25 Jun A New Value Proposition for CEO Leaders In A More Connected World
Part 2: Conversation with Paul Laudiciana on Global CEO Leadership
Paul Laudicina, Chairman Emeritus, A.T. Kearney, author of Beating the Global Odds, shared with me his astute perspective on a new value proposition for CEO and organization success that requires peripheral vision, a broader experience and process for leadership development, and a commitment to “doing well by doing good.”
Cashman: In today’s world, what will make the difference in a CEOs success?
Laudicina: Among other things, domain knowledge and excellence in their area of expertise are essential, but no longer sufficient. CEOs and their enterprises are being held to a higher standard. Employees, customers, shareholders—stakeholders across the board—demand not just products and services that deliver value for the enterprise and drive shareholder value, but products and services produced by values-based organizations, that find the sweet spot between “doing good and doing well.”
The CEO needs to create a vision that includes this corporate zeitgeist and attract customers to it. They have to produce good products/services at a reasonable price within the context of being responsible global citizens who deliver broadly on the needs of stakeholders. Look at the recent challenge Apple has faced. They are being compelled to continue to provide great products and services, but also to pass a broader, stakeholder stewardship value proposition. Those are the challenges facing CEOs. They need to attract followership for what the corporation stands for beyond the immediate material yield.
Cashman: How is this different from social responsibility?
Laudicina: When I started in the oil industry as a young man in strategy and public affairs, companies would ingratiate themselves by doing good for the community, but they were doing so largely out of ulterior motives. They were buying favor to do things the community might otherwise oppose. Today it is absolutely impossible to sustain long-term success if your success is at the expense of key stakeholders—workers in another part of the world manufacturing your product, citizens concerned about the impact of your product on the environment, anyone engaged with the enterprise. Because of the speed and innovations in information technology, we have created this open kimono transparency. Everything is subject to scrutiny. Observe how specious rumors about corporate behavior go out on social media and propagate like wildfires. Companies have to address them. The ones that succeed will be those who get their products and services right within the broad envelope of how they deliver value broadly to all stakeholders, who will increasingly hold companies accountable for their behavior which is and continue to be more transparent than it’s ever been.
Cashman: What needs to be developed within the CEO to not focus on personal success at all cost, but to see and understand the larger system, and to have the courage with the board and shareholders to go for the longer range? What needs to be within that person to navigate this environment you’ve just articulated?
Laudicina: CEOs have to have keen peripheral vision. You can’t just focus on your “knitting”—your business. This is no longer a prescription for success. You need to know your business, but you need to understand it within the larger context. Peter Drucker used to observe that companies fail not because they do the wrong things, not even because they do the right things poorly, but because they fail to perceive a change in the theory of business. Drucker was referring to forces that shape things like customer preferences, technology, or the regulatory environment. The fantastic failures of companies over the last 20 years were about existential risk, the risks that come from fundamental changes. In the automobile industry it was about fundamental changes in consumer preferences, while in other industries technological innovation led to the unraveling of some mighty players, to wit, Kodak, AOL, Motorola, among many others. These companies were excellent in their own businesses, but they didn’t’ have the peripheral vision to understand changes in the theory of business that were coming at them, and if you accept the proposition that the pace of change will continue to accelerate, and certainly it’s not going to slow down, the velocity and amplitude of change will drive continuous transformation in business models.
Years ago, I asked the chairman of a failing airline why it was that his airline was failing. He answered, “We were focused like a laser beam on our principle competitors to understand how to stay competitive. Out of nowhere came this upstart, Southwest Airlines, that had a fundamentally different business model and ate our lunch.” Peripheral vision allows you to understand social, economic, technological, regulatory, and consumer preference dynamics. It provides that added layer of what is expected of a CEO.
Cashman: How does a CEO do that?
Laudicina: CEOs will have to be bred in a different environment than the traditional CEO incubation chamber. They need a process in which they understand their business proposition, but they need to be people who have had broad exposure to different cultures, social scientific thinking, as well as sensitivity to history, the arts, society and culture. They need to be people’s people, who understand what drives preferences and the broad environment in which business operates. This is how they will develop peripheral vision.
Some years ago we did a strategic plan for the new CEO of a global 50 company. We completed a vision statement and a strategic plan from which he would focus his tenure as chairman and CEO. When all this was done, I asked him why he selected us. Was it because we understood his industry better than others? He said, “Absolutely not. What I wanted was someone who would come to it with broad, peripheral vision of the forces outside our normal field of vision.” He wanted someone to help him understand what a former U.S. Secretary of Defense used to call “the unknown unknowns.”
I think it’s crucial to bring in outside advisors and populate the board with at least a couple of people who come at the issue of existential risk differently from people who have specialized expertise in a given industry. This is part of the challenge of maintaining expertise in the domain knowledge needed for success, but not becoming smug about that success, and being prepared to countenance different ideas about challenges to the business.
Cashman: When I hear you describe broader peripheral vision and human sensitivity, I can’t help but wonder if it wouldn’t be better if MBA and leadership programs were more interdisciplinary or liberal arts oriented to better prepare more developed, agile people?
Laudicina: The pedagogy of management training is changing. One can reasonably ask why was leadership in both the private and public sector ill prepared for the biggest economic tsunami to hit society in our lifetime? Why do we suffer from the biggest chasm in trust between the public and private sectors at any time in memory, and how can we close that gap? What are we doing to prepare our next generation of corporate leaders to have the ability to discern and get out ahead of important trends and developments, to create and enable the vision necessary to generate support of the products and services they sell and of the communities in which they operate, to inspire people to rise above the constraints that threaten a quantum leap backwards? This will require a transformation of formal management training and of business school curricula. Many schools are in the process of thinking through that transformation. The extent they are able to help develop the next generation of business and management leaders differently, will help determine whether or not we have the leadership needed to unleash the next generation of global integration and the opportunity and promise it brings.
Cashman: What do you want to expose a potential CEO candidate to in order to help them get there? What developmental opportunities do you want to give them?
Laudicina: I think that you want to expose people to different opportunities—working in different space closely with different constituencies and tools. Business schools can only produce graduates who have a sensitivity to what they need to be successful, but what they do and where they perform over their career as they ascend the corporate ladder will be ultimately what determines their success. There’s only so much you can achieve in a 2-year program, no matter how varied and rigorous. What it’s got to do is whet the appetite and create the demand for this kind of broad, varied, omnivorous approach to learning and experience that will help prepare them to have different cultural experiences, different ways of looking at the impact of the corporation on the community, engaging with employees, crafting visions for the future, as well as engaging the public sector.
The most recent Edelman Trust barometer findings confirm how frayed the bonds of trust are between consumers and producers; lenders and borrowers; employees and employers; government and businesses. At every level we have to build back credibility. The Latin verb, “credere,” to believe, is the root of the word credibility. People need to believe that the leaders of all institutions they depend on are going to act and behave in the public’s best interest.
In business school, many cite Adam Smith as the intellectual father of modern capitalism. He’s too well remembered for phrases like the “invisible hand” and how laissez faire capitalism presumably is supposed to work. But the truth is he was a dogged advocate of the view that free enterprise required strong moral and ethical underpinnings and that most market participants needed to be people of “propriety, prudence, and benevolence,” in order for the system to work properly. When he talked and wrote about what he was proudest of, it wasn’t the book he is most well-known for, The Wealth of Nations, but the book he published 17 years before and which he continued to work on until his death, The Theory of Moral Sentiments, in which he explores this ability to think and act morally in the face of pure natural self interest. Such behavior, reconciling the imperative to do well with the need to do good, is fundamental to a sustainably successful, free enterprise system itself. By encouraging leaders to stop, think, listen and refocus, Kevin, you are helping us understand how we can build the kind of values-based, purposeful leadership proposition central to building private and public sector institutions which will deliver on the broad needs of society’s stakeholders.