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MANAGERIAL COMPETENCIES
Contents
The Perspective
- Context
- The Chosen Response of Visionary Companies
Abiding Factors
Competencies
Managerial Competencies
- Positive Indicators
- Contra Indicators
Select Readings
The Perspective
The Context
Globalisation dominates the competitive horizon. The concept of globalisation is not new, but
there are three aspects that are unique and are radically different the pace of change is faster;
the reach is unprecedented and developments in one corner of the globe can affect other parts
almost instantaneously.
Because of the intensity of the challenge, Globalisation is being talked about as the greatest
economic event of our era. It is a term that triggers strong emotions. Depending on where one is
coming from, it is either dreaded or admired, perceived either as a great leap forward or several
steps in reverse.
Even though India has embarked on the reforms path to integrate the Indian economy with the
global economy, it hasnt yet experienced the full impact of globalisation. Just as water changes
to solid state when the temperature drops one degree at the 32o F mark; so will one more degree
of globalisation create a totally different reality to which corporations, as the agents of capital
and technology will have to respond and adapt.
In the light of the heightened pace of change and global competitiveness, there is a compelling
need to rapidly reposition Indian companies for extreme competitive preparedness and ensure
their successful transition from an era of regulation and protection to the fully globalised market
of the 21st century.
The competitive landscape is changing, and new models of competitiveness are needed to deal
with the challenges ahead. These responses reveal a new competitive reality demanding
organisation capabilities that will enable firms better serve their customers and to differentiate.
The truth is, theres nothing new about being in a new economy. Those who faced the invention
of electricity, the telephone, the automobile, the radio, or the transistor did they feel it was any
less of a new economy than we feel today ? And in each rendition of the new economy, the best
leaders have adhered to certain basic principles, with rigor and discipline.
The rapid pace of change in technology and competitive forces make it imperative for
organisations to re-examine the way their competencies are organised to enhance organisational
capability. Organisation capability is the DNA of competitiveness. Positioning and matching
people with the right jobs has become a critical process. Performance is also dependant on the
alignment of people capacities and competencies and capabilties to organisation strategies,
objectives and culture.
The Chosen Response of Visionary Companies
From the perspective of building a visionary company, the issue is not only how well the
company will do during the current generation. The crucial question is, how well will the
company perform in the next generation, and the generation after that, and the next generation
after that? Individual leaders have a major role to play in taking the organisation forward. But a
visionary company can tick along for centuries, pursuing its purpose and expressing its core
values long beyond the tenure of any individual leader.
COMFORT is not the objective of a visionary company. Indeed, visionary companies install
powerful mechanisms to create discomfort to obliterate complacency and thereby stimulate
change and improvement before the external world demands it.
Visionary companies ensure greater continuity in leadership talent grown from within.
And that is one of the key reasons why we see so few that become great.
We dont have great schools, principally because we have good schools. We dont have great
government, principally because we have good government. Few people attain great lives, in
large part because it is just so easy to settle for a good life. The vast majority of companies never
become great, precisely because the vast majority become quite good and that is their main
problem.
The executives who ignited the transformations from good to great did not first figure out where
to drive the bus and then get people to take it there. No, they first got the right people on the bus
(and the wrong people off the bus) and then figured out where to drive it. They said, in essence,
Look, I dont really know where we should take this bus. But I know this much: If we get the
right people on the bus, the right people in the right seats, and the wrong people off the bus, then
well figure out how to take it someplace great.
The old adage People are your most important asset turns out to be wrong. People are
not your most important asset. The right people are.
In determining the right people, the good-to-great companies placed greater weight on
character attributes than on specific educational background, practical skills, specialised
knowledge, or work experience. Not that specific knowledge or skills are unimportant, but they
viewed these traits as more teachable (or at least learnable), whereas they believed dimensions
like character, work ethic, basic intelligence, dedication to fulfilling commitments, and values are
more ingrained.
To go from good to great requires transcending the curse of competence. It requires the discipline
to say, Just because we are good at it just because were making money and generating growth
doesnt necessarily mean we can become the best at it. The good-to-great companies
understood that doing what you are good at will only make you good; focusing solely on what
you can potentially do better than any other organisation is the only path to moving from good to
great.
Everyone would like to be the best, but most organisations lack the discipline to figure out with
egoless clarity what they can be the best at and the will to do whatever it takes to turn that
potential into reality. They lack the discipline to rinse their cottage cheese.
Enduring great companies dont exist merely to deliver returns to shareholders. Indeed, in
a truly great company, profits and cash flow become like blood and water to a healthy body
: They are absolutely essential for life, but they are not the very point of life.
Enduring great companies preserve their core values and purpose while their business
strategies and operating practices endlessly adapt to a changing world. This is the magical
combination of preserve the core and stimulate progress.
We at ITC take justifiable pride in the fact that our company is a successful premier Indian
Enterprise, creating enduring value for the nation and for the shareholder. ITC which
commenced business operations in India in 1910 has grown into a multi business conglomerate:
FMCGs including Cigarettes; Branded Packaged Foods; Greeting Cards and Gifting Products;
Lifestyle Retailing; Hotels and Tourism; Packaging, Paper and Paperboards; Agri-Businesses and
Infotech.
A company is known by its people; and its success is determined by their competence and
commitment.
ITC has been built by successive generations of people with purpose and passion. Each
management generation is a link in a long chain. Nurturing and continuously upgrading the
quality of management is one of the keys to ITCs success.
ITCs strategic agenda is that each of its businesses becomes globally competitive; and create
new avenues for growth by blending proven skills and capabilities drawn from different parts of
the ITC Group.
Were proud of our successes, and we celebrate them. But the real excitement comes in figuring
out how we can do even better in the future. Its a never-ending process of seeing how far we can
go. The drive for progress is being never satisfied with the status quo, even when the status quo
is working well. We can always do better, we can always go further, we can always find new
possibilities.
How can we do better tomorrow than we did today? We must institutionalise this question as
a way of life a habit of mind and action.
Our commitment must be to perpetuate this vitality of ITC its growth in physical terms and also
its growth as a great institution so that this company, this institution, will last through
centuries and continue in its never ending pursuit of value creation.
Abiding Factors
Abiding Factors, are the bedrock of our organisation, which transcend functional and
managerial competencies. These are sacrosanct.
Competencies
Competencies are the building blocks, DNA of an organisation. They contribute to the distinctive
characteristics of each organisation and when nurtured provide sustained competitive advantage;
build highly competent managerial talent within the company, and thereby ensure continuity of
excellence through multiple generations.
COMPETENCIES are skills, knowledge and behaviour, which underlie effective managerial
performance.
Competence assessment is the route through which ones capabilities, managerial style as well as
results delivered can be discussed, and development needs specifically highlighted.
Competencies can be knowledge based and/or skill based and each type of competence has its
own set of learning contexts.
Both Functional and Managerial Competencies are equally important, in order to build a
high performance organisation.
Demonstration of both Functional Leadership and Managerial Leadership are essential for
Business Leadership positions.
Where Managerial Leadership may not be an area of ones strength, deep Functional Specialism
which contributes to ITCs competitive advantage will also be encouraged, nurtured and
rewarded.
Managerial Competencies
The Managerial Competencies have been developed from past learnings, future insights and our
strategic agenda.
For each competency we have developed purpose and meaning, to capture the overall spirit
of the competency.
Positive and contra indicators have also been developed for each competency at each work
level.
Positive indicators are examples of behaviour which produce the expected results when the
competence is employed effectively; contra-indicators state the symptoms of inadequate
competence in the defined areas.
In order to win in the market place in a highly competitive environment, and to build an
Enduring Institution, we need to continuously strive towards raising the quality index of
the human resource. And, towards this objective, certain amount of stretch has been
built in while describing the competency behaviours.
MANAGERIAL COMPETENCIES
ITC Managerial Competencies
Framework
The five managerial competencies which have been identified as relevant to ITC are
depicted in the diagram.
Strategic
Mindset
1
Customer
People
Focus
Leadership
4 2
3
5 Making
Leading Things Happen
Change
These competencies individually and through a strong interplay with each other seek to create a
common understanding of the drivers of enduring performance of ITC.
Purpose & Meaning
Strategic Mindset: Success is not a matter of how packed with intelligence an organisation
is, but how far ahead it looks and how well it forms perspectives of the future. That is what
makes an organisation (or even an individual) great and enduring. A strategic mindset
enables continuous building of the organizations capacity to reinvent and regenerate itself
to successfully exploit opportunities for sustained value creation Managing Mechanisms
for Renewal and Competing for the Future.
Having a global mindset, a holistic and long term perspective. The capacity to foresee trends,
patterns, discontinuities and the associated risks and opportunities in the environment that impact
our organisation. The ability to determine direction and develop strategies to succeed in the
current business as well as create new growth engines.
Customer Focus: In the future, the real core competence of organizations will be the ability
to creatively reinvent itself to meet customer demands and realise unexploited
opportunities. Being customer-centric and focused on creating a unique preference loyalty
among customers. Engaging the companys internal processes, business knowledge,
partnerships and relationships in crafting and implementing the customer value proposition
- Managing the Customer and Creating Future Customers.
Ability to understand the customer; leverage business knowledge and functional expertise to
deliver customer value; build and nurture business relationships and partnerships; use
organisational core competencies and processes to provide customised value offerings to existing
and future customers/end users.
Ability to instill a sense of urgency and deliver results as demonstrated through a positive will
do attitude; decisiveness; high energy, a bias for action and continuous improvement; high
performance standards and respect for systems. Ability to manage the value creation process
through empowerment, personal credibility and maximising the potential of each resource both
internal and external. Ability to proactively manage the business environment and marshal
support for companys policies and strategies.
People Leadership: Creating an exciting sense of purpose, instilling core values, building
human capital and orchestrating processes that energize people in identifying with the
companys mission and vision to enhance value creation. Managing Meaning and
Orchestrating Winning Performance.
Assessed through the individuals people sensitivity, relationship focus and team play
characteristics; the ability to infuse passion and the desire to excel and align individual goals with
organisational goals to contribute to sustained competitive advantage. The ability to build high -
performing individuals and teams. The ability to blend personal humility with professional will;
and the ability to take difficult people decisions to protect the long-term interests of the
organisation.
Managerial Competencies
Strategic Mindset
The Horizons
The Insights
The Perspective
Risk Management
Organisation Renewal
Customer Focus
Customer Relationship Management
Continuous Improvement
Innovation
Business Development
Leading Change
Commitment to Change
Transformational
Communication and Influencing Skills
Champion of Change
People Leadership
Interpersonal & Social Skills
People Development
Distributed Leadership
Orchestrating Winning Performance
RESPONSIBILITY LEVEL 7
Strategic Mindset
Responsibility Level 7
Positive Indicators
Contra Indicators
Responsibility Level 7
Positive Indicators
Contra Indicators
Responsibility Level 7
Positive Indicators
Efficient
Is enthusiastic about delivering results.
Displays high energy levels.
Is a self starter - does not need to be pushed.
Spreads an air of urgency in getting things done.
Dependable
Contra Indicators
Responsibility Level 7
Positive Indicators
Contra Indicators
Responsibility Level 7
Positive Indicators
Contra Indicators
Shirks responsibility.
Waits every time for others to show the way.
Loner does not interact with others.
Passes the buck.
Does not inspire confidence in direct reports.
RESPONSIBILITY LEVEL 6
Strategic Mindset
Responsibility Level 6
Positive Indicators
Foresightful
Conceptual and critical thinking.
Displays an ability to sense emerging changes.
Spots trends and patterns and identifies key issues from a mass of data/information.
Grasps information quickly; picks up nuances, subtleties.
Understands how his/her role impacts others in the function.
Displays a logical thought process in day to day operations.
Uses information from diverse sources to make effective ground level decisions.
Recognises implications of decisions and alternatives.
Contra Indicators
Responsibility Level 6
Positive Indicators
Contra Indicators
Positive Indicators
Contra Indicators
Positive Indicators
Contra Indicators
Positive Indicators
Contra Indicators
Withholds ideas and information. Does not seek others advice even if needed.
Does not enjoy credibility within the team.
Is confused about his own stand on issues.
Is unable to adapt approach to better appeal to ones audience.
Does not interact with people beyond his scope of work.
Reacts with criticism and is defensive if his ideas are questioned.
Is unable to communicate expectations.
RESPONSIBILITY LEVEL 5
Strategic Mindset
Responsibility Level 5
Positive Indicators
Has a holistic perspective; appreciates the role of each function and the interdependent
nature of the various functions while taking decisions.
Displays capability to foresee trends, analyse and anticipate outcomes of subsequent
developments in a situation, so as to pre-empt losses/exploit opportunities.
Displays ability to ask insightful questions, identify the core of a problem or an issue and
evaluate it from different perspectives.
Recognises differences and similarities between current and past situations and uses this
understanding as a framework for future actions.
Is able to appreciate the impact of day to day decisions and activities on medium and
long-term goals of the Unit.
Contra Indicators
Looks at problems and issues from a short term and narrow perspective.
Focuses on specific tasks/activities irrespective of whether they align to the department
or business direction
Fails to connect or draw trends from a set of issues, events or data.
Initiates actions without considering the implications and outcomes.
Customer Focus
Responsibility Level 5
Positive Indicators
Has a good grasp of the total value chain, the key processes, technologies and
infrastructure.
Understands the key value drivers for the business; financial dimensions of decisions,
working capital management and cost control.
Listens to customers and assigns the highest priority to customers satisfaction including
internal customers.
Attends to customer feedback with zest and spontaneity.
Gathers feedback on systems, practices and processes of competing organizations
towards enhancement of focus on the customer/end user.
Builds a strong network of partner relationships at the operational level.
Is technology savvy and comfortable with contemporary technical equipment/software
applications
Contra Indicators
Positive Indicators
Displays a positive will do approach and the desire to achieve. Spreads enthusiasm,
excitement and a winning attitude.
Displays a strong bias for action and to actively seize opportunities. Prepares action
plans and processes to achieve desired objectives.
Makes decisions based on sound business logic.
Takes calculated risks.
Copes effectively with constraints/adversities.
Sets high expectations of himself and others to continuously improve productivity,
quality and standards of excellence.
Proactively creates systems to manage resources.
Creates new benchmarks in his work area.
Provides innovative solutions to design or delivery problems.
Is a relentless and versatile learner.
Seeks out experiences that may change perspective or provide an opportunity to learn
new things.
Is well informed about the issues that impact the work unit / business.
Regularly involves relevant people in executing daily activities, workflow, material flow
and information flow.
Ensures required regulatory compliance with thought and speed and maintains good
working relationships with concerned agencies.
Maintains contact and formal work relationships with internal and external parties to
achieve business objectives.
Is well informed about the industrys and Companys contribution to economy,
employment and all stake holders.
Participates actively in Company sponsored social and community development
initiatives in his operating area.
Contra Indicators
Does not plan ahead; deals only with the here and now.
Is defensive when critiqued.
Sits on the fence.
Follows the rulebook and precedents without evaluating their relevance to the current
context.
Is more activity focused rather than results driven.
Changes plans under pressure.
Does not take initiative to draw out his own developmental plan or engage in self-
learning activities.
Is disorganized and unplanned in his work.
Is unresponsive to others developmental needs.
Does not participate in organization initiatives.
Is unable to appreciate the role that external relationships play in building the companys
image and achievement of the units objectives.
Leading Change
Responsibility Level 5
Positive Indicators
Understands the why of change, the origin and reasoning behind various policies and
processes.
Explores and identifies opportunities to navigate through times of change.
Can manage change well.
Understands the explicit (e.g. voiced comments) and implicit (e.g. body language) cues
and deduces their unspoken thoughts and feelings.
Conveys ideas and opinions clearly and confidently, by summarizing the essential points
of information.
Over a series of interactions with others, successfully reinforces others view of self as a
valuable contributor
Copes effectively with questions /challenges when presenting views.
Is able to re-orient priorities when warranted.
Experiments with unconventional approaches. Comes up with unique and creative ideas
and solutions in the course of his work.
Thinks outside existing boundaries to generate innovative and practical solutions to
problems.
Contra Indicators
Positive Indicators
Contra Indicators
Positive Indicators
Approaches problems and opportunities from a broad, business and strategic perspective.
Develops realistic, medium and long-range plans, with a built in anticipation of future
trends.
Has clarity on current goals and how his/her plans may be effected by external/internal
changes.
Anticipates and prepares for obstacles and unexpected developments.
Focuses beyond day to day activities. Identifies and addresses problems and
opportunities well in time.
Appraises the risks/opportunities associated with operating decisions and designs
appropriate systems for control.
Synthesises information from different sources to arrive at sound decisions.
Can connect experiences and generate new perspectives.
Contra Indicators
Fails to weave patterns from seemingly discrete and unrelated issues, concepts or
incidents.
Does not go beyond the obvious for root causes or issues.
Is unable to articulate for the medium or long term on where the department or function
or unit should be focused given the overall business direction of the Company.
Does not develop systems to address risks/opportunities in the operating environment.
Customer Focus
Responsibility Level 4
Positive Indicators
Contra Indicators
Contra Indicators
Positive Indicators
Communicates the bigger picture and shares his understanding of the need for change
with others.
Intuitive
Can manage paradoxical situations and cope with ambiguities.
Does not lose his/her equilibrium in situations/events lacking in systems and support.
Is willing to put in that extra bit to get the team to work in a boundary less environment.
Can detect and correct risks and set the course in a period of uncertainty or in an
unpredictable environment.
Understands the significance and challenge of new situations and develops processes for
facilitating a smooth transition.
Anticipates apprehensions and uncertainties in times of change and seeks resources to
deal with them.
Creates transient roles and responsibilities in a dynamic environment. Navigates and
holds the team together during the transition period.
Provides an environment that enables questioning /challenging the accepted way of
doing business.
Talks with conviction. His style enables others to see the key points quickly and clearly.
Listens effectively and integrates others ideas.
Equally effective in both verbal and written communication.
Provides space to try out new ideas, taking calculated risks without violating companys
core values and the professional code of conduct.
Identifies key influence targets and mobilises their support for change initiatives.
Contra Indicators
Positive Indicators
Contra Indicators
Positive Indicators
Foresees the impact of opportunities and challenges on current and future business
strategy with a global perspective.
Generates ideas to reshape the function/business over the long term and constantly
thinks of new ways to stay ahead.
Is able to formulate and communicate a compelling picture of future success for the
business.
Develops a framework and methodology to manage risk.
Aligns internal business processes to the companys vision.
Contra Indicators
Follows the beaten track. Is not able to align business initiatives with the companys
current operations and vision.
Is not sensitive to the opportunities and challenges that could have a significant impact
on the business.
Unaware of happenings, concepts and trends shaping the market/profession.
Customer Focus
Responsibility Level 3
Positive Indicators
Contra Indicators
Responsibility Level 3
Positive Indicators
Combines the ability to envision as well as strategise for world class execution
capability.
Supportive and integrative.
Proactively resolves issues arising out of emerging gaps between strategy and
implementation.
Creates processes to sustain organisational energy around vital issues.
Provides the framework within which clear roles and responsibilities may be established
to execute results.
Takes timely decisions by simplifying issues; not always waiting for 100% information.
Evaluates and converts risk to opportunities in ambiguous situations and develops
unique solutions.
Resourceful has the ability to act effectively and inventively, especially in difficult
situations. Has the courage of conviction to get these ideas implemented.
Demonstrates an unwavering resolve to do whatever must be done to produce best long-
term results, no matter how difficult.
Can link and cross-fertilise dispersed knowledge, skills, ideas, competencies and best
practices across Units.
Continues to strive for break-through improvements.
Encourages others to look at existing situations in new ways.
Manages continuous performance improvement by driving productivity, innovation and
growth.
Is restless in pursuit of major functional improvements and successes.
Sets standards to monitor the continuous improvement index.
Develops a framework and methodology for managing risk.
Has a thorough knowledge of the Companys position on key issues, which are critical
to the business; and can articulate and present the Companys position effectively when
required.
Establishes internal communication systems to disseminate information about the
organizations commitment to the importance of statutory compliance, corporate
governance etc.
Can sensitise managers at unit/divisional level on the need for healthy environmental
linkages.
Contra Indicators
Positive Indicators
Contra Indicators
Is unable to articulate the need for change or provide a direction towards a new way of
conducting business, setting systems.
Does not encourage independent and boundary less thinking. Insists on following the
rules.
Shies away from addressing people concerns and taking ownership.
Remains anchored in the past.
People Leadership
Responsibility Level 3
Positive Indicators
Contra Indicators
Responsibility Level 2
Positive Indicators
Contra Indicators
Spends too much time managing the present and not enough creating the future.
Does not capitalize on opportunities that have a significant impact on companys
products, services and markets.
Customer Focus
Responsibility Level 2
Positive Indicators
Is a repository of information on the industry and its dynamics and uses this information
to shape companys strategies and policies.
Extremely sensitive to environmental changes and responds to them in a timely fashion.
Looks for ideas and concepts, both within and outside ITC to enhance customer value
and satisfaction as well as generate surpluses for the company.
Leverages current business/group capabilities for identifying new products, services and
markets.
Ensures sustained leadership of the business by exploiting discontinuities.
Promotes ongoing market place experiments to ensure that we are ahead of competition.
Sets the standards for building and nurturing strong relationships with key business
partners.
Contra Indicators
Responsibility Level 2
Positive Indicators
Contra Indicators
Tends to be more focused on delivering operational results rather than empowering and
creating conditions for achieving strategic targets and goals.
Is all the time disproportionately obsessed with denominator management (cost cutting,
productivity gains, downsizing, seeing figures minutely) and has no time to pay attention
to growing the numerator (growing the revenue stream and building new competencies).
Tends to get reactive and makes hasty comments on public policy announcements.
Does not have an adequate understanding of the legislative environment relevant to the
industry/Company.
Leading Change
Responsibility Level 2
Positive Indicators
Has the commitment to hand over to future managers, the division/function, in a much
better state than he/she inherited it.
Understands and communicates the significance and challenge of the new situation and
the long-term impact of such change efforts.
Recognises and drives the rationale for blending in new ideas, while retaining good
aspects of the present.
Unlearns those habits that hinder future success; and sheds the past, which represents
excess baggage.
Develops behind the scene support and excitement for his/her ideas.
Encourages an environment for people to take initiative, value diversity and innovation.
Creates internal processes for celebrating/rewarding ideas.
Steers changes at appropriate times when such changes are necessary and warranted.
Institutes concrete organisational mechanisms to stimulate change and improvement, while
preserving the core.
Contra Indicators
Responsibility Level 2
Positive Indicators
Contra Indicators
Frequently engages in murmurs of discontent and dissonance about the organisation and
business.
Jeopardizes teamwork by getting too involved in micro dealings or by making
incomplete or misguiding statements.
Is unable to work with a wide variety of people.
Builds a coterie of favored people to the exclusion of others. Is not easily accessible to
people.
Excessively depends on command, control and compliance and neglects empowerment
and development.
SELECT READINGS
CREATING VALUE
In the new economy, the boundaries of commercial enterprises are beginning to disappear.
Companies are no longer self-contained organisations. The new business model is akin to an open
network based on the premise that Creating Value rests on establishing strong links with a wide
range of constituents, with all these constituents reinforcing each other.
Value creating organisations encourage people to work collectively towards shared goals to the
superordinate benefit of the organisation and value creation for the shareholder.
What is value?
The answer to developing a good strategy is not merely putting in place new planning processes
or better-designed plans. The answer lies in understanding two fundamental points: the benefit of
having a well-articulated, stable purpose, and the importance of discovering, understanding,
documenting, and exploiting insights on how to create more value than other enterprises do.
In strategy formulation, managers are encouraged to focus less on the action plan or perhaps
even the articulation of the strategy itself - and more on the insights. Planning processes may not
be strategic (and may not even be worth engaging in) unless they focus initially on defining the
insights from which the strategy will be developed.
Insights into value creation are in-depth understandings of the needs of stakeholders that allow
one to discover superior ways of creating value. These insights normally focus on practical issues
and point to new ways of doing things. They can be about relationships with suppliers, about new
ways to attract talent, the needs of a particular group of employees, about customer segments, or
about the value equations used by shareholders. Sometimes these insights are grand ideas that
seek to completely reconfigure the company or the industry. More commonly, they are insights
that a particular process can be performed differently or by a fewer people or that a segment of
customers requires a new service.
To quote some examples: Insights about value creation at Marks and Spencer are primarily
about the way suppliers are selected and managed and the way employees are treated. This has
enabled the company to maintain unusually high control over quality without incurring high
costs. The insights at Canon are about how technologies can be combined in more innovative
ways. This has led to a string of new products that continue to expand the companys technology
base in a virtuous circle. The insights at Body Shop are about the value that employees and
customers attach to natural and environmental products.
The stakeholder model is helpful in explaining the rules of the economic game and the link
between stakeholder value and competitive advantage. Companies must win and retain loyalty
from each of their active stakeholders: shareholders, customers, employees, and suppliers.
Without support from all four groups, companies cannot function they cannot finance
themselves, sell their products, attract talent, or purchase the supplies they need. These
stakeholders are active not just because they have a commercial relationship with the company
but also because they are infinitely demanding: they want to get as much as possible out of the
relationship. Their demands are fueled by the existence of competitors.
An enterprise can only afford to deliver adequate value to all its stakeholders if it has unique
competitive advantages. As a result, our economic system demands that companies have as one of
their driving objectives, the search for and the creation of sources of unique competitive
advantage.
Competitive advantage, whatever its source, ultimately can be attributed to the ownership of a
valuable resource that enables the company to perform activities better and more cost
effectively than its competitors.
VALUE INNOVATION
Value Innovation is the simultaneous pursuit of radically superior value for buyers and lower cost for
companies.
Conventional strategic logic and the logic of value innovation differ along five basic dimensions
of strategy. Those differences determine which questions managers ask, what opportunities they
seek and pursue, and how they understand risk.
Industry Assumptions: Many companies take their industrys conditions as given and set
strategy accordingly. Value innovators dont. No matter how the rest of the industry is faring,
value innovators look for blockbuster ideas and quantum leaps in value. They seek to change the
rules of the game.
Strategic Focus: Many companies let competitors set the parameters of their strategic thinking.
They compare their strengths and weaknesses with those of their competitors and focus on
building advantages. Consider this example. For years, the major U.S. television networks used
the same format for news programming. All aired shows in the same time slot and competed on
their analysis of events, the professionalism with which they delivered their news, and the
popularity of their anchors. In 1980, CNN came on the scene with a focus on creating a quantum
leap in value, not on competing with the networks. CNN replaced the networks format with real-
time news from around the world 24 hours a day.
Customers: Many companies seek growth through retaining and expanding their customer base.
This often leads to finer segmentation and greater customisation of offerings to meet specialised
needs. Value innovation follows a different logic. Instead of focusing on the differences among
customers, value innovators build on the powerful commonalities in the features that customers
value. They believe that most customers will put their differences aside if they are offered a
considerable increase in value.
Assets and Capabilities: Many companies view business opportunities through the lens of their
existing assets and capabilities. They ask, Given what we have, what is the best we can do? In
contrast, value innovators ask, What if we start anew? As one of Virgins executives put it,
We dont let what we can do today condition our view of what it takes to win tomorrow. We
take a clean-slate approach.
Products & Service Offerings: Conventional competition takes place within clearly established
boundaries defined by the products and services the industry traditionally offers. Value
innovators often cross those boundaries. They think in terms of the total solution buyers seek, and
they try to overcome the compromises their industry forces customers to make.
The race never ends. No companys strategy can endure without continual pressure to improve.
Whats Wrong with Strategy, Andrew Campbell & Marcus Alexander, HBR, Nov-Dec
1997
Value Innovation: The Strategic Logic of High Growth, W. Chan Kim & Renee
Mauborgne, HBR, Jan-Feb 1997
Competing on Resources, David J Collis & Cynthia A Montgomery, HBR, July-August
1995
Big corporations have emerged as perhaps the most important social and economic institutions in
our modern society. They are much more than money making machines and hold society together
by providing it with the means of progress. The problem is that their managers dont always
understand this bigger role and, if they do, they dont always like what it implies. It is crucial for
our societies, that managers wake up to their new role and, more than that, that these giant
organisations learn how to re-invent themselves so that they can go on producing wealth and
drive progress for us all
- Sumantra Ghoshal
TOWARD AN ATLAS OF ORGANISATIONAL CHANGE
- Peter Senge
From Dance of Change
Look ahead twenty or thirty years. Does anyone expect the next twenty years to be less tumultous
than the last twenty years ? Given the changes expected in technology, biology, medicine, social
values, demography, the environment, and international relations, what kind of world might
humanity face ? No one can say for sure, but one thing is reasonably certain : Continuing
challenges will tax our collective abilities to deal with them. Failure to rethink our enterprises will
leave us little relief from our current predicaments : rising turbulence causing rising stress;
increasing disconnection and internal competitiveness; people working harder, rather than
learning how to work smarter; and increasingly intractable problems beyond the reach of any
individual or organisation. If you are an organisational leader, someone at any level concerned
deeply about these challenges, then you face a daunting task. In effect, you are engaged in a great
venture of exploration, risk, discovery, and change, without any comprehensive maps for
guidance.
Leadership is the art of accomplishing more than the science of management says is possible.
Picture a martial artist kneeling before the master sensei in a ceremony to receive a hard-earned
black belt. After years of relentless training, the student has finally reached the pinnacle of
achievement in the discipline.
Before granting the belt, you must pass one more test, says the sensei.
I am ready, responds the student, expecting perhaps one final round of sparring.
You must answer the essential question: What is the true meaning of the black belt?
The end of my journey, says the student. A well-deserved reward for all my hard-
work.
The sensei waits for more. Clearly, he is not satisfied. Finally, the sensei speaks. You
are not yet ready for the black belt. Return in one year.
What is the true meaning of the black belt? asks the sensei.
A symbol of distinction and the highest achievement in our art, says the student.
The sensei says nothing for many minutes, waiting. Clearly, he is not satisfied. Finally,
he speaks. You are still not ready for the black belt. Return in one year.
A year later the student kneels once again in front of the sensei.
And again the sensei asks: What is the true meaning of the black belt?
The black belt represents the beginningthe start of a never-ending journey of discipline,
work, and the pursuit of an ever-higher standard, says the student.
Yes. You are now ready to receive the black belt and begin your work.
SOME COMPANIES LAST HUNDREDS OF YEARS
- Arie De Geus
From The Living Company
They are innovative. Not only being unusually good at what they do but at being especially
adroit at continually responding to change of any sort in their environment. As the needs of
their customers shift, the skills of their competitors improve, the mood of the public
perturbates, the forces of international trade align, and government relations shift, these
companies tack, revamp, adjust, transform and adapt in short, as a whole culture they
innovate. Visionary companies prosper over long periods of time, through multiple product
life cycles and multiple generations of active leaders, with purpose and passion.
They display a powerful drive for progress, (change, challenge, creativity) without compromising
on their cherished ideals.
THERE ARE TWO DIFFERENT TYPES OF
COMMERCIAL COMPANIES
- Arie De Geus
From The Living Company
1 The Economic Company - to produce maximum returns, with minimum resources, in the
shortest time.
It is like a puddle of rainwater - a collection of raindrops, gathered together in a cavity or
hollow. These drops are the puddle.
Puddles of rainwater cannot survive much heat. When the sun shines and the temperature
heats up, the puddle starts to evaporate.
2 The second type of Company - by contrast, is organised around the purpose of perpetuating
itself as an ongoing community.
This type of company has the longevity of a river. Unlike a puddle, a river is a permanent
feature of its landscape. Come rain, the river may swell. Come shine, the river may shrink.
But it takes a long and severe drought for the river to disappear.
In such a river company, return on investment remains important. Its purposes are
longevity and the development of its own potential. Profitability is a means to that end. And
to produce both profitability and longevity, care will be taken with the various processes for
building a community : defining membership, establishing common values, recruiting
people, developing their capabilities, assessing their potential, living upto a human contract,
managing relationships with outsiders and contractors, and establishing policies for exiting
the company gracefully.
To create a company that flows like a perennial multipurpose river, we must enrich the
sources and channels that maintain the flow.
the capacity to distribute its leadership and knowledge capabilities more broadly throughout
the organisation, and
Not only must the future be imagined, it must be built; hence our term, "strategic architecture".
An architect must be capable of dreaming of things not yet created - a cathedral where there is
now only a dusty plain, or an elegant span across a chasm that hasn't yet been crossed. And an
architect must also be capable of producing a blueprint for how to turn the dream into reality. An
architect is both a dreamer and a draftsman. An architect marries art with structural engineering.
Strategic architecture is basically a high-level blueprint for the deployment of new functionalities
(product/service benefits), the acquisition of new competencies, or the migration of existing
competencies and the reconfiguring of the interface with customers.
We often come across companies that have set an ambitious long-term goal, perhaps to double
revenue and profits over five years, or to dramatically increase the proportion of revenues coming
from new businesses, but have devoted almost no intellectual effort or infrastructural investment
to thinking through the medium-term capability-building program that is needed to support that
goal.
There seems to be, in many companies, an implicit assumption that the short-term and long-term
abut each other, rather than being dovetailed together. But the long term doesn't start at year five
of the current strategic plan. It starts right now!
A strategic architecture identifies "what we must be doing right now" to intercept the future. A
strategic architecture is the essential link between today and tomorrow, between short-term and
long-term. It shows the organisation what competencies it must begin building right now, what
new customer groups it must begin to understand right now, what new channels it should be
exploring right now, what new development priorities it should be pursuing right now to intercept
the future. Strategic architecture is a broad opportunity approach plan. The question addressed by
a strategic architecture is not what we must do to maximise our revenues or share in an existing
product market, but what we must do today, in terms of competence acquisition, to prepare
ourselves to capture a significant share of the future revenues in an emerging opportunity arena.
WHAT LEADERS REALLY DO
Good management controls complexity; effective leadership produces useful change
- John P Kotter
Leadership is different from management, but not for the reasons most people think. Leadership
isnt mystical and mysterious. It has nothing to do with having charisma or other exotic
personality traits. It is not the province of a chosen few. Nor is leadership necessarily better than
management or a replacement for it.
Rather, leadership and management are two distinctive and complementary systems of action.
Each has its own function and characteristic activities. Both are necessary for success in an
increasingly complex and volatile business environment.
Management is about coping with complexity. Its practices and procedures are largely a response
to one of the most significant developments of the twentieth century: the emergence of large
organisations. Without good management, complex enterprises tend to become chaotic in ways
that threaten their very existence. Good management brings a degree of order and consistency to
key dimensions like the quality and profitability of products.
Leadership, by contrast, is about managing change. Part of the reason it has become so important
in recent years is that the business world has become more competitive and more volatile. Faster
technological change, greater international competition, the deregulation of markets, over
capacity in capital-intensive industries, an unstable oil cartel, raiders with junk bonds, and the
changing demographics of the work force are among the many factors that have contributed to
this shift. The net result is that doing what was done yesterday, or doing it 5% better, is no longer
a formula for success. Major change always demands tranformational leadership.
Consider a simple military analogy: a peacetime army can usually survive with good
administration and management up and down the hierarchy, coupled with good leadership
concentrated at the very top. A wartime army, however, needs competent leadership at all levels.
No one yet has figured out how to manage people effectively into battle; they must be led.
Without managers the vision of leaders remains a dream. Leaders need managers to convert
visions into realities. For continuous success, organisations need both managers and leaders.
However, as most seem to be over-managed and underled, they need to find ways of having both
at the same time.
Perhaps the best way to handle this paradox is for managers to aim to be managers when viewed
from above (by their bosses) and leaders when viewed from below (by direct reports), and to
remember that the need for leadership grows as we move up the organisation.
LEVEL 5 LEADERSHIP
- Jim Collins
From Good to Great
Level 5
Leadership
The Triumph of Humility and
Fierce Resolve
Even today, remarkably few Americans are prepared to select jobs for themselves. When you
ask," Do you know what you are good at? Do you know your limitations?", they look at you with
a blank stare or they often respond in terms of subject knowledge, which is the wrong answer.
When they prepare their resumes, they still try to list positions like steps up a ladder. It is time to
give up thinking of jobs or career paths as we once did and think in terms of taking on
assignments one after the other.
Being an educated person is no longer adequate, not even educated in management. One hears
that the government is doing research on new job descriptions based on subject knowledge. But I
think that we probably have to leap right over the search for objective criteria and get into the
subjective - What I call competencies? Do you really like pressure? Can you be steady when
things are rough and confused? Do you absorb information better by reading, talking, or looking
at graphs and numbers?
Managers are synthesisers who bring resources together and have that ability to "smell"
opportunity and timing. Today perception is more important than analysis. In the new society of
organisation, you need to be able to recognise patterns to see what is there, rather than what you
expect to see.
When I ask people what they contribute to an organisation, they blossom and love to answer. And
when I follow with, "Have you told other people about it?" the answer often is "No, that would be
silly because they know." But of course, "they" don't. We are 100 years past the simple economy
in which most people knew what others did at work. Farmers knew what most farmers did, and
industrial people knew what other factory people did. Domestic servants understood each other's
work, as did the fourth major group in that economy: small tradesmen. No one needed to explain.
But now nobody knows what others do, even within the same organisation. Everybody you work
with needs to know your priorities. If you don't ask and don't tell, your peers and subordinates
will guess incorrectly.
The key to the productivity of knowledge people is to make them concentrate on the real
assignment. Do you know why most promotions now fail? One third are outright disasters, in my
experience, while another third are a nagging backache. Not more than one in three works out. No
fit. The standard case, of course, is the star salesman promoted to sales manager. That job can be
any one of four things - a manager of salespeople, a market manager, a brand manager, or a super
salesman who opens up an entire new area. But nobody figures out what it is, so the man or
woman who got the promotion just tries to do more of whatever led to the promotion. That's the
surest way to be wrong.
Knowledge is power, which is why people who had it in the past often tried to make a secret of it.
In post-capitalism, power comes from transmitting information to make it productive, not from
hiding it.
I'm not comfortable with the word manager any more because it implies subordinates. I find
myself using executive more, because it implies responsibility for an area, not necessarily
dominion over people. The word boss, which emerged in World War II, is helpful in that it can be
used to suggest a mentor's role, someone who can back you up on a decision. The new
organisations need to go beyond senior and junior polarities to blend with sponsor and mentor
relations. In the traditional organisation - the organisation of the last 100 years - the skeleton, or
internal structure, was a combination of rank and power. In the emerging organisation, it has to be
mutual understanding and responsibility.
NOTES