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The Digital Marketing Podcast
Dealing With Exponential Change - Leadership in an AI-Driven World
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- [00:00]
A
Welcome back to the Digital Marketing Podcast, brought to you by targetinternet.com My name is Daniel Rolls, and in this episode, we are talking about dealing with exponential change. So we all know that AI is driving levels of change that we've never really dealt with before, and it's making everyone struggle to keep up to date with things even worse than we've ever had in marketing. So once we explore in this episode, with the help of Jeff Tough, who is consulting principal at Deloitte and author of numerous books, including his latest, hone, on how we can practically deal with this level of change. Now, as you might be aware, I head up the digital Transformation Strategy program at Imperial College. But one of the challenges we often face as marketers, leaders, or entrepreneurs is that can't really institute a major change project. We might also feel like it's not particularly the solution anyway. So for that reason, Jeff's new book, How Purposeful Leaders Defy Drift, which he co wrote with Stephen Goldbach, who's Deloitte's sustainability business lead in the US was so interesting as it explores how we build systems and processes into our organizations, both large and small. And it really does apply to all organizations how we can help deal with ongoing change. And I thought there's some real nuggets in here that will help us hopefully bake in innovation, bake in change into what we're doing every day, meaning that hopefully this level of exponential change won't disrupt us. Because actually, as you hear from the book, how do we go through and deal with this on an ongoing basis? So, over to the interview. So I'm here with Jeff. So, Jeff, I mean, I think it's a particularly relevant time, but why does HONE feel especially relevant for things right now?
- [01:56]
B
Do you think hone, it originated when Steve and I first started talking about the book. There were lots of different ways we were conceiving of it, but one impetus for the book is we wanted it to be the antidote to transformation. And so I, you know, if I had to characterize what I hear from just about every single client we serve these days, or all of the accounting to serve our clients, it's that their clients need to go and undergo a transformation for whatever reason. Most of the time, the reason is because they're being impacted by some set of forces, either internal or external, that are more powerful than anything they've seen before. I've done a lot of thinking and writing and talking about the power of exponential change and the reality that we are shifting and have been Shifting over the course of the last decade from a world that's dominated by linear change to one dominated by exponential change. When exponential change hits your company or your markets, things get reared really quickly, and it makes it. And it's easy to feel as though you're off track. And so the number one exponential out there right now, not hard to see it, is AI. It is everywhere right now, and it's impacting every facet of business. When weird things happen and you're given cause to believe that you're off track, that's when the brain immediately says, well, we need to go through a massive wholesale shift. We need to transform. We need to either get back on track or we need to fundamentally change the way we're doing things. That is an interesting way of thinking about it, but the reality is transformations fail almost all the time. Deloitte has some data that shows the transformations fail 70% of the time. Anecdotally, I'd say it's more often than that. They're costly. People lose their jobs over them because they don't really end up working. And Steve and I set out to write something and introduce a body of research to the world that said, you know, there is actually an alternative. You don't always have to wait until things are too far off track to move. You can hone instead. And that's really what the book is about. And I'd say increasingly, as we're impacted by exponential change, which we will be hone, will become even more relevant to that point.
- [03:50]
A
I watched another interview you did with Brain Bar, and it was talking about innovation, and you'd kind of made the point that innovation was always seen as important but not urgent. And you gave this example of someone's going through some quarterly targets, and they said, oh, it's really interesting what you said, but can we kind of come back to that as well? And I kind of connected those two things massively because that idea of kind of baking innovation in is kind of part of it. So could you speak to that a little bit?
- [04:13]
B
That comment from Brain Bar, I think, was born of the same realization of the world that we're living in today. You know, one of the things that we like to talk about is that we have undergone a shift where we all have grown up. And when I say we all, and I'm saying those of us that are reasonably senior in our organizations, who have been around the business world for 20, 30 years, we grew up in organizations where, while it may not have been named out loud, the general accepted way of thinking the conventional wisdom was that status quo is safe, change is risky. If we keep on doing what we're doing and we don't rock the boat too much, we're going to be okay. But if we really try to shake things up and do things, do things differently, that that may actually expose us to risk and that makes us feel uncomfortable. And that ultimately is I think, why innovation often does feel important. It's interesting but not urgent because it's actually, it's innovation does threaten the status quo. And we as human beings have a status quo bias. We are loss averse. There's nothing we can do to counteract it. It's just a reality. And you know, if we innovate, we're changing something and that feels threatening. But we have shifted to a different type of world. And interestingly, in the work that Steve and I do with our clients, it's now way more frequently the case that status quo and accepting the status quo is actually pretty risky and change is actually the safe thing to do. But the key is to change in the right ways. And in hone. Actually a lot of the writing that we've done over time, we talk about the right way of approaching change versus the wrong way, which actually does sometimes expose you to risk.
- [05:51]
A
So. So talk to us about this idea of drift then, because why is drift such a big risk?
- [05:55]
B
Adrift as you, I'm sure, recognize as part of the subtitle to the book, I will blame myself for hauling boating metaphors into just about everything we write. And again, as we were tossing around ideas for the book, I explained to Steve, who has been kind enough to come out sailing with me on occasion, what it's like to go through at planning a sale and executing a sale. And obviously this is a bit, a bit artificial in its, in its exactness, but one version of what it looks like to go for sale is you hop on the boat, or before you hop on the boat, you have a destination in mind and you can either see a point on land or out on the horizon that you're aiming towards, or you have a set of coordinates that you're sailing towards and you have a plan in mind and you set off on the sail and inevitably as you are, are on that course, Wind impacts your course of travel, waves impact it, current does, tides do, and you're incrementally knocked off track here and there, but you actually have the ability to recognize when you're drifting, when you're off track. Either you can see yourself drift away from the point on land you're aiming towards, or you have the machinery to tell you that you're no longer on track to the coordinates. And so you adjust course incrementally, you move the rudder a little bit, you trim the sails a little bit and you're generally able to stay on the course that you set off for yourself. And obviously this is very simplistic. There's times when you're going directly into the wind where you need to tack back and forth, but then anyway, it's a controllable path of travel in business, unfortunately, there is no point on the horizon that you can keep in your gaze and there are no core coordinates that you can use to measure your course of travel. And so what ends up happening is even the best leaders often will declare a desired outcome or declare a goal they have or a vision they have for the company. But the reality of the day to day and handling what comes at them every single day, akin to the waves and the winds and the current and the tide, things like new competitive entries or new technologies on the scene or shifting regulations or some sort of talent crisis, what they need to do is react to that and solve those problems in a moment. And they probably do all the right things to, or most of them do all the right things to tackle those day to day issues. What ends up happening is the management systems that they use to address those issues over time pile up on one another and they create this great encumbered, I'm now going to extend the metaphor probably unnecessarily, this great encumbered ship moving through the water. There's nowhere anywhere close to being on track to the desired, the original desired outcome. And it's when there is actually either for a report to the board or some reason to actually pick up their heads and pay attention to where they are and realize that, wow, we're really no longer headed the direction we headed to. That's where the necessity to transform or the desire to transform comes from. Because there's a recognition that something massive has to happen to get back on track. And so that's the drift is what happens when organizations are no longer aligned and headed towards their, what we call in the book, their elemental purpose, the reason that they exist as an organization to their stakeholders here on Earth.
- [08:58]
A
So, so that's where the honing comes in, I'm assuming.
- [09:01]
B
And then.
- [09:01]
A
So what does it kind of look like in context?
- [09:04]
B
Yeah, I've now plowed through so many metaphors, I feel like we're going to be accused of using too many of Them.
- [09:09]
A
This is great. I mean if you knew Kieran, our co host, he's obsessed with analogies and particularly sailing analogies because he spent a lot of time at the UK sailing account. This fits in perfectly.
- [09:17]
B
Don't worry, we should spend more time together. So honing came from an interaction that Steve actually had with, with a chef named Flannery. One of the things we did in this book because we always like to try to bring the business ideas we have to life in accessible ways, we profiled four different artisans. So Flannery was, is a chef that we spoke to. We spoke to Sam Pollard, who's a documentary filmmaker. We spoke to Anna van der Waal, who's a very well known boating photographer, actually yachting photographer. And then we spoke to a good old fashioned rock band from Canada called Our Lady Peace. We spoke to the lead singer in the bassist and Flannery was one of the artisans that we spoke to. And Steve, this was actually nothing to do with the book. Steve was just with her when she was preparing to cook a meal at some point and she pulled out her. We never really knew the technical term for all these things, but the honing rod and she started going away at it with her knife. And Steve said to Flannery, Flannery, I see you do this almost every single time you cook. Why do you have to sharpen your knives every single time you cook? And she said, actually Steve, you got it wrong. I'm not sharpening the knife, I'm honing the knife. And there is a fundamental difference because when you sharpen a knife, you are actually removing steel from the blade. It's an act of destruction and you are revealing a sharp edge underneath it. But ultimately what you're doing is removing steel from the blade. And that over time, you can't do that indefinitely. The knife becomes brittle, it gets worn down, it breaks, and too much sharpening is bad for the knife. So instead what we do as chefs most of the time is we hone our knives before we cook. Hone is different because we're not actually removing steel from the blade. What we're doing is we're realigning all those, I think she called them, snaggle d teeth things that the bits of metal that microscopically have kind of come out of line and we're bringing them back together into an edge that will perform as we need the knife to perform to be safe and to, you know, to do all the things we need to do as chefs. And it was an interesting moment when Steve and I then talked about that experience he had, because to us, it's a very similar temptation that companies have, or if you equate sharpening to transforming. And yes, you may transform a company, and if you're lucky enough to be one of the few ones that are successful to actually to get it done right, you may end up in a good place with a sharp edge for some period of time. But there's only so often you can do that. And instead it's much better to pay attention day in, day out to honing your management systems, which are the tools of the trade of most senior executives in organizations, to stay on track.
- [11:48]
A
I love that. And so how do leaders think about honing their organizations then? And how does that look in context?
- [11:54]
B
There is a theme through all of the writing that Steve and I do that actually is kind of fundamental to how we think about business, and that is that change of whatever scale doesn't happen unless someone somewhere changes their behavior. So I don't care how dominated we are by AI or technology, it is a fundamental reality that change doesn't happen unless there's a behavioral change somewhere in the value system of an organization. So we think about that as the kind of subatomic element of how businesses run. And so the purpose of management, the purpose of leadership ultimately, is to make sure that one, especially at senior levels of the organization, is exerting the right type of control to drive the right types of behaviors to achieve the outcomes that organization needs to achieve to stay profitable or for the mission of the moment, whatever the desired outcome is. And the issue we've got, I think, and one of the orthodoxies that Steve and I wanted to challenge in this book is that many senior leaders, and I'll just say for ease of reference now, CEOs, when many CEOs think it's their job to be the inspirational leader of an organization. So they're the ones who chart the course for the company. They're the ones who make the promises to the capital markets, are the ones who declare the vision and set the mission statement. And often they are the ones who approve the markets that they play in and the products that they prioritize and the business models that they're going to use, all the things that kind of that set the conditions for actually getting a strategy done. But then when it comes time to actually go and execute that strategy, they hand that off to someone else, usually lower down in the organization, and they ask for reports quarterly or semi, annually or what have you on how it's going. That unfortunately, is the wrong use of power. And that's our core contention in. In hone, because the things that a company has at its disposal to hone to drive the behaviors that ultimately are the things that affect change or that affect outcomes are management systems. So think. And I'll now just turn that around and say, by definition, the management system is anything within an organization, either formal or informal, that drives behavioral outcomes.
- [14:06]
A
Right?
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B
So think of performance metrics, think of budget allocation processes, think of declared decision rights. These are all things that ultimately guide behavior. But. And those are all those things I just named are formal management systems. They're informal ones as well, such as the types of questions that senior executives ask in meetings or the way you kind of interact with others in the hallway. Ultimately, there's a lot of things that are management systems that drive behavior, that if you sum them all up, they're the company's culture. But that's a conversation for a different time. And what we believe should be happening to HONE is that, yes, senior executive CEOs should be setting the course and setting the vision for a company, but then they really need to get their hands dirty in executing through those management systems. So we spend a lot of time at HONE talking about the importance of CEOs thinking of themselves as being chief system designers, so really understanding what behaviors they're trying to drive and designing the management systems that will create those outcomes, not always on their own. Obviously, they need to work with others. They can't do everything, but they need to have their fingers in the details of how that work is being done if ultimately they're going to prevent the drift that we talked about before.
- [15:19]
A
I love that idea because I've spoken previously about the idea of digital transformation being about purposeful culture, I. E. Not just the way we do things around here, but like, actually what can we put in place to create that culture. And it relates back to those kind of management systems. So I was just gonna. There are examples of leaders that have been good at doing this.
- [15:37]
B
There are. And it feels a bit like an easy out for me to name the one I'm gonna name, but I'm gonna do it because I actually do genuinely believe in this, and we write about it in the book. But Jeff Bezos and what he's been able to accomplish over the course of his time at Amazon, I mean, if you It's. And I don't happen to know the man, and I read same business press everyone else does, but everything you read about the processes that they use within Amazon to drive the types of outcomes that they want to suggests that he innately, or maybe he thinks very similarly, he innately knows that he needs to be in on the details of how the company runs. So, you know, the famous five page memo before a meeting, instead of having a lot of presentation slides and he set the tone. He didn't just set the tone, he made it a requirement that people write the summary memo of the purpose of the meeting and distribute it ahead of time so that when they come into the meeting and not everyone is faffing about listening to presentations and being bored and being on their phones, they're actually digging into the details immediately. And I'm sure I'm butchering the purpose behind that. But that did a bunch of different things, both for the culture of the organization and for the way people behaved. That led to, I think, one of the reasons for success behind Amazon. It trained people to think ahead of meetings about what they wanted to convey. It forced people to put ideas down on paper in a way that were succinct and therefore processed multiple different times before they actually got passed around in the memo. It forced people to read the memos ahead of the meeting unless they wanted to be caught out in it. And it led to a culture of being just much more efficient. And you think about all of those things from that simple act with that one management system. And that's one of only dozens and dozens that I've read about at Amazon over time time. Think about the impact that that one thing did, and it came from Jeff himself. He's the one that declared that was going to be the case. And so, you know, you could pick example after example early on, declaring that everything had to have an API so that there was intercommunication between different parts of the company that led to a completely different type of company structure and culture than we see in most companies today. All of the investments that they made early on in trying out new business models in small ways and being willing to explore whether it made sense to get into aws, for example, which of course is now a behemoth in the world. The reason I fall back on what, what could feel like an easy kind of trite business story, and it's not trite, it's actually really interesting. But it's because you can actually attach the actions that led to the powerful outcomes in Amazon to the individual himself, the CEO, who in this case was Jeff Bezos.
- [18:12]
A
Well, that, that leads me on nicely into something that's come up in a previous book, which is this idea of Minimally viable move. We would all heard of minimal viable products. But how does that relate to this?
- [18:22]
B
Well, you've got the, you got the etymology right of the term. So a minimally viable product, I'm sure everyone knows, or at least all your listeners know, is a, is an approach to doing product development where you do a little bit of development work, you put it out into the world, you see a reaction, and depending on the reaction, you pull it back into the lab and you either continue on down that development path or you do something different based on the feedback. The exact same approach can be applied to any sort of management decision where if you can boil what you're trying to do down to the smallest testable hypothesis and just go do it and get some feedback. And you know, if it sounds like whether, whether you're trying to make a talent decision, you're trying to make a partnership decision with another company, or if you, it could be in product development as well, if the feedback from your target audience is positive, then yes, take the next step and then the next step and continue on down that path. If it's not, if it's not good, then don't go wildly in a different direction. But because you're working in these smallest kind of viable moves, you can take a small step sideways and try something a little bit different. And the connection between using minimally viable moves and honing is that if you do that with everything that, that you use to run a company, then you're never going to get that far off track because you're constantly making those small adjustments, just like the small moves in the rudder or the small trimming of the sales to stay on track the entire time. I would imagine that many of your listeners would hear that and say, yeah, that seems like good common sense. But the reality is most companies do not operate that way. They analyze a decision for months and months or they let new products get stale in stage gate Systems for literally 18 months to two years to try to get the answer right. Not recognizing that actually past data and all the analysis that they're doing is absolutely useless in the face of the change that we're facing out in the outside world. And the only way to go and explore potential outcomes in the face of uncertainty is go try something. You're never going to analyze yourself to the right answer.
- [20:22]
A
On that point, I'd like to come point to what you raised a moment ago was talk about management systems as being the nervous system of the organization and you talked about the purposeful ones, but also maybe some of the underlying stuff that happens organically. To me, this is really at the heart of how you kind of make this work and how most digital transformations fail. So do you mind just talking about that a little bit more again as well?
- [20:44]
B
I think the informal ones in some ways are. The word that comes to mind are the more insidious ones because they're the ones that people sometimes don't challenge and don't even recognize. But, you know, all the, you know, performance management and I talked before about budgeting and the more formal ones I think are reasonably obvious how what you need to do. It's actually incredibly hard, though. And we had an experience with this yesterday trying to lead a group through this. Even when you know the impact of the formal management systems, you know which ones matter and you know what the problem is. Nailing down a behavioral change that needs to occur and finding an individual who is going to change a management system to drive that behavior. That gets really difficult, no matter how obvious on the surface that the solution is. But it's doable. It just. You need to constantly come back to the question of what is the behavior we're trying to drive and who has the control over the management system to drive it? That in itself is an act of honing, getting closer to the answer. The informal ones, though, are a lot harder to see. And actually this in some ways goes back to the first book that Steve and I wrote together, Detonate. We talked a lot about orthodoxy, and the power of orthodoxy is just the unspoken conventional wisdom around the hallways of an organization. In order to have a complete look at the management systems, we need to understand how orthodoxy is driving behavior in our organizations. And there are myriad ways that happens. But, you know, the core trick to start to root out some of those is just to ask literally, why are we doing things the way that we do? Whenever something seems like it's taking too long or we're not getting the outcomes, what are the forces that are leading to that? What are some of the belief systems that we're carrying around in our head that we can address to get to a different outcome. And interestingly, or perhaps obviously a lot of the time, the things that are driving the behavior are the way that senior leaders are acting. So beyond what people get paid for, just the way that they. What they ask about in the hallway. We had a great example of a very senior executive at a CPG company that Steve and I were working with, and he was incredibly frustrated because. And we were consulting with them on how to get better innovation out of the system. And it was. We had a realization collectively that actually the most important innovation they could. They could earn more money from was to drive commercial innovation and to think about business model innovation. And there was a. You know, that was the mandate that we had, and that the senior executive was getting incredibly frustrated with his team that they weren't hearing the message and coming up with more commercial innovations. Because every single time they came into a meeting, they started talking about the product innovations that they had that the team had come up with. And Steve and I sat in a couple of these meetings, and over time, it became pretty obvious what was happening, because this senior executive, and he was actually head of the business group, every single time a meeting started, someone would come in with a product innovation, and he would ooh and aah over the product innovation for 10 minutes before the meeting even started. And then, you know, we get back down to business and remind them that they were supposed to be working on commercial innovation. But he had trained the team to, no matter what was said, no matter what the strategy said, he had trained the team to recognize that he rewarded product innovation, even though that wasn't what he was saying. There's another great story that I don't know if it's apocryphal or not, but we've been telling it recently because Steve heard about it somewhere. But apparently at some point in time, J. Edgar Hoover, who many of your listeners may know, ran the US FBI for a very long time and had responsibility for our FBI network. And the way he communicated with many members of his team was through memos. They would write him a memo, and he would respond to them by jotting down notes on the memo and send it back to them. And obviously he's responsible for intelligence. And so that was the domain that he was working in. And he got a memoir at some point, and he read through the memo and he, you know, wrote on the. In the margin of the memo, watch the borders. And the people who got the memo back, who've been trained not to, you know, question J. Edgar Hoover, but to go and execute on his commands, that's what they did, immediately started deploying people to the borders of Canada and Mexico because he had written, watch the borders. And what he actually meant is, your margins are too big in this memo. Watch the borders of your memo. And it's just. It's one of those stories that is. I think it resonates so much, especially in business community, if it's even true, by the way. I don't know if it's true. But it resonates so much in business communities because think about how often a senior executive in a meeting will either say something or ask a question. And then immediately after the meeting, everyone runs to go to try to get the answer because they believe that's the most important thing they can go and do without actually ever just pointing up their hand and saying, is this just a point of curiosity or is it something you really want us to go and run down?
- [25:32]
A
I love it. So, I mean, if someone's read the book and they're kind of thinking about these principles, what do you think the first thing a leader should go off and do after going through?
- [25:40]
B
Hone Engage in whatever way they have to engage down into the organization. So not just their senior executive team, but down through the middle and lower management layers of the system to understand and collectively decide what are the behaviors that matter. And sometimes it's obvious what behaviors matter in an organization. When I say behaviors here, by the way, I think about it expansively as being the behaviors within the organization, but also outside the organization. But get the conversation going about what behaviors matter. That in and of itself will change the way that people look at and think about their business, but it will then start the dialogue around, okay, let's, you know, we can't shift every single behavior we would like to, but let's understand which ones matter. Let's do some sort of prioritization and then let's start to realign our management systems to drive the things that will be most in line with us staying on track to what we set off to do. And if we can do nothing other than simply reconfigure companies to go drive the behaviors that matter to them, that in and of itself is a massive source of value. But I bet just the very starting of the conversation to talk about behaviors, especially with all levels of the organization, will lead to a different lead to a different cultural approach to management as well.
- [26:53]
A
We'll put the link through to the book into the Show Notes so Targetinternet.com podcast is there anywhere else, Jeff, that people can kind of follow what you're doing and the other things you're working on?
- [27:02]
B
So absolutely, the best place to find anything that Steve and I are doing is on LinkedIn. We would love for people to connect to us. We only get to write these books because we learn from people like your listeners, and anytime they would like to engage, whether it's to just talk about some of the ideas or invite us out to discuss some of the ideas with companies we're always getting to do that. That's what we like. Well, it's not the only thing we like in our lives, but we really enjoy that.
- [27:26]
A
We'll put the link through to those LinkedIn connections in the show notes as well. Jeff Tuff, thank you so much for joining us and discussing Home.
- [27:32]
B
Yeah, thank you for having me.
- [27:35]
A
For more episodes resources to leave a review or to get in contact, go to targetinternet.com podcast.