Spotting a transformational leader is akin to spying great art. You know it when you see it.
Your response is visceral.
It’s the equal, yet opposite, gut reaction we all felt when confronted with the failings of Travis Kalanick, Oscar Munoz, John Stumpf and other CEOs earlier this year who, despite some measure of brilliance, managed to damage their company’s brand and create cultural toxicity.
(Related Article: Ethical Issues In Business: Are CEOs Becoming Less Ethical?)
Countless companies want to transform. Yet how many have legitimately made it to the other side?
That’s precisely the question HBR’s latest transformation study set out to answer.
HBR’s study spoke to me because their very approach is transformational.
Even though they looked at the traditional group of S&P 500 and Global 500 firms, their measurements were far from expected.
Rather than relying upon generic metrics (like innovation, or profit margin), they dug deep into which leaders were able to strategically reposition their companies…and why.
WHAT THEY CONSIDERED:
- New growth. How they attained new revenue growth outside their core business.
- Core repositioning. How they flexed that core business to navigate change and disruption.
- Financial performance. How their financial health equated to a relevant benchmark (i.e. NASDAQ for a tech company).
- Pinpoint 57 companies that have made substantial progress toward transformation.
- Narrow that list down to 18 finalists.
- Hire a panel of judges with similar expertise.
- Land on the final 10.
So, what do the leaders of Amazon, Netflix, Priceline, Apple, Aetna, Adobe, DaVita, Microsoft, Danone and ThyssenKrupp all have in common?
FIVE WINNING CHARACTERISTICS.
1) They’re “Insider Outsiders”
These 10 leaders are either founders who had no previous experience in their new industry (Reed Hastings / Netflix), or CEOs who were brought into the role by the board (Satya Nadella / Microsoft).
2) They’re On Two Separate Strategic Journeys
The study purports that transformation can’t occur when a leader pursues one linear journey during which the old company is expected to evolve into a new one.
Instead, the recommended dual journey is one of repositioning the core business while actively pursuing new ones.
A quick example: Steve Jobs reinvigorated Apple’s core business with the design of the iMac and iBook. His second and simultaneous journey was to launch iPod and iTunes—their new growth.
3) They Use Culture Change to Drive Employee Engagement
While this tactic sounds like a no-brainer, it’s easier said than done. Here, a much lesser-known example captured my imagination:
It’s 1999. Total Renal Care—an almost bankrupt kidney dialysis firm—brought in a new CEO: Kent Thiry.
- First order of business was a six-month effort to create a new identity and set of values.
- DaVita, Italian for “giving life,” became the new name and their core values focused on service excellence, teamwork, accountability, and fun.
What, you may be asking, is the big deal?
Thiry and his leaders actually brought the values to life.
From dressing up as the Three Musketeers to celebrating “village victories”, employees bought in—and so did Warren Buffett, as a key investor in their new vision.
As a result of the culture shift, DaVita was able to create an “integrated delivery network” (their new growth) that provides their patients with comprehensive care—now an impressive 30% of their total revenue.
4) They’re A Storyteller-in-Chief
Another great lesser-known example: Aetna’s Mark Bertolini, who refers to himself as Aetna’s “storyteller in chief.”
His strategy: Create one transformation narrative with unique angles / messages for each and every stakeholder group.
For Aetna, the story was bold: change the nature of health insurance. And finally, render it obsolete.
His advice on building your own narrative?
“You have to be tireless about it, consistent and persistent, and keep battering the core messages home week after week.
“Your leaders have to as well, and they have to tailor the message so it has the appropriate level of fidelity relevant to each part of the organization.
“A person working in a call center might need a different set of messages than a line manager does to understand how he docks into the big picture.”
5) They Plan for Disruption
The two-pronged transformation journey takes time. According to the study, at least 10 years.
And, if you’re not vigilant, you can still be knocked off your feet more than a decade after you’ve begun.
No one knows this better than Reed Hastings of Netflix:
“My greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming.”
So he started planning early, back in 2007. Ironically, he moved too fast when five years later, Hastings attempted to launch Qwikster—a stand-alone mail-based DVD company.
Netflix customers weren’t ready for it. Hastings had to admit defeat and back off.
The answer was returning to the dual journey until it was time to make the leap. The end result is that Netflix is now in 100 million homes in 190 countries.
Although personally, I’m repeatedly disappointed that anything I want to watch is only on DVD, this broader question of timing raises one of the trickiest issues in the transformation game.
GETTING THE PLANNING PROCESS RIGHT.
Ari Wallach, Fast Company’s new expert on social and business trends, and self-proclaimed creator of “futuring,” feels we’re doing ourselves a disservice as a society by focusing on the short-term.
Wallach, who has strategised for clients as diverse as Obama and Deepak Chopra, laments that when he began his consulting work more than a decade ago, corporate leaders used to talk, think and plan in longer chunks of time.
Five, ten even 20 years out.
But today, when Wallach meets with corporate leaders, they say “Hey, I love your work. Now let’s talk about the next six months.”
In one of his insightful Ted Talks, he cautions against relying upon sandbag strategies and falling prey to a syndrome he’s deemed “short-termism.” Short-termism, Wallach claims, is a backlash of technology. We want and expect everything instantly.
It’s a syndrome Wallach cautions is making us hyper-reactionary.
In an age when change is coming at leaders (and at everyone) faster than most humans can productively process, what does he recommend? An approach Wallach has coined as the Longpath Practice.
Note that he calls it out as a practice, meaning its success requires our committed active involvement repeatedly in the present moment.
THREE COMPONENTS OF LONGPATH:
1. TRANSGENERATIONAL THINKING:
What impact will your business have long after your own cycle of birth and death? What is your legacy to society?
2. FUTURES – NOT FUTURE:
Open up your point of view beyond the dominant lens of your time (technology). Create a new point of view for yourself, and your business. What other futures—beyond the obvious—can your business foster?
3. TELOS THINKING:
In Greek, telos means “ultimate aim” or “ultimate purpose.” Telos thinking invites us to answer the question: To what end?
- What will be different by taking this step, changing this policy, or shifting this approach?
- What will come after? And not just a year from now or even five years from now.
- What will have happened 20, 50, or 100 years from now because we made this choice today?
In other words, to what end are you doing what you are doing?
Can you hold a vision that stretches far beyond your lifespan?
Before you dismiss this approach to transformational leadership as being too laborious, consider this.
Not the tip of South America, the corporation.
Yvon Chouinard, Patagonia’s founder, on NPR’s “How I Built This” podcast said:
“The faster a business grows, the faster it dies. We decided on a growth program so that we would be around 100 years from now. So all decisions were made as if we’re going to be around 100 years from now.”
Again, 100 years. And for Chouinard, his reasoning is similar to Wallach’s.
“We slowed down our growth, said ‘No’ to a lot of opportunities and became more responsible.”
No surprise then that Chouinard’s “to what end” is advocating for the environment, helping to prevent global warming and donating to causes that align with this vision.
Imagine how different a company Patagonia would be today if he had only focused on the next six months. Or even the next five years.
Don’t get me wrong. I’m not proposing that you scrap your short- and medium-term plans.
But powerful transformation happens when you take a huge step back and widen your scope. Daily issues seem a lot less pressing when considered in the bigger picture.
TWO CHALLENGES FOR YOU.
The next time you’re feeling back in a corner by a risky short-term dilemma, ask yourself:
Will delaying this decision / launch affect the future of your business 100, 10 or even five years from now?
If the answer is no, back away.
It becomes easier to lead without the distraction of a minor setback. And to course correct if you’re not expending your precious energy on a short-term stressor.
How can you simplify your company’s mission?
What basic statement embodies your very purpose for doing your business? When you think about the next century, platitudes and business jargon seem to land where they belong—in the waste bin.
So, if spotting a transformational leader is a visceral process—like deciding for yourself what is great art—the same is true for spying those transgenerational, transformational opportunities for your business.
You trust your brain, your heart and your gut.
But in this case, you’re the artist.