Maintain Agility and Lifelong Learning
At the beginning of 2020, a sudden public health event triggered a worldwide economic and financial crisis, and enterprises and organizations face unprecedented challenges. Looking back at the history of business management in the past, from Welch's "management capitalism to build a corporate empire" to Iger's "participative economy", from Zuckerberg's "M&A philosophy" to Kristan Mori's "disruptive innovation", under the post-COVID-19 "new normal", what kind of new changes and models will appear in business organizations?
On the afternoon of May 10th, emlyon Global DBA Program (GDBA) and The Economist · Business Review held a virtual forum and 2020 Program Workshop. Mr. Chen Wu, Executive Editor-in-Chief of "The Economist · Global Business Review" made a presentation focusing on the theme of "Changes in Management from the Perspective of the Evolution of Business Generations" and reviewed the new changes in business management under the great changes of the times with four real-world cases . Subsequently, Mr. Chen Wu, Mr. Qiuyong Tang, Co-Director of emlyon Leadership and Organization Innovation Center, and Ms. Diana Tang, Founder of EDGE Consulting and Chief Consultant of Development Dimensions International, Inc. (DDI), conducted a wonderful event entitled "Organizational Change and Leadership", sharing their cutting-edge insights and in-depth thinking.
Chen Wu: Under the great changes of the times, business leaders shall act as connectors rather than cost controllers
Although the world is still in the outbreak of COVID-19, China has already begun to restart its economy. The epidemic also masked many important events in the business world, one of which was the death of Jack Welch, the legendary Chairman and CEO of GE. Welch was a representative of management capitalism for traditional American multinationals to build their own corporate empires. During his career, Welch had forged GE into an all-encompassing giant and a forging plant for CEOs of Fortune 500 companies.
Welch believed "1 + 1 > 2" in any industry, that is, managers with rich and cross-industry experience are the key factors for integrating multiple industries. One of his foremost theories is 4Ps, i.e., People, Purpose, Profit and Process.
As a great example of a versatile manager, Welch believed that the most important thing for leaders or CEOs is to cultivate talents and to hire people who are stronger than themselves, and in turn invented a number of human resources management models such as management trainees and the last 10% elimination. He believed that the role of a CEO shall provide a stage for everyone who is better than him/herself in a specific field and find his/her successor.
Welch advocated enterprise integration. He stated that if a company can't be the leader in one of its businesses, it should sell off or close this business unit. However, mergers and acquisitions (M&As) require managers to have good strategies and a vision of future trends. If M&As are just to expand the territory of the enterprise empire, without a profound prospect and evaluation of the future development, the results may be disastrous.
If an enterprise empire goes further in the direction of bureaucracy and seniority, it will face the footprint "barbarians at the door" and potential spin-off. As Welch's successor, Immelt is a typical example. In addition, if the managers pay too much attention to financial management and process efficiency, there will be obvious shortcomings in innovation, and they will face huge turnaround challenges, which is why Immelt suffered a fierce defeat when competing for Uber CEO. In the future, if managers cannot properly combine innovation with efficiency, they will soon be eliminated.
In addition, GE's biggest burden and profit contributor was GE Finance. In the minds of many Chinese business leaders, the combination of industry and finance is the future blueprint for manufacturers. In 2000, when Welch retired, GE Finance contributed over 50% of GE’s gross revenue. For an industrial enterprise, especially an equipment producer, the benefits of finance are that it helped the company better compete in price, provided financing and also facilitated GE to enter the construction of the Internet of Things (IoT) and industrial Internet through financial leasing.
But when Immelt took over GE, GE Finance quickly fell from its peak. By the time of the financial crisis in 2008, without the rescue of the US government, GE Finance might have collapsed, so would the entire GE Empire. Therefore, the high risks posed by the mix of industry and finance deserve attention.
In addition to Welch, Clayton Christensen, author of The Innovator’s Dilemma, passed away at the end of this January. Christensen brought us an extremely important management idea, that is, disruptive innovation. Christensen once mentioned that he would ask Saint Peter a question at the end of his life, "Why do you only provide past data instead of future data?" This is actually a question for the entire Internet economy: Both Big Data and Artificial Intelligence use past data to make decisions about the future, so disruptive innovation seems meaningless.
In his book The Innovator’s Dilemma, he also pointed out that the reason why big companies cannot predict their own failure is not because of extreme rationality rather than stupidity. They focus on their own industries and consumers and continue to provide customers with quality services, while ignoring their competitors. Therefore, it is difficult for them to achieve long-term sustainability. Nokia is a typical example.
Moreover, Christensen also revealed that every company should build its own management system of disruptive risks, because companies are likely to ignore their potential competitors and fall into complacency and stagnation. Therefore, they should be more keenly observing potential competitors around their ecosystem, strangle them in the cradle or merge them. So there emerged Zuckerberg's "M&A philosophy".
The entire ecosystem of technological innovation, including Silicon Valley and China, is increasingly dominated by several platform-based companies. Zuckerberg's Facebook is one of them. For the companies he likes, Zuckerberg is determined to take part in M&As and does not hesitate to appeal the targets with his compliments and attention. Zuckerberg would promise that the acquired company could still operate independently under the control of the founder, while Facebook only provide capital, logistics and technical support to help the company grow rapidly.
Zuckerberg is very generous, who would provide the founder with irresistible “gold handcuffs” and would not go away simply because of the founder’s early refusal. In fact, Zuckerberg are buying founders and key employees instead of companies. But noticeably, as platform-type companies keep on expanding and continue to build their ecosystems by taking over or break down their competitors, is it good or bad the future of innovation and entrepreneurship?
In addition to the deaths of two legendary managers, Bob Iger, Disney CEO, stepped down in February. He had been in charge of the Disney Kingdom for 15 years and brought tremendous changes to it, mainly in two aspects. One is the content-oriented IP strategy, which includes not only Disney's own IPs, but also super IPs we are familiar with, such as Pixar, Marvel and Star Wars. The other is that Iger took disruption and embracing risks as his motto, who emphasized that the future development of Disney would generate sequels based on Ips, while associating more and more consumers during the process.
Meanwhile, he put his head in the crowd and launched Disney+ to compete head-to-head with Netflix. However, Iger also faced challenges. Created by his own hands, Disneyland, which had contribute more than 50% of the profit to Disney in the past quarter, was greatly affected by COVID-19. In the future, whether the Disney Empire can cope with unexpected changes, especially the uncertainty brought by the pandemic, is still unknown.
In conclusion, facing the future, CEO should quickly capture the ability to configure intangible and digital assets, which is more complicated and calls for creativity and greater collaboration. The development of large enterprises requires both creativity and economy of scale, in which CEO needs to play an important role as a connector, treat creative and internal entrepreneurs as well as mass production and operation talents fairly, and effectively connect creativity with development, rather than a straightforward cost controller.
In addition, CEO also needs to clearly understand the possible windows of strategic threats and opportunities facing the company. Times are undergoing tremendous changes. In the course of such changes, knowledge and experience are more dynamic. Although everyone can engage in lifetime learning, it is best for a good CEO to follow a cycle to complete his career journey. When a wave ends, a new wave may be the best time to pass on.
Panel discussion: In the post-COVID-19 era, agile leadership will become the top priority of organizational management
Q1 COVID-19 has brought tremendous changes. Which of them are long-term changes? What are the ways to deal with the outbreak that will become an integral part of the organization in the future?
In the business world, an organization is a company. In 1856, Britain promogulated the first company law, which marks a milestone in the history of human economy. After the birth of company, a set of scientific organizational systems followed, that is, the hierarchical organization described by Max Weber, which remained stable for the next one or two centuries.
In the 1980s, the model of outsourcing appeared, resulting in a new structure of organization between companies. In the 2000s, more and more new organizational structures were born. For example, with the development of the franchise industry, each franchiser becomes a conglomerate. In contrary, the sharing economy is a circle-based organization. The inner circle represents its core employees, the middle circle includes people who have no employment relationship with the organization, such as drivers, and the outer circle is its customers. In addition, there are some kinds of platform-type organizations, which are most frequently found in fast fashion companies. The bottom layer consists of production, logistics and retail, on top of which are the smallest combat units dedicated to design new styles as quickly as possible.
The birth of these new organizational structures mainly stems from the innovations and changes in business models, which call for new organizational structures. In the past, the organizational structures are similarly, but today, they become diverse. Meanwhile, new organizational structures require new management models.
In Welch’s era, bureaucracy did a good job, which managed people and processes. Nowadays, more and more organizations are networked, between which there are transactions and connections, yet without affiliation. However, bureaucracy still exists, and COVID-19 has also brought us new challenges. For example, companies are required to improve efficiency, but the ultimate form of supply chain efficiency is Just-in-time. When a sudden public event occurs, organizations will be hit hard, so strategic redundancy is also necessary to a certain extent.
The hierarchical structure is obviously no longer suitable for the current need for agility and responsiveness of organizations, so there are self-organization, synergy and other organizational structures. If a company without agility wants to become agile, it will face a lot of changes and breakthroughs in thinking, working and organizational structure, focusing on three points. First of all, traditional organizations usually follow the processes of goal setting, planning, execution, control and measurement, but these fit for the ever-changing society and markets. Thus, goals and plans should be used for continuous adjustment beyond execution. Second, enterprises should strive to get closer to end users and consistently iterate to be small and beautiful rather than large and all-inclusive. Finally, traditional bureaucratic management usually manage people with systems and processes. However today, people and interactions should greatly overweigh processes, and the entire organization should be highly empowered. To a certain extent, COVID-19 also drives the organizations towards agility.
Q2 How should the organizations respond to the ever-changing external world?
First of all, the organization should have the ability to quickly detect changes in the external world. Second, the way of thinking should change accordingly. Finally, in regard to behaviors, companies should seize the time window to complete their agile transformation, because both for organizations and individuals, time is the most precious and resource.
If a company does not have the agile DNA, there can be many ways of turnaround. For example, some companies use small teams as pilots and run two systems in parallel. Some respond with strategic actions taken by small agile teams, while traditional functions undertake daily operation. In addition, it is also common to incubate new businesses and set up new agile organizations.
Q3 How should CEOs cope with the conflicts between size and resilience and between innovation and efficiency?
First of all, from an organizational perspective, a company should strictly control its hierarchy. The more the levels of an organization, the higher the rigidity. Each additional level may enormously increase the management costs. And second, organizations are now facing exponential changes, which require a rapid transformation of thinking and quick trials and errors within the organizations.
One of the key lessons brought about by COVID-19 is that information will move faster. Everyone should seek for a wider source of information, try to make the information intact in the transmission process and make quick decisions and trials and errors to extract lessons and move forward quickly, which are huge challenges for both businesses and individuals. The speed of knowledge obsolescence will also accelerate. Therefore, everyone should stick to lifelong learning.