To sustain performance and navigate complexity, authors Andrei Perumal and Stephen Wilson encourage business leaders to embrace an “Explorer’s Mindset.”
The complexity of today’s business environment and market conditions make it nearly impossible to grow as corporations once did. Leaders have to assess where they’re making money and focus on core products and services while also serving customer needs and innovating. Developing an “Explorer Mindset” can push leaders to ask the tough questions necessary to both stay on-track and drive growth.
FEI Daily spoke with Stephen Wilson, managing partner and cofounder of Wilson Perumal & Company and co-author of “Growth in the Age of Complexity: Steering Your Company to Innovation, Productivity, and Profits in the New Era of Competition” about the strategies and skillsets required to navigate complexity.
FEI Daily: The book explores two attributes of a successful leader: explorer and navigator. Why do leaders with these qualities have a leg up on their competition?
Stephen Wilson: When we start thinking about how to achieve growth in an increasingly complex environment we start seeing growth as an act of exploration, versus the assumption that growth is elastic or simple or linear.
We see in a lot of clients’ skillsets that are missing which are leading to issues such as not really understanding where you’re truly making money, or out of date operating models. That’s where we started. Then we recognized that a lot of issues today are really driven by how people are thinking about the business, which gets to this idea of the explorer’s mindset. The idea being that there are actually skills that are missing because we haven’t fully adapted to this new age. At the same time we need to rethink how we’re approaching the business and thinking about our growth opportunities. It really requires a shift in mindset and a shift in skillset.
FEI Daily: What are some of the ways leaders specifically in finance roles can help the company navigate complexity?
Wilson: CFOs should be asking do we have a clear strategy and are we putting resources behind it? So many companies are really too distracted by too many different initiatives and too many different programs and projects. I think a CFO can really challenge that and say let’s focus on this area so we can actually achieve something meaningful.
One thing we’ve seen a big pickup from our CFO clients is this whole notion of highlighting for the organization where you actually make money, and where you don’t. Most CFOs understand that static costs don’t reflect true cost. We have some different techniques in the book around understanding the cost of complexity and how to highlight where you’re making money by product, by region, by business unit, and where you’re not. Without that knowledge, it’s very hard to make decisions around pricing.
FEI Daily: How does being an explorer help a leader face day-to-day challenges and be a better decision-maker?
Wilson: Having this explorer’s mindset, as we define it in the book, helps the leader to be very clear on where they want to go and why. You have a unique belief in what you’re trying to do so you can keep a much clearer direction, which in turn helps you give clearer direction to your team as well.
I think having a very clear focus on the one or two things that really matter in your business, and not being distracted by a thousand programs helps you be more effective because you’re really focused on the key things.
You really need to experiment to improve your decision making, to understand the markets, to find your opportunities. The more that you actually believe in that and then follow through, create this experimentation machine, the more you’re going to be rewarded by much better information. You’ll be testing it on the market and getting those quick feedback loops as to what’s working and what’s not.
FEI Daily: The point was made that in the name of serving the customer, a side effect is often a loss of customer focus. Explain why that happens and how leaders can return the business to an external customer focus.
Wilson: Let’s take a product company that gets a request for a specific variation of a product. You launch that to get that internal revenue and to keep the customer happy, but over time what can happen is there’s complexity built up which creates a lot of cost, can impact critical service levels, can impact on-time delivery, the overall cost structure, and so on. And that can actually impede your ability to serve the customer.
You need to be customer-responsive but it’s also about making sure you have the operating model, mechanisms and processes to deliver variety to the market. Many times companies need to adjust those. We do live in a complex environment where customers want variety and want differentiated products and services. But the reality is product variety is often the third or the fourth attribute listed by customers as being important. What they really want is the right price, the right product or improvement at the right time.
You may have a glorious portfolio but that can really undermining performance. And then what happens is of course smaller companies may come in and cherry-pick the highest volume products and do them very cost-effectively and very quickly. That’s the dilemma that you need to watch out for.•