Seven thoughts for managers of the future

It is a commonplace to suggest that the challenges facing management today are different from what it faced in the past. So it requires no genius to make forecasts about the future: the future, too, will be different from today.

Or is it? No matter what century or circumstance you are talking about, organisations have succeeded or failed for the same reasons. To succeed, you need luck, pluck, flexibility, and focus. You don’t need all of the above to succeed; if you manage one or two of the above well, you will be rewarded with your fair share of success.

But one thing is certain: every route to success is different and unique; you can gain insights and ideas from other success stories, but you cannot succeed merely by trying to be someone else or copying methods that worked for some company somewhere.

Idea 1
This brings me to the first rule of managing in the future: One should read success stories only for inspiration and ideas, not for emulation. A good book that will demythologise all global success stories is The Halo Effect. Its author Phil Rosenzweig makes a simple point: we recognise success only after it happens.

In short, success is defined only in hindsight. So it is downright impossible to break success up into its component elements and package it for easy learning. Once a company succeeds, it is easy to find great leadership, strategy, and customer orientation as important elements in its formula. But it cannot be replicated.

Did Amazon win by copying Barnes & Noble? Just as you cannot drive forward by looking into the rearview mirror, success comes from being alert to your own situation, not trying to follow someone else’s path. But if must learn how to succeed, I can think of only one management guru who got it more right than wrong: Peter Drucker.

Most gurus are like the blind men of Hindustan. Each one has got hold of one part of the animal and touted it as the way to success. Drucker managed to feel his way around most parts of the elephant by sheer observation and avoidance of narrow truths. He was successful because he forced managers to ask the right questions; he did not try to prescribe too many answers.

Idea 2
This brings me to the second key idea in managing for the future: Ask the right questions, and the answers will emerge from the mist. For example, how does one become a successful executive? Drucker’s answer: the main task of the leader/ manager is to be effective. And effectiveness comes from asking oneself: what needs to be done?

And who is the best person to do it? Success flows from the answers we find to these questions. Another piece of advice from Drucker is about the future. His observation: don’t worry too much about the future. If you wait long enough, it will be with you. Rather, managers should focus on how one can profit from the future that is already here.

This insight comes from the reality that we cannot ever know how the future will unfold. When IBM carelessly signed over the rights to the PC operating system to Bill Gates, it believed the future was in hardware; it was half-right and half-wrong. The key piece of hardware turned out to be the Intel chip. The software that drives it all went to Gates. Gates’ success was built on this one piece of luck and the lock he had on PC software. Everything else he sold was built on this one success.

Did Google win by predicting where the internet would head? What its founders realised was that everyone on the web was searching for something — and Google decided to be part of the solution. Did Sergey Brin and Larry Page envision the future? Not quite; they saw what surfers were already doing and decided to help them do it better. They capitalised on the future that was already visible.

Idea 3
The third idea is luck. Too many businesses fail because they don’t harness luck when it stares them in the face. IBM passed its luck on to Microsoft for it was too proud to think of software as a product. Infosys got lucky because the government wanted foreign exchange and knew too little about software to meddle with it.

Idea 4
What matters is not luck alone, but what you do with it. Infosys had its share of luck, but it alone had the pluck to decide that the new breed of foreign investors coming to India in the 1990s wanted integrity and high levels of corporate governance.

Narayana Murthy positioned Infosys as the clean company and listed on Nasdaq. As the first mover in corporate governance and image management, Infosys reaped disproportionate benefits.

Idea 5
The next idea is to understand the law of compounding. Once you’ve had luck and pluck, success is perpetuated by the law of compounding. You don’t have to do anything spectacular to maintain success; only make sure you monitor your relative speed vis-a-vis your competitors.

If Toyota is bringing down costs at 5% a year and GM at 2%, even if GM is making more money today, it will fail. If HDFC Bank is compounding net profits at 30% per annum and State Bank reports 40% one year and minus 20% in the next, one can safely predict that ultimately — barring terrible missteps — it is HDFC that will win.

This explains why HDFC Bank quotes at a price-earnings multiple of 32 and State Bank at less than half that (15) despite being many times bigger in size and reach.

Idea 6
The sixth idea flows from the fifth. Companies have to focus on compounding excellence, and weeding out incompetence. The Peter Principle tells us that organisations do this very badly — all people rise to their level of incompetence.

No real cure has been found for this, but, once again, success comes from relative performance. If your organisation has fewer incompetents than your rival, you will succeed. The trick is to figure out how to do that. There is no one answer.

Idea 7
The last idea is to learn to recognise the symptoms of failure. Success is easy to spot once it happens. It’s the same with failure. You know it only when you are about to fall off the cliff. Also, some failures help us learn, others lead us to defeat. Future success depends on an organisation’s ability to differentiate one kind of failure from the other.

Jim Collins, who wrote two books trying to define success (Built to Last and Good to Great) hit the mark better with his book on failure (How the Mighty Fall). He lists a few tell-tale signs of impending corporate failure: hubris born of success, undisciplined pursuit of more, denial of risk and peril and so on.

Success means you should know how to read the storm signals of failure better than the rest.