Digital + Traditional = Success
Business leaders are continually told they need to embrace digital disruption wholeheartedly to thrive in the 21st Century. Legacy companies, we hear, are all doomed to fail unless they double down on the latest digital innovations, and disruptors are ordained to take over the world. Digital innovation is the answer to everything.
According to Stanford Graduate School of Business Lecturer and venture capitalist Robert Siegel, this is false – nothing in life or business is ever that simple.
In The Brains and Brawn Company: How Leading Organizations Blend the Best of Digital and Physical, Siegel brings the digital innovation conversation back down to earth. He shows that, while important, digital is only part of the answer―and it’s never the only answer. The vast majority of successful leaders from both incumbents and disruptors focus as much on things like logistics, manufacturing, and distribution as they do on digital innovation. In fact, many established companies are successfully countering young upstarts in other creative ways, and many new organizations are learning from their older brethren.
“Now that almost every good or service combines digital and physical, leaders need to be able to manage and drive both digital and physical in a company.” -Rob Siegel
We are bombarded with digital disruption strategy and yet we hear little about the traditional skills like customer service, quality control, and logistics. Why is this?
This is largely because these things are hard to do and are very unsexy to the masses. These functions are usually not customer facing and are just expected to go right. In fact, it’s only when these things go wrong that we hear about them.
And, yet, great customer service keeps customers coming back. Quality products that don’t break build customer loyalty. And availability of merchandise is what allows a company to make a sale – or not. It is this sort of operational excellence that needs to work hand-in-hand with a strong digital front-end to deliver great products and services.
Describe the Brains and Brawn framework and how it can be used.
In the many companies we studied, we found 10 attributes – five digital (or Brainy) and five physical (or Brawny) – that are present to deliver a satisfying customer experience in a world that increasingly blends digital and physical solutions.
The Brainy attributes include the left hemisphere (using analytics), the right hemisphere (embracing creativity), the amygdala (having empathy), the pre-fontal cortex (managing risk) and the inner-ear (balancing ownership and partnership).
The Brawny attributes include the spine (excelling at logistics), one’s hands (making things), muscles (operating globally at scale), hand-eye coordination (shaping one’s ecosystem) and stamina (surviving for the long-run).
Companies can rate how they are doing on each of these 10 attributes and explore areas of needed improvement to better serve customers.
Would you share an example of a company in the framework?
Each chapter in the book looks at several companies that do well on each function, with a deep dive on one company in particular. The book looks at organizations such as Charles Schwab on its use of analytics, Kaiser Permanente for how it employs empathy, Instacart in how it manages partnerships, Best Buy, Target and Home Depot for developing great logistics, Michelin in how they operate globally, and Google for shaping ecosystems.
In addition, the book rates both Daimler and 23andMe on all 10 attributes and gives an overall score to each company.
“Leaders need to be able to simultaneously recognize patters based on interactions, also while driving change by being great communicators, being aware of their own and their company’s biases, and finding trusted partners outside of the company to understand truth.” -Rob Siegel
What are some of the difficulties in creating the partnership with digital and traditional business operations
One big challenge is that the competencies for each have historically required different backgrounds and capabilities. And now that almost every good or service combines digital and physical, leaders need to be able to manage and drive both digital and physical in a company. This becomes even more of a challenge as the way of thinking, and the language used for digital and physical, are often very different.
I describe System Leadership as the the ability to lead on both digital and physical areas. Leaders need to be able to understand how functions inside of an organization interact with each other, as well as how one’s company interacts with others in their ecosystem. It’s not only the competencies of digital and physical but understanding broadly how systems and groups interact with each other, and the consequences of these interactions. Leaders need to be able to simultaneously recognize patterns based on these interactions, also while driving change by being great communicators, being aware of their own and their company’s biases, and finding trusted partners outside of the company to understand truth.
As every good and services becomes connected, leaders need to understand the outcomes of the constant interactions between people, products and companies.
“Leaders need to understand the outcomes of the constant interactions between people, products and companies.” -Rob Siegel
You cover the power of empathy, which many do not cover. Would you touch on this and its importance?
One of the best leaders I ever saw demonstrate this attribute was Bernard Tyson, the former CEO of Kaiser Permanente. He would spend most of his time talking about how others were having to act and live in their roles: the doctors and nurses, the company’s members (patients), the payers, and even the government. He was such an effective and powerful leader, and his empathy helped him understand the issues and points of view of all that were around him. It made him a much more productive person.
How do leaders build a culture of brains and brawn?
Most importantly, leaders need to acknowledge and communicate that Brains and Brawn must both reside inside a company, and that both are important. And saying it is one thing – but being conversant and on top of the issues of both areas on things like analytics, manufacturing, creativity and logistics show employees that leaders understand each’s importance.
In addition, modeling the behaviors of a Systems Leader – recognizing patterns, making decisions based upon how to shape ecosystems, what technical stacks to use in making products and services, etc. – those are the key things that leaders due to build a culture. It’s as much by the actions leaders perform as anything else.
Let’s talk about stamina because you cover it later in the book in the brawny competencies. What are some ways to cultivate and develop this skill?
Companies that can survive over time, first and foremost, know their purpose. For example, in the case of Johnson & Johnson, the company’s Credo calls out very specifically and in a prioritized order the people they serve. For J&J, it’s patients first, doctors and nurses second, communities third, and shareholders fourth. There is no confusion as to what is supposed to be the hierarchy of purpose of the company.
More tactically, we saw companies with strong stamina have multiple business lines over time in order to add diversity to their business models. Innovation is done through multiple areas – from innovation groups to corporate venture capital to aggressive partnering with companies that are developing new technologies or capabilities. And, finally, companies with stamina anticipated and worked through hard times. They often did not know where the challenges would come from, but they seemed to have an expectation that hard times were inevitable, and when those times arrived, the company was prepared to work and fight through them.
“Leaders have to constantly ‘molt your own skin’ and keep growing – no matter how senior you are in a company.” -Rob Siegel
As a lecturer at Stanford and a VC partner, what advice do you have for aspiring leaders?
Be aware of your own strengths and development needs and understand when in the past your successes were based on talent and when it was based on luck. There is nothing wrong with luck – it is just important to understand what circumstances led to a successful outcome.
The other thing I would say is that leaders have to constantly “molt your own skin” and keep growing – no matter how senior you are in a company. The world is constantly changing, and leaders need to keep their skills and their mindsets fresh and current. That is really hard to do – especially as leaders move to the top levels in their company and have been rewarded for doing things a certain way. Forcing oneself to change is hard.
For more information, see The Brains and Brawn Company: How Leading Organizations Blend the Best of Digital and Physical.
Photo credit: Akshay Nanavati