The Leader's Guide to Radical Management

Leadership Storytelling 3.0: From Arithmetic to Calculus

You have to understand what numbers are before you can do algebra.  And you have to understand algebra before you can do calculus. It doesn’t mean when you are doing calculus that the numbers aren’t important.

Madelyn Blair, author of Riding The Current

In order to create people-centered organizations, organizations need people-centered processes. They need systems and processes that will keep the organization focused on systematically achieving people-relevant outcomes rather than merely the production of outputs. They need systems and processes that will continually push the organization routinely delight and enchant their customers and signal when this is not happening. They need systems and processes that will push the organization to automatically draw on the full talents and creativity of the people who are doing the work. The latest generation of leadership storytelling–Leadership Storytelling 3.0–accomplishes exactly that.

Leadership storytelling: the beginning

In October 2000, I asked to meet with the director of the Smithsonian Associates in Washington DC and proposed to her a symposium on leadership storytelling. She looked at me as though the idea was absurd and asked: “Why on earth would we want to do that?” When I told her my story, she changed her mind and the symposium took place in April 2001. It marked the beginning of a great flowering leadership storytelling in the ensuing decade all around the world.

During the decade, the leadership storytelling scene was transformed. As a result of the efforts of myself and many others, it is now commonplace to find leadership storytelling discussed and promoted in even the most conservative business journals. Most leadership textbooks now have a section on storytelling. Business schools now often include segments on storytelling in their courses on leadership. Major corporations have taken it up as a central leadership theme. In broad terms, the intellectual battle to have storytelling accepted in the world of work has been won. What was once seen as absurd is now seen as obvious. In this month—March 2011—when a book on storytelling was number one in all the top lists of bestsellers,[i] it is not too much to declare that leadership storytelling has arrived into the mainstream.

Yet not everyone is aware that the storytelling has emerged in three interconnected generations.

Leadership Storytelling 1.0

In the beginning, it was simple. The story begins: “Once upon a time…” or equivalent, and we are off, traveling on the wings of the narrative imagination. It’s a story, without a care in the world or any thought as to where it might lead or what consequences might follow. Stories naturally enable us to get inside the mind of another human being. Stories expand our understanding of other people. Stories give us vicarious experience that we can obtain in no other way. These stories “in the wild” are inherently stimulating and naturally life-enhancing.

All these advantages come from the unthinking use of story. To the extent that thinking about it occurs at all, it is usually at the level of, “Gee, that’s amazing!” The subject matter of these stories might be soaring tales of accomplishment or utter disaster, or it might be mundane gossip about who did what to whom. In organizations, the stories are told in corridors, in cafeterias, around water coolers, in meeting rooms and board rooms—in fact, anywhere where human beings get together. Storytelling 1.0 involves no more than simply telling, retelling and celebrating stories as they are occur in a state of nature.

Leadership Storytelling 2.0

In the second generation of storytelling, narrative consciousness awakens, and there is an explicit recognition of the potential effects of storytelling as well as the beginnings of an explicit understanding of mechanics of narrative. My book, The Springboard (Butterworth Heinemann, 2000) tells the story of my own narrative awakening.

In this world, there is explicit awareness that one is “telling a story” as well as the development of expertise as to what sort of story is effective in which context, and how the story could be told in a way that would maximize that effect. The recognition of different narrative patterns flows from the insight that different kinds of stories are needed for different purposes.  One kind of story—a springboard story—can spring an audience to a new level of understanding and action; it enables leaders to communicate authentically and inspire enduring enthusiasm for worthy causes. Other narrative patterns relate to communicating who you are, communicating the brand, getting people to work together, transmitting knowledge or moving people into the future. Understanding the characteristics of the stories that would perform each of these functions is a key to effective leadership storytelling. These different narrative patterns are elaborated in various places, including my book, The Leader’s Guide to Storytelling (Jossey-Bass, 2^nd Edition, March 2011).

The risks of Storytelling 2.0

Yet as Storytelling 2.0 has made its way into mainstream of organizations and leadership thinking, several concerns have emerged.

As always with the acquisition of new knowledge, there is sadness at the loss of innocence. Some people feel nostalgia for the simpler more naïve world of stories of the “once upon a time…” variety and lament the risk of losing the magic of an ancient and sacred art of storytelling.

A more serious concern is that Storytelling 2.0 can degenerate into manipulation, and be used to trick and deceive people. This risk doesn’t materialize where the storytellers are in an interactive relationship with their listeners and recognize that the only important stories are not the stories that the storytellers tell, but rather the stories that the listeners generate for themselves: these latter stories are the stories that will be acted upon.

An even more worrying concern is that the full potential of leadership storytelling is still not being realized. The hope that storytelling would enable leaders to transform dehumanizing workplaces, and turn them into creative and energizing experiences that uplift the human spirit has been only partially fulfilled. It is true that many battles have been won. Many organizational storytelling programs have been launched. Executive support for storytelling initiatives has often been forthcoming in major corporations. And yet the overall war is still not won. Something always seems to happen. There is a change in command among the senior executives. Or a cost-cutting drive. Or a reorganization. The result? The promising storytelling initiative is defunded, set aside, marginalized or simply crushed. As a result, attention is now turning to what is necessary to go beyond winning battles to create workplaces worthy of the human spirit and to win the war itself.

Leadership storytelling 2.0 is not enough

This has led to the development of new kinds of storytelling that embed human centered values in the very drivers of an organization so that the organization systematically and automatically focuses on human-centered outcomes.

One reason why this is possible now is the appearance of studies that show that even on its own terms, traditional management is failing. Thus the Shift Index has revealed that the rate of return on assets of US firms is only one quarter of what it was in 1965. The life expectancy of firms in the Fortune 500 is down from around 75 years half a century ago to less than 15 years. Only one in five workers is fully engaged in his or her work. We also know that these attitudes, values and practices have infected our education system which no longer provides an education that fits our children for the future. Our health system, which, quite apart from the recent health reform, is heading the country towards bankruptcy. These disastrous results create necessity of finding a better way of managing organizations.

But persuading people to manage the organization differently is not enough. We need to change the very processes and systems that drive the organization. If those processes and systems remain focused on the manipulation of things—outputs, demand, human resources—those processes and systems will undermine deliberate attempts to make the organization more people-focused. If the traditional systems and processes are left in place, the organization will automatically revert to its default mode—manipulating outputs, demand, human resources—even though the leaders and managers sincerely want to operate differently and contribute strenuous efforts to make it happen.

Leadership storytelling 3.0

In order to create people-centered organizations, organizations need people-centered processes. They need systems and processes that will keep the organization focused on systematically achieving people-relevant outcomes rather than merely the production of outputs. They need systems and processes that will continually push the organization routinely delight and enchant their customers and signal when this is not happening. They need systems and processes that will push the organization to automatically draw on the full talents and creativity of the people who are doing the work.

In effect, they need systems and processes that don’t need continual adjustment to achieve people-oriented results. They need systems and processes that automatically push the organization to achieve people-oriented results.

The good news is that methodologies have indeed been developed that do exactly that.

As the methodologies are people-oriented, it should not come as a surprise that they are also story-based:

• At the organizational level, the very goal of the firm is to generate positive outcomes for customers. This is best measured by a story: the Net Promoter Score is a methodology that enables the organization to measure whether it is delighting the customer by inviting the customer to imagine a story: “Would you recommend this product or service to a colleague or friend?”

• At the level of the team, work is planned in the form of user stories—a special kind of story devised to formulate the goals of teams in terms of customer outcomes.

• The user stories that are developed are then sized and prioritized using other methodologies called “story points” and “planning poker” to measure how much work is involved in making any of the user stories “come true.” In such work places, people routinely speak of “implementing stories.”

• Value stream mapping is a tool that creates a story of the organization seen from the customer’s point of view, and helps identify any delays in delivering value to the customer. It enables the organization to manage the forgotten competitive weapon: time.

• These story-based measures enable the firm to go further and—for the first time—calculate the productivity of a firm in terms of human outcomes rather than merely the production of things.

In this third generation of leadership storytelling, with the shift in vocabulary to NPS, user stories, story points, planning poker and team velocity, we are a long way away from the innocent world of “Once upon a time…” Are these methodologies still really genuine storytelling?

Using Madelyn Blair’s a wonderful metaphor from mathematics, Storytelling 1.0 is the equivalent of simple arithmetic. Storytelling 2.0 is the equivalent of algebra. Storytelling 3.0 is calculus. Each one provides the foundation for the other. We have to understand Storytelling 1.0 before we can do Storytelling 2.0. We have to master Storytelling 2.0 before we can cope with Storytelling 3.0. Each one builds on the other. New skills give us new capabilities.

What now becomes possible is to create organizations with systems and processes that are systematically life-enhancing.

To achieve this, we need to recognize that storytelling is more than just a tool. It is a different way of thinking, speaking and acting in the workplace. We must use it to convey meaning that reveals our deepest values, our very core, as human beings. It involves creating a state of mind that starts with a change of heart.

To learn more

My book, The Leader’s Guide to Radical Management offers a comprehensive account of the principle and practices of Storytelling 3.0.

If you would like to get together with others who are intent on using Storytelling 3.0 to master what’s involved in creating a workplace that systematically puts people at the center, please join me, Rod Collins (author of Leadership in a Wiki World, Seth Kahan (author of Getting Change Right) and others for two days on May 12-13 in Washington DC. Cool, innovative and serious fun.

Don’t delay: the early bird discount ends March 31. More details here.

Missing In Action (Again!): The Customer

I wrote yesterday about the wonderful work of Gallup in documenting the global problem of the disengaged workforce. The extent of the problem varies from country to country, but it is present everywhere. The results of the survey are summarized in a short document on the Gallup website entitled, “Employee Engagement: What’s Your Engagement Ratio?” The document is truly insightful when it comes to documenting the scale of the problem and the need to do something about it.

The document is less helpful when it gets to precisely what should be done about it. It lists the “The 12 Elements of Great Managing” as follows:

• I know what is expected of me at work.
• I have the materials and equipment I need to do my work right.
• At work, I have the opportunity to do what I do best every day.
• In the last seven days, I have received recognition or praise for doing good work.
• My supervisor, or someone at work, seems to care about me as a person.
• There is someone at work who encourages my development.
• At work, my opinions seem to count.
• The mission or purpose of my organization makes me feel my job is important.
• My associates or fellow employees are committed to doing quality work.
• I have a best friend at work.
• In the last six months, someone at work has talked to me about my progress.
• This last year, I have had opportunities at work to learn and grow.

Given the title of this post, I am not offering a prize to anyone who can spot what’s wrong with this list.

A mind-boggling omission

Once again, there is a shocking, mind-boggling omission: the customer or client (or stakeholder) is totally absent from the picture.

It’s not that the Gallup organization as a whole doesn’t know that the customer is important: they have a wonderful section on their website entitled “Customer engagement” and explain:

“What strategy does your organization use to engage its customers? And how do you know whether your efforts are paying off? World-class organizations unleash their potential for growth by optimizing their customer relationships. Organizations that have optimized engagement have outperformed their competitors by 26% in gross margin and 85% in sales growth. Their customers buy more, spend more, return more often, and stay longer.”

However when it comes to compiling a list of the twelve most important elements of “great managing”, the customer is nowhere to be seen. It’s not that the things included in the elements of “great managing” aren’t important. They are. The problem is that the most important element—the customer—is not there.

When push comes to shove, the customer is missing in action.

A pervasive mental model of management

It’s exactly the same problem that I noted last week with the popular blog post, “12 Things Good Bosses Believe”, which totally omits any explicit reference to the customer. It’s not that the author doesn’t know that the customer is important. He has written about it eloquently in his recent post, “The Power of Observing and Talking To Real Humans”.

In an intellectual sense, the Gallup organization knows that the customer is important.

I am not picking on the Gallup organization for this particular piece, which could easily be corrected.

Rather I am pointing to a pervasive mental model of management that results in the customer getting the short end of the stick in the real world of business. The mental model is defective because it omits what should be the central preoccupation of a manager: the customer It’s like having a guide to running a power plant that fails to mention electricity.

The reality is that the omission of the customer in these documents is not an accident. In fact, it reflects a mental model of “management without the customer” that is still the norm in the Fortune 500. Business schools continue to teach it. Consultants are paid large amounts of money to embed it into organizational systems and procedures. Management books continue to recommend it. And websites like these hold it up as an example for firms to follow. As a result, the Fortune 500 continue on their steep performance decline. The health sector continues on its course to bankrupt the country. The education sector increasingly fails to educate our children for the future.

A ferocious desire to delight the customer

In the age of customer capitalism, the goal of the firm, and everyone in the firm, particularly the managers, has to be that of delighting customers (or in the case of the public sector, stakeholders). The key to an enduring future is to have a customer who is willing to buy goods and services both today and tomorrow. It’s not about a transaction; it’s about forging a relationship. For this to happen, the customer must be more than passively satisfied. The customer must be delighted. To accomplish this, both managers and workers must have a ferocious desire to delight the customer.

A whole set of books that describe this way of managing is now available. It includes The Power of Pull by John Hagel, John Seely Brown and Lang Davison,  Reorganize for Resilience by Ranjay Gulati, or The New Capitalist Manifesto by Umair Haque, and Leadership in a Wiki World by Rod Collins.

My own book, The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century offers a comprehensive account of the principle and practices of customer capitalism.

To learn more: May 12-13 in Washington DC

If you would like to get together with others who are intent on mastering what’s involved in creating a workplace which continuous innovation and customer delight are truly at the center, please join me, Rod Collins (author of Leadership in a Wiki World, Seth Kahan (author of Getting Change Right) and others for two days on May 12-13 in Washington DC. Cool, innovative and serious fun.

Don’t delay: the early bird discount ends March 31. More details here.

Montessori Is An Example Of The New Culture of Learning

I reported a few days ago on a conversation with the authors, Douglas Thomas and John Seely Brown, of the wonderful new book, A New Culture of Learning: Cultivating the Imagination for a World of Constant Change.

A colleague, Daniel Petter-Lipstein, wrote to us and asked the pertinent question: why there was no mention of progressive models of education like Montessori? He suggests that much of what is described takes place in my view in thousands of good Montessori classrooms every day, as he wrote in his marvelous article, “Superwoman Was Already Here“:

“The Montessori method cares far more about the inquiry process and less about the results of those inquiries, believing that children will eventually master–with the guidance of their teachers and the engaged use of the hands-on Montessori materials which control for error–the expected answers and results that are the focus of most traditional classroom activity.

“My daughter’s lower elementary teacher (Montessori classes are typically multi-age, lower elementary is grades 1-3 together) recently told me that a few kids in her classroom were learning about the triangle and they asked “Can a triangle have more or less than 180 degrees?” In classic Montessori style, the teacher turned the question back on them and said, “Use the hands-on geometric materials and try and make an actual triangle that is more or less than 180 degrees.” So the children have their question honored and arrive at the proper answer by themselves.

“This story also highlights the role of a teacher in a Montessori classroom as being a “guide on the side” rather than the “sage on the stage.”

John Seely Brown asked me to post the following reply:

As I am sure you have heard many times – your post is a great post.

Directionally speaking the Montessori approach is highly aligned to much of our thinking.. with our focus being more on scale and scope.. how might one build an entire educational system – not just k-12 or k-16 but a true arc of life scope that leverages the naturally occurring resources of collectives, the tools of social media with an explicit amplification of mentoring, reverse mentoring (and peer to peer mentoring) with explicit focus on cultivating imagination, not just creativity.

We also wanted to problematize experiential learning, and the roles of indwelling/collective indwelling in order to provide a better foundation of entrepreneurial learning.

As such, personally speaking, I have always been inspired by both the Montessori methods and much of Piaget’s early work on assimilation and accommodation.   But our goal was not to write an academic thesis – although that is our natural tendency – but to hopefully start a discussion around a new kind of learning platform that honors the past but scales to a new kind of future.

Guy Kawasaki On The New Business Imperative of Enchantment

“I travel all the time,” says Guy Kawasaki, author of the wonderful new book,  Enchantment. “It’s the little things that get to you. I go into the hotel room and I’ve got a Macbook. And an iPhone. And an iPad. And possibly a MiFi which enables me to make my own network. That’s four devices. I put my bag down. I sit at the desk and what do I see? A power outlet with two plugs, and one is already taken for the lamp. So now I have one plug for four devices. So that means I also have to carry a power strip with multiple plugs.

“But if I didn’t bring one, I end up charging my iPhone in the bathroom where it’s going to get wet. Has anyone in the hotel management ever stayed at the hotel and asked themselves would be the first thing a business person would notice? One plug for four devices. Has anyone in management ever taken a serious look at the room?”

He continues: “Or consider this: you pay $400 to stay at a fancy hotel, and they tell you have to pay another $19 a day for wireless Internet. Meanwhile across the street at a lower standard hotel chain, it’s $80 a day and free wifi. A charge of $19 a day is not going to break me. So I sign up for it and what do I get  A 1 megabit download speed. I feel like I am back in the old dial-up days.”

Kawasaki is not enchanted.

Enchantment is now a business imperative

Kawasaki’s book defines enchantment as “the process of delighting people with a product, service, organization or idea. The outcome of enchantment is voluntary and long-lasting support that mutually beneficial.

His book is one of group of new books that recognize that businesses have to go beyond satisfying the customer. If they are going to flourish in a world where the customer is the boss, they must delight them.

“Enchantment can occur in villages, stores, dealerships, offices, boardrooms and on the Internet.  It causes a voluntary change of hearts and minds and therefore actions. It is more than manipulating people to help you get your way. Enchantment transforms situations and relationships. It converts hostility into civility. It changes skeptics and cynics into believers… When you enchant people, your goal is not to make money from them or to get them to do what you want, but to fill them with great delight.”

“Enchantment is a process,” says Kawaski, “ by which you improve your likeability, trustworthiness, the quality of your idea, product, cause, whatever. It leads to relationship that is not transaction-oriented any more. It is longer and deeper and more delightful.

Enchantment may mean doing less

Enchanting your customer may mean  that doing fewer things will enchant your customer more. If you can find out what the customer really, really wants, then you may be able to focus on that and stop doing things that the customer doesn’t really care about. “Enchanting the business person in a hotel room,” says Kawasaki, “is not about putting warm chocolate chip cookies on the pillow at night. You want to do that? God bless you. It’s a cute little thing. But when I come into a hotel room, forget the chocolate cookies and give me enough power outlets!”

Which firms are enchanting their customers?

“The relationship that people have with computer companies other than Apple,” says Kawaski,” is primarily one of transactions. By contrast, Apple has delighted people and now they have Macs, and then they buy a iPhone, and an iPad. Next thing you know, it’s iTunes, it’s iBooks, you’re standing in line waiting for this stuff. That’s enchantment.”

Virgin America is an airline he looks forward to flying on.

He also sees lots of small businesses and startups enchanting people, even though they are not household names.

One that Kawasaki likes is Kogi BBQ, which offers a combination of Korean-Mexican food. The business has about a dozen trucks and around 83,000 followers on Twitter (@kogibbq). It sends out a tweet that it will have a truck on a certain street corner at a certain time. When they show up, there are 50-100 people who are ready to buy their tacos. That’s customer delight.

How do you communicate enchantment to the C-suite?

I asked Kawasaki how he goes about communicating enchantment as a serious business proposition to CEOs, CFOs, and other senior managers, for whom enchantment could mean something about kids’ fairy tales. How does he get them out of that world and persuade them that they need to be in the business of enchantment?

“The best way is to use examples,” says Kawasaki. “Wouldn’t you like to have the evangelistic base of Apple or the likeability of Virgin America? Wouldn’t you like customers to trust you the way they trust Zappo’s, so that they will buy shoes, sight unseen? Even the most hard-core pencil-pushing bean-counter  will have to say, ‘Yeah, I wish we were Apple or Virgin America or Zappo’s! That’s not such a bad place to be.’”

I asked Kawasaki what happens when he makes the sale and persuades the firm to embrace enchantment? What then?

“You need to realize,” says Kawaski,” that enchantment is like fitness. Fitness is a curve. You can be Lance Armstrong, or you can be really out of shape at the opposite end. People enter the curve wherever they are and then they can move up the curve, by better nutrition and better exercise. The same is true of enchantment. I’m not talking about ’60 days to miracle enchantment’. It’s not that easy. It starts with the CEO. If the CEO is an untrusting and untrustworthy person, you will have to overcome that CEO.”

How is the Fortune 500 doing on enchantment?

I asked Kawasaki where are companies in the Fortune 500 in the curve? He believes that most of them are towards the wrong end of the curve. That’s because they are larger. They are older. Typically the founders are long gone. Maybe a private equity firm runs the place. There are a lot of things going on, he says.

“Startups without a lot of venture capital have to enchant people,”  says Kawasaki. “Otherwise they don’t survive. By contrast, startups with a lot of venture capital can blow it continuously for quite a while. I’ve seen a lot of those. Money is often the enemy of enchantment. Even those startups that do start out enchanting people—something happens to them along the way. It’s called MBAs.”

The three pillars of enchantment

“The three pillars of enchantment,” says Kawaski, “ are likability, trust  and product. There are various companies with various degrees of each of those. Apple is great on the product side. VirginAmerica is great on the likability side. Zappo’s is great on the trustworthy side. If you had a company had all three, you would own the world.“

“It’s a process,” says Kawasaki. “And it’s takes time. Top management has to agree to it. But it’s the middle and the bottom that are customer-facing people that are going to first execute it.

Kawasaki doesn’t want to have a CEO to buy his book at an airport and then come into the firm one morning and say, “Today, we’re going to start enchanting.” The employees’ eyes will roll and they will be thinking, “O God, the CEO has just read a new book. First, it was this. Then it was that. And now it’s enchantment. This is the latest fad du jour.” It needs to be something more permanent than that.

Where to start on enchantment?

Kawasaki suggests starting at the most customer-facing place in the organization. That may be the sales force or customer service. That’s the place that has the most contact and will have the greatest short term gain. It’s there that you will get quickest realization that it works or it doesn’t. Enchantment can’t cure everything, but it is a way to improve customer relationships.

Kawasaki believes in small incremental steps. “Let’s say that the people are skeptical as they reasonably should be of any new idea. Let’s take the case of a hotel. Then one might say, ‘Let’s look at our rooms. Are we enchanting our customers?’

“It’s the little things like giving enough power outlets in the hotel room for business travelers, or dropping the extra charge for wifi connection. You proceed step by step, perhaps trying it in one department, or one store or hotel. I’m certainly not advocating a massive re-write of the employee manual.”

A user’s guide to enchantment

Enchantment is a practical, not an academic book. It’s not a view from 50,000 feet. It’s about how to do it, like blocking and tackling. Kawasaki doesn’t see himself as a consultant, or a motivational speaker. He sees himself as a business person who happens to write. He is coming from the direction of implementation. It’s part of his personal goal of empowering people. Putting practical suggestions in people’s hands so that they can get on and make it happen.

It also happens to be a beautifully produced book, with delightful black-and-white drawings and photos. Enchanting!

Guy Kawasaki: Enchantment: The Art of Changing Hearts, Minds, and Actions (Portfolio, 2011)

Books And Their Future: SXSW 2011

Last night, I was at the CaveHenricks Books & Bytes party at SXSW 2011 in Austin TX with Barbara Cave-Henricks, Rusty Shelton and a host of people who love books: people who write books, who write and talk about books, people who publish books, above all, people who care about books.

Some of the discussion was along the lines of: “I like the smell of old books,” as Peter Georgescu, Chairman Emeritus, Young & Rubicam wrote recently. There’s nothing like the experience of a physical book.

For example, last night, Carol Sanford was clutching the first physical copies of her new book, The Responsible Corporation: Reimagining Sustainable and Success, like a baby. Carol  is “on a mission to create a better world, and she believes that business can and will play a major role in accomplishing that. It’s more than just a responsibility program. Responsibility will be in the DNA of the business and everyone will participate to make a real difference.” Having the physical book in hand helps make the vision real.

And yet, some of the discussion was also along the lines of Fred Allen’s recent discourse on the subject: “I never would have expected this just a couple of years ago, but I do almost all my book reading electronically now. I use the Kindle apps on my iPad and iPod Touch. I love the versatility of the devices, that I can read while standing on line at the drugstore, or in bed without bothering my wife, and the fact that I can travel with a library effortlessly, instead of lugging around the piles of books I used to haul everywhere.”

When you think of someone reading a wonderful substantive book on a Kindle or an iPad, wouldn’t it be seductive to be able to digress, and listen to an aside by the author, what he or she was thinking when this passage was written, or a conversation with one of the participants, or a set of dazzling pictures of what was under discussion? Who would be able to resist this seduction?

Isn’t this ultimately what John Hagel, co-author of the path-breaking book, The Power of Pull (2010), was really talking about when he foreshadowed the end of the era of pushing products and services at customers, and manufacturing demand, and the beginning of a new era in which the winners will be those who can can “pull” people into a different world and interact with them. It’s a world focused on outcomes rather than outputs; on relationships rather than transactions; on people rather than things.

If the new kinds of books can make the future more understandable, more transparent, more accessible, bring it on!

Wakeup Call For GE: Mr. Immelt, Pull That Ad!

Image by AFP via @daylife

I went to gym this morning, as I normally do, to work out on an elliptical machine, and decided to watch CNBC and catch up with the latest on the unfolding calamity in Japan, where the New York Times was reporting, “Japan’s nuclear crisis verged toward catastrophe after an explosion further damaged one of the crippled reactors and a fire at another spewed large amounts of radioactive material into the air.”

I watched as workers in contamination suits struggled to deal with the multiple failures of the backup cooling systems and prevent the disaster from getting any worse. A commentator noted that GE was affected because it has a nuclear energy joint venture with Japan’s Hitachi and it supplied three out of six reactors at Fukushima No. 1 plant. All six reactors have experienced differing degrees of problems since the quake and the ensuing tsunami. GE is in talks to sell nuclear reactors to India. GE’s share price has fallen 6% in pre-market New York trading this morning.

Immediately after that, an ad from GE came on on CNBC, showing among other things workers in contamination suits happily dancing to the beat of GE’s “Ecomagination”.

Was I watching the news or Saturday Night Live?

Even if GE had had nothing to do with the unfolding nuclear calamity in Japan, the ad is in the worst possible taste.

But GE is not just an innocent bystander.

GE designed and built the plant which has caused the accident. Even if nothing worse happens than has already happened, the incident has already been responsible for loss of life, injury and contamination of an unknown number of people. The risk that the incident could verge towards a massive catastrophe is still there.

What is GE saying and doing?

Newscore reported this morning: “The BWR Mark 1 reactor is the industry’s workhorse with a proven track record of safety and reliability for more than 40 years,” Michael Tetuan, spokesman for GE Hitachi Nuclear Energy, said Monday. “There has never been a breach of a Mark 1 containment system.”

Mr Tetuan’s statement may be factually accurate as far as it goes, in the same sense that it is factually accurate to say that 1500 happy passengers reached New York after the Titanic’s maiden voyage. The statement misses the whole point of what is going on.

Four days after the calamity began unfolding, GE is denying there is a problem and playing ads with dancing workers in contamination suits.

Is no one at GE watching the news or thinking about the messages it spending large sums of money to disseminate?

A symptom of deeper management issues

Two weeks ago, I wrote that GE has a problem: its share value is now roughly 50% of what it was ten years ago. This stems from a way of a managing that pushes products and services at customers, of tweaking the supply chain, of parsing and manufacturing demand, with the goal of making money of shareholders.

Continuing to play the ad with the dancing workers in contamination suits tends to show that “ecomagination” is just another product that GE is pushing at its customers irrespective of its relevance.

If GE is to become a company that that is truly concerned about the welfare of its customers, a first step would be for GE’s CEO to pull that ad with the dancing workers in contamination suits .

From Outputs To Outcomes: Part 5: Measuring Customer Delight in Real Time: Social Media

Image via CrunchBase

This article is the fifth and final part in a series of posts on measuring what matters in organizations: the shift from outputs to outcomes. Today the focus is on measuring customer delight in real time: social media.

1. Measuring customer delight at the organizational level: NPS
2. Measuring customer delight through user stories
3. Measuring delight: sizing and prioritizing user stories
4. Measuring the neglected competitive weapon: time

In Part 1 of this series, I showed how to use the Net Promoter Score (NPS) to measure what has already happened to your business, in terms of client delight and outcomes. In parts 2-4 of this series, I showed how to deploy user stories to measure the inputs that will generate client delight in the future. In this part, I look at how social media can be used to measure what is currently happening in terms of client delight in your business.

Social media has changed everything. The explosion of social media from practically nothing five years ago, to over 500 millions participants has created major threats to traditional management that is focused on outputs and making money, as well as major opportunities for organizations that are committed on delighting their customers by generating positive outcomes.

The threat of social media

“Customers know everything about your company,” wrote Christopher Meyer and Julia Kirby in Harvard Business Review in April 2010. “That has changed the rules of business forever.” When customers know everything, it becomes important that management be equally informed, particularly when customers have the ability to videotape the experience and transmit it potentially to millions of other customers. Most traditionally-managed firms are just one YouTube video away from a major brand disaster.

Consider the following examples.

In 2008, when United Airlines broke Dave Carroll’s guitar, he made a singing YouTube video that told the story of the incident; the video has now been viewed by more than 8 million people.

In 2008, when a mother took offence at a commercial for the pain reliever Motrin that implied, in her eyes, that mothers were wearing baby slings simply to be fashionable, she was able to launch a “Motrin Moms” protest movement, that within two days became the most popular subject on Twitter.

In 2008, when Howard Schultz came back to be CEO of Starbucks, he woke up one morning to find around a hundred emails in his inbox. It turned out that this was the result of a sensational story in the Sun newspaper in London about a piece of equipment that Schultz had never heard of. When his phone rang and a reporter asked him to comment, Schultz replied that he had no idea what it was. The reporter advised him, “Google Starbucks real fast!” Schultz recalls: “We had a real problem. The lesson was that the world had changed. Something that happened in London had created a world-wide story that positioned Starbucks with venom and disrespect.”

These are just a couple of eye-opening illustrations of the revolution generated by sites like Twitter, Facebook and YouTube. The scale and rapidity of the ensuing public relations crises are astonishing.

The opportunities of social media

At the same time, the positive opportunities for organizations to use the power of social media for telling the story of their products and services are equally dramatic:

Procter & Gamble has used social media to reach otherwise unreachable customers when they helped create a community for teenage girls (beinggirl.com) that provides a friendly and helpful environment for them to converse and share stories, where the girls also learn about P&G’s feminine care products.

Ford has used social marketing to launch a new car—the Fiesta—without traditional advertizing by generating a massive “Fiesta Movement,” involving stories reflected in 6 million YouTube views, 740,000 views of Flickr photos and 3.7 million Twitter impressions.

In the last five years, the dynamic of marketing has been transformed. In 2005, the examples cited above could not have happened. Now social media have hundreds of million of participants, who can and do tell stories about the products and services that they use.

Unfortunately, traditional management will find itself ill-equipped to deal with these threats or take advantage of these opportunities, because its top-down command-and-control bureaucracy focused on transactions and outputs will be unable to engage in interactive conversations. To cope with social media, traditional managers will have to reinvent their management practices and commit themselves to delighting customers through interactive relationships and conversations, as discussed in an earlier post.

Using social media to measure customer delight

For those organizations that have cross the Rubicon into customer capitalism and have committed themselves to delighting their customers, social media give us the possibility of seeing what is happening in real time. The Net Promoter Score (NPS) can tell us what has happened quite rapidly, but it is still operating in terms of days and weeks. By contrast, social media can tell us what is happening in minutes and even seconds.

Social media give us the possibility of conducting controlled experiments to tackle the complex challenge of delighting customers. We can immediately see what the nature, intensity and scale of a response to an input on Twitter, Facebook, or a blog, and adjust course accordingly. We can see how many people respond to a particular input, whether the responses are positive or negative in tone, and whether the responses are passionate or lackluster. We can combine these findings with Net Promoter Scores to determine longer term trends.

As Charlene Li points out in her insightful book, Open Leadership, “having a common metric across the company provides not only a unified view but also a way to make consistent tradeoffs.” (p. 100)

However as she also points out, the ease with which we can now collect data creates the risk that we will drown in a sea of statistics. Before venturing into this territory, it thus becomes crucial to define objectives, identify the key performance indicators that bear on customer delight, identify the activities that are likely to influence those performance indicators, establish a baseline for those indicators, track the outcome of the indicators as activities are undertaken, and then adjust activities in the ensuring cycle of work.

A different way of managing

Here, as elsewhere, the individual tools that are used to measure outcomes are less important than the management mindset that deploys them. Effectively measuring time entails a wholly different way of thinking, speaking and acting in the workplace.

What we measure determines how we see the world. It enables us to see where we have come from, where we are now and where we could be heading. It’s the foundation of discovery. It expands our knowledge, defines our progress, and sparks new insights.

To learn more about the principles and practices of measuring outcomes so as to generate customer delight, read my book, The Leader’s Guide to Radical Management (Jossey-Bass, 2010) which provides a comprehensive overview of the principles and practices involved.

If you would like to get together with others who are intent on mastering what’s involved in measuring time, and creating a workplace of continuous innovation and customer delight, please join me, Rod Collins (author of Leadership in a Wiki World, Seth Kahan (author of Getting Change Right) and others for two days on May 12-13 in Washington DC. Cool, innovative and serious fun. More details here.

Leadership: Style Vs Substance

Image by dpstyles™ via Flickr

In a poll of management authors, Jossey-Bass asked the following question: What should a new leader do to establish his/her style and make an impact – without rocking the boat? (The question was prompted by the dismissal of Jack Griffin at Time Inc, after a mere six months on the job, ostensibly because of his ‘leadership style’.”

Among the authors who have weighed in so far were:

• Bob Herbold: What’s Holding You Back?
• Sylvia Lafair: Don’t Bring It To Work
• Guy Harris: From Bud to Boss
• Kevin Eikenberry: From Bud to Boss
• Cy Wakeman: Reality-Based Leadership
• Jeffrey Cohn and Jay Moran: Why Are We Bad At Picking Good Leaders
• Harry Kraemer: From Values To Action

My own answer (#8 in the series) drawing on my book, The Leader’s Guide to Radical Management, was as follows:

I have to start by saying that I have some concerns about the apparent premises that underlie the question.

At a time when the rate of return on assets of US companies is 25% of what it was in 1965, and when the life expectancy of a firm in the Fortune 500 has declined from 75 years in 1965 to less than 15 years today (and heading towards 5 years if nothing is done), and when only one in five workers is fully engaged in his or her work, a preoccupation with “leadership style” and  “not rocking the boat” needs to be replaced (in most cases) with a pre-occupation with ascertaining why the boat is sinking, identifying those who understand this, selecting the future champions who have the smarts and leadership skills to create the future of “the boat,” and quickly getting them in positions where they can get to work.

I agree with those authors who have already spoken to the effect that the focus in this endeavor must initially be on listening.

I would add however that there should be less emphasis on “establishing a leadership style” and a more single-minded focus on the substance of finding those who understand the real situation and have practical ideas and talents to refloat the boat and getting it moving forward. The focus needs to be less on “you” as a leader and your “style” and more on “the boat.”

See also my follow-up post: Let’s Celebrate Dilbert Style Management? Huh?

The series is continuing with:

9. Gary Burnison: No Fear of Failure

Other authors’ views will be posted here in coming days. Your views?

Let’s Celebrate Dilbert-Style Management? Huh?

Image via Wikipedia

The most popular blog post for the whole of 2010 at Harvard Business Review was Bob Sutton’s list of the “12 Things Good Bosses Believe.” From one perspective, his list presents an engaging people-centered picture of manager—someone who is sensitive to others’ feelings, who listens carefully to those who disagree, someone who strives to be humble as well as confident. The contrast to a dictatorial command-style manager no doubt helped make the post very popular.

From another perspective, however, there is one shocking, even mind-boggling, omission from the list: there is no mention of the client or the customer (or the stakeholder).

Among the “12 things good bosses believe”, any concern for the people for whom the work is being done is completely absent. Indeed the list suggests that the “good boss” pays less attention to “well-defined and ambitious goals” than to “small wins” and “a little progress every day”.  The “good boss” spends no time worrying about whether the customer is satisfied, let alone delighted, by what the organization is doing. Instead, the “good boss” spends time agonizing over such issues as striking “the delicate balance between being too assertive and not assertive enough,” avoiding “imposing my own idiocy” on “my people,” or trying to decide whether “I am acting like an insensitive jerk.” (sic)

The omission of any concern for the customer in the “12 things good bosses believe” reflects the natural habitat of hierarchical bureaucracy. This is a world that operates from an inside-out perspective, pushing products at customers, parsing and manufacturing demand, tweaking the value chain to achieve ever greater efficiencies, and concerned about outputs more than outcomes. Middle managers in this world find themselves in a squeeze between achieving ever greater efficiency and keeping the workers happy. The result is a lot of internal agonizing over such issues as striking “the delicate balance between being too assertive and not assertive enough.” It leads to a preoccupation with style over substance.

Evidence-based management?

Coming from the author of Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management, the “12 things good bosses believe” are presented as “evidence-based” and “rooted in real proof of efficacy.”

The “12 things good bosses believe” however overlook one huge mass of evidence: the comprehensive study of the productivity of 20,000 US companies from 1965 compiled by Deloitte’s Center for the Edge under the title of the Shift Index. Its conclusions? Running organizations as hierarchical bureaucracies has proved to be an utter disaster:

• The rate of return on assets is one-quarter of what it was in 1965.

• The life expectancy of a firm in the Fortune 500 has fallen from around 75 years half a century ago to less than 15 years, and is heading towards 5 years unless something changes.
• The “topple rate” of leading companies is accelerating.
• Only one in five workers is fully engaged in his or her work.

What this evidence shows is that the way of managing reflected in “12 beliefs of a good boss” hovers somewhere between a “dangerous half-truth” and “total nonsense.”

The list is right to castigate the top-down monster as a “bad boss”. That’s the dangerous half-truth reflected in his list. Yes, top-down is bad.

But what the list doesn’t reflect is that the opposite of top-down is not bottom-up: it’s outside-in.

The customer is now the boss

Fifty years ago, large corporations were essentially in control of the marketplace. No longer. The advent of global competition, customers’ access to reliable information and their ability to communicate with each other through social media means that the customer is now in command. The shift goes beyond the firm paying more attention to customer service: it means orienting everyone and everything in the firm on providing more value to customers sooner.

We are in effect now in the age of customer capitalism, as Roger Martin explains in his landmark article, “The Age of Customer Capitalism” (HBR, January 2010). This has occurred because of the monumental transition in the power balance between seller and buyer. As a result, the firm’s goal has to shift to one of delighting clients: i.e. a shift from inside-out perspective (“You take what we make”) to an outside-in perspective (“We seek to understand your problems and will surprise you by solving them”).

What the “12 things good bosses believe” fail to recognize in parsing the difference between the “good boss” and the “bad boss” is that the manager is no longer the real boss at all: the customer is now in charge. The shift goes beyond the firm paying more attention to customer service: it means orienting everyone and everything in the firm on providing more value to customers sooner. In particular, the manager.

A ferocious desire to delight the customer

In the age of customer capitalism, the goal of the firm, and everyone in the firm, particularly the managers, has to be that of delighting clients. The key to an enduring future is to have a customer who is willing to buy goods and services both today and tomorrow. It’s not about a transaction; it’s about forging a relationship. For this to happen, the customer must be more than passively satisfied. The customer must be delighted.

If the manager is spending time agonizing over such issues as striking “the delicate balance between being too assertive and not assertive enough,” avoiding “imposing my own idiocy” on “my people,” and “wondering whether I am acting like an insensitive jerk,” the customer will get the short end of the stick. And these days, when the customer gets the short end of the stick, the firm’s future is in grave jeopardy.

That’s because the customer has information. The customer has choices. If the customer is not delighted, the customer goes elsewhere. The firm dies. As the Shift Index shows, the phenomenon is happening on a wide scale.

In today’s organization, there is no place for managers who spend their time agonizing over whether they are being too assertive or not assertive enough. Instead what is needed are managers and workers who have a ferocious desire to delight the customer. Once that principle is in place, both managers and workers can be focused on accomplishing a common and uplifting goal. As the customer is a demanding boss, with good information about what is going on, and has many other options, there is no room for worrying about “whether I am acting like an insensitive jerk.” The only question is whether the firm is succeeding in delighting the customers.

“12 things good bosses believe”: the Dilbert-style manager

In fact the behavior described in  “12 things good bosses believe” describes has a long history. The “good boss” who agonizes over issues like assertiveness and sensitivity emerged because managers found themselves in a squeeze between achieving ever greater efficiency and keeping the workers happy. Dealing with that squeeze led to behaviors that were described Abraham Zaleznik in his classic 1977 HBR article, “Managers and Leaders: Are They Different?”

Managers coped with the squeeze with three particular skill sets and attitudes. First, managers focus attention on procedure and not on substance. Second, managers communicate to subordinates indirectly by signals, rather than clearly stating a position. Third, managers play for time. Amid conflicting rules and procedures of a hierarchical bureaucracy, managers have no way of knowing what the right answer is. Self-protective routines are used, up and down the hierarchy.

Zaleznik’s identification of these behaviors, which were very different from those of genuine leaders, might have led to an inquiry as to whether these were productive behaviors even in 1977. Paradoxically, the article led to the endorsement of those behaviors and to a bifurcation of management from leadership. The role of leaders was to inspire people to embrace change while managers were grimly grinding out execution while struggling to keep the workers happy.

Scott Adams picked up on the ensuing managerial behaviors and continues to depict these antics on a daily basis in his Dilbert cartoon. The behaviors dispirit workers, cripple innovation and frustrate customers.

Dilbert-style management continues to be celebrated

Over 11,000 business books are published every year. I read a lot of business books but I can’t pretend to have read more a tiny portion of those 11,000. But a good proportion of those that do come across my desk continue, like the “12 things good bosses believe” , to celebrate the behavior of the Dilbert-style manager. Business schools continue to teach it as the normal way to manage. Consultants are paid large amounts of money to embed it into organizational systems and procedures.

As a result, Dilbert-style management continues to thrive. Scott Adams gets richer and richer. The Fortune 500 continue on their steep performance decline. The health sector continues on its course to bankrupt the country. The education sector increasingly fails to educate our children for the future.

The world of customer capitalism

Yet in parallel, another world has already emerged. Unlike the world of Abraham Zaleznik’s manager, or Scott Adams’ Dilbert, or the “12 things good bosses believe”, the world of customer capitalism is one where managers bring their own personal passion for delighting clients to the workplace. They are so busy and intent on finding new ways to delight customers more and sooner, they have no time to be worried about whether they are striking “the delicate balance between being too assertive and not assertive enough,” avoiding “imposing my own idiocy” on “my people,” or whether “I am acting like an insensitive jerk.” Managers and workers are united in a common passion to deliver more value to customers.

Firms that are implementing the principles of customer capitalism, like Apple, Amazon and Salesforce.com are experiencing exponential gains in their share price, while traditional firms like GE or Wal-Mart are finding that they have to run harder just to stay in place.

A whole set of books that describe the future is now available. It includes The Power of Pull by John Hagel, John Seely Brown and Lang Davison, or Reorganize for Resilience by Ranjay Gulati, or The New Capitalist Manifesto by Umair Haque, or Leadership in a Wiki World by Rod Collins.

My own book, The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century offers a comprehensive account of the principle and practices of customer capitalism.

To learn more: May 12-13 in Washington DC

If you would like to get together with others who are intent on mastering what’s involved in creating a workplace of continuous innovation and customer delight, please join me, Rod Collins (author of Leadership in a Wiki World, Seth Kahan (author of Getting Change Right) and others for two days on May 12-13 in Washington DC. Cool, innovative and serious fun.

Don’t delay: the early bird discount ends March 31. More details here.

Time For KM To Manage Knowledge About Management?

When I was young and even more naive than I am today, I used to believe that if you did good work it would get recognition. If you did something that made a contribution and were able to prove it with hard numbers, rational people would inevitably recognize your success.

I was therefore somewhat surprised when I found that most of the great knowledge management programs that I observed in large organizations around the world were eventually closed down, sidelined or shifted to the periphery. The managements of these organizations didn’t seem to appreciate great KM accomplishments right in front of their noses.

I am not talking here about badly managed KM programs, such as programs with unclear goals, or no communities of practice, or an excessive reliance on IT to address human problems. I am talking about well-run internationally-recognized KM programs.

I saw the phenomenon at BP. I saw it at IBM. I saw it at Ernst & Young. I saw it at Hewlett Packard. I watched it happen to a certain extent after I left the World Bank. These were world-class programs, with demonstrated results that were not understood appreciated by the management. In due course, they were closed down or undermined or sidelined. Why?

These great KM programs would flourish for a while, and even receive widespread recognition. But then something would happen. For instance, there would be a merger: in the name of rationalization, the KM program would be declared a success and the leadership unit of the KM program would be gutted. Or there would be a cost-cutting drive, and the KM program would be one of the sacrifices. Or the organization would decide to appoint a leader of the knowledge program who was docile and didn’t rock the boat, so that the death became a long drawn-out affair.

Why, I asked myself, did managements act this way? Why didn’t they recognize that knowledge was the very lifeblood of these organizations? Why didn’t they examine the metrics of success? Why did they take such thoughtless decisions, almost by accident, and kill something of central importance to their organization’s future?

Web seminar: slides and recording

I gave a web seminar on these issues last Tuesday for the SIKMLeaders group. You can see the slides here:

http://www.slideshare.net/SIKM/why-km-programs-fail

and listen to the audio discussion here:

http://www.divshare.com/download/14318673-1ee

You can also read an earlier blog post on the same subject here.

Options for knowledge managers

The bottom line of these discussions is that the horizontal, collaborative, value-adding principles of knowledge management are barely compatible with the top-down, bureaucratic, efficiency driven preoccupations of traditional management. Even KM programs that by all measures are doing well and enjoy significant top-management support are still at risk. In any efficiency or cost-cutting drive, knowledge management will usually be seen as “a low hanging fruit.”

The practical options for a knowledge manager in the light of this are as follows:

• Wear a parachute at all times. One never knows who will wield the axe or when it might fall.
• Educate yourself about the nature of traditional management and realize that there is a fundamental difference in values.
• Make sure that your knowledge management operation meets all the metrics and responds to the efficiency concerns of traditional management.
• Learn about how some organizations are managing themselves in a radically different way that is compatible with knowledge, as discussed in, The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century as well as other books such as The Power of Pull by John Hagel, John Seely Brown and Lang Davison, or Reorganize for Resilience by Ranjay Gulati, or The New Capitalist Manifesto by Umair Haque, or Leadership in a Wiki World by Rod Collins.
• Join together with allies both inside your organization and outside. You may well find that there are groups already practicing radical management within your organization in software development (under titles like “Agile”, “Scrum”, “Kanban”) or in manufacturing (under the title of “Lean”).
• Spread knowledge about radical management within your organization. We now have reliable knowledge that traditional management is leading to disastrous long-term business result. The extraordinary financial gains that come from making the shift to radical management (e.g. ten times increments in share price over ten years) will far outweigh the gains from any other knowledge that KM can disseminate.

To learn more: May 12-13 in Washington DC

If you would like to get together with others who are intent on mastering what’s involved in creating a workplace of continuous innovation and customer delight, that is compatible with the values of knowledge management, please join me, Rod Collins (author of Leadership in a Wiki World, Seth Kahan (author of Getting Change Right) and others for two days on May 12-13 in Washington DC. Cool, innovative and serious fun.

Don’t delay: the early bird discount ends March 31. More details here.