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by Bill George | 8:25 AM April 30, 2010 (Editor's note: This post is part of a six-week blog series on how leadership might look in the future . The conversations generated by these posts will help shape the agenda of a symposium on the topic in June 2010, hosted by HBS's Nitin Nohria, Rakesh Khurana, and Scott Snook.) During the last half of the 20th century, business leadership became an elite profession, dominated by managers who ruled their enterprises from the top down. Influenced by two World Wars and the Depression, organizational hierarchies were structured along military lines, with multi-layered structures to establish control through rules and processes.
STEVE HILTON remembers months of despair after the collapse of Lehman Brothers in 2008. Customers rushed to the sales offices of Meritage Homes, the property firm Mr Hilton runs, not to buy houses but to cancel contracts they had already signed. “I thought for a moment the world was coming to an end,” he recalls.
Michael Porter opened his classic “five forces” article with these sentences: “In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly.” It would be difficult to imagine a more appropriate opening here. In this article, I argue that today’s dominant ideas about the practice of business strategy—defined by Porter in these pages three decades ago—hinge on a specific and therefore partial interpretation of competition. The result is an equally partial picture of the strategist’s job.
A new survey investigates how individual leaders lead and how that has changed in the past year. 1 For example, respondents say that during the crisis they have seen far more leaders focus on monitoring individual performance—even though they see that as one of the least helpful ways of managing the crisis. The survey also asked about the organizational capabilities and leadership behavior organizations will need to thrive during the recovery and about the ways companies are approaching employee development and gender diversity in the crisis. The kinds of leadership behavior that executives say will most help their companies through the current crisis, such as inspiring others and defining expectations and rewards, are the same ones they say will help their companies thrive in the future.
Artwork: Josef Schulz, Form #20, 2007, C-print, 120 x 270 cm In the fall of 2008, Mike Lawrie, the CEO of the London-based software firm Misys, asked his senior executives to prepare a plan for weathering the global economic crisis. When they reported back, at the top of their list of recommendations was to cut the company’s annual $3 million investment in Misys Open Source Solutions, a venture aimed at developing a potentially disruptive technology in the health care industry. It’s a familiar story. Although most executives acknowledge the need to explore new businesses and markets, they almost always bow to the more-pressing claims of the core business, especially when times are hard. Innovations like Misys’s Open Source face an uphill battle to secure a share of the firm’s capital.
Artwork: Geoffrey Cottenceau and Romain Rousset, Vide-cartons, 2006 Watching his employees use a new social technology, Marc Benioff, the CEO of Salesforce.com, had an epiphany. His company had developed Chatter, a Facebook inspired application for companies that allows users to keep track of their colleagues and customers and share information and ideas. The employees had been trying it out internally, not just within their own work groups but across the entire organization. As Benioff read the Chatter posts, he realized that many of the people who had critical customer knowledge and were adding the most value were not even known to the management team.
The more the business environment changes, the faster the value of what you know at any point in time diminishes. In this world, success hinges on the ability to participate in a growing array of knowledge flows in order to rapidly refresh your knowledge stocks. John Hagel, John Seely Brown, Lane Davison While new knowledge flows are important, they are not enough! A major challenge that confronts business leaders is seeing how change and innovation, external to their own organization, can lead to new possibilities to create and deliver value to customers.