Secrets of the Superbosses 03-24

Secrets of the Superbosses

What do Ralph Lauren, Larry Ellison, Julian Robertson, Jay Chiat, Bill Walsh, George Lucas, Bob Noyce, Lorne Michaels, and Mary Kay Ash have in common?

Certainly all of them are known for being talented and successful—even legendary—in their respective fields. All have reputations as innovators who pioneered new business models, products, or services that created billions of dollars in value. But there’s one thing that distinguishes these business icons from their equally famous peers: the ability to groom talent. They didn’t just build organizations; they spotted, trained, and developed a future generation of leaders. They belong in a category beyond superstars: superbosses.

I started researching this cohort of managers a decade ago, when I noticed a curious pattern: If you look at the top people in a given industry, you’ll often find that as many as half of them once worked for the same well-known leader. In professional football, 20 of the NFL’s 32 head coaches trained under Bill Walsh of the San Francisco 49ers or under someone in his coaching tree. In hedge funds, dozens of protégés of Julian Robertson, the founder of the investment firm Tiger Management, have become top fund managers. And from 1994 until 2004, nine of the 11 executives who worked closely with Larry Ellison at Oracle and left the company without retiring went on to become CEOs, chairs, or COOs of other companies.

Eager to learn the secrets of these star makers, I reviewed thousands of articles and books and conducted more than 200 interviews to identify 18 primary study subjects (definite superbosses) and a few dozen secondary ones (likely superbosses). I then looked for patterns—common tastes, proclivities, behaviors—anything that might help explain why these people were able to propel not only their companies but also their protégés to such great heights.

I found that superbosses share a number of key personality traits. They tend to be extremely confident, competitive, and imaginative. They also act with integrity and aren’t afraid to let their authentic selves shine through.

But far more interesting (and more important for teaching purposes) were the similarities I saw in the “people strategies” that superbosses employed. Their remarkable success as talent spawners was not the result of some innate genius. These leaders follow specific practices in hiring and honing talent—practices that the rest of us can study and incorporate into our own repertoires.

Unconventional Hiring

Superbosses begin by seeking out unusually gifted people—individuals who are capable not merely of driving a business forward but of rewriting the very definition of success. As Lorne Michaels, the longtime producer of Saturday Night Live, has said, “If you look around the room and you think, ‘God, these people are amazing,’ then you’re probably in the right room.” Here’s how he and others do it.

Focus on intelligence, creativity, and flexibility.

Superbosses value these three attributes above all others. C. Ronald Blankenship and R. Scot Sellers, both protégés of real estate guru Bill Sanders before they became CEOs of leading property companies themselves, remember how Sanders would brag about bringing in so many people who were “four times smarter” than he was. He would insist that if you weren’t going to hire someone great, you shouldn’t hire anyone at all.

Superbosses begin by seeking out unusually gifted people.

Superbosses want people who can approach problems from new angles, handle surprises, learn quickly, and excel in any position. Norman Brinker, the casual-dining innovator who founded Steak and Ale, was a good example. As Rick Berman, who worked under him before founding a successful lobbying firm, recalls, Brinker “wasn’t a fan of hiring people to play first base; he just wanted to hire a good baseball player.” That emphasis on versatility helped give rise to a generation of top leaders in the restaurant industry, including the CEOs of Outback Steakhouse, P.F. Chang’s, and Burger King.

Find unlikely winners.

Superbosses consider credentials, of course, but they’re also willing to take chances on people who lack industry experience or even college degrees. According to Marty Staff, who worked for Ralph Lauren before becoming CEO of Hugo Boss USA, Lauren once made a runway model the head of women’s design “for no other reason than she seemed to get it—she got the clothes.” At health care giant HCA, Tommy Frist sometimes set even physical therapists on a path to the C-suite, simply because he spotted something in them.

Because they reject preconceived notions of what talent should look like, superbosses often show greater openness toward women and minorities. Mary Kay Ash, in fact, expressly designed her company to empower women, holding sales conferences where the message was “If she can do it, so can I.” Walsh started a fellowship program in the NFL for minority coaches, giving participants a fast track into the league and himself a chance to tap into a vast new source of talent.

Superbosses often dispense with the conventional interview process, too; instead, they pose unusual or quirky questions or use observation as a tool. When Ralph Lauren met with job candidates, for example, he would ask them to explain what they were wearing and why. Sanders would invite prospects to hike a 7,000-foot peak on his New Mexico ranch with him and other managers. “We learned a whole lot about these kids on the hikes,” recalls Constance Moore, who worked for Sanders at Security Capital before becoming CEO of BRE Properties. “After, we would all sit down and talk about each of them and figure out which ones we wanted to ask to join.”

Adapt the job or organization to fit the talent.

Superbosses opportunistically tailor jobs and sometimes even their organizations to new hires. As an assistant coach for the Cincinnati Bengals, Walsh had to invent a new offense to enable the backup quarterback to excel after an injury brought down the team’s starter. Because the second-stringer had more accuracy than arm strength, Walsh designed an unusual strategy around short passes—which later became known as the West Coast offense (when Walsh was with the 49ers). Lorne Michaels lets his ensemble’s ideas and abilities constantly shape and reshape their contributions to Saturday Night Live. Writers sometimes become performers, and performers or assistant directors sometimes become writers. At Industrial Light & Magic, George Lucas’s employees didn’t even have job descriptions. They were assigned tasks on various projects according to what was needed and who was available. All these examples run counter to traditional HR practices, but they reflect an innovative mindset that superbosses bring to virtually everything they do.

Accept churn.

Smart, creative, flexible people tend to have fast-paced careers. Some may soon want to move on. That’s OK with superbosses. They understand that the quality of talent on their teams matters more than stability, and they regard turnover as an opportunity to find fresh stars. Consider how Discovery Communications founder John Hendricks reacted when, in 1997, his second in command, Richard Allen, was asked to become the head of National Geographic’s for-profit arm. Hendricks would have loved to have kept Allen but never tried to hold him back, realizing that he’d rather have a friend leading his rival than anyone else. “It was a real indication of his generosity of spirit,” Allen says.

The Three Types of Superbosses

	GLORIOUS BASTARDS These superbosses care about one thing: winning. They’re the ultimate hard drivers, yet they realize that to get the very best results, they need to develop the world’s best people and teams. So they do.  EXAMPLES: Larry Ellison, Michael Milken, Bonnie Fuller, Julian Robertson, Jay Chiat
	NURTURERS These coaches and teachers resemble traditional mentors the most. They take pride in bringing others along and care deeply about the success of their protégés. They help people accomplish more than they ever thought possible.  EXAMPLES: Mary Kay Ash, Bill Walsh, Michael Miles, Norman Brinker, Tommy Frist
	ICONOCLASTS These executives usually operate in creative fields, where their single-minded passion for their work inspires their protégés.  EXAMPLES: Ralph Lauren, Alice Waters, George Lucas, Jon Stewart, Lorne Michaels, Robert Noyce
Amanda Edwards, Graham Bezant, Neilson Barnard/Getty Images

This kind of attitude has an added payoff: When word gets out that people who work for you succeed not only at your organization but outside it, the world will start beating a path to your door. Superbosses barely need to recruit, because their reputations bring a continuous stream of talent to them.

Hands-on Leadership

Superbosses also have a distinct way of developing employees. Take Larry Ellison. His greatest strength, according to one of his protégés, is his ability “to make exceptional people do the impossible.” I heard stories in a similar vein about other superbosses. From them, one can distill these principles:

Set high expectations.

Superbosses are bullish on what their teams can accomplish. They demand extraordinarily high performance; “perfect is good enough” captures their attitude. The legendary Bob Noyce, for instance, “could be a very, very tough taskmaster,” remembers his fellow Intel cofounder Gordon Moore. “If you were up for the challenge, you could be very successful.” But superbosses go beyond pushing hard for results and instill a sense of confidence and exceptionalism in their people. Michael Rubin, who was a young member of Lucasfilm’s Graphics Group in the 1980s, recalls how transformational it was to hear Lucas talk about his vision for digital filmmaking and the role they would all play in it. “I heard him explain what the future could be like, and I was infected with that at age 22. I believed him. And it changed my career.” Tom Carroll, now chairman of TBWA Group, sounds a similar note about former boss Chiat: “Jay left something in people that makes it hard for you to go back to being ordinary. Once you feel it, you can’t change it.”

Be a master.

Superbosses are extremely effective delegators. Having chosen smart, ambitious, adaptable people and offered them a vision, they trust the team to execute. “Norman Brinker gave us incredible autonomy,” explains Richard Frank, a former senior manager at Steak and Ale who went on to run Chuck E. Cheese. “We definitely had the ability to fail.” And yet superbosses also remain intimately involved in the details of their businesses and their employees’ work. HCA’s Tommy Frist, a licensed pilot, would take subordinates on his plane to company events, using the flight time to engage in what was almost a tutorial on some aspect of what those people were working on. I compare it to the master-apprentice relationship you find in a traditional artisan workshop. Like highly skilled craftsmen, superbosses give protégés an unusual amount of hands-on experience but also monitor their progress, offer instruction and intense feedback, and step in to work with them side by side when necessary.


Even if people leave the organization, superbosses continue to offer them advice.


Superbosses’ teachings extend to leadership and life lessons as well. Frist would counsel managers on everything from setting daily goals to the importance of exercising to stay sharp. Luc Vandevelde, the former chairman of Marks and Spencer and Carrefour, was taught by former Kraft CEO Michael Miles to walk a fine line between partnering with subordinates and micromanaging them. Miles advised Vandevelde to work closely enough with his people to “elicit skills” but not so closely that he would “limit skills.” “I’ll never forget those words,” Vandevelde explains. “They profoundly changed my management approach, creating an environment where people can be at their best.”

Encourage step-change growth.

All the superbosses I studied offered advancement opportunities far beyond those found in traditional organizations. Rather than relying solely on “competency models” to guide development and promotion decisions, they customized career paths for protégés who had proved their worth, seeking to dramatically compress their learning and growth. Chase Coleman, a disciple of Julian Robertson, says that his former boss “was good at providing a steep learning curve for people who excelled at their first task.” In fact, just three years after Coleman joined Tiger Management as a technology analyst, Robertson sent him off with $25 million to start his own fund. Larry Ellison took a similar approach, says Gary Bloom, a former executive VP of Oracle who later became CEO of Veritas. “One thing Oracle was incredibly good at was on a continual basis throwing new responsibility at people,” Bloom notes. For example, Safra Catz was acting as CEO in all but name for a decade before formally being elevated to co-CEO (with Mark Hurd) in 2014.

Stay connected.

For superbosses, counseling protégés is a long-term commitment. Even after someone moves out of their organization, superbosses continue to offer advice, personal introductions, and “membership” in their networks. Former creative director Ken Segall says that although he served under Jay Chiat for only three years during the mid-1990s, he made a practice of calling his former boss whenever he changed jobs. “Usually within two or three hours at the most, I would get a call back,” Segall recalls. “He would consult with me and advise me. He was that kind of guy.”

Maintaining relationships with ex-employees sets superbosses up for all sorts of follow-on opportunities, such as developing business partnerships. Frist helped many of the managers who’d worked for him at HCA start companies in the health care space by investing or becoming a customer. Lorne Michaels excelled at this, too, producing films and TV shows with former SNL stars Jimmy Fallon, Seth Meyers, Fred Armisen, and Tina Fey.

Superbosses employ practices that set them head and shoulders above even the best traditional bosses. They seek out talent differently and hire them in unusual ways. They create high expectations and take it upon themselves to serve as “masters” to up-and-coming “apprentices.” And they accept it when their protégés go on to bigger and better things, making sure to stay connected.

You, too, can move closer to this ideal. Don’t feel you need to try every move in the playbook at once. Experiment with one or two. Consider unorthodox applicants for open positions, looking at people who might possess unusual abilities. Remember that people are more effective when they feel confident, and make it your job to build them up. Get in the trenches more often with line employees, so you can learn more about their particular talents and challenges and impart wisdom that will help them grow. Look for opportunities to delegate big responsibility even to younger team members.

Following the superboss playbook, we can all become better at nurturing talent, creating higher-performing workforces and, ultimately, more dynamic and sustainable businesses and industries.



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Only 8% of Leaders Are Good at Both Strategy and Execution

Only 8% of Leaders Are Good at Both Strategy and Execution

In a 2013 survey of nearly 700 executives across a variety of industries, our firm asked respondents to rate the effectiveness of the top leaders of their companies. How many excelled at strategy? How many excelled at execution? The results are shown in the chart below. These responses are sobering: Only 16% of top leaders were rated very effective at either strategy or execution. Only 8% were very effective at both, while 63% were rated neutral or worse on at least one dimension.

But there is heartening news in one finding. More than half of the leaders who are effective in either strategy or execution (that group of 16% in the top row and right-hand column) are skilled in both strategy and execution. This finding suggests that among the rest of us, those who become better strategists (those who can develop compelling answers to those fundamental strategic questions) will probably gain skill at execution as well, and vice versa.

In our research, we’ve found five leadership acts that help companies close the strategy-to-execution gap. The five acts of unconventional leadership also provide an opportunity for deep and powerful leadership development. Think of them as a chance to create an engine of growth for you personally and for the company:

Commit to an identity. As a leader, you can become a symbolic figure, a model of commitment. You have something powerful to sell: a message about identity and the need to stay with that identity over time. As you demonstrate the courage of those convictions, you develop the influence and impact needed to build an extraordinary company.

Translate the strategic into the everyday. Although you occupy a top executive position, you also “get your hands in the mud,” as Starbucks CEO Howard Schultz puts it in his book Pour Your Heart into It. You become the architect of the capabilities you need, the chief of builders. In these roles, you operate at a fine-grained level of detail so that you can see, sense, and touch the details of everyday activity. But you also raise your view high enough that you clearly see — and show others — how all your global capabilities fit the value you offer customers. You need two kinds of perspectives, nearsighted and farsighted, simultaneously, and you can only develop them this way.

Put your culture to work. As a leader, you are infused with your company’s culture. You are a primary champion of emotional commitment. You practice mutual accountability; everyone’s success is important to you. Through teaching and learning, you devote yourself to the cultivation of collective mastery. You do all this in a way that matches the unique cultural attributes of your company, which are grounded in its capabilities system. You don’t act like you come from a remote corner office; you act like you are one with the company’s culture.

Cut costs to grow stronger. Your company consistently allocates its resources with an eye toward strategic priorities. As a leader, you do the same with your personal resources, particularly your time and attention. Are you devoting enough to the most critical capabilities and the value proposition they support? Or are you squandering too much time and attention on immediate demands, responding to everybody else’s idea of what is important?

Shape the future. As a leader, you are one of the first to experience the constant challenge of external change. You can muster the fortitude (and humility) to recognize when change in yourself is required. You build an extremely capable team, knowing that ultimately the future will depend on developing the next generation of leaders.

Nearly every CEO we’ve met has great aspirations to change the game, move beyond the constraints that his or her organization faces, and build a legacy that leaves years and years of growth. Living these five acts of leadership can help. They build your confidence, and that of your company, and increase your ability to close the gap between strategy and execution.

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Design Thinking 06-26

Design Thinking

Thomas Edison created the electric lightbulb and then wrapped an entire industry around it. The lightbulb is most often thought of as his signature invention, but Edison understood that the bulb was little more than a parlor trick without a system of electric power generation and transmission to make it truly useful. So he created that, too.

Thus Edison’s genius lay in his ability to conceive of a fully developed marketplace, not simply a discrete device. He was able to envision how people would want to use what he made, and he engineered toward that insight. He wasn’t always prescient (he originally believed the phonograph would be used mainly as a business machine for recording and replaying dictation), but he invariably gave great consideration to users’ needs and preferences.

Edison’s approach was an early example of what is now called “design thinking”—a methodology that imbues the full spectrum of innovation activities with a human-centered design ethos. By this I mean that innovation is powered by a thorough understanding, through direct observation, of what people want and need in their lives and what they like or dislike about the way particular products are made, packaged, marketed, sold, and supported.

Many people believe that Edison’s greatest invention was the modern R&D laboratory and methods of experimental investigation. Edison wasn’t a narrowly specialized scientist but a broad generalist with a shrewd business sense. In his Menlo Park, New Jersey, laboratory he surrounded himself with gifted tinkerers, improvisers, and experimenters. 

Indeed, he broke the mold of the “lone genius inventor” by creating a team-based approach to innovation. Although Edison biographers write of the camaraderie enjoyed by this merry band, the process also featured endless rounds of trial and error—the “99% perspiration” in Edison’s famous definition of genius. His approach was intended not to validate preconceived hypotheses but to help experimenters learn something new from each iterative stab. Innovation is hard work; Edison made it a profession that blended art, craft, science, business savvy, and an astute understanding of customers and markets.

Design thinking is a lineal descendant of that tradition. Put simply, it is a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity. Like Edison’s painstaking innovation process, it often entails a great deal of perspiration.

I believe that design thinking has much to offer a business world in which most management ideas and best practices are freely available to be copied and exploited. Leaders now look to innovation as a principal source of differentiation and competitive advantage; they would do well to incorporate design thinking into all phases of the process.

Getting Beneath the Surface

Historically, design has been treated as a downstream step in the development process—the point where designers, who have played no earlier role in the substantive work of innovation, come along and put a beautiful wrapper around the idea. To be sure, this approach has stimulated market growth in many areas by making new products and technologies aesthetically attractive and therefore more desirable to consumers or by enhancing brand perception through smart, evocative advertising and communication strategies. During the latter half of the twentieth century design became an increasingly valuable competitive asset in, for example, the consumer electronics, automotive, and consumer packaged goods industries. But in most others it remained a late-stage add-on.

Now, however, rather than asking designers to make an already developed idea more attractive to consumers, companies are asking them to create ideas that better meet consumers’ needs and desires. The former role is tactical, and results in limited value creation; the latter is strategic, and leads to dramatic new forms of value.

Moreover, as economies in the developed world shift from industrial manufacturing to knowledge work and service delivery, innovation’s terrain is expanding. Its objectives are no longer just physical products; they are new sorts of processes, services, IT-powered interactions, entertainments, and ways of communicating and collaborating—exactly the kinds of human-centered activities in which design thinking can make a decisive difference. (See the sidebar “A Design Thinker’s Personality Profile.”)

Consider the large health care provider Kaiser Permanente, which sought to improve the overall quality of both patients’ and medical practitioners’ experiences. Businesses in the service sector can often make significant innovations on the front lines of service creation and delivery. By teaching design thinking techniques to nurses, doctors, and administrators, Kaiser hoped to inspire its practitioners to contribute new ideas. Over the course of several months Kaiser teams participated in workshops with the help of my firm, IDEO, and a group of Kaiser coaches. These workshops led to a portfolio of innovations, many of which are being rolled out across the company.

One of them—a project to reengineer nursing-staff shift changes at four Kaiser hospitals—perfectly illustrates both the broader nature of innovation “products” and the value of a holistic design approach. The core project team included a strategist (formerly a nurse), an organizational-development specialist, a technology expert, a process designer, a union representative, and designers from IDEO. This group worked with innovation teams of frontline practitioners in each of the four hospitals.

During the earliest phase of the project, the core team collaborated with nurses to identify a number of problems in the way shift changes occurred. Chief among these was the fact that nurses routinely spent the first 45 minutes of each shift at the nurses’ station debriefing the departing shift about the status of patients. 

Their methods of information exchange were different in every hospital, ranging from recorded dictation to face-to-face conversations. And they compiled the information they needed to serve patients in a variety of ways—scrawling quick notes on the back of any available scrap of paper, for example, or even on their scrubs. 

Despite a significant investment of time, the nurses often failed to learn some of the things that mattered most to patients, such as how they had fared during the previous shift, which family members were with them, and whether or not certain tests or therapies had been administered. For many patients, the team learned, each shift change felt like a hole in their care. Using the insights gleaned from observing these important times of transition, the innovation teams explored potential solutions through brainstorming and rapid prototyping. (Prototypes of a service innovation will of course not be physical, but they must be tangible. Because pictures help us understand what is learned through prototyping, we often videotape the performance of 

Prototyping doesn’t have to be complex and expensive. In another health care project, IDEO helped a group of surgeons develop a new device for sinus surgery. As the surgeons described the ideal physical characteristics of the instrument, one of the designers grabbed a whiteboard marker, a film canister, and a clothespin and taped them together. “Do you mean like this?” he asked. With his rudimentary prototype in hand, the surgeons were able to be much more precise about what the ultimate design should accomplish.

The surgeons described a new device for sinus surgery. One designer grabbed a marker, a film canister, and a clothespin and taped them together. “Do you mean like this?” he asked.

Prototypes should command only as much time, effort, and investment as are needed to generate useful feedback and evolve an idea. The more “finished” a prototype seems, the less likely its creators will be to pay attention to and profit from feedback. The goal of prototyping isn’t to finish. It is to learn about the strengths and weaknesses of the idea and to identify new directions that further prototypes might take.

The design that emerged for shift changes had nurses passing on information in front of the patient rather than at the nurses’ station. In only a week the team built a working prototype that included new procedures and some simple software with which nurses could call up previous shift-change notes and add new ones. They could input patient information throughout a shift rather than scrambling at the end to pass it on. The software collated the data in a simple format customized for each nurse at the start of a shift. The result was both higher-quality knowledge transfer and reduced prep time, permitting much earlier and better-informed contact with patients.

As Kaiser measured the impact of this change over time, it learned that the mean interval between a nurse’s arrival and first interaction with a patient had been more than halved, adding a huge amount of nursing time across the four hospitals. Perhaps just as important was the effect on the quality of the nurses’ work experience. One nurse commented, “I’m an hour ahead, and I’ve only been here 45 minutes.” Another said, “[This is the] first time I’ve ever made it out of here at the end of my shift.”

Thus did a group of nurses significantly improve their patients’ experience while also improving their own job satisfaction and productivity. By applying a human-centered design methodology, they were able to create a relatively small process innovation that produced an outsize impact. The new shift changes are being rolled out across the Kaiser system, and the capacity to reliably record critical patient information is being integrated into an electronic medical records initiative at the company.

What might happen at Kaiser if every nurse, doctor, and administrator in every hospital felt empowered to tackle problems the way this group did? To find out, Kaiser has created the Garfield Innovation Center, which is run by Kaiser’s original core team and acts as a consultancy to the entire organization. The center’s mission is to pursue innovation that enhances the patient experience and, more broadly, to envision Kaiser’s “hospital of the future.” It is introducing tools for design thinking across the Kaiser system.

How Design Thinking Happens

The myth of creative genius is resilient: We believe that great ideas pop fully formed out of brilliant minds, in feats of imagination well beyond the abilities of mere mortals. But what the Kaiser nursing team accomplished was neither a sudden breakthrough nor the lightning strike of genius; it was the result of hard work augmented by a creative human-centered discovery process and followed by iterative cycles of prototyping, testing, and refinement.

The design process is best described metaphorically as a system of spaces rather than a predefined series of orderly steps. The spaces demarcate different sorts of related activities that together form the continuum of innovation. Design thinking can feel chaotic to those experiencing it for the first time. But over the life of a project participants come to see—as they did at Kaiser—that the process makes sense and achieves results, even though its architecture differs from the linear, milestone-based processes typical of other kinds of business activities.

Design projects must ultimately pass through three spaces (see the exhibit “Inspiration, Ideation, Implementation”). We label these “inspiration,” for the circumstances (be they a problem, an opportunity, or both) that motivate the search for solutions; “ideation,” for the process of generating, developing, and testing ideas that may lead to solutions; and “implementation,” for the charting of a path to market. Projects will loop back through these spaces—particularly the first two—more than once as ideas are refined and new directions taken.

Inspiration, Ideation, Implementation

Sometimes the trigger for a project is leadership’s recognition of a serious change in business fortunes. In 2004 Shimano, a Japanese manufacturer of bicycle components, faced flattening growth in its traditional high-end road-racing and mountain-bike segments in the United States. The company had always relied on technology innovations to drive its growth and naturally tried to predict where the next one might come from. This time Shimano thought a high-end casual bike that appealed to boomers would be an interesting area to explore. IDEO was invited to collaborate on the project.

During the inspiration phase, an interdisciplinary team of IDEO and Shimano people—designers, behavioral scientists, marketers, and engineers—worked to identify appropriate constraints for the project. The team began with a hunch that it should focus more broadly than on the high-end market, which might prove to be neither the only nor even the best source of new growth. So it set out to learn why 90% of American adults don’t ride bikes. Looking for new ways to think about the problem, the team members spent time with all kinds of consumers. 

They discovered that nearly everyone they met rode a bike as a child and had happy memories of doing so. They also discovered that many Americans are intimidated by cycling today—by the retail experience (including the young, Lycra-clad athletes who serve as sales staff in most independent bike stores); by the complexity and cost of the bikes, accessories, and specialized clothing; by the danger of cycling on roads not designed for bicycles; and by the demands of maintaining a technically sophisticated bike that is ridden infrequently.

The design team, responsible for every aspect of what was envisioned as a holistic experience, came up with the concept of “Coasting.” Coasting would aim to entice lapsed bikers into an activity that was simple, straightforward, and fun. Coasting bikes, built more for pleasure than for sport, would have no controls on the handlebars, no cables snaking along the frame. As on the earliest bikes many of us rode, the brakes would be applied by backpedaling. With the help of an onboard computer, a minimalist three gears would shift automatically as the bicycle gained speed or slowed. The bikes would feature comfortably padded seats, be easy to operate, and require relatively little maintenance.

This human-centered exploration—which took its insights from people outside Shimano’s core customer base—led to the realization that a whole new category of bicycling might be able to reconnect American consumers to their experiences as children while also dealing with the root causes of their feelings of intimidation—thus revealing a large untapped market.

Three major manufacturers—Trek, Raleigh, and Giant—developed new bikes incorporating innovative components from Shimano. But the design team didn’t stop with the bike itself. In-store retailing strategies were created for independent bike dealers, in part to alleviate the discomfort that biking novices felt in stores designed to serve enthusiasts. The team developed a brand that identified Coasting as a way to enjoy life. (“Chill. Explore. Dawdle. Lollygag. First one there’s a rotten egg.”) And it designed a public relations campaign—in collaboration with local governments and cycling organizations—that identified safe places to ride.

Although many others became involved in the project when it reached the implementation phase, the application of design thinking in the earliest stages of innovation is what led to this complete solution. Indeed, the single thing one would have expected the design team to be responsible for—the look of the bikes—was intentionally deferred to later in the development process, when the team created a reference design to inspire the bike companies’ own design teams. After a successful launch in 2007, seven more bicycle manufacturers signed up to produce Coasting bikes in 2008.

Taking a Systems View

Many of the world’s most successful brands create breakthrough ideas that are inspired by a deep understanding of consumers’ lives and use the principles of design to innovate and build value. Sometimes innovation has to account for vast differences in cultural and socioeconomic conditions. In such cases design thinking can suggest creative alternatives to the assumptions made in developed societies.

India’s Aravind Eye Care System is probably the world’s largest provider of eye care. From April 2006 to March 2007 Aravind served more than 2.3 million patients and performed more than 270,000 surgeries. Founded in 1976 by Dr. G. Venkataswamy, Aravind has as its mission nothing less than the eradication of needless blindness among India’s population, including the rural poor, through the effective delivery of superior ophthalmic care. (One of the company’s slogans is “Quality is for everyone.”) From 11 beds in Dr. Venkataswamy’s home, Aravind has grown to encompass five hospitals (three others are under Aravind management), a plant that manufactures ophthalmic products, a research foundation, and a training center.

Aravind’s execution of its mission and model is in some respects reminiscent of Edison’s holistic concept of electric power delivery. The challenge the company faces is logistic: how best to deliver eye care to populations far removed from the urban centers where Aravind’s hospitals are located. Aravind calls itself an “eye care system” for a reason: Its business goes beyond ophthalmic care per se to transmit expert practice to populations that have historically lacked access. The company saw its network of hospitals as a beginning rather than an end.

Much of its innovative energy has focused on bringing both preventive care and diagnostic screening to the countryside. Since 1990 Aravind has held “eye camps” in India’s rural areas, in an effort to register patients, administer eye exams, teach eye care, and identify people who may require surgery or advanced diagnostic services or who have conditions that warrant monitoring.

In 2006 and early 2007 Aravind eye camps screened more than 500,000 patients, of whom nearly 113,000 required surgery. Access to transportation is a common problem in rural areas, so the company provides buses that take patients needing further treatment to one of its urban facilities and then home again. Over the years it has bolstered its diagnostic capabilities in the field with telemedicine trucks, which enable doctors back at Aravind’s hospitals to participate in care decisions. In recent years Aravind’s analysis of its screening data has led to specialized eye camps for certain demographic groups, such as school-age children and industrial and government workers; the company also holds camps specifically to screen for eye diseases associated with diabetes. All these services are free for the roughly 60% of patients who cannot afford to pay.

In developing its system of care, Aravind has consistently exhibited many characteristics of design thinking. It has used as a creative springboard two constraints: the poverty and remoteness of its clientele and its own lack of access to expensive solutions. For example, a pair of intraocular lenses made in the West costs $200, which severely limited the number of patients Aravind could help. Rather than try to persuade suppliers to change the way they did things, Aravind built its own solution: a manufacturing plant in the basement of one of its hospitals. It eventually discovered that it could use relatively inexpensive technology to produce lenses for $4 a pair.

Throughout its history—defined by the constraints of poverty, ignorance, and an enormous unmet need—Aravind has built a systemic solution to a complex social and medical problem.

Getting Back to the Surface

I argued earlier that design thinking can lead to innovation that goes beyond aesthetics, but that doesn’t mean that form and aesthetics are unimportant. Magazines like to publish photographs of the newest, coolest products for a reason: They are sexy and appeal to our emotions. Great design satisfies both our needs and our desires. Often the emotional connection to a product or an image is what engages us in the first place. Time and again we see successful products that were not necessarily the first to market but were the first to appeal to us emotionallyand functionally. In other words, they do the job and we love them. The iPod was not the first MP3 player, but it was the first to be delightful. Target’s products appeal emotionally through design and functionally through price—simultaneously.

This idea will grow ever more important in the future. As Daniel Pink writes in his book A Whole New Mind, “Abundance has satisfied, and even over-satisfied, the material needs of millions—boosting the significance of beauty and emotion and accelerating individuals’ search for meaning.” As more of our basic needs are met, we increasingly expect sophisticated experiences that are emotionally satisfying and meaningful. These experiences will not be simple products. They will be complex combinations of products, services, spaces, and information. They will be the ways we get educated, the ways we are entertained, the ways we stay healthy, the ways we share and communicate. Design thinking is a tool for imagining these experiences as well as giving them a desirable form.

One example of experiential innovation comes from a financial services company. In late 2005 Bank of America launched a new savings account service called “Keep the Change.” IDEO, working with a team from the bank, helped identify a consumer behavior that many people will recognize: After paying cash for something, we put the coins we received in change into a jar at home. Once the jar is full, we take the coins to the bank and deposit them in a savings account. For many people, it’s an easy way of saving. Bank of America’s innovation was to build this behavior into a debit card account. Customers who use their debit cards to make purchases can now choose to have the total rounded up to the nearest dollar and the difference deposited in their savings accounts.

The success of this innovation lay in its appeal to an instinctive desire we have to put money aside in a painless and invisible way. Keep the Change creates an experience that feels natural because it models behavior that many of us already exhibit. To be sure, Bank of America sweetens the deal by matching 100% of the change saved in the first three months and 5% of annual totals (up to $250) thereafter. This encourages customers to try it out. But the real payoff is emotional: the gratification that comes with monthly statements showing customers they’ve saved money without even trying.

In less than a year the program attracted 2.5 million customers. It is credited with 700,000 new checking accounts and a million new savings accounts. Enrollment now totals more than 5 million people who together have saved more than $500 million. Keep the Change demonstrates that design thinking can identify an aspect of human behavior and then convert it into both a customer benefit and a business value.

Thomas Edison represents what many of us think of as a golden age of American innovation—a time when new ideas transformed every aspect of our lives. The need for transformation is, if anything, greater now than ever before. No matter where we look, we see problems that can be solved only through innovation: unaffordable or unavailable health care, billions of people trying to live on just a few dollars a day, energy usage that outpaces the planet’s ability to support it, education systems that fail many students, companies whose traditional markets are disrupted by new technologies or demographic shifts. These problems all have people at their heart. They require a human-centered, creative, iterative, and practical approach to finding the best ideas and ultimate solutions. Design thinking is just such an approach to innovation.

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The Four Phases of Design Thinking 06-25

The Four Phases of Design Thinking

What can people in business learn from studying the ways successful designers solve problems and innovate? On the most basic level, they can learn to question, care, connect, and commit — four of the most important things successful designers do to achieve significant breakthroughs.

Having studied more than a hundred top designers in various fields over the past couple of years (while doing research for a book), I found that there were a few shared behaviors that seemed to be almost second nature to many designers. And these ingrained habits were intrinsically linked to the designer’s ability to bring original ideas into the world as successful innovations. All of which suggests that they merit a closer look.

Question. If you spend any time around designers, you quickly discover this about them: They ask, and raise, a lot of questions. Often this is the starting point in the design process, and it can have a profound influence on everything that follows. Many of the designers I studied, from Bruce Mau to Richard Saul Wurman to Paula Scher, talked about the importance of asking “stupid questions”–the ones that challenge the existing realities and assumptions in a given industry or sector. The persistent tendency of designers to do this is captured in the joke designers tell about themselves. How many designers does it take to change a light bulb? Answer: Does it have to be a light bulb?

In a business setting, asking basic “why” questions can make the questioner seem naïve while putting others on the defensive (as in, “What do you mean ‘Why are we doing it this way?’ We’ve been doing it this way for 22 years!”). But by encouraging people to step back and reconsider old problems or entrenched practices, the designer can begin to re-frame the challenge at hand — which can then steer thinking in new directions. For business in today’s volatile marketplace, the ability to question and rethink basic fundamentals — What business are we really in? What do today’s consumers actually need or expect from us? — has never been more important.

Care. It’s easy for companies to say they care about customer needs. But to really empathize, you have to be willing to do what many of the best designers do: step out of the corporate bubble and actually immerse yourself in the daily lives of people you’re trying to serve. What impressed me about design researchers such as Jane Fulton Suri of IDEO was the dedication to really observing and paying close attention to people — because this is usually the best way to ferret out their deep, unarticulated needs. Focus groups and questionnaires don’t cut it; designers know that you must care enough to actually be present in people’s lives.

Connect. Designers, I discovered, have a knack for synthesizing–for taking existing elements or ideas and mashing them together in fresh new ways. This can be a valuable shortcut to innovation because it means you don’t necessarily have to invent from scratch. By coming up with “smart recombinations” (to use a term coined by the designer John Thackara), Apple has produced some of its most successful hybrid products; and Nike smartly combining a running shoe with an iPod to produce its groundbreaking Nike Plus line (which enables users to program their runs). It isn’t easy to come up with these great combos. Designers know that you must “think laterally” — searching far and wide for ideas and influences — and must also be willing to try connecting ideas that might not seem to go together. This is a way of thinking that can also be embraced by non-designers.

Commit. It’s one thing to dream up original ideas. But designers quickly take those ideas beyond the realm of imagination by giving form to them. Whether it’s a napkin sketch, a prototype carved from foam rubber, or a digital mock-up, the quick-and-rough models that designers constantly create are a critical component of innovation — because when you give form to an idea, you begin to make it real.

But it’s also true that when you commit to an idea early — putting it out into the world while it’s still young and imperfect — you increase the possibility of short-term failure. Designers tend to be much more comfortable with this risk than most of us. They know that innovation often involves an iterative process with setbacks along the way — and those small failures are actually useful because they show the designer what works and what needs fixing. The designer’s ability to “fail forward” is a particularly valuable quality in times of dynamic change. Today, many companies find themselves operating in a test-and-learn business environment that requires rapid prototyping. Which is just one more reason to pay attention to the people who’ve been conducting their work this way all along.

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Why Strategy Execution Unravels—and What to Do About It 03-03

Why Strategy Execution Unravels—and What to Do About It

Since Michael Porter’s seminal work in the 1980s we have had a clear and widely accepted definition of what strategy is—but we know a lot less about translating a strategy into results. Books and articles on strategy outnumber those on execution by an order of magnitude. And what little has been written on execution tends to focus on tactics or generalize from a single case. So what do we know about strategy execution?

We know that it matters. A recent survey of more than 400 global CEOs found that executional excellence was the number one challenge facing corporate leaders in Asia, Europe, and the United States, heading a list of some 80 issues, including innovation, geopolitical instability, and top-line growth. We also know that execution is difficult. Studies have found that two-thirds to three-quarters of large organizations struggle to implement t to understand how complex organizations can execute their strategies more effectively.

 The research includes more than 40 experiments in which we made changes in companies and measured the impact on execution, along with a survey administered to nearly 8,000 managers in more than 250 companies. The study is ongoing but has already produced valuable insights. The most important one is this: Several widely held beliefs about how to implement strategy are just plain wrong. In this article we debunk five of the most pernicious myths and replace them with a more accurate perspective that will help managers effectively execute strategy.

Myth 1: Execution Equals Alignment

Over the past few years we have asked managers from hundreds of companies, before they take our survey, to describe how strategy is executed in their firms. Their accounts paint a remarkably consistent picture. The steps typically consist of translating strategy into objectives, cascading those objectives down the hierarchy, measuring progress, and rewarding performance. 

When asked how they would improve execution, the executives cite tools, such as management by objectives and the balanced scorecard, that are designed to increase alignment between activities and strategy up and down the chain of command. In the managers’ minds, execution equals alignment, so a failure to execute implies a breakdown in the processes to link strategy to action at every level in the organization.

Despite such perceptions, it turns out that in the vast majority of companies we have studied, those processes are sound. Research on strategic alignment began in the 1950s with Peter Drucker’s work on management by objectives, and by now we know a lot about achieving alignment. Our research shows that best practices are well established in today’s companies. More than 80% of managers say that their goals are limited in number, specific, and measurable and that they have the funds needed to achieve them. If most companies are doing everything right in terms of alignment, why are they struggling to execute their strategies?

To find out, we ask survey respondents how frequently they can count on others to deliver on promises—a reliable measure of whether things in an organization get done (see“Promise-Based Management: The Essence of Execution,” by Donald N. Sull and Charles Spinosa, HBR, April 2007). Fully 84% of managers say they can rely on their boss and their direct reports all or most of the time—a finding that would make Drucker proud but sheds little light on why execution fails. When we ask about commitments across functions and business units, the answer becomes clear. Only 9% of managers say they can rely on colleagues in other functions and units all the time, and just half say they can rely on them most of the time. Commitments from these colleagues are typically not much more reliable than promises made by external partners, such as distributors and suppliers.

When managers cannot rely on colleagues in other functions and units, they compensate with a host of dysfunctional behaviors that undermine execution: They duplicate effort, let promises to customers slip, delay their deliverables, or pass up attractive opportunities. The failure to coordinate also leads to conflicts between functions and units, and these are handled badly two times out of three—resolved after a significant delay (38% of the time), resolved quickly but poorly (14%), or simply left to fester (12%).

Even though, as we’ve seen, managers typically equate execution with alignment, they do recognize the importance of coordination when questioned about it directly. When asked to identify the single greatest challenge to executing their company’s strategy, 30% cite failure to coordinate across units, making that a close second to failure to align (40%). Managers also say they are three times more likely to miss performance commitments because of insufficient support from other units than because of their own teams’ failure to deliver.

Whereas companies have effective processes for cascading goals downward in the organization, their systems for managing horizontal performance commitments lack teeth. More than 80% of the companies we have studied have at least one formal system for managing commitments across silos, including cross-functional committees, service-level agreements, and centralized project-management offices—but only 20% of managers believe that these systems work well all or most of the time. More than half want more structure in the processes to coordinate activities across units—twice the number who want more structure in the management-by-objectives system.

Myth 2: Execution Means Sticking to the Plan

When crafting strategy, many executives create detailed road maps that specify who should do what, by when, and with what resources. The strategic-planning process has received more than its share of criticism, but, along with the budgeting process, it remains the backbone of execution in many organizations. Bain & Company, which regularly surveys large corporations around the world about their use of management tools, finds that strategic planning consistently heads the list. After investing enormous amounts of time and energy formulating a plan and its associated budget, executives view deviations as a lack of discipline that undercuts execution.

Unfortunately, no Gantt chart survives contact with reality. No plan can anticipate every event that might help or hinder a company trying to achieve its strategic objectives. Managers and employees at every level need to adapt to facts on the ground, surmount unexpected obstacles, and take advantage of fleeting opportunities. Strategy execution, as we define the term, consists of seizing opportunities that support the strategy while coordinating with other parts of the organization on an ongoing basis. When managers come up with creative solutions to unforeseen problems or run with unexpected opportunities, they are not undermining systematic implementation; they are demonstrating execution at its best.

Such real-time adjustments require firms to be agile. Yet a lack of agility is a major obstacle to effective execution among the companies we have studied. When asked to name the greatest challenge their companies will face in executing strategy over the next few years, nearly one-third of managers cite difficulties adapting to changing market circumstances. It’s not that companies fail to adapt at all: Only one manager in 10 saw that as the problem. But most organizations either react so slowly that they can’t seize fleeting opportunities or mitigate emerging threats (29%), or react quickly but lose sight of company strategy (24%). Just as managers want more structure in the processes to support coordination, they crave more structure in the processes used to adapt to changing circumstances.

A seemingly easy solution would be to do a better job of resource allocation. Although resource allocation is unquestionably critical to execution, the term itself is misleading. In volatile markets, the allotment of funds, people, and managerial attention is not a onetime decision; it requires ongoing adjustment. According to a study by McKinsey, firms that actively reallocatedcapital expenditures across business units achieved an average shareholder return 30% higher than the average return of companies that were slow to shift funds.

Instead of focusing on resource allocation, with its connotation of one-off choices, managers should concentrate on the fluid reallocation of funds, people, and attention. We have noticed a pattern among the companies in our sample: Resources are often trapped in unproductive uses. Fewer than one-third of managers believe that their organizations reallocate funds to the right places quickly enough to be effective. The reallocation of people is even worse. Only 20% of managers say their organizations do a good job of shifting people across units to support strategic priorities. The rest report that their companies rarely shift people across units (47%) or else make shifts in ways that disrupt other units (33%).

Companies also struggle to disinvest. Eight in 10 managers say their companies fail to exit declining businesses or to kill unsuccessful initiatives quickly enough. Failure to exit undermines execution in an obvious way, by wasting resources that could be redeployed. Slow exits impede execution in more-insidious ways as well: Top executives devote a disproportionate amount of time and attention to businesses with limited upside and send in talented managers who often burn themselves out trying to save businesses that should have been shut down or sold years earlier. The longer top executives drag their feet, the more likely they are to lose the confidence of their middle managers, whose ongoing support is critical for execution.

A word of warning: Managers should not invoke agility as an excuse to chase every opportunity that crosses their path. Many companies in our sample lack strategic discipline when deciding which new opportunities to pursue. Half the middle managers we have surveyed believe that they could secure significant resources to pursue attractive opportunities that fall outside their strategic objectives. This may sound like good news for any individual manager, but it spells trouble for a company as a whole, leading to the pursuit of more initiatives than resources can support. Only 11% of the managers we have surveyed believe that all their company’s strategic priorities have the financial and human resources needed for success. That’s a shocking statistic: It means that nine managers in 10 expect some of their organizations’ major initiatives to fail for lack of resources. Unless managers screen opportunities against company strategy, they will waste time and effort on peripheral initiatives and deprive the most promising ones of the resources they need to win big. Agility is critical to execution, but it must fit within strategic boundaries. In other words, agility must be balanced with alignment.

Myth 3: Communication Equals Understanding

Many executives believe that relentlessly communicating strategy is a key to success. The CEO of one London-based professional services firm met with her management team the first week of every month and began each meeting by reciting the firm’s strategy and its key priorities for the year. She was delighted when an employee engagement survey (not ours) revealed that 84% of all staff members agreed with the statement “I am clear on our organization’s top priorities.” Her efforts seemed to be paying off.

Then her management team took our survey, which asks members to describe the firm’s strategy in their own words and to list the top five strategic priorities. Fewer than one-third could name even two. The CEO was dismayed—after all, she discussed those objectives in every management meeting. Unfortunately, she is not alone. Only 55% of the middle managers we have surveyed can name even one of their company’s top five priorities. In other words, when the leaders charged with explaining strategy to the troops are given five chances to list their company’s strategic objectives, nearly half fail to get even one right.

Not only are strategic objectives poorly understood, but they often seem unrelated to one another and disconnected from the overall strategy. Just over half of all top team members say they have a clear sense of how major priorities and initiatives fit together. It’s pretty dire when half the C-suite cannot connect the dots between strategic priorities, but matters are even worse elsewhere. Fewer than one-third of senior executives’ direct reports clearly understand the connections between corporate priorities, and the share plummets to 16% for frontline supervisors and team leaders.

Senior executives are often shocked to see how poorly their company’s strategy is understood throughout the organization. In their view, they invest huge amounts of time communicating strategy, in an unending stream of e-mails, management meetings, and town hall discussions. But the amount of communication is not the issue: Nearly 90% of middle managers believe that top leaders communicate the strategy frequently enough. How can so much communication yield so little understanding?

Part of the problem is that executives measure communication in terms of inputs (the number of e-mails sent or town halls hosted) rather than by the only metric that actually counts—how well key leaders understand what’s communicated. A related problem occurs when executives dilute their core messages with peripheral considerations. 

The executives at one tech company, for example, went to great pains to present their company’s strategy and objectives at the annual executive off-site. But they also introduced 11 corporate priorities (which were different from the strategic objectives), a list of core competencies (including one with nine templates), a set of corporate values, and a dictionary of 21 new strategic terms to be mastered. Not surprisingly, the assembled managers were baffled about what mattered most. 

When asked about obstacles to understanding the strategy, middle managers are four times more likely to cite a large number of corporate priorities and strategic initiatives than to mention a lack of clarity in communication. Top executives add to the confusion when they change their messages frequently—a problem flagged by nearly one-quarter of middle managers.

Myth 4: A Performance Culture Drives Execution

When their companies fail to translate strategy into results, many executives point to a weak performance culture as the root cause. The data tells a different story. It’s true that in most companies, the official culture—the core values posted on the company website, say—does not support execution. However, a company’s true values reveal themselves when managers make hard choices—and here we have found that a focus on performance does shape behavior on a day-to-day basis.

Few choices are tougher than personnel decisions. When we ask about factors that influence who gets hired, praised, promoted, and fired, we see that most companies do a good job of recognizing and rewarding performance. Past performance is by far the most frequently named factor in promotion decisions, cited by two-thirds of all managers. Although harder to assess when bringing in new employees, it ranks among the top three influences on who gets hired. 

One-third of managers believe that performance is also recognized all or most of the time with nonfinancial rewards, such as private praise, public acknowledgment, and access to training opportunities. To be sure, there is room for improvement, particularly when it comes to dealing with underperformers: A majority of the companies we have studied delay action (33%), address underperformance inconsistently (34%), or tolerate poor performance (11%). Overall, though, the companies in our sample have robust performance cultures—and yet they struggle to execute strategy. Why?

The answer is that a culture that supports execution must recognize and reward other things as well, such as agility, teamwork, and ambition. Many companies fall short in this respect. When making hiring or promotion decisions, for example, they place much less value on a manager’s ability to adapt to changing circumstances—an indication of the agility needed to execute strategy—than on whether she has hit her numbers in the past. Agility requires a willingness to experiment, and many managers avoid experimentation because they fear the consequences of failure.

 Half the managers we have surveyed believe that their careers would suffer if they pursued but failed at novel opportunities or innovations. Trying new things inevitably entails setbacks, and honestly discussing the challenges involved increases the odds of long-term success. But corporate cultures rarely support the candid discussions necessary for agility. Fewer than one-third of managers say they can have open and honest discussions about the most difficult issues, while one-third say that many important issues are considered taboo.

An excessive emphasis on performance can impair execution in another subtle but important way. If managers believe that hitting their numbers trumps all else, they tend to make conservative performance commitments. When asked what advice they would give to a new colleague, two-thirds say they would recommend making commitments that the colleague could be sure to meet; fewer than one-third would recommend stretching for ambitious goals. This tendency to play it safe may lead managers to favor surefire cost reductions over risky growth, for instance, or to milk an existing business rather than experiment with a new business model.

The most pressing problem with many corporate cultures, however, is that they fail to foster the coordination that, as we’ve discussed, is essential to execution. Companies consistently get this wrong. When it comes to hires, promotions, and nonfinancial recognition, past performance is two or three times more likely than a track record of collaboration to be rewarded. Performance is critical, of course, but if it comes at the expense of coordination, it can undermine execution. We ask respondents what would happen to a manager in their organization who achieved his objectives but failed to collaborate with colleagues in other units. Only 20% believe the behavior would be addressed promptly; 60% believe it would be addressed inconsistently or after a delay, and 20% believe it would be tolerated.

Myth 5: Execution Should Be Driven from the Top

In his best-selling book Execution, Larry Bossidy describes how, as the CEO of AlliedSignal, he personally negotiated performance objectives with managers several levels below him and monitored their progress. Accounts like this reinforce the common image of a heroic CEO perched atop the org chart, driving execution. That approach can work—for a while. AlliedSignal’s stock outperformed the market under Bossidy’s leadership. However, as Bossidy writes, shortly after he retired “the discipline of execution…unraveled,” and the company gave up its gains relative to the S&P 500.

Top-down execution has drawbacks in addition to the risk of unraveling after the departure of a strong CEO. To understand why, it helps to remember that effective execution in large, complex organizations emerges from countless decisions and actions at all levels. Many of those involve hard trade-offs: For example, synching up with colleagues in another unit can slow down a team that’s trying to seize a fleeting opportunity, and screening customer requests against strategy often means turning away lucrative business. The leaders who are closest to the situation and can respond most quickly are best positioned to make the tough calls.

Concentrating power at the top may boost performance in the short term, but it degrades an organization’s capacity to execute over the long run. Frequent and direct intervention from on high encourages middle managers to escalate conflicts rather than resolve them, and over time they lose the ability to work things out with colleagues in other units. Moreover, if top executives insist on making the important calls themselves, they diminish middle managers’ decision-making skills, initiative, and ownership of results.

In large, complex organizations, execution lives and dies with a group we call “distributed leaders,” which includes not only middle managers who run critical businesses and functions but also technical and domain experts who occupy key spots in the informal networks that get things done. The vast majority of these leaders try to do the right thing. Eight out of 10 in our sample say they are committed to doing their best to execute the strategy, even when they would like more clarity on what the strategy is.

Distributed leaders, not senior executives, represent “management” to most employees, partners, and customers. Their day-to-day actions, particularly how they handle difficult decisions and what behaviors they tolerate, go a long way toward supporting or undermining the corporate culture. In this regard, most distributed leaders shine. As assessed by their direct reports, more than 90% of middle managers live up to the organization’s values all or most of the time. They do an especially good job of reinforcing performance, with nearly nine in 10 consistently holding team members accountable for results.

But although execution should be driven from the middle, it needs to be guided from the top. And our data suggests that many top executive teams could provide much more support. Distributed leaders are hamstrung in their efforts to translate overall company strategy into terms meaningful for their teams or units when top executives fail to ensure that they clearly understand that strategy. And as we’ve seen, such failure is not the exception but the rule.

Conflicts inevitably arise in any organization where different units pursue their own objectives. Distributed leaders are asked to shoulder much of the burden of working across silos, and many appear to be buckling under the load. A minority of middle managers consistently anticipate and avoid problems (15%) or resolve conflicts quickly and well (26%). Most resolve issues only after a significant delay (37%), try but fail to resolve them (10%), or don’t address them at all (12%). Top executives could help by adding structured processes to facilitate coordination. In many cases they could also do a better job of modeling teamwork. One-third of distributed leaders believe that factions exist within the C-suite and that executives there focus on their own agendas rather than on what is best for the company.

Many executives try to solve the problem of execution by reducing it to a single dimension. They focus on tightening alignment up and down the chain of command—by improving existing processes, such as strategic planning and performance management, or adopting new tools, such as the balanced scorecard. These are useful measures, to be sure, but relying on them as the sole means of driving execution ignores the need for coordination and agility in volatile markets. If managers focus too narrowly on improving alignment, they risk developing ever more refined answers to the wrong question.

In the worst cases, companies slip into a dynamic we call the alignment trap. When execution stalls, managers respond by tightening the screws on alignment—tracking more performance metrics, for example, or demanding more-frequent meetings to monitor progress and recommend what to do. This kind of top-down scrutiny often deteriorates into micromanagement, which stifles the experimentation required for agility and the peer-to-peer interactions that drive coordination. Seeing execution suffer but not knowing why, managers turn once more to the tool they know best and further tighten alignment. The end result: Companies are trapped in a downward spiral in which more alignment leads to worse results.

If common beliefs about execution are incomplete at best and dangerous at worst, what should take their place? The starting point is a fundamental redefinition of execution as the ability to seize opportunities aligned with strategy while coordinating with other parts of the organization on an ongoing basis. Reframing execution in those terms can help managers pinpoint why it is stalling. Armed with a more comprehensive understanding, they can avoid pitfalls such as the alignment trap and focus on the factors that matter most for translating strategy into results.

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