5 Keys to Success for the Strategic Leader

greetings from New York City and Columbia Business School executive education my name is Scott Garden I'm very happy to be back again with Professor Willy Peterson for his newest webinar five keys to success for the strategic leader before I introduce Willie I'd like to go over just a few key logistics as you'll see on your screen right now a recording will be made available after the webinar if you'd like to tweet about the webinar please use our hashtag CBS exec and finally please upload your questions throughout the webinar in the Q&A box and we'll get

to as many of those as possible in the last ten minutes thank you so it's my pleasure to introduce Willie Peterson he was born and raised in South Africa where he received a Rhodes scholarship to Oxford University his three career iterations started with practicing law in South Africa followed by 20 years as a CEO of such international companies as lever foods Seagram USA Tropicana and sterling Winthrop consumer Health Group finally in 1988 1998 he joined Columbia Business School as the practice the professor of the practice of management he is also currently the faculty director of

the implementing winning strategies executive education program which I believe is running June and November this year in New York City yep he also is the author of the strategic learning so it's great to be with you Willie thank you for the introduction welcome to everybody who signed up for this webinar it's my pleasure to interact with you here you know well as I said in previous webinar you have a very varied very unusual background first as a lawyer than a CEO for 20 years and then now as a professor at Columbia for the past 20

years how has your background as a practitioner influenced your thinking yeah to a very large degree and I feel very privileged Scott to have worked in these big learning laboratories if you like first as a lawyer and then as a corporate executive and now at at Columbia and if I think back on the synergy between them how they build on each other it's an interesting kind of journey as a practitioner of course the driving forces to deliver results it's the bottom line it's the sales number it's meeting the quarterly salt etcetera etcetera not a lot

of time for abstract theory mm-hmm and but now that I've come to Columbia this 20 years it's been a wonderful experience I've gained a lot of respect for theory and but with a big condition a big writer and that is this that I belong to the pragmatist school of thinking which says that the test of a good theory is its usefulness in practice so so my idea is that good theories must have problem-solving power now where I work at Columbia given this background this combination of experience is at the intersection between theory and practice so

I'm always searching for what I call ideas with energy and then finding good practical frameworks for translating them into action so it's a kind of an insight to action mode of thinking right that I that I enjoy I like that so my question would be how did you come up with these five keys to success above all the others and then what I'd like to know is did the answer surprise you absolutely they did actually surprise me I went into it with an open mind and the trigger for this was the fact that whenever I

have a meeting with corporate executives I like to ask them at the outset you know one of the big challenges that you face it that we can talk about have a conversation about and the most common answer I get is about disruption yes they're saying you know disruption is threatening our survival and and then they offer a generalization I say what do you mean by disruption they say well technology you know well let's explore that a little bit and then the conversation goes into things like artificial intelligence big data robotics cloud computing mobile technology and

they're these evolving things are producing new threats and opportunities that are big challenge for us and then I pondered this because that's a common answer and for me that triggered a question this is the disruptive world of change that is the reality of today and it's probably going to accelerate and it's going to be bigger and bigger challenges us to face the big question for me is what are the most important most powerful leadership ideas that will drive success in the face of change of this kind that was the question that I asked myself then

as I pondered it and explored it and your was the surprise none of the ideas that I wrote down as I filtered through this and sifted through my thinking none of them was new hmm they were they're not new but they are the most important ideas in the sense that they're the most powerful ideas for driving long-term success in the face of discontinuity disruption and change and then I stepped back and said well these are familiar but they're not strongly applied so I think there's an element here of neglect and maybe lip service to these

things right and what I think corporate America faces here for its corporations worldwide is a gap and maybe the gap is growing it's not enough to be knowledgeable about these or even to do them the real challenges to excel at them right so as we go through them I just want to suggest to the audience that we have here today they'll be familiar to I'm sure but the question I'm asking to pose for yourselves as we go through this one by one are you really excelling at these do you have hardwired processes and your businesses

or not-for-profit organizations the will mobilize these ideas and create success for you in a in an enduring way so that's the idea wonderful so let's go through them one by one let's start with number one as you'll see on your screen right now in future our only sustainable competitive advantage will be our ability to learn faster than our competitors I like this but I think for many people who are watching right now the word learning is a broad term with enormous connotations and so can you pinpoint the specific type of learning you mean and is

there a you know concrete process for it now surely there needs to be otherwise it's just an exhortation you know let's be a learning organization some nice little buzzword no we do we do need to have hard wired practices to help us do this effectively but you know let's go back a little bit in time this idea was put forward most strongly by a guy called Ari the goose in an article he wrote called the living company right when he made this particular statement and I was I was very taken by this idea even as

a CEO and realized that there was a big idea here in an environment that's changing more and more rapidly so I think the underlying thought is is the crucial thing here and it's this that if we looking for competitive advantage because that's the name of the game at the end of the day in a competitive world we seeking competitive advantage but we seeking something that's sustainable as a competitive advantage we have to come to a hard-nosed conclusion and that is that competitive advantage cannot rest on a particular product or business model these are very quickly

overtaken by events and need to be reinvented in some kind of way so I think that uses our idea here which i think is crucial is that we need that there's a shift in our mindset that we need to make that I think is crucial that the understanding of competitive advantage is this it's not a product it's not a service sustainable competitive advantage is an organizational capability to build an adaptive organization through processes that enable us to continuously learn and renew our organization as the environment shifts and if we're unable to do this we can't

contend with change now so that's a big idea it's the shift from product based competitive advantage to organizational capacity the big idea but you don't build that by just recognizing the idea right so I came back to this issue of being pragmatic and my approach and design a process to get this done is called strategic learning and I'd like to put it up here and briefly talk through it as a kind of a core process so this is a process that if you're if you like represents a shift of gear from strategy is planning to

strategy as learning involves four steps that move in a cycle step one is learn conduct a situation analysis understand the external environment needs of your customers step two is then to focus by taking those insights to determine where you will compete and how you will win the third step is to align the entire organization behind your strategy and galvanize very important data what's data like that step of alignment and a lot of it involves people and their commitment to the strategy fourth step is to implement faster and better than your competitors do and then there's

a learning loop back to the situation analysis and the reason for that is that the external environment won't stop changing so we can't stop learning if you make this just seasonal and say well I'll do this maybe once a year and the environmental it's gonna stop for me until I do it next time you're gonna fall behind and that gap will widen so that's the idea now just one final thought on this though this idea of creating a living company this organizational capability to adapt through learning and renewal can't rest on a single process it

needs to be embedded in the culture and behaviors and practices of the organization and and diffused in that kind of way through after-action reviews regular quarterly retreats ongoing examinations of customer needs etc right well I think when I when I've looked at this with you over the years the biggest word I get is the unknowing on do it and the mistake I see the companies make is to make it sort of a singular event and then it just sort of gets put in the closet you know the year that we did one of the season's

over we we go back to what we did it was so very go operational wonderful yeah you know the military actually get it right when they say strategy is a process of ongoing assessment and reassessment right as the organization shift well that's fair and that is that will assist with with the buy-in from the entire you know the culture creation absolutely is that shall we move on to number two let's move on to know okay so we're putting us up on the screen for you now number two success means putting the customer at the center

of business decisions and you know I often come back in our discussions to that word intention as a source of guidance and organizations and for life for that matter this lesson seems to me to be a North Star or a lighthouse in the fog type of lesson for organizations would you agree absolutely do agree you know this is one of these buzz words and I move we hear it over and over people having meetings and they say well let's look at it from the customers customer point of view as if there's some kind of piece

of mental gymnastics we're not used to doing let's try and do this right my mind goes back to my experience as a young brand manager and Unilever learning my way forward and I was obsessed with the product features of my brand so I I did a presentation of my boss saying cuz these are the particular attributes of my brand that I think very important and he stopped me and he said stop you're getting this all wrong people don't buy attributes people looking for solutions to their needs they want to satisfy their needs you're thinking is

back-to-front you thinking inside out you got to think outside in so your product they offering is a vehicle for delivering benefits to customers think benefits you gave me an article there's a Theodore Levitt articles or wonderful articles called marketing myopia right and in marketing myopia Leavitt makes the point very strongly that and uses the railroads as an example that products are just a means of delivering benefits and he said the railroads got into trouble because they thought they were in the railroad business what are people looking for it's not a rail a ride on a

railway track they looking for transportation right we said well they were not they were in the transportation person it's not the railroad business they didn't recognize this so as a very important kind of thing I here's an example Hallmark cards without I love this example and here's their winning proposition we help people connect with one another and give voice to their feelings yeah now let's just examine that for a minute the benefit that's being offered here is human connection but cons are just a vehicle for doing those it's a vehicle so that's that's the ultimate

benefit now an important point that Levitt made is that there's no such thing as a commodity right at either end of any transaction of human beings and the way the service is delivered becomes the key benefit right now if you look at Amazon's retail business for example it's not a single unique product so it's really the quality speed and convenience of its service that matters that benefit and even with Hallmark cards if you think about the fact that when people stop sending cards if that is their intention then they can adjust they can be flexible

just in the interest of time let's move on to number three yes drat ax G is about achieving differentiation by making choices and you know I as I said I believe this can be a very difficult lesson for leaders because of many emotional elements yeah did a trivia company such as fear of change admittance of maybe past past possible failures human capital elements is this true absolutely true I mean making choices is an agonizing thing actually it's a it's no easy thing but if you go back to fundamentals again and think about strategy which is

a concept largely widely misunderstood there's only one reason why we need to have a strategy in the first place and that is the reality of limited resources and this forces us to make choices on how we will concentrate those resources on the few things that will drive competitive advantage so at the end of the day it is about making choices now now we get into this difficulty choice making if a limited resources and choice making it confronts you with a zero-sum game every additional thing you choose to do subtracts energy and effort and attention from

everything else you do right so you have to be able to subtract before multiplying so choice making is very largely a question of what you will give up it's an act of sacrifice now let's look at the choices we need to make when we do a strategy they're kind of three questions we need an answer and that's really the essence of a strategy and if we don't have good answers to these three questions we really don't have a strategy is where were we compete in what is our aim and where will we not compete second

one is how will we win the competition for value creation in our chosen arenas and the third one is what will be our key priorities for success that's the guts of our strategy everything that we do in the organization must flow from the answers to those and cascade down now if you look at that middle bullet there a very important point emerges strategy is about winning not just about competing so I get dismayed when I hear organizations talk about a value proposition that's a kind of a bland statement and it misses the biggest question of

all which is how much value we're in a competitive world and winning the game is creating a measurable margin of difference in the value that we offer customers that gives them a compelling reason to choose us now there are only two ways of being unique we'll talk about differentiation first way is doing something that nobody else is doing that doesn't last very long people copy you and the second way is really equally important which is doing what everybody else is trying to do but doing it materially better in the eyes of the customer right so

let me just offer two quick examples of that here this is Google's search business if you look at this as three very big words here we organize the world's information we make it universally accessible and make it useful now of course other companies are trying to do that as well but Google away in front because they do that better than anybody else with a marked with a measurable margin of difference right so it gives a compelling reasons to choose Google I love the one for the Economist I love it for its brevity and for the

core of the idea we're not just reporters we explain the world to our readers now it's my favorite Weekly magazine and I because of this interpretive element right there does this know if we step back from those two we come back to the point again step back and you look at each of those and you say there's a benefit that I'm lying right from the customers point of view so I do this right at that point again that's great all right let's move on to number four yes leaders must be able to simplify a complex

world so many leaders know this lesson is much easier said than done but it's absolutely paramount to the success of an organization and we know that if a company is riddled with the complexity that is magnified enormous ly out to the customer yeah and the world is becoming more complex yeah and if you think about the leadership a sort of overriding capability of effective leadership is to be able to simplify or oversimplify but simplify a an increasingly complex world now a simplification sounds like a shortcut and we just find a kind of a way to

sort of express this quickly it's not at all it's very hard work simplification is is enormously hard work and you can't get there very quickly but it's essential leadership work there's a great story of a Supreme Court judge called Oliver Wendell Holmes a lawyer was arguing a case before him and was giving a very complex argument and Holmes stopped him and said I can't follow you you being far too complicated here and my IQ is okay so wait I don't know how to take the blame for the other and the lawyer said oh you know

I don't want to give you a superficial answer I don't want to distort the truth Holmes's answer was a classic and he said I don't give a fig for simplicity on this side of complexity but I'll give my life for simplicity on the other side of complexity I'm giving you a 45-minute break go work through the complexity bring me simplicity on the other side now there's a there's a famous guy who's a chef called Marco Pierre White he's a British chef who got the three Michelin stars for his excellence in cuisine bought a number of

restaurants and they chaotic things right and he developed this little credo for running a wrist set of restaurants and I think this is a good credo for all of us to think about I like the complexity creates confusion confusion creates inconsistency that's the problem with it and inconsistency creates failure so this issue of being go for simplicity right that's very important I agree and I think that those last three words of that confusion inconsistency failure to the customer that's their consumption chain correct oh yeah that's great sunshine chance a great point all right so we

move to number five move to number five to move people at the deepest level you need compelling stories and as you know this lesson is very close to my heart as someone who you know teaches public speaking I believe in the power of the leadership narrative and again do you think this lesson goes back to defining the EQ or the emotional intelligence of a leader it does indeed because if we done tune into your people and tune into what their what their needs thoughts fears hopes and expectations aren't connect spec to lead so this EQ

factor is a is a key determinant of leadership effectiveness so you know if you think again bring it back to the idea of of of a strategies that you wanted to store in a very very simple way like I said before the document itself is important because you need to have a frame of reference but it should never be longer than 10 pages so you simplify it but that's not where it ends the final deliverable of a strategy is not just a document but people don't follow documents right they follow leaders and they follow ideas

so the big thing is to translate the document into a compelling leadership message that wins the hearts and minds of people it explains the strategy and the reason why so I think great leadership is always about a powerful narrative some kind of the bigger the change the more important the story becomes a critical thing as Peter Drucker said tasks of a leaders to be the trumpet that sounds the clear sound 3m is a great example of this as a company through young they've gotten completely away from presenting strategy and PowerPoint presentations with bullet points and

they they express their strategy now is a narrative that explains the entire logic where everybody fits in what's expected of them what success looks like etc as a narrative and I just want to put this statement up here we really need to become a great storytellers as leaders right just an ad hoc way but Express the strategy and these are the elements of a good story I just give this example Bill Clinton when he was president became very frustrated when he had meetings in the Oval Office between competing points of view right right and the

meetings became dysfunctional disorganized and he'd stop them and say come on folk that settle down solved the problem you know we serving the American voter and it didn't work so he got a moon rock from NASA put it on the table in the middle of the room next time there was dysfunction and things went out of control he said stop you see that rock it's 3.6 billion years old and we just passing through settle down collaborate and solve the problem and he says it worked every time so that's kind of brilliant use of symbolism right

very invoked we're here for a short time and there's a great big span of time you know in the universe so to speak so I mean the bottom line for us here is stories create meaning and people are in search of meaning in their lives and in their work place great leaders make meaning through stories and what we've allowed to happen more and more is for the deadening effect of PowerPoint presentations to take the place of an effective narrative right and I think we should just rethink that well and I would you know I would

also say that these stories from a leader also show that the leader understands the human element of a company which is you know there's sort of a relatability so there's leader there's an inspiration but then there's also I know what's happened I know what you're going through and and I'm with you understand where PowerPoint doesn't completely there's no greater human experience than the experience of being understood exactly so and employees feel that it's big motive you know it's a big motivator all right well we have some time now for some questions that have come in

would you like to take those for you okay the first question is from Amy what is the biggest impediment to doing these things systematically okay it's the absence of hardwired processes in complex organizations that are global and have a number of functions underneath them the way that work happens is through business processes so whenever we define something truly important the question to ask ourselves is how will we make this turn this into a business process that is ongoing and shared across the organization with a common language a common set of concepts that we all understand

and use and applies a process now strategic learning which I showed earlier on is an example of a process like that that's the way work happens not just through exhortation let's think about the customer what are we doing by way of understanding customer needs doing a hierarchy of needs analysis that we all do systematically deepen our understanding of customers so these kinds of frameworks practical frameworks other way that work gets done right and you do how do you insert that into the culture I mean what do you you know what is it do do you

I mean what things did you do to make sure that was part of the culture whenever there was a meeting we're about competing more effectively and I was in running businesses that had brands right my question would be it's not the meeting what do you understand about the needs of the customers we seek to serve who are they what have you done to explain their most important needs right what are our competitors doing our rivals doing to meet those needs better than us what if the key factor that differentiates us and gives our customers a

compelling reason to choose us now there's a kind of flow of thinking next time around nobody's going to come to the meeting unprepared right for those questions because there they are and it's kind of a thing is a little bit like Sam Palmisano who is the CEO of IB prior to the current one who said to these organization there are always four questions that every executive must be able to answer in every meeting we have or one why should customers choose to do business with us they have four choices number two why should investors choose

to give us their money bank choices number three why should employees seek to work for us the best of them are volunteers and number four why should communities welcome us in their midst and he kept driving those questions and the narrative followed and the processes to provide good answers to those questions flowed from that railroad and it shouldn't just be in meetings right it should be somehow all pervasive all around the company right whether it's you know visually you're seeing these questions I mean something to me to inspire not just oh I'm preparing for a

meeting but this is hardly living my daily life no I worked a lot with Erickson in the past and I was working with them in Turkey and they were striving to bring the customer into the picture in their conversation so how can we do this effectively and the customer for them was big telephone operators suggestion I made a very pragmatic one is get a photographer to go and take photographs of the real people who work in that system Mary and Fred and Joe and Cynthia take photographs of them put them on the wall in every

conference room in your Lobby rotate those every three months and underneath and interview them briefly underneath that have a brief inscription what do I expect from Ericsson now you can never escape the customer when you're sitting in a conference room you looking at the customers all around you and they're looking here and they speaking to you now just that bit of symbolism like the moon rock right and rotating it every three months was a constant to reminder that we serve customers right and what we are where we owe them as a set of benefits that

are better than the compound exactly and it focuses intention all right let's take another question from Jeff what are the differences between the for-profit world and the not-for-profit world and I know you don't like that phrase so yeah the not-for-profit world you know yeah I don't like that phrase not-for-profit because it's weird at kind of is what you do in terms of what you don't do right so I always say when I go to a social occasion and people say you know hello I'd like to meet you what's your name I don't say I'm not

Tom I saw him Willy right so to find yourself that kind of- is weird so I think I invite nonprofits is to change their language from being not-for-profit to being for benefit now that leads to a whole different way of thinking who are the beneficiaries I seek to serve what are the most important needs how am i serving those needs you don't get that kind of conversation from saying I'm not for profit I'm trying to avoid a profit here right right and broadly speaking it's the same except the drive for it's not the drive for

superior financial returns but for a sufficient bottom line if you like or gain at the bottom to be able to reinvest in yourself over time right so there is sort of set of financial disciplines yes but the whole idea is to reinvest in the organization in service of its of its beneficiaries otherwise it's the same thing you said it's you exist in order to create benefits for somebody outside the organization great well Willie this has been you know really wonderful and just really quickly if you can just give me which quadrant this is from Denis

which quadrant is the most difficult on the strategic learning cycle that you found people have the most difficult just at the top of your head what's that oh boy I mean there's there's definitely all the way I would say the situation analysis occurs people produce a lot of data but the idea is to produce insight and that's where the competition out data insights data insight you go to work through like Oliver Wendell Holmes said work through the data work through the pile of rubble come out of the other end with four to six critical insights

I call the brutal truths that enable you to define your challenge and then your winning proposition that's a tough game but as the military say always emphasizes intelligence precedes operations and if your intelligence is poor a lot of people will die and there will be your own people right very difficult thing to pull there to go for good practice do you over and over I get better better well your best work is a habit exactly well ladies and gentlemen thank you very much for joining us today it was a pleasure to be with you Willie

it was always wonderful to be with you thank you Scott thank you everybody for joining in it's been a pleasure thank you you