In a prior issue of The Bulletin, we discussed attributes of organizations that are confident in executing strategy and advancing their respective visions successfully. We asserted that these attributes of confidence were important because executives and directors can use them to assess and advance their organizations along the journey to realize their vision. This issue of The Bulletin augments the prior issue by adding examples to illustrate the attributes in action.
The Attributes of Confidence
We defined confidence in the prior issue of The Bulletin as “the state of feeling certain about the truth of something” and “a feeling of self- assurance arising from one’s appreciation of one’s own abilities or qualities.” In addition, we raised three fundamental questions that are vital to facing the future with confidence:
- Directionally, do we know as an organization where we’re going and why?
- Are we prepared for the journey we are undertaking?
These two questions are about knowing where we are headed and confirming that we are prepared. Are our people devoted to achieving a common future-state vision? Do we have a plan with a clear road map, as well as the capabilities and infrastructure in place to execute the plan and navigate the road map? Positive responses to these two questions are the price of entry to the high-stakes game of establishing sustainable competitive advantage, leading to the final question:
- Do we possess the ability, will and discipline to cope with change along the way?
This latter question is about whether we can get to our ultimate destination no matter what happens. Definitive, positive responses to these three questions enable organizational confidence in facing future uncertainty.
The attributes that enable positive responses to these three questions are summarized in the schematic below:
The Attributes That Lay the Foundation
The first three attributes of confidence represent what we refer to as a base level of confidence for doing business. They represent the table stakes — the price of entry — that lay a solid foundation for engendering confidence. Take any one of these three attributes away and the organization’s leadership must take corrective action, and soon. We discuss these attributes further below.
Confident organizations share a commitment to a long-term vision. Confidence is maximized if there is a commitment to the enterprise’s long-term vision, which provides its people a shared “future pull” perspective. That perspective fuels enterprise wide focus and energy to learn, encourages participation, and spawns an altruistic camaraderie so that people at all levels recognize that the enterprise’s success and their personal success are inextricably linked.
Confident organizations seek clarity of, and are in touch with, the environment. A confident organization constantly “reality tests” its understanding of the market through an open and sharing culture that encourages dialog and discussion up, down and across the enterprise, and in which people can share what they know and think as well as express disagreement without fear of repercussions.
For example, a confident organization implements processes that facilitate real listening to customers, suppliers, employees and other stakeholders as sources of new learning. Formal and informal continuous feedback loops flatten the organization and enable systemic thinking in distilling and acting on the feedback received to drive continuous improvement and foster preparedness.
Confident organizations align their capabilities with the strategy. Every successful company has differentiating capabilities. Examples include an entity’s superior know-how, innovative processes, proprietary systems, distinctive brands, collaborative cultures, and exclusive supplier and customer relationships. Appropriate policies, processes and organization must be in place to support the company’s strategy. In confident organizations, leaders ensure that the capabilities needed to differentiate the company and execute its strategy successfully are in place and appropriately aligned.
The Attributes That Sustain Confidence
While important, a base level of confidence is not enough to face the future confidently. Astute business leaders know that the ability, will and discipline to cope with change are also needed to advance their organization’s journey. Below we focus on these attributes for sustaining confidence using case examples.
Confident organizations are risk-savvy. Few companies can boast of anything similar to the Walt Disney Company’s legacy of making big bets to transform itself. After several setbacks, including bankruptcy in his early twenties, founder Walt Disney created a new cartoon character that would later become the symbol of the entire company. The early successes of Mickey Mouse gave Disney the confidence to keep taking calculated risks. Despite concern about the profitability of cartoon shorts, Disney branched out into animated films, beginning with Snow White and the Seven Dwarfs in 1937. A resounding success, the movie positioned the company as a major force in Hollywood, paving the way for additional animated feature hits.
Later, Disney invested heavily in making another full-length animated film: Cinderella (1950). The production of the movie cost as much as US$50 million in today’s dollars, a crippling cost that might have threatened the company’s viability if the movie were a flop. But Cinderella became a blockbuster and is generally considered a classic American film of the 20th century.
When television emerged, Disney made long- term commitments for television projects while the major Hollywood studios pressured each other not to support televised productions, believing the medium would ruin the movie business. The result of Disney’s decision was exceptional: an array of classic programs that helped define early television.
Disney’s success with the new medium enabled him to obtain the necessary financing to build Disneyland, a theme park for families. Operating under Disney’s high standards of customer service and attention to detail, Disneyland became a phenomenal success, spawning other parks and becoming a critical component of the Walt Disney Company business.
Since Walt Disney’s death in 1966, the company has followed in its founder’s footsteps by taking calculated risks that have helped make one of the world’s most well-known and beloved brands even more successful. For example, after expanding its theme park operations and continuing its focus on feature films, the Walt Disney Company experienced an animation renaissance when it released several hugely successful animated films in the late 20th century, including The Little Mermaid (1989), Beauty and the Beast (1991), and The Lion King (1994). It became a major media company with the purchase of Capital Cities/ABC in 1995. It launched the Disney Cruise Line in 1996, and acquired Pixar Animation Studios in 2006, Lucasfilm Ltd. in 2012, and Marvel Entertainment in 2015, all for hefty price tags. Disney CEO Robert Iger has said, “I worry about our ability to sustain creative success. There’s always risk in the creative process.” Iger points out that a company can “never let a brand rest on what it was.”
In more than nine decades, Disney has provided a valuable lesson: The biggest risk of all is not taking one. Walt Disney said, “To some people, I am kind of a Merlin who takes lots of crazy chances, but rarely makes mistakes. I’ve made some bad ones, but fortunately, the successes have come along fast enough to cover up the mistakes. When you go to bat as many times as I do, you’re bound to get a good average.”
As we learn from the experiences of Disney and similar organizations, it is important to note that a risk-savvy organization doesn’t make casino-style bets; nor does it operate based on gut feelings. When the organization goes to bat, to paraphrase Walt Disney, it does so based on its knowledge of markets, customers and competitors, coupled with robust decision- making processes and reasonable assurances that it can execute and overcome anticipated obstacles. That knowledge and assurance drive confidence.
The confident organization routinely identifies the risks from its strategic choices, as well as the risks to executing its strategy successfully and achieving its performance goals so that it can ensure the most critical exposures are managed effectively.
Confident organizations also understand the critical assumptions underlying the strategy pertaining to such drivers as the enterprise’s capabilities; competitors’ capabilities, behaviors and actions; customer preferences and bargaining power; supplier availability, performance and bargaining power; technological trends and innovation; capital availability; legal and regulatory trends; and the absence of catastrophic physical phenomena. This understanding gives them a focused line of sight on key factors to monitor as the strategy is executed.
Confident organizations cultivate an aggressive learning environment. Organizations that focus on learning are able to adapt better to change. General Electric (GE) is a pioneer and global standard-setter for leadership development and learning through advancing an evolutionary culture, where learning shapes strategy and leaders are equipped and inspired to succeed. This commitment to the learning environment is important because, in today’s rapidly changing environment, acknowledging that individuals alone can’t possibly know everything is vital to building a confident organization. It is the collective knowledge and genius of the organization that really matters and lies at the very foundation of truly confident organizations.
Sixty years ago, GE built its first learning center in Crotonville, N.Y., with a focus on continuous learning. Led by up-and-coming managers and leaders, Crotonville became a nexus of innovation, ideas and learning where leaders congregated to learn, teach and share at critical transitions during their careers. Every day, thousands of GE employees and customers around the globe take part in state-of-the-art experiential learning opportunities offered at the 59-acre New York campus, at GE learning centers and local GE sites worldwide, and across its digital platforms.
As a backdrop, GE’s focus on innovative solutions leverages the driving forces behind global disruptive trends such as the Industrial Internet of Things (IIoT) and innovative technology to improve products and processes (advanced manufacturing). In partnering with organizations and investing in companies and projects to promote entrepreneurship and incubate ideas through innovation centers, GE has embraced its industrial roots digitally. For example, GE plans to develop the IIoT to create technology that makes its products more efficient and enables businesses to use them more effectively.7 In the words of GE’s chairman and CEO Jeff Immelt: “We act. We learn. We get better. We insist on being more than we are today. Some companies are retreating; we are moving forward to become the Digital Industrial.”
GE operates in more than 170 countries and has over 300,000 employees worldwide. To compete and win in demanding markets, it needs leaders who share common values in an open, informal, trust-based culture. Consistent with a “We Company” approach, GE relies on its learning environment to train its people and develop its leaders while instilling consistent values across its management structure.
Crotonville is a strategic enabler for corporate transformation and the nerve center for cultural change — from customers, competitors, peers and others — and a relentless drive to invest and build things that better serve customers around the world. GE’s strong focus on learning and development enables its employees to grasp the key overarching concepts with which the company must reshape itself every few years to keep pace with a rapidly changing world.
The lesson is that learning organizations breed confident organizations. A commitment to learning facilitates the pursuit of opportunities and the undertaking of risks and all that entails, including the inevitability of mistakes that stimulate further learning. The confident organization views success and failure as equivalent experiences to proactively avoid the plague of complacency with past successes becoming ingrained within the culture. Learning is used to continuously transform the organization; by converting lessons learned into process improvements, the organization is better able to respond to dynamic market forces and become more competitive.
Confident organizations place a premium on creativity. Confidence in an organization’s vision and infrastructure is one thing; confidence in the organization’s ability to transform continuously no matter what is thrown at it — whether it be new regulations, technologies, changing workplace and customer demographics, or other market forces — is a source of competitive advantage.
Not many successful technology companies in the marketplace today can trace their origin to the 1980s, let alone the 1960s. But IBM can.
Technology industry pundits have been predicting the demise of the mainframe computer for decades. Yet mighty IBM continues to reinvent itself while embracing the mobile internet, cloud computing, big data and other aspects of the latest technologies. In a world where product life cycles are measured in web years,10 the mainframe’s longevity is an amazing story that illustrates IBM’s staunch commitment to innovation in one of the fastest-changing industries.
IBM’s business transformation during the information revolution is partly a result of two major architectural innovations:
- A family of computers. IBM created an entire series of computers — from small to large, low- to high-performance, all using the same instruction set — that allowed customers to invest in a model they could afford and then upgrade the capabilities of their systems as their needs dictated. The eloquent storyline behind this design was easy for the market to understand.
- A common operating system (OS). IBM designed OS/360, which supported the various members of the S/360 family (except for the smaller ones, which ran a subset with more limited capabilities). Today’s z/Architecture and z/OS are direct descendants of the original S/360 and OS/360 design.
The above innovations ushered in a whole new way of thinking about designing and building computer systems. Previously, manufacturers built a new computer and its OS from scratch, sometimes to customer specifications. The modular family design concept supported by common components was a huge paradigm shift for the industry, as it eliminated the need to rewrite software and redesign components, such as processors and memory, for each machine. IBM was therefore able to offer more economies of scale to serve an ever-growing market.
With the emergence of the cloud-based model of computing, systems are needed to provide very fast response times to huge volumes of requests. Mission-critical services in health- care, finance, transportation, electric utilities and other industries require very high levels of availability, security and other industrial-strength capabilities. IBM’s new zEC12 mainframes are designed to support these demanding cloud-based workloads.
Today, IBM’s architecture and business ideas are well-accepted and widely taught in engineering and management schools. They’re embodied in the concept of platforms, which make it possible to implement an architectural design across different technologies and models. In addition, platforms are generally accompanied by an ecosystem of complementary products and services.
Over a decade ago, IBM, concerned with replacing retiring mainframe engineers to support its mainframe business, reached out to universities to advocate for mainframe courses and offer support. Today, after an investment of over $10 million during the first decade, more than 1,000 schools in 67 countries participate in IBM’s academic initiative for mainframe education — yet another powerful example of IBM’s out-of- the-box thinking in adapting to the market.
In summary, companies committed to innovation are confident in facing the future because they know the market, their suppliers and their channels, and are passionate about focusing on their customers. Because innovation is a strategic imperative, these organizations empower and reward employees to test new ideas and take the appropriate risks to make those ideas a reality without paralyzing them with the fear of repercussions if they are not successful.
Confident organizations know that clinging to the status quo is not sustainable. That is why they make innovation an integral part of their cultural DNA. They also set accountability for results with innovation-related metrics at the organizational, process and individual levels. In doing so, these organizations encourage and reward creativity.
Confident organizations are unwaveringly resilient. Companies that are resilient in the face of change and unexpected crises are generally more successful — and ultimately, more profitable — than their less agile counterparts. To learn what makes a company resilient, researchers from the Cranfield School of Management interviewed executives with risk management responsibilities, as well as chief executives, at several companies in different industries, including AIG, InterContinental Hotels Group, Jaguar Land Rover, Virgin Atlantic and Zurich Insurance. They found that enterprises become more resilient by being more responsive to their customers and the markets they serve. Thus, resilient companies have an embedded culture that encourages employees to be flexible, customer-focused and alert to danger.
Organizational resiliency is the ability and discipline to act decisively on revisions to strategic and business plans in response to changing market realities. Organizations with adaptive processes are supported by a strong decision-making discipline and a commitment to embrace both continuous change and break- through change. Such organizations are more likely to respond to sudden incidents rapidly enough to ensure they do not escalate into crises. The qualities underpinning their resiliency also enable them to seize market opportunities and respond to emerging risks as early movers.
Using “what if” scenario planning, stress- testing and other tools, confident organizations visualize different future conditions or events, what their consequences or effects might be, and how the organization can respond to or benefit from them. They avoid the blind spot of a single view of the future by focusing on identifying the likely direction and order of magnitude of the effects of changes in the business environment that can impact the enterprise’s revenues, costs, profits and market share. They also develop appropriate contingency, exit and response plans to maximize their preparedness.
Summary: What About Overconfidence?
Personal confidence and organizational confidence are like the proverbial chicken and egg: You can’t have one without the other. Confident executives build confident organizations. And confident organizations breed confident employees. It’s one thing to have a confident CEO, but if the people within the organization lack confidence, they may not have the creativity and resiliency needed to sustain a winning strategy.
In this and a prior issue of The Bulletin,16 we’ve articulated a deeper understanding of the requisites of organizational confidence so that leaders can embed them within their culture in ways that can lead to superior performance relative to competitors. Organizations can shape their internal environment and culture to support the execution of their strategies and better cope with change if they study, replicate and apply the attributes of confident organizations. However, in making this assertion, an important question arises: How do leaders distinguish between “very confident” and “overly confident”?
Given the complexity of the business environment, executives need to be careful to avoid overconfidence driven by the successes they have experienced in the past and the quality and coherence of the storyline they’ve constructed to frame the future they envision. Countering the perilous risk of overconfidence and the “organizational bias” it spawns is the humility to recognize the need for interdependencies and collaboration to achieve success in a rapidly changing environment. Unchecked, overconfidence hinders collaboration.
Overly confident people are prone to failure when they undertake a shortcut or underestimate a task or a competitor. More important, they typically don’t address the three fundamental questions posed earlier. By contrast, highly confident people are able to address these questions extremely well because they have the inner assurance of their creative abilities to cope with change, the humility to recognize the vital importance of remaining fixated on delivering value, and the fortitude and mental toughness to stay the course when things get tough.
The Bulletin, Vol 6, Issue 6