27 March 2014

Book Excerpt: The Good Struggle: Responsible Leadership in an Unforgiving World

book excerpt


In a turbulent, sometimes dangerous world, responsible leaders need a broader view of critical decisions. This means viewing these decisions as commitments, but in an unconventional way. We typically think of commitments as deep, abiding pledges that individuals and organizations will do absolutely all they can to make good on. In contrast, the kind of commitments that matter critically today are paradoxical: they are evolving commitments.
An evolving commitment is a pledge, by a leader and an organization, to move in a particular direction, but to do so in a flexible, open-ended way. High-stakes, highrisk, once-and-for-all decisions—the contemporary versions of the "big factory" decisions—are sometimes unavoidable, but evolving commitments are far better suited to a world in which leaders are immersed in a stream of possibilities, surprises, opportunities, and deals in the active, fluid markets that surround and pervade their organizations. Commitments require data, analysis, and experienced judgment, but, all too often, these are far from decisive.
In more and more cases, when leaders make critical decisions, they are not choosing among specific, detailed options, each supported by in-depth analysis, nor are they expecting to implement the option they choose in a familiar, predictable, or managed environment. All they are doing is making an initial choice, for themselves and their organizations, among broad, flexible, open-ended directions.
This initial direction will evolve, sometimes dramatically, in response to what is learned from first steps, hard-to-predict developments in the churning, recombinant markets around companies, and reactions in the markets for funding, talent, partners, and meaning.
Evolving commitments have always been central to entrepreneurial success. Leaders of new organizations have never been able to see very far into the future. They have usually been surrounded by intensely competitive, often turbulent markets—a far cry from the buffer zones and spheres of influence surrounding the large twentieth-century hierarchical organizations. They typically didn't know whether their product would work, what it would really cost to make and sell it on a large scale, whether a large, established firm would copy it or use influence with government to create obstacles, whether other entrepreneurs were on the brink of introducing something similar or better, and whether they would even have enough cash to operate beyond a few months.
Under conditions like these, all a responsible leader can do is whatever analysis is possible, commit to moving in a particular direction, carefully plan the immediate next steps, work hard to learn from execution and experiment, seize opportunities along the way, and be prepared to recalibrate an organization's efforts, again and again, to match emerging realities. Decision making has to be as fluid as the markets around an organization.
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Instead of periodic big decisions, responsible leaders make or orchestrate an unending series of smaller ones—all aimed at some larger, broad, flexible objective. Gary Mueller, the founder of ISI Emerging Markets, which provides hard-to-get information on companies in emerging markets, said, "You have to make decisions because indecision is a decision. So you say this is the direction we're going in, but you're constantly asking if you're doing the right thing and adjusting what you're doing."
In a world of heightened hazards and uncertainty, leaders who make commitments to other parties are basically saying, "This is the overall direction we plan to pursue and this is what we specifically plan to do and accomplish in the near future, but a lot will change, perhaps dramatically."
Commitments are serious pledges. They have real legal and ethical weight, and responsible leaders and their organizations work very hard to make good on them, but these commitments, in a recombinant world, are inescapably flexible and fallible. The bolder the initiative or the more turbulent the environment, the more appropriate and inevitable these types of commitments are.
From a broader perspective, an organization today is not simply what Michael Jensen and William Meckling called—in an insightful and widely cited phrase—a "nexus of contracts." It is also a nexus of commitments, and sophisticated parties understand this from the start. There is often too much uncertainty and turbulence in market-driven economies to rely on contracts and contingencies to specify who will do what and when. Without ongoing, flexible adaptation, entrepreneurs and the market actors who support them would have only one shot at success, and this would typically be a shot in the dark, given the many uncertainties new ventures face.
Evolving commitments are basically the managerial version of a longstanding view of military strategy. Almost two centuries ago, Carl von Clausewitz, the brilliant Prussian general and strategist, wrote, "War is an area of uncertainty; three quarters of the things on which all action in war is based lie in a fog of uncertainty to a greater or lesser extent." His view was that the principal value of careful military planning was to prepare a force for the first engagement with the enemy and little more. It is no coincidence that some entrepreneurs today echo Clausewitz's observation and say the purpose of a business plan is to prepare a new organization for its first engagement with a customer. In other words, entrepreneurs can raise their chances of success by gathering data, studying customers and their industry, trying to assess likely competitor moves, and trying to understand where and how they can best focus their limited resources. At the same time, however, they have to keep their thinking loose, broad, flexible, and revisable.

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Leaders rely on evolving commitments for three practical reasons. First, they can. Knowledge-based organizations are more flexible than traditional manufacturing firms with dedicated factories, and firms that sell products today can rely on outsourcing and flexible factories to "produce" them. Second, they often have to. A wide range of actors are typically involved in monitoring and shaping an organization's decisions; these parties want a say in what the organization does, and their own agendas are continuously evolving in response to the continuously shifting, sometimes turbulent markets around them.
The third and most important reason for leaders to rely on evolving commitments is that they should. Responsible decisions should not outrun visibility, and, in a recombinant world, it is hard to see much of the future. In addition, there is a great deal to be learned from execution, experiment, and actual experience. Finally, going step by step provides people inside an organization and all the parties in the multiple markets around it with clear, immediate objectives and even metrics.
This enables all these parties to concentrate their efforts, focus on meeting specific objectives, and not be paralyzed by endless possibilities. The greater the uncertainty, the more important it is for leaders to provide a clear path, even if it is almost certain to be adjusted and readjusted, to enable others to commit, plan, and work with a strong sense of confidence
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