THE AMBIDEXTROUS CEO[/b]
Change is the only constant. A popular but clichéd adage. But this very ‘change’ seems to have huge implications especially when it comes to doing Business and being successful at it. All Success stories in business share one major climax-dealing with ‘change’. In the global business scenario staying one step ahead of your competitors dictates the difference between success and extinction and staying ahead does not only mean beating your rivals in a core business domain but also being able to nurture a clear vision of the future of that business domain as well.
If history is to be believed then it seems that Innovation has in most cases proven to be the best insulation against change. Innovation not only prepares a business for the future abrupt changes in the market demand but also helps in leveraging those changes to eliminate competition and making profits also. But nurturing a vision of innovation is easier said than done. Innovation can be a very demanding wife at times. Encouraging innovation in a business is a very uphill task especially when you are already using all resources in competing in your core domain. Diverting some of these resources to sustain innovation is a very tricky task which involves a carefully considered trade off between the competing demands of the core business and the new units driving innovation.
Lack of innovation can sometimes be suicidal if the company fails to cope with abrupt change in the market demands. Sometimes established businesses have to get through a lot of mess to stay alive in the market. This thing was clear when HP, the largest maker decided to acquire Autonomy corp. , a software service firm .Given the premise that Hp’s stocks were not performing very well and the pc making business had become a business with very less profit margin the decision to buy Autonomy corp. was an outcome of the mounting pressure on HP from its investors . With little or no innovation to handle abrupt changes in the business ,this time the shift in consumer demands towards more software oriented services, HP’s decision can be perceived as a quick fix to keep up with this change.
In the fall of 2008, Mike Lawrie, the CEO of London based software firm Misys, asked his senior executives to prepare a plan for weathering the global economic crisis. When they reported back, cutting investments on Misys’s open source solutions topped their list. Considering the fact that the company was having a tough time in coping with the difficult economic scenario , the Open source solutions unit was perceived as a threat to the firm’s core identity and values. Often in this kind of tight situation the CEO is the only friend of innovation who ends up trying to persuade the heads of the core businesses to support and fund the innovations. In other words he pushes the key decisions in this regard into these units, ceding much of his or her own power and creating a collection of feudal baronies- a perfect recipe for failure. To avoid this kind of trap which seems to be the most easy way out, research suggests three basic leadership principles to be followed:
(1) Engage the senior team in a forward looking strategic aspiration.
(2) Explicitly hold the tension between the demands of the innovation unit and the core business at the top of the organization
(3)Embrace inconsistency by maintaining multiple and often conflicting strategic agendas.
FIRMS THRIVE WHEN SENIOR TEAMS EMBRACE THE TENSION BETWEEN OLD AND NEW AND FOSTER A STATE OF CONSTANT CREATIVE CONFLICT AT THE TOP
When Misys acquired Allscripts, a major proprietary electronic health records(EHR) provider, the tensions reflecting the power struggle between the company’s identity and future became even more intense. Open source started roping in all the contracts and beating Allscripts fair and square. But Lawrie held this tension in the senior team, constantly devising and tweaking strategies to achieve a balance between the Allscripts and the open source solutions unit. Lawrie’s efforts soon yielded results when Allscript’s revenues grew by 30%, even as Misys’s open source won important contracts. Lawrie was successful in creating a complementary business model which encompassed both the company’s identity and future. He did this by increasing the customer base and acquiring software assets and used the open source solutions unit to solve his customer’s mission critical problems.
In a nutshell, Lawrie did not let his company’s identity limit him to customer groups or solutions that may be disrupted in the future.
WHEN CONFLICT ABOUT FUNDING OLD AND NEW BUSINESSES ARE RESOLVED AT LOWER LEVELS, INNOVATION USUALLY LOSES OUT.
The case of Hewlett-Packard stands out as a classic example of the tragedy that happens when the decision regarding allocation of resources to old and new businesses are left to lower levels of management. HP , by 1996,had built a successful franchise in the fast growing market of flatbed scanners when a new innovation emerged: the portable handheld scanner. A small team within the scanner’s unit of HP came up with a portable prototype with an aim to gain from this newly created market segment. The only ingredient this team lacked was the support from the senior managers who were too busy winning market share for the flatbeds. Although senior HP executive Antonio perez intervened with a $10 bn dollar sanction for the portables team but within months the scanner unit had diverted the funds to plug a hole in its budget leaving the portables R&D team with no fund and authority ,thus crippling their further development. This happened because the senior management didn’t want to go through the painstaking process of making tough choices leaving the decision making part to the lower levels.
To hold this tension at the top, two approaches have been particularly successful. The first one is the Hub and Spoke model and the other being the Ring-team model.
In the former, the CEO sits at the center of a wheel surrounded by business unit heads and interacts with them on a one-to-one basis. But there is no interaction among the business unit heads so that they do not intervene in each other’s domains and concentrate on their own agenda. Following this model also helps in avoiding under representation of issues not in congruence with the business’s identity thus facilitating the proper consideration of agendas(innovation) that can shape the firm’s future . Every time a new stream of revenue develops, it creates a new unit of its own leaders, engineers and local culture. Integration of these diverse units remains the main job of the CEO in this model.
In stark contrast to the hub-and-spoke approach, a ring-team model brings unit leaders together in the CEO’s key circle. Decisions are made collectively by the senior team about how to allocate resources and make trade-offs between the present and the future.
EMBRACING INCONSISTENCY
In many companies, innovation units find themselves measured against performance standards of the core business. This puts the former at a disadvantage as it struggles to match up to a well established business that has proven itself. The senior management should avoid falling into such traps and should develop different benchmarks for the core and the innovation unit, demanding profit and perfection in one and encouraging experimentation in the other.
Take former ‘USA today’ president Tom Curley, who grew his company’s online business even as he scaled the newspaper into a publishing phenomenon. When a CEO embraces inconsistency in this way, the company’s mission and strategy can seem incoherent but this inconsistency is also accompanied by the readiness to tackle changes justifying the sacrifice.
It would be safe to conclude that change and innovation have always been and always will be an important aspect of doing good business. It is better for businesses if the current generation and the future breed of CEOs realize this.