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BOOM! – The Perils of Big-Bang Rollouts

Posted on March 4, 2014 by David

Off Target

Late last year Target, the Minneapolis-based American discount retail chain, suffered a massive data security breach. Just before the busy Christmas season hackers broke into the corporation’s computer systems and stole information from over 100 million of its credit and debt card users. Fraudulent transactions using that data began almost immediately. It was a public relations disaster for Target, as its holiday sales fell 3-4% over those of the previous year and it was faced with the problem of repairing its security systems and replacing the customers’ cards. But there was a silver lining to this dark cloud: at least the big chain did not have to talk about the disastrous rollout of its Canadian venture, where it is expected to lose $800-$900 million in 2013. It had expected to break even!

Target announced its intention to enter the Canadian market – its first international expansion – in early 2011. It bought the leaseholds of 220 stores of the Canadian retailer, Zellers, which was a low-end discounter that had fallen on hard times. Zellers was founded during the Great Depression, when it had flourished via alliances with the American variety store, W.T. Grant (Grant went bankrupt in 1976) before being acquired by the Hudson’s Bay Company in 1978. Zellers took over the K-Mart operations in Canada but even together they were unable to compete effectively with Wal-mart and other big box retailers. The upshot of the deal was that, instead of being able to do an incremental store-by-store advance into Canada, Target was faced with executing a large-scale “big-bang” rollout in facilities that did not necessarily fit its size and location requirements and in a country where it could not rely on its American supply chain to handle the logistics.

The consequences of this, which even a casual shopper in the stores could see, were catastrophic. Much of the attractive merchandise found in the US stores never made it across the border due to licensing and labeling problems. In Canada there were miles of empty shelves and the prices of the goods on them seemed much higher than those in the US. As a result the Canadian Target stores seem empty and cheerless. Some shoppers say they preferred the old Zellers! Continue reading →

Posted in Change, Leadership, Strategy | Tagged big bang, change, ecological perspective, hacking, HMO, Hudson's Bay, Learning from the Links, Lowe's, Obamacare, Oxford Health Plans, positive deviance, RONA, security breach, Stephen Wiggins, systems, Target, W.T. Grant, Zellers | 1 Comment

Sweet But Dangerous: The Challenge of Institutional Change

Posted on February 25, 2014 by David

John Yudkin
(1910-1995)

There was a very interesting story in the Sunday Telegraph a couple of weeks ago about John Yudkin (1910-1995), a British physiologist and nutritionist who did pioneering work on the connection between the consumption of sugar and all manner of health problems. In 1972 he wrote a book Pure, White and Deadly that outlined the link between excessive sugar consumption and heart disease and hinted at its connection to obesity, diabetes and liver disease as well as possible relationships with some kinds of cancer.

Not only was this message extremely unwelcome to the sugar industry and manufacturers of processed foods, but it went against the conventional wisdom of the times that saturated fats were the problem. The fat story had been a boon to sugar industry because food processors had responded to public concern about health by producing low-fat versions of their products and using vast amounts of sugar to conceal the fact that without fat they tasted awful. Thus what followed Yudkin’s book is a classic illustration of the challenge of institutional change. Like the tobacco industry and the makers of leaded gasoline, to name just two examples, the sugar industry and those who used sugar as a major ingredient of their products, had insinuated themselves into the fabric of the communities they depended upon. Sugar manufacturers sat on national nutrition councils and pop producers sponsored conferences. They set out to discredit Yudkin and his work in ruthless, unscrupulous ways. He found himself disinvited from conferences and vilified by fellow scientists employed to discredit his work, which was dismissed as “emotional assertions” and “science fiction”.

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Posted in Change, Leadership, Strategy | Tagged Alfred Wegener, conscious capitalism, continental drift, fructose, institutional change, John Yudkin, paleomagnetism, sugar, Whole Foods | 2 Comments

Watch Your Language! Why Metaphors Matter in Management

Posted on February 18, 2014 by David

“Good news. The test results show it’s a metaphor.”

It’s another launch of another strategic plan to the company’s senior and middle managers and the CEO is rattling on about “roadmaps” and “blueprints” that will generate “traction” in the market and “buy-in” from the employees. The employees are watching politely, but I can see that they aren’t engaged by the message and that their “shields” are “up”. No wonder; the kinds of images that the CEO’s language is evoking are mechanical ones of top-down control. If you have a roadmap for a journey, that implies that you know where you are going and that there is a clear route to be followed; blueprints are usually designs for machines and they suggest that we have a detailed design for the project and that all we have to do is build it according to specifications. The roadmap and blueprint images both imply that little creative input or learning is expected from the employees; they just have to follow directions. And the “buy-in” metaphor indicates that no commitment on the part of employees is needed either – it just an economic transaction.

“That’s ridiculous!” I can here some readers mutter, “…‘roadmap’ and ‘blueprint’ are just figures of speech.” Yes, they are “figures of speech” but their impact is far from trivial. Indeed I think that their power is far greater than most managers realize and it drives me crazy to hear the careless use of such a potentially powerful feature of language as the metaphor. I can still remember how depressed I felt when the CEO of the company that had acquired us described himself and his senior team as “guns for hire”; the image of mercenary killers was totally at odds with the culture of commitment that we were trying to build in our organization.

The view of the role of metaphor in management practice has been an erratic one. The reform of the business schools in the late 1950s was greatly influenced by the views of analytic philosophy, which emphasized conceptual clarity and formal logic and had no time for metaphorical language. This began to change in the late 1970s, with the appearance of Burrell and Morgan’s Sociological Paradigms and Organisational Analysis, which used Thomas Kuhn’s concept of the paradigm to suggest that there were radically different ways of framing organizations and their issues. Subsequently Gareth Morgan went on to write about the critical role that metaphors play in this framing process in his well-known book, Images of Organization. He explored organizations as machines, as organisms, as brains and as psychic prisons among other analogies. Each of these metaphors revealed some insights but concealed others and none was comprehensive.

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Posted in Change, General, Leadership, Strategy | Tagged Aristotle, blueprint, buy-in, change, ecological perspective, ecological rationality, embodied cognition, Gareth Morgan, George Lakoff, Gibson Burrell, Mark Johnson, metaphor, roadmap, Thomas Kuhn, top-down | 1 Comment

Skating To Where the Puck Is Going To Be: CVS Decides to Stop Selling Cigarettes

Posted on February 11, 2014 by David

“Cigarettes have no place in an environment where healthcare is being delivered.” With these words, Larry Merlo, the CEO of CVS, the US second-largest drugstore chain, announced that they would be the first such chain to discontinue the sale of cigarettes. The decision appears to be an admirable one. It comes across as the highly unusual decision of a public company to forgo certain short-term profits in exchange for uncertain long-term benefits. CVS estimates that, together with ancillary products bought by smokers, it will lose about $2 Billion in annual revenue, costing it about 17 cents a share in earnings (CVS earns about $4.50 a share annually). So the downside is clear; what about the upside?

The upside has to be seen against the volatile, ever-changing face of American healthcare, with all its attendant uncertainties. One of the most helpful guides to this is Harvard Business School’s Clayton Christensen’s The Innovator’s Prescription, written with medical doctors Jerome Grossman and Jason Hwang. Their basic insight is that the one of the reasons that the American healthcare system is so expensive and inefficient is because it is being disrupted by three dynamics. The first is scientific and technological progress, which sees our understanding of diseases advance from that of symptoms to causes. Thus leukemia, which we used to think of as a single disease, is now seen as comprising over forty different kinds of blood cancers, each of which may require a different approach. The second is what they call business model innovation, often facilitated by digital technology. The third disruptive dynamic is in the value networks – the contexts in which firms launch their business models. The migration of TV sales from appliance stores to discount retailers would be a good example.

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Posted in Change, General, Leadership, Strategy | Tagged American healthcare, business model, change, Clayton Christensen, community, diagnostics, disruption, drugstore chain, ecological perspective, ecosystem, facilitated network, general hospital, hernia, Innovator's Prescription, Jason Hwang, Jerome Grossman, lukemia, Minute Clinic, pharmacy, Roman Catholic Church, Shouldice Clinic, solution shop, subsidiarity, value-added process, Wayne Gretsky | Comments Off

“Ethical Capitalism – Worth a Try?” – Confusion at Davos about What “It” Is

Posted on February 4, 2014 by David

Zanny Minton Beddoes chaired the panel

“Ethical Capitalism – Worth a Try?” was the rather timid title of one of the open forum sessions at the recently concluded World Economic Forum at Davos. It was chaired by Zanny Minton Beddoes, the Economics editor for The Economist, and featured a panel of leading businesspeople as well as the social sector represented by Save the Children’s Jasmine Whitebread and Muhammad Yunus of Grameen Bank fame.

The panel began with Stan Bergman, Chairman of Henry Schein, declaring that he was “100% committed to the notion of free markets” as if they were articles of faith rather than useful tools, whose efficacy in practice is not always guaranteed. This point was made later by the economist on the panel, Ignazio Visco, Governor of the Bank of Italy. But it quickly became clear that most of the businessmen regarded capitalism as an economic machine that tended toward equilibrium and that any changes should be minimal and directed at making the machine work better. Of course this assumption of equilibrium legitimizes the status quo and makes any criticisms of the system suspect.

Several of the participants made the point that, as an economic mechanism, capitalism is inherently free of ethics and that they have to be imposed from the outside. From that they concluded that there was nothing inherently wrong with or bad about the capitalist system; the problems were caused by bad or misguided individuals – investors who looked only to the short-term, unethical capitalists and interventionist governments. It was another version of the “bad apples, not a bad barrel” argument; get rid of the wrong doers, the system is fine.

The only participant who disagreed with this assessment was Muhammad Yunus, who argued that capitalism has an inadequate, impoverished view of human nature, emphasizing selfishness at the expense of our ability to be selfless and altruistic. He gave the example of payday lenders in America and the UK who are often the only source of funds for poor people and who charge interest rates of 1,000% or more. He went on to suggest that the high level of unemployment and that the state of the American healthcare are both examples of problems with the capitalist system. Clearly his comments struck a note with the audience and his remarks were the only ones to be applauded.

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Posted in Change, General | Tagged Davos, ethical capitalism, Henry Schein, Ignazio Visco, Jasmine Whitbread, KPI, Martin Sorrell, Max Weber, Muhammad Yunus, Quakers, Stan Bergman, wertrationale, World Economic Forum, WPP, Zanny Minton Beddoes, zweckrationale | 2 Comments

The “3Rs” of Management Part II: Rationality and Power

Posted on January 28, 2014 by David

Walter Bagehot (1826-1877) founder of The Economist

Walter Bagehot once wrote that “The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards”. Following on my blog from last week, I think that this is a fair description of what has happened to the creed that was used to reform the business schools in the 1950s. It was invaluable at first, shaking up a field that had probably not been challenged for some time and that was in need of renewal. The quantitative, instrumental focus on means – the “what” and the “how” – helped American industry focus on the challenges of managing growth and scale in the aftermath of World War II. Twenty-five years later, however, with the rise of investor capitalism and the shareholder value model, the creed started to become destructive and counter-productive. Analysis began to trump synthesis as calculation triumphed over judgement and value-distribution took precedent over wealth-creation. The “what” and the “how” began to take over from the “who” and the “why”. In addition the problems faced by the Western world were changing as the challenge of managing growth and scale moved to China, India and other countries in the East. The watchword in the West is now “innovation”.

Perhaps the central issue in making any organization innovative is that of power and its distribution. We understand the contexts that encourage creativity, innovation and entrepreneurship quite well. I call them contexts with “hunting dynamics” – small-scale, egalitarian, wide open communication that promotes trust, learning-by-doing (and hence the ability to make mistakes) and a so-called “fission-fusion” dynamic where the group is continually going out into a much wider network configuration to explore and search for opportunities and then coming together to meet face-to-face, build relationships and exploit those opportunities. This “hunting” dynamic, which requires all the strengths of the team to be mobilized, demands a rather flat distribution of power instead of the pyramidal one found in large-scale, hierarchical organizations. One of the factors that perpetuates this situation is that the assumptions of rationality make power in organizations very difficult to discuss.

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Posted in Change, General | Tagged agency theory, Bent Flyvbjerg, Bertrand Russel, Bertrand Russell, domination, ecological perspective, ecological rationality, exploitation, Harold Leavitt, hunter-gatherer, innovation, investor capitalism, Machiavelli, means and ends, Nietzsche, power, Rakesh Khurana, Rationality and Power, rationalization, Realpolitik, Realrationalitat, shareholder value model, Walter Bagehot | Comments Off

The 3 “Rs” of Management: Rigour, Relevance and Rationality

Posted on January 21, 2014 by David

The 3Rs of Management

The debate between rigour and relevance continues in management education, usually spurred by management professors’ concerns that practitioners are paying little attention to their research. The history of the problem is now familiar: in the first half of the 20^th Century America’s schools of technology and commerce were mostly vocational schools, staffed by practitioners and aimed at preparing business people for their careers. They were not known for the intellectual horsepower of either their faculty or their students. In the 1950s these schools came under heavy criticism as “wastelands of vocationalism”. Reformers, guided by reports from the Ford Foundation and the Carnegie Corporation, moved to make them more research-oriented and to place management on a sound “scientific” foundation. The schools grew enormously, but as rigour replaced relevance practitioners found the research products of the schools less and less comprehensible. Worse still, as the management academic community grew, writers and researchers found themselves with internal academic audiences large enough to consume their writings without any need for them to appeal to practitioners. According to its critics the result of this “incestuous, closed loop” has been the creation of an activity that has been compared to the glass bead game in Herman Hesse’s novel of the same name. That is, research on management has become an esoteric intellectual activity completely detached from the problems of the world.

Some of these thoughts came to mind when I read the Schumpeter column in The Economist over the weekend. In it Adrian Wooldridge reports on the findings of a pair of economists that managers actually make a difference to firm performance. They proved through “rigorous research” that setting targets, rewarding performance and measuring results is associated with better financial performance than not conducting those activities. Proving causality rather than just correlation is always a problem but the researchers had some nice “before and after” experiments that supported their conclusions. In general though their conclusions were pretty underwhelming and I thought that the column was far too reverential – as if managers had been sitting around waiting for scientific evidence before taking action. Here is my comment on the column:

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Posted in Change, General, Leadership, Strategy | Tagged Bloom, Carnegie Corporation, constructivist, ecological rationality, engineering, Ford Foundation, Hayek, Kahneman, Martin Wooldridge, Michael Raynor, Mumtaz Ahmed, rationality, relevance, Richard Rorty, rigour, rules, Schumpeter, System 1, System 2, The Economist, Van Reenen, Vernon Smith | Comments Off

Why Isn’t ‘Servant Leadership’ More Prevalent?

Posted on January 14, 2014 by David

This was the question posed recently on the Wisdom Research Network of the University of Chicago by James L. Heskett, Baker Foundation Professor, Emeritus at the Graduate School of Business Administration, Harvard University. He continued:

“Servant leadership is an age-old concept, a term loosely used to suggest that a leader’s primary role is to serve others, especially employees. I witnessed a practical example of it at a ServiceMaster board meeting in the 1990s when CEO William Pollard spilled a cup of coffee prior to the board meeting.

Instead of summoning someone to clean it up, he asked a colleague to get him cleaning compound and a cloth, things easily found in a company that provided cleaning services. Whereupon he proceeded to get down on his hands and knees to clean up the spill himself. The remarkable thing was that board members and employees alike hardly noticed as he did it. It was as if it was expected in a company with self-proclaimed servant leadership.

Lao-Tzu wrote about servant leadership in the fifth-century BC: “The highest type of ruler is one of whose existence the people are barely aware…. The Sage is self-effacing and scanty of words. When his task is accomplished and things have been completed, all the people say, ‘We ourselves have achieved it!'”

It is natural, rightly or wrongly, to relate servant leadership to the concept of an inverted pyramid organization in which top management “reports” upward to lower levels of management. At other times it has been associated with organizations that have near-theological values (for example, Max De Pree’s leadership at Herman Miller, as expressed in his book, Leadership is an Art, that emphasizes the importance of love, elegance, caring, and inclusivity as central elements of management). In that regard, it is also akin to the pope’s annual washing and kissing of the feet as part of the Holy Thursday rite.

The modern era of servant leadership began with a paper, The Servant as Leader, written by Robert Greenleaf in 1970. In it, he said: “The servant leader is servant first … It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead … (vs. one who is leader first…) … The best test, and difficult to administer, is: Do those served grow as persons … (and become) more likely themselves to become servants?”

Now it appears that a group of organizational psychologists, led by Adam Grant, are attempting to measure the impact of servant leadership on leaders, not just those being led. Grant describes research in his recent book, Give and Take, that suggests that servant leaders are not only more highly regarded than others by their employees and not only feel better about themselves at the end of the day but are more productive as well. His thesis is that servant leaders are the beneficiaries of important contacts, information, and insights that make them more effective and productive in what they do even though they spend a great deal of their time sharing what they learn and helping others through such things as career counseling, suggesting contacts, and recommending new ways of doing things.

Further, servant leaders don’t waste much time deciding to whom to give and in what order. They give to everyone in their organizations. Grant concludes that giving can be exhausting but also self-replenishing. So in his seemingly tireless efforts to give, described in the book, Grant makes it a practice to give to everyone until he detects a habitual “taker” that can be eliminated from his “gift list.”

Servant leadership is only one approach to leading, and it isn’t for everyone. But if servant leadership is as effective as portrayed in recent research, why isn’t it more prevalent? What do you think?”

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Posted in General, Leadership | Tagged Adam Grant, First Industrial Revolution, Give and Take, Herman Miller, James L. Heskett, Lao-Tzu, leadership, Mary Parker Follett, Max de Pree, power-over, power-with, Quakers, Robert Greenleaf, servant-leadership, ServiceMaster, Taoism, wisdom | 5 Comments

Words are Easy, Numbers can be Faked, Behaviour is Difficult: The Case for Embodied Management

Posted on January 7, 2014 by David

“Genghis” the Robot

When I wrote Learning from the Links back in 2002 I was trying to make the case that management, like golf, was a practice and attempts to make progress in either activity should follow similar paths. I was particularly inspired by the work of MIT professor of robotics Rodney Brooks, who was building robots using a revolutionary “bottom-up” approach. This was in sharp contrast to the “top-down” approach of what he called Good Old Fashioned Artificial Intelligence (GOFAI). GOFAI was based on the assumption that the brain was the seat of intelligence and thought and that it used symbols to build a representation of an external “reality”. According to this view, the brain senses what is going on in the outside world, converts the input into symbols, which it then manipulates before sending out instructions on what the “body” should do. Unfortunately the resulting programs were unable to do the kinds of things that infants and toddlers do easily like recognize a face, manipulate blocks and learn to walk.

Instead of starting with a brain, Brooks started with a body with sensors and actuators, building a machine that was capable of sensing the position of its legs and the conditions of the local environment. Here is a description of the six-legged robot called Genghis walking:

“Genghis had six legs but no “brain” at all…Each of Genghis’s six legs worked on its own, independent of the others…Walking for Genghis then became a group project with at least six small minds at work. Other small semiminds coordinated communication between the legs…walking emerged out of the collective behavior of twelve motors. Two motors at each leg lift, or not, depending on what the other legs around them are doing. If they activate in the right sequence – Okay, hup! One, three, six, two, four! – walking “happens.”

There is no “brain” reading input, making decisions and then sending output to the legs to implement the decision. Once the activity is initiated and the process started, the behavior we call “walking” emerges.

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Posted in Change, General, Leadership, Strategy | Tagged artificial intelligence, body, body-mind, brain, Charles Sanders Peirce, dualism, embodied management, Genghis, GOFAI, integrated reporting, John Dewey, Learning from the Links, Mark Johnson, pragmatic turn, pragmatists, Rodney Brooks, Upton Sinclair, William James | Comments Off

Every Manager a “Janus”: Ambidexterity and the Ecological Perspective

Posted on December 31, 2013 by David

Statue of Janus from the Vatican (Courtesy of Wikipedia)

I can’t believe it’s almost January again, but perhaps it could make a timely theme for a blog. The month is named after Janus, the Roman god of thresholds – beginnings and endings – who looked two ways, toward both the past and the future. The concept has a very ancient history; although there was no Greek equivalent, the idea of a god with two faces can be found in Babylonian art and other Indoeuropean religions. The general concept floats in and out of Western consciousness, where it has been particularly popular with creative people in many fields.

“Janusian thinking” was a phrase coined by psychiatrist Albert Rothenberg in his 1979 book, The Emerging Goddess: The Creative Process in Art, Science, and Other Fields to describe a process of “actively conceiving two or more opposite or antithetical ideas, images, or concepts simultaneously”. He discerned use of the practice in the work of people ranging from Coleridge and William Blake to da Vinci and Michelangelo, Rembrandt and Picasso, Kierkegaard and Nietzsche, Poincare and Einstein. In the field of management its latest incarnations are in Roger Martin’s idea of The Opposable Mind and in the academic theory of ambidexterity. The latter concept is the subject of an excellent issue of the Academy of Management Perspectives. As an aside, let me say that membership in the Academy and access to their journals is still one of the best deals in the management field!

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