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Disruption Inevitable But Not Always Disastrous

Posted By Prucia Buscell, Thursday, June 6, 2013

Globalization, technological change, huge financial crises, political turbulence and natural disasters in the last two decades have made disruptive events virtually inevitable in business and industry. Yet some companies manage better than others and some even come out ahead.

"Captains in Disruption," a Strategy + Business article by Ken Favaro, Per-Ola Karisson, and Gary L. Neilson, reports on the experiences and actions of CEOs who not only guided their organizations to survival but were able to shift trouble and turbulence to organizational advantage. To lead effectively in such times, these authors say, CEOs have to anticipate the kinds of disruptions their companies may face, including natural disasters in remote locations that could disrupt their supply chains. Then they have to prepare an adequate response, and find a way to implement it effectively. And of course, none of that is easy.

They quote Clayton M. Christensen, professor and management professor who first examined the dynamics of disruption in his book The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. "How can you make sense of the future, Christensen asks, "when you only have data about the past? That’s the role of theory, to look into the future.” That means being able to analyze data to spot changes and figure out what they mean, which is especially hard when analysis depends on the strength of the limited data and risk models. Further, Christensen says, leaders often lack candid insights from people at all levels of the organization, which they need plan effectively.

Responses to disruption may need organizational redesign and culture change, the authors write, and if top executives have become isolated, they need to begin interacting informally with people throughout the organization who understand first hand what works and what doesn’t. Cross-organizational interaction, the authors write, is by far the biggest accelerator of change.

Antony Jenkins is an executive who took on a tough job during a time of disruption. In mid-2012, Jenkins was head of the retail and business banking division of Barclays, then the U.K.’s second largest bank. Then the LIBOR rate rigging scandal broke, exposing a series of fraudulent actions connected to the London Interbank Offered Rate (LIBOR), a primary benchmark for short term interest rates around the world. The bank’s chairman and CEO resigned, and Jenkins took over as CEO. The article explains Jenkins immediately informed the bank’s 140,000 employees that the focus on short term goals and immediate profits were out and a new long term strategy for transformation was in. Jenkins says the "cataclysmic experience” made people ready to listen. Jenkins emphasized involving all stakeholders in asking the right questions to move forward. In addition to bank employees, he met with politicians, media, consumer groups and regulators and listened to their criticisms.

The organizational change needed to respond to this cataclysm, Jenkins told S+B, "is about being continually dissatisfied with that you are doing...It’s about constantly challenging and creating an organization that is never satisfied.” What makes that kind of thinking hard, Christensen told the authors, is the human tendency to be complacent and forget to ask good questions. As an antidote, Christensen points to the famous phrase of former Intel CEO Andy Grove: (and the title of his book) "Only the Paranoid Survive." Read the S+B story here.

Tags:  buscell  complexity matters  leadership  organizations  resilience 

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