A Leadership Mindset to Connect Strategy & Purpose

The very first episode of Voices of a Business School features INSEAD strategy professor Susan Lynch on how companies are becoming increasingly reliant on agile approaches and purpose as the world faces constant change.

Professor Susan Lynch (INSEAD)

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Transcript

SPEAKER_02 0:06

I think it's interesting to think back to important childhood memories or things that really stand out to you because they can tell you quite a bit about what drives you. Purpose gives you an overriding reason to act in certain ways inside a firm. The world is more VUCA than it's been before, so it's more volatile, it's more uncertain, it's more complex, and it's more ambiguous. We can see how what's going on in the world today makes this challenging and may actually shift the way we approach sort of leading firms. Yes, we have to find direction, but that's harder because there is so much uncertainty. So some say, you know, the world's changing so fast that there's no point in actually even having a strategy anymore. You just need to respond to what's going on. I think that's naive. You still need to have a clear direction, but now you've got to be more willing to change. Purpose is the you know the hot topic. Firms are getting very hands-on about building a bottom-up process, helping individual employees work out how they can connect to the corporate purpose. That's where those childhood stories come back into play.

SPEAKER_03 1:06

Wow.

SPEAKER_01 1:14

Hi everyone and welcome to the very first casting session of Voices of a Business School, hosted by AVT Business School. In the studio today, we're excited to welcome Strategy Professor Susan Lynch from NCAT, together with AVT's very own director, Jesper Bergman. My name is Frederica, and I will be here to introduce you to every single episode of the podcast in the forthcoming future. I'll let the the experts do it for now. Thank you for listening. Let's dive into it.

SPEAKER_00 1:47

Welcome, Susan, to the AVT Podcast. Today we have Susan Lynch from InSet in our podcast studio, and we will ask Susan about strategy, strategy execution, and purpose. But first of all, it'll be really interesting to hear just a little bit about your life up to this day. Wow.

SPEAKER_02 2:10

Um it's great to be here. I um uh was born in Australia. I actually did uh a couple of degrees. I did a law degree and a commerce degree, and uh from that background went into consulting. And so my first job was at McKinsey, and I spent seven years there, traveled the world, really enjoyed uh the experience, really loved the idea of helping uh businesses solve important problems. And after the seven years uh decided to take a little break and did a PhD. And I did a PhD at London Business School in strategy, in in uh strategy and international management, and enjoyed that experience and really enjoyed becoming a little more expert in one topic. And from that uh went on to become a professor of strategy at INCAD, which is still my home uh university. So uh from there uh moved uh with my family to Boston, which is where I'm now based. And so I now uh uh teach and research from um my uh home office uh in Concord, Massachusetts, and uh fly um to wonderful locations like Copenhagen uh to meet with executives and hopefully help them start to solve some of their problems.

SPEAKER_00 3:19

Brilliant. I was just like to go back to Australia just for a little bit and dig into your background. Yes. So growing up there, what uh what about some some childhood dreams?

SPEAKER_02 3:32

Well, it's interesting because uh we talked about this in a in a session uh that we did yesterday uh here at ABT. But um I think it's interesting to think back to important childhood memories or things that really stand out to you because they can tell you uh quite a bit about maybe what drives you. Uh because I think there's some things that perhaps don't change. Yeah, I think what I most wanted to be as a little kid, and I don't know why, um, was to think big thoughts and um have people kind of uh I guess be interested in them. But weirdly the way that manifested was to think the big thoughts, I really felt I had to be isolated and deprived. So I had to live in a tower on a craggy cliff and be fed bread and water. Don't know why. But and to to be kind of for those thoughts to be desired, I guess somehow it involved travel for me. And maybe that's because I lived in Australia, which always seemed very far from everywhere. Uh, but it involved sort of flying around in planes and talking to people. So um yeah, kind of a prescient um childhood dream, I guess, in some ways.

SPEAKER_00 4:36

Eventually you went traveling a lot for Mackenzie.

SPEAKER_02 4:40

Yes. Uh I joined McKenzie in the Sydney office, had a had a actually you know quite a few trips as you do. Um but my main trip was to transfer from Sydney to New York after a couple of years. Uh and so uh I was then based in New York and and from then it's flying to you know visit uh clients and uh particularly senior management teams is extremely common.

SPEAKER_00 5:00

Traveling around for Mackenzie Advising, when you look back at your experience there, what were some of the main takeaways? You I was just thinking if there's any difference uh when you when you're looking at how you would go about thinking about business then versus today?

SPEAKER_02 5:19

So I think that I mean there's a couple of differences. One is definitely my age and experience. So as a young person starting out, you know, it's all about kind of learning and starting to understand actually the complexities of uh running, working, directing a large organization uh were things that started to fascinate me. And I saw how difficult it was, frankly, to make change happen inside large firms. So I think that was kind of one of my big takeaways. I I enjoyed learning how to make small changes happen.

SPEAKER_00 5:49

Thank you for your reflections. And there has certainly been changes taking place throughout history. Yeah, so in today's environment we'd we talk about uh VUCA as to explain what's really happening or the challenging uh environment that we exist. But can you just um tell us about what the the four letters actually stand for?

SPEAKER_02 6:08

Certainly. Um so I believe it's a military analogy, um, that that's where the term is first used. But again, it's another buzzword that we are hearing all the time. Uh the world is more VUCA than it's been before, so it's more volatile, it's more uncertain, it's more complex, and it's more ambiguous. We typically run those words together, frankly, so I think there's some overlap uh between what all those words mean. Uh, but it basically means it's gonna get hard, right, to decide what to do.

SPEAKER_00 6:35

I was just thinking about were they themes that you were talking about when you were developing strategies for clients, etc.

SPEAKER_02 6:42

Yeah, d I mean the interesting thing is the world has always seemed extremely uncertain. Uh, consider where we are today, you always think, wow, everything's changing. Um, I guess the big changes happening in the 90s were the emergence of the internet, which I was fascinated in myself. Um, and I did a lot of work with telecom firms. So uh some on this podcast might be old enough to remember, but in the 90s and early 2000s, firms were investing hundreds of millions of dollars in building internet backbones. And what nobody knew was how big the internet would be. Uh, there was a lot of speculation, and so in fact, most of these firms overbuilt. So we had a lot of firms actually did quite badly because they spent too much money uh invested in the internet over overcapacity in the sort of internet backbones. For the consumer, it was great because the internet became cheap, but for the firms um it was very hard to kind of uh get their money back from what they'd spent. Uh, they felt it was extremely uncertain uh at that time. So what's interesting is I think firms have always felt uh that the world is a little VUCA. It does seem right now that yes, so much is happening, you know, even with the war in Ukraine right now, which is so much uncertainty. So it's always been a factor.

SPEAKER_00 7:50

I guess the uncertainty also prevailed around integrating the internet in one's business model and strategy then. And how do you see artificial intelligence? Is there also a great uncertainty about how to integrate that into one's strategy? Do you see the sick same kind of relevance in that debate about embedding that into your strategy or I I definitely do, um, though I think it's a little different.

SPEAKER_02 8:15

Uh I think there is more certainty about adoption. Uh I think that this is going to happen. It's no longer something you speculate on. And I also think that the ability to experiment um with these technologies is a lot um easier and cheaper than it was uh for say a telecom firm deciding to build an internet backbone, which is a very large fixed cost. So for a relatively small marginal cost, you can sort of dip your toe in the water of AI. Um, you can get AI services um from you know the big uh tech companies and see what you can do with them. And I think that's quite different. So uh I think firms are right to question how much this will change their business. I think it will. Um, but I think they should not hesitate because I think for a very relatively small amount of money uh they can experiment with what a lot of these digital technologies like AI can do for them. And so it's almost an imperative that you have to, you have to try.

SPEAKER_00 9:10

So the internet will kind of, you know, the infrastructure uh as opposed to AI is more building on top of what they already have.

SPEAKER_02 9:17

Yeah.

SPEAKER_00 9:20

So recently you spoke about uh the DAC framework, so the direction alignment commitment. Um would you just describe how that might be helpful when you think about your leadership um in today's world?

SPEAKER_02 9:35

Sure. Um so I'm borrowing from the Center for Creative Leadership there. Um it's a framework that's been around um for quite some time. Uh I like it, it's really simple. If we think about the sort of the three elements, uh directing, aligning, and uh building commitment um for your organization. We can see how uh what's going on in the world today makes this challenging and and may actually shift the way we approach sort of leading firms. Yes, we have to find direction, but that's harder because there is so much uncertainty. So you need to you know make sure that there's a an approach to both um respond to change but also to anticipate what changes might be out there so that you can keep reorienting your direction. Direction is not something you set and follow, but rather you have to constantly keep adjusting it. In terms of alignment, because of that change and that um churn in direction, I think it means again you have to have some fluidity in how you align your organizations, and that's hard to establish because structures are hard to kind of move and change. So, you know, that's where I do see increasing reliance on agile approaches and also purpose. Uh, purpose gives you an overriding reason to do act in certain ways inside a firm. And by using sort of purpose as that overriding reason, um, and then kind of agile ways of responding to the changes in the environment, I think you can more quickly align to the direction that you set. Um, commitment, uh, the third one, uh third, third element of the framework, is about building commitment for the direction that you're trying to pursue, the goals you're interested in pursuing. And again, um that purpose-driven approach uh helps to do that. And even agile as an approach to executing change helps you do that because agile is very people-centered. It's about giving people autonomy so that they can pursue the uh initiatives that you're trying to put in place with a lot of autonomy, pursuing that purpose, and just those aspects of agile tend to make more committed employees and give people more of a reason to want to kind of engage and develop the change programs you're you're trying to pursue.

SPEAKER_00 11:49

Susan, there are also views out there that firms are too slow in responding to changes in the environment. What is your thinking about that?

SPEAKER_02 12:00

So some say, you know, the world's changing so fast that there's no point in actually even having a strategy anymore. You just need to respond to what's going on. I think that's naive. Um if you think about it more than more than once, it's it's hard to kind of make sense of that to me. Uh, you still need to have a clear direction to start with, and that's what a you know robust strategy process can give you is a direction that you have some confidence in. But now you've got to be more willing to change, right? To to shift that direction. So that, as I said, the direction has to have some way of anticipating change. The challenge is um that you know, to be responsive to the environment, to adapt your organization, your strategies, you do need to cascade strategy down the organization so that the folks who are actually directly working with customers, um, seeing the response of customers to new products, new services, new innovations, can put those sort of responses back into the strategy process. So you need to cascade strategy down. But there the challenge is how do you cascade it down? So you still need a strategy perspective at the top as well. And that perspective is really about that overarching purpose and direction for the whole organization, uh, or maybe it's the whole business unit, just got to be consistent with the corporate above. And then, and I think this is probably the new piece, uh, and I think firms are still working at how to do this well, is how do you break down the strategy process so you can allocate it lower down in the organization? So, how do you make it more modular? And whatever you choose will have trade-offs. So, you know, you need to be making choices about how to break the strategy teams down so that they're more at the coal face, but then recognizing, you know, if you chose customer facing by a geographic markets, you lost something versus um doing it at a product level or a brand level. Um, so yeah, constantly kind of working out well, what's the trade-off we're making? Does this make sense? And do we need to do something different?

SPEAKER_00 13:55

So the strategy execution bit is really tricky in businesses, is certainly what the response. And we've got statistics about the poor implementation often. To your point, is that the main kind of challenge is is alignment as opposed to adapting the strategy going forth, ensuring that we actually align throughout the organization. Where do you see the big challenges in the firms you work with?

SPEAKER_02 14:21

It varies by firm, right? So um, you know, a large portion of firms don't have a very clear direction as to where they want to go. Okay. Um, so I think for many firms, having a better perspective on the overall direction they're trying to pursue in terms of, you know, most firms understand what products or services they're trying to sell. Um, another portion of firms, uh, of those firms know what customer segment they're trying to sell them to. Um, so they're more refined in their segmentation and have a kind of clear idea as to why a certain set of customers want their product. I think an even smaller set know how they're gonna win in that market that they're going to play in. So really understanding what's your source of competitive advantage, you know, is it sustainable? How is that likely to play out over time and what are you going to do to defend that position or reinvent yourself if you need to? I think far less firms understand that piece of it. And then underneath that, again, I think a small portion of firms understand what their true distinctive capabilities are. Most firms think that they do something, so does everyone else, so we'll just use that capability as opposed to really understanding is there some capability that you have or can develop that makes you better than anybody else, which positions your strategy in a very clear way. So, you know, firstly, most firms could benefit by better clear direction and strategy process. If you have that, then I think the challenge becomes alignment.

SPEAKER_00 15:42

What's your perspective in terms of innovation? Also, when we think about competitive advantage, because I think, you know, many authors, at least uh also consulting firms, try to push innovation so that that's the only way you can basically sustain a competitive advantage, that you you keep reinventing yourself right from looking at the segments or the value propositions you offer, etc., and creating new markets, etc. What what what's your take on that?

SPEAKER_02 16:13

So I think exceptional firms manage to reinvent themselves again and again and again. So, you know, who does that? Uh companies like Netflix, right, is a classic example, um, you know, who took itself from a direct mail DVD service to a streaming service uh to a content creator and you know, let's see where they go next. Uh or Amazon, who went from a bookseller to cloud-based services to grocery retailer, again, you know, where are they going next? So a small number of firms managed to reinvent themselves. But many, many firms manage to stay in business for decades because they know what they're good at, and they can morph that kind of capability given the turbulence around them and how things are changing. And so there is obviously some innovation involved, probably incremental innovation, and they have to be good at that to m maintain their position over a you know a long period of time. So, you know, I think there's firms have that skill as well.

SPEAKER_00 17:14

So just um a final question about purpose. How how should firms actually get started with working with a with a purpose? And what what do you think is important when you decide on your purpose and then and roll it out in an organization?

SPEAKER_02 17:28

So purpose is the you know the hot topic uh of the moment, uh, one of the hot topics of the moment. And the challenge is that it's a word that's being thrown about the way you know mission and vision used to be thrown about um in the 80s and 90s. And so, you know, what does it really mean? Uh there's a great uh HBR article uh that came out this month, March 2022, which uh by Jonathan Knowles and others, and what those authors point out is that different corporations use purpose in different ways. So some purpose is around competence, um, some is around culture, uh, some is around a cause. And for a corporate for a business, uh, an organization, they really need to understand which type of purpose is most authentic to them, fits with their strategy, and really aligns with their stakeholders. So it's something that motivates and helps with that alignment process as you're trying to kind of implement a strategy. So that's one place I think firms have to be very thoughtful. I think pursuing a purpose is a is is a is a good idea, but you have to get the right purpose. It has to be, as I said, authentic, fit with the strategy and serve stakeholders. That's one side of it, but it's no use to you if the people that work with you, if that purpose doesn't resonate with them at all. I think what is fascinating is we're now seeing more stories about how firms are getting very hands-on about building a bottom-up process whereby teams of employees are working with managers really at the sort of coal face, at the shop for shop floor level or the customer interface, helping individual employees work out how they can connect to the corporate purpose. That's you know, a that's where those childhood stories come back into play, right? If you have to really understand the dreams of the people in your organization and how they might mesh, uh, perhaps not exactly, but uh enough of a way that you can motivate those employees and make them feel like the purpose is something they can really engage with and that it can be meaningful to them as they decide to kind of give um their their full effort at work, which is which is what you want to do. You want engaged employees that will you know deliver, not just for the company but also for themselves. Brilliant. Thank you very much, Susan.

SPEAKER_03 19:38

Yeah.

SPEAKER_02 19:39

Thanks, thanks, Gaspa. It was great to great to chat with you. Better Rica says, gosh, that's a lot to edit. I'm done.

SPEAKER_00 19:48

In a year's time, that'll be better. Okay.

unknown 19:50

Okay, cool.

SPEAKER_00 19:51

Yeah, that was it. Okay.