Monthly Archives: September 2012
Has the lack of ‘Integrity’ and authentic leadership comprimised the ‘workability’ and performance of the West?
As I listen to what is happening in the western world (USA, UK, Greece, Spain… banking, financial services, media, politics….) I am struck by the thought that what we are seeing is a degradation in the performance of key institutions and systems. Why is this so? It occurs to me that the ‘workability’ of the system that powers western democracy and institutions has been compromised and so that is why we have what we have. What is the cause of this degradation in ‘workability’?
The failure in leadership. And our collective practice of being ‘out of integrity’. We act as if we can spend more than we earn: borrow indefinitely without paying the price. We act as if we can make a set of promises before getting into government and then throw them out of the window when we get into government. We think that we can talk customer-centricity and customer experience whilst focussing ruthlessly on cutting costs or finding hidden ways of charging more for providing less……
With this context in mind I am reissuing this post that I wrote at the start of the year. If you have no interest in leadership and performance then I advise you to go do something else. If you do have an interest then I advise you that this post is long and has to be grappled with not skimmed. If you are a skimmer then I advise you to go and skim something else.
Grappling with the domains of ‘integrity’ and leadership is necessary for improving performance
This post is associated with and follows on from the previous post: Want a breakthrough in customer-centricity in 2012? Start with ‘Integrity’. This post clarifies what I wrote in the earlier – some people did not get what I was getting at and I take responsibility for that – and extends ‘Integrity’ into the domain of leadership and business performance. If you are up for being customer-centric and improving the performance of your organisation then you absolutely have to grapple with the domains of ‘Integrity’ and leadership and connect the two together. So let’s take a deeper look at these and how they fit together. This is a long post AND you can get a lot of value out of it if you take the time to really read it and digest it. Some of you are going to find all kind of issues (too long, too boring, too preachy…) with this post. How do I know? Because we ‘resist’ that which ‘confronts’ us and spoils the picture of the world that we are attached to – especially if it means giving up some of our self-serving habits.
When I speak/write ‘Integrity’ I am not pointing at morality and virtue!
If you take a look at the dictionary you find the following definitions for integrity:
- The quality of being honest and having strong moral principles; moral uprightness - e.g. he is known to be a man of integrity
- The state of being whole and undivided – e.g. upholding territorial integrity and national sovereignty
- The condition of being unified, unimpaired, or sound in construction – e.g. the structural integrity of the novel
When I use the term ‘Integrity’ I am NOT talking about, not pointing towards, nor interested in the first definition. I am talking about and pointing towards the second and third definitions. Why? Because I am concerned with the domains of ‘workability’ and ‘performance’. Allow me to illustrate this through a personal experience and a concrete example.
Recently I jumped into my Honda Accord and drove fours hours to spend some time with my parents. I noticed that the car was ‘dirty-messy’ on the outside and on the inside. I also noticed that when I pushed the accelerator down hard there was a delay of several seconds before the car responded and when it did the response was sluggish and the engine made a noise that suggested that I was asking it do more work than it was able/ready to do. Finally, I noticed that at certain speeds the steering wheel vibrated suggesting wheel balancing and tracking issues. Whilst I was at my parents I shared my experience of driving the car with my brother (who runs a car business) and asked him to fix the issues and get the car back into ‘Integrity’. After examining the car he replaced the spark plugs, he topped up the fluids, balanced the wheels, took care of the tracking to make sure the wheels were in alignment and cleaned the car – inside and out. When I drove the car back home my driving experience was completely different: instant response from the car when I hit the accelerator, no noise from the engine, no steering wheel vibration, crystal clear windscreen, sparking interior…..
Why the difference in performance of the car as I experienced it? When I was driving to my parents my car had been out of ‘Integrity’. It was not whole and complete. It was not a condition of being unified, unimpaired or sound in construction: the spark plugs were not working, the power transmission was less than it needed to be, the wheels were not balanced, the wheels were not aligned…. When I drove back to my parents my car was in ‘Integrity’: all the components that had to be there for the car to be whole and complete (sound, unimpaired) were there and so the performance of the car was transformed.
Now is the time to address the question: why are you ignoring the first definition of integrity that of moral uprightness? Different people have different ideas about what is moral. Different groups of people have different ideas on what is and is not moral. Morality is simply a social agreement between a group of people: is some groups of people (Christians say) it is moral to eat pork, in others (Muslims say) it is immoral to eat pork; in some groups of people it is moral to make use of all the latest technology (most of us), in others (e.g. the Amish) it is immoral to make use of electricity, phones etc. Now here is the thing to get no matter what we decide is ‘moral’ regarding my car, in the real world having in place faulty spark plugs or unbalanced and misaligned wheels degrades the workability and performance of my car – that is simply what is so in the real world no matter what I, you, they, we believe about it. Get it?
What would be present in your life (including your organisation) if ‘Integrity’ was present?
Werner Erhard has done great work on ‘Integrity’ and I cannot explain it any better than he has written it. So I am going to use his words:
“What would your life be like, and what would your performance be, if it were true that:
You have done what you said you would do and you did it on time.
You have done what you know to do, you did it the way it was meant to be done, and you did it on time.
You have done what others would expect you to do, even if you never said you would do it, and you did it on time, or you have informed them that you will not meet their expectations.
And you have informed others of your expectations for them and have made explicit requests to those others.
And whenever you realised that you were not going to do any of the foregoing, or not going to do it on time:
You have said so to everyone who might be impacted, and you did so as soon as you realised that you wouldn’t be doing it, or wouldn’t be doing it on time, and
If you were going to be do it in the future you have said by when you would do it, and
You have dealt with the consequences of not doing it on time, or not doing at all, for all those who are impacted by your not doing it on time, or not doing it at all.
In a sentence, you have done what you said you would do or you have said you are not doing it; you have nothing hidden, you are truthful, forthright, straight and honest. And you have cleaned up any mess you have caused for those depending on your word. And almost unimaginable: what if others operated this way with you?”
‘Integrity’ and communication go together
If you read what Werner has written you get that ‘Integrity’ and communication go together – think of them as two sides of the same coin. Being ‘in Integrity’ means ‘being in communication’. How? Why? We live in relationship with one another and we progress our ‘projects’ (and an organisation exists to progress specific ‘projects’) by making, accepting, declining, renegotiating, fulfilling requests of one another – these requests can be implicit (implied) or explicit as is clearly set out by Werner. Making, accepting, declining, renegotiating, fulfilling requests how is this done? Surely it is done through language – right? That is to say through speaking and listening – whether that is face to face, on the phone, email, SMS…
Let me put it more bluntly when you are part of a group – and we are always part of a group as we exist in relationship – not ‘being in communication’ with the group is being ‘out of Integrity’. That is simply so even if you did not promise to be in communication. Why? Because it our normal functioning to expect the people in our group to ‘be in communication’ – to let us know what is going on. How do you feel when your son or daughter does not let you know what is going on his/her life? How does your mother feel if you turn up and tell her that you have been experiencing a really difficult time for the last year? Does she berate you for not sharing? Does she say that you should have called her and shared your pain? I hope you get what I am saying.
‘Integrity’ and leadership
One of the people who read my last blog on ‘Integrity’ made the comment that his organisation (he is the CEO) relies on a contract manufacturer and fulfillment partner to honor its promises to its customers. He also pointed out that this contract manufacturers is out of ‘Integrity’: this organisation has committed never to be out of stock and to despatch order within one day and it is regularly out of stock and often takes up to five days to despatch orders to my readers customers. Bob (the reader) also stated that whilst the CEO of the contract manufacturer is in ‘Integrity’ the people in his organisation are out of ‘Integrity’ – else the organisation would honour the agreements around stock and fulfillment. My response: bull***t!
What goes with being the CEO (the leader) of an organisation? When I or you step into the CEO role you automatically become responsible for the ‘Integrity’ of the whole organisation! That is what is so. The CEO is the top dog and rightly or wrongly we (customers, partners, employees, suppliers, regulators) expect the CEO to make sure that his organisation works: it does what it says (keeps promises) and says what it does (honesty, authenticity). So the hallmark of effective leadership is taking the stand: I am responsible for the ‘Integrity’ of the organisation that I lead. What goes with this stand? It involves setting up an ‘existence structure’ that regularly gets me present to where the organisation is out of ‘Integrity’ and another (or perhaps the same) ‘existence structure’ for taking action to get the organisation back into ‘Integrity’. Any fool can take responsibility for his own (personal) integrity it takes a special fool to take responsibility for the group of people – family, organisation, community, society.
Does you CEO relate to himself as the person who is responsible for the ‘Integrity’ of the organisation he leads? And when the ‘Integrity’ of the organisation is out does he/she ask the question: who am I being such that the ‘playing field’ that I have created (upon which the organisation plays the game of business) gives rise to the organisation that I lead being out of ‘Integrity’? Or does he/she simply point the finger of blame at other people in or outside the organisation? Why do I say outside of the organisation? Because the CEO is also responsible for the ‘Integrity’ of value chain partners! When I, the customer, order from Amazon I expect Amazon to be accountable for getting what I have bought to me by the promised date. I do not care if Amazon has outsourced part of the value chain to another party e.g. the end delivery to a fulfillment company like Yodel – I hold Amazon responsible!
‘Integrity, leadership, communication and performance – how are they connected?
By now you should be clear that ‘being in Integrity’ can only occur if you are also ‘being in communication’. You should also be clear that ‘being in Integrity’ for the organisation as a whole is related to leadership. And you should know that ‘being in Integrity’ is desirable because when any ‘system’ is not in ‘Integrity’ then workability and performance of that ‘system’ degrades. So I’d sum it up as follows:
- Leaders are responsible for the performance of their organisations;
- Performance (the output) is correlated with the ‘Integrity’ of the organisation (the ‘system’) – ‘Integrity’ gives rise to workability and performance which means that if you compromise on ‘integrity’ then you are compromising workability and performance of the system that you are responsible for;
- Leadership is fundamentally about being a stand for the ‘Integrity’ of the entire organisation (including value chain partners) and setting up ‘existence structures’ to quickly detect where the organisation is ‘out of Integrity’ and then taking prompt, effective action to put the organisation back ‘into Integrity’; and
- Communication is essential to ‘Integrity’ and so leadership involves a concern for effective communication – communication that tilts the table towards the organisation being ‘in Integrity’ rather than being ‘out of Integrity.
What do you say?
This post is related to and carries on the conversation started in the following posts:
What is a guiding policy?
Let’s start with what it is not. A guiding policy is not concerned with ambition – the desired outcome, the end state, what you wish to accomplish. Arguably it is easy to create a picture of the kind of customer experience you want your organisation to generate say in 12 months. Figuring out which course of action is most likely to get you there is a very different exercise and requires a different type of thinking. Here is how Rumelt puts it in his book Good Strategy/Bad Strategy:
“The guiding policy outlines an overall approach for overcoming the obstacles highlighted by the diagnosis. It is “guiding” because it channels action in certain directions without defining exactly what shall be done.…Like the guard rails on a highway, the guiding policy directs and constrains action without fully defining its content.”
I once consulted with a financial services company that had aggressive revenue and profit growth targets. Yet its growth – customer base, revenues, profits – had stagnated after a great start. How to generate that growth? Which guiding policy to pursue? The options on the table included: attracting new customers for existing products; coming up with more products e.g. pension plans; moving into new geographical markets; selling more financial products to existing customer base….
The diagnosis showed that on the whole each existing customer held only one financial product. The guiding policy chosen was that of x-selling the existing portfolio of products to the existing customer base. Why? Because: the company had a sizeable customer base; the customers were satisfied and loyal; and research suggested that many of these customers were not aware of the full range of products that the company offered.
A good policy seeks to create/exploit advantage
This brings me to issue of advantage – how a good guiding policy seeks to create/exploit advantage. This is how Rumelt puts it:
“A good guiding policy tackles the obstacles identified in the diagnosis by creating and drawing upon sources of advantage. Indeed, the heart of the matter in strategy is usually advantage. Just as a lever uses mechanical advantage to multiply force, strategic advantage multiplies the effectiveness of resources and/or actions.”
What guiding policy did Howard Schultz put in place to turnaround Starbucks when growth had stalled and the Starbucks brand had lost its former magic? The first part of his guiding policy, as I understand it, was to stop the bleeding: to close stores that were unprofitable and unlikely to be profitable. The second part of his guiding policy (once the first part had been executed) was to focus on getting back to the kind of customer experience that Starbucks generated and to be the ‘third place’ again.
Why did he go down this route? Because many of the people in Starbucks had noticed how the original passion for coffee, the customer, the customer experience had gone out of Starbucks and were up for, even crying out for, bringing it back into Starbucks so that it could be the soul of the brand once more. Put differently, Schultz exploited the passion of his people for the Starbucks and what it stood; when you are instigating change there is no advantage like tapping into the hearts of the people in your organisation.
A good guiding policy itself can be a source of advantage
How? Let’s take a look at Gerstner and his turnaround of IBM. Gerstner came up with the guiding policy of providing customer solutions instead of selling products. This made great sense because it met customer needs and played to IBM strengths – its breadth and depth of expertise in almost all areas of IT. Yet the policy itself “provide customer solutions” created advantage because it replaced ambiguity/uncertainty with clarity about what to do and how to do it. It was the stimulus that got IBM going on the journey of coordinating and concentrating IBM’s vast resources on a specific challenge “provide customer solutions”.
I want to end this post with the words of Richard Rumelt:
- “A guiding policy creates advantage by anticipating the actions and reactions of others,
- by reducing the complexity and ambiguity in the situation,
- by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and
- by creating policies and actions that are coherent, each building on the other rather than canceling one another out.”
If you have any interest in strategy then I recommend buying Good Strategy Bad Strategy. Alternatively you might want to watch this speech/presentation:
In this post I continue the conversation I started in the last post on the kernel of a ‘good strategy’. Why? Because if you are talking about a ‘customer strategy’, a ‘customer experience strategy’, or any other strategy you should know what you are talking about when you talk ‘strategy’. And because you should know the difference between what passes for strategy (‘bad strategy’) and real strategy (‘good strategy’).
As the following diagram shows the kernel is composed of three strands: Diagnosis; Guiding Policy; and a Set of Coherent Actions. In this post I want to explore the first strand – Diagnosis – and stress its criticality to generating a ‘good strategy’.
Diagnosis is concerned with the question “What is going on here?”
In my consulting work(as a strategist) a great deal of my time is spent in the following: creating a ‘map of the territory’; and coming up with a diagnosis. Being an outsider I have to ‘create a map of the territory’ as it is essential to being able to come up with a diagnosis. So I conduct high level research on the company (history, key players, organisational structure, products, markets, distribution channels, financial performance..), its industry, its competitors etc.
Once I have an adequate (usually high level) ‘map of the territory’ to orient myself I concern myself with the task of Diagnosis. The diagnosis is always linked to the ‘strategic issue’ that requires a strategy. What might that strategic issue be? Examples include: Why are we signing up less and less customers through our website? Why is it that so many customers are leaving us and going to our competitors? Why is it that our sales folks are so much less effective in selling to our business customers? Or why is it that there is crisis around the Euro?
Lets make this discussion real through a personal example. During August holidays my young daughter told us (her parents) that her left wrist was hurting. It continued to hurt for several days and we could not figure out why it was hurting. So my wife took her to a doctor. The doctor asked various questions: when did it start; what were you doing, where does it hurt, what kinds of actions cause it to hurt…. And then he examined her arm: pressing here, pressing there, and observing her reactions. At the end of this his answer to the question “What is going on here?” was that my daughter was most likely to have as a small fracture in her wrist. This was later confirmed by the x-rays.
Diagnosis: insight, genuine insight, is of the utmost significance
According to Richard Rumelt in Good Strategy/Bad Strategy:
“An especially insightful diagnosis can transform one’s view of the situation, bringing a radically different perspective to bear. When a diagnosis classifies the situation as a certain type, it opens access to knowledge about how analogous situations were handled in the past…”
What does an insightful diagnosis look like? Allow me to share a personal example, again. My eldest was being disruptive and obnoxious at home but only at home. So I was grappling with the question “What is going on here?”. I came up with various answers: he eats too much junk food and that is affecting his mood/behaviour; he is bored; we are not being strong/consistent enough in enforcing discipline …… When I discussed this with my wife she replied: “What is missing is a relationship between you and him!” It immediately struck me that this was a game changing diagnosis: it opened up avenues that had simply not been present. And it struck me that it was an accurate and insightful diagnosis: most poor/disruptive behaviour is a result of poor relationships. As a result I ended up with a completely different guiding policy and this triggered a radically different set of coherent actions.
Do you want examples of especially insightful diagnosis that transformed a view of the situation at hand? You will find them (Apple, IBM) towards/at the end of this post.
Diagnosis: what constitutes a good diagnosis?
It is not always possible to come up with an insightful, game changing, diagnosis. Sometimes we just have to settle for a good diagnosis. What constitutes a good diagnosis? A good diagnosis according to Rumelt:
- links facts into a pattern and at a minimum names/classifies the situation into a certain type;
- “replaces the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects“ and thus enables/encourages more attention to be paid to some issues/feature and less to others;
- “does more than explain a situation, it also defines a domain of action” that is to say it is actionable, it identifies one or more levers that can be pulled; and
- is explicit and thus permits an independent person to evaluate the strategy (diagnosis, guiding policy, set of coherent actions).
Diagnosis: both a hypothesis and a decision of utmost significance
The real world is complex there are so many actors/variables that interact and are interdependent. Put differently, challenges that really matter and which face companies/organisations/governments are ill-structured. That is to say it is not obvious how to define the problem (the situation at hand) nor is there an obvious/sound list of guiding policies or actions. And the linkage between actions and outcomes are not clear. This means any diagnosis and every diagnosis in an ill-structured situation is an educated guess.
It also means the a diagnosis is a decision – a decision of substantial importance. Why? Because the diagnosis shapes the future: the guiding policy, the set of coherent actions, and the outcomes that result. As Rumelt says:
“In business, most deep strategic changes are brought about by a change in diagnosis – a change in the definition of a company’s situation.”
Are you wondering what he is talking about and pointing out? Then I draw your attention to:
- Steve Jobs who changed the diagnosis and thus did the opposite of what the experts advised – sell Apple, license the software – when he took the helm at the almost bankrupt Apple;
- Lou Gerstner who changed the diagnosed and how he did the opposite of what experts were advising – break IBM up into seperate/distinct businesses; and
- Stepen Eloph who has shifted Nokia from independence to being reliant on Microsoft and its operating software for smartphones.
I will continue the conversation in the next post and explore the second element within the kernel of a strategy: the Guiding Policy.
Misunderstanding, reality and narrative
There are so many misunderstandings around customer-centricity that it is hard for me to know where to start. In this post, I want to deal with a particularly dangerous and widespread misunderstanding. Some of you have led yourself to that misunderstanding after reading my last post on customer-centricity. Before I deal with this misunderstanding I want to draw your attention to the following:
Reality is amenable to and readily supports any narrative that we place on it. Once upon a time the narrative was the earth is flat. Later the narrative changed to the world is round. Once upon a time there were witches in the world, now, at least in the West, there are no witches. For a little while the narrative was almost all of the DNA in the human genome was junk DNA. Today the narrative is that vast majority of so called ‘junk DNA’ is essential to and involved in key biochemical processes. I hope you get what I am getting at.
No single definition and/or ‘understanding’ of customer-centricity will exhaust customer-centricity. Put differently, customer-centricity seems so obvious until you really grapple with it. And when you grapple with it all kinds of stuff shows up – some of it rather surprising. Furthermore, what shows up as customer-centric in one context may not show up as customer-centric another context.
With that out of the way and the context set, lets grapple with this misunderstanding.
To be customer-centric you have to be nice and give you customers what they are asking for
Far too many people confuse customer-centricity with doing what the customer wants, giving the customer what he wants, and being ‘nice’. Some go further and equate customer-centricity with being a patsy, a pushover. I say this is the most serious misunderstanding plaguing customer-centricity.
Why is it so dangerous? First, there are the people who understand customer-centricity this way and for them it shows up as unrealistic and distasteful. Given this way of understanding customer-centricity they dismiss it and/or want nothing to do with it. Second, there are a different group of people who speak and act as if customer-centricity is as simple as giving the customer whatever he asks for.
Customer-Centricity is neither this simple nor this simplistic
To both of these groups of people I say that you are mistaken. You’re mistaken, badly mistaken. Customer-centricity is neither that simple nor that simplistic.
I say that being customer-centric is a stand that you take and not a fixed set of behaviours. What kind of stand am I talking about? The kind of stand that says that the only acceptable profit is that made by creating genuine value for customers. It means letting go of existing policies and practices that enrich the company at the expense of customers – ‘bad profits’. Taking the customer-centric stand is not possible without courage. The kind of courage Tony Hsieh and the Zappos management team showed when the business was in deep trouble financially and they gave up a lucrative source of revenue, profits and cash because it did not fit with their vision and stand to be the brand renowned for great customer service.
I say that being customer-centric is as much about being proactive in coming up with new products/services/experiences that you believe will create value for customers as it is about reacting to what customers say/ask for. As I write this Apple/Steve Jobs/iPod/iTunes/iPhone/iPad come to mind immediately. Or think of Amazon, ebooks and the Kindle.
I say that being customer-centric is as much about influencing/persuading customers as it is listening to/obeying customers. Yes, there is a role for the right advertising, marketing and selling. Customers are human beings and they do not necessarily know what is best for them. Even if they do know, customers often do not do what is best for their well-being. This is where you can use insights into the human functioning to come up with a design that nudges the customer towards the right behaviour. It is also where something more forceful than a nudge can be necessary. Again I cannot help but think about how Jobs handled the antenna/signal reception issue around the iPhone. Or think about how Zappos persuaded shoe buyers that it was OK to buy shoes online without trying them on.
I say that customer-centricity only makes sense in a particular context and as such being customer-centric requires a “yes” when it is appropriate to say “yes” and a “no” when it is appropriate to say “no”. This point was the key point made by Frances Frei and Anne Morriss in their book Uncommon Service. As they say “you have to be bad in the service of good”. They talk at some length about Commerce Bank: to be great at convenience and service Commerce Bank chose to only offer one banking product (checking account) and paid the worst rates of any bank in the market place. Look, if you turn up at my Mercedes dealership and want to pay Ford prices then the most ‘customer-centric’ behaviour is for me to drive you to the nearest Ford dealership! Furthermore, sometimes a “no” is simply in the best interests of your customer even if he does not know it. This was the point I was making in this earlier post.
I say a lot. What do you say? If you the situation at hand differently to me then speak up and share your understanding.