Back in the early 1990’s, I used MacDraw on a Macintosh to prepare the presentation on leadership for an academic audience. The following slide summarizes its primary point: leadership enterprise effectiveness is a matter of fit between a leader’s personal competencies and the enterprise’s business context.
The Fit Between A Leader and the Enterprise Determines Success
(See “Effective Leadership Performance: A Question of Ability or A Question of Fit” for the full presentation.) My fascination with what makes a person an effective leader in the workplace has continued since then. Since making this presentation, my experiences as a leader and as a follower in all four enterprise contexts – production, innovative, creative, and turn-around – has not changed my basic belief that leadership effectiveness is first and foremost a question of fit. This is especially important to remember as our economy is undergoing fundamental change. We need to deal with the harsh realities which lead to the current recession. We will need innovative, creative and turnaround leaders rather than production leaders. I do not think that we will really see an end to the current recession under many of the people who led us into it, have changed. They are leaders whose competency profile is closer to the production profile above, in my view. Much of the economic activity in the last twenty five years has been in production organizations, both commercial, not-for-profit and political. Movement out of this recession will be led by the leaders of creative, innovative and turnaround organizations, as it has in the recessions of the past. Recessions are a time in which many organizations which eventually become established as household names first start up. Many of our existing human resource and executive search professionals do not think about leadership in these terms. By and large, their experience is with production enterprises in times of economic stability. As a result, they do not think critically about the crucial differences in this chart. Sometimes they talk them, but that is different from behaving them. Their business experience, and the intuitions they have built on it, is largely with production enterprises in a time of economic stability or growth. They use these intuitions in their subjective “chemistry and fit” judgment of leadership candidates. As a result, they are not really the best predictors of who will be tomorrow’s outstanding enterprise leaders. I believe that the recent down turn in the executive recruiting industry is partially the result of this “future discounting” of this dynamic. These thoughts started when I participated in a recent Linked In group exchange on the competencies required for Break Out and Turn Around executives in the Green Tech Economy. I went back to the chart above to clarify my ideas on this. I found that it applied partially. I needed to combine it with the schematics which follow a little later in this blog to really get clear on these issues. Break Out and Turn Around are very different enterprise situations. Unlike business as usual, organic growth, or growth through acquisition in production enterprises, they place very specific demands upon an enterprise leader. Turn Arounds involve cleaning up messes. (See a white paper on these dynamics). They involve doing more with less. The dollars needed to fund turn around activities have to be found somewhere. Tough people and business decisions need to be made about what to stop doing, as well as what to continue doing in different ways. The prime competencies required by Turn Around Leaders are analytical conceptual and unifying / integrating people skills. Turn Around enterprise leaders need to be destroyers as well at change agents. They must replace what they destroy with ways of doing the remaining things in an enterprise in that inspire people to contribute. They must inspire confidence when times are bleak. They must achieve constant visible progress towards goals that both insiders and outsiders value. Turn Around Leaders must have an ability to disrupt the status quo, but do so in a way that people believe will work. This mean applying already proven ways of doings things to existing enterprise processes and work flows. Break Outs involve getting an enterprise beyond a current plateau. Many small startup enterprises with exceptional products and services languish at a level far below their market potential. They become “life style” organizations, generating a decent living for their owners and employees. But they never get beyond this.
The Stages of Technology Development and Commercialization
(Source for this figure – and the one following below – The Clean Technology Report – see http://cleantechnologyreport.ca/.) Product development has a life cycle. The first three phases are ones that require deep personal belief and product development vision on the part of the enterprise leader. The best leaders for these stages are often individuals who believe so deeply in the potential of their ideas that they ignore negative feedback from the outside. They push ahead based on their inner beliefs. The strength and conviction of those beliefs inspires both investors and early stage employee. Technical and cognitive skills predominate in such leaders’ competency profiles. People skills are extremely important in the latter stages – product commercialization. Generating and paying attention to feedback is a key component of success in these stages. Effective enterprise learning requires structuring early, tentative operational and marketing initiatives so that they create actionable production and market feedback. Learning how to do new things in “big” ways successfully is the core skill demonstrated by enterprises that commercialize new products and services.
Product Development / Commercialization Risk Profile by Stage
It’s all a question of effectively managing different kinds of risk at different points in the technology and product development life style. The strong personal inner beliefs of early stage enterprise leaders are precisely what are required to overcome the technology risk that predominates in the fundamental research, applied research and technology development stages. During the last two stages – product development /commercialization and market entry / market volume- the risk profile changes. The financial stakes increase as well. The investment required in the first three stages is relatively smaller than that needed for the last two. (If I were doing the schematic above, financial risk would be proportionately larger, probably somewhere between market and operational risk.) Consequently, the required leadership competencies are very different. The ability to innovate is still key, but a different kind of innovation is now required. It’s no longer about developing a product or service. Instead, it’s about bringing a product to market. It’s about developing, servicing and holding customers. This is especially important in the face of success. Success means rapid operational expansion, done in financially prudent ways. Such success breeds imitation. Imitators have one major advantage. They are imitators rather than developers and innovators. They can compete without having had to make the financial investment in first three stages. Consequently, they are able to compete on price. Financial prudence is essential to being able to meet such early competition. In the first three stages, the driving product developer is the single most important human resource in the enterprise. In the last two stages, the enterprise leader is still important. But this individual is no longer the only really important human resource. Enterprise leaders need to do “through others”. There is two much going on, and the kinds of expertise / experience needed are to broad to allow micro-management to succeed. The unifying and integrating people skills are now essential. These skills are needed to inspire and to motivate, so that the leader can delegate to others in a time of constant growth pressure and of extremely limited resources. The enterprise leader must integrate the activity of these others in a way that ensures that they continually generate and respond to the feedback needed to adapt the new operational and marketing approaches. Many innovative firms successfully start up, make it to the end of the technology development and demonstration stage, and languish. They become life style enterprises, generating a reasonable living for their owners and employees. A group of initial customers stays loyal to them, based on the business value they are receiving, and the emotional investment they have made in being early adopters of the technology. The underlying reason for this has to do with this change in required competency profiles on the part of the enterprise leaders. The startup leaders are smart people. They have an intuitive sense that the skills which successfully brought them through the first three stages are not the ones needed in the future. They know, in a pre-rational, pre-conscious way, that they do not have the ability to manage successful commercialization. They accept, without ever articulating it, that they will ignore market and operational feedback in favor of their own opinions and beliefs. They rationalize away the fact that they do not have the people skills to do through others by pointing to themselves as being more creative and more determined than average. They sense that the immediate micro-managing form of control that has been key to their past success will not work in future. Besides, they liked things the way they were in the first three stages. There was a great “fit” between their competency profiles and enterprise success. Most of them will not give over “their baby, their creation” to another leader. If they do, they will only do so to a “hand picked” person whom they sense they can still control. As long as the enterprise generates enough money to afford the “life style” of key players, things stay stable until market pressures undermine revenue, or outside investors force the issue. Investors however have a different set of requirements. They want the financial success which comes with market entry and market volume. However, they often prefer to avoid the turbulence and the difficulties required to work through a successful change of enterprise leadership. As a result, many formulate “exit” strategies that are focused on “acquisition” by a larger, already existing company. This creates an environment in which these leadership transition issues are handled as a result of the acquisition, rather than in pre-thought and planned way. Leadership change, especially startup enterprise leader change, involves much emotional energy. Not all investors have the desire or the perseverance to work through it. The down size of course is that the acquirer gets most of the financial benefit of the eventual break out. A better understanding of these dynamics, by startup entrepreneurs and investors, could help foster transitions to Break Out Leaders who can more effectively lead enterprises during the last two stages of commercialization. The financial benefits of Break Out can then accrue to the startup leaders, the investors and the employees of the enterprise.
Tags: enterprise leadership, leadership
