Preparing for the future now:

Peter:

I enjoyed the conversation a lot and hope you will too. Now, without further ado, I bring you Professor Rita McGrath. Hello, everyone. I am here today with Professor Rita McGrath. Hello, Rita. Thank you for joining us. It’s a pleasure to be here, Peter. It’s lovely to see you again, and um, we’ve got a lot of ground to cover.

I’ve been a happy consumer of your books, as you know, for a very long time, and one of the things I think we’ll get into today is I think many of them, if not all of them, actually may be even more relevant today than they were when you first published them. But of course, we can get into that. I will have introduced you  properly in the, um, the housekeeping for the session.

But before we begin, why don’t you tell us a little bit about your intellectual history? You know, how is it that you came to be where you are now in your professional and intellectual life?

Rita: Oh, what a great question. Um, well, so my first. job out of my master’s degree was in city government. And the amazing thing about city government, especially local governments is that if you’re young and you’re capable and you’re ambitious, they really give you as much as you can possibly handle.

Um, and, so it was. Just an amazing experience because I was in charge of, uh, back in the day, we called it computerization today. We call it digital transformation. It’s all about how do we, um, how do we take this very traditional bureaucratic organization and upgrade its capabilities to something radically different and better.

And that got me thinking about how do you take a large organization and make it change? So when I started my Ph. D. program at the Wharton school, I told my then thesis advisor, Ian McMillan, who you probably remember, uh, what I really wanted to study was the  science of implementation. And he said, I can’t think of anything more boring than the science of implementation.

This is your

Peter: academic advisor.

Rita: He’s my academic advisor. So we kind of came to a pass there. And, um, what, um. Uh, what ended up happening was we actually got a grant for a three year study from Citibank at the time to study their corporate mentoring programs. And, blessedly, I was put in charge of that program, uh, with Mac.

I was a research director there. And what I realized was the phenomenon that fascinated me so much was about large scale organizational change. And innovation and growth that comes from it is really one variation on that. So we kind of were able to agree on a compromise there. And that got me really into the whole area of How do we think about change and innovation as it connects to strategy?

And so I would say the whole arc of my work has really been about that intersection between strategic thinking and innovation and or change, uh, and or transformation, which is what a lot of organizations are very concerned with today. As we have this fundamental shift in what’s, you know, what’s going on almost under our feet, uh, in terms of a shift in, you know, what, what are the boundary conditions under which we have strategy  at all?

Peter: That’s interesting. And so, uh, you know, that, that actually explains, uh, I think perfectly. Uh, how you ended up writing books with titles like Seeing Around the Corner, uh, Seeing Around the Corner’s Discovery Driven Growth. The the entrepreneurial mindset and even the end of competitive advantage. I think of all of those.

They’re all great reads and I’ve enjoyed them, but two of them, at least for me, really stand out as being particularly relevant today. And that’s, of course, seeing around corners where you talk about how to identify and anticipate inflection points. In business, you know, this idea when the traditional ways of doing things become obsolete.

You know, how do you, how do you get ahead of that? And then, of course, discovery driven growth, which seems to be a wonderful recipe for how you de risk projects. And as leaders say, I don’t know, and still move forward and charge forward. So I’d like to, I’d like to talk about both of those. And maybe we could start by talking about seeing around corners first.

So how would you describe  it? The central theme of that book. And, uh, you know, we can go from there and, and talk about what is it in that book that you find is most relevant for the world we’re in today. And, you know, maybe even there’s some things, uh, in there that the world has gotten ahead of us that are, that are less relevant.

So why don’t we start there? What, what was the key theme of seeing around corners for our listeners maybe who are not familiar with it?

Rita: Well, the core idea is that of strategic inflection points, which I define as a shift in the environment that represents a 10× change in what we’ve taken for granted as normal.

So 10× faster, 10× cheaper, 10× smarter, you know, with AI, who knows? Um, and, what that does is it fundamentally changes, you can almost think about it as the envelope of constraints that you operate under. And I wrestled with this idea for years, uh, and I was fascinated by it, because, obviously, what could be more important than something that creates a 10× shift in possibilities or constraints?

Um, and, it wasn’t until a friend sent me this wonderful article called, What If You Changed the World and Nobody Noticed, that things fell into place. Because what I realized was, inflection points feel when they’re happening to you, as though they came out of absolutely  nowhere. You know, they bop you on the side of the head, and you go, what was that?

And yet, when you go back and look, they’ve been building on me. Sometimes for decades before they actually become a reality on the ground that you have to deal with. So I think that’s so relevant to where we are right now is that many of the things we’re grappling with. So AI would be a thing.

Everybody’s talking about. Now. Um, you know, we’ve been working on artificial intelligence easily since the 1940s. So it’s been a long, long, long time coming. Um, and, now we’re beginning to ordinary people are beginning to see what its effects on their day to day lives could be. But if you’ve been tracking it all along, you would see the evolution of these technologies.

And one last thing I’d say is that. We have this feeling right now that everything’s moving faster and faster. And I think that’s true. And I think Ray Kurzweil, who’s a very famous futurist, um, has the answer to that. And that that is that any system that learns by trial and error experimentation takes on this exponential quality.

So it’s not just linear, you know, it’s not going from A into point B the way our brains are wired. It’s, it’s this kind of multiplicative, right? Uh, quality of having a compounding effect on change. And I think that’s what we’re experiencing right now.

Peter: So, you know, what, what,  what I heard in there is, you know, you’re making the point that with the benefit of the hindsight, you realize.

That the moments where, you know, your core assumptions underlying a business change where that shift happens, it seems like it might be random or unpredictable, but in fact, it’s not that these changes are usually the results of trends and shifts that could be identified and analyzed if you knew where to look.

So how, how does one, I mean, I think it’s. It’s uncontroversial to say that, um, you want to separate the signal from the noise, right? Nate Silver talks about this, and you yourself talk about, uh, identifying weak signals and kind of separating them from all the noise. But how does one practically do that in a world that is just so noisy?

And, you know, because of things like artificial intelligence getting more noisy all the time.

Rita: Well, I think the first principle is you want to be thinking about what I call time zero events, which is the moment that something happens. And it could be a good thing, right? It could be a bad thing, but something’s going to  happen.

That’s going to fundamentally change what’s true about your business. So take the automotive sector, right? So let’s say your time zero event is 50 percent of all cars on the road are now electric and not the conventional way that we power cars. Um, so that’s your time zero event. And then if you think about it, there’s a whole bunch of stuff that would have to happen before that could be true.

So what I say is take a time zero event and then work backwards. So 12 months before that could happen, 24 months before, 36 months before. And then what you do is you sort of train your mind to pay attention to those signals. Um, so Peter Senge very famously called this creating memories from the future.

And if you think about it as, as human beings, we do this all the time. So even as you and I are talking here, you might be thinking about, Hey, like, and then it doesn’t happen consciously, right? In the back of your mind, your brain is kind of going, Hey, what am I going to eat for dinner? Am I going to go for the veggie salad or am I going to go right to the steak place?

And how will I get there? Will I take the subway? Will I walk? Will I take a bus? And our brains are constantly doing this because what we’re programmed to do as a species is conserve brain energy. Your brains are constantly revving, saying, what do I need to be to paying attention to? So to take a a, a typical example, let’s say you’re planning to fly to Paris tomorrow  and you hear noise that there’s gonna be some kind of pilot strike at JFK airport, right?

Um, a week before, if you haven’t been planning to go to Paris the next day you might hear that news about a strike and it just, yeah. Oh, interesting. You know, but it goes right in and out of your consciousness. But if you are suddenly gonna be in the middle of that, now you’re paying attention. So when it comes to anticipating signals from the future, that’s the sensitivity you wanna create in your brain.

You want it to say. Oh, actually, that’s a signal I should be paying attention to. And I think that’s what you want to prepare your mind to do with this idea of working backwards.

Peter: That’s um, you know, that’s great. So why we’re on the topic, why don’t we take a live fire example that I know will be top of mind for many people listening.

And it’s how might we use the principles of seeing around the corner to prepare for a future in which artificial intelligence It’s clearly going to play an even greater role. So, um, if, if, you know, if I were a client to you right now and I said, you know, Hey, Rita, I really like to apply the principles of seeing around corners to this, this world.

I’m worried about, um, where artificial intelligence seems to be everywhere. How would you advise? Me  and my team to tackle that problem.

Rita: Well, I’d use an analogy, right? So if you think about the era that we are leaving behind, right, it’s an era of mass production, huge corporations where the competitive advantage in many cases was being able to replicate a product or a service.

Reliably over time with very high levels of quality. Um, and,, and we’re kind of moving from that era into this digital dematerialized, right? A lot of things that used to require physical products like the flashlight, right? Well, we don’t buy flashlights much anymore. We use our phones. Um, so dematerialized digitally influenced and so forth.

And so to me, AI today is sort of analogous to what plastic was back in the fossil fuel era.

Peter: So

Rita: plastic was first introduced. Now plastic didn’t create mass production. Plastic didn’t create the fossil fuel era, but what plastic did was it made it ubiquitous. And I think what we’re going to see is AI is going to be ubiquitous in, um, just about everything that we do.

And we know that’s going to destroy some jobs, and it’s going to create others, and it’s going to be very disruptive. So I think, um, for a corporate leader, you’d want to be thinking about how do I deal with the folks who’s  So what does a junior consulting analyst do when you can push a button and get the answer to your questions without actually having to interact with the human being?

So what do I do with those people? And how do I develop their skills? So they can become more valuable? And then how do I think about the skills? I don’t have yet that I need to acquire? Um, and, so just just as people were sort of like, Hey, what is a plastic bag? We’re going to be thinking about well, what is augmented human intelligence going to look like?

And that’s going to be.

Peter: That’s interesting. So, you know, if I can linger on that point for a moment, I remember you. You wrote that often the signs of disruption are subtle. They’re not as obvious as, you know, A. I. everywhere. And by subtle, you were suggesting that they would emerge at the edges of an industry or of a market.

Um, what would that look like to your lights? Uh, when it comes to artificial intelligence, in other words, where would one look at the what does it mean to look at the edges of our industry or a market when you’re looking for ways that artificial intelligence might be disruptive?

Rita: Well, you’re going to have to look at where  your organization and organizations today are much more porous, right?

Than they used to be. I mean, we’re all in ecosystem. systems now. So you’re, you know, this old idea that, oh, I have a company and produces a product and that gets sold to a customer. And there’s very clear divisions between who’s a buyer, who’s a supplier, who’s a rival. Um, all that stuff is getting much more blurry.

So I think the edge’s idea is how do you go to where those transactions are happening between your company and its ecosystem partners, your company and its, um, customers. Um, so to take a specific example, if you think about a call center interaction.

Peter: Right.

Rita: That’s right at the edge. It’s some customer who’s reaching out to your organization for some reason.

It could be good. It could be bad. Um, but that call center person is going to know so much more about that customer situation than the people working at corporate headquarters. And yet here’s the, in many cases, what we’re doing is we’re actually creating systems that shut us off from that rich flow of information.

So whether it’s AI or whether it’s some of their automated call switching system, we’re not actually listening to what customers are telling us. Voluntarily right at the edges of our organization. And I think this gets to another key idea in a world of AI, which is if you don’t think about your employees as just units of  cost, but start thinking about them as units of potential revenue creation, that’s going to unleash a lot of potential power for organizations that are prepared to make that leap.

That’s interesting. Um,

Peter: and then, you know, presumably, presumably, if you are, if you do do this work, and if you do do arena scanning, as you described it, if you do. Look for these signals, you know, the edges of an industry, wherever you find them, um, if you’re lucky, you may actually stumble across an opportunity to either, um, innovate against a need for which a solution doesn’t exist or for which one does exist, but that you can disrupt with a leap in cost, convenience or capability.

And of course, that’s where discovery driven growth comes in. Um, and, so, uh, you know, if you’ll you’ll give me the artistic liberty to make that transition from your first book. Uh, are from, um, seeing around corners to discovery driven growth. Uh, what I found fascinating about that book and why I think it’s still relevant for today, and we can debate this.

Is, uh, discovery driven growth provides a framework for leaders to be able to say, look, I don’t know, and move forward, as we said before, for managing  innovation and managing it specifically in uncertain markets. But, um, why don’t, why don’t we start there? How would you describe, that’s my, um, my takeaway of the key learning points of discovery driven growth, but what would you say they are?

And the same question today. What is it about the key learnings from that book that you would say are most. Important or relevant for the environment. We’re in today.

Rita: Oh, absolutely. So discovery driven planning and then discovery in both of the book were based on this fascinating series of studies. I did of corporate flops.

These are the big ones, right? These are Disney’s foray into Europe and FedEx doing this thing called zap mail back in the day where you would like to create an image of a thing and then send it from one office to another. And what I found when I studied these, these flops was they were united in a common pattern.

Which was untested assumptions taken as facts, few opportunities for low commitment testing, commitment to a big team, an upfront expense, a big ambitious plan, and, and, and, and what I took from that was, hey, wait a minute, if we’re in a situation, which is highly uncertain, that’s a mistake, right? You can’t plan it as though you knew what the answer was  going to be, as you just said, right?

It gives me permission to say, I don’t know. So what people, okay. What people have an impulse to do when they’re faced with a big opportunity, or what they think could be a big opportunity, or when they’re faced with what they think could be a big risk, right? They tend to take a huge team, throw a lot of money at it, knee jerk reaction, go fix this, you know, big ambitious launch plans, 18 months from now we’re going to be doing blah, blah, blah.

And what, what I often find is that’s usually a mistake because you have such a high degree of assumptions relative to knowledge that you actually possess. Then you get a big team going and all of a sudden, everybody’s saying, yes, yes, yes, we absolutely must make this true. And even though in your heart of hearts, you may have your doubts, you may not actually know, you may have a lot of reservations.

You don’t want to tell anybody because you’ve got this big team and you’ve made this big commitment and you’ve committed. And you sort of hope you can pull a rabbit out of the hat by the time the deadline comes. So instead, I think you’re much smarter being able to say, in a highly uncertain situation, I’m not going to throw 50 people at this, I’m going to take maybe two people.

And we’re going to plan to the limit of what we know, and then we’re going to plan for the next step. And once we learn. What we’ve discovered, we’re going to look around and say, what  are our assumptions? We’re going to document those. And then based on the updated assumptions, then we’ll make a decision about where we’re going to go next.

Right. And I think that’s giving people permission to behave that way is one of the most powerful things a leader can do, which is, as you said, giving them the right to say, I don’t know, but here’s my plan for how I’m going to find out.

Peter: You know that this is just I heard I heard a couple things in there that I actually haven’t thought about before.

I heard you say, look, when you when you’re doing this, it’s not simply about testing your assumptions fast and cheap. There’s also this up front piece where you’re saying, look, don’t actually commit all your resources up front instead, allocate them in stages. Uh, and presumably I, I imagine you would add more as you learn more and about the market, the market and the opportunity as you’re going forward.

Um, but I still have a question for you there. Even in that, that kind of environment, you said this is great because it allows leaders or it gives them the opportunity to say, you know, I don’t know and move forward at all. Presumably it also give them the opportunity to say, look, this isn’t working and bail out.

But, um, I recall you also pointed in your book that there’s often. A  natural impulse that they just have to stick with ideas, even if they aren’t working. Um, and, you called it escalation of commitment that can kind of creep into even a perfectly designed checkpoint plan. Could you say a little bit more about the idea of escalation of commitment and how, if at all, you think it might be more or less relevant in the current environment?

Rita: Oh, absolutely. It’s huge in the current environment. I would absolutely say yes. So this was actually a term that was invented by Ross and Stott years ago, and they called it escalation of commitment to a failing course of action. I just, I like to give credit where credit is due, but, but it, um, escalation tends to come from three sources.

Um, so the first source is it’s your idea, right? So, so you kind of take pride in ownership of it, and you’re convinced of its correctness and all kinds of human biases come into that, right? So, uh, confirmation bias. So I take in information that tells me what a great idea it was, and I reject all information that this could not be a good idea.

So the first one is your own, uh, tendency to want to stick with something you said would be a great idea years ago. Second is social, right? So if you think about it, if you’re passionate about something, who do you invite to go with you on that journey? You know, people you hate? No, you invite your friends, your colleagues,  your young people.

And so they say, come with me on a journey to change the world. And then the world. Stubbornly remains the way it is, and you kinda have to go back to them and say, well, gee, maybe that wasn’t such a great idea, . So there’s a social pressure and then there’s competitive pressure. You know, in any situation there are gonna be people who would be quite pleased if you failed and having to go back and confess that maybe that wasn’t happening.

So there’s all these pressures upon people. To continue with something. And if you think about it in a large company, as doubtless, you’ve seen, it takes so much commitment and so much effort to get any idea going, right? Then you almost have to put yourself in this position of saying, I passionately believe in this.

I’m betting my career on it. And then it almost locks you into this position of, of being unable to shift once the facts reveal themselves to be no longer true. So I think it takes a lot of courage to say, Hey, given what we know now, I think this is the best course of action going forward, but I am open to hearing that that may not be the case down the road.

And I think really talented innovation leaders are brilliant at this and saying, look, hey, we learned a lot, right? But now we’re learning that there’s a different something different. That’s going to be required of us, or that might make sense, given what we’ve now discovered.

Peter: So  that’s, that’s interesting.

So I heard you say that there are a number of different sources of entrapment. And, you know, you talked to some of them, some psychological, some of them sound rationalized. Thank you. Uh, some of them are susceptible to competitive pressure, and I remember in your book, I think you were, you were quite generous that you use language to the effect that, uh, it’s possible your team can be a victim to, um, the developments of an entrapment.

And of course, it’s a good leader. You want to search for that. Um, I’ve noticed a slightly different. Problem and I’m curious to get your view on it. And the problem is the following in our own work. We’re often asked by our clients to help leaders become more data driven, right? Which is, you know, this is a popular trend now to get leaders to shift from making decisions by their gut and being much more thoughtful about gathering data and using to make informed decisions.

And yet often we’re finding that the opposite happens. Instead of using data to discover what is right, People are shoehorning data and using data to prove that they are right. It’s almost like a super stimulus  for confirmation bias. So my question for you in a, in a world where it is increasingly easier for, um, motivated people to use data to prove that they are right instead of to prove what is right.

How, if at all, does that change your recommendations for how one tests for whether they are, um, caught in a entrapment of any kind?

Rita: That’s a, that’s a great question. I think, um, some sensible ways of approaching that are multiple sources of data, right? So a lot of people will take just one source of data and, and, you know, double, double down on that.

Whereas if you say, well, wait a minute, I’ve got data that comes from this data set, and I’ve also got qualitative data that comes from there. And I’ve got, you know, anecdotal evidence that comes from here. How does that create a complete picture? So I think it’s. Don’t just rely on one data source or one one analytical approach.

You want to use multiples. Secondly, I think there’s a lot of room for healthy debate. And sometimes, especially in a very consensus oriented organization, you’ll actually need to structure that. So, um, one popular approach is red team. You know, where you give people permission  to say, okay, what we want this group to do, like, we think this is a great idea, right?

Absolutely. What we want this group of, say, three or four people to do is go off and pretend that you’re the enemy and pretend that you’re going to find every single possible flaw in this idea that you can. So it’s almost like you’re giving them social permission to deviate from the norm of conformity.

And a lot of times that can be a super useful exercise because once they’re freed up from the confines of having to be good team players and that kind of thing, they can often come up with really interesting ideas. Another interesting approach that I’ve used. Is, um, what I call corporate takeover, which is, uh, okay, here, let’s say you’re general mills or something.

Um, well, if Nike came along and bought your company,

Peter: you know,

Rita: what would they do differently? What would they stop doing? What would they start doing if they increased your marketing budget by 10 X? What would you do differently? And somehow, let’s say you’re a lifetime general mills employee. Somehow the thought of now I’m working for Nike, it frees people up from this traditional lock step that they’ve often gotten themselves into.

Peter: That’s interesting. What, um, you know, just listening to you. You, you speak, it’s your, you’re also pointing at, um, you didn’t use these words explicitly, but you’re,  you’re really shining a light on the need for agility and adaptability, which, you know, as even as I say, these are, these are, it’s almost consulting jargon.

And yet, I think most people would agree most of the time that one really does need to be more flexible and responsive in order to deal with all the changes happening in the world. So how would you take those ideas of agility and adaptability? And convert them into practical advice that an executive can can do something with, you know, more specifically, it’s what to your mind is the pathway to build an organization that is more agile and more adaptable, adaptable that that one could take.

Action on today.

Rita: So please do ask that because that’s actually what my next book is about creating what I call permissionless organizations and to be sounding too jargony. But what that basically means is if you think about bureaucracy, you know, why did we create bureaucracy? And what everybody’s forgotten now is that at the time when that idea was 1st invented.

This is a huge advance from what came before. So bureaucracy, which, which  has its principles are division of tasks into functional areas, hierarchical division of labor, so that everybody’s really clear on what their decision rights are and who has decision rights, the sort of accumulation of power to that quote, quote, top of the organization so that you can actually create decisions that cascade across a large organization where.

Remember, in a mass production context, that’s what you want. We’re being reliable and delivering results with high quality replicably over time in a stable environment. That was your key to the golden kingdom. Um, and, so bureaucracy in those contexts works great. What we’ve forgotten is that bureaucracy in a really fast changing, very dynamic environment is, is hopeless.

It can’t, it can’t cope. So what you need to do instead, and I would advise people listening, is if you want to build some, Organization that can move with greater speed that can sort of reform itself. You want to get rid of that division of tasks into functions. You want to break things down to the smallest level you can, which is typically a team of somewhere around five to seven people.

And you want to give them either all the functions that they need to operate within the team, or you need to give them easy access to the functions that they require. So if finance has to approve something,  how do you make that as easy as possible, right? If marketing has to sign up on something, how do you make that as easy as possible?

So the, the context I would encourage your listeners to think about is think about The relationships between teams being something like an application programming interface, which is like the relationship between software programs. So it’s why, you know, Bank A and Bank B can do business with each other without having to rewrite all their internal banking code.

It’s because they’ve got an agreed upon set of protocols that they do business with. And I think human teams are starting to be able to do that. And an example that I think begins to capture some of this is what they do at Salesforce. Which is something called a V2MOM, and the V2MOM stands for Vision, Values, Methods, Obstacles, and Metrics.

So, vision, what is it I want to accomplish? Values, how am I going to do it? Uh, methods, what am I going to try? You know, what are my obstacles that I need to overcome? And then, how will I know if it worked or not? So, you have that. Now what’s interesting to me about the way Salesforce does this is every person in the company has one.

It’s all on one page. And it’s all transparent to everybody else in the company. So if you and I are working together on something, this gets back to this idea of agile, right? So if I need Peter to do something for me and it’s going to  take half a day of his time, I can go look at his v2 mom and I can say, Oh, I’m on the roadmap there.

Like this thing I’m trying to accomplish is also a thing he’s trying to accomplish. And so working together becomes so much easier. Now, if it’s not on your roadmap, but I really, really, really need you to do this for me. Now we have an explicit conversation about, okay, what are you going to put on the back burner so that you can help me, or what am I going to put on the back burner so I can help you, and it makes all that transparent.

So, when you have that, now notice the difference, right? I’m not going up to some person three layers up in the organization and say, hey, I really need Peter’s time for next week, and then we have a whole negotiation, and then there’s all this, well yeah, but then I’m not going to make my quarter. That whole conversation just gets pushed right to the level of the people that are actually involved in the discussion.

And I think that’s a lot more powerful than having to rely on a power structure to resolve those kinds of issues. Well, let me, um,

Peter: so for that. There was a lot in there. Let me double click on, on two things I heard you say and see if we can, uh, explore them a little further. So you, you mentioned that part of, you know, getting a culture that’s more agile and adaptive, uh, involves making it easy, easier for people to get things done and to work together.

And then you also talked a little bit about bureaucracy. And, uh, when you said that, what came to  mind is I remember, um, we doing one piece of work with some executives at a rather large company. And the, we were talking about the importance of trust. And this, uh, executive said to me, bureaucracy is what you can get if trust is lacking.

So what, what I wonder about here is, you know, it, trust is another one of those words that sounds great, and then it also makes some people cringe because it sort of, it can sound soft and abstract. But listening to you, it sounds like it would, it would have to be a core ingredient for any of your suggestions to work.

So how do you, how do you think about operationalizing something like trust or, or moreover, How should leaders who are who want to go down this past path think about finding the places where maybe trust doesn’t exist or or doesn’t exist? To the degree to which it needs to, if any of this is going to work,

Rita: that’s, that’s a very important idea.

And I think trust is key. So a great example of a company that’s managed to operationalize. A lot of this is a company called Morningstar. They, um,  they are a tomato processing company out in California, and they have 2 core principles that they use to operate. The 1st 1 is what they call noncoercional.

So nobody in the company should be coerced to do something that they are not willing to voluntarily commit to do. So I think that’s one of the pillars of trust, which is if we’re cooperating, because we’re not being coerced to do something that’s much more powerful than if we were under duress to deliver some kind of results.

So that’s 1 2nd principle, though, is accountability. So I’m not being forced to do anything. But if I make a commitment to do something, I’m going to deliver. And I think that creates a kind of a lattice structure for building trust. So if I know that you’re doing this because you’re voluntarily doing it, you’re not being forced to.

And I know that I can come back to you and say, Hey, you said you were going to get this to me Thursday. What’s my likelihood that I’m going to get it by Thursday? Uh, and if I, if I can count on you, look, if, if, if you don’t have it to me by Thursday, either there’s something awful that’s happened, or you’re going to let me know what, what the workaround is going to be, right?

That creates the building blocks for trust. Now, it doesn’t mean, and I think this is where people get confused. It doesn’t mean we like each other. I can trust, I trust many, many people without particularly caring for them as  friends or coffee partners or anything. Um, and, it doesn’t necessarily mean that we’re, you know, great social companions, but it means that.

If I promise to get you something, you can count on me doing that for you. Right. And, and I think that’s one of the building blocks. The other thing I would say about bureaucracy and lack of trust is where I see this bubbling up a lot is, um, particularly in middle managers and particularly when they come under stress.

And what we know about human beings when they come under stress is it tends to shortcut their range of possible. Uh, behavior that they consider. And it also tends to create blind spots. You know, when people are stressed and anxious and need to deliver a result, the, the most, for many people, the most natural thing to do is try to get more control over the situation.

And that often expresses itself as a bureaucratic, um, kind of thing. One last thing I’ll say about this is, um, unfortunately in many situations in our modern economy, We have situations in which we’re treating human beings like really poorly performing robots. And what I’m thinking here, it’s like warehouses run by algorithms, right?

And that kind of violates the coercion part. The algorithm is telling you, Hey, you didn’t  put enough boxes on that shelf quickly enough. And it also is almost violating your, um, commitment to be accountable because it’s taking that, it’s saying, I’m going to tell you what accountability is. And I’m going to tell you what you should be doing.

And so it’s sort of violating those two principles to have that kind of control system in place.

Peter: That’s interesting. So, um, you know, what that reminds me of is now going back to seeing around cornices. I think about it. I think I’m getting this right. Um, you, you talked about the principles of arena scanning.

And I think for doing that, it was largely to look for where disruption is going to take place. But I remember a key principle of that was seeking out diverse perspectives. And I, what I’m wondering is, is there, is it too much of a leap to say, to reuse this idea of arena scanning as a means by which to seek out diverse perspectives, perspectives internally, and maybe spot or get out ahead of some of the problems you just described there?

Or is that, um, is that a bridge too far in your view?

Rita: I think you’re right on. Um, if you think about it,  who knows more about your business than the people that are on the front lines? And yet I see so many executives kind of wrapped in metaphorical bubble wrap, you know, they spend all their time with other people in the C-suite or maybe the, maybe the top managers, their customers, maybe, um, how much time do they spend on the loading dock or driving around with the truck drivers or actually getting their, you know, instructions from people that are really doing business with customers.

So I think that, that getting to where the knowledge really exists. It’s in your company is so important. Um, and, if you think about many of the great business leaders, um, in back in the day, it would be Sam Walton, right? If he went to visit a store, he would go to the department store, I mean, the supermarket across the street, he’d find out how much they were charging for milk.

He’d come into the Walmart and find out if the store manager knew how much his competitor was charging for milk. And you know, if they didn’t know, there’d be healthy. So very granular, right? And even, even in more recent times, people like. Like a Jeff Bezos, you know, he would, he would tap into customer complaints or customer comments.

And I’m told that what he would do is he’d print out an email and forward it to people with like a question mark on it. And everybody was like, Oh, wow, he’s paying attention. Um, so I think the really great business leaders have this  sense for how they get direct information from the edges of the business, right into the corner office and, and not over index on it.

You know, you don’t, you don’t want people micromanaging and messing people up, but you want them with their ear to the ground paying attention.

Peter: I really like that, that language go to where the, uh, the stores of knowledges and where the information is. I think, um, you know, as I listened to this, the, the question that comes to my mind, though, is, uh, one of time, right?

You know, inevitably, every great book or every great podcast ends with a call to action, which is almost immediately followed by, well, when am I going to find the time to do that? So, uh, my question for you is what, what have you learned? Maybe since Cove it because I think things have changed, of course, quite a bit since Cove it.

What have you learned about the trade offs? Leaders need to make between dealing with tactical issues, stuff that’s right in front of you in a business that has to be taken care of now versus creating the time and the space for longer term thinking, say, like going out and doing customer visits or  spending time About thinking about the next three to five years that we could convert into some practical recommendations for leaders simply to figure out how do I balance my time in a practical way between getting stuff done today while also creating the space to think about tomorrow.

I mean, is there a formula or approach you’ve seen that you think is pretty is most effective? It’s a recommendation there.

Rita: Yeah, I do. So the way I think about it, and this applies at a corporate level, I think it also applies at a leadership level, is if you think about the uncertainty that you’re dealing with, um, there’s stuff that you know has got to get done today.

That’s, that’s the realm of the tactical, right? And you can think about that as low uncertainty. I mean, I know if I flip the switch, that’s got to happen. Then I got to go to the weekly board meeting, whatever. Then you’ve got the things that are laying the groundwork for, I’ll call it the medium term future.

And you can think of those as your new platforms, right? So if you’re I’ll make it up. If you’re running a tech company today, you better be paying attention to AI. Now, you don’t know yet what it’s going to do for your company, but you do know that in perhaps three to five years, it’s going to be core. So, so you can think of these new platform places as places where it’s the next generation of your business that you need to be paying attention to.

Then you’ve got the time that you have to devote to creating options for the future. And you know, it’s been a lot of time talking about options. So what’s an option? An option is a choice you’re making today to make a small investment in something that buys you the right but not the obligation to take a future action.

And we do this all the time as human beings. We, we listen to podcasts, we take courses, we invest in skill building, we take a trip, we go to a conference. We don’t sit down with a spreadsheet and do a net present value calculation of going to the computer electronics show. But if you’re in that business, you need to be there.

You need to see what’s going on. You need to network with people. You need to talk to people. People don’t even question the need to do that. And yet when it comes to an executive calendar, we let all that go out the window and we say, Oh, no, no, I’ve got to be dealing with the X, Y, Z. So I think it comes down to being, um, deliberate about how much time you’re spending on what kind of activity and trying to create almost a budget out of it.

Um, so a great reference for this is David Cody’s book, um, Winning Now, Winning Later. And David Cody was for 18 years, he was the CEO of Honeywell, uh, which had been the process of a merger between Allied Signal and the company Honeywell took the Honeywell name. Um, and,,  uh, and basically dug them out of a very deep hole that they’d gotten themselves into.

And what he used to describe was, he used to describe what he called X time on his calendar. So he would take his calendar, gather a paper calendar, and he would just put a big giant X, uh, for periods of time. And that was the time he deliberately set aside to do plant visits, to talk to customers, to just think.

Um, and,, and other people have other devices that they use to do this. So I have a friend who had a, a fake. Um, colleague named Ben, and he would put Ben meetings in his calendar and just say, this is my time. I’m going to block out to think or do whatever I need to do. That’s not the day to day. But I think the core, core, core idea is you want to get ahead of that as a leader.

And if you don’t do that as a CEO or a senior leader, you’re really not in control of your calendar. It’s controlling you. You

Peter: know what I really like it. There’s a couple of things that really clicked for me. First was the idea of thinking about. Um, business decisions in terms of options and how do I create as many options that give me the, the opportunity, but not the obligation to pursue things as the information becomes more clear that that’s lovely language and also this idea of thinking about it as a budget and I presumably what goes  along with that budgeting is how much time I have available to allocate to each one of these activities.

It sounds like that’s where you’re going. Um, and, then having that imaginary friend in there, I suppose you could create a, uh, an artificial intelligence version. Of that friend, but it’s a scary thought, but an intriguing one, um, read it. The one book we haven’t talked about yet, uh, which I know is one of your favorites.

You’ve told me is the end of competitive advantage. I mean, I don’t want to call you Nostradamus, but you know, it just rereading parts of that to prepare for this podcast today. It was very prescient. There’s a lot in there. And I know the key theme of the book is it’s about challenging the traditional notion of sustainable competitive advantage.

Which is the scary part, and then you quickly pivot to offering a framework for how you can thrive, uh, in an environment which is, which is much more volatile. Uh, perfect description of the world today. What would you Again, same question. What, what to you for you were the key themes of that book and of those key themes, which are the ones that you find are particularly  relevant today?

Rita: Well, in the book, I talk about a new playbook for strategy. So I think the 1st thing for me, I was to bear in mind is that. Most of us will spend most of our lives in that area where the advantage exists, the existing institution exists, the technology exists, and what we’re basically doing is executing against a pretty known set of parameters.

And what I argued in end of competitive advantage is we need to add two additional skill sets to our toolbox, right? We need to get really smart about where do new advantages come from, which is the whole. Innovation merger, new development, whatever you call that stuff, right? It’s something that doesn’t exist yet, but it’s going to come into being.

We need to figure out how to make that part of our day to day. And then at the other end, when an old advantage goes away, you know, you’re a Blackberry and nobody wants phones with keyboards anymore or whatever. How do you not transition your company to a new center of gravity? And the core of leadership theme of the book was we need to get smarter about those two things.

And so that involves what I call a new playbook. So thinking of change as the norm, rather than the weird thing. Hmm. Smarter about what we stop doing, uh, getting resources to where they can do the most good. And what we find is resources get held hostage, right? Yesterday’s budget  is almost like a, like a holy relic, right?

I, I’m not gonna be asked to give up my budget and absolutely not. And it becomes the source of turf battles and, and politics. So how do we get resources to where they’re gonna do the most good? How do we make innovation? A proficiency, even if you don’t call it innovation, whatever it is you call it, we’re getting new things into the world.

Where does that fit in? And then how do you as a leader become what I call discovery driven? How do you respond to new information in a way that makes it clear to the organization that you’re willing to hear bad news, you’re willing to hear discomforting things you’re open to having your ideas challenged.

And then the last thing which I think is something we’re just now coming to grips with is this tour of duty employee environment where, you know, it used to be you’d go to work for General Motors or something and that was your whole career. Today, people are taking jobs with a two to three year horizon and saying, you know, after that time I may stick around, I may not.

And we’re seeing boomerangs, right? It used to be, if you left my company, take your cardboard box out of the parking lot and, you know, a pox on your house. Today, people are coming back. They go away, they get their growth somewhere else. And then three or four or five years later, they’re back again. We’re seeing a lot more of that.

And so I think the, the talent question becomes really critical  because I’m coming and going across so many entities now that, that how do you even plan for your talent in that kind of volatile environment? So a lot of what leaders have to do is create a really great growth opportunity for the people that they would like to attract.

Otherwise they’re going to go somewhere else. Yeah.

Peter: You know, that’s interesting. You say, I thought you were going to go in a different direction. So let me, um, let me double click on that for a moment. What I thought you were going to say is that leaders have to prepare for a world in which some of their best talent may be gone in, in, in two years.

And they ought to be adaptable and agile, um, and prepare for that sort of thing. But instead you went a different direction, which is to say, no, actually you, you should do the best you can to keep people for the long haul. And that means thinking differently about how you retain them. But, um, if I turned it around for a second and, um, Say, let’s say you did find yourself in the presence of a client who said, you know what, I, I see that the future is going to be having people come in for 2 to 3 years, you know, maybe 5 and then going someplace else because it’s the way of the world.

Um, what recommendation if we pull everything we’ve talked about.  So far, you know, seeing around corners, allocating resources flexibly, um, focusing on learning, challenging assumptions. How would you bring that together to advise an organization to deal with this future? Would you still say, like, you really need to lean in and find a way to keep them, even though the trend is for.

Uh, shorter duration,

Rita: well, I didn’t mean to imply that you need to keep them working for your company. What I think I would say instead is you need to keep their relationship with them because they’re going to be part of the bigger interest. You know, they’re going to be. And as I said earlier, most firms today have very porous boundaries.

So let’s say they leave you when they go to a. Potential customer. Well, what’s wrong with that? Let’s say they leave you when they go to a thought partner or a regulator or an ecosystem partner. What I think you want to preserve is the integrity of that relationship so that you can continue to benefit mutually, even if they’re not actually working in your organization anymore.

And I think that’s really the essence of the longevity part of that connection part. Um, and, I do think you need to recognize your company isn’t going to be able to offer the right growth opportunity. To the best people at all times. Now, the trade off we used to make, you know, back in my dad’s  day, right?

Was you’d live with a less than optimal job. You’d live with being stagnant or you’d live with having to worship the copy machine for a year or 2 because you had that promise of a longer term tenure and eventually your loyalty would be rewarded. And it was all part of the system. It all worked together and we don’t have that anymore.

So I think it’s important to recognize people. Are going to go to where they see the best opportunities presenting themselves. And if you can preserve that relationship with integrity, I think that’s great. That’s why so many companies now are starting really active alumni groups. I don’t know if you’ve noticed this, but there’s more attention to, hey, you know, the New York area alumni job interns are all getting together and, uh, and then they sort of share networking opportunities and so forth.

So it’s not that break that we used to have when you left a company. It’s

Peter: a really interesting idea. So investing in maintaining the integrity and longevity of the relationship, not just the role of the tenure at the, um. At the company. Thank you for that, Rita. Well, we’re almost at the end of, um, our time together and you, you gave me personally a tantalizing surprise, which is you’re working on, um, another book.

So since this whole theme has been about, uh, looking at the world  from the future back, uh, what is it you would like to say? Or maybe it’s a nice preview of what’s to come, uh, from that book. And, um, maybe for our listeners, what early lessons can we expect to get from that book?

Rita: Well, I think, uh, Where I would set the book, right, is we’re in this transition from the certainty of the mass production, fossil fuel, automobiles, suburbs, highways, world, to this really, what does it mean to be digital?

What does it mean to dematerialize something? So I’ll give you an example. There’s an Israeli company called Bina. AI, which uses your phone to, it scans your face and it can do vital signs. So let’s say you’re applying for life insurance. What used to be, you had to go to a place, get your blood taken. The blood goes to a lab, the lab analyzes it.

Then they come up with a number. Then they send that off to your insurance company. And then somebody calculates what, what your risk premium should be. Um, all that disappears. Bina does it in an app, in a nanosecond, um, music, right? I mean, I don’t know about you, but I used to buy, you know those colorful coasters that we used to buy that have songs on them?

Yeah, sure, yeah. Well, it’s all gone now and we buy one song, we don’t buy 18 anymore,  uh, and they come through the air and they land on a thing. So we’re moving into this world which is digital, dematerialized, it’s gotta be greener, or as we We’re seeing what’s going on in the world today and the environment, you know, it’s, we’ve got to figure out some way of not destroying the planet as we go forward and so what this book is really about is picking up where seeing around corners and end of advantage drop off, which is.

What is out there? You know, what is that digital landscape look like? And how are we going to be effectively participating in it? Um, as business leaders, as as people who make decisions in business. Um, and, the early signs are that what we want to be thinking about is firstly, digital opens up vast amounts of new opportunities.

How do we use that to solve intractable problems? So I’ll give you an example of that. Um, there’s a wonderful company called care bridge. Which has taken on the task of coordinating care for people that are on Medicaid that have needs that are not just notes. So they need to bathe, they need help getting dressed, they need all this, and Medicaid pays for that.

But right now, the, the situation in many places is you’ve got a home health aide who doesn’t, who’s not there all the time. If somebody has a fall or gets out of bed, it’s a 911 call, then they end up in the  hospital. And it’s just this, this uncoordinated, fragmented mess. Well, what Carebridge has done is said, hey, wait a minute.

With digital technologies, we can actually surround these patients with digital infrastructure. And so all they have to do if they have a problem or a call, they push a red button, and that alerts a 24 7 group of people who have all the talent that they need. It’s a little bit like this. Me too much about the sales force, right?

To, you know, Do they need help getting out of bed? Is it actually a situation which requires a plumber and not a doc? And so what Carriage has done is created a business out of this, this formerly completely intractable problem. And by using digital technologies, they’ve made it possible for this infrastructure layer to take place.

So the first kind of principle of the new book is, is these digital technologies open up new opportunities. The second one is that we can invoke different players to participate together that never perhaps in an analog world would have been able to do that. So you have at the home health aide connected to the nurse who’s connected to the doctor who’s connected to the phone operator operating 24 7 remotely possibly to direct all that care.

And then the third thing is that we can actually use the techniques of things like  discovery driven planning and so forth to plan what these new initiatives would look like. But it’s going to require something really different. And this is what I call a permissionless organization. Which is. Using technology instead of bureaucracy to coordinate the actions of firms, I think we can get rid of a lot of managers and leaders, but it’s gonna require a real revolution and how we think about things.

So just take something really simple like, um, what does, what does saving and investment and health insurance and all that mean in a world where you might be a gig worker? You know, you might have a day of your week to company A, you might have half a day to company B, you might have something that you do on the side that’s just a passion project.

Then you might have a social media thing where you sell goods. So how do we account for that in a lot of our supporting social systems? So we’re going to need to really reinvent a lot of those things. And I’m interested in the book and speculating about what some of that could look like.

Peter: That’s, uh, that’s interesting.

And when, when can we, when can we expect to see it at the

Rita: Oh, you and my editor all want to know that. So here’s a, here’s a little, um

Peter: Your editor sent me, by the way, this whole thing. Yes, here on my left shoulder.

Rita: Um, so, so here’s  a time hack that I use when we’re talking about how executives spend time.

So I’ve actually got a lot of writing days allocated in my calendar. I spend about 20 percent of my, my working time on, uh, on writing. So, look, it’s at, it’s at this wonderful stage where, like, it’s in my head and it needs to get out of my head and into my fingers and into some kind of keyboard, but I’d say I should have a first draft.

Realistically end of February, complete draft of the whole thing. And then it’s really a question of whether my editor goes, you know, this makes no sense. Or whether she’s, sorry, this is wonderful. And it’s, the reaction, will doubtless be somewhere in between. Um, so we should know a lot more in the next month.

Peter: And so are you using AI to help you?

Rita: I’m, I’m, um, and this is interesting because when I first. Started to play with it. I kind of had this guilty feeling like, Oh, am I cheating? You know, that’s just what I just basically is doing is what I would do if I did a literature search, right? I’d go out and I’d read all these articles and I try to summarize them.

And what I was helping do is kind of do that. That initial. Um, now it gets a lot wrong, which is why you have to have the expertise, you can’t just rely on the app, but it does save a lot of time just sitting. Oh, yeah. Who’s that guy that wrote this thing  about globalization? La la la la la. And if I ask it, it can go find that instead of my having to log on to Columbia and go to the library and figure out the right keywords.

It just saves time. So I’m using it for that. I’m, I don’t use it for final writing at all because I find AI written stuff all sounds the same. Don’t you find that? Um, you know, it all has that kind of. Very pedantic sort of thing. And, uh, a lot of the same words. Um, so I don’t, I don’t use it for writing, but I would use it for initial research brainstorming.

Sometimes I’ll ask it to come up with a counter argument. So we were talking earlier about how do executives avoid this tunnel vision? And I think AI is actually super good at that, right? So if you sort of state your position, you say, come up with the three best arguments about why this isn’t a good idea.

It’s often because it’s not emotional, you know, it just goes off and it finds the three best arguments, why this isn’t a great idea. It’s up to you as a human to judge whether you buy them or not, but it can at least challenge your thinking in a way that’s not threatening.

Peter: It’s a really, it’s a, it’s a really good, a really good partner to, uh, stress test, uh, my ideas without judgment, which is, which is a lot of fun.

Rita: Well, uh, Rita, we look forward to, uh, The other great thing about AI, so the other great thing about AI is you don’t have to tell anybody, right? Right. It’s just between you and the machine, right?

Peter:  That’s right. It’s a guilty pleasure. Um, this has been fantastic. As always, Rita, uh, I look forward to the book and I think we’ll have to schedule, uh, a round two once it’s published.

But, uh, in the meantime, thank you very much for your time and, um, keep doing the work you’re doing because, uh, now is a really great time. We need minds like yours out there helping us navigate the future.

Rita: Thanks so much, Peter. It’s always a pleasure.

Peter: Take care.

Rita: Bye.