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Future of Executive Teams: Defending the Core

In my last post, I summarised the findings of my analysis of the composition of executive leadership teams in the FTSE 100, having first set out some basic principles for the role of that team in the present environment. You can find that content here.

Today I’m going to start to look at possible roles on an ideal future ExCo, leading onto future essays on orthodox and unorthodox compositions and finally on the resulting impact those compositions will have on decision-making flows. To look at roles, we first need to think about the demands that the present environment is placing on leaders.

The world has always been a complex place to do business in. The difference today is that we are far more aware of that complexity than we have been in previous generations and our ability to generate and suffer from change is exponentially greater than it has been before. We are also nearing the end of the latest techno-economic revolution – in information technology – which began in 1971 with the launch of the Intel microprocessor. History tells us (through the medium of Carlota Perez) that this revolution should last between fifty and sixty years all told. We are therefore in the lull years of the last decade of this cycle, waiting for the emergence of the next revolution.

So despite the technological wonders of the modern world, we find ourselves in a period of long-term economic and social stagnation.With physical, financial and human resources deeply constrained, all organisations are presently engaged in a number of parallel competitions, each of which is life-and-death:
  • between incumbents trying to maximise the productivity of generations of assets and newcomers trying to leapfrog them by subverting the value of those assets
  • …between incumbents trying to add features to their distribution and newcomers trying to add distribution to their features
  • …between incumbents trying to develop killer algorithms on their datasets and newcomers trying to get data to feed into their killer algorithms

The difference between winners and losers will be in their ability to manage complexity and uncertainty – a psychological battle as well as one of distinctive ideas and skills. Nowhere is that psychological battle felt more acutely than in the ExCo.

Specifically, then, the demands on leadership are:
  • To defend the portfolio’s cash cows by continuously improving their productivity in the face of competition and substitution
  • To invent and scale up new business models sufficient to ultimately replace the income stream generated by the cash cow (i.e. create new oligarchies)
  • To avoid drowning under the flood of new information and black swan events that flows in every hour

A CEO thus needs to have advisors around him or her that will help to make the right observations about the environment and the organisation's actions within it, to successfully orient on what those observations mean, to synthesise and take actions.To gratuitously drive traffic, I’ll tackle each point separately.

On the defensive

Let’s go back to first principles. The legendary Bruce Henderson was probably the first to point out that all industries over time trend towards monopoly or oligarchy. On this journey they reach a point at which the value of each unit that they sell starts to fall as its utility becomes well understood and customers look for new experiences. The incumbent reacts by using its understanding of how to optimise that oligachic model to drive down cost and thus continue to extract margin from the model at the same, or perhaps a greater rate than before.

As the CEO of a business that has achieved scale I therefore need someone on my leadership team who is adept at ferreting out where the problems that impede productivity lie and going out and resolving them. Those can be revenue-generating or cost-causing. For example, being underpenetrated in a particular geography may require us to create a new onshore team, develop a go-to-market plan, make some investments or even engage in M&A, but fundamentally this is just a way of maximising the value of scale of the incumbent’s model. It therefore needs to be judged in the same way as reducing headcount in headquarters through a programme of automation or driving out wastage in the supply chain using simulation technologies.

In the book (did I mention that I’ve released a book?), I give the example of Patricia Moll Kriese, who performed a variation on this role at Yahoo under Marisa Meyer’s tenure. In that example, I advocate for a ‘Head of Bodging’or ‘Corporate Handyman’to fulfil this role. I probably now prefer the latter as a description of the first role on the leadership team of the future because it travels better outside the small villages of rural England.

The Corporate Handyman is not the only defensive player that may be needed on an ExCo. We also need someone who has ultimate command of how the business works and doesn’t work right now. The best Finance Director I ever encountered did this brilliantly. He’d taken the time over many years to understand not just what the finance system and data said was happening with business performance but also why it happened. He did this through the simple expedient of talking to the people who’s work actually impacted the numbers, whether they were the lowliest engineers or the most senior of leaders. It was he who correctly identified during a strategic planning engagement that the assumption the rest of the leadership was making about their buying power was in fact largely false and that long term lack of dynamism in their planning had led to them being severely disadvantaged. It must be said that it might have been beneficial to have raised that point a little earlier…

…in any case, without knowing how a business really works it is largely impossible to change it as actions will be based upon assumed behaviour not real activity. What we need is a ‘Head of System Economics’to bring that perspective into every leadership discussion.

Another contention in ‘Art of Winning…’ is that all teams in an organisation should be focused on accomplishing missions that directly relate to the strategy. Those missions are dynamics, not statics, so there should always be an aspect of experimentation and thus risk in day-to-day activities. The intent is to give everyone in the organisation the dignity of ownership and autonomy in their work, leading to improvement in their happiness and performance. In turn, this idea results in the idea that all people should be treated as craftspeople, on a journey to learning new skills for their roles and ultimately mastering their crafts.

The idea of the multi-disciplinary team is certainly not new and many digital businesses operate such models throughout every function in their organisation. The idea is less-well developed in incumbents, where even simple ideas such as objective performance management do not exist. If we have a professional working environment, then it presumably makes sense to represent those professionals on the leadership team as a valuable perspective into how to defend the organisation. Let’s call this role the ‘Ultimate Professional’, because it’s more fun that way.

Next time we’ll look at advisors more focused on creating and accessing new markets than defending old ones.

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