Ram Charan has real-world advice for business leaders who want to thrive in disruptive times.
Ram Charan’s skill in translating complex business theory into plain English has proved useful to business leaders in the real world. In recent times, Forbes magazine has dubbed him “the most influential consultant alive”. The former Harvard Business School professor has spent more than 35 years advising some of the world’s top executives.
Here are seven tips from Charan for senior finance managers who want to stay on top in disruptive times.
Forget the comfort zone
In a globalised, internet-connected world, “business as usual” quickly leads to having no business at all. Looking for incremental improvements, such as small gains in operational efficiencies or slightly better margins, is not enough anymore. While change has long been a factor in the business environment, disruption has now become structural and ongoing. This requires a new style of leadership, focused not on coping with change but on anticipating, creating and exploiting changes in the environment.
Do the maths
A key change of the past decade has been the “maths revolution”, in which complex algorithms and related software are used to build direct connections with customers, build and manage global supply chains, and map possible future paths. Business leaders must become familiar with the language and capacities of maths-based tools, even if it means doing some short courses.
“We have barely scratched the surface of the potential uses,” says Charan.
“The task is to understand the future.”
“The growth opportunities can be immense for those who seize the opportunity.”
Build agility into the organisation
There is a natural tendency to see an organisation’s existing core competencies and competitive advantages as intrinsic to its future, but in reality they have a decreasing shelf life. Leaders have to be on the lookout for new opportunities for profitable growth, even if it means a thorough reform of the company.
Charan’s advice: at least four times a year, leaders should ask themselves what new developments can they utilise to create a new need or give the customer a more compelling experience?
Look to the long term
An emphasis on quarterly results pushes a company into a reactive, incremental pattern. What is needed is an offensive mindset, even if it means sacrificing short-term profits while a reform program is underway.
A communications strategy has to be built into the re-structuring campaign, to explain to both employees and investors why change is not just desirable but necessary. New metrics to act as “stepping stones” might be needed to make the direction clear and to judge the results of the campaign.
Follow through on execution
Corporate leaders cannot focus solely on strategy; they must ensure that a reform program is executed in line with goals. This requires that they identify areas within the company that are likely to be resistant to change, and then use their authority to push reform in these sectors. Issuing edicts from the corner office is not enough; personal involvement is also needed.
“Once you know where the organisation must go, define the steps that must be taken,” Charan says.
Related: 前哈佛教授给财务高管的 7个忠告 (Chinese version)
“It’s a matter of working backwards to the present and identifying the steps that will move you along.”
Look for change signals
Indications of paradigm shifts need to be seen early. Leaders should aim to pick up on anomalies, contradictions and emerging trends in society, business and technology by reading widely and by expanding their information networks. Regularly bringing together people from across the organisation to discuss the future can be a positive step.
But while any person, including a corporate leader, might find it easier to interact solely with people who agree with them and come from a similar background, this tendency should be resisted. Charan recommends that a leader should make a deliberate effort to also communicate with and learn from people unlike themselves in ideology, tastes and origin.
To anticipate and positively respond to structural uncertainty, there should be a team of senior people that meets at least several times a month, with the chief executive as the chair. The work of the team must be transparent, so people can see how decisions affect each part of the business and how resources are allocated towards common goals. Team members can better organise their part of the company if they can visualise the progress of the whole, and coordinate responses to any challenges that arise as part of the reform process.
“This cannot be just another committee,” Charan emphasises.
“The point of this group is to consider the external environment, and how the company can best move to exploit disruptions. The task is to understand the future.”