The Seoul of Kafka

I'm back in Seoul for the next few weeks to complete some organization transformation work with Korea Telecom. I first arrived here in early April, just a few weeks after the South Korean naval ship, the Cheonan, was sunk. All 46 sailors were lost.

Although the sinking was big news on South Korean channels it only got minor play on the English channels that I receive in my hotel room - even though two are brought in from the region, one from China and the other from Australia.

Out of curiosity, on my first weekend here I took a tour to the DMZ (Demilitarized Zone) that maintains the cease fire (there never has been a peace treaty to conclude the Korean war) between the northern and southern parts of the Korean peninsula. In fact, it wasn't a tour. It was me, my work colleague from the Netherlands, and a guide - she said that business had fallen off dramatically following Cheonan.

The DMZ was what you'd expect. Barbed wire fences, guard houses, and soldiers. The interesting part were the few viewing points where you could look across the river. A stark reality is that the hills on the other side are barren. No trees. They have been forested long ago for fuel. Your looking at a country that is low on energy, and even food - to feed its 22,000,000 citizens. And yet it boasts of a 1,200,000 soldier army, the fourth largest in the world. Behind China, the US, and India.

Gazing to the south there is a different reality. South Korea is somewhat of an economic miracle. It has put big brand names on the global stage, like Samsung and LG. It has almost 50,000,000 citizens - and more than 20% of these live in the capital, Seoul.

Over the past few weeks the world has become acutely aware of Cheonan. An international panel of investigators concluded that it was sunk by a North Korean torpedo. Political tensions have gone on the alert. This little peninsula between Japan and China has become a center for concern. South Korea says it is not ready to retaliate with force. It is looking to the world community to bring clarity and some form of resolution.

However, it's not the South and its President Lee that is the concern; rather, eyes are on the totalitarian regime in the north led by Kim Jung Il. North Korea has about 10,000 artillery pieces aimed south. A hellish devastation could rain down from the sky in minutes. It would not succeed as an act to occupy the South. The South would retaliate in force backed up by the US. However, the loss of life in and around Seoul would be enormous.

So how do people in South Korea live with this? The answer seems to be, "they just do." Yes, the media is filled with Cheonan; however, the people go on with their lives.

I have developed many good friendships while I have been here. I sense that the people of South Korea (they just say "Korea") just want to be left alone. But this is not their history. They are a proud people who, maybe because of their kind nature, have been invaded and occupied for centuries.

A striking fact about Seoul is that it has no soul. It's not like an Istanbul where you can go to the Grande Bizzare, the Spice Bizzare, the Blue Mosque, and the Topkapi Palace to feel the history passing from east to west. Seoul has been occupied and burned so often that now it builds big buildings to the future and rarely looks to the past. This is attested by the beautiful Gyeongbok Palace that was originally built in the 14th century at the beginning of the Chosun Dynasty. The buildings of the palace have been destroyed several times. The last raising was during the Japanese occupation of 1910 to 1946. What you visit today has been constructed since 1995.

Koreans have been living in an uneasy calm for almost 60 years. This is testimony to both human will and human insanity. I'm starting to understand how invading armies often seem to arrive "by surprise." People were just going about their lives.

Can You Find Me Now?

I've been fortunate enough to be on a transformation project with South Korea's primary teleco, KT (Korean Telecom). They introduced the i-phone to the Korean market and they were kind enough to give us phones for the duration of our stay - phase I ends in mid-June.

Both of my colleagues have been i-phone enthusiasts in their home towns of San Jose and Amsterdam. This is the first time for me and I have to admit to its ease and usefulness of Apps. But I wonder what all of this is doing to the way we work and think. Yes, it changes your life, but what are we losing?

Here's my specific example. On day one our client met us at the hotel. The KT office is about five miles away and although Seoul is a sprawling metropolis of about 11,000,000 people, the drive to the office is not complicated. You turn right out of the hotel for half a block, right again for a long block, and then right onto Tehran. Go five miles and its the big blue building on the right. Easy, right? No!

We have i-phones with Google maps, text messaging, voice recordings and even a phone. Why use the physical world and the recognition features that humans have used for thousands of years to survive when you can use technology.

Day two we were on our own. We jumped into the cab and showed the driver the directions that our client had given us. The driver didn't understand. Panicing, we texted our client who emailed a new set of clearer directions - in Korean! The cabbie still didn't understand. We called our client who spoke to the cabbie. We finally got to work.

The next day was the same confused scene, but this time we couldn't connect with our client. I made the suggestion that we just turn right, right, and right. My colleagues that I was nuts. Why would we do that when we had our i-phones. Finally our client called and we rolled out of the hotel entrance.

Day four had all of the characteristics of the previous days, but this time technology saved us. We had been smart enough to record the directions from our client on our i-phones. Out we went into the world, but the driver still didn't understand. By the time we crossed over Tehran street there were three screaming passengers and three i-phone map Apps in the drivers face.

By the time we got to day five I convinced my colleagues that we just might be able to get to work the "good old way." It worked beautifully. Since then things have been fine.

I love technology. It has its place. But it can erode our survival skills. I suspect that children have already lost directional skills. They put their faith in GPS. It's a different world with a different way of thinking; but I'm not quite ready to give up my internal compass.

Change Management & The US Health Care Debate: A Case Study

The United States has gone through a wrenching debate over the reform of health care. The new bill cut to the essence of the United States as a republic and the sole of its citizens. This has been high stakes change management. What can the business world learn from this as a case study?

There is an alternative to Private Insurance

The first step in implementing change is for the leader to articulate a vision – what will the new world look like? President Obama’s vision a year ago had tenets such as “single payer and public option”. This is not idealism; it is real life practice that is the norm in most western democracies. It is an alternative and in places like Canada it is less costly and produces better outcomes. Although open to interpretation, here are some numbers.

• Spending as a % of GDP: in US 15%, in Canada10%
• Spending per capita: in US, in Canada $6700 $3700
• Life expectancy - age: in US, in Canada 78.5 80.5
• Very satisfied: in US, in Canada 25% 57%
• Very dissatisfied: in US, in Canada 44% 17%

The gap exists for two reasons:

1. Administration: A single payer dramatically reduces burdensome administration. In the US this activity constitutes about 1/3^rd of the cost of health care. In Canada it’s a little more than 1/10^th. In other words, the single payer approach would save the US about 20+ percentage points on cost. That adds up when you’re talking about trillions of dollars.

2. Treatment: In Canada there are fewer medical resources than in the US – people, equipment, supplies, facilities. This means priorities are required in the allocation of these scarce resources. In the US, where there has always been a luxury of supply, this idea of “allocation” is interpreted as “rationing”.

America was looking for a new model for health care. Canada provides an alternative, but Americans didn’t choose it. They came up with a framework that is uniquely American; a solution that does not look like the starting vision that included single payer and a public option. Erosion of the vision is a common result in the change business. What happened?

In my view The Administration did not recognize the enormity of the change it was proposing. How do you radically change the private health insurance sector in the US. It’s fundamental to the American DNA of individualism and capitalism. The orthodoxy is that corporations have the right to make profits and individuals have the opportunity to earn money to provide for their health care.

Such a discontinuous change requires strong, directive leadership. Although bipartisanship is a rhetorical principal of the American political system it is not an ally to radical change. The effort to develop consensus opened the door to incrementalism, which is resistance in disguise. Ultimately the bill that got passed did not please anyone.

Lessons Learned

Most changes fail – even when the sponsors don’t admit it. This result comes from not understanding the nature of change and the leadership style required to implement change.

The US health care debate highlighted principles that CEO’s should take to heart.

• Know your organization’s DNA. Resistance is directly related to how hard you swim against the organization’s heritage.
• Know the type of change you seek – continuous means incremental, discontinuous means breaking with the past.
• Know your leadership style. Don’t attempt discontinuous change if you are a consensus builder.

In our culture it is unnatural for leaders to adopt a harsh style. Everyone wants to be loved. That implies that most changes will be incremental. CEO’s should know this before they set their visions for change and underlying migration paths.

TOYOTA'S GOAL DELUSION: A CASE OF HUBRIS

Toyota fascinates me. As a global icon only Tiger Woods has fallen further and faster. How did this happen to a brand that a year ago was characterized by its quality and durability?

The Toyota fall is the result of the goal Toyota set early in this century to become the world’s #1 in car sales. It decided to take on the wounded GM and move its global market share from about 11% to 15%. It achieved this and more, but now is struggling to maintain its starting position.

Toyota followed all the management rules. It was a case study on goal setting, measurement, and execution – and it failed. It will cost Toyota $3 billion in repairs and lost sales for its hubris. So what went wrong?

Toyota was measuring the wrong thing! Its aggressive market goal was not related to the needs of car buyers.

Toyota believed that its legacy of innovation and high quality, durable products would carry it to its goal of world #1. It forgot its customers and embraced its supply chain. As it got beyond its tier one suppliers it no longer had deep relationships that could ensure quality. Eventually the complexity of the over reach imploded into Toyota’s recall crisis.

The question behind Toyota’s goal should have been: “How much market share can we gain annually and still maintain the high quality and durable products that our customers expect from us?

Goal Confusion

I see this goal confusion all the time in my consulting work. Business plans are set with goals and metrics that have no relationship to the customer. In fact, the customer is rarely part of the discussion.

If we’re going to learn from Toyota then it looks like it will be the hard way. Our executives are still in a cost control mentality. Unfortunately, survival is being built on the backs of customers. This conflicts with the lesson of the financial collapse that shows customers are angry; they feel abused by: financial institutions, the housing industry, and now trusted name brands.

Customers don’t want to do business with companies that just get over the bar. They want to do business with companies that show: moral leadership, social responsibility, and respect for their employees. We are not meeting this customer expectation, and part of the reason is that we’re still setting business goals without regard to our customers.

I believe in goals and monitoring their achievement to know where you are. But we have to know how to set goals and then know what to do with them. All too often our goals are an incomplete reflection of the values that should be leading our business. Too often our goals are built on what we value - that is, making "profit". This causes us to forget about doing things right for those we serve, and we focus on the goal of making money. I know I will be chastised, however, contrary to popular belief the business of business isn't "to make money". The business of business is to serve customers. Making money is difficult without them.

Toyota’s goal forced it to take its eye off the customer. The cost? MasterCard. Priceless!

Grease Is The Word

A few weeks ago I got back from Athens. I was invited to give a keynote address to Customer Service executives at their annual conference. The conference went well and the feedback on my presentation - Building Sustainable Organizations - was positive.

I've been to Athens several times and I must admit that I'm not a big fan. It's a huge, sprawling city with homes built on the sides of bowls - and it has little or no skyline. Most tragic is that Athens has struggled to showcase its antiquities. Yes, they have been working on the Acropolis for years and it's getting better, but look off the mountain a mile into the distance and you'll literally see the ruins of the Temple of Zeus decaying in an un-kept park.

The financial crisis in Greece has Athens and it's inhabitants by the throat. The city continues to spiral into poverty and squalor. The most precious item in the city is a parking spot - but don't worry if you don't have one, just abandon your vehicle like so many others.

As I walk the streets of Athens I don't get a feeling of friendliness - it's more despair. People do not see a way out.

On the evening of my arrival our hosts, Boussais Communications, took the speakers to dinner. I asked about the financial crisis. The answers were surprising:

• firstly, there was the whole question of perspective. I was reminded that Greece is a small economy in the Eurozone. I does not have the mass to bring the system down. Others like Spain are more critical to Euro survival;
• secondly, there weren't any real good answers to how the government was going to solve the crisis. You can only sell treasuries for so long. Sooner, rather than later Greece will need to cut social spending and increase taxes. My hosts saw the answer was in cutting back on the government workforce; however, they saw no need for new taxes or reduced benefits to citizens. Interesting, no sense of urgency here.

Well, it seems that laborers in Greece didn't like the idea of government cutbacks; and it looks like the EU leadership is going to get even tougher on Greece. This is not going to be pretty.

For me this situation casts me back to the early 80's in Canada. At one point I worked for the central budgeting organization in the government. My biggest learning is that when government doesn't have money, it does have flexibility. It can't do anything. All of it's energies are focused on paying interest on debt, reducing annual deficits, and eroding the national debt. It took Canada a decade to get it's finances in order but it did, and now it is financially strong - giving the government alternatives in how to help Canadians.

Ooops, do you see a parallel. The US is now mired in debt. We pay over $1,500,000/minute to service our debt. If we can't manage ourselves better then our creditors, like China, will call our notes. We may not want to make sacrifices to get the US financially stable, but I'd prefer that we make the choices rather than having them imposed.

Yes, Greece is on a slippery slope; however, there is grease on the slope that we're riding as well.

Google in China

The current discussion about Google China fascinates me. I was in Shanghai just before the end of the year speaking on Innovation and Change. I had links in my presentation to YouTube videos. The links didn't work because about a year ago the Chinese government stopped YouTube because of viewings of a dissident.

When you go to Google in China you're actually on Google.China . This is a limited version of the search engine we use everyday. Google is thinking of shutting down Google.China. Google says it's too restrictive; but maybe it's just that Google isn't making money. It has 35% market share against China's homegrown search engine, Baidu.

Television programming is filtered as well. I was in China during the Copenhagen conference on the environment. What I heard about events and results on Chinese TV doesn't square with what I've been learning since I returned.

What strikes me is that these restrictions on information do not align with the economy and the people I worked with.

I worked with entrepreneurs. People who understood capitalism as well as we do. They have ideas, they know how to find investments, and they are winners. Sooner, rather than later, the restrictions on information are going to come up against these vibrant business people.

It will be interesting to see how China responds. Will the politics of information give way to global economics?

How Companies Succeed - Work on the Right Things with the Right People

Jim Collins' book Why the Mighty Fail has caused a lot of discussion with my clients; particularly since Akio Toyada the head of Toyota has stated that his company has passed through the first three steps on the way to decline:

1. Hubris born of success,
2. Undisciplined pursuit of more,
3. Denial of risk and peril,
4. Grasping for salvation, and
5. Capitulation to irrelevance or death.

I think this is a good framework; however, for my part I boil failure down to two things:

Working on the Wrong Thing.

Organizations forget who they are. They ignore their DNA. They want to escape from the basic strategy that made them what they are. They want to become something else. Something greater because others say they should. Others like Blue Ocean and Black Swan strategists.

I'm all in favor of the Blue Ocean and Black Swan sentiment that we have to constantly monitor our environment to understand discontinuities that might alter or kill our business. But I'm not in favor of the implication that if we are under threat we have to vault to a new future that is not rooted in our DNA - those competencies that are ingrained in us and have made us successful.

Often we aggrandize the positive culture at Southwest Airlines that was built by its venerate founder Herb Kelleher. How long would it take to drive this positive culture out of Southwest? I suspect a long time. And during that time initiatives that resist this culture will fail!

Working with the Wrong People.
Today's business world is too complex to have everyone on the same page. Sure, we need agreement on a mission and some broad strategies, but that leaves a lot of room to interpret implementation details.

Implementation will cause conflict with leaders. People will always have different models, data, and understandings of what's going on in the market and the capabilities of the business to meet the challenges. Conflict on content is good. It's how leaders make sense out of chaos so they can choose a path that keeps the organization healthy, relevant, and profitable.

Conflict at a personal level is not good - it subverts conflict on content. Personal conflict is rooted in ESP: Ego, Status, and Power. These political objectives create a lack of trust and lack of openness within leaders. Quickly the organization loses its future.

So if you want to succeed the bottom line is: ... work on the right things with the right people.

2010 Leadership Forecast: Cloudy with a Chance of Clearing

2009 is in the rear-view mirror. For most of us that’s a good thing. Many businesses suffered. The strategy of the day was: cut costs, conserve cash, and strengthen the balance sheet. Growth was rarely on the radar screen.

And, things seemed to work out. 2009 was a banner year in the stock market. The DOW was up 18.8%; the NASDAQ 43.9%; and the S&P rose 23.5%. All is good in the world of business, right?

Well, maybe not. The strength of the stock market could be masking the hard work that has to be done. The 2009 fight for survival has devastated our organizations; they are no longer healthy and relevant to their customers. Here are a few scary research findings:

• A survey by the Centre for Work-Life Policy, an American consultancy, found that between June 2007 and December 2008 the proportion of employees who professed loyalty to their employers slumped from 95% to 39%. The number voicing trust in their employers fell from 79% to 22%.

• The lack of trust is confirmed in the 2010 January-February issue of the Harvard Business Review which reports that on a five point scale: employees have a general trust of 3.7; trust in a their firm is 3.0; and trust in their boss is 2.7.

• Another American consultancy, DDI (Development Dimensions International) recently found that more than half of survey respondents described their job as “stagnant”; and half of these planned to look for another job as soon as the economy improved. This is taking a toll on short-term productivity and long-term competitiveness: the people most likely to move when things look up are high-flyers who feel that their talents are being ignored

• And, the Brand Asset Valuator used by the marketing and communications company, Young & Rubicam tells us that trust in brands has fallen dramatically. Trust was running at about 52% in 1997, while it hovers around 20% today.

Well what can we take from these research trends? The conclusion is that customers are hostile and employees are disengaged. Great! Just at a time when we need our customers and employees most they are sitting on the sidelines. We have told customers that they are secondary to shareholder profits; and we have told employees that they are secondary to cost cutting.

So our leaders have to feel buoyant that the economy has survived as evidenced by the stock market; but they also have to feel angst about how to win back customers and employees; how to make their companies healthy and relevant again. What should they do?

The first thing they have to realize is that what got them here won’t get them to where they need to go. The last several years has been dominated by left brained, cause and effect, management thinking. The next several years will need to re-engage left brained, inspirational, leadership thinking.

The focus has to get back on our customers. We need to know what they know and we need to drive organization change from their perspective. So, what do they know?

1. Value for money. Firstly, they know they want value for money in products and services. When they put out money they want to be satisfied with the transaction. The 2009 recession has taught them how to buy differently. They know:

• they can buy down, or bargain for better prices;
• o that simple products and services trump “bells and whistles”; and
• o they can defer or spread out purchases.

Consumers know they can save. They know that unlimited credit does not mean that it has to be used.

2. Sustainability. Secondly, they know they want to deal with companies that “look and act just like them.” They want to buy from brands that will be around for the long term. They know they want to buy from firms that exhibit three characteristics:

• Moral Leadership: It’s not hard. We all know right from wrong – that standard doesn’t change just because “it’s business.” We all know when our actions feel wrong – that is the test on morality. CEO’s would never steal from the cash box – so how is backdating stock options any different? It isn’t. You can’t justify it to your mother.

• Social Responsibility. This comes down to being a good corporate citizen. It comes down to a commitment to “green” for the good of our world, and a commitment to our communities for the good of our friends. Green has to be exhibited in our products and services and we have to demand it from our suppliers. We need to sustain the communities that surround us by buying and hiring locally and giving back with financial support to businesses and time to community causes.

• Employee Commitment. Customers have had enough of companies who don’t treat their employees with respect. We have pay policies that do not adequately share profits; we have people in authority who abuse their staff; and we have severance policies that are disrespectful. Employees no longer work for companies; they work for customers. Employees who are disrespected will treat their customers in kind. If your not committed to your employees, your customers won’t be committed to you.

This concept of sustainability has been proven beyond small green companies our community niche companies like Whole Foods. There are great success stories like: Johnson & Johnson who puts “customer” at the top of its priorities and used this to recover from the great Tylenol scare; then there’s Research In Motion (RIM) who are so focused on the long term customer relationships that leaders are admonished for discussing quarterly financials in public.

2010 will be a great challenge for our business leaders. They have an opportunity to advance the value of their organizations. They can build organizations with a greater purpose than simply maximizing shareholder returns. They can give us organizations that sustain customers, employees and communities.

Our spirit and creativity are indomitable. Now is the time to clear away the clouds.