Ronin Age : Creating Innovation and Radical Change in Organisation [1 ed.] 9789812619174, 9789812326119

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Creating Innovation and Radical Change in Organisations Author of Ronin and Revolutionaries

Peter Sheldrake

TIMES EDITIONS

© 2003 Times Media Private Limited Published by Times Editions An imprint of Times Media Private Limited A member of Times International Publishing Times Centre 1 New Industrial Road Singapore 536196 Tel: (65) 6213 9288 Fax: (65) 6285 4871 E-mail: [email protected] Online Bookstore: http://www.timesone.com.sg/te Times Subang Lot 46, Subang Hi-Tech Industrial Park Batu Tiga, 40000 Shah Alam Selangor Darul Ehsan, Malaysia Tel: (603) 5635 2191 Fax: (603) 5635 2706 E-mail: [email protected] All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. National Library Board (Singapore) Cataloguing in Publication Data Sheldrake, Peter, 1944 The Ronin age / Peter Sheldrake. – Singapore : Times Editions, 2003. p. cm. ISBN : 981-232-611-1 1. Organizational change. 2. Industrial management. I. Title. HD58.8 658.406 — dc21 SLS2003024497 Printed in Singapore

CONTENTS

Preface

vi

CHAPTER 1

Introduction: What is a Ronin?

1

CHAPTER 2

Ronin: Born or Made?

19

CHAPTER 3

The Business Arena

39

CHAPTER 4

Becoming a Practising Ronin

63

CHAPTER 5

Revolution in Action

85

CHAPTER 6

Leading the Life of an Internal Revolutionary

109

PREFACE

The pace of business change has been extraordinary in recent years, only to be matched by the proliferation of packaged solutions and systems that are intended to deal with these changes. Despite frequent announcements that someone has developed “the solution to your business woes”, the only real outcome has been the increasing realisation that we live in an uncertain world at present. It was in this context that I began to think about solutions that recognised uncertainty and the need for continuing change. Paradoxically, my thinking started some years ago when I had the opportunity to take the Executive Seminar at The Aspen Institute in the USA. Reading — and sometimes re-reading — classics from the past reminded me that great thinkers have thought about the challenges facing societies for several thousand years, and there is much to be learnt from their analyses and views. More recently, working with a number of colleagues, and especially Matthew Deveson and Andrew Corbett, both at the Centre for Transformational Leadership, I have come to appreciate the role of the “internal revolutionary”, and the importance of innovation and entrepreneurship as organisational capabilities. Those two strands came together in Ronin and Revolutionaries (Singapore, Times Books International, 2003), which sets out the importance of constantly challenging the way things have been done. In this book, I hope that I have taken these ideas forward to offer a more practical focus. The approach has benefited from the comments of friends and

PREFACE

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colleagues, and from the experience of running programs for RMIT delivered to a variety of organisations. I am indebted to them all. Writing is a strange business — so much goes on in your head before the words are put on paper! It takes an indulgent family to sustain that practice. I am fortunate in having several wonderful children and grandchildren, but at the same time, my attempts to write are the result of the peace that my wife, Trish, and youngest daughter, Julia, allow me when I am hiding at home. To them, I owe a very special debt. Peter Sheldrake August 2003

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CHAPTER 1

INTRODUCTION: WHAT IS A RONIN?

The capability to change is critical — and so are the people who will bring about significant, revolutionary change Ronin are the drivers of change in organisations — but they are not necessarily running the business from the executive suite. In the current environment, change and innovation are critical. Companies that stay still die: they are eaten by other more aggressive organisations, those that are moving faster, or they simply run out of customers as others nibble away at their market. In order to stay in business, organisations have to continually change, and have to think of new ways to do business, of new products and services to entice customers. You have to innovate to stay alive. Innovation and change can be driven from the top of the organisation. However, while system-wide change has its place, often it is change at the business unit level that makes the critical difference. It is at this level that Ronin play an especially important role. They are constantly questioning, and seeing if things can be done differently, done better. They probe. They challenge. They make life uncomfortable — and they discover new and effective ways for organisations to operate.

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THE RONIN AGE

The original Ronin — samurai without a lord The term “Ronin” comes from Japan. Ronin were samurai who no longer were tied to a feudal lord — often because their leader had been defeated. Under Japanese feudal tradition, samurai were expected to do as they were told — trained fighters who fight as directed, and die in the service of their master. However, the “master-less” samurai, the Ronin, became independent — in thinking and in behaviour. Some travelled — even outside Japan. They found themselves in unexpected and unfamiliar situations, and they had to live by their wits, a long way from the comfortable world of living under direction. Many of those who travelled came back to Japan, and shared what they had learnt. They were an important source of change in Japan. The comparison with modern business is obvious. Just as the closed society of Japan needed new thinkers, and people who were willing to follow an independent path, so do organisations today. They need people who are confident in their abilities — and are comfortable with new ideas, challenging the past, and unwilling to continue to do things “in the old way”. In other words, Ronin are free thinkers, who continue to live within a system, but are willing to learn and behave differently. They sound a bit like revolutionaries, but this leads to an important distinction, which we will use throughout this book: ♦ Ronin are internal agents of change, committed to the organisation and its goals, but willing to rethink how those goals can be attained. ♦ Revolutionaries are people who want to “overthrow” the organisation, and replace it with something new, directed towards new goals.

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Ronin are people who do not fit — they see things and behave differently Think about where you work today. Around you are a variety of staff. Some are “hard workers”. They are not particularly imaginative or creative, but they are the essential basis on which the work of the organisation is carried out. No organisation can survive without hard workers. There are also other staff who are very good at setting direction, establishing plans, developing capability, and encouraging continuous improvement. In the not-so-distant past, they were the basis for longer term competitive success, when continuous improvement was enough to ensure that you remained successful. Also, there are some people inside your company who are “square pegs in round holes”: people who don’t seem to “fit” as well as everyone else. They are the people who always ask difficult questions in meetings, disagree with approaches that everyone else agrees to, and who often just “don’t seem to get it”. They are often irritating, hard to embrace in the team — and they are essential. Some of those people are Ronin. We ignore the square pegs at our peril, because they are the people who do not just move along with the ways things are. The square peg in the round hole is a person who does two very important things. The first is to reveal, by their “bad fit”, the real nature of the organisation. They are the people who help you see the effects of the culture, and the limitations and restrictions that a culture can invoke (as well as the benefits, of course). The discomfort tells you that there may be practices and procedures that are in need of review, renewal, or even rejection. If you leave the culture as it is, you will keep losing the very people you can ill-afford to pass on to a competitor — the people who know your culture, but who can see how to do

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things differently, and help point the way to the next new business. At the same time, the square peg breaks and changes things — all those sharp edges keep on getting in the way. As the famous saying has it, “if it ain’t broke, break it”! They are the people who see no reason to keep on doing something because it has been done that way in the past. They are the people who do see challenges as opportunities, and are always trying to see how to do something (as opposed to those who work hard to show why we should not be doing something!). Living with Ronin is uncomfortable. They disagree and they do not accept things just because that is the way they have been in the past. Being a Ronin is even more uncomfortable. Lots of other people in the organisation tend to want to avoid you — because you make them feel uncomfortable. It’s a strange situation — you are essential, and not necessarily loved! If you are a Ronin, or would like to be one, then this book is for you. It is for people who want to make a difference — by doing things differently. The path of the Ronin can be lonely, and challenging, but it is also rewarding and stimulating. Come along and join the “journey of the Ronin”.

Why is the need for radical change so important? Before we go any further, there is one very important issue we need to get out of the way. We need radical change in organisations right now. Why is this? One of my friends is fond of saying that, if you want to understand the way things are today, you have to look backwards. If we compare the beginning of the 21st Century with much of the 20th Century, there are a number of interesting things we observe.

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Firstly, for most of the last century, things changed relatively slowly. Does that seem surprising? Well, think about some examples. At the beginning of the last century, cars began to be made — they were called “horseless carriages” in these days! Now, much has improved in cars in the hundred years, but in essence, they are still wheeled vehicles propelled by the internal combustion engine. A hundred years ago, flight had not commenced, but the technology of flying has undergone only two major revolutions in the past 80 years — using the internal combustion engine as the source of power, and then the jet engine. Of course, there are some more recent inventions. Computers and televisions, for example. However, even in these cases, the pace of change for much of the 20th Century was slow and predictable. Computers are smaller and faster, but the underlying technology has not changed greatly since the emergence of the transistor.

The pace of innovation and change is getting faster All that began to look very different in the 1990s. Suddenly, we witnessed an extraordinary burst in the rate of innovation. Mobile telephony led to portable devices that could be computers and even cameras — and before long we will be able to combine these with televisions well. Voice interaction with computers began to emerge. New transport technologies began to become more significant (especially using fuel cells). Logistics changed with the emergence of intelligent and active packing and tracking systems. At the end of the century, another burst of innovation began to become apparent with biotechnologies, the human genome project, and new kinds of medical and drug therapies. Just around the corner, we can see the first stage of nanotechnology.

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What has led to this burst of new thinking — and to so many new products and services? In part, the changes have been driven by a second factor that we can see by looking back — and that is increased interconnectedness. We live in a more “globalised” world. The Internet, and improved telecommunications (and better transport systems) mean that we are closer to one another, as time and distance have less impact. This has led to a number of consequences: ♦ technological changes in one part of the world extend more quickly to other areas; ♦ research and development spreads more quickly; ♦ companies compete with enterprises around the world, not just with the organisation “down the road”; and ♦ information is more freely available, and increasing rapidly. There is a third factor we can discern by comparing our present world with the recent past. This is that, overall, the world is better educated. Compulsory education into the late teenage years in many countries, combined with a dramatic increase in participation levels in tertiary education have led to a situation where people know (and want) more, and more become involved in areas of research and development. In particular, there are many more people undertaking research, and based on research others are developing new products, new services, and new ways of undertaking business.

In a time of rapid change and uncertainty, unpredictable thinking becomes important Taken together, technology, globalisation and education have contributed to create a rapidly changing world. In this new environment, the pressures on companies and other organisations increase. In the private sector, competition increases. In the public sector the demands to be met, and the

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technologies to be used, are changing quickly. We are truly living in an era of rapid change. Of course, the situation is not going to stay like this forever. Current rates of change cannot be sustained into the future. It is likely that the pace of change will eventually slow down again, just as it did after the Industrial Revolution, when there was another time of dramatic and rapid change. However, while that may be true in the long term, right now we are in the middle of an era of rapid change. In periods of rapid change, organisations need to combine two approaches: ♦ Reaction — coping with change as it occurs. ♦ Anticipation — trying to sense the path of future change, so as to be well placed to deal with the changes as they occur.

Organisations need to lead change, not just follow others In fact, anticipation and reaction is not enough. For business, there needs to be a third approach — seeking to lead or even determine the direction of change. As we have seen in the last twenty years, companies are often involved in key challenges in seeking to set the developmental path (Sony and Betamax versus the other VCR manufacturers and the VHS format; CDMA versus GSM in mobile telephony; competing formats for DVD, and so on). In business, the trick is to see ways to be “radically innovative”, to reinvent the business so that you establish a new path for the industry, and your competitors are left trying to catch up: and this, of course, is where we look to the Ronin. However, there is another reason why Ronin are important. It is not enough to say that we live in rapidly changing times. If that were the issue, then intelligent people should be able to

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keep up with the changes, and work out how to address them. There is another factor.

Uncertainty adds to the pressure to innovate We also live in an uncertain world. For some people, this has been exemplified by the popularity of Chaos Theory, and the ideas that in a complex and interconnected world, events in one place can have unanticipated consequences in another — the favourite example is a butterfly flapping its wings in Japan and setting off a series of events that end up with a tornado in Texas! However, I think we can have a simpler view of uncertainty: it is simply the case that we cannot be sure what is going to happen next, not what its consequences will be. When the Thai Government decided to devalue the baht, almost no-one could have anticipated that this would trigger the Asian Financial Crisis — and the impact on sharemarkets and economies throughout the region. Each morning when we read the daily newspaper, the question in our minds is: “Now what has happened? And, what will it mean?”

Why should you be concerned? To be told that the world is changing quickly, and that uncertainty is increasing is not exactly news! Nor is it a surprise to learn that organisations need people who are going to be innovative, to be the source of new ideas and change. What may be more of a surprise is to learn that Ronin are going to become recognised and rewarded. Think about it. Organisations need internal revolutionaries — if they are to be sustainably competitive in the next couple of decades. Being good at your job will not be enough. Being good at continuous improvement will not be enough. Increasingly companies will look for the innovative staff, the

INTRODUCTION: WHAT IS A RONIN?

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radical thinkers, and they will become the staff who get the rewards and attention. There is another reason for you to be concerned — you might be a Ronin yourself!

How can you recognise a Ronin? What makes a person a Ronin? The essential attributes of Ronin relate to their ability to work within organisations, and yet be a potent source of change and creativity. In a sense their role is a paradoxical one — to be part of the organisation, and yet apart from it. So it is with their attributes — they are a paradoxical combination of skills and abilities. Do you have these? A Ronin is: ♦ both a high achiever, and at the same time someone who wants to contribute to creating a better society; ♦ a person who is self-reliant and an adventurer, and at the same time reflective and capable of drawing inward; ♦ someone who is confident and self-motivated, and at the same time always willing and wanting to learn; ♦ persistent and determined, and at the same time possessing a high tolerance for ambiguity and uncertainty; ♦ committed to the values and the goals of the organisation, and at the same time able to rethink these and adapt to changing circumstances; and ♦ someone who possesses “helicopter” vision — the ability to see the broader picture, and at the same time focus on the details — while also being open to new experiences, and is capable of reframing and re-examining how things are done. Ronin are comfortable with paradox and ambiguity. They accept the world is not a tidy place, and that things do not fit, or work well: in fact, things are often in conflict, ill-adjusted, and in a state of tension. The capability to deal with these forces mean that Ronin are able to do things under extreme pressure and in

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the face of conflicting demands, and yet also able to rethink and innovate, changing direction and even changing the bases on which they operate. In many respects, joining the Ronin means joining a group of special and different people — and at the same time having fun, and helping change the world. Are you a Ronin?

How to use this book I started this book staying at a hotel in Australia. That day, I had seen two places that fascinated me: the first was a department store, and the second was the hotel. Both of these organisations could be described as “dinosaurs” — organisations that had become stuck in their way of operating, increasingly out of touch with changes and trends, and increasingly in need of revolutionary rethinking. Ronin are needed in all organisations, but most of all in those that are becoming redundant through their inability to change in face of a changing environment — like the dinosaurs, and like Japan in the 18th Century. Japan survived — but the dinosaurs did not. Will department stores survive? It seems unlikely. The form of the department store is the same the world over. You walk into a store in Paris or Calcutta, Tokyo or Miami, and they are all similar. On the ground floor, you have cosmetic counters, and accessories for women — and maybe some souvenirs or local products. Then, you move up to the next floor to women’s clothes, then to men’s above that, and finally on the upper floors you have things such as toys, furniture and electrical goods. If there is a basement, it will probably sell foodstuffs. Think about what you see in a store a bit more. The underlying model of the store is the “maze”: trap the customer inside, and he or she will wander about, trying to find the product they are seeking (or the way out), and — almost on impulse — buy things that they needed but had forgotten to buy. Margins are thin, profits are tiny, and costs are high. It is a

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business crying out for change, and it has begun. Gary Hamel has described the appearance of the Sephora stores, an experiment in rethinking the selling of cosmetics, and there are other attempts to rethink taking place (Hamel, 2000). There will be more. Hotels are similar. They also look the same all over the world, and they are also trapped in a model that has outlived its usefulness. Most are riddled with processes and systems that suit the hotel and not the customer. The check-in process and the detailed form with all that unnecessary detail. The clerk behind the desk deciding which room you should have, and not offering you any choice; the uniformity of the rooms themselves, unavailable until after a set hour, when the chambermaids have completed their work — no matter that you have been flying all night from Melbourne to Frankfurt. We need to rethink dinosaur industries like these, and at the same time keep faster moving companies on the edge of the innovation challenge. This book is a guide to help you to do this, a guide to the journey of the Ronin. As a guidebook, it is something to use as you need it, and different sections may be of importance at different stages of your work. You can read it all the way through, or you can treat it as a resource — dipping into the sections that relate to your concerns.

Five elements of being a Ronin — Reflection, Observation, Narrowing Down, Innovating and Navigating The chapter began by talking about a Ronin as: a person who identifies and develops new, effective and different ways to achieve an organisation’s goals

Let us look a little more carefully at the word RONIN: it is also a mnemonic — a word that also reminds you of the key words

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that define what a Ronin does! Ronin have to combine five skills — standing back and reflecting on the organisation or environment in which they are working, observing what is happening, identifying and narrowing down on the key issues to be addressed, innovating and finally navigating through the processes of making changes, and making change work. So, the word RONIN reminds us that a Ronin is someone who: Reflects Observes Narrows down Innovates Navigates These are the skills we are going to explore in the next few chapters of this book: ♦ The next chapter deals with becoming a Ronin — an “internal revolutionary”. It explores the reflective skills that are required, how these can be developed, and how they can be sustained. ♦ Chapter 3 addresses observation, how to analyse a business, and to identify the key areas where change is taking place. ♦ Chapter 4 is concerned with narrowing down and innovation. It introduces the idea of systematic innovation in business — rather than relying on inspiration and brainstorming. ♦ Chapter 5 completes the Ronin toolbox — the set of techniques and skills you need to carry around to be effective. ♦ Finally, in Chapter 6, we look at living as a Ronin, and how to sustain and nurture your approach in the face of the usual pressures to conform within the organisation.

How to look at organisations To be a Ronin is partly a matter of the way in which you think and behave — it is about how you work. It is also a function of

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the tools you use, the skills you have. To be a Ronin places a high premium on your analytical skills: in learning to look at a business and observe what is going on, the critical skill concerns the ability to piece together the essential information. In this book, we are going to explore a framework to do this. There are two reasons for this. First, a framework helps you remember what to look for — it ensures that you are systematic. Second, a framework alerts you to what you do not know — because every time you can’t fill in one part of the framework, you know there is more observing to be done. There are many frameworks that have been developed, of course, and many suggest a number of key elements that characterise an organisation, in terms of such factors as politics, structure, operations, values, culture, strategy, resources, customers (or clients, or users), processes and stakeholders. The model that I want to propose I have called the CORE approach — one that emphasises Character Operations Relationships and Environment. CORE is another mnemonic, and at the same time the word was deliberately chosen — as it makes it clear that this framework is aimed at essential information — rather than trying to be too ambitiously inclusive. The CORE model has four parts: 1.

Character

2.

Operations

which includes: Strategy Resources Structure Intent, and Alignment which includes: Positioning

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3.

Relationships

4.

Environment

Boundaries Value creation, and Synergy which includes: Customers Stakeholders, and Business context which includes: Broader context Scenarios, and Reputation

All these are interlinked, as the following figure shows. However, while the terminology may seem rather daunting, the intention is simple — a Ronin needs to know how to make sense of the world in which they are operating. Moreover, the model is a framework for understanding — the central task is to use the framework to gain an understanding of how an organisation works, and the result may be summarised in a few paragraphs. Positioning

Strategy

Customers

Figure 1: The CORE model

Intent Values

Boundaries

Resources

Value Creation

Structure

Synergy

Business Context

Operations

Relationships

Environment: Broader Context

Stakeholders Alignment

Character

Scenarios

Reputation Environment

We will explore the CORE model in some detail in Chapter 3: right now, I just want to make it clear that being Ronin involves real work. If you want to be a successful internal revolutionary, you will have to show dedication, commitment and

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perseverance. Not everyone will support you. As the Japanese Ronin found out, being a Ronin is not for the faint-hearted!

Providing support Perhaps you are reading this book because you are interested in Ronin, and what they can contribute — but you are not one yourself. Perhaps you could be someone who supports Ronin — a champion or a mentor, roles we explore in Chapter 6. On the other hand, if you are a Ronin, then you might like to seek out others who share your interests. In Australia, we have established a network for Ronin — if you want to find out more, visit the Centre for Transformational Leadership — www.cftl.com.au.

Case study Rethinking the chemicals industry The chemicals industry is full of companies that exhibit dinosaur qualities. Many produce chemicals in large quantities, and in the last few years, they have become commodity suppliers, fighting with each other on price. Price warfare is a good indicator of the need for some Ronin thinking. A typical company might manufacture some essential but common chemicals — ammonia and chlorine, for example. These are hazardous chemicals, but, provided good safety systems are in place, easily manufactured, stored and transported. However, in a price competitive environment, the supplier of today is constantly fighting against new entrants in lower labour cost countries. The price battle always moves in the same direction. Competition over prices pushes prices down. Margins become thinner and thinner — and eventually some of the players in the industry go to the wall. Consolidation

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takes place, but the giants are still under pressure from new, low price entrants. Keith worked inside a leading chemicals company, and knew that the business had to change. There was a limit to the cost-cutting strategies that were being employed — especially in relation to the bulk chemicals they produced (chlorine, ammonia), which could be manufactured more cheaply overseas. Keith asked a simple question: “what are these chemicals used to do?” A common answer is “cleaning”. Chemicals like chlorine (converted into hydrochloric acid) is good to clean metal surfaces, for example, so that they can be painted or powder coated. Ammonia is used to clean polluted water of biological and other contaminants. Once Keith started to think about the uses of the chemicals, he could see there were some new ways to operate the business. He approached some colleagues, and suggested they stopped thinking about selling chemicals, and instead start selling the service for which the chemicals are used. Why could they not become a cleaning services company? “We will clean your metal products, and the waste water produced.” Keith believed that this would be a service that customers would welcome — especially if the company could guarantee to offer high quality service, excellent metal finishing, and pure water leaving the factory. What Keith recognised was that in offering the service, of course, was that the company would still be selling chemicals, but now they would be bundled into the price of the service. Moreover, since it was now the company that was using the chemicals, not the customer, they should be able to use them in the most cost efficient manner. Indeed, it was possible that they might even stop producing them, and buy them from a low cost producer overseas (where prices are low, and that company, rather than your own, can deal with all the challenges of price

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based competition) … Keith’s colleagues were interested, but it is hard to change an organisation’s core business ideas. Many senior people could not see why they should move into a service role — they were a manufacturing company. So Keith went off to explore the ideas with some customers, and found one who was keen to work with the company in this new way. He started to build support for his idea — and eventually it was the enthusiastic customer that persuaded the senior management that this was an initiative worth supporting. Keith understood that one of the most powerful strategies in business today is to move down the value chain: to move from growing to making, from making to providing service, and from providing service to managing knowledge. The move from manufacturer and seller of products, to service provider and user of products is a typical Ronin strategy.

Reflection Can you take Keith’s ideas further, and add a knowledge business to the service business he has identified? Can you see how a chemicals company can be changed to a knowledge company? You are beginning to think like a Ronin — and if this is the case, then this book is for you!

Summary Key points to remember: ♦ The current organisational world is dominated by technology, globalisation and education. • Together, they are creating a world characterised by rapid change and increased uncertainty. ♦ In this environment, competition is increasing in the private

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sector, and complexity in the public sector. • This is leading to an increased emphasis on innovation, both to stay in business, and to find ways to jump ahead of the competition. ♦ Ronin are the drivers of change in organisations — especially at the business unit level. • They are internal change agents, people who are willing to think differently and pursue unfamiliar approaches. ♦ Ronin are not revolutionaries, as they work inside the organisation, and subscribe to its broad goals. • They are unlike revolutionaries, who seek to change organisations from the outside, and change their goals and long term direction. ♦ A Ronin is someone who: • Reflects • Observes • Narrows down • Innovates • Navigates

CHAPTER 2

RONIN: BORN OR MADE?

The first part of the word Ronin is ‘R’, which is our key to the important first skill of reflection. In order to understand why the ability to reflect is so important, however, we first need to look at some more details on Ronin themselves, and their skills.

Who are the Ronin? When we look at people who are different, it is easy to fall into a simple trap — confusing Ronin with “Revolutionaries”. In Chapter 1, I explained that Ronin are different from Revolutionaries, as the term has traditionally been used: Revolutionaries want to overthrow the system as it is now, and create a new one. They are not workers who want to contribute within the organisation, but rather they sit outside, seeking to change the way things are.

As we currently try to deal with an unprecedented period of change — a situation outside the experience of many, if not most, members of society — we desperately need Revolutionaries to help us get past the inertia of the ways things are. However, we also need Ronin, people who work within the existing system, but still seek to change it — changing it from the inside out. They are committed to pursuing the goals of the organisation — but they want to do it in quite a different way — they do not support the “old ways”, they are seeking new ways. 19

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There is another element of the difference between Ronin and Revolutionaries that is important to understand. Revolutionaries want change because they believe in something that they see as an alternative — they have a vision, an ideology, a cause, which makes them want to overthrow what is there now. Ronin want to change things, but they start by seeking to understand the way things are now, and on the basis of that understanding find the opportunities, the possibilities for doing things differently — and better! In other words, Ronin seek to understand the outcomes the organisation is trying to achieve in order to change the means to get there: on the other side, Revolutionaries know what they want, and do not need to understand what is being done today in order to achieve their goal.

How to identify a Ronin — people who live comfortably with paradox How can you identify a Ronin? Are there some features — some essential attributes of Ronin — that relate to their ability to work within organisations, and yet be a potent source of change and creativity? If you think about their role in the organisation, the answer to the question is easy. In a sense, their role is a paradoxical one — to be part of the organisation, and yet apart from it. So it is with their attributes — they are the combination of extremes, each balanced in a creative tension with the other. There are six attributes that are important. First, a Ronin is both a high achiever, and at the same time someone who is socially concerned and wants to contribute to creating a better society. Many Ronin are at the forefront of driving the “triple bottom line agenda”, arguing that businesses need to contribute financially, environmentally and socially. They are also concerned about governance. However, they are not concerned about the need for companies to be profitable —

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as long as they achieve these other goals as well. They want to succeed, but to do so in a way that contributes to the broader social good. Second, Ronin are self-reliant and adventurers, and at the same time reflective and capable of drawing inward. An important characteristic of the Ronin is this simultaneous ability to go out and make changes, and yet be willing to take time out to reflect and restore their energies through rest and retreat. Ronin are confident and self-motivated, and at the same time always willing and wanting to learn, and recognise when they have made mistakes or pursued an ineffective path. The ability to know that they do not always know how to do things, while remaining confident, is a key to recognising a Ronin. Next, Ronin are persistent and determined, and at the same time possessing a high tolerance for ambiguity and uncertainty. Equally important is a fifth paradox — Ronin are committed to the values and the goals of the organisation, and at the same time able to rethink these and adapt to changing circumstances. Other writers have talked about this as a critical leadership skill — “level five leadership”, where determination and flexibility and a willingness to keep learning and changing are central. Finally the sixth is that a Ronin is someone who possesses “helicopter” vision — the ability to see the broader picture, and yet focus on the details, simultaneously — and at the same time is open to new experience, and capable of reframing and re-examining how things are done.

Are you a Ronin? You were certainly born with the attributes! Have you ever watched a young child at play? It is one of the most amazing things you can observe — children playing by themselves, are capable of the most extraordinary imagination and creativity. They can play different roles, create complex

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stories, weave in and out of fantasies, and cope with bizarre and fantastic scenarios of their own creation. Of course, we do an excellent job of beating this out of them over the ensuing years. We send them to school, where excellent teaching cannot help imposing rules and restrictions, curbing all that natural creativity in the face of the need to learn basic skills, and the ways in which things are done. Society depends on rules and roles. Organisations are equally demanding. In many ways, a company is the natural enemy of innovation and creativity. It depends on rules and procedures, making sure that universalistic policy and fairness in treatment is sustained. Ronin sustain those childhood capabilities in spite of the pressures of education, work and the demands of society. They are special people, because they recognise and respect all the important processes we put in place, and yet they are able to see beyond them, and seek out new ways of achieving what needs to be done. Are you a Ronin? Do you have the attributes set out above? Do you thrive in an environment of ambiguity and paradox?

Enhancing the capabilities of the Ronin — retrieving skills you were born with, and adding to the Ronin “toolbox” There is a lot of wasted debate about trying to separate the characteristics you are born with, and those you learn. It is clearly the case that both are important. A Ronin draws on natural abilities, and supplements these by learning new skills and approaches. It is possible for us all to grow beyond the person we are today. Before we start on the task of developing the five key skills, there are several simple techniques that will keep you thinking like an “internal revolutionary”.

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Here are ten ways to keep thinking and behaving differently. Technique #1: Set unreasonable objectives When we think about improvements, we usually think in small increments. Can we cut the cost of this by 5%? Can we reduce the time to deliver the service by 8%? Suppose you try taking the opposite approach. Can we reduce the price of this by 95%? It was that kind of objective which led to the development of the disposable camera. By setting an unreasonable objective, we open our minds to solutions that are unpredictable, and do not depend on current thinking and models. Technique #2: Focus on outcomes, not how they have been achieved When the company sets a target, the target becomes the focus of the business. We are asked to increase market share. The reason is to build a more profitable business by making better use of our assets. However, soon the market share becomes the goal, and not the increase in profitability. Thinking like that led one car hire company in Australia to lose sight of the costs of what they were doing, to the point that every extra 100 customers was costing the company hundreds of dollars! If you focus on the outcome you are seeking to achieve, then you will open your mind to new paths to get there. Technique #3: Listen to unfamiliar voices Who do you listen to in the organisation? Often, when I talk to people, they tell me how someone working on the front line saved them from an embarrassing situation. Or, they explain how they developed a new approach by listening to one of the maintenance staff. When I ran a training organisation, I used to get lots of good ideas from the building’s night porter —

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because he talked to the evening class students every day, and found out what they thought of our courses, and what they were really hoping to learn. Unfamiliar voices exist inside and outside the organisation. Many of the best ideas we adopt come from listening to someone else’s approach, and adapting to our circumstances. Conversation, and asking good questions — especially when the person you are talking to is not the colleague next door — can open up a world of innovative and exciting ideas. Of course some will not work — but neither do many of the ideas you come up with yourself! Technique #4: Develop an open market for innovatory ideas So far, I have talked about what you need to do to find out about new ideas. However, there is a second side to this: how receptive are you to the new ideas of others? Often, when someone suggests something new, we think about the problems that are going to arise, why the idea similar to this didn’t work before, and the problems that this is going to cause! A good idea is to close the “negative” side of your mind when you hear new ideas, and instead, ask the question “how could we make this work?” That may lead to changes in the original idea, but it will be building on it in a positive way. This is also an organisational issue. Can you develop an open market for ideas in the organisation? At the simplest level, this means having a suggestion box, and giving rewards for suggestions to those ideas that are implemented. At the other extreme, you can end up with the kind of systems that have been developed by Shell (their GameChanger process), or the Australian chemicals company Orica (their LiveWire approach). In these systems, there is a formal system to encourage, assess, support and reward new ideas. Does you company have an internal market for ideas? Can you start to develop one?

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Technique #5: Allow people to work on projects Routine kills innovative thinking — for you, and for everyone else. Putting people on to a project team allows them to work away at a defined task, and address something out of their usual focus. It frees them to “think outside the box”. In setting up project teams, one of the best ideas is to provide a real mix. Of course, the team needs some experts; it also needs people with different backgrounds — from diverse areas — and even from outside the organisation. One last thought about project teams. Sometimes it is a good idea to “hide” or “protect” a team, so it is allowed to come up with different ideas, even ones that are likely to be threatening to others, and then give them the space to develop their ideas before they are confronted with the inertia of the rest of the organisation. Some people have talked about the idea of creating a “skunk works” — a backroom hidden area, where crazy ideas can be explored. Technique #6: Engage in low risk experimentation A great way to kill a promising new idea is to try and launch it as the “great new project”. Most new ideas will need development, and refinement: it is very hard to get things right the first time around. So, first try the ideas out in a small scale way. Experiment. Expect some experiments to fail. When you think about it, that is the approach of scientists. They come up with important new ideas, but they do so by conducting experiment after experiment. Many fail, and many do not produce the results they were seeking. Strangely enough, they do not think about their experiments just in terms of failure, but they also talk about “learning”. Each experiment is the source of new data, and new data allows more learning, and better designed experiments the next time around. Change the language of new ideas from “risk and failure” to “experiments and learning”.

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Technique #7: Be a novelty addict One of my friends is always encouraging me to have some “barbarian experiences”. If that sounds strange, it is meant to do so — because he is really trying to encourage me to move out of my comfort zone. He knows that environment shapes thinking — and it is much harder to think differently if you are always living comfortably in a familiar environment. A novelty addict sounds a bit like a sports addict — and it is meant to shake you up a little bit. Being a novelty addict means that you are always interested in what is new — the “next big thing”. Like most addictions, many of the new things will prove to be of limited value, but ever so often there will be something new that is really worthwhile. You need to be there to spot it! Technique #8: Look for the underlying trends We live in a world of “surface” stories. The news on television, the stories in the daily paper, they are always about the unfolding events. That is what we have come to mean as “news”. However, the surface is often a poor guide to what is going on underneath, the hidden underlying patterns and their consequences. Think about your experience in going to see a doctor. You have a pain — in your abdomen, perhaps. When the doctor sees you, she checks your tongue and throat, your ears, your eyes, and listens to your heart. What is going on here? She knows that symptoms can be misleading, and that it is important to find out the cause of an ill ness, not just address the symptoms, which are often superficial and unimportant. It is the same with the world of events. Try to look beyond the obvious, and ask the same question — “what is really going on here?” Technique #9: Be heretical — keep asking “why” When I was young, I was always asking questions. Why are

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cars driven on the right hand side of the road? How does a vinyl disk make music? What is an electron? I think I must have driven my parents close to the edge of madness at times! Ever so often, my father would say, “Just because”. I vowed that was an answer that I would never give — because asking why is one of the most important kinds of question we can ask. The need inside organisations to question conventional practice is overwhelming, especially in what I call “dinosaur businesses”, businesses that have been going the same way for a very long time. Think of some easy examples: department stores is one, and hotels another. We looked at department stores in Chapter 1 — so let’s focus on hotels this time. If you have traveled, you will know that, basically, good quality hotels are the same all over the world. The reception desk is set somewhere on the side of the ground floor, usually adjacent to the lounge, bars and one or two restaurants. Once you get to the reception desk, you will complete a detailed registration form, before the clerk allocates you a room. Off you go, then, to your room — which will almost certainly include a desk and chair, a comfortable chair (usually placed in such a way that you can watch the television — but not always with ease), a television (in fancier hotels this is hidden in a large wooden chest called an armoire, a bed with side tables, a coffee table, and a bathroom with the usual facilities. Why do most hotel rooms look like this? Well, conventional wisdom has it that “this is what the customer wants”. Now, are hotels like this because this is the only way to run a hotel? Or is it because people have stopped asking why? There are some innovators rethinking these dinosaurs — like the staff-less Formule 1 hotels, or those hotel groups that allow you to choose and book your room on-line, and where you can then go straight to your room on arrival, and open the door with your credit card! The next change will come in relation to the rooms themselves — a process that has begun with the funky

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style of W Hotels. Just remember — dinosaurs died out because they could not adapt to changing circumstances. Dinosaur businesses will die out if they forget to keep asking the question, “Why are we doing this in this way?” Technique #10: Choose your scenario for the future Contrary to what you may have heard, the future does not just happen. It is an outcome of choices — sometimes very carefully made, and sometimes with quite unexpected consequences. In other words, we can choose to influence the direction the future takes. One very good way to think about the future is to look at future scenarios. Each future scenario we develop is a picture of a possible, realistic future. Some are attractive, and some less so. They are warnings and guides, setting out what could happen. However, they also provide a pathway for change — because you can identify the scenario that you would like to see developing, and then start to take actions to enable it to happen. If that sounds like science fiction, think about the way in which many governments right now are creating an environment in which they are “demonising” some members of society — both those within their country, and especially those on the outside. By identifying people who have different views and hopes, and then calling them all terrorists (when many of them are not), they are encouraging more and more to believe the only way to have their views heard, and their style of life preserved — is by becoming a terrorist. So, terrorism is almost bound to increase. Trying to stamp out something is almost always a sure way to ensure that it develops “underground”, and actually grows in strength.

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How can I nurture Ronin traits in my organisation? There are two elements of an organisation that are critical to supporting a particular form of behaviour — culture and structure. The culture of an organisation is “the way we do things around here”. It is embodied in behaviour, in dress, in stories and in the language of the company. Each of these things has to be supportive of Ronin. Given that Ronin are a threat to organisational stability, this is a challenging task. Few organisations relish the idea that they should house people who think differently, and who will upset the status quo, but these are the very people they need to keep innovation and responsive change alive. Here are three simple ways you can start to change the culture. First, tell some stories about successful Ronin in the organisation’s history. Many businesses and other organisations have had charismatic figures in the past, people who broke the rules, and created new and exciting directions. They often include the founders, and those who established new areas of business. Put an article in the company newsletter about these innovators. Put up some storyboards. Make them the focus of interest — rather than shareholders, or those staff that have worked hard to maintain the status quo. In other words, create some “heroes”! Second, when one of your staff comes up with an innovative and different idea, give it public recognition. Explain why it has the seeds of something that may be important for the future. When someone disagrees with an initiative in a meeting, do not ignore him or her, but give them a chance to explain

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why they see things differently. Celebrate differences! Third, give some time over to brainstorming ideas, and looking for new approaches. Treat this as serious planning — just as serious as preparing the next year’s business plan, with all those carefully designed performance objectives, budgets and key performance indicators (KPIs — one of the most subversive ways of stopping organisations from doing things differently!). Give time to looking for new ideas. When it comes to structure, ask whether or not the organisation has built a system for supporting innovation. There are many levels in this — and we have already referred to some of these: ♦ it can simply be a bonus system for good ideas; ♦ it can be a structured process to regularly seek innovative proposals; ♦ it can be an annual “innovation competition”; ♦ it can even be a dedicated group in the organisation that is given the charter to develop new ideas — not new products, but new ways of doing business, and rethinking the current approach. Remember, Ronin are not inventors — they are re-thinkers. They share the goals of the organisation, but they are always looking for new and better ways to achieve them. They are not the R&D team, which provides another, but quite different, function, which is to develop specific new products or services. Ronin focus on the business approach itself — the business model. But everything begins with reflection!

A Ronin reflects in order to see the bigger picture The first key skill that distinguishes a Ronin is learning to stand back from the day-to-day pressure of events, and see things in a broader perspective.

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One way of thinking about this is to use the analogy of the balcony. Think about a game of soccer. Down on the pitch, the game is fast and quickly changing. As a player, you constantly have to respond, as the ball unexpectedly goes in a different direction — a tackle fails, the ball bounces unexpectedly, or the captain shouts an instruction. There is a lot going on, and each player has to work hard to keep in play. The coach has a different view. He can go up into the stand (just like standing on a balcony looking over a hall), and can see the game as a whole. He sees what the players on the ground find hard to see: one of the opposite team’s players — the left winger — keeps getting the ball up the field, and then centres it near the penalty box. The right half and the right back do not seem to be able to stop him. Given this, the coach can now develop a strategy to deal with this. He sends a new player on to the field, replacing the right half, who is not playing well, with strict instructions to mark that left winger hard and well. Standing on the balcony is a form of reflection. It is about standing back from the immediate flow of events, and trying to see more, the bigger picture, the underlying trends, or the critical issues. In a world where the flow of information is almost overwhelming, this is very important. Research shows that the average manager receives some 200 items of information a day — letters, emails, and telephone calls. If the manager has 3 minutes to each item, then that is 10 hours of work already — and no work would have been done other than responding to other people’s inputs. If you decide to go and seek data on the Internet, the situation is even more overwhelming. As I was writing this, I tried a test. I typed the word “innovation” in Google, the popular search engine. It came up with “approximately 5,950,000 ‘hits’ ”. There is so much going on, it is impossible to deal with all possible sources of information, advice and news.

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How do we cope? We ignore things. What does a Ronin do? A Ronin tries to get beyond the immediate information, the immediate events, and ask the question: “What is going on here?” That cannot be answered until you learn to stand back, and look for the broader trends, the underlying issues, the deeper currents. Many of you will be familiar with this situation. You go into the office one morning, and the telephones are going crazy. Customers and dealers are ringing in. There is a problem with a product — liquid fertiliser, shipped in 10-gallon drums. The containers are underweight and people are complaining, “You’ve under-supplied — these containers are only 80% full!” The place is almost chaotic. Extra supplies have to be sent out to the dealers. Offers are being made to irate customers. Different deals are being made with different customers. There is a need to get some order into this chaos. Some principles need to be established, and some consistency in how to respond to the challenge. It is a typical bit of management “fire fighting”. However, there are some other questions to be asked. How did this problem arise? It turns out that the night manager in the warehouse filling the drums — which are shipped to dealers every morning — filled them without remembering to take off the weight of the empty drum. No wonder there was a problem — they really were only being filled with 80% of the expected amount of product. It would be easy to blame the night manager. However, another question could have been asked: “If the drums are a standard weight, why were the filling machines not calibrated to automatically allow for the weight of the empty drums? Further research shows that the filling process was based on the old manual system, and the new so-called “automated” system had not really been rethought to allow for the potential for automation. A good manager would have done some investigation, and eventually identified these issues (a less diligent manager might have stopped at blaming the night manager — some people

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like to blame an individual or specific person for problems which arise). A Ronin would go further. By looking at the bigger picture, the Ronin might conclude that there is a bigger underlying problem. The current system illustrates a deeper issue, which is that whole business has been growing over the years, but continues to use the systems and processes that were developed in the early stages of growth. Several years ago, when the company was a small agricultural supplies operator, liquid fertiliser was a small but steady area of the business. A farmer would ask for some to be supplied, and you filled a drum. Fifteen years later, the business is very different. This is a major item, and supplied in thousands of gallons a week. However, when you look at the user end, farmers take the drums to their properties, and tip the fertiliser into spraying tanks. The tanks typically hold 100 gallons, and the farmer has to empty ten drums to load up for a spraying session. The next step is clear. Instead of selling the fertiliser in the old ten gallon drums, go into a partnership with the manufacturers of the spraying machines — and fill the spray drums instead. Now the farmer swaps a filled container for an empty one, and simply puts it on the spraying machine. It is a familiar problem. In scaling up a business, it is often assumed that you can use the same systems and processes, and just do more. In fact, scaling up often requires rethinking. Rethinking starts with reflection. A Ronin starts by standing back, but seeing issues in a broader perspective, by Reflecting.

Case study Building a business innovation group One of the typical challenges facing a Ronin is to change the culture of a large, long established company. Many companies

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that have been operating successfully for a long time have found the last five years of the 20th Century very challenging: the pressure to keep reducing costs and push up margins, in the face of increasing competition, has been demanding. The focus on improving efficiency and reducing costs meant that, for many, there had been relatively little R&D translated into new products. Companies in this situation, if they continue to operate in the same way as they have been in recent years, were likely to die a slow but certain death. They are dinosaurs, as we described them above. New competitors in specific areas were always appearing, and typically a dinosaur company relies on patented products and new products coming from R&D to ensure growth. In recent years, with reduced expenditure, the number of new products coming on stream are few, and as a result competition has become more challenging, especially as increased globalisation bring new players into the market, often with significant cost advantages because they operate or manufacture offshore in new, low labour cost regions. Such companies need to restore a sense of innovation and entrepreneurship. One famous example as been Shell, through its “GameChanger” process (Hamel, 1999). The model that lies behind GameChanger and similar approaches is quite simple: it is to establish an “internal market for ideas”. In this system, a unit is established, with its own discrete funding, which runs a programme to encourage innovative thinking — looking for new business ideas. Staff are encouraged to put up ideas — usually in the form of a simple proposal in the first instance, and those whose ideas are seen as having merit, are given an initial reward, perhaps in the form of a bonus. More important, they are also encouraged to develop a proper business plan for that new business, either by themselves, or with support from the unit. Success in putting

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up a detailed new business plan leads to further rewards, and a chance to work on the new business. In such schemes, ideas have to be radical — i.e. new business concepts that represent something other than an existing business or its simple extension or development. Marcus worked for a major company, which had been going through a typical “cut costs to keep us competitive” process. He, and a few colleagues, could see that this was a path to extinction. Keep on cutting, and grow nothing new — and the company will surely die (get bought, or go out of business). Together, the team developed a process similar to the GameChanger model. However, as Marcus quickly discovered, another element of getting an innovation process of this kind off the ground became clear: organisations have a “political” environment that has to be addressed. In this case, Marcus and the core team set up a small task force that undertook considerable work in dealing with internal politics, lobbying key players within critical divisions of the company to gain support before the proposal was officially put forward at a divisional management meeting. The team also proposed that the panel for assessing new ideas, and for subsequent business plans, had some external members (people outside the company) to give the process more credibility, and to enhance the chances of new ideas getting initial support. Early on, Marcus recognised that it would be important to get some new ideas up quickly, and new businesses started early on (“runs on the board”) to convince key organisational stakeholders that this was going to work. Workshops were held to encourage creative, innovative thinking, and there was a good flow of ideas. However, work on developing business plans was very slow in the initial stages, until it was realised that most staff needed training in how to write a business plan.

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With several ideas approved and off the ground, and one or two getting close to submitting a business plan, the team turned to looking at longer-term issues. It was clear that new business ideas were insufficient to change the culture, and that a more systematic, and deeper, process was needed. It was decided to commence a training process for all staff, working department by department, in introducing a “business concept innovation” approach that would help staff develop both radical and smallscale innovation ideas. Work was undertaken with the management group — to gain initial commitment, and then commenced in one of the business units. Feedback indicated that everyone was waiting to see some completed business plans accepted, but that the overall strategy was well received. One indication of early success was some “copy cat” projects launched in other areas of the company. They were in business!

Reflection As this case clearly shows, developing a business innovation group within a company, to support Ronin and encourage their activities, can be a long and complex task. Fortunately, Ronin are reasonably patient! Does your organisation support innovation — in a realistic way? If it does not, can you see a path that will move it towards becoming more willing to consider new ideas and approaches?

Summary In this chapter, we have looked at a number of key points in identifying and supporting Ronin: ♦ Ronin are people who work within the existing system, but still seek to change it — changing it from the inside out.

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They are committed to pursuing the goals of the organisation — but they want to do it in a quite different way — they do not support the “old ways”, they are seeking new ways. ♦ Ronin want to change things, but they start by seeking to understand the way things are now, and on the basis of that understanding find the opportunities, the possibilities for doing things differently — and better! ♦ There are six attributes of Ronin that are important: • First, a Ronin is both a high achiever, and at the same time someone who is socially concerned and wants to contribute to creating a better society. • Second, Ronin are self-reliant and adventurers, and at the same time reflective and capable of drawing inward. • Ronin are confident and self-motivated, and at the same time always willing and wanting to learn, and recognise when they have made mistakes or pursued an ineffective path. • Ronin are persistent and determined, and at the same time possessing a high tolerance for ambiguity and uncertainty. • Ronin are committed to the values and the goals of the organisation, and at the same time able to rethink these and adapt to changing circumstances. • Finally, a Ronin is someone who possesses the ability to see the broader picture, and yet focus on the details, simultaneously — and at the same time open to new experience, and capable of reframing and re-examining how things are done. ♦ There are several simple techniques that will keep you thinking like an “internal revolutionary”. • Set unreasonable objectives. • Focus on outcomes, not how they have been achieved. • Listen to unfamiliar voices. • Develop an open market for innovatory ideas. • Allow people to work on projects.

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• Engage in low risk experimentation. • Be a novelty addict. • Look for the underlying trends. • Be heretical — keep asking “why”. • Choose your scenario for the future. ♦ There are two elements of an organisation that are critical to supporting a particular form of behaviour — culture and structure. However, the key issue is that a Ronin reflects, trying to see the bigger picture, rather than being caught up in trivial issues.

CHAPTER 3

THE BUSINESS ARENA

The second part of being a Ronin comes from the second letter — “O”: a Ronin observes. This chapter is going to explore how to become much better at looking at a business.

A Ronin observes In Chapter 1, we noted that a key skill is learning to look at a business and observe what is going on, in being able to piece together the essential information. In this chapter, we are going to explore the CORE approach. Setting out a framework means that we do have to go into some detail. However, the best way to deal with this material is to use it — persist in working through the framework, because the better you understand an organisation, the better you are able to think about how to change it.

Developing observing skills — Part I: CORE In Chapter 1, we noted the CORE model has four parts: 1.

Character

which includes: Strategy Resources Structure Intent, and Alignment

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2.

Operations

3.

Relationships

4.

Environment

which includes: Positioning Boundaries Value creation, and Synergy which includes: Customers Stakeholders, and Business context which includes: Broader context Scenarios, and Reputation

All these are interlinked, as the following figure shows. We will now move to look at each of these areas in turn. Figure 1: The CORE model Strategy

Positioning

Values

Boundaries

Resources

Value Creation

Structure

Synergy

Business Context

Operations

Relationships

Customers

Intent

Environment: Broader Context

Stakeholders Alignment

Character

Scenarios

Reputation Environment

1. The character of an organisation Taking the first of the elements of the CORE model, the “character” of an organisation refers to its internal structure and operations, and as such it has a number of key dimensions. First, there is the “strategy” of an organisation. While there is a vast literature on this subject, for practical purposes it is possible to reduce this to a small number of key features:

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Strategy This comprises four elements: Direction:

This is usually expressed in terms of a vision statement, a set of goals, or a set of objectives: the central factor is the aspirations of the organisation in terms of where it wants to be in the future, which might be expressed in financial terms, in turnover, or in terms of impact. As an example, think about an air carrier that sets its goal “to be the world’s best domestic airline”, as measured by profitability, safety, and focus on meeting customer needs. (This is not the same as a mission statement or a statement of company principles or values, as below.)

Market:

This is the business market within which the organisation sees itself operating the broad group of customers or clients the organisation is seeking to serve. This might comprise a market segment (for a commercial organisation), or a group of users of a particular kind of service, or a geographical group (as in the case of many government agencies).

Competitive arena:

This is the competitive context within which an organisation is operating — and a good model for thinking about this is Porter’s 5-forces (Porter, 1980) — which indicates you need to look at the power of suppliers, the power of customers, the barriers to new entrants, the risk of substitutes being

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developed, and the actual rivalry between existing competitors. To continue with the domestic airline example used above in relation to a mission statement, the competitive arena would refer to other competing airlines operating in the same geographical area, the likelihood of others coming in to this region (or new start-up airlines), and the threat of alternative means of transport (e.g. high speed trains).

Strategic choices:

These are the specific strategies that an organisation is pursuing in practice, in order to achieve its vision, and given its competitive situation. The emphasis on “in practice” is important — Ronin are interested in what an organisation is actually doing, not in strategies that are espoused but not pursued (although these may be the source or ideas for more effective practice in the future). Continuing with the domestic airline example, these strategies might include price and service incentives for business travellers, strict market segmentation between leisure and business travellers, provision of business support services on the ground and in the air, etc.

Values This area comprises: Espoused values:

These are usually expressed in terms of a mission statement, or a set of company values or principles, and they represent an explicit statement of how the organisation wants to be

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seen, which may be expressed in terms of an overarching and “moral” role for the organisation, or in a set of value statements. Typically, companies establish statements such as “we operate on the basis of integrity, honesty, transparency and care”, as many claim (and somewhat less seem to follow in practice — see below).

Operational values:

These are the values the organisation follows in practice, as defined by operating procedures and day-to-day behaviour. In contrast to espoused values, these are often expressed in terms of “this is how we do things around here”, and can encompass such values as “do anything to get the sale”; through to “even if it is legal, but breaks the spirit of the law, we do not do it”.

Culture:

This refers to the broader set of symbols, rituals, behaviours and activities that characterise the organisation, and can include such things as modes of dress and address, through to the stories that are told about key personnel and the intricacies of company language. Cultures can vary from the “men in suits carrying their PCs” that characterises so many consulting firms, through to the firstname, casual dress approach of many IT companies, through to the formal and hierarchical nature of many older British and German companies.

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Resources This third area comprises three elements of an organisation: Core These are capabilities in which an organisation competencies: excels — see Hamel and Prahalad (1994). The use of core competencies is best thought of as including those capabilities that enable an organisation to be better than others in the same field, and that have the potential to give the organisation sustainable competitive advantage. Incidentally, given this definition, it is often the case that a good organisation may have no core competence as such, or at best only one. Continuing with examples from the airline industry, let us look at Singapore International Airlines. This company may have a core competency in understanding and meeting service needs for passengers, and it may also have a core competency in load and route management to assure maximum return on each flight — what do you think?

Critical assets: These are the assets that are central to the organisation’s ability to perform effectively and competitively. They can usually be determined under five headings: • • • • •

physical; financial; human; informational; and intangible assets.

As noted above, the focus needs to be on what is critical — a detailed analysis of all the assets of an organisation is not just time

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wasting, it can also take you away from focusing on what is actually important. In the airline industry, such critical assets might include aircraft, landing slots at airports, trained staff, and access to additional working capital, operational software — but they will not include paper clips or pencils!

Critical processes:

These may include patented processes and technologies, and other forms of Intellectual Property (IP) that an organisation possesses — and again, the issue here is to identify what is actually of major importance. Note that in this area many companies identify patented processes and technologies, many areas of which are no longer of importance to them, while ignoring areas of IP that are of central importance.

Structure This fourth and final area of “character” comprises: Organogram:

This is the formal reporting, authority and responsibility structure of the organisation, the organisational “chart” that explains where everyone fits: typically, in most industries, organisations have a “pyramidal” structure, although in some cases the pyramid has become flatter in recent years.

Power and influence:

This refers to the real links of power and influence in the organisation — those people who are seen as having power and influence, and those others who are opinion leaders, and

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who may act as nodal points in terms of influencing organisational agendas. Again, typically, many organisation power and influence maps bear only a weak relationship to the formal organogram, with many people in senior positions not exercising the power and influence one might expect, and many others having a great deal more influence than their formal positions might suggest. Business processes:

These are the actual business processes that are followed inside the organisation — the paths that work follow. There are many ways to describe these, like business process maps, which result from the study of workflow. In recent years there has been a great deal of interest in business process re-engineering, which takes such process paths and looks at ways to simplify them.

These four “building blocks” of the “character” of an organisation are made operational by two other elements — intent and alignment. Intent refers to the way that the organisation’s strategic choices are communicated so that they are understood, and practice matches intention. Intent is usually made clear through short, clear and meaningful statements about how the organisation intends to work: “beat Benz” or “circle Caterpillar” are famous short examples of strategic intent — focusing the staff on the approach in a meaningful way for everyone. Alignment is the complement to intent, and refers to the importance of ensuring that the processes and systems of the organisation are aligned with the strategy that it intends to pursue. This refers to values as well as concrete processes, quality systems and to support systems such as compensation, as well as logistics.

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Taken together, the character of the organisation can now be developed as shown in Figure 2. Figure 2: Organisational character Strategy Direction Market Competitive arena Strategic choices Intent Values Espoused values Operational values Culture Resources Core competencies Critical assets Critical processes Alignment Structure Organogram Power and influence Business Processes

Wow! That was hard work! However, let me tell you a secret — most people actually do not know what their organisation is like, because they only see it from their point of view. If you can master this framework, you are taking a critical step towards being able to understand what could be changed — and how to do it. Let’s keep going!

2. Operational elements The second element of the CORE model deals with the operational functions of the organisation as it interacts with its environment, and, again, this has a number of dimensions. The four that constitute this group are positioning, boundaries, value creation and synergy: some of these terms are more familiar than others.

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First there is positioning, which refers to the way in which an organisation places itself in the market, the image it provides of itself and its products, and the ways in which it seeks to differentiate itself from other competing organisations. A recent, if short-lived, example of this was BP, the oil major, which redescribed itself as “Beyond Petroleum” in an attempt to capture a positioning in consumers’ minds that this company was moving beyond petroleum to new, environmentally friendly products and activities — short-lived because it turned out that the positioning was ahead of the company’s strategy and the reality of its activities.

The second, critical element of the external operational focus of the organisation is that of boundaries (see Hamel, 2000, for the development of this idea). In referring to boundaries, this is to emphasise the decision about what activities an organisation will carry out using its own resources, and which it will give to others — which it will outsource, to use the current term in favour. To refer back to our familiar example of the airline industry, many have become experts in outsourcing: some airlines are no longer responsible for aircraft maintenance, ticket sales, catering, ground transportation services, etc.: they have passed these activities on to partners or suppliers, in order to allow them to focus on their core activities.

It may seem odd to add the third factor, value creation, to the list, since this is what most would agree is the purpose of business. However, there are two points to be made about this. First, in looking at government agencies and not-for-profit organisations, it has to be recognised that all organisations create value, but the metrics of value can differ very greatly. Moreover, the real issue, as with the first two factors, is how this is done — and in particular, the question here is who

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receives the benefits of the value created by the organisation. A series of reports from the Shell Company under the general heading “Profits and Principles” provides a very important example which comes, again, from the oil industry, where a number of companies are adopting the “triple bottom line” approach to accounting for the value that they create: they are emphasising contributions in terms of financial, environmental, and social benefits. Finally, synergy relates to the extent to which a company is seen as linking well with the broader aspiration of the industry, sector and community within which it operates. This sense of synergy is about both “fit” and “added value”, since organisations that are maverick find it hard to get broader support (and hence customer loyalty) unless they are seen in some sense as cooperating in a way that is compatible with broader goals. At the same time, the degree of synergy is also reflected in greater ease in attracting staff, investments, and other sources of support. The acquisition of country “icons” by outside companies often leads to debate about synergy — as with a number of cases in Australia in recent years where a “local product” was found to be in the hands of an international conglomerate: examples range from foods like Vegemite and Anzac biscuits, through to the “merger” of BHP (familiarly known as the “big Australian”) with Billiton.

3. Organisational relationships The next element of the CORE model comprises the “relationships” of an organisation, and these have been put into three groups: customers, stakeholders, and business context. To take customers out as a separate group, set apart from stakeholders, is to take an illogical yet a justifiable step — customers are so important that they deserve separate consideration (especially when it is noted that this refers to all

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categories of users of a service or product — clients, customers, users, etc): An understanding of customers comprises an examination of four issues: Logistics:

This refers to the processes by which the organisation’s service or product is acquired by the end user. In the case of the airline industry, the customer has to come to the organisation (or at least to the airport where the aircraft is to be boarded (just as users of hotels or department stores have had to go to their place), whereas one of the most interesting effects of the Internet has been to make it possible for customers to contact an organisation from their workplaces or homes to place an order, and then to actually receive their order at that same place (especially where the product is digital).

Information:

The second attribute of customers is what is known about them, their tastes, preferences, needs, behaviours, etc. Amazon, the well-known on-line bookseller (and later on-line department store and auction house), has developed excellent customer information and customer software to exploit that information, as any regular buyer from them will be aware — they learn your buying preferences, and then map these against similar purchasers, and hence work out what else to offer you: every purchase allows them to know you, and also to target others, more effectively.

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This refers to the nature of the interactions between the organisation and its customers — the closeness of that relationship, the nature and effectiveness of feedback, and the frequency of contact. In the case of airlines, the relationship is very close each time a person uses the airline, and airline operators are often sensitive to the “moments of truth” that such closeness can bring (Carlzon, 1989). The same is true for retailers and hotels — except that in retail stores, the level of sensitivity to the relationship seems to have diminished over time. (Is there less choice between department stores than hotels or airlines?)

Pricing:

How does an organisation get the financial returns it requires — through fixed price sales, contracts, retainers, etc. The increasing success of auction sites on the Internet has illustrated that. The real value of the on-line relationship rests in its immediacy — people will pay at the time a particular price, even though they might have paid a quite different price at another time, or if they had been allowed the time to compare prices.

Stakeholders comprise any group that has a real interest in the success or failure of an organisation — the word “real” signifying that it matters to them in a tangible way, not just as a

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matter of passing interest. Ronin should be particularly concerned to find out about stakeholder interests in five areas: Suppliers:

Self-evidently, these are those organisations or individuals who supply goods or services to the organisation, and whose own success — at least to some extent — is bound up with the success of the organisation.

Partners:

Again, these have an obvious interest in the fate of the organisation –– and the partnership will be a function of each one’s contribution to the other.

Society:

Given increasing interest in what is often called the triple bottom line approach, society is now seen as a stakeholder in an organisation — in its own right, and not just through the constituent parts of society, which comprise the other stakeholders, listed.

Environment:

The third of the triple bottom line components (together with society and the traditional financial bottom line), the environment is an increasingly well-recognised stakeholder.

Others:

This umbrella group comprises all the other organisations and groups that are seen as stakeholders, and include (among others): • employees; • managers; • unions; • government; • shareholders; and • local community.

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Finally, the business context refers to the industry environment in which an organisation operates: Industry structure:

This includes the number of companies operating in the industry area (where industry area is taken in the broadest sense, and might include an area of not-for-profit activity, or a domain of government responsibility), their size, turnover, and other characteristics.

Profession:

The existence of a professional body in the area, its role, values, scope of activities; professional accreditation requirements; ongoing professional development; and any other evidence of the professional culture and approach in the industry.

The key relationships for an organisation are shown in Figure 3. Figure 3: Organisational relationships Customers Information Logistics Relationship Pricing Stakeholders Suppliers Partners Society Environment Others Business context Industry structure Profession Critical processes

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4. The broader environment The final part of the CORE model is concerned with understanding the broader environment, and this is addressed in three parts: the present, the broader context; the future; and the past, reputation. A well established approach to understanding the broader context is provided by PESTO analysis: PESTO: This acronym is used to describe a structure for providing a broader context in terms of the following areas: Politics —including political, governmental, and international issues. Economics — covering the general economy, trends, and broader financial and industrial issues. Society — the characteristics of society including social issues, unemployment trends, welfare and educational trends, housing and other indicators. Technology — the levels of development and investment in various areas of technology, research and development and innovation. Other — covering everything else not included above, and especially issues germane to the particular company under study. Scenario analysis is an approach to thinking systematically about the future. It is based on painting a picture of realistic, possible futures at some pre-determined point in the future. Every scenario is a picture of society at that point in time (and can most easily be summarised in terms of a PESTO framework). Each scenario has a “story” behind it, i.e. a set of events that took place before the time horizon in question that

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led to the scenario that is being described (and, conventionally, the name of the scenario is often a brief summary of that set of critical prior events — e.g. a scenario called “world-wide recession” might describe the world in ten years’ time, following a major world wide recession that had taken place in five years’ time). Analysing the scenarios for an organisation are important in thinking about the future it may be about to enter, and we will explore this approach further in the next chapter. Finally, reputation refers to the accumulated history of an organisation, as others perceive it. Work on reputation suggests that it is a summary based on a number of factors: ♦ ♦ ♦ ♦

financial performance; brand positioning; ethical performance; and environmental and social responsibility.

Developing observing skills — Part I: Understanding the underlying business model When you look at most businesses, you also need to stand back from the detail we have been exploring, and look at the broader picture (remember, a Ronin reflects). In most cases, when you look at a business in an overall sense, you can see that it is built around a fairly easily identified “business model”. We can use the example of a mobile telephone company, and one of its businesses to illustrate this idea. Many of the mobile companies — like Nokia, Ericsson and Motorola — sell handphones. In order to do that, they buy a number of components — casings, LED displays, integrated circuits, etc. — and assemble them into mobile handsets, which are then sold through retail stores. The underlying model is a manufacturing one: ♦ ♦ ♦ ♦

design a product; acquire the raw materials; assemble the product; and sell to distributors/retailers.

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The same model underlies a whole range of other products — refrigerators, cars, toilets, chocolate bars, books or socks. Of course, mobile handset manufacturers like to think they are part of a very sophisticated 21 st Century industry — telecommunications — but in practice what they are doing in this business is essentially the same as manufacturing socks! To understand the underlying business model is extremely important — because once you understand the model, you can also seek to change it. The motorcar industry is a good example for us to consider. They — like Nokia — make something. In recent years, outside of new markets like China, the industry has faced the realisation that they are becoming commodity manufacturers to a very significant degree. Cars, like computers or socks, sell on price, and value for money. The more a product becomes another commodity, the more price becomes the key issue. At the same time, there is an associated risk that the market will mature, and there will be an oversupply of goods. This leads to another very familiar outcome. As manufacturers become more involved with commoditised products, so there will be increasing pressure for reducing costs, and then rationalisation of the industry. Players are bought out or merge, and in the end there are few left, and, even for them, profit margins remain thin. In the car industry, this has led to a number of changes. First, within the manufacturing business itself, the relentless focus on costs leads to alternative models being developed. A car manufacturer may decide to outsource a significant element of the manufacturing, and focus more on final assembly. They may even decide to retain the design component of the business, and outsource the whole of the manufacturing task itself. Alternatively, they may decide to focus on managing distribution and sales, buying cars from other manufacturers. At the same time, new players may emerge from very low labour cost countries — changing the consumers’ perspective on what is a “good price to pay for a car”.

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Alternatively, and as a corollary of the rethinking of the manufacturing process, the company may come to the realisation that profits are more readily made from business that are completely outside of manufacturing. In recent years, the areas of growth have been in such businesses as spare parts and service, and financing. Again, these entail quite different business models. We can summarise this with two very simple propositions: 1. 2.

any business has an underlying business model (and there are only a limited number of such models); and by rethinking the underlying business model, it may be possible to revitalise a business, and gain competitive advantage over others in the same area.

What are some common business models? There are a number of core business models that keep recurring in companies. (a) Manufacturer In this model, the business is “product driven”, and the key elements of the model — as described above — are: ♦ design a product; ♦ acquire the raw materials; ♦ assemble the product; and ♦ sell. (b) Enabler In this model, enabling is providing a service to allow another company to undertake it business — for example, this includes logistics providers, business services companies, and other kinds of intermediaries. In these businesses, the key is that they are “service driven”, and the key elements of the business model are: ♦ identify the client’s support needs; ♦ develop a service to meet those needs; and ♦ deliver the service.

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(c) Personal service provider This business model has some similarities with the second model — but there is a key difference in that the client is not a company, but a person, and a critical step is developing a service that can be “personalised” for each client. This model is “customer driven”, and examples of this model in practice are hairdressers, childcare agencies, and aerobics clubs. In these businesses, the key elements are: ♦ develop an area of personal service expertise; ♦ market; and ♦ deliver and personalise the service. There are many other business models that can be identified. A good way to think about this is to see if you can work out the key elements of the model that underlies each of these business areas: (d) (e) (f) (g) (h) (i) (j)

Educator Validator (tester, accrediter) Developer/Investor Impresario Custodian Retailer Entertainer

The importance of the business model will become clear in the next chapter. For now, we have covered a lot of ground, and explored a lot of ideas — central observational tools — for a Ronin. Remember, the second step to developing as a Ronin: A Ronin observes — assessing the character, operations, relationships and environment of the organisation.

Case study Sometimes what may seem very familiar today may have been the result of someone rethinking in the past.

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A good example of this comes from the supermarket. Many years ago, when you bought groceries and fruit and vegetables, you would go into a shop with counters and staff behind the counters who would go and collect the items you wanted. The staff of the store served the customer. One day, someone asked the question “can we do this differently?” The answer was, “get the customer to do the work”. Today, we find nothing unusual in the fact that when we shop at a supermarket, we have to collect the items, carry them to the checkout counter, and now — in some cases — scan the items and bag them ourselves. That now raises the question as to what makes for “good service” in a supermarket. Is there such a thing? Equally important, the success of this approach has spilt over into other areas of life. At the petrol station, we fill our cars, and we clean the windscreen if it is dirty. In the fast food outlet, we collect the food, and we throw away the rubbish after our meal. Getting the customer to do the work is the source of many fertile ideas about how to change a business. At present, we see other companies that are reversing this trend — but adding service to what otherwise would be a standardised, commoditised activity or product. Consider dry cleaning, as an example of this opposite trend. The traditional model of dry cleaning has been that the customer takes the clothes to the dry cleaner, and then goes to collect them when they are ready. Some now come to you to collect the clothes (especially where they can collect them from you at your office). Instead of getting the customer to do the work, the alternative is true: the cleaner reduces the work you have to do — a very attractive idea for the time-hungry office worker. One final example of the “getting the customer to do the work approach” comes from the motorcar industry. In the past, engineers designed cars, and these were then “sold” to potential buyers. Now, some companies involve the customer in designing the car. This enhances the attractiveness of the design (it really

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meets customer needs), and increases customer commitment to the manufacturer. It is not too long before the extension of this takes place, when the customer designs his own car, and each car is made “for the person” on the assembly line. We will explore this further in Chapter 5.

Reflection There are a number of very simple ideas that can be applied to a variety of organisations. We have explored “get the customer to do the work”. Here are some others: ♦ Simplify the complex (make things easier to do). • Think of computerising car systems, or pre-settings for washing machines or microwave ovens. ♦ Add features that bring technologies together. • The mobile telephone that also takes emails, or photographs, or even the refrigerator that has Internet access! ♦ Cut out the middle person. • Remove agents, distributors, and all the other people that are a barrier between you and your end customer. Can you think of some more? Can you see how these ideas might apply to your business?

Summary In this chapter, the key issue of concern has been the ways in which you can identify opportunities for radical innovation: ♦ When you look at most businesses, you can see that they are built around a fairly easily identified “business model”. ♦ By rethinking the underlying business model, it may be possible to revitalise a business, and gain competitive advantage over others in the same area.

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♦ There are a number of core business models that keep recurring in companies: (a) Manufacturer (b) Enabler (c) Personal service provider (d) Educator (e) Validator (tester, accrediter) (f) Developer/Investor (g) Impresario (h) Custodian (i) Retailer (j) Entertainer Above all, Ronin develop the skill of observing — of learning to look systematically at organisations, identifying the key elements of the organisation, and understanding how they work together.

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CHAPTER 4

BECOMING A PRACTICING RONIN

In Chapter 1, we said that a Ronin was someone who: Reflects Observes Narrows down Innovates Navigates In the previous two chapters, we have explored a number of skills and techniques you need to master to become a Ronin in practice — skills in reflecting and observing. In this chapter, we want to move on to the skills of narrowing down and innovating. These techniques are absolutely critical. This is going to require some hard work!

A Ronin “narrows down” The third skill in becoming a Ronin represents the transition from thinking to identifying where the action is required — narrowing down on the critical points for change and innovation. Narrowing down requires the Ronin to learn how to focus attention, and this entails three key skills — asking why, identifying priorities, and setting targets.

Asking why? Much of what is done inside the organisation is done for reasons that have been left unchallenged — sometimes for 63

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years. Unchallenged ways of doing things and their justifications are often called “sacred cows”. For a Ronin, a sacred cow is a starting point! If something has not been challenged for a while, then the time must be now! Of course, Ronin do not challenge sacred cows just for the sake of it. We ask questions about why thing are done in the way they are in order to see if there is a better way. It is making the focus of attention the outcome the organisation is trying to achieve, rather than the particular way in which it has been done. I was told a (probably apocryphal) story about the army in Australia. A senior officer was watching some large field guns being fired. He noticed that a man stood behind each gun, with his two arms outstretched just as the gun was to be fired. He asked what the person was doing there. He was told, “We’ve always had someone doing that”. It was a good indication that this was time to challenge (the phrase “we’ve always done it this way” is a great give away that this is a recently unchallenged practice). He assumed that the person concerned use to hold two warning flags. It turned out that the original role was to hold the bridles of the two horses that pulled a gun — to prevent them starting and bolting when the gun went off — an interesting role considering that horses had not been used for nearly 80 years! Inside organisations, we frequently do things because that is what we have always done (prepared forms in triplicate, for example, and filed the third copy because no-one knew what else to do with it!). There is a powerful three-letter word which allows us to examine practice, and assess its relevance, and that word is why? People who ask “why?” can be very trying — ask the parents of any three year old! They can be very trying inside the organisation when there is a lot of work to be done. However, a Ronin must keep on asking why — it is the key to unlock the potential for change.

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Establishing priorities Many things in life are important. However, a few years ago I was introduced to a very simple and common tool that separates important issues along two dimensions — urgency and impact: ♦ Urgency refers to how quickly an issue needs to be resolved — which means that something is highly urgent if it needs to be dealt with and completed immediately (in the next day or so). ♦ Impact refers to the effect the issue will have on the goals of the organisation — something is high in impact if it will substantially affect the financial or operational performance of the organisation. These two criteria are two central dimensions of importance — something can be important because it is pressing (urgency) or because it has real consequences for the operations of the organisation (impact). Both dimensions are important, but they lead to different implications in terms of the actions that are required. Using these two criteria to construct a 2 × 2 table, and then placing issues in the matrix according to urgency and impact can illustrate this: Figure 4: Priorities matrix

High Impact

1

2

Low Impact

3

4

Low urgency

High Urgency

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There are two sectors in the matrix that are high in urgency — numbers 2 and 4. Any issue that falls into either of these sectors require management action. In the case of sector 4 — low impact and high urgency — these are things that should be got out of the way quickly and without spending much time on them. In the case of sector 2 — high impact and high urgency — they also demand expediency, but also careful attention, as they do have impact. Items that appear in sector 3 — low impact and low urgency — are important, but do not require action now. They are the source of potentially urgent or high impact issues in the future. Items in sector 1 — high impact and low urgency — are those of greatest interest to Ronin. These are the ones that do require attention, and where a new and different approach will be important, and where there is time to address them in this way.

Setting targets The final issue in narrowing down is to set a target in reviewing an issue. The important thing that differentiates a Ronin from others is the nature of the target. Usually, when we ask a manager to improve things, we discuss the level of improvement. We suggest a 10% cut in costs — and the manager negotiates back, on the basis of what “realistically can be achieved”, and eventually a target of 5% is agreed upon. For a Ronin, the target has to be extreme — a 95% reduction in costs. Or, the elimination of an area of activity. Or a 10x growth in income (or a 100x growth). These targets are set for a good reason. Radical change will not come from modest targets, because those sorts of targets allow us to continue to do what we have done in the past. Extreme targets mean that the means used in the past are no longer worth considering, and things have to be done differently. Ronin narrows their focus on the priority issues — and sets demanding targets.

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A Ronin innovates The fourth stage in becoming a Ronin is the search for innovative approaches — for ways to meet those demanding targets. This is the critical phase of “re-thinking” the business.

Re-thinking the business There are many ways to be innovative. One way is to look around at new inventions and new technology, and see how these might be applied. We will explore this further in the next chapter. Another is to watch competitors in the same field — or even in other industries. By observing what they do, you may see strategies or approaches that could be crafted into the operation of your business. However, for a Ronin, the most important approach is reexamining the basic building blocks of the organisation as it is. This is currently called business concept innovation — and that refers to two levels of “re-thinking”. The first level is concerned with looking at the organisational analysis that results from the approach outlined above, and asking the simple question “what would happen if we did this differently?” — whether the “this” refers to a relationship with a stakeholder, a shift in strategy, or a changed relationship with clients. Asking this question can lead to significant changes — like outsourcing activities that are not critical, while allowing you to focus on those that are central to your charter. The second level refers to re-examining the underlying “business concept”. What is the basic nature of the activity in which you are engaged, and can that be re-thought? Asking that question has led some organisations to move from providing services to providing solutions — and often seeing that many of the services they previously provided could be delivered quite differently. In other words, what I am suggesting is that you use the rigour of analysing your organisation as a starting point for

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systematically looking at everything that you do. In this examination, you are trying to find opportunities for change that will enhance your overall effectiveness — even if they entail shooting some sacred cows along the way. Gary Hamel, in Leading the Revolution, has pioneered the business concept analysis approach (Hamel, 2000). The basis of the underlying approach is to question every single element of the analysis — for everything that is there, to ask “why”, and “what would happen if we didn’t do this?” or “what would happen if we did the opposite?” It is hard to summarise this approach without going into detail, but some examples of areas of such a reexamination might be helpful. For example, in relation to customers, there are a number of ways in which it is possible to review the customer relationship. You can start by looking at your clients — and trying to get inside their “skin” as it were. There are many illuminating and interesting ways of doing this. One is simply to follow a client around, from the first time they contact your service, and through to the end of the process (I realise that might take a very long time in some cases — so you can do some short cuts!). Another is to look at where in the clients’ life cycle they contact you, and what they do all the rest of the time. Yet another, of course, is to find out what clients say — or don’t say — about you. To summarise this more systematically, the re-thinking of customer processes can include: 1.

Getting inside the customer’s world ♦ Follow the order — and identify where there is waste or delay. ♦ Live the customer’s life cycle — and find out where they want to use your business, your service.

2.

Identifying customer needs and expectations ♦ Utilising customer information — to better target key groups and areas of need.

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♦ Assessing “what customers would never say” about the service you offer today, in order to see if there are opportunities there that could be exploited. 3.

Exploring the relevance of some alternative customer models ♦ Bundling — putting together a number of products or services for one price (in the same way a hotel charges a “room price” to cover a number of areas of service). ♦ Individualising — making a product or service tailored to each customer (as with the idea of mass customisation being explored in areas like the car industry). ♦ Making elite — deliberately enhancing value and quality, and reducing quantity, so that a product or service commands a premium price based on scarcity (the strategy of all luxury brands). ♦ Adding intelligence — putting intelligent systems into products (like the computerised home appliances, cars, etc. that we see increasingly available in the market). ♦ Adding experience — responding to the customer’s need to feel and relate to a product, not just sell it on rational grounds (like test driving the car). ♦ Providing solutions — shifting the focus from the product or service to addressing a customer problem, and developing a way of resolving that problem (“bundling” the traditional product or service within the solution being offered). ♦ Offering neutrality — as an intermediary, offering impartial advice. ♦ Offering currency or immediacy — being up to date, offering the very latest items or approaches.

In the same way, we can also examine stakeholder opportunities, again re-thinking what has been done in the past, and coming up with new forms of relation through such approaches as:

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4.

Re-thinking the relationship with suppliers and partners ♦ Working with suppliers, and treating them more as partners, as part of the business, or ♦ Adding to the list of partners, so that stakeholders become more connected with the business.

5.

Adopting a triple bottom line approach, through looking for approaches that increase ♦ Financial returns, ♦ Environmental returns, and ♦ Social returns.

6.

Looking for new forms of stakeholder relationship, such as: ♦ Virtual links ♦ Auctions ♦ Consolidation ♦ Aggregation

Yet another level of re-thinking comes through looking at alternative approaches to resources. Many of the ideas here are more familiar, and they include such approaches as: 7.

Leveraging core competencies, both horizontally and vertically ♦ Value chain analysis ♦ Outsourcing ♦ Business Process Re-engineering (BPR)

8.

Leveraging critical processes, through licensing or franchising.

Finally, another more familiar and popular approach is to rethink the basics of strategy, by using such approaches as: 9.

Asking “What business are we in?” ♦ Re-thinking mission, objectives and goals.

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♦ Looking at ways to restructure the competitive environment, through mergers and acquisitions, or divestments. ♦ Developing and growing strategy, through developing new approaches, or looking for unique selling propositions. Finally, there is still a place for brainstorming, the process of encouraging the free flow of innovative and different ideas. There are many descriptions of brainstorming approaches — but the main things to remember are: ♦ ♦ ♦ ♦

giving people new experiences so they think more widely; allowing ideas to flow freely; listening to the voices below; and entertaining the extreme and the outlandish. A Ronin innovates through re-thinking the business, brainstorming new ideas, or seeing the potential in inventions and technological developments.

In summary, the 14 key points of revolutionary business change are as follows: 1. Replace a core competence, or use and existing one in a new area. 2. Dispose of an asset, or outsource it. 3. Develop a new process, or use an existing one in a new way. 4. Change the logistics of getting to the customer. 5. Acquire new information about customers, or use existing information for new purposes. 6. Change the relationship with customers. 7. Change the pricing model. 8. Change the mission of the company. 9. Change the market, or abandon the existing market. 10. Change the competitive arena.

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11. Adopt a new approach, or use the existing approach in a new context. 12. Make suppliers into partners, staff into suppliers. 13. Change partners into suppliers, or suppliers into staff. 14. Change the relationship with any other stakeholders.

Using the approach — an example Rather than tell you about a company that changed in the past, I am going to take a familiar business, and analyse it. I will show how the skills of narrowing down and innovation are used in practice. An interesting area where there are pressures for change is in the airline industry, and I am going to use Singapore International Airline (SIA) as our working case.

Identifying the key resources What are the core competencies of SIA — the things they do exceptionally well, and give them competitive advantage? We could probably agree on two things: 1. 2.

exceptional cabin service; and utilising the latest technologies in aircraft and services.

Does SIA have any other important strengths and weaknesses? You can probably develop your own list, but I would suggest there are some obvious strengths — its reputation as a safe, high quality company, its location at a regional hub, with an high quality hub airport in Singapore, and a very comprehensive route network, through its own flights, and its “Star Alliance” partners. Similarly, one weakness is the obverse of its strengths (this is often the case) — it is based in South East Asia, and seen as an “Asian” company. What are the critical assets that SIA has? In terms of the headings, we could identify the following: ♦ physical — aircraft, support facilities, landing slots; ♦ financial — strong shareholding, government support;

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♦ human — pilots, cabin staff, management; ♦ informational — knowledge of customers, route loadings and variations; and ♦ intangible — strong brand (“Singapore Girl”) and reputation. In addition, they have some key products or services — Raffles Class and First Class — which have further enhanced their reputation in the marketplace. Finally, under resources, we can ask whether or not the company has any critical processes. This is hard to answer from the outside, but it is likely they have sophisticated load management/booking systems, which allow them to maximise profitability on any flight.

Understanding the customers as a source of innovation The second element of the framework for analysing a business is concerned with looking at customers, and just as before, there are a number of headings. In order to examine this area, we need to define who the customers are. In the case of SIA, there are many “groups” of customers. There are individual fliers. There are companies who have preferred travelling arrangements. There are travel agents and travel booking clerks. There are freight companies. In fact, because the list is so extensive, we will focus on passengers — individual and corporate — just to keep this example simple. The first issue is how a business reaches its customers — the logistics of the business. In the case of SIA, as with all airlines, the customer has to come to the airline — and the airport — to use the service (just like in the hotel industry). Given that the customer has to come to them, this places a great deal of emphasis on SIA “attracting” potential customers, and this means that advertising and promotion is a critical part of their business. The fact that the customer comes to the airline also impacts on the relationship with the customer — as the customer uses

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each part of the service (buying ticket, check-in, boarding, inflight services, “de-planing”, etc), so the relationship is very important, albeit quite brief at many stages (what Jan Carlzon of SAS referred to as “moments of truth”). We have already mentioned information — the information that an airline has about its customers is extensive, especially where they have a frequent flyer scheme like Krisflyer. Of course, this begs the question as to how well this is analysed! Finally, it is important to understand how a company charges its customers. SIA charges by use — a fee for each flight, which is “fixed” in the sense that there are a variety of fees that can be applied to any particular flight, according to time of booking, level of service, and pre-agreed discounting to allow for levels of usage.

Clarifying the organisation’s strategy So far, our quick overview of SIA has covered some of the obvious issues about a company — its resources, including its key activities, and its customers. There are, however, two other headings that are important in understanding a business. The first is strategy. Despite the complexity of this area, the main elements or strategy can be described quite easily in most cases. The majority of businesses carry out strategic analyses in which they define the key elements of mission, market, competition and approach. In the case of SIA, its website suggests that it wants to “set the standards” for a leading world-class airline. Quite clearly, SIA wants to be Number One in the airline industry. Its market is worldwide, and it therefore has to compete against the other major world airlines — British Airways, Air France, Lufthansa in Europe, some of the US airlines, and in Asia companies like Cathay Pacific, Thai International, Emirates and Qantas. In recent years, the competitive arena has been really demanding — with newcomers bringing “no frills” packages, new alliances, and heavy discounting and cost competition.

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Finally, SIA has a clear strategic approach. It markets itself as “setting the standard”, in terms of quality service and in bringing the latest infrastructure inside and outside the plane to ensure the best support and service is being provided.

Identifying the key stakeholders The final element of analysing a business is to look at various stakeholders — groups with a real interest in the business, and who are affected by its performance. There are many groups we could look at — and customers are one of these, (but they are so important they are examined separately anyway). Again, since this is meant to be illustrative only, we will focus on just a few. One key group are the suppliers to a business, and in the case of the airline industry, there are three suppliers that are particularly important because of their power and control in the industry. These are the aircraft manufacturers, the aviation fuel suppliers, and the airports that provide landing “slots” to enable airlines to collect and deliver passengers to a particular location. In each case, the numbers of organisations are limited, and hence their importance to each airline is considerable: this is the classic dilemma for the industry, in that these three groups effectively “run” the industry, rather than the carriers themselves. In comparison to the suppliers, partners and customers are relatively weak. Indeed, travel agents have found themselves becoming more and more marginal, as on-line booking, and websites like Travelocity and Expedia offer far more costeffective approaches. Finally, there are many other stakeholders we could examine — such as boards, government, unions, employees, etc. In the real world of being a Ronin, every element of the business needs to be understood and analysed.

Understanding the underlying business model Given the quick overview, what can we say about the underlying business model for SIA. To use the terminology introduced

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earlier, it is clearly an “enabler”. As such, it has to develop its service, and then promote it to companies and individuals. The other side of this is that the company also has to keep on learning from its customers, to see if it can refine and develop its service to better meet needs. One of the challenges for an enabler, like SIA, is to determine how proactive it can be. Overall, SIA seeks to be successful by doing what it does very well: it makes sure that its resources are well aligned with its strategy; it positions itself carefully in the market, and it offers a value proposition that sees all stakeholders getting some benefit from its business.

14 key points of change Now, having done the analysis, we are ready to take the next key step — the step the Ronin takes — to “re-think” the analysis. A Ronin innovates. What does this mean? It means taking any element of the business as it is, and asking “could this be different?” Perhaps this is easiest to introduce this with just one example. In the description of SIA, one of the elements of that description had to do with resources. Under “physical resources”, we listed aircraft. Re-thinking in this area means asking the question: could we run the airline without aircraft? While the questions seems rather silly to begin with, after some reflection, it opens up a number of possibilities: 1. rather than owning aircraft, perhaps SIA could lease them (and, in fact, it does do this); 2. alternatively, perhaps it could lease space on other carriers planes (and this is one of the outcomes of the alliance model that involves airlines like SIA); or 3. perhaps an airline could “lease” an aircraft from another airline, complete with staff, maintenance etc., and just have the employees wear “our” uniform, the plane carry “our livery”, etc. (and, again, this has been done by smaller carriers).

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At one extreme, this is exactly the path that a company like Travelocity has pursued. They own no aircraft, staff, routes etc. — they simply sell customers space on whatever airline’s seats they can identify at an affordable price. Why 14 points of revolutionary business change? That is easy to answer. In the CORE analysis framework, we identified 14 areas of information (four each under the strategy and customers headings, and three each under resources and stakeholders) that were of importance in describing an organisation. Each one of these can be reviewed and “rethought”, and each has the potential to allow revolutionary change.

Applying the 14 key points to SIA We can use each of the 14 areas as a lever to explore potential innovations and changes. To do this, we have to be a Ronin — we have to ask: ♦ what is the outcome we are trying to achieve — not what is the approach to achieve it? ♦ what would happen if we didn’t do what we have done in the past? ♦ what could we achieve if we changed the approach in a radical way? 1.

Revisiting an organisation’s resources to find areas for competitive advantage Utilising core If load management is a core competence competence: of SIA, could it be applied to other businesses — for example, cargo ships, passenger liners, etc.? This would mean a new business for SIA could be logistics consulting to other carriers in various forms of transport, or it could become a multi-systems carrier itself (land, air and water).

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If service quality is a core competence, could this be the basis of a new business? SIA could run a quality service training academy. It could be a quality service consultant to other companies. It could sell quality service systems, manuals, etc. Re-thinking assets:

We have already used the example of getting rid of the planes. What about some other alternatives? Could SIA outsource the flying of the planes? Could it outsource cabin service, check-in, catering, etc. In fact, many airlines have outsourced function previously performed by their own staff. What about information management — could this be undertaken by a specialist CRM operator. Or, if SIA has good systems, could it become a CRM operator?

Using key processes:

We are not aware of the key processes that SIA has developed, but they must have, for example, excellent tracking systems for baggage, passengers, etc. Could these be used to start new businesses? In the freight industry generally, there is a lot of experimentation going on regarding real-time freight monitoring. Either SIA could use some of these systems, or they could become a key player in this emerging industry. Why not develop a system so that any passenger, at any time, can be identified precisely in terms of where they are — in the air or on the ground (so that family or colleagues can know when they will be available or contactable)?

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Customers as a source of innovation Logistics: Is it possible to take the business to the customer, rather than the other way round? What does this mean? Perhaps it could mean that SIA liaises directly with customers on-line, and collects them from their home/office using its own taxi fleet. Maybe flights on popular routes could go on a “when full” basis, and intending travellers could check on plane capacity, deciding when to go to the airport based on that information. Customer information:

This is a familiar area, as many companies have thought about how to use customer information more effectively. Can it be used to sell other services and products? By SIA, or by others? Can it be used to develop more targeted mailing/marketing strategies? Can the customer provide the information they want, rather than the airline setting the framework, and expecting everyone to comply in the same way? Can better customer data capture systems be implemented — a “smart” Krisflyer card, that is read every time a customer uses SIA facilities, and this data is linked back to customer characteristics?

Relationship:

The relationship between the airline and each customer is relatively impersonal. Apart from time in the air, most interactions are short. Is it possible to “personalise” the system? Some airlines already have check-in staff also working as cabin staff, so the person who meets you at the gate is also the person you see

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on board? Can this be taken further? Can you have a “personal travel liaison assistant”, an SIA staff member who knows you, and looks after you? (It could be a virtual “person”!) Pricing:

3.

Alternative pricing models are becoming more common. Could passengers “bid” for seats, using an auction model — at least for part of the passenger complement on a flight? Could they pay a fixed fee for a minimum of 20 flights a year (or 20,000 km a year), and then a marginal rate for every flight beyond that?

Meeting the needs of stakeholders and enhancing business value Suppliers: A key approach has been bringing suppliers “into” a company, so they are part of the overall system, rather than outsiders who feel they only make money by extracting profit out of the buyer. When the business is much larger than its suppliers, it is relatively easy to establish good links and partnerships. When the major suppliers are very strong and powerful, as they are in the aviation industry, such partnerships are harder to create. However, links between airlines and plane makers would clearly benefit both. Perhaps SIA could start to build such links. Partners:

As with suppliers, the trick is to make the partner feel an insider. For SIA, this might

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mean developing much stronger links with — for example — hotel chains and tour operators, so that, from a customer point of view, the process is seamless. Clearly, e-business will encourage such links, but the airlines that build strong connections early on will benefit from having strong networks of allies. Triple bottom line issues — the environment:

The environmental issues that have dominated so many industries in recent years will eventually become much more significant for airlines. At present, the focus has tended to fall on noise. In the future, it will be pollution — especially from spent aviation fuel, and also the use of noxious chemicals, non-reusable materials, etc. SIA is well positioned — like BMW in the motoring world — to take the lead as the premium brand that also addresses environmental issues.

Other stakeholders:

SIA is already strong in its relationship with many key stakeholders beyond those we have already discussed, especially government, the community and staff. Perhaps just one idea here, and that is the increasing importance of logistics. Can SIA spearhead enhanced e-enabled logistics systems, to help it offset the increased competition Singapore is facing in traditional logistics (through competition in ports, lower cost labour in surrounding countries, etc.)?

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Re-thinking strategy to jump ahead of rivals Mission: Could the company change its mission — what is it trying to become? Maybe SIA should aim to be the world’s most exclusive airline (no economy class sections)? Or perhaps it could become the preferred travel “portal” for business people around the world? Market:

Another area of re-thinking might be to re-define the market. Perhaps SIA should be the world’s leading Chinese (Mandarin speaking) airline? Perhaps it could become a business airline only? Many airlines have looked at the success of some of the start-up airlines that have differentiated themselves (cut-price, use of out-of-city-centre airports, etc.), and asked — so, how could we be really different?

Competitive:

Another way to rethink is to re-consider the competitive arena. It has been fashionable to acquire competitors in many industries, but recently we have seen an alternative strategy — to restructure the competitive arena by creating your own competitor (SIA and Silk Air; Cathay and Dragonair, and now Qantas and Australian).

Approach:

The last element of re-thinking in relation to strategy comes from looking at alternative approaches. Many companies now look at companies in other industries and ask: how can we use their approach?

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This has led to outsourcing, business process re-engineering and new forms of alliance and licensing. Could SIA become a franchiser, licensing others to use some of its technologies? Clearly, all this is simply to start you thinking like a Ronin. The approach is clear — for every element of the business as it is, could it be changed, and if so, would that change give advantage?

Summary In this chapter, the key issue of concern has been the ways in which you can identify opportunities for radical innovation: ♦ When you look at most businesses, you can see that they are built around a fairly easily identified “business model”. ♦ By re-thinking the underlying business model, it may be possible to revitalise a business, and gain competitive advantage over others in the same area. ♦ There are a number of core business models that keep recurring in companies: • Manufacturer • Enabler • Personal service provider • Educator • Validator (tester, accrediter) • Developer/Investor • Impresario • Custodian • Retailer • Entertainer ♦ Having identified the underlying business model for an organisation, the key step — the step the Ronin takes — is to “re-think” the analysis.

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♦ This means taking each and every element of the business as it is, and asking “could this be different?” ♦ There are 14 key points of revolutionary business change, and these are: 1. Replace a core competence, or use and existing one in a new area. 2. Dispose of an asset, or outsource it. 3. Develop a new process, or use an existing one in a new way. 4. Change the logistics of getting to the customer. 5. Acquire new information about customers, or use existing information for new purposes. 6. Change the relationship with customers. 7. Change the pricing model. 8. Change the mission of the company. 9. Change the market, or abandon the existing market. 10. Change the competitive arena. 11. Adopt a new approach, or use the existing approach in a new context. 12. Make suppliers into partners, staff into suppliers. 13. Change partners into suppliers, or suppliers into staff. 14. Change the relationship with any other stakeholders.

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A Ronin navigates Finally, a Ronin navigates. A Ronin works out the strategy to get new ideas adopted, and to get new approaches implemented. A Ronin has to do so in a generally hostile environment, where inertia and a love of the familiar make people naturally opposed to change. Navigation is important because a Ronin needs to make changes, to break patterns.

“Breaking the pattern” — the importance of escaping from the established approach Business perspectives on change seem to fluctuate with the economic cycle. When the business cycle is on the upsurge, and the bulls are running in the stock market, then the view is that companies should innovate, develop and change. When the cycle is on the downward path, and there are worries about recessions and the bears are afoot, the talk shifts to cost cutting and focus. These views are indicative of two problems that businesses face — and organisations more generally. First, there is a great deal of “fashion” in what is seen to be appropriate. At the end of the 20th Century and the beginning of the present century, it had been fashionable to outsource, for example. “Give tasks that are not at the centre of the business and its core competencies to those who specialise or excel in those areas.” Now, it is easy to imagine that in a few years time, 85

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someone will come up with the idea that “in-sourcing” is a good idea. Of course they will not call it that: when time and motion studies were rediscovered, they were called BPR (Business Process Re-engineering). If an idea is going to catch on, it has to sound new, and preferably also be summarised in a three-letter acronym. Perhaps it will be called CSI (for Competitive Strategic Integration): this idea will be based on the view that the best way to run a business is to take control of every facet of activity, and thereby ensure focus and consistency, while other foolish companies allow outsiders to look after activities without really understanding priorities. Second, and related to the incidence of fashion is the “herd instinct”. People in organisations do not want to feel they have missed out on the next big thing. Once an idea has become fashionable, then everyone wants to be following the approach. Of course, the corollary of this is that once the next big thing comes along, most abandon the previous approach — which explains why the success of each of these new approaches is always limited, as they are never given the chance to show their ability to really enhance improvement and increase effectiveness. Ronin are indifferent to fashion. Their concern is to identify ways to do things differently and achieve outcomes more effectively and efficiently, and they do not mind if the approaches they develop are aligned with, opposed to or irrelevant to the latest fashionable set of ideas. To a large extent, this means that Ronin face a challenge in getting action under way — they have to “break the pattern”. Breaking the pattern is not just about behaviour, of course. It is about how people see and understand the ways things are: breaking the pattern starts with getting colleagues to see the world differently, and ends with new and different approaches and behaviour. The key to breaking the pattern is to look into the future. We do this through looking at trends, and developing scenarios.

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Identifying trends to spot future opportunities One of the greatest frustrations facing business is in the process of finding future opportunities. These opportunities are the most important to find, but in trying to do so, companies quickly come up against the fact that it is impossible to predict the future. In order to understand this frustration, it is useful to remember that businesses grow and develop through successfully identifying new opportunities and exploiting them. At present, they do this in part through seeing the potential uses of emerging and improving technologies. In addition, opportunities are also found through seeing market needs and niches that have emerged or are beginning to emerge. Usually the opportunities emerge when a challenge or a problem becomes evident. A few years ago, there was a great deal of press coverage of DVT — “deep vein thrombosis” — one of the dangers of long-distance air travel in cramped conditions. To an entrepreneur, the emergence of such a problem is a window on an opportunity — and there must have been dozens of people thinking of ways to address this opportunity and establish a successful business. For example, I thought of going into a joint venture with one of those companies that makes massage device in chairs — and putting the device in the foot rest of the seat in the aeroplane. However, would it not be even better to identify an emerging opportunity — to “see it” as it were, before it even eventuated, and be ideally positioned to make use of the opportunity when it did emerge? The trouble with this wish is that even the best of entrepreneurs are unable to predict the future. Or are they?

Demographic trends are very revealing There are some aspects of the future that are relatively predictable. For example, demographic projections are, generally speaking, very easy for the next 5 to 20 years. Most of the people we are considering are already alive, and, save

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some unexpected major catastrophe, patterns of morbidity and birth rates will remain relatively easy to determine — the trend lines are clear. There are some demographic “facts” that are well know. For example, not only is the world as a whole ageing (by which I mean the percentage of people aged 60 or more years is going to increase from around 10% back in 2000 up to around 20% by 2050), but this process is also going to happen very fast in some countries. In particular, in that same time period China will see its older age group increase from 10% to 30% of the population — with obvious social and economic implications. In the same vein, over the next 20 years, the number of people in work as compared to the number of people of retirement age will fall below two in most developed countries. In other words, every working person will also be “supporting” nearly half a retired person. Demography is, of course, an immensely important area for understanding future changes and opportunities. Another area where trends and future developments are fairly predictable lies in information and communications technologies. Voice activated computers, convergence in telecommunications, broadcasting and information systems, visual mobile devices, and embedded intelligent systems — these are easy to predict. However, unlike the case of demography, we don’t know when, where and exactly how all this is going to work out.

Scenarios help us “see the future” There is another approach, and this is where the use of scenarios becomes apparent. Future scenarios are coherent, consistent pictures of possible futures — the way the world might work out. By developing a series of realistic scenarios for the future, it is possible to do a number of things. First, you can examine the “drivers” of these future scenarios — the forces, the changes, that would lead to a scenario

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becoming the future we actually experience. Those forces can then be tracked and reviewed: as circumstances change, so increasing evidence will allow you to feel more confident that one of your scenarios is more likely to emerge, or is becoming redundant. Second, you can use scenarios to help make choices about how to act in order to increase the likelihood of your preferred scenario emerging. It is possible to influence the future, and if you have thought systematically about what possible futures could emerge, you are then better placed to assess the effects of interventions — whether they be at a government, industry, business or individual level. The converse of this is also true. Wise analysis of scenarios helps you identify risks and threats, and ways to manage risk and anticipate contingencies more effectively. However, the third use of scenarios is the one that interests Ronin in particular. Scenarios allow us to contemplate future opportunities — before they even occur. To illustrate that idea, let us consider the increasingly familiar scenario that suggests that hydrocarbon power for land transportation (petrol and its variants) will be replaced by electrical power (fuel cells). To an entrepreneur, this particular future is an obvious gold mine! What would be needed to ensure effective access to fuel cells and their components? How would they be recharged? Where? What could be done with the spent fuel cells? Equally interesting, what opportunities exist inside the gradual phasing out of petrol engines? Developing scenarios is one of the most powerful ways we know to help us think about the future. It is true that we can’t predict the future, but we can think about the future in a systematic way. Those who do, have found many benefits — but in particular, scenarios present the possibility of seeing opportunities in the future. Entrepreneurial managers can anticipate how to make use of these insights to ensure their businesses prosper in the long term.

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By the way, scenarios are not developed by just imagination. A scenario for the way the world might be in the year 2020 has to be developed out of assessing the implications of a series of changes taking place between now and then. Scenarios are the result of changes that have taken place. Good scenario analysis is the result of thinking carefully about the changes that could occur, and then working through their consequences. Creative and lateral thinking creates new alternatives. A second very important skill in breaking the pattern is learning to see things from different perspectives. It is easy to understand what this means: just sit on the floor in your own home — and suddenly you are seeing things from the visual perspective of a child! Edward de Bono came up with a very clever way of helping us see things differently. He suggested that we could put on different “hats”, and then use each hat to think about an issue: one hat might be to see things negatively, another might be to see them in terms of growth, etc. Perhaps we could devise a set of business hats. One hat would be to see the business through the eyes of a customer. Another would be to see it from a supplier’s point of view. Another would be from the Board’s viewpoint. The local community’s perspective would provide another direction. Indeed, we can take the viewpoint of any stakeholder. Alternatively, when someone suggests an initiative, we can ask ourselves “what would happen if we were to do the opposite? Or a different way round?” Of course, we don’t take different points of view to be difficult — but rather to see what an alternative perspective reveals in terms of opportunities and innovative approaches. .

Eight key techniques for gaining strategic advantage You break the pattern so that you can do things differently. You do things differently in order to gain strategic advantage.

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Strategic advantage refers to having an edge on your competitors. There are a number of ways this can be achieved through successfully competing on: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦

Price Quality Differentiation Interdependence Value focus Leveraging Re-thinking Radical innovation

By the way, there are also strategies to “contain” competitors, but they are not the focus of this book. Treating competitors like an enemy, and trying to find ways to defeat that enemy is part of the traditional thinking that a Ronin seeks to avoid. A good illustration of this comes from the many books that are written about the ideas of Sun Tsu and his analysis of The Art of War. To hear most people on this subject is to conclude that Sun Tsu wrote all about battle strategy, manoeuvres, etc. In fact, most of his work is about avoiding battles rather than winning them — you win the war by never fighting if you possibly can. Ronin find The Art of War very useful to read, but they are likely to really read the book, and absorb what Sun Tsu is trying to address, rather than fall into the trap of believing that the “business is like war” analogy is anything more than a simple idea. Let us look at the eight strategies in turn.

Competing on cost A very large number of business people argue that competing successfully is all about cost. If you can produce the same item for the same quality as someone else — but for a lower price — then people will buy from you. It seems obvious.

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In one sense, it is obvious. For many items, people do shop on price. However, in terms of competitive advantage, the situation is a little more complex. Today, you are able to offer a product at a cheaper price than your competitor. What will he do? Try to reduce his costs, and hence the price of his product, of course. If he succeeds, then he will be able to sell at a cheaper price than you. Then you will try to reduce your costs. This is a simple description of the downward price spiral — which happens when you start to rely on cost competition. We see the evidence of these downward price spirals all the time. They are the dominant feature of commodity products, where there is only price to distinguish one producer of the commodity from another. Within a country, the price spiral eats away at margins, and this is even more the case when companies from different countries compete. Indeed, this is the driver for companies to seek to outsource production to low cost countries — there is very little choice if you want to remain competitive. I think a really interesting example of this came with the initial development of the so-called B2B businesses: online closed markets, with a fixed number of suppliers and purchasers. Many of these markets were “catalogue” markets. That means that the sellers placed their catalogue on the market website. From a buyer’s point of view, the system looked excellent: it was a perfect market (a perfect market is one where every supplier and every buyer has complete information). By that I mean that as a buyer I could look at all the catalogues of all the suppliers in the B2B market, and choose that supplier whose price was lowest for the item and the quality I was seeking. Every supplier in this perfect market was forced to try to reduce prices — a very intense downward spiral, making margins paper thin. What happened to these B2B on-line companies was that most failed. The reasons why are instructive. From the supplier’s point of view, they were being invited to take part in a process where they would need to constantly shave their margins, and

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run close to failure, because of the pressure on price. They responded by circumventing the market. A company supplying another in the B2B business would still send its sales representatives around for traditional face-to-face negotiations — to offer special deals that meant that the supplier still made a reasonable margin, while meeting the needs of the buyer. From a buyer’s point of view, they were being expected to buy from a limited group of suppliers, and to have to pay the B2B business a small premium to cover the costs of the B2B business itself. They responded by still seeking alternative quotes from suppliers outside the market — and the technology already existed to allow them to search all companies on the web for the “best price and quality” on the day. Why pay the B2B premium? Competing on price is the least attractive of all approaches to strategy. If your company is in that situation, then the issue is to find another and better basis for competitive advantage. For a Ronin, seeing that you are competing on price is the best indication that there has to be a better and different way.

Competing on quality It is well know that some people will pay a premium for perceived quality. There are a number of reasons for this. Some are rational: better quality means that the product will last longer, will operate better, that the service will more closely meet your needs, etc. Some are more to do with other benefits: better quality is more exclusive, is indicative of wealth, has “snob” value, etc. However, quality also has some other elements in terms of business strategy. The higher the quality, then, in general, the higher the cost. The higher the cost, the smaller the market that will be willing to purchase the good or service at that price. In other words, there is an inverse relationship between quality and market size.

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Now think about the competitive situation. If you are a quality provider, you will always be trying to find ways to increase the number of customers. To do so tempts you into lowering cost/quality. This will have two consequences. First, you will be seen as a lower quality provider in the market, which will now be unwilling to pay premium prices for your product or service. Second, you will not be competing against other providers in this lower cost market, and so the pressure to reduce costs will continue — you are starting to become an organisation competing on price. On the other side, your competitors will be asking — can we add the same features/character to what we do, and still offer our product at our current price? If they can, then the perceived value of what you are offering goes down (after all, anyone can buy these features now). The car industry is a wonderful example of this second issue: every new feature that is put into quality cars slowly finds it way down to cheaper models and makes. Look at the rapid extension of ABS braking systems, impact air pillows, etc. You will already have seen there is a link between quality and brand. In effect, a brand is evidence that a company’s products or services have become established as having a clear level of quality, embodied in the brand. As any marketer will tell you, it is very hard to establish a prestige quality brand, and, conversely, it is very easy to lose the value of that brand. Maintaining quality as a differentiator, and sustaining a quality brand, these are difficult things to do as competitors spend a great deal of time working out how to steal the ideas — and the customers — of companies that emphasise quality. As we will see later, if this is where you are in the market, then a Ronin will be looking to innovation to sustain the brand.

Competing through differentiation To differentiate yourself from competitors means to stand out from them as being different. Sometimes we call this finding a

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niche market. Niche markets are wonderful — but they seldom last for long. In a niche market, you can charge a premium price — which is exactly why would-be competitors keep trying to think of ways to get into that same niche area. Differentiation attracts competitors. Some companies have been able to sustain a niche area for a long time. Consider the case of Polaroid. That company was founded on a patented process to develop films immediately, and no one over many years came up with an alternative system that was easy to use and gave the same virtue of (almost) immediate photographs. There are two elements to the Polaroid story that are worth examining. First, protection by patent (or some other form of intellectual property protection) is a good way of keeping would-be competitors out of a niche area. However, the very existence of a patent is an encouragement to others to see what had been done, and whether or not they can come up with an alternative — and better — process. Indeed, the original purpose of patents was to encourage further research and development through requiring that the patent be granted on the basis of submitting the full detail of the process being used — which was then available to everyone else to examine and seek to develop further or in different ways. For a Ronin, the existence of patents by a competitor is also a great incentive — a company with a patented process feels safe, and it therefore unlikely to respond quickly to a new technology, a new approach — but rather they will seek to protect what they have. A second element of the Polaroid story comes from looking at its demise. Polaroid photographs lost all their appeal when digital photography appeared. This also gave instant photographs, but with the added bonus that if you took a photograph you did not like, you could just delete it and take another. The lesson is simple. No one has permanent competitive advantage, and however strong your niche is today, it will eventually be lost. Ronin constantly seek new niche markets

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and differentiated businesses (that is what “new and different” means), but they also understand the process is relentless: as soon as you have found a new area, start looking for the next one! A second example is also helpful. In the 1990s, many IT companies developed sophisticated applications to run on computers. Many were based on years of computer programming, and they led to the establishment of some very clever niche businesses. In Australia, one company focused on writing software to simulate the behaviour of plastic in plastic injection dies. These dies are expensive to make, and any mistake is very costly. The simulation programme allowed manufactures to make perfect dies, and the company — Moldflow — established a wonderful niche business. However, in the world of software, while some companies made their business developing specialised software applications, others were writing better and better generic software. The virtue of generic software is obvious. It allows you to write your own specialised application, without having to pay the high price the specialist provider charges. As a result, more and more specialised applications are being bypassed by companies using generic software to custom build their own applications. It is getting easier every year. It hasn’t happened yet — but one day, it will be easy to write software like that used by Moldflow and not need to use their very good (but costly to develop) system. This is an illustration of a general process. New technologies lend themselves to niche markets and specialised applications. Over time, however, the technologies become simpler and more accessible, and the specialised becomes more generally available, and the business advantage slips from differentiation to cost or quality. There is a further variant of the differentiation approach, which is about changing the underlying nature of a business area. This will be explored later under the heading of innovation.

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Competing through establishing interdependence One of the most well-known brands in the world has to be “Windows”. I am using Microsoft products as I write this book. I often make presentations or give lectures in cities around the world. In order to do that, I put them on a disk, and take the disk to wherever I am speaking. I expect (and always find) that there will be a computer system with Windows included that I can use. Through Windows, Microsoft has had competitive dominance in computer graphic user interfaces (GUIs). Despite the sophistication of Apple systems, and despite the virtues of software like Linux, Microsoft has retained competitive dominance. Why? One answer seems to be interdependence. If you look at each new computer system that comes out from a manufacturer, you will notice two things. First, it is likely to have a new (and faster) Intel processor. Second, that processor will allow you to run the latest version of Windows. In a sense, Microsoft, Intel and the computer manufacturer all need each other. Microsoft needs Intel in order to be able to have a processor powerful enough to run their latest (and larger) version of Windows, with all its new features. Intel needs Microsoft, and the new version of Windows, to maximise the value of its new processor. The manufacture needs both to justify why a purchaser needs to buy this new model (faster processing, new software). The three form a “web”, each linked to the other, and needing the other in order to successfully develop and compete themselves. Seeking to create a web, to develop interdependence, is a great way to gain competitive advantage. It almost goes without saying that such webs are also very high profile targets for others. It is not surprising that some computer manufacturers are constantly flirting with new software and processor manufactures to see if they can break their dependence on Microsoft and Intel.

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Competing on value focus — choosing the high profit areas of the value chain Focus has become a very fashionable word in the last few years. Consider a typical example of who this is being used by — in the computer industry. If you look across the range of things that are involved in this industry, it is clear that some areas attract much higher margins (or as some say, much deeper “profit pools”) than others. Some areas have high margins, and a great deal of profit potential: these would include manufacturing processors (Intel’s business, as we explored above);writing machine languages, especially GUIs, like Windows (Microsoft’s business), and applications. Other areas have low margins: these would include manufacturing other components (not processors), assembly, retail, repairs and service. Figure 3: Profit pools in the computer industry

Profit Proft

Processors Other

Software Assembly

Retail Servicing Applications

It is obvious from all this that a computer manufacturer looking at this would determine that it would be much better to be in some areas of this business more than others. Specifically, this would be to move out of assembly (outsource to a low cost assembler somewhere where labour costs less), and to try to

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move into areas like manufacturing processors, or developing software and/or applications. Of course, some of these areas (processor manufacturing, developing generic software) may be hard to enter (given the competition from players like Intel and Microsoft), whereas others may be more open (like applications). It is thinking like this that has been used by people like Stanley Shih, CEO of Acer, to shift resources away from an emphasis on assembly. Now ACER is also moving into areas like processor manufacturing (competitive, but rewarding if you can establish a foothold), and applications (still an area where there are many opportunities to pursue), diminishing the company’s traditional reliance on income from being an assembler.

Competing through leveraging core competencies into new areas One final familiar approach is to look at areas in which the business performs exceptionally well, and then ask “can we leverage these skills/practices in to other business areas?” A company may be very good at handling logistics (an airline for example), and shift that skill into other related areas (packing lorries, or trains, or ships, rather than aeroplanes. Generally speaking, this approach works well if an organisation has one or more core competencies — things it does exceptionally well, and which give it competitive advantage in its current industry — and which can be used in other industries where others do not have comparable skills. These first six areas of competitive advantage are familiar and well established in the traditional paradigm of business behaviour. The remaining two take a far more Ronin-like approach, by seeking ways to be innovative and revolutionary in their approach.

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Competing through “Re-thinking” — seeing the business differently We have used several computing examples in this chapter, so let us use one more. The PC is a commodity item. It comes in a grey box, with a screen, keyboard, mouse and speakers. PCs are similar in price, and there is strong price competition. It is a typical commodity — and hard to avoid continuing evidence of the downward price spiral. One manufacturer in the market did a re-think. Apple decided that there was no reason why a computer had to be grey. (It was a bit like Henry Ford saying you can have a car any colour you like — as long as it is black!) Computers could be fashionable and funky — and that led to a whole new series of laptops and PCs that were distinctive, exciting and worth putting on a desk. It was a bit like “swatching” the watch, and it has created a new category of computers that have a distinct market. Sometimes the re-thinking can go in the opposite direction. This has happened twice in the motorcar industry in the last 50 years. Twice a manufacturer has said, “cars are very sophisticated, complex, and are expensive — why don’t we produce a new style of affordable car?” This led to the “bubble cars” of the 1960s (perhaps a re-run of the development of the peoples car, or VW, in the 1930s). Recently, the process has been repeated again, with a whole set of new car manufacturers appearing whose view is that cars can be cheap and good: Suzuki, Daihatsu, Hyundai, Kia, and Daewoo. Re-thinking segments a previous market into two, and creates a new product or service category for the new segment. The process is to look at an existing product/service and its market, and ask one of two questions: 1.

Can we offer this product or service in a different way, at a much lower price, perhaps by reducing some of the addons or extras that are standard at present? or

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Can we offer this product or service in a different way, at a premium price, by adding features or elements that are currently not part of the current offering?

Re-thinking does not change the industry as a whole, but what it does do is segments what was a unified area beforehand. This is quite different from innovating — where the focus is on creating a totally new market, by adding something that did not exist before, or by radically changing the underlying business.

Competing by radical change through innovation If the first rule of competitive advantage for a Ronin is that “advantage is temporary”, then the second rule is that “reinvention is the goal”. Every business should be seeking radical innovations — not only to change the nature of the business, but also to change the nature of the industry. The shift from traditional retailing to supermarkets, from custom built cars to mass production, from tradesmen home repairs to do-ityourself, from energy production to energy trading — these are all examples of radical innovation. There are some other changes about to take place in the next few years. In the car industry the next shift looks as though it will be from mass production to customised mass production (making individual cars on the assembly line). From broadcasting to narrowcasting — to customised broadcasting? What else is on the horizon? The task of the Ronin is to seek to re-think, to buy time, and to identify radical innovation to change the nature of competition in an industry, and propel their company to the leading edge. In emphasising that Ronin are looking for better ways, they are also looking for different ways to achieve the organisation’s outcomes. This underlying approach can be summarised in a series of simple rules: 1.

Competitive advantage is temporary.

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2.

Keep existing businesses running until they die or are surpassed (they bring in the cash for change). Recognise and respond to the changes that are happening now (react). Assess future developments, trends and scenarios, to prepare for the future (anticipate). Continually look for the radical innovation that will reinvent the business and its industry (seek leadership).

3. 4. 5.

Keeping alert to what is happening: observing and tracking results Being a Ronin demands that you remain constantly alert. That has two components: 1. 2.

keep monitoring changes, trying to identify the underlying trends, the key factors, and the emerging directions; and persist, persevere and push to keep the momentum for change in place.

Keeping an eye on what is going on requires a great deal of discipline. Earlier we discussed the flood of information that is available today. The challenge for you as a Ronin is to keep a focus on what is important for you. Human being has a great capacity for distraction, and we are quire capable of distracting ourselves. Some distraction is good — and enjoyable! However, there must be enough focus to ensure that you keep in touch — with the technologies, the markets, and the other issues that are important to your organisation. I find “small scale experimentation” helpful. By that, I mean trying out ideas, testing views, and listening to and learning from responses. Scientists proceed by trial and error. They constantly carry out experiments, many (most?) of which do not work. However, not working is not a failure, it is simply a basis for learning. We should adopt the same approach. Try out ideas and learn from what happens. The only “failures” in

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life come from doing nothing (never experimenting), or doing the same thing time and time again (not learning, but simply repeating an experiment, from which learning should already have occurred).

A Ronin navigates in order to manage the challenges of change Navigation is a function of political astuteness. Political astuteness is a function of networks, champions and “runs on the board”. Networks are the lifeblood of organisations. Earlier in this chapter, we described power and influence, and the network of relationships that underpins the formal organisational structure. Understanding these networks, and establishing your own links, is central — for anyone inside an organisation. They are especially important for the Ronin, because a Ronin tends to sit outside the normal organisation. First, a Ronin needs to understand the key networks, and assess both the key people and critical links that are the major sources of power and influence. They may be needed in the future to get something off the ground. At the same time, a Ronin needs colleagues — like-minded people who can support what the Ronin seeks to do. Some people describe using networks as “working the system”, and it seems to have a negative connotation. It might be better described as “understanding and using the system”. The system is there, it is a reality — and so the issue is to make good use of it, rather than ignore it. Ronin also need help. A key person inside the organisation is a champion. A champion is someone who supports and looks after a Ronin because that person can see the value the Ronin can bring to the organisation. Such people tend to be what are sometimes called “servant leaders”: people whose ability to influence grows from their commitment to supporting others.

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For a Ronin, finding the servant leaders inside the organisation is an important task: a Ronin needs a champion to help them survive what otherwise is a fairly hostile environment. Being a Ronin is a bit like being an outsider — the organisation has a tendency to reject outsiders, rather than embrace them. The only way a person who is like an outsider can remain “inside” is to have a champion who gives them refuge, and links them back into the networks and authority structures. However, navigation is always a function of results, and the most important thing a Ronin can do is demonstrate success. In sporting terms, this is called getting “runs on the board”. It means demonstrating that there is value in the new and different approach that is being developed. For this reason, it is often a good idea for Ronin to engage in small scale experimentation — that is, to test out ideas, and demonstrate their value, through small applications, before getting the organisation to commit to something more substantial. Developing a prototype, trailing an idea in one office or division, these are the sorts of approaches that allow the Ronin to build credibility, and show there is success down the path they are advocating. Ronin navigate change through understanding networks, seeking champions, and demonstrating success through getting “runs on the board”

Ronin also never give up. In the last chapter of this book, I want to explore how you can go on being a Ronin, even when the environment is hostile — even toxic — to your efforts.

Case study Not every innovation is based on an invention. Sometimes radical ideas come from looking at approaches being pursued in other industries — or even from looking backwards!

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We have referred to the car industry a number of times. In this area, the idea of mass customisation has become increasingly important — which is interesting when you reflect on the fact that the car industry started with small manufacturers making custom-built “horseless carriages”. BMW is one of the leaders in this “new” approach (this case study is based on a recent report from Lean Directions). Recently, Dr Norbert Reithofer, a member of the BMW Group Board responsible for worldwide production, announced at a congress of experts in Gothenburg that customer desire for “tailor-made vehicles” is increasing all over the world. He noted that exceptionally flexible manufacturing processes, a high degree of conversion capability and networked production — simple, quick and efficient production structures — are the basic prerequisites for the successful automobile manufacturing of the future. Almost coming full circle from those early days of custom-built vehicles, today the car can be manufactured to an individual customer order, like a made-to-measure suit. In the USA market, 10 years ago less than 10 percent of BMW customers ordered an individually tailor-made vehicle, but today the figure is above 30 percent. The BMW Group has been manufacturing in accordance with the so-called build-to-order principle for decades. The complexity this engenders can be seen in the following statistic: for the BMW 7 series alone, the number of different vehicle combinations arithmetically possible is an astounding 10 to the 17th power. The flexibility demanded is not only aimed at the product, but also toward the organisation and its procedures. For example, the desire to be able to make changes after the vehicle has been ordered without affecting the promised delivery date is very great. This can be seen at BMW where 40,000 changes made by customers after the vehicle has been ordered are processed and implemented each month. These new conditions demand production and working procedures which the BMW Group meets with landmark

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projects, such as the so-called customer-oriented sales and production process (KOVP). This succeeded, for example, in shortening the process throughput times drastically from around 30 days to 12 days for the current BMW 7 Series, a quantum leap in the automobile world.10 days is even being discussed for future models. Today, with the BMW 7 Series it is already possible to make changes in color, fittings and motorisation six working days before the start of assembly, without affecting the delivery date. This kind of flexibility was scarcely conceivable 10 years ago.

Reflection When we talk about Ronin looking for different and successful ways to change an organisation, it is important to remember that their ideas might not be “new”, but simply the application of ideas in context to another. Just as BMW is learning about custom building (which is where the industry started), there are thousands of other smart ideas that you can use and apply. Here are some starter thoughts. Can you apply the supermarket model to your business (to education, mobile telephony, or logistics)? Can the systems used by McDonalds (or the Pizza Hut), be applied to your organisation (to a plant nursery, to a child care centre, to a fashion store)? Ronin are not necessarily inventors — but they are clever at trying old ideas in new contexts!

Summary Breaking the pattern — a challenge because: ♦ companies and managers are very “business fashion conscious”; and ♦ there is a “herd instinct” in following trends and strategies.

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The key to breaking the pattern is to look into the future: ♦ we do this through scenarios; and ♦ through encouraging creative and lateral thinking. Companies seek competitive advantage, and there are a number of sources of competitive advantage. It can be achieved through successfully competing on: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦

price; quality; differentiation; interdependence; value focus; leveraging; re-thinking; and radical innovation.

The task of the Ronin is to seek to re-think to buy time, and to identify radical innovation to change the nature of competition in an industry, and propel their company to the leading edge. This underlying approach can be summarised in a series of simple rules: 1. 2. 3. 4. 5.

competitive advantage is temporary; keep existing businesses running until they die or are surpassed (they bring in the cash for change); recognise and respond to the changes that are happening now (react); assess future developments, trends and scenarios, to prepare for the future (anticipate); and continually look for the radical innovation that will reinvent the business and its industry (seek leadership).

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Being a Ronin demands that you remain constantly alert. That has two components: 1. 2.

keep monitoring changes, trying to identify the underlying trends, the key factors, and the emerging directions; and persist, persevere and push to keep the momentum for change in place.

CHAPTER 6

LEADING THE LIFE OF AN INTERNAL REVOLUTIONARY

Building support for revolutionary change Being an agent of change, especially revolutionary change, requires support. There are some things you can do that can help in ensuring that you are not left in too isolated a position — they include making sure that you manage change well, that you encourage the development of a balanced portfolio of activities within the organisation (in part to complement what you are doing), that you retain flexibility, and that you keep an eye on costs. These are not foolproof ideas, but they do help.

Choreography — making sure that change is well managed I wonder if you have ever been to the ballet? I have been on a few occasions, but there is one moment that has stuck in my mind for years. In one ballet I saw, a muscular young man threw a sylph-like young woman into the air. As she sailed across the stage, another muscular young man caught her gracefully. It was breathtaking. I remember that scene because I have often thought about how carefully a choreographer was to work to write a ballet (if “write” is the right word!). Everyone has to be positioned with such care, and each move has to lead naturally into the next. It is in such sharp contrast to my experiences in organisations, where changes frequent, but seldom are they 109

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carefully arranged, and even more seldom does one change naturally slide into the next. It is as if the muscular young man throws the young woman in the air — and the choreographer forgets to get the second man in place! The young woman crashes onto the floor — and the whole sequence of movements is destroyed. Unfortunately, in many organisations we do not choreograph organisational change. We just tend to make changes. They have consequences, and often we don’t see them, and we seldom plan for dealing with their outcomes. Throughout this book I have emphasised that Ronin tend to start apart from others in the organisation — we used the term “square pegs in round holes” earlier on — and for that reason, they need to be very careful in making sure that whatever they do, thinking about consequences is part of their repertoire. Indeed, I see Ronin as similar to both choreographers and impresarios. As choreographers, they have to plan the sequence of changes, and think about their impact, and as impresarios they have to draw together resources and support as they need it, without access to people of their own. You are going to spending a lot of your time trying to make changes. In order to sustain your credibility, try to make sure that you are more of a choreographer than the typical manager — focus on looking at what you want to do, and think about the changes that are necessary. Then, as you try to make changes, think through what they might entail, and see if you can anticipate the outcomes, and prepare for them.

Avoiding potential problems In effect, what you should be doing is trying to avoid potential problems. In fact, what you would really like to do is to avoid problems ever arising again — and we call that approach “potential problem analysis” (or sometimes it is called “risk analysis”).

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There are five stages involved in this: 1. 2. 3. 4. 5.

anticipating and prioritising potential problems; anticipating causes; taking preventive or contingency actions; setting triggers; and implementing actions as required.

Potential problems can be identified from looking at an action plan: starting by looking at what should happen — and then identifying what could happen instead. Just as we explored earlier, we can define the priority in addressing these potential problems in terms of probability and seriousness. To address potential problems, we need to develop remedies: 1. 2.

3.

identifying the reasons why something could happen (not what should happen); taking preventive action for high probability/high seriousness issues (where this is possible), or ameliorative measures (if they cannot be prevented); setting triggers to initiate contingency plans.

To summarise all this, we can use a worksheet: Potential problem: Analysis:

Possible cause

Actions:

Prob.

Preventive

Contingency

Trigger

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An example will make this clear. Suppose you have to move staff from one location to another. The problems that could occur when moving are numerous — so let us pick a few! ♦ ♦ ♦ ♦ ♦

utilities not connected; telephone does not work; removal truck fails to arrive; new offices not ready; or removal truck breaks down.

We cannot look at all of these, so let us use the telephone as the example. Potential problem: Telephone doesn’t work Analysis: Actions

Actions:

Possible cause

Prob.

Preventive

Contingency

Telcom do not arrive on time

75%

Specify time Have old 1 week in the afternoon number diverted before — when we to mobile will be on site

Booking ‘lost’ At Telcom

10%

Ring Telcom one day before moving to confirm date

As above

Trigger

1 day before

Obviously, real potential problems are a lot more complex than this. However, the form of analysis can be applied to any situation. Remember, Ronin are choreographers and impresarios — a lot of this will have to be achieved without having the resources and staff immediately under your direction!

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The balanced portfolio approach — ensuring you have both new and established areas of activity Sustaining your role as a Ronin also requires that you think about the “balance” between revolutionary and other activities within the organisation. That balance is a matter of investment of resources. Professional investors suggest that there are three types of investment. The first is conservative — putting money into “blue chip” companies, where you are very likely to get a steady return, but the prospects of making a fortune are very slim. The second is ideal — investing in growing companies, that seem to be destined to continue to grow and be successful, an excellent idea, even if they are hard to identify, and even if the most promising can sometime suddenly collapse. These are investments where the prospects are much better in terms of increasing their value. Finally, there are high risk investments — getting in early on companies that may or may not actually survive in the next couple of years. Here the expectation is that many will fail, but just ever so often you will invest in one that booms, and really make a lot of money. A good investment strategy is to have some money in each of these three categories. The balance is a factor of your risk profile — but some in conservative companies, some in growing companies, and some in high risk “just might make it” companies. Businesses also need similar profile in relation to projects. They need some business activities and projects that are safe — if unexciting. They will ensure the stability of the company, at least for a while, but not be a source of great profits. Hopefully, some business areas and projects are in fast growing areas (“stars” as the Boston Consulting Group used to call them). They will make a real contribution to profits, and if they

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continue to grow, will become the major business areas of the future. Finally, some resources go into the high risk area — and these are the resources that Ronin seek to use and the investments that Ronin seek to encourage. This is an area in which either a “champion” or a “mentor” can be very helpful. These roles are explored further below. The value of these people in relation to this area is that they can advise you on the best balance between safe, growth and high risk projects, through their knowledge of your organisation and its risk profile.

Flexible strategies — to deal with the reality that things do not happen according to plan! One of the strengths of being a Ronin is that you are not locked in to a particular approach or way of seeing the world. However, one of the risks is that when you do identify an approach that is new and different — and will achieve a better result — you may begin to think that this is the answer. Ideas are like experiments, and they have to be continually tried out, and their outcomes assessed. A good scientist knows that their ideas are only good until a better theory emerges — a good Ronin should be aware that a promising new approach is only worthwhile until a new and better one appears. This places a great deal of emphasis on your ability to stand back and review ♦ what the organisation is doing, and dispassionately consider if there is a better way; and ♦ what you are doing, and dispassionately consider if there is a better way! Being a Ronin is not about picking up some new skills, it is about a whole way of thinking, and behaving. A Ronin never stops questioning.

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Watch the money! One last warning about building support: be careful about resources! All organisations are concerned about costs, financial, human and informational You have to be concerned about costs also. Watch the money!

Demonstrating results to convince supporters and interest others Runs on the board One of the more unusual business expressions comes from cricket — people talk about the importance of “getting runs on the board”. In any organisation — business, government or not-for-profit, it is important to show that an approach being adopted is achieving results. Once you have some runs on the board, then people will start to take notice: however, runs on the board are real, they are not promises, and it is not enough to say the runs are “almost there”. There are many example of Ronin who have achieved their success by getting some results, even before their approach was adopted. Gary Hamel, in his book Leading the Revolution, describes two staff at IBM, David Grossman and John Patrick, who managed to establish the Internet side of IBM’s activities — by slowly getting a series of successful events and activities underway and promoted to management. It is a good illustration of the importance of those runs on the board. How do you get runs on the board? There are three steps in getting some early success: 1.

identify some modest outcomes that can be achieved in the short term;

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2.

focus on these, to ensure they are achieved, and at the same time make sure the results are clear, measurable and significant; and promote these outcomes to key staff in the organisation.

3.

Early runs on the board are not achieved by trying to get a high score quickly. In cricket, those first few runs are usually the result of carefully appreciating the strengths of the opposing team, and working out some ways to get a few single runs — and maybe a boundary. They are the result of hard work, grafting away, but they set the basis to demonstrate that more runs can be made, and that this team is one that can be beaten. It is the same inside your organisation. Identify some outcomes that are realistic, and that will show the benefits of the approach you want to see adopted. Do not try to reach too high too early on: it is better to achieve some modest targets, than to fail completely in trying to achieve something more exciting, but also beyond your reach at an early stage. Build a model of success by starting with some “foundation” achievements, on which a bigger set of outcomes can be based. Step by step. There is an old Chinese saying that says that a journey of a thousand miles begins by taking the first step. One step is modest, but it is necessary to start.

Building customer loyalty — locking in and locking out! For any organisation, the customer (or client) is critical: without customers there is no business; without clients there is no service delivery. The key assessment for any proposal that a Ronin develops must be: will there be a sufficient group of customers/clients to justify this approach? Without a positive answer to this question, there is no basis to move forward. There are many ways to assess customer interest. You can carry out some pilot testing. Or convene a focus group. You

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can assess current customer information, and analyse areas of need, preference and frustration. However it is done, meeting a customer need has to be the basis for a new, better and different approach. Ideally, you would like to develop an approach that locks customers or clients in to using your service, your product, and which also locks competitors out. In discussing Polaroid, we looked at a company that successfully locked competitors out for years. Moldflow has managed to lock customers in — at least for some years. Some other attempts to do this have not been as successful. When airlines started to introduce frequent flyer schemes, others followed the approach — and as a result, the degree of “lock-in” was weak: several customers joined several frequent flyer schemes, and still shopped around for the flight they wanted on the day. Some customers resent being locked in, of finding you are the only provider. The best approach is one where the customer wants your product, your service, because you are meeting their need — rather than them being forced to buy from you.

Relentlessly studying customers and their needs If meeting customer needs is paramount, then the corollary is that you have to relentlessly study those customers and their needs. In Chapter 3, we examined customers, and the issues that are important in assessing their needs. There were four factors: 1. 2.

3.

The first issue is how a business reaches its customers — the logistics of the business. Second is the information that exists about customers, in terms of their background characteristics (income, age, etc), and their behaviour and preferences (the other things they buy, their lifestyles, their values, etc). Third is the nature of the customer relationship — the degree to which the customer and the organisation are close and involved, or distant and with a tenuous relationship.

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4.

Finally, it is important to understand how a company charges its customers; charging can range from fixed price for a product or service to auction arrangements, from retainers to contracts, etc.

However, the relentless study of customers is not just about how they are today, but how they might be in the future. Of great importance is the range of future possible customer relationship models –– and we identified a number of these earlier. To remind you, some of the ways in which an organisation can relate to its customers or clients include: ♦ bundling (putting a number of products or services together for “one price”); ♦ individualising (making the product or service unique to the customer, mass customisation, etc); ♦ making elite (creating scarcity around a product based on quality, unique attributes, etc); ♦ adding intelligence (especially through using embedded IT systems); ♦ providing experience (adding experience to the basic product or service); ♦ creating solutions (through making the relationship one of solving a problem, rather than selling a specific product or service); ♦ offering neutrality (through advising on alternatives, rather than selling one in particular); and ♦ offering currency and immediacy (by being “up-to-date”). The better and different approaches that Ronin develop are always customer driven.

Activating networks to build support The power of who you know In many respects, the world of the Ronin is both exciting and lonely. As the internal revolutionary, as the seeker of difference,

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as the person always willing to ask difficult questions, the Ronin always sits on the margin of the organisation. This means that Ronin have to ensure they have some degree of internal protection or support — to avoid being thrown out or excluded. In this regard, champions and mentors are of critical importance. Champions — a champion is a supporter, and Ronin need champions. These are people within the organisation who are willing to ensure that the Ronin is protected, given resources, and is even kept “hidden”. Some years ago, Robert Greenleaf wrote about the idea of “servant leadership”. It sounds a funny term, but Greenleaf distinguished between two ways in which people come to be leaders: The servant-leader is servant first … It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. That person is sharply different from one who is leader first, perhaps because of the need to assuage an unusual power drive or to acquire material possessions. For such it will be a later choice to serve — after leadership is established. The leader-first and the servant-first are two extreme types. Between them there are shadings and blends that are part of the infinite variety of human nature. The difference manifests itself in the care taken by the servantfirst to make sure that other people’s highest priority needs are being served. The best test, and difficult to administer, is: Do those served grow as persons? Do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants? And, what is the effect on the least privileged in society; will they benefit, or, at least, not be further deprived?

Servant leaders are extraordinarily important in organisations. They are the source of nurture and protection for those who don’t fit, and Ronin need to find the servant leaders in order to

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find the champions who will support them, as they seek to change the organisation. Of course, a champion may be more than just a protector. They may also be an advocate, willing to speak out in meetings to promote the views and the ideas of the Ronin. However, while the servant leader as advocate is a very special kind of champion, they are even harder to find. Often, Ronin have to learn to speak for themselves. Mentors — mentors are also very important. They sit outside the organisation, and are a source of advice, counsel and encouragement. Because the mentor has no vested interest in the organisation in which the Ronin is working, they are able to provide an independent perspective on what is happening, and what might be done. A mentor is really a kind of sounding board — and ideally is someone with experience and wisdom about organisations and they ways in which they operate.

Providing support — looking after the Ronin in your organisation Perhaps you are reading this book because you are interested in Ronin, and what they can contribute — but you are not one yourself. Perhaps you could be a champion or a mentor. There are many books written about mentoring and providing support, and it is not my intention to replicate all that here. However, I do want to stress one important role a person can play in mentoring a Ronin. Giving another perspective is a very important task. Ronin thrive on uncertainty and ambiguity, and an important element of support is to provide them with alternative points of view and perspectives. Sometimes this is essential, to redress the balance, so that the Ronin you are hoping to assist does not lapse into believing they have identified the answer to a current issue.

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Case study Several years ago, Matthew Deveson introduced me to the term “Ronin”. In the original reference of the word, Ronin were skilled practitioners who chose to follow an independent path. Their confidence in their skills allowed them to take more readily to new ideas and technology, and to place greater reliance on their wits and imagination, rather than continuing to do things “in the old way”. Ronin were also willing to work to develop their potential. In today’s sense of the term, Ronin are free thinkers, who continue to live within a system, but are willing to learn and behave differently. Another way of thinking about Ronin is to consider them as internal revolutionaries, rather than those who seek to overthrow systems from the outside. When we started to talk about Ronin, we grappled with the ways in which they could be supported and developed. Are Ronin born, or can someone be developed and become a Ronin? Do they need external support networks, and how could these be provided? Our conclusions have already been explored in the earlier chapters of this book. Most importantly, we believe that the capacity to be a Ronin resides in everyone, and it represents a series of attributes that are typical of young children, but tend to get drowned out by the relentless processes of socialisation and of accommodation that characterise our educational systems and the induction into organisations. The challenge is to revitalise the capabilities of the Ronin, to reawaken the capacities of creativity, tolerance of ambiguity, and a willingness to question and seek alternatives and new ways of thinking an operating. We also believe that is possible to support Ronin, and for that reason set up the Centre for Transformational Leadership. The Centre offers programmes to develop Ronin capabilities, and at the same time a place to meet and liaise with others with

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similar interests. There are other Ronin, and there are opportunities to meet and learn from one another.

A Ronin at work Describing a typical Ronin is like describing the typical company — it is an impossible task, because no two companies are alike, and neither are two Ronin. In an earlier book, I described one Ronin I had met, and compared him with an entrepreneur — Julian compared with Ted Turner. Ted Turner appears in the first chapter of the textbook I use in teaching entrepreneurship. There he is described as a charismatic, almost flamboyant figure. Founder of CNN, he takes major risks to pursue his goals, and at the same time finds time to support worthwhile endeavours and organisations. He is the epitome of the 20th Century entrepreneur, a name that is known around the world, a person who has made things happen on the biggest of scales (see Hisrich and Peters, 2002, pages 3–6). Julian is quite a different person. He works in an Australian company. He joined them a few years ago, as an accountant, and when I first met him, he had been appointed the finance manager of one of their major divisions. On first acquaintance, Julian seemed nice but unexceptional — he was conservatively dressed, engaging to speak with, and had an obvious sense of fun. The year before, Julian had been on a management development programme. As part of the programme, he had analysed how the company was faring, as a team project with three others in the company. Their conclusions were bleak: while the company had been making profits, it had been doing so without growth. It was a clear example of the implementation of the theme song of the 1990s — reduce costs and improve margins. At the same time, it was an unmistakable warning of

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the limits of that approach: cost-cutting cannot go on for ever, and the company needed to grow its markets — and its income — through new or improved products and services. It was losing out in a highly competitive environment. However, first impressions are often misleading, and I quickly realised that there was more to Julian than met the eye. When he had taken up his position as finance manager, the first thing he had done was to reduce the number of staff working in finance and accounting — from eight to three. In a world where managers are told to preserve or even try to grow their empires, Julian was willing to think differently. At my first meeting with Julian and his colleagues, he described his views of where the company was going, and what needed to be done. They were proposing a radical change — exciting, high risk, and very much against the current culture. They were determined, and worked hard, out of hours, yet with conviction and persistence. Within nine months, Julian and his friends launched their proposed new activity, complete with corporate funding to enable the approach, and began a process of change that continues within the organisation to this day. Whether or not he had been a Ronin, Julian was clearly now becoming adept at using the skills of a Ronin. He knew how to dissect an organisation; he was willing to entertain quite different ways of doing things. He understood the politics of his organisation, and how and who to influence. He sought out a champion. He knew the importance of showing that a different path was also a successful one. The company was slowly changing, and one day a more senior position became available. Julian was seen as the ideal person to fill the role. It was not something to which he was strongly attracted, but he could see the possibilities He moved into his new role, now working in the head office of the company.

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Some months later, Julian came to talk to me again. The changes he had initiated with his former colleagues were having an effect. In his opinion, the company was changing too slowly, however. The Board had fired the CEO, and Julian saw another opportunity. The company was centrally run, and he believed that it needed to give more power to the operating divisions, and remove the dead hand of the central bureaucracy, together with the costs that the centre imposed. Within another six months, Julian had played a key role in seeing through a radical restructuring of the organisation, with significant effects on its relationships and operations, and had reduced the head office complement to a small fraction of its previous size. I do not know what the next project will be that attracts Julian’s interest. All I know is that there will be another, and yet more again. Like Ted Turner, he is a restless person, always looking for something new, and ways to change the world around him. However, they are also unlike — and not just because Ted Turner is a well-known public figure. Ted is a revolutionary. He has changed the face of television, first by introducing a 24-hour news channel available around the world through satellite, and then developing other specialised television channels. Julian is also an agent of change, but he does so from inside the organisation: he is not an entrepreneur, and he brings about change through working with others rather than directing them. Julian is a Ronin. Ronin are not born as such. We all have the potential to see different ways to achieve ends, to be creative, innovative and revolutionary. We can all learn to be courageous and take the initiative. Julian did.

Reflection The key word here is “courage”. A Ronin needs to have courage, or, as some would say, passion. To be courageous is not to be foolhardy. Ronin recognise risks, challenges and

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obstacles, and then determine the best path to make the changes that matter. They are not put off by the obstacles they face, but they are sufficiently determined to keep on trying despite them. Every time you face a challenge, the solution is simple: there is a solution. You have to spend time to find it. Every time you face a huge challenge, do not be put off. Just keep trying to find the way. There will be an answer!

Summary As an internal revolutionary, a Ronin is constantly trying to ensure that there is a sufficiently strong link into the organisation to compensate for their role as an “inside outsider”. In order to build such support, Ronin have to do a number of things. First, in pressing for change, they have to be choreographers, rather than the typical managers: ♦ focussing on looking at what needs to be done, and thinking about the changes that are necessary; ♦ as changes are being made, thinking through what they might entail, and seeing if the outcomes can be anticipated and addressed; and ♦ using potential problem analysis to identify and address areas of risk. Second, businesses need: ♦ some business activities and projects that are safe; ♦ some that are in fast growing areas; and ♦ some in high risk areas — the areas in which Ronin focus. Ronin need to strive for a “balanced” business portfolio, where the balance is struck bearing in mind the propensity to risk that characterises the organisation.

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Third, they need flexible strategies — always moving beyond the approach that has been developed today to seek the next one, the one that will be needed tomorrow. Change is accelerated by the tangibility of benefits — Ronin need to get runs on the board, and this is achieved by: 1. 2.

3.

identifying some modest outcomes that can be achieved in the short term; focussing on these, to ensure they are achieved, and at the same time making sure the results are clear, measurable and significant; and promoting these outcomes to key staff in the organisation.

The key assessment for any proposal that a Ronin develops must be: will there be a sufficient group of customers/clients to justify this approach? Without a positive answer to this question, there is no basis to move forward. Ronin always sit on the margin of the organisation, and have to ensure they have some degree of internal protection or support. To avoid being thrown out or excluded, having champions and mentors are of critical importance. This book started by explaining that a Ronin is: a person who identifies and develops new, effective and different ways to achieve an organisation’s goals.

We then defined a Ronin in terms of five key attributes — describing a Ronin as someone who: 1. 2. 3. 4. 5.

Reflects Observes Narrows down Innovates Navigates

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Given this, the five attributes of an effective Ronin can be summarised as such: 1. 2. 3. 4.

5.

A Ronin starts by standing back, but seeing issues in a broader perspective, by Reflecting. A Ronin Observes — assessing the character, operations, relationships and environment of the organisation. A Ronin Narrows the focus on to the priority issues — and sets demanding targets. A Ronin Innovates through r-ethinking the business, brainstorming new ideas, or seeing the potential in inventions and technological developments. Ronin Navigate change through understanding networks, seeking champions, and demonstrating success through getting “runs on the board”.

The next step The need for Ronin is greater than it has ever been — the pace of change and the demand for new, different and better ways to do things is almost overwhelming. If you are a Ronin — or aspire to be a Ronin — get started! Ronin are about action — looking for opportunities, pursuing them, and making the changes that will allow organisational leadership. If you need to read anything else, here is a short list of things that might help you — many have already been referred to somewhere in this book: Carlzon, J, 1989, Moments of Truth, New York: Harper Collins, J, 2002, Good to Great, New York: Harper Greenleaf, RK, 1977, Servant Leadership, New York: Paulist Press Hamel, G and Prahalad, CK, 1994, Competing for the Future, Cambridge, Mass: Harvard Business School Press

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Hamel, G, 2000, Leading the Revolution, Cambridge, Mass: Harvard Business School Press Handy, C, 1995, Beyond Certainty, London: Hutchinson Hirsh, B and Sheldrake, P, 2001, Inclusive Leadership, Melbourne: Information Australia Porter, M, 1980, Competitive Strategy, New York: Free Press Sheldrake, P, 2003, Ronin and Revolutionaries, Singapore, Times Publishing However, acquiring knowledge is not just about reading. Knowledge is about action. Go out there, and see if you can help your organisation become the new leader in its field. The journey may be a little uncomfortable at times, but there is no greater adventure in the world of organisations than bringing about radical change. Good luck!