until it explodes at an exponential rate. To close the gap, we need to treat innovation differently than we do normal operations. Here are four things that leaders need to do to close the gap.
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On a recent episode of Last Week Tonight, John Oliver pointed out the dangers of corporate consolidation. In a variety of industries today, ranging from airlines to healthcare to even buying a coffin for a funeral, a handful of major players dominate, which allows them to raise prices and restrict consumer choice.
Anybody who has flown on an airplane in recent years knows what he’s talking about. The once reeling industry now charges more and delivers less, but is reaping record profits, despite its horrific service. As Oliver pointed out, United posted strong results even after its notorious passenger dragging scandal.
Clearly, we have a problem with antitrust regulation and consumer protection, but corporate consolidation is more than an example of corporate greed, it is also an indication of industry weakness. Growing industries generally don’t consolidate and, by restricting competition, firms in oligopoly markets often hasten their own disruption and demise.
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The recent Equifax data breach was unusual for its scale — nearly 150 million accounts were affected — but the basic story is nothing new. Massive data breaches have been happening at a record pace. Just one security flaw in one piece of software can put an entire enterprise at risk. Everybody is vulnerable.
The European Union has responded to the problem with its upcoming General Data Protection Regulation (GDPR), which will help minimize the risk and impose stiff penalties — up to 4% of global turnover— for organizations that don’t comply. Firms with EU exposure are scrambling to prepare for its 2018 starting date.
Most companies see GDPR as a burden, but Kenneth Sanford, an analytics expert at Dataiku, sees it as a blueprint for better data practices. While regulation won’t stop the breaches, it will help prevent the damage that they cause. With data and analytics becoming so central to how we do business, it’s time that we start taking it more seriously. Here’s what you can do:
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It seems like every business discussion today is just counting the seconds before the term “platform” comes up. Books and articles are written, pundits swoon and conference audiences nod and exchange glances in knowing agreement. Everyone, it seems, wants to transform their business into a platform.
Yet take the argument to its logical conclusion and the message becomes problematic. Platforms, as many have observed, function as multi-sided markets and therefore must connect value to value. So if everybody becomes a platform, who actually creates the value to make a vibrant marketplace?
The truth is that, while some amazing platform businesses have been created, there is also a considerable amount of survivorship bias going on. We notice the Amazons, Ubers and AirBnB’s, but forget about the thousands of platform startups that failed. Make no mistake, even in an increasingly networked world, you still need to create, deliver and capture value.
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In 1892, George Eastman formed the Eastman Kodak Company to “make the camera as convenient as a pencil.” It was an idea whose time had come and by the early 20th century, Kodak emerged as one of America’s largest companies and Eastman one of its most successful entrepreneurs.
It wasn’t just that one idea that made the company so successful, it managed to stay on the bleeding edge for over a century, pioneering impressive new advancements in photographic paper, development and image processing. In 1975, it invented the digital camera, which would lead to its downfall as a major corporation.
The problem wasn’t that Kodak didn’t understand the potential, but that it became stuck in its operating model. It was so huge and so profitable, that almost any other opportunity seemed small by comparison. While Kodak is an extreme case, many others fail in new markets for similar reasons, they fail to bridge the gap between innovation and operations.
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In 2006, Blockbuster Video launched Total Access, a service that allowed its customers to rent videos online and return them to stores. The strategy was an immediate hit with customers and before long its online unit was making big gains against Netflix. It seemed that the video giant had finally cracked to code to renting videos on the Internet.
Alas, it was not to be. Investors balked at the cost of the new plan, while franchisees feared that online rentals would make them obsolete. In 2007, the company’s CEO, John Antioco, was fired and the online strategy was scrapped. Just three years later, in 2010, Blockbuster filed for bankruptcy.
Traditionally, we have looked at strategy solely as a set of plans designed to achieve specific goals. However, as we increasingly operate in a world of networks rather than hierarchies, leaders need to learn the lessons of social movements and focus on shared values. As the story of Blockbuster shows, you can’t change behaviors without first changing core beliefs.
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Completed in 1928, Henry Ford’s River Rouge plant was a marvel of its age. It was almost 100% vertically integrated, even producing its own steel and by the 1930s over 100,000 employees worked there, producing nearly every component for the cars that Ford built. It was, at the time, considered to be a key advantage.
Nobody makes factories like that anymore though. It wouldn’t make any sense. In today’s economy, it would be impossible for any one firm to be competitive in more than a handful of the thousands of components that go into a modern automobile. That’s why today we have global supply chains.
All to often, we think of innovation as an problem of developing internal capabilities but in today’s world, far more value can be unlocked by widening and deepening connections. So we need to learn to use the entire ecosystem, including partners, suppliers, customers and open resources and think in terms of value networks rather than value chains.
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