Aligning Leadership, Activating Culture Change

Innosight co-founder Clay Christensen, who led both CEO Summit events, talks with BASF’s Guido Voit in Munich.

CREATING THE AGILE ORGANIZATION

Large companies are notorious for moving slowly, as they are weighed down by the inertia of the way things have always been done. That’s why leaders of Daimler AG believed they had to accelerate organizational agility in order to capture big opportunities in transportation around what it calls CASE: connected, autonomous, shared services, and electric powertrains.

In a Q&A with Innosight co-founder and HBS professor Clay Christensen, Daimler board of management member Wilfried Porth told the story of how the 280,000-employee, €164 billion automaker is remaking its culture, starting with a survey asking all employees for input on how to redesign management practices.

The result was the Leadership 2020 initiative, based around principles such as less top-down hierarchy, more pilots, more feedback, more risk, more speed, more “wow!”

Specifically, employees stressed the need to work more autonomously, without upper management dominating. “We need to free up people reporting to us,” Porth said, “and people need to learn to do things without always getting instructions.”

Still, becoming more agile doesn’t mean losing confidence in core capabilities. “A car is the most complex product on Earth produced in mass,” Porth said. “A startup cannot produce something like the Mercedes S-Class.” But newer competitors from Tesla to Uber have shown how quickly things can change. And digital platform companies like Apple and Google are carving out roles in the mobility as well (see video below).

As an example of how Daimler in recent years moved faster than many would have expected, Porth points to the Cars2Go venture, a sharing service for younger, urban consumers who don’t own cars. Drivers use their smart phone to locate available vehicles when they need them, rent them by the minute, and park them anywhere when done. Cars2Go has become the largest service of its kind in Europe, with 2.5 million members, 14,000 vehicles, and is now in 26 cities as it has expanded to Asia and North America.

BREAKING THE CYCLE OF LEADERSHIP MISALIGNMENT

Developing a new growth strategy that incorporates new capabilities and new business models is often fraught with conflict among the senior leadership team. As Innosight managing partner Patrick Viguerie noted, typically one-third of the team wants to embrace change, one-third doesn’t, and one-third is on the fence.

Just as common is what happens after the senior team meets for an offsite retreat to agree on a plan for the future—only to leave the meeting and never actually implement the plan. “We have lots of discussions every quarter among higher management,” said one delegate. “But by the time the team is supposed to move, there is an HR change. The ideas are in the air, or they disappear, and very little is produced.”

Innosight’s Scott Anthony collaborates with Michaela Burger (Swarovski), Noland Townsend (Pfizer), and Jonathan Popper (Temasek).

Innosight senior partner Scott Anthony framed the problem, citing an MIT study of 4,000 managers of which only 28% could correctly list three of their firms’ top priorities. The alignment challenge is even steeper, he said, when you consider common behavioral stumbling blocks ranging from “authority bias” (deferring to higher-ups without buying in) to “social loafing” (staying silent while watching others make decisions.) Fighting these biases requires new approaches to strategy models with deep team engagement.

Otherwise, blockers can undermine leadership teams as they embark on critical initiatives such as new growth or digital transformation. Senior teams may say they are aligned in the room, but divisions and doubts below the surface leading to them acting like they are not aligned. The result? Paralysis or promising initiatives getting derailed.

Bernard Kümmerli describes the leadership alignment challenge.

“Alignment is needed, but how do we do it?” asked Innosight senior partner Bernard Kümmerli.

To meet that challenge, he introduced an approach for overcoming this cycle of misalignment, built on three principles: establish common ground, surface misalignments, and get physical using participatory exercises.

Surfacing Misalignment

Anthony shared a case study from a global law firm to bring the second principle to life. The leadership team agreed that blockchain, artificial intelligence, and disruptive business models had the potential to reshape their market. However, the leaders disagreed on how significant each of these trends were and how much the firm should invest in response.

Using live polling software from Pigeonhole, each team member anonymously entered the amount they thought the firm should invest in new growth innovation. After the votes were cast, the data appeared as a word cloud, with numbers attracting multiple votes appearing larger.

A summarized report would have shown that the average was 10 percent, with a standard deviation of 4 percent. But the discussion focused on the outliers: 2 and 20. A facilitator asked the people who submitted the lowest and highest numbers to reveal themselves and make the case for the extreme ends of investment. The discussion helped to identify the assumptions in which the low investment and high investment leaders agreed and, most critically, where they didn’t, such as the pace and scale at which those technologies would advance.

Focusing only on the average score would have obscured these differences, Anthony concluded, leading those at both extremes feeling disconnected from the apparent consensus. Once the team agreed on assumptions, members could do further focused research that resulted in an aligned plan to build the law firm of the future.

Walking the Line

Bringing alive the third principle, Kümmerli led the delegates in a 12-minute exercise called “walk the line.” The goal of the exercise is to have people physically stake out their position on an important question as a way to reveal misalignment, overcome bias and increase group energy. It is based on research that suggests that physically enacting difficult ideas can be a more effective way to bring them to life and encourage discussion than following conventional meeting etiquette of sitting, talking, and listening.

Inspired by the 2018 World Cup (then about to take place), the delegates walked the line by positioning themselves on a semi-circle of tape on the floor, marked with five spots according to how far they predicted Germany would advance in the Cup. Each participant argued their case with others and try to persuade colleagues, moving more and more delegates towards a consensus point, with most standing at the semi-final marker.

The exercise, along with structured dialogues and visualizations, can be powerful in helping senior teams overcome misalignment in strategy setting sessions. In a new Harvard Business Review article, “Unite Your Senior Team,” Kümmerli and Anthony along with Markus Messerer describe how leadership at Swisscom used this approach to surface disagreement, overcome inertia, and converge on a growth strategy. The result was a strong consensus to invest in new growth ventures around opportunities in cloud security, blockchain, and automotive telematics.

Innosight’s Kümmerli leads a “walk the line” demonstration. See the video to visualize the movement.

CASE STORY: HOW DBS BECAME THE ‘BEST BANK IN THE WORLD‘

The story of Singapore’s DBS Bank shows that it is possible to overcome barriers to change and grow a large organization in new ways. Paul Cobban, Chief Data and Transformation Officer, described how he got in a taxi to report to his first day of work, and when he said his destination was DBS, the driver said, “You mean, ‘damn bloody slow?’” a reference to the notorious queues that plagued its ATMs.

After first focusing on performance issues, Cobban began working with the new CEO, Piyush Gupta, to tackle the wider cultural problems in the way of achieving its aspiration of “making banking joyful.” This involved transforming a traditional bank into “a 26,000-person startup,” a company with an entrepreneurial spirit for building digital products such as mobile payments and other global platforms for growth.

One key question: what exactly does a 26,000-person startup do on a day-to-day basis? Cobban and his team detailed five specific behaviors: agility, customer obsession, learning orientation, data-driven decision making, and experimentation.

Cobban and his team then helped employees routinely follow new behaviors. For example, to make customer obsession real, DBS leaders began to regularly spend time with customers and map their journeys using the lens of jobs-to-be-done, studying the functional, social, and emotional tasks people are trying to accomplish in their daily lives. This effort highlighted innovative ways to improve the customer experience using new metrics such as measuring “customer hours.” This led to a savings of more than 250 million customer hours. Satisfaction ratings skyrocketed.

Paul Cobban tells how DBS transformed its culture and went from being a local bank to a global digital platform company.

Cultural transformation also required isolating “blockers,” bottlenecks in team behavior, and overcoming them in a way that is non-threatening and fun. For instance, you can’t be datadriven if you fear HIPPOs, which is the tendency to always defer to the Highest Paid Person’s Opinion.

To overcome the HIPPO problem, DBS created MOJO, a way of making sure meetings are both more productive and serve to
strengthen the collaborative culture.

The “MO” is the meeting owner. Their responsibility is to ensure that the meeting is data driven, has a clear agenda, clear conclusions at the end, that it starts and ends on time, and that there is “equal share of voice” through the discussion. The “JO” is a joyful observer (which connects the role to a general theme at DBS to make banking joyful). At the end of the meeting they provide feedback to the MO about how they did. Not only has this program doubled the effectiveness of meetings, it has provided the unexpected benefit of allowing people to provide feedback in a safe environment.

By breaking through these kind of cultural logjams and embracing a powerful story about its future, DBS has been able to reach record profits and revenue and also transform into a digital platform company that has twice won Euromoney’s Best Digital Bank Award and in 2018 was named Best Bank in the World.

FORWARD-LOOKING TAKEAWAYS

Delegates left both CEO Summit events with new models for operating their companies with a future-focused perspective integrating strategy, innovation, and leadership. Some of the messages that resonated included these insights:

Strategy & Organization

While strategy is top-down, agile execution needs to be bottom up: Once the strategy is embraced, push decision making authority throughout the organization.

Remember that the riskiest option is to stay where you are: Incremental improvements aren’t enough; fortune favors those making bold moves into new growth territories.

Organize around your customer’s jobs to be done, not your products: Don’t focus exclusively on existing services, but rather the important objectives customers are trying to accomplish.

Behavior & Culture

Isolate specific “blockers,” bottlenecks in team behavior: Cultural transformation requires developing interventions for overcoming blockers in a way that is non-threatening and engaging.

Recognize common behavioral barriers: If every leader is not called on to participate in making strategy, phenomena like “authority bias” and “social loafing” can create the “illusion of unanimity” that will undermine leadership.

Expose conflict by making differences physically visible: Don’t sweep differences under the rug but force leaders to show where they stand, so that teams can engage in real debate about strategy.