Extract

Chapter 3 – Dreams and Details – A New Leadership Model

On May 25th, 1961, young and newly-elected president, John F. Kennedy, stood before the United Sates Congress and announced that, before the end of the decade, the United States would send a man to the moon and bring him safely back to earth. The following year, on September 12th, 1962, he reiterated it in front of a packed stadium at Rice University in Houston, Texas. “We choose to go to the moon! We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win,” said Kennedy to thunderous applause.

President Kennedy could have expressed it in many other ways. He could have said that the United States would become the world’s leading innovator of technology, surpassing the Soviet Union, and set a number of specific goals, such as the number of patents filed, to achieve it. Would that have seemed inspiring? Probably not.

Kennedy admitted in his speech that a large number of necessary conditions for a lunar landing were not yet present. It required metal alloys and techniques that had not been invented at the time. They gradually did though.

The Space Race was not just about saber rattling. It ushered in an era filled with technological advances and new insights, materials and inventions that today are used far beyond spacecraft: memory foam, insulin pumps, insulation materials, ear thermometers and microchips are just a few. Today, NASA owns thousands of patents, and a myriad of private and public companies have emerged based on the knowledge and technology that space research brought with it. And the United States became a leading technology-producing nation.

Seven years after Kennedy’s speech in Houston, Neil Armstrong walked on the face of the moon.

Dreams and Details – And the Platform for Change

President Kennedy did what we advocate for in this book: He translated a logical strategy into an inspiring dream. It was extremely ambitious, but not unattainable. It was inspiring, easy to convey and spoke of a future with lots of unknowns and infinite possibilities; a situation that most of today’s businesses will recognize. The direction was clear – the road was unpredictable, but Kennedy trusted those involved so much that he left them on their own to determine how to best land a man on the Moon and returning him safely to the Earth again.

In the process of reaching the moon and back, there were details – technologies and human performance – which were absolutely crucial. Due to the time pressure, it was also crucial that everyone worked in the same direction, and the framework made it possible to improvise along the way and seize opportunities that arose. The mindset was that security had to be high. The first moon travelers had to make it back in one piece.

Dreams and Details is our recommended leadership model to enable continuous reinvention based on maximizing human performance. The Dreams and Details leadership model advocates for the importance of inspiring people to drive reinvention based on an ambitious dream that points to the opportunities in the future. It involves focusing on the most crucial details and developing the most critical capabilities that enable the dream to come true.  And it includes setting the right mindset and framework to unleash human potential and accelerate the transformation of the organization.

Later in the book, we elaborate on each of these individual elements of the leadership model. This chapter is meant as an overall introduction.

In short, the Dream is what we want to achieve. It is derived from the overall purpose and long-term strategy of the organization. A dream sounds elusive, but we chose that word because it indicates the importance of going beyond logic to inspire people to be part of something meaningful and ambitious. For some, leadership has been about setting expectations so low that they can be overachieved. This is the wrong approach if you want to reinvent a company. As leaders we must dare to think big and have ambitious dreams about what the company could become. The dream is developed through outside-in a thorough process to define the role and ambition of the company in future markets. In includes an ambition of how we will succeed in future markets and it translates the ambition into something meaningful and inspiring. The dream defines a relevant direction for the company, but not the plan on how to get there. The dream has to be ambitious enough to inspire the necessary changes and must be so inspiring that it motivates and engages. Direction, ambition and inspiration: That is the dream.

The second part of the model is the Details. The Details define which areas we need to transform and perfect in order to achieve the dream. In other words, the Details define which areas need the biggest change.  It is important to emphasize that we are not suggesting to focus on all details, but the few crucial details that need the most radical change to develop the needed capabilities and performance of the organization to achieve the dream.

To connect the Dream and the Details, we need what we call the Platform for change. The Platform includes first of all a common mindset for the organization. The mindset is derived from the Dream and defines what people should have in mind, when they make decisions. As such the mindset enables people in the organization to make the right decisions in line with the strategic priorities. The Platform also includes a common framework for the organization. The framework defines the boundary conditions, structures and rules within which the organization works. The framework allows people to act according to the “rules of the game”. In other words, the Platform enables employees to unleash their potential by allowing decentral decision making based on a mindset defining common priorities for decisions and decentral action based on a Framework defining “how we play together”.

“Dream” is Direction, Ambition and Inspiration

 When we first mentioned our ambition to double the revenue of SAP to a colleague in the IT industry, he warned us: “The way to survive as a CEO is to deliver more than you promise, so you don’t want to promise too much.”The concept of under-promise and over-deliver may ensure a CEO’s survival for some time, but it will not enable a reinvention of the company. To reinvent companies, you need to be ambitious. You need an inspiring dream, and the dream needs to have a strategic direction, like Kennedy’s dream to put a man on the moon. Where are we going and where do we see opportunities for future growth? How do we ensure that we are relevant in the future?

In our definition of the dream, the dream contains three elements: direction, ambition and inspiration. Direction and ambition speaks to the brain; it sets the strategic priorities for the company. Inspiration speaks to the emotions; it motivates and engages, which is necessary to increase performance, so the dream can be realized.

It is neither ambitious nor inspiring to live by the under-promise and over-deliver rule. What’s more, it doesn’t set a course for reinvention of the company.

Kennedy said that the United States would send the first human to the moon. That is an inspiring dream with a clear direction. At the same time the dream was very ambitious: “before the end of the decade.” You can be skeptical about whether it can be done, but it is clear and comprehensive communication that everyone involved, from the cafeteria assistant to the top engineer, can relate to and be inspired by. It gives direction and meaning in their world when they are part of an overall dream and contributing to it. Meaning is engaging and motivating. Who wouldn’t want to be part of a mission to send a man through space to land on the moon and make it back safely again?

The Dream is not a Plan

An important point is that the dream is not to be confused with a business plan. The dream must indicate a direction which ensures that the company is also relevant in the future, but if you want to reinvent your company, we believe that you should refrain from trying to plan exactly how to get there. Planning the path to an ambitious dream will, with high likelihood, limit the outcome to the past experiences of the organization. In times of a season change the future is unknown. So the plan will most likely be wrong. Instead, the company needs to define which capabilities are required to be developed in order for the organization to find the best possible path to the dream.

When Kennedy said that the United States would send a man to the moon and back, there was no detailed plan for how it could be done. But the dream motivated employees to develop the needed capabilities to invent the necessary materials, applications and technology to make it happen.

The advantage of being open to new and better solutions and methods in a company is, among other things that it allows for unexpected ideas and gains along the way. Some of the biggest breakthroughs in the world were not planned but were invented because someone discovered a potential opportunity and dared to deviate from the plan.

As an example, penicillin was discovered when the doctor Alexander Fleming was looking for ways to treat bacterial infections in humans.  In 1928, returning from a summer holiday, he discovered a forgotten container with a bacterial culture where a fungus had invaded the container and killed a part of the bacteria culture. He found that the fungus attacking the bacteria contained the substance penicillin. The discovery was obviously based on an unwillingly deviation from his normal research and planned procedure. It was never planned that way – but it was a breakthrough innovation. In 1945, he was awarded with the Nobel Prize for his extraordinary discovery, which has saved so many lives.

The Dream has to be Relevant

We argue that a dream needs to be ambitious in order to be motivating. However, it is also important that the dream must be within reach. Like the dream to put a man on the moon, it must fill you with excitement and make you wonder if it is indeed possible. However, it should not seem so unattainable that it is unrealistic. You can formulate an ambition that the Danish men’s national team in volleyball will win the World Cup, but if it’s completely unrealistic, then it is just a demotivating fantasy. The dream has to be within reach for it to be meaningful.

At the same time, it should be relevant. It doesn’t make sense to formulate an ambition for which the company lacks abilities to achieve. An example is the computer company HP, which in 2010 stated that it wanted to becomea software company. While it is correct that growth and profitability in software normally is much higher than in hardware, it is very hard to become something you are not. If you don’t have the skills to go from hardware to software, it can easily be perceived as an irrelevant dream and won’t get the necessary support from the organization.

The Dream must be Ambitious

As mentioned, the dream must be so ambitious that it inspires and engages. If you expect excellence and radical change from your organization, make sure you reach for the stars. Companies that aspire to be number one or two in a given market often attract the best people.

If you are a small-town carpenter, your market should be defined differently than if you are IKEA, but the dream should still be ambitious. It may be that you want to be your region’s chosen carpenter for built-in shelves, or the most popular local repair man of Rococo chairs. It depends on the company’s skills, but you must define your market and challenge your position in it.  If you are the only carpenter in a small town, it is neither ambitious nor inspiring to aim to be the best carpenter in town.

The Dream should Enable Growth

What do you do if you are an oil company today? You could continue as though nothing has happened, but that may be shortsighted.

The oil business is still profitable, but it is likely that, at some point in the future, renewable energy sources will dominate the market for energy. So, the question is: When is the right moment to begin the reinvention of a company to stay relevant in a future where sustainable energy may be in abundance. This does not mean that you cannot make money in the oil business for many years to come, but your dream may need to include other elements already now. Maybe you want to become an energy company instead of an oil company and lead the transition of the energy market towards renewables.

While there are many ways to deal with this, we believe it is crucial to challenge your own assumptions about where future growth will be and how to make yourself relevant in the next season. Where is the growth and the profit in the future and how can you leverage your strengths in order to differentiate yourself? Where do you need the biggest change?

Grocery retailing is not exactly a niche market, and competition is tough. Nevertheless, the more than 100-year-old WegmansFood Markets in the USA has managed to gain access to an ever-increasing share of the market, with close to 100 giant supermarkets in the northeastern United States. Wegmans formulated a dream to make a positive difference for customers and their surroundings, and they have differentiated themselves with an ambition to combine an exceptionally high level of service with low prices. The differentiation for their stores is that their food is organic or grown locally. Wegmans demonstrated that it was possible by challenging the classic assumption that high quality cannot be combined with low prices. Wegmans Food Markets is also known for working to reduce food waste, promoting sustainability and contributing to local communities.

Wegmans Food Markets’ corporate values state that if the chain has a choice between profit and the health of its customers and community, then it would pick health. As a result, Wegmans has stopped all sales of tobacco.

Wegmans’ customers are over-the-moon excited to shop in the family-owned chain, which has been named one of the world’s most ethical companies. In a world of tough competitors, often accused of acting cynically, greedy and exploiting their employees, Wegmans stands out as an ethical, but affordable, alternative, which also treats their employees well. The ability to differentiate themselves has secured Wegmans Food Markets, a prominent place on one of the world’s most competitive markets.

The Dream must be Magnetic

Wegmans has remarkably high employee retention. Although Wegmans spends more on their employees than, for example, Walmart – hourly wages are significantly higher, and Wegmans offers employees a wide range of benefits such as health insurance and continuing education – the retailer benefits from employees’ drive to renew and improve individual supermarkets. And they don’t lose money or knowledge associated with replacing employees. Employees stay an average of seven years at Wegmans, as opposed to the industry average of 14 months.

That is a chief characteristic of creating the right dream: It becomes self-recruiting. If the dream is forward thinking, ambitious, relevant and inspiring, and if employees have freedom to innovate and find new and better solutions, then it undoubtedly will draw people who want to engage. As is the case with Wegmans Food Markets, it creates engaged employees, willing to work to make the company even better.

“The thing that bound us together at Apple was the ability to make things that were going to change the world,” said Steve Jobs in 1995 on his time at Apple.

Research has found that an employee’s engagement and sense of meaning has a clear influence on company performance. Engagement and meaning is also one of the most effective ways to increase growth and profitability. This is found in sports as well, as integrated, personal and meaningful motivation by far outweigh external motivation when it comes to performance in individual and team sports. We will return to this idea in chapter four.

Too many companies paint over the rust, so to speak, when they have a large group of employees who find it difficult to find the meaning of it all. The company creates more wellness initiatives, but that is not where the problem lies. When a large portion of employees are unengaged, then there’s something fundamentally wrong, and the company needs to evaluate if its direction is relevant and exciting for employees.

 “Details” are Roles, Skills and Collaboration

The ancient Greek poet, Archilochus wrote the words that the American elite Navy SEALs since have adopted: “Under preasure, we don’t rise to the level of our expectations; we fall to the level of our training.”

This is where the other part of our book title comes in: the details. The dream is a prerequisite for the future of the company, but it can’t stand alone. If management designates a strategic direction with corresponding ambition and inspiration, but then leans back and expects it will happen because they said so, it is unlikely that the dream will ever come true.

While working on formulating a dream with direction, ambition and inspiration, leaders should consider what details are crucial for the dream to be realized. The details of the current business are often known and based on best practices. However, in order to reinvent the company, the dream requires that the company is able to perform at a high level in new areas. The list of new capabilities should not contain 20-30 important elements. We are talking two to four indispensable factors. At SAP, we decided to focus on two crucial details, the speed of innovation and the value for customers. In the world of sports, the work with the details is called training. In fact, most of the time in sports is spent on training the crucial details, so the team is ready to win the game. In business, we need to spend more time training the crucial details as well.

The crucial details must be revisited, reviewed and rehearsed continuously to increase performance in future capabilities. Leaders have to look at what roles and skills are needed in the company and how they have to collaborate if the company is to perform at the needed level to achieve the dream.

If everyone knows what their role is, has the right skills and knows how to use them individually and together, they will achieve superior performance needed to achieve the dream.

The first explorers took the same path. They knew which direction they were traveling in – whether their goal was establishing a sea route to India or exploring sub-Saharan Africa. However, they didn’t know what they would encounter on the way. Often their maps were limited and sometimes outright wrong.  It would have been meaningless to come up with a detailed plan for navigating an almost unknown ocean, where storms, lack of wind, disease and other highly unpredictable events made it necessary to improvise continuously along the way.

The ships were the best possible technology available at the time. The crew was handpicked and trained in navigation, setting the sails, and so on; and their many competencies were tested continuously. The crew understood what was expected. They knew each other and knew how to create the best conditions for fulfilling the dream. In other words, the right roles, skills, and collaboration were present to find new land and handle the small and large challenges that arose along the way.

The solutions could not be predicted in advance. But they had a good idea of what obstacles a ship and crew could encounter and what they would need to reach their goal. The crucial details were identified and rehearsed. The captain and other officers knew when to intervene.

Similarly, management teams should dare to describe a dream, make sure that employees understand it and allow them to pursue the dream. Management must ensure that the necessary roles are brought together, that each employee has the necessary skills and are trained on how to collaborate in a certain way. And management must be ready to take the lead when the situation requires it.

We don’t recommend a laissez-faire leadership style, where employees are on their own and can do what they want. It is necessary for leaders to create excitement and clarity around the dream and make it clear which details are crucial. Also, management plays a critical role in ensuring that the necessary skills and capabilities are present and trained, and enable employees to master the details and find the right way towards the dream.

In the following chapters, we will explain how to develop the dream and how to select and work with the details. It is like being modern explorers:  the course is clear, we know which crew members should be on the team and which capabilities they need to have. What obstacles are lurking on the way to the destination are unknown, but the challenges can be overcome when we focus and train in the crucial details.

This focus and training in the details will unleash human potential and create high performance organizations able to reinvent themselves.

 “Platform” is Mindset and Framework

When Louis ‘Lou’ Gerstner joined IBM as CEO and chairman of the board in 1993, the world expected that he would split up the company and sell it off in pieces. The plan was already laid out by his predecessor, and there was a general consensus that the days of the technology giant as a group were over.

At that time, IBM was in the middle of a serious crisis. More than hundred thousand employees had been laid-off and the company was losing money. In fact, IBM had lost more money in 1992 than any other company in the history of the United States. The reason was an inflection point in computer architecture had shifted the market from centralized mainframe computers to smaller servers and personal computers connected via networks. This fundamental change challenged IBM’s core business. Even if IBM was in all the new markets, they struggled to move from the old season to the new. The general assumption was that the best path forward was to split the company up, so each of the individual parts could be optimized and focused.

Louis Gerstner, the first executive in IBM’s history to be recruited from the outside, without a background in computers, challenged the assumption. He believed in an integrated IBM and thought that the company could still be relevant. However, he knew it required a radical change in IBM’s self-image, which he called inward-looking and inbred. Focus had to move from the product and instead directed towards the customers’ needs.

Gerstner launched Operation Bear Hug. Customers were given a big hug, figuratively. Fifty IBM executives were sent out to meet with at least five customers every day, face to face. Their assignment was not to sell anything, but to listen. How did they perceive IBM? What were their issues? How could IBM help them?

It created prompt changes. Top executives’ meetings and subsequent reports made the company more focused on customers’ needs and how to fulfill them and made employees aware of new business opportunities. Their customers were frustrated over the many new computer technologies that didn’t work together. Companies had multiple products from different suppliers, but no one took responsibility for the integration.

IBM’s management realized the unique competitive edge of being a company with an expertise in connecting technologies and building solutions for customers. If Gerstner had listened to the general assumptions, most likely the conclusion would have been to split the company up in smaller parts, each with its own product category. This would allow each part to compete in the new season, but it would not deliver on the biggest need of the customers. Also it would not differentiate IBM.

Lou Gerstner implemented a new mindset to focus the organization on solving the problems of the customers. In parallel he implemented a new framework within the company. He reorganized the company – moving from independent product units to integrated industry solution units. The heavy and closed hardware business became an open and empathic service business, while preserving the core of its expertise. It was the start of a long period of double-digit profit margins and high growth, where the mindset and framework changed the company’s focus from product orientation to customer orientation. IBM’s dream to be a service company was enabled by a platform for change including a new mindset and a new framework.

The Mindset transforms the Dream into Decisions

The mindset in a company reflects what assumptions the company has and what drives decisions. With a vision to create a better everyday life for many people IKEA is based on a mindset that the price of a product must be as low as possible. The mindset is essential to how employees act every day, as the mindset guides day-to-day decisions and concrete action. What is important? What do I need to prioritize as an employee – price, customers, safety, quality, simplicity or complexity? The mindset decides what to prioritize when in doubt. It guides the individual employee. With the right mindset, an employee can make the right decisions by themselves, without involvement from a manager in most cases. A common mindset is crucial for both the quality and timeliness of decisions and actions.

Often the mindset is not formally recognized or even written down. It is a filter that employees use when making decisions. While older employees may not be conscious of it, new employees experience it very intensely as they try to figure out how to navigate within the company.

A mindset often represents a set of unwritten assumptions upon which an organization’s work is based. In sports, the mindset defines how we are going to play the game. But it’s not a plan – it’s a mutual understanding of how we will play within the framework, implementing and unleashing the details in a way so it is possible to reach the ambition and the dream.

In order to lead a reinvention, we believe it is necessary to change some of a company’s biggest assumptions that are not valid in the next season. To do this you need an awareness of the existing mindset of the company – the existing mindset may be an obstacle to change whereas a new mindset could be a catalyst for change. Good intentions based on the dream may collide with the old mindset, if the mindset is not aligned with the dream.

Our experience has shown that it requires strong symbolic actions to change the mindset in a company. An example is the Nordic bank, Danske Bank, which was drastically losing popularity in 2013. The bank was perceived as the elite’s bank. Adding to the negative image, they launched a marketing campaign that failed miserably. Their ‘new normal – new standards’ campaign used the grassroots movement Occupy Wall Street as a symbol that the banking industry needed to change. At the same time, Danske Bank fired employees, closed bank branches, and increased customer fees. The campaign associated with a movement protesting greed in the financial sector contrasted executive decisions and actions.

When Thomas Borgen end of 2013 became the new CEO of Danske Bank, his intention was to transform the bank into a bank for everyone in Denmark, not just the elite. At that time, they had two cafeterias in their Copenhagen headquarters: one for general employees and one specifically for executives. The executives also had chauffeurs. Thomas Borgen abolished both privileges for executives as one of his first decisions.

The change was symbolic, and it was consistent with the dream that Danske Bank was to be a bank for everyone. It showed consistency between what the management said and what they did. It became a signal that management was serious about the intent to challenge the assumption that the bank was only for the elite.

A Framework for Action

With the right mindset, employees are able to make the right decisions, to find the best path towards the dream. However, in order to enable employees to develop and generate high performance, the framework for how the organization works and what is allowed must be well defined. The framework is not just the organizational structure, although organizing the business naturally plays an important role. In the world of sports, the framework is the field we play on or the space in which we develop, train and compete.

If we take the definition from sports and translate it to a company, the framework is, among other things, the organizational structure, governance models, remuneration systems, contracts, working hours, product portfolio, deadlines, economics, etc. These are the elements upon which a company chooses to base their efforts.

Mindset and framework must support and reinforce each other. They are not two separate building blocks in the platform for change, but a bond.  The mindset is primarily derived from the dream and enable people to make the right decisions, while the framework relates more to putting the details in play in the right way.

If the mindset is part of the platform that helps us make the right decisions, then the framework is the structure that enables us to carry out the decisions in the best way. It may sound contradictory, but a clear framework can create greater freedom. If you know where the path is, the clarity creates a sense of security since everyone knows what is allowed, and employees can act without fear of taking a wrong step. The framework sets clear boundaries for how the company will take action.

The framework – or the playing field – must be precisely defined so everyone can see where the boundaries or the chalk lines are. The lines can be wide but should not be too wide. Leaders must be ready to involve themselves with those employees who never get chalk on their shirts. And those who do so too often.

The right framework gives the right amount of freedom to allow for creativity in finding the best path towards the dream. Employees have the opportunity to concentrate on practicing, using their skills and working together. Optimal development in a company occurs when everything is calibrated. With the right platform to support the dream and details, employees can bring their full potential into play.

 The right Platform Increases Speed

It pays off to define the right platform – to create the right mindset and the right framework. It will save a lot of effort to ensure that the company uses its resources where it makes most sense and in the most productive way.

It is possible to have the right dream and focus on the right details without being successful. If the platform is inconsistent with the dream and the details, the connection will be missing, and it may all seem meaningless. You can have an assignment that employees both can and want to solve, but the company’s framework counteracts it. At some point, employees will resign or find another place to fulfill their potential.

In business, we have all experienced how a framework can get in the way. At SAP, Jim had an experience that exemplified this perfectly:

At one point, an employee from the design department sent me an email that he had some ideas for a new product that he would like to discuss.  We set up a meeting and he brought a mockup of the product. We had a talk and he got some good ideas to improve the product.

Shortly after, another employee came by from the technical department, with an idea for a similar type product. I asked if he had spoken with the employee from the design department. The answer was: “No, he is from a different department.” The framework didn’t allow for interaction, and because of this, the value from having different skillsets working on the same product were lost.

I changed the playing field they played on: “You guys will work together. You have three weeks. You can use x amount of money – and it is okay if you reach a conclusion that it is not possible.” The rest was up to them. The new playing field was clear, and they were challenged beyond their own formal responsibility. However, they had clarity and greater freedom to play and better chances of winning.

The framework must support the dream and the work on the details. As a leader, you constantly have to ensure that the playing field is right, so it provides optimal conditions for improving the details and unleashes potential in your organization.

Goodbye Business Plan

Most leaders have all tried to develop business plans to ensure execution of strategy. We suggest that it is better to define the dream, practice the details and define the platform for change.

A business plan allows managers to instruct employees: “You are to do this and that, and here are the results you must achieve within a certain timeframe.” If we want to unleash and develop an organization, we should instead say: “This is the dream we all aspire to achieve, this is the playing field you will play on and the players on your team. These are the details you have to become world class at. Please develop your capabilities so you can perform at a much higher level within the details that matter the most”. We don’t tell what the employee has to do exactly but give them optimal conditions to find the best way themselves.

As a manager, you can give an employee an assignment: “Drive from A to B. The assignment may come with the perfect plan: take exit 42, drive 50 miles per hour all the way and get gas here.” It makes total sense, if the traffic conditions are completely predictable all the way. In that case the plan will most likely be the optimal plan. However, if the traffic conditions are not predictable, the plan may not be the optimal plan. Therefore, it would be better to say: “Drive from A to B as fast as you can without breaking the law. You decide how to do it best.” Here there is a clear direction and ambition but at the same time freedom to use one’s own abilities and judgement within a well-defined framework. This driver has more freedom to use his or her own competences and is more likely to reach B faster than driver number one – especially if traffic conditions are unpredictable.

In a world that is changing with ever-increasing speed and with many unknowns, there is a need to unleash human creativity to find the best solutions and the best path to fulfilling the dream.

As leaders, the more detailed plans we make, the more defensive we become, because we cannot foresee everything and can only plan based on the boundaries of current knowledge.

Instead, we need to unlock the full potential of everyone in our organization by improving their capabilities within the most critical details and inspire talented people to do their best in order to reach a common dream.