Leading in the Connected Future IMD Business Forum, Dublin

PROFESSOR THOMAS MALNIGHT
www.imd.org/globalcenters
Leading in the Connected Future
IMD Business Forum, Dublin
June 20, 2011
Kristian Gerhard Jebsen Chair for Responsible Leadership in the Maritime Industry
© 2007-2011 IMD – International Institute for Management Development. Not to be used or reproduced without permission.
FROM CURRENCY WARS TO INFORMATION WARS…
FROM NATURAL DISASTERS TO GEOPOLITICAL
PROCRASTINATIONS…
FROM E-COMMERCE TO M-COMMERCE – IN FACT
MOBILE EVERYTHING…
FROM TRIAD TO BRIC TO BEYOND THE BRIC ….
TRENDS ARE (NOT ALWAYS) SLOWLY
RESHAPING OUR LIVES AND WORK
© IMD 2007-2011
What’s your role as a leader in helping your
organization stay ahead of the many, rapid changes
happening?
How can we think about the future when we are too
busy worrying about surviving today!!
Let’s take just an hour to step back from day-to-days issues
and think about how the world might be changing and what it
could mean for our business in the future!!
© IMD 2007-2011
I hope somebody up there knows where we are going © IMD 2007-2011
Discussion will bring together two streams of work to try to make
some sense of how the world is changing and what it means today
Global Trends
CEO Interviews
•  Data on how major trends
•  Interviews with 110+ CEOs from
impacting the world today
around the world
–  What are critical resources
–  How is the world organized
–  Who are the key influencers and
shapers
–  Europe
–  North America
–  China
–  Brazil
–  South Africa
–  India
–  Indonesia
–  Singapore
More detail on CEO Interviews available on http://www.imd.org/research/global-centers/ceo/#/.
More details on Global Trends available on www.GlobalTrends.com.
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© IMD 2007-2011
BUT: Growing Challenges for a VUCA Future
“We plan for everything except what we truly need to do to be successful in
the long term. We have business and market and function plans. We spent
enormous time and effort on these processes. We analyze them with rigor
and determination. But in the long term these plans do not look at what are
the fundamental capabilities that we need in the future to reflect the changes
taking place around us. We need to get ahead and lead change, and stop
being reactive…..”
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© IMD 2007-2011
Sample Fundamental Trends:
Changing Nature of “Valuable” Resources
The world is getting more crowded,
older, more urban and more mobile
Natural Capital People Time Resources Information & knowledge is exploding…
and increasingly available anywhere,
anytime
Knowledge Technology We have more time than ever… but time
is an increasingly scarce resource
Environment Labor Outputs Value
Technology is making the impossible
possible
Pressure on natural resources is
significant and increasing
The world may face potential crises in
water, food, energy, environment
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© IMD 2007-2011
(1) Changing Focus of “Global” Competition
Key
Developed economies BRIC Beyond BRIC: PotenBal markets of the future © IMD 2007-2011
(2) Changing Role of BRIC Markets
Low growth domestic markets
Growth in BRICs
Short-term mindset
Contraction mindset
High growth domestic markets
Aggressive growth and expansion
Investment mindset
BOP mindset, skills
Key
Developed economies BRIC Beyond BRIC: PotenBal markets of the future © IMD 2007-2011
(3) Changing Strategies of “Developed” Market Firms
Triad Strategy:
Preparing for low growth
Protect, grow positions
Cost reduction
Consolidation
BRIC Strategy:
Aggressive growth
Build, grow positions
Investment
Beyond BRIC Strategy:
Growth
Expand positions (from mid/top of pyramid base)
Short-term centralized KPIs
© IMD 2007-2011
(4) Changing Role of BRIC Competitors
Triad Strategy:
Sales markets
Selective investment
Acquire brands or market positions
“If you are not
doubling your
business every 3-4
years, you will
become less and
less relevant”
BRIC Strategy:
Aggressive growth and
investment in home market
Build, grow positions
Investment
Beyond BRIC Strategy:
Growth markets for BOP base
Expand positions
© IMD 2007-2011
(5) Changing Strategies of “Developed” Market Firms: Hybrid Model
Triad Strategy:
Preparing for low growth
Protect, grow positions
Cost reduction
Consolidation
BRIC Strategy:
Aggressive growth
Build, grow positions
Investment
Beyond BRIC Strategy:
Growth
Expand positions (from mid/top of pyramid base)
Short-term centralized KPIs
© IMD 2007-2011
Let’s change focus now to the challenges facing firms in the future…
What is the implication of these and other
trends on the challenges and opportunities
facing firms in preparing for the future?
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© IMD 2007-2011
Owners Expanding
relations with
long term owners
Aligned
relations with
long term owners
Optimizing
Shared
Value
CSR as
activity and
function
Building
permissible
business
models
Deliver
Financial
Results
Meet
Requirements
Firm Owning
Consumer
Experiences
Sell
Products
Hire
Employees
Hire, Retain,
& Motivate
Employees
Provide
Products
& Services
Co-Creating
Experience
with
Consumers
Consumers Society Deliver
Consistent
Results
Engage &
Challenge
Employees
Engage &
Challenge
Communities
Employees © IMD 2007-2011
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Challenges facing firms in interactions with Consumers
Environment
•  Commoditization of traditional products and services
•  Rapidly changing consumer needs, growing consumer demands
•  Disruptive innovations, rapid dispersion of knowledge and replication of
innovations
•  Emerging competitors from new markets with different business model,
including low-cost competitors
•  Falling industry boundaries, with growing cross-industry competition
Note: In this, we are explicitly focusing on the consumer who actually use/consume the
product and whose needs are fulfilled, not intermediate channels or customers
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© IMD 2007-2011
Sample Trends: Falling Industry Boundaries
Health & wellness – fighting for value creation & capture across boundaries
Life sciences, Live well BeJer informaBon, beJer health Look good, feel good Good food, good life Vitality, NutriBon InnovaBon is personal Working together for a healthy world Healthy lifestyles Changing the face of chronic disease Sense and Simplicity Empower you to manage your health © IMD 2007-2011
Affordable healthcare Get more out of medicine Sample Trends: Growing power of the individual
“I, you, we… are now the media”
Social Media Time Spent: By the Numbers
2 billion: The number of videos watched on YouTube 2,000 every day 1,104
1.1 billion: The esBmated number of minutes of video uploaded to YouTube in a year 600
600 million+: The esBmated number of Facebook users globally; in total people spend 11.7 BILLION hours a month on Facebook 250 million: The esBmated number of Facebook users using Facebook via mobile devices 250
200 million+: The esBmated number of TwiJer users 200 globally 155
Time spent on social
network and blogging
sites is growing at over
three times the rate of
overall Internet growth.
155 million: The esBmated number of Tweets sent daily 17
© IMD 2007-2011
Partly driven by new consumer demands and communities of
choice
Personalization
Communities of Choice
My DNA Fragrance
Makes individual
fragrances by
incorporating your
DNA. The company
sends customers a
home swab kit to
collect the DNA
sample, which they
then use to create
the perfume.
Men’s Long Hair Hyperboard Second Life Global Gecko Association The Flat Earth Society Furrs fur Christ Photo Source: Author My DNA Fragrance. This file is licensed under the CreaBve Commons AJribuBon-­‐Share Alike 3.0 Unported license. Pet Pop © IMD 2007-2011
www.mlhh.org www.secondlife.com www.gekkota.com www.theflatearthsociety.com www.furrsfurchrist.com www.petpop.com Evolving Relations with Consumers:
From Products to Services to Experiences to Engagement
Mass
Production
Mass
Customization
Changing competition
within “industries”
Customization
“Made for me”
Co-Creation
“Made by me”
Redefining the
playing field
Engagement
Interactive
involvement and cocreation
Experience
Complex, holistic needs
Service
Providing ancillary support
Product
Simple, single need fulfillment
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© IMD 2007-2011
Example: Competing Value Propositions in the Music Industry
Traditional Record Label
Players
• We are all about music
and the artists
•  We own the artists and
enable them to become
stars.
•  We open the world to the
stars of today and tomorrow
•  We make money through
our stars in either product
sales through any channel
or in concerts
• We own the artists?
Mobile Device Players
•  Music enjoyment is just
one of the many benefits
we offer.
•  We are the one-device you carry
with you everywhere you go.
•  We are a mobile life style enabler
providing all the services you
need 24/7 every where every
day.
•  We outsource app development
to continually expand our offering
•  We make money through lots of
revenue sources
•  We own the device?
•  We own your pocket?
Software Platform Players
• We enable you to enjoy,
produce or experience
music as just one of an
array of experiences we
offer
• We are your interface of
connection. We allow you to
define your own role, being a
provider and user of content
• We provide you with the best and
most flexible experience
• We are available on any device.
We provide you with the capacity
to select what ever you want,
everywhere, any time, in any
format.
• We own the interface?
© IMD 2007-2011
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Issue for Leaders: What could be future challenges?
Sample Current Issues
Potential Future Issues
•  Preparing for rising raw material
•  Re-defining our market spaces
•  Re-defining our value proposition
costs
•  Winning in our current market space
•  Delivering results today
•  Preparing for BRIC markets and
competitors
and offer
•  Re-defining our relations with
consumers
•  Re-defining our relations with other
players
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© IMD 2007-2011
Challenges facing firms in interactions with Employees
Environment
• 
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© IMD 2007-2011
Sample Trends: Shifting generational values and
behaviors are impacting how we live and work
• Traits: PatrioBc, loyal, desire to leave a legacy, fiscally conservaBve, and faith in insBtuBons. • Want: Help easing into reBrement. • Leadership style: Command and control. • CommunicaBon style: Top down. • Technology use: Uncomfortable. • Job changing: Unwise. Tradi9onalists (born 1900-­‐1945) • Traits: Globally concerned, integrated, cyber-­‐literate, media savvy, realisBc, and environmentally conscious. • Want: Work that has meaning for me. • Leadership style: Partner. • CommunicaBon style: CollaboraBve. • Technology use: Unacceptable if not provided. • Job changing: Normal and frequent. Baby Boomers • Traits: CompeBBve, quesBon authority, desire to put their own stamp on insBtuBons, sandwiched, and opBmisBc. • Want: Robust careers; help juggling it all. • Leadership style: Get it done. • CommunicaBon style: ProtecBve. • Technology use: Unsure. • Job changing: Sets me back. (born 1946-­‐1964) Genera9on X Y/ Millenials Genera9on (born (born 1965-­‐1980) • Traits: EclecBc, resourceful, self reliant, 1981-­‐2000) skepBcal of insBtuBons, highly adapBve, and independent. • Want: Balance and freedom. • Leadership style: Coach. • CommunicaBon style: Network. • Technology use: EssenBal for work. • Job changing: Necessary. Source: Adapted from: BridgeWorks, Lynne Lancaster and David Stillman.Website:
www.generations.com; authors of When Generations Collide, HarperCollins, 2003
© IMD 2007-2011
Sample Trends: Falling Firm Boundaries
Tapping into the “Global Brain”
P&G: The Connect & Develop Approach to
Innovation
•  In 2008, P&G reviewed
approximately 1,500
external ideas and tends
to act on 5-7% of these.
•  Over 40% of innovation
was from outside the U.S.
•  Product successes from
external collaboration
include: Swiffer Duster,
Bounce, SpinBrush, Olay
SkinCare pump
dispensers.
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© IMD 2007-2011
Evolving Relations with Employees/Individuals:
From Hiring to Retaining to Challenging to …
Burning the organization framework (eg iPad without instruction manuals)
Falling boundary of the firm
From boxes and silos to relationships
Non negotiable values, purpose and vision
Challenging and
Engaging Communities
“Communities of CoCreation”
Challenging and Engaging
Employees
“Commitment Focus”
Retaining and Developing
Employees
“Loyalty Focus”
Hiring Employees
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© IMD 2007-2011
Taking Relationships with Employees to the Next Level
Retaining &
motivating
employees
Engaging &
challenging
employees
Employees
Firm
Hiring
employees
1.  From CEO power and decision making to engaging, aligning and building ownership across the
organization
–  Enabling entrepreneurship in an era of uncertainty and volatility
2.  From compliance and complacency to ensuring the courage, capacity and commitment to
challenge
–  Tapping into the knowledge and insights of dispersed, diverse, global employees to enable speed and agility
3.  From bureaucratic controls to leveraging the power of values, trust and commitment
–  Rebuilding the foundation for internal engagement and cooperation
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© IMD 2007-2011
Issue for Leaders: What could be the future challenges?
Sample Current Issues
Potential Future Issues
•  Retaining and developing my
•  Preparing for operating in a
employees
•  Strengthening our values and
culture
•  Empowering entrepreneurship
•  Building, strengthening the global
organization
connected world
•  Working with individuals outside our
organization
•  Re-defining the employment
contract
•  Re-defining our relations internally
and externally
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© IMD 2007-2011
Evolving Relationship with Society:
From Compliance to CSR to Permissible Models to Shared Value
Optimizing
Shared Value
Developing Permissible
Business Models
Expanding CSR
Activities
Compliance with
Requirement
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© IMD 2007-2011
Focusing on the Core Activities of the Firm
Engaging in Dialogs before, not after the strategy process
•  “Our strategy process is built around three phases; starting in dialogue, thinking in alternatives, and
then maintaining flexibility throughout the process. Doing this as an individual is hard, instilling it in
an organization is even more difficult.”
Tapping into the Power of Public-Private Partnerships
•  “If you look at how the economy is developing today, if you are not involved in shaping policies and
in the way new business model are being developed, you won't be where the value adding
opportunities are in the future.”
•  “In the future, the real big opportunities will be developed through public-private partnership. This is
where the real commitments will be made and the resources will be focused.”
Developing Permissible Business Models
•  “The major challenges we are focused on are (1) sustainable growth, (2) moving our center of
gravity, and (3) ensuring we have a permissible long-term business model.”
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© IMD 2007-2011
Issue for C-Suite Executives: What could be the future challenges?
Sample Current Issues
Potential Future Issues
•  Earning the license to operate
•  Building partnerships with
•  Re-defining the “value” equation
•  Re-defining relationships with other
governments and society
•  Building long-term “legitimacy”
type institutions
•  Re-defining the societal context
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© IMD 2007-2011
•  Breaking the Power of Analysts
•  Rethinking the Role of Boards, and the
Relationship Between Firm Leadership and
Boards
•  Taking Ownership of Firm Relationships with
Owners
Expand
Relations with
LT Owners
Build Relations with LT
Owners
Consistent,
Predictable Results
Deliver Results
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© IMD 2007-2011
Board Evolution
Old Boys Club/
Administrators
Board Role
Composition
Activities
Chairman Role
Relationship with
CEO/Management
Time Horizon
Board Evaluation
Compliance
Committees
Risk mitigation, Meet
regulatory requirements
Prestigous individuals and
expert specialists
Support the CEO
CEO friends, prestigous
individuals
Rubber stamp or bureaucratic
approvals
Approval and compliance
Represent long term owner
interests
Diverse capable individuals
operating as team
Governance, challenger and
LT owner representative
Manage processes and
procedures (ally of CEO in
text)
Responsibility for successful
functioning of board
Non-threatening, friendly
relationship
Managing processes,
procedures and overseeing
commmittee activities
Quarterly and annual
Supervision and verification
Annual and ongoing
compliance
Superficial
Selective, inconsistent
Limited
Expert training
Open, transparent, trusting,
Long term institutional
sustainability
Comprehensive, individual
and collective
Internal to understand the
company, external to
understand the broad
environment
Prestige
Prestige and expert
credentials
Committed to success of
institution
Board Member
Training
Board Member
Motivation
Representatives of
Long Term Owners
© IMD 2007-2011
Moving From Level 1 to Level 2
Assigning tasks to areas of the organization
Owners Deliver
Consistent
Results
CSR as
activity and
Meet
function
Requirements
Set up
activity
Deliver
Financial
Results
Firm Extend
existing
activities
Sell
Products
Hire
Employees
Hire, Retain,
& Motivate
Employees
Provide
Products
& Services
Consumers Society
Extend
financial
planning
Modify HR
processes
Employees 33
© IMD 2007-2011
Moving from Level 2 to Level 3
Fundamental and holistic challenges to the entire organization
Owners Aligned
relations with
long term owners
Deliver
Consistent
Results
Deliver
Financial
Results
CSR as
activity and
function
Meet
Requirements
Modify firm
organization
and culture
Firm Sell
Products
Hire
Employees
Hire, Retain,
& Motivate
Employees
Provide
Products
& Services
Owning
Consumer
Experiences
Consumers Society Change
mindset and
perspective
CSR
integrated in
core
activities
Refocus and
rebuild
relations
Alter firm
activities and
focus
Engage &
Challenge
Employees
Employees © IMD 2007-2011
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Issue for Discussion:
Are Leaders Today Treating Systems or Addressing the Root Causes
of Issues?
•  Research Issue: How are leaders preparing themselves and their organizations for
uncertainty and volatility
•  Answer 1: We are already busy!
•  Issue: Are we currently addressing the symptoms or root causes of our long term
challenges?
•  Assertion:
–  Not addressing the long-term challenges and opportunities associated with building strong,
mutually beneficial relations
–  Solution cannot be found in silos, but rather in how leaders are fundamentally reshaping their
organizations
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© IMD 2007-2011
Potential Implications for Ireland and Irish Companies
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© IMD 2007-2011
At a time of crisis, some hold back, panic or are in denial, others see
opportunities
Very cautious
Panicing
In denial
  Balance sheet and liquidity are strong
  Balance sheet and liquidity under pressure
  “This is Wall Street’s problem, not ours”
  Extremely concerned about current dislocation
  Significant refinancing looming
  Have not changed approach to risk management,
  Re-examining all angles of risk management,
  Missed capital-markets opportunities due to focus
liquidity, and capital-markets access
  Will do well through the crisis, but may miss
significant value-creation opportunities
on “pricing”
  May need “rescue” equity
  Could be in jeopardy if markets remain shut any
longer
capital raising, and liquidity
  Boards of directors and senior decision-makers not
focused on the changing bank and capital markets
  Will live through this if conditions rapidly return to
normalcy
Realistic / opportunistic
  Have strong balance sheets and financial flexibility
  Acutely aware of effects of current market conditions and
sector opportunities
  This is a once-in-a-lifetime opportunity to use balance-
sheet flexibility to buy assets (which are now cheaper)
Source: Adapted by Prof. Didier Cossin, IMD
  Willing to issue equity out of position of strength to build
war chest
© IMD 2007-2011
Never Waste a Good Crisis!!!!!
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© IMD 2007-2011
Strategic leadership requires balancing visionary and operational
leadership….
VIEW OF THE WORLD
VIEW OF THE MARKETS INDUSTRIES,
CONSUMERS
VIEW OF YOUR BUSINESS
VISIONARY LEADERSHIP
“Make Sense”
1. Creating awareness
2. Building understanding
3. Developing insights
4. Defining implications
Building shared
insights
Defining
implications
Creating
options
Making decisions
Taking actions
© IMD 2007-2011
OPERATIONAL LEADERSHIP
“Choices and Actions”
1. Selecting the path
2. Defining options
3. Making choices
4. Taking actions
Implications for leaders in a VUCA world:
Balancing Visionary and Operational Leadership
Operational
Leadership
Visionary
Leadership
Playing Field
Defined boundaries
Framing opportunities
Strategy
Rigorous analysis of
products, markets, functions
Selecting the right path
Mindset
“What can we do”, Fix
problems, avoid failures
“What must we do”, learn, adjust
lead
Issue Frame
Rigorous analysis, data driven
Constructive dialog, data enabled
Advantage
Firm strength, efficiency driven
Network strength, value creation
View of Change
Painful temporary process
Continuous necessity
Success
Measures
Budgets and targets
Institutional strength and
sustainability
Key Risk
Judging too soon
Deciding too late
(x% of time)
(100-x% of time)
What should “x” be?
© IMD 2007-2011
Defining priorities from two-directions is an ongoing part of a
journey, not a one-off exercise/event
Transforming the Firm
Future
Goals
What “must” we do to enable
achievement of our vision?
1. 
Prioritizing, focusing
and accelerating our
current agenda
2. 
3. 
Solidifying our Foundation
What “must” we do--that we have
avoided--to fix our current
business?
1. 
Today
2. 
3. 
Must-Win Battles © Peter Killing, Thomas Malnight, Tracey Keys
© IMD 2007-2011
Identifying and
prioritizing required
new capabilities and
options for future
Thank You!!
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© IMD 2007-2011