Thought Leadership

This post has been many months in the making and still isn’t polished, but I thought I’d publish and see what sort of response I get.

The writing process was triggered when I saw this article on the BBC website looking at the Companies Bill. In the bill, shareholders that have their shares held in nominee accounts will now have to be given nearly full voting rights at AGMs. As the article says this is a significant victory for shareholder democracy. It also presents a golden opportunity for pressure groups.

The pressure group, e.g. Friends of the Earth, could ask it’s members to buy a few shares each in, e.g. Shell, through on-line share trading. When it comes to AGMs then the pressure group’s members could co-ordinate their actions to make a protest, such as voting against the re-appointment of directors. If they had enough shares (admittedly difficult in the case of Shell), they could force an EGM on a decision they did not like. This sort of action could become very tiresome for publicly traded companies and only becomes practical with the Companies Bill.

The example above also illustrates what might be a trend driving towards an increasing “mutualisation” of PLCs listed on stock exchanges around the world by the back door.

Consider the following four trends in business

1. The growth in consumer power. This is best represented by the movement to ethical trading and “corporate social responsibility” (CSR); consumers want to feel that what they buy has not been delivered to them at a disproportionate cost to the environment or through poor wages and/or conditions in less developed nations.
2. The move to “knowledge working”. This results in the key people in a business having stranglehold on the direction and profitability of a business. If they leave, or take the wrong decisions, the business fails. These people have realised this and are taking an increasing proportion of the value created by the business through stock options and bonuses. The “fat cats” as the media like to portray them are not just restricted to the board. There are a large number of people that have made good money out of e.g. Oracle, Vodafone and Tesco share schemes.
3. Increasing shareholder/bond holder activism. The people that provide the money and “own” the business want more control over how it is used. In some cases it is the movement towards CSR where e.g. the state pension funds in the US demand changes in business practice as a price of their continued investment. In others they want to prevent abuse by senior management. This is being enhanced by the Companies Bill.
4. Decreasing asymmetry of information. Asymmetric information is an economist’s term describing the situation where one group of people has more information than others. From this comes (without going into the details) the opportunity to make money i.e. if I know how to do something or exploit an opportunity and everyone else doesn’t then I can make money. Partly as a result of the Internet, good ideas for creating money don’t stay restricted to one or two organisations for very long. This results in decreasing competitive advantage periods. One of the key examples here is the “open source” movement in software i.e. “Why buy from Microsoft when it is available for free on the net?”

As a result of these trends there is an increasing amount of tension over who governs and gets the rewards from a business. This is particularly true of mature, regulated, and infrastructure businesses e.g. utility companies.

In businesses there are 3 key stakeholder groups; the senior/key employees, the customers and the financiers (note that shareholders, the legal owners of a business, can and often are from all 3 groups). Trying to balance their needs is an increasingly difficult task and in reality one group or possibly 2 will tend to dominate. One can see already some businesses where either consumers and/or key employees have power over the direction and rewards of the company.

If we look at the retail sector as an example. Some of the big growth areas are healthy eating, organic and fair trade goods none of which were even on the radar of the largest companies 10 years ago. The majors all now say that they are just delivering what customers want but the leaders into these areas were and are Waitrose (John Lewis Partnership) and the Co-op Retail Societies, both mutual organisations one owned by employees and one owned by customers.

To take a different example, the professional services industry; Accountants, Lawyers, Financiers and to a greater extent the IT industry, are dominated by the “war for talent” i.e. making sure that they recruit the best and brightest in their fields. Inevitably the businesses are configured to make themselves good places to work (however they chose to define it) and while yes they make a decent return for their investors, the priority is to keep and retain employees.

Of course it can be argued that throughout the last 20 years the combination of building society demutualisation and privatisation has pushed the mutual model to the fringes of business, the recent flotation of Standard Life is a case in point.

However, as a Standard Life policy holder, and now shareholder, I actually think that the demutualisation actually helps illustrates the point I am trying to make. The reality is that to me as a customer the change has made no difference; as an mutal “owner” I had very little real power over the board which has changed in the slightest now I am a shareholder “owner”. The key pressure on the senior management of Standard Life is the same (in very broad brush terms) i.e. make industry leading return on investments.

There is also a very interesting challenge here for the leaders of the Co-operative Retail Societies. Why is it that Tesco’s (or John Lewis Partnership) employees can make good money out of share options and customers get a “divi” through the Clubcard and yet the Co-op has only just re-instated a meagre dividend. From the outside it looks like the Co-op is inefficient; perhaps the management has become complacent given that it is difficult to “force” changes to be made.

The reality is that it doesn’t really matter what formal structure is underneath, I see that most major businesses are being forced to adopt a “stakeholder capitalism” approach to remain successful. What is important is not making a profit, that is a given for survival, it is how you make that profit and what use is made of that profit that determines sucess.

“So what’s the Big Idea?” I’ve been asked this question several times recently and it has occupied my thinking processes, one of the reasons why there has been a lack of entries on this site.

The question is important for me as I very much subscribe to Noel Tichy’s view that to be able to excite people and build a truly winning organisation there needs to be a compelling story that people can chose to buy in to. People that chose to buy into a story and make it part of their own are dramatically more motivated to achieve the results the organisation is looking for, whether they are employees, associates or customers. Tichy calls this story this a “Teachable View”  and he developed a framework to create them while working with Jack Welch at GE.

At the core of a teachable view are ideas and beliefs. One of the most interesting concepts that Tichy puts forward is that your ideas and beliefs should be sorted into Quantum and Incremental ideas. Quantum ideas deal with the revolutionary changes that are happening around you and the organsiation that you can only be a part of. The key quantum idea at the moment is globlisation and its effects. Incremental ideas are how the quantum ideas impact your organisation and how you are going to prosper, so nearly all “strategies” are composed of incremental ideas. In the globalisation example, outsourcing manufacturing to China would be an incremental idea.

So if I think that having a Teachable View is a good idea, what is Kubernetes’ Teachable View? Having read Tichy’s books I was glad to find that Teachable Views take time to develop and evolve. The starting place is to look at the quantum ideas that one is part of.

Kubernetes was specifically set up because I believe that facilitation is the most effective way of ensuring buy in to strategy and that imposing change on people is often counter-productive and at worst damaging to the individual. I also had a feeling that facilitative approaches will come to dominate, as the Knowledge Economy emerges, for the simple reason that if people are the “means of production” and they don’t feel bought in to into what’s happening in the organisation, they will walk, taking their value with them. Having been trained as a scientist, I also try to look for the fundamental principles of why things are as they are and this feeling has not been enough for me.

I have now found a good discussion of the fundamental principles in Stephen R Covey’s most recent book “The 8th Habit”. Whether you like Covey’s work or not, his diagnosis of the problems in organisations today is compelling. He also builds a picture of organisations where people are treated as “whole people” i.e. where their 4 basic needs, to live, to love, to learn and to leave a legacy, are met.

The quantum idea that leaped out at me from The 8th Habit is the translation of live, love, learn and legacy into a “covenant” for organisations in their relationships with their (Knowledge) Workers:-

• Pay me fairly…
• Treat me kindly…
• Use me creatively….
• …in serving human needs in a principled way

The discussions about communicating knowledge (digital communications) have brought me back to a concept that I first presented 10 years ago; The Half-life of Relevence of Information.

My definition of this is the the time it takes for half of the information contained in a document to become irrelevant.

For example the half life of relevance of information for…

• a daily newspaper is probably no more than 48 hours in most cases.
• Henry V by William Shakespeare is over 400 years as it is just as relevant today as it was when it was written

The key variables here are time and relevance. Relevance is subjective, Henry V is likely to be more relevant to the English rather than the Chinese; and more relevant to an actor than a geologist.

Once you start thinking about it, the concept could be very useful in context and individually sensitive searching. Perhaps this is something that the semantic web will or could deliver.