This is the next podcast for the power sector corporate strategy study we will soon release as part of our Executive Program.

Building leaders in broken companies is very difficult. In an earlier podcast, we discussed a change at Firmsconsulting in the way we are managing large corporate strategy transformation-type studies. Essentially, we now have a dedicated partner working with executive clients to help them with leadership and CEO-transitions issues. The work is absolutely fascinating: it sits at the intersection of leadership, motivation, happiness and clinical psychology.

I am personally learning from watching this partner in action. This is, therefore, a very interesting podcast and we are going to discuss the following.

We are going to predict what is going to happen to the Empire International (EI) executive leadership team based on our experience of running similar studies. Next we are going to briefly explain the leadership challenge at Empire International.

Then we are going to look at the unique context of the local labor market and how the backgrounds of the EI leadership team essentially make them voluntary corporate zombies who cannot fail financially: this is personal financial success even if EI fails financially.

Next, we will explain how and why they will be sidelined and why they will accept it!

Finally, we will look at our leadership strategy to deal with this: hint – involves focusing on the transition.

Finally we will discuss the central concept of our leadership philosophy: authenticity. It will surprise you to learn that this philosophy is absolutely nothing like anything you have read about in mainsteam business literature. We will use some case studies to discuss the philosophy.

I will also add some notes about the profile of the partner who should run leadership development and why it needs to differ from a corporate strategy partner.

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6 responses to Building Leaders in Broken Companies

  1. You are welcome Marut.

  2. Really helpful Michael. Thank you!

  3. Hi Marut,

    There are a couple of things to consider here.

    Yes, the rate of change in a market is faster, but companies are also moving faster. So the relative rate of change is not that great. And that relative rate is more important.

    If the rate of changes was just the issue, than no company could end up dominating a market. So, clearly the fact that many companies can dominate a market indicates that the rate of change of the market is not the main issue.

    Think of Google’s advertising market. That has been pretty static from 1999 to 2012 and only now starting to shift to mobile and apps. So in that hotly contested area, the market did not change much. Yes, there where thousands of innovations and changes in that space, but broadly speaking, the market did not change much. So, when we say markets rapidly change, we need to make sure the underlying market is actually changing. Lots of activity does not mean lots of change.

    We confuse noise in the market for a real change.

    The fact that Google can dominate a market for 16 years or 10 years or so, makes us think that Google is special. Google probably thinks they are special. The alternative view is that Google’s market has not shifted and Google just built a great position in a relatively static market, like all other successful companies.

    Now, if Google’s core market constantly shifted from desktop browsing to social networks to apps and they where still number one, that would be incredible. Yet, their core market has always been desktop and they simply own that one space. That is not to say it is easy to fend of challengers for that one static market.

    However, when the market shifts, a challenger is not the reason you are losing. You are losing since you could not change with the market.

    In other words, their underlying market is not the same.

    So, companies can fail for one of 4 reasons. If they fail at one of the 4 below, they will fail:

    1 – The strategy is wrong.
    2 – The operations are wrong.
    3 – The implementation of the two above are wrong.
    4 – All of the 3 above are correctly done, but the market need shifts and the company cannot/will not adjust.

    Transformation studies are ONLY needed when condition 4 is met. Lots of companies just need a new strategy or operations plan but the market has not shifted. When the underlying market has shifted, and you have not adjusted to it, your core business needs to change to adjust to it.

    Other strategy partners/firms would have a different definition of transformation, since this a more classical, Michael Porter language, definition.

    Michael Raynor’s excellent book “The Strategy Paradox” explains this concept very, very well.

    Companies fail to transform themselves since they cannot predict when a market will shift. If they cannot predict it, they see no urge to transform because there is absolutely little proof the tsunami is coming. There are just no clear signals. Even when the shift begins, they cannot be sure it is permanent so simply assume their old core will work.

    Even when the shift begins, the signals can be interpreted to be a blip or even variation on the core market.

    That is why so many companies transform so late, after the fact: HP, IBM, GM and I would group Google here as well. Their core market is shifting.

    I would say one reason this happens is because boards have become too powerful in the US and in general. Boards vote by consensus and since this core market change is so hard to intuit (hope that is a word!) and understand, here we are are hoping 8 or 9 of 12 board members will see and understand this shift. When you rule by consensus the lowest common view wins which is to do nothing.

    If one person cannot see the shift, do you know how hard it is to get 8 or 9 people to agree there is a shift?

    If you look at companies that do move ahead of the curve, there is usually one powerful CEO that forces the company to change. And when he does, the press will attack him since he is reacting to something for which there is little proof.

    Because you have to realize that when you want to shift your core before the need to change becomes apparent, there is NO absolute proof you should change. The data can be read in many ways.

    I am not sure smarter boards are possible here.

    Hope that helps.

    Michael

  4. Thanks Michael.

    I have a follow up question:
    With the economic downturn and generally greater pace of changes observed in the markets and industries over last decade or so, have you observed an increase in such type of studies? If not, is it because the corporations ignore the need to transform, even if their core businesses have shifted?

    Marut

  5. Hi Marut,

    The leadership partner track is different but built off similar partner roles both McKinsey and BCG pioneered. They had CEO and CEO-Transition partners. For example, Kevin P. Coyne led this work at McKinsey & Co.

    We are, however, doing it differently. I do not think a corporate strategy partner does this role well. You really want someone completely focused on leadership development working on this. When we used corporate strategy partners for this role, in prior studies, those discussions became additional discussions about the study and the leadership side was ignored.

    That ended up making the recommendations unsustainable since the leadership team was pretty much burnt-out and no one was focusing on helping them at a personal level.

    And you are right, it takes a very unusual person to excel at this. There is no obvious training or career track that creates them.

    Prioritizing client groups is normal. We always do that.

    To answer your final question, these types of studies are normal for me since I specialized in the turnarounds of state-owned-enterprises and this is a common type of work in that sector. When I was at the firm, only about 2% to 4% of work fell in this space. It is a very complicated form of corporate strategy.

    Big transformation studies are not uncommon for private sector companies, but they are also rare. Yet, these types of studies are considered to be quite tough, and for good reason.

    Hope that helps.

    Michael

  6. Michael,

    A couple of remarks followed by a question:

    Remark 1: It is truly fascinating to hear about this track of the study. It is unlike anything I had come across before. Hearing about the description of the partner required for this role, Chris (I hope I have the right name) surely has to be a special person. I mean it is a very specialised role with tightly defined criteria for the profile. I am definitely looking forward to hearing more on this track.

    Remark 2: I was not really surprised to hear about people being sidelined and focus put on a select group. But what struck me really was how this thinking too is so in sync with the consulting characteristic of prioritising things – analytic but not excel analytic.

    Question: Is this the first time that you are doing such a thing in a study and how prevalent is doing such a thing in studies done by elite firms?

    Marut

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