Jay A. Conger
Professor, London Business School
Leading in the New Century: Storm Clouds and Silver Linings on the Horizon
This book comes at a critical moment. As we start off this new century, we are already witnessing a remarkable array of perils and opportunities for leaders. Their roots can be found in the closing decade of the 20th century. On the one hand, it could be argued that the 1990s were an aberration, despite the fact that as they drew to a close, they were widely proclaimed as the starting gate to a “New Economy.” The decade departed in a rush of technology-driven euphoria not likely to be seen for a long time; 21-year-olds are not likely to have another opportunity to raise millions of dollars on the strength of simplistic business plans favored simply because they contained the word “Internet.” In the frenzy, unproven but imaginative business models such as Amazon and Priceline and Yahoo and Webvan caused such a stir that their market capitalizations exceeded some of the world’s most successful companies These seedling firms were predicted to rapidly displace industry giants such as Barnes & Noble, American Express, AOL Time Warner, and United Kingdom’s Tesco. Yet, as we now know, they did not. The end of the ‘90s was also the era of Enron—a revolutionary company in an un-revolutionary industry: natural gas. As the icon for corporate transformation from the then-styled “Old Economy,” Enron epitomized the sky’s-the-limit thinking of the era. Its CEO, Wunderkind Jeff Skilling, claimed that companies no longer needed hard assets to be highly successful. According to this mindset, information—not hard assets such as pipelines and power plants—was the key to dominating, in this case, energy markets. Physical assets, so the thinking went, simply tied up cash. It was said to be the era of bits and bytes and brainpower. Brawn was out, imagination was in.
Euphoria aside, the true technological wonder of the late 1990s—the Internet—indeed continues to alter our lives in both mundane and profound ways. Unlike the dotcom mania of that time, it is not a short-term aberration. Internet retailing and net-based exchanges continue to grow. Several infants of the e-age, such as eBay, have proven their staying power: they are now more mature and more profitable. Email has become the primary means of communication within organizations. Mobile Internet-enabled technologies such as the cell phone and personal digital assistants are undergoing remarkable transformations in their capabilities. Although Enron underwent the most spectacular corporate collapse in the early days of the 21st century, other companies have become e-enabled revolutionaries—and at a rate faster than most critics would have guessed. GE, for example, today has the largest business-to-business net-based exchange in the marketplace, and Tesco boasts one of the most successful net-based supermarket operations in the world.
The “War for Talent” so widely promulgated in the ‘90s seems less intense today, as widespread layoffs thin the ranks of American business. The recession, while temporarily alleviating the intense competition for talent in general, ironically created a war for leadership talent. Nevertheless, the lesson remains: talent is the most precious of resources in this Digital Age. It now seems crystal-clear that most of the true value-added work in this century will be performed by sophisticated knowledge workers; the upshot of this is that these people are ambitious, restless and sophisticated, and they can and will jump companies if necessary to keep their own value propositions strong and viable. Attracting and retaining these critical assets will remain one of the most important challenges and competitive advantages for any organization.
Other challenges for leaders will come from environmental concerns and important geopolitical trends that began in the 1990s. Global warming, growing concerns about water quality and supply, and the potential toxicity of components of today’s industrial products are sleeping giants ready to create competitive pressures in the global marketplace On the geopolitical front, China will continue her global ascendancy, having joined the World Trade Organization. While many Western companies see China as an immense market for their goods and as a place for inexpensive production, she will also become a fearsome competitor and is already moving into the arena of high-value-added products and services. Several Chinese hard goods companies have set up manufacturing operations in the United States. China and India now contain the world’s largest populations of engineers. Soon, both will contain a great number of software programmers. Those resources will give these nations immense competitive advantages in this century. Only politics, lax banking practices, and opaque financial systems will slow them down.
Leaders now face the added challenge of operating in a world where terrorism is not restricted to faraway lands or isolated incidents but, rather, is a possibility in one’s backyard. Over the past decade, terrorism has undergone a clandestine process of global organization. Despite recent setbacks in Afghanistan and environs, the international network of terrorist cells established by Osama Bin Laden and the al Qaeda organization with the active backing and financial support of important Middle Eastern nations are far from dismantled. Some Middle Eastern and Near Eastern nations see this organization as absolutely vital to their interests, especially as a counterweight to the influence of the United States. As importantly, al Qaeda’s mission has expanded from launching terrorist attacks on Western soil to a broader mandate of harming the economies of the West and disrupting global trade. At the very least, turmoil in the Middle and Near East and Africa will most likely worsen. We may be at a crossroads with implications few of us truly understand.
In the world economy, leaders face a great deal of turbulence, like pilots navigating between mountains and storm clouds. The first part of the new century is already proving to be an economic challenge: Argentina’s economy has crumbled. Turkey is in a precarious position. Germany is still struggling with employment problems, and Japan is like a mastodon trapped in quicksand. On the other hand, one of the grandest economic experiments of all time—the integration of Western European countries into a common market—is entering a new phase with the conversion of national currencies to the Euro. The success of this experiment will be determined within the first decade of this century. If it succeeds, Western Europe could become the world’s most dynamic market. National interests, however, could still derail the vision.
In hindsight, we may discover that many of the “well led” companies of the 1990s were simply riding waves of a booming economy and an exuberant stock market. One barometer that lends weight to this idea is the rising number of ousted CEOs. Several of the glamour corporations of the last decade are already looking ragged. For example, Lucent Technologies and Nortel Networks have watched their valuations implode due to losses from poor investments in acquisitions and wrong choices in technologies. Several all-stars of the New Economy, for example, Cisco Systems, EMC Corporation and Sun Microsystems, continue to struggle to regain the high ground they once held. The industry providing the pipelines for the Digital Age—telecommunications—is now facing massive losses from investments in both technology and licensing arrangements. Marconi’s collapse was the first warning that the industry was in trouble. It was quickly followed by the high flyers—companies like Vodaphone and JDS Uniphase. The latter alone announced write-offs of $51 billion in 2001. Global Crossing, which spent five years and $15 billion to build a worldwide network of high-speed Internet and telephone lines, has gone into bankruptcy. These are instances in which the corporate vision was far ahead of the customer base.
In addition, the leaders of many of the remarkable mergers of the late 1990s will be tested hard during this first decade of the new century. Some of the most interesting arenas: the automobile industry, with the Daimler Benz-Chrysler and Renault-Nissan mergers—and financial services—with the Travelers-Citicorp merger and others. History would suggest that only a handful of these merged entities will live up to their promises of synergy. For example, the AOL side of the communications and entertainment gorilla AOL Time Warner has already announced potential write-offs of up to $60 billion, representing 30 percent of the company’s assets. Tyco International, one of the world’s largest conglomerates and long admired for its acquisition strategy, has talked about splitting itself into four independent companies because of market valuation issues. Are these harbingers of disillusionment to come?
Despite these storm clouds, silver linings still abound for leaders in the new century. Rapid advances in logistics and information technology, global financing, and shifting demographics all promise new marketplace opportunities. Advances in computer-assisted product prototyping and mass customization promise a dizzying array of ever-changing products for consumers. Thanks to fast-cycle logistics, which allow manufacturers to bring components together instantly without tying up lots of inventory, companies may invest only hours in working capital. Information technology and the virtual workplace will enable us to create organizations that were never before possible. For example, we can now “assemble” a company with employees around the globe. A venture capitalist friend of mine is putting together one such business: The technology is designed in Finland. The software programming is performed in India. The CEO and his executive team are based in Silicon Valley. The products are marketed by an entirely different group of companies who span the globe. The lesson of such an enterprise is that yesterday’s management science fiction is today’s reality.
The implications of these trends and others that we cannot yet foresee is that leadership will be the most important resource an organization can possess. After all, it will be leadership that determines whether organizations successfully harness the emerging opportunities and overcome the perils that await. It is no time for cowards; indeed, it is a time when leaders are being, and will continue to be, tested mightily. Not only that, but the stakes—financial and otherwise—have never been higher; the consequences of failure are devastating. In such circumstances, Boards of Directors are far quicker to oust poorly performing CEOs than ever before, and the news media are as quick to chronicle falling heroes as they are to point out rising stars.
Financial markets today punish poor performance with a vengeance. Cases in point are Enron and Lucent, one-time darlings of Wall Street, and the remarkable speed with which their market valuations imploded. Within weeks of serious performance problems being announced, tens of billions of dollars of market capitalization were lost. What took years to build in market valuation vanished in days.
It is in turbulent times such as these that we most need guides. That, in a nutshell, is the value of this book, which is an anthology of leadership tales and a traveler’s guide to leading in the 21st century. Its teachers are leaders or keen observers of leadership. They have lessons for others along the way, and each one has its own value in terms of advice, experience, resources and encouragement.
The book is organized in five themes: 1) leadership, 2) managing human capital, 3) competitive advantage; 4) strategic change and transformation; and 5) the stakeholder’s view.
A word about each:
Chapter 1 - Leadership
Chapter 2 - Managing Human Capital
Chapter 3 - Establishing Competitive Advantage in Today’s Market Environment
Chapter 4 - Strategic Change and Transformation
Chapter 5 - The Stakeholder’s View
In conclusion, this book will take you on a tour of the most important challenges and opportunities that you will face as the new millennium unfolds. This new century will be characterized as both the best and worst of times. Like most of us, you may feel lost at times. Perhaps some advice from one of America’s greatest explorers, Daniel Boone, will come in handy. Boone was once asked, “Have you ever been lost?” “No,” he replied. “But I have been bewildered for a few months.” In the end, he always found his destination as an explorer. These are words and an attitude worth remembering when you are leading in this new century.
The Book
Overview
Inside the Bookcover
Foreword
Preface
Excerpts
Chapter 1 - Leadership
Chapter 2 - Managing Human Capital
Chapter 3 - Competitive Advantage
Chapter 4 - Strategic Change
Chapter 5 - The Stakeholder's View
Prologue
List of Featured Executives
Executive & Company Bios
Fast Facts
About the Editors
Contact the Editors