Ok.

This is about running a business and the heretical thought that the consumer is NOT the king or queen <if it helps … I will also suggest that they are not subjects of the kingdom either>.

I thought about this again after I watched the following TED.com video on how leaders inspire action.

http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.html?goback=.gde_129331_member_8477855

 

<please note: the video is long but interesting if you like this kind of stuff … and … what I am going to write about has little to do with what is said in the video>

 

That said.

Why did I think about consumers not driving everything after watching this?

Well.

It reminded me that great leaders don’t respond … they … well … lead.

Maybe not always proactively but they lead from the inside out … not from the outside in.

Yeah, yeah, yeah.

A bunch of people pay some lip service to the thought I just typed but it all goes awry as soon as their lips close because they then immediately start focusing on “what does the consumer want” or “how can I make my consumer happy?”

Now.

I understand you cannot go whole hog in one direction <solely “it’s about me” with wanton disregard for the people who actually purchase whatever it is you want them to purchase> but I believe too many business people have this equation <balance> way out of whack.

A business certainly  needs to understand its position in customers’ minds but a fundamental feature of a successful company is having a certain stamina for consistency. This is an ability to have a core strength combined with an inherent flexibility to adapt without being knocked off course by some short term consumer “gosh … I think this is what I want’ trend.

 

Good leaders appreciate the value of this business stamina and focus.

And at the core of this stamina idea is a focus on an embedded trust & integrity within the essence of the organization and ultimately its people <who actually embody the corporate brand>.

A trust & integrity tied to its purpose <which I imagine is a combination of individual morality as well as organizational  morality>.

The process in doing this?

I have heard people suggest that this is ‘turning the telescope inside’ where you look inside the company <users, employees, culture, etc.>  and explore the ‘brand essentials – where it comes from, how long it has been around, what the company is all about, its culture, values, personality, what makes it different, and so on.

And all that is good stuff.

But inevitably stamina circles around the overall intent of the process: desirable to consumers, distinctive from competition, deliverable by company, durable over time.

Well.

Maybe.

That’s important stuff but its … well … stuff.

Most processes will invariably pound away on those business distinctions … but honestly … inevitably it comes down to consistent, predictable essence <purpose, moral compass, vision … whatever you want to call it>.

And ,to me, inside out leadership is more important than ever because I believe the business world is finally reaching the critical point in a shift that began in 1990 <or so>.

Huh. Why now?

Easy answer.

Generations.

Change always needs to evolve and people need to wrap their heads around change … and big changes only truly evolve as people implement it in youth <so it is embedded>.

And, frankly, in the midst of change leaders kind of make it up as they go <as they have for maybe 20 years or so> but now we have a clearer picture of what a business will be facing moving forward.

 

Two books clearly outlined the initial stage of the generational shift <Drucker’s New Realities in 1991 and Toffler’s Powershift in 1990>.

I would like to remind everyone what Alvin Toffler wrote in 1990 in discussing this business shift:

 

“Anyone who believes that we’re just going to leap into some sort of glorious new age is very unrealistic … far-reaching turmoil can be expected, as individuals and institutions either adapt to, or resist, change.”

 

Yup.

More than twenty years ago Alvin Toffler wrote a book called Powershift: Knowledge, Wealth, and Violence at the Edge of the 21st Century which was a look at how social, political, and economic power structures were changing on the cusp of the computer age.

It foresaw many of the issues businesses <and the world> are facing today … and how the business world tried to cope <with far reaching turmoil>..

He noted when he wrote the book that at rare moments in history the advance of knowledge has smashed through old barriers. The most important of these breakthroughs has been the invention of new tools for thinking and communication, like the ideogram … the alphabet … the zero … and at that time … the computer.

 

He clearly outlined the impact on businesses created by the computer <and internet>.  The fact that the entire business structure kind of entered a chaotic stage as old barriers fell and leaders <who were steeped in an entirely different culture & world> struggled to adapt to the change <with no playbook to follow>.

He pointed out that everything reorganized <production, labor, distribution of knowledge as well as how it is all communicated> and at the same time as everything fell apart leaders tried to piece it all back together again … leaders who were learning on the fly and, frankly, making it up as they went.

 

And while Toffler & Drucker walked everyone through the shift … how did the existing business world and leaders deal with the shift?

In some one else’s words … business leaders “attacked everything in life with a mix of extraordinary genius and naive incompetence, and it was often difficult to tell which was which.”

<note: that is an awesome quote>

Business book after business book has been written on these leaders … sometimes skewering and sometimes praising … but they were simply adapting with an extraordinary mix of genius and naïve incompetence.

 

Ok. Moving on to today.

This means we are now entering a period of time <almost 25 years after the shift> when a generation is entering into the workplace which is steeped in ‘knowledge as wealth.’ We have reached a point that Drucker & Toffler ignored … the time when new leaders are not adapting to the shift but rather leaders are implementing engrained attitudes & behavior.

 

As I said upfront.

Consumer is not really the king/queen. The knowledge wealth <the company> is the king, queen or ruler … and they provide value to their citizens … without being subservient to the citizens.

So.

Why did leaders suggest consumer is king/queen?

Well <I will rationalize for them because they may actually have had a good reason>.

As knowledge wealth was dispersed to all levels within an organization <someone called it the democratization of knowledge> businesses became more fragmented.

These vast changes, within a short time, created stress and distortion beyond the adaptive capabilities of most people and pushed our physiological and psychological resources to the limits.

Interestingly Toffler identified maladaptive psychological conditions seen in the attempt to adjust.

This adjustment entails forms of denial, specialization, obsessive reversion, and super-simplification.

Oh my.

That sure sounds a lot like what we say about many of today’s leaders <and some of the leaders we grew up working under>.

 

The easiest way to say this is to say that knowledge could slink into any office space and anyone smart enough to use it could become smarter than the person they reported to. It is easy to see that this organization fragmentation driven by real/actual knowledge could easily become chaos … unless leaders put a shiny object in front of everyone that was easy to grasp and easy to accept – the consumer.

Frankly it was a cheap leadership trick from leaders. And at its worst actually could divert a company from its true purpose. At its best … it made businesses money.

Now.

I say this with the benefit of hindsight. It is quite possible that I, trying anything imaginable to rally & focus an organization around, would have done exactly the same.

But it is not the way to go.

And good leaders today have the opportunity today to get it right.

It is not easy and it is certainly challenging.

The big challenge?

I believe that today’s successful business is the ultimate contradiction – personal freedom for openness to imagination and creativity <with a tolerance for individuality> tied to careful channeling and close control of directed purpose and actions/behavior.

This contradiction makes it impossible for leaders to lead in a traditional way <the way they learned to lead from those who were adapting to the shift> and there needs to be a new leader, and leadership style focus, to manage in this evolved business environment.

 

It becomes dynamically more challenging because beyond the consumer is the king/queen trick … leaders were also faced with organizations shifting from a culture of individualism management <management by ‘one’>. This post-industrial revolution stage rewarded people who could break problems and processes down into smaller and smaller parts. This disintegration or analytic approach had led management to think of production as a series of disconnected <or mutually exclusive> parts to be honed to ultimate efficiency. At that time the entire process was seen as either sequential or isolated.

This is what current managers/leaders grew up on and tried adapting to the changing business world.

This is what they feel most comfortable with especially when problem solving or delving into a situation.

However.

The new knowledge system driven by technology <and the spread of knowledge across multiple constituents instead of solely knowledge leaders> began to understand <and treat> production or the process as increasingly simultaneous and synthesized. The parts of the process are not the whole and cannot be easily isolated. Everything feeds into the other arcing back and forth in a never ending cycle.

That threw the business world in a tizzy and leaders scrambled to adjust.

 

In addition <to add an additional layer> we began interrelating data in more ways, giving them context, and thus forming them into informed information as well as assembling chunks of information into larger and larger models and architectures of knowledge.

That ‘non mutually exclusive’ skill set began creating a need for a different type of leader/manager <one who did not exist at that time>.

Want more challenge?

Now the practical business issues I just outlined gained additional complexity because as information, and access to knowledge, became available to the lowest common denominators <any work space> at the same time we began to realize that not all this new knowledge is factual or even explicit.

In other words … not all knowledge was good <or available>.

Much knowledge is unspoken, consisting of assumptions piled atop assumptions, of fragmentary models, of unnoticed analogies, and it includes not simply logical and seemingly unemotional information data, but values, the products of passion and emotion, not to mention imagination and intuition.

 

This new knowledge based business model created new opportunities … and new challenges to leaders.

Toffler’s implicit assumption was that new technologies usually work in favor of the common man. He argued, for example, that computers are helping “thoroughly smash” the knowledge monopoly of Western managers and specialists, leading to a democratization of power.

Well.

I agree and disagree.

I agree it creates a perception of democratization of power.

I disagree it smashes the knowledge monopoly of managers.

 

I believe it simply began the need for the creation of a new type of manager/leader.

And it certainly began the need to look at businesses, and capitalism, as a whole differently <which is probably a separate post in that it is a philosophical crisis we seem to be facing today that is an outcome of this shift beginning 25 years ago>.

 

And I even agree this whole line of thinking totally changes on how we should be looking at businesses and inevitably ‘capitalism’ as it is defined in our minds.

As Toffler suggests: “if the shift toward knowledge-capital is real, then Capital itself is increasingly “unreal” – it consists largely of symbols that represent nothing more than other symbols inside the memories and thoughtware of people and computers.

Capital has therefore gone from its tangible form, to a paper form that symbolized tangible assets, to paper symbolizing symbols in the skulls of a continually changing work force.  Finally, the electronic blips symbolizing the paper. Capital is fast becoming “super-symbolic.” Salt, tobacco, coral, cotton cloth, copper, and cowries’ shells are useful things that served as money. However, paper money dominated the industrial society … today, as a more advanced economy emerges, paper money faces near-total obsolescence. Not a single coin or piece of paper money is exchanged. The “money” here consists of nothing more than a string of zeros and ones transmitted by wire, microwave, or satellite.

In brief, the rise of electronic money in the world economy threatens to shake up many long-entrenched power relationships. At the vortex of this power struggle is knowledge embedded in technology. It is a battle that will redefine money itself.

“Mind-work” is range of “mixed” jobs – tasks requiring the worker to perform physical labor, but also handle information. Since the inception of the Industrial Revolution, big smokestack companies have held a great control on the economy.

But In the super-symbolic economy, “wealth creation is increasingly dependent on the exchange of data, information and knowledge. “With these changes, there are now growing conflicts between the “highbrow” or knowledge-base and the “lowbrow” or muscle-base businesses.

 

All that said.

Leadership will be defined by the inside aspect of businesses. Not just in producing things but rather knowledge capital and how it is managed. Not just innovations and ideas … but getting an organization to collectively think in a common direction.

Leadership will be defined by their ability to not respond to the consumer but rather respond, and adapt, to the organization <boy … there is a paradigm shift … isn’t it?>.

And the organizational power, in general, will depend on taking advantage of the cracks in the process. The cracks speed creates. The events that were not pre-programmed or foreseen.

I imagine leadership power partially depends on chance <finding the opportunities to lead within the moment> and managing human behavior in a desired fashion.

This doesn’t mean everything is accidental. Not everything is random. In fact power is found within predictability as well as randomness. Power implies combining chance, necessity, continuity, chaos and order.

 

Interestingly Toffler suggested, in 1990 I would like to remind everyone, the following <which impacts my thinking on inside out>:

-              THE CORPORATION OF THE FUTURE – the bigger the world economy, the more powerful will be the smaller players. This is because they are more flexible, faster and more economical – not burdened by layers of bureaucracy. Computers and telecommunications, now affordable to small companies, allow them to compete globally, and deregulation and globalization of financial markets gives them access to capital. Computer-driven technology also makes it possible to produce small runs of customized “higher value-added” products aimed at niche markets. Products produced “just in time” save money on inventory, and they can be quickly improved to compete with rapidly changing technology and tastes. Big companies will break up into confederations of small, entrepreneurial units. Small interacting firms will form themselves into temporary mosaics to be more adaptive and productive.

 

-              KNOWLEDGE IS THE RESOURCE OF THE FUTURE – land, natural resources, factories and workers are no longer the measure of a country’s wealth because multinational businesses can easily obtain these things anywhere in the world. It is the APPLICATION OF KNOWLEDGE that now offers the competitive advantage in the world economy. The KNOWLEDGE WORKER is the true asset because of the knowledge and abilities he or she possesses. In the twenty-first century at least 35 percent of the workforce will be knowledge workers. They must have formal education, possess specific knowledge and skills, have the ability to acquire and apply theoretical and analytical knowledge, and continue to learn throughout their lives. They will work in teams because no one person can know enough to do it all. Because they are the true assets and are highly mobile, companies will work hard to keep them.

 

I bring this into the discussion not only because he was so accurate in his 1990 thoughts but because to me this means the new inside out leaders of today will have more of an opportunity to create the necessary attitudinal shift in business world than in recent years. Smaller organizations are easier to create attitudinal and behavioral direction than larger organizations. Lots of smaller pieces and parts coalescing in a common direction can affect a larger cultural shift.

a host of different smaller business formats will shift traditional power away from manager-bureaucrats in the years ahead and create a new power for leaders <that they not only need to recognize but embrace in order to be successful>.

I believe organizational morality <or value beyond profit> will become the leadership cornerstone within an organization.

And while morality and virtue are developed over time <via repeated decisions to choose what is right and to fore go what is wrong> which typically means there is no quick fix to any organizational morality problems … lots of smaller pieces can be redirected in the here and now.

 

What about laws? <you may ask>

Sure.

Laws can help foster an environment in which virtue can be developed and exerted more readily. But if managers and leaders could be empowered and encouraged to take moral considerations into greater account, and unshackled from the constraint to operate their corporations with an unwavering focus on maximization of shareholder value the cultural shift can happen. And within a generation I believe. Think within a 2 decade span.

Forestalling the wrongdoing of the future can only be reached with a longer term perspective because the creativity and persistence of wrongdoers in the present <or at any time actually> is mind numbing.

Look.

Having spent a boatload of years in the corporate world I know that business leaders don’t want young people coming into their companies who are brilliant but dishonest. Nor do most want to build a flawed organization which will encourage moral ambiguity in decision making <albeit they lose sight of this with a focus on profits>.

And yet we are bombarded with stories of greedy corporate leaders and corrupt decision-making/actions all the time.

Indeed, every sector of our society seems confronted by a crisis of character … but the change can occur within the business world. A change created by the new inside out business leader.

 

All that said.

Today’s’ inside out leader faces a variety of challenges. I will speak to what I consider the two biggest:

-          Embracing fragmented knowledge while empowering it through  organizational ‘tribes’

-          Discerning between desire for speed and need for speed

 

-              inside out leader: Embracing fragmented knowledge while empowering it through ‘organizational tribes‘

 

There are two portions to this challenge … contradictory but compatible.

Individualism empowered by access to knowledge and organizational tribes embedded within organizations.

First.

Tribes.

I didn’t coin this term and in fact Toffler may have used it in 1990. I like the term. It exhibits a stronger cultural aspect than simply suggesting the younger generation of employees cluster into groups of likeminded people.

Because it is more of a behavioral truth if we just say that this generation’s attitude embraces the communal aspect … comfortable in ‘tribes.’ Not full large organizations but tribes <organizations are made up of a number of tribes>. Not unlike the Iroquois nation there are various tribes co-existing under a common charter. Each with separate cultural nuances and rituals but clearly aligned on a bigger purpose.

I began there because todays leader grew up under the ‘dog eat dog’, ‘big fish eat little fish’ and ‘kill or be killed’ every person for themselves organizational upward movement mentality.

Remember … I shared these Toffler words earlier in the post:

“Big companies will break up into confederations of small, entrepreneurial units. Small interacting firms will form themselves into temporary mosaics to be more adaptive and productive.”

He didn’t recognize a cultural shift affecting the generation <more of a community/tribal character> but rather focused solely on the power shift <knowledge wealth>.

As the two connect <a cultural shift and a business power shift> the words he shared become even more powerful … and meaningful to a new inside out leader.

These smaller units are tribes within an organization.

Each with its own ‘power’ to be managed by a leader savvy enough to move pieces seamlessly and have the ability to empower disparate thoughts, and tribes, into an aligned organization.

The new inside out leader will need to recognize the balance between managing individuals and managing tribes <with tribal cultures>. Neither a one-size-fit –all mentality or a one-by-one management mentality will work and be successful. It will be about empowering tribe without having tribal war … and permitting the natural tribal leaders to arise from the culture.

 

Second.

Fragmented knowledge <individualized empowerment through knowledge>

A truth.

Knowledge is the most democratic source of power. The truly revolutionary aspect of knowledge wealth, and the internet, is that it can be grasped by weak & poor as well as strong & wealthy which makes it a continuing threat to the powerful, even as they try and use it to enhance their own power.

Toffler said this:

Bureaucracy is also a ways of groupings “facts”. A firm neatly cut into department according to function, market, region, or products is after all a collection of cubbyholes in which specialized information and personal experience are stored.  The vaunted “rationality” of bureaucracy goes out the window. Power, always a factor, now replaces reason as the basis for decision. The power structure based on control of information was clear, therefore: While specialists controlled the cubbyholes, managers controlled the channels.”

 

Reading this also explains why every leader is tempted <if not actually desirable of> to control the quantity, quality, and distribution of knowledge within his or her domain.

Therefore the internet has created a power shift by taking it from solely under those with legal or formal position and towards those with natural authority based on knowledge and certain psychological and political skills.

It became a leader’s headache as knowledge could slink into any office space and anyone smart enough to use it could become smarter than the person they reported to. It is easy to see that this organization fragmentation driven by real/actual knowledge could easily become chaos … unless leaders begin showcasing a different ability than maybe we have valued up until today.

This means today’s leaders need to be assimilators of fragments.

They need to encourage empowered individuals and tribes to accumulate knowledge and then redirecting or gathering disparate pieces of knowledge into new forms in which the organizations, and ultimately, the tribes benefit from.

The control of knowledge is the crux of an organization’s struggle for power and a leader’s biggest challenge in tomorrow’s businesses.

Compounding the issue is that the hyper speed in today’s world is making facts obsolete faster. Therefore knowledge built upon certain facts becomes less durable. This has 2 key impacts:

-              truth is fleeting <and decision making has small windows of opportunity>

-              business has become more abstract <as knowledge streams non stop into and within an organization>.

 

Which now leads me to discuss speed.

 

-              inside out leader: Discerning between desire for speed and need for speed

Inevitably speed kills <leadership power, decision-making, quality, sense of teamwork, etc.>.

Economics is now all accelerated <even if it isn’t really … we incessantly talk about it as if it is>. And all this accelerated pressure <speed> also shifts power by putting stress, and inevitably undermining, the fixed, bureaucratic chain of command.

Now <taking a step back>.

While everyone talks about a faster world today I would like to point out business has always had a love affair with speed. I would like to remind everyone that the second phase of the industrial revolution was focused on breaking apart production processes <and behavior associated> into the smallest portions with the intent to isolate and shrinking time to the most efficient pace possible.

I point that out because we have always desired speed. But we do not necessarily NEED speed. Speed is not only an addictive objective but an elusive one … the more you get the more you want.

That said.

I believe the new inside out leader will learn how to slow organizations down. They will need to be able to discern the difference between desire and need.

I don’t mean make them slow … but rather simply slow them down.

There are a variety of ways to do so but I would suggest the best, and easiest, is to embed the core purpose or vision of the organization within each employee.

Organizations will slow to think … and assess. And only leaders can empower organizations to do this.

 

Therefore this will be a new kind of leader stressing the central importance of character and virtue in a culture … focusing everyone on the basics … decency, doing the right thing, cooperation and that actions always have long-term consequences.

This changes decision-making from “if it makes money it is good” to “how does this fit within our purpose/direction?” … which inevitably leads to smarter decisions and sometimes even adapted decisions <on the ground> all meeting a common purpose.

It slows down the organization to think a little.

James Q. Wilson wrote in The Moral Sense “Order exists because a system of beliefs and sentiments held by members of a society sets limits to what those members can do.”

Those limits not only provide a moral compass but also steady an organization <invariably slowing it down smartly>.

Businesses, in order to function well, therefore depend upon the virtue of their participants. Any distrust engendered by moral ambiguity raises wasteful transaction and monitoring costs to levels that can paralyze a business and infringe upon effective leadership <plus different tribes will assume different rules within the ambiguity>.

Moreover, moral ambiguity leads to the phenomenon of “putting profits before people.”

Even Adam Smith understood the link between markets and morality. Contrary to his common portrayal, he did not believe that a successful economy could arise from the raw, unbridled pursuit of self-interest. He maintained that self-interest could fuel a successful economy only if it were narrowed by the constraints of traditional morality.

Now.

If you do not believe there is a business benefit to what I just suggested there are some results of a major research study <which I need to refind the source>.

It was a study of professionals in all vocations who did not succeed and why did they not succeed <or even fail>.

Was it because of a lack of knowledge?  No, their education provided that or they acquired it.

Was it because of a lack of skills?  No, their education and/or life experience provided the necessary skills.

Was it because of a failure of character?  The study stated an unequivocal yes.

 

In the end … it is pretty simple … inside out ‘slowing down an organization’ will come down to an ability to drive <and exhibit> consistency and predictability.

And an ability to avoid structural organizational corruption due to fragmentation <and a desire for speed>.

So.

I use the term structural corruption to refer to a specific kind of risk‐taking in which an entire enterprise,  industry, or market deviates from accepted norms of behavior in a dangerous way. Often the pressures of business performance override the kinds of good judgment that managers would otherwise apply.

Structural corruption doesn’t materialize out of nothing.

It begins with a private but clearly stated agreement within a small group to cut corners, to find ways of doing things that appear to be in its favor but fail to account for their broader implications. The behavior then spreads to the wider workforce that hasn’t been party to the original consensus, but which now views the practices that have resulted as standard operating procedure. Often years pass before it becomes clear that the breadth of the original agreement to engage in questionable conduct exposes the entire organization to compromise and reputation loss.

In order to battle organizational misbehavior and structural corruption the leader has to use consistency and predictability.

While they cannot regulate behavior they can certainly, and publicly, manage ethical violations. Because individual violations ignored … lead to a group <or followers inclined to act the same way> violations which leads to organizational fragmentation … and ultimately some type of dysfunction <structural corruption>.

There is a simple solution.

The new leaders will find magic in consistency.

Not regulation and rules.

They need to encourage events which make values substantive in employees’ minds.

And, inevitably, management responses need to be predictable.

Organizations will be operating on consensus not compliance to moral obligations and actions.

Organizations will be connected by the shared values … and the consistent delivery of decisions based on the shared values or shared purpose.

 

Anyway.

Inside out leadership.

In today’s world of pundits, pontificators and prognosticators we seem to believe everything is new and a crisis and unforeseen. We overlook some really smart things said in the past and do not take the time to reassess and reapply the thinking.

Drucker and Toffler were true futurists. They recognized and outlined the real shift happening. The only thing they missed was what most miss … the generational lag.

When a shift happens <like the computer or even the printing press> the existing culture deals with it. sometimes with naiveté and sometimes with ingenious.

During the shift an entire generation not only has to watch the fumbling & bumbling of those doing their best to cope <therefore viewing the test tubes of management in front of their very eyes> but they also are steeped in the shift from early behavior patterns. The shift shapes who they are versus the shift being adapted to be the generation having to accommodate it.

Outside in kind of worked because it not only generated money/revenue but in general a happier consumer who felt important <who doesn’t like that?>. But it also worked because this knowledge power created a newer faster ‘responder’ organization which permitted leaders to be … well … lazier. They could build careers based only on responding and not foresight & consistency … and makes gobs of money.

But.

“If it feels good do it” mentality is not an effective business management style <especially if encouraging individuality and individual freedom in business>.

“If its profitable do it” mentality is not an effective business management style because it doesn’t breed the organizational cohesiveness to balance against the individual freedom.

But the worst thing about those?

If both of those management thoughts are driven by the outside, the wants & desires & whims of the consumer, then the organization will never be centered.

Ambiguity, not just morally, will reign within an organization.

Oh.

Ambiguity in leadership, and an organization overall, is bad.

 

Inside out leadership leads to minimizing ambiguity and maximizing organizational focus, efficiency & … well … doing the right thing.

Inside out leadership is the key to the future successful business.