Gender Partnership: Beyond Equality and Equity

Equality, Equity, and Partnership

EQUALITY: The state of being equal in rights, treatment, quantity, or value to all others in a specific group.
EQUITY: Actions, treatment of others, or a general condition characterized by justice, fairness, and impartiality.
PARTNERSHIP: Cooperation between people or groups working together toward a common goal.

From its inception, the conversation about how women are treated in the workplace has centered on equality – equal pay for equal work, equal treatment, and so on. More recently, while equality continues to be an issue, we have seen an added concern for equity – fairness, consideration, respect. Very lately, some companies have begun to appreciate the possibility and opportunity that gender partnership can provide.
Research has shown that companies with a higher proportion of women in senior management and leadership positions are on average 48 percent more profitable and show a 37 percent higher return on equity than companies with fewer senior women. Closer scrutiny reveals that among companies with more women in senior positions, the most successful have taken on changing not only the quantity of women in relation to men, but the quality of the relationship between them, starting at senior levels and extending throughout the organization.
The most important quality of that relationship is a higher partnership that goes beyond cooperation and common goals. True gender partnership yields a synergy wherein what is created and produced by executives in these organizations is far greater than the sum of the talents that individual men and women bring to the table.
To understand the power of Gender Partnership, we have to kill the assumption that equality and equity – that is, equal treatment, equal rights, fairness, and impartiality — mean treating people as if they were all the same. This is particularly true in the realm of gender, where the innate differences between men and women are often striking.
Recent neurobiological research has shown that much of the folk wisdom about how men and women differ is, in fact, based on real differences in their brains and the way they react to events and other stimuli. (Of course these are generalizations – a given individual may be more or less like to have the characteristics we’ll look at below.)
Men’s and women’s brains have evolved very differently. At the risk of over-simplifying, we can say that men’s brains are more specialized, with much of their brain activity occurring in the areas of the left hemisphere where skills used for hunting and fighting are located. These skills include visual-spatial talents and the ability to single-mindedly focus on the task at hand. Women, by contrast, have much more “balanced” brain patterns, with talents distributed over larger areas and across both hemispheres. In addition, the language areas of women’s brains are more developed, and more of the female brain is devoted to language. Thus even men who have strong language skills tend to speak less and be very narrowly focused, while women with their multiple-focus brains will notice and think about more things, especially more details.
Here are some examples of these differences (bear in mind that these are generalizations based on averages and do not apply across the board to any individual man or woman):

    •  Human relationships: Women communicate differently than men, focusing on mutually workable solutions, utilizing non-verbal cues, and showing greater empathy. Men tend to be more task-oriented in their communication, talk less, and prefer working in isolation.
    • Brain hemispheres: Men tend to process better in the left hemisphere of the brain (emphasizing logical, analytical, and objective skills), while women tend to process equally well in both hemispheres. Thus men tend to approach problem-solving from a linear, task-oriented perspective, while women typically solve problems less linearly and are more aware of feelings when communicating.
    • Reaction to stress: “Fight or flight” is commonly considered the normal response to stress, but — as with many other behaviors — what is considered normal is, in fact, the male response. By contrast, women tend to approach stressful situations with a “tend and befriend” response. These differing reactions to stress are rooted in hormones. Everyone experiences the release of the hormone oxytocin (the “nurturing hormone during stress. However, women’s higher estrogen levels potentiate the effects of oxytocin while men’s higher testosterone levels reduce these effects. Thus in a conflict situation, women in a business setting will be more likely to seek common ground and alignment rather than engage in a “who’s right” debate; this is likely to lead to more creative solutions and greater buy-in going forward. [NICELY PUT!]
    •  Language: Two sections of the brain responsible for language were found to be larger in women than in men, supporting the view that women are more effective communicators. In addition, Men typically only process language in their dominant hemisphere, whereas women process language in both hemispheres.
    • Emotion: The deep limbic system, which is involved in emotion, is typically more developed in women than in men, which allows them to be more in touch with and expressive of their feelings, which promotes bonding with others.
    • Pain: Men and women perceive pain differently. Women are generally more resistant to pain medication, including morphine, and are more likely to vocalize and seek treatment for their pain. Researchers have discovered that in men the right amygdala is activated during pain, while in women it is the left amygdala. The right amygdala has more connections with areas of the brain that control external functions, while the left amygdala is more connected to internal functions. This may explain why women perceive pain more intensely than men. More importantly in the business setting, it means that even under extreme stress, women will tend more to look inward for solutions rather than to strike out or compete.

Based on these and other gender-related differences, it is clear that men and women bring very different and often complementary talents to the workplace. Any system of supposed gender equity or gender equality that ignores these differences is unlikely to succeed — and will cost the organization the possibility of maximizing the contribution of every individual.
If a company is determined to maximize those contributions, then equity and equality are necessary but not sufficient. What is needed is Gender Partnership. For purposes of this paper, I want to go beyond the dictionary definition of partnership. I propose to define partnership as follows:
Partnership occurs when a gender-balanced group of men and women share a common vision and a common set of values with a commitment to maximizing the skills, innate talents, and synergy of the group.
To elaborate on this proposition we need to reference two important books, The Wisdom of Crowds by James Surowiecki and Drive by Dan Pink . In the first, Surowiecki does a thorough job of documenting the validity of the folk wisdom that “all of us is smarter than any of us.” His work shows that a group, under the right conditions, will always produce solutions to problems that are better – smarter, more creative, more executable – than would have been produced by its smartest members working on their own.
The right conditions include:

    • Diversity of opinion Each person brings their own information, even if it’s just an eccentric interpretation of the known facts.
    • Diversity of experience & expertise The group includes novices as well as experts, rookies as well as veterans.
    • Independence People’s opinions aren’t determined by the opinions of those around them.
    • Decentralization People are able to specialize and draw on local knowledge.
    • Aggregation Some mechanism exists for turning private judgments into a collective decision.

In Drive, Dan Pink takes on the question of intrinsic vs. extrinsic motivation. He argues convincingly that when a person’s financial survival needs are not at stake, external motivators such as money become at best irrelevant and at worst de-motivators. More importantly for our purposes, he shows that the most effective intrinsic motivators are purpose, mastery, and autonomy. When people have a shared sense of purpose, are given opportunities to learn and master skills and ideas, and are allowed a high degree of self-management, they are more productive, more innovative, and happier than when these three factors are not present.
To return to my proposed definition of partnership, it seems clear from Surowiecki and Pink’s arguments and from the neurobiological data that gender partnership will maximize the value-add that each gender brings to the workplace and is more likely to yield high performance than any approach that simply aims for “equality,” ignoring valuable gender differences in favor of the “we’re all the same” approach.
One last note on Gender Partnership: It should be obvious that after thousands of years of male dominance in societies that valued strength and specialization over feeling and generalization, the movement for Gender Partnership is not taking off from a standing start. In the early years of feminism, both men and women tended to see that struggle as the property of women. When the fight in the workplace was for equity and equality, this was a valuable approach as partnership was not even possible until women empowered themselves.
But if the fight is for gender partnership, men will need to step up and lead — not instead of women but alongside them. History has shown that in struggles of this kind, the ruling class has stayed in power due to the actions of the few who are determined to hold onto their power and the in action of the many who are unconscious, apathetic, or unaware of the cost at which their hegemony is bought. It is only when leaders emerge among the ruling class (in this case, men) to partner with the leaders of the disenfranchised (in this case, women) that real progress is made.

THE POSSIBILITIES OF FUTURES

“The object of science is prediction and control” is a sentence I heard in every graduate and undergraduate course I took during my education in the 1960’s, and lest you think this is a quaint bit of outmoded lore, a Google search today on the phrase “prediction and control” yields 10.4 million hits from areas as diverse as angel investing, physics, and botany.

As a student it was impressed on me that Psychology would never be able to take its place among the sciences until we could predict and control human behavior. Later I found the same idea expressed in management theory going back to Frederick Taylor’s Principles of Scientific Management, published in 1911. Taylor, considered the father of “scientific management” advocated four principles all clearly aimed at the elusive goal of prediction and control:

  1. Replace rule-of-thumb work methods with methods based on a scientific study of the tasks.
  2. Scientifically select, train, and develop each employee rather than passively leaving them to train themselves.
  3. Provide “Detailed instruction and supervision of each worker in the performance of that worker’s discrete task”
  4. Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks.

Today this raises two important questions: What has been the impact of this obsession with prediction and control in business and should prediction and control really be the goal in the 21st Century?

To start, we need to separate the mantra into its parts – prediction and control:

Prediction

As used in the worlds of science and business, prediction is a statistical abstraction. To predict, you take data from some portion of the past – the past year, quarter, month, etc., determine the trend of the data over time, and then extend it into the future:

 

A problem with this is that while Statistics is a rigorous mathematical discipline, the application of the method in practice often lacks the requisite rigor. The validity of a trend is determined in part by factors such as the number of data points, the degree of variance of the data points around the trend line, etc. Furthermore, subjective factors may, intentionally or unintentionally, influence the analysis, e.g. how far back the data used to determine the trend are collected. There is also the issue of whether even the most rigorous analysis of past data really indicates anything about the future – implicit in the use of trend analysis to say anything about the future is the assumption that nothing significant is going to change. To quote the caveat in financial advertising, “past results are not a guarantee of future performance.”

In practice, of course, prediction is not applied so narrowly. Rather, the future is seen to include a range of possible outcomes, a narrow range of results that are considered highly likely on the positive side (predictable) and a range of less probable outcomes above what is predictable (stretch) or below (problem).

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What is critical to notice about this whole system is that the past is the template on which the future is created.

Control:

The objective of all this data-based manipulation is meant to be control of the future and is based on the assumption that the future is always an extension of the past. In other words, nothing that has not existed can exist, except through a process of improving on what has gone before. Improvement can range from discrete, incremental changes through continuous improvement, big improvements into the arena of stretch goals, all the way up to paradigm shift, when the new paradigm is built on an old one (e.g., the shift  from carriages to automobiles where the latter were seen as “horseless carriages,” and electric lights are still measured in “candle power.”)

This entire paradigm of prediction and control made sense when the pace of change was slow and particularly since technological change consisted largely of improvement on existing technology (the first automobiles were, in fact, build on the structure of carriages, and incandescent light bulbs, like candles, operated by heating a filament that was very like the wick of a candle). However, it is now axiomatic to say that since the middle of the 20th Century the rate of change – business change, technological change, and social change – has been increasing at a constantly accelerating rate, and discontinuous change (Clay Christensen’s “disruptive technology”) has become commonplace.

In point of fact, prediction was always a statistical inference based on a shaky assumption, and control a complete illusion. The makers of buggy whips in the early 1900’s could predict the demise of their industry, and could do nothing to control it. The assumption behind prediction and control, however, namely that the future is always continuous with the past, lives on despite all the evidence for futures of products, markets, and industries that arise de novo and create new futures all the time. Perhaps it is time to put the myth of prediction and control to rest.

 

As Christensen, Jim Collins, and others have shown, the most successful companies in today’s world include a disproportionate number of incidences of the creation of a future that was unpredictable from the past at the time they were created. In order to understand this fully, it is necessary to appreciate an interesting quirk of human perception. To paraphrase Kierkegaard, life is understood backward even though it can only be lived forward. Any change, however discontinuous, viewed in hindsight will appear to be the result of a more-or-less continuous process. You may break a new trail up a mountain – one that was not visible from the bottom because it did not exist – you make choices at every moment about where to go and how to proceed; then when you reach the top and look down, the trail will be evident and seem like it was the result of a process or a plan. Every created future will look in hindsight like it was going to happen anyhow and it’s important not to be fooled by that.

CREATING THE FUTURE FROM A BLANK CANVAS

Based on the above, we can say that, in their usual way of operating, companies design their futures (strategy and tactics) by improving on or fixing their history to date. So what is the alternative?

We can start with confronting the reality that the future is a page that has not yet been written. we can say that there is an existing field (paradigm) that we may call historicism that calls for the future to be designed as a variation (presumably an improvement) on the past, whether the improvement is slight (incremental improvement) or radical (paradigm shift, revolution). In all cases, in this paradigm the perceived past operates as a constraint on what is possible in the future.

While conventional wisdom may hold that this historicism is the only possible access to the future, I would propose that it is only one approach. If we hold the future as an open possibility that will only be realized when we interact with it or create it (cf. Schrödinger’s cat), then what is the most effective way to design a future that we want rather than inheriting a future that is, at best, better than, but a variation on, what we now have?

In an earlier white paper on this blog[1] we examined how language can create what in Physics are called “fields” – arenas of engagement where the probability of designed events is determined by intentional acts of speech called declarations, requests, and promises – language can create contexts that are discontinuous from the past – that honor the successes and lessons of the past without being limited by it, and then fulfill those futures in action and results.


[1] What Does Language Create?, 2013

WHAT DOES LANGUAGE CREATE?

Early in the 19th Century there was a quiet revolution in the still-young field of physics. An English scientist named Michael Faraday (1791-1867), inventor of the electric motor and discoverer of benzene, proposed a remarkable reversal of conventional thinking. That reversal was described by a modern physicist as follows:

 According to Faraday, rather than looking upon the potential field of force that could be exerted by a bit of matter on other matter…as a secondary derivative property of that matter, one should rather consider the continuous field of potential force as the elementary feature.

 He then viewed the “discrete particle” aspect as a secondary, derivative property.  According to the field theory proposed, the real stuff of the material world is the abstract (i.e. not directly observable) aspect associated with the potential field of force of matter.

 This view challenged a prevailing philosophic stand, presently known as “naive realism,” which asserts that only that which we human beings directly perceive to be there, outside of us, is the reality from which a true description must follow.  Faraday’s abstract approach, on the other hand, took the fundamental reality to be at a level underlying that of human precepts.[1]

It took over a hundred years for the true genius of Faraday’s view to be appreciated. It was not until the development of quantum field theory in the 1930’s and 40’s that the view that fields might be the “real stuff of the world” began to be accepted among physicists, to the point that, today, “According to quantum field theory, fields alone are real. They are the substance of the universe and not “matter.” Matter (particles) is simply the momentary manifestations of interacting fields which, intangible and insubstantial as they are, are the only real things in the universe.”[2]

 But what are these elusive phenomena called fields? We cannot observe them directly, even with the most sophisticated of instruments. We recognize them only by their effects. Newton, observing an apple falling from a tree, introduced the field, gravitation, which he took to be, as Faraday put it, a secondary derivative property of matter. Later Einstein postulated that the gravitational field was not a property of matter at all, but the result of space-time curving in response to matter. Thus gravity for Einstein was not a force, but a medium, an agency through which something is accomplished.

 The other field with which we are most familiar is magnetism, the presence of which we infer from, for example, iron filings lining up in rows instead of scattering themselves randomly.

 The dictionary defines a field as

  • an area or division of an activity
  • the sphere of practical operation outside a base
  • a space on which something is drawn or projected
  • a region or space in which a given effect exists
  • a complex of forces that serve as causative agents in human behavior
  • a particular area in which the same type of information is regularly recorded.

 Synonyms for field are: realm (as in the realm of science), sphere, province, or clearing.

 A prominent modern physicist has said:

 Although we know a great deal about the way fields affect the world as we perceive it, the truth is no one really knows what a field is. The closest we can come to describing what they are is to say that they are spatial structures in the fabric of space itself. [3]

 For purposes of our work, we can take a probability-based definition of a field as “an area of the world where some things are more likely to happen and/or others are less likely to happen.” Thus in a magnetic field, iron filings are more likely to line up than they are in the absence of such a field. In the gravitational field of earth, objects are more likely to fall down and less likely to float than they are in outer space, where the gravitational field is weak or non-existent.

 More recent thinking in quantum physics, chaos theory, and elsewhere has led us to believe that fields are far more pervasive than was previously thought. Field theory may also account for the impact of “soft” phenomenon such as culture, vision, commitment, etc. in human behavior.

 The philosopher Martin Heidegger said “Language is the house of being – in it [humanity] dwells.” Being itself is without form and, according to Heidegger, exists outside of time[4], so if the position regarding being and language is correct, then language must also be outside of time.

 This is a counter-intuitive position – we use language every day, and clearly we use It in time, in that we use it to describe things and actions that exist in time, whether present or past. There is, however, another, less common kind of language that occurs in the present, but neither describes or refers to any thing. According to Heidegger, when Being interacts with Time, Being occurs as presencing, so we can say that this kind of language, occurring in the Present, presences. Said slightly more understandably, this kind of language brings something into Being (existence) that did not exist before it was spoken (languaged).

 While this may sound theoretical and obscure, instances of this type of languaging are not uncommon. When a clergy person or judge says “I pronounce you married,” a marriage occurs in that utterance – what was two unmarried people becomes by that speaking alone a married couple. Other examples include “you’re hired,” “you’re fired,” “guilty,” not guilty,” etc.

 In each of these cases it Is what J. L. Austin termed a speech act (in this case a declaration) that creates an alteration in being – someone who previously would have said “I am single” now says “I am married,” for example.

 To return to our discussion of field theory, and continuing to use the declaration of marriage as a case in point, the declaration creates a field in which certain things are more likely to happen (filing joint tax returns, living together, etc.) and other things are, presumably less likely (dating other people, making unilateral life decisions, etc.). Thus, a declaration is a linguistic act that creates a field in the same way that a magnet is a physical object that generates a field.

 In the instance of language, the field that is created can be called a “context,” or a “possibility” which must then interact with the physical world in order to have an effect. Again the analogy to magnetic fields is persuasive – a magnet will have no effect unless it interacts with a metal like iron, and the presence of the field will be known by its effect. Thus Heidegger’s dictum that “there is no being without being-in-the-world.”[5] The means by which a declaration of a context or possibility comes into the world is a class of speech acts called performatives,” including requests, offers, invitations, demands, promises, etc. In our example, the marriage vows and other commitments serve this purpose.

 A simpler example can be seen in the following instance: Fred invites George to lunch at noon next Tuesday at a particular restaurant, and George accepts the invitation. Prior to this simple conversation, “lunch next Tuesday at noon at Chez Canusee did not exist. After the conversation, it exists as a future created by a request (Fred’s invitation) and a promise (George’s acceptance), to be fulfilled (manifested in reality) several days hence. In the field created by that conversation, some things are more likely to happen – George and Fred putting the date into their respective diaries, each leaving his office at a time determined by the distance to the restaurant, both showing up at the appointed place and time – that would not otherwise have happened, and other things are less likely – either man scheduling a meeting for that date and time, for example.

 The development of this ability to create a field by means of language can have world-changing effects – when John F. Kennedy committed to sending a man to the Moon and bringing him back safely by the end of the decade of the 1960’s he set in motion events that not only outlived the speaker who generated the field, but changed the world profoundly. Similarly for utterances of Martin Luther King, Jr., Mohandas Gandhi, Winston Churchill, and others we consider world-changers.

[1] From Ideas of the Theory of Relativity by Mendel Sachs, 1974 (emphasis added)

[2] Gary Zukav, The Dancing Wu Li Masters, 1979

[3] Michael Talbot, Beyond the Quantum, 1986

[4] “Nowhere among things do we find being.  Everything has its time.  But being is not a thing, is not in time.” – On Time and Being

[5] Being and Nothingness

Intellectual Property is Intellectual Theft

The 19th Century French Anarchist Jean-Pierre Proudhon said “property is theft.” While there are logical and philosophical problems with this statement where physical property is concerned, I think it is very defensible with regard to so-called intellectual property – I assert that intellectual property is intellectual threat.

Despite Proudhon’s, Marx’s, and others’ attempts to challenge it, the doctrine of physical property dates back to the Roman Empire and before. When a person owns, say, a piece of land or a horse or a barn, that property is theirs to do with as they please as long as the title to the property is sanctioned by law. Since Rome that principle has been amended from time to time – zoning laws restrict what can be done with land and animal cruelty laws make the right to treat your horse as you please less than unlimited. Likewise the definition of property has changed – people, for example, are no longer legitimately treated as property in much (though not all) of the world – but the principle that there is such a thing as property and ownership remains in force.

For centuries, however, the products of intellect – thinking, problem-solving, etc. – were not considered property. History, for example, lived in oral tradition passed from one generation to another, and throughout the Epic of Gilgamesh, the books of the Hebrew Bible, and the Gospels of the Christian tradition we find the same stories told and retold with differing details and plots. Similarly the guilds of the middle ages operated to promote rather than to restrict the dissemination of knowledge and skill. As apprentices were trained and became journeymen they traveled to work with other masters with the goal of attaining mastery themselves. This cross-pollination of crafts operated to have what we would call today “best practices” spread around.

At the same time, though, another way of preserving and communicating knowledge was developing. In ancient Greece, Rome, and Alexandria, philosophers, scientists, and theologians operated very much along the guild model – they taught in public, students went on to develop their teachers’ ideas, written records were made, stored, and shared, for example in the Library at Alexandria. With the fall of the great empires the Western World entered the Dark Ages, so-called because learning and intellectual development, along with economic development, virtually stopped.

Virtually, but not completely. Priests and monks studied and copied down the canons of religion, philosophy, and as will always happen, some began to develop these ideas further and ultimately to teach them – first in seminaries and then in universities, the latter eventually becoming available to the elite of secular society as well as to the Church. There was a crucial difference, however, between the academies of the ancient world and the universities of the Middle Ages. Instead of being an open exchange of learning, the medieval institutions were the province of a priesthood of knowledge dedicated to maintaining its hold on the ignorant masses by making knowledge the exclusive province of an elite few.

Initially most of this elite were, in fact, priests and monks. A combination of demand on the part of the ruling classes and need on the part of the universities for financial support, however, brought more and more laymen (and virtually without exception they were men) into the ranks of the initiated and practices developed to protect the exclusivity of this knowledge. Examples of such practices are patents, peer review, the development of publications available only to the “qualified,” and the institutionalization of the guild system of apprentices, journeymen, and masters as undergraduates, graduate students, and “doctors” (from the Latin docere, to teach). Implicit in this whole system is the notion that the thinker has a proprietary relationship to the thought.

Where intellectual product is concerned, that foundational notion is questionable at best. Yes, if I build a device that has not been built before or is a significant advance over what exists, and if I stand to make money from that invention, it is arguable that I deserve to be able to protect my creation. But what if I develop an idea or a theory that significantly advances human knowledge? Einstein acknowledged the work of Michelson, Lorentz, and others and there is an ongoing debate about Einstein’s priority in developing the theories of relativity. This has long been recognized in this quote from a letter from Isaac Newton to Robert Hooke in 1676: “If I have seen a little further it is by standing on the shoulders of Giants.” The turn of phrase predates Newton by centuries – the 12th century theologian and author John of Salisbury used a version of the phrase in 1159. “We are like dwarfs sitting on the shoulders of giants. We see more, and things that are more distant, than they did, not because our sight is superior or because we are taller than they, but because they raise us up, and by their great stature add to ours.” The phrase may even pre-date John of Salisbury, who was known to have adapted and refined the work of others.

The point is that there is probably no such thing as a completely original idea – every “new” thought, every “new” idea builds on the centuries of thinking that has gone before it, so how can the products of intellect be claimed as “property?”

This question was of largely academic interest until the development of technology made it of wider importance. When I was in college it was interesting to debate whether Darwin or Russell thought of the idea of natural selection “first,” but no one really cared. Anyone who went into academics knew that there were a few peer-reviewed journals, that their acceptance rates were low, and that tenure depended on passing muster with those journals – publish or perish. The journals did not pay for their content (or pay their reviewers), and once you published they owned the rights to your work to the extent that if you wanted reprints of your own material you had to buy it from them. It goes without saying that anyone who wanted copies of your work had to pay – the publisher. Unless it was a book, the author never saw a dime.

That system still exists today, but it exists in a much different context. First of all, the need for specialized publishers of academic material no longer exists. A century, or even fifty years ago, academic papers were written by hand or on a typewriter, and special fonts and typesetting was needed to accommodate Greek letters, symbols, and equations. Secondly, in order for an article or paper to be made available it had to be printed and bound, and the publications it was in had to be marketed and sold. All of this served the medieval purpose of keeping knowledge the province of an anointed few, and it has been subverted by that game-changer, the Internet.

Today anyone can publish anything and subject it to the marketplace of ideas to determine its value. With the availability of journals online, articles can be downloaded and reproduced at will, and the prevailing outlook on the Internet favors the free exchange of information. Academia, however, is clinging to its historic positions – tenure still depends on a few hard-to-break-into journals, and publishers still consider the fruits of others’ efforts their property.

This brings us to the case of Aaron Swartz. Swartz was an Internet pioneer, founder of Reddit and other web companies. On January 6, 2011, Swartz was arrested by a federal agent in connection with the systematic downloading of academic journal articles from JSTOR, a digital library that is a repository for digitized academic journal articles. Federal prosecutors eventually charged him with two counts of wire fraud and 11 violations of the Computer Fraud and Abuse Act,charges carrying a cumulative maximum penalty of up to 35 years in prison, a fine of more than $1 million. On January 11, 2013, two years after his arrest, Swartz hanged himself in his Brooklyn apartment, unable to face these draconian penalties.

There are a lot of details to the Swartz case, of course, but one question stands out for me. Bernie Madoff stole an estimated $18 billion from the investors he duped. He was sentenced to 150 years. Aaron Swartz was liable for a sentence of 35 years, or 23% of Madoff’s sentence – in what universe does downloading a few journal articles equal $4 billion (which is 23% of $18 billion)? Put another way, how is downloading a few articles worth a life? I know Swartz chose to kill himself, but he made that choice under threat of 35 years in Federal Prison. If intellectual property is intellectual theft, what was stolen in this case was a young man’s life; had he chosen otherwise it would have been his future that was stolen and for what? Without knowing what papers he downloaded, or for what reason, I can be certain of two things: First, not one of the ideas in those papers was original – every one built on the work of others – so they did not belong to the authors, much less the publisher and second, not one of them was worth the price Aaron Swartz paid.

 

Leadership, Theory, and Being

The professional networking site LinkedIn has a thread going for “the best advice I ever got” and hundreds of people have responded to it. All the entries I’ve read are sincere, heartfelt, and above all they illustrate the adage “everything I need to know I learned in Kindergarten.” All the advice cited was familiar – anyone reading it would have heard this advice numerous times in their career. It also misses the point.

Years ago I was a young psychotherapist studying Family Systems Therapy. As part of that study I attended a conference at which a prominent therapist – one of the giants of the field – had taken on an unusual challenge: He had offered to do a demonstration in front of a conference session – to work with a family he’d never met, knew almost nothing about, and to sweeten the pot he requested that it be a family with whom a therapist was stuck – the therapy had reached an impasse. In other words, he took on what was probably a most difficult situation, and the difficulty was compounded by the fact that he would do this demonstration in front of an audience of about 400 therapists.

Dr. M. worked with the family for about 90 minutes and achieved truly remarkable results – insights, breakthroughs, emotional opening up – the psychotherapist’s trifecta. He then thanked the family and dismissed them and opened up a Q and A session with the audience. If anything, Dr. M was even more brilliant in the Q and A than he’d been in the therapy session. Every question elicited an answer that was concise, insightful, and powerful in the potential it held for the therapists in the audience to learn. All in all a bravura performance.

After the workshop there was a reception and here again Dr. M was more than generous in making himself available for questions and discussion. Toward the end when most people had left, I approached him and complimented him on his work that day and particularly in how he answered questions. He was grateful and modest and, in a moment of candor, said that there was just one thing that bothered him about the answers he gave: “not a word of it was true” he said. Pressed for an explanation of this astonishing remark, he said that none of what he said in response to the questions was present for him during the therapy session – he was just there, doing and saying what occurred to him to do and say. In the Q and A and the reception, he explained what he had done, but, he pointed out, explaining something after the fact is different from doing it in the moment.

That confusion – between the description or explanation of high performance and high performance itself can be crippling to managers and leaders aiming to create a High-Performance Organization (HPO). Don’t get me wrong – if all those therapists went out and did what Dr. M described himself as doing, they would produce some good results, but none of them would produce the brilliance that Dr. M displayed. The difference is that their behavior would be sourced from the explanations while his came from his being present in the moment with all of his knowledge and tools operating in the background.

The great jazz saxophonist Charlie (Bird) Parker was once asked how he played so brilliantly. His reply: “First you learn your instrument, then you forget all that shit and just wail.” Dr. M was a master of his instrument – himself and all of his learning, training, and experience. He trusted that all that would be available (“ready to hand in Martin Heidegger’s terms). To work from the descriptions and explanations, they would have to be “present at hand” or, said another way the listeners to Dr. M would have to be thinking about what to do.

To apply this thinking to leadership, the best leaders are not consciously applying theory but at the same time are drawing upon everything they know, have learned, and have experienced. Most importantly, they are being leaders, not becoming leaders, and in being leaders everything they know and every experience they have had is available to them.

More on being leaders in coming blog posts.

The General Manager as Coach of the Team

What will the future world of- business and industry look like? Who can know? The great changes taking place in the world make all forecasts ridiculous and confuse most of the forecasters. There is only one item on which there is nearly total agreement That the future has more surprises in store for us. Therefore, there are those who construct their theories on the basis of unexpected changes — which must be expected. The management theory of Dr. Edward Gurowitz, for instance, is one of them.

The manager of the future will manage changes, not the content of the work or its processes. He who will succeed in the team of’ the future will invent a new generation of products and matching markets, before the present generation completes its run. In practice, at the moment that a product begins to succeed the manager will already turn to Its successor, which will not be an improvement of the existing product but something new from another sphere.

To succeed in something so undefined and lacking in certainty as change, the character of the manager must also change. No longer an inflated manager who knows all the answers, asserts Gurowitz, but a new one who does not hesitate to ask questions. No longer the manager who relies on his wealth of’ past experience, but a colleague who works with an orientation toward the future. The business organization of the future will be run by a manager who is capable of discerning opportunities for the organization that are not yet apparent to the eye. In other words: the manager of the future will be an artist and an inventor. Being outstanding himself, however, will not be enough. He will also have to imbue his associates with the spirit of excellence

Dr. Gurowitz defines the sphere of his expertise as “consulting to management performing pioneering work,” or if you prefer:. “working with companies that want to obtain results which go well beyond what might be expected from past experience.”

The secret is buried in “paradigm,” a word more characteristic of cogitative expressions. A paradigm is that totality of assumptions, beliefs, customs and habits, that influence us automatically and determine acceptance of the reality in which we live. Since it is automatic, it leads us into thought without self-examination. In the realm of management this is characterized by sentences like: “that’s how we do it” or “that’s what I am used to.” If we change the paradigm, explains Gurowitz, then our actions will also change. If we operate within the framework of a new paradigm then we have a reasonable chance to achieve far-reaching results, maybe even to do pioneering work.

LIKE A JAPANESE WATCH

Here is an example for a paradigm that led to one of the most unfortunate management decisions in the history of industry:: During the 1950’s a young researcher in the Swiss Institute for the Watch Industry suggested a novel watch, which would show time by simply showing numbers, without any moving mechanical parts, wheel or spring.

“The industry managers said that would not be a watch” relates Gurowitz with enjoyment. “That is not how one would make a watch. They didn’t even take out a patent on the idea.” At the

Electronic I Industries Meeting, which took place that year, the Japanese company “Seiko” and American “Texas Instruments” both adopted the idea and started to produce quartz watches. The rest is well known: Switzerland, which controlled 96% of the world market in watches at one time, barely holds on to about 4% of it today. “The Swiss” says Gurowitz-, “couldn’t see beyond their particular paradigm.”

A paradigm, he explains, inhibits vision and does it systematically: “take a look at all the young people who have just finished their university studies and are going to conquer the world. What happens to them after a few years of working? Where has their great dream disappeared to? The paradigm destroyed their vision.”

Perhaps reality proved to be stronger than the dream and they had to compromise with its requirements? Gurowitz: “No, that is normal for dreams. The whole State of Israel was founded on a dream.” How to change a paradigm? First of all, people must be brought to understand and recognize its restrictive function, says Gurowitz. What we call “reality” is not a permanent thing. Reality draws its power from the fact that it is not examined or questioned. He has a true personal story relating to that: IBM and the personal computer market, to which he owes his bright career.

Ed Gurowitz, 49, is a Ph.D. in psychology, who did research of the mind and worked in clinical psychology when he was invited, in 1981, to consult to the brain trust at IBM. The

company was then shaking I from the hit it had to absorb, because of one of the greatest errors in the history of the industry: the refusal to enter into the sphere of personal computers, out of a belief that the P.C. was an expensive toy that nobody would want to buy. The brain trust was charged with finding ways to return IBM to its proper place at the top of the pyramid. It was Dr. Gurowitz’s first experience in working with large organizations, but he remained with them from then on. His clients include giants like American Express, A.T.&T., British Petroleum and other such names from the ‘Fortune 500” list. It Is no surprise then that Gurowitz believes the future belongs to the multi-national giants. “Already today” he says, “they, not the governments, rule the world.”

This is Dr. Gurowitz’s second visit in the country and this time he came to give a series of lectures before close to a thousand managers. “Israel is facing a window of exciting opportunities,” he says. It can be the Japan of the 90’s, because it is a small country with a heavy concentration of international industrial companies. With particular enthusiasm he mentions “Motorola Israel” which, in his definition, is the leading edge of a leading company. Doesn’t their excellence stem from their TQM (Total Quality Management)? Gurowitz: “That is exactly what I am talking about. They don’t use it,, they invent it. Other companies just use it. They generate it. TQM started in Japan, at the end of the 40’s and the beginning of the 50’s.

Only afterwards did the 13 famous principles take shape. The book “In Search of Excellence” became a hit but not one of hose who built systems according to the book founded an excellent company. In the book 43 excellent companies are listed. Five years after publication the authors returned and inspected them. The results are astounding: there were still 13 excellent companies, but half of’ the other 30 were deep in problems or had ceased to exist. My explanation is: they read the book and started to do what it said instead of continuing to do what had brought them to excellence. Excellence doesn’t come from principles but from generating excellence. “Motorola generates quality as daily obligation and company culture.”

ZERO FAULTS MANAGEMENT

Don’t those who adopt TQM assume such an obligation anyway?” No. That is lip service. People wave the flag of excellence, hear the name and immediately salute, but in reality most of them don’t actually do anything about the matter. This theory is highly popular today in Israel, but in the USA, where it is already in practice for some 10 years, people will tell you that it is disappointing. The Japanese dropped it more than

10 years ago and are laughing.” They might laugh but they became an economic power because of it. “No. The Japanese used the theory of excellence to create new paradigms. At the moment that they had created the paradigm of* quality they discarded TQM. Today they have a new paradigm “Zero Faults Management”.

When I asked what that was, a Japanese industrialist answered me: “What you are going to do in about five years, when we are going to change to the next thing.” The secret of the Japanese is that they think of the pioneering of new paradigms as a management function. “

Dr. Gurowitz, who has a sharp eye for details, was amazed to discover how great our interest in management theory is. In the USA, he says, there is almost no interest in periodicals on management, except among academics. But here, in this small country, there are three periodicals (Status, Managers, and Human Resources) devoted to it. “All the components are here, which would allow you to be a world leader in business and industry,” says Dr. Gurowitz, “’on condition that you accept my premise that leadership in the 90’s will be a function of management and not of technical or production expertise. Management is going to decide matters. Even if you adopt total quality management, which holds tremendous possibilities, everything will still depend on management. What is so exciting in Israel, in my eyes, is this possibility of creating a culture of management.”

Positioning Products and Services Accurately

The purpose of this article is to distinguish critical factors in product marketing, particularly as they apply to the marketing of professional services. The intent is to provide ideas and tools that will enable marketers of professional services to be more effective in selling their business by helping them to target their approach to what the market is really listening for.

According to the Buying Hierarchy developed by Windermere Associates of San Francisco, California (1), buying decisions are based on the following four elements, listed in order of importance.

  • Functionality
  • Reliability
  • Convenience
  • Cost

This model posits that, when no available product satisfies its market’s requirements for functionality, then functionality becomes the basis on which a buying decision is made. When one or more products satisfy the demand for functionality, then customers no longer base their choice on this criterion, but choose based on reliability, and so on down the hierarchy. First, I will describe some present-day examples to illustrate how the Buying Hierarchy works. Subsequently, I will make the original hierarchy more concrete by offering dimensions for each element. The resulting framework, which I call the Service/Product Positioning Model (see Figure 1), will enable marketers to examine in detail at which element level they need to position and market their service or product to compete with maximum effectiveness.

Reviewing the Validity of the Buying Hierarchy

When functionality is the determinant of buying, arguments regarding reliability, no matter how good, will be less persuasive than arguments stressing functionality, and the former will lose out to the latter. A common mistake is to think that one can compete on cost or convenience when the market is not saturated on functionality or reliability. Said another way, people are predisposed to pay more for functionality and reliability as long as these are competitive factors. It is only in a market where all the competing products are equal in functionality and reliability that buyers make decisions based on convenience and, convenience being roughly equal, cost.

An example of this would be the long-distance telecommunications industry where all the competing parties provide comparable functionality and reliability (not necessarily good functionality and reliability; equally bad or equally mediocre are still equal), and so are fighting the competitive wars on price. In wireless telecommunications, on the other hand, functionality and reliability (e.g., static vs. clarity in the cellular vs. PCS debate) are at issue. For this reason much of cellular advertising stresses convenience (i.e., coverage gaps, roaming fees) and price are at issue only when the advertising is cellular vs. cellular or PCS vs. PCS.

In the airline industry, where as in telecomm, functionality and reliability are roughly equal, Southwest and JetBlue compete successfully on price (and in Southwest’s case convenience), and America West hangs in based on price despite abysmal performance on functionality and reliability. The opposite of this phenomenon can be seen in package delivery, where FedEx and UPS have shown that the US Postal Service’s (USPS) ability to offer lower price does not offer the USPS a competitive edge against the commercial carriers’ functionality and reliability.

As a final example I would offer personal computer hardware, where competition in the early days of the industry was based on functionality and reliability. As those two playing fields became more level, convenience (Dell’s and Gateway’s “design your own and we’ll bring it to you” concept, for example) and price came to be the primary ground of competition. One could argue that Apple missed the boat here by sticking to (admittedly outstanding) functionality and reliability with lower convenience (fewer software titles, difficulty communicating across platforms) and higher cost.

Oftentimes manufacturers who can use economies of scale and/or high volumes to lower price attempt to circumvent the rules of this model by offering drastically lower prices. While this may provide a short-term edge, experience has shown that the market will gravitate back to the higher-priced products with greater functionality and reliability unless the difference on these factors is very small (hence the continued success of brand-name consumer products in the face of lower priced generics or store brands).

Based on 30 years experience marketing, selling, and delivering professional services (psychological services, human development seminars, management consulting, executive training, and business mentoring), I believe that this model operates particularly powerfully in the service-marketing arena, and offer the following distinctions as an aide to implementing the model.

The Buying Decision and Service/Product Positioning Model

Below I outline the specific dimensions or attributes that define each layer of the traditional model. By adding and understanding these dimensions, marketers are provided with a tool that enables them to effectively market their existing products and services or, alternatively, determine how to modify an offering to strengthen its position in the marketplace.

Functionality:

Functionality has four dimensions:

  • Relevance
  • Applicability
  • Features
  • Fit

Relevance means pertinence to important and current issues. A product or service offering is relevant to the extent that the customer/client perceives that the offering will forward the vision and/or strategy of their organization.

Applicability is similar to relevance but is more focused – where relevance refers to general or strategic issues, applicability refers to specific matters – does the product or service work with a company of our size, is it scalable, will it meet our needs. A question of the applicability of executive mentoring, for example, might be “Will the CEO having a personal mentor affect organizational issues and problems we are trying to solve?” Another question of applicability might be “Just because this product or service has worked in the financial sector, how do I know it will work in my area, which is manufacturing?”

Features refers to the meat of the offering. What does it do, what will it accomplish, what ancillary or side effects will there be, etc. The features of a product or service are what make it distinct – its prominent or important characteristics. With service offerings, the question of ancillary benefits is often important. For example, mentoring for enhanced performance may also increase communication skills.

Fit has two components, intellectual compatibility and chemistry. Intellectual compatibility, particularly where service offerings are concerned, means that the service being offered has to “make sense” to the buyer. For example, few business people would be amenable to an approach that promises to increase their effectiveness by divination through the interpretation of tarot cards. However, these same people might buy and study Sun Tzu’s Art of War, simply because they find seeking wisdom in a book more intellectually compatible than seeking it in the interpretation of patterns of playing cards. Chemistry means emotional compatibility between the buyer and the seller/deliverer of service, and is therefore very difficult to define precisely except by terms such as “mutual attraction” or “rapport.”

Reliability:

Reliability has three dimensions:

  • Integrity
  • Trust
  • Sustainability

Integrity is a subject about which volumes can and have been written. For our purposes, integrity could be said to be the foundation of character and is the key to living successfully. Integrity is, at its core, being true to oneself. There are said to be three levels of integrity – keeping one’s promises, owning up to one’s ideals and standards, and being true to one’s innermost being.

We learn the first almost from the time we are born – not to lie, cheat or steal, and not to tolerate others who do; to keep our promises, to follow the rules. The second begins when we realize that, even though we never consciously invented most of our ideals and standards, they are ours, and our life works better when we own them. We then even begin to invent some of our own.

The third level involves creating oneself authentically. What some traditions call ultimate integrity is a creation of the self by (after achieving the first two levels of integrity) making a commitment as to who one is, then living true to that commitment.

The three levels of integrity have exact correlates at the organizational level. The first level requires little organizational creativity – every organization has rules, policies and procedures and operates within the larger context of the rules of business. GAAP, business ethics, regulations, etc., set basic standards of right behavior, both internally and in the organization’s relationship with the outside world of customers, vendors, competitors, etc. Commonly today organizations create a vision, and from their vision create values (even if there is no directed effort to create values, values necessarily fall out from vision). Values are the ideals and standards of an organization, and set the stage for the second level of integrity. Vision, when it is a commitment rather than simply an exercise, is an organization’s creating itself. An organization that is true to its vision is being “true to itself.”

Collins and Porras (2) have examined the benefits to an organization of commitment to a strongly held vision and set of values. The organizations that most strongly “walk their talk” are the organizations that comprise the lists of “best companies” and “best places to work” that periodically appear in business magazines. Charles Schwab, the man and the organization, come to mind as an outstanding example of such an organization.

Trust is a correlate of integrity (3). For our purposes we can say that there are two forms of trust, earned and granted. Earned trust is based on history, track record, credentials, position and authority. Earned trust operates like a bank account – there may be an initial deposit based on the factors just mentioned, and then additions or subtractions based on subsequent experiences and actions; should the account ever fall to a zero or negative balance, it is very difficult to restore to solvency.

Granted trust is a gift we give or that is given to us when we or another person simply decides to trust, without reason and without conditions. It is like unconditional love, or what some psychologists call unconditional positive regard. While earned and granted trust may interact and affect each other, it is possible to make an irrevocable grant of trust.

Contrasting examples of organizations managing earned trust are found in Johnson and Johnson (J & J) and the Firestone/Ford debacle. In 1982 J & J turned around what could have been a disaster when bottles of Tylenol on vendors’ shelves were found to have been sabotaged by injections of cyanide, resulting in seven deaths. Industry pundits and J & J’s own public relations agency predicted that this would cause enormous damage to J & J, and the death of Tylenol as a product. The company, however, took a series of actions based around telling the truth and taking responsibility for the situation. This course of action actually enhanced its reputation and re-established Tylenol as a respected product. By maintaining a consistent customer focus and taking full responsibility, J & J was quickly able to reearn and indeed to strengthen trust. Johnson and Johnson remains today a widely trusted company despite what could have been one of the worst public relations disasters in history (4).

The situation involving Firestone tires and Ford Explorer automobiles offers a trust situation that, at this point, seems unlikely to turn out as well as the Tylenol incident did for Johnson and Johnson. In 2000, Firestone tires were found to have defects that caused the tires to fail, often resulting in serious accidents. Firestone (a key supplier of tires, particularly for the Ford Explorer) and Ford have a historic relationship going back to the founding of the companies. Nonetheless, the situation has escalated to mutual finger pointing and requests for congressional inquiries. It seems clear that public trust in Firestone and perhaps also in Ford is unlikely to be restored anytime soon. This is, in my view, largely because both companies, unlike Johnson and Johnson, are focusing on shifting the blame and avoiding liability, and not on the issues their customers consider paramount, namely safety and public security.

Both cases are examples of companies that lost customer trust that was earned by long reputation, to the point that trust was granted based on company name and reputation. The two different approaches to addressing the situations illustrate the central importance of customer focus if trust is to be (re-) earned.

Sustainability is the final dimension of reliability. Simply put, sustainability is the answer to the question “will you be here when I need you, for as long as I need you?” In marketing a product, or particularly a service, the customer or prospective customer must have certainty that the person or company offering the product or service will be there if needed.

Convenience and Cost:

Contrary to some popular notions, convenience and cost only become significant factors when issues of functionality and reliability are satisfied. As noted above, in marketing arenas where functionality and reliability are saturated (everyone offers the same level of these, and that level is above the market’s “buy threshold”), convenience and cost are the prime considerations, and it makes sense to compete on these bases. In professional services, and indeed in any non-commodity arena, this is never the case. Clients and potential clients for professional services are deeply concerned about functionality and reliability, and any marketing strategy that hopes to be effective, must address these areas powerfully and completely. When this is done, convenience and cost must be addressed, but will not be less significant or less difficult factors to deal with.

Like Functionality and Reliability, Convenience and Cost have their dimensions (see Figure 1), but these are familiar and need not be detailed here.

Conclusion:

While product marketing may cover the full range of the Service/Product Positioning Model, convenience and cost are not significant factors in the decision-making process of service clients. Those wishing to gain a competitive advantage in service markets would, therefore, do well to concentrate on issues of functionality and reliability. The US Postal Service, for example is consistently losing business to FedEx and UPS by attempting to compete on the wrong bases. By determining how their products and services fall on the dimensions of functionality and reliability, service providers will create a marketing message that is distinct and is a match for their market’s interests.

Figure 1: The Service/Product Positioning Model

 Element  Dimensions
 Functionality  Relevance  Applicability  Features  Fit
 Reliability  Integrity  Trust  Sustainability  –
 Convenience  Proximity  Ease of Use  Accessibility  –
 Cost  Cost of Manufacture  Economies of Scale  Supply and Demand  –

References:

  1. Cited in Christensen, C.M.(1997). The Innovator’s Dilemma. New York: HarperBusiness
  2. Collins, J. C. & Porras, J. I. (1994). Built to Last. New York: Harper Collins
  3. Maister, D.H., Green, C.H., and Galford, R.M. (2000). The Trusted Advisor.New York: The Free Press is an excellent treatment of this topic.
  4. There is an excellent and comprehensive review of the Tylenol case on the World Wide Web at http://www.personal.psu.edu/users/w/x/wxk116/tylenol/crisis.html

Author’s note:

I am grateful to all those whose suggestions and readings of early drafts contributed to this article. I am particularly indebted to Andreas Lorenz of Charles Schwab & Co who made numerous substantive contributions and also provided insightful editing.

Edward M. Gurowitz, Ph.D. is Managing Director, Merryck & Co. Limited/US. Ed Gurowitz has spent over 20 years on the front lines of organizational transformation. He designed the internationally respected Executive Excellence Program, which he delivered to over 300 top executives from 1991 to 1998. In his work with companies ranging from Fortune 500 organizations to startup companies, he has concentrated on executive coaching and on producing large-scale organizational change while maintaining and increasing productivity and profitability and on helping companies to produce results that are well beyond what was previously thought possible. In 2001 he has undertaken to establish the US operations of Merryck and Co. Limited, a firm founded in the UK that specializes in mentoring for CEOs and top executives of global companies.

The Challenge of Strategy Implementation

A recent commercial for a major computer company’s e-business consulting practice showed a CEO, in a state of high excitement, expostulating about a thick book he held in his hands. “Here it is,” he exclaimed, “it cost $2 million. The best strategy ever! Now the question is, ‘is it implementable?’” We then watch his face fall as, one by one, his executives consider the question and reply “No.”

Numerous studies have noted the very weak relationship of strategy formulation to strategy execution. Fortune Magazine stated that “Less than 10% of strategies effectively formulated are effectively executed.” Companies large and small worldwide spend billions of dollars each year on strategy formulation. A search of the World Wide Web using Google™ took less than 1/3 of a second to return more than 1.3 million hits on strategy consulting, ranging from the “Big 6” firms to boutique firms specializing in strategy. Interestingly, a similar search for strategy implementation consulting returned less than 500,000 hits. Even allowing for overlap this is a significant disconnect.

If Fortune is correct, only one of ten companies that do an effective job of formulating strategy are doing equally effective jobs of implementing it. For the rest, presumably, the well-crafted strategy is lost in the press of day-to-day tactical concerns or is left to languish in a report on the CEO’s bookshelf.

Yet very few people would deny that, in today’s fast-moving fast-changing business world, strategy, with its long-range perspective, is critical. By analogy, if the guidance system on an airplane or ocean liner is not programmed to reach its destination, then it cannot keep the plane or ship on course in rough or stormy weather. For any company today, strategy provides, or should provide, that overall trip plan against which management can true up in difficult times.

Why is it seemingly so difficult to execute strategy? The answer, I believe, lies in the way the nature of business has changed in the past 30 years. For the first three-quarters of the 20thCentury, strategy was not seen as difficult to formulate or difficult to execute. As recently as 1981, when Jack Welch took over as Chairman and CEO of GE he was able to formulate a strategy as simple as “be number 1 or number 2 in every business we are in or don’t be in that business,” and was able to execute that strategy with legendary results. Yet 1981 was the beginning of one of the most remarkable shifts in the history of business, the shift from value based in tangible assets to value based in intangible assets.

Baruch Lev of the Brookings Institution (www.brook.edu) has made an extensive study of this shift. Lev’s and Brookings’ data indicate that in 1982, 62% of the market value (measured by market capitalization) of companies could be attributed to tangible assets, and only 38% to intangibles. Ten years later Brookings’ analysis of S&P 500 companies showed that the relationship had been reversed: in 1992 it was 32% tangible to 68% intangible. A follow-up study in 1998 showed that, with the rise of the knowledge-based economy, the ratio had further shifted to 85% intangible to 15% tangible.

This could be said to be a shift to a world where value is based in service, in selling solutions rather than in objects or hard assets. But why would this shift have had such an effect on strategy implementation? The answer is deceptively simple – the rules of management have changed. Management of a company whose value-creating mechanisms are based largely on intangibles is a whole different ballgame than when those mechanisms are based on tangible assets.

Peter Drucker is said to have remarked that “if you can’t measure it, you can’t manage it.” Yet the measurement of intangibles is, by its nature, a tricky business. Tangible assets are measurable directly. If it costs $100 to manufacture an item and the cost of sales is $25, and you sell it for $200, then every item sold puts $75 on the gross profit line of the spreadsheet. If the (tangible) assets of a company are worth $5,000,000 and the liabilities of the company are $4,000,000, then the net worth of the company is $1,000,000. Simple.

But intangible assets are, well, intangible. Like electrons in a cloud chamber they cannot be measured directly, but only by the tracks they leave. If we invest $1,000,000 in a CRM system, the measures for the ROI from that system are things like customer satisfaction, repeat business, customer retention, new business acquisition, etc. To be sure, the ultimate measure is increased revenue. But in order to determine how much of the increased revenue is attributable to the CRM system, we must look at second, third, and even fourth-order effects. Furthermore, much of the case for ROI will be made inferentially rather than by direct observation as in the case of tangible asset ROI.

And it gets worse: In almost every case the use of an intangible asset for value creation will require the initiation of at least one other intangible asset as well. The CRM system will require a training program and the creation, actively or passively of a culture or climate that promotes using the system. This will require leadership (another intangible asset), and possibly process reengineeriing.

Just as tangible assets had to be integrated with the company’s overall strategy (GE would rightly have rejected out of hand a suggestion that they go into the business of making automobiles), intangible assets must be integrated as well. The problem is that intangible assets reside in people’s thinking and the value- creating power of these assets lies in people’s ability to put them to work. This means that in order to integrate them into the organization’s strategy, that strategy cannot be a top-down imposition by management, but must be introjected and owned by the proprietors of the intellectual property.

So in today’s business world, strategy implementation is inseparable from effective leadership and communication within the company. The value creation process, in our experience, follows these lines:

  • Formulation and effective communication of vision and values
  • Formulation and effective communication of mission
  • Generation of enthusiasm and buy-in at all levels
  • Commitment to projects and business results that will fulfill on the mission
  • Design of organizational architecture that allows for empowerment and communication
  • Creation of tactics and short-term goals at the local level
  • Effective Action in a context of accountability

Work on these intangibles is a strategic investment equally as important as new equipment, buildings, or mergers and acquisitions.

 

Status Magazine Article

DR ED GUROWITZ IS A COACH FOR MANAGERS. ON THE FACE OF IT, HIS MESSAGE IS CHECKERED WITH CONTRADICTORY COMBINATIONS: HE ASKS HIS CLIENTS TO DEFINE THEIR GOALS STRICTLY AND WITH ACCURATE NUMBERS, BUT ADMITS THAT MANAGEMENT IS MORE OF AN ART THAN A SCIENCE. HE PROMISES THE MANAGER RESULTS BEYOND WHAT HE CONSIDERS TO BE POSSIBLE, BUT BELIEVES THAT EVERY MANAGER KNOWS BASICALLY WHAT HE IS CAPABLE OF DOING. TWO SOLID FUNDAMENTALS CAN BE IDENTIFIED IN THE BASIS OF HIS METHOD: A HIGHLY PERSON-CENTERED APPROACH BASED ON TRUST IN THE INDIVIDUAL AND A PRAGMATIC APPROACH DIRECTED TOWARDS RESULTS.

Dr. Ed Gurowitz heads CMD (Center for Management Design), a company based in California. He has published articles in clinical psychology and psychobiology, and even published a book on the molecular basis of memory. During the past 22 years Dr. Gurowitz has engaged in consulting to managers in the USA and in various other countries. Last December he visited Israel in con- junction with the preparation of a course for senior managers, to take place in ’93 with his participation, together with the Israeli company COACHING – Training in Business and Organization Inc. Among CMD’s clients are small enterprises, as well as big companies like British Petroleum AT&T and American Ex- press.

“My company earned $ 750,000 as result of my participation in the CMD program and will earn $ 2,000,000 in the near future”. This strange proclamation by one of the company’s clients appears in its publications, next to other testimonials about direct profits of thousands, millions and even hundreds of millions of dollars.

The manager is told to set himself goals that exceed the customary results of his company. On the other hand they must be realistic. Does that not produce a certain amount of stress ?

Most managers have a hard time differentiating between what they think will happen and what they hope will happen. We try to arrive at a reasonable forecast, based on the tendency of the company in the past and in the present. At the next stage you look at the goals to which you are ready to commit yourself. On the one hand we must forget about fanciful expectations. On the other hand it is hardly worth it to invest effort for goals that are very close to achievements to be expected anyway. If we retreat from those two extremes we get to the range in which we operate. Most businessmen are capable of answering the question- “To what goals can you honestly commit yourself, in spite of the fact that you do not as yet know how?

In the USA I like to quote Theodor Herz in that connection and in Israel I quote President Kennedy. Kennedy liked to tell that, the day after his declaration that the USA would put a man on the moon, many people came to h -,in to voice their concerns. “You will not succeed” said the first one, “because you don’t have suitable fuel”. Kennedy forthwith appointed him to the position of responsibility for developing the fuel for the project. The next visitor complained about there not being any suitable metal and was, of course, appointed to handle that subject. The appointments continued that way until the last visitor arrived and flatly said: “It can’t be done.” “That man” Kennedy related “ I appointed to be head of the project”. The man who was able to define why the fuel was unsuitable was in the best position to develop a suitable one. What may appear to you as an impediment to the project will lead you to the solutions- on condition that you are committed to succeed

What is the role of the commitment to succeed?

I will tell you about my experience with a computer company: Two teams are wrestling with the same software problem. One team commits itself to complete the work in eighteen months and the other takes on the commitment to finish it in six months. Let us say that after two months it be- comes clear that the work will take twelve months. The members of the team with the eighteen months commitment will be pleased. They go on vacations and long lunch hours. In the other team, however, you will find some very unhappy people. But if you deny them the opportunity to withdraw from the commitment they made- the challenge to complete the task in six months – they will almost immediately discover new methods and applications for existing technologies. There is a good chance that they will finish the work in less than twelve months. When people stand before impossible situations, without an option for despair, they will perform miracles. In our work we try to create among managers and workers a commitment to grapple with problems that seem unsolvable. This commitment spurs them on to arrive at breakthroughs.

Is not the price you pay a constant frustration of the workers, who are faced by impossible tasks ?

At first, perhaps, yes. But that will not continue very long. There is a myth that people do not want to work, that they want an easy life and that when someone wins the big prize in a lottery he buys himself a yacht and remains on deck, tanning himself, for the rest of his life. But the data on people who did win big prizes show that the majority return to work after a few months. For most people work is the source of self-expression and self-fulfillment. Therefore, if you put them in front of an in- soluble problem they will be frustrated at first- But afterwards they will invest themselves in it, will come late less often, lose fewer working days and even make less use of the rest rooms. They will enjoy a feeling of satisfaction that is not present in routine work. Our first intervention as consultants is to work with the team members on the commitment that they formulate by themselves, so there is no danger of creating a perception among them that they were compelled to commit themselves,

Gurowitz uses the term paradigm a lot. The term, which was coined by Thomas Kuhn in his book “ The Structure of Scientific Revolutions”, is defined by the CMD as the foundation don for the subconscious basic assumptions with which man approaches the world. The paradigm thus serves as the unseen filter that shapes the limits of reality. The goal of working with the manager is to bring him, through a change in the paradigm, to true breakthroughs. Seen from the point of view of the new paradigm so claims Gurowitz, achievements that Might have been considered tremendous before are accepted in a matter of fact way.

How does a change in the paradigm of a manager express itself ?

It is likely to express itself in a new idea. When you invent a product, develop it and bring it to market – that is the stage at which you make money. But after you have invested so much money and effort and are tied to the concept that gave birth to the product, it is unlikely that it will lead you to another breakthrough with the same product. Someone else will do it, so it is better for you to enjoy the early profits, to drop this product and to start developing another one. It is understood that not every new invention represents a change in paradigm. Regis McKenna wrote that, in contradiction to accepted theories of marketing, the market does not determine products – quite the opposite.

Take, for instance, Sony’s Walkman. No one said to himself ten years ago: “If only I had a tape player hanging from my belt”. There was no breakthrough in technology in this case but *in the thought itself, which originated from Morita the head of the company. No one outside himself thought that it was a good idea, but his position permitted him to decide on its implementation. If you look at the most successful products of recent years – the fax machine, the cellular phone- you will see that they all created the market and not the other way around. We discovered that the type of thinking that our method teaches people – to break through beyond their present system of concepts – leads to the creation of new products and through them to new markets.

How do you work it to bring people to a change of paradigm and to breakthroughs?

We are working with a combination of preparation and coaching. The preparation lasts four or five days once every few months, or two days every month. But between these meetings a coach is as- signed to every participant, who talks with him at least once every two weeks. The coach is always accessible so the work proceeds at the rate of in- tensity desired by the manager. Without a coach it is impossible to achieve the results we require, in such a short time.

The coaching idea appears in our work at two lev- els: we coach the manager and turn him ‘into a coach of those working for him. The concept of a coach is known particularly from the realm of sports and there it has been thoroughly explored. But it also occurs in acting, in singing and in other areas. Management is a type of coaching. There- fore, you sometimes know what has to be done bin you cannot explain it ‘in words. That puts us be- fore a problem and much may be learned, per- haps, from the way ‘in which sports coaches bring their trainees to achieve results. I will give you an example: Thirty years ago a famous American Football game took place between the Green Bay Packers and the Dallas Cowboys. A few seconds before ore the end of the game, the Dallas players gained four points. To win, the Green Bay players had to score a goal. In the film one sees Bart Starr, the Green Bay Packers’ star, approaching his leg- endary coach Vince Lombardi and asking him what to do. The coach looks at him with contempt and turns away. Then he turns around to Starr, says: “Score!” and walks off. That’s all. The game started again, Starr signaled a play, took the ball, executed an entirely different play from the one indicated and went on to win the game. It would be silly to say that the coach gave him the idea. In coaching they don’t teach you anything, they change your way of looking at things. You identify possibilities for action that you did not notice previously. Later on Starr related that he had practiced the maneuver a thousand times but never paid attention to the possibility until that moment. That was a great coach- I don’t know what exactly he did there, but it worked

Can you tell as something about a manager whom you coached ?

I worked with a man who was appointed manager of a copper mine in Arizona. When he accepted the job he was told that the mine had thirty to forty years of exploitation left, but he immediately discovered that only about six years remained. Mining copper is a dirty and frustrating job. Most copper miners in Arizona are simple and uneducated people and it is accepted that they are only there to earn a scant living. So management decided the expected relationship: pay them their wages, don’t let their union get too strong and always tell them exactly what to do. He was advised by management not to disclose the true situation of the mine to the workers. At that stage we started to work together. He called all the mine’s workers together and brought them up to date. If the mine were to close in six years, he said, the whole town built around it would close up. But if all of us worked together, perhaps a way could be found to extend the mine’s life. As a result the workers themselves discovered ways to extend the lifetime of the mine. He established a joint council of workers and managers and got the engineers together with the miners. It turned out that many of the engineers had never talked with the miners before. Wonderful things happened at those meetings. For in- stance: when I visited the mine I saw a big hill of dirt. That was the hill of tailings that had been pulled out of the mine during the past hundred years of its activity. At one of the meetings a miner got up and said: everyone knows that in that hill of dirt there is copper, which is not worth extracting. But that was true a hundred years ago and I bet there are methods today to utilize that material. An expert investigated the subject and it turned out that the required technology exists. Thus, in a minute a mountain of dirt turned into a stratum with ten thousand tons of ore. People suddenly began to notice things that they had not paid attention to, previously. What is interesting is that this particular manager had previously involved himself only in money matters and book keeping. All of a sudden he discovered that he really enjoyed being in the company of miners, to put on a miner’s hat and to go down into the mine and talk to them. That way he discovered his commitment to the men. The moment he discovered that he liked the people it was easy to teach him how to be a coach. All great coaches agree that the most important factor for success is to like the people with whom you are working.

 

The Self-Regenerative Organization

One could say that the purpose of a business organization is to add value and be paid for this added value. A manufacturing company, for example, adds value by converting raw materials into finished products. The manufacturing process can be seen as a chain of steps, each of which adds value to the raw materials. Raw materials have, in fact, no value of their own, but acquire value in terms of the future they represent, i.e., what will be produced at the end of the value-added chain. To be competitive, a company must, in the end, add greater value than its competitors.

Each step in the value-added chain reflects some competency or expertise, applied to the developing product. Those competencies that are unique or special to a particular company (as distinct from competencies that are general to an industry or to doing business itself) and are central to the value that added by that company we call core competencies. The specific constellation of core competencies in the value added chain of a given company defines the market identity and competitive advantage of that company over its competitors. If a company does not have specific core competencies needed to establish market identity and competitive advantage that are durable and robust, that company will need to buy or create those competencies that are missing, or will need to develop alliances to provide them.

Any consideration of the true worth of a company must take into account not only the usual array of assets and liabilities and its hidden assets (intangible but real factors such as R & D, labor relations, leadership, vision, etc.), but also an assessment of its core competencies, its value added,

SELF-REGENERATION

Historically, decline seems to be an inevitable part of the organizational life-cycle. Even the most vital, spirited, high-riding organization ultimately deteriorates and declines, and eventually this deterioration and decline is reflected in loss of business, internal discontent, and organizational demise, often after an agonizing descent into organizational senility. The IBM of the early 1990s is barely a shadow of the living, vigorous IBM of the 1970s. The same could be said of companies such as Digital Equipment, General Motors, Wang Laboratories, and others too numerous to mention.

In other cases “turnaround specialists” have come in and shaken the company up, pruning away dead wood, and re-fertilizing the company’s soil. Sometimes the turnarounds have worked, obscuring the real tragedy, namely that the company declined in the first place.

It is becoming increasingly clear that, in the last decade of the 20th Century, “turnaround” is no longer a sufficient response to corporate decline. More and more companies are turning to options called “re-engineering”, “organizational breakthrough”, and “large- scale systems change” not merely to repair, but re-create their organization to design futures that are not extensions of the past. Magma Copper Company, under CEO Burgess Winter’s leadership, has achieved such an outstanding rise from the ashes that it was hailed by Industry Week as a “Metamorphosis in the Desert,” strong language from a publication not normally given to effusiveness. The transformation of General Electric under CEO Jack Welch is a better-known, but no less dramatic example of an organization altering its culture, character, and design through an intentional self-regeneration.

It is our contention that organizations designed for the next century will have built into their “genetic code” the ability to self-regenerate. Like the starfish, when limbs are damaged or lost, the ability to grow new, and perhaps better limbs will be designed in. Further (and unlike the starfish) the organization of the 21st Century will cut off its own limbs to grow new and better appendages! By contrast, 20th Century companies are reactive — captives of their past, responding to problems, crises, and threats by looking to historical competencies, and seeing the future as an extension of the past. They are survivors, not thrivers, dedicated to being conservative, (taking small risks) and see risk management and risk aversion as synonymous.

The “Self-Regenerative Organization” will:

  1. Respond to change in terms of self-generated strategic drivers as distinct from basing response to change on tactics derived from past experience.
  2. Add maximum value at every step of the value chain, treating each step as if it were a product in itself.
  3. Develop critical core competencies through internal development and external acquisitions and alliances.
  4. Build in strategically-based architecture for internal and external cooperation .
  5. Build a culture of generativity in which rapid change and flexibility are given ratherthan anomalous.
  6. Create powerful high-level synergies.
  7. Engage in systematically planned and applied projects for breakthrough ordiscontinuous results continually challenging what is already known.
  8. Utilize future-oriented, regenerative benchmarking.
  9. Establish wholistic/systematic measurement systems which go beyond the meremeasuring of results to building registers for accomplishment in which people cansee the difference they are making.
  10. Trigger its own regenerative mechanisms proactively.

(These features of the model will be discussed in more detail below.)

As we mentioned above, Magma Copper Company provides an excellent example of a company that has organized itself for self-regeneration. Magma’s Internal Development Department has declared its Strategic Intent:

To provide a self-creating and self-sustaining breakthrough culture which will give Magma a competitive edge into the 21st century. This development must take into account both the executive management transition within the company and the transition within the labor unions.

Combining a “self-creating, self-sustaining breakthrough culture” with an effective executive management and union transition has never been accomplished in American industry. We, therefore, will be inventing another historic breakthrough by sustaining and creating a new paradigm for leadership, organization, and worker/management relations.

ORGANIZATIONAL GENETIC ENCODING

Genetic Encoding occurs in an Organization in its culture (context) and architecture, as reflected in:

  • Performance Measurement and Reward Systems
  • Beliefs and Values
  • Hierarchy Structure
  • Policies and Procedures
  • History of Experience
  • Processes
  • Language
  • Communications Patterns
  • Core Competencies
  • Behavior Patterns
  • Response to Threat, Risk, andOpportunity
  • Methods of Differentiation and Integration
  • World-view (Internal and External)
  • Valuation of Team Vs IndividualEffort
  • Sacred Cows
  • Listening
  • Patterns of Ethnic and GenderDiversity
  • Customer and Vendor Relations
  • Work Ethic
  • Leadership Style

This “genetic encoding” is ingrained in the contextual fabric of the company as critical to the company’s survival. The “in the background” nature of the encoding and its perceived necessity for survival make it very difficult to access, affect, or alter the code.

This survival mechanism eventually results in the death. Typically the company goes through a development cycle of Startup, Growth, Stability, and Decline, with Stability seen as the desirable end state and Decline ignored, denied, or staved off. Stability is characterized by minimizing risk, conservative decision-making, and rigid hierarchies. Stability can be maintained only if the surrounding world is stable, and there are no aggressive competitors. Companies in Stability adopt as measurement systems lagging indicators of performance such as financial reports, which fail give a picture of the company’s performance that is too late to be responded to effectively. Thus the “Genetic Encoding” causes the company to react too slowly, or to be responsive only to crises, or to withdraw in the face of threat. When leadership is most needed, it is the most difficult to provide.

The company of the future will have in its Genetic Encoding “triggers” and processes that enable it to be responsive to threat and to maintain its structural and cultural integrity in the face of crises, emerging from them strengthened. What is more important, the company of the 21st Century will be genetically programmed to be proactive, and to de-stabilize structures that make it vulnerable to threat before the threat occurs.

THE MODEL OF THE SELF-REGENERATIVE ORGANIZATION

Responsive to change in terms of self-generated strategic drivers:

Companies exist in a field of internal and external forces, opportunities, and demands to which they can respond in reactive and proactive ways. These include competitive threats, productivity changes, market opportunities, technological innovations, etc. The Self-Regenerative Organization will place a premium on being proactive — anticipating and even causing changes in the operative forces in its industry and in business at large.

Adds maximum value at every step ofthe value chain:

As noted above, the real job of any company is to add value. While this can be very easily seen in, for example, mining and manufacturing, it is no less true for service businesses. The Self-Regenerative Organization will have as an integral part of its strategic intent to gain the greatest strategic advantage at each step of the value-added chain.

Develops critical core competencies through internal development and external acquisitions and alliances: The effective functioning of the value- added chain is dependent upon having the right core competencies and capabilities. Features such as high quality, low cost, innovation, and productivity will be a function of the level and appropriateness of a company’s core competencies. The Self- Regenerative Organization will acquire, either through hiring, acquisition, or alliance the core competencies that are critical to its particular value-added chain.

Built-in architecture for internal andexternal cooperation:

Cooperative Architecture describes the company’s posture with regard to strategic alliances and joint ventures, both internal and external. The Self-Regenerative Organization will use external alliances to provide missing or strengthen inadequate core competencies External alliances also provide avenues to products or markets where internal core competencies can be leveraged. Internal alliances maximize decentralized or “virtual” corporate structures by creating synergies between business units and departments that add power at points on the value-added chain.

Builds a culture of generativity:

In the culture of every company is the “genetic encoding” of its rules of thinking and its rules for existence. Most companies are encoded for the survival of the corporate culture and structure by placing a high value on what has worked in the past and applying the thinking that has been successful in the past to present and (anticipate future problems. Unlike real genetic coding, corporate genetic coding can be changed. By systematically changing this coding the company gives itself a new response pattern that enables it to respond to threat, stagnation, and opportunity in a positive way, empowering itself to break with, or build upon its old paradigms, regenerating itself in new forms. This is what is rightly called culture change, or organizational transformation.

Creates powerful high-level synergies

Most Western business organizations today are designed on what could be called an analytic model. That is, they are composed of more or less specialized, separate units, centrally controlled or managed. The bankruptcy of this model has been becoming increasingly apparent over the past 10 or 15 years, and such innovations as MBO, matrix management, MBWA, independent business units, etc., can be viewed as attempts to deal with the inadequacies of the model. The Self- Regenerative Organization will include in its design a commitment to and a structuring for synergies at all levels of the organization — between individuals, between the organization and other organizations, and between parts of the organization. Business units will form strategic alliances and joint ventures with each other, and one business unit may even acquire another in the interest of creating synergy — wholes that are greater than the sum of their parts. Synergy derives from synthesis, a method of thinking and acting in which cooperation results in creativity, innovation, and in turn stimulates new levels of regeneration in an upward spiral.

Engages in systematically planned and applied projects for breakthrough or discontinuous results:

Remaining competitive requires a company to add unique value at every step in the value-added chain. This will require the continuous development and acquisition of new competencies. The core competencies that add the most value to the chain will be those that are most innovative and creative with respect to the history of the organization and the industry. Breakthrough projects are projects intentionally designed to produce results and fields of possibility that are discon- tinuous with the past. The methodology exists for designing, implementing, and executing projects to produce these results, and competency in producing breakthroughs is a core competency that empowers the entire value-added chain.

Utilizes future-oriented, regenerative benchmarking:

Conventional benchmarking at its best measures where the company is now relative to the competition. (More accurately it measures where the company is now relative to a description of the competition), since it is almost impossible to obtain an accurate picture of the creative processes that went into the competitor’s production of the results being studied This standard is clearly insufficient since the best it can do is shift the company’s current past-based operation to someone else’s past-based operation. The Self- Regenerative Organization will benchmark against an invented future state — a vision of where the company is committed to being at a specified future time. This benchmarking will need to look “outside the box” of current thinking, and outside the industry to other industries that share similar patterns, drivers, pressures, and technologies.

Establishes wholistic/systematic measurement systems:

The lagging-indicator measurement system favored by successful (and declining) com- panies is insufficient for what is needed for the Self-Regenerative Organization If, in Drucker’s words, “what you measure is what you get,” then a measurement system must be established that measures the “big picture,” leading indicators, and integrative processes. We have designed measures that approach this, (Strategic Return On Investment, Total Life Cycle Cost), but these are the subject for a future paper.

Triggers its own regenerative mechanisms proactively:

To make the Self-Regenerative Organization viable, a series of “triggers” must be designed to activate the regenerative system before decline sets in. Benchmark results, breakthrough projects, employee participation, and the generation of breakdowns, provide some (though undoubtedly not all) of these triggers.