Derek Sivers

Know-How - by Ram Charan with Geri Willigan

Know-How - by Ram Charan with Geri Willigan

Go to the Amazon page for details and reviews.

Acquired expertise in big business. Subtitle: 8 Skills That Separate People Who Perform from Those Who Don't.

my notes

You will be constantly tested for your know-how to lead your business in the right direction. Will you be able to do the right things, make the right decisions, deliver results, and leave your business and the people in it better off than they were before?

Can you position your business by finding the central idea that meets customer demands and makes money? And, as will increasingly be required, can you appropriately reposition it?

Are you able to pinpoint external change by detecting patterns ahead of others and put your business on the offensive?
Do you know how to lead the social system of your business by getting the right people together with the right behaviors to make better, faster decisions and achieve business results?

Can you judge people by finding their best talents based on facts and observations and match them with a job?

Are you molding a team by getting highly competent leaders to submerge their egos and coordinate seamlessly?

Do you know how to develop goals by balancing what the business can become with what it can realistically achieve, not merely looking in the rear-view mirror and making incremental adjustments to what’s been done before?

Can you set laser-sharp priorities by defining the specific tasks that align resources, actions, and energy to accomplish the goals?

Can you deal with forces beyond the market by creatively and positively responding to societal pressures you don’t control but that significantly impact your business?

Know-How is about what you must both do and be to lead your business in what is shaping up to be the most challenging business environment in decades. It plants business leadership squarely on a foundation of profit and loss, capital utilization, resource allocation, productivity, and customer satisfaction while never losing sight of the fact that leaders are human beings.

Successful leaders learn, practice, hone, and refine the know-hows until they become natural.

Know-hows aren’t taught in schools, and cultivating them isn’t easy. But over time, with lots of development, the know-hows become automatic, instinctive, and superb, and judgment improves.

It’s important to practice the know-hows through a series of deliberate, appropriately challenging job assignments, combined with self-reflection on your personal traits. That’s how leaders are made.

The ways leaders develop and deploy the eight know-hows are especially influenced by a handful of them: ambition, drive and tenacity, self-confidence, psychological openness, realism, and an insatiable appetite for learning.

Ambition - A desire to achieve something visible and noteworthy propels individual leaders and their companies to strive to reach their potential. Leaders need a healthy dose of it to push themselves and others. But ambition can be blind. That’s when you see leaders making flashy acquisitions that are financially unsound or setting attention-getting goals or taking on more priorities than the organization can handle out of a desire to do everything. Overambitiousness, combined with a lack of integrity, can lead to undesirable behavior and even corruption.

Drive and tenacity – Some leaders have an inner motor that pushes them to get to the heart of an issue and find solutions. They drill for specific answers and don’t give up until they get them. Their high energy is infectious. They consistently drive their priorities through the organization. They search tenaciously for information they’re missing and keep tweaking their mental models until they arrive at a position that works. But drive and tenacity can cause a leader to stick to a plan that isn’t working or to outdated assumptions or an investment that is no longer promising.

Self-confidence – You have to be able to listen to your own inner voice and endure the lonely moments when an important decision falls on your shoulders. You have to be able to speak your mind and act decisively, knowing that you can withstand the consequences. It’s not a matter of acting tough. It’s having a tough inner core, or what some refer to as emotional fortitude. Underlying fears and insecurities can be just as detrimental to your know-hows as can excessive self-confidence in the form of narcissism or arrogance.

Some leaders need to be liked. They therefore tend to go easy on people. They have an especially hard time dismissing people who have been loyal to them. Such leaders often find their own progress slowed because they promote people for the wrong reasons, tolerate nonperformers, and allow the social system to corrode.

Thinking encompasses a wide range of altitudes from the conceptual to the specific, they have a broad cognitive bandwidth, meaning they see things through a wide lens, and they are good at reframing issues and problems, looking at them from various points of view.

But your use of the know-hows is better when you’re able to do both: think in terms of concepts, but also drill to the specifics. You see this ability in leaders who ask probing questions that hit on exactly the right points or unearth the critical but unspoken assumptions, and in those who can cut through complexity.

A broad cognitive bandwidth allows you to take in a wide range of information and see things in their broader context. You can take in more complexity, and see the interconnections. You’re more likely to pick up on trends outside your industry that affect the positioning of your business and create new growth opportunities, and you’re better able to see the business and its social system holistically, rather than as separate functions.

But even if your positioning is on the money today, there’s a good chance it won’t be tomorrow. Positioning is not for eternity. The frequency, depth, and abruptness of change in the world today means that you will be frequently shaping and reshaping your business.

Spotting new opportunities for profitable growth, resegmenting markets, and deciding which technologies to adopt.

The clarity and specificity of positioning of a company in the mind of the consumer, employees, and other constituencies is paramount.

Too often a shift in positioning (sometimes originating because of the change of company leadership) in a relatively stable environment can cause a permanent blurring of the company’s value proposition in the eyes of customers.

The early warning signals come, for example, when customers start going somewhere else.

It’s easy to see why people working in an industry for many years can develop psychological blockages and fail to see bigger trends. For example, a veteran newspaper leader who is overly optimistic and too self-confident will see the precipitous decline in one major source of revenue as an aberration, rationalizing that the business is just going through a flat period.

Figuring out what the new composition of revenues will be, from what sources, and what the new cost structure will be to continue to make money.

You have to be aware that in such an uncertain situation, there’s a high likelihood that the behavior of some players may be totally irrational.

You have to be open, receptive, and active in searching for the signs that the business is being shifted or needs to be. You need to be surrounded with people whose conversations with you help you wrestle with these issues in a brutally honest manner.

Regular visits to client CEOs and business leaders provide a stream of new insights. Whitman himself made 234 of these personal visits by early 2006. Such closeness to the market will help him and his team detect early on any breaks in the external landscape and whether and when it will be time again to reposition the business.

He had been asking, “What costs can we cut?” He realized that a better question was “Where could we win?”

Early warning signals that the positioning of your business may need to change to take advantage of emerging opportunities:

Nascent industries emerge.
Nontraditional competitors start to appear.
The positioning of a key competitor changes.
The rise of new customers.
Consumption patterns are being influenced by affordable new offerings from new technologies (think iPod).
Customers are defecting.
Loss of market share in select key segments.
Emergence of new business models and new management models.
Pressure on profit margins.
Unexpected decline in cash flow from operations.
Decline in customer satisfaction.

Only by looking out far over the horizon and taking into account developing trends that may not seem directly relevant now can you really do the kind of analysis necessary to prepare for rapid change and new opportunities. You have to look at your business from the outside in.

How would it all play out? Seidenberg had to think through all those nonquantifiable factors, sifting, sorting, and selecting what information could help him decide what will prevail, in what conditions, with what timing, and with a sharp focus on changing customer-buying behavior. In addition he had to take into consideration competitors, emerging coalitions of rivals, and special interest groups.

One way to become effective in the know-how of seeing emerging patterns is to be an active listener who continually searches for what is new and different. Seidenberg has said that in every conversation he looks for ideas he has never heard before.

Recognize how you have obtained information in the past. Did you seek it out, or did you just let it come to you?

Reading each item carefully and slowly and then thinking about what it means for your company and your industry. What is changing and for whom? Where is the opportunity in that change and for whom? It’s a simple exercise that over time helps condition your brain to detect patterns from these observations and what they mean for various businesses and industries.

In my observation, people who create organic growth that is profitable and sustainable connect the dots sooner and are on the offensive.

Seven simple questions can help you sort through and detect patterns in the complex world around you:
1.What is happening in the world today?
2.What part of my frame of reference has worked for me? What hasn’t worked for me?
a.When you experience a failure in detecting a change – and you will – you need to reflect on why you missed it.
3.What does it mean for anyone?
4.What does it mean for us?
5.What would have to happen?
6.What do we have to do to play a role?
7.What do we do next?

Leaders who connect the dots:
Have a methodology for anticipating and detecting breaks in the continuity of the external landscape.
Imagine one or more pictures of the future and pinpoint the gaps that make the picture incomplete.
Have a reliable, diverse social network – both inside and outside the business.
Talk to their network for ideas about how to close gaps that they identify.
Have the personal imagination to construct patterns from emerging disparate trends, always searching for the missing links and missing ingredients.
Are psychologically self-aware of potential bias on their part or that of people they associate with to be overly optimistic or pessimistic, thereby distorting a realistic perception of external trends.
Connect patterns of change with the question of whether the positioning of the business could become irrelevant or obsolete.

Perhaps the biggest untapped opportunity for your success as a leader is shaping the way people work together to deliver the numbers. Your own performance depends on your ability to get other people to commit to and deliver their common goals.

Understanding the social system of your business is the best way to get a handle on the otherwise mysterious subject of managing and changing how people work together to meet ever-changing business requirements.

Managing the social system has two parts. You have to be able to determine what critical decisions and trade-offs must get made, and by whom, to accomplish your business goals. Then you use that insight to design disciplined, routine, regularly scheduled meetings – I call them operating mechanisms – to bring the right people together at the right frequency with the right information to make those decisions.

Shape the content of these discussions and ensure that the right behaviors are taking place in them and the output links to results. In short, you have to actively design and lead the social system of your business.

A leader with this know-how will always investigate the social system to see if it is the source of the problem and take specific steps to fix it.

Map your operating mechanisms, ensure that each of them is geared around a business result, and diagnose how each of them is actually working. If new ones are required or existing ones are obsolete, it’s your job to change them. And if the people are not having the right discussions in them or behaving in the right way, it’s your job to correct the behaviors, using persuasion, power, and rewards, whether money, recognition, or promotion, as necessary.

That’s how the social system changes – through your conscious actions in designing and redesigning the operating mechanisms and conducting the dialogue in a way that shapes people’s behaviors. As you do this repetitively, with discipline, you change the quality and substance of business decisions, and because the behaviors that get shaped in the operating mechanisms carry over to people’s everyday work, you sustain a change in how people work together. With this know-how, you accomplish the elusive goal of culture change and develop the ability to deliver on commitments and achieve business results.

What was far more important was what information is exchanged, how much freedom is created for people to opine, what new information is brought from outside, how candor is valued by the leader, and the know-how of the leader to draw everybody in, surface conflicts, and get the group to be decisive without making poor compromises.

You also have to establish and enforce what behaviors are acceptable and which are not. You do this through conducting dialogue. You have to be able to perceive when a person’s behavior is going off the track and have the emotional fortitude to correct it face-to-face, often right there on the spot. Through dialogue, people can see what you, the leader, think is important.

1.What is the purpose of the existing operating mechanisms and how do they and their linkages combine to help deliver results?
2.Which ones should be kept, eliminated, or combined?
3.Which require a total redesign and a new way to lead them?
4.Are there new operating mechanisms that should be installed?

You will have to design operating mechanisms around your more important business activities, such as serving new markets and achieving new growth. Each operating mechanism must have a clear business purpose.

Using simple facilitation techniques – “Pat, I haven’t heard from you yet”- he went out of his way to draw people out.

Short, frequent, content-rich meetings can be highly effective in distributing fast-changing information and are especially useful for staying in touch with the outside world.

When you need different business results, you almost always have to tinker with the social system.

He couldn’t just set a goal and expect it to be delivered. He had to be sure the organization’s social system was built for getting it done.

Asking what had happened the previous week and what the leaders were planning to do in the upcoming week, so the business was making adjustments in a much shorter time frame. In each subsequent meeting, he would ask whether the leaders had done what they said they were going to do, creating a sense of urgency and accountability to the group.

As Nardelli selected leaders, he kept a keen eye on their know-how in managing a social system and their tendency to be psychologically open, willing to be influenced by others, and intellectually honest in keeping the group focused on the business purpose.

Does Your Social System Pass the Test?
The built-in conflicts that are part of every organization are being surfaced.
These conflicts are resolved in a timely way by people committed to delivering results.
Information flows horizontally across silos and is not hoarded or deliberately distorted.
The right questions are raised so that you can look at your business from both “50,000 feet” (the big picture) and at ground level and conduct brutally honest dialogue.
Operating mechanisms are designed so that they result in high quality, timely decisions and help deliver the aspired results.
You know the points of intersection where operating mechanisms are needed for people to make trade-offs and share information.
Appropriate and continuous improvements are made in the working of the operating mechanisms: creating new ones, combining some, eliminating others.
Each operating mechanism is connected in an unfiltered way to sources of external information.
Leaders have the psychological courage to confront reality and shape behavior of participants in line with the value of the business. The right behavior and values are reinforced and those who deviate are dealt with.

You must take the initiative to provide opportunities for them to not only contribute to the organization, but also to be tested and hopefully expanded. If they reach a limit – maybe because certain know-hows didn’t develop properly or personality traits got in the way – you then deal with this issue as well.

The usually way of deploying people’s leadership talent is to start with a job opening and see who can fill it. But the know-how of selecting leaders and helping them reach their potential means focusing on people first, not jobs – actively searching for leadership talent throughout your organization, creating for those individuals career moves that test their ability to take on more complexity or learn new skills, and creating processes to do it on a disciplined, regular basis. You have to develop and improve your judgments on people, which means spending time and energy on it daily, weekly, monthly, not just during one-a-year talent reviews or succession-planning sessions. You have to create a view about the person’s competence in the know-hows, but also look at him more broadly to see what makes him tick: what he loves to do, how he thinks, how he behaves around others. Then you can match the leader to the job in which that person will shine and strengthen business performance.

As you practice and improve your observational powers, you have to prevent your own psychological blockages from getting in the way or perceiving people accurately. You can’t afford to lock into unrealistically positive or negative views of people, thinking “he can do not right” or “she can do no wrong,” and discounting information to the contrary. People grow and change, and jobs continually evolve, so you have to be psychologically open to continuously update your judgments on people and their fit with the job.

See the person as a whole, over time, in a variety of situations, and work backward from what you observe to determine what that person’s individual gifts really are.

Crosscheck your judgments by soliciting different viewpoints about key people.

First nail down the person’s natural talents and tendencies, and then look for situations that will allow those things to develop and take off. If the negatives are really getting in the way of job performance or growth, you can give the person coaching to see if they can be corrected.

People learn as much if not more from adversity as from success. People who’ve had setbacks shouldn’t be discounted without probing into the specifics of the situation.

The principles involved to mold a team of leaders:
Share numbers, reasoning, and results to shape a common view of the business and its context.
Have the psychological courage to confront behaviors that harm the team’s effectiveness.
Anticipate, surface, and resolve conflicts.
Pick the right people.
Provide prompt feedback and coaching.
Recognize and avoid derailers.

It takes an enormous effect and sustained repetition to get every member of the team to arrive at the same point. At first team members will see and hear what you are saying through the lens of their job specialty and select only what seems to apply to them.

Develop an internal team dialogue in which each member contributes to the discussion.

But the value of a team and your ability to lead it is that a decision can be reached that allows everyone to voice an opinion, debate the merits, and the right choice emerges.

The group makes better decisions than individuals and no one person has all the information.

But people can be reluctant to offer opinions or comments in a group setting where they may be challenged or, worse, ridiculed. Those who do speak out can become committed too early to a position and be unwilling or unable to retreat.

Goals have to be of the right type and magnitude to be both achievable as well as motivational.

Unlike many leaders who set grandiose goals and implore others to achieve them, Immelt established aggressive goals only after he assessed how the organization might go after them. The granularity of the thinking makes all the difference. The goals were realistic at every stage, and realism eventually earns credibility, just as surely as unfulfilled promises destroy it.

The goals must be clearly defined with specific time frames at the start.

Sometimes the view from below is a wake-up call for high-level leaders.

Sometimes you might want to set goals that build the self-confidence of the organization. Usually that means goals that you are almost certain can be accomplished. When they are, the organization gets energized. Over time you can increase the goals as you simultaneously increase the self-confidence, and eventually you can begin setting stretch goals.

Stretch goals show people that they can accomplish more than they thought they could.

The point is not to get people to work harder. Rather, it is to get people to do things differently and thus raise the capability of the organization. Such a goal carries with it higher risks. Unless you do the mental gymnastics necessary to figure out what has to radically change, setting a stretch goal won’t be credible and the organization won’t trust you. You have to be sure that people are prepared to think differently and have sufficient resources to accomplish the goals.

Setting the right goals means frequently rethinking every assumption about the market, the competition, and the business environment.

Take a broad look at what is on the horizon two or more years out, then work backward to visualize what you think the organization can achieve in that context, both over the longer term and in the interim.

Priorities are the pathway for accomplishing goals. They provide the road map that organizes and directs the business towards its goals. When the priorities are unmistakably clear and specific, people know what to focus on and, therefore, what should get their attention, resources, and follow-through.

Goals are set at fifty thousand feet. Priorities are set at ground level where you must have the tenacity, attitude and willingness to probe the messy details to think through and define what the most important actions should be. Priorities determine how resources are allocated and thus have the potential for touching off clashes as resources are moved from one person to another. While the priorities must be absolutely clear, very specific, and, above all, doable, that isn’t enough. Once set, you must repeat the priorities over and over again and follow through on them to be sure that people understand them, buy into them, and act on them so the organization executes them and doesn’t deviate from the course the priorities set.

What is important, what is urgent, what is long-term versus short-term, and what is realistic versus visionary.

“A very important part of this process is to be very specific and very clear. We learned that you have to repeat things a lot. You have to create communication channels that have consistency to keep the priorities from changing. At first, people understand them differently depending on their mindset. You have to be repetitive and consistent until they all understand what they need to do.”

“First you have to open up their minds and convince them you are listening. Too often in the past someone might say ‘This is worrying me’ and the leader would say ‘We’ll deal with that later.’ Now we have to know to stop and say instead ‘Why are you worried?’ and work it out right then.”

That’s why clear, specific priorities with a time frame are so useful. They help build confidence.

Anyone can state a priority. It is only when resources are applied to it that it really becomes one.

People announce priorities but find it psychologically difficult to take resources from someone and give them to someone else. You need to have a process to ensure that the necessary shifts take place. You have to monitor in your regular reviews that the shift is continuing to happen and that priorities are being executed.