How do successful businesses adapt to a world of uncertainty? That's been a big question for me that has largely been unanswered in the race towards applying new and advanced technologies as a way of finagling the business and digital transformation agendas.
It was in that context I recently spoke with Jim Hagemann Snabe, chairman of Siemens and former co-CEO SAP. I learned a great deal and am grateful that Jim shared experiences and lessons from the last 10 years or so that have led to Dreams and Details, the book I reviewed in September last year.
Since the book was written, Snabe has deepened his thinking about a framework for how a successful 21st-century business evolves. Of course, technology plays a big part. But it is only a part. For example, Snabe talked about the fact that since 2013, Siemens has acquired four large software companies and now employs some 22,500 engineers who work on bridging the gap between the physical and digital worlds.
The last 10 years have seen the digital technology businesses win but sooner or later you run out of things to digitize. The wind turbine will still be there producing energy and while we see autonomous vehicles, you still need the vehicle. But when you can have a digital representation of the real world then there are many things you can do that you can't if you only have the plant or the software. This is what our digital factories do.
Moving into these areas carries great risk yet according to Snabe, these investments are paying off in terms of increased, profitable revenue. It is one example of how he applies the idea of re-imagining business to compete in a digitally enabled world.
Another example Snabe cites is counterintuitive.
When Maersk ships sail slower we reduce costs and burn less fuel. It is not uncommon for a container to sit in a port for days. So instead of sailing fast we focus on reducing the overall transportation time from factory to the customer. We deliver a better service and make more money. It is good for business and good for the climate at the same time.
Viewed another way, when you're reducing oil consumption then you are both adding value and contributing to a reduction in carbon emissions. But how do you make those kinds of leap in imagination in established and successful businesses where customs and practices are deeply ingrained?
We are so used as leaders to believing in the plan but we don't account for change. In the current world that no longer makes sense. The plan is meaningless and so I believe that to release the kind of creativity and human potential required to succeed then you have to free people from the plan.
If that sounds like a recipe for madness you'd be among the majority but in the examples Snabe cited, it is clear that while difficult, inspiring the entire workforce to get behind a mission to which they can relate is achievable. In another example, he talked about how, during his time at SAP, he worked to instill and reinforce a mindset where developers could imagine building software that a billion people would use.
When your mindset says that you have to develop for a billion people then you instinctively know that it has to be simple, work primarily in a mobile environment and be very easy to use. As a leader I can now leave you as the developer to figure it out and make the right decisions about how that software will work.
That is very different from the precisely planned waterfall method of development that has been common among large software vemdors. There is a certain logic in this apparent chaotic form of leadership but one that is attuned to the idea of getting everyone to think differently.
Instead of appealing to the financial logic by which we've run businesses for many years, there needs to be an emotional connection to the story that leaders tell their people. And that must be accompanied by authenticity. If you're not authentic in the way you go about execution then you lose authenticity for a long time.
In my review of the book, I was critical of the lack of detail about getting from A to B. I was especially concerned that while leaders often talk a great story, it often gets lost on the way down to those who have to do the real work. Here Snabe has an interesting approach:
We have traditionally 'managed in the middle.' That leads to dilution at every level so your 120% vision loses 30% each time it is told so by tthe time people who do the work get the message there's maybe 10% left. That does't work. I believe we should manage up. I have to prepare a story that the next level of leaders can articulate and become passionate about so that they act as empowering CEOs as they take the message on to their people and so on.
One way he describes this in the book and repeated to me was with the idea of the person who has to make a journey from one point to another and where the leader provides the person with a planned route.
We can agree that I'll check in with you every 15 minutes to check how you're doing but there are two things that can go wrong. If I don't teach you how to drive the car properly then shame on me. But traffic conditions are things I can't control. They are unpredictable. So if I am calling you up and you're not where I think you should be, then what? Our tendency then is to call you more frequently to inquire how you're getting on. And you can imagine how well that works.
What I can do is this: I can teach you to drive, I can teach you how to use a map and I can provide you with rules such as speed or safety. I only ask that you don't break the rules and I am willing to bet that if I leave you alone to find your own way then you'll do so more quickly than if you follow my plan.
The reason this works is because a plan is only as good as the imagination of the person making the plan and cannot account for the unpredictable nature of the conditions under which plans are executed. But in order to succeed leaders have to remain focused on the most important thing.
I believe you can only successfully concentrate on one or two things that you're working upon in an iterative, scrum session way to eventually achieve perfection. I want to get that one thing perfect.
But what about purpose? We've heard recently about the importance of inclusion, climate change seems to be on many agendas and the concept of values is infusing much management rhetoric. Snabe's answer surprised me because I know he cares passionately about sustainability topics.
We often think about doing good but frame it around what I spend and that doesn't please my shareholder. If we think about how we make our money rather than spend it then I can satisfy my shareholder while making meaningful contributions to societal goals. But it has to be in the context of the shared vision. If you think in terms of the UN's SDGs, then you're really becoming philanthropic and in my view you then need to be an NGO. There is another way.
Again and providing yet another example, Snabe talked about the fact Maersk ships a considerable amount of the world's food. By thinking about how to reach more people and applying technology, Maersk can move food more efficiently and safely while at the same time establishing a leadership position of sustainable responsibility that makes them a preferred supplier. In other words, it's not about the emphasis of one thing over another but about how a business operates through a state of becoming that allows the business to contribute to many stakeholders.
During our conversation, Snabe told me how his way of thinking is informing the way he chairs board meetings.
In the past, you spend most of your time looking at what has been done, whether you've hit your KPIs and so on. Now I ask that we spend at least half our day talking about the future (the unknowns) and how we are tackling those. We're a lot faster at dealing with the necessary reporting which we do first but I now say, we need to spend this time on what comes next so when do you want lunch?
It's a great incentive!
I could have spent hours soaking up the wisdom I was freely offered and, with a background in both finance and technology, I can see how Snabe's message appeals. Applying scrum principles to figuring out how to approach the details of the future allows for experimentation and a degree of failure while at the same time learning. It is an approach that Snabe believes has to be baked into the ethos surrounding the journey towards change.
The most important thing about the scrum approach is not that you arrive somewhere but that you are learning and applying the lessons in an iterative manner but always with the goal in mind.
One thing fresh I took from our conversation that was completely new. While we tend to view the scrum approach as one that is located within the technology industry, the principles of learning when the pathway to the goal may be unclear can hold good across multiple industries.