Change Rules And Rules Change
10 February 2010 Gary Hayes
How do you lead when the world just won’t stand still? Leading in Turbulent Times is based on exclusive interviews with the frontline leaders who know how to adapt to rapid change and how to help their companies overcome the challenging obstacles they face. Authors Kevin Kelly and Gary Hayes here address quite how the world has changed.
Fast, turbulent, mind blowing, exciting, scary. It has never been more difficult to make sense of the world. One CEO told us: "Our sales are half what they were this time last year, which is a challenge. But I think we're in the same place that a hell of a lot of other people are in right now. The focus on performance is finer. When you are growing at 35% everybody benefits; when your growth goes down to 11 or 12%, the separation between the poor and the best performers increases. And then you need to figure out how to handle it, because in this environment you cannot let that rise. We have had to let some of those poor performers go."
Then there's car rental company Hertz. During the past three recessions, in 1981, 1991, and 2001, annual sales never contracted more than 3.5%. In November and December 2008, the company saw a 20% fall. In January 2009, Hertz announced a reduction in its global workforce by 4000 employees in a bid to decrease costs due to reduced rental demand. Hertz had already reduced its workforce by 22% in the past two years.
It took the Indian company Infosys 23 years to reach revenues of $1bn and just another 23 months to hit $2bn. It's even more amazing when you consider the company's birthplace and the changes it, too, has witnessed. Ask any Indian leader and they will tell you that running a business in India before the economic reforms of the early 1990s was an impossible obstacle course – companies often had to wait a year to get a telephone line and individuals needed to give two weeks' notice of plans to fly overseas.
"When I got into this business in 1996 as a CEO, mainframes ruled, the internet was just happening and nobody believed distributed processing would be as powerful as mainframe processing in years to come," says K. V. Kamath, CEO of ICICI Bank. "Unless you keep yourself updated you will be obsolete. One good thing that comes out of me trying to reinvent myself is that it is easier to tell my colleagues that unless they also reinvent themselves they will be obsolete."
Another CEO told us a few years ago he used to get his sales figures every month. Then it went to every week. Now it can be every hour. In the next year, General Electric will launch more new products than in any previous year in its century-plus history.
"The environment has changed so much, especially in the financial sector, that some of the old rules do not apply," Bijan Khosrowshahi, former CEO of Fuji Fire and Marine in Japan observed, echoing the opinions of many in the business world and beyond. Meanwhile, British Prime Minister Gordon Brown told the G20 Summit in spring 2009 that "the old orthodoxies will not serve us well in the future".
"For business leaders and people who are on the track to leadership, this will have a permanent impact on the way they do business," says former Leo Burnett CEO, Linda Wolf. "The level of trust has been diminished and I think it will take years and decades to build that back. In terms of how people are going to do business, I think there’s going to be a lot more skepticism."
Change is a fixture
Charles Darwin said: "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change."
Change is a universal fact of organisational life. No business is immune, and any leader who refuses to accept that change is inevitable in our turbulent times is in denial. Becoming an agile leader – in terms of thinking and behaviour – is critical for success in such times. Rigid and inflexible thinking runs the risk of making today's leader irrelevant.
Leading in Turbulent Times (Financial Times Series) is published by Financial Times/ Prentice Hall