We have an interesting case study playing out right now: Ford Motor Company has had three recent waves of leadership changes that give evidence to the demands of leading a large mature firm into what has become a classic set of trade offs between optimizing the current business model and creating the next. For those of you who lead teams that are creating fresh value in mature businesses, this drama is filled with insights and applications. Acknowledging that this is playing out before our eyes, we’ll condense the recent history and draw out some valuable lessons together.
Let’s start with Alan Mulally, who took over the reigns in 2006 (after a great run at Boeing) and led the firm through the great recession. In June 2015, he was hailed as the leader who brought Ford back from the brink. In fact, Quartz nicknamed him “The Comeback Kid.” He was widely heralded as the leader who installed leadership systems that relentlessly focused on authenticity, focus and teamwork, guided by razor sharp clarity around execution and serving the customer first. Perhaps most famously, he was able to lead Ford through the economic turmoil without an injection of government bailout money.
In 2014, Alan handed off to Mark Fields, one of his deeply experienced internal lieutenants who led North American operations. Mark enjoyed great results as recently as 2016, and chose to invest heavily in purchasing assets to take on Tesla and the autonomous vehicle market by making big bets on software, attractive campus environments and bringing back the $400,000 Ford GT. He built a smart “mobility” division to house the new assets and get ready for the coming business model changes. Undermining his visionary work, the core focus in operations was eroding with an increase in recalls and margins slipped behind the industry benchmarks. With the financial pressure mounting, the bills for the acquisitions put real pressure on earnings.
In May of 2017, the board replaced Mark with the leader of the Smart Mobility Division, Jim Hackett. Jim is the ex-CEO of Steel Case and has a reputation for bold moves with operational discipline. He is currently working hard to get an organically developed turnaround plan in place, but has already led the decision making to exit sedan product lines that were losing money for the manufacturer. Industry leaders expect a comprehensive plan to remove nearly $25B in expenses by September 2018.
All this turmoil underscores the incredible tension between the demand for real-time results from equity holders and long-term value creation investments. While acknowledging that there are differences in leaders, clearly, there is more here than simple issues of each brand of leadership.
Optimization versus Disciplined Discovery
While the above is a remarkably clear set of events, the dilemma takes place every day in nearly all firms – regardless of size or complexity. To be successful, modern leadership needs to have two sets of skills: that of efficiently optimizing the current enterprise for continued results as well as the disciplined discovery of new value propositions during times of business model transition.
Optimization requires the core muscles of planning, focus and variation control. Setting razor sharp short and medium-term objectives is the mark of great operations leaders. Great amounts of courage and creativity are needed by teams as they solve the day-to-day issues that continue to improve the performance of the core value engines(s) of the firm.
Each of the above executives had roots in highly-disciplined, high-volume manufacturing environments and made their way to the C-Suite based on results. Yet, the one who bet on the emergent autonomous vehicle space had a shorter run. This underscores the need for leaders to have a “both and” mindset – you need to make your numbers and invest in options for the future (more on this below).
Disciplined Discovery is an entirely different mindset, using different tools of leadership. The work of leading the firm into a new business model involves cycles of strategy and vision setting, measured investment in incubation of those concepts and then work to remove variation and preparation for scale. What you are building is the most efficient discovery engine you can, based on turning a hypothesis into fact.
The truth is that every emergent business model is based on a narrative of the future and that narrative is riddled with fiction.
It may be well-informed fiction, but without disciplined experimentation, that fiction can quickly become taken as fact. The siren song in large firms is when they launch into the discovery work at scale. When this is combined with the “big guns” of operations scale on the level of a Ford, massive amounts of cash can be consumed.
An efficient tool, like STRIDE, needs to be used to manage this work in a way that serves to remove the fiction and sets the firm up with new discovery and IP that will serve it into the next business model. By having a “business model discovery engine” mindset, an incumbent can find their way – with a very make-sense narrative to the investor.
Tools that Aid the Work
We use a suite of three processes to come alongside firms and help them with these hard tradeoffs. Step one is helping to establish the specific balance that senior management is guiding towards using the FCP process. FCP uniquely bridges the gap between the strategy session and subsequent decision making, creating committed focused outcomes that help the firm stay on point. By focusing the strategic demand on limited innovation resources, real progress is made.
Secondly, we make sure we are guiding the business model discovery work in the most efficient way possible using STRIDE. Regardless of the size of the balance sheet, in this day and age, we need to focus on making a series of small investments in well-designed experiments. To the above example, loading up the firm with new technology M&A has to be done very carefully to avoid a large downstream costs for integration.
Finally to assure that the Growth Leader Talent is available to support the work we find, we develop and coach using the competence-based tools in Complete Growth Leader (CGL). Complete Growth Leader is an assessment and coaching tool to help grow individual team members that can carry value within the firm.
If you’d like to talk more about how to efficiently construct your growth work, please call me at 847-651-1014 or use this link to set up a 20-minute, (no-strings-attached) consult.
