Preface

There are no CEOs alive who don’t want their organization to operate more effectively. Nor is there an investor alive who doesn’t worry about scaling the organizations they invest in to drive profitable growth. This book offers a playbook for doing both of those things and more: building better organizations in the digital era.

Without question, the pandemic has pulled the digital world front and center. However, what’s surprising is how advances such as artificial intelligence (AI) have highlighted—not diminished—the importance of familiar organizational topics such as talent, leadership, and culture. Property and equipment are no longer a company’s most valuable assets; people are.

Nowhere is this truer than in tech companies. Among the S&P 500, the value of intangible assets such as human capital and culture have risen since 1975 from 17 percent of total assets to a stunning 90 percent in 2020.¹ As founders, investors, and board directors alike catch their breath after the fallout from COVID-19, they will do well to examine the organizational practices that may no longer serve them.

To begin with, leaders must rethink their value-creation strategies and overcome the organizational challenges of scaling. The way forward is to hone their digital edge to enhance their organizational edge by adopting the tenets of an organization’s health in seven vital areas that are a focus of this book: strategic direction, culture, leadership, talent, organizational design, EID (equity, inclusion, and diversity), and well-being. No matter what type or size of business, those essential conditions can be leveraged for increased value and growth.

AI is what will get us there. Advances in technology such as machine learning and quantum computing, which can help companies monitor and measure improvements as well as extrapolate next steps, enable leaders to build organizations that can compete and win in the future.

Finally, an investor mindset will enable leaders to invest wisely in the technology (and leveraging that tech) that sets their organizations apart. By investing in the health of an organization and by investing equally in digitally enabled strategies and business models for the AI era, companies win. In this book, I chose to draw examples from companies in the portfolios of private equity (PE) and venture capital (VC) firms. Why? Because while PE and VC are not historically known for their focus on “warm and fuzzy” organizational aspects like culture, design, or employee well-being, in recent years such investment firms have demonstrated a deep understanding of today’s business imperative: to scale and grow, companies must get the organizational elements right. That begins with having the right strategy, the right CEO to drive it, and the right top talent, culture, and org design to realize a company’s potential. More recently, investment firms have recognized, too, the critical importance of other org topics such as EID and employee well-being.

My point of view about organizational effectiveness developed over more than 20 years of shaping, testing, and evolving the ideas in my work as a consultant, advisor, practice builder, and researcher. I cut my teeth in organization development by way of instrumentation, where I first understood the powerful impact of leadership assessments on organizational change. While I completed my graduate training in the behavioral sciences (including interpersonal, group, and organizational dynamics), I was introduced to strategy consulting—focused on the management sciences, including competitive and industry analysis, forecasting, and business case development.

During those formative years as a consultant, I began to integrate both content and process consulting and developed the belief that both had merit. Why? Because I observed again and again how the strategic and economic plan of a business—its business strategy—is only as effective as the corresponding behavioral agenda of that business—the organizational strategy. Today I think of my work as an animated synthesis of the “tech stuff” and the “org stuff.” I focus on organizational elements for companies seeking to scale and pivot quickly in the age of AI. I do this by drawing on observations, professional experiences, and insights gained from advising fast-growing startups, government agencies, nonprofits, and businesses.

Despite their differences, I observed all these organizations share one consistent characteristic: when they invest in the essentials that make up organizational health, they improve the odds of delivering a step-change in performance. As these essentials align and function better, organizations overcome inertia and improve their odds to scale and grow.

Those new insights compelled me to write this book, which I believe fills a vital gap in the literature—namely, how organizational health, digital, and an investment mindset can work in tandem to build better organizations. Moreover, by exploring organizational health, I hope to spur dialogue around a different way to boost the performance of companies—and perhaps to deepen how organization development gets taught to students in graduate and MBA programs.

Intellectual Themes and Sources of Inspiration

As I undertook the research for my book, I drew on the work of management and organizational thinkers like Warren Bennis, Ed Schein, John Kotter, Jennifer Chatham, David Nadler, Carol Dweck, Christopher Worley, Robert Thomas, Rob Cross, and Amy Edmondson. I also found helpful the work of authors who view themselves not as organizational theorists but as organizational strategists. These included Jon Katzenbach, Colin Price, Scott Keller, Bill Schaninger, and Patrick Lencioni.

I then turned to recent articles and books written by thinkers who are focused on organizational issues, their impact on growth and scaling across tech and nontech companies and a variety of asset classes, including private equity funds and venture capital firms, and the lessons publicly traded companies can learn from private equity. These writers included Sandy Ogg, David Ulrich, Geoffrey Moore, Huggy Rao, Robert Sutton, Roger Martin, and the work of Benoit Leleux, Hans van Swaay, and Esmeralda Megally.

Later, I turned to more recent materials by writers pondering how to build a better and healthier organization in the age of artificial intelligence. These included the works of Marco Iansiti and Karim Lakhani, Shoshana Zuboff, Kai-Fu Lee, Sue Cantrell, Kevin Kelly, Thomas Malone, Joseph Allen, and John Macomber.

While I have relied on a variety of sources to ground and push my thinking, I also draw heavily from publicly available cases featured in Harvard Business Review, MIT Sloan Management Review, Private Equity International, Fortune, and several other key journals; interviews I conducted with leaders across the business, tech, and investor landscapes; and direct experiences with leaders and organizations with whom I’d had the privilege of counseling and advising. I also gained insights from audience interactions during talks and workshops I conducted on the book’s themes. Throughout this process, I sought to mine these sources for insight and examples as to how leaders and investors fuel growth, lead, and build better organizations in a digital era.

Finally, I want to emphasize that the ideas in the book represent my opinions and do not necessarily reflect the views of my partners at McKinsey & Company or of the firm’s organization and private equity practices. My use of the term “organizational health” in the book has its origins in literature I was introduced to as a graduate student and in my own work developing an organizational health framework at Google. More recently, I’ve focused on digital technologies to scale organizations and serve investors on organizational matters across the private equity and venture capital landscape, utilizing the science of org health as measured and practiced by the growing discipline of people and organizational analytics.