Luck and Agility

Bear with me, here’s a little chronology: • 1953: Rupert Murdoch takes control of the Adelaide, Australia newspaper company News Limited. • 1953-1964: Murdoch expands his holdings by buying a slew of suburban and provincial newspapers throughout Australia, culminating with the launch of The Australian (a USA Today type of national paper) in 1964. • 1968-1969: Buys The Sun and The Daily Telegraph in Great Britian.• 1973, 1976: Buys his first two U.S. papers, the San Antonia Express-News and the New York Post. (He had to sell the Post in 1988 because of cross-media ownership laws, but bought it back in 1993).• 1981: Buys the London Times and The Sunday Times. • 1985: Buys 20th Century Fox with its slew of regional TV stations which he eventually builds into the Fox network.• 1987, 1989: Buys book publishers Harper & Row, then Collins, then merges the two to HarperCollins• 1989: Forms BSkyB satellite TV. • 1993: Buys Star TV in Asia.• 1996: Launches Fox News Channel in the U.S.• 2005: Buys MySpace.• 2007: Buys The Wall St. Journal.This is an abbreviated chronology, believe it or not. And, believe it or not, unlike most serial acquirers, Murdoch has consistently created shareholder value rather than destroyed it. So the burning question is this: How does he do it? Through genius? Through brilliant strategic planning? Through some sort of cosmic intervention? Maybe, but Murdoch himself recently attributed his success to two factors: Luck and agility. There’s something for us to learn here. First of all, the reality is that luck and serendipity do play a tangible role in business success. In my experience, I’ve found that arrogant self-absorbed leaders deny the impact of luck, attributing their success almost entirely to their own brilliance, fabulous leadership and uber-prescience. Leaders who combine confidence with humility admit that the good fortune of being in the right place at the right time always deserves some credit. Jim Collins demonstrated the importance of leadership humility in Good to Great. I agree. You're better off placing your bet with the humble leader than with the blowhard. The agility factor is even more important. In my 20 years of researching this topic, I’ve found that the best organizations are not necessarily the best at planning, but the best at quickly taking advantage of the fleeting opportunities that periodically appear in the horizon of the marketplace. Troubled organizations focus their resources on getting good at analyzing and planning. Successful organizations focus their resources on getting agile and fast. Good strategic planning is important, to be sure. You need to have a clear sense of your direction and priorities. But as the great general von Clausewitz noted: “No battle plan survives first contact with the enemy.” The competitive terrain shifts and convulses regularly. That’s why, consistent with Murdoch’s view, the best companies focus on staying light and nimble. I call it “strategy on the run.” As I wrote in Break From the Pack: “The winners…are companies whose people are always scanning the environment and horizon for opportunities and agilely capitalizing on them, then quickly generating action plans, racing to execute them, and ultimately redefining themselves in line with changing market realities.” I’m certain that thorough due diligence, vetting and oversight preceded every one of Murdoch’s acquisitions, and I’m also certain that they were conducted with a sense of healthy urgency and speed. For the leader, the lesson from Murdoch’s career is not “let’s do a binge of acquisitions”. The lesson is “let’s humbly respect the power of luck, and let’s concentrate on getting agile so that we can take rapid-response advantage of any opportunity—acquisition, market niche, technology, partnership, potential hire, or anything else that can help us create genuine value.”
Posted by Oren Harari at 12:26

The Value of Wearing Customer Glasses

In my September 7 blog, I noted the intimate connections between innovation, customers, execution, and profitability. I also suggested that while each of these issues is vital for organizational health and performance, a leader would be very wise to put the customer first and foremost. To illustrate this point further, I want to share with you a story about Jim McNerny’s early days at Boeing. In June, 2005, Boeing named McNerny as its new CEO. McNerny had enjoyed an impressive run as CEO of 3M, and upon his appointment he prepared to transform a financially and ethically troubled corporation that was getting competitively trounced by Airbus. Today, of course, the tables have been turned, and Boeing’s slim 787 Dreamliner is kicking some serious aerospace butt, while Airbus’s fortunes have seriously declined in the wake of the company’s disastrous forays into the monstrous 600-seat 380 jet. There are many reasons for this reversal of fortune (and to be sure, hideous Airbus execution in operations is one big culprit). But I submit that one of the main reasons is that McNerny got Boeing executives to take off their traditional “engineer” and “manufacturer” eyeglasses and replace them with “customer” eyeglasses—to view the world differently, and react accordingly. One story will demonstrate what I mean. In one of McNerny’s early senior meetings, he asked the executives to explain the value and benefits of the 787’s new composite technology. The chief technology and engineering people put together a nice Power Point on factors like fatigue life, corrosion, and such,. The manufacturing and financial people put together a nice Power Point on factors like operational and cost efficiencies and such. And McNerny responded in a bizarre way. He said, in effect, that he was aware of all those benefits, but they all were benefits for Boeing. His question was different. What he had meant was: How does the new composite technology benefit Boeing’s customers, in this case the airlines? As you can imagine, the reaction in the room was slack jaws and a “hmmm…”. But McNerny was not engaging in word play. He was trying to get Boeing's leaders to view the world from the customers’ perspectives, and act accordingly. If the composite technology would have lasting business value, the value should be reflected primarily on behalf of Boeing’s customers, and if it was, then Boeing would benefit with the kinds of customer loyalty, market share, profit margins, and sustained growth that truly delight investors. In fact, it turns out that the composite technology would very much benefit aircraft customers by significantly lowering their maintenance and fuel costs, providing them with much greater flexibility in their routing, increasing their speed to destination, and so on. Unsurprisingly, once all this sank in, Boeing people raced to develop even more customer-pleasing features into the product. McNerny’s lesson was very important in beginning the process of culture change within Boeing. He wasn’t telling the group that this was a marketing problem, a la “well, do what you’ve always done; just change your public message to something that the public will swallow”. No, he was trying to set up a new framework for decision making. His message was: You—you executives--think about your customers from the very beginning, start by truly understanding their needs, and only then build your products and organization around that knowledge. Sure, you must do everything with excellence and innovation in engineering, operations and finance, but weave everything you do around the spoken and unspoken needs of your customers. That’s where value and benefit have lasting competitive impact.It's a good lesson for all of us. We love to talk about the notion of the customer as king or queen, but are we ready to build and rebuild and rebuild and rebuild our business around their continuously evolving needs and demands?

They’re All Important!

I just finished leading a seminar for a hundred-some CEO’s in Perth, Australia. In a four hour seminar, sometimes issues that were discussed at the beginning get conceptually separated from the issues that are discussed at the end. For example, one of the questions I received at the end of the seminar was an interesting one. It went something like this: “You’ve spent a lot of time talking about the importance of executing and monetizing our strategies. Are those issues more important than the issues that you talked about earlier, like innovation and customer care?"My quick answer to that gentleman: No and double no! All are important, and all are intimately intertwined. For one thing, it makes no sense to discuss innovation without talking about whether the innovation matters to customers, matters enough that they will be excited, engaged, and willing to pay for it. If your initiative doesn’t matter to them, then it simply doesn’t matter, period. GE CEO Jeff Immelt has stated that one can no longer even discuss meaningful innovation without discussing and documenting a positive reaction from the customer. But likewise, the coolest ideas about how to serve customers innovatively mean nothing if the organization cannot efficiently translate those insights into profitable action. If your execution stinks, or if you can’t demonstrate how your actions will yield a profitable return on investment, then all you’ve got is a cool idea that you can pontificate about in a pub.. So you see, they're all important. But if you back me against the wall on which element is really and truly the "most" important, remember Peter Drucker’s dictum that the sole purpose of any business organization is to create and grow customers. So if you’re a leader, start with the customer. That’s your foundation. Then obsessively work with your team to figure out how to continually innovate on behalf of the customer—and don't forget to consider tomorrow’s customer, not just today’s. And in the same breath, consider how you as a leader plan to direct--and inspire-- your organization to continually deliver and implement those great ideas in a way that unambiguously yields the kind of high margin financials that reflect healthy growth. That may sound obvious, but in real life, customers are not the starting point and fountainhead in many organizations. Other constituencies or priorities are. Another problem is that when it comes to these four issues of innovation, customers, execution, and profitability, too many organizations compartmentalize responsibilities: for example, one department focuses on innovation, another on customers, another on execution, and another on "the numbers" like profit. Likewise, many leaders themselves focus their attention on the areas that turn them on, and pass off the elements that don’t interest them to others. Wrong! Some functional specialization is inevitable, but in the best organizations, every group and function considers the four issues as an inherent part of their charge. Likewise, each leader considers these four issues as a critical part of his or her responsibilities—regardless of role or rank. So yes, in that particular seminar in Perth, I did spend quite a bit of time on innovation, customers, execution and monetization. Why? Because they’re all important. And they’re all connected when it comes to market leadership and competitive advantage.