In this series, Business Strategy Review profiles a major thinker who has made a significant difference to how organisations are managed and how business careers have been shaped as a result.
This article is provided by the Deloitte Institute of Innovation and Entrepreneurship.
The corporate graveyard is littered with the remains of corporations which remained locked in the past at the expense of the moment. Don Sull spends a great deal of time advising corporate leaders to dwell less on the past and future and more on the here and now.
The past “can be a dynamic force,” Sull has remarked, and is not to be ignored. But too often a company’s experiences are carried forward as holy writ, which can “ossify into clichés, while processes lapse into routines and commitments become ties that bind companies to the same course of action.”
As for the future, Sull asserts, there’s limited utility in worrying about it, in part because: “The record of people’s predictions in business … is very, very poor.” That contributes to Sull’s low regard for corporate vision statements, the value of which is “none or thereabouts” because companies use them for, according to him, “articulating some vague thing about aspiring to global leadership in their industry while being nice to employees and blah, blah, blah.”
With regard for past and future thus diminished, Sull touts the value of the present, with advice to sniff out and grab fleeting opportunity.
That’s something at which Sull himself seems rather adept, having risen to acclaim at a relatively young age, such as being among Fortune’s ‘10 new management gurus to know’. This was after he earned undergraduate, masters and doctoral degrees at Harvard; consulted at McKinsey & Company; and managed the private equity firm Clayton Dubilier & Rice’s $1 billion leveraged buyout of tyre maker Uniroyal Goodrich.
Today, Sull’s prodigious workload includes dual London Business School posts as Professor of Management Practice in Strategic and International Management and Faculty Director of Executive Education. He consults worldwide to firms including Nokia, Coca-Cola, Procter & Gamble, Oracle, Royal Bank of Canada and Baker & McKenzie — and finds time to write, with awards for several best-selling business books and numerous articles in major management journals.
Those rare opportunities
Seizing the moment demands organisational agility, but Sull recognises that such strategic manoeuvres are easier to talk about than do, because even though “you knew there would be golden opportunities, you didn’t know their specific timing or form or magnitude, but you knew they would come, just as you knew it was quite likely there would be these sudden death threats, although you didn’t know their form, magnitude or timing, either.”
The ‘sudden death’ in Sull’s construct is essentially the opposite of a golden opportunity: it may often be the golden opportunity of your upstart competitor — his chance to penetrate your markets or pilfer your customers. Where Sull most prominently shines, where his years of research have most clearly carved out a unique niche in the study of corporate management, is in his understanding of the periods of ‘active waiting’. These periods collectively account for the vast majority of time in corporate life — the time between the presence of golden opportunities and threats of sudden death.
Active waiting, as described in the overview to Sull’s 2005 article on this topic in Harvard Business Review, arises from ‘the importance of taking action during comparative lulls in the storm’. One has to be, he advises, prepared and ready to move. “Huge business opportunities,” he says, “are relatively rare; they come along only once or twice in a decade… What managers can do is prepare… by managing smart during the comparative calm of business as usual.” Smart management means that leaders probe the future and remain alert to anomalies that signal potential threats or opportunities. They exercise restraint to preserve their war chests. They maintain discipline to keep the troops battle ready. Then, when a golden opportunity or sudden-death threat emerges, they must rally the troops and focus resources on seizing the moment.
Digging in deeper
Sull claims that the greatest threat to a firm’s responding constructively during active waiting is what he calls ‘active inertia’. It happens when managers respond to opportunities or threats with measures that worked in the (overvalued, often misleading) past. “When the world changes,” Sull has stated, “organisations trapped in active inertia do more of the same… Executives in failing companies unleash a flurry of initiatives; indeed, they typically work more frenetically than their counterparts at competitors which adapt more effectively. Organisations trapped in active inertia resemble a car with its back wheels stuck in a rut. Managers step on the gas. Rather than escape the rut, they only dig themselves in deeper.”
Sull believes he’s found an effective alternative to active inertia in his studies of the world’s most volatile markets, in countries such as China and Brazil, and in industries such as enterprise software, telecommunications and airlines. “If you look at the rise of Mittal Steel [launched in India, now operating as Arcelor Mittal, the world’s largest steel company], they didn’t go around avoiding turbulence, they went after the most turbulent markets in the world — Kazakhstan and Indonesia and so forth — to seize the opportunities there.” Yes, turbulence has its good points and can be of enormous value, according to Sull. It “throws out new resources. It shifts consumer demands. If you look now in the current downturn, a lot of consumers have a lot less disposable income. You could say, ‘That’s awful.’ … Well it is, although some of the more nimble companies like Nestlé and Starbucks and McDonald’s are responding to those shifting consumer demands.”
In Sull’s concept of corporate success, turbulence creates opportunity and — as today’s turbulence is perhaps unprecedented — opportunities have never been greater. “My research has suggested that a lot of the big opportunities to create economic value emerge because of shifts in the broader environment. A window of opportunity or two open at the same time and allow firms to create value.” Curiously, but also logically, the fact that opportunity is largely created by external turbulence renders a company’s inherent proclivity for innovation of little value. Sull confirms this, having stated he’s ‘an innovation sceptic’. That’s because innovation makes people focus on ‘anything that’s new is good’. Sull prefers to be more precise: “Anything that’s new that creates economic value is good.” So innovation in the prevailing sense that there are untapped ideas and, if you have willpower and creativity, you can create opportunities — Sull finds this thinking to be flawed. He says that innovation has to be aimed at a real and expressed consumer need to create value.
Webs of promises
That requires the aforementioned agility, by which companies can tap employees’ entrepreneurial energies to seize new opportunities. The most effective means of accomplishing this, Sull has found, is ‘managing by commitment’.
He defines commitments as “a network of overlapping, continually evolving promises that people make to each other to get things done. The advantage and the power of this approach is that it lends itself quite well to situations that cannot be standardised: emergent strategies, innovation, one-offs or one-of-a-kind crises. It also works well when you coordinate among people who don’t report to you: suppliers, distributors, etc.”
Sull’s views on commitments question the modern utility of the traditional ways of getting things done in companies: through hierarchies or processes. “One of the most promising new ways to approach strategy,” he’s argued, “is viewing the organisation not as a hierarchy of power or a bundle of processes, but rather as a network of commitments to get things done… Most of the challenges [to corporate accomplishment] stem from broken or poorly crafted commitments. That’s because every company is, at its heart, a dynamic network of promises made between employees and colleagues, customers, outsourcing partners or other stakeholders.”
That means executives can overcome many problems in the short term and foster productive, reliable workforces for the long term by practising what Sull calls ‘promisebased management’. “Leaders must weave and manage their webs of promises with great care, encouraging iterative conversation and making sure commitments are fulfilled reliably. If they do, they can enhance coordination and cooperation among colleagues, build the organisational agility required to seize new business opportunities and tap employees’ entrepreneurial energies.”