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Thursday, November 15, 2012

Are You Driving Too Much Change, Too Fast??? 11-15

Are You Driving Too Much Change, Too Fast??? 

Image credit : Shyam's imagination Library
Pity Ron Johnson. The charismatic Apple Store retailer turned JC Penney CEO announced far worse-than-expected quarterly results. Same-store sales declined 26% and the company's stock dropped to a three year low. The congealing critical consensus is that Johnson's bold overhaul of the sagging American retailing icon went too far too fast.
Pity Meg Whitman. The failed California gubernatorial candidate and former eBay CEO is attempting to lead a turnaround at Hewlett-Packard. The struggling high-tech titan is still bleeding from self-inflicted wounds from a fractious board. She's outlined a long-term recovery strategy but the congealing critical consensus is that she's simply not moving fast enough.
GE's Jack Welch was inordinately fond of emphasizing that his biggest leadership regret was that he didn't move fast enough to make fundamental changes. By stark contrast, IBM's Lou Gerstnerpracticed a cultivated deliberateness in his successful turnaround: Slow and steady won his leadership race. Durk Jager's tumultuous 17-month effort to inflict hard and fast change at P&G led to the steadier tempo of A.G. Lafley's "game-changing" stewardship. Of course, the congealing critical consensus is that current P&G CEO Bob McDonald isn't moving fast enough.
This "too fast/too slow" leadership conundrum reeks of "Goldilocks" management — transformations and turnarounds should be neither too fast nor too slow; they must be "just right." That's a mug's game. When "reckless" moves succeed, they're retrospectively rebranded as "bold." When "timidity" triumphs, it's celebrated as "patient" and "safe." Failure simply means leadership went too fast or didn't go fast enough. That's rationalization, not insight.
The issue is less about how fast CEOs are willing to move than how quickly their most reliable customers are prepared to change. The most effective and important diagnostic I've observed for assessing organizational speed and tempo appears obvious but underappreciated: How fast are your customers willing to change? Your own rate of change is determined less by the quality or price/performance of your offerings than the measurable readiness of your customers and clients. Their internal readiness matters more than yours. Their inertia matters more than your momentum.
In some industries, customers have been successfully trained to turn on a dime. Look at mobile phones, personal computers and social media. For over twenty five years now — and with a tip of the cap to Moore's Law — consumers have been trained to expect something faster, better and (cost-effectively) cheaper on a faster-than-annual basis. Readiness to change is now an everyday part of their rational expectations. That doesn't mean they will change or even that they are predisposed to change; it simply means that competitors in those industries will likely lose if they can't change at least as fast as their customers. The folks at Dell and Nokia have learned this the hard way.
At Electrolux, for example, the company has implemented a new "70% rule" for testing its new product innovations to make sure it's not getting too far ahead or falling too quickly behind either its customers or competitors. Electrolux CEO Keith McLoughlin has declared that new product prototypes have to enjoy at least a 70% customer preference rate in blind competition with best-selling rival products. "Speed to market" isn't what's driving the change. The goal is assuring that the firm's ability to innovate is effectively aligned with the customers' willingness to value them. The 70% rule helps identify and clarify their customers' readiness for change.
The clear exception occurs when your innovations effectively create a new kind of customer or client. That is, your innovation offer is so compelling or valuable that your customers willingly to adapt themselves to it (these themes are developed more explicitly in my Harvard Business Review Pressebook). Ron Johnson certainly enjoyed that innovation environment at Apple where his shoppers paid a premium to have their digital lifestyles transformed by iPhones and iPads. By contrast, JC Penney shoppers don't yet appear as ready, able or willing to change into the kinds of shoppers he envisions for his next-generation stores.
More often than not, the real "speed" challenge most leaderships face is quickly determining whether they're trying to better follow, lead or transform the customers and clients they have. Being a "fast follower" is much easier to manage than being a "fast transformer." But whether you're seeking to innovatively serve or transform your customers, their openness to change is more revealing than your own.
Put your product or service offering aside: Do you know along what dimensions your most important customers are changing fastest? Can you tell when your customers feel that they're not going fast enough? Start paying less attention to your own innovation speed limits and more attention to theirs.

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