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September/October 2009
SUPERCORP: AN INTERVIEW WITH ROSABETH MOSS KANTER
by
Stephen Bernhut
Rosabeth Moss Kanter is the Ernest L. Arbuckle Professor at Harvard Business School, where she chairs the Harvard Advanced Leadership Initiative. Professor Kanter, who developed, introduced and promoted the concepts of “empowerment” and “change management,” has been named by the London Times as one of the “50 most powerful women in the world.” One of her previous books, Confidence, The Change Masters, was named by the Financial Times as one of the most influential business books of the twentieth century. This interview is based on Professor Kanter’s recently published book, SuperCorp (Crown Business).
Ivey Business Journal: What is a SuperCorp?
Rosabeth Moss Kanter: Three years ago, I started a research project that took me to outstanding companies around the world. These are companies that have built and are run according to a new business model, one that puts purpose and principles at the centre of its strategy, operations and culture. This is the values-driven organization, where values drive decisions. Not coincidentally, these are also companies that empower and engage their employees. And not surprisingly, these employees are more inclined to be creative when their company values innovation that helps the world. IBM, P&G, Cemex, and Banco Real are a few examples of the SuperCorps I researched and interviewed.
IBJ: What factors have driven the emergence of the SuperCorp?
RMK: The global information era has changed conditions for companies. There is more complexity, more uncertainty, and more competition. That competition includes competition for talent. So it's important for companies, under these conditions, to have a way to create a culture that motivates employees, that produces innovation. This is not something that can be ordered or commanded, even though there can be good processes for innovation. All of that rests heavily on attracting, motivating and retaining the best talent. In addition, because of the increasing global scope of business and the information tools that make transparent more of the things that companies once kept hidden and internal, it is even more important for companies to be able to show the contributions they make to society and to well-being. Then a series of corporate scandals and the recession make companies more accountable, make bad press, something the companies have to think about much more and therefore provide an advantage for businesses that have a coherent culture, that stand for more than simply the current portfolio of products or services. That last point is very important, because in a world of change, a company cannot be known only for a product. Products constantly change and innovation is highly desirable. So as the chairman and CEO of IBM said to me, and it is quoted somewhere in the centre of the book, “Businesses come and go and managers come and go. But only the culture, only the purpose of the institution endures.
IBJ: How does a SuperCorp innovate?
RMK: I have studied innovation and contributed to processes for producing innovation in companies for over 25 years, so this is a field that I know well. There are several important ingredients for innovation. One is a steady stream of ideas, a steady stream of awareness of needs and opportunities that can be tapped as sources of innovation. So, just in terms of generating ideas, these are companies that focus their employees on making a difference in the world, on products and services that meet the unmet needs of people. Markets come later. Those companies encourage and empower people throughout the ranks to bring ideas forward because they will be listened to. These are the companies that are more likely to have more ideas, more possibilities, and therefore more chances at innovation.
One of the differences between success and failure in innovation is the number of things you try. Innovators have more failures because they try more things, and that also gives them more successes. So having more ideas is an advantage, having ideas that look beyond markets to unmet needs. Procter and Gamble is one of the companies that is a superstar of SuperCorp. It has a statement of purpose, values and principles called the PVP and it is widely disseminated by top leaders as something important to Procter and Gamble’s culture. It also makes contributions to decision making, and I have many examples of that in my book. In August, the new CEO of Procter and Gamble decided that he had to do even more with the company's core values. So the new growth strategy for P&G is called “purpose-inspired growth.” That will direct the company, direct people in the company, to look at things and phenomena that are not yet on the market, things that people need to improve their well-being and that will help drive P&G's innovation. So it's a very good thing for the world but it's also very good for the company. One of the examples that I talk about at length in SuperCorp is how the people at Procter and Gamble Brazil saved the business by finding ways to serve a very fast growing segment of the Brazilian population, which is lower- income people who were beginning to have a little bit more income but were growing in numbers. So they made some very significant product modifications to serve those people, based on understanding their lives and what would improve their lives. That thinking saved the business in Brazil.
IBJ: Which markets offer the greatest opportunities to meet unmet needs?
RMK: I think that most major international companies now see that the biggest growth markets are the emerging-market countries. Those are the huge growth opportunities because mature markets are often saturated with goods and services. Now there are certainly opportunities in mature markets. I would say the Apple iPhone is a stunning success and is leading to many applications. And that was introduced in North America first. But the opportunities are coming from those countries where people are beginning to emerge from poverty and in fact it's in the interests of companies that they help people move out of poverty, that they help contribute to education in those countries, and so forth. That's where growth opportunities of the future will be, in the so-called BRIC nations of Brazil, Russia, India, China. They have huge populations, they have many unmet needs, though there are also unmet needs in mature countries and developed economies, in health care. There are many unmet needs, opportunities for a wide range of products and services of a kind that I call quality of life services. The values-based companies that I talk about are aware of this and those are things that give them an opportunity to exercise their values and make money because they can contribute products and services, not contribute in the philanthropic sense. They can directly offer products and services that improve quality of life. But in nearly any industry, there are opportunities for taking old products and making them more environmentally friendly. The more that the strategies companies undertake emphasize social good and not just the selling of more things that people don't necessarily need and pushing products on people who need them or not, the more that social good and well-being are emphasized, the better off the company will be. Such an approach also provides sustainable growth opportunities because the society or the community is also better off, and when it's better off, people are more prosperous and they can buy more things. So this is a way of thinking about capitalism that adds a social logic to the market logic.
IBJ: The fact is that a company wouldn’t come out with a more environmentally friendly product if it didn't make a lot of money.
RMK: Here's a striking thing. Consumers are making more demands on companies to demonstrate their values. Not by philanthropic contributions, but directly in their products and services. So Procter and Gamble doesn't advertise that they have great values. Instead they make sure that the products have all the criteria that consumers want. Companies of course respond to the public, but they also shape what the public wants.
In terms of whether it's profitable, there are lots of other factors and I only began to list the factors that help produce more innovation. You get more collaboration internally in companies that have a strong culture and are led by values and principles. You get more collaboration because people share a set of standards, they share a set of values, they feel that they are valued and empowered because respect for people is one of the important values that are common to all of the companies that I studied. And so, it's a lot easier to get collaboration internally, it's a lot easier to have the argument about whether resources should go toward one product or the other, and so they can make decisions that have the support of people in the company, and then they have very motivated people who want to execute because they want to go home and feel good about the work they did. It's not simply whether there's some politically correct label attached to a product. Of course, products need to be profitable but sometimes companies keep alive products with a great deal of social value that they cannot yet make profitable. Procter and Gamble did that with water purification powder when they could not sell it profitably in the places that really needed clean water. They set up a non-profit to keep it alive, in collaboration with non-profits and NGOs from the United Nations to the U.S. Centers for Disease Control, and then NGOs. That non-profit, called Children's Safe Drinking Water, makes this available on a different basis. That was a very important signal to people in the company that the company is serious about the values. That strengthened the culture. And it's now off the balance sheet, no one has to worry about profitability, it's a partnership, but it definitely solidifies the company's values.
There are so many other things I could say about that story. When IBM wanted to demonstrate a new technology, grid computing, which is now called cloud computing, while they were seeking commercial customers. They set up a non-profit called World Community Grid and donated that computing power to some of the world's biggest scientific projects. Anyone actually can sign up, any individual organization, can sign up for World Community Grid, donate unused computing power, that is when their computer's on, it can be connected to the grid and fuel some of that analysis on ending AIDS or solving the breast cancer puzzle. IBM employees do that and they are highly motivated. IBM partners also do it and it solidifies their connection with the IBM family.
IBJ: What characteristics define a SuperCorp leader?
RMK: The leaders don't have super powers, but my title SuperCorp is a suggestion that people can do things that are slightly larger than life when they are in companies that have a strong values-based, principles-based culture. So leaders first of all need to value the role of culture. They need to be systems thinkers who see broadly across the company but also outside the company to society, which doesn't mean only social causes, but also the network of business partners. So they're very good at seeing the ecosystem surrounding business, they are diplomatic, they reach out to partners, they're willing to share the stage and share the power, both externally and within the company. That's very, very important. So they might be very self-confident, but they also are willing to suspend their own egos in the interests of the institution. And move decision making to whatever level is appropriate for the decisions and not centralize everything at corporate, so it's a very different leadership style.
It isn't only IBM and Procter and Gamble but those are obvious examples. In the IBM case, Sam Palmisano followed Lou Gerstner, who was very effective in turning around IBM. He did many wonderful things but he had a more command-oriented style. Sam Palmisano is extremely smart. I have enormous respect for him. He has a very different style, he presents himself with much more humility than I think Gerstner did and he is highly inclusive in his leadership style. There are many people who have a great deal of influence at IBM. At Procter and Gamble, A.G. Lafley followed a CEO who was only in place about 18 months because he was not doing well strategically. He also wasn't particularly effective at managing the company internally. Lafley also is a very unassuming person, but very strong. The old model of the CEO as monarch is disappearing. I used to quote a CEO I consulted to a number of years ago who would say, “Business is the last monarchy.” Well, not any longer. And the fall of people like Hank Greenberg at AIG demonstrates that.
IBJ: Let’s say that I’m the CEO of a fairly traditional company, that’s has a top-down style and a belief in one thing only, making a profit, which I’ve been doing for years. Why should I consider becoming a SuperCorp?
RMK: I'll give you three reasons. First of all, making money seems to be a sufficient motivation for people on Wall Street in the financial community but when that got taken to excess, that led to not only the recession but to public scrutiny. There are public demands on these companies to change their ways. So one reason is a defensive reason...a greed-based system of business is not going to last forever. Making money is not going to be a sufficient driver and it's going to be regulated out of existence if that's all a company wants to do. Secondly, people today want to be proud of what they make. Companies that chuckle about how they put one over on consumers are going to lose the loyalty of employees and won’t be able to hold their heads up in the community. Thirdly, people in the new generation want to feel that they're making a difference,, because the problems of the world are in everybody's face every day and it's beginning to be a new status symbol, whether you are working on some important problem. So it's a source of respect and it also taps a deep human longing for meaning in life. And then, as people get older they start to realize that they want to leave a legacy.
IBJ: Many people today who cannot find a job are becoming self-employed. How can such an individual take on some of the attributes of a SuperCorp?
RMK: If they want to sell to the big SuperCorps, they've got to understand what's going to give them an edge. They've got to understand how those companies are changing. Secondly, non-profits are increasingly partnering with large companies and so they also need to adopt many of the operating ways of those large companies. Individuals selling a service to other individuals should lead with their values. I think they can learn a great deal from people like Maurice Levy (Publicis founder) that I talk about the book because of his ability to make relationships with people first. There’s also the Japanese company that talks about values in the first conversation with a prospect. That solidifies relationships. I don't know if there's anybody who oughtn't to pay attention to what I write about in SuperCorp because I when I was writing it I was thinking about somebody who sits at home, works remotely, never sees a customer, does tech support. Somehow they're going to be attached to an enterprise and they need to understand how the world is working and how big companies might be changing and at some point, they're going to be part of a partnership network. But all the things I talk about...the workplace, remote work, diversity, how to deal with people who are different...that's all relevant to individuals, not just the CEOs of big companies. But clearly, people who are in businesses of any size, who have a team from 12 to 12,000, can benefit from these principles.
IBJ: Thank you very much.
RMK: You’re welcome.
Reprint: 9B09TE10
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