Think:Act Magazine "The Circus of Transformation"
How to see what’s around the corner
Rita Gunther McGrath on how to look out for inevitable inflection points
by Neelima Mahajan
Photos by Amy Lombard
Timing can be everything. Good leaders, strategy expert Rita Gunther McGrath argues, know when to mentally remove themselves from the fray and be on the lookout for any larger patterns that may be forming around them. Taking the space to gain this kind of perspective is crucial to being ready to make a transformative move. It can also determine who might emerge as the winner in a crisis.
Executives seek out Rita Gunther McGrath for her ability to "see around corners" and take the fright factor out of innovating in uncertain times. In this conversation conducted at the Global Peter Drucker Forum, the Columbia Business School professor and bestselling author expands on how to identify and capitalize on inflection points – those harbingers of change to the ways we work and live. Three years after the pandemic struck, the key advice from her 2019 book Seeing Around Corners applies more than ever: step back and notice subtle changes before taking charge.
If you were to write Seeing Around Corners today, is there something you would emphasize more now?
Rita Gunther McGrath is one of the world's most widely recognized experts on leading innovation and growth during uncertain times. Also known as a pioneer of discovery-driven planning, an integral theory for the foundation of the "lean startup" movement, she has been listed in the Top 10 of the Thinkers50 biannual ranking since 2013.
I would put more emphasis on the need to slow down to speed up, to get different perspectives on what's going on. Daniel Kahneman talks about this: We have these fast ways of thinking where we accept judgments – we want to make announcements and get out there. I think a lot of people who did that in the pandemic came to regret it. They said too many definitive things too early, without taking that bit of extra time to see what's really happening.
Did we really have the luxury to slow down?
It depends on where you were. Obviously, if you had people in physical danger – if you needed to completely retool a factory or you needed to get essential supplies to people – you didn't have a lot of time. But I'm not talking about days. There's a wonderful analogy that talks about the balcony on the dance floor. Leaders can go up to the balcony, look at the patterns and sort of mentally remove themselves from the fray, if only for a few minutes, before going back and engaging. So, what is this "slowing down"? Do not be paralyzed. Take those extra few beats to just say: "Am I really understanding what's going on? Do I really see the patterns?"
What did you make of the Covid-19 inflection point from an organizational perspective?
It caused a lot of assumptions to be challenged: That remote work couldn't be nearly as good, that you couldn't integrate work with other aspects of your life. Some of the unpleasant discoveries were how much we counted on schools and day care facilities, or how much we assumed global supply chains would just keep humming along. One of the enduring impressions I have is we are becoming a lot more aware of how fragile some of these things we've taken for granted are. Christopher Mims, a technology columnist at The Wall Street Journal, talked to me about how this dongle is manufactured and how it gets to a doorstop in Connecticut – all that stuff happening in the background we never gave two thoughts to. Now suddenly, we're learning about the mysteries of cross docking, why ports work and what robotics mean. It's a completely different level of granularity.
As we're still living through the early stages of digital transformation, pretty much every aspect of our lives is in flux.
These shape an individual business and are more local to the stakeholders.
Big shifts happen in 50-year cycles but there are lots of little ones which will occur in between.
Aside from Covid-19, we've seen trade wars, supply chain issues, geopolitical events and even a war. Has the number of strategic inflection points shot up recently or are we just feeling overwhelmed?
Part of it is because when we look at the past, we know how it worked out and whether we're pleased with how it worked out – there's certainty about what happened. Yet, if you were living in World War I or II, the level of uncertainty was massive. When you don't know what is going to happen, it feels risky and scary. Take the Great Recession of 2008, for example. People were talking about the worldwide collapse of the financial system. Now we know these things were put into place. When I look at today's crises, it feels the same: a sense of urgency, a sense of being really frightened. But qualitatively, I think anything you're living through just doesn't have that piece: knowing how it's going to work out. So, it seems emotionally harder than it is.
What has the pandemic done to the competitive advantages of companies?
During the pandemic, there were winners and there were losers. Companies like Clorox, Peloton and Amazon all responded to the increased demand by ramping up. Yet, if you look at historical situations, you know that demand isn't going to last once the pressing immediate conditions pass – you have to ramp up in a smart way. A lot of companies are now finding that demand is eroding. Consequently, they are not going to retool. Amazon is a case in point: They overextended and now they're going to have management-level layoffs, which is unusual.
I do think doing what gives you an advantage has changed. We are looking more for solutions; we are looking for ecosystem-based delivery of goods and services. This has been going on for a while, but we're moving toward services as the thing that delivers the end result better than products – and, even today, products are embedded. You don't buy a hammer without looking up what other people think of it. Every product is digital and connected in some of these interaction fields. I think that has changed the nature of companies.
Do recent events hold implications for business model life cycles and how companies should think about them? It feels like there has been a sudden acceleration in the pace of business.
I think that's true – look at the speed of technology adoption. Look at TikTok: They're eating Facebook's lunch. They've grown to a billion users in a breathtakingly short time and you see these abilities to exponentially scale up. What you are also seeing is the unraveling of some traditional sources of competitive advantage. Entry barriers have come down. The things that used to make it difficult for people to copy have gone away.
We're also rediscovering something we never should have forgotten: Strategy 101. Look at all those direct-to-consumer businesses that started to spring up about 2010-2011: Dollar Shave Club, Warby Parker or Harry's. What they learned was yes, they're easy businesses to start, but they are really easy to copy. Take Casper, the mattress-in-the-box company. By the time they tried to do an IPO, there were 206 mattress-in-the-box companies. Strategy 101 still matters: You still need a competitiveness solution. You still need your firm to be behind this thing you are doing, and you still need a set of customers to appreciate that and be willing to pay for it. That's a challenge.
Do you think we are hitting a kind of reset button where our assumptions about industries, business models, consumers and markets are changing?
I wouldn't say all our assumptions are changing. Jeff Bezos very famously says that he likes to pin his businesses around what will change. I can't imagine a conversation in ten years where people say: "Jeff, I love Amazon. I just wish you’d deliver more slowly and charge me more." Some things do not change. I think the way I would frame that is: It's the job to be done. Those things are relatively simple. Now, how we do these things changes dramatically. Take smoke signals, the Pony Express, the telegraph, the telegram, landline telephones, primitive mobile phones, communicators, smartphones – all those things dealt with a human need to communicate across time and distance. But the way that we were allowed to do it changes. Technology challenges the assumptions about how your business can operate.
Who is better poised to deal with such inflection points – big organizations or startups?
I've seen rigid startups. And I've seen flexible big organizations. I don't think it's a function of size; it's a function of leadership. The companies that deal with inflection points the best have these pots of slack resources and people are allowed to tinker. If manager A says "no," I can go to manager B. I can get a grant from a pot of money. 3M would be a case in point of a traditional organization that has interesting ways of doing this. Its position is: "We never know where a really good idea is going to come from." When a crisis hits, they have inventories of ideas and things people have been working on for a while. They don't go to a bare cupboard and see there's nothing there. I think companies that have some slack resources, that manage their portfolios well, have these sensing mechanisms. Those are the companies that are best poised.
You mentioned leadership capabilities. What's special about the leaders who emerge as winners out of these crisis situations?
They are intensely curious and they never think they have all the answers. They will say: "This is the best choice we have right now, but it's not the best one." There is always something more to do. They're very good at building rich information architectures. So, they will do skip level meetings; they'll do sessions where they get exposed to front line people. They'll do ride-alongs, go to the customer call center – they are very connected. Connected without being micromanagers. They want to know what's going on, but that doesn't mean they're going to freak out the whole organization by making some decision four levels away from their vision. They have this deep knowledge of what is going on. When you have that base layer of deep knowledge and there's a variation, you notice it. If you haven't invested the time to see what the base conditions are, you don't realize that and it's hard for you to interpret things.
Did anything good come out of the pandemic in terms of innovation capabilities or companies rethinking their competitive positions?
I think a lot of good came out of the pandemic. Like any period of instability, if you think about the time leading up to it, we had a lot of money floating around the system. It was a replay of the late '90s. It led to too many ventures getting too big. We had it very good for a long time. I don't believe people realized how good we had it. The pandemic came and people said: "This is really different." It forces creativity; a creative response.
Seeing Around Corners by Rita Gunther McGrath, 259 pages. Houghton Mifflin Harcourt, 2019. $26.