Seeing around corners by Rita McGrath
I finished this book in March 2023. I recommend it 8/10.
A book with several tools and frameworks for guiding actions on how to look further ahead—Mental note: snow melts from the edges.
Get your copy here.
My notes and thoughts:
P27. The following eight practices can help you make sure there isn't something brewing at the periphery of your organization:
Create mechanisms that direct information flows from the corner office to the street corner. A very common reason that leaders miss potentially important inflection points is that they are isolated from the people who could tell them what is really going on.
Make sure you are leveraging diversity of thoughts.
Balance type 1 and type 2 decisions: empower agility but create balance. Type 1 decisions have huge implications, are highly risky, and irreversible. Type 2 decisions, in contrast, are reversible, low risk, and rich in learning potential.
Instrument the edges: foster little bets. Most creative ideas can easily die fighting corporate bureaucracy for the chance to be discovered.
Get out of the building. Alert leaders make it a point to personally connect with the external environment, looking for what is changing and how.
Create incentives that reveal useful, if awkward, information.
Talk to the future that is unfolding now.
P28. Level-sipping conversations are another source of unfiltered information. One practice I've observed is a leader who regularly invites various employees, chosen random by a computer program, to breakfast. Another, famously in use at Citibank's credit card division, is to regularly ask leaders to report on one insight they have learned from an actual customer that month. The key here is to provide a methodical bit organizationally safe way for those with decision rights to get exposed to what is changing at the interface between the organization and its external environment.
P30. One of them, Jack Abraham, had an idea for a major redesign of the company's web page. Donahoe told him to figure out what resources he needed to make it happen. Abraham took the five best developers out for drinks one night and convinced them to take a two-week trip to Australia the next day to work on a prototype, Donahoe was blown away. "Had we asked a normal product team," he said, " I would have gotten hundreds of PowerPoint slides and a two-year time frame and a budget of $40 million. Yet these guys went away, worked 24/7, and built a prototype. These guys build. They do no PowerPoint. They just build."
P38. Snow melts from the edges. The changes that are going to fundamentally influence the future of your business are brewing on the periphery. To avoid being taken by surprise by an inflection point, you need to be exposed to what is happening at the edges.
Ensure a direct connection between the people at the edges of your company and the people-making strategy.
Go out of your way to include diverse perspectives in thinking about the implication of the future.
Foster little bets that are right in learning, ideally distributed across the organization.
Pursue direct contact with the environment—"get out of the building."
Realize when your people are in denial.
Expose yourself and your organization to where the future is unfolding today.
P43. During the Ballmer era, Microsoft failed to understand the five most important technology trends of the twenty-first century: "In search—losing to Google; in smartphones—losing to Apple; in mobile operating systems—losing to Google/Apple; in media—losing to Apple/Netflix; and in the cloud—losing to Amazon. Microsoft left the 20th century owning over 95% of the operating systems that ran on computers (almost all on desktops). Fifteen years and 2 billion smartphones shipped in the 21st century, and Microsoft's mobile OS share is 1%."
P48. As a third example, consider the tack taken by Satya Nadella, who replaced Steve Ballmer as CEO of Microsoft in 2014. Rather than continuing to focus on Windows-driven profits that characterized the Ballmer era (and which Blank so roundly criticized), Nadella has framed his leadership entirely around leading indicators. As he said in a 2015 interview, "We no longer talk about the lagging indicators of success, right, which is revenue, profit. What are the leading indicators of success? Customer love."
P52. Two key elements to avoid in doing this work are (1) imagining a future in which only one thing changes, but everything else stays the same, and (2) thinking only in terms of linear change. One of my favorite examples of this is the classic TV show The Jetsons, which featured robot servants and flying cars but portrayed gender roles and work arrangements firmly rooted in 1962! Andy Grove's 1997 discussion on indicators signaling that a change may be afoot is a reasonable point of departure. He suggests considering three future scenarios.
Your key competitor is about to change. If you had only one silver bullet, whom would you aim it at?
Your primary complementor is about to change. The ecosystem will be different.
Management's ability to make sense of what is going on "out there" has diminished in some significant way.
P57. Want to reduce the number of resumes sitting in your inbox? Easy—make some kind of credential, like a bachelor's degree, a requirement. Boom! In one fell swoop, that list of candidates will get a lot shorter. In fact, according to the Bureau of Labor Statistics, 21 percent of entry-level jobs today require a four-year degree. While it does make life easier for the personnel department, the degree requirement has a large number of unanticipated negative consequences and unintended side effects. It knocks out as many as 83 percent of potential Latino candidates and as many as 80 percent of potential African American candidates. That is a lot of talent to overlook."
P64. There are three kinds of indicators in any business. Lagging indicators provide information about what has already happened and cannot be changed. Current indicators provide information about what is going on based on assumptions about how the business currently operates (which can create blind spots). Leading indicators are the most critical for spotting impending inflection points, but they are the most difficult to make sense of—they are often qualitative and emergent. By using a simple juxtaposition of key uncertainties, you can articulate very different time-zero events, which can become points of inquiry among your management team. Allocating the time to do this work is critical yet often overlooked, which can lead to strategic blind spots.
P68. Arena map.
P76. Start defining your arena by asking which pool of resources—typically revenues—your business currently relies on. What other players might be trying to grab those same resources, even if they don't make or offer products and services similar to yours? What are the key jobs your customers are trying to get done that influence spending decisions? What is the consumption chain your customers go through to get a job done? Does it involve spending on something you could sell them? Are there any places where the chain breaks down? What about doing business with you do customers see as positive (they would buy more or be more loyal because of these features)? What do they see as negative? Finally, how might the configuration of these things change given shifts in the environment and new possibilities? Are there issues you need to begin preparing for now?
P82. But the dirty little secret being Blockbuster's business model was that customer-irritating late fees accounted for a significant percentage of its profits. According to one source, in 2000, the company earned $800 million in such fees or 16 percent of its revenue. In other words, the most significant factor contributing to the company's success was the penalties imposed on its customers. That is what I would call a "tolerable" attribute, a concept that was introduced in the previous chapter. This is a basic feature that customers view negatively. As the word implies, customers will tolerate negative features as long as they do not feel they have viable alternatives. Once something comes along that allows them to capture the benefits they seek but eliminates the "tolerable" feature, that attribute becomes a "dissatisfier" and eventually an "enrager." Netflix took advantage of this DVD inflection point to introduce an entirely different model for its customers, one that eliminated the enrager of excessive fees.
P100. Practices that displease or even enrage customers can create an opening for a disruptive player to come into your market and cause customers to defect. Even when you see an inflection point on the horizon, it can take a lot longer than you think for it to actually arrive. Customers will only remain hostages for so long. Eventually, the model that imprisons them is bound to collapse. It may make sense to separate the operating functions of a growing business from those of businesses in decline. The two require different metrics and operational considerations and different points of value to customers.
P103. The idea is not to plan out in great detail what should be done. Rather, with an inflection point in mind, the idea is to make what Peter Sims has called "little" bets and what I call "planning to learn." Before making a large commitment, in other words, start by breaking the monolithic plan down into smaller pieces. These pieces are each punctuated by what I call a checkpoint. A checkpoint is simply a point in time at which you will learn something. At each checkpoint, you want to be asking two questions. The first is whether what you are learning is worth the cost )or risk, or time) required to achieve it. Elsewhere, I've referred to an organization's "appetite," which is the determination, in advance, of what we think we will learn and how much that learning is worth to us. The second is whether, given what you are learning, it still makes sense to continue with the plan or whether a shift of some kind is warranted. The catch you want to avoid is getting tangled up in need to be right when you really don't have all the facts.
P107. Take insurance. Digital technologies have the potential to completely change the way the different components of the traditional value chain are managed. Further, digital business models can often be delivered far less expensively than traditional models, creating enormous pricing pressure for incumbents.
Distribution. The traditional broker "selling" a customer on policies disappears to be replaced by an interactive, on-demand experience, probably through a mobile device.
Underwriting and pricing. The core competitive advantage of mange large traditional insurers was that they had access to massive databases that other companies did not, upon which they could base smarter pricing decisions.
Claims. While companies such as Progressive have been inching toward real-time claims processing and settlement for years, widespread and inexpensive technology will accelerate this trend. Sensors, drones, and mobile devices will dramatically change what insurers call " first notice of loss."
P120. "Fall in love with the problem...Not with a particular solution."
P126. Don't worry about being "right." Instead, think about whether it is worth it to learn about the next step. Start with your arena: where are the funds going to come from, and is there enough there to make this effort worthwhile? Habitual entrepreneurs use a set of practices that help them see around corners, such as building various, non-redundant networks of connections for advice, resources, and insights. You can learn these practices as well.
P143. It isn't enough to see an inflection point coming. Many people in the organization need to align around a common point of view in order to respond effectively. Internal friction and competition can undermine even a correct response to changing times. Managing politics is a key task for many would-be change agents.
P146. One of the key points made during that session was that, increasingly, innovation was a collaborative endeavor requiring organizations to reach across boundaries to source ideas and create value; if the attendance at that conference was any indication, even traditional players were starting to rethink their customary competitive activity.
P150. The first phase of the digital work was to create more or less standalone tools that were customer-centric and dealt with specific pain points that existing systems did not ouch. In the second phase, Klöckner planned to expose its own customers to the digital tools, allowing them to choose how they wanted to connect on the digital platform. The third phase Klöckner envisioned was to open the platform to competitors, allowing the experience of doing business on the platform to be as integrated for customers as possible. For example, General Electric's efforts at a similar digital platform for manufacturing businesses focused too much on GE business unit needs to be of much interest to external parties. The company ended up facing a reboot after disappointing results. In Klöckner's case, Rühl realized that its position in the value chain meant that it could populate its platform with both buyers and sellers. This addresses a point that often confuses leaders in established businesses, which is that setting up a startup unit to do great things is pretty easy, but without strong ties and translation mechanisms back to the parent firm, it's also fairly useless. It's the connection to parent capabilities that leads to corporate revitalization, and that is often not thought through very well.
P156. The innovation proficiency scale:
Level 1: Extreme bias toward exploitation.
Level 2: Innovation theater.
Level 3: Localized innovation.
Level 4: Opportunistic innovation.
Level 5: Emergent proficiency.
Level 6: Maturing proficiency.
Level 7: Strategic innovation.
Level 8: Innovation mastery.
P160. Take Buffalo Wild Wings, for example, a food franchise that lost its luster in 2017. Its Imagination Premium was a really depressing -.66, meaning investors not only didn't expect growth, they expected shrinkage! What happened next, however, happens with regularity to low-Imagination Premium companies: an activist investor swooped in, demanded seats on the board, pushed the CEO to step down, and eventually ushered the company into the arms of an acquirer. So, a low Imagination Premium can also create an incentive for action.
P170. When I look at the outstanding corporate leaders of today, male and female, I see these dame patterns. Alan Mulally, legendary for turnarounds at both Boeing and Ford, refers to his role among his executive teams as a "facilitator." General Stanley McChrystal, the leader of the United States'' fight against Al Qaeda, talks of creating what he calls "shared consciousness" and trust among team members so that decisions can be made by those closest to the problem, regardless of their seniority. Mark Bertolini of Aetna took a personal interest in the lives of his employees and was shocked at the economic and, thus, the personal toll they labored under. His controversial decision to raise Aetna's minimum wage and improve its medical benefits was the result.
P171. If snow melts from the edges, then the ability to get to the edges and hear their messages is absolutely key. Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision making is often locked in individual brains. Somehow leaders need to be able to access that information and make it available with the right level of accuracy to everyone. People have to be willing to bring you, as a leader, disconfirming evidence—indicators that your assumptions were wrong and challenges to the takes-for-granted ways of doing business. Genuinely relating to customers, their pain points and their jobs to be done requires being motivated and incentivized to get into the field and empathize with them.
P174. First issue: strategy, she said, is pretty straightforward, defining "who are we serving, what problem are we solving, and what is our unique competitive advantage." While that seems right to the point, she cited the problems that can arise when the overall strategy is not clear to all the team members. If you're sloppy on the direction of the company's strategy, lots of things get built that aren't needed, and lots of people get confused about the "why." The second thing on the table for alignment is what she referred to as "the culture stuff." This includes mission, vision, and values. She could recite each of these when she was at Constant Contact and made sure that everyone else on the team could as well. Next is alignment on key priorities. Gaining clarity about what is really important in the business and in what priority order is a critical topic. These are called "rally cries" in Patrick Lencioni's book, The Advantage. "We would come out of these off-sites with rally cries and priorities," Goodman explained, then added, "It's always better to do two or three things completely right than do a half-assed job at eight." As she pointed out, the executive team needs to exercise the discipline of making choices—and being aligned on the right choices takes time.
P182. High-performing CEOs are unanimously alike in this one thing: they insist on total candor and brutal truth, even if it challenges their previously held assumptions. No, make that especially if it challenges their previously held assumptions. Andy Grove (Intel), Lou Gerstner (IBM), and Alan Mulally (Ford) have all stressed in their management writings just how important this is.
P184. Alan Mulally's cultural norms:
Everyone is included.
Compelling vision, comprehensive strategy, relentless implementation.
Clear performance goals.
Facts and data.
Everyone knows the plan, the status, and the areas that need special attention.
Propose a plan, a "find-a-way" attitude.
Respect, listen, help, and appreciate each other.
Emotional resilience—trust process.
Have fun...enjoy the journey and each other.
P189. As Kolditz pointed out in an email to me, "The problem is, it is nearly impossible to suddenly become a successful 'wartime' leader unless you've put money in the bank. It's too late to play catch-up. So the only solution, really, is to lead like a wartime leader all the time, as a matter of personality, of who one IS." He explained that simple leadership practices could make a big difference. "I used to visit new moms from our department at West Point when they were in the hospital the day following delivery," he wrote. "No real crisis, I'd just as if they were getting proper care, etc. But more than one of them, later, said that the simple visit made them aware that if anything were really amiss, that I would definitely be there. That's money in the bank—and you have to invest well before any crisis." In terms of the transition to wartime, Kolditz stresses that some people who function well enough during peacetime have to go when a crisis hits. He wrote, "Step one of the crisis—fire those incapable of making the transition to the demands of wartime." This leads me to conclude that the best leaders are continuously poised for wartime. Failing to put practices in place to build trust, shared risk, and willingness to follow your lead during peacetime can lead to people being desperately ill-prepared in wartime. And as inflection points come at us more quickly and with greater consequences, failing into a pure peacetime pattern is dangerous.
P191. Many of the same principles that help an organization do this can also apply on a personal level. Three overarching themes apply personally. The first is how you prepare yourself to "see" an unfolding inflection point and what it might mean for you. The second is how you prepare yourself to navigate it. And the third is to create a personal point of view of where you want to be heading.
P196. I do recommend going through whatever feedback you receive with a coach, if possible. Some people even create a personal "board of directors" to whom they look for advice and inspiration as they contemplate their next moves.
P204. The goal is to reflect on the patterns you've seen in your life so that you can better recognize and build on similar patterns in the future. This is a general process that I have found helpful—feel free to elaborate or adjust as you see fit.
Step 1: Create your lifeline.
Step 2: Identify your own building blocks.
Step 3: Start creating your own story up to this point.
Step 4: Write an article about yourself from the future.
Step 5:Get feedback on your article.