Issue 17 (emailed version), Friday February 16, 2001
Made in New Zealand - twice winners of the America's Cup


EDGE FIRST is an email magazine dedicated to making you a better leader, by providing:
— provocative thinking about what it means to be a leader
— the tools, techniques and best-practices that drive leadership improvement

Increasingly, we'll lean towards the personal, and away from the corporate—delivering on our promise of big ideas in a small package, but with a clear focus on total quality you

"You think the past five years were nuts? You ain't seen nothin' yet! " — Tom Peters

In this issue
WarmUp
MasterClass — Strategy is back - and so is Michael Porter
Leadership for the next five years? — Tom Peters!

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WarmUp® — We're back!
Who's the big cheese in strategy? The really big cheese? We'll make it easy – Michael Porter. And the biggest noise in … well we're not sure in what, but he's a big noise – Tom Peters. This issue, we got em both. Peters, because he's talking about leadership, and Porter because he's back in the business strategy business (after a decade in the higher realms of advising governments and the competitive strategies of nations).

Michael Porter has been Mr Strategy for, like, forever. His first book, Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1980), is in its 53rd printing and has been translated into 17 languages. Tom Peters we're not so sure about, but he is at least provocative, and we're up for that. Oh, and we're back – into the fortnightly groove, delivering big ideas in the familiar small package. Gidday.
MasterClass® — Michael Porter's big ideas
If you want to make a difference as a leader, you've got to make time for strategy, Porter says (Fast Company #44)

Recent times have been bad for 'strategy'. Companies have bought into flawed or simplistic ideas about competition – Porter's 'intellectual potholes'. Many have abandoned strategy almost completely. They won't say so, of course. Sure, we've got one, they'll coo to Wall Street. But typically, their 'strategy' is to produce highest-quality at the lowest cost or some such – improving on best practices. That's not strategy.

Strategy has suffered, Porter says, for three reasons. In the 70s and 80s, people tried it, they had problems. It was hard. It seemed artificial.

Second, the ascendance of Japan riveted attention on implementation. Strategy's not what's important, people said, you just had to produce a higher-quality product than your rival, at a lower cost, and then improve that product relentlessly.

Third was the idea that in a world of change, you really shouldn't have a strategy. The drumbeat was that business was about change and speed and being dynamic and reinventing yourself, that things were moving so fast, you couldn't afford to pause. If you had a strategy, it was rigid and inflexible. And it was outdated by the time you produced it.

There's a fundamental distinction between strategy and operational effectiveness. Strategy is about making choices, trade-offs; it's about deliberately choosing to be different. Operational effectiveness is the admission price – the given; it's about what's good for everybody and what every good business should be doing.

Lately, leaders have tended to dwell on operational effectiveness – fed by the business literature and the fashions of the 80s and 90s; total quality, just-in-time, reengineering. All focused on being effective. Some Japanese companies turned that into an art form. They were incredibly competitive. But, Porter says, it's dangerous to bet on the incompetence of your competitors – and that's what you're doing when you compete just on operational effectiveness.

What's worse, a focus on operational effectiveness alone creates mutually destructive competition. If everyone's trying to get to the same place, then, almost inevitably, customers choose on price – a metaphor, maybe, for the past five years. Some argue that's the way it's got to be. It's the new millennium, destructive is the way competition just is. Porter believes very strongly that's not the case. There are many opportunities for strategic differences in nearly every industry, he says, even more so in a dynamic fast-paced economy.

The underlying principles of strategy are enduring, regardless of technology or the pace of change. Consider the Internet. Whether you're on the Net or not, your profitability is still determined by the structure of your industry. If there are no barriers to entry, if customers have all the power, and if rivalry is based on price, then the Net doesn't matter – you won't be very profitable.

Sound strategy starts with having the right goal – superior profitability. If you don't start with that goal and seek it pretty directly, you will quickly be led to actions that will undermine strategy. If your goal is anything but profitability – to be big, or to grow fast, to become a technology leader – you'll hit problems.

Finally, don't be re-doing it all the time. strategy must have continuity. Strategy is about the basic value you're trying to deliver to customers, and about which customers you're trying to serve. That positioning, at that level, is where continuity needs to be strongest. Otherwise, it's hard for your organization to grasp what the strategy is. And it's hard for customers to know what you stand for.

The half-life of everything has shortened, Porter says, so setting strategy has become more complicated. Companies have to be very schizophrenic. On one hand, they have to maintain continuity of strategy. But they also have to be good at continuously improving.

Southwest Airlines, for example, has focused on a strategy of serving price-minded customers who want to go from place to place on relatively short, frequently offered flights without much service. That has stayed consistent over the years. But Southwest has been extremely aggressive about assimilating every new idea possible to deliver on that strategy. Today, it does many things differently than it did 30 years ago – but it's still serving essentially the same customers who have essentially the same needs.

And there's no inconsistency – strategy constancy and continuous improvement are absolutely consistent. In fact, they're mutually reinforcing. Some managers think, 'The world is changing, things are going faster – so I've got to move faster. Having a strategy seems to slow me down'. No, no, no, says Porter, having a strategy actually speeds you up.

Stop worrying about transformation and disruptive technology, Porter says. Inflection points – when the world shifts – are very rare. They exist, and their threat has to be on every leader's mind. But words like 'transformation' and 'revolution' are overused.

Two years ago, we were all reading that the Internet was an incredibly disruptive technology, that industry after industry was going to be transformed. Well, guess what? It's not an incredibly disruptive technology for all parts of the value chain. In many cases, Internet technology is actually complementary to traditional technologies. What we're seeing is that the companies winning on the Internet use the new technology to leverage their existing strategy.

The chief strategist has to be the leader. Empowerment – letting responsibility and accountability go and getting a lot of people involved is very important, but empowerment and involvement don't apply to the ultimate act of choice. To be successful, an organization must have a very strong leader who's willing to make choices and define the trade-offs. There's a striking relationship between really good strategies and really strong leaders, Porter says.

That doesn't mean that leaders have to invent strategy. At some point in every organization, there has to be a fundamental act of creativity where someone divines the new activity that no one else is doing. Some leaders are really good at that, but that ability is not universal. The more critical job for a leader is to provide the discipline and the glue that keep such a unique position sustained over time.

A leader also has to make sure that everyone understands the strategy. Strategy used to be thought of as some mystical vision that only the people at the top understood. But that violated the most fundamental purpose of a strategy, which is to inform each of the many thousands of things that get done in an organization every day, and to make sure that those things are all aligned in the same basic direction.

“The best CEOs I know are teachers, and at the core of what they teach is strategy. They go out to employees, to suppliers, and to customers, and they repeat, 'This is what we stand for, this is what we stand for.' So everyone understands it. This is what leaders do. In great companies, strategy becomes a cause. That's because a strategy is about being different. So if you have a really great strategy, people are fired up.”
QuickStudy® — Tom Peters on leadership – the next five years
“You think the past five years were nuts? You ain't seen nothin' yet! It's only going to get weirder, tougher, and more turbulent. Which means that leadership will be more important than ever – and more confusing” (FC issue #44, March 2001).

For the next five years, we're going to go from nuts to flat-out freakin' crazy, Peters says. It'll be business on a wartime footing – a high-stakes, high-risk, high-profile time, filled with uncertainty and ambiguity.

Think of pre-1990 as the Age of Sucking Up to the Hierarchy. The Age of the Promise 'Em Everything Pitch lasted from 1995 to 2000. The next five years will be the Age of No-Bull Performance. Which means that we're going to see leadership emerge as the most important element of business – highest in demand and shortest in supply. And that means that over the next five years, we're going to have to reckon with a new, unorthodox, untested list of leadership qualities. Here's a sampler:

Heroic leaders will still be important – but great managers are the bedrock of great organizations. Sustainable excellence comes from able managers. If you don't believe me, Peters says, then go read First, Break All the Rules: What the World's Greatest Managers Do Differently (Simon & Schuster, 1999), by Buckingham and Coffman. A boiled-down version: Great managers are an organization's glue. They create and hold together the scores of folks who power high-performing companies.

But then again, there are times when this cult-of-personality stuff actually works! It's also true that there are times of genuine corporate peril when no one other than a larger-than-life visionary leader can get the job done. Lee Iacocca. When he took over as Chrysler's chairman and CEO in 1978, that company was on its deathbed. Chrysler turned to him the way the country turns to charismatic leaders in times of war – exactly how Iacocca characterized Chrysler's dilemma. The Japanese, Iacocca said, were eating our lunch, and he was going to be the wartime leader to rally the troops. There are times when you really do need to turn to a leader who offers a broad, popular, galvanizing vision – someone who can symbolize a new approach to business.

Leadership is situational – let's get it up front, Peters says: There is no one-size-fits-all approach to leadership. Leadership mantra number one: It all depends – the right person, the right style, for the right situation. The situation rules. Leader for all seasons? In your dreams!

When it comes to talent, leadership doesn't income-average. It's a favorite one-liner these days: There is no 'I' in team. What ___p! Is there anyone who really thinks that Phil Jackson won six NBA championships with the Chicago Bulls by averaging Michael Jordan's talent with that of the rest of the team? Yes, teamwork is important. No, teamwork doesn't mean bringing everyone with exceptional talent down to the level of the lowest common denominator. Stellar teams are made up of quirky individuals who typically rub each other raw, but they figure out – with the help of a gifted leader – how to be their peculiar selves and how to win championships as a team. At the same time.

Leaders create their own destinies – there won't be room for paper pushers. Only people who make personal determinations to be leaders will survive – and that holds true at all levels of all organizations (including entry level).

Leaders win through logistics. Vision, sure. Strategy, yes. But when you go to war, you need to have both toilet paper and bullets at the right place at the right time. In other words, you must win through superior logistics. Go back to the Gulf War. After that war ended, the media stories focused on the strategy that was devised by Colin Powell and executed by Norman Schwartzkopf. For my money, the guy who won the Gulf War was Gus Pagonis, the genius who managed all of the logistics.

Leaders understand the ultimate power of relationships. War – or business on a wartime footing – is fundamentally a woman's game! Why? Because when everything's on the line, what really matters are the relationships that leaders have created with their people.

A biographer claimed that the one piece of advice Douglas MacArthur most valued was 'Never give an order that can't be obeyed.' But women already know that. They tend to understand the primacy of massive IIR (investment in relationships), which is one reason why the premier untapped leadership talent in the world today rests with women!

Which element is in the shortest supply today – and tomorrow and tomorrow? Time. The future belongs to the leader who can juggle a dozen conundrums at once. And who is he? I mean she? Find a copy of Selling is a Woman's Game: 15 Powerful Reasons Why Women Can Outsell Men (Avon Books, 1994), by Nicki Joy and Susan Kane-Benson. Take this quick quiz, the authors urge: Who manages more things at once? Who usually takes care of the details? Who finds it easier to meet new people? Who asks more questions in a conversation? Who is a better listener? Who encourages harmony and agreement? Who works with a longer to-do list? Who's better at keeping in touch with others? Let's hear it for women leaders!

But, ah, passing thought - this is an American point of view, right?
Next issue Thursday, March 1, 2001 - reader contributions warmly received
Copyright © 2001, Macpherson Publishing All rights reserved
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Written and edited by Malcolm Macpherson
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