7

Scanning for the Right Paradox

Read not to contradict and confute, nor to believe and take for granted . . . but to weigh and consider.

—Francis Bacon¹

Working as consultants around the world, we encounter a persistent concern among company CEOs: Leaders from the executive team on down have become prisoners of their experience. The CEOs say: We need people to diversify their thinking, exercise imagination, loosen up their control, get out of their comfort zones. Only by doing so will we come up with the right solutions to today's paradoxical problems.

We hear this concern so many times that we sometimes think of ourselves as coaches in open-mindedness. Leaders today recognize they spend too much time talking with their peers—and too much time in familiar, comfortable office and plant settings. They too often don't respond to the obvious need to get out of their offices. They almost seem to think they can think their way to diversity. But of course that isn't true. They have to step out and immerse themselves in it.

We recently heard an anecdote from western Kenya, not far from where we worked with the team of GSK executives. An expatriate worker observed that outside organizations, concerned about the shortage of fuel for cooking, had brought in efficient charcoal-burning stoves. But few local people used them regularly. Why? Because they liked gathering around the “hearth” of the fires just outside their back doors. Moreover, the only way to stir their favorite staple—a corn-meal mash called ugali—is in a big kettle. And you can't cook the thick ugali mixture on a lightweight stove. You can only stir it on a perch of three solid campfire rocks.²

The point is that leaders, like the perches for stoves in Kenya, need to balance their thinking on more than one point of experience. They need several points—or many—or they won't have the mental material to best solve paradoxical problems. Too often, the global executive relies on insight from within the organization, trying to cook up something new and nourishing without insights from partners and stakeholders throughout the world.

If you're a leader, you probably recognize you spend too much time talking with your peers and company insiders. That's why, in part, leaders at GSK took a trip to Kenya to explore local conditions. They were heeding an old yet newly relevant message: If you're someone with insular and elitist views, you block the resolution of complex problems.

But that's not all. If you have a limited base of experience, you will have trouble determining which paradoxes to attack in the first place. What is the priority? We often ask executives when we first meet them: What's your leadership agenda? What are you trying to accomplish? Can you identify the paradoxes you really want to focus on? We often discover they haven't thought about their priorities in that way. They don't know which of a dozen significant problems they should devote their time and energy to.

The Value of an External Focus

Over the past thirty years, leaders have shifted their focus from hierarchical structures to business units to teams to networking. Today they stress acquiring knowledge, learning skills quickly, and adapting to a volatile, ambiguous, and complex environment. Most futurists predict that we will move along a trajectory that makes the world harder to understand and navigate through an increasingly tangled web of contradictory forces. To be effective in this new world, no matter what level you're on, you need to develop an “other” focus: What other things should I and my colleagues read? What other people should we meet? What other experiences should we have?

Companies like Plantronics, AT&T, Ericsson, Twitter, PwC, and Google help their people use outside networks and talent to inspire creativity, solve problems, and get products to market faster. But this is not the norm. In the United States, rugged individualism remains the cultural model. Global leadership expert Stephen Rhinesmith has shown the United States and Australia as the most individualistic countries in the world. Individualistic leaders try to control the flow of information and maintain a fortress of confidentiality. Connecting rather than creating—becoming a networker, alliance maker, and relationship manager—remains awkward.

We can't blame many leaders for remaining insular. They are responding in ways that reflect traditional incentives: You have to receive credit for achievements to get promoted. You have to get control of your work to please the boss—“For goodness sake,” the boss says, “No surprises!” And you get paid for this year in and year out. You often don't get paid at all for the big-picture thinking that comes with a diversity of thought and experience. If you've been in this system, you know you get paid mostly for puzzle solving.

But if you want to be a complete leader, this sort of caution will block your development. Embracing best practices from others, admitting to not having the solution, and absorbing the variety of the world prepare you to identify paradoxes and select right actions.

In a study of hospital top-management teams, researchers found a strong correlation between cognitive diversity and decision quality. The researchers surveyed eighty-five CEOs and team members and found that when leaders held diverse beliefs and preferences, they elicited more conflict with each other during decision making. But the conflict led to greater understanding, commitment, and higher decision quality. The authors concluded that even when top executives clashed personally, the increased debate stemming from differences in the way people thought improved decisions, as long as the executives trusted the competence of other members of their teams.³ This is further evidence that, as crucial as analytical thinking and problem solving are, securing ideas and information from the other has risen immeasurably as prerequisite to prioritizing, originating, and reshaping action.

The Practices of Scanning

As a leader, you will need to collaborate with others to poke, prod, and partake of every opportunity to expand your group's knowledge, deepen your experience, connect with people, and in short get everyone out of their comfort zones to see what really matters. This is of course as true in life outside as inside the corporation. We recommend four practices:

• Questioning assumptions
• Seeking new knowledge
• Connecting with others
• Seeking new experiences

Practice 1: Questioning Assumptions

The first act by leaders is to admit they don't know everything. This comes hard to most top bosses, because saying “I don't know” feels weak and indecisive. In our consulting, we rarely work with top leaders who openly reveal honest confusion or ignorance. The confidence required to climb the company ladder is incompatible with the willingness to express uncertainty. But leaders, like the rest of us, are often wrong, so we recommend that those having a hard time opening up take an interim step, namely, questioning assumptions. You can do this as part of setting the tone with one of the three mindsets. Once you see that your assumptions have foundations of sand, you have a much bigger appetite for fresh ideas.

Research on cognitive biases clearly shows that presenting people with facts or statistics that demonstrate social, economic, or industry changes doesn't get them to challenge their assumptions. We all tend to ignore facts that don't agree with our perceptions. Our experience has taught us that one thing causes another, and even when data show that the causal story we have developed no longer explains reality (if it ever did), we hold tightly to it. That's one reason why, as Nobelist Daniel Kahneman says in Thinking, Fast and Slow, “Intuitive predictions are almost completely insensitive to the actual predictive quality of the evidence.”⁴ How often have you projected with confidence how your life will unfold in the next couple of years—only to find the future refusing to cooperate?

We see examples time and again of bias when leaders face game-changing paradoxes. The best-known example comes from the auto sector. For years, everyone in American manufacturing felt the way to improve quality was to inspect finished products. Moreover, you couldn't produce higher quality and lower costs at the same time. The paradox of cost and quality, people widely believed, was irreconcilable. It took seasoned managers more than a decade to shake that story, and they did so only when they could no longer ignore the Japanese model. Japanese car companies steadily eroded U.S. market share by building quality in rather than inspecting afterwards. Ironically, managers in many industries still have not grasped that principle and its accompanying practices, even as Toyota has grown into a global colossus by elaborating it.

As an exercise, you might want to systematically examine the assumptions that hold you prisoner. Many managers have recently benefited from questioning the formerly irreconcilable notions of environmental performance and low cost. They have in turn profited handsomely by giving customers both. Other managers have benefited from questioning the mutual exclusiveness of high pay and high profits in retailing. We cited John Mackey and his pay practices as turning this notion on its head. Still other managers, such as those at GSK, have benefited from questioning the contradictory notions of making profit and serving the poor, perhaps influenced by C. K. Prahalad's groundbreaking book, Fortune at the Bottom of the Pyramid, which argues that the poor need goods and services, and they have money for the right thing delivered in the right way.

This calls out the big question for all of us: What assumptions do we hold that, a decade hence, we will realize are nonsense? Are we ready to lead others in questioning those assumptions? This brings to mind the old saying: “The mind is like a parachute. It works better when it's open.”

Practice 2: Seeking New Knowledge

After you learn to enter the don't-know world, you can more readily see the paradoxes most important to the company's future. With the help of the three mindsets, you can also see paradox-solving insights all around you. Those insights come from scanning a wide range of print and digital media. A report by Forbes.com/Insight revealed that competitor analysis, customer trends, corporate developments, and technology trends rank far and away as the prime focuses of executives scanning their environment. Societal and political trends ranked far below.⁵ This suggests that, in a paradoxical world, executives are scanning too narrowly.

Your scanning should always include deepening knowledge in macro trends, including effects of globalization, demographics, and technology. Here are six top issues to watch:

• Dramatic growth in Asia and Africa. Tens of millions of people will soon join the middle class in Asia, and this will pose many paradoxical questions. The question for Western companies today is whether to wait or invest. Asia will explode with new growth—one of our clients forecasts a 500 percent growth in its business in the next few years. Africa is also emerging as a contender for rapid growth of a middle class, as China invests heavily on the continent and oil and mineral development provide an ongoing influx of cash. At the same time, the earth has shrinking capacity to absorb even a new Chinese middle class—soon to exceed that of the United States. How should companies trade off the demand for growth and planetary sustainability?

• Robotics changing the way we live. Robotics and cloud computing will transform our lives as machines replace routine tasks in work and life, and as a result, eliminate many jobs, especially managerial, intermediary, and relationship roles. While innovations like 3D printing will increase our productivity and enhance welfare, we face the prospect of reinventing concepts of work, livelihood, leisure, and personal fulfillment. One paradox: Should an organization make big investments in untested concepts to transform its business, or should it hold off to milk current technology, risking falling behind?

• Major diseases cured or controlled. A world-renowned cancer researcher recently shared with us his belief that many chronic, lethal diseases won't kill people ten years from now. Doctors will have the ability to retard disease progress and extend life even more than today. What will this mean, and not just for health care? One paradox: Do we push for faster, better, deeper innovations in the quality and length of life regardless of the costs associated with them, the inability of societies to provide the services, or the potential to increase the gap between the haves and have-nots?

• Ever more transparency. We see no end in sight for public and political demands that companies measure and report performance. As concerns over specific issues such as climate change or social consciousness grow, more firms will rate companies publicly and rank them numerically. Poor performers can expect to receive bad publicity, sanctions from government, downgrades from analysts, witch hunts from politicians, and consumer boycotts. What new paradoxes will arrive? One will be the intensification of the need to decide between profitability and sustainability.

• More sophisticated network influences. Networks will continue to evolve beyond the control of leaders, presenting the paradox between the inner circle and the periphery. Meanwhile, people alternately want more surface connections and deeper and more meaningful ones. How do you achieve the right blend of external networking and attention to internal factors associated with business performance? How will you assess the quality, and not just the scope, of information and ideas that emerge from networks? The proliferation of information demands that we decide which sources we should listen to and which to ignore.

• Changing needs of the workforce. Expectations in needs and work style vary with each generation—Baby Boomers, Generation X, Millennials, and so on. You need to recognize the importance of leading increasingly diverse talent. How do your people use their own experience to understand others without making the wrong assumptions about what others are looking for?

Practice 3: Connecting With Others

We have observed in many industries a similar pattern: People who have been promoted to top jobs exhibited competitiveness by personally delivering outstanding results, besting others to shine and take credit, and exerting control to deliver predictable outcomes. But these people now face a new world, where they can solve paradoxes more effectively through coordinated interplay, achieving shared objectives, and looking beyond one another's prescribed boundaries. These leaders have to fight a reliance on a select group of colleagues and advisers to get things done. If you are like these leaders, you have, consciously or not, probably divided the world into us and them. In your mind, the us group is the only one that counts. You will now have a hard time making the most of contacts in the them group, even though that group is much larger and more diverse than the us group.

We once ran a program for two merging banks, and we encouraged leaders to reach out and invite members from the other bank to join their teams. Not surprisingly, those leaders who were the most inclusionary, measured by a psychological test, formed better teams and received critical pieces of new information. The control-focused executives lagged on both counts. We have used the same test on executive teams and CEOs for twenty years, and we have noticed a distinct shift. Historically, more control-oriented leaders became CEOs or senior executives. In the last ten years, this has abruptly changed. More inclusion-oriented leaders emerge as CEO because of the need in large companies to bring people together rather than attempt to control people and events.

The control-focused dysfunction is just what leaders need to avoid when they face a range of paradoxical problems today. You instead need to embrace a broad network so that you position yourself on the information pathway. Success stems not just from connecting the dots but from connecting the people.

Ultimately, you will need to cultivate a sort of collective leadership, building a more complete picture of the environment by sharing knowledge across the network, whether that network operates at the foot of the water cooler or in the virtual world of social networks and online forums. You might think that chief executives network naturally outside their immediate work groups, but that depends on the CEO. Researchers in one study found that only CEOs with board appointments outside their industry tended to “focus more on broader sectors of the environment such as the economic, political/legal, socio-cultural and technological factors that could affect their firm's operation.” Other CEOs tended to keep more in touch with developments in their own industry, leading to a homogenization of attention by the CEOs in the same industry.⁶

Although the study looked just at manufacturing companies, it points to the narrow focus leaders today need to avoid. Leaders need to expand their networking to other sources of intelligence that go beyond competing CEOs and peers. They also need to encourage their people to do so, asking them to take a risk by going outside their function or team to elicit the views of opposing functions. Or ask them to invite in an expert with a controversial viewpoint. Or insist they study the moves of a formidable competitor.

Practice 4: Seeking New Experiences

As so amply illustrated by the GSK executives' trip to Kenya, broader experiences form the basis for a clearer view of paradoxes and how to prioritize solving them. As consultants, we help executive teams use short-term trips and events that thrust them into unfamiliar environments that challenge their opinions. Leaders usually react with less certainty about what they know. They become more willing to look at situations with an open mind. And they have a better idea of where to place their energy.

As for foreign experience, across five studies, researchers showed that people who have lived abroad (rather than simply traveling abroad) are more creative. That creativity is expressed as insight, association of ideas, and idea generation—in short, bringing to the table something novel and useful. In one study, the more time a sample of MBA students studied and lived abroad, the more quickly they solved two problems: one of them required finding an inventive but necessary solution to negotiating the sale of a gas station. The most creative solution promised the seller a bonus of a job at the station at a future date—enough of a bonus to get him to accept an offer lower than his reservation price.

Another study showed that it was the time spent adapting to unfamiliar local conditions that explained the higher levels of creativity. Interestingly, experimental studies showed that priming students with memories of their expatriate experience could also raise creativity.⁷ Although it is unclear whether this effect leads to enduring changes, it at least goes some way toward showing that experience leads to creativity.

Most executives draw from a narrow range of experience. Because of their socioeconomic status, many live protected lives, shielded from interactions with others who may be from a different economic situation, cultural context, or political or economic philosophy. They have never wrestled with the ambiguity of working in different systems with different people. They have succeeded precisely because they have deep experience in their industry and jobs, as well as because they have learned lessons from that experience they can apply in similar situations. But that school-of-hard-knocks experience also encourages them to repeat actions with metronomic regularity, depriving them of an openness to see alternative strategies. They stick with the tried and true. They act reflexively and not reflectively.

Experience is a great teacher, of course. But if you are going to solve paradoxes today, you need to be on guard against ossified thinking. You can counter the hardening of opinion through personal retreats, acting counterintuitively, seeking feedback from others, and stopping to learn from teachable moments during new experiences. You will want to encourage the same in people you work with, whether on or off the job.

Developing a Point of View

All of us come to view the slate of paradoxical problems in work and life with a different worldview. The components of that view run the gamut. Do the people you associate with believe in cooperation or competition when it comes to interacting with others? In independence or interdependence when it comes to connections? In individualism or collectivism when it comes to groups? In tolerance or intolerance when it comes to judging outlying behaviors? In universal or relative truths about ethical action? In achievement or self-actualization when it comes to aspirations? What are people's beliefs and assumptions and objectives? How do they acquire knowledge and learn? Set goals? Organize priorities and relationships?⁸

Worldviews can be specific and abstract, tangible and intangible, conscious and unconscious. We often assume our worldview stems from variables such as gender, ethnicity, nationality, education, functional expertise, and so on. But a person's worldview is far more complex, a rich fabric woven with individual fibers reflecting the range and nuance of personal and work experiences. Many leaders have an execution mentality, for example, which works well for getting work done when times remain stable and circumstances fixed. But what about during unstable times—when paradoxes with evolving contradictory forces dominate? This mentality, though just one fiber in the bigger fabric, blocks them from nimbly jumping over the line.

The more experiences you have as a leader, the better able you will be to handle paradoxical questions. Your worldview will become increasingly nuanced with each step outside your comfort zone. It will allow you to more easily exhibit a continuous reinvention mentality. You will see different ways to get things done—ways that can only stem from scanning and immersion in the broader work and societal world.

To achieve quantum leaps in productivity or to reconcile the irreconcilable, we advise every senior leader today to think every day about how the six issues we mentioned affect the company's business model. Where do the paradoxes lie? Which deserve the leaders' attention? Some of them may require willingness to engage in creative destruction, or reshaping as one executive calls it. Can you get rid of products, processes, and policies that soon may become a drag on the organization? What is worth preserving and what is worth destroying? Sometimes resolving the paradox of stability and change is the hardest of all—and only constant scanning of the horizon will tell the complete leader which action to take.