42. Corporate Management Styles
Firms often organize themselves into business units when they serve different markets and need to be responsive to the differing customer requirements and competitive dynamics encountered in each market. Each business unit will develop its own specific business strategy, while the firm as a whole will formulate a corporate strategy.
The business units will typically report to a headquarters, called a corporate center, that in turn will steer the business units in a particular way, which is called corporate management. There are different approaches to steering that the corporate center can take, referred to as styles.
The Corporate Management Styles framework outlines five different approaches to steering the business units, along a continuum from a high level of corporate control to a high level of business unit empowerment. The styles higher up the continuum are used when the corporate center needs to take the lead and integrate the business strategies to ensure that the important synergies are realized. The styles lower down the continuum are used when the business units need to take the lead and differentiate their business strategy to ensure responsiveness to their specific challenges.
The five corporate management styles are the following:
- Integrated Organization Style. In this style the corporate center runs the firm as if it was almost a single business unit. One integrated corporate strategy is set, that needs to be implemented at the business unit level, with only minimal wiggle room for specific adaptations. Many primary activities are centralized or highly coordinated, as are almost all of the support activities, in order to maximize cross-business synergies.
- Strategic Direction Style. In this approach the business units have a more distinct identity as separate vessels, but the corporate center keeps the fleet closely together to ensure that the significant cross-business synergies are realized. These synergistic activities tend to be centralized and/or coordinated, as are support activities, while on other activities the units have more room to maneuver as long as they stick to the overall strategic direction.
- Strategic Control Style. Using this style, the corporate center strives to balance between steering the business units towards specific synergies and empowering them to take the initiative and respond to the demands in their own market. Therefore, the strategy will be a co-production, with the corporate center setting a general direction, challenging BU ideas, and giving final approval. Centralization and coordination of activities will be more selective.
- Strategic Guidance Style. In this approach the business units are clearly in the lead, giving them the autonomy to flexibly respond to developments in their own market. The corporate center will give them some strategic guidelines (e.g., grow or hold) and financial targets, while challenging and ultimately approving their plans. Cross-business synergies will be limited and often not mandatory for the business units.
- Financial Control Style. Finally, in this style the corporate center behaves more like a holding company, running a portfolio of financial investments, with little more than financial synergy between the business units. There might be some strategic discussions between the corporate center and the BU teams, but the performance targets set and monitored will be financial. Meeting these targets will ensure that the business units remain empowered.
- Corporate centers have a management style. In model 14 (7I Corporate Center Model) it was outlined that every corporate center can play 7 roles, but it wasn’t described how differently these roles can be played. The specific approach taken by a corporate center to playing these roles, and thereby steer the firm, is their corporate management style.
- Corporate centers balance control and empowerment. One the one hand, corporate centers want to exert control over their business units, actively influencing what they do, to increase corporate value creation (see model 35). On the other hand, they want to empower their units, to be responsive to market conditions and create business value.
- Corporate centers can select from 5 styles. There are 5 corporate management styles on a continuum from corporate control to business unit empowerment. In the first two (integrated organization style and strategic direction style) the corporate center is in the lead, with the business units following and adjusting. In the last two styles (strategic guidance style and financial control style) the business units are in the lead, with the corporate center placing guardrails. The middle style (strategic control) is balanced.
- Corporate centers can easily overdo control. Control needs to add value, by facilitating synergies and challenging BU management. But corporate centers easily descend into knowing everything better, crushing BU initiatives, pursuing useless synergies, and imposing one-size-fits-all solutions. Without reflection, corporate center domination lurks.
- Corporate centers can easily overdo empowerment. Empowerment also needs to add value, by allowing business units to be entrepreneurial and responsive. But corporate centers easily allow stubborn BUs to undermine synergy efforts and act like cowboys, as long as the targets are met. Without reflection, corporate centers can steer too little.
41. Strategic Action Modes
A strategy is a course of action to achieve a particular purpose. An individual or organization has a strategy when they don’t behave in a random or ad hoc fashion, but there is a pattern in what they do and don’t do. Strategy is the logic in the actions as they move forward.
To realize a coherent pattern, strategic action needs to be guided by some deliberate choices made before getting underway. Such a plan of action can be very general and only sketch the ‘big picture’ (setting BOLD goals – broad, optimistic, long-term, and daring) or can be very detailed (setting SMART goals – specific, measurable, actionable, realistic, and time-bound).
The Strategic Action Modes framework outlines three different manners of moving forward in a strategic way, each requiring a different level of deliberate choices to be made upfront. The key message of this framework is that the archetypical approach called strategic planning – first formulate a blueprint and then move to execution – is not the only form of strategic action. Where detailed choices are hard to make in advance and then roll out, people can still move ahead by trying out and finding out. To be effective, strategists need to run a portfolio of actions (see model 10 – Strategic Agility Model), using all three complementary strategic action modes and formulating just enough beforehand to have sufficient direction for each action.
The five levels at which the intended strategy can be specified are the following:
- Strategic Vision. When the intended direction is only set by offering an attractive big picture outline of what the future state could look like, we speak of a strategic vision.
- Strategic Guidelines. Once a strategic vision has been specified, the general principles (main routes) that will guide the organization to get there are called strategic guidelines.
- Strategic Framework. Along these main routes there will be major initiatives that will be the steppingstones to get to the vision. Together they should form a consistent framework.
- Strategic Roadmap. Each of these initiatives can be worked out into a roadmap of key activities, general milestones, main responsibilities, and required budgets.
- Strategic Blueprint. Finally, general roadmaps can be filled in to create comprehensive plans detailing all activities, timings, responsibilities, and resources.
The three modes of strategic action are:
- Strategy Execution: Roll Out. To execute is to carry out as intended – to roll out a plan that has been determined beforehand. If you know where you’re going and can largely anticipate what will happen, it is efficient to first plan (making a roadmap or blueprint) and then implement. After this ‘planning and doing’, you can always do some adaption along the way (‘check and act’). Planning helps with clarifying priorities, allocating resources, aligning stakeholders, setting performance measures and tracking progress.
- Strategy Experimentation: Try Out. To experiment is to field test an assumption – to try out a possibility that you have identified beforehand. If you are not certain enough about the best route forward but have a few hunches as part of your strategic framework, you can give them a trial run and see how things go before proceeding to execution. This lowers the risk of prematurely committing too much time and resources to an unpromising option, while increasing the flexibility to learn, adjust, and develop along the way.
- Strategy Expedition: Finding Out. To go on an expedition is to investigate an area – to find out whether an attractive idea has further potential, not by thinking behind your desk, but by going on a voyage of exploration. Inspired by a vision, an expedition mobilizes internal and external stakeholders to see the future differently, scouting for promising options that could later make it to experimentation. An expedition not only looks around but sows ideas that might grow into future options, while also building political support.
- Strategy is a course of action. Your strategy is what you do (pattern of actions), not what you say you will do (plan of actions). Strategists need to get the organization moving in the best direction, not dwell on making the best PowerPoints. Effective strategists have a bias for action and creating facts on the ground, while making just enough choices ahead of time to help the action to be well-considered and coherent.
- A plan of actions can vary from BOLD to SMART. Before acting (‘implementation’), some strategic choices need to be made (‘formulation’). These don’t always need to be very specific (SMART), but can also be kept broad (BOLD), or at various levels in between.
- You can act without knowing the exact direction. If you know with a high level of certainty where you want to go, you can draw up a detailed strategic plan (a strategic blueprint). But waiting to act until you know the exact direction into the fog of the future can lead to procrastination (paralysis-by-analysis). You need to move despite the fog.
- You can act strategically in three ways. Execution is about acting on a detailed plan (rolling out). Experimentation is about acting on a substantiated hypothesis (trying out). Expedition is about acting on a compelling vision (finding out). All get things moving.
- You should act strategically in all three ways. Effective strategists initiate actions using all three approaches. This makes a strategy a portfolio of initiatives.
40. Psychological Safety Compass
People experience psychological safety when they do not fear negative social reactions, such as disapproval, rejection, blame or retribution. In a psychologically safe team or organization people feel they are not running the risk of being harshly judged by others and therefore will dare to be more outgoing and proactive, instead of withdrawn and careful.
Key to psychological safety is a sense of inclusion and fairness – inclusion means a person is fully admitted to a social group as a respected member, while fairness means that a person is treated in a reasonable and equitable manner. Generally, the more diversity in a team or organization, the more challenging it is to ensure inclusion and fairness.
The Psychological Safety Compass outlines the four main social fears that undermine people’s psychological safety, as well as the four linked types of safety that need to be created to allow people to function optimally as team members. The four types of psychological safety differ along two axes – vertically whether they focus on people’s sense of inclusion or fairness, and horizontally whether they focus on what the individual is/does or on how the individual relates to others. As a compass, the model encourages leaders to measure safety and take actions in all four directions, instead of seeing psychological safety as one monolithic phenomenon.
The four related types of psychological safety are the following:
- Acceptance Safety: Avoiding the Fear of Disapproval. To dare to show yourself as you genuinely are, you need to feel that other team members will accept you without judgement. You need to sense an openness to take you as you are, instead of measuring you against some unwritten criteria of how you should be. If the fear that you don’t meet the norms subsides, you no longer have to wear a mask, or worry about losing face, but can be your authentic self, warts and all. You can be vulnerable, honestly admitting your weaknesses, and you can be different, without being branded as an oddball.
- Connection Safety: Avoiding the Fear of Rejection. Being accepted, or maybe just tolerated, doesn’t necessarily mean that other people will happily be in your presence and enthusiastically talk with you. To dare to interact with other team members, you need to feel that they see you, value you and welcome you to connect. You need to sense an openness to get to know you, involve you in conversations and hear what you have to say. Once the fear of rejection and being locked out subsides, you can more easily approach teammates, speak up and even ask others to help you.
- Activity Safety: Avoiding the Fear of Blame. Anytime you do something, there is a risk of it being wrong or going wrong. But at the same time there is a social risk of being blamed for what is perceived as wrong by other team members. This blame can lead to shame, loss of standing and even punishment. To dare to do things, particularly more risky things such as solving complex problems or engaging in innovative ventures, you need to feel a tolerance for mistakes and even an admiration for taking action. Only once the unfair threat of blame is off the table, will you readily act, as well as admit when things go wrong.
- Challenge Safety: Avoiding the Fear of Retribution. ‘An elephant in the room’ is when there is an uncomfortable issue you shouldn’t bring up. If you do break the silence, retribution by teammates is often swift. In the same way, you risk being punished by contravening other group rules, or asking uncomfortable questions, surfacing awkward problems, and stating unorthodox opinions. So, to dare to speak up, you need to feel there is room to challenge the status quo without fear of retaliation, or that there is even respect for the person who opens up the dialogue and pushes people out of their comfort zone.
- Psychological safety is about avoiding four types of social fear. In any group, people run the risk of being harshly judged by others and suffering the consequences. There is a threat of disapproval (not being accepted for who you are), rejection (not being welcomed as a group member), blame (found at fault for something that happened) and retribution (being retaliated against for challenging the status quo). People experience psychological safety when these four fears are absent.
- Psychological safety requires inclusion. To feel psychologically safe, a person needs to feel they can show who they genuinely are (acceptance safety) and that they will be welcomed to participate in the group (connection safety). Together this creates inclusion.
- Psychological safety requires equity. To feel psychologically safe, a person needs to feel their actions will be judged fairly (activity safety) and their uncomfortable questions will be viewed as useful (challenge safety). Together this creates a sense of fairness.
- Leaders need to manage all four types of psychological safety. Psychological safety is a fuzzy topic for many leaders, making it attractive to simplify by only focusing on one type. Yet, the four types are different, and all require specific attention.
- Even with safety, courage remains important. Full psychological safety is impossible, as some social risk will always remain. Therefore, leaders need to also stimulate people to show social courage to be and act despite their fears. Leaders should help to create safety, but without becoming curling leaders, sweeping away all team members’ challenges.
Power is the capacity to cause an effect – the potential to make things happen. Individuals can have power, but so can groups, organizations, and countries. Using power can lead to its depletion, but can also cause it to grow, depending on the circumstances.
The amount of power that people have depends on the resources to which they have access (power sources – the roots of power), but also on the way they make use of these resources (power approaches – the branches of power).
The Tree of Power model uses the metaphor of a tree to explain how different types of power (fruits) grow out of different approaches to power (branches or shoots) and are fed by different sources of power (roots). The key message is that acquiring resources is necessary, but not sufficient to become powerful. Power results from how the resources are used to influence people. The three different approaches to exerting influence – compliance, conformance, and commitment – lead to very different (and complementary) types of power. Having a portfolio of all six types of power makes people more powerful and gives them the flexibility to use the most effective form in each situation to achieve the effect they wish to realize.
The tree of power consists of roots, shoots, and fruits. The five roots are the following:
- Tangible Resources. Power can stem from access to physical items, such as food, shelter, land, money, and machines. Data as tradeable resource also belongs here.
- Capability Resources. Power can also be rooted in access to valuable abilities, such as skill, expertise, insight, creativity, proactivity, and manual labor.
- Relational Resources. Power can also be derived from interpersonal relations, such as friendships, alliances, confidence, reputation, and team spirit.
- Positional Resources. Power can also spring from someone’s formal or social position, such as decision-making authority, rule-setting mandates, other privileges, and status.
- Moral Resources. Finally, power can arise from having what is ethically good on your side, such as virtue, honor, respect, justice, rights, and someone else’s guilt.
These roots are drawn underground, to symbolize how they feed the tree. Above ground, the six types of power (fruits) grow from three different approaches to power (shoots):
- Power can be exerted by using carrots (benefits) and sticks (punishment) to make people calculate it is in their interest to go along with the other’s wishes. This approach is about obedience – making sure people feel they “must” comply. The two types:
- Coercive Power. Using the negative threat of punishment to force compliance.
- Reward Power. Using the positive lure of benefits to buy people’s compliance.
- Power can also be exerted by appealing to people’s sense of responsibility to behave properly, in accordance with duties and rules. This approach is about following the norms – getting people to feel they “should” conform. The two types:
- Legitimacy Power. Pointing to formal rules to get people to play along.
- Obligation Power. Pointing to social expectations to get people to play along.
- Power can also be exerted by winning hearts and minds, getting people to buy in to what is being requested of them. This approach is about attraction – getting people to “want” to commit because they like what the other is asking. The two types:
- Charisma Power. Using attraction to you as a person to influence.
- Engagement Power. Using attraction to a cause or organization to influence.
- Power is not a dirty word. No one can function without power. Power is the capacity to cause an effect and therefore crucial for getting anything done. To be a leader, you need to have sufficient power to sway others, so considering how to build up and use power is important. That some people misuse their power shouldn’t give power a bad name, but just be a warning that power is a tool that can be used in positive and negative ways.
- Power is widely misunderstood. French & Raven’s ‘model’ from 1959 is probably the most commonly used framework about power, but it is no more than a checklist mixing up power sources and power types. It is time to retire this framework.
- Power is rooted in access to resources. All types of power require access to a variety of resources. These can be clustered into five categories: tangible, capability, relational, positional, and moral resources. Yet, resources are not power, only the sources of power.
- Power can be exerted in three ways. The five types of resources can be applied in three fundamentally different ways – the approaches to power. Resources can be used to trigger compliance (getting people to calculate they must), to encourage conformance (getting them to believe they should) or to win commitment (getting them to desire they want to).
- Having a portfolio of power types is useful. Each approach to power bears fruit to two power types, resulting in a repertoire of six different forms of power. Being able to flexibly use all six, depending on the situation, greatly enhances a person’s effectiveness.
38. Value Proposition Dial
A value proposition is the full package of benefits that a firm promises to potential customers if they purchase its products and/or services. It is the set of valuable attributes that a firm vows to deliver to buyers, in the hope that this will sway them to select the firm’s offering.
What is valuable is determined by the potential customer. On a hot day, cold ice cream is valued, but so is its availability at the beach, its trusted brand, and the possibility to pay by credit card. It is the set of attributes together that make a value proposition compelling.
The Value Proposition Dial gives insight into the seven categories of attributes that can be combined to create an attractive value proposition. Its key message is that a value proposition is more than the characteristics of the core product/service. Surrounding these core attributes are the envelope attributes – six sets of possible characteristics providing valuable ‘wrapping’ around the ‘gift’ inside. In each of the seven categories a few examples have been given, but there is no limit to the possible attributes per category. This “dial” is one of the three dials that together form the business system (see model 32, Strategic Alignment Model).
The seven categories of possible attributes are the following:
- Core Product/Service Attributes. The core product or service is at the heart of the offering to customers. Most product-driven companies will focus on technical attributes such as quality, size, color, features, and functionality, but from a customer perspective attributes such as design, style, smell, convenience, and assortment can add huge value to the mix.
- Supplemental Products Attributes. A laptop might be made more attractive if it comes with pre-loaded software; dentistry services more appealing if the waiting room is pleasant; and chocolates more desirable if beautifully packaged. These are all examples of tangible products added on to the core product/service, each with its own specific attributes.
- Supplemental Service Attributes. In the same vain, complex machinery is more valuable if installation is included, car rental more attractive if insurance can be tacked on, and electronics more alluring if repair is available at no extra cost. These are all examples of services added on to the core product/service, each with its own appreciated attributes.
- Distribution Attributes. The way that a product/service is made accessible to customers can also bring additional value. Being able to order online, make reservations, get home delivery, and/or have a product immediately available are all distribution attributes that can be highly appreciated and represent reasons to select a particular offering.
- Informational Attributes. Sometimes information is the core product, but often information is added an extra benefit. An instruction manual or video can be offered, along with technical documentation, a database of fonts and icons can be included and access to a library of frequently asked questions can be provided, all sweetening the offering.
- Reputational Attributes. The way a product/service is perceived, judged, and trusted by the potential buyer, and its more general renown among other stakeholders, can also be of great value. Been known as a luxury brand, having great reviews and an image of trustworthiness, and being certified as meeting quality standards, all increase desirability.
- Payment Attributes. Likewise, what, and how, to pay for a product/service can make it more alluring. A low price, a volume discount, paying in instalments, only paying for premium features, receiving bonus points, and buying through an auction are just a few examples of how getting people to part from their money can be made a selling point.
Almost all value propositions will have attributes in all seven categories. The challenge is to find distinctive and appreciated attributes in each and to align them into a desirable whole.
- Value is in the eye of the beholder. Product-driven companies believe that great products are valuable and will almost sell themselves. Customer-driven companies realize that what is valuable is determined by the potential buyer, who will look for a package of attributes, often extending beyond the technical characteristics of the core product/service.
- Value propositions are more than products. A value proposition is the package of attributes promised by a firm to a potential buyer that is intended to be seen as more valuable than offerings by rival firms. The package is broader than the product at its center.
- Value propositions have core and envelope attributes. Every value proposition consists of a core product/service, with a range of attributes making it attractive to buyers. Around this core is an envelope of six types of additional attributes – supplemental products, supplemental services, distribution, informational, reputational, and payment attributes.
- Value propositions need to be compelling. To get potential customers to select their value proposition, the package needs to consist of a set of desirable attributes, usually drawn from all seven categories. These attributes should be mutually reinforcing and fit closely with the wants of the customer to create a high level of value.
- Value propositions need to be distinctive. The package also needs to be more highly valued than what competitors are offering. Broadening the value proposition to encompass various attributes from all seven categories often creates various layers of distinctiveness.
37. Sustainable You Model
Something is sustainable if you can keep it up in the long run. In recent years, it has become commonplace to question the sustainability of our economic value-adding activities, as natural resources are being rapidly run down, while the ecological and social environment are being negatively impacted more quickly than they can recover.
But you can also run yourself down, choosing to achieve quick wins in the short run at the expense of your capacity to function and thrive over the long run. Where someone undermines their ability to keep up their level of performance over an extended period of time, we say they damage their personal sustainability.
The Sustainable You Model gives an overview of the four key areas in your personal environment in which you need to invest to remain in the game in the long run. With a wink to Muhammad Ali, these four “wings” of sustainability will allow you “to float like a butterfly, but sting like a bee”. Just as the UN has set 17 Sustainable Development Goals for the broader world community, this model presents 20 personal sustainable development goals for you as an individual.
The four key areas of personal sustainability are the following:
- Energy: Vitality Sustainability. To keep functioning in the long run, you first need to maintain your physical and mental energy. You need to safeguard your vigor and avoid running down your battery by paying attention to the five levers of sustained vitality:
- Fitness. Exercising regularly to strengthen your body and mind.
- Recreation. Taking time to rest, unwind, refresh, and recover.
- Sleep. Getting enough high-quality sleep at the right moments in the day.
- Nutrition. Eating a healthy, moderate, and balanced diet.
- Mindfulness. Being mentally present, calm, and open to new stimuli.
- Embeddedness: Relational Sustainability. Your healthy functioning also depends on maintaining the web of relationships in which you are embedded. As a social animal, you can’t thrive in isolation, but need to have warm interactions with five groups:
- Partner(s). One or more close companions, to have an intimate relationship.
- Family. Children, parents and relatives, to share time, love, and a sense of belonging.
- Friends. Best pals and good acquaintances, to talk, laugh and occasionally cry together.
- Direct and indirect co-workers, to team up with to achieve results.
- Neighbors and other community members, to live together enjoyably.
- Employability: Competence Sustainability. To keep functioning in an everchanging work environment, while ensuring that future career opportunities remain, you need to continuously upgrade your competencies. There are five levers of sustained employability:
- Keeping your information, understanding and insights up to date.
- Adding new capabilities to your repertoire of potential behaviors.
- Adapting your attitude and broadening your ways of thinking.
- Becoming clearer which principles you stand for and live by.
- Building a track record and a reputation in specific areas.
- Engagement: Motivation Sustainability. To keep functioning in the long run, you also need to remain inspired. Some activities will give a quick thrill in the short run, but to stay engaged you need to focus attention on all five levers of sustained motivation:
- Engage in activities that fit your natural strengths and avoid your weaknesses.
- Seek activities that you love to do and never feel like a chore.
- Find activities that are important to others and will help them out.
- Select activities that are valued by others and will be welcomed.
- Chose activities that are rewarded, both in terms of fame and fortune.
- Sustainability is about not running something down. Something is sustainable if it you can keep it up over a longer period of time. When most people speak of “sustainability”, they mean ecological and social sustainability. This can be called ‘macro-sustainability’.
- Personal sustainability is about not running yourself down. Sustainability is also relevant at the personal, or micro, level. Here the question is whether you can keep up your ability to function over a longer period of time, or whether you are overexploiting yourself.
- Personal sustainability is required in four areas. Each individual needs to avoid overexploiting themselves by maintain four areas: their energy (vitality sustainability), their embeddedness (relational sustainability), their employability (competence sustainability) and their engagement (motivational sustainability). All four areas are equally relevant.
- Personal sustainability is hard in practice. The need to maintain all four areas is easy to understand, yet hard to achieve. Short-term gain, leading to long-term pain, remains tempting. Investing in personal sustainability only pays back in the long run.
- Personal sustainability requires personal SDGs. To strengthen your resolve to invest, it can be useful to copy the UN approach and set personal sustainable development goals that can be monitored and followed up. The Sustainable You Model can be the basis.
36. Change Manager’s Toolbox
Organizational changes can range from small-scale incremental adjustments all the way to large-scale radical transformations. Whatever the magnitude, managers inside the organization, sometimes supported by consultants from outside, need to stimulate and guide change. In this sense, every manager is also regularly a change manager.
To realize change, managers need insight into change processes (see no. 25, Everest Model of Change), but also require tangible change management tools. These are ways of influencing what people do (intervention methods) in order to steer changes in the right direction.
The Change Manager’s Toolbox framework suggests that there are four change manager roles, each with four categories of tools. These roles differ along two dimensions. The first dimension is whether the role is focused on changing things (content-oriented) or changing behaviors (people-oriented). The second dimension is whether the role is focused on changing in a planned way (control-oriented) or in a more evolving way (responsive-oriented). All change manager roles need to be played by someone, but not necessarily by the same person. Which categories of tools are used will depend on the situation and the change manager involved.
The four change manager roles and their associated tools are the following:
- Project Manager. Every change can be seen as implementation project of getting from A to B, whereby the change manager needs to go through the classic plan-do-check-act cycle to ensure the effective and efficient execution of change. To run this cycle, the project manager will typically use tools from each of the following in four categories:
- Activity planning. Tools for determining which tasks need to be carried out and when.
- People planning. Tools for finding the right people and assigning tasks to them.
- Resource planning. Tools for providing these people with all the necessary means.
- Performance management. Tools for checking and incentivizing realization.
- Team Coach. Every change can also be seen as a team challenge of getting from A to B, whereby the change manager needs to coach the squad to work together in unison to be successful. To achieve this concerted effort, the team coach will typically tap into all four categories of potential tools:
- Direction setting. Tools to ensure all team members are striving towards the same goals.
- Expectation alignment. Tools to help mutual understanding and agree on shared rules.
- Team building. Tools to foster team spirit and commitment to each other.
- Conflict resolution. Tools to clear up interpersonal irritations and clashes.
- Learning Facilitator. Every change can also be seen as a learning journey of starting at A and finding out whether B is the right destination, whereby the change manager needs to facilitate the unfolding insight and to trigger the required adaptation. To achieve this ongoing learning, the learning facilitator can draw on tools from four categories:
- Learning from practice. Tools for gaining understanding from implementation feedback.
- Learning from experiment. Tools for discovering from controlled testing of assumptions.
- Learning from mistakes. Tools for drawing conclusions based on errors made.
- Learning from others. Tools for capturing and transferring best practices from elsewhere.
- Engagement Officer. Every change can also be seen as an uncomfortable move of going from A, inside people’s comfort zone, to B, somewhere outside. The change manager needs to win people’s hearts and minds to embrace this discomfort and then keep them engaged when the going gets tough. Four categories of tools are typically employed:
- Process participation. Tools to facilitate involvement and influencing of the change.
- Personal connection. Tools to help relationship-building and mutual bonding.
- Confidence building. Tools to stimulate people’s conviction that success is attainable.
- Inspiring leadership. Tools to encourage people to follow the change leader.
- Change has four different faces. Change can be seen as an implementation project, as a team challenge, as a learning journey and as uncomfortable move. All four sides of change pose different questions and require their own response.
- Change managers can play four roles. To tackle each of the four change issues, change managers need to play a different role – project manager, team coach, learning facilitator and engagement officer. All roles need to be filled, but not necessarily by the same person.
- Change managers can be content- and people-oriented. The roles of project manager and learning facilitator focus more on the ‘what of change’ – things and activities. The team coach and engagement officer focus more on the ‘who’ – the people.
- Change managers can be control- and responsive-oriented. The roles of project manager and team coach focus more on the planned side of change, while the learning facilitator and engagement office focus more on the evolving side.
- The change manager’s toolbox has 16 compartments. Each of the four roles has four categories of tools, giving a toolbox with 16 compartments, each with room for a whole range of specific tools. A change manager’s toolbox is big and needs time to be filled.
35. Corporate Value Creation Model
A corporation is a firm consisting of two or more business units. Each business unit creates economic value-added for the corporation by producing and selling products and/or services in a particular market at a price higher than the cost per unit. If corporations only engaged in this standalone value creation, their overall value-added would be the sum of their parts.
Yet corporations also add extra costs to their business units by having at least one extra level of management. Therefore, they need extra corporate value creation over and above their standalone value creation activities to more than offset these additional corporate costs.
The Corporate Value Creation Model describes the four ways in which a corporation can create extra value, on top of what a business unit could have achieved on its own. Horizontally, the four value types differ in the length of time typically required to realize the intended value-added after launching or acquiring a new business. Vertically, they differ in how much they interfere with the business unit’s ability to quickly react in a tailored way to the specific demands in their market. This diminished responsiveness is in itself an additional corporate cost.
The four types of corporate value creation are the following:
- Portfolio Value. When a corporation acts like an investor, using financial engineering to add value to its portfolio of holdings, we speak of portfolio value. The metaphor here is ‘leveraging the family fortune’ – using the corporation’s money to make more money. Three common ways of creating portfolio value are:
- Acquisitions/divestments. Buying businesses cheaply and selling them dearly.
- Capital reallocation. Shifting cheaper internal capital between business units.
- Tax optimization. Shifting tax burdens/advantages between business units.
All these forms of portfolio value creation can be achieved relatively quickly, with little interference in the day-to-day management of the business units.
- Reputational Value. Often the fact that a business unit belongs to a particular corporation will bestow it with an air of reliability and/or attractiveness, which could help to win over external stakeholders. The metaphor here is ‘leveraging the family name’ – using the corporation’s reputation to gain competitive advantage. Three common forms are:
- Buyer trust. Gaining customers’ confidence and hence a stronger bargaining position.
- Partner trust. Gaining more confidence with suppliers, contractors and complementors.
- Labor market desirability. Looking more appealing to prospective employees.
All these forms of reputational value require a bit of time for ‘advertising’ but can be realized relatively quickly. Business units only need to avoid damaging the corporate good name.
- Management Value. Many business units, as ‘daughter companies’, can benefit by having a good ‘mother’, who can help with guidance, assistance, rules, and sometimes a stern hand. The metaphor here is ‘leveraging the family parents’ – letting the corporate center support and steer the ‘children’ depending on their level of development. This includes:
- Management control. Interacting with business unit managers to direct their behavior.
- Business unit staffing. Ensuring the right people are in the right positions.
- Organizational systems. Installing the most appropriate processes and practices.
All this is also called parenting value or vertical value creation and takes a while to achieve. The extra coordination also limits the ability of the business units to be responsive.
- Synergy Value. Many business units, as ‘daughter companies’, can also benefit by having good brothers and sisters, with whom they can share and get stronger. The metaphor here is ‘leveraging the family siblings’ – getting the children to work together as a team to save money or get better. The three most important types of synergies are:
- Sharing resources. Copying, reallocating or jointly using tangible and intangible means.
- Integrating activities. Carrying out activities together or in coordination.
- Aligning positions. Jointly approaching customers, suppliers, or other stakeholders.
All this is also called sibling value or horizontal value creation and can take a long time to grow. The high level of necessary coordination strongly restricts business responsiveness.
- Corporate value creation is essential. Most large firms consist of more than two business units, requiring more levels of management, bringing more cost and potential bureaucracy. They need to have a clear understanding of which value-added they are pursuing.
- Corporate value creation is possible in four ways. As a family of business units, corporations can leverage the family fortune (portfolio value), the family name (reputational value), the family parents (management value) and/or the family siblings (synergy value).
- Corporate value creation takes time. All four types of corporate value creation require an investment of time and energy before the full advantages can be realized. Many private equity investors therefore focus on portfolio, reputation, and a bit of management value.
- Corporate value creation comes at a cost. Management and synergy value look potentially attractive, but besides taking long to achieve, they also limit a business unit’s responsiveness, making them slower and less focused, while undermining ownership.
- Corporate value creation is overlooked. Despite its importance, few corporations have an explicit corporate level strategy in which they clarify which types of value are being pursued and how the negative impact on responsiveness will be limited.
34. Organizational System Map
An organization is a group of people acting together to realize a shared objective. In an organization, the necessary work is divided among the organizational members (division of labor or differentiation) and their activities are aligned to jointly achieve the intended results (coordination of labor or integration). Organizing is about how best to differentiate and integrate activities. This can be called the horizontal organization issue, as it is between people.
Organizing is also about determining who should steer the activities (control) and how much room members should have to determine actions themselves (empowerment). This can be called the vertical organization issue, as it is about who should have power over whom.
The Organizational System Map gives an overview of the key characteristics found in every organization. While organization charts are the most popular way to picture organizations, this model suggests that organizations can be better understood by recognizing four main aspects: their particular design (formal organization), the characteristics growing on top of this formal design (informal organization), the people they have on board (organizational members) and their underlying beliefs, values and norms (organizational culture). These are not parts of the organization, found in a specific place, but aspects found throughout. Note that this model is the third building block of the Strategic Alignment Model (Meyer’s Management Model #32).
The four main characteristics of each organization are the following:
- Formal Organization. All explicitly agreed upon arrangements made between people about how to work together are part of the formal organization. These include:
- Structure. This details how work is split and assigned to specific people (differentiation) and to whom these people report (control). This is commonly summarized in an orgchart.
- Processes. These specify how people need to work together to complete multi-stage activities or exchange information (integration). Here RACI models are often used.
- Controls. These are the instruments used to steer people’s behavior, such as strategic planning and performance management. See Meyer’s Model #11 on the Control Panel.
- Informal Organization. When coordination between people develops organically, but isn’t formally arranged, we speak of the informal aspects of the organization. These include:
- Networks. These are all connections established between people that can be used to exchange information, influence decisions, and/or get work done.
- Community. Even where people are not personally connected, they can experience a sense of belonging, team spirit and mutual responsibility vis-à-vis each other.
- Leadership. While management is one of the controls, specified in the structure, leadership is the ability to influence others. This needs to grow, despite one’s position.
- Organizational Members. The people that make up the organization are its members. There are three sub-aspects that need to be considered when looking at them:
- The members can be viewed as a collection of individuals, each with their own personality, knowledge, skills, capabilities, and relationships.
- The members also need to be viewed collectively to see how diverse and balanced the composition of each part of the organization is.
- The members also need to be viewed as more than a bundle of required resources (hands & heads), recognizing their energy and motivation (hearts & minds).
- Organizational Culture. Lurking behind the three front disks is the organizational culture. The culture encompasses the shared worldview of the organizational members (their beliefs), the principles they hold dearly (their values) and the unwritten rules of behavior that follow from both (their norms). Culture subtly influences all three other organizational aspects and can only be influenced back via changes to these three.
- Organizations are more than their orgcharts. Organization charts give limited insight into the functioning of organizations, as they only show the (intended) division of labor and reporting lines. How integration and control really (should) happen is not made clear.
- Organizations have four key characteristics. Structure is only one of the three elements making up the formal organization. Equally important for understanding organizations is knowing the informal organization, organizational members, and organizational culture.
- Organizations have a hard and soft side. The top big disk is the engineered, mechanical aspect of the organization, with hard controls and integrators. The bottom three big disks are the human, social aspects, which allow for soft controls and integrators. These soft aspects guide behavior (indirect steering) instead of determining it (direct steering).
- Organizations have a front and back side. The three big disks in front are the tangible and directly influenceable aspects of the organization, while the organizational culture at the back is difficult to observe and only indirectly influenceable via the front three disks.
- Organizations have an adaptive and rigid side. Changing the formal organization is the easiest, while it gets increasingly difficult as you move to the organizational members, the informal organization and ultimately the organizational culture.
Creativity is the ability to generate something original and unusual. It is the capacity that individuals, teams, and organizations can have to come up with new ideas, tools, approaches, designs, products, services, and/or business models. It is the skill to create something novel.
Creativity, like charisma, is often seen as a mysterious quality, that is hard to explain and difficult to purposely develop – either you have the elusive x-factor, or you don’t. The most widely used approach to spurring creativity is brainstorming, in which ideas are generated spontaneously, usually by a group of people, and only evaluated later.
The Creativity X-Factor model outlines the key factors contributing to the creativity of a person, team, or organization. With a wink to the notion that creativity is tough to pin down, the model arranges the four conditions that stimulate creative processes into a large X – these are having creative mindspace, a creative mindset, cognitive diversity, and a cognitive challenge. The creative process itself (in the center oval) can make use of four thinking techniques that build on each other to drive creativity. The key message is that creativity is not an enigmatic quality, but a capability that can be consciously developed and maintained.
The four conditions supporting creative processes are the following:
- Creative Mindspace. Creativity requires mental effort and therefore people need to be willing to invest time and attention to do so properly. It helps to dedicate a specific block of time for creative thinking and to avoid distractions. Presence of mind is crucial.
- Creative Mindset. Creativity also requires an attitude of openness and curiosity. People should have an adventurous and inquisitive state of mind, highly interested in probing the unknown, while avoiding premature judgement. Uninhibitedness of mind is equally crucial.
- Cognitive Diversity. Creativity is also aided by using a range of perspectives to look at issues. These different angles can be brought in by different people or by using alternative lenses to view things in distinctive ways. Hence, variety of minds is just as crucial.
- Cognitive Challenge. Creativity can also be triggered by mental puzzles. By confronting people with a tricky problem or counterintuitive statement, their certainties can be shaken, stimulating them to think outside their comfort zones. So, spark of mind is crucial as well.
Besides these four supporting conditions, there are also four thinking techniques that build on each other to spur the creative process:
- Explore. Coming up with new ideas can be done by employing different types of logic (‘think like a pirate, then like a teacher’). By using different thinking formats in a disciplined way, people will arrive at new insights. This can also be called structured scouting.
- Expand. Once new ideas have been generated, it helps to run with them. By taking ideas, building on them, and driving them ever further, people can flesh out an entire new avenue of thinking without restraint. This can also be called radical extrapolation.
- Contrast. Once a broad portfolio of ideas has been generated, it can be enriching to compare and sharpen them, highlighting the differences. As in a good debate, the clash of ideas strengthens each further. This can also be called competitive juxtaposition.
- Combine. With the key characteristics and strengths of each idea revealed, it is possible to cross-fertilize them, to come up with new combinations that bring together the best of both worlds. This can also be called constructive synthesis.
And after new combinations are shaped, people can continue by exploring even more types of logic, going through the cycle as often is they want or is needed.
- Creativity is an ability that can be developed. Creativity is not as magical is it sometimes seems, nor is it a talent that someone happens to have. The ‘creativity x-factor’ can be explained and the ability to generate novel ideas can be organized and learnt.
- Creativity is supported by four conditions. The chance that creative thinking will happen can be enlarged by enhancing four starting conditions: by ensuring people have enough time and attention (creative mindspace) available and engage with openness and curiosity (creative mindset), while there are enough different lenses (cognitive diversity) and stimulating puzzles (cognitive challenges) brought in.
- Creativity is triggered by four techniques. The creative process can be driven by using four complementary thinking methods: generating new ideas using alternative logics (explore), extrapolating these new ideas to discover their full potential (expand), comparing these ideas to sharpen them further (contrast) and cross-fertilizing these ideas to shape an even stronger synthesis (combine).
- Creativity is an ability of individuals, teams, and organizations. Individual people can use these conditions and techniques to improve their creativity, but working in groups can potentially be more effective, but can also be more difficult to organize.
- Brainstorming is the poor man’s route to creativity. Brainstorming hardly makes use of any of these ingredients and is therefore an inferior way to engender creativity.