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Vigilant Leadership
March 15, 2010
The single most valuable asset I see in an organization is a habit of foresight coupled with contemplation and tied directly to action.
If I rank the organizations I consult on their effectiveness, those that do all three of these do best overall. They generate more profits, have better looking balance sheets, attract investment, or serve their stakeholders the best.
I like to call it “vigilant leadership.”
What’s involved?
Vigilant leadership engages as many individuals as possible in an organization, and certainly all of the directors and senior management, in a discipline of looking ahead. That means staying abreast of events, being advised of emerging issues, recognizing “weak signals” of shifting environments, having depth of knowledge in areas specific to the organization’s strategy, and focusing particularly on long term thinking about what will affect the organization over a decade-or-longer time frame.
This is extraordinarily difficult for most organizations to achieve. Clients of mine have difficulty with it. I think it’s for several reasons.
One is the lack of a major commitment to foresight. For example, with some of my financial service clients an environmental scanning piece developed by a national trade organization is distributed to the board in advance of the annual planning retreat. When I ask about what foresight process they’re using that’s the answer I get. A start, but not nearly enough.
Another difficulty is the governance structure and expectations. I don’t believe organizations ask enough from their directors. Every organization’s director should be expected to be not only up to speed on the industry market as well as geographical or industry or product or service niches. They should be accountable for depth of knowledge in the much broader and higher impact developments in the economy, consumer behavior, emerging competition, and geopolitical forces.
A third barrier is the lack of discipline, time, and process for contemplation. Retreats are for contemplation. Their very label presupposes getting away to do some thinking. They are for discussion certainly. But most of all they should be an immersion away from one’s typical environment in order to gain perspective and spend time in thought.
I find thought is rare in most retreat settings. There are many reasons. One is the assumption that because the retreat is being held in a nice location with recreation opportunities then one should focus on those. Another is the presence, in too many settings, of spouse and family. Nice, but counterproductive largely. Another is a tendency to crowd agenda. One presentation after another. A need to sign off on strategy. A board meeting with a consent agenda. A race to complete work in order to have fun, socialize, or get to a meal.
Most of all retreats feature way too much opinion expression and much too little contemplation.
This doesn’t mean that directors and senior management should be shut up in monastic cells to think. But it does mean that there should be time to gather one’s thoughts, form opinion, discuss deeply, and only then to reach consensus on decisions.
Fourth is stamina. Vigilant leadership is a process, a journey. There is no letup. There is no downtime.
I’m not suggesting that all of an individual’s time away from an organization should be spent in foresight. Nor am I espousing huge amounts of force-fed reading. But I’ve found through the years as I’ve taught anticipatory skills to management, installed foresight systems in organizations, and consulted on strategy that the really good work that makes a successful organization happens in between all the other daily responsibilities in my clients’ lives.
When directors and senior management are introduced to foresight techniques, integrated into a system that pushes appropriate amounts of information to decision-makers, and encouraged to contemplate on one’s own time, good things happen.
Image: susanvg, via Flickr CC license
If I rank the organizations I consult on their effectiveness, those that do all three of these do best overall. They generate more profits, have better looking balance sheets, attract investment, or serve their stakeholders the best.
What’s involved?
Vigilant leadership engages as many individuals as possible in an organization, and certainly all of the directors and senior management, in a discipline of looking ahead. That means staying abreast of events, being advised of emerging issues, recognizing “weak signals” of shifting environments, having depth of knowledge in areas specific to the organization’s strategy, and focusing particularly on long term thinking about what will affect the organization over a decade-or-longer time frame.
This is extraordinarily difficult for most organizations to achieve. Clients of mine have difficulty with it. I think it’s for several reasons.
One is the lack of a major commitment to foresight. For example, with some of my financial service clients an environmental scanning piece developed by a national trade organization is distributed to the board in advance of the annual planning retreat. When I ask about what foresight process they’re using that’s the answer I get. A start, but not nearly enough.
Another difficulty is the governance structure and expectations. I don’t believe organizations ask enough from their directors. Every organization’s director should be expected to be not only up to speed on the industry market as well as geographical or industry or product or service niches. They should be accountable for depth of knowledge in the much broader and higher impact developments in the economy, consumer behavior, emerging competition, and geopolitical forces.
A third barrier is the lack of discipline, time, and process for contemplation. Retreats are for contemplation. Their very label presupposes getting away to do some thinking. They are for discussion certainly. But most of all they should be an immersion away from one’s typical environment in order to gain perspective and spend time in thought.
I find thought is rare in most retreat settings. There are many reasons. One is the assumption that because the retreat is being held in a nice location with recreation opportunities then one should focus on those. Another is the presence, in too many settings, of spouse and family. Nice, but counterproductive largely. Another is a tendency to crowd agenda. One presentation after another. A need to sign off on strategy. A board meeting with a consent agenda. A race to complete work in order to have fun, socialize, or get to a meal.
Most of all retreats feature way too much opinion expression and much too little contemplation.
This doesn’t mean that directors and senior management should be shut up in monastic cells to think. But it does mean that there should be time to gather one’s thoughts, form opinion, discuss deeply, and only then to reach consensus on decisions.
Fourth is stamina. Vigilant leadership is a process, a journey. There is no letup. There is no downtime.
I’m not suggesting that all of an individual’s time away from an organization should be spent in foresight. Nor am I espousing huge amounts of force-fed reading. But I’ve found through the years as I’ve taught anticipatory skills to management, installed foresight systems in organizations, and consulted on strategy that the really good work that makes a successful organization happens in between all the other daily responsibilities in my clients’ lives.
When directors and senior management are introduced to foresight techniques, integrated into a system that pushes appropriate amounts of information to decision-makers, and encouraged to contemplate on one’s own time, good things happen.
Image: susanvg, via Flickr CC license
The Buffett Letter
March 01, 2010
I read Warren Buffett’s letter to me as a shareholder this morning. Direct, analytical, balanced as usual. I like this passage a lot:
“Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be. In the past, it required no brilliance for people to foresee the fabulous growth that awaited such industries as autos (in 1910), aircraft (in 1930) and television sets (in 1950). But the future then also included competitive dynamics that would decimate almost all of the companies entering those industries. Even the survivors tended to come away bleeding. Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean we can judge what its profit margins and returns on capital will be as a host of competitors battle for supremacy.”
The chairman’s contention that obvious upside growth is no guarantee of success is one that many leaders miss. I see it in industries challenged by bright but unclear futures.
Agriculture is an example. It’s obvious that increasing world population is going to demand food and a growing middle class will increase demand for animal protein in diets.
OK. Barring a major disease outbreak or a comet hit, this is an obvious outcome.
Many in agriculture assume that North America will be the big winner. That the world will beat a path to their production. That other nations, other producers will not be able to keep pace or match their products. Here the Buffett interpretation is missed.
Predictions from Malthus to Paul Ehrlich to recent forecasts of peak oil after-effects have breathlessly proclaimed danger. I watched Lester Brown of the Worldwatch Institute in 1995 do a predictive presentation on Who Will Feed China. He’d written a book with that title.
The answer to Brown’s question? China itself. While importing substantial quantities of soybeans and vegetable oil it is quite adept at meeting its own food needs and exporting very large quantities of foodstuffs and value-added products to the world.
Where is Buffet’s “host of competitors” battling for supremacy? Everywhere.
I can cite examples of basic crop rotation and sound agronomy’s ability to triple and quadruple the productivity of land in Asia and Africa.
Then there’s wonderful technology not involving genetic modification but making use of plant genomes to bolster Mendel’s techniques in developing even better crops and nutritious food. Mega-competitors like Brazil, Argentina, and huge multi-national corporations that have bought land in the poorest nations will crank out food, feed, and fiber in the next 3 decades.
Errors in judgment like looking at autos in 1910 or TV sets in 1950 or hand-held converged devices today with rose-colored myopia abound. There’s no argument that strong demand is ahead but there are no clear, dominant, easy winners.
Heck, one of my clients, Motorola, is spinning off its well-known handset business and retrenching to the predictable, profitable platform that has been there for decades: two-way radios and similar technology. Personally I think it’s a solid, overdue strategic move.
Question the too-easy and too-optimistic assumptions. Widen your view. Look ahead. Identify the potential competition before it surprises you. And then adjust your strategy to compete in the good, but challenging times ahead.
The chairman’s contention that obvious upside growth is no guarantee of success is one that many leaders miss. I see it in industries challenged by bright but unclear futures.
Agriculture is an example. It’s obvious that increasing world population is going to demand food and a growing middle class will increase demand for animal protein in diets.
OK. Barring a major disease outbreak or a comet hit, this is an obvious outcome.
Many in agriculture assume that North America will be the big winner. That the world will beat a path to their production. That other nations, other producers will not be able to keep pace or match their products. Here the Buffett interpretation is missed.
Predictions from Malthus to Paul Ehrlich to recent forecasts of peak oil after-effects have breathlessly proclaimed danger. I watched Lester Brown of the Worldwatch Institute in 1995 do a predictive presentation on Who Will Feed China. He’d written a book with that title.
The answer to Brown’s question? China itself. While importing substantial quantities of soybeans and vegetable oil it is quite adept at meeting its own food needs and exporting very large quantities of foodstuffs and value-added products to the world.
Where is Buffet’s “host of competitors” battling for supremacy? Everywhere.
I can cite examples of basic crop rotation and sound agronomy’s ability to triple and quadruple the productivity of land in Asia and Africa.
Then there’s wonderful technology not involving genetic modification but making use of plant genomes to bolster Mendel’s techniques in developing even better crops and nutritious food. Mega-competitors like Brazil, Argentina, and huge multi-national corporations that have bought land in the poorest nations will crank out food, feed, and fiber in the next 3 decades.
Errors in judgment like looking at autos in 1910 or TV sets in 1950 or hand-held converged devices today with rose-colored myopia abound. There’s no argument that strong demand is ahead but there are no clear, dominant, easy winners.
Heck, one of my clients, Motorola, is spinning off its well-known handset business and retrenching to the predictable, profitable platform that has been there for decades: two-way radios and similar technology. Personally I think it’s a solid, overdue strategic move.
Question the too-easy and too-optimistic assumptions. Widen your view. Look ahead. Identify the potential competition before it surprises you. And then adjust your strategy to compete in the good, but challenging times ahead.
Patent Harbinger: Where is Distributed Energy Headed?
February 27, 2010
I advise clients to watch certain metrics for emerging direction. A good example popped up recently in all the hype over the Bloom fuel cell announcements.
Bloom is a startup that has built fuel cell “servers” supplying electricity to a number of Silicon Valley firms. If you’ve missed the hype there’s a healthy helping here. The servers at those big SV firms run a cool $750,000. Not pocket change to us consumers.
The Bloom technology is interesting because of a several factors. 1) It might scale down. The company’s statement that they could be producing home-sized units for a $3000 price point in a few years causes ripples in the energy sector. 2) It shows off a technology that’s taken a back seat in the media, fuel cells. 3) It demonstrates early hype for a technology. I encourage skepticism when something gets too much media attention.
But what caught my eye as my scanning system picked this up is the longer term pattern of patents in “clean energy.”
My favorite weekly scanning source, The Economist, showed this chart at left.
When you think “alternative energy” or hear it in a politician’s speech you probably think solar, wind, electric vehicle, or maybe biofuel. You don’t think of fuel cells. But a patent rate three times the other technologies causes me to point to it as a trend to watch carefully.
The Economist hypothesizes it’s due to corporate R&D stimulated by government subsidies. Probably the major driver. When you start delving into the practicalities of the Bloom style of cell you see problems. Very, very high operating temperatures. 24 hour a day operation which gets to be a problem if you can’t sell your electricity back to the grid especially at night when demand is low. A reliable source (read that as natural gas).
My forecast: true renewables like solar and wind look like the best bets. But keep an eye on fuel cells for the long term.
Bloom is a startup that has built fuel cell “servers” supplying electricity to a number of Silicon Valley firms. If you’ve missed the hype there’s a healthy helping here. The servers at those big SV firms run a cool $750,000. Not pocket change to us consumers.
The Bloom technology is interesting because of a several factors. 1) It might scale down. The company’s statement that they could be producing home-sized units for a $3000 price point in a few years causes ripples in the energy sector. 2) It shows off a technology that’s taken a back seat in the media, fuel cells. 3) It demonstrates early hype for a technology. I encourage skepticism when something gets too much media attention.
But what caught my eye as my scanning system picked this up is the longer term pattern of patents in “clean energy.”
When you think “alternative energy” or hear it in a politician’s speech you probably think solar, wind, electric vehicle, or maybe biofuel. You don’t think of fuel cells. But a patent rate three times the other technologies causes me to point to it as a trend to watch carefully.
The Economist hypothesizes it’s due to corporate R&D stimulated by government subsidies. Probably the major driver. When you start delving into the practicalities of the Bloom style of cell you see problems. Very, very high operating temperatures. 24 hour a day operation which gets to be a problem if you can’t sell your electricity back to the grid especially at night when demand is low. A reliable source (read that as natural gas).
My forecast: true renewables like solar and wind look like the best bets. But keep an eye on fuel cells for the long term.