Chapter 6
INFUSING FUTURE-BACK THINKING INTO LEADERSHIP TEAMS
The problems we face today come at us so fast and are so complex, that we need groups of talented people to tackle them, led by gifted leaders, or even teams of leaders.
—Warren Bennis
Making time for long-view thinking • “The prime ingredient in these decisions is judgment” • Toward a new leadership framework • Resources talk • King Arthur, CEO of Britain • The chemistry to dance • The board as catalyst to visionary thinking • A recipe can’t cook your dinner
We’ve written about the new way of thinking that future-back leadership requires. But how does that work in practice in a large organization? In this chapter, we present a new framework for enterprise leadership that balances future-back and present-forward thinking.
A typical multinational organization is comprised of scores of business units, some of them in different industries and markets, operating in dozens of countries. With so many balls in the air, it’s hard for leaders to carve out time or mindshare to think about and plan for the long term of the whole organization. Further, they tend to delegate their thinking about future technologies, products, businesses, and overall growth to their R&D organization, and appoint chief innovation officers to run their internal innovation or ventures organizations. This generally works well when it comes to long-term enhancements to the core and the development of close-in adjacencies, which don’t require a different business model, a new set of people and competencies, or fundamentally different organizational capabilities to carry out. But as we’ve seen, it is a recipe for failure when it comes to the creation and management of discontinuous, beyond-the-core, white space plays. We would argue that enterprise leaders need to delegate more of their routine management tasks than they currently do so they can take a greater share of the burden of long-view thinking onto themselves. No matter how good the chief innovation officer may be, no matter how creative and entrepreneurial an innovation team, they cannot successfully create new market growth for an organization unless the leadership team is directly involved in their work, guiding them with their long-term vision and strategy, helping them create the right processes move their ventures forward, and protecting them from competition from the core.
Without sufficient high-level attention, most breakthrough ventures won’t even get off the ground.
We saw this happen not too long ago when a scientist in a consumer product company’s R&D department developed a 3D-like printing technology to create one of its highly customized products on demand. Although there were still a few remaining technical hurdles to work through, the company’s head of new growth platforms was excited about its disruptive implications—not just for manufacturing, but their whole value chain.
Potentially, a customer could walk into a store off the street, describe their needs, and walk out half an hour later with the product in hand. Such a model of onsite crafting would offer better and faster service to customers at a lower cost and provide them with even more personalization. And it wouldn’t just be a boon for customers—instead of distributing their products via third parties, the company could own those stores themselves (or provide the same service on the internet), placing themselves squarely at the center of the competitive map of their industry.
Surely the idea was worth pursuing, at least on an exploratory level. We thought so. But our client’s senior leaders hesitated. All they could see, it seemed, were its potential downsides—the remaining technical challenges (albeit imminently achievable, in the R&D team’s view) and the threats to their existing factories, supply chains, and distribution channels, which might in time become obsolete. Without proof positive that the technology would work seamlessly and the new business model wouldn’t destroy their old one without adding net growth, they refused to give it more than a very limited investment of people and dollars.
Had those top leaders regularly engaged in the kinds of strategic dialogues about enterprise vision and strategy we’ve described, they might have been able to envision a low-risk, low-cost way to prove or disprove this potentially breakthrough business’s premises. Perhaps they could have started with a limited foothold test that targeted customers who would especially benefit from the added speed and personalization, and who weren’t as well-served by the company’s existing products. If initial results were promising, governance models like the ones we described in chapter 5 might have allowed them to grow the new business in tandem with their old, gradually shifting resources to it as it matured. Given the likelihood that a competitor would develop a similar technology in time, they might have inoculated themselves against their eventual disruption by disrupting themselves. Instead, the senior executives demanded proof of superior product and market performance, backed up by marketing data—data which by definition did not yet exist.
“Many of the important decisions we make,” Jeff Bezos wrote in one of his annual letters to Amazon shareholders in 2005, “can be made with data. There is a right answer or a wrong answer, a better answer or a worse answer, and math tells us which is which.” But sometimes, he added, “We have little or no historical data to guide us and proactive experimentation is impossible.… Though data, analysis, and math play a role, the prime ingredient in these decisions is judgment.”1 Our client’s senior leaders needed to make a similar judgment call, but they didn’t have to stake everything on their gut feelings. As real as the risks were, the concept could have been tested and managed in a risk-mitigated way. And its upside was potentially transformative.
It’s not that those leaders’ questions and doubts were unreasonable. In the best of all possible worlds, no one would ever have to compete with themselves, spend money on technologies that might not ultimately pan out, rely on business models that weaken over time, or see their capital investments become obsolete and lose their value. But that is not the world we live in.
Those leaders weren’t averse to innovation per se. They created the group for new growth platforms that put the idea on the table, and their R&D department was highly respected and well-funded. But as with so many other leadership teams, they had brought a present-forward mindset to a future-back opportunity.
The opportunity is still there, waiting for someone else to pick it up, test it, modify it, and push it forward.
The Need for a Leadership Framework
Those leaders were not only using the wrong mindset; they were working within a model of enterprise leadership that was incomplete. The leadership framework depicted below matches up to the left brain/right brain, present-forward/future-back comparisons that we fleshed out in chapters 1 and 2.
The present-forward side lists the leadership capabilities needed for operating and executing the business—a profit-and-loss-oriented, relatively short-term perspective; mastery of straight-forward, algorithmic processes; and a reliance on decision-making criteria turning primarily on financial data. That’s where the leaders who were so skeptical of the 3-D printing opportunity were sitting.
The future-back side of the framework, in contrast, describes the more intuitive and creative set of leadership activities geared to exploring, envisioning, and discovering needed for efforts that are out-of-the-box and beyond-the-core. Its associated processes are iterative and driven by discussion and debate; decision-making turns on the insights gained as teams make the rounds of the learning loop.
Our client’s leaders believed they were moving their organization forward, but by hewing so closely to the data-centric, operate-and-execute modality on the left side of the framework they were merely managing it—and potentially setting themselves up for a big failure down the road. Some leaders may know when to switch over to a different mindset instinctively, but most need to learn how and when to toggle over to the right—to become ambidextrous, to borrow a phrase from Michael Tushman and Charles A. O’Reilly III, and hence more innovative and creative.2
Business thinkers like Gary Hamel have proposed that top-down leadership and organizational creativity are inherently in conflict. Taking their cue from the internet, they argue that organizational charts should look more like networks than pyramids, with decision making distributed all the way out to their edges, where the most customer-facing employees are clustered. Innovation cannot be commanded and controlled, they declare; it must be allowed to emerge organically.3 We agree that flatter and more egalitarian organizations are nimbler, have a more granular understanding of the markets and customers they serve, and are able to tap more creativity from their ranks than their more hierarchical peers. We also believe that the more decentralized and flatter an organization becomes, the more aligned and committed its top leaders must be in setting its overarching vision and the guiding growth principles that it entails.
Future-back Leaders Put the Enterprise First
The great industrial organizations of the nineteenth century developed silos of functions, each with its own distinct processes, practices, rules, and norms. Management itself, the art of organizing human systems so they add up to more than the sum of their parts, has evolved into more or less a science. There is a vast body of literature on teams and team-building. But as critical as leadership teams are, in most organizations they are not guided by the same kinds of explicit policies, procedures, and processes that functions and lines of business rely on. There’s no lack of consensus on what the president of a business unit or a regional affiliate is supposed to deliver, or how a chief financial officer, a chief marketing officer, or the head of legal, procurement, HR, or manufacturing is supposed to operate, all the way up to the CEO.
But when the senior-most executives of a big, established business convene to make enterprise decisions, they’re often loath to cede their functional or business-line roles as individuals. This can even happen with a CEO. A CFO who is promoted to CEO may continue to view the organization through a CFO’s stringent financial mindset, just as a regional president may see it solely from the skewed perspective of the territory he or she is responsible for. When tasked to make critical resource allocation decisions for the enterprise as a whole, they might act to protect the interests of their old fiefdoms instead.
When we asked Udit Batra, the CEO of MilliporeSigma, a multinational life science business that is the product of a recent merger, how he persuades the heads of his newly blended business units to put the interests of the enterprise ahead of their own, he answered, “I think resources talk. Ultimately capital allocation matters, and everything else is a game. That’s one part. The second is truly getting their buy-in—with hope and fear, or logic and love pushing them in the direction that you feel is appropriate. You need both tactics. You have to free up resources, and you have to force people’s hands. You have to force their hands and then you have to support them to do it.”4
How can CEOs bring their own leadership teams into line? Most of their members have already mastered the left side of the framework, as it matches up to what they do in their individual roles. But moving them over to the right side as a team is much, much harder. Hope, fear, logic, and love, and the subtraction or addition of operating resources are powerful persuaders all, but they are not a structured and repeatable approach; which is to say, a set of guidelines governing the focus of activities, the processes employed, and the decision-making criteria that a leadership team must use, even as its individual members come and go. Creating a true team of leaders is perhaps the greatest challenge that a CEO faces.
Consider the legend of King Arthur. Arthur was the CEO of Britain, and he drew his leadership team from the ranks of lesser kings, dukes, marquises, counts, viscounts, barons, and knights who managed its subsidiary kingdoms and territories. Each was a paragon of heroic chivalry, but when Arthur called them into council, they treated one another as rivals instead of peers, and very little got done. So Arthur ordered his carpenters to fashion a round table and a set of chairs, in order that, in the words of the Norman poet Robert Wace, “their chairs should be high alike, their service equal, and none before or after his comrade.”5
Henceforth, things were different. When they were at home or off pursuing their quests, the Knights of the Round Table looked after their individual responsibilities. But when they went to Camelot, they conducted the business of state. The round table was the physical representation of the leadership framework that allowed them to become more than the sum of their parts.
Of course, these knights were fictional, but their story is a useful parable. Successful teams, whether they are knights of the realm, athletes, superheroes, government leaders, or business executives, must contain a diversity of strengths while maintaining a unity of purpose. The chief executive’s job is not to erase their members’ differences but to array their strengths in the best possible way. To do that well, they must know which way of thinking and acting is best suited to solve which problems and ensure that their team knows when it is time to execute and when it is time to explore and discover, when it is time to parse data and when they must summon the courage to walk a tightrope without the net of certain knowledge.
Successful future-back teams must know what they know, but also what they don’t know and must learn.
And they must be conditioned to act on what’s best for the organization as a whole. If a CEO struggles to focus his or her leadership team, as a recent white paper from the Center for Creative Leadership (CCL) put it, “on learning, thinking, and leading globally across the enterprise, not merely on their particular functional areas,” then they will also struggle in the rest of their job. Many do. The CCL cited a recent global survey of senior executives it conducted in which 97 percent of the respondents agreed that the “increased effectiveness of my executive team will have a positive impact on organizational results,” but only 18 percent of them rated their own teams as “very effective.”6 That’s quite an indictment.
Lining Up Your Leadership Team
Just knowing a leadership challenge exists goes a long way toward resolving it. So does the discipline that comes out of the diverge/converge process of strategic dialogues. When a CEO ensures that his or her team members really listen to their peers and know they are being heard in turn, their teams are more able to reach alignment on answers to the biggest and hardest questions. When they’re able to develop a common language to describe a common set of goals, they are better able to problem-solve, commit and allocate resources, and sponsor and govern.
Mike Leavitt, a leading management thinker and insurance executive who is a former governor and cabinet secretary, told us that when it comes to leadership teams, “having the adaptability to make changes is like having the chemistry to dance. It is an intuitive sense about one’s next move. Great dancers feel a nudge on the back or a dip of the shoulder and they know what that means. Great teams develop that kind of chemistry. Unless all the members are dancing toward the same objective, it doesn’t happen. Great teams collaborate. It’s a continual process of iteration in which people are willing to have disagreements that tease out differences and allow them to learn from each other.”7
There is no one right way to build such a team, but it’s mandatory that, in Jim Collins’ words, the ultimate leader makes certain “the right people [are] on the bus (and the wrong people [are] off the bus).”8 The CEO may need to change the composition of the team, adding or subtracting members as the circumstances dictate. Some may have to leave the organization. It’s sad but true that knowing who to fire is as important a leadership capability as knowing who to hire and promote. When we asked enterprise leaders what their greatest regrets were, more than a few confessed it was that they waited too long to remove a senior executive who didn’t add value, or who didn’t contribute the right mindset to the team.
David Henshall, the CEO of the software company Citrix, told us he tends to include all of his senior-most executives in discussions about long-term planning and strategy. “But I’ve also cherry-picked a few individuals from around the organization that have unique knowledge, or who I believe can be high contributors to the dialogue. It’s very narrow to believe that just the most senior people in the company have all the answers. But it’s a balance, and finding out how to select those people without creating a situation where decision making gets muddied is a little bit of an art,” he admitted.9 R&D executives, designers, marketers who specialize in new product development, or senior executives from recently acquired companies can help catalyze the future-back thinking of a senior team that’s overweighted with present-forward thinkers.
Terry Crimmins, the president of BAE Electronics Systems, told us that he divides his senior team into unequal parts, with the bulk of its members tasked with ongoing operations and a much smaller group given a charter to sit on the right-hand side of the leadership framework and focus on the future. “If you try to take the whole leadership team along for the ride when you’re doing long-term strategy,” he said, “forget it. But it’s important to keep them all stitched together as a leading team as well. If you don’t integrate that team back together on a routine basis, they become misaligned.”10
People who are innately future-back or present-forward thinkers may not only have very different cognitive styles; they may feel uncomfortable or even threatened by their opposites. “Each side feels differently than the other,” Bob Rivers, CEO of the Boston-based Eastern Bank, reflected when we showed him our leadership framework.
The words I would use around the left side of the framework are serious, disciplined, and self-critical. The right side feels very different to me. Its emotions are aspiration, optimism, risk orientation, or, what I like more, risk-taking. Each side must appreciate and value the other, even if, innately, they don’t embrace them. Both sides may feel fear when they look at each other. But the CEO has to be comfortable on both sides. If you, as the CEO, don’t have an optimism about the future and a willingness to take risks, an aspiration, a sense that something’s greater—if you can’t play out there as the CEO, then this whole thing is dead.11
In a similar vein, Chris Chadwick, the now retired leader of Boeing Defense Systems, observed that “good leaders must be able to think from right to left,” meaning from the future-back side of the framework, where a future-facing plan is envisioned, to the present-forward side, where the first stake is driven into the ground and an initiative is deployed.12
How does one develop that ability? Early on in these pages, we said that “if you want to change what you’re doing, you have to first change the way you think.” This is true when it comes to intentional processes, but when the goal is to change the way one leads, sometimes the opposite is the case. As the leadership and organizational behavior professor Herminia Ibarra has noted, “People change their minds by first changing their behavior. Mind-sets are very difficult to change because changing requires experience in what we are least apt to do. The only way to think like a leader,” she continues, “is to first act.… Those freshly challenging experiences and their outcomes will transform the habitual actions and thoughts that currently define your limits.”13
Ultimately, the secret to lining up a well-functioning leadership team that can think from right to left is to ensure that you spend enough time doing just that, individually and together.
Just as there are annual budget reviews, you should establish quarterly future-back reviews—one- to two-day retreats in which senior leaders convene to revisit their vision and strategy, review the progress that their innovation teams are making, and further their own learning.
Obviously the frequency and duration of these reviews will vary depending upon your company’s circumstances, but the key is to maintain a disciplined cadence of these kinds of conversations. As you and your colleagues grow more comfortable with future-back thinking, it will become second nature.
How Boards Can Enable Future-back Thinking
One refrain that emerged in nearly all our conversations with leaders is the positive role boards of directors can play in encouraging executives to take a longer view. Boards of directors have a fiduciary duty to serve as guardians of an organization’s future; as such they can help ensure that its leaders don’t neglect the right side of the leadership framework. Beyond simply hiring a new CEO who is not glued to its left side, they can press an incumbent CEO to spend more time on the right with his or her teams. As Bob Rivers put it, “Boards have a longer time horizon as a unit than CEOs do; the average retirement age now is seventy-five. They’re typically going to be sitting there, call it ten years longer than the CEO. Most directors have an itch about the future that they need to scratch.”14
Sandi Peterson, who sits on Microsoft’s board, took up this theme as well. “I don’t think the board’s role is to set vision,” she said. “I think its role is to be a catalyst to ensure that the company and the leadership of the company is setting the right vision and being bold enough, thoughtful enough about that. The board is not close enough to the day-to-day, the competitive landscape, and the customers to be the ones who say: ‘This is the vision,’” she continued. “But they can push the leadership team to think bigger and bolder than they have been, or in some cases the opposite.… The board doesn’t own the vision, but it owns ensuring that it happens, that there’s enough conversation about it, and that teams are being pushed hard enough on how to think about it.”15
“The way I look at my role as a board member,” Rich Bane, a director of Eastern Bank, told us, “is not to be focused on the day-to-day. The board should be thinking about the bigger picture every day. The board has to say, ‘We believe in innovation, we believe in the future. We believe in the need to think long-term.’ ”16
The board should not let itself be steered by the CEO, which is something that happens far too often; it’s important that it develop its own perspective, and it should have a broad understanding of the organization’s broader culture. To ensure that it does, its members must interact with lower-level executives when they can. If their own meetings are too focused on compliance and governance matters, that should raise a red flag. “Executive sessions without any members of management in attendance, including the CEO, is a really good thing to do,” Peterson observed. “If it’s a well-run, functioning team of board members, they should be able to raise those high-level issues.”17
Boards have a big role to play in ensuring that an organization’s new leader builds on the progress that its old one made—or, conversely, that a new leader sets a different vision and leads the organization in a better direction, if that is what’s called for. If a leader is too focused on the short term, the board can press him or her to take a longer view. If the board itself has been exclusively focused on governance and operations, it needs to expand its own thinking.
Of course, not all boards are bastions of visionary thinking; most directors were shaped in their own careers by present-forward incentives and systems, and they are as vulnerable to short-term cognitive biases as the leaders of the companies they oversee. Most expect CEOs to keep share prices rising and to avoid making ambitious bets on beyond-the-core initiatives that are too risky, as indeed they should.
But a visionary CEO who has a sound and actionable plan for a different future can often enlist even a conservative board as an ally. As Chris Chadwick told us:
For 90 percent, even 99 percent of the organization, my message was, “Here’s the path you’re on and here’s what I need you to do and why.” But when I went to the board, my message was also, “Here’s where we’re going to go in the long term and how we’re going to introduce new elements into our business.” By presenting both our present and our future to them, I was better able to open their eyes to both the quarter-to-quarter reporting-to-the-street elements and our vision. In other words, I never forgot I had a day job, which was to deliver results. But I could also make them see that the future was changing drastically, even if it was twenty years out.
The cool thing about briefing the board was that I learned to give them the benefit of the doubt. When I first started talking about my future-back view of digital transformation, the board would ask very tough questions. We are a very manufacturing-heavy company, after all. But with the right answers, they would begin to buy into it and embrace it. So yes, you can get alignment with the chairman and the board. And then of course, it’s not enough to just think future-back. You need to slowly institutionalize that change inside the organization, so that when the next person comes along to fill your role, it’s difficult for things to just wholesale default to the way they used to be. You’re building in new foundations as you go that embrace that new way of thinking and what it has brought to the business.18
At the end of the day, the leadership framework is just that—a schematic representation of the kinds of thinking and decision-making processes a senior team needs to master before it can manage an enterprise. Just as a map can’t transport you to your destination and a recipe can’t cook your dinner, the framework is not an operating system. Leaders and their teams must learn to stretch themselves, to think in ways that may be hard for them and will likely feel unnatural to some.
What Senior Leadership Teams Need to Successfully Drive Long-Term Growth
- A diversity of strengths
- A unity of purpose, guided by a shared vision for the enterprise as a whole
- The understanding that successful enterprise leadership is as much about exploring and envisioning as executing and operating
- The wisdom to know which capability is called for and the ability to balance them when more than one is required at the same time
- A willingness on the part of its members to change their behavior, even if they’re not yet ready to change their minds
- The guidance of a strong, independent board and a willingness to collaborate with it
But a map can help you find your way when you’re lost and a recipe can help you turn a list of ingredients into a meal. Simply having the leadership framework and a five- to ten-year or longer growth horizon can make you more conscious of the need to do those difficult things.
In chapter 7, we will describe some of the ways you can embed future-back thinking in your organization.