A clear vision for sustainable business transformation 

In our experience, pioneers all made considerable investments into developing their employees’ capabilities at scale. This investment always includes three streams of effort: hiring new competencies and/or mindsets, shedding some old competencies and mindsets, and training everybody else in a set of values and behaviors carefully selected to support the new strategy.   Too many organizations underestimate the importance of substantial investments in helping develop individual and organizational capabilities.  Pioneers all understood this point and designed and deployed several waves of capability-building interventions.

Changing behavior or changing culture. Few academics are as closely associated with the notion of leadership and culture than John Kotter, who wrote several articles and books explaining to managers how to go about changing their organization’s culture. For many years, Kotter’s and others’ view was that since the biggest impediment to creating change in a group was culture, it would make great sense to tackle culture first. Once the culture had shifted, the change effort would become much easier to effect.

This focus on changing culture first is misguided, because as Kotter came to realize: “Culture is not something that you manipulate easily … you can’t grab it. Culture changes only after you have successfully altered people’s actions for a period of time.” Culture comes down to a common way of thinking that drives a common way of acting. And paradoxically, human beings act their way into new mindsets and values much more than they think their way into new actions. This is somewhat paradoxical, but it is not exactly new; more than two thousand years ago, Aristotle observed that “(human beings) do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. (Human beings) acquire a particular quality by consistently acting in a particular way.”

Hence, smart top teams focus on identifying the behaviors that they need to observe throughout their organizations, and then put in place a set of levers (discussed above) that will shape the behavior of enough employees for long enough, thus ensuring that enough individuals gradually internalize the desired behaviors. Behavior change comes first, culture change is the result of a job well done over a long enough period of time.

The microscope and the telescope

The late Sumantra Ghoshal liked to say: “Leaders are not paid to preside over the inevitable. They are paid to make happen what otherwise wouldn’t happen.” That is very true. Anyone can ride a positive economic cycle and can be lifted by tailwinds. The difficulty lies in winning when things are not going your way – in making things happen that would not have otherwise happened.

But if Ghoshal was alive today, he might complement this first sentence by adding that leaders are also paid to make happen things that leave the system – the organizational, the ecological, and the social systems – stronger than they found it. Leaders are stewards of the organizations they lead, and we are all stewards of the world we are borrowing from our children. A good steward leaves the system in a better state than they found it. As of now, the generation leading governments and organizations is not exactly excelling on this front. We are continuing to create economic wealth, but we are doing so in a way that is increasingly unsustainable socially and ecologically.

Wayne Gretzky, arguably the greatest ice hockey player ever, once said he succeeded because he was skating to where the puck was going to be, instead of where the puck was. We at IMD believe that smart organizations, too, must skate to where the puck is going to be. They must prepare their organization to excel in a world that will increasingly force organizations to internalize the social and environmental cost of their actions.

To do so, they must work on their strategy and on their organization. The graphic toward the beginning of the article summarizes our current understanding of some of the key domains that we have seen successful innovators tackle. The specific decisions that each company made were always context-specific and hence changed across companies and contexts, but decisions had to be made on the dimensions that we discussed above. We believe that this framework highlights some of the areas that your organization will have to tackle to accelerate its transition toward a more prosperous, sustainable, and inclusive model.

This is not an easy undertaking. It requires organizations to be performing at the same time as they are transforming. That requires leaders to keep “one eye on the microscope [and] one eye on the telescope,” as Kadri puts it, where the microscope provides a granular view of current activities and capabilities, and the telescope helps to start picturing the future. A more sustainable and inclusive, and yet prosperous model for business is possible. Making it a reality requires clear vision, bold leadership, and transformational management.