Becoming Mindful about Unconscious Biases

Satya Nadella came under fire for his comments at the Grace Hopper Celebration of Women in Computing conference celebrating women in computing, in which the new Microsoft CEO suggested that “women who don’t ask for raises have “good karma” and that not asking for equal pay with men is a “superpower.”” This controversial comment has gone viral in social media. Moreover “knowing and having faith that the system will actually give you the right raises as you go along” seems to be at odds with a Gallup poll finding that US worker productivity, engagement and commitment is at an all time low. According to Gallup estimates, this cost is more than $300 billion in lost productivity which, in turn, is dwarfed by the costs of lost joy and happiness.

Perhaps Satya Nadella has an opportunity to learn from Sheryl Sandberg regarding a gender-neutral, equitable and fairness-preserving approach to employee compensation. When Sheryl was talking to Mark Zuckerberg about joining Facebook, she did not accept the first offer and came back to make a counteroffer. Eventually Zuckerberg came back to Sheryl with a much more lucrative proposal. Sheryl emphasizes this point to “negotiate like a man” in her best selling book Lean In: Women, Work, and the Will to Lead. Lean In has become a movement.

In the recent issue of McKinsey Quarterly (Sep 2014) there is an article about gender diversity in eBay. Ever since eBay launched the Women’s Initiative Network (WIN), eBay has more than doubled the number of women’s leadership roles.

Apologies by Satya vis-a-vis this remark is appreciated but probably inadequate because, “at the root of these types of challenges there is a pervasive mix of unconscious mindsets, behavior and blind spots that color anyone’s perception of gender.” This unconscious bias has the following impacts:

  • The woman’s motivated cognition and the value of commitment in the workplace
  • The woman’s day-to-day experience while handling a range of issues with higher levels of corporate leadership (only one of them is compensation, which is high on the priority list)

As someone aptly tweeted, “you apologize for what you said but never how you think.” Co-creating healthy professional relationships (*) between employee and manager requires “excelling in the twin journey of loving and leading,” a life construct pioneered by relationship and organizational consultant Blair Glaser — ‘eL squared‘ for brevity.( * : viewed as a strategic alliance) The prominent management guru Tom Peters feels that every leader is in the people-development business and candidly asserts that “I don’t have patience with CEOs who don’t see it that way.”

At the end of the day, no human being or organization is perfect. Every person has a shadow side. Even organizations have a shadow side and need to heal. I regard these shadows as “clouds” in our head (aka skeletons) that need to be busted. Perhaps it is a good idea for entire leadership team [in every company] to mindfully reflect and actively engage in a conversation with their employees at the grassroots level, “leaning in” and listening to their concerns, enhancing their day-to-day experiences and career advancement opportunities, as well as championing gender diversity. Not merely in a town hall meeting but in a retrospective at the end of every month and make improvements incrementally.

Becoming mindful and passionate about recognizing and eliminating unconscious biases is a personal, conscious, therapeutic and transformational journey.

(This is a living blog in progress)

The Talent Performance of a Lifetime

I have been mulling over Micrsoft CEO Satya Nadella’s interview for a couple of months. While I share the core belief that constructive organizational change starts with the individual at a grassroots level, in a world of corporate downsizing individual morale can sometimes sink or swim. According to Robert Kramer of Stanford University, when an organization clearly explains reasons for major decisions that impact workforce reduction, it reduces staff anxiety.

I favor sensemaking so that we can engage in an emergent dialogue that is devoid of speculation during the journey towards corporate renewal. Below is my key takeaway from the interview.

corporate strategy

Rather than brood over the past, I desire to be solution focused and take a page from the world of development theater in my quest to rekindle and recapture my mojo with a spirit of positivity and “find a seat on the corporate turnaround bus” to (co-)create the perfect storm. Although innovative late movers have plenty of work cut out to reclaim marketshare, there is enough evidence that they can still orchestrate a successful turnaround.

Innovative Late Mover

I need to cultivate the sensitivity to listen with my body, demonstrate perceptual courage to be empathetic, as well as personally invest over a period of time in a relationship that will demand an increasing openness. Besides physical and moral courage, creative courage involves the discovery of new forms, new symbols, new patterns on which a new society can be built.

“Welcome, O life! I go to encounter for the millionth time the reality of experience and to forge in the smithy of my soul the uncreated conscience of my race.”
— James Joyce

Courage

“Creativity is the encounter of the intensively conscious human being with his or her world.”
— Rollo May

Every creative encounter is an act of courage. Any encounter with the customer is a “moment of truth” (not just a soundbite).

creative encounter

The dialogue between manager and employee should focus on the “performing potential” of an individual consistent with the brand promise “Your Potential. Our Passion.” Below is a mental model of the performative conversation which can also be a soliloquy.

working_identity_1

working_identity_2

working_identity_3

working_identity_4

working_identity_5

In the world of service innovation, the operational view of “how we do things” has a human dimension that resonates with feelings of Attunement, Buoyancy and Clarity (ABC). Fostering a culture of companionate love reduces employees’ withdrawal from work and improves the employee satisfaction, commitment and accountability.

attunement

buoyancy

clarity

The ABC focus is the heart of a new brand of leadership called Host Leadership pioneered by Mark McKergow.

Host Leadership

Performing is essential to our humanness and is the ability to go beyond ourselves and the (stranger) act of “being who we aren’t at any given moment.” People don’t grow individually but grow as a social unit. Vgotsky’s observations led him to believe that young children thrive in a natural environment where they are supported to do what they don’t know how to do — such an environment is called the zone of proximal development (zpd) and creates the conditions for learning and emotional growth. When I am in the “becoming” state, I am creative, creating, alive and performing. The zpd supported creative process is “not creating a product” but creating the tool that gives rise to the product.

“Our culture has produced elaborate rationalizations to exclude performance from everyday life.”
Psychological Investigations: A Clincian’s Guide to Social Therapy
Lois Holzman and Rafael Mendez (eds.)

“Life is but a stage and we are true but actors upon it.”
William Shakespeare

performing

Fred Newman insightfully observed that in development theatre, we want “Doug to reshape DuBois.” “Why should we judge Doug by how well he reshapes DuBois? Let Doug imitate DuBois to create a more developed Doug.”

Performance of a Lifetime

critical few for culture change

culture eats strategy

Conducting the Talent Orchestra’s Performance of a Lifetime (TOPL) is the “growth hacking” strategy for competing in a Mobile F#irst Cloud F#irst World. Activist managers with the courage to create may chose to focus on the human dimension and pave the path for jugaad innovation.

“There is a thing that sometimes happens in rowing that is hard to achieve and hard to define. Many crews, even winning crews, never really find it. Others find it but can’t sustain it. It’s called swing. It only happens when all eight oarsmen are rowing in such perfect unison that no single action by any one is out of synch with those of all the others. Poetry, that’s what a good swing looks like.”

The Boys in the Boat: Nine Americans and Their Epic Quest for Gold at the 1936 Berlin Olympics
Daniel James Brown

Boat Synchrony

With a dash of inspiration from “The Boys in the Boat,” the corporate turnaround strategy is being sharpened with an agility focus.

OPS view of Agility

Winning Strategy

This is a living blog by Last Mile Resource

The Operating System of Succession Planning

The recent press coverage describing the outside versus inside perspectives regarding the choice of a CEO candidate gave me pause to mull on the succession planning process, using Microsoft as a case study.

“In fact, in Good to Great, Jim Collins makes a compelling argument in support of the case that promoting an insider is a key characteristic of great companies.”

According to Professor Joseph Bower of Harvard Business School and author of The CEO Within, the optimal candidate to succeed as a CEO is a person who is “both inside and outside the company”: the Inside Outsider. A dialogue map of an Inside Outsider perspective is shown below.

IO_1

IO_2

IO_3

IO_4

Leadership as an ongoing relational process between the conductor and the musicians (leader and the followers). Conductors engage in relational leadership processes with the musicians through mutual listening, aesthetic judgment and kinaesthetic empathy. We need to re-cultivate the fiber of moral intelligence — integrity and character — the two crucial elements of courageous leadership.

In response to growing competition and shareholder activism, Microsoft is embarking on a process to build greater collaborative advantage by revitalizing its orchestra of technical talent and an empowered team of managers. A CEO with an inside-outsider perspective is well-positioned to serve as its orchestra conductor.

HP_Leadership

When I peel the onion of Microsoft’s brand promise “Your Potential, Our Passion” (YPOP), I see the relentless pursuit of the Succession Planning (SP) process etched in the periodic creative interchange between established (current) leaders (mentor role) and aspiring (future) leaders (mentee role) at all levels of the company. Integrating Joseph Bower’s insight, “the mentor is a kind of venture capitalist, teaching potential leaders how to make new ideas work.” For brevity, let’s label this mental model as the YPOP-SP ecosystem (similar to an operating system). By concatenating YPOP and SP, we are able to see the succession planning process is embedded in the brand promise. An evangelist of YPOP-SP is also a cultural architect, who (1) creates a sense of community, (2) brings a sense of enjoyment to exploration and assertion, and (3) pay invaluable attention towards creating a sense of meaning that strives to achieve great people decisions. Increasing the stickiness of YPOP-SP both inside and outside the company allows the Microsoft brand promise to reach its tipping point.

Focusing on walking the YPOP talk, with an SP (Succession Planning) frame of reference, will increase the kinetic energy of the brand, enabling the organization to work collaboratively and compete for the future. From a CxO perspective, it will fine-tune the organizational process to identify and cultivate a credentialized cadre of inside-outside leaders (bench strength of internal candidates who have an outside perspective). This will mitigate the business risk that “there is currently no CEO succession plan in place.”

Next, we need to ensure readiness and grab the marketbuster opportunity (for every revenue-paying customer) by the forelock of her hair wherein a “5% increase in employee commitment leads to a 1.8% increase in customer commitment and a 0.5% increase in financial results.” [*] In order to shift the culture in any organization from “what we value” to “what the customer values,” the journey begins by imagining the goal to “be the employer of choice of employees that our customers would choose.” This creates an opportunity for Human Resources (HR) to focus on outside-in contexts and stakeholders and turn them into inside-out HR practices. We need to take a cue from Jeff Immelt, CEO of GE, who spends 60% of his 100 hour work week on the road. Strategically this implies an opportunity for Microsoft employees to partner with each of its top revenue-paying customers (20% of the customers who represent 80% of the value) and proactively engage in value co-creation by focusing on observation on the front lines, solving business problems, pipeline building, market entry and take-off. In contrast to naively viewing technology insertion as “adhoc dogfooding,” the venturesome consumption of technology innovation uses YPOP-SP as a catalyst for change agents to trigger the desired culture change while achieving speed to market, adoption, usage and profits. [* : study by Huselich, Becker and Ulrich]

world case face to face

In a multipolar world,  in order to achieve predictable success, the CEO must also craft a one-firm identity by recognizing the global tilt and managing the tensions across the three business strategy dimensions:

  • Adaptation: Increase the firm’s local relevance
  • Aggregation: Deliver economies of scale
  • Arbitration: Exploit differences between national or regional markets by balancing supply and demand

Orchestrating the incubation and sustainment of the Succession Planning process will enhance the growth engine of both Microsoft and its revenue-paying customers.

Getting onboard the bus in the journey towards revitalizing the Microsoft ecosystem will enable the transformation of the brand promise from a noun to a “verb.”

Documented by Last Mile Resource

Corporate Renewal from the Inside Out

I listened to a webinar on Innovation as Usual delivered by the faculty at IESE.

Facilitated by an innovation architect, “Innovation as usual” is an inside-out process that engages employees at a local level to think differently and nurture a passion for creativity and value creation.

Below is a dialogue map of my key takeaways from the lecture.

ibis_innovation_1

ibis_innovation_2

ibis_innovation_3

ibis_innovation_4

ibis_innovation_5

The leadership lessons of the late Nelson Mandela are particularly insightful in order to achieve success during “the relentless pursuit of innovation” (quoting Lexus) in an organization.
mandela

By creating an increasing appetite for innovation, employees learn to operate as “inside outsiders” and display the following behaviors (The CEO Within):

  • Choose to “remain detached from local traditions and ideology”
  • Display a firm grasp of the essential character of the organization
  • Act as a shareowner of the company

Corporate renewal is a journey. In a multipolar world, astute managers realize that the tipping point of increasing innovation throughput hinges on managing the CAGE (*) distance between stakeholders so that they can think globally and act locally. (* CAGE is a framework developed by Prof Pankaj Ghemawat)

CAGE Innovation as Usual

big bang disruption

At the end of the day, innovation as usual is about competing for the future without excessively dwelling on the past or peering at a crystal ball.

RGP Inside Out

Documented by Last Mile Resource

The Tipping Point of Ubuntu Edge

Motivation

The late Nelson Mandela was the embodiment of change through non-violence and ardently believed that to serve is human. Mandela served with attunement, benevolence and clarity. In Mandela’s own words:

“It always seems impossible until it’s done.”

“After climbing a great hill, one only finds that there are many more hills to climb.”

“Ubuntu, named after the South African philosophy of “humanness”, is about creating a common platform across many devices, so as you move from one to another you interact with each in the same way [1].”

Mark Shuttleworth of Canonical has clearly articulated that “What I’m really interested in is this once-in-a-lifetime opportunity to create a free and open platform that is THE LEADER across both consumer and enterprise computing.”

This sentiment provided the stimulus to reflect and write this blog posting so that I can discover the path to authentic leadership in a special situation.

Pixar Pitch

Once upon a time, the mobile industry was crowded with a number of smartphone operating systems such as Android, iPhone, Windows Mobile that offered varying value propositions.

Every day, Google, Apple and Microsoft competed with each other and remained content surfing the red ocean within a (partially) closed ecosystem and an oscillating marketshare. Yet creating differential value using these mobile devices remained somewhat suboptimal.

One day a company called Canonical, navigating in the blue ocean, announced a disruptive innovation with a pioneering design called Ubuntu Edge (Ubuntu smartphone) that challenged conventional and siloed assumptions of the status quo.

To overcome resistance from partners and users, change minds and win hearts, Canonical used a combination of persuasion, negotiation and inclusivity to build alliances.

Because of that creative developers implemented game changing mobile applications, targeting both the Ubuntu and Android ecosystems, that made users discover the feeling of being alive.

Because of that the passion for learning and entrepreneurship on both Main Street and Wall Street, empowered with an Ubuntu Edge smartphone, increased by an order of magnitude at all levels and became an unstoppable force, especially at the base of the pyramid.

This set the stage for a global tilt and, in the true spirit of Mandela’s rugby strategy that changed minds, Canonical created the context, unification and cemented the emotional connection across the alliances among early adopters, skeptics and laggards.

Until finally the venturesome consumption of Ubuntu Edge innovations reached its the target goal is 200 million Ubuntu users by 2015 and created a craving to become a “must have” device for a spectrum of users and enterprises in a multipolar world.

This crossing of the chasm set the stage for Ubuntu Edge to be positioned as a candidate in the digital business strategy of a firm and steer a dialogue regarding its scope, scale, speed and sources of value creation and capture.

My Intent

My intent is to perform beyond where I am today in an increasingly digital world. When I say “perform” it is not about performance using a conventional lens. Rather it is about navigating in a turbulent environment through improvisation and an outside in mindset so that I can discover my true potential.

This navigation is a Hero’s Journey — a storytelling narrative to guide me past the hesitation and doubt and into a rich, inviting series of experiences that improves my adaptive capacity and leaves me feeling great about myself despite the hardships.

Ubuntu Touch Heros Journey Change

(click to enlarge)
Ubuntu Touch Blue Ocean Strategy

I imagine that Ubuntu Edge promises to ignite and enhance my capability to be more entrepreneurial than I am today. Using Ubuntu Edge and its ecosystem as an enabler, I search within myself and ask the following strategic five questions to prevent inertia:

  • What business should I be in?
  • How will I add value to the business?
  • Who are the target customers for the businesses?
  • What are the value propositions to the target customers?
  • What capabilities do I need to add value to the businesses and differentiate these value propositions?

Backbrief

“I found that the use of ubuntu was instrumental in all learning. The doll emerged as a powerful tool for transformation, providing opportunities to celebrate diversity, establish values, address bias, social behaviors and structures, identify and communicate feelings, problem solve and exercise change.”

Catherine Amanda Clark
Ubuntu: Cradle for Development of Authentic South African Selfhood
Ph.D. thesis, Fielding Graduate University, South Africa, UMI No: 3321026, 1998

Predictable Magic

References

  1. King, Will. “How Ubuntu translates hi-tech into humanity; Canonical is writing the future for IT with common software that will even work on devices yet to be invented.” Daily Telegraph [London, England] 4 Dec. 2013: 3. Business Insights: Essentials. Web. 30 Dec. 2013.

This is a living blog by Last Mile Resource

Peeling the Onion of the Wicked Problems in the Healthcare Crisis

The quagmire in providing adequate and affordable healthcare for everyone is a wicked problem. Any proposed solution to a wicked problem is imperfect and has unintended consequences (positive or negative).

health care wicked problem

By becoming mindful about this complexity we can seek to improve our shared understanding and, in the process, improve our cohesion to work together and achieve cooperative consensus in diffusing the healthcare imbroglio. Can we create a Cheesecake Factory style model for delivering affordable healthcare?

how does cheesecake factory function

cheesecake factory playbook

health_care_PRT_1

A dash of Howard Schultz’s (CEO, Starbucks) sentiment is instructive in this context:

“Any business today that embraces the status quo as an operating principle is going to be on a death march.”

Health care transformation is a hard hat area under construction and a plethora of work remains to be done after the health care law becomes operational.

The logic trees sketched below show the current state and the desired future state of the healthcare transformation agenda.

Current Reality Tree

health_care_CRT_1

Below is the evaporating cloud (conflict) that we have to explode so that all the eligible parties — patients, providers, employers and insurers — can win together in finding a sustainable solution to the healthcare crisis.

evaporating_cloud_healthcare

Future Reality Tree

health_care_FRT_1

Busting the status quo also requires being an Artistic Turnaround Manager. This provides a groundbreaking opportunity to think differently, shape the path forward, widen the sphere of moral inclusion and reduce our “empathy deficit.”

We have a moral obligation to (1) avert post traumatic stress of healthcare institutions and (2) prevent the needle of the Z-score of any healthcare institution from moving towards the bankruptcy zone.

References

Documented by Last Mile Resource

(Re-)(Organizing) Best Buy for Resilience

Preview

The Z score of Best Buy is approximately 4.0. The Z score is a bankruptcy indicator of modern industrial corporations. Although Best Buy is currently in the safe zone, a Z score lower than 1.81 will cause it to be in the distress zone.

best buy z score

The skeptics have been the heralding the demise of brick and mortar stores due to trend in showrooming where customers come into physical stores to look at products they later intended to buy for less online. Rather than be discouraged by showrooming, Best Buy has already embraced the challenge of showrooming by beginning to price-match lower prices from all local competitors and major online retailers and making other structural changes to compete for the future.

In this strategic briefing, I will share a mashup of how I see this transformation unfolding. These thoughts are synergistic with Best Buy’s Renew Blue transformation agenda.

Strategy Briefing for Best Buy

Best Buy’s SWOT

To create a working frame of reference, below is a sketch of the strengths, weaknesses, opportunities and threats confronting Best Buy.

Best Buy SWOT

Marketbuster

Best Buy has an opportunity to incrementally refine its turnaround strategy by viewing the world with an outside-in focus through the lens of a customer in its journey towards resilience as well as increase its profit velocity.

A marketbuster is a move, sastisfying one or more of the following criteria, taken by the firm that changes the game to deliver markedly superior performance.

  • A 2% change (gain or loss) in market position (typically volume share) of an incumbent as a result of its move or the moves of another player.
  • Annual growth in sales of shipments of 10% or more over at least two years from a new entry by an innovator.
  • Annual sales or shipment growth 5% greater than the growth of the underlying market by an incumbent.

Retail Therapy and Service Innovation

Artistic Retail Therapy

To serve a customer is human. Surveys indicate that more than 50% of Americans shop to boost their moods and an increasing number of shoppers believe that retail therapy can boost their moods. Getting a compelling deal makes shoppers feel best when indulging in retail therapy. Under these circumstances, isn’t a sales associate in a retail store uniquely positioned to serve as a retail therapist rather than be an iconic “one click buy button” on an e-tailer’s website?

In 1986, Paul David wrote that “innovation has become a cherished child, doted upon by all concerned with maintaining competitiveness…whereas diffusion has fallen into the woeful role of Cindrella, a drudge like creature who tends to be overlooked when the summons arrive to attend the Technology Policy Ball.”

Best Buy brick-and-mortar retail stores are uniquely positioned as the last mile to the revenue-paying customer to manage the Venturesome Consumption of Technology Innovations (VCTI).

VCTI is a multi-vendor ecosystem where Best Buy has an opportunity to serve as as an orchestra conductor. Best Buy has already forged strategic alliances with Microsoft and Samsung (others to follow). These alliances have to be carefully nurtured in order for the VCTI ecosystem to be successful. By relentlessly focusing on VCTI, Best Buy can create value by driving the widest wedge between a customer’s willingness to pay and the supplier’s willingness to supply as well as enable the customers, both the technology enthusiasts and the laggards, cross the chasm.

The conventional wisdom among pure play online retailers is that the world is flat. In the omnichannel world, which includes Browse Online, Purchase in Store (BOPS), the online and offline channels are in the early stages of blurring. In the retail store, the sales associate has an opportunity to wear the hat as a “retail therapist” — this service innovation is not a one size fits all model (it is more of an art than a science). Furthermore, inside the retail store, the world is non-flat (spiky) despite the prevalence of technology to monitor the inventory and do a price compare. The game changer in this non-flat, omnichannel world is to therapeutically assist the customer in (1) navigating the shopping experience using a combination of logic and emotion and (2) providing a laboratory for accelerated technology adoption. A greater attention on retail therapy will minimize the CAGE distance between Best Buy and the customer as sketched in the figure below.

CAGE for Best Buy

Creating Differential Value

When a Best Buy associate pitches a product, (s)he should tailor the message with motivational fit. The buyer may either have an opportunity-focused (technology enthusiast) or have a prevention-focused mindset.

If the buyer is eager, optimistic and ready to take chances, the pitch should be gain framing so that the buyer feels that the expensive product is truly valuable for consumption — i.e., an eagerness strategy.

On the other hand, if the prospect is being careful and prefers being accurate with the selection and wants to avoid making mistakes, then the pitch should be loss framing so that the buyer is confident that the product is “right” and feels that (s)he should not miss out on getting energized from the product (and stay behind the innovation curve).

face to face play to win

It is very important for the sales associate to use the appropriate motivational language to appeal to different communities. For example, in the world of “busy moms,” a FTWOH mom (full-time work outside mom) who believes in CIO (cry it out) has a very different mindset than a SAHM (stay-at-home mom) who practices AP (attachment parenting). Talking to a mom about her technology needs as opposed to the technology needs of moms in general can be really powerful. In similar vein, the needs of tech fanatics, home theatre connoisseurs, family men and small-business customers should also be addressed so that the pitch can be delivered with appropriate motivational fit.

Managing the VCTI ecosystem is a relentless campaign for Best Buy. The ultimate goal of a sales associate in a Best Buy retail store is the co-creation and realization of a moment of truth with the buyer in order to enhance the experienced value of a product because of motivational fit.

Artistic Retail Therapy enables people to connect with others for advice about purchase; in other words social shopping using the recommendations of a curator. Humanizing ecommerce, similar to an approach pioneered by Rakuten (a Japanese company), creates a more personal shopping experience in a “showroom” setting.

Re-examining the Consumption Chain

consumption chain

monopolize trigger event

The Yellow Brick Road towards Resilience

FRT best buy

empowering sales associate

organizational resilience

ADDING Value Scorecard for Best Buy

Imagine a world where the blurring of the brand becomes as invisible as a figure of speech such as “best buy” (lowercase). This would be really cool.

References

Heidi Grant Halvorson and E. Tory Higgins. Focus: Use Different Ways of Seeing the World to Power Success and Influence. Hudson Street Press, 2013.

Documented by Last Mile Resource

Restructuring FTE Debt: The Role of Activism in a Firm

Pixar Pitch

Once upon a time, Microsoft was a republic consisting of independently run profitable business divisions. Along the way, it lost the founder’s touch and succumbed to complacency. As a result, it was outflanked and left flat-footed by more nimble competitors in conceiving game changing product innovations in Internet search, social media and mobile operating systems. And every day it tried to plough ahead incrementally to grab market share in product areas where it had lost ground — however, it proved to be tough going to achieve second mover advantage. ValueAct Capital, a prominent hedge fund investor challenged the status quo and, in true Kellogg spirit, campaigned that a business needs to Think Bravely. Until one day it became clear to the board of directors that they need to reboot the organizational culture with a dose of activism. And because of that they granted ValueAct Capital a board seat. And because of that the CFO began to enjoy an expanded relationship with the company’s board of directors and external stakeholders. As a result, the CFO was strategically positioned to become the Activist CFO of the firm — i.e., an alter ego of the board of the directors and senior management team, not only supporting the business with information and analyses, but also ensuring that the entire enterprise delivers on its commitments. The team of hedge fund activism and the Activist CFO played synergistically to reinvent the FTE role and incubate and nurture a collaborative culture of digitally minded leaders adept at (and committed to) leading with both head and heart. Until finally the firm’s strategy was clear, differentiated, and well-articulated with demonstrated resilience to achieve market success. And from that day forward, the journey “onwards and upwards” towards the brand promise of “Your Potential, Our Passion” became authentic to all the stakeholders and established a competitive groove of differentiation.

Preview

The computed Altman’s Z-score for Microsoft is around 4.8. This corporate finance metric is considered the assessment of the distress of industrial corporations.

z score msft quarterly

Although Microsoft is not exactly in financial distress, we believe that it is good to revive the entrepreneurial instinct and start with a clean slate by vividly acknowledging that the Z-score has shown a downward spiral over the last few years. A lower Z-score proportionately increases the Financial debt (F) of the firm.

Value creation can only be realized by the collective talent pool who design and deliver innovations. The talent pool may be inside or outside the firm (employee, partner, customer). While conceiving or enhancing systems, designers accumulate Technical debt (T) as systems evolve and create obligations that must be “repaid” in order to make changes to a system.

The traditional lens of cost accounting has a bias for denominator-based management, which is an euphemism for headcount reduction. When the talent pool’s emotional bank account is depleted, their Emotional debt (E) increases.

For brevity we label the collective debt as FTE (pun intended). The premise of this paper is that restructuring the FTE debt provides the opportunity zone for routinizing imagination and corporate renewal.

The Managerial Trap of the Corporate Savior

Professor Rakesh Khurana of Harvard Business School (HBS) insightfully observed:

“A corporate savior riding in on a white horse is ill-suited to changing the company’s internal culture, yet it is that culture that exerts a far greater influence in the company’s business.”
[..]
“And unless its long-term strategy and internal culture change, Microsoft under the its next CEO won’t be all that different than it has been Mr Ballmer’s leadership.”
(Wall Street Journal, 8/31/2013)

Furthermore, the classic conundrum between operating as a whole vs individual parts can cause undesirable effects (UDEs) such as redundant activities, competing agendas and turf wars, intermediate layers of oversight, dilution of accountability and shareholder value destruction. This is a leadership challenge that cannot be easily punted to a corporate savior.

microsoft_tension_map

Hedge Fund Activism

The recent inclusion of to ValueAct Capital to the Microsoft board of directors is a tipping point for operationalizing Moneyball and Hedge Fund Activism. This nurtures a compelling, not-to-miss opportunity to enhance activism in the firm, spur greater innovation and right the ship.

Research data from at least 78 activist investments has revealed that hedge fund-led activist investments have outperformed passive investments by earning 20% over two months, 3.8% greater returns and, over two years, they earn 18.4% greater returns. The following are the different types of hedge fund activism that ensure that a firm is run in the interest of its owners:

  • Board room activism
  • Business strategy activism
  • Mergers and acquisitions activism
  • Sales activism
  • Capital structure activism
  • Governance activism

hedge-fund-activist-investor-mindset

It has been shown that a firm with stronger shareholder rights has higher corporate performance (higher firm value, higher sales growth, higher profits, lower capital expenditures). Developed by Professor Gompers of HBS, the governance index (G) is a cherry picked set of governance provisions, spread across 5 subindices, that proxies for the strength of shareholder rights of a firm. G has a possible range from 1 to 24 and captures what is important about corporate culture and governance-related issues.

governance index

CFO Activism

Finance activism is defined as the Finance team being well-positioned in a role beyond controllership and decision support in order for the Finance team to become more closely engaged with the board of directors via an expanded relationship. Aside from being a business partner to the CEO, providing information and analyses, the Activist CFO is an alter ego to the senior management team to really influence the entire enterprise and deliver on its strategy and commitments.

The nature of activism is not a PowerPoint presentation nor is it the “flavor of the month.” As a first step, it is prudent to assess the firm’s fit for growth agenda and objectively score the firm’s strategic clarity and coherence, investments in differentiating capabilities and its organizational culture. Specifically:

  • To what extent are we strategically adrift or distracted?
  • To what extent are we in the game?
  • To what extent are we ready for growth?

Rather the improvisation as an Activist CFO is a Think Bravely play whose span is sketched in the figure below:

activist CFO

execution maestros

growth navigators

turnaround surgeons

business model transformers

Technical Debt

Design capital encompasses internal systems and processes that enable business capabilities. New designs are fundamentally options with associated economic option value. Designers accumulate technical debt as systems evolve and create obligations that must be “repaid” in order to make changes to a system. The value of a firm’s design capital is enhanced in the presence of high option value and low technical debt.

technical debt

The Disciplined Agile Delivery (DAD) “decision process framework is a people-first, learning-oriented hybrid agile approach to IT solution delivery” and provides a number of comprehensive strategies for managing technical debt.

The following are key insights based on an analysis of real-world systems:

  • Under option-constrained design capital and resource scarcity, a firm’s design moves will tend to increase the technical debt of its design capital.
  • Under option-constrained design capital and resource abundance, a firm’s design moves will tend to create design options in its design capital.
  • Under debt-constrained design capital and resource scarcity, a firm’s design moves will tend to abandon design options.
  • Under debt-constrained design capital and resource abundance, a firm’s design moves will tend to reduce its technical debt.
  • Under low-quality design capital and resource abundance, a firm’s design moves will tend to reduce technical debt if the technical capability of the firm is high.
  • Under low-quality design capital and resource abundance, a firm’s design moves will tend to create design options if the technical capability of the firm is low.
  • Under high-quality design capital and resource scarcity, a firm’s design moves will tend to increase technical debt if the firm’s ability to transfer technical debt to other members of its ecosystem is high.
  • Under high-quality design capital and resource scarcity, a firm’s design moves will tend to abandon design options if its ability to transfer technical debt to other members of its ecosystem is low.

Emotional Debt

Prior to the digital era, the traditional marketing approach consisted of place, promotion, product and price (4Ps). Empowered customers are reshaping the firm in the digital era. In the customer-focused enterprise, the key marketing drivers are product systems, public engagement, revenue model and access and availability.

Research has shown that business success depends on integrating strategy and design in order to forge deep, emotional connections with customers. Therefore, in every business process interaction, whether it is inward or customer facing, relationships between players in the value chain can become resilient only when everyone learns to listen and understand each other authentically at an emotional level.

emotional_connection

Competing for the future in a connected economy requires instilling the values of Lean In across the firm. The (mythological) Hero’s Journey accounts for the hesitation, doubts and trials that go along with embracing something new and the satisfaction of conquering new trials. When the customer is unable to travel or complete the Hero’s Journey, it leads to the depletion of emotional bank accounts. This in turn causes emotional debt to accumulate in the value chain. Why are emotions important to the firm? The potential of talent can be harnessed only by being sensitive to each other’s feelings and walking in another person’s shoes.

The Activist CFO spearheads the charge to audit every touchpoint in every strategic business process and evaluate how to minimize emotional debt and achieve first-connector advantage.

Heros Journey

Send Off

Whether it is “software and services” or “devices and services,” the world is all DIGITAL at Microsoft. The (new) FTE adopts a digital leadership mindset in order to dynamically balance the tension between “operating as a whole” and “operating as individual parts.” A digitally minded leader is adept at leading with both head and heart.

microsoft_tension_map_FTE

digital leadership

The clarion call is that activism is a relentless campaign for any firm. Restructuring the FTE debt provides the opportunity zone for corporate renewal. In this paper we have presented that the activist hedge fund investor and the Activist CFO need a synergistic working relationship to effect culture change and enhance shareholder value.

Using the insight of Joseph Paris of Xonitek, we illustrate the circuitry of a resilient organization.

operational excellence by design

The previous expansion of FTE as Full Time Equivalent has to be deprecated. Rather there is an urgent need to develop a new cadre of talent called Activist Turnaround Manager (ATM). The intent is less about “riding a white horse” to rescue a firm. We need to anchor an understanding that authentic leadership is an art of struggle to routinize imagination and compete for the future.

References

This is a living document authored by Last Mile Resource

Towards Anchoring “Lean In” Values from the Boardroom to the Backoffice

Icebreaker

I listened to Sheryl Sandberg’s talk at HBS Class of 2012 with great interest. I noodled about the dilemma that gender remains an unresolved issue at the highest levels of leadership not only in America but also in other parts of the world.

Preview

Dr John Badaracco, Jr. of Harvard Business School insightfully observed that “leadership is, in part, a struggle of flawed human beings”. We often find ourselves in dilemmatic situations which result in individual or organizational disconnects, fire fighting or undesirable effects in the system. This, in turn, impacts business success. These dilemmas are also called “clouds.” Conventional wisdom views “why is there a disconnect?” superficially and favors management by escalation approach where silver bullets or incomplete solutions are proposed and implemented.

Recognizing the Dilemma

Let’s consider the pivot as a recognition that a certain conversation just isn’t going to work and has evolved to become a dilemma or a wicked problem and is causing stagnation. However, there is an intentional desire at least for one of the players to try something new in order to achieve authentic win/win outcomes.

Lean In evaporating cloud 1
We identify the conflict underlying the two different leadership strategies for building a high performance organization.

Assessing the Dilemma

Below we identify the underlying assumptions for each of the paths in the evaporating cloud introduced in the previous section.
assumption_AB

assumption_AC

assumption_BD

assumption_CDash

assumption_DDash

No-Compromises Solution to the Dilemma

We avoid quick fixes or silver bullets and propose that we eliminate the disconnect via the injections shown in the tree below.
Lean In injection

From an operational standpoint, “leaning in” is a cross-border transaction between 2 or more people who consciously strive to consistently achieve win/win outcomes by enlarging the pie. This shapes the path for predictable success. In a world of differences, in every interaction, there are three opportunities for failure (win/lose, lose/win, lose/lose) and only a single opportunity for achieving success (win/win; think 1 + 1 = 3).

Athena Doctrine for Multipolar Managers

“I smelled something was wrong [...]
“It’s not the company I thought I founded.”

Howard Schultz. Onward: How Starbucks Fought for its Life Without Losing its Soul.

Great leaders go beyond smelling the coffee aroma through their nostrils and figure out what is going on at an operational level in the organization. They have an excruciating focus on “how we do things” and raising corporate consciousness (i.e., awareness of who we are, what for and why we do the things we do). They proactively reach out through the physical and digital channels to build boundary spanning relationships while listening and understanding the environment and the culture using the power of instrumentation.

We live in a world of increased transparency as a result of the power of digitization. By seeking to understand what is going on in the environment, leaders can constantly create and cement connections with the people. Instilling the values of leaning in is a no-compromises option for increasing the emotional bank accounts across all stakeholders in the journey towards authentic leadership.

In order for a firm to create differential value in a collaboration economy, it is (1) vital to engage and understand “what is the common objective of the players who have a disconnect” and (2) navigate a disciplined thinking process to design a no-compromises complete solution that truly achieves win/win. The genuinely peoplesmart mindset is a World Class, Face to Face engagement approach, both offline or online, and avoid the siloed trap of missed opportunities for value creation by favoring win/lose, lose/lose or lose/win. Going forward, the motto is to resolve “a cloud a day” so that we can evaporate the cloud and continue the pursuit of relentless innovation that enlarges the value pie.

The values of leaning in along with the courage to Think Bravely will gear the perpetual motion machine for reviving distressed businesses on Main Street.

Quite honestly, I am eager to “get a seat on the rocket ship” in a firm where I can be my authentic self, solve business problems, and perform beyond where I am today.

References

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Documented by Last Mile Resource