I was recently invited to speak to a group of the world's most powerful Chief Procurement Officers.
Here is the text of what I said.......
'Thank you Alan. And thank you all for having invited me to speak this evening.
Tonight I’d like to talk to you a little about the '3Cs':
And I’m going to urge you, as CPOs, to stop looking outside your organisations, nickel and diming poor impoverished suppliers who are just trying to put a bit of bread on the kids’ table (not that we don’t love a good RFP and a series of spreadsheets – I mean who doesn’t?), but to look within.
Because all joking aside, I think that’s where the real gold lies.
And here’s why.
We are now living in a post-Fordist world.
Most businesses haven’t really recognised it yet but we are.
The 20th century was all about Fordism: better, faster, cheaper.
But the 21st isn’t. Because we’ve reached this tipping point.
A tipping point where Operational Excellence – the thing that used to be the competitive advantage, the thing that got your business – and lots of us as individuals– to the top, is now offering diminishing returns.
Just to be clear on this, I’m not – as someone accused me at a conference I was speaking at in Switzerland recently - saying Operational Excellence was dead.
It’s not. We still need it, of course.
I think an MBA type would say:
‘It’s necessary, but not sufficient’.
And it really isn’t sufficient.
We’ve got these two huge disruptive phenomena in the shape of commoditisation and disintermediation.
The explosion of digital and the rise of Asia have brought these about, and – as we know – it’s changing everything.
And it’s changing everything for everyone.
You know, it used to be just blue collar workers – or their agricultural forbears – who were affected by technological changes – in comes the threshing machine, out go the rural labouring jobs, ditto the combine harvester, and the same in the cities as factories got more sophisticated, but this time it’s everyone.
White collar inclus.
As Alan mentioned, I was a solicitor at Ashurst many years ago. My memories of it are all quite pleasant really – all very cosy, and we’d win work by taking people out to lunch, and there was never any mention or discussion of anything as ‘vulgar’ as fees for goodness’ sake.
But I had a drink recently with a pal who’s a partner there, and he was telling me how that’s all changed. He now sits at his screen – using a system that you guys no doubt love ;-) – where he has to bid a fixed-fee quote in some kind of online portal, against a timed deadline.
Now he feels quite sorry for himself (on his £1m a year..!), but frankly that’s just the way it is.
But it illustrates the extent of what I call ‘value diminution’ in the last couple of decades.
And lest we laugh, this is the Niemoller moment
– and then they came for me.
It’s a big red flag.
If we’re not all to be competing on price (and that is, of course, a zero-sum game, unless you know anyone who is ready to work for Chinese wages – and I don’t), we need to do something very different; we need to reinvent our businesses.
We all need to be game-changers.
Cos if we don’t, what we do know, is that very quickly, we will become irrelevant.
Look at Detroit.
In 1990, the Detroit motor industry (rather Chrysler, GM and Ford together) had revenues totaling $250bn.
Between them, they employed 1.2m people. And their shared market cap was $36bn.
In 2012, Silicon Valley (rather Google, Facebook and Apple) had revenues of about the same level. But they employed just 130k people.
And yet their market cap was $790bn!
Now of course these tech businesses are overvalued, but the point is that no one had even heard of them in 1990. They didn’t even, for most people, exist. And here they are now, with 10pc of the employees, and 22 times the market cap!
So we really, really care about relevance right?
We really care about reinventing our businesses so that they stay ahead of the game right?
Well I do.
But – here’s the problem –'they' don’t.
Last year, Gallup did a big survey of American workers.
Guess how many of them described themselves as ‘disengaged’?
And it’s part of the most extraordinary paradox, at the heart of 21st century business.
We’re always on, through mobiles and such, but we’re also – clearly – nearly always off, too.
We’ve never been more ‘connected’, but we’ve never been more disengaged.
And that matters.
Gallup estimates that this disengagement costs American business between $450bn and $550bn each year.
Think about the impact that could have in your business, on your bottom line.
I mean, it makes the few quid you can shave off a cleaning or facilities contract – even if it’s a big one, a global one, kind of meaningless, doesn’t it?
And this is why I think this is a perfect area for CPOs to own. No one else is.
You guys can, and should.
‘But how?’ I hear you cry.
Well, by UNLEASHING the inherent creativity within your staff, tapping it, using it to help reinvent your business;
and by ENGAGING them – giving them reasons to care, to belong. Because the market for something to believe in is, well, infinite…
And you unleash and you engage with the 3 Cs.
The first C.
Princeton University says that for 85pc of young people, the No. 1 thing they look for in a job is purpose.
They want to care about something. Feel like they’re making a difference. It’s understanding the ‘why’, as Simon Sinek would have it, ‘why are we doing what we are doing? Why am I hauling my ass outta bed every morning?’
And that ain’t just the young. We all feel it.
And we’d all have said so if we’d been asked those kind of questions when we were young.
What do we wanna say we breathe our last:
‘I helped maximize shareholder value’?
But let me just read you some examples of some mission statements; the kind of thing we’re offering people who work for us, or are thinking about coming to work for us:
1. ‘We want to be the best financial services company in the world. Because of our great heritage and excellent platform, we believe that this is within our reach.’
2. ‘To be one of the world’s great specialist banking groups, driven by commitment to our core philosophies and values.’
3. ‘To be the most competent, profitable and innovative financial organization in the world.
4. ‘We want to be a pre-eminent provider of financial services……’
You get the point. And some of you may recognize them…. But don’t worry, I’m not singling any out - nearly all of them are equally bad.
Does anyone genuinely, in a human way, feel inspired by these statements?
Of course not. They’re boring, meaningless corporate bullshit.
Frankly, it’s amazing that as much as 30pc feel engaged!
Mission or vision is not, of course, the same as culture – but culture flows from the mission or vision.
Culture is how we achieve our vision, our behaviour (especially when no one is looking), it’s how we answer the phone, it’s how decisions are made, it’s everything, and it’s forever.
Products and services come and go, culture just ‘is’.
That’s what makes people come to work engaged. Or not.
How many of you have ‘values’ or similar at your place of work?
Yeah? How many of you have them up on the walls? Screen savers, mugs, coffee points?
How many of you have kids?
How many of you would say that that you have a greater sense of shared values within your families than between your colleagues at work?
And how many of you have your family values up on the walls at home?
QED. Stuff needs to be on the walls when it’s not strong. Like rules. I saw this great TV show once presented by this historian-anthropologist whose big schtick was – by looking at the signs and notices of ancient civilizations, or indeed any civilization, the things that were being expressly prohibited – do not do this, do not do that – were the things that were clearly all too commonplace.
So in a civilization where there are signs asking that you refrain from expectorating and defacting in public, you can be sure it was a spit and shit fest.
Same for values. Meaningless unless they are lived.
Live the values, live the culture from the top, don’t put it on mugs, and expect it to happen.
You have to make this yours.
They do at Netflix.
If you have a bored moment tomorrow and if you haven’t already seen it, go to Slidehsare and look for the Netflix Culture slides.
Written by Reed Hastings, the CEO, and their HR director, slide 8 is my favourite:
‘The REAL company values, as opposed to the nice-sounding values, are shown by who gets rewarded, promoted, or let go’
So the first C, Culture, it really matters.
There’s a cliché for our times.
Most used adjective on Linked-In last year.
‘I wanna be more creative’
In a survey of CEOs, PwC found that 97pc of them identified ‘innovation’ as their top priority for growth.
Let’s get some clarity around this word. And let’s also be clear that – whatever the hipsters in Shoreditch might think – creativity is not an aim or a goal in itself.
In fact, I think business needs to reclaim the word from those guys. I know many more people in banks and the like who are ‘creative’ in the true sense of the word, than creative directors. What was Michael Milken if not ‘creative’ with his high yield bonds. And Rupert Murdoch, every Creative Director’s favourite baddie, so creative – in the way that all successful business people are.
But creativity is not a goal; it’s a way to get to an answer, by thinking differently. And that comes from a culture ( there’s that word again ), a culture where challenge is not just permitted but – at the right points – actively encouraged.
It’s about diversity of thought.
Yes, I used the ‘D’ word. It was cool in the 90s, wasn’t it? All Blairite, fashionable, and politically correct, we managed to use to upset, understandably, all sorts of groups who felt, with some justification, they were being patronized.
But real diversity goes beyond fashion; it’s style.
What is the style in which your organisation makes decisions?
At McKinsey, there is an obligation to dissent, then a duty to follow. Absolutely.
And that’s not an unsuccessful business. Just like countries that tolerate – or even encourage – dissent are not unsuccessful countries (but we’ll come to that in a moment or two).
Now of course, once a decision’s been made, you do then have to fall into line, though – otherwise you end up with ‘the cult of the cowardly ego’; dissent after the event.
But think for a second about all successful, and sustained, civilizations and schools of thought.
The Greeks, Romans, the Caliphs and their courts jam-packed with mathmaticians and astronmers and poets, to the Scottish Enlightenment – did you know that James Watt, inventor of the steam engine, Adam Smith, who wrote that book you might have heard of, and Joesph Black, a chemist, and David Hume, the moral philosopher, used to deliberately get together once a week to shoot-the-shit and learn from each other; that’s a BIG deal, especially when you consider how big a role their thinking played in the thinking of the Founding Fathers. To the Californian ‘empire’ of today – from Aldous Huxley to Mark Zuckerberg; it’s all about diversity of thought.
It’s the one common denominator. And in those kind of environments, the sum is always, always greater than the parts – gesamtkunstwerk, as Walter Gropius, founder of the silo-free Bauhaus movement, had it.
But how many corporate cultures really encourage this right now, as opposed to arse-covering and sloping shoulders?
I mean we gotta recruit the right people in the first place, of course: smart people who CAN think; Renaissance men and women, who, Da Vinci stylee, can move from chapel to chopper in one fell swoop.
But then we have to give them room to speak up; to do their thing. To voice an opinion.
But we don’t.
We suck all the personal discretion, out of corporate activity – spreadsheetizing. Powerpointizing everything – in the vain hope that this syndication of risk, putting everything into little boxes, might somehow make everything safer.
But it doesn’t – it increases the danger. It one of the things that leads to the 70pc disengaged figure I gave you earlier.
We are, in our corporations, killing this innate human trait, killing creativity.
In preparation for this event, I did a quick poll on creativity with my buddies at YouGov.
The results are really interesting.
55pc of Brits say that they have good ideas about work on a regular basis, but only 16pc of them feel that they are able to voice those ideas and be creative in the workplace.
Put your CPO hats on, and think about the wastage there.
So what we do?
By adopting what I call the Frozen doctrine….
That’ll all become obvious in a moment but first let me tell you a story.
In 1991, I was 15, and I was living in a little town called Warminster. 20,000 people, middle of nowhere in Wiltshire. I was the kid who looked a little older than the others, so I’d be the one who went into the offy to buy cider – Thatchers; you bought it in flagons, and you drank it ‘down the park’.
But in 1991, in America, a psychologist called Christina Shalley published the most extraordinaery paper in the Journal of Applied Psychology.
Now this paper should have revolutionized the way we run our businesses. But it hasn’t.
Shalley found that , in any workplace, the harder the challenge, the more creative the person and their response would be - provided that personal discretion was high.
That’s a big deal.
Remember that scene from Apollo 13; these guys are gonna die unless you fix it, against this very tight deadline, using just these things. Now get on with it. A hard challenge, for sure, a creative goal, yep, and plenty of discretion – all that mattered was saving these guys’ lives.
And they did it.
The ‘Frozen’ doctrine?
Let it go, let it go, let it go…..
We have to free people up.
Literally. Because there is this interesting relationship between freedom and creativity.
Think about the most creative countries in the world. This is one of them for sure.
And I think it’s because of our long-standing tolerance, or celebration even, of eccentricity. From the moment Caesar got off his boat, 2000 years ago. The Brits he met were naked, and had painted themselves blue for God’s sake.
Permissibility. If it ain’t expressly prohibited, go for your life. That’s the basis of the English common law (which we exported to the US, NZ etc), and it means we default to free-thinking.
We need to do the same in our corporations.
A mentor of mine put it well.
'Manage 'em on kite strings, not dog leashes'.
We all talk about communication all the time.
But, in business, we get it sooooo wrong.
And we can take another lesson from history here.
From Aristotle in particular.
He said that any good piece of theatre, any decent argument, any effective communication fullstop had what he called 3 ‘appeals’:
In all business communication, we assume ethos – that the speaker has some credibility, that what he/she/it is saying has some authenticity.
And we’re just great at logos – logical, rational appeal.
But pathos? Don’t make me laugh.
We don’t do emotion really, do we?
But we need to.
Anyone heard of the Elephant and the Rider? Jonathan Haidt, psychologist.
So there’s an elephant. Huge. Enormous. Emotional. Hot. Very powerful.
But the elephant has a rider. And the rider thinks he is in charge. He is rational, cool, cognitive, he knows where he’s going.
And that’s the relationship, Haidt said, between the emotional parts of our brains – the elephant - and the rational parts of our brains – the rider. The rider often gets it - yep, I’m on board, I get it, I’m with you.
But if that elephant doesn’t want to move, he ain’t going anywhere…….
And so often, usually, we don’t.
Pathos or emotion doesn’t even get a look in, in most corporate communications – internal or external.
And here’s the thing. We need emotion. Believe it or not, we actually need to make decisions –whatever we might like to think about being totally rational when we’re making big decisions, we are still riding that elephant.
A Portuguese scientist called Antonio Demasio looked at patients who had all suffered damage to the part of the brain that deals with emotion. In every way, they were normal, fully functioning adults - holding down jobs, marriages, kids.
But the one thing about all of them was that they just couldn’t make decisions. About anything.
Now that’s amazing. Because, if he’s right, Demasio’s work suggests that all decisions are emotional and that it’s all about the elephant, all the time – and that without that, we just can’t make a decision, any decision.
So communicate, and communicate with EMOTION!
So here’s the deal.
In a disintermediated, commoditized world,
Your business, all our businesses, need to reinvent themselves – constantly.
The only way we can do that is with people.
But right now, they’re seriously disengaged.
But they don’t need to be.
They all want to be good employees. They all want to give, to grow,to create, to develop, to move ever closer towards the pointy end of Maslow’s pyramid.
We just gotta help ‘em do it.
We gotta UNLEASH them.
We gotta ENGAGE them.
And we do that with the 3 Cs – culture, creativity, communication.
It’s about the bottom line.
Thank you for listening.'