Smartest guys in the room … what could go wrong?

What could go wrong?  Plenty it seems.

Commonwealth Bank (‘Which bank?’) is just the most recent example of overconfidence in the ‘intellectual capacity’ of a leadership team to steer the organisation through the ‘white water’ of modern corporate life.  In its recent report on failures at CBA APRA reportedly found:

  • The board relied too heavily on senior management’s ‘high IQ’ and their ability to take care of all things
  • That their risk management processes relied too heavily on ‘raw intellect over comprehensive analysis’

This is a pattern that we see repeated too often and yet we still fall for it.  We’re a bit like Charlie Brown and Lucy (in the old Peanuts cartoon).  Despite Lucy repeatedly pulling the ball as Charlie goes to kick it, each time Charlie imagines 'this time it is different'. 

There’s been a host of studies on team performance and team dynamics over the years that show that teams full of ‘really smart people’ don’t perform as well as teams which might have 1-2 really smart’ players (and not necessarily the CEO).  But somehow, we too often assuming that the answer to complex problems is ‘smart people’.    

This has proven to be a very expensive assumption. 

Perhaps the doozy of them all was Long Term Capital Management.  LTCM was a hedge fund that boasted two Nobel laureates (Merton & Scholes, famous for options valuation theory), multiple PhD’s, and fund management veterans.  LTCM grew to over US100B in funds within 4 years, showing 40% annual returns.  But for all that, the Asian financial crisis triggered a collapse that saw LTCM facing US1Trillion in default risks.  Ultimately the US Treasury had to step in to stablise the global financial system.   So much for genius. 

A close second: Enron.  From a pipeline company in the 1980’s, Enron grew into the world’s largest energy trader.  The collapse of Enron is told in a documentary ‘The Smartest Guys in the Room’.  It traces the rise and fall of Enron, which grew to be the darling of Wall St, until it collapsed.  The Chairman and Chief Executive of Enron at the time were Kenneth Lay and Jeff Skilling.  They have been described[1] as ‘two supremely arrogant and belligerent men who believed they were the smartest guys in the room: that through sheer cleverness and creativity they had brought into being the most innovative corporation in the US’.  Indeed, Enron was named ‘America’s most innovative company’ by Fortune for six consecutive years.   The collapse was triggered, at least in part, by investigative reporter Bethany McLean who was undistracted by the glossy brochures and glitzy premises.  It seems she didn't drink the Kool Aid.  

As the dominoes began to fall a pattern of appalling behaviour emerged.  For example, when the power markets were deregulated in California, Enron shut down energy generation to create power shortages and drive up energy prices.  According to The New York Times, the top brass at Enron realised what was happening ‘but like a mad and dysfunctional cult, everyone carried on’.  This description has parallels to the revelations of the current banking royal commission.

My final example is closer to home.  The CEO of one of Australia’s leading companies had a reputation for his prodigious intellect.  The company prided itself on capturing the best talent available in the sector.  Despite this, with his powerful intellect, he developed a reputation for intellectual bullying.  But in the years prior to his retirement he was persuaded to introduce a values-based leadership development program.  In a post-retirement interview he observed, with a sense of profound insight, that he had recently come to the realisation that ‘it was all about the people’.  One got the impression the interviewer was nodding approvingly at such wisdom. 

I was bemused.   How is it possible that the CEO of a major company, with a reputation for a prodigious intellect, took until his late 50’s to realise ‘people matter’?  This is Management 101 on any MBA.  Tom Peters, management guru, author and former McKinsey partner, has been telling us this for as long as I can remember. 

The simple reality is that intellect can only get you so far.  Perhaps intellect is a bit like money: more is better up until you reach a point at which the upside plateaus.  At this point, other factors – wisdom, emotional intelligence, and the collective intelligence – begin to play a much bigger role.


[1] Oppel, R. A. and A. R. Sorkin (2001). Enron's collapse: The overview.  Enron collapses as suitor cancels plan for merger. The New York Times.

MBA's, strategy and judgement

Why do we teach the various models and concepts of strategy?  Is it as simple as Lewin's aphorism: there is nothing so practical as a good theory?  Actually, it is much more than that.  At its core we are teaching judgement; or at least, providing tools that will enhance judgement.  

But what is judgement?  What does it look like in action?

To finish I offer my own simple mantra for a great strategy process: immersion; synthesis; simplification.  

DDB ... a strategist's view

PS: to my regular readers, my apologies. It has been too long.  But in the last couple of months I've been teaching multiple MBA programs; working with a CEO to develop their strategy; and travelling to KL for some leadership development programs on strategy execution.  And more.  

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What driving fast cars can teach you about strategy …

Too many executives are focused on the near field obstacles ahead of the end game.  They collapse the time frames in their strategic thinking based on ‘felt’ competitive pressures.  Gary Hamel observed nearly 30 years ago, “most strategic plans tell us more about today’s problems than tomorrow’s opportunities”.

But Jeff Bezos (CEO Amazon) argues that a short time horizon confines organisations to a crowded competitive space.  How do you extend the attention span of the organisation?  Thinking about the longer-term future does not guarantee success, but the converse pretty much guarantees failure in today’s competitive landscape.

DDB ... a strategist's view


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I feel the need, the need for speed ...

Most of us think about decision quality - making the right call - when we think about strategic decision making.  But it turns out speed is also vitally important.  More CEO's are ousted for indecisiveness than for wrong decisions.  Too many companies know that they are slow, but don't know what to do about it.  

Jeff Bezos, Amazon's CEO describes their approach to high velocity decision making.  It is predicated on maintaining a Day 1 mindset.  ‘Day 2’ companies make high quality decisions, but they make them slowly.  For Bezos, Day 2 is stasis, followed by irrelevance and excruciating, painful decline. 

Are you a Day 1 company?  What does your extended leadership team think?  And what practices can you put in place to accelerate decision speed in your organisation?  

DDB ... a strategist's view

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MBA reflections ... what stuck?

When you teach an MBA strategy class it is interesting to reflect on what sticks?  After 12 weeks, what frameworks have struck a chord with the students?  The MBA cohort offer an interesting perspective, because they are often middle managers ... and middle managers are the backbone of an organisation: they connect the 'head' and the 'feet'.  I outline here three themes that 'stuck' with my latest MBA cohort: strategy execution playbook; strategic readiness; and 'fit'.  

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Can someone help me please? I'm stuck!

At a recent workshop a client expressed the fear that she felt stuck when thinking about strategy execution.  That's not surprising.  Research consistently shows that organisations massively under-perform on strategy execution.  

I outline five practices here that will give you a winning edge when it comes to strategy execution. Execution is not a trivial part of managerial work: it defines the essence of that work.

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Apparently mining blew the boom ... but who's the greater fool?

The headlines scream at you: major miners blew the boom.  It is true they repeated the patterns of all commodity booms.  But are we guilty of playing Monday morning quarterback?  What might they have done differently?

And what about shareholder value?  When did we lose sight of the value part of the equation?  And who was the greater fool?

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Rethinking leadership development - it's about strategy execution

About 15 years ago a major Australian resources company set out to develop ‘world class leadership’.  But Professor Chris Worley rebuts[i] the usual prescription of ‘more leadership’.  He argues that asking people to change behaviours without changing the underlying system – the structure, systems and processes – is borderline immoral. 

Leadership requires us to develop new behaviours and create a context in which those behaviours can flourish.  My research explored the barriers organisational context creates in the pursuit of 'world class leadership'.  These prove to be at least as important as individual factors.   But what are the conditions we need to create to enable leadership?  

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Strategy lessons from the greatest CEO in tech history … and it's not Jobs

The recent death of Andy Grove passed unremarked in the Australian press.  Grove has been called the greatest CEO in tech history: he mentored a young Steve Jobs.  A former Intel CEO, Grove was responsible for the transformation of Intel from a ‘memory company’ to a ‘microprocessor company’.  Few companies have successfully redefined themselves so fundamentally.  When Grove stepped down as CEO in 1998 Intel was earning $6.9B profit on $25B revenue. 

The story of the transformation remains a classic case study in strategic leadership.  

I highlight three key lessons and suggest some practices you build into your personal leadership repertoire.

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Breakout strategy: what if anything were possible?

At its core, strategy is design.  And great design starts with the question: what if anything was possible.  If we start with constraints we get designs for tomorrow that merely tweak today.

What if we applied the same design principle to the strategy process?  This would improve the chance of creating something truly distinctive: a ‘breakout strategy’.

In preparing for a leadership conference Starbucks CEO Howard Schulz argued:

Before we could challenge the status quo, my colleagues and I had to see it in new ways, reframe our existing ideas, and move beyond self-imposed constraints to imagine new possibilities.

How bold are you willing to be  to achieve something truly distinctive?  

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Avoiding Gray Rhinos ... strategic renewal and the status quo trap

Strategic renewal is a fact of life,  While strategies constantly evolve, organisations experience strategic drift either through organisational entropy (the tendency for systems toward increasing disorder) or market and competitive shifts that are no longer reflected in our strategies.  The challenge is to respond to these issues before you reach crisis.  Regrettably, organisations often move too late.  Why?

There are two explanatory factors: a ‘failure to see’ or a ‘failure to move'.  This blog illustrates the power of some of these issues and describes an approach used in a recent workshop to overcome some of these limitations.   

This is part 2 of a three part series of blogs looking at some of the issues at different stages of the strategy life cycle.  To see the earlier blog click here


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The profound responsibility of leadership

The most creative conversations of our professional lives engage both our emotional and analytic selves.  These conversations are the source of inspiration and sense-making that leave you buzzing hours later; that wake you in the middle of the night; that create new insights through connecting previously disconnected ideas. 

I had such a conversation a few months ago with a colleague.  Exploring the role of purpose in organisations, he challenged me to articulate my purpose: why do I do what I do? 

One of the outcomes of that conversation was a paragraph I wrote about the profound responsibility of leadership.  I didn’t post it at the time, at least in part because I suspect for many business leaders – prospective clients – it might seem ‘too soft’.  But after some interesting conversations yesterday I decided I would share my world view.  So here’s what I wrote those months ago: 

I believe in the capacity of leadership to create great organisations … organisations that can develop and execute strategies that match the demands of a complex and changing environment; that can build connections with customers that transcend the simple transactions that characterise too many market places; that create customer experiences that build longevity into the relationships.  And this comes about through leaderships’ capacity and commitment to engage with the people who are the body and soul of any organisation and want to make a contribution that goes beyond just earning a wage. 

This is the primal responsibility of leadership.  If not this, then what is our job as leaders?

I also believe in the self-evident truth: it is the leadership teams which need to design, develop and energise the change in organisations.  Our job as consultants and advisors is to help them in that pursuit. 

This is my ‘bias.’  It shapes the conversations, approach, and expectations in my work as a strategist, facilitator and teacher.  And I think this is largely reflective of my clients.  The people I have worked with over the years who I connect most deeply with do feel a profound responsibility. 

But over time many leaders slowly, often unconsciously, withdraw from this profound sense of responsibility, reflecting a felt lack of a shared sense of responsibility among their peers and their leaders.    Or sometimes in the face of challenges that seem overwhelming.  But this model of leadership demands institutional leadership: it is beyond the capacity of individual leaders.

Do you feel this profound responsibility?  How often do you experience deep, creative conversations within your organisation which engage both your emotional and rational-analytic self as you explore your collective role as leaders?  Do the conversations leave you buzzed?  Or just frustrated?  If the latter, I suspect the ‘emotional’ self has been ‘shut out’.  Caution: the failure to engage the emotional self can ultimately lead to ‘burn out’.  

Leadership lessons from the world of Australian politics

Leadership and strategy are inextricably linked.  One without the other is like fertiliser without water: wasted.  The reader could be forgiven for raising a quizzical eye at the suggestion there is anything to learn of leadership from recent years of Australian politics.  But applying the adage we learn more from failure than we do success, perhaps there’s something here for us all. 

What follows is a summary of my five key lessons for business leaders from Australia’s recent political history.   How well does you/your organisation stack up on these issues?  

But remember this.  All leaders are flawed.  Undoubtedly Malcolm Turnbull will reveal flaws over time.  The real issue is not the existence of the flaws, but awareness of the flaws and a willingness to establish mechanisms to protect the organisation from their downsides.

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Leadership Lessons from Dockers' coach Ross Lyons

In the early 90’s Paul Keating remarked that every parrot in the pet shop was squawking micro-economic reform.  Today those same parrots would be squawking productivity.  While this is a multi-dimensional challenge, leadership plays a fundamental role. 

And so I thought I’d highlight a leadership lesson from Fremantle Dockers coach Ross Lyon.  He recently observed his team needed a vast improvement if they were to maintain their position on top of the ladder.  He questioned their decision making following a ‘grinding’ 7 point win over Collingwood, highlighting some specific areas: some shocking turnovers; repeatedly slipping. 

What did he say next?  “At the end of the day that starts and finishes with me, so clearly our football program needs to improve because they should be able to do it instinctively under pressure”. Wow.  How many of our leaders today adopt this perspective?  We often lose sight of the fundamental truth: we are accountable for the performance of our teams.  So if their productivity is low, you are underperforming. 

Ouch.  That puts a different slant on it.  Try looking through this prism next time your team disappoint.  

Stronger no longer - what now?

One of my resources clients recently shared his observations after returning from a marketing conference and from a series of meetings with many of his customers.  The message was loud and clear: the ‘stronger for longer’ mantra of the resources sector is now ‘stronger no longer’. 

What now?  Of course, most resources executives know ‘what’ to do: cut capital spend; cut exploration; reduce travel; reduce headcount; drive productivity.  But the real leadership challenge is not ‘what’ but ‘how’.   

Here’s some of the ideas I offered from the perspective of an organisational strategist. 

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