Friday, February 25, 2011

Lessons from an MBA course

I have always felt that individualistic societies have a leaning toward a cult of leadership. I happen to believe that good followers make good leaders and that opinion is born out by many studies. Throughout my study of psychology, it has appeared to me that while leaders can do good, they can also do great evil and so must be somewhat scrutinized and not blindly followed. I believe in the Jeffersonian quote that admonishes us to chain mankind's impulses with the chains of the constitution. Charisma is a very interesting ingredient to the social mix and self promotion and self interest are traps into which leaders can fall hurting many.

What this course has done for me is to balance my perspective. I realize now that psychology often focuses on disfunction rather than the functional. It is a bias that I am pleased to have noted. In this course I admit to being truly surprised by the influence that a leader with the company’s best interests at heart can exert. Men like Kelleher of Southwest, Lafley of Proctor and Gamble, Schultz of Starbucks and Beal of Harley Davidson impressed me. Kelleher and Beal most especially impressed me because they were able to do great business feats without the collateral damage to employees’ lives. They seemed more fully human than many of the others and I would like to have the opportunity to emulate them. All of these people have a keen sense of the business and understand it at a deeper level than some others would. They are visionary and that is exceptional.

There are common threads among the successful leaders and companies.

1. They are able to build a strong corporate culture.

2. They are truth-tellers.

3. They are able to find and cater to under-served markets.

4. They notice what is “invisible" - that is, they spot potential winners or trends before their rivals or customers do.

5. They use price to build competitive advantage.

6. They excel at managing and building their organization's brand (which in some cases may simultaneously be building their own name).

7. They are fast learners.

8. They are skilled at managing risk.

9. They are consummate marketers.

I learned that adversity can be overcome with intelligent business practices, skills with people and with hard work. ‘Never say die’ is not just a slogan but a real business skill that I saw in many business cases. The men who simply gave up like those in leadership at Maytag, Chrysler and others offended me somehow. Did they not really understand the number lives that they were affecting? What happened to the ‘buck stops here’? If they were in for the good times, they should have hung in for the bad. They owed their people that much.

I learned a lot about how companies really gain stable growth. Rapid expansion and acquisitions do not have the same stability as organic growth that comes from focussing on doing what we do well and on innovation. Judicious growth and bricks and mortar acquisition make more sense. People who run businesses as though every cent belonged to a loved one or friend build differently than those who gain large amounts of debt. I think they do it better. I have also learned that acquisitions and mergers are fraught with danger and that any company who plans to undertake one must be very clear as to their reasons and the risks involved. The most important ingredient to be considered is cultural whether international or simply the business culture. The people factors will make or break the manoeuvre so a comprehensive plan must be in place for dealing with the integration of the two work forces.

A few years ago I was deeply impressed by an article in the Harvard Business Review by Michael Porter. He suggested that companies who do what they do best can change the world for the better more successfully than NGOs or governments can. I believe that to be true but it takes a specific kind of company that has a head and a heart. In this course I was introduced to companies that are truly like that. Levi’s is one. It has had its scandals but I see a pattern of behaviour from early days, which continues until today. Social responsibility is not just a catch phrase but a way of doing business. The people of the world have been very lenient with the destructive practices of many companies but their patience has worn thin. When consumers have a choice between two equal offerings they will vote with their dollars for the company which has a better environmental profile. They will know too, because of the internet and social networking will put the information at their finger tips.

I have been surprised to learn how forgiving or forgetful consumers have been. A company can be redeemed by public apology and an expressed intension of reforming. Most people are too busy to hold a grudge and when presented with the company’s offering the next time they will buy your product if they have a good reason. I have been shocked that companies like Pfizer, Merck, Ford, and MetLife moved beyond their shocking behaviours so smoothly. It reminds me again to ‘never, ever say die’.

I also have a deeper respect for the art and business of advertising.

Every cent spent for good advertising is an investment for now and for the future. Differentiating a commodity can create value that people perceive and are willing to pay for. There are so many forms of advertising, so many ways to make an intimate connection with people to help them understand what you offer. The internet is now providing a whole new source and immediacy of contact. I was worried that the kids who grew up under the influence of television would be deeply influenced by it- and they are- but not mindlessly so. This new tech savvy generation is smart and equipped for independent thought. In spite of a declining educational system, they have learned from their environment and are reaching new heights. They will be expecting a lot from the advertisers and companies that have demanded their attention and their resources. Media is powerful but so are they.

Finally, I am more convinced than ever that every company needs to be firing on all cylinders. The Board of Directors must actually direct and be vigilant to oversee what is going on. The leadership must have a vision and must be able to communicate it. The entire focus must be customer centric but the best companies really do value their employees. There must be ethical oversight by a distinct body within the corporation. Globalization is only acceptable if it means operating on a Global scale for the good of all stakeholders no matter how poor or marginalized. Marketing must be top notch and creative. Throwing dollars at problems does not work. I did not know that logistics was part of marketing but it makes sense and I now see just how very vital it is to the company, to the distribution system and to the customer. It is far more complicated and requires far more organization than I ever considered. Employees must feel hope, empowerment and commitment to the company and from the company. Businesses are, after all, human social organizations created to fulfill a need.

Mistakes will happen. They are part of being human with our distractibility, frailties, our misconceptions and our growth processes. Many mistakes in business can be eliminated with good processes and systems. Good companies need to understand where people make errors and design the work and the products around human abilities and tendencies. This will be done as good design is being incorporated in business at every level.

Success can be enduring. I have often chaffed at the idea of product life cycles when businesses have not done all that they could to ensure that a product lives on. Look at Levi’s for an example. Work pants! What was its original market and potential market? Savvy people saw them as more than just a commodity and they have lasted for over a hundred years as a FASHION statement. On paper that should be next to impossible but MARKETING made the difference. I did say that it could be enduring but it probably won’t be a straight line and it won’t be easy. It will take good business practices!

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