In the case of a strategic inflection point, the sequence goes more as follows: denial, escape or diversion and, finally, acceptance and pertinent action.
Escape, or diversion, refers to the personal actions for the senior manager. When companies are facing major changes in their core business, they seem to plunge into what seem to be totally unrelated acquisitions and mergers. In my view, a lot these activities are motivated by the need of senior management to occupy themselves respectably with something that clearly and legitimately requires their attention day in and day out, something that they can justify spending their time on and make progress in instead of figuring out how to cope with an impending strategically destructive force.
At such times senior managers often involve themselves in feverish charitable fundraising, a lot of outside board activities or pet projects.
Frankly, as I look back, I have to wonder if it was an accident that I devoted a significant amount of my time in the years preceding our memory episode, years during which the storm clouds were already very evident, to writing a book. And as I write this, I wonder what storm clouds I might be ducking now. I’ll probably know in the end.
But let’s go back to acquisitions, my favorite example. If I undertake a multibillion-dollar acquisition, every decision associated with it will require my attention. I have to work so very hard and very quickly that the acquisition will take on far more important than anything else that I have to deal with in the ordinary line of my business. So I will have created an infinite sink for my attention. I can justify looking in the mirror every morning and saying, “I don’t have time to deal with such mundane issues as why we are gradually losing sales at the smaller accounts. I’ve got a very important midnight meeting with my investment advisors coming up.” Under the circumstances, my inattention to daily details is understandable, even respectable; the acquisition has taken on a life of its own that takes me away from something that I don’t know how to handle. I wonder to what extent all the acquisitions of movie studios by the major Japanese consumer electronics companies were motivated by the need of senior management to engage in diversions from the far more intractable and mundane problems of a secular slowdown of their core business.
This is a key point. The replacement of corporate heads is far more motivated by the need to bring in someone who is not invested in the past than to get somebody who is a better manager or a better leader in another way.
Senior managers got to where they are by having been good at what they do. And over time they have learned to lead with their strengths. So it’s not surprising that they will keep implementing the same strategic and tactical moves that worked for them during the course of their careers-especially during their “championship season.”
I call this phenomenon the inertia of success. It is extremely dangerous and it can reinforce denial.
When the environment changes in such a way as to render the old skills and strengths less relevant, we almost instinctively cling to our past. We refuse to acknowledge changes around us, almost like a child who doesn’t like what he’s seeing so he closes his eyes and counts to 100 and figures that what bothered him will go away. We too close our eyes and are willing to work harder, to dedicate ourselves to our traditional tasks or skills, in the hope that they and hard work will get us there by the count of 100 The phrase you’re likely to hear at such times is “Just give us a bit more time.”
Signs of strategic dissonance often surface when senior mangers engage their middle management or their sales force in a free-flowing discussion, provided that the discussion takes place in a culture that permits open confrontation. This how it works at Intel. Occasionally, when I stand in front of such a group and field questions, I find it awkward to attempt to defend the position of the corporation in the face of some specific questions and comments that come from people who are wise to their world and their environment. Often these questions come in the form of follow-up questions after I have been asked about our specific strategy regarding a particular product, customer or technology. After I have given my well-practiced answer, the follow-up question may start with “But what about…” or “Does it mean that…”
Such questions usually represent sharp probing for the true intent behind the general answer I’ve just given. To be sure, they may be triggered by my not having been clear enough. But, on the other hand, they might be caused by a growing dissonance between my well-worn answer and a diverging reality. If it’s the latter case, this may be the first sign of a strategic dissonance and prompts me to say to myself, “Grove, listen up, something is not quite right here.”
Strategic dissonance is so much an automatic reaction to a strategic inflection point that probing for it is perhaps the best test of one. When people in the company start asking questions like “But how can we say ‘x’ when we do ‘y’?” more than anything else this is a tip-off that a strategic inflection point may very well be in the making.
The resolution of strategic dissonance does not come in the form of a figurative light bulb going on. It comes through experimentation. Loosen up the level of control that your organization normally is accustomed to. Let people try different techniques, review different products, exploit different sales channels and go after different customers. Much as management has been devoted to making and keeping order in the company, at times like this they must become more tolerant of the new and the different. Only stepping out of the old ruts will bring new insights.
The operating phrase should be: “Let chaos reign!”
Not that chaos is good in general. It’s awfully inefficient and wearing on all participants. But the old order won’t give way to the new without a phrase of experimentation and chaos in between.
The dilemma is that you can’t suddenly start experimenting when you realize you’re in trouble unless you’ve been experimenting all along. It’s too late to do it once things have changed in your core business. Ideally, you should have experimented with new products, technologies, channels, promotions, and new customers all along. Then, when you sense that “something has changed,” you ill have a number of experiments that can be relied on to expand your bag of tricks and your organization will be in a much better position to expand the scope of experimentation and to tolerate the increased level of chaos that is the precursor for repositioning the company in a new business direction
By “early” I mean acting while the momentum of your existing business is strong, while the cash flow is there and while the organization is intact. The momentum of a still healthy business provides you with a benign bubble within which you can work on repositioning the company. Under the protection of this bubble you can make changes far more easily than when the vital signs of your business have all turned south.
In other words, it is best when senior management recognizes and accepts the inevitability of a strategic inflection point early on and acts before the vitality of the business has been sapped by the 10x forces affecting it. The necessary transformation of the business will likely be a lot less wrenching and more successful if proper action is taken early and enforced decisively.
The reality, unfortunately, is that we tend to do exactly the opposite. Owing precisely to the emotional factors described earlier, most management will do too little too late and therefore fritter away the protection that the bubble of their existing business would otherwise have provided them with.
It’s easy to see why. There’s no panic in the early stages of an inflection point. One can couch the arguments for inaction in the early stages in statements like “We shouldn’t tinker with the golden good” or “How could we possibly take our best people away fro, the business that pays all of our salaries and put them on some speculative new project?” or the most alarming on of all, “That organization can take just so much change; it’s not ready for more,” meaning really, “I’m not ready to lead the organization into the changes that it needs to face.”
Looking back, I have never made a tough change that I haven’t wished I had made a year or so earlier.
This tendency is easy to see in others although we are prone to blindness when we do it ourselves. The other day I met with a manager of a company that is struggling with strategic change. I was urging him to act aggressively in adopting a new direction. It was easy for me to encourage him: After all, I didn’t have to do anything, while he had to force his organization into a set of actions that would mean discontinuing some products that they had already committed to their customers. He knew that he needed to act; in fact, he was making some moves in the right direction. They adjusted things at the margins, whereas what he needed to do was discontinue the product altogether and redeploy development resources into obvious and far more promising directions. I wasn’t any smarter than he; I was just unfettered by the responsibility of actually having to order up the changes. When, during Intel’s memory crisis, I was in this manager’s shoes, for a long time I too was guilty of the same too-little-too-late syndrome.
But the danger of oversimplification pales in comparison with the danger of catering to the desire of every manager to be included in the simple description of the refocused business, therefore making that description so lofty and so inconclusive as to be meaningless.
I can’t help but wonder why leaders are so often hesitant to lead. I guess it takes a lot of conviction and trusting your gut to get ahead of your peers, your staff and your employees while they are still squabbling about which path to take, and set an unhesitating, unequivocal course whose rightness or wrongness will not be known for years. Such a decsion really tests the mettle of a leader. By contrast, it doesn’t take much self-confidence to downsize a company – after all, how can you go wrong by shuttering factories and laying people off if the benefits of such actions are going to show up in tomorrow’s bottom line and will be applauded by the financial community?
Admitting that you need to learn something new is always difficult. It is even harder if you are a senior manager who is accustomed to the automatic deference which people accord you owing to your position. But if you don’t fight it, that very deference may become a wall that isolates you from learning new things.
Strategic change doesn’t just start at the top. It starts with your calendar.
Strategic plans are statements of what we intend to do. Strategic actions are steps we have already taken or are taking which suggest our longer-term intent. Strategic plans sound like political speech. Strategic actions are concrete steps. They vary: They can be the assignment of an up-and-coming player to a new area of responsibility; they can be the opening of sales offices in a portion of the world where we haven’t done business before; they can be a cutback in the development effort that deals with a long-pursued area of our business. All of these are real and suggest directional changes.
While strategic plans are abstract and usually couched in language that has no concrete meaning except to the company’s management, strategic actions matter because they immediately affect people’s lives. They change people’s work. They cause consternation and raise eyebrows, as did the transfer of the Intel manager from the tried-and-true microprocessor business to an ambiguous new area.
Strategic plans deal with events that are so far in the future that they have little relevance to what you actually have to do today. So they don’t command true attention.
Strategic actions, however, take place in the present. Consequently, they command immediate attention. Their power comes from this very aspect. Even if any one strategic action changes the trajectory on which the corporation moves by only a few degrees, if those actions are consistent with the image of what the company should look like when it gets to the other side of the inflection point, every one of them will reinforce every other. That’s why I think the most effective way to transform a company is through a series of incremental changes that are consistent with a clearly articulated end result.
Your tendency will almost always be to wait too long. Yet the consequences of being early are less onerous than the consequences of being late. If you act too early, chances are the momentum of your previous business is still healthy. Therefore even if you’re wrong, you’re in a better position to course-correct. For instance, you can even pull back to their old jobs people whom you’ve reassigned to other areas. Since they come from those tasks, they can pick up the pieces again in no time and help out. But management’s tendency is to hang on to the old, so their strategic actions are more likely to happen later rather than earlier. The risk is that if you are late you may already be in the irreversible decline.