Talent Is Overrated (20 page)

Maybe you noticed something else about those teams: Each consists of a boss who became famous and a much less famous number 2 who devoted his career to the success of the enterprise. Such devotion is rare and points to another pathology that frequently sinks teams. . . .

 
Competing agendas.
You don't often find examples of the best and worst executive teams involving the same person, but consider the case of Michael Eisner. For the first ten years of his reign at Disney, he and COO Frank Wells formed one of the great teams, saving a storied company and making shareholders rich. They were a classic top pair, with a clear number 1 and number 2, neither one famous outside the industry when they took the jobs. This productive partnership ended suddenly and terribly when Wells died in a 1994 helicopter crash.

Eisner then formed one of the most famously disastrous teams in recent history, bringing in überagent Michael Ovitz as president. He lasted only fourteen months. In the extensive postmortems, the overriding theme is conflicting business and personal agendas. Ovitz wanted to buy a major stake in Yahoo!, expand Disney's book and record businesses, and buy an NFL franchise, among other big ideas that Eisner dismissed as off-strategy. Ovitz also seemingly had notions of his own future—he spent $2 million remodeling his office—that did not sit well with Eisner. Bottom line: team failure.

It's a common problem. Just as great individual performers possess highly developed mental models of their domains, the best teams are composed of members who share a mental model—of the domain, and of how the team will be effective. Eisner and Ovitz held strongly conflicting models of Disney's domain and of their own team. More broadly, as noted, when everyone wants to be a CEO and has good reason to think it's possible, the conflicts can become overwhelming. And while it's easy to condemn the political hardball and hotdogging that result, don't be too quick to do so. After all, suppose you're toiling away beneath the world's radar and your boss gets fired—what happens to your career? Some companies even like to spotlight rising stars because it's good for the business; as these managers advance, employees want to follow them.

The challenge is to keep the inevitable personal agendas from becoming destructive. That's part of the leader's job. For example, Ameritech in the nineties had an all-star team of top executives that included Richard Notebaert, future CEO of Ameritech, Tellabs, and Qwest; and Richard Brown, future CEO of Cable & Wireless and EDS. Michigan business school professor Noel Tichy, who was advising the company on leadership development at the time, recalls that CEO Bill Weiss told the team bluntly every week that if he caught anybody trying to undermine the others, the guilty party would be fired.

Jack Welch used a different approach to managing potential successor conflicts at GE. He recalled his own miserable experience as one of the CEO finalists twenty years earlier, when the company promoted him and the other main contenders to jobs at headquarters, which politics soon turned into a steaming swamp. Two decades later, Welch kept his own top candidates in operating jobs hundreds of miles apart.

Even when ego-driven stars aren't fighting for the same job, a team can still be torn apart by another curse.

 
Unresolved conflicts.
Colonel Stas Preczewski, coach of the army crew team at West Point a few years ago, faced a baffling problem. Through extensive testing he had determined the strengths and abilities of every rower on his team. He had measured each man's power on ergometers and had composed crews in every possible combination in order to calculate each member's contribution. He was able to rank his rowers objectively and precisely from best to worst. He then put the eight best in his varsity boat and the eight others, the weakest, in the junior varsity boat. The problem: The JV boat beat the varsity boat two-thirds of the time.

The situation is explained in a famous Harvard Business School case, which also notes that the varsity boat was full of resentment over who was contributing most, while the JV rowers, feeling they had nothing to lose, supported one another happily. But the case doesn't tell how Coach Preczewski solved his problem.

One day he lined up the varsity crew in four pairs. He told them they were to wrestle for ninety seconds. Only rule: no punching. “It was like the WWF,” he recalls. When he stopped them, he noticed that no one was winning. Each man was discovering that his opponent was just as strong and determined as he was. Preczewski then had them change opponents and wrestle again. By the third round they were choosing their own opponents—“One guy would point at another and say, ‘You!'” Preczewski says. On the fourth or fifth round, one of the rowers started laughing, and they all piled into a general brawl. Eventually someone said, “Coach, can we go row now?” From then on the varsity boat flew, and made it to the semifinals in the national tournament.

You probably can't order members of an executive team to wrestle, tempting though it may be. But there are other ways to discharge tensions that are crippling a group. These conflicts are the flip side of competing agendas; instead of being focused on the future, they typically linger from the past. Bringing them out into the open and then resolving them is one of the team leader's most important jobs. Doing it is an important element of dealing with a more general threat to team performance. . . .

 
Unwillingness to face the real issues.
The usual metaphor is the elephant in the room. Former Eli Lilly CEO Randall Tobias called it the moose on the table. George Kohlrieser, a professor at the International Institute for Management Development in Switzerland, has developed the metaphor particularly well: “Put the fish on the table,” he says. It's smelly, and cleaning it is messy work, but you get a good meal in the end.

Most people don't want to be the one who puts the fish on the table, especially on a team where it might not be culturally okay. “There's a veneer of politeness,” says David Nadler, “or unspoken reciprocity—we won't raise our differences in front of the boss.” Consultant Ram Charan describes a $12 billion division of ABB that was headed for bankruptcy. “One reason,” he says, “was its culture of polite restraint. People didn't express their honest feelings” about the most important issues. The unit's leader turned it around by insisting that team members say what was really on their minds—though the first time, he had to endure sixty seconds of tense, angry silence after calling on an executive to explain why he was so clearly upset.

Jack Welch was one of the great champions of putting the fish on the table—confronting reality, as he says. Often overlooked were his efforts to make doing so easier for the top team. GE's dream team was and is the Corporate Executive Council, which used to meet at headquarters in a formal atmosphere with rehearsed presentations and little real discussion. Welch moved the meetings off-site, forbade prepared presentations, jackets, and ties, and lengthened the coffee breaks to encourage informal discussion, among other changes. At GE they call this social architecture. Business scholars believe it was a critical element in the success of Welch's revolution.

 
Applying the principles of great performance in an organization is no easier than doing anything else in an organization. It's hard. But in an increasingly competitive global economy, enterprises that want to survive and thrive will face little choice. If we suppose that every organization will sooner or later be trying to apply these principles, then it's important to remember that starting early confers a significant advantage. The effects of deliberate practice activities are cumulative. The more of a head start your organization gets in developing people individually and as teams, the more difficult it will be for competitors ever to catch you.

Chapter Nine

Performing Great at Innovation

 
 
It isn't true that everything can be commoditized. It just seems like it is.

One of the miracles of our networked world is that buyers know so much more about what they're buying, which is a major problem for the surprisingly numerous sellers who used to depend on customer ignorance. Most people still don't buy cars online, but most car buyers do shop online before buying; you see them walking into a dealership with a dealer's invoice, which they found online and printed out. That changes the balance of power. Prescription drugs have cost less in Canada for eons, but it didn't matter to the pharmaceutical industry before the Internet; now it does. Families with kids in college had long been floored by the exorbitant cost of textbooks in the college bookstore, but what choice did they have? Now they know they can often order the very same books from the United Kingdom for much less.

In the digital age, any products that can be compared will be compared, and any directly comparable products will be commoditized. Most brutally, this phenomenon takes the form of the reverse auction. An automaker, for example, needs a million injection-molded plastic parts. It designates eight suppliers as worthy to compete for the business, and tells them the specs, where and when the products will be needed, and the terms on which the winning supplier will be paid. Then it tells them all to get online Tuesday at eight AM and gives them an hour to beat the living daylights out of one another on price. When the bell rings at the end of the hour, the low bidder gets the business.

It's tempting to think that only a few low-value products could be bought this way, but in fact purchasers are finding ways to use this procedure for buying—that is, for commoditizing—all kinds of things, including high-value services. Tyco International (postscandal) used a reverse auction to hire a law firm to handle its product liability cases. A Kansas City-based firm called Shook, Hardy & Bacon won the business with an eighteen-month fixed-fee bid.

If you're wondering why innovation is one of the hottest topics in business—why leading magazines are full of articles about it, conference organizers are putting on $2,700-a-ticket conferences on it, and top-tier management consulting firms are building practices around it—this is a big part of the answer. In a world of forces that push toward the commoditization of everything, creating something new and different is the only way to survive. A product unlike any other can't be commoditized. A service that reaches deep into the psyche of the buyer can never be purchased solely on price. Creating such products and services was always valuable; now it's essential.

Yet fighting commoditization won't do much good if you don't keep it up. You can never stop because product life expectancies are getting drastically shorter. In the good old days, Wrigley produced the same three flavors of gum (Spearmint, Doublemint, and Juicy Fruit) for fifty-nine years and succeeded so grandly that William Wrigley built one of Chicago's great office buildings and bought Catalina Island, among other things. By contrast, consider the twenty-first-century saga of Wrigley's Chicago neighbor, Motorola—heroic and innovative pioneer of the cell phone at first, then scorned failure when it didn't jump fast enough to digital phones, then reborn champion when it created the sleek RAZR, then goat once again when it couldn't produce a successor, and finally a casualty of competition with its decision to unload its cell phone business completely. Motorola achieved lots of great cell phone innovations—just not enough of them.

As products and services live shorter lives, so do the business models of the companies that sell them. Time was when you could turn the crank on a good business model for thirty or forty years, and sometimes much longer; the regulated-utility model of AT&T and electricity companies worked for close to a hundred years. But now we hear the startling sound of CEOs admitting publicly that their business models don't work anymore. Paul Allaire said it out loud when he was CEO of Xerox; Michael Armstrong said it at AT&T; Bill Ford said it at Ford. Now companies with the most vaunted and successful business models of all time are being forced to change them. Southwest Airlines built itself into America's most valuable airline with a low-fare model that gave no special perks to business travelers; then results began to sag, and now it's offering special deals to exactly those customers. Dell became the world's largest PC maker with a model that sold directly, and only directly, to end users; then Hewlett-Packard surged ahead, and now Dell sells through Best Buy and other retailers. Adrian Slywotzky, an author and consultant who has worked with America's biggest companies for thirty years, has said that many companies now have to create innovative new business models every three or four years—“eight to ten years is heaven today.”

Creativity and innovation may even be the key to the future economic prosperity of America and other developed countries, at least according to one line of thinking. The theory, though somewhat radical, resonates with various trends. It's radical because for three hundred years the source of economic dominance has clearly been leadership in science and technology; the countries or regions that were most advanced technologically have also been the most prosperous. But now a number of analysts, including Daniel H. Pink, author of
A Whole New Mind: Why Right-Brainers Will Rule the Future,
and Virginia Postrel, author of
The Substance of Style: How the Rise of Aesthetic Value Is Remaking Commerce, Culture, and Consciousness,
argue that this era may be ending. Technology will become commoditized by China and India, they say, being dispersed and adopted almost instantly after it's created. Economic value will arise instead from the powers of the right brain—creativity, imagination, empathy, aesthetics.

Exhibit A in their evidence is the Apple iPod. Apple didn't invent the MP3 music player; several models had been around for a few years before anyone had heard of the iPod, but they had never gone anywhere. Apple took an existing product and gave it an elegant design, created a simple, intuitive user interface, then added the business innovation of the iTunes Music Store, and somehow imbued the whole package with coolness. The result is 75 percent market share in music players and online music sales, a reordering of the music industry, and a multibillion-dollar boost to Apple's market value. The key wasn't technology. It was creativity, design, and a deep empathy with the customer.