Issue 2, Sunday June 18, 2000
Made in New Zealand - winners of the America's Cup
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Welcome to the second issue of EDGE FIRST, a groundbreaking e-zine dedicated to making you a better leader. Our goal is to provide the two key ingredients of effective leadership:

- provocative thinking about what it means to be a leader
- the tools, techniques and best-practices that drive leadership improvement.
In this issue
Strategy Gary Hamel is the man. The message: Think context, not content!
Context? What's context!? A taxonomy for the new economy, that's what.
Everyone's a leader, right? At Pervasive Software, CEOs are everywhere
Women leaders Different? Better! The stories – and the numbers – that prove it.
Strategy
If, like us, you think Gary Hamel is THE man when it comes to strategy, you'll have loved his lead article in June 12's FORTUNE magazine.

Strategy, like faith or ethics or riding a bicycle, is something a lot of us do instinctively. We're pretty sure we know what it is, and how to do it because - look Mum, no hands - we hardly ever seem to fall off.

So why is there such an extensive literature on strategy?

Turns out it's not so simple. It's a key, maybe THE key, to successful leadership. It's what differentiates the great from the merely good in business and politics, and life. It means different things to different people. And the new economy has thrown an 18 inch spanner into many organizations' strategy machinery. Suddenly it's not what we thought it was.

So what, now, all of a sudden, is 'strategy'? Here's what the man had to say:

“Watch a flock of geese turning and swooping in flight. There is no grand vizier goose, no chairman of the gaggle. The geese can't call ahead for a weather report. They can't predict what obstacles they will meet. Yet their course is true. And they are a flock. Complexity theorists describe this as order without careful crafting, or order for free.

“The intricate play of the many markets that make up the global economy, the vibrant diversity of the Internet, the behavior of a colony of ants, that winged arrow of geese – these are just a few instances in which order seems to emerge in the absence of any central authority. All of them have something to teach us about how revolutionary strategies should emerge in a chaotic and ever-changing world. By creating the right set of conditions, one can provoke the emergence of highly ordered things – maybe even such things as revolutionary business concepts.

“Order emerges out of deep but simple rules. Too many executives try to design flight plans for their far-flung flock rather than work to create conditions that would help their brood get off the ground and on their way to new shores. They spend too much time working on 'the strategy' and not enough working to create the conditions out of which new wealth-creating strategies are likely to emerge.

“This doesn't mean that top management is irrelevant. Far from it. In a business world that's ever more competitive, where models change overnight, radical innovation is no longer an option for big companies – it's the imperative. So top management's job isn't to build strategies. Its job is to build an organization that can continually spawn cool new business concepts, to design context rather than invent content.”

Here's the key phrase. Get it engraved and hang it on the wall! If you're a leader, or aspire to be, your job is “… to design context rather than invent content.”

Context? What's context!?
Here's serendipity. Just as our FORTUNE magazine fell open at Gary Hamel's article, an on-line discussion (from Harvard Business School on-line) with Don Tapscott, David Ticoll, and Alex Lowy, authors of DIGITAL CAPITAL: Harnessing the Power of Business Webs (details below) arrived in our email in-box.

Tapscott et all are writing about context. But let's start with some background.

“Too many executives think that sustaining advantage in the digital economy means nothing more than relegating digital technologies to nifty Web-site designs, superficial cost-saving initiatives, or databases that help track customer buying patterns” they say. And “These are potentially fatal errors of an industrial-age mindset.”

What's important about the internet is not that it's becoming faster, safer, and more robust (it is), but that it's becoming function-rich.  “We now have a digital public infrastructure – transaction engines, payment systems, negotiating tools, agents – that make it possible for us to think about how we create wealth in entirely new ways … we can take any customer value proposition, disaggregate its essential components, and reassemble them on the internet as partnerships, rather than traditional firms.”

These new partnerships are Tapscott et all's 'business webs' (b-webs), and the wealth they create is 'digital capital.'

As part of a three year, multimillion dollar research program, the authors investigated hundreds of b-webs, virtual and real, ranging from the Microsoft Alliance to the Open Source Code movement to the automotive industry. Dozens of embryonic success stories emerged, and by reverse-engineering their business strategies, five distinct patterns emerged: Agoras, Aggregations, Value Chains, Alliances, and Distributive Networks.

“We're not talking buzzwords here,” they say, this is not management-speak, not just another fashion – this is a new taxonomy – a whole new way of viewing, understanding, and executing e-business strategy, and a structure for understanding new-economy business models. B-webs are an inevitable new force on the business landscape. They are emerging as the generic, universal platform for creating value and wealth in the new economy. Ignoring them will be perilous for any business.

What are the key elements of this new taxonomy?
(1) Agoras facilitate exchanges between buyers and sellers – like eBay, an Internet-based auctioneer, and Freemarkets, an innovative online business procurement site.
(2) In Aggregation b-webs dominant companies position themselves between producers and consumers. E*Trade has aggregated many companies to create a virtual brokerage firm, charging one-tenth the fees of a traditional broker.
(3) In Value Chains, the context provider structures and directs a b-web network to meet a specific customer order or market opportunity. Cisco Systems, which makes networking products such as routers, sits atop a $12b value chain.
(4) In Alliances, participants work together to design goods and services, create knowledge, or simply produce dynamic, shared experiences. The Open Source initiative and the MP3 phenomenon are both alliances.
(5) Distributive Networks are the bedrock of the economy, servicing the other types of b-webs by allocating and delivering goods. Postal services, data network operators, and banks are all examples.

If thriving, or even surviving, in the new economy is something you should be worrying about, and if you're wondering, already, how Hamel's 'think context … not content' applies to you, then this book provides compelling, and business-changing, context. Start here.

Digital Capital: Harnessing the Power of Business Webs, May 2000. Don Tapscott, David Ticoll, and Alex Lowy, from Harvard Business School Press. 288pp. $US27.50. ISBN: 1-57851-193-3

Everyone's a leader, right?
One of the themes of new-economy leadership that we're going to return to often is the idea that we're all leaders.

Whaddya mean, 'we're all leaders!?' Here's a real example. It's from Inc. Magazine (June 1st 2000), and by Anne Marie Borrego.

“If Gilbert van Cutsem's customers mistakenly assume that he's the CEO of Pervasive Software Inc., he isn't going to correct them,” Anne Marie wrote. “Then again, neither will Pervasive Software's official CEO, Ron Harris. In fact, Harris would rather watch multiple 'chief executives' take charge of the $59m Web-development and database company than have to shoulder the entire responsibility himself.”

At Pervasive, it seems, lots of people are 'CEOs,' “responsible for everything from crafting annual business plans to overseeing all the daily activities for their projects or business areas.”

These JIT CEOs are nominated 'as-needed,' according to their leadership abilities. They can take big risks, without seeking real CEO Harris' approval or that of other top executives. But Harris does, of course, expect results and accountability.

"When we started the company, we wanted to have a progressive culture that went further than 'empowering' people," he says. "That word is tired and overused. We wanted to go beyond that." So he gives his CEOs the ability to act autonomously. He believes they inspire everyone in the organization, making the whole company more productive.

Harris' COE appointments can be both geographic and situational. When Pervasive outgrew its original Austin headquarters, he appointed Sandy Rios, then the director of operations, CEO of the move and trusted her to handle everything – from the $21m cost of operations over a 10-year lease period to IT connections and possible moving days. When Rios presented her plan to move to a larger space in Austin, Harris and the board accepted it right away.

Handing over the reins isn't always easy, though. "But I'm sharp enough to know what I don't know, and I have to surround myself with people who are better at certain things than I am," he says. He believes that once he's selected the right people, all that's needed is a little fine-tuning - like tailoring compensation incentives to the individual CEOs - before setting those employees out on their own.

Women and leadership
Women and leadership is interesting because: Maybe it tells us useful things about leadership. Women are socialized differently, even in painfully egalitarian New Zealand (where, incidentally, male school teachers are becoming as rare as hens' teeth, the women Rugby team is the current world champion, and the two senior politicians are both female). Are women leaders different? Do women lead differently? are questions that might throw some light on the argument about whether leaders are made or born.

Women are crashing through the glass ceiling in larger numbers than ever before - which may have a lot to do with the nature of the new economy. Don Tapscott, David Ticoll and Alex Lowy, in the May 2000 issue of Business 2.0, point out that in a business-webbed world, where relationships and community are all-important, the key marketers are increasingly women.

Here's three takes on women as leaders. In the first, Kiwi research shows that where it matters, women are better (well, in New Zealand they are). In the second a CNN executive VP talks about playing and winning, and to finish, we look at how a petticoat mafia is transforming a telecom – or do we?

Ken Parry, director of The Centre for the Study of Leadership at Victoria University of Wellington in New Zealand has been studying the differences between women and men leaders. He's found there are differences, they're measurable (just), and that women rated higher than men in most areas that matter (reported in New Zealand Management, June 2000). The characteristics displayed more by women leaders are positively associated with desirable leadership outcomes, while male leaders are more likely to adopt less desireable laissez-faire attitudes and manage by exception.

Using a classification based on categories of transformational and transactional leadership, probably (although he doesn't say so) referring to work by Bernard Bass (From Transactional to Transformational Leadership: Learning to Share the Vision, Organizational Dynamics, Winter 1990), Parry found the results shown here:

Playing to win
Women account for almost half of the US labor force, occupy less than 10% of the highest-ranking corporate positions, and only four Fortune 500 companies are run by women.

In an Amazon.com interview, CNN Executive VP Gail Evans, author of Play like a man, win like a woman, says “Whenever I give speeches, women come up to me afterwards and tell me that they're doing a great job at work, and they know they're performing well, but they aren't getting the plum job or the next promotion.” It's not about the quality of their work, Evans concluded, but something “more ethereal.”

For most men, the 'win' is very clear. It's about bigness. How powerful am I? How big is my pay check? For women? We've assumed it's the same, she says, but maybe it's not, maybe for women the 'win' is very different.

So what about the 'feminisation' of the American workplace we keep hearing about, the Amazon.com interviewer asked.

You can't change the playing field unless you've got power, Evans responded, talking about 'the feminization of the workplace' is not changing it. You change things by achieving enough power to make changes. “I've actually reached a point where I have some power and I can change the workplace,” she says, “I have women who report to me who work under all sorts of weird arrangements, but I could never have arranged any of this before I had power.”

So what about in New Zealand?
In the 200 days since former chief executive Rod Dean left Telecom New Zealand, his powerful but gentlemanly 'invisible man' style has been swept aside by the dynamic, outspoken charisma of his 38 year old successor. She's young (38), she has the sort of persona that fills a room, and she's surrounded by women (corporate communications boss Jane Austin, Esolutions head Jane Freeman and Australian head Karyn Devonshire).

There've been women executives in this organization in the past, but in support roles. Now they're driving the show, and that sends strong signals. “This is line leadership. Boys normally bag these jobs. This sends signals into the organization and into the wider country. Even into Australia,” new CEO Theresa Gattung says (reported in Unlimited, June 2000).

It's a culture change matching what's happening in the telco market. Monopoly positions are being challenged by the rapidly changing internet era. All Telcos, everywhere in the world, are facing new and different competitors, and some of them are also customers – it's an environment which needs a whole new set of rules and relationships.

Deane was remorselessly analytical, spearheading one of the biggest improvements in value ever seen in a New Zealand company, squeezing out costs (and jobs – from 12,500 down to 7,800 in his time, and down from 27,000 in 1987) and more than doubling after-tax profits.

But the day came when squeezing costs and stripping out jobs was no longer productive – another strategy was needed. Enter Theresa Gattung. Her challenge: turn a low-growth, high payout, high ROE business into a high growth, high profits organization, with more focus on the top line and on marketing and customers, and a new strategy for the new economy.

So what's changing? The culture is – and fast. There's a move away from rigid hierarchy to project management, towards a more fluid, permeable organization more likely to welcome new ideas and new people. Gattung is more accessible, many more people contribute to key strategy formation and an internet-enabled 'census' tests staff attitudes to the company's vision and mission every six months. “This isn't unrelated to having women in leadership positions,” Gattung says.

Has Telecom New Zealand gone all touchy feely? Hardly. The former CEO is still chairman, and Gattung is his chosen successor – the board wanted change, but change they knew and could trust. And win-win still means 'I win and then I win again,' according to one past executive. Criticism of the new CEO – especially in public – can be 'career-limiting.'

Relationships? Success in the new economy is as much about relationships and partnerships as about competition. Esolutions – an alliance with Microsoft and EDS – will test Gattung's ability to relate as well as she competes. Esolutions boss and Telecom outsider (she's from banking) Jane Freeman is precipitating a culture change there as well – much more new-economy than old-Telecom.

It's not all sweetness and light – cooperation with some competitors has been bought, Microsoft-style, rather than wrought, and the independents who won't be bought have been stood on, according to one previous executive, now working for a competitor.

And there's bound to be internal resistance to culture change, among the old-guard almost exclusively male engineers, for example, whose understanding of 'customer focus' is likely to differ from Gattung's, and who may resist the new 'petticoat mafia.'

Theresa Gattung is no Margaret Thatcher, no “woman in a man's clothing,” authors Stride and Mandow write. She has a whole new cadre of women with her and below her in the organization, and their collective influence is showing – in a more family-friendly attitude to work conditions, in significant culture change, in a new approach to customers and markets.

The industry verdict so far is 'neutral to positive.' After all, Gattung's job wasn't to turn one of the nation's biggest corporations upside down. “Her habit of listening and talking will serve her well,” says one source, “She's smart and adaptable, and she surrounds herself with people who fill the gaps.” Too radical a change would likely be counter-productive. Will she survive? The verdict so far is “probably yes.”

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