Webcast transcript:
Willy Walker: Thank you Susan and good morning everyone. I’m extremely excited and honored to have Dr. John Kotter joining me this morning. Dr. Kotter taught me and the other 90 students in Section E -- a course called “Lead” -- in the spring of 1994. I loved Dr. Kotter's class, not only because the cases he taught were on a subject matter I enjoyed but because Dr. Kotter is such a talented professor and how he asks questions of students and reveals aspects of the cases that few of us see going in. I’ve had a lot of fancy and accomplished guests on the Walker Webcast, but few have made me as nervous as preparing to ask questions to my former Professor on a topic he knows as well, or better, than anyone in the world.
Before I introduce Dr. Kotter, I must mention the timing of this discussion on Dr. Kotter’s new book Change could not be better for Walker & Dunlop as we announced on Monday, the acquisition of Alliant Capital; the 14th and by far largest acquisition we have ever done it Walker & Dunlop. Reading Change has dramatically influenced the way I and the Walker & Dunlop Management Team are going to manage and lead the integration of Alliant into Walker & Dunlop. I would also mention from a timing standpoint that announcing this major acquisition that is focused on affordable housing and low-income housing tax credit syndication on Monday and then having a major Executive Order come out of the White House this morning, calling for the creation and more affordable housing in America, through the use of low-income housing tax credits is both fortuitous and wonderfully helpful to Walker & Dunlop. It makes us look a lot smarter than we are but, as they say we'll take it.
Okay, to my guest. John Kotter is the Konosuke Matsushita Professor of Leadership Emeritus at the Harvard Business School. He joined the Faculty at HBS in 1972 and in 1980 at the age of 33 was granted tenure and full professorship making him, one of the youngest people in the history of Harvard to be so honored. He is the author of 20 books, 12 of which had been business bestsellers, and two of which have been overall New York Times bestsellers. He is the founder of Kotter International a management consulting firm based in Seattle and Boston. He is truly one of the most gifted researchers, authors, consultants, and experts on leadership in the world and holds degrees from MIT and Harvard.
So, Professor Kotter first thank you so much for joining me it's beyond an honor to have you spend an hour with me to discuss leadership in your new book Change. I want to back up 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 outline an eight-stage model for successful change management in which managers lead change they don't implement change. You highlight that the first step is to create quote “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 needs to be in our minds every single day?
Dr. John Kotter: Without question. The problem is that a lot of people look around them and see their colleagues or their subordinates behaving in ways that might be interpreted as having a high sense of urgency there they're racing, they're working hard, they're running from meeting to meeting. But it's not really, it's what I call false urgency, it's something driven more by anxiety, and angst, and stresses and pressures. Which is not what you need and what we have far too much of in this COVID etc. world going on right now. So, to answer your question, yes, we need a sense of urgency but it's a sense of urgency, based on opportunity. It's a sense of urgency, based on passion and excitement. It's a sense of urgency that makes us want to get up every day and do something to push along that agenda. It's not something that's driven by anxiety and guilt and anger and all the rather noxious emotions that are being fueled by all sorts of social forces.
Willy Walker: When a company or a leader is able to instill that type of urgency, and urgency in the context of what you just outlined, you also talk about short-term wins and making sure that what you're going after has the ability to be both defined and tracked. From your experience of studying hundreds and hundreds of companies, do those short-term wins have to be tied back to a budgeting process or can those short-term wins be, if you will, broader?
Dr. John Kotter: As a matter of fact, more often than not, we have found they're not tied back to a budgeting process, because the budgeting process tends to be very much a managerial activity and the sort of creation of short-term wins that helps push along a change process and helps the leverage off of a sense of urgency tends to be driven more by a leadership process. And wins don’t have to be financial. They just have to be proof points, if you will, that whatever opportunities you're talking about, it's feeling that sense of urgency that you're making progress. People's willingness to go along with changes that sometimes require years is very much a function of them seeing some proof points along the way and that's where the small wins become absolutely essential, financial, unfinancial, best if measured. But sometimes even non=measured ones are so obvious and have so much credibility that they can be celebrated and produce the effect you want.
Willy Walker: So, in 1995 you wrote a seminal article in the Harvard Business Review called Leading Change: Why Transformation Efforts Fail. And in that article, you outline eight areas where companies fail and actually successfully implementing change. Number one of not creating a sense of urgency and number two in in not continuing to communicate around what the vision is. Given that that article was written 26 years ago are companies actually any better today at figuring this stuff out then they were back when you wrote the article?
Dr. John Kotter: Well, it's a good question because here's the issue, the objective answer as much as I can tell from our studies is that companies are better today than they were back when I wrote that article. They have learned some things and applied those things to their benefit. The problem is, if you were to draw a curve of how much better they’ve gotten and then drew a curve of how much more challenging, faster moving, volatile, and uncertain the external business environment in which they are operating had changed during that same period of time that second curve is actually going up faster. So, even as companies are better today at change the gap between what is needed and what they're capable of doing I fear has grown and unless we do something about it, it will continue to grow, which is not going anybody.
Willy Walker: One of those areas that you say companies fail on -- you say under communicating by a factor of 10. If you think about transformations in the business world and the overall world communication is something that has dramatically changed back when you wrote that article, we weren't texting each other, we weren't talking on cell phones constantly, etc., etc. And yet companies still fail on the communication of the vision, they can they fail on the communication of change. What are some of the things you've seen that companies have effectively done as it relates to communication? I guess we all hear that and think, “oh you've got to be tweeting out the vision every other day”, or something. What are the types of things that are really sustainable good communication techniques?
Dr. John Kotter: I mean, the main one is the more that you can get larger and larger even if it starts with four of you, larger and larger groups of people feeling down deep that there is some strategic direction and opportunity that excites them, that makes sense, and that they understand, that the more people who understand this and understand their role in making it happen, which inevitably requires changes. The more that they will as a part of their daily routine, as a part of rolling in and out of meetings, as a part of hallway conversations, that will become, that will sneak into that communication and when you get that sort of built in to the daily activities of more and more people a constant stream of communication that isn't just the same old tagline, or the same message repeated until people no longer hear it or listen to it, but is fitting into the details of the tactics, the problems, the activities of the day. That's where you get a flood of useful communication without setting up for example within marketing a big “communications program” that somehow tries to push from the top, a lot of information down that simply gets missed by busy people.
Willy Walker: So, one of the I thought very interesting things in Change that you talk about is the fact that when companies are faced with directional changes, strategic acquisitions, or implementation of technology. First of all, you put all those together. That those are change agents inside of companies and I thought it was very interesting that a lot of us approach those three things very differently. The implementation of technology might be viewed, “let's get our IT team in here and let's just figure out how we implement the technology”, whereas it is just as important as integrating a new acquisition and a lot of us, I think kind of silo that up. But one of the things you say in your book Dr. Kotter is getting broad based buy in to these strategic efforts. I thought about it and I thought about the acquisition we've just done at Walker & Dunlop, for instance. Because we're a publicly traded company when we sat down to engage in conversations at the company, we couldn't bring a whole lot of people into the boat, if you will. Had to keep it really quiet and we also not only from a from a confidentiality standpoint but typically there's going to be someone on a major acquisition, a major change in strategic direction, or a major technology implementation who's going to be a little scared by it. So, if you just kind of put it out there and bring in too many people, many of us feel like oh my gosh we've got to manage the message. But you argue in the book, I think, very forcefully and very clearly, that the broader you can get buy in, the better the change implementation is going to be. Can you talk about that a little bit?
Dr. John Kotter: Yes, there's no question. It sounds strange to a business here, I think, to talk about whenever you're producing serious change and a large M&A is certainly require a serious change, you need a social movement. That is to say, you need not just a few people with a management program doling out carefully information. You need more and more and more people on a regular basis talking about, and getting excited about, whatever the relevant issues are and changes. We have found it is possible to start at a very low base, and if you do it right because you're thinking at the beginning, our goal has to be to get as many people as humanly possible into this in a positive way and that that is possible. It's not just a hope, there's empirical proof you can do it. If you start the game that way, you're ahead of the norm by a lot because that's not the way people start M&A integrations. And if you set the bar high on how many people you want to buy in at the beginning that will change the dynamics too. What you want ultimately is a lot of people out doing the work for you. A lot of people finding ways to knit together. In a way where one and one does equal three. Two organizations, for example in the M&A space, that you couldn't possibly do by yourself, or your Executive Committee, because you don't have the time, you don't have the information, you want lots of people doing that work for you and you can, if you mobilize them and create, in a sense, a social movement to create a great great new enterprise from these two units.
Willy Walker: There's a chapter in the book where you outline the typical strategic planning process. Where a bunch of really smart people sit around a conference room table, they've been challenged either come up with a new strategy, a new acquisition, a new technology implementation and they've got a bunch of PowerPoint presentations. They might have been brought in a strategy consulting firm. All of us who've been in corporate America for as long as I have, have been in that meeting numerous times. What comes out of it is either some task force that is like, “okay you all are responsible for the implementation of the new technology” or “this division is going to go about going and doing it.” In the book you discuss a number of case studies of strategic implementation the old-fashioned way, top-down, PowerPoint presentation heavy, consultant heavy and how they run into a brick. In the pharmaceutical industry you talk about it too. One that does the top down, and the other one that does a bottom up. It makes sense when I read it in your book, but I also sit there and scratch my head and say, “all right, how did they set that up the typical way, we all know?” What are the tricks to going the other way? What are the tricks to making this broad-based social movement that you're talking about?
Dr. John Kotter: I think it starts with a very broad proposition. This is going to be a significant shift in the behavior of a lot of people if we are to get the value out of this transaction or this strategy or this digital transformation and think about that. You're not just changing things on paper; you're changing human beings and often a lot of them and that doesn't necessarily happen easily. Change of any significance tends to be done by leadership processes, not management processes. It's not planning, budgeting, controlling, and structuring as much as it is having to do with vision, buy-in, communication, and inspiration. If that mindset is with you up front and you start making choices based on that mindset and through that lens you will simply make a different series of choices on how you “integrate an acquisition or handle a digital transformation”. You will involve more people. You will be nervous at some points because you don't control everything as much as you’d like to control things, but that's what leadership is all about. It's not about controlling things; it's about empowering and mobilizing through empowering to make extraordinary things happen. A lot of it starts with a mindset, a leadership mindset more than a management driven mindset, more people rather than fewer people. There is sufficient evidence throughout history, and certainly from my forty years of research that I can make a statement like that with total confidence.
Willy Walker: You have a great line in the book, which is “most strategic planning is all head and no heart.” How do leaders get heart into it? You talk a lot about iconic leadership and you also talk about steady leadership and there's a chapter in there, where you talk about how we're all sort of waiting for Lincoln or Nelson Mandela to show up. Lincoln and Nelson Mandela typically show up in times of real crisis, and they are unique leaders given the times that they're leading in. But most of us don't need a Lincoln or Mandela to lead change on a day-to-day basis, so how can leaders think about strategic planning and leadership from the heart and not from the mind?
Dr. John Kotter: You need it from both mind and heart, obviously, but what's missing so much and this is your point, is the heart piece, traditional strategic planning is heartless. So much of planning is heartless and bringing heart in is just to allow ourselves in a sense, to be human and to ask basic human questions like, what is real? What is meaningful to our workforce? What is truly meaningful? We sell pens but what makes this meaningful to our customers? Not just at the level of functionality. Why did they buy our pens and not somebody else's pens? What does that mean to them, and the same with investors and communities we’re in. If we just to 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 moving world. Again, 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 pretty darn well. The faster things move the more uncertainties there are, the more that the world around you is changing and you need to change. The more leadership becomes important from many people and with leadership always comes that human heart element which we've all got in us. Sometimes it's under a few inches of steel but it's there and we need to tap into it.
Willy Walker: You set up a fantastic paradigm in your book of getting people to focus on thrive versus survive. Can you explain that a little bit and how leaders can keep the teams out of focusing on survive and focusing more on thrive?
Dr. John Kotter: It starts with understanding what brain researchers have learned in the last 20 years, which is a huge amount about what we traditionally would have called human nature. One of the things they've learned is that we're all built, and the building was done 200,000 years ago probably. With a system inside of us that is enormously powerful that has one function and one function known and it's to help us survive. It's like a radar system that looks for threats and an ability to send out chemicals that give us spiked energy to leap up and to deal with those threats and to survive. The problem we have today is, that system was built in a world that is so different from the world that you and I, and everybody else on this call lives in, that it's incomprehensible. That world moved at one 10th of one mile an hour and we're moving at 100 and in this new world, this noisy, confusing, uncertain pandemic world, it easily sets off this survive system into overdrive in a way that it was not designed to handle. It does not help us or our organizations it just stresses us out. It makes us feel all kinds of troubling emotions, which we often try to hide from ourselves. The good news is we have another system that's newer in human evolution that's similar in structure, but it looks for opportunities. It sends out chemicals that give us energy, not spike energy, and as long as we move and take action and see some proof that we're actually making traction to those opportunities that excitement can stay alive in us for a long period of time.
Right now, the typical organization, public and private, in my judgement from the research we've done, has too many people in too high a survive mode and too little activated thrive. The way that you make the changes, the way that you get that leadership from many people, the way that you make the heart, as well as the head, into it, is by activating that thrive system in people. If I had a magic wand, I would clink every CEO in the world and ask them to look at their organization objectively and see how many people are in an overheated state of survive and how many people are really in a state of thrive that's needed to make their organizations prosper. A lot of people wouldn't like what they would find with that, but at least that would get them started on the journey to correct it and to build something that is much better and greater.
Willy Walker: You mention in the book talking on this topic of thrive versus survive that most strategic plans are filled with survive messages versus thrive messages. I thought it was so interesting because again, I hear what you say, and I say that makes perfect sense but how do you do it. But you point out that the very documents that we use to try and implement change in organizations, we're going to put in a new technology, we're going to acquire new company, we're going to bound off in a new strategic direction are filled with reminders or activators on the survive side and not on the thrive side. It struck me Dr. Kotter. It makes perfect sense that we put things into those documents that get everyone spooling up on “oh, this is changing my life, this is changing my job,” rather than “this is where we're going, and this is how we're going to build it.”
Dr. John Kotter: I actually saw an example of that two or three weeks ago, again, it was virtual but a presentation that was made by someone that must have included 80 slides and I started taking notes. Every time I felt in myself a little bit of “oh, my goodness”, I checked the survive side and every time that I felt in myself a little bit of excitement, I checked the thrive side. When he finished with his presentation, which took at least 45 minutes, it was like 75 x's on the survive side about eight on the thrive side. It just happens and it happens all the time. To some degree it's because people were taught that's the way you do it. They don't fully appreciate the implications of it, how it affects people, and how it undermines them achieving what they want to achieve.
Willy Walker: Are thrive and survive mutually exclusive, in the sense that I think about those two emotions and as you correctly state, all of us today after 18 months of a pandemic that doesn't seem to want to go away, we still are somewhat in survive mode. So that's running in the backs of all of our minds and yet at the same time, we as leaders have a responsibility to get people to focus on the thrive in the opportunities ahead of us. Are they mutually exclusive, or can you have both running at the same time?
Dr. John Kotter: No, the way the body seems to work, again, according to the brain scientists is they both run, and the name of the game is modulating them in the right areas. Survive not too high and thrive typically not too low because you do want people dealing with the threats, the very real threats and problems that they face in their jobs and you want them to be efficient and effective dealing with that. But you don't want that turn into being over heated, stressed out, etc. On the other side that can go on easily at the same time that people are looking for opportunities, getting excited about opportunities, taking action to make really exciting M&A or digital transformations or restructurings happen. It's only when survive gets overheated that it's very difficult to have both because it tends to suck all the air out of the room, if you will, and it tends to shut down thrive.
Willy Walker: In the point that I mentioned previously in your article back in ‘95 about why change efforts fail and the under communicating 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 that he talks about is storytelling and narratives and a narrative for change. And the All Blacks use storytelling extensively of their history and then also the coaches use it as it relates to where the team is going to go. And, as I was reading that in Legacy and then getting prepared for this, I don't know why it's taking me almost 30 years to figure this out, but the case method of teaching is all about stories. It's telling stories, stories of success, stories of failure. And as I thought about that Dr. Kotter, I was just curious, as you think about all the cases that you've taught, is there a certain case or two that when you get ready to go teach that it just puts a smile on your face and you're excited because there's either a certain narrative or something that's so special about that case that you just loved teaching it for all the years that you have taught?
Dr. John Kotter: Well, quite a few, I have a number that could fit that description. But there's no question which one, if I were to rank them, comes up on top and it's a story about the time that Mary Kay Ash of Mary Kay Cosmetics visited Harvard Business School. She was such an amazing person, interesting company. One of my students actually joined Mary Kay, came to the Business School from IBM if you can believe that and went out to become a marketer of skincare products and did very well. But you know, you come back, the importance of the stories, there's no question that there's a correlation between strong leadership and storytelling but part of that relates back to, what do you think gets more heart across, a typical slide from a management consultant or a good story? Boom! Stories by their very nature about human beings, that begins to pull in, not only the thought processes, but the meaning and the emotion and the reality of human existence and the heart piece of it. I think, part of the reason that my Mary Kay story is so memorable, beside the fact that it is funny and it makes a big point, it is dealing with not only facts, but something that is very, very human. Which she was very good at. She had a mission in life after a very difficult period, right after World War II, when she had no husband, killed in the war, a couple of kids, no money, high school education, no job and went out and discovered all the problems in the 1950s that women had. Which, believe it or not, were even much, much, much worse than they are today in the workforce. And she came up with this mission of times are still changing, although much lower than today, and her mission was to find a way to give women opportunities that traditional firms were not giving them. Find a way to eliminate barriers from sexist bosses, from different pay scales, etc., etc., and stated by her in particular, it's very moving, it’s very human, it's very heart. The sincerity of it. She started with two people, herself and her son and seven friends. She died now, a couple of decades ago, but the last time I checked, the number of consultants, I think they call them skincare consultants, that Mary Kay has internationally is three million, starting from two.
Willy Walker: As you talk about someone like Mary Kay and her leadership, you've predominantly focused on business leadership. As you look at political leadership, are there parallels? Nancy Koehn who is at Harvard Business School. She's done a lot of research on both business leaders, as well as political leaders and trying to look at the parallels or the differences between the two. You seem to shy away from that. Is that just because there's a framework in the business world that you like to focus on or is political leadership wildly different than business leadership?
Dr. John Kotter: I have, you can’t see it, but across the room here a book that's called Mandela and it's a picture book mostly, but if you open it up, on the first page in this kind of shaky handwriting that is clearly done by an older person, is a long note that starts with “to Professor Kotter” and ends with “sincerely thank you, Nelson.” And that book came to me through a set of students at Harvard Business School from South Africa, because one of them asked one day, the following question, they said, ”What's the best biography or autobiography of a business leader.”, I’d 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 you tell me if I’m wrong, 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 insight in there into the way that he thinks, the way that he looks at the world, which is especially illuminating, given the fact that he spent 27 years in jail. I started off, anyway, that’s what led to this lovely book.
My doctoral thesis, although done at the Business School was not done on businesses. It was done on big city mayors in the late 1960s. So, I was making the assumption, as was my thesis advisor, that we can learn something by looking at the public sector and even the elective public sector, that would be relevant to the private sector. And I can say now, many years later, that some of the insights we got out of that study help fuel this long series of studies that have mostly benefited the business world. Starting with one big insight, and that was the difference in performance, we studied 20 mayors up close, not from the library, but from finding out who knew about them the best and then going to the cities and interviewing, watching, talking, it was an incredible thing. I mean talking to Eric Johnson, who was the President of Texas Instruments before he became Mayor of Dallas or Martin Luther King, Sr. in his church in Atlanta, about Ivan Allen a businessman, small businessman who was Mayor of Atlanta. The distance between the three best, by objective measures and the three worst of the mayors of the 20 mayors was not significant, it was galactic. And I think that produced in me some motivation to try to understand why you can get these huge differences and how you could get more people going toward the top end. Because the impact on society, in business and government anywhere, could be huge on billions of lives. So, there are lots of similarities. There are critical differences, no question about it, but in a fundamental sense leadership is leadership. It's never been more important, and it can have an impact on dozens, thousands, millions.
Willy Walker: So, when you talk about a galactic difference in leadership, it makes me think about Jeff Immelt and Bob Iger. So, I’m sure everyone listening today knows Jeff Immelt came in after Jack Welsh to take over GE, at that time arguably the most successful corporation in America, certainly the most valuable. Bob Iger followed Michael Eisner into Disney after Eisner had been one of the most celebrated CEOs in America. So, they’re both stepping into big shoes, they're both stepping into iconic brands and they both came in the early 2000s. And over the subsequent 15 years Jeff Immelt 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 did Immelt not do that Iger did or what did Iger do from a leadership standpoint that created that dramatic a difference in those two companies that you can't even sit there and say, oh well, Disney was in a more stable industry or GE was in a really challenged space? They were a broad 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 kind of across the board, whereas Disney succeeded almost across the board, what gives?
Dr. John Kotter: Well, the Disney situation I don't know that well. The GE, because it's closer geographically to where I hang out, I worked with the Jack Welsh when he first came in. So, I know the beginning of that story. One thing that stands out is GE after a decade of Jack had an awful lot of talent that was being raised, groomed systematically, given some rope to try new things and to build businesses. And Jack, although he was smart enough, and he could dig into detail, like a lot of great business people can, he was willing to allow and made the assumption that he needed dozens and dozens and dozens of great executives if he was going to have a great corporation. Now at the end of his term, I think he got so much positive press that I’m worried some of that eroded but that was the mindset and part of what made GE great was just that. So many people with some rope, mobilizing their people, and Jack was a great storyteller, come back to that point with head and heart. That seemed to start disappearing after he left. It was more a smaller group of people were important, others were not. 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 come up with 12 more, certainly, did not help Mr. Immelt and his regime at all.
Willy Walker: In the book you focus on the GE technology initiative, I think they call it GE Digital. So, rather than sit there and make every company or division try to implement technology they decided they were going to try and create a kind of technology division inside of GE that everyone would get technology from. And, as you clearly underscore in the book that centralization of trying to make a GE technology business stand on its own, made it so that there was no true investment in technological innovation on a business-by-business basis. And I think you conclude very clearly that's not exactly the way to go about doing technology, from a technological implementation in a company. But I found the framework, Dr. Kotter, of technology implementation and strategic planning and mergers and acquisitions, how you bring all that together. That every company in America today is trying to figure out how to implement technology and they're sort of going about it through, I would say, a technology prism, rather than a leadership and strategic planning prism. Is that a fair take?
Dr. John Kotter: No question. The amount of digital transformation happening today is uncountable. I mean it is huge. The sad part of it from society's point of view, from an investor's point of view, from an employee’s point of view, is that the majority of cases are still being delegated to a limited group of technologists. Without recognizing that for the technology to pay off, it's got to serve a business purpose, and it's got to be embraced and used with enthusiasm by large numbers of the employees. Increasingly, as that is needed at a faster and faster pace. There is a tendency to say we don't have time to involve more people. We have to leave it to the experts. The technology is changing all the time. Obviously, you want to go to the best expert experts, and so this piece of our IT group is responsible for the digitization. And, you hear this story again and again and again that they come out of their cave, nine months or two years or three years later, present to the rest of the organization, something that either sends people into survive because they're scared to death, they don't understand it, or it's going to change their job. Or, work even more so, they come out with something that doesn't really meet customer needs or employee needs and you're back to the drawing board or you're trying to execute something that isn't very smart. The solution of course is, again, it's the diverse many not just the elite few driving these digital transformations. We've seen some, through my consulting company and help with some in which the executive committee, when we started, signed off, but frankly I don't think more than two of them believed what we were talking about was really possible. And they were just waiting for us to fail. And they, of course did it, not us. But they managed to get a growing coalition of people driving this technological advance. Smarter, faster and with a lot more acceptance than they thought was humanly possible. 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.
Willy Walker: You mentioned there, the need to focus on the customer and the need to focus on what the technological innovations going to do to change the customer experience. Because I did a bunch of cases in your class on American Airlines, I know you spent a bunch time with American Airlines and on customer service; I don't want to go there right now, but just talking about that makes me think back to all those cases, we did on American Airlines and all the work you did around American Airlines back in the 1990s. Excuse me, British Airways not American Airways, British Airways. You've written a lot about culture that Peter Drucker famously said, “Culture eats strategy for lunch”. And as you talk about that customer focus and culture, what you and James Haskett in your article talk about is the fact that not all cultures are good. I mean you highlight GM as being one that it's a big culture, it's powerful, but back then it wasn't that you know ended up being not that great. You said that a culture that is tied to a strategy, is generally speaking, good, but can go off the rails like with Uber where Travis Kalanick had a great culture and had an interesting strategy, but he went a little bit too aggressively down that strategy. But then you say, generally speaking, where culture works is when culture ties in with the customer. And so, from what you just talked about technology being tied into the customer, how do you get culture tied in with the customer?
Dr. John Kotter: Well, ultimately, you want to develop a culture where your people automatically because of the way that the “culture” works learn that what's important in this business is serving customers and in a way that is good for the workforce and in a way that gives good returns to investors. All three. And further that when the needs of customers change, same with employees and investors, anybody up and down the hierarchy should be watching out for this. And should feel free within the confines of their jobs; they're empowered to take action to try to meet the new needs. And certainly, if they don't control enough to do it by themselves, to immediately tell others who do control the strings on that. So, the combination of the two, valuing customers, employees and investors and communities, and believing in leadership up and down the hierarchy mean you have lots of eyes watching what's going on and lots of points for initiative to make changes to adapt to changing needs. And we found that was associated with superior economic performance over a period of 11 years. Somebody recently sent me an email, staff group out of Dupont, who followed up and followed those same companies for another 20 years. And believe it or not, the ones that we identified as having the right kind of culture, almost all of them continue to perform well over that period of time which even surprised me.
Willy Walker: In Change, you and your team focus on successful technology implementations and there seem to be two common themes. One is a concept of a minimally viable product: MVP and the other is agility. Can you talk about those two factors in successful technology implementations?
Dr. John Kotter: Increasingly, with technology, things are moving so quickly, that the traditional, put the engineers in a room, put together a plan, lock the doors, at the end of the six months or the 12 months or two years unlock the doors they hand you the thing; is an insane model. Because they're out of touch with the users and they're out of touch with all the changes that are going on in the needs of the users and in the needs of internal and external users, i.e., customers and employees. And so, one way around that, is to be more agile. And one of the ways you become more agile, is that instead of creating something that has all the t's crossed, i’s dotted and is polished, you put together a minimum viable product, kind of version 1.0. Get it out to the users in a collaborative relationship and watch what happens. Obviously not putting it up in an environment where you're taking some great risk with your reputation. And then immediately react to the feedback. Go on to 2.0, 3.0 and that type of agile, iterative adaptation is a much better way to handle almost any technology; certainly software, which is where the scale agile movement came from. And although I think it's hard to find, for example, a software person that would disagree with that these days, it's much, much harder to find a company that successfully embrace that and has made it a part of just how they do business, and that has got to change.
Willy Walker: And on the agile side Dr. Kotter, you reference back to sort of why do corporations exist, and why have American corporations been so successful and that is that we have systems, we have processes and then all of those things of the past, are what have allowed for consistency in products, consistency in marketing, etc., etc. Yet in today's world, specifically back to the example you just gave on the MVP products from a technology standpoint, if you allow those management structures to stay in place and manage that process you're doomed to fail.
Dr. John Kotter: Correct. When businesses, you gotta understand, the modern organizational form is a product of the late 19th century. It doesn't go back five, six, two millennium, I’m sorry. It's a function of the Industrial Revolution and the way it played out, at least in America, in the 1880s 1890s. And the need, then, was for, “how, in the world”, people were saying, “can we pull together enough people to take advantage of these new technologies?” To run railroads, to build railroads, to run the large textile, not a small textile, but a large textile plant or two or three different geographic locations. What they found is all too often they went into chaos, or it worked for a while, but then it wasn't scalable because the investor couldn't manage the 5,000 people spread out all over the place. And so, management was invented. The first school of management didn't exist on earth until the 1880s. And that was because it wasn’t needed before the 1880s. The average organization had five employees. It was a farm or a small shop. Now that's all changed radically in the last 150 years. But a lot of what was invented, a modern form of it is still needed to create efficiency and reliability. But, now today with technology changing and offering new opportunities all the time, and a global business environment also changing and offering new opportunities all the time. You need a second mechanism, if you will, 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 firms are building in a sense. And we're talking beyond the traditional “Task Force”. We're talking beyond the traditional committee that was put together to coordinate efforts across departments or divisions. We’re talking something that looks more like a startup environment, with more leadership, network activities, flatter hierarchy, greater emphasis on speed and things like MVPs. And you can build that into an organization that is large and has some history, but you have to do it deliberately. It doesn't happen automatically at all. What happens automatically is the mothership from the design of 1880 tends to kill off that innovative leadership network approach as being chaotic and a threat.
Willy Walker: So, to anyone listening who wants the blueprint to how you can be deliberate on implementing change and leading change, I would strongly suggest picking up a copy of Dr Kotter’s book. As I said at the top, my entire executive team is reading it right now, so that we can use it as a basis for the integration efforts on our newest acquisition.
Dr. Kotter it's been an honor and I am deeply appreciative of you spending an hour with me. I love your new book. I learned a ton from you 26 years ago in the classroom, and I’m just deeply thankful for your time and, also for all of your insights that you've shared with all of us over so many years, at both the Harvard Business Review, in the cases you've written, and in all the teaching you've done at HBS.
Dr. John Kotter: Willy, thank you very, very much, and congratulations back to you on the incredible work you've done over the last few decades. It truly is amazing, not surprising, from what I saw of you, as a young man, but still something to be celebrated.
Willy Walker: I appreciate that very, very much and it means a ton coming from you. Thank you everyone for joining us today we'll be back next Wednesday with another Walker webcast I hope everyone has a great one. Thanks again Dr. Kotter.
Dr. John Kotter: Bye bye now.
