Business leadership focuses on consumption

Today’s Harvard Business Review article When Marketing is Strategy by Niraj Dawar bears a striking resemblance to my own 2011 article in which I analyze how business in the developed world has shifted from an emphasis on the production of goods and services to their consumption. In his article, Mr. Dawar, does an excellent job – certainly more eloquently than me – of analyzing this new perspective.

Interestingly, he echoes my own point of view that business leaders are still, too often, mired in an industrial revolution mindset.

“Yet business strategy continues to be driven by the ghost of the Industrial Revolution, long after the factories that used to be the primary sources of competitive advantage have been shuttered and off-shored.”

A mindset that is no longer as relevant as it used to be.

I highly recommend both articles.

What is an airline’s key component?

A few days ago, while presenting the ROKC methodology to a group of international business people, one asked me, “What is an airline’s key component?” An animated discussion ensued in which different points of view were expressed and a great deal of debate around each proposal. Some of the key components suggested were:

  • Customer service
  • Information technology
  • For low cost carriers, one type of aircraft
  • Routes/Networks, and
  • Landing slots

Sure, airlines compete on customer service and information technology but those services are increasingly bought-in. The big exception is customer service in the air which is still performed by the airline’s staff. Airlines don’t build airliners so even if there is an advantage to have a homogeneous fleet this cannot be a key component. Using one type of aircraft helps with maintenance costs and standardized image of service. Routes are important from a consumer point of view but it is hardly imaginable that an airline’s competitive advantage stems from from flying from point A to point B instead of point J. A very close cousin of routes and networks is landing slots, which in my view is an airline’s key component. Without a landing slot the air carrier cannot provide their service in terms of the first three: customer service, IT, aircraft type or routes.

From the ROKC point of view by placing landing slots at the center of the airline business it becomes clear that this is the asset that gives an operator a competitive advantage while the other suggested assets are part of transforming that asset into a product that customers want to consume or related to managing the inherent business risks.

Interestingly, not too long after this talk, an article appeared in the paper “Baffling About-Face in American-US Airways Merger” (NY Times, James B. Stewart, November 15, 2013) explaining how the Federal Government was dropping its lawsuit against the American Airline – US Airways merger as a result of the parties having agreed to sell landing slots in certain airports.

“The Justice Department did get some important concessions from American and US Airways, primarily an agreement to give up slots at some of the nation’s busiest airports, including La Guardia in New York, Reagan National in Washington and Logan Airport in Boston, to low-cost carriers. The department said it was the biggest divestiture program agreed to by any airline as a condition of federal approval of a merger.”

So I guess it is safe to say that landing slots are an airline’s key component.

(Photo:Gary Cameron/Reuters)

The #1 Problem Every Leader Has But Isn’t Aware Of.

As I have come to appreciate, Mike posted some very thought provoking articles I enjoy reading and responding to.

In this article, Mike hits on a number of leadership topics. The first, is problem-solving skills. The second, is the application of that skill when leaders are affected by myopia. And the third, how to improve problem-solving by not tackling the problem in the first person but to actually be a leader who leads others in the problem-solving process. Mike then recommends this 15 point framework within which to address problem-solving.

I think I hit all the points he makes, or at least the important ones.

Having worked with leaders and as a leader for over 20 years I am quite familiar with the first three issues. It is too often the case that leaders take on an operational role instead of sticking to their leadership role and this can mess things up to no end. Quite rightly, as Mike points out, by being myopic. When a leaders steps into that more operational role they tend to lose the perspective they need to guide others in the direction the company is going in. Beyond this loss of direction, not being very good at the operational stuff the leader also risks losing credibility with those who report to them which can lead to even more significant consequences for the company and the leader.

In my view, leadership is the use of power for economic purposes. Where power is the influencing the outcome of the decision-making process. A leader who has to step into an operational role is no in condition to exercise power thus potentially discrediting their own leadership position. A big no-no!

As for the framework Mike recommends I find it useful but a bit complex. My own work has led me to a more straight-forward framework that I hope is okay to share here. It is similar in may aspects to the above so I think it may useful to the discussion.

All business is based on the ownership or control of an asset that provides a significant enough competitive advantage within that particular market to allow a viable and robust business to be built upon it. This asset is known as the “key component”. If a leader organizes and manages the business processes (just two types: operations and risk management) with an eye on maximizing the return on the key component then the leader can make significantly decisions.

By referring all decisions to the key component decision-makers are obliged to question all the premises and assumptions on which the business has been built including the strength of the competitive advantage thereby avoiding the pitfall of investing on an obsolete product or service. Likewise, this focus on the key component permits the business to know when it is time to change key components. The clarity of purpose this framework provides helps the leader lead the whole business and allows all those collaborating with them to proactively participate in the problem-solving process. The leader maintains their leadership role.

Finding your inner hero

In the introduction to ROKC, Leadership built on the Return On Key Component, I start with a discussion of how “God” – whatever the expression or manifestation – is the ultimate business. No one owns “God” making “God” open source; anyone can appropriate “God” for their own use and many do. “God” is intangible allowing each appropriator to define their own brand, appealing to a different market segment. And like a brand, “God” can be applied to any number of asset classes: education, publishing, real estate, war, and so on.

The above is an allegory of course and not intended to offend anyone. I certainly hope I didn’t and beg your forgiveness if I did.

The point I make with this allegory is “God” truly unknowable. Each “God” has their own messenger and each creation story starts with “God’s” messenger leaves their community for a harsh place of isolation and contemplation before returning with sacred knowledge that enlightens the way of everyone else. This is the archetype we find reflected in the Hero Myth which helps bridge the divide between the spiritual world and the realities of the everyday world.

In Western culture, the Hero Myth is very particularly important. It permeates almost the entire cultural fabric. Not only is this model found in books, movies, music, and such but also in business. Every story told about a business leader includes some unknown quality that is attributable to their success; their inner hero. We mere mortals often aspire to be successful in life and in business this means finding our inner hero. So don’t be too hard on yourself if you fall short, this is a very challenging endeavor. We are trying to fill some big shoes!

The Silent CEO Addiction Killing Productivity and Talent Development

Well, I have to admit Mike’s argument in The Silent CEO Addiction Killing Productivity and Talent Development (Forbes 10/17/2013), is a strong one and one I even subscribe to. Consultants should not be brought into a business to tell management, or the board, what time it is using the client’s wristwatch. This is a waste of resources. But… There’s always a “but”.

First of all, I do not think any CEO worth their salt will engage in such wastefulness. If they did, they would be dismissed for just cause. No, the CEOs I know bring in these big name consultancies to legitimize their course of action to the board. It is lonely at the top and having the support you need to change the direction your company has been going in is not easy. These consultancies help balance the playing field and get the decision through.

As a matter of fact, it is often the board who requests the consultancy be brought in not only to legitimize the course of action recommended by the CEO but in some cases it is they, the board, who are recommending the change and want to be perceived as legitimate by the shareholders.

Consequently, in my view, the use of strategic advisors has much more to do with internal power politics than efficiencies.

The second area Mike addresses is efficiencies, or productivity gains, where consultants can also be brought in to affect change. In my experience, here the issue has more to do with the type of managerial talent a corporation needs to conduct business as compared with the type needed to bring about change. In other terms, a manager who excels at overseeing the process of making widgets out of steel is not necessarily the same person who will do an equally great job making widgets out of plastic or capable for migrating from one to the other.

The truth of the matter is in exchange for productivity gains we have created a talent pool that is hyper-specialized. A person specialized in one area will increase their uncertainty of future employability if they take on other tasks by doing something too far outside the “norms”. An foreign investor had just bought a company in the U.S. and asked me why the acquired business had double the headcount of a commensurately sized company abroad? I explained the foreign company had employees who did multiple jobs while the U.S. employees were very specialized; asking the U.S. employees to behave like the foreign ones would adversely impact their careers, they wouldn’t do it. To achieve the same result, they would have to either create a Shared Services Center in the U.S. where the employees could maintain and develop their skills or outsource to a third party vendor in the U.S. or abroad.

From my point of view, Mike’s battle cry against the norm is not properly directed. I invite Mike and any others who care to join to take up battle against the hyper-specialization of employment, which makes it difficult for employees, managers and executives alike to do anything radically different from their assigned task. This economic approach goes beyond consultancy services to the whole company, the economy and the polarization of politics.

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