How many organizations have we seen hit the wall and get into big trouble because they didn’t change the business while they were running it? Life changed around them, but they didn’t respond effectively and/or proactively to those changes. General Motors is a good recent example of this. How did GM let this happen, and what could they have done to be more viable today? We believe there is a way to successfully structure the work of changing the business, while running the business, so both get done well, and in dynamic relationship to each other.
In our experience, working inside many organizations, private and public, big and small, there is usually a well established infrastructure in place for running the business, but not one for changing the business. Changing the business is something management is expected to do, off the side of their desk in their spare time. Before I go further, let me explain what I mean by these two terms.
Running the Business
This is the work that gets done in the Operations Work Domain (activities and working relationships) of the organization which is about adding value in the present and short term. This is where the money is…or where it comes from. This is where the activities and working relationships are focused on creating products or providing services for existing customers in established markets. While doing this we engage in work to adapt to the changing needs and requirements of these customers, thereby continuously improving the quality and the profitability of the product or service. People work within a given framework of policy, processes and systems, making suggestions on how these might improve. The focus of management in this work domain is to ensure effective operational systems and processes. This is the domain of work where fires get detected and get put out. A focus on control and reliability is critical in this domain. To use the “blue ocean” analogy, this is where our work is directed to minimizing the amount of blood we spill in the competitive waters of “red ocean”.
Changing the Business
This is the work that gets done in the Innovation Work Domain, or the domain of work focused on creating value for the future. This is the domain where new market and environmental trends, along with regulatory policy changes are brought into the strategic modelling and moves that are decided upon. This is the world where ideas about new products, services, customers, partners, etc. are thought of, developed in project teams, piloted, and either discarded or embedded into the Operations Domain. This is also the domain where big, complex, system problems regarding existing strategy and its execution, are also addressed. This is where life in the “red ocean” is resourced and monitored and where new “blue oceans” are created.
Most organizations are heavily tilted in favour of running the business, rather than changing the business. This is where most organizations and their leadership are long on rhetoric with catch phrases like “we need to be more innovative, take more risks, be open to change, re-invent ourselves, etc.,” but short on sustained effort, accountability and resources for the actual work that would reflect the expression of those catch phrases. I think the work in this domain gets neglected for some of the following reasons. There often is limited infrastructure (e.g. structure, processes, resources, capability, re-enforcement mechanisms, etc.) for coordinated & focused work (activities and working relationships) to change the business, while running the business. I witnessed what could have been, a generative conversation at the elevator, between my client and one of his colleagues the other day, where they quickly came up with a “cool idea” for a new product. The excitement died quickly as they both realized…now what? There was no internal structure or forum to explore this idea further. An additional barrier is a host of psychological risks. It takes huge personal courage to do the work of changing the business. Often there are no ready answers or solutions in this work domain, therefore this is risky territory with no guarantees or immediate rewards. There is also the additional risk, depending on the outcomes of this work, that there will be internal winners and losers as a result of the proposed changes. Another key reason for not getting around to this work,is that managers are always borrowing time from this domain to go down in the weeds of the Operations Domain to put out fires and/or do the work of their subordinates…micro-managing. That is because the organization values the “running the business” work more than the work of “changing the business”, and it is familiar and safe territory to play in. The ongoing need for short term results always trumps the rhetoric of innovation and long term viability of the business. At the end of the day managers get compensated for running the business, not changing the business.
Senior leadership needs to address the current “tilt” or bias, in favour of Running the Business, over Changing the Business. This leadership group has to resource an infrastructure which begins to tilt the weight between these two work domains in a more balanced fashion, so both get attended to, appropriately. Where to start with the rebalancing?
The work orientation of the Operations Domain (Running the Business) is about a “market pull” or reaction to the existing market. The problems here are mostly technical problems, in that similar problems have likely been addressed and solved before. We generally have the know-how to do this. It is like an Orthopaedic surgeon and a broken fibula. This is a technical problem (Heifetz), which he is well trained and experienced to solve. Solving problems in the Operations Domain are usually of this nature.
However the work orientation of the Innovation Domain, is more about “market push” or being proactive and creating new realities, that changes the nature of stakeholder relationships. The problems here are more about adaptive challenges (Heifetz), where there are no known solutions. This is new territory, and the work is risky, with the outcome resulting in new winners and losers.
graphic of the domains of work
I believe it is helpful to see that the work of “Running the Business” (creating value in the present) is primarily the work of the front line and the first two levels of management, and together this work domain needs to be held accountable for delivering excellent product and service to the customers, continuously improving the quality of those products and services. Managers here need to effectively manage the operational systems and processes, and working relationships within the Operations Domain to both deliver on our existing strategy, and successfully embed and operationalize the new strategic moves and innovations that have been decided upon by the leadership group, doing its work in the Innovation Domain (to change the business.
The most senior level of management in the Operations Domain will also be the lowest level of management in the Innovation Domain (Changing the Business). This second level of management, operates as a hinge between the two domains and will likely make up the project leads and teams that are trying out the new experiments or innovations (transition mechanism to transfer work from one domain to the other).
This second level of management (level 3) plus the next two higher levels (4 and 5) make up the Innovation Domain, and the work at this level SHOULD be directed toward “changing the business”. This involves observing and understanding key trends in the market, regulatory, and political environment and being able to turn those trends into opportunities and innovations for the business. The leader at level 5 and her subordinates at 4 need to decide on what those new ideas are that will turn into specific strategic moves (projects and/or pilots), and what they need to do to create the conditions for those new ideas to develop to the point where it is decided to either reject them or make them a part of the Operations Domain. Part of the “hinge” function holding these two domains of work together is a well coordinated project management structure that manages the process of idea to either acceptance or rejection within the Operations Domain.
There is another broader work domain, we call the Values Domain, as it is about changing the structure of the industry, through debating and changing the very values, ground rules and policy that the industry dynamics have been based on. However, this is a topic for another article.
The Quality of Leadership
I commented in an earlier article I wrote on “Why Senior Leaders Fail” that what makes you successful at one level, doesn’t could lead to your failure as a leader, at another level. We believe that the leadership competencies within the Operations Domain (levels 2 and 3) for running the business are very different than the competencies required for changing the business within the Innovation Domain (3,4 and 5). In the former you hear words and phrases like….results driven, decisive, able to mobilize a team, disciplined, in control. In the Operations Domain leadership is mostly expressed between managers and subordinates. These are all good qualities for managing technical problems, where a manager needs to get his team focused quickly on a solution. The quality of leadership and its resultant conversations changes dramatically when managers are engaged in work geared toward changing the business, in the Innovation Domain. The competency set or set of personal traits that you are more likely to hear tend to be words like, alert, agile, curious, open, empathetic, courageous, (to make a call, when you are not quite sure, or to intentionally lose a battle to win the war), listening, comfortable with ambiguity, patient. These traits are important here because leadership is no longer just a dynamic between a leader and a follower.
Leadership at this level often expresses itself with peers, when they are collectively addressing a complex problem with no absolutely right answers, just better answers. At this level an effective leader also needs more self awareness and authorship (Kegan 1984). By that I mean he is less motivated and directed by others, and tends to act out of this grounded sense of himself, informed by his own set of evolving principles, values and practical wisdom. He is also capable of seeing the world as both/and and not either/or. He is able to hold opposing ideas or positions in his head at the same time, without the need to reject one of them out of hand. For example he can see the advantages of both centralization and decentralization. He knows that both growth and cost containment can be equally important. Here it is often necessary to create a “holding environment” which is a collectively agreed upon pressure cooker, where the intentionally created centripetal forces of respect, common vision and commitment are greater than the centrifugal forces of competing values, ideas, backgrounds, and opposing points of view. Potentially, after a period of time, what begins to emerge are some collectively arrived at novel opportunities and solutions, thereby relieving the creative tension. This is a very different quality of leadership, than what was successful in managing operations at lower levels of the organization. It requires a higher level of raw horsepower, interpersonal skills and social-emotional intelligence and wisdom.
In conclusion my advice to a senior leader in charge of a business unit or large function, who wants sustainable competitive advantage, had better get the tilt right between running the business and changing the business. This requires an investment of leadership and leadership development, as well as time and resources to building an infrastructure and leadership culture that truly supports innovation and change, rather than relying on superb rhetoric and platitudes to get you there.