Eight Business Trends that will Shape Strategy New Approach to Value-Based Leadership Euro p ean secs... Managing our Work & Non-Work Identities Business Review September - October 2013 europeanbusinessreview.com Collaborative Creativity: Leading High Performance through Theatre [SPR comeing or communion gayProgram for Leadership Development aH IESE Business School DEVELOPING LEADERS YOU CAN TRUST CHALLENGE YOURSELF, INSPIRE OTHERS JOIN IESE’S PLD AND IESE’s Program for Leadership Development (PLD) will enhance your business knowledge and leadership capabilities to improve your MOVE FORWARD IN performance and shape you into a well-rounded executive ready to move YOUR CAREER. forward in your career. You will collaborate with a pool of high-caliber participants and faculty to develop your personalized Executive Challenge. BAe The PLD consists of three 1-week modules on IESE’s Barcelona campus followed by the Short Focused Program of your choice (Barcelona or ‘New York) or our new Fast Forward Program. www.iese.edu/pld SSE AG a eo eer infopld@iese.edu Ht i“The European Business Review September - October 2013 Contents Leadership Strategy ‘Technology Innovation Organisation 10 5 19 2B 28 33 35 39 a 46 31 3 37 59 8 o n What Good Managers Do: Management Priorities for the 21st Century Jaume Llops &Joan E,Ricart Blueprints for Ensemble Leadership: Choosing the Right Operating Mode! Robert J. Thomas, Joshua Belin, Claudy Jules & Nandani Lynton Forgiving: The Hidden Dimension of Exceptional Leadership Manfred FR Kets de ies & Katharina Balazs (Quinn Bauriedel & Jeff Klein Leading Teams: Tools and Techniques for Successful Team Leadership from the Sports World Paolo Guenzi& Dino Ruta Dynamism and Discontinuity: Eight Trends in the Business Environment that will Shape Strategy Mike Canning & Eamonn Kelly Security-asa-Service: AtYour Service David Sandin ‘The Blue Line Imperative: A Radical New Approach to Value-Based Leadership Kevin Kaiser &S. David Young Sustainable Business Model Innovation to Create Value in a World of Finite Resources, Christophe Sempels & Jonas Hoffmann ‘The Hidden Costs In Business Processes Pichard Ward How Enterprises Exploit Five Digital Capabilities to Globalise ‘Slew Kien Sia, Peter Well & Chvistina Soh ‘ShoreTel: Blllantly Simple Business Solutions ‘Technological Innovation, Entrepreneurship, and Development Wim Naudé & Adam Sziemai "New Business Creation Among BRICS Seven Times Faster Than G7 Jean Stephens, CEO of RSM International Designing Inspiring Futures: Six Lessons of Sustainable Innovation ‘Steven P. MacGregor & Tamara Carleton ‘Changes in Work, Changes in Self? Managing our Work and Non-Work Identities in an Integrated World Lakshmi Ramarajan & Erin M, Reid ‘When Relationships at Work, Work (And Don't Work!) Rachel L. Morison, Helena D, Cooper-Thomas & Susan Geertshuls Competitive Advantage Through HR Innovation Upamali Amarakoon, Jay Weeravvardena, & Marie-Louise Verreynne &6The need for bold strategies to capitalise on the dynamism of our times - combined with excellent, timely execution of evolving opera- tional imperatives ~ has arguably never been greater.” sioiegyp28 Fetors Jane Lia Peres Kagbala David lean Elena Elroy ‘Annabel Jacobs Commissioning Eto Rebecca lord Nisha Kir Natasha Scott Ly Nw CCodelia Mantsebo Simon Rosenthal Business Development Eators lan Love Marcus James Melisa Ford Zara Hamilton JuliaRobecs Production Saul Luckman Charlotte Godtey iustation Alana Kerr Mork Hithersay Vaan Cao Head of Finance Lynn Moses Eedtorin Chet ‘The European Business Review Publishing scat Daniel READERS PLEASE NOTE “he views expressedin articles are the author and not necesaly those of The European Business Review. Authors may have consulting or other busines relationships vith the companies they discus ‘The European Business Review 113 Sted Avenue London 32 4PF Tel +4 0)20 8678 8991 Fax -+44 (20 7000 1252 Info@europeanbusinessreviewscom wawieuropeanbusinesseview.com Copyright ©2013 EBR Media, Al rights reserved, No part of this publication may be reproduced or transmitted in any form or by any means electronic or mecharica including photocopy, recording. or any information storage and retrieval system, without written permisionIngenieur Perpetual Calendar Digital Date-Month, Ref. 9792: Taking a big idea an Into a tiey space like a watchease isn't impossible, Atleast not when our engineers, d That's how the Ingenieur Perpetual Calendar Digital Date-Month became a really. The big news, however, is the use of a material typically found in motor sport: titanium aluminide. The case is ‘made of an alloy that's lighter and tougher than pure titanium, The IWO-manutactured 89802 calibre supplies the watch's func ver. These include the combined squeezing it signers and watchmakers are involved, tions and complications wit hour and minute counters in a single totalizer at 12 o'clock, a ‘small hacking seconds hand, aflybs calendar with large double-digit leplays, The semi-transparent subdials eneure that the digital display aises forthe day, month and leap year are never entirely concealed and give the dial its unusual appearan nary quick-a junction and a perpetual (On 31 December, thanks to IWC's revolu all the discs are synchronously set in n to welcome the New Year, Wy would anyone need more when all that fits inside a case measuring just room for ide: 46 milimetres?ENGINEERED FOR MEN WHO THINK INSIDE THE BOX. SCHAFFHAUSENWhat Good Managers Do: Management Priorities for the 21 Century Over many years Jaume Llopis and Joan E. Ricart have interviewed more ‘than 200 managers that have attended their classroom to explain to MBA students what the priorities for top ‘managers in organisations are. Below, the authors discuss how they have identified four fundamental priori- ties that explain what good managers really do. ss professors of Strategy and General Management, the uestion of what good man- agers do is a very relevant one. We are always worried about what is good ‘management, what is a good manager, or what characterises good manage- ment. The question is clearly rel- evant but the answer is far from easy. Managers differ a lot in their respon- sibilities, in their style, on the type of problems that they face, on the industry in which they compete, on the strategy that the company follows, on the char- acteristics of the company, etc. There By Jaume Llopis & Joan E. Ricart are so many contingencies to take into account that to generalise is extremely difficut. ‘One could try to find an answer in literature, just to realise that there is no clear answer. The classic literature on this question should of course start with Peter Drucker (The Practice of ‘Management, 1954) where he focuses fon three areas for action: Taking responsibility for the economic results of the company (the business), manag- ing the managerial structure or intel- Tectual force, and organising the labor force towards efficiency. To do so, ‘managers set objectives, organise, moti- vate and communicate, measure, and ‘manage people. ‘Another complementary answer can be found inJ. Kotter(1982), “The General Managers’: good (general) managers have a clear agenda for the future and a {g00d network of (internal and external) contacts they can use to get things done. Previously, H. Mintzberg (1973) in ‘The Nature of Managerial Work’ challenges some myths on the work of managers by describing people as less predictable, less systematic, and acting fast on minimal information. In a more recent publica- tion Mintaberg insists on not studying ‘management asa science, forgetting it is an experimental act where art and expe- rience are as important, if not more, than science elements ofthe profession, More recently, Barlett and Ghoshal (2000) in ‘Individualized Corporation’ illustrate that the basic imperatives of strategy, structure, and. systems, are substituted by the softer elements of purpose, process, and people. Unsatisfied with these answers we decided to ask managers directly. For 10 years we have been inviting top execu- tives from a very diverse set of compa- nies to discuss with our MBA students their priorities and their agendas. In this period of time more than 200 profes- sionals accepted our challenge. Many of them were further interviewed and a small sample reproduced in two books, ce published (in Spanish) in 2007 and in 2013." We provided very little struc- ture t0 our research and allowed them {0 use their own words to describe what they considered good management practice, what had worked for them, and What they consider the essential tasks and priorities for their level of respon- sibility. What we found can be sum- ‘marised in four fundamental priorities: ‘What is good management? What is a good manager? One could try to find an answer in literature, just to realise that there isno clear answer... We decided to ask managers directly. 6 The European Business Review September - October 2013,1. Create a future and communicate it, All the managers shared with us his/her worries about the future. Mr. Jaime Aguilera, President of Unilever in Spain, clearly summarised the role of a General Manager as ‘leaving the company is a better position to face the future than the initial one’. This role can be trivialised but itis extremely important. It means an exercise in the anticipation of changes, in sensing oppor- tunities, in creating new spaces for competition... If the top ‘manager is not thinking about the future, who in the company is doing it? David Teece (2009)° describes sensing as one of the three fundamental dynamic capabilities. To do so, managers need to know well their business, the industry, the clients, the cus- tomers, and the competitors. But they should also make the ‘effort to consider, to imagine, to create the future. They need. to develop a long-term vision. They need time to think. Our analysis shows two very important points in this ‘context, Most of our sample managers have an extreme focus con the customer and on the competitors. While they also refer to other relevant players, the key focus is customer intimacy and competitor benchmarking. Furthermore, complexity increases with time. Complementors and even ecosystems are increasingly important as well as relations with government agencies, regulators, and different associations as globalisa- tion increases Future plans are reflected in a clear strategy that can be ‘communicated and that helps in mobilising the whole organ- isation, Peter Betzel, now at IKEA Germany, explained that any good strategy should have a long-term vision but clear short-term objectives. Laura Gonzalez-Moleto from Merck ‘explained that strategy should focus the organisation on a ‘common goal but be flexible to contingencies in the way to reach it. Enrique Martinez from FNAC reminded us that clear ‘goals are needed to better assign resources even in good times. 2, Constant adaptation of the business model. To compete in the 21* century is far from easy. Rivalry is tremendous, ‘competitors emerge from other lands or even other industries, new ideas emerge, and disrupt current business models: the ‘competitive advantages of today are fast substituted and not adequate for the future. Therefore, in the fight for the future, top managers needs to rethink, reconfigure, and constantly reinvent their business models, ‘Our protagonists talk about constant adaptation, continual ‘change, renewal, noting that nothing lasts forever anymore. A Company such as Ficosa International, a component sup- plier to the auto industry, had to totally re-invent itself when it realised the industry was rapidly globalising. Even a company such as IKEA, an innovative business model, has been chang- ing and adapting as its size and geographical imprint has been changing. ‘The rules for adaptation differ from one company to the other, but we found some dominant threads such as the search for differentiation, the focus towards quality, the increasing relevance of innovation, and the care taken with details in order to get the job really well done, a kind of a search for excellence. Companies are discovering innovative business models to develop and sustain the competitive advantage to drive their organisations into the future. This is a creative, design-oriented capability that is fundamental in today's com- petitive landscape, ‘To manage organisations in the twenty-first Cea ERR ute sess yt es Cee ensues aay 3. People as the center ofthe organisation. Many corporate cultures highlight people, human capital, and/or knowledge as the key resources and advantages in organisations. But the ‘managers in our sample have a clear commitment to people Jn terms ofthe time they involve and the effort they exert in this area. They are thinking ahead of the capabilities they will need to reach the future they dream about, and they develop talent as needed in their organisations. ‘We found three regularities worth mentioning in tis area: fist, the time and dedication of top management in talent ‘management and team development. All managers put a lot of effort in searching for and developing individuals with high potential, and in following and mentoring them. But also in developing teams: Francisco Roman, President of Vodafone Spain insisted on the importance of team composition. Kim Faura from Telefonica noted that individuals should aim to develop the best complementary skills without being afraid of excelling in areas in which others donot. ‘A second key element in people as priority is challenge and risk management. Give people the right assignment, allow them to grow and learn, challenge the status quo and take risks when needed. All recognise that ths is a funda- ‘mental job that balances efficient task assignment with the opportunities to grow and develop fundamentally if we not only want to have the right team today, but a high performing team tomorrow. Finally talent management and task allocation should be combined with a demand of high performance and the drive to excellence in the organisation. All managers are highly demanding of their team. Josep M. Pujol, President of Ficosa International, told us that a good manager should love his/her team, but this cannot be a deterrent to demanding high per- formance. Rosa Garcia, President of Siemens but with a long career at Microsoft, said that managers are trainers and should balance the development of talent with the demand of high performance. This task isnot a consequence of the other two, itis a prior- ity in itself, and one in which good managers invest a lot of time: To manage organisations in our century is to manage people as the center of any activity in the firm. ‘worcuropeanbusinessreviewcom 74, Integrate with an institutional strat- ‘egy. Essentially tis is providing meaning to any task in a firm. While the other three priority task are quite expected, they emerge in other studies, perhaps with other wording, subdivided in differ- ‘ent ways, but essentially are constant in most studies, However in our work a fun- damentally different task emerged that integrates everything in the organisation and it is a unique and exclusive priority for the top management of a company. ‘We have called it institutional strategy. Institutional Strategy Integrates the organisational values and_ principles, the institutional purposes of the organ- isation, and the ‘ideological’ rules that underline the firm. As such itis the basis that supports, integrates and coordi nates all organisational efforts towards the organisational goals and aims. ‘Values and principles are fundamen- tal in any organisation, and top man- agement should not only comply with them, but also live and share them, as he/she has to set the example. The role of management can be different depending of the type of company. Rosa Garcia highlights the role of a manager as ambassador, typical in a large multi national. In contrast, if one is the main CO reorte Finally, the action, the day-to-day, develops a culture and an ideology about what is right or wrong, about what is excellence in an organisation as a con- crete notion, not as an abstract idea In this way rules, norms, and codes of conduct get developed and embedded in the organisation. ‘Managing these elements is a funda- ‘mental task for top management in any organisation. They may do it with differ- ent styles, in different forms, with differ- ent emphasis... but all doit Values and principles are fundamental in any organisation. Top management should not only comply with them, but also live and share them, as he/she has to set the example. owner, he/she can do a lot to define the values that should drive the company, and that are consistent with the strategy and business model of the company. Think for instance about the origin of the strong values of companies as Ikea or Southwest, to mention just wo. ‘Values are key but need to be comple- mented with organisational purposes and goals. And this cannot be imposed, itis the result of dialogue with different stakeholders, and a balancing exercise on internal and external coherence. It is a balance between continuity in the mission but also change in the strategy and renewal in the business model. The overall set of priorities can be represented in the figure above. It is important to highlight that, while one ‘may consider that the tasks may not look toonovel, two things are very important. First, the institutional strategy is a very important umbrella that covers the other tasks, And second, while most managers have full working schedules, they all put their quality time, and more time than less effective managers, into real priori- fies: creating a future and communicat- ing it, constantly adaptating a business ‘model, putting people as the center of the organisation, and integrating with an institutional strategy, BUSINESS ‘MODELS. FUTURE About the Authors Prof. Joan E. Ricart is Carl Schrader Professor of Strategic Management and Chairman of the Strategie Management Department at the IESE Business School. He is Associate Director for Faculty and Research, and was Director of the Doctoral Program (1995-2006) and Associate Dean for Research (2001- 2006), He is also Fellow of the Strategic Management Society and the European Academy of Management, and has Published several books and articles in leading journals. Prof. Jaume Llopis is Senior lec- turer in the Department of Strategic Management at the IESE Business School. He has served as CEO at a number of prominent companies including Agrolimen, AGF Unién- Fénix, Nestlé, Moulinex and Borges Mediterranean Group. He is a member of the board of directors at several mul- tinational companies as well as family owned businesses, He has published several books and articles in leading newspapers and magazines and speaks at events and seminars. References 1. Yin La Dec dl siglo XXT etn ss po- oni, Ed. Deusto, Barcelona, 2007; “Qué Inacen los Buenos Diectvos: El reto del siglo XXi, Ed, Pearson, Madrid, 2013 2. David Teece, Dynamic Cables and S Management, Oxford University Press, New “York, 2008, 8 The European Business Review September October 2013Blueprints for Ensemble Leadership: Choosing the Right Operating Model By Robert J. Thomas, Joshua Bellin, Claudy Jules & Decisions at the top of global companies are increas- ingly made through leadership ensembles. Below, Robert J. ‘Thomas, Joshua Bellin, Claudy Jules and Nandani Lynton argue that to lead effectively, ensembles have to understand hhow they fit into—and shape—a company’s operating model. wd decisions et mae at eof bal compa sent, pomp Of adc feel conic inmaces arora o te ty of deionised Krave calls akeon iene depending on wheter faxes, sto with ody’ eas Torcnampla oop of ads nay neo debt acon tionships to quickly ratify a decision, or discuss a range of pos- sblesoluons oa robin. Each cirques dierent trent coniguaton companys tou dened operaing model the whe through which a company executes its business model and from sete Toad ect, eens hve under Four operating model blueprints In our leadership ensembles research, we interviewed more than 50 topevel executives. Ths helped us identify four op- erating model approaches that successful ensembles can take fandani Lynton ‘These approaches frame the context for decision making at the top. While leadership ensembles can certainly shift their oper- ating model blueprints to better match their enviroment and growth strategy, we found that many top leaders often fall back ona default blueprint that influences how they work together. ‘The global leadership ensembles we studied varied on two dimensions: First, leaders generally either place greater emphasis on issues of talent and culture or structure and process. Second, they generally either seek to create a highly integrated organisation, wit standards that apply everywhere, orthey prefer toallow local operations to maintain a high degree of autonomy, While these dimensions represent a continuum rather than binary choices, they suggest four relatively distinct blueprints to designing operating models atthe top. (See exhibit on next page) INCUBATORS. Ensembles that apply this blueprint value a cohesive corporate culture and see themselves as stewards of the values and behaviors that will generate future success. They ‘make acquisitions with care, emphasising cultural fit with any new addition. ‘Ajay Piramal, executive chairman of India-based Piramal Group, explained that as his top leadership group contem- plates expansion into new areas such as financial services and real estate, it’s very important for us to think through what we should do, what in our experience generally has succeeded in the past, and what we need t0 avoid, [We now] spend much more time thinking about the key values our new businesses should have and the principles for those businesses’. The leadership at Piramal follows through on this concern. “We have a half-day session with newly acquired businesses to lay out what will be the guiding principles and the rules we want to follow. This is so new people who joined us understand clearly where we stand and the sorts of boundaries in which they will be working’ ‘An incubator blueprint is often taken by ensembles whose companies are growth-oriented and branching nto new markets, but arent looking for rapid entry or irst-mover advantage. DIPLOMATS. Ensembles that apply this blueprint pursue ‘outcomes through a process of give-and-take among local busi- nesses, and also between local businesses and headquarters. “We're working {0 establish more global practices’, explained John Mahoney, chief financial officer at the office supply retailer Staples. But rather than dictate change, his lead- ership’s role is ‘to challenge: when things are going well, what is it that’s driving that? Is it something that works because it’s tailored to the local markets? Or is it something that the 10 The European Business Review September - October 2013,‘management team should adopt as one of our common, more global practices?” Mahoney notes that the global lead- ership at Staples ‘may be fairly certain about the right way to do things, but we may go back and forth between being directive and being cooperative. We're working to make sure the strategic deci- sions in the local markets get made prop- erly and get executed properly and with the full support and cooperation of the local market operators’ Ensembles may often operate as dip- Tomats when expanding globally not just to access new markets, but also to inte- grate new talent and new ideas. They are more concerned with the quality of management and less concerned with speed and efficiency in the short term, DIRECTORS. Ensembles taking this approach want decisions to be made by those who are closest to the operations involved. They therefore see great value in keeping many decisions focal and, like engineers, they focus on using processes and structures to delegate responsibilities Toronto-based hotel chain Four Seasons has had to learn faster than ‘most other companies what kinds of decisions need to be ‘contracted out’ to local managers. According to former CEO Katie Taylor, ‘We came to realise that you couldn't take a North American focus and transplant it elsewhere, In our business it’s very important to under- stand the cultural nuances of all the dif. ferent locales’. This ethos is carried all the way to the top of the organisation, ‘me up to spend time thinking about and. doing things that are longer ranging and more important for Four Seasons’ future success’, Ensembles that take this approach prefer to keep decisions quick and, if possible, keep decisions local. Designing a better model Global leadership ensembles can signi icantly improve their blueprint options for operating model design by following these steps ‘Step 1: Understand what operat- ing model blueprint leaders currently prefer. A useful starting point is for top leaders to explicitly articulate a pre- ferred operating model approach For many of the companies we inter- viewed, the approach they were taking was often based on an unspoken agree- An important guide to effective ensemble leadership is a company's broadly defined operating model. To lead effectively, ensembles have to understand how they fit into—and shape—an operating model. ‘ment among top leaders rather than an informed conversation of benefits and drawbacks. For insight into whether your top leadership ~ the two percent ENGINEERS. This type of blueprint wants above all to optimise the organ- isational structures and processes that tie their firms together. Here, ensem- ble leaders do not disregard corporate culture, but they view changes to pro- cesses and structure as the most imme- diately useful tools at their disposal ~ tools that will ultimately build and foster a single culture across the firm. Ian Cheshire, group chief executive of the world’s third-largest home improve- ‘ment retailer, Kingfisher, is focused on driving a more common product mix across the company's stores. To do so, Kingfisher restructured the way that regional functional heads interact. ‘In our effort to have a common product range’, Cheshire explains, ‘we decided to get the commercial directors running the local businesses to create a global network and decide which categories to carry’. Ensembles that apply an engi- neering blueprint often prioritise consol- idation of operations ahead of under- standing local innovations or enhancing Tocal autonomy. where Taylor, who in late 2010 took over her role from the company's orig inal founder, was focused on building a clear separation of labor when it comes to decision making. "My role as CEO haas by definition got to become less tac- tical’, she explained. ‘Ie’s going to free of most senior managers, generally = prefers one blueprint over another when designing a global operating model, we offer a mini-diagnostic. (see next page) ‘Step 2: Continually assess how your preferred blueprint helps or hinders your organisation’s goals for global expansion. Global leadership ensembles can take on different decision making blueprints. Lenders esas canfoas on of authority ndeontrol | fas on green sexsom | Diptomats tl ee opr 2012 Acar pe Reserved Acer ga and Hh Pererance Dele ae ener ofA woreuropeanbusinesseviewscom ILGlobal leadership ensemble operating model design and process checklist: ‘Which operating model blueprint do you prefer? Section One: Please place check next to the description tat best rflcs the degree to which your tam prefers one mode of authority and control over another in defcing ts operating model Please select one option |. Weare dscpined in focusing our efforts on ‘where we can 2. We make acquisitions with care, and place 2 hefty emphasis on. 2. Welk for laders wha are motiatd mere be 4. We promote ways of working that enable senior leaders to. 5. Leaders in our company are more. {6 Theabiley to deer on performance com- tment more inuenced by. 7. Our talent management strategy relies heavy on. Total Section Two: 1 Create a coheshe corporate euture 1 Shared values and cultural due diigence Proactively alning the organisations oF worker ike to supports seater Ey Consul wih employees before making echions Focused on ying employees day-to-day 1D actions toa higher meaning and o che organ Isaton’s strategic priorities 1p $reg dstncve culture of mprovition that gies usa compete advantage Recruiting practices based ona strong [Ey company brand, employee valve proposition, nd eanddae fe wth company values and pede Mpg 1p Clearly deine procedures and loves of decision-making authority 1 Speed and efcleney \dentifingiefciences and recurring prob- lems and restructuring the organsabon to rasimiz effectiveness 17 Set standard of excelence to manaln oper ‘onl efcleney Designing and esabishingsructures sys- tems and processes to achieve organisational objectives 1 Atringexisng ways of doing busines to ‘enter new markets and customers Hiring decisions based on mechanical weight- 15 ng of resume highlights, structured icerview Fests, and other standard processes and methods Process and Structure Overall Pe place a check next to the description that best reflects the degree to which your company’s growth pend, strategy operating model andere are oly or lcly- driven Pease select one option |. Our growth agenda is focused on. 2. Our strategic decisions are typically 3. The most senior leaders in our company 4. Our company is structured such that. 5. To harness global alent busines unis wil rose pial rely on. 6. Our emerprise processes are managed 7, Our is best described as, 8. Ourkey performance indiators are. 9, The value and behaviors of our workforce Total Growah nthe core business Globally visible and coordinated [pp Reusnely decide on orl matters rom bal headquarters or gobal busines units [pp Autonomous business unis and counties are ‘organised to operate que linked 1 Global mobility and expatriate sourcing ener Flowing om a central headquarters o bush [Cineas uns and coun to ensure systems are Unform and sandardeed management ystems [Defined and monitored at the corporate center or global business unit Arefullyinegratedandsharedenterpriseswide [EB Slctay neesration Growth rom emerging or non-core markers (Local, derived from being close tothe market Routinely devolve local decisions to countries ‘Auxonomous countries are organized to operate quite independentyexcopt in cass of