Listening, Watching and being Watched

Rosabeth Moss Kanter

The CEO’s new challenge

Professor Rosabeth Moss Kanter, one of the world’s most respected educators and consultants, tells Jo Bowman that our ability to listen to the market and innovate to stay ahead of it is more acute now than at any other time in business history.

Corporate life has rarely been a breeze, but in the current climate of competition and public scrutiny of businesses and their leaders, the intensity of the pressure is greater than ever, says Harvard Business School’s Rosabeth Moss Kanter.

“The pressure is always there, it’s true, and in times of crisis, the only way to get out of it is fresh ideas and fresh approaches,” she says. “I’d say what’s different now is the scope of the global problem, the number of things that are unravelling, and the rise of emerging market countries that operate in different ways to developed markets. So there are more forces, more moving pieces, more complexities, which makes innovation even more urgent. Those who say we can cut ourselves out of decline as opposed to imagining new ways to shape institutions are making a mistake.”

Innovation means more than adapting products and services to fit the changing times, or even coming up with new ones. Nor is it something that companies can achieve through acquisition programmes in which small, nimble and innovative companies are snapped up by bigger ones when the time is right. “I think that a company that doesn’t have internal innovation capabilities also doesn’t have a way to absorb new ideas from acquisitions. You always need a combination, because you have to have people inside the company who both understand the technology as well as the marketplace, and then have a company that’s agile enough to receive the innovation,” Moss Kanter says. Innovation in business practices is also a key part of moving with the times. “Business models are becoming obsolete at a rapid rate, and without innovation there’s no way to fundamentally change how a business thinks about making money and approaching the marketplace. So we need innovation at so many more levels now – in products and services, in internal processes, in new kinds of external collaboration in the new business models.”

As more industry-shaking developments come out of university research laboratories and the public domain, companies are realising that they can’t innovate all by themselves. And while they need internal innovation capabilities, they also need to source ideas from many new places. “New, interactive technology and social media have made it harder to be proprietary – to hang on to new ideas and be the only one who has those ideas,” Moss Kanter says. “Rather than try to do everything in secret, more companies are now throwing things open to the public. Apple, which is the heroic company of the moment, in its first round under Steve Jobs was a very closed company – it didn’t give away source codes or anything. The new Apple that created the devices that the world has come to love didn’t share everything, but it certainly opened some of the platform to the developers who could create thousands and thousands of applications, and arguably that’s one of the things that made the iPhone so attractive.”

Listen carefully, but not to everyone
As technology-enabled consumers not only vote with their feet but broadcast their views on companies and brands, companies need to listen hard to what the world is saying, and react immediately when the need arises. They need open channels to those at the top of a business to make sure feedback gets to those in charge – but, crucially, not all feedback. “CEOs could spend all their time arguing with different complainers, and that isn’t the point,” Moss Kanter says. “The point is to weight negative feedback to know how seriously to take it, and whether it’s part of a real force that’s going to disrupt the company or whether it’s a few disgruntled people. You have to be able to make those discerning judgements … and we need much more open, adept CEOs.”

There are clear examples of how not to do it. “The former CEO of BP, Tony Hayward, clearly had never had any experience dealing with the public or public opinion, and didn’t know how to handle it or what to say. Well, that is a mistake to put anybody in a senior position who doesn’t know how to talk to the public, how to make the case for the company, how to be the ambassador – that external role is as important for the CEO now as the internal role.”

Moss Kanter says the skills required of leaders now, whether in business, politics or the military, are in many ways the same as they’ve been for centuries: curiosity, and the ability to see patterns in the outside world, communicate a vision and build strong teams. “What’s different today is the spotlight on leaders is so much more intense and so much more constant,” she says. “They’re in the public eye all the time. If you rise to a top position, there is no more privacy, and while I firmly believe that leaders should have a private life – that family is very important as a value and source of enrichment and nurturing on a human level – that still, the higher the position in the company, particularly in very, very top leadership, the more leaders have to recognise that that boundary between their public role and their private conduct is erased. People have to behave as if a video camera is always on them, and it’s scandalous what certain public sector leaders have gotten away with because they thought no one would notice. People will notice.”

That means leaders have to be clear about their values, and make those values consistent in their private and business lives. “People now follow leaders not for particular actions or particular campaigns or particular issues, and that’s inside companies as well as in the larger world. They follow leaders because they have trust in the values that the leader exemplifies. Leaders have to reveal a little bit more of who they are as a person and sometimes do it by telling their personal stories. Great leaders through the centuries were people of strong character and high values. And values are more than just ethics; they’re more than just not breaking the law. Values say something about what priorities the leader will have, and I would say that’s always been important. But it’s even more important today. Values-based companies that have a sense of purpose are more likely to get commitment from employees, and leaders who exemplify the values are more likely to be successful.”

Building bridges
If companies need to hear more of the consumer’s voice, and need more help making sense of it, does that mean expanding the research department, or teaching some of the skills of the researcher to more people across a business? “The answer isn’t a bigger research department, because I think that pure research is a wonderful thing, but an increasing luxury,” Moss Kanter says. Researchers need to be better connected not only to the consumer’s world, but also to the heart of the businesses they’re in and supply. “Some of the best and most creative ideas come because researchers have embraced a cause and they really care about fixing that problem, whether the problem is a cure for a disease, or how do we get more technology into remote areas, or how can we make the cell phone into a source of educational materials. Whatever it is, that definition of what you might do in a research capacity can be shaped by your connections with the outside world.” Increasing the size of a research department is not likely to help, though, she says. “We have to connect the department better to the rest of the world and the rest of the company. Then, within the company, I think more people should be idea spotters, and maybe, depending on how technical the research is, that some people will take temporary assignments in a research role, or a task force, or a problem-solving group. And then rely on the people with very deep technical skills to figure out how to act on what it is they find.

“In the ideal world that I imagine, in the really great companies there would be strong connections between the people in touch with problems and the people who have the technical skills. I see that at IBM, because there are so many things that the company has made possible both in terms of new commercial services and in terms of contributions to the world, because certain corporate executives keep very close ties with people in the research labs.”

For suppliers of market research, as for all professional services firms, keeping and attracting clients’ business means going beyond providing the routine service and doing it well. Moss Kanter says research companies are under the same pressure as companies in other business sectors to innovate. To be of true value to clients, they must be innovating at least as fast as the clients are. “Be a little ahead in terms of bringing them the potential to use new tools in new ways to solve their problems. You have to know your own customer very, very well. Know where their business is heading and sometimes be able to help them get there because you know an awful lot about that direction.”

Given the unparalleled volatility of current global market conditions, Moss Kanter points to what she calls vanguard companies – firms like Procter & Gamble, Digitas and Cemex – as those that are well placed to stay strong now and into the future. “Those companies are sustainable because they know how to change and there’s a commitment to change,” she says. “They’re values-based, they’re able to acknowledge and solve problems, and they don’t mortgage the future by making short-term cuts. But there are no guarantees. The only guarantee for a company is to focus on values, have a strong sense of purpose, be a ‘supercorp’, but also continue to renew and refresh the business.”

Rosabeth Moss Kanter holds the Ernest L. Arbuckle Professorship at Harvard Business School, where she specialises in strategy, innovation and leadership for change. A former editor of Harvard Business Review, she is the author of several books, most recently SuperCorp:  How Vanguard Companies Create Innovation, Profits, Growth, and Social Good.