IN 1971, A SEEMINGLY ordinary man named Darwin E. Smith was named chief executive of Kimberly-Clark, a stodgy old paper company whose stock had fallen 36% behind the general market during the previous 20 years. Smith, the company’s mild-mannered in-house lawyer, wasn’t so sure the board had made the right choice—a feeling that was reinforced when a Kimberly-Clark director pulled him aside and reminded him that he lacked some of the qualifications for the position. But CEO he was, and CEO he remained for 20 years.
What a 20 years it was. In that period, Smith created a stunning transformation at Kimberly-Clark, turning it into the leading consumer paper products company in the world. Under his stewardship, the company beat its rivals Scott Paper and Procter & Gamble. And in doing so, Kimberly-Clark generated cumulative stock returns that were 4.1 times greater than those of the general market, outperforming venerable companies such as Hewlett-Packard, 3M, CocaCola, and General Electric.
Smith’s turnaround of Kimberly-Clark is one the best examples in the twentieth century of a leader taking a company from merely good to truly great. And yet few people—even ardent students of business history—have heard of Darwin Smith. He probably would have liked it that way. Smith is a classic example of a Level 5 leader—an individual who blends extreme personal humility with intense professional will. According to our five-year research study, executives who possess this paradoxical combination of traits are catalysts for the statistically rare event of transforming a good company into a great one. (The research is described in the sidebar “One Question, Five Years, 11 Companies.”)
“Level 5” refers to the highest level in a hierarchy of executive capabilities that we identified during our research. Leaders at the other four levels in the hierarchy can produce high degrees of success but not enough to elevate companies from mediocrity to sustained excellence. (For more details about this concept, see the exhibit “The Level 5 Hierarchy.”) And while Level 5 leadership is not the only requirement for transforming a good company into a great one— other factors include getting the right people on the bus (and the wrong people off the bus) and creating a culture of discipline—our research shows it to be essential. Good-to-great transformations don’t happen without Level 5 leaders at the helm. They just don’t.
Not What You Would Expect
Our discovery of Level 5 leadership is counterintuitive. Indeed, it is countercultural. People generally assume that transforming companies from good to great requires larger-than-life leaders—big personalities like Lee Iacocca, Al Dunlap, Jack Welch, and Stanley Gault, who make headlines and become celebrities.
Compared with those CEOs, Darwin Smith seems to have come from Mars. Shy, unpretentious, even awkward, Smith shunned attention. When a journalist asked him to describe his management style, Smith just stared back at the scribe from the other side of his thick black-rimmed glasses. He was dressed unfashionably, like a farm boy wearing his first J.C. Penney suit. Finally, after a long and uncomfortable silence, he said, “Eccentric.” Needless to say, the Wall Street Journal did not publish a splashy feature on Darwin Smith.
But if you were to consider Smith soft or meek, you would be terribly mistaken. His lack of pretense was coupled with a fierce, even stoic, resolve toward life. Smith grew up on an Indiana farm and put himself through night school at Indiana University by working the day shift at International Harvester. One day, he lost a finger on the job. The story goes that he went to class that evening and returned to work the very next day. Eventually, this poor but determined Indiana farm boy earned admission to Harvard Law School.
He showed the same iron will when he was at the helm of Kimberly-Clark. Indeed, two months after Smith became CEO, doctors diagnosed him with nose and throat cancer and told him he had less than a year to live. He duly informed the board of his illness but said he had no plans to die anytime soon. Smith held to his demanding work schedule while commuting weekly from Wisconsin to Houston for radiation therapy. He lived 25 more years, 20 of them as CEO. Smith’s ferocious resolve was crucial to the rebuilding of Kimberly-Clark, especially when he made the most dramatic decision in the company’s history: selling the mills.
This is an excerpt from HBR’s 10 Must Reads (On Leadership). Get your copy here.
Credit: Abhishek Singh
Tag: Business
Managing Your Boss, The New Angle to Boss-Subordinate Relationship
TO MANY PEOPLE, THE PHRASE “managing your boss” may sound unusual or suspicious. Because of the traditional top-down emphasis in most organizations, it is not obvious why you need to manage relationships upward—unless, of course, you would do so for personal or political reasons. But we are not referring to political maneuvering or to apple polishing. We are using the term to mean the process of consciously working with your superior to obtain the best possible results for you, your boss, and the company.
Recent studies suggest that effective managers take time and effort to manage not only relationships with their subordinates but also those with their bosses. These studies also show that this essential aspect of management is sometimes ignored by otherwise talented and aggressive managers. Indeed, some managers who actively and effectively supervise subordinates, products, markets, and technologies assume an almost passively reactive stance vis-à- vis their bosses. Such a stance almost always hurts them and their companies.
If you doubt the importance of managing your relationship with your boss or how difficult it is to do so effectively, consider for a moment the following sad but telling story:
Frank Gibbons was an acknowledged manufacturing genius in his industry and, by any profitability standard, a very effective executive. In 1973, his strengths propelled him into the position of vice president of manufacturing for the second largest and most profitable company in its industry. Gibbons was not, however, a good manager of people. He knew this, as did others in his company and his industry. Recognizing this weakness, the president made sure that those who reported to Gibbons were good at working with people and could compensate for his limitations. The arrangement worked well.
In 1975, Philip Bonnevie was promoted into a position reporting to Gibbons. In keeping with the previous pattern, the president selected Bonnevie because he had an excellent track record and a reputation for being good with people. In making that selection, however, the president neglected to notice that, in his rapid rise through the organization, Bonnevie had always had good-to excellent bosses. He had never been forced to manage a relationship with a difficult boss. In retrospect, Bonnevie admits he had never thought that managing his boss was a part of his job.
Fourteen months after he started working for Gibbons, Bonnevie was fired. During that same quarter, the company reported a net loss for the first time in seven years. Many of those who were close to these events say that they don’t really understand what happened. This much is known, however: While the company was bringing out a major new product—a process that required sales, engineering, and manufacturing groups to coordinate decisions very carefully—a whole series of misunderstandings and bad feelings developed between Gibbons and Bonnevie.
For example, Bonnevie claims Gibbons was aware of and had accepted Bonnevie’s decision to use a new type of machinery to make the new product; Gibbons swears he did not. Furthermore, Gibbons claims he made it clear to Bonnevie that the introduction of the product was too important to the company in the short run to take any major risks.
As a result of such misunderstandings, planning went awry: A new manufacturing plant was built that could not produce the new product designed by engineering, in the volume desired by sales, at a cost agreed on by the executive committee. Gibbons blamed Bonnevie for the mistake. Bonnevie blamed Gibbons.
Of course, one could argue that the problem here was caused by Gibbons’s inability to manage his subordinates. But one can make just as strong a case that the problem was related to Bonnevie’s inability to manage his boss. Remember, Gibbons was not having difficulty with any other subordinates. Moreover, given the personal price paid by Bonnevie (being fired and having his reputation within the industry severely tarnished), there was little consolation in saying the problem was that Gibbons was poor at managing subordinates. Everyone already knew that.
We believe that the situation could have turned out differently had Bonnevie been more adept at understanding Gibbons and at managing his relationship with him. In this case, an inability to manage upward was unusually costly. The company lost $2 million to $5 million, and Bonnevie’s career was, at least temporarily, disrupted. Many less costly cases similar to this probably occur regularly in all major corporations, and the cumulative effect can be very destructive.
This is an excerpt from HBR’s 10 Must Reads (On Managing People). Get your copy here.
Credit: Abhishek Singh
Understanding Strategic Positioning
Three key principles underlie strategic positioning.
- Strategy is the creation of a unique and valuable position, involving a different set of activities: Strategic position emerges from three distinct sources:
- serving few needs of many customers (Jiffy Lube provides only auto lubricants)
- serving broad needs of few customers (Bessemer Trust targets only very high-wealth clients)
- serving broad needs of many customers in a narrow market (Carmike Cinemas operates only in cities with a population under 200,000)
- 2. Strategy requires you to make trade-offs in competing—to choose what not to do. Some competitive activities are incompatible; thus, gains in one area can be achieved only at the expense of another area. For example, Neutrogena soap is positioned more as a medicinal product than as a cleansing agent. The company says “no” to sales based on deodorizing, gives up large volume, and sacrifices manufacturing efficiencies. By contrast, Maytag’s decision to extend its product line and acquire other brands represented a failure to make difficult trade-offs: the boost in revenues came at the expense of return on sales.
- Strategy involves creating “fit” among a company’s activities. Fit has to do with the ways a company’s activities interact and reinforce one another. For example, Vanguard Group aligns all of its activities with a low-cost strategy; it distributes funds directly to consumers and minimizes portfolio turnover. Fit drives both competitive advantage and sustainability: when activities mutually reinforce each other, competitors can’t easily imitate them. When Continental Lite tried to match a few of Southwest Airlines’ activities, but not the whole interlocking system, the results were disastrous.
Employees need guidance about how to deepen a strategic position rather than broaden or compromise it. About how to extend the company’s uniqueness while strengthening the fit among its activities. This work of deciding which target group of customers and needs to serve requires discipline, the ability to set limits, and forthright communication. Clearly, strategy and leadership are inextricably linked.
This is an excerpt from HBR’s 10 Must Reads (On Strategy). Get your copy here.
Credit: Abhishek Singh
Change Through Tipping Point Leadership
Four Steps to the Tipping Point
- Break through the cognitive hurdle.
To make a compelling case for change, don’t just point at the numbers and demand better ones. Your abstract message won’t stick. Instead, make key managers experience your organization’s problems.
Example: New Yorkers once viewed subways as the most dangerous places in their city. But the New York Transit Police’s senior staff pooh-poohed public fears—because none had ever ridden subways. To shatter their complacency, Bratton required all NYTP officers— himself included—to commute by subway. Seeing the jammed turnstiles, youth gangs, and derelicts, they grasped the need for change—and embraced responsibility for it.
- Sidestep the resource hurdle.
Rather than trimming your ambitions (dooming your company to mediocrity) or fighting for more resources (draining attention from the underlying problems), concentrate current resources on areas most needing change.
Example: Since the majority of subway crimes occurred at only a few stations, Bratton focused manpower there— instead of putting a cop on every subway line, entrance, and exit.
- Jump the motivational hurdle.
To turn a mere strategy into a movement, people must recognize what needs to be done and yearn to do it themselves. But don’t try reforming your whole organization; that’s cumbersome and expensive. Instead, motivate key influencers—persuasive people with multiple connections. Like bowling kingpins hit straight on, they topple all the other pins. Most organizations have several key influencers who share common problems and concerns— making it easy to identify and motivate them.
Example: Bratton put the NYPD’s key influencers— precinct commanders—under a spotlight during semiweekly crime strategy review meetings, where peers and superiors grilled commanders about precinct performance. Results? A culture of performance, accountability, and learning that commanders replicated down the ranks. Also make challenges attainable. Bratton exhorted staff to make NYC’s streets safe “block by block, precinct by precinct, and borough by borough.”
- Knock over the political hurdle.
Even when organizations reach their tipping points, powerful vested interests resist change. Identify and silence key naysayers early by putting a respected senior insider on your top team. Example: At the NYPD, Bratton appointed 20-year veteran cop John Timoney as his number two. Timoney knew the key players and how they played the political game. Early on, he identified likely saboteurs and resisters among top staff—prompting a changing of the guard. Also, silence opposition with indisputable facts. When Bratton proved his proposed crime-reporting system required less than 18 minutes a day, time-crunched precinct commanders adopted it.
This is an excerpt from HBR’s 10 Must Reads (On Change Management). Get your copy here.
Credit: Abhishek Singh
Cracking the Code of Transformation
Comparing theories of change
Our research has shown that all corporate transformations can be compared along the six dimensions shown here. The table outlines the differences between the E and O archetypes and illustrates what an integrated approach might look like.
| Dimensions of change | Theory E | Theory O | Theories E and O combined |
| Goals | Maximize shareholder value | Develop organizational capabilities | Explicitly embrace the paradox between economic value and organizational capability |
| Leadership | Manage change from the top down | Encourage participation from the bottom up | Set direction from the top and engage the people below |
| Focus | Emphasize structure and systems | Build up corporate culture: employees’ behavior and attitudes | Focus simultaneously on the hard (structures and systems) and the soft (corporate culture) |
| Process | Plan and establish programs | Experiment and evolve | Plan for spontaneity |
| Reward system | Motivate through financial incentives | Motivate through commitment—use pay as fair exchange | Use incentives to reinforce change but not to drive it |
| Use of consultants | Consultants analyze problems and shape solutions | Consultants support management in shaping their own solutions | Consultants are expert resources who empower employees |
This is an excerpt from HBR’s 10 Must Reads (On Change Management). Get your copy here.
Credit: Abhishek Singh
6 Luminous Lessons from Dharmashastras to Look Out For
Business law in medieval and early modern India developed within the voluminous and multifaceted texts called the Dharmashastras. These texts laid down rules for merchants, traders, guilds, farmers, and individuals in terms of the complex religious, legal, and moral ideal of dharma.
The Dharma of Business – an exciting new book by Donald R. Davis, Jr. – provides a new perspective on commercial law in this period. It makes a compelling case for the relevance of the dharma of business to our own time.
Here are six lessons from Dharmashastras that are relevant in our modern age.
The Dharma of an Employee
The Dharma of an Employer
When not putting one’s best foot forward
The Culture of Rewarding Excellence
Tax for Welfare
Greed, the Destroyer
Want to apply ancient wisdom to your own work and issues at workplace? Get The Dharma of Business here!
Dealing with Dual Transformation
With the ever-changing environment, the adaptability of a business determines its height of success. A leader’s ability to percept the changing environment and act in accordance with it marks the sign of true leader. We have umpteen numbers of cases for both, the success and the failure in leading the organization towards change. Often, the path to change is seen as a one-dimensional one. However, the authors of Dual Transformation beg to differ. They firmly believe in the dual course of action required to take the company out of turbulent waters. The following excerpt clarifies the fundamentals of Dual Transformation by keeping Deseret News at the pivot:
‘Our bedrock case study comes from coauthor Clark Gilbert’s firsthand experience leading a transformation at Deseret Media. The Deseret News is one of America’s oldest continually published newspapers, tracing back to 1850. Ultimately owned by the Mormon Church (which also owns the local KSL television station), the paper historically competed in Utah with The Salt Lake Tribune under what is known in the industry as a joint operating agreement, wherein the two companies share facilities and printing presses but have independent journalists, brand positions, and so forth. As the number 2 provider in its market, Deseret Media was hit particularly hard by the disruptive punch of the internet; between 2008 and 2010 the Deseret News lost nearly 30 percent of its print display advertising revenue and 70 percent of its print classified revenue.
In 2009, Gilbert—who had done his doctoral research at Harvard on the newspaper industry and had consulted to the industry before he became head of online learning at Brigham Young University-Idaho—was asked to launch Deseret Digital Media, a newly formed organization that contained Deseret Media’s collection of websites.
Five years later, however, Deseret Media had a vibrant print publication, including a national weekly that was one of the fastest growing publications in the United States. It also had built an impressive array of quickly growing digital marketplace businesses tied to its KSL classifieds products that collectively produced more than 50 percent of the organization’s combined net income. These digital businesses shared brands, content, and a few other resources with the core business but largely functioned autonomously. Deseret Media had revitalized its historical core business while simultaneously pioneering the creation of a new hill on the media landscape. By the time Gilbert left in 2015 to become president of BYU-Idaho, net income at Deseret, in the midst of an industry in free fall, was up by almost 25 percent from 2010.
Deseret’s success, according to Gilbert, is attributed to organizing the company to adapt to two very different types of change. Rather than view change as one monolithic transformation process, Gilbert organized the company into two parallel change efforts: one to reposition the core newspaper business, and another to unlock new growth in digital markets.
We call this change effort dual transformation.
When you take your first algebra class, you’re introduced to the Greek letter delta. The capital form of the fourth letter in the Greek alphabet, Δ, also serves as shorthand in math equations for change. The kind of change we’re talking about here is indeed a very large delta. Achieving that change requires following this formula:
A + B + C = Δ
Here’s how it breaks down.
A = transformation A. Reposition today’s business to maximize its resilience.
B = transformation B. Create a separate new growth engine.
C = the capabilities link. Fight unfairly by taking advantage of difficult-to-replicate assets without succumbing to the sucking sound of the core.’
For in-depth knowledge about the theory of Dual Transformation, click here .
This is an excerpt from Scott D. Anthony, Clark Gilbert and Mark Johnson’s Dual Transformation.
Credit: Abhishek Singh
The Third Way to Innovate
There is a big flaw in innovation thinking today – a false dichotomy. Conventional wisdom says that to survive, companies must move beyond incremental, sustaining innovation and invest in some form of radical innovation. “Disrupt yourself or be disrupted!” is the relentless message company leaders hear. Don’t be fooled. David Robertson in his book, The Power of Little Ideas shows there is a Third Way that is neither sustaining nor disruptive, but is, in its essence, complementary. This low-risk, high-reward strategy is one that all managers and executives must understand and practice in order to achieve competitive advantage in today’s dynamic economy.
The Third Way, isn’t a new concept altogether. Some companies have used the concept in their own way to maneuver their businesses into profit. However, no one has explicitly defined and described this form of innovation as a replicable process. To understand the concept in a concrete way, one should know its three distinctive traits.
First, and most obvious, the Third Way consists of multiple, diverse innovations around a central product or service that make the product more appealing and competitive. We refer to the product at the center of every Third Way project as the key or core product. It is always a key or important product; making a marginal product the focus of so much effort would make no sense. But the product does not always have to be a company’s core product, as its sports drink was for Gatorade and used cars were for CarMax. For Novo Nordisk, its HGH drug was certainly important, but its insulin product was, at least for the period covered in our story, the company’s core product. “Always key and often core” is the way to understand any product that is the focus of the Third Way.
By diverse complementary innovations, we mean that they should fall into a wide range of business categories, such as pricing, marketing, operations, sourcing, and partnerships. Likewise, the innovations should appear in a host of different forms, such as auxiliary products, support services, and social media activities.
Second, what makes this approach work is that all the complementary innovations operate together as a system or family to satisfy a compelling promise to the customer. Gatorade promised peak performance for serious athletes through a complete nutrition and hydration solution. Norditropin promised to make HGH therapy as trouble- and pain-free as possible for all involved. And CarMax promised buyers a hassle- and worry-free experience when they were locating and buying the car they needed.
Third, and perhaps the least obvious in the stories, the family of complementary innovations must be closely and centrally managed. It’s not an ecosystem of interrelated but autonomous companies and products that compete, collaborate, or otherwise co-evolve according to their own needs and priorities. Instead, each complementary innovation is created or selected and then closely managed, usually by the owner of the key product. Indeed, the careful selection and proactive management of this system is crucial to the success of the Third Way.
This is an excerpt from David C. Robertson and Kent Lineback’s The Power of Little Ideas. Get Your Copy here.
Credit: Abhishek Singh
Narrating Stories with Data
As director of analytics and A/B testing at Visa, Ravichandran supports executives, leaders, and decision makers in product, marketing, sales, and relationships. He explained to me that “we are the custodians of the data, so our responsibility is to enable our users to have confidence in the decisions they make using that data.”
One of the biggest changes the analytical era of marketing has brought about is that things need to happen much faster than before. “We used to have a very linear approach,” Ravichandran told me. “Now when something is going live, there’s already an immediate need to respond. We need to be able to take action on the fly.” Because of those changes, marketers can no longer think about analytics as something that supports them or a function that just one person, like a chief digital officer, would perform. Rather, analytics is now an integral part of marketing’s value chain.
Ravichandran said that numbers by themselves are historical. That’s why, while data is needed to inform campaigns, at the end of the day, it still comes down to marketers using their gut feelings to make the best decision possible. “And we can use data and analysis to inform and guide us in the right direction,” he added.
Because data and analytics are now so intertwined with marketing strategy, expectations for leadership on the marketing side have changed. “It’s no longer acceptable to say you’re a marketer, but you’re not a numbers person,” Ravichandran said. “Executives are demanding more data literacy as a precursor for being a good marketer.” And it’s not just in the marketing space. He added, “All of our chief executives are comfortable with numbers and data-driven approaches.”
Ravichandran was quick to clarify, however, that a focus on data, numbers, and quantified measures should not replace the value of vision: “I have an enormous respect for data, but I also believe all of it has to be driven by strategy, the business case, benchmarking against the industry, all those things that provide a broader perspective. You have to understand what specific metrics you’re trying to impact with your actions.” He advocates the importance of understanding your company’s business model, applying and measuring the right metrics, and truly understanding your competitive position and your customers’ needs.
The big mind-set shift we need to make, therefore, is recognizing how our intuition is now informed by data and analytics. When someone comes to a marketing manager or leader with a proposal to spend, say, $250,000 on a campaign, she had better come armed with data, analysis, testing plans, and expected outcomes, as well as what her gut is telling her.
This is an excerpt from Adele Sweetwood’s The Analytical Marketer. Get your copy here.
Credit: Abhishek Singh
STAR: The Mantra to Develop a Caring Mindset
Subir Chowdhury has helped numerous corporations to climb up the ladder of success in the course of his career. However, he has observed that while some companies benefit only marginally from the training others do exponentially well.
Chowdhury credits ‘a caring mindset’ as the difference in the performance of the two companies. Furthermore, he states that a caring mindset contains four facets.
The four facets make up a useful and memorable acronym: STAR. Here’s what it stands for:
Do you agree with Subir Chowdhury?
