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‘Leading Digital Transformation’ is a weekly podcast series produced in collaboration between The Digital Transformation People and Rob Llewellyn digital transformation advisor and founder of CXO Transform.
During this series, Rob interviews experienced practitioners, authors and thought leaders whose stories and experiences provide valuable insights for digital transformation success.
In this episode, Rob speaks with Greg Satell international keynote speaker, best selling author and advisor for digital transformation. Another fascinating episode as Greg speaks about his new book Cascades, what inspired him to write it and his key insights into the power of network cascades to drive transformational change.
“People talk about change being top-down or bottom-up and the truth is that it’s neither; true transformation is always from side to side. You’re never trying to convince people, you’re empowering people to convince each other. That’s where you get small groups that are loosely connected united by a shared purpose” – Greg Satell
Listen here and read the full transcript below.
Rob Llewellyn: [00:00:22] Hi and welcome back. Today I’m joined by Greg Satell. Greg’s journey has been quite an interesting one. He spent 15 years living and working in Poland, Ukraine, Russia and Turkey before returning to the States in around 2011. He’s gone from being a corporate executive and entrepreneur to being an innovation adviser, speaker and a best-selling author. His books include “Mapping Innovation” and most recently “Cascades: How to create a movement that drives Transformational Change”. So, let’s learn more about all that and jump into the interview with Greg. Greg, welcome.
Greg Satell: [00:01:03] Thanks for having me, Rob.
Rob Llewellyn: [00:01:05] Greg, before we get into the questions, your most recent book “Cascades”, which I just mentioned, tell us a little bit about what brought you to writing that kind of book.
Greg Satell: [00:01:17] That’s kind of a funny story. Back in 2004, I found myself running a major news organisation during the Orange Revolution in Ukraine. And I just found it was amazing how all these thousands upon thousands of people, who would ordinarily be doing thousands upon thousands of different things, would all of a sudden stop what they were doing and start doing the same thing all at once. And I thought to myself, I said, “Gee, I’d really like to do that!” Here I am running this big company and there’s all these thousands upon thousands of potential customers buying all sorts of different things. I wanted them to unify on the one thing I wanted to sell them. And I had hundreds of employees, all with their own ideas, I wanted them to embrace the initiative that I thought was important. And there were advertisers and investors and I wanted them to embrace where we wanted to take the company. But of course, I had no idea how to do that. So that’s what set me out on this 15-year long journey that led to “Cascades”, which explains how you can drive transformation, truly transformational change using the principles of successful social and political movements.
Rob Llewellyn: [00:02:40] That’s really interesting, Greg. Tell us, about some of those fascinating experiences in Ukraine’s Orange Revolution and how it led to the book.
Greg Satell: [00:02:50] Well, what was amazing is how everybody was confused. Nobody seemed to know what was going on. Not the journalist I would speak to every day in the newsroom, not the other business leaders I would meet with regularly, not the political leaders I would run into from time to time. Nobody who had any conventional form of power had any ability to shape events. All there was this mysterious force that nobody could describe and nobody could deny that was driving things forward. And what I found, later on, is that this force has a name. It’s called a Network Cascade. And in the late 90s, there were some breakthroughs in network science. And now we know a whole lot about how these things work. And one of the most interesting things is I found that whenever you see one of these mass movements, where people are flooding the streets of a place like Kiev or Istanbul or Washington D.C., what it really is, is not just a mass of people but actually small groups loosely connected that have become united by a shared purpose. And that’s what really drives any kind of transformation. Small groups loosely connected united by a shared purpose. And what I found was fascinating is these same principles, they’re not just social or psychological. They’re actually physical. We can see the same types of things happen in a computer network or with physical particles. So, what I found really amazing is that there’s almost a physics to how a cascade propagates and spreads information or whatever it is.
Rob Llewellyn: [00:04:51] Greg, most of the people listening to this podcast will have heard about the Blockbuster story, Blockbuster Video I’m talking about there. In the book, you give a slightly different take on this to what we typically hear about. Tell us about that.
Greg Satell: [00:05:06] Yeah. This is also another funny one. The idea everybody has about Blockbuster is that somehow they just ignored the Netflix threat and then didn’t wake up until it was too late. When actually the exact opposite was true. They understood the Netflix threat very, very early. They had a bit of a problem, because they couldn’t really do anything about it until the spin-off from Viacom was complete. But once they were spun off as an independent company, they moved immediately to start an online rental business. And then very quickly as well, they cut late fees. And then they came up with a new business model that Netflix couldn’t really compete with. It was called “Total Access”, which basically allowed consumers to use the brick and mortar stores and the Internet interchangeably, so they could rent online and return at the store, rent from the store return online. And as soon as they implemented that, the new additions of subscribers flipped from 70-30 in Netflix’s favour to 70-30 in Blockbuster’s favour. This was at the end of 2006, so Blockbuster was actually starting to beat Netflix. What happened was that the CEO, John Antioco, lost control of internal stakeholders, so the franchisees didn’t like these policies and they felt that the online business was putting their business at risk. So, they started making a lot of noise and the analysts and investors didn’t like how much it was costing. So, things came to a head when Carl Icahn, who had gotten control of the board, demanded that the CEO give up his bonus for that year. And the CEO left and then the new CEO came in and reversed all of the policies. There was some, I don’t know, personal animosity or whatever it was, so it wasn’t that they didn’t have a strategy. What they couldn’t do, what they failed to do, was align all of the stakeholders behind the strategy. So when the new CEO came in, that strategy was very quickly reversed and then three years later after that, Blockbuster went bankrupt.
Rob Llewellyn: [00:07:33] Is there anything in that story, Greg, which gives clues towards something that Blockbuster could have done to save themselves?
Greg Satell: [00:07:43] Well, in the book I point out that in Iraq, General Stanley McChrystal had a very similar type of situation, where there was a disruptive threat, there were problems of coordination internally and there was a number of steps he took to manage his internal networks and to build connections within his organisation, which was the U.S. Army and to build connections to outside stakeholders. And even in talking with John Antioco the CEO, he acknowledges there’s some things that they could have done differently. One of the things [was that] they probably put too much stock on the market too quickly, so that depressed the share price. But certain things that they did like Blockbuster Online was in a separate office from the main Blockbuster. So that made it hard to integrate. There were some other things that they could have done. They could have worked to pacify the franchisees earlier, worked to explain what they were doing to the shareholders and analysts better. Basically, build connections to those stakeholders who ended up causing problems for them. The really interesting thing about the Blockbuster story from an innovation perspective is when I was talking to John Antioco, (who’s certainly no dummy, I mean he’s had a wonderful career and he’s gone on from success to success to success), he said that “throughout my career, I learned that whenever you’re going to do something different, somebody isn’t going to like it. And I just learned to push through it.” And he’d been successful doing that his entire career. It’s just this time the opposition got him or he just lost the will to fight. He told me that when they had the compensation dispute, he said “listen, I was just at a place personally and professionally and financially. I didn’t need to put up with this any more.” So, he left and now he’s doing quite well, he invests in retail food chains. But that’s the thing I would say that the main lesson is that any time you’re going to have change, there’s gonna be some people who aren’t going to like it and they’re going to work to actively undermine what you’re trying to do. And there’s tools in the book and we spend a lot of time on this subject in the workshops of identifying that opposition and coming up with a strategy for either nullifying them or overcoming them. But already in our workshops, we found that people are for some reason really reluctant to do that, really reluctant to say “hey, these people are really going to hate it. What are we going to do about that?” But it’s super important that you do, because there’s no reason to be blindsided.
Rob Llewellyn: [00:10:36] I think probably there are a lot of people listening to this that can resonate with that challenge of people not opening up. How do you get around that, Greg? How do you help these teams, these organisations, open up in a way that they wouldn’t necessarily do without you there?
Greg Satell: [00:10:49] Well, first of all, you need to kill this “burning platform” strategy. This whole “start with a big bang, create this sense of urgency around change” and all of this stuff, because you rally some troops, but at the same time you are signalling to your opposition that they better start working to undermine you or this change will actually happen. So, you want to start off with people who are already enthusiastic about the idea. And then you empower them so that they can bring in others who are maybe slightly less enthusiastic and they bring in others still. And that’s how you start building momentum. People talk about change being top-down or bottom-up. The truth is that it’s neither. True transformation is always from side to side. You’re never trying to convince people, you’re empowering people to convince each other. That’s where you get the whole “small groups loosely connected, united by a shared purpose”. And then you want to work up to – well, there’s a couple of things. First, every change effort starts off with a grievance. That’s why people want things to change in the first place. But grievances don’t get you very far. Just saying our sales are down or we’re behind in technology or competitors are killing us or whatever it is, that doesn’t get you very far. You need to come up with affirmative vision for tomorrow. What is that future state you’re looking for? Unfortunately, it’s very, very rare that you can achieve that future state in one step. So, in the book, I talk a lot about how you need to come up with the Keystone Change, which is a clear and tangible goal that involves multiple stakeholders and paves the way for future change. One of the most interesting things I found was that every single successful transformation I studied (it didn’t matter whether it was Gandhi and the Indian independence movement, or the civil rights movement, or turnarounds at IBM, Alcoa, digital transformation at Experian), they all had a Keystone Change. And so, that is the first place to start. I’ll give you an example, a more specific example about this. So, with Experian, when they started their transformation to the cloud, it started because the CIO, their chief information officer, when he first came to the company, he started talking to customers and they were telling him how much they wanted access to real-time data. And when he went back to the company, he saw how much fear that inspired within the company. A lot of people were dead set against it because of obvious security concerns. Remember last year we had the Equifax breach, so that’s a very real danger, but also concerns about losing control of the business model. So the Keystone Change he came up with was to build a network of internal APIs, because that was a clear and tangible goal. It involved many of the same stakeholders you would need to make a full shift to the cloud. And it paved the way for future change, because people could see how much value the internal APIs delivered, making a full shift to the cloud become that much more plausible.
Rob Llewellyn: [00:14:23] Greg, I just want to take a couple of steps back, because when you were talking about Blockbuster, you mentioned John Antioco. I think I pronounced it correctly, hopefully! And you mentioned that he came up against opposition as a lot of organisations are doing these days. Explain to us the role of the opposition and breaking through higher levels of resistance.
Greg Satell: [00:14:46] Yes. So there is a tool called the “Spectrum of Outlines” and this is one of these tools that’s been battle-tested for decades. You want to set out who’s your most active supporters, who are your passive supporters, who’re neutral, who are passive resistance and who are your most active opposition. And you want to target your efforts as far to the right, so into the passive opposition as you can. But you don’t want to engage your most active opposition. What you want to do is by empowering people that already support your idea, you’re shifting passive opposition into neutral, neutral into passive support and passive support into active support. And often when your most active opposition, when they feel that they’re losing support, they will overreach and send people your way. And I think we’ve all seen this in our daily business life. When somebody starts losing an argument at the meeting, they start lashing out. It hurts their case even more. But you always want to be connecting out, bringing people in. That’s what drives a transformation.
Rob Llewellyn: [00:16:04] So, we’re talking about a number of different aspects of transformation, Greg. And of course, there are many. I want to go on to one which is really fundamental to any organisation out there. Of course, it manifests in many different ways and that’s values. What role do values, in your view, play in driving transformation?
Greg Satell: [00:16:25] Values represent constraints. So, one of the things we ask people in our workshops is “what are your values?”. And then the follow-up question is: “what do those values cost you?”. Because if you’re not willing to incur costs, then it’s not much of a value. And by making those values explicit and showing that you’re willing to incur costs, that’s how you build trust. So, a great example of this was when Paul O’Neill took over Alcoa in the late 80s, and it was in really bad shape. So, at his first press conference, they asked him what he’s going to do with the company. How’s he going to return it to profitability? And he said: “I intend to make Alcoa the safest company in America. We’re going to go for zero injuries.” And they said: “OK, but what about the strategies?. He said “No, I don’t think you heard me. If you want to see how I’m doing, look at our workplace safety records.” And it was a really smart strategy, because he understood that in many ways, workplace safety was a proxy for operational excellence, but because he was able to show very, very quickly that he was serious and that he was willing to incur costs for that value, he built trust with the employees, the unions and also outside regulators. And because he was able to build that trust by holding to those values and incurring costs for those values, that made a lot of the stuff he wanted to do down the line much easier when they were talking about, let’s say, changing work rules or having labour negotiations or changing ways of doing things. He could bring people to the table who trusted him and they could work out a solution instead of just negotiating as adversaries.
Rob Llewellyn: [00:18:22] Greg, you talk about transformational efforts surviving victory. Now, can you just clarify what you mean by that and then give us a little bit of insight as to how that’s achieved?
Greg Satell: [00:18:36] Yes. So this is another instance where it’s so much more clear in a social or political movement. So, if you think of the Arab Spring, where they got rid of Mubarak and ended up with el-Sisi. We had the same problem in Ukraine. We took to the streets in 2004 to keep a man named Viktor Yanukovych out of power and then five years later, he’s elected. He rose to the presidency in an election that everybody pretty much agreed to be legitimate. If you look at Blockbuster, is a great example, if you say “what is our objective?”. If you were in a meeting at Blockbuster: “what is our objective?”. Well, “to surpass Netflix in new subscriber additions” and they achieved that victory. They failed to survive that victory. And just in ways large and small. I mean, I think we’ve all seen transformational efforts, whether it’s a start-up company or a transformational plan within an organisation, that achieved some initial objectives and looks like it’s going really well. And then just seems to putter out. And the reason that happens is that every revolution inspires its own counter-revolution. Whenever change is successful, there are people who don’t like it. And they’re still going to work to undermine it, even though you think that you’ve already won. And the way you get over that is you make your transformation about values. Back to the Blockbuster example: they had the right strategy and tactics, they executed them well, but they never really changed how they saw themselves as a company. You compare that to Stanley McChrystal in Iraq, where he realized that they needed to change the culture and the values within the special forces. His famous line is “if we want to beat a network we need to become a network”. So that’s how you survive victory. You don’t make it about a particular persona or policy or strategy. You make it about values. One of the most interesting parts in the book is when a guy named Irving Wladawsky-Berger who was one of Gerstner’s key lieutenants in the IBM turnaround in the 90s. He made the point, he said: “because the Gerstner revolution was always about values and not any particular strategy or work technology, we were able to evolve, long after the marketplace and the technology changed.” And if you look, here it is almost 20 years after Gerstner left IBM, they’ve had their ups and downs, but they’re still a very, very profitable company and still on the cutting edge of technologies like blockchain and neuromorphic computing and quantum computing and lots of other stuff. Long after most of their former competitors no longer exist. So that’s why it’s so important to start planning how you’re going to survive a victory from the start. How are you going to not only achieve this change, but the next one and the next one after that?
Rob Llewellyn: [00:21:51] Greg, we can go on and I’m afraid we’re going to have to wrap it up there. I know that of course people can go and pick up the latest copy of your book, “Cascades”, to get more on these kinds of insights you’ve been sharing with us and in your previous book “Mapping Innovation”. But if people want to find you aside from your two books, where can they go?
Rob Llewellyn: [00:22:19] Terrific, and we’ll put a link to those in the show notes. Greg, thank you so much for your time today.
Greg Satell: [00:22:25] Thanks for having me.
Announcer: [00:22:25] We hope you enjoyed this episode of “Leading Digital Transformation” with Rob Llewellyn and The Digital Transformation People. Visit www.TheDigitalTransformationPeople.com to secure the knowledge, talent and services you need for digital transformation success. To continue your journey as a certified transformation professional, visit www.RobLlewellyn.com. Be sure to subscribe to the podcast and follow us on Twitter, @TheDigitalTP and @RobertLlewellyn.
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