Turning Change Into Competitive Advantage with Peter Sheahan

28 Nov , 2018 podcasts

 

Often times, companies fail because they claim to never see future coming. This idea is highly in contrast to what keynote speaker, thought leader, and consultant Peter Sheahan believes. He says that the changes coming are not as unforeseeable as what many think. That is why he greatly values the role of leaders and how their leadership response influences the entire company. Talking about turning change into competitive advantage, he speaks of the journey of choosing what to do with what is in front of you. He differentiates being in awareness and being in ownership, burning platform and burning ambition, and alignment and agreement. He also brings out the personal journey that manifests into the company and gives some great examples of how big companies do it.

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Turning Change Into Competitive Advantage with Peter Sheahan

This is the full presentation of Peter Sheahan’s talk titled Turning Change into Competitive Advantage from the 2018 Coca-Cola CMO Summit.

Facebook reminded me where I was a year ago. I was working with a snack food company that sells into the major grocery retailers around the world and in some of the food service organizations in this room as well. They were running an emergency strategic meeting with one of the major retail clients. A big retail, you’d know the name, gross retail, they’ve lost 35% of their market value in 45 days. If anyone who think back what happened in the middle of last year that wiped $21 billion worth of market value of the five largest grossers in America. Amazon buys Wholefoods. These are the stock charts of those companies. Many of them have recovered some of that value. This was right in the depths of, “Will we find our way back?”

Leadership Response

Full day of discussions about trends and changes and information. At the end of the day, I put aside the CMO and I said, “What is your conclusion for the day?” She said, “My conclusion is we can’t be held responsible because we never saw it coming.” I was like, “Really? That was your conclusion to the day?” Not to mention you never saw it coming. I left the meeting and I texted one of my analysts in our Denver, Colorado office where I live as well. I said, “I know you’re on a bunch of client projects right now. I don’t care if you have to pull this client work for two months. I want you to get to the bottom of this conclusion and tell me if it’s fair. Literally, if you have to be off the tools for two months, that’s okay. Do your research and come back to me and tell me what evidence there should have been in the market of what the likely competitive dynamic would look like for that industry.”

Thirteen minutes later, he text-messaged me the answer. He put the following list together. He said a year ago, they launched the Wickedly Prime food brand, which is a vertical integration. It’s maybe a suggestion they were taking that market pretty seriously. That very same year, they launched the Amazon Go store. You might have seen. They’re expanding that now to 3,000 different locations. You could go years before that when GMA, their industry body run a headline going, “Don’t freak out. We’ll figure a way to deal with this.” They’re getting serious about food.

In case that wasn’t enough notice, you could go a decade before when they launched their direct to consumer play, which is already in 35 US states at this point. You could go a year before that when they start selling food or you could go eighteen years before the transaction when they bought a third of an online food delivery company. Would it be fair to say, there was a little bit of evidence suggesting where that market dynamic might go? Don’t hold me as a senior executive accountable because I never saw it coming. In eighteen years of doing this work, we have never ever encountered a company or an industry that was disrupted by a trend that nobody already knew was happening. I want you to compare that leadership response and I choose that word specifically.

That was a series of strategic choices over the period of let’s say a decade to choose not to act in response to that competitive dynamic. To squeeze the business model tighter and tighter until an incremental change can have exponential impact. That’s essentially what the leadership choice was in that organization. Compare that to an organization you would know pretty well. Imagine this is Adobe. Imagine eight years ago, I was here at the first summit and I said to you, “What does Adobe sell?” What do you think the most common answer to that question was? What sort of software? PDFs, Premier, Elements, they help marketers and your agency partners make beautiful images and then store them both online and offline in some cloud-based environment.

At the time, they’re doing about $257 million a year in software in a box selling you Photoshop Premiere, etc. How many of you woke up eight years ago when Adobe was my strategic analytics marketing partner? Zero. I know we heard from IBM and you mentioned Deloitte and Accenture as well in part of the remarks. It would be fair to say that Adobe has well and truly recreated their position in your mind. Several years ago, they saw the writing on the wall. How much did you pay for your most recent PDF freedom? How much did you pay to edit those unbelievable imageries that you take using your iPhone that you post on Instagram? Anyone paying for that editing?

The journey now is not about whether you can predict the future. It's about what you choose to do with what's right in front f you. Share on X

This chairman says, “We saw it coming. Our business was beginning to stagnate. We’re seeing massive saturation in the market.” You have two choices at this point. Number one, you sweat the asset. Cut your way to greatness and hope you can eke out earnings growth for a period of time until you retire and it’s someone else’s problem. You ask yourself the question, “What’s the ultimate problem I can solve?” which in Adobe’s case, they’re like, “The data we collect is more valuable than the functionality of the software itself.” You might remember they bought Omniture and they went on this journey of helping you scrape and aggregate data. 80% of all retail transactions in 100 largest consumer retailers in America were going through platforms they had access to.

They decided to position themselves as an analytics partner for business. You might have noticed they’re trying to acquire Marketo now. They’re still on the same strategy. $18 a share they were trading at in 2010. Does anyone know what Adobe is trading at now? $275. Do you know how much money they make a year selling Photoshop and Premier? $5.7 billion of annuitized subscription revenue on those same core design platforms that you are all using seven or eight years ago. The difference is we don’t see them as a software player. We see them as a more of analytics data strategic play. I know you don’t like paying how much you’re paying right now, but you’ll wish you had $100,000 in Adobe stock ten years ago.

The point is simply this, it’s not that the trends facing Adobe were any less difficult than the trends facing the retail environment. People are literally giving this stuff away for free. It’s that the leadership response was different. If I was to boil down two decades worth of doing this work, I would say we’ve learnt one primary thing. It’s that it’s not actually companies that transform. Meaning the difference between turning change and disruption into opportunity and competitive advantage and not has very little to do with strategy and very little to do with the trends or very little to do with available capital. It almost always boils down to the quality of the leadership decisions in that space or to put it to you slightly differently, companies don’t transform, leaders do.

The journey to exploiting the trends, I know we’ve only heard the beginning of some of them in Ron’s remarks and Cathy’s remarks. You’re going to air a whole bunch of them tomorrow when you get your minds bent by a bunch of these startups around the things that they’re doing. At the Google event for the Coca-Cola CMO Summit, you would have been exposed to crazy information and data and a vision of what’s possible. Let’s be clear, “Would it be fair to say that all of you have been exposed to most of the trends and disruption that you’re facing? Yes or no?” Is that a fair statement? The journey now is not about whether you can predict the future, it’s about what you choose to do with what’s right in front of you. That’s a big difference.

Three Steps Of The Personal Journey

The journey that I want to take you is not a company journey. It’s a personal journey that manifests itself at a company level. It takes three steps. Number one is you’ve got to start by telling yourself the truth, not about the challenging environment but about the opportunities. In Adobe’s case, the converging forces of disruption gave birth to emerging new possibilities. Those same emerging possibilities were available to that retailer I used as an example as well, totally a different business model, totally a different market but still there. The difference was they weren’t willing to own it. I thought Ron did a beautiful job on this, talking about what your ambition. What are you actually trying to do? Growing at 5% to 7% and increasing costs at CPI minus 0.5 doesn’t generally get it done.

 

Third and finally, who goes first? Is it someone else’s job? Do we wait for the CEO? Do we wait for the board? We’ll unpack some of these examples around what it needs to look like. Let’s start by telling yourself the truth. It is harder for a leader to move from awareness to ownership than from ownership to action. Let’s take food service, 80% of the room. Number one, we know we’ve got challenges around foot traffic whether it will be in fast casual or QSR. QSR was doing better for a little while, but now we’re seeing the headwinds here in the North American market. Their primary strategy for growth is scale rather than looking necessarily for more relevance. We know what’s happening in that space too. The fastest growing customer base is a highly diverse market that doesn’t necessarily match the makeup of our leadership and executive teams let alone our boards.

We know we’re seeing non-traditional competitors. You see even the fastest section of food service they believe is grocery at 3.8% year-on-year growth as a whole category. The grocery store might be our biggest competitor. You’ve seen the aggregate is coming into the middle. Did you see the mediate, the GrubHubs, etc. of the world? I can list that with you on academia. We’ve got Yale and ASU as well. We know academia is facing mass online courses and what that looks like. We know that the campus experience has to be worth the price difference between delivery online. We know the blended learning coming and that you play a role in creating that experience. We’ve got theme parks and cinemas. Share a wallet, people competing with gaming inside their home and what that looks like. People’s ability to download what they like, wherever they like and whatever. You have kids that didn’t watch TVs. They watch phones these days. Most of us are watching other people play video games, which is maybe the weirdest thing I’ve ever heard. I didn’t even hear of Twitch five years ago.

Start by telling yourself the truth, not about the challenging environment on the opportunities. Share on X

Did I list anything there that none of you in the respective verticals that are represented? Did I list anything there that none of you have heard of? By the way, you’re allowed to play. You are allowed to get involved. Part of being a community is like, “Kangaroo boy just teach us.” Come on. Did I say anything that was new to any of you? No. I don’t think anyone in the next two days could present anything to you that you didn’t already have some awareness of. The question is have you taken ownership for them? I’ve never met a CMO in my life or an executive in any function who said, “I’m totally stuck in awareness,” but 99 out of 100 executive teams we’ve worked with over the last twenty years are stuck in awareness.

Maybe there’s a problem with awareness. How do you know? If you’re in awareness mode, your primary mindset is one of prevention. I want to put that slightly differently. How do we slow our customers’ progress to the future? We see the trends in what people are wanting to consume. Can we slow that down a little bit while we figure out how to position ourselves for that emerging trend? We know people are looking to order and acquire and get access to food in different ways. How do we slow that down just long enough that we can hold on to our existing business model? Promotion is a different mindset. If you’re an ownership, you’re asking the question, how do we accelerate our customers progress to that future? If you are in awareness, your primary emotions are frustration and overwhelm. Do any of you on occasion feel a little bit overwhelmed with the amount of stuff that’s going on? One of the pass-through that is to get very clear on who you are and what you’re trying to create because the questions become different.

Notion Of Assumptions

The frustration, “Why are all these changes happening to me?” to me is a victim mindset. This thing that happens to us. People in ownership aren’t thinking about being victims to the change. They are asking the question, “How do we use this?” At some point they ask, how do I make the change by us? If you are in awareness, you’re primarily acting on your conditioned experience. If you are in ownership, you’re primarily acting on what’s possible. No one at Adobe had any right to suggest that that was possible. By the way, your examples from your industry as well, like not to single out any company. One of the best stocks you could have invested in eight years ago would have been Domino’s Pizza. It’s outperformed Apple. It’s outperformed Amazon. It’s outperformed Netflix. It’s outperformed Google, but no one was running around going, “The market dynamics in QSR are going to give you super high growth opportunities.” You’re all facing the same trends, 21 times increase in enterprise value in eight years. Not to single out anyone specifically.

Here’s the question, what is it that keeps us stuck in awareness? What is it that makes it difficult to even know when we are? There are a couple of insights that might help. It’s primarily the notion of assumptions that causes the issue. Years ago, we did a study for News Corporation. They just bought the Dow Jones company. The Wall Street Journal, it’s obviously since splitting into two businesses. The primary question they’re asking is, “What’s the difference between good decision-making and bad decision-making during times of significant change?” Media companies used to make their money controlling access to content and the internet was threatening that business model in a meaningful way.

 

We went back 100 years. We studied cities. We studied the City of London. Did you know in 1901, the City of London had a strategic plan for the year 1925? By the way, who would like a 25-year planning horizon? It was 1901, they were planning for 1925. Population growth was their primary issue. Joe Dimsdale, the mayor, had a written plan with three priorities on it. One, we need a million new horses to get people around. If you have a million new horses, you’ve got a whole lot of other problems you have to deal with. Two, hygiene infrastructure, how to create the streets clean and disease free? Three, property prices, how do we keep the animals close enough to the city people have access to them and so close they take up all the available land? Supply and demand get out of whack, people can’t afford to live in London anymore.

How relevant was their strategic plan come to say 1905? We studied here in the US. We studied the telecommunications industry. There is a huge disruption. Did you know 25 years ago, an average telco made 65% of their EBITDA on long distance phone calls? They don’t even report against them anymore. That’s pretty significant change in disruption. AT&T hired McKinsey. McKinsey did a study on the total market feasibility of cell phones. They asked the question between 1990 and the year 2000, “How many cell phones might we sell?” 900,000 units were the guess, 109 million shipped in those ten years.

I could give you 100 of these examples. I’ll give you one last one there. I was asked to present the results at the Global Subscription Television and Radio Association. There were almost 350 CEOs, companies that control access to content and this was years ago. I’m the second speaker. The first speaker was a Texan man. He’s the CEO of the largest satellite TV company in the world. I’m about to do a speech on how executives make dumb decisions in the face of change. He gets up, quote and says, “I don’t believe the internet will be fast enough in the next ten years to threaten the distribution of video content.” I was like, “Seriously?” I totally didn’t say that. I said, “That’s an interesting perspective,” which turned out to be very sensible because he then became the COO of News Corp and that would have been a very difficult renewal conversation for me.

It is harder for a leader to move from awareness to ownership than from ownership to action. Share on X

While he was doing his session, I emailed one of our clients who had just bought a website called YouTube. Some of you have heard of it, but back then that seemed like a pretty random idea. I asked her, how many downloads took place in the last 30 days on this website that you spent billions of dollars by? Two billion downloads in the 30 days prior to the CEO of a satellite TV company saying he doesn’t think the web is threatening video distribution. Sure, cats doing stupid stuff to the other cats, but two billion is a pretty convincing number. Were there cellphones in the late ‘80s or early ‘90s when McKinsey did their plan? They are as big as like that table and you had to wheel them around but they were there. Were there cars in 1901 when Joe Dimsdale did his plan for the city? 68,000 were already on the road. They were building the London Underground. The first state in the world to build a multi-story parking garage was London, England. They did it in 1906, six years into the 25-year one million horse plan.

Here is the problem, when we filter information, we filter through our condition beliefs and biases, which are based on the world as it existed, what got us to where we are. We don’t act from a position of possibility as a result. We manifest a whole bunch of opinions that then become strategy based on what we’ve known and how we’ve won in the past. When you write a plan, the only thing I’m going to ask you to do is to list the assumptions you write underneath it. We don’t believe that the Hispanic community will continue to be our fastest growing market. Hence, we’re going to continue to target advertising at middle class, dead white men.

Two, we don’t believe that consumers are migrating fully to a digital world so we’re going to continue to dominate. Write them down and if they still feel okay, keep your plan but then in 90 days when you look at it, ask yourself the question, “Do I still believe those things?” Include a section called assumptions in your strategy and planning about what are the beliefs that are underpinning those decisions? That’s the thing you come back and question less so than the tactics that underpin the strategy. Two quick observations. One is this, never found an industry that was changed by a trend that nobody predicted. I have had a pushback on that statement before. Someone said to me once, “What about Uber? They came out of nowhere.” Actually, Uber turns fourteen this month. It takes Uber seven years to get critical mass in a market. He got a taxi company that’s got seven years of notice plus the twenty years prior when we hated them. That’s 27 total years of evidence to suggest that maybe there was an alternative for the market.

Here’s the interesting thing, when Uber gets critical mass, taxi revenue drops by two-thirds in twelve months. It took him seven years to get it. Incremental change has an exponential impact because we are able to prevent, squeeze the model until the margins are razor-thin. It just takes the tiniest little shift in foot traffic or stall counts. The second thing is this, the truth will set you free. The second thing is change is slow until it’s not. That’s good because it means we have noticed. Your challenge is not predicting the future, it’s making bad assumptions about what’s happening already. The question is, what do you do about this? One is you come to the realization that there’s a fine line between experience and baggage, which is essentially what I’m talking about.

Towards Disruption

In addition to that, you accept the fact that reality will always win in the end. That part of your job is to stay in touch with it, but what you do is start taking intelligent risks to learn not to make money, but to learn at the edges of the disruptions where you want to place your bets. Here’s a set of questions for you. Play a game with me. This is like a stupid speaker activity but it will be fun. Would you do something if, one, it made you less happy? Two, it had an 80% plus chance of creating an economic burden for you for life? Three, if two-thirds of you reported that it led to the long-term denial of your basic human needs? Four, it had a 50% chance of failing anyway and five, if it did, you lose half your stuff. Would anyone engage in this behavior? Anyone married or in a de facto relationship longer than six months, they are the stats for marriage. We do it anyway because we’re tribal people. That’s what gives us meaning. I’m all about it. I tried it once, it was totally worth it.

The problem for that is for one of our clients, increasingly fewer people are engaging in that behavior. The problem for our client is that they sell diamonds. At one point in history, they control 93% of all the diamonds in the world. There are a couple of trends disrupting this diamond company. Number one, these Millennials aren’t getting married. Number two, when they are getting married, the good news is they’re staying married no longer by the way. Did you see that research by Pew? They often don’t celebrate it with a dime and they’d rather spend that money on a trip. Three, people don’t want to put something on the finger of their partner that someone may have died for the privilege of getting. All the blood diamond issues and how do we find sustainable sources, etc. Five, it turns out you can manufacture a biochemically identical substance in a lab for a significantly less and lower amount of money. You think you’re facing some change, that’s serious change right now. This is a 130-year-old company. The culture is so strong in this organization.

They have a brilliant new CEO, who has the courage to step out of the comfort zone and towards the edge of disruption with no expectation of finding profitable business models immediately. If you saw about six months ago, they launched the Lightbox brand, which is buying, manufacturing and flooding the market with synthetic diamonds because they want to bifurcate the way the consumer thinks about it. The story will become no one wants to put a fake diamond on the finger of their partner. If you want the real thing, you know where to get it, but you can buy these for about one-tenth of the price. That’s $80 million bet. That’s a small bet in a $13 billion company though. There is no desire yet to guarantee whether that makes any money. They want to see how the consumer reacts and what it does to the market dynamic. They are doing it to learn. Your bet might be an $80,000, but that’s okay too. The point is are you stepping towards the very things that disrupt you and trying to learn what’s happening now?

Change is slow until it's not. Share on X

Let’s take an example like Burberry. Burberry built the flagship store on Regent Street in England where they do facial recognition. They near field communications where they transcribe your Twitter, your Pinterest feed and your Insta feed and they combine that with your buying history. They try to cross-reference that to people who pin what you’ve pinned, tweeted what you’ve tweeted, posted what you’ve posted and begin to make recommendations. They have interactive screens all around the store that change the footage based on the cumulative buying history of everyone that’s in the store in real time. That interactive thing that when you take a garment off a hanger, that one shows you the artisan making the garment because you’re going to spend $2,500 on a raincoat. You don’t have a damn good excuse to justify it. It’s a total radical new store. 300,000 hours to build it, but it hardly works at all.

If you were to talk to Angela Ahrendts who is now the Head of Consumer at Apple who pioneered that initiative of Burberry whether she’s glad she built the store, she said, “We learned more about one-to-one marketing through that store and culture through that store than anything we’ve done in the last 50 years.” She was like, “Our job wasn’t to find the store of the future. Our job was to learn a little bit more about what might define the store of the future. If I’m going to continue to compete online, I need to make a walking on my store worth the price difference between buying in bricks and mortar and buying online. I’ve got no chance of doing that if I don’t take online and bring it to life. I want to make walking into my store feel like you’re walking on a website.” She embraces the failure that comes with that because it’s only through the failure that they’re learning. The learnings that would get you closer to success to come.

The question for us is where might you take an intelligent and compartmentalized risk? The first question is, where are you stuck in awareness rather than ownership? The second question is what could you do to push closer to the disruption itself? Not because you think you know the business model that lives there or because you’re guaranteed to have success there, but because you’re guaranteed to learn there. That’s the orientation. That’s easy to say, but it’s tougher when you’re a CMO and the average tenure of a CMO is 24 months. Part of the challenge will be bringing people on the journey with you. Trust me when Adobe decided to go on its journey, don’t think for a second their board was excited about the multibillion-dollar acquisition of Omniture. Even if the board was, the investment community was not.

That’s first idea. I will make one last statement though, and that’s this idea that new opportunities are a little bit like problems. People say the best thing to do with a problem is kill it when it’s small. What are big companies good at doing? Killing new ideas when they’re small. We acquire them often and then they get chewed up and spat out by the machine, which is why I’m so excited about the venture conversation with Coca-Cola. I used an espresso example because that took them 26 years. Everyone wants the direct to consumer model that they’ve got. One of the major retailers in America threatened to take Nestle’s food products off its shelf because they wouldn’t let them sell. That’s how powerful that D-to-C model became. It’s like 26 years until I got profitable. You don’t have 26 years, but it’s a provocative example. You’ve got to get out on the edge and you’ve got to hold a nerve when you’re out there.

Burning Platform And Burning Ambition

Second idea is this notion that we have two ways to create tension. In order for an organization to transform, it needs tension and there are a couple of choices with tension. One is a burning platform and one is a burning ambition of what we would call out a burning aspiration. Which one do you go for? I was at a conference, not like this but even smaller than this. It was about 25 people that were CEOs of financial services companies, big businesses, tens of billions of dollars’ worth of enterprise value. Their speaker was Jeff Bezos. That’s not a bad get if you can get Jeff to show up. In a fireside chat with Jeff, one of the CEO says, this is like you know who this person is, you’ve seen them on TV, and they run a multi-decade billion-dollar company. They put their hand down. These guys don’t put his hand up in 35 years. “Mr. Bezos, how do you decide who you are going to disrupt next?” I was like, “Please don’t say us.” It was pathetic to be honest. Jeff Bezos laughed at the question. He wasn’t being arrogant or trying to ridicule. He was like “What?” He was like, “How do you decide which industry you have a bunch of analytics dashboards with SWOT analysis?”

He was like, “Please don’t take this the wrong way, but I didn’t get up and think about any of you ever.” He said, “I get up in the morning and I ask myself one question.” He said, “I ask myself, where are my customers going and how do I beat them there?” I said, “That’s an elegant way of talking about moving from prevention to promotion. Where are my customers going and how do I beat them there?” He went on to talk about his day one metaphor around understanding the S-curve and not taking advantage of your traditional competitive advantage. No one’s entitled to a competitive advantage for sustained periods of time. I think it talks directly to this idea of a burning aspiration or a burning platform. When you think about it, this relates to what Ron was talking about a little bit around purpose, but I’m going to differentiate it just a little bit. Let’s call this the status quo. You have two choices for tension. You have the burning platform or the burning ambition.

Has anyone ever heard the saying that in order to transform a big company you need a burning platform? That’s the dumbest pieces of advice ever given to an organization in history. Trust me, we will eventually get a burning platform if we don’t do anything. That’s a reality of the dynamic market conditions. No one is entitled to the competitive advantage that they may have grown their business on the back. We all love a free market until there’s a competition. No one is entitled to the competitive advantage upon which they built their business. You might have pioneered the way burgers were consumed or pizzas were done. That doesn’t mean you’re entitled to retain that. We are continuing to innovate and push the boundary. If we don’t do things, we will get burning platforms.

Accept the fact that reality will always win in the end. Share on X

Here’s what a burning platform looks like, razor-thin margins. Struggling to retain relevance in the mind of the customer. Investors, maybe we have an activist investor on the board or we’re beginning to get tension from the street. We’ve cut old discretionary spending. Our staffs are disengaged and morale is low. That’s a burning platform. Who would like to transform a company from that position? What about when your margins are not high but at least predictable? When the investment community backs you and the leadership team? When customers still engage with and are inspired by and find relevance in the product mix and the brand promise. When you stop pushing for change, but they’re doing it from a position of excitement rather than from death will come to us if we don’t. Where would you rather architect from?

The truth is we don’t wait for this. Here is what happens. Most organizations spend their life here by having a competitor-based benchmarks for growth, CPI minus 0.5 or they hire a strategy company that gives them an operating plan but calls it a strategy. Where their growth is purely driven by financial metrics when no one is having a conversation, which is what we believe and how do we want to impact the world? The problem is you can do that for a decade. If the rate of change outside of your organization is faster than the rate of change within, then you are sitting in the land of the boiling frog. The rate of change outside the organization is faster than the rate of change within, then you can continue to squeeze the model because change is slow until it’s not. You can’t say you never saw it coming because you did, but the problem was a lack of ambition.

The people didn’t want to go and stand for something. You didn’t want to bring a new solution to bear in the marketplace and they keep squeezing and squeezing and squeezing. Eventually, they do end up in the land of the boiling frog and the path is predictable. Something finally gets critical mass, a fringe trend that creates significant change in the organization. The leaders suggest they didn’t see it coming but go radical innovation mode and they begin to mimic competitors’ strategies that have been causing the problem. They invest more and more money for a lesser return because they’re using incremental thinking and a step change. How much money are we now spending on product innovations compared to the returns years ago?

In response to pressure from investors, we bring that brand name consulting firm in who promised to take 30% of cost out of the business and grow revenue by 10% declaring as a growth company. There are attempts to cut their way to greatness, destroy morale and culture and innovation falls flat because no one has any capacity to do anything. They then get a new CEO who hires a chief digital officer because digital officers will fix everything in the organization. Anyone who has seen this happen before, who gets left out there with no budget, no authority nothing. People like me start telling your story without your permission to get laughs at conferences. If we go back and I’m being facetious but I’m doing that on purpose because there are organizations that go on different journeys.

 

This is the CEO of Adobe saying, “When I set an ambition, I want it to be so optimistic that you can’t quite connect the dots because if I don’t, I’m not being ambitious enough.” It’s worth noting that when they set their strategy this was what Wall Street said, “Were you out of your mind?” The Adobe CFO said, “For two years he had one job, protecting the leadership team from the investment community. I will protect you from above, so you can get to work but get to work.” This is 50,000 of their customers, some of them work for you probably, saying they are completely opposed to the move to subscription and they didn’t understand what a data lake could look like and how you could analyze good quality data or large volumes of it. Nobody thought it was a good idea, $275 a share.

The point is you don’t want to get on to that path. You don’t want to declare your aspiration through some lines of we want to gross store count by X or we want to increase average ticket sales by Y. That’s not an ambition, that’s not an aspiration. There’s no concept of the customer first in that idea. That’s not a Jeff Bezos, “We asked the question where the customer is going and how do we beat them there?” In some versions of the world, it’s purpose-driven or purpose to align. Purpose doesn’t get it done because it’s too abstract, “We want to bring joy to the world’s burger lovers.” That doesn’t put any pressure on the system. If the average tenure of a CMO is 24 months, the average tenure of a CEO is about 4.1 years right now, then you’ve got about a 36 to 48-month window to unleash your aspiration on the world. That’s the timeframe within which you should set it. It’s not a company aspiration, it’s a leadership aspiration.

Team And The Brand

It’s getting the ten or twelve people who make the decisions in a room and go, “What’s our legacy going to be when we’re done?” Accepting the fact that not many of us will be here in nine years, “How are we going to leave this organization in 36 to 48 months?” It’s not something that you communicate publicly necessarily. It’s not a PR activity. It is unleashing an ambition and aspiration for that group. There are companies that I think have done a pretty good job of this. I’ll give you one example. I’m going to talk about the orientation of the team rather than the promise of the brand. When Nike was formed, they gained 50% market share in ten years between Blue Ribbon Sports and Nike solving the number one challenge the amateur athlete had and it was access to functional equipment.

Do any of you have difficulty accessing athletic apparel these days? Nike still sells athletic apparel, but that’s not the highroad problem that they solve. They move very quickly where people are like, “We’ve got plenty of access to a product. We want to look cool and feel beautiful about what we wear.” I live in Denver, Colorado. I look out of my office every day. There are streams of people walking up down the street with yoga mats. Something happened on yoga in ten years. They’re still carrying them out. It’s strapped in the back like a statement of health and wellness. There’s no shortage of people making lifestyle-based brand promises related to athletic apparel. Is that a highroad a problem anymore? No. Every little sub-vertical every subsegment has been appealed to. There are all these pure play competitors nipping away at things. A year ago, Adobe was an $80-billion company, this year it’s $135-billion company. That’s a serious growth rate in a highly competitive market.

The question is how? It’s because the team has a very strong ambition beyond just resurrecting the brand. One of their problems as the brand is so popular that it’s no longer cool. It turns out the campaign was less about athletes and more about appealing to the up and coming youth, which is highly diverse. It turns out if you want a middle-class white guy, you’ll appeal to the younger crew and he follows suit. The ambition was, “What’s the higher order problem we solve?” I’ve got a question for you as an amateur athlete, what’s the number one problem you have engaging in an active lifestyle? Time is the number one excuse. Time is a question of priorities. What happens is we’d rather sleep than work out or we’d rather work than workout. If we had to find a time could we find the time? Motivation is the issue.

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If I could create some form of accountability and some form of social pressure, two of the most critical elements to behavior change, then I’ve got a better chance of making you exercise. Converging forces of change give birth to emerging new possibilities. Years ago, Nike couldn’t have pulled this off. They can now. It’s NikePlus as a data and social community platform that drives accountability and behavior change that helps you become a better version of yourself. This community could be that for the marketers. If you don’t know the NikePlus platform, 28 million people use it every week. They’ve set 100 million goals or something a year, “I’m going to run a marathon. I’m going to do 5K. I’m going to do this.” Everyone said to themselves, “When I get to Nashville, I’m going to run 5Ks every morning. I’m feeling it.” Then you had a margarita or two Tequilas last night, and you woke up this morning like powwow. What have you told 5,000 of your closest friends on social media? You’d have to stand outside and totally run 5Ks now except there’s a sensor in your shoes and an accelerometer in your phone that says you walked about thirteen steps from your room to the elevator and even sat in a soft puffy chair ever since.

2.5 billion miles are being tracked on the NikePlus platform. If you run 2.5 billion miles, what do you need a lot of? Shoes. I’m assuming you know that the Michelin Food Guide came from the tire company to make the drive longer and longer distances to recreate because the longer you drove, the more tires you used. If you’re a NikePlus member who spends three times more money in retail than a non-NikePlus member. That’s part correlation. It’s not entirely causality because you’ve obviously got a predisposition to exercise if you used the platform in the first place. How much money does Nike make from NikePlus? Nothing. It’s a call center, but it’s orienting the organization towards a higher purpose, which is helping amateur athletes be the best version of themselves. That’s the sort of thing that gets people moving. That’s reinvigorating a brand that had $135 billion of enterprise value need some reinvigorating.

Alignment Versus Agreement

Growth is a byproduct of executing in alignment with a bold leadership aspiration. What are we aligning to? I can’t even imagine how difficult it would be in marketing because there’s a constant barrage of new platform, content versus that and this versus that. There’s a deluge of information. You must struggle day-to-day going, “Is this a good idea or a bad idea? Is it the right thing to do or the wrong thing to do?” It’s not the right question in our experience. The question should simply be, “Is this aligned or misaligned?” You can’t answer that question if we’re not clear on what we stand for, what we’re trying to create or what we’re trying to build. If companies don’t transform leaders too, then they can’t be something at the level of purpose. It should be purpose-aligned, but it needs to be a human aspiration for the people in critical decision-making positions.

If you can’t influence the rest of your executive team, at least do it with your team. We have 24 to 36 months, what’s going to be the legacy of our team? That’s what gets people out of bed in the morning and keeps them up late at night. This sweet spot away from a highly abstract esoteric and away from the detail of an operating plan that’s in a comp sales of X percent or whatever. Open Y numbers of stores, that’s operating plan. That’s not ambition. It’s the sweet spot in the middle. That’s a human-oriented ambition rather than some abstract company-wide thing. It should manifest in purpose like the Nike example does or the Adobe example for that matter as well.

This is the third and final idea. When you get the invite from Kathy for the event, did any of you go, “I’m so glad this is happening in the middle of October because if it wasn’t happening, I would not know what to do this week?” Did any of you wake up and have no email to respond to? Some of you are struggling even to sit here right now and not be checking your email. Therapy helps, by the way. None of you aren’t working hard, is that fair? None of you appears on what everyone in your organization is probably working hard. We’ve been sweating the asset, squeezing the model and driving efficiency, which is the appropriate thing to do unless there’s zero slack left to innovate and take risks and push to the edge of disruption.

There is a difference in our experience between working hard and doing the hard work. I’ll give you a simple example of this. I’ve talked a lot now about aspiration of defining the goal and the ambition way you want to go. In our experience, that’s not the key to alignment. That’s the key to agreement. There is a difference between being in agreement and being in alignment. Have you ever sat in a room where your team all nodded their head and you’re like, “I totally get this,” and then no one behaved differently the following day, and no one made any different decisions and not a single program of work was deselected? Anyone ever had this experience? Anyone got children? To transform an organization do you need agreement or you need alignment? You need alignment. Alignment is people making new decisions, engaging in new behaviors and deselecting work that no longer stacks up to where we’re trying to go.

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You can agree with the ambition. That’s not the same thing as aligning. Let me give you an example. This is Paul Polman and his vision 2010 for building the most sustainable packaged goods company in the world. He was like, “We’re going to reshape the hygiene of a billion people. We’re going to reduce our impact by 50%. We can enhance the livelihoods of a billion people.” He came out on his first day as CEO of Unilever and said to the shareholders, “I don’t work for you. I work for the customers and the communities that they live in.” He later said, “I figured I couldn’t get fired on the first day.” I reckon he went pretty close to testing that assumption for the record.

He’s also outperformed P&G two to one since, but it’s all good and well for the CEO to architect some beautiful vision around transforming the world into becoming a community-centered organization. What if you’re the CMO and when you do an analysis of your €8 billion marketing spend every year and you find that in that €8 billion, only 1% of your ads conveyed women are funny? Only 2% of them showed them as intelligent and only 3% position them as leaders. Are you a sustainable marketing function? I went looking for some campaigns. This is Keith’s new campaign for Axe of being a brand. It’s all about burning ambition rather than a burning platform. That kickstarted the brand whether you resonated with the campaign or not it doesn’t matter that has been monumentally successful for that group. You get that in order for that to happen, someone in marketing has to do that.

Someone in procurement or in community investment has to transform the way people wash their hands. That’s alignment. Someone in procurement has to change the way you source palm oil. Someone in partnerships has to stop thinking that the only things worth doing in the world were invented inside your four walls and start driving true collaboration and partnership because the money gets made in the white space. Someone in product had to reduce the amount of water because it used to take three rinses to wash out suds from clothes. If you’re carrying water two miles a day on your head, there and back, you don’t want three rinses for this stuff. Large scale transformations are an accumulation of smaller changes made in alignment with the bold aspiration. Stuff has to change.

The beautiful thing is when you’ve got a clear defined aspiration, you can get pretty clear on what fits and what doesn’t fit. Can I tell you the kicker? This is the $64,000 question. This is eighteen years distilled into one line, “Alignment is not about being in agreement with the aspiration. It’s about having a true and shared understanding of how far away you really are.” It’s the departure point that matters. Most senior people don’t realize how far away they are from the ambition that they articulate. They think they’re pretty innovative to begin with. The CFO is like, “All we need to do is cut costs.” The head of HR says, “We just had an engagement program.” The CMO says, “We just need a brand campaign.” That’s not alignment because there’s not enough tension in the system if we don’t have a shared understanding of where things are at.

This is the final example. If large transformations are the accumulation of smaller changes made in alignment with a bold aspiration, then what do you think the single most important thing for a person in a position of power to do first is? It’s to change their own behavior. Every organization we work in like we start with say the top ten and then we end up with the next level. Every level we go, like the store managers are like, “We totally get this. You need to talk to our territory leaders and our regional presidents.” You talk to the regional presidents and they’re like, “We totally get this but you need to talk to the directors.” Then you talk to directors like, “We totally get this. You need to talk to the executive committee.”

Then someone at the executive committee pulls you aside and says, “We totally get this. You need to talk to the CEO. He needs therapy.” You talk to the CEO and he’s like, “You don’t understand my life. I got to talk to the board.” You talk to the board and they’re like, “You don’t understand how hard it is. We’ve got to talk to the investment community, Wall Street.” Then you talk to Wall Street and they’re like, “You don’t understand, we report to God.” Everyone somewhere is pointing their finger at somewhere else. Someone somewhere has to go first. It turns out as goes your behavior so goes the behavior of the people around you.

The first question is not, “Does the rest of my organization get this?” The question is, “Do I get this? Have I truly moved from awareness to ownership? Have I unleashed an ambition in my team for the legacy we’re going to leave even if it’s only 24 months together?” That’s going to leave this organization in a more relevant and a better platform for growth. Are we making the change we need to make to the mix and where we spend money and how we engage? Before we blame ops or before we blame finance because if everyone’s pointing at someone else, no one’s taking ownership. Somebody has to go first.

A final thought from me to you, if you all knew what you all know, you’d be unstoppable. Leverage the day and a half you have here, but it’s not just a moment in time. Leverage the community that this helps generate and creates access to, but go one step further than leveraging the community. Challenge yourself to form different levels of partnership with each other because in my experience the more adversarial we create the partnerships, the less able we are to co-create the future together. I’m yet to see an organization outperform their market where they weren’t able to significantly influence people over whom they had no direct control.

In my experience, being adversarial doesn’t give you a lot of influence. If you can open your own kimonos to each other and vice versa, you can accelerate the rate at which we grow at the edge of disruption. For me to you, have an awesome time. Remember don’t get stuck in awareness. There’s a difference between awareness and ownership. Unleash an ambition and don’t confuse agreement with alignment. Alignment is new decisions. It’s deselecting old programs of work and it’s engaging in new behaviors. Unless we’re doing that, don’t expect anybody else to do that first.

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• Peter Sheahan

About Peter Sheahan

Alignment, Awareness, Competitive Advantage, Leadership Response, Ownership

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