THE CHALLENGE OF CHANGING COMMITMENTS

In the first part of this series we looked at how companies are identified by core commitments. We also looked at the necessity to generate transforming commitments, as a way to catapult the company forward as the world, or technology, or competition, or all of the above, changes.

In this segment, we'll look at why all companies don't transform themselves by transforming their commitments, as well as how to assess if your own organisation may be facing that challenge.

As Donald Sull, who originated the language of transforming commitments, warned, the primary reason company commitments start to congeal is because of 5 key degradations.

BEWARE OF BLINDERS

The first such degradation is when strategic frames deteriorate into blinders. In other words, we refuse to see the world beyond those inhibiting frames. The banking industry provides ample examples here.

When the National Westminster bank came into being (itself a merger between two venerable banking institutions in the UK), it believed it had to outperform

Barclays, it had to move beyond retail, it couldn't succeed by focusing on the UK (whose economy it considered irreversibly stagnant), and it had to enlarge itself (the bigger the better).

These were the strategic bets NatWest placed and it expanded operations all over Europe and the US. For a while, things worked wonderfully. Their assets came to exceed Barclay's. However when banking deregulation hit the UK in the mid 80's, and competition in the US and Europe surged, NatWest continued on its pre-established trajectory.

Other rivals, like Lloyds, divested overseas and refocused back to domestic retail operations. NatWest continued to acquire and apply its outdated strategy. Barclays surged ahead once more, huge US losses hit NatWest, and they were eventually acquired by Royal Bank of Scotland.

Being imprisoned behind such blinders is often referred to as 'fighting the last war,' rather than the current one. It was a charge leveled at the French Maginot Line which failed so conspicuously in WWII, as it was in response to fixed offensives in WWI rather than mobile artillery of the sort the Germans had in place by the latter period. It is a charge leveled today when we sometimes apply the mentality of the Cold War to fighting terror cells or the bureaucracy of big government departments to homeland security when corporate identity tracking technology and methodology would have so much to teach and to contribute.

AVOID RESOURCES BECOMING HANDICAPS

Tangible and intangible resources that continue to mandate what we will see and how we will act become handicaps rather than aptitudes.

US airlines operated on a hub-and-spoke system, requiring people to come through their hubs to catch connections to their final destinations. This amplified the value of the real estate (airports) that they controlled. Again, with deregulation, when upstart airlines started offering direct flights at far lower costs, it rocked the business model of these original carriers.

We spoke about IBM's recent transformation in the last article. The transformation was necessitated by IBM having earlier succumbed to this very trap. With the huge investment in mainframes, IBM found it very difficult to emotionally commit to PC's. It went into PC's, but plowed virtually all its profits back into mainframes. Moreover, despite early PC dominance, IBM continued to think of PC's just as 'bait' for what they called 'big iron' (mainframes). IBM morphed into a product supplier, away from their original heritage of being a service business that resolved customer's technological challenges and aggravations. After painful losses and brand erosion, thanks to the alchemical leadership of many inspired IBMérs under Lou Gerstner, IBM recommitted to its real roots, and saw that it was, is, and needs to be, more than a set of fixed resources.

DON'T LET PROCESSES DEGENERATE INTO ROUTINES

At their best, processes are liberating. They take confusion and mismanagement and subject them to the twin tests of effectiveness and efficiency. These Total Quality pillars have guided and streamlined business after business to greater quality, simplicity and profitability.

However when processes become unthinking second nature, when they become an end rather than a 'means', then they devolve into repetitive, even mindless routines.They begin then to verge on bureaucracy.

Following another computer example, Compaq computer rose to meteoric success, overtook IBM as a PC leader, had an unrivaled reputation for quality, and alas enshrined processes that focused on getting things 100% right all the time. That lead to a very slow, risk-averse, overly consensualised management culture. They called it 'quality at any price' -- implication also at at any speed.

As PC's became increasingly commoditised, supply chain and cost innovations allowed entrants like Dell to take over leadership. This led to wrenching senior leadership changes at Compaq, a shift to low-price machines, and eventually a take-over by HP.

The fact that I can have a 12 year credit history with American Express in Asia that American Express USA refuses to acknowledge to allow me to transfer my account to them (given that I've now moved back to New York) shows how archaic and obsolete processes in allegedly 'global' companies can be. This has cost them their percentage of at least $250,000 to $500,000 per annum, as I use the card for my business as well as personal expenses. Over how many other befuddled account holders might this also be happening? How many other customer-belligerant and self-destructive processes might there be, a hangover from less interconnected times?

AVOID RELATIONSHIPS BECOMING LIMITATIONS

Some relationships are indeed the thing legends are made of. Microsoft and Intel, Walmart and P&G, etc.

On the other hand, sticking to the wrong advertising company because of 'old ties' as one of my clients did to the tune of multi-millions for year after year of faltering performance is just daft.

One of my happier clients of old, Engro in Pakistan, realised their relationship with their then-parent company Exxon, had passed its 'sell-by' date. They engineered a remarkable employee buy-out and went on to outperform the parent consistently as well as setting an enviable standard for corporate ethics and integrity.

Giants like Royal Dutch Shell created relationships based on highly autonomous country operating units. This was a reaction to a Nazi-sympathising past leader, Henri Deterding, and his highly dominating and centralised leadership style. The resultant taste for quasi-independent operations allowed Shell to respond quickly to seize local and even regional opportunities. However, when oil prices slumped in the 90's, this structure made it difficult to contain costs or rationalise operations.

For Shell, what set of relationships and inter-relationships would be right today, given the needs for public accountability, credibility (an area where Shell has recently taken some arguably earned flak), as well as both an increase in oil prices and an overall increase in volatility?

Such decisions cannot be taken on the basis of 'default settings' relative to relationships. They must be continually challenged, evolved and re-imagined.

VALUES MUSTN'T BECOME WINDOW DRESSING FOR DOGMAS

What our company places value on, what it's priorities and commitments are, must find new modes of expression as the context changes.

While Laura Ashley was once the style of a generation, as women became CEO's,corporate executives on the move, the style suddenly seemed quaint. People said it reminded them of '18th century milkmaids' not modern women. And offshore manufacturing suddenly threatened the very viability of the company.

The paternalism that works well while an iconic founder still leads a business can become stifling chloroform as that leader moves on, leaving in his wake, a Board almost inevitably made up of the acolytes, submissive analysts and good corporate citizens of yesteryear. Then an entire power structure has to be challenged.

A lot of Middle Eastern corporations are trying to localize. Overall, this is wise. The Middle East is an anomaly, as most of its economies are powered not by locals, but by expatriates. As that imposes a huge cost structure, and as many of these societies are riddled with unemployment, there is a huge push to 'localize.'

However, when companies localize in East Asia, they find a cadre of well-educated, highly motivated people, eager to move towards a middle class life. Those are the ones they hire. Often in the Middle East, I've seen locals inducted to fulfill a quota, who basically are doing their job as a 'hobby', who insist on taking time off whenever their families jet off to Europe or wherever. While localisation is a value, it becomes a mindless dogma, when we fill slots with people who we either cannot hold accountable, or for whom this is just another diversion. Valuing the best talent in the Middle East who are willing and able to fully deliver on the same playing field as others, would be absolutely worth it. What often happens, just isn't.

WHAT ABOUT YOUR COMPANY?

There are certain early warning signs that let you know if your company is approaching, or even in, a quagmire of outdated commitments.

The biggest indicator, as the ancient Greeks taught us so compellingly, is hubris, or pride. As a more modern commentator and exemplar, Bill Gates, so wonderfully intoned: 'If you think you can't be beaten, you already are.' It's then, truly, just a matter of time.

So, if your company constantly trumpets its specialness, its superior performance, its inherent gifts, and you have to extol its virtues in every sentence, watch out! When you're at your most successful, that's when the commitment-trap is most dangerous. Truly if it can happen to IBM, it can happen to anybody.

Remember, of the Forbes 100 from the 1930's, there is only one name left that consistently matched or outperformed the market over that period: GE. In 1987, there was one other name, Kodak. We all know why it's not there now.

If your CEO continually appears in the business press, while still CEO, not to share plans, but to explain his/her self-evident success, beware! A tracking of CEO's making front covers of glossy magazines seems to correlate eerily with either their sacking, the company's decline, or sometimes worse. The Enron leaders were regular poster-boys.

Even if your CEO isn't that celebrated, if he swans around, to parade and trumpet your success and his role in it, rather than to share lessons, ask questions, and talk about his team, it likely means that contrary views or bad news will never make it to his altitude...until of course, it's too late.

Unless you truly are Microsoft, or GE, have paid your dues and done your part to significantly impact the world, building monuments to your success, huge campuses, and whatnot, probably also display more narcissism than transforming insight.

Another big indicator to me is how much time we spend outside our own offices and enclaves. Are we interacting with our people in honest give-and-take sessions? Are we out there with customers, suppliers, market leaders? And are we listening as much as we're talking?

Just yesterday I went to a client office. The receptionist was seething that he didn't have our names on his list. When I explained who I was ultimately to see, he groaned: 'Yeah, but if they had told their assistant, I'd have your name wouldn't I? It's same all over this company, we just don't communicate.'

Of course I had been called in to address that very problem! Yet here was a receptionist, who had accurately diagnosed one of the central mailaises of this $60 billion dollar transnational powerhouse. Would anyone consult him, or try to make his life easier? Unlikely. Yet shifting attitudes and attention to do so, would be indicative of a larger and more fertile willingness that this company, like many others, could really use.

Another eye-opening indicator is when all your managers and leaders look, sound, act, think, feel alike. The greater the homogeneity in both background, as well as operating paradigms, the greater the danger of blinders, shackles, dogmas and more.

The best overall indicators of stagnant commitments are recurring problems in a few key areas: flattened growth and market share, increasing burnout and disengagement from the team, and a free fall of overall confidence.

In the final piece in this series we'll look at how to revitalise, or if necessary remake our commitments so they can help us generate fresh enthusiasm, hope and possibility.

For now, it's important to list for yourself, your team, and your company, potential dogmas, limiting relationships, ossified processes, limiting resource commitments and overall blinders. What 'can't' be said in your business and what most NEEDS to be said, internalised and acted upon?

By generating that understanding, you prepare the ground for a real breakthrough. With that you and I can redraw the map of our own potential. We can then imagine and begin to act into a powerfully vitalising future.

Let's get ready!

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