Leadership in a Complex and Changing Business Environment
By Lois Slavin
November 2, 2002
On October 25, 2001, members of MIT’s System Design and Management Program convened for its first alumni conference. SDM alumni from across the United States were joined by their partners in the SDM community, including current students, industry executives, faculty, and staff to hear presentations on and participate in discussions pertaining to the conference theme, "Leadership in a Complex and Changing Business Environment."
SDM co-founder and Dean of MIT’s School of Engineering Tom Magnanti opened the conference. He presented an overview of four current strategic themes in engineering at MIT: bioengineering; tiny (micro and nano) technologies; engineering systems; and information engineering. He also spoke about the Institute’s educational innovations, including the OpenCourseWare initiative.
"SDM students are exceptional," he told the group. "They bring great value to our partner companies and many other organizations."
Leadership through Crisis
Following Dean Magnanti, Sam Liggero, former vice president of Polaroid, spoke about leadership through crisis in a presentation entitled "Leading in White Water." He described how the company dealt with high turnover rates and other challenges, outlining approaches used to develop a critical mass of about 40 mid-level managers to positive influencers throughout the company.
Liggero explained that he put out a call for volunteers to head up sub-committees to determine root causes of the turnover and determine how to address the issue. "Their involvement allowed rapid penetration of new ideas throughout the company," he explained. "Forty people can do this much more quickly than one. The more people you can get on board to help make the change happen, the better."
Liggero offered many other tips for leaders to create an environment where people can realize their full potential, among them:
- Know what the company’s strategies are and consistently bring them to the people so they can link them to their work.
- Give employees clear goals and build accountability.
- Communicate, motivate, inspire!
- Do not micromanage. Get out of the way!
- Invest in people! This goes beyond money – show your people you care about, and trust, them.
Liggero concluded that the bedrock of managing change is constant communication. "When the marketplace changes so quickly and the strategy must adapt, you must constantly communicate," he advised. "Keep the goals simple, relevant, and SMART — Specific, Measurable, Achievable, Realistic, Time-bound."
Perspectives on Leadership
Don Davis, retired CEO of StanleyWorks and a lecturer on leadership at LFM/Sloan for the past 15 years, shared his perspectives on leadership with the SDM alums in an open discussion. Among them:
- Leaders don’t choose their followers – followers choose their leaders.
- Diversity in an organization is not only legally required, socially desirable, and politically correct, it works better.
- The number of effective leadership styles is limitless. Be yourself!
- In building an enterprise, hire for attitude, and train for SKILLS.
- No one can take your integrity away from you. Only you can lose it.
- Leaders should think of themselves at the bottom – not the top – of the organizational chart.Leadership should be viewed as service or stewardship.
- We all have underdeveloped leadership potential. It can be developed.
- Good leadership doesn’t just make a lot of difference. It makes all the difference.
Davis also shared his eight essentials for good leadership, which include good emotional, physical, and mental health; creativity; competence in the area in which you are working; a degree of good judgment that results in at least a 50 percent hit rate of positive outcomes; awareness of how people are responding to you; integrity; and trustworthiness.
Davis emphasized the need for being an integrated person who has a balanced physical, intellectual, and spiritual life. "Keep fit. Have outside interests. Do volunteer work. Cultivate a spiritual dimension in your life. Don’t think you really control anything because you don’t."
Near the end of the discussion, Davis was asked how he came to MIT. He told the audience of how he approached the dean at Sloan, said he was interested in teaching in the Leaders for Manufacturing Program, and said he wanted to give back. "I told him I didn’t want a salary, just expense reimbursement, a parking space, and access to MIT’s squash and tennis courts. Fifteen years later, Davis is still here.
SDM Leadership Experience in Business
SDM alums John Sullivan, who is the director of system design and integration at Pratt & Whitney Aircraft, and Chris Holmes, who is the vice president of engineering, at L-3 Communications, which is a supplier of communications and navigation equipment, held an interactive discussion on the SDM leadership experience in industry.
To gather data, they polled the audience on a number of items, including where they are positioned within their organizations; how effective they believe they are; their stress level; their ability to distinguish between immediate, short- and long-term needs as well as between what is right for them, their boss, the company; the definition of "risk," and a range of other items.
Members of the audience engaged actively throughout the presentation, sharing their insights and experiences. Sullivan and Holmes reminded them that leadership means making " a million decisions a thousand times a day. Expect to be alone. The person who you are really accountable is the one you see in the mirror."
Leadership in Crisis
Professor Tom Kochan began with an update on leadership initiatives at MIT. "This is obviously a time that is trying for all of us – with our families, in work, and in society — so looking at questions of leadership after September 11 is particularly important."
Kochan gave an overview of the MIT Leadership Model being developed by Professor Deborah Ancona and a team from the Sloan School. Kochan expressed concern that leadership is generally seen as an individual endeavor. "We see it as a distributed process where a community is energized to get people who are separated working together interdependently."
He then outlined the Sloan Leadership Model, describing the three Cs: Catalyzing action; contingent on Context; and the form of a leader’s individual Change signature.
Kochan described a post-September 11 conversation he had with Anne Stevens, the vice president of North American vehicle operations at Ford, which described several lessons for crisis leadership:
- Focus on the crisis and set aside all other issues.
- Take charge. At Ford, the process involved contacting senior vice presidents, closing corporate headquarters; and bringing them together so they could all get the same information and communicate effectively throughout the organization.
- Frame the issue clearly. Consider how people should think about, and interpret, the event.
Kochan then expressed concern about how U.S. companies were addressing post-September 11th workplace issues and asked SDM participants for examples – good or bad – from their companies or others. One alum described how Marriott polled employees, then decided to cut back everyone’s hours so that, although wages would be reduced, they could all keep their jobs and still get health insurance and other benefits.
Another related situation involved Air Canada and how they developed a work-sharing agreement to help reduce the number of layoffs. Pratt & Whitney locked down some facilities, set up help lines for families, and even held prayer meetings.
Kochan noted that it’s important to involve employees. "Are we asking the American people how we are all going to work together on these issues? And how can we engage them? Both Marriott and Air Canada discussed the possibilities first with their employees. These types of decisions need to involve a lot of community input."
Kochan said, "Crises bring out both the best and the worst in people. Companies need to prepare a plan for returning to ‘normalcy,’ but that doesn’t necessarily mean going back to the way it was before."
Kochan believes that we are currently in a period of reflection. It’s a time to ask "how did we handle things and what are the lessons that will help us plan for the future?
"Leadership comes in many sizes, colors, and genders," said Kochan. "It’s important to get people involved and help them feel they are making a contribution. People can share the burden and share the leadership.
Leadership in Strategy Development and the Delta Model
Professor Arnoldo Hax outlined post-September 11 strategy development. "These tragedies produced an extraordinary change everywhere in this country. We need to ask what it means to business, government, and the NGOs."
Hax believes that the net flow of talent is important. "Are you attracting and retaining the very best? How do you deal with it in creative ways that are not mere platitudes?" he asked the audience.
Hax believes that how we make the transform from a transaction-centric organization to customer-centric will be key to success. Three tenets of strategy must be based on a business’ purpose:
(1) Create economic value – profitability and growth (output).
(2) Develop customer bonding – this is the driving force in strategy.
(3) Achieve the spirit of success.
He illustrated how the Delta Model showed three distinct strategic challenges that transformed the customer-centric organization.
(1) Fight the product-centric mindset – The best product positioning is not necessarily the most profitable or best way to serve your customer.
(2) The transformation is not straightforward — The alternative to a best-product positioning is not always easy to define or accept. Knowing each customer individually is important. Beware of treating technology in terms of this mass mindset.
(3) Often redefine the game you are playing.
Hax advised the audience not to sell products but to sell customer solutions, customization, learning, and services. His Delta Model focuses on competitive driving forces; service differentiation; and different go-to approaches.
"In order to receive documented return on investment, you need to know the individual customer," he remarked. "Therefore, de-commoditize your customer, the product and mindset. Don’t treat every customer equally. Select your customers – don’t let them select you."
Hax also suggested that there should be an empty chair in every strategy meeting, representing the customer. He also cautioned the audience to remember that "channels are essential – they own your customer;" to use technology wisely, and to beware of the organizational structure implications.
"There’s no easy answers," he concluded. "This is just a quick grounding on a very difficult issue."
Entrepreneurial Leadership: From an Idea to a Company
Peter Stern, CTO and co-founder on Datek Online, the fourth largest online financial services firm, began by giving an overview of the company and its origins. "We develop technology to let people trade stocks more quickly and give everyday people advantages previously available only to that those with more sophisticated technology," he explained.
Recognized as an innovator in its industry, Datek Online is a young, profitable Internet company, competing with other businesses that have been around for decades.
"We didn’t know what we were doing when we started," said Stern. "We had good ideas, made a lot of errors in every aspect of the business, and tried to understand why. We were able to learn a lot from our mistakes."
Stern believes that knowledge is easy to package and share, but wisdom is not. "Wisdom usually sounds like platitudes until you’ve made some mistakes and learned the lessons on your own." He then went on to offer the following leadership and non-leadership truisms:
(1) Don’t measure success by headcount. Hire as few as possible, but hire the best people.
(2) Try to keep your business in one room as long as you can. It is easier to coordinate activities and decide who has what role. Datek Online was fourth largest company in 1997 and all people and computers were in one room.
However, if you have to grow your company, Stern suggests the following:
(1) Consider the amount of "scaffolding" you’ll need to support the business, such as software documentation, paper processes, and organizational charts. Stern calls this "scaffolding" because it provides the support that will allow you to build something else.
(2) A leader determines goals, implements processes to achieve them, then has metrics to determine if the goals have been met. A useful metric for a leader is to see how many people can paraphrase the goals correctly.
(3) Realize that everything in the world can be represented as a process. When someone has an idea about how to implement a process, chances are it will apply elsewhere. You just need to think about it differently.
(4) Make sure you have metrics in place.
(5) Understand your goal, determine your next step, then, at every step, see if that is actually getting you to your goal. If not, rethink.
Stern then offered several general leadership platitudes, among them:
(1) Share conflict with each other. It can be useful. When a leader chooses the best idea, s/he will generate conflict. That’s good.
(2) Don’t lie.
(3) Don’t avoid risk.
(4) Do the simplest possible thing that works. Most times, technology-oriented people love complexity.
In concluding, Stern told the audience, "the key to a successful organization is to make lots of mistakes, learn from them, and then change the thinking that led to them."
SDM: What Did I Get Out of It?
Several SDM alums met with current SDM students to share their experiences of the program and how it has helped them since graduating. Two of them, Steve Klosterman and Tim Root, gave formal presentations. Others, such as Joe DiStefano, Troy Hamilton, Shawn Ritchie, Sylvie Bokshorn, Jeff Ezzo, and Doug Hague spoke more informally.
Steve Klosterman, SDM ’00, noted that when he entered SDM in 1998, the class of 60 was SDM’s largest to date and the economy was booming.
He gave an overview of his career at Digital, at a start-up, then at Sun MicroSystems, where he has been for about 12 years. He noted that, although he had risen through the ranks to senior manager, he began to feel that his basic competency in leading across the enterprise might be lacking — especially in non-technical areas that interfaced with engineering, such as knowledge of accounting, marketing, and other non-technical areas.
Klosterman noted that Sloan’s business curriculum is what attracted him to SDM. It gave him an opportunity to validate where his intuition in certain business areas was strong and areas where he needed to shore up his knowledge with courses. He noted that one class was especially useful for the practical tips he learned in, for example, effective ways to network both in his job and at social functions. Klosterman said that his work with teams at SDM has translated directly into how he now works with virtual teams at Sun.
He explained that he chose a thesis topic that primarily involved organization, analysis, and intuition, as well as some engineering content. Working closely with Professor Tom Kochan, Steve told the group he found the experience very satisfying and rewarding.
Klosterman said that the MS in Engineering that he got from SDM has more value at Sun than an MBA. He has an increased ability to synthesize and interpret information and values the networking capability the program has given him, such as having access to MIT professors. This served him well when he was asked to apply for a particular position and he spoke with Dr. Anna Thorton. "It was notable that I never had her as a professor, but had just met her previously during a brief hallway conversation. Yet she spent over two hours with me discussing the opportunity."
While Klosterman did not get that job, he did get noticed and soon thereafter was asked to interview for a director-level position. He is now working in that position, which involves global contract manufacturing. He is also forming Sun’s first systems engineering group.
In concluding, Klosterman told the group he is now sponsoring Sun’s first MIT internship. "Giving back is as rewarding as receiving," he said.
SDM ’00 alum Tim Root is VP and Chief Technology Officer (CTO) of PictureTel. He noted that one of the reasons he decided to return to school is the opportunity to learn from top professors who present organized information, rather than continuing to learn in a more ad hoc way at work.
With a wife, two children and a house, Root first spent time defining what he wanted to get out of the SDM program. For him, it wasn’t an "A" in every class – it was the opportunity to create a network. "Succeeding in business is all about people," he told the group.
Root worked as a group manager in software while at SDM then moved up to director of product development in hardware. This new position required him to work extensively in developing new products with a team of engineers at PictureTel in the United States and at Sharp Technologies in Japan. Their success led him to the position of CTO and involves his establishing and building new business partnerships.
Root said that at PictureTel, there was a void in engineering knowledge at the most senior levels and a lack of business acumen. Consequently, the company was recently purchased by Polycom Corporation.
Root also said that SDM has given him a holistic view of markets, technology, and corporate strategy and he is now comfortable in people/project management; architecture/technology; and business development.
Root shared his learnings, which he referred to as "nibbles of knowledge," among them:
(1) There is a life outside of engineering. Engineers tend to have a limited view of business and it should be broadened.
(2) Have confidence in your instincts. SDM has presented you with tools and knowledge that 99 percent of your contemporaries do not have.
(3) Pay attention to the corporate business model.
(4) The customer is king.
At the end of the conference, SDM alums met with Denny Mahoney, who is the director of the SDM Fellows Program, and other LFM-SDM staff members to discuss how to move forward with next year’s alumni event.
"Holding the 1st Annual SDM Alumni Conference in Cambridge was a real ‘homecoming’ for many of our alums," said Mahoney. "Scheduling the conference during the SDM Fall Business Trip meant that alums were able to share their experiences with the SDM students – a fundamental need expressed by both groups. This willingness to ‘tell their stories’ and ‘to give back’ to the program, was testimony to the fact that the SDM experience has made a profound difference in their lives. My sincere thanks to the planning team led by Joe DiStefano. They did an extraordinary job in attracting an outstanding group of speakers. From my perspective, the conference was fantastically successful – I can’t wait until next year!"