Unmet needs versus the voice of the customer

We know the mantra calling for organisations to listen and respond to the voice of the customer. Fair value delivery is a given, challenging established organisations to be flexible and adaptive to respond to changing customer needs and expectations. Value transformation goes further. It begs the question of the underlying values, and the unspoken needs and desires of organisation stakeholders. To deliver value transformation and accelerated growth, organisations must engage in an in-depth discovery process of the life of the customer. What are the unmet needs? Where are the gaps in product and service delivery? To build value and trust, it is in perceiving and responding to those needs that are not necessarily yet articulated or expressed.

Values assessment

In Gary Hamel’s 2012 book on ‘What Matters Now’, he underlines the concept of stewardship. Value transformation is about resilience and sustainability over time. For that, organisations need leaders with a long-term horizon and an aligned accompanying set of values. In particular, says Hamel, these must include:

1. Fealty: the propensity to view the talents and treasure at one’s command as a trust rather than as the means for personal gain.
2. Charity: a willingness to put the interests of others ahead of one’s own.
3. Prudence: a commitment to safeguard the future even as one takes advantage of the present.
4. Accountability: a sense of responsibility for the systemic consequences of one’s actions.
5. Equity: a desire to ensure that rewards are distributed in a way that corresponds to contribution rather than power.

How much more deceit, hubris, myopia, greed and denial must we witness in the behaviour of organisation leaders before stakeholders rebel? Wall Street sit-ins may just be the beginning of a transformation in what is truly valued and tolerated.

Translating value transformation into a values agenda

We would do well to reflect on the following values failures identified by Hamel in ‘What Matters Now’ in leading organisations towards sustainable transformation and growth in the global village, with a commitment to oppose and counter:

1. An even bigger share of the world’s wealth going to an ever smaller global elite.
2. Companies spending millions to tilt the regulatory playing field in their favour.
3. Huge pay differentials between top management and first-level employees.
4. Governance structures that are designed to deflect shareholder concerns.
5. Companies treating employees as mere factors of production.
6. Executives reaping outsized reward for mediocre performance.
7. Companies awarding the majority of their share options to a handful of senior executives.
8. Companies that resist call for greater transparency and consumer protection.
9. Companies that compromise their values to do business with repressive regimes.
10. Company PR campaigns that fudge the facts and demonise critics.
11. Executives who feel that society’s interests are somehow distinct from their own.

Passion, creativity and initiative are the keys to value transformation

In his books, The Future of Management, and again in What Matters Now, Hamel challenges us to change organisation culture. In the global village, there is an abundance of available labour with sufficient expertise, diligence and obedience. Yet these capabilities will not deliver value transformation. Organisation leaders need to instil a culture and a set of values that encourage and reward passion, creativity and initiative, and position serving the customer as their central focus, if they are to survive and thrive, and add the most value over time.
Goldman Sachs would do well to reflect on the values question posed by Greg Smith, if it plans to continue to be one of globe’s great investment banks.

About the author
Dr Grant Sieff is a part-time senior lecturer in strategy and international business at Wits Business School and is a member of Duke University’s Corporate Education Global Learning Resource Network. He is also CEO of the IC Growth Group, a research, strategy and leadership development consultancy that assists organisations with their development and growth. Grant has worked as a vice-president for Citibank in Australia and a partner for Accenture. He consults to leaders at the top levels of organisations in South Africa and abroad. He can be contacted at grant@icgrowth.co.za or on +2721 462 7902.

For most organisations, the prevailing operating environment is far from stable.  Organisation leaders world-wide are contending with increasing volatility.  An accelerating pace of change exposes organisations to new opportunities and threats that continually challenge the status quo.  Technology-driven social media are the new driving-force of social interactions, consumer groupings, communication, education and awareness.  There is more fragility in the prevailing economic, social and natural environments.  Change is consequently experienced more as a shock threatening business as usual and less as an evolutionary trend to be adapted to over time.

It is imperative that the role of corporate governance also change.  How should those in a governance role more effectively support and guide the CEO and executive team to manage change and build organisational resilience?

There are four elements to addressing the challenge of change and resilience in the governance role:

1. Firstly, become familiar with the varied nature of organisational change.
2. Secondly, understand the relationship of change to business cycle management.
3. Thirdly, consider the different strategic postures that can be used to implement a change initiative.
4. Fourthly, engage in a change audit to identify weaknesses in the mix of change initiatives, and recommend actions that will optimise the change mix to build organisational resilience.

Firstly, become familiar with the varied nature of organisational change.

Change, in all its guises, is inevitable.  The consequences of change are unpredictable.  Without active change management, there is a greater likelihood of change compromising organisation effectiveness and resilience.  Reactive change is usually a weaker response to market conditions than pre-emptive or creative change.

Possible reasons for change occurring include:

1.  Adaptive change.   A fine tuning process  takes place in the normal  course of organisational development.
2.  Reactive change.   Management modifies strategy and / or culture in response to the changing strategies of other players in the operating environment.
3.  Pre-emptive change.   Management changes strategy and / or culture anticipation of emerging trends.
4.  Creative change.   Innovative initiatives are introduced to shape and influence the operating environment management .

 The terminology of organisation change is extensive.  Other areas of change emphasis for consideration include whether it is:

• planned or emergent
• episodic or continuous
• incremental or radical
• core or peripheral
• remedial or developmental

Secondly, understand the relationship of change to business cycle management.

The organisational life-cycle, or S-curve, which plots the typical stages of life for any system, product, service, organisation or even industry, can be used to categorise and identify change initiatives.  The life-cycle curve plots the change in potential over time.  It typically addresses four phases, namely, development, growth, maturity and decline.   The four possible reasons for change, described above, can be understood in terms of where they most likely occur on the life-cycle, as is illustrated in Figure 1, below.

More resilient organisations are generally better able to anticipate and respond to change, and are more likely to have a greater percentage of change initiatives occurring earlier in life-cycle terms.  Their modus-operandi is more orientated towards creative or pre-emptive change, rather than adaptive or reactive change.

In highly competitive market circumstances, the most resilient organisations are able to get inside of their competitors’ renewal cycles.  They are able to initiate necessary change in anticipation of market demand earlier than their competitors, and are thus more likely to be seen as market leaders, with all the benefits that accrue to organisations who achieve this status.

Thirdly, consider the different strategic postures that can be used to implement a change initiative.

For a change initiative to be successful, the organisation must have the underlying competence to execute that change.  There is more than one approach, or strategic posture, for implementing change.  Choosing which strategic posture to adapt depends both on organisational capability (competencies) and on which area of competence offers the organisation its best source of competitive advantage.

Three possible sources of competitive advantage are:

1. Foresight, innovation and creativity.  The organisation is able to lead the market with new ideas, products and services.  This competitive advantage allows the organisation to lead change and shape the way the industry evolves.
2. Agility, responsiveness and speed of execution.  The organisation is able to implement a change initiative more efficiently and speedily than the other players.  Even if it is following the leader, this competitive advantage allows the organisation to adapt faster and capture market potential.
3. Resources, structure and market dominance.  The organisation is able to hedge its bets and avoid making a premature commitment.  With abundant resources, it reserves the right to play by investing sufficiently to stay in the game, and then chooses its timing of market entry for any necessary change.

In linking types of change with strategic postures, the following associations become apparent:

• creative change is associated with a shaping strategic posture
• pre-emptive change is associated with an adapting strategic posture
• adaptive change is associated with reserve the right to play strategic posture

 Strategic postures can also be understood in life-cycle terms.

 Fourthly, engage in a change audit to identify weaknesses in the mix of change initiatives, and recommend actions that will optimise the change mix to build organisational resilience.

The demands of a fast-changing operating environment oblige most organisations to have many change initiatives planned or in play at any point in time.  A key governance and strategic leadership responsibility is therefore to critically assess this mix of change initiatives to ensure that:

• The right types of change are taking place.  Ideally there should be less reactive change, and more creative and pre-emptive change.  Adaptive change may be useful, but only if it serves the organisation to maintain market dominance.
• The mix of strategic postures associated with these change initiatives is optimised to build organisational competency and resilience.  Relying too much on one source of competitive advantage may limit the organisation’s ability to respond effectively in all change situations.  Ideally, the organisation should cultivate multiple sources of competitive advantage.  This can be done by deliberately associating different strategic postures with different change initiatives, to develop a balanced portfolio of strategic postures associated with change.

 Conclusion

All those in a corporate governance or strategic leadership role need to embrace the responsibility of managing the multiple elements of change underway at any point in time within and around the organisation.  The effective governance of change may be the most influential factor in building organisational resilience.

The notion of a triple bottom-line has been in leadership vocabulary for a number of years already. Milton Friedman, the advocate of free market economics, whose bold quote in the New York Times Magazine on 13 September 1970, that “the social responsibility of business is to increase its profits”, appears to be obviously out of touch today. To claim, as he did, that “the business of business is business”, is to miss the central relationship between the environment within which business operates, the customers and stakeholders who are affected, and the financial bottom-line.

The triple bottom-line recognises that shareholders are best served, and business resilience is more assured, when the core strategy recognises and nurtures the social and environmental relationships that the business has with its operational activities.

Ecological leadership speaks to our greater selves. Robert Bly offers us a translation of the poem by Antonia Machado from the 1800’s, titled “The Wind, One Brilliant Day”:

The wind, one brilliant day, called to my soul with an odor of jasmine.
“In return for the odor of my jasmine, I’d like all the odor of your roses.”
“I have no roses; all the flowers in my garden are dead.”
“Well then, I’ll take the withered petals
and the yellow leaves and the waters of the fountain.”
The wind left. And I wept. And I said to myself:
“What have you done with the garden that was entrusted to you?”

It is those haunting last words that issue a call to all of us, especially those of us in leadership roles: What will we have done with the garden that was entrusted to us? Our stakeholders are paying more attention to how we answer this question than ever before.

Business leaders need to engage in a systematic and ongoing stakeholder analysis, to attune and respond to current and potential needs and concerns of stakeholders, both within the business and in the larger operating environment. There are a few key elements for consideration in this regard:

1. Define stakeholder groups with care, to avoid missing out on voices that need to be heard.
2. Stake holder assessment goes well beyond a focus on our customers, and includes suppliers, the community, government, society in general and anyone who may support or object to our products, services or activities.
3. Much can be learned from a careful competitor analysis.
4. Be careful not to undervalue the internal intelligence within the organisation, and incorporate the voice of internal stakeholders.
5. Review the key social and environmental concerns that appear to be connected in some way with the organisation. Can a concern be turned into a winning strategy? As a cosmetics business, The Body Shop turned a potential vulnerability around the general outrage of testing cosmetics on animals into the basis for a global business ethos and empire.

Strategy formulation has transformed utterly since the days of Milton Friedman. The pace of change is so much faster. The nature of innovation is more extreme. For a winning strategy to be sustainable, we must think in terms of radical innovation; incremental change is a given. Strategy formulation must be founded on a triple bottom-line, where the social and environmental benefits provide a clear rationale for stakeholders, overwhelmed with choice, to continue to support the company over time.

Gary Hamel, in his book, The Future of Management (2007), provides a set of essential principles for developing winning strategies that are resilient in today’s environment. They include the following:

1. Business resilience in the face of relentless change is about variety,or having lots of strategic options.
2. We need to pilot options in an innovation pipeline,both to manage risk and to test for radical innovation.
3. We need to avoid the disconnect that suggests that“radical”implies a high or unacceptable risk. A radical innovation may not be high risk, and may not equate to a long or uncertain payback, or a large amount of cash. The pilot process of the innovation pipeline is intended to identify these options. An idea or option may be radically innovative if it has the power to change: (a.) customer expectations (b.) industry economics (c.) the basis of competitive advantage
4. We need to continually look for opportunities to get inside our competitors’ renewal cycles, and get ahead in the race for innovation.
5. We need to recognise the temptation that prevails in management, based on principles that were formulated in the industrial age, to over- emphasise the value of optimisation, incrementalism and efficiency, at the expense of new ideas and change. The danger of focusing on efficiency alone is the danger of irrelevance.
6. It is critical for business leaders to create a culture that values courage, creativity, imagination and passion, to support a winning strategy that is innovative and aligned with stakeholders.

Building a winning strategy today is much less about long-term planning, and much more about a process of engaging our awareness of the volatility and change taking place within and around the organisation. We need to understand our stakeholders and their needs. And we need to reflect deeply on the impact of the organisation’s activities on the social and natural environments, with a view to making a positive contribution to society and the environment, and, ultimately, to ourselves as leaders.