Leading Through Change | with Harvard Business School Professor John Kotter

Joining Willie Walker, CEO of Walker and Dunlop today, is Dr. John Cotter, a

professor

at Harvard Business School. Willie and Dr. Carter will discuss how corporations can effectively innovate and evolve in this technologically changing world. Thank you Susan and good morning everyone. I am very excited and honored. have dr.

john

cotter joining me this morning dr. cotter taught me and the other 90 e section students a course called lead in the spring of 1994. I love dr. cotter not only because the cases he taught concerned a topic I enjoy but Because Dr. Cotter is such a gifted teacher in the way he asks students questions and reveals aspects of the cases that few of us see, I've had many elegant and accomplished guests on Walker's webcast, but few have made me so nervous. how to prepare to ask questions to the former

professor

about a topic he knows as well or better than anyone in the world before introducing dr. cotter, i should mention that the timing of this discussion about dr. cotter couldn't be better for walker and dunlop as we announced on monday the acquisition of alliant capital, the 14th and by far the largest acquisition we have made at walker and dunlop, the read

change

has dramatically influenced the way i and the walker and dunlop management team we will manage and lead the integration of alliant As for Walker and Dunlop, I would also mention from a timing standpoint that the announcement of this major acquisition that focuses on affordable housing and tax credit syndication for low-income housing on Monday and then the important executive order that came out of the White House this morning calling for Creating more affordable housing in America through the use of low-income housing tax credits is both fortuitous and wonderfully useful for Walker and Dunlop.

It makes us look a lot smarter than we are, but, as they say, we'll take it. Guest John Cotter is the Kanazuki Matsushita Professor of Leadership Emeritus at Harvard Business School. He joined the HBS faculty in 1972 and in 1980, at the age of 33, was granted full professorship and tenure, making him one of the youngest people in Harvard history. my. He is the author of 20 books, 12 of which have been

business

best-sellers and two of which have been New York Times overall best-sellers. He is the founder of Cotter International, a management consulting firm based in Seattle and Boston. He is truly one of them. one of the most talented researchers, authors, consultants and leadership experts in the world and has degrees from mit and

harvard

, so first, professor cotter, thank you very much for joining me.

It is more than an honor that you will spend an hour with me to talk about leadership in your new book

change

I want to go back to start and talk about two of your seminal books

leading

change from 1996 and the heart of change from 2002. In those two books you describes an eight-stage model for successful change management in which managers lead the change that they do not implement the change. We emphasize that the first step is to create a sense of urgency given the competitive dynamics of today's

business

world. Don't we live in a world where a sense of urgency must be on our minds every day without a doubt?

The problem is that many people look around and see their colleagues or subordinates behaving in ways that could be interpreted as having a high sense of urgency. They are running, they are working hard, running from meeting to meeting, but it is not really what I call false urgency, it is something driven more by anxiety, anguish, stress and pressures, which is not what you need and of what we have too much in this cobit world etc. which is happening right now, so to answer your question. Yes, we need a sense of urgency, but it is a sense of urgency based on opportunity.

It is a sense of urgency based on passion and enthusiasm. It's a sense of urgency that makes us want to get up every day and do something to push that agenda forward. It is not like this. something that is driven by anxiety, guilt, anger and all the pretty unhealthy emotions that are being fueled by all kinds of social forces once a company or a leader is able to instill that kind of urgency and urgency in the context from what you just described. Also talk about short-term gains and make sure what you're looking for has the ability to be defined and tracked from your experience studying hundreds and hundreds of companies.

Is it necessary to link those short-term gains? In fact, more often than not we have found that they are not linked to a budgeting process because the budgeting process tends to be largely a management activity and the type of creating short-term achievements that helps drive a process. of change and helps harness a sense of urgency tends to be driven more by a leadership process and achievements don't have to be financial, they just have to be proof points. If you want, any opportunity you're talking about is to feel that sense of urgency that you're making progress. People's willingness to accept changes that sometimes take years depends largely on them seeing some proof points along the way and that's it. where small victories become absolutely essential, financial and non-financial, it is better if they are measured, but sometimes even the ones that are not measured are so important, so obvious and have so much credibility that they can be celebrated and produce the effect you want.

So in 1995 you wrote a seminal article. in Harvard Business Review it's called Leading Change Why Transformation Efforts Fail and in that article you describe eight areas where companies fail and actually successfully implement change. The first is not creating a sense of urgency and the second is not continuing to communicate what the vision is. Since that article was written 26 years ago, there are companies that are better at solving these things today than when you wrote the article. Well, it's a good question because here's the problem and the answer is objective as much as I can. What we can say from our studies is that companies are better today than when I wrote that article, they have learned some things and applied them to their benefit.

The problem is that if you drew a curve of how much they improved and then drew a curve of how much more challenging, faster, volatile and uncertain the external business environment in which they operate had changed over that same period of time; That second curve is actually rising faster, so even as companies are better today at changing the gap between what is needed and what they are able to do, I fear it has increased and unless we do something about it, it will continue to grow, which will not help anyone. One of those areas where you say companies fail, you say they don't communicate well. a factor of 10. um, like you, I mean, if you think about the transformations in the business world and the world in general, communication is something that has changed dramatically when you wrote that article, we weren't texting. , we were not talking on the cell phone. phones constantly, etc., etc., and yet companies still fail to communicate the vision.

They may fail in communication. The change. What are some of the things you've seen companies do effectively when it comes to communication? I mean, I guess everyone hears that and thinks, oh, they have to be tweeting the vision every other day or something. What are the types of things that are truly sustainable? Good communication techniques. I mean, the main one is the more you can get the bigger. and bigger, even if it's small, even if it starts with four of you, larger and larger groups of people, feeling deep down that there is some strategic direction and opportunity that excites you, that makes sense and if you understand it, more people They will understand this. and understand your role in making this happen, which inevitably requires changes the more you make it part of your daily routine, as part of entering and exiting meetings, as part of the hallway conversations that will become that, that will sneak into that communication and when you incorporate that type of um into the daily activities of more and more people, it creates a constant flow of communication that is not just the same slogan or the same message repeated until people no longer hear it. you hear or listen to it, but it fits into the details of the tactics, the problems, the activities of the day, that's where you get an avalanche of useful communication without establishing, for example, within marketing, a big budget communications program that somehow tries to push from above a lot of information that is simply overlooked. by busy people, so one of the very interesting things about change that you talk about is the fact that when companies face strategic directional changes, strategic acquisitions or technology implementation, first of all, all those come together. who are internal change agents. of companies and I thought it was very interesting that many of us approached those three things very differently.

You could see the implementation of the technology. Let's bring our IT team here and figure out how we implement technology because it's just as important as integrating a new acquisition and a lot of us think it's kind of a silo, but one of the things you say in your book, Dr. Carter, is to achieve broad acceptance of these strategic efforts and I thought about it and sort of thought about the acquisition that we just made in walker dump, for example, because we are a publicly traded company, when we sat down to have conversations with the company, we couldn't bring many people on the ship, so to speak. “I had to keep it very quiet and not just from a confidentiality standpoint, but typically there will be someone on a major acquisition, a major change in strategic direction or a major technology implementation who will get a little scared.” If you put it out there, you're going to bring in too many people, a lot of us are going to say, "Oh my God, we have to manage the message," but you discuss it in the book, I think very forcefully and very clearly. that the broader the acceptance, the better the implementation of the change.

Can you talk about that a little bit? Yes, there is no doubt. It sounds strange for a business year, I think talking about it every time serious changes occur. and a big m certainly requires serious change, it needs a social movement, that is, it doesn't need just a few people with a management program that carefully distributes information, it needs more and more and more people, uh, on a regular basis, um, talking about that. and get excited about whatever relevant issues there are and whatever changes we've found, it's possible to start from a very low base and if you do it right because you're thinking from the beginning, our goal has to be to get the most people. humanly possible in this in a positive way and that that is possible, it is not just a hope, there is empirical evidence, you can do it if you start the game that way, you are heavier, you are ahead of the norm by a lot because that is not the way people start integrations, excuse me, and if you set the bar high on how many people you want to buy at the beginning, that will also change the dynamic, what you ultimately want is to have a lot of people doing the work for you, a lot people find ways to come together in a way where one in one equals three two organizations, for example, in space m, which you couldn't possibly do yourself or your executive committee because you don't have the When you don't have the information you want , there are many people doing that work for you and you can do it if you mobilize them and create in a certain sense a social movement to create a great new company from these two units, so in the book painting there is a chapter in the book where you describe sort of a typical strategic planning process, where a group of really smart people sit around a conference room table and they've been challenged to come up with a new strategy or a new acquisition or a new technology implementation. and they have a ton of PowerPoint presentations.

They may have been brought in to a strategic consulting firm. All of us who have been in corporate America since I have been in that meeting. times and what comes out of it is a task force that says, "Okay, everyone is responsible for the implementation of the new technology" or this division will go to work and do it and you will paint a number that you will show and from which They'll talk in the Reserve a series of case studies about whether you're going to implement strategy the old-fashioned way, a top-down PowerPoint presentation, a heavyweight consultant and how they hit a brick wall, and then you too in the pharmaceutical industry talks about two, one that does the best. down and the other one that does something like bottom up, sounds like it makes sense when I read it in your book, but I also sit there and scratch my head andI say, "okay, how did you set that up?

How did you make the typical one?" way we all know so what are the tricks to go in another direction? What are the tricks to creating this broad-based social movement that you're talking about? I think it starts with the very broad proposition that this will be a significant change. in the behavior of many people if we want to extract the value of this transaction or this strategy or this digital transformation and think that you are not only changing things on paper, you are changing human beings and, often, many of them and that does not It necessarily happens easily.

Changes of any importance tend to be made through leadership processes, not big changes, not management processes, they are not about planning, budgeting, controlling and structuring, but they are about vision, acceptance and communication and inspirationand again, yes that mindset is with you from the beginning and you start making decisions based on that mindset and through that lens, you're just going to make us a different set of choices about how you price, integrate an acquisition or handle a digital transformation, you're going to involve more people. uh you will find that at some points you will get nervous because you don't control everything as much as you would ideally like to control things, but that's what leadership is about, it's not about controlling things, it's about empowering and mobilizing through empowerment to Extraordinary things happen, so a lot of them start to really answer your question with just a mindset, a leadership mindset, rather than a management-driven mindset, more people rather than fewer people, and there's enough evidence to support that. throughout history and certainly throughout my 40 years of research. that I can make a statement like that with complete confidence, so you have a great line in the book that says that most strategic planning is all head and no heart, so how can leaders put heart into it?

In other words, you know you talk a lot about iconic leadership and you also talk about sort of stable leadership, so to speak, and there's a chapter in there where you talk about you know we're all waiting for Lincoln or Nelson Mandela to show up, and Lincoln and Nelson Mandela normally. They appear in times of real crisis and are unique leaders given the times in which they are

leading

, but most of us don't need a Lincoln or a Mandela to lead change on a day-to-day basis, so how can leaders think about Do you know if you will do strategic planning and leadership from the heart and not from the mind, well, you need it and you are not suggesting otherwise, you need it from both the mind and the heart, obviously, but what is missing is so much and this is your point It is the heart.

Traditional strategic planning is soulless, so a lot of planning is ruthless and bringing in the heart is just allowing ourselves, in a sense, to be human and ask basic human questions like, um, what is real? What is meaningful to our workforce? It is really significant that we sell pens, but what makes this significant for our customers, I mean not only the level of functionality. Why did they buy our pens and someone else's pens? What does that mean to them and the same? with investors in the communities that we are in if we allow ourselves to think for a second in more human terms because it is better as a way to run a business in a rapidly changing world, the slower things are, the more stable things are, the more you can get away with a management mindset a management process a lot of head very little heart and do it quite well the faster things move the more uncertainties there are the more the world around you changes you need to change the more leadership becomes important to many people and with leadership always comes that element of the human heart that we all have in us, sometimes it is under a few centimeters of steel, but it is there and we must take advantage of it.

You establish a fantastic paradigm in your book. of getting people to focus on thriving instead of surviving, can you explain that a little bit and how leaders can stop teams from focusing on surviving and focusing more on thriving? It starts with understanding what brain research has learned in the last 20 years, which is a lot about what we would traditionally have called human nature and one of the things we have learned is that we are all built and the building was made a long time ago. 200,000 years, probably with a system within us that is enormously powerful. that has a function and a functionality and that is to help us survive it's like a radar system that looks for threats and then the ability to send chemicals that give us energy to jump and deal with those threats and survive um the problem we have today is that the system was built in a world that is so different from the world that you and I and everyone else on this call live in, and it is incomprehensible that the world was moving at a tenth of a mile an hour and we are moving.

It's a hundred and in this new world, this noisy, confusing, uncertain pandemic world, it easily kicks this survival system into overdrive in a way it was not designed for and it doesn't help us or our organizations, it just stresses us out, It makes us feel. um all kinds of worrying emotions that we often try to hide from ourselves the good news is that we have another system that is newer in human evolution that is similar in structure but looks for opportunities, sends out chemicals that give us energy, not spikes of energy. and as long as we move and take action and see some evidence that we are actually taking advantage of those opportunities, that emotion can stay alive in us for a long period of time right now, the typical public and private organization, in my view of the research. what we've done has too many people in too high a survival mode and too little activated to thrive and the way you make big changes, the way you get that leadership for a lot of people, the way you turn the heart and the head en is activating that prosperity system in people, if I had a magic wand I would rattle every CEO in the world and ask them to look at their organization objectively and see how many people are in an overheated survival state and how many people are really in a state of prosperity that is necessary to thrive, a lot of people wouldn't like what they would find with that, but at least that would help them begin the journey to correct it and build something that is much better and what's more, you mentioned in the book that talks about this topic of thriving versus surviving that most strategic plans are full of survival messages versus prosperity messages and I thought it was very interesting because again I listened to what you say and I said it makes a lot of sense, but in a way How do you do it, but you point out that we are going to incorporate the same documents that we use to try to implement changes in organizations into a new technology, we are going to acquire a new company in which we are going to launch ourselves?

A new strategic direction is full of reminders or triggers on the survive side and not the thrive side. I realized, doctor cotter, that even that makes a lot of sense that we put things in those documents that make everyone get to work. It's changing my life, this is changing my work instead of this is where we're going and this is how we're going to build it. I actually saw an example of that, which two or three weeks ago again was virtual, but a presentation that was done by someone that must have included 80 slides uh, I started taking notes, you know, every time I felt in me a little bit of oh my gosh, I checked the survival side and every time I felt a little bit in myself.

With a bit of excitement, I checked out Thrive's side and when he was done with his presentation, which took at least 45 minutes, I mean, I can't draw it for a year fast enough, but it was like 75x in Survival Thrive about eight in the prosperity side just happens and it happens all the time and to some extent it's because people were taught that that's the way to do it and they don't fully appreciate the implications of it, how it affects people and how it undermines them to achieve What they want. we want to achieve are our thriving and surviving mutually exclusive in the sense that I think of those two emotions and, as you rightly say, all of us today after 18 months of a pandemic that doesn't seem to want to go away, we still are in some ways. in survival mode, so that's in the back of our minds and yet at the same time, we as leaders have a responsibility to get people focused on thriving and the opportunities ahead of us, Are they mutually exclusive or can you have both working? at the same time, no, the way the body seems to function and again, according to brain scientists, they both run and the name of the game is to modulate them in the right areas, they survive not too high and they don't typically thrive. not too low because you want people to confront the very real threats and problems that they face in their jobs and you want them to be efficient and effective in dealing with that, but you don't want that to turn into overheated stress. etc and on the other hand, that can easily happen at the same time as people are looking for opportunities, getting excited about opportunities, and taking action to achieve really exciting digital transformations or restructurings.

Only when survival overheats is it very difficult to have both. because it tends to suck all the air out of the room, so to speak, and tends to close up. It thrives on one of the points I mentioned earlier in your article back in '95 about why change efforts fail and the UN you know in communication. by a factor of 10. I had James Kerr, the author of Legacy, on the Walker webcast about a month ago and he cites a lot of your work in his book Legacy and one of the things he talks about is storytelling and storytelling , and a The narrative for change and the All Blacks use narrative extensively of their history and then also the coaches use it in relation to where the team is going and as I read that in Legacy and then prepared for this, I don't .

I know why it's taken me almost 30 years to figure this out, but the case teaching method is about stories, it's about telling stories, success stories, failure stories, and, um, as I was thinking about Dr. Cotter, I had curiosity while you think about everything. The cases that you've taught, are there one or two certain cases that, when you get ready to go teach, they make you smile and you get excited because there's a certain narrative or something that's so special about that case? that you loved teaching it for all the years that you have taught it well enough.

I have a number that might fit that description, but there's no doubt which one, if I were to rank them, comes up first and it's a story about the era. that mary kay ash from mary kay cosmetics visited

harvard

business

school

and it's just that she was an amazing person, interesting company, uh, one of my students actually joined mary kate, she came to business

school

from ibm, if you can believe it, and went out to become a skin care marketer and did very well, but you know you go back to the importance of stories, there's no doubt that there's a correlation between strong leadership and storytelling, but part of that relates to what you think becomes more difficult in a typical management consultant slide or a good story, booming stories by their very nature about human beings who begin to attract not not only the thought processes but also the meaning, emotion and reality of human existence and the core of it.

I think part of the reason my Mary Kay story is so memorable, besides the fact that it's funny and has great meaning, is that it's about not just facts, but something that is very, very human, and she was very good at she had a mission in life after a very difficult period right after the Second World War when she had no husband killed in the war a couple of children no money secondary education no job and she went out and discovered all the problems in the 1950s that women had that, believe it or not, were much worse than they are today in the workforce and she came up with this mission that times are still changing, although they are much lower than today and her mission was to find a way to provide opportunities for women. um, that traditional companies were not giving them find a way to remove the barriers of sexist bosses of different pay scales, etc., and uh, she in particular stated it, it's very moving, it's very human, it's very difficult and the sincerity of it, uh, she started with uh, two people, her, her son and seven friends, and they died a couple of decades ago, but the last time I checked the number of consultants, I think they were called health care consultants.

The skin that Mary Kay has internationally is three million, yes, not bad to start with. Two, when you talk about someone like MaryKay and her leadership, you've focused predominantly on business leadership, when you look at political leadership, are there parallels or am I talking about Nancy Kane, who is at Harvard Business School and who you've done a lot of research on? Both business leaders and political leaders and in trying to look at the parallels or the differences between the two, they seem to avoid that is just because there is a framework in the business world that they like to focus on or it is Political leadership is tremendously different from business leadership.

I have, uh, you can't see it, any of you, but across the room there's a book called Mandela and it's primarily a picture book, but if you open it to the first page in this kind of shaky handwriting that clearly it is written by an older person it is a long note that begins with professor cotter and ends with a sincere thank you nelson and that book came to me through a group of students from harvard business school in south africa because one of them one day I asked the following question they told me what is the best biography or autobiography of a business leader I would like to read one and I thought about it and I said well let me tell you this I think what you really want is the best and tell me if I'm wrong it is the best autobiography or biography of a leader and the person nodded and I said: read Nelson Mandela's autobiography.

I said there's an insight into the way he thinks, the way he looks at the world, which is especially enlightening given the fact that he spent 27 years in prison, that's a lot. I started anyway, that's what led me to this beautiful book. My doctoral thesis, although I did it in business school, was not done on companies, it was done on mayors of big cities in the late 1960s, so, like my thesis advisor, I was assuming that we could learn something by looking at the public sector and even the elected public sector that would be relevant to the private sector and I can say now, many years later, that some of the ideas we gained from that study helped fuel this long series of studies that have mainly benefited the business.

The world started with a great idea and that was the difference in performance. We studied 20 mayors up close, not from the library, but finding out who knew best about them and then going into the cities and interviewing, watching them speak, it was incredible. I mean talking to Eric Johnson, who was president of Texas Instruments before becoming mayor of Dallas, or to Martin Luther King Sr. at his church in Atlanta, about Ivan Allen, a small businessman who is mayor of Atlanta, the distance between three best per objective. The measures and the three worst mayors of the 20 mayors were not significant, they were galactic and I think that gave me some motivation to try to understand why you can get these huge differences and how you can get more people to move towards the extreme superior. because the impact on society in business in government anywhere could be enormous over billions of lives, so there are many similarities, there are critical differences, there is no doubt about it, but in a fundamental sense, leadership is Leadership, has never been more important and can have an impact in the tens of billions, so when you talk about a galactic difference in leadership it makes me think of Jeff Immel and Bob Iger, so I'm sure everyone listening Today they know that Jeff Immolt came after Jack Welsh to take over GE in that. time possibly the most successful corporation in the United States without a doubt the most valuable Bob Iger followed Michael Eisner to Disney after Eisner had been one of the most famous CEOs in the United States so they are both stepping into big shoes, they are both they're getting into iconic brands and more Then they both arrived in the early 2000s and over the next 15 years, Jeff Immo destroys hundreds of billions of dollars of value at GE and Bob Iger creates hundreds of billions of dollars of value at Disney, so in the context of your book, change what Emel didn't do what Iger did or what Iger did from a leadership standpoint that created such a dramatic difference in those two companies that you can't even sit there and say, well, Disney was in a more stable industry or you know Ge was? was in a really challenging space, I mean they were a very diversified company, they could have failed in financial services and still won in jet engines, they could have failed in financial services and still won in light bulbs, they failed in some ways across the board, while Disney.

I was successful almost across the board, what, what, what, what, what, what, what, what, what, what, what, what, what, well, the Disney situation, I don't know the ge very well, uh, because it's closer geographically to where I spend my time, I do and I worked with Jack Welch when he first arrived, so I know. The beginning of that story, one thing that stands out is that, after a decade, Jack had a lot of talent that was being nurtured, systematically groomed, given some rope to try new things and build businesses, and Jack Although it could be, it was. smart enough and could delve into the details like a lot of people do, a lot of big businessmen, and he was willing to let it, they assumed he needed dozens and dozens and dozens of big executives if he wanted to have a big corporation now at the end of his term, I think it got so much positive press that I worry that some of that has been eroded, but that was the mentality and part of what made it great was that so many people with some rope were mobilizing their people. and with jack it was a great storyteller to get back to that point with your head and your heart um that seemed to start to disappear after he left, it was more of a smaller group of people who were important, others weren't, it was more intellectual without the heart piece and those two. factors alone and I'm sure if we wanted to take the time we could find 12 more um they certainly didn't help mr emel and his regime at all uh you in the book focus on the GE technology initiative or the gi, they call it digital ge, So instead of sitting there and having every company or division try to implement technology, they decided that they were going to try to create some sort of technology division within GE that everyone would get technology from and like you.

You highlighted clearly in the book that the centralization of trying to make an era technology business stand on its own meant there was no real investment in technology innovation on a business-by-business basis, and I think you conclude very clearly. That's not exactly the way to implement technology in a company, but I found the framework of technology implementation, strategic planning, mergers and acquisitions, how you put it all together that every company in America today is trying to solve. how to implement technology and they're doing it through a prism, I would say, of technology rather than a prism of leadership and strategic planning, I mean, it's fair, there's no question, the amount of digital transformation that's happening today in day is uncountable.

Which means it's huge, the sad thing from society's point of view, from investors' point of view, from employees' point of view, is that most of the cases are still delegated to a limited group of technologists without recognizing that technology is what is going to bear fruit. It has to serve a business purpose and it has to be enthusiastically adopted and used by an increasingly large number of employees, as it is needed at an increasingly rapid pace and there is also a tendency to say that we don't have time to involve to more people. We have to leave it to the experts, technology changes all the time, obviously you want to go to the best fitness experts, so this part of our IP group is responsible for digitalization and you see you hear this story over and over again. and again they come out of their cave, you know, nine months or two years or three years later, to the rest of the organization, something that sends people to survive because they are afraid of death, they don't understand it or it's going to change their work or we're even more so they come out with something that doesn't really meet the needs of the customer or the employees and you go back to the drawing board or you're trying to execute something that's not very smart um and the solution, of course, it's again that it's the diverse, not just the elite few, that are driving these digital transformations, and we've seen some through my consulting company and we've helped with some that the executive committee when we started approved, but frankly , I don't think more than two of them believed that what we were talking about was really possible, uh, and we were just waiting for us to fail and, of course, they didn't fail us, but they managed to get a growing coalition of people who promoted this technological advance. smarter, faster and with a lot more acceptance than they thought was humanly possible, so I've seen it, I know it's real, it's not theoretical and again, it's much more of a leadership approach to things, not just a management approach.

You mentioned the need there. focus on the customer and the need to focus on what technological innovation is going to do to change the customer experience and I, because I did a lot of cases in your class at American Airlines, I know that you spend a lot of time with American Airlines. and customer service, I don't want to talk about that right now, but just talking about it makes me think of all those cases we did with American Airlines and all the work you did with American Airlines in the 1990s. Sorry, British Airways doesn't . american airways british airways um, but you've written a lot about culture, you know Peter Drucker's famous quote, culture eats, uh, lunch strategy, um, and as you talk about customer focus and culture, so What you and James Hesket talk about in your article is.

The fact that not all cultures are good, I mean, you highlight GM as one of which is a great culture, it's powerful, but back then it wasn't like you knew it ended up not being that great, you said it's a culture that is united. to a strategy is generally good, but it can go off the rails like with Uber, where Travis Klatnick had a great culture and an interesting strategy, but he was a little too aggressive with that strategy, but then you say, generally speaking, where the culture works is when culture is linked to the customer and so you just talked about technology linked to the customer, how is culture linked to the customer?

Ultimately, you want to develop a culture where your people learn automatically because of the way the culture works. that the important thing in this business is to serve customers and in a way that is good for the workforce and in a way that provides good returns to investors, all three and also, that when customer needs change, so does It happens with employees and investors, anyone around the world. The hierarchy should be aware of this and should feel free within the limits of their jobs, they are empowered to take action to try to meet the new needs and, certainly, if they do not have enough control to do it themselves, immediately inform others who pull the strings on that, so the combination of the two clients who value employees, investors and communities and believe in leadership up and down the hierarchy means you have a lot of eyes watching what's going on. happening and many initiative points to make changes to adapt. to changing needs and found that it was associated with superior economic performance over an 11-year period.

Someone recently emailed me a group of Dupont people who followed and followed those same companies for another 20 years and believes it. or not, those we identify as having the right type of culture. Almost all of them continue to function well over that period of time, which even surprised me. In the shift, you and your team focus on successful technology implementations, and there appear to be two of them. common themes, one is the concept of a minimum viable product mvp and the other is agility, can you talk about those two factors in successful technology implementations? Yes, increasingly with technology, things move so fast that the traditional thing is to put engineers in a room, put together a plan, you know, close the doors at the end of the six months or the 12 months of the two years, open the doors that happen to you, the thing is a crazy model because they are not in contact with the users and they are out of contact.

With all the changes that are happening in user needs and the needs of internal and external users, i.e. customers and employees, one way to avoid this is to become more agile and one of the ways to become more agile is Instead of creating something that's all dotted and polished, you put together a version 1.0 type of minimum viable product, deliver it to users in a collaborative relationship, and see what happens, obviously not puts it in an environment. where you're taking a big risk with your reputation and then react immediately to feedback, go 2.0 3.0 and that kind ofAgile iterative adaptation is a much better way to handle almost any technology, certainly software, which is where the agile movement scales. came from um and while I think it's hard to find, for example, a software person who doesn't agree with that these days, it's much harder to find a company that has successfully embraced that and made it part of how They do business and stuff. has to change and on the agile side dr. cotter, I was, I love you, you refer to you, you know why corporations exist and why American corporations have been so successful and that is that we have systems, we have processes and that all of those things from the past are what have allowed consistency in products, consistency in marketing, etcetera, etcetera and yet in today's world, let's go back specifically to the example you just gave about mvp products from a technological point of view if you allow those management structures remain. implement and manage that process, it is doomed to fail, right when companies must understand that the modern organizational forum is a product of the late 19th century, it does not go back five six two millennia, sorry, it is a function of the industrial revolution and the way it developed at least in America in the 1880s and 1890s and the need then was how in the world people were saying can we get enough people together to take advantage of these new technologies to run railroads and build railroads to run the large textile, not a small textile, but a large textile plant or two or three in different geographical locations, what they found is that too often it went into chaos or it worked for a while, but then it was not scalable because the investor could not It didn't manage the 5,000 people spread all over the place, so management was invented.

The first school of management did not exist on Earth until the 1880s and that was because it was not necessary. Before that decade, the average organization had five employees. Whether it was a farm or a small shop, that has changed radically in the last 150 years, but much of what was invented in a modern way is still needed to create efficiency and reliability, but now, with technology changing and offering new opportunities, All weather and the global business environment also change and offer new opportunities all the time. You need a second mechanism, so to speak, that didn't exist for the most part when they invented the modern corporation that can handle innovation, that can handle change, that can be more. agile and that's what more and more companies are building in a sense um and we're talking beyond the traditional task force uh we're talking beyond the uh uh the traditional committee that was formed to coordinate efforts In every department or division, we're talking about something that's more like a startup environment with more network leadership activities, flatter hierarchy, uh, more emphasis on speed and things like mvps mpps um, and you can incorporate that into an organization that's large and has some history but you have to do it deliberately it doesn't happen automatically at all what happens automatically is that the mothership of 1880 design tends to kill that innovative leadership network approach as being chaotic and a threat to anyone who will listen and want the plan how you can be deliberate in implementing change and leading it.

I would highly suggest purchasing a copy of dr. cotter, as I said at the beginning, my entire executive team is reading it right now so we can use it as a basis for integration. efforts in our new acquisition, dr. cotter, it has been an honor and I deeply appreciate you spending an hour with me. I love his new book. I learned a lot from you 26 years ago. In the classroom and I am deeply grateful. for your time and also for all the knowledge you have shared with all of us over so many years, both in the business of Harvard, in the cases you have written and in all the teaching you have given at hbs willie, thank you Many, many congratulations again for the incredible work you have done over the past decades.

It really is amazing, not surprising from what I saw of you when you were young, but still something to be celebrated. Thank you. Very much and it means a lot coming from you. Thank you all for joining us today. We'll be back next Wednesday with another Walker webcast. I hope everyone has a great time. Thanks again, Dr. Cotter.