Videocast with Vijay: Episode 5 - Mark Johnson

Thank you, Vijay. It's great to be here.

Well, I think back to a former naval officer, an admiral in the Navy named Admiral James Stockdale. He was a prisoner of war in the Vietnam War and the most senior officer of that group. As they were dealing with being prisoners, his philosophy, his explanation to his fellow prisoners was: look, we need to have hope that we will make it through this. We need to have a North Star about where we can be past being a prisoner of war, but we have to be realists. We can't be telling ourselves we're going to get out of here next month; if we do that, we actually will die. So it was having a vision or a view of completing the mission in military terms, but being realistic about the moment in the short term. I think about that in this war-like situation with COVID-19. I think there is going to be as much opportunity as there is long-term threat about what this all means in terms of changing the way we are as human beings, the economic situations around the world, and the innovation that gets unlocked. There's lots of opportunity, and I think we need to think about as organizations: what's our best possible future? But at the same time, we have to be realistic about how hard it could be for the next 12 to 24 months, be prepared, and a key piece of that, which I'm sure we'll talk about, is how you learn the right way. That's how I would think about being on a sort of war-like footing as we speak.

Well, you know, Vijay, in the book we did sort of land on the five to ten year horizon almost as a common time frame for most companies and organizations. But you're right, there are some organizations that should think even longer, like a pharmaceutical company or an aerospace defense contractor that have much longer product cycles. But then there are also shorter ones. I used the example of software companies that are moving at the speed of light comparatively, and their long-term horizon might be three or four years out. So I do think if you're talking about someone in the IP space or a contract manufacturer, they're going to have to look at it for their own circumstance. The key about looking out into the long term is that it should be a place where you can actually develop a vision that has to be past the noise of resource allocation challenges, budgeting, or forecasting periods. For most companies, you need to be at least a couple of years past that to get beyond to a place where there's less noise and you can start thinking about points of inflection, because trend lines come together. So for a contract manufacturer or any examples you listed, they still have to be thinking about what their long-term future is. What do they need to think past their current core business to sustain a trajectory of growth that allows them to continue to grow in a way that allows their people to grow? That usually means for any profitable or established business, you're focused more on the long-term top-line revenue growth of the organization and all the ensuing capabilities that need to happen to make that take place.

Well, that's such a great question. It's the essence of the book, Vijay. We make a distinction because I think we haven't tightly grounded vocabulary about what vision and strategy are. Vision is about, to your point, making sure you're not going in the wrong direction. It's about what is the right direction. We use a hockey analogy: Wayne Gretzky, the famous Canadian hockey player, used to say, 'I don't skate to where the puck is; I skate to where the puck is going.' Then we take it a step further and say not only should you skate to where the puck is going, but you should skate in such a way that you shape where the puck should go. I think vision is the part about deciding what game in the first place you should be playing in the future, along with maybe your existing game, whereas strategy is about how you take the existing game and maximize your chance of winning. So I think we need to make that distinction between vision and strategy. The whole process of vision should be more than just a half-day exercise to come up with an inspirational statement like 'We'll be the best medical device manufacturer in the world' or 'We'll be number one or two in our industry.' It should be something thoughtfully developed that comes up with a point of view about the way the world is going to work in the future, the key assumptions about various trends and other potential disruptions, and then how you put yourself in that future to create the best possible future for your organization. That should be laid out in terms of a portfolio of businesses and capabilities at the high level. If you go through the process and spend enough time in the foresight of the future horizon and trying to develop insights about what is the art of the possible, I guarantee you will come up with a perspective. Your team will come up with a shared perspective of what direction they should take based on having spent time debating and discussing the environment and the implications of that environment on what you should do. I have never seen it not happen like that, especially if you keep perspective that this is not about certainty; it's about developing clarity. It's about getting an impressionist painting of the way the world works and how you fit in it, not a perfect photograph. That impressionist painting, that clarity that you get as a team, is how you get direction and feel good about that direction. The final point is that direction is not permanent. You bring that future into the reality of the present with the kind of initiatives you undertake, and then you constantly work to adjust that future shape and the initiatives you're working on today. That's how it all comes together, letting the direction drive the organization but without feeling like you're permanent on anything that could create the kind of risk that so many fear about talking about the future.

Yeah, I think the specifics are, one, that North Star vision, as I've said, more than a vision statement that really describes the hopeful future of the organization. In many ways, it should transcend the next 12 to 24 months in the crisis, to where you're past the stormy waters. In the aggregate, this is where you want to go. As many leadership gurus have talked about, you have to communicate that vision. You have to be good at articulating the narrative, be a good storyteller, and bring other people along and motivate them toward that vision. At the same time, you have to help your people understand the realism and the reality of the uncertainty over the next 12 to 24 months. That's where scenario planning comes in, to think about different ways things could go and the implications and options of each potential path. Those are more of the strategic considerations—how you are going to get to your intended vision. But you have to have that ability to know that there could be some different paths, especially in the short to mid-term, that you're going to have to take to keep your organization viable in the short term because it can't run out of cash; it needs to stay sustainable. You have to right the ship and do whatever it takes to sustain the cash flow, but you also should be planting the seeds for how you look at the organization coming out over the next 12 months after the post-COVID crisis. That should be informed back to the vision. I think how you bring people along is just like the vision: you have to be clear about communicating. Like Admiral Stockdale, the realism that things will be tough in the next 12 to 24 months, but we can get through it, and here are the different contingencies we're putting in place to see our way through. Honesty and transparency are more important than ever, but not over-selling anything because nothing is certain. People do need clarity. Certainty will kill the organization; clarity will help it get to where it needs to go.

Yeah, another great question, Vijay. I think it's about being able to be both oriented towards the operate and execute mentality. What I talked about in our book 'Leap from the Future' is being present-forward minded. That's going to be 80 or 90 percent of your job as a leader. You're going to have to take things as they are today, respond to the situation, and move the existing business forward in time, being able to react, respond, and make the choices needed to continue driving the sustainability of the core business. But then you need that 10 to 20 percent mindset which is about vision and strategy, thinking more mid- and longer-term along the lines we've been talking about in terms of an overall vision and the strategic scenarios facing you. That mindset should be more exploratory instead of operate and execute. Instead of 'give me the latest information and let's make a linear decision,' this one is more of an iterative learning loop. When you're thinking future back to the vision or strategic scenarios, you should be exploring before you envision—exploring different assumptions that you're making as a team, diverging on a long set to converge on a short set, because assumptions are not facts; they're assumptions. You have to develop them together over time and come to a shared set. Those then become the means of those assumptions that need to be proved. So you need to explore, then you need to envision what is the art of the possible of future opportunities and businesses that you want to establish. If you're an education institution, how do you envision being more online than you've been, and how does that connect with being in person with students? How do those coexist—a virtual classroom and an actual classroom? Then you have to discover, which is how you bring that vision of a new opportunity or your overarching enterprise vision back to a portfolio of initiatives today. Not just the core, although that would be the majority of what you have to do, but what are those new and different initiatives that are the seeds you're planting to take advantage of the opportunity post-COVID and beyond to ensure the sustainability of the organization?

Well, I would just say that the choice-making about resources falls into three key buckets. The essence of all of this is that strategy is about choice, and the ultimate of leadership is to make resource allocation decisions. The first that's on everybody's mind is scarce resources of dollars, of cash, and so forth. But it's also about the scarcity of people within the organization—they're almost always overworked and overtaxed, and there's nobody really available to think about the new and different. And what's even more overlooked is management bandwidth. There's so much coming at senior leaders that they're overwhelmed just operating and executing their business, and they don't have any time to carve out to support the learning journey of their innovation teams or to think about being a more forward-looking organization themselves. So it's first important to categorize scarce resources in those three buckets: dollars, people, and management bandwidth. Don't forget that leadership bandwidth is a very important piece that so often gets overlooked. The key in all of this is to come up with the right mix between your focus on the core and your focus beyond the core. That's best done future back by being able to look, based on the vision, at what the core is going to look like and how we think about its contribution in the future, because many core businesses commoditize and decline. We have to be realistic about that. Then how does that growth gap get filled by determining how you transcend beyond maybe not just your core company's business, but you might even be able to transcend an industry, like Apple did in the early 2000s when it went past personal computers into consumer electronics and multiple industries related to that, like music and telephony. So the key is being able to portfolio manage in the dimensions of those resources I said, but you can't really get the best insight about investing for the future unless you work it future back. Hence why I put so much emphasis on going out to that five to ten year horizon and working back to today.

Well, it's another great question. I think the hardest thing organizations face is what they're going to slow down or stop or let go of. That's why I reinforced the importance of long-term thinking and having a process to be out there in the future. What we have found is it's much easier to have a conversation out five to ten years about what things are going to be in the worst case irrelevant in that future, what things are going to be not as relevant, and what things will still be viable. That safer conversation leads to starting the discussion of what we should be prepared to slow down or let go or stop. I think it's the hardest job of an organization to shape the portfolio on the projects that no longer make sense. In innovation management, we call them zombie projects—projects that have sponsorship and have had it for a long time by a group of leaders, and no matter what comes back, they just seem to still sit there in the overall innovation portfolio. It's very hard in the moment to just say this doesn't really make sense, but when you look from a forward-looking and future back perspective, you can make that a lot easier. It needs to be because so often, in order to really do the real opportunities that become made known by looking into the future, you're going to have to make room for the investments in them. Those mostly will come by reshaping the portfolio of those things that you're investing in, like in core business that are only marginally improving things. You've kind of run out of what we call innovation headroom, so those efforts should be slowed down and redeployed towards something that creates a much greater opportunity for innovation and growth. So that's what I would say. It's probably one of the hardest parts of management, but the best way to do that is to have a longer-term planning horizon in addition to the shorter one.

Well, thank you very much, Vijay. It's been great to be on your show. Bringing this all together, I just can't emphasize enough, especially in these times of uncertainty, that the operative word is learning. We have to be better at learning. When we started at Innosight about innovation, we said the other side of the coin of innovation is learning, and the other side of learning is humility. There's not a time more important than now for us to be thinking about this. It's never a one-and-done. Anything we talked about, you have to be in learning mode: exploring, visioning, discovering what is the art of the possible, what we need to learn, and then how we need to learn it. Be ready to pivot, to learn and adjust based on information that comes to the forefront that helps us understand how things are unfolding. The organizations and the people that have the highest humility and the greatest effort of learning are the ones that will make the adjustments and will have the greatest chance not only to be sustainable but to come out on the other side actually stronger, having taken advantage of a lot of opportunities that will be born because of this crisis.

Thank you, Vijay.