Your Company’s Networks Might Matter More than Its Strategy

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In a classic Harvard Business Review article, Abraham Zaleznick contrasted two very different styles of authority. Managers, he argued, take a rational approach and seek order and control. Leaders, on the other hand, are more emotionally driven and seek to drive change.

Every organization needs both. Managers provide the continuity needed to execute efficiently and leaders drive the kinetic energy needed to respond dynamically to the needs of the marketplace. The best CEOs, like Steve Jobs and A.G. Lafley, are both great managers and great leaders.

Today, however, the most important capabilities and resources often lie outside of an organization. So executives need to leverage platforms in order to access ecosystems. Therefore, the ability to manage operations and the capacity to inspire employees is no longer enough. Today, we must learn how to shape networks around a shared purpose.

Consider the case of Blockbuster, whose CEO John Antioco had proven himself as both a manager and a leader. Starting his career as a trainee at 7-11, he worked his way quickly through the ranks, gaining a reputation for operational excellence. Later, he pulled off impressive turnarounds at Circle K convenience stores and Taco Bell before taking the top job at Blockbuster.

He was also innovative. By convincing the movie studios to share rental revenues rather than paying them upfront, he effectively turned them into partners and transformed the economics of the industry. Once again, he had turned around a struggling company, transformed its business model and made its operations hum.

When Netflix emerged as a disruptive threat, Antioco met it head on. He eliminated the late fees that alienated customers and invested heavily in a digital platform that could compete head on. Before long, Blockbuster was gaining nearly half of all new subscribers in the online rental market.

He then launched Total Access, a service that allowed customers to use the Web and retail stores interchangeably. It was something Netflix couldn’t match and Blockbuster’s online membership doubled in six weeks. Now, Blockbuster had the superior model but, as Antioco explained in an article in Harvard Business Review, it was all for naught.

The problem wasn’t that the Blockbuster couldn’t compete, but rather that its internal networks rejected the changes. Franchisees, fearful of the risk to their livelihoods, and investors, disappointed by decreasing margins, balked. Antioco was fired, late fees were reinstated, investment in the digital platform was all but eliminated and the company went bankrupt in 2010, three years later.

Around the same time that John Antioco was battling it out with Netflix, General Stanley McChrystal was facing his own disruptive threat. Although, as Commander of the US Special Forces, he led the world’s most capable force, he was losing the war to AQI (Al Qaeda in Iraq), a ragtag bunch of extremists.

The problem wasn’t that AQI had capabilities that his organization lacked-or that they had a greater will to fight-but that the battlefield had changed. It was no longer enough to operate effectively, his forces now had to adapt-in real time-to an enemy that seemed to be able to change form at will.

As McChrystal describes in Team of Teams, the challenge wasn’t so much that he needed to develop new resources, but that he had to access surveillance and intelligence assets -many of which were not under his direct control-more effectively. All too often, valuable information would sit for days, or even weeks, before anyone even took a look at it.

Even worse, like his own teams, partner agencies had their own cultures, procedures, objectives and esprit de corps. In isolation, these factors led to operational excellence, but they also created barriers to collaboration. If he was to succeed, McChrystal knew that he not only needed to change how his own forces operated, but outside agencies as well.

To do that, he would need to integrate operations at a scale no one had thought possible. As the General himself put it, “It takes a network to defeat a network.”

The key to McChrystal’s eventual success lay in a series of studies done by Solomon Asch in the 1950’s. Faced with an overwhelmingly majority opinion, subjects would conform their own views even if it was clear that the prevailing view was wrong. Further, he found that this conformity effect broke down quickly when exposed to a diversity of opinions.

Effective execution is not wholly dependent on capabilities and procedures, but also a set of beliefs. Close-knit teams learn to see things in terms of their own challenges. So McChrystal’s teams, as well as those of his partners, were optimized to perform against their own objectives, yet often failed to take into account the broader mission.

In order to effectively integrate the disparate units into an effectively integrated “team of teams,” each had to go beyond its own share of the task “see the system.” McChrystal understood that no amount of planning or strategy could achieve that; it had to come through personal contact.

So he designed a series of initiatives to do just that. The physical command space was transformed to encourage interaction and collaboration. He began to embed highly trained commandos with intelligence analysts-and vice versa-for six-month stints. Liaison officer positions-previously neglected-were now only given to top performers.

As in the Asch studies, when exposed to new relationships, long held beliefs began to change and a new outlook began to emerge, this time based on the overall mission rather than internal rivalries.

While formal structure and traditional lines of authority stayed very much in place, operating principles changed markedly. The transformation wasn’t immediate, but soon personal relationships and shared purpose replaced rules, procedures and internal rivalries. Even those resistant to change found themselves outnumbered and began alter their views.

That allowed McChrystal to also change the way he led. While in traditional organizations information is passed up through the chain of command and decisions are made at the top, McChrystal saw that model could be flipped. Now, he helped information get to the right place and decisions could be made lower down. As a result, operating efficiency increased by a factor of seventeen.

Successful movements don’t just convert, they connect and that’s what drives lasting change. It is never enough to gather together a small group of true believers, because to achieve anything of any significance, larger networks must be brought to bear.

And that, in the final analysis, is the difference between John Antioco and Stanley McChrystal. Where Antioco had to overcome resistance to his plan for change, McChrystal networked his organization so that it could adapt to change. Because he forged a shared purpose among various constituencies, he didn’t need to drive transformation, merely facilitate it.

In the Blockbuster case, a successful CEO was faced with a disruptive threat and came up with a successful market strategy. However, because the networks within his organization (e.g. franchisees and investors as well as, to a lesser extent, internal operations people), the plan failed.

McChrystal, on the other hand, focused on creating a shared purpose among his internal networks and the strategy took care of itself. In effect the structure, rather than the plan, was the strategy.

McChrystal writes that “the role of the leader was no more that of controlling puppet master, but of an empathetic crafter of culture,” and there’s more than a little truth to that. But it was his ability to shape networks that allowed that culture to spread and, in doing so, enhanced his ability to both manage and lead.

HBR

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Posted on June 11, 2015, in Sri Lanka. Bookmark the permalink. Comments Off on Your Company’s Networks Might Matter More than Its Strategy.

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