It's a fast paced world we live in. Blink and the competition has stolen a march, and disappeared along the fast lane leaving you languishing on the hard shoulder. So how are corporate leaders to keep up?
Steven Spear senior lecturer at MIT, and an expert on how exceptional organisations can create competitive advantage through the strength of their internal operations, has an answer - high velocity organisations.
The author of The High-Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition talked to Des Dearlove.
How would you describe a high velocity organisation?
In the book I write about companies succeeding over many years, sometimes decades, in even the most hypercompetitive markets. Given the intense rivalry in these markets, no one should get a lead, and if they do then others should overtake them. But these high velocity companies, as people start to close the gap, come up with another good idea about what the market needs, what to offer the market, and how to deliver it, and they keep running away. So they're the firms setting the pace – leaving it to everyone else to try and catch up.
Can you name some of the high velocity organisations you looked at in your research?
When I first started my research, I looked at Toyota. Toyota not only maintained a lead over its rivals, but widened the lead. It kept advancing quality and productivity, entered new regions, expanded its product portfolio, adding new brands like Lexus, and at the time was on the cusp of introducing new technology like the Prius hybrid. It just kept running away from the field.
Other companies that had continued to create and then widen a gap in hypercompetitive markets included Southwest Airlines in commercial aviation in the United States, and Alcoa, in heavy industry.
You spent some time at a Toyota supplier in the US. What did you discover?
Toyota realised a long time ago that it has these very, very complex systems. The car is complex, the equipment to make the car is complex, the factory is complex, the supply network is complex.
And it kept discovering that as much as it invested in trying to design these complex systems, it designed very imperfect systems. But there was discovery over time where it realised that if it couldn't design perfect systems, it had to constantly, relentlessly discover perfection.
If you can't see the subtlety, the nuance, and the details of how work gets done, you're likely to miss opportunities to get better. But if you really train yourself, starting with what's going on in the truck, and then working your way to much more sophisticated situations, more nuanced situations, you have a chance to gain insight and convert what you don't understand into knowledge which is useful.
Are there some characteristics and universal principles that apply across the board?
Sure. It's rooted in the problem people have, particularly when working in large groups that no matter how smart they are, how much effort they invest, they're going to design something complex and it's going to be broken. The problem is they just don't know how.
The folks at these high-velocity organisations are optimistic, though, in the sense that they believe that if they can see the problems and see them quickly, they can solve those problems. So, the very first capability or principle here is that work is designed in these high-velocity organisations so that the problems are immediately evident when and where they occur.
The second capability is that when problems present themselves, these organisations don't just say that's normal, it always happens, and then work around the problem - cope and compensate.
When they see problems, they swarm them very aggressively, and with tremendous discipline, they understand the root cause of the problem, develop a treatment, and then follow up to make sure the treatment works. And if it does, they realise they've converted something which they didn't understand - that's why they had the problem - into something which they do understand.
How do you use that knowledge for the organisation's benefit?
Once they've got this little pocket of knowledge, the most sophisticated organisations realise that if you've had ignorance in one place, you probably have the same ignorance laced throughout your system. If you can get a multiplier effect by spreading what's learned locally in a disciplined fashion and make it systemically useful, then you get this huge return on your investment in solving the problem.
So the third capability of these high-velocity organisations is tremendous discipline around knowledge sharing.
What about leadership in this context?
Well the fourth capability is leadership. The conventional wisdom on what a leader does is that they make decisions, they delegate other decisions, they give commands, they enforce them, and they ensure compliance.
But at Toyota when I asked people to tell me about the best leader they've ever had, every single person told me a story about a leader they had, at some point, who took the time and effort to teach them how to be a great learner in their right, and how to teach others to do the same.
So this different style of leadership also sets the high velocity organisations apart?
That's right. When people say, what's difficult about this? The tools are not the hard part. There are hundreds if not thousands of people who can sell you the tools. The hard part is the leadership model.
With high-velocity organisations, their whole operating system is based on the premise that the job of a leader is to find ignorance, convert it to knowledge, and teach others to do the same. So to convert a company from a typical company into a high-velocity fundamentally demands that leaders change their posture and their approach from telling other people what to do, to helping other people discover and, when in doubt, leading the way on discovery.
And the thing about leading the way on discovery, the very first step is raising your hand and saying, I just don't understand.
Although we don't know the full details behind what has happened at Toyota recently, what do you think might have been the issue?
Toyota has become extraordinarily successful based on a model of developing people to be very agile learners, so that the products and the processes got much better more quickly than anyone else in the industry could manage.
That development of people depends on a very intimate coaching process, and that coaching process has had more and more demands placed on it as Toyota's business expanded through the 1980s and 1990s. The real challenge is maintaining the intimacy and continuity of those coaching mentor apprenticeship relationships and developing enough people fast enough.
I certainly do not think it invalidates Toyota's approach towards achieving greatness; what it says is that achieving greatness is rate limited and the critical processes that are the rate limiters are the processes you use to develop people.
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