Leadership and the importance of changing one’s mind

Martin McGuinness, former deputy first minister of Northern Ireland and also former IRA commander, died today. I was shocked to learn he was only 66. Shocked because I have known his name since I was a child growing up in India, and had always thought he was much older.

But he wasn’t. In that short life, McGuinness, as many obituaries are reminding us, went from being “the butcher of Bogside” to “brave statesman”. In other words, he changed his approach to finding an acceptable settlement and peace. And he did it in the glare of the public eye.

Changing one’s mind, one’s opinion, one’s approach is an important trait for good leaders. It shows their ability to take on board new information as well as their ability to admit mistakes and course-correct. Not only are these traits indicators of an open mind, they also enable people around the leader to speak truth to power, for the consequences of silence can be many and unwelcome.

Yet we — the press, the analysts writing about companies, the electorate — find it difficult to forgive anyone, especially a politician, who changes his or her mind on an issue.

Not changing one’s mind is seen as a virtue, immortalised by Mrs Thatcher’s punny soundbite “You turn if you want to; the lady is not for turning”, before Mr Blair even tried his hand on the politics of soundbites.

Even the liberal press finds it hard to resist the chance to take a dig when it discusses a change in the direction of travel, a “u-turn“. See, for instance, the Guardian insist Philip Hammond digs in on his u-turn on national insurance for the self-employed.

This bald criticism creates pressure on leaders to be perfect, in-control, and always-right. It is unfair and wrong. And sad, because it demonstrates the rigidity of the electorate and the press pundits, who expect a leader to remain rigid, regardless of circumstances and possible outcomes of the original course.

An open mind is not cynical; an open mind is sceptical, inquiring and searching.

An open-minded voter or commentator does not distrust a change in stance as a knee-jerk reaction. What s/he does or must do is question the reason for the change, without sarcasm or without expecting an abject apology.

Is the change really just political expediency?

Is the change informed by new information?

Is the change driven by a new understanding of historicity, and how one might have been on the wrong side of history due to any number of reasons?

These questions hold good in both hierarchical societies as well as those who see themselves as more egalitarian.

Further, we need to remember that hindsight really is 20/20, and our understanding and memory of history both short and imperfect.

A friend and I were once discussing the leadership of Nelson Mandela. He is often cited in the same breath as Gandhi, who too had his flaws but steadfastly refused to support or choose violence. Mandela however categorically refused to denounce violence as a weapon in the pursuit of his cause. At the time the UK government under Mrs Thatcher was fighting another nationalist cause, which used terrorism and violence as its tools, namely the IRA. The policy of branding both the IRA and Mandela/ ANC terrorists was consistent with the thinking at the time.

As the President of South Africa, Mandela has been on record speaking in favour of luminaries, such as Colonel Gaddafi , the common cause being Africa and their shared identity as Africans. General Suharto was another one accorded high state honours by Mandela while he was a serving President.

Yet over time, the former “terrorist” Mandela came to be hailed as a hero. This shift took more than just one change of heart or mind.

In the United States, the Democrat Bill Clinton, the “first black president of the United States” did nothing to remove Mandela from the US Terrorism Watch list, while the Republican President George Bush signed a bill to change that in 2008. In the United Kingdom, where then-PM, David Cameron, who had once worked under the Thatcher government as a young whippersnapper, publicly noted in 2006 that the Thatcherite policy to brand the anti-apartheid movement terrorist was wrong. Predictably, the latter lead to many wondering aloud if Cameron was a Conservative at all — making one wonder if an extreme form of white supremacism is an essential quality to one being a Conservative in the UK!

But here is the rub. Post Robben Island, in his writings and speeches, Mandela was brutally honest in admitting his errors of judgment, mistakes, and shortcomings.

In other words, Mandela changed his mind too.

As leadership — and indeed, statesmanship — go, there are lessons in here for us all.

Especially in these times, when it is increasingly in vogue to dig in and refuse to consider the damage hard, inflexible stances can do.

Preferably before it is too late.

Of diamonds and responsible eternities

Millennials, often described in media as hapless, poor and unfocused, reportedly dropped a cool $25 Billion on diamond jewellery in 2015. This indicator of current and future demand for sparklers notwithstanding, we are nearing the peak of natural diamond mining.

It raises the question as to why synthetic diamonds have not taken off.

After all, millennials as consumers are also focused on environmental consciousness and reportedly willing to pay a premium too. Further, laboratory-grown synthetic diamonds — not to be confused with diamond simulants, such as the non-precious cubic zirconia and the semi-precious white sapphire — are virtually indistinguishable from natural diamonds mined from the womb of the Earth in an energy intensive and ecologically intrusive process. The Gemological Institute of America now even certifies that the synthetic diamond you have just bought is real, authentic synthetic. Synthetic diamonds also come from a transparent supply chain with no human exploitation, which is an excellent reason to choose them.

Why then isn’t the world switching en masse to the more environmentally sensible option?

The answer lies in the deeper probing of what shapes our preferences. We don’t buy diamonds, diamonds are sold to us. There is hard nosed business behind shaping our desires even though the traditional reasoning behind engagement rings no longer holds water, and plenty of women can and do buy their own diamond rings.

The economics is simple enough. Synthetic diamonds sell at a considerable discount to real diamonds. Trade makes more money selling a real diamond than it does selling a synthetic one, even with a certificate. In turn, this means a consumer is likely to see many, many more real diamonds on offer than she will see synthetic ones. This shapes the consumer’s consideration set and undoubtedly influences what gets bought.

The value chain reason is more interesting. Making synthetic diamonds is a capital intensive business. The barriers to entry of a new player are significant. So unless the demand for synthetic diamonds is proven to exist, investment may not come pouring into the space. In a delicious but understandable irony and a strategic masterstroke, a De Beers group company owns a vast majority of patents in the manufacturing of synthetic diamonds. So while it is possible to manufacture synthetic diamonds, it may be darned hard to do so without committing patent violations. This is not trivial. From a consumer’s point of view, this changes nothing and everything at once. De Beers has invested in distribution as well as, since Frances Gerety’s virtually immortal “A diamond is forever” line in 1948, branding for diamonds. It would have been foolhardy and self-destructive, if De Beers did not try to hold on to those advantages.

The branding reason is, of course, the strongest.

Most diamond purchases are not rational purchases but rationalised, emotionally led buys. Feelings are notoriously difficult to dislodge and remarkably easy to hurt. For years, the intrinsically “forever” and “real” character of diamonds has been used as some kind of proof of eternal love and commitment. Would a synthetic diamond ring mean fewer flaws, more perfection but also fake, performative love on the cheap?

Here lies the opportunity.

The brand story for the category itself is ripe for change.

Millennials say they are willing to pay a premium for environmentally friendly products (though not always willing to make good on those intentions). If the positioning is right, synthetic diamonds need not be sold on the cheap. They could be positioned as the environmentally friendly, technologically advanced, ecologically savvy, energy conserving version of the gemstone for the new, tech-savvy generation, while their sparkle still remains celebratory.

Thanks to digital platforms, the engagement with millennials can be kept quite targeted and kept away from the prying eyes of the boomers or even Generation X, who may be confused by the messaging about synthetic diamonds or feel cheated.

Moves are afoot in the space already.

Until a few years ago, when I heard the word “diamonds”,  Dame Shirley Bassey’s booming “Diamonds are forever” rang in my ears. Mental concerts are a real thing, look them up.  The song is wall-to-wall marketing of the De Beers catchphrase of enviable longevity.

However nothing lasts forever, as the rock prophet Axl Rose reminds us.  Why then should sparklers bear this unfair burden of eternity and permanence?

Why not move the discourse from eternity and permanence to a more achievable and realistic exhortation to just “shine like a diamond”?

Move over Dame Shirley, Rihanna, the millennial maestra, is here.

 

Brand leadership has to change

A few years ago, shortly after the 2008 crash, American Express in the United States paid many of its less profitable customers to close their accounts and go away. The move garnered much attention and analysis then. It was seen as a de-leveraging move. Whatever hubbub surrounded the brand then has since died down and in an unscientific survey of my business-savvy friends, few remember that this happened at all.

It was a story of a brand choosing its customers, rather than the dominant narrative that conventionally goes the other way round. The latter powers the nascent GrabYourWallet movement.  Another campaign, Sleeping Giants, is similarly holding brands and companies to account if they continue to advertise on extremist websites.

These are interesting times, as the Chinese curse goes.

As consumers, we profess to love brands that are “authentic“, never mind that in many cases, contrived authenticity, not rooted in values embedded into the business’s value chain, is all we are getting excited about.

What happens when “authentic brands” meet programmatic advertising? Unfortunate, inadvertent outcomes, that is what. Brands are left scrambling to do damage control.

What happens when “authentic brands” take a stand that is vastly unpopular? What happens when the brand’s CEO tells a customer she is free to leave if she does not like their philosophy? Isn’t that just the brand being authentic?

What when all signs point to the emergent challenges being bigger than the more popular political bugbear of the time?

Is authenticity malleable? Should it be?

What if a brand never had cause to reveal some of its stances before and is now choosing to do it in a way that consumers find abhorrent?

And when that comes to pass, should consumers force the brand to comply with their idea of authenticity, or choose to walk away with their wallets?* After all, wisdom says, when facts change, changing our minds is no bad thing.

These growing disagreements and schisms are why, more than ever before, brands need values at their foundation, in their DNA, embedded in their value chain.

Real, defensible, explicit values that the brand is willing to stand up for.

Not convenient values that change with the times or fads du jour.

It is then that brand managers will truly be able to use programmatic advertising as a tool to help them rather be helplessly enslaved by it, while they operate in a haze, whether it be about their brand values or technology.

It is then that “customer choice” will come to mean both that the customer chooses, or rejects, the brand and that the brand chooses, or rejects, the customer.

[* Switching costs for small businesses on a shopping cart platform are not negligible but then that is an economic argument, not one about values.]

 

Risk culture and your startup

This article is the tenth in the Startup Series on FirstPost’s Tech2 section and first appeared on January the 23rd, 2017.

A healthcare startup founder I know was in a dilemma. For a pretty sizeable chunk of the equity pie, she had agreed to take on as cofounder a tech development guy. He would in turn build the platform which would enable her business model. As delivered, the platform however was far from adequate. The tech cofounder however was not amenable to taking feedback. Lately he had gone completely quiet and was not responding to emails or picking up calls. Our healthcare founder was left with a platform that did not work as expected, with no access to the source code, and now a growing dread that the company was slipping away from her even before it was built. She had no more money left to bootstrap or to pay for legal advice to buy out his share so she could get the code and find another solution.

When I heard about it, I asked her if the equity was his outright or had a vesting schedule, whether there were ways of clawing back some of the equity as a BATNA, what checks and balances had been built into the agreement between them. What I found was not encouraging.

Through some wrangling, this particular situation somehow found a cobbled-up solution. It is, however, illustrative of why your company’s risk culture needs to be thought of right at the time of creating the startup.

Whenever I bring this up with founders, they ask if entrepreneurship is nothing but risk taking by any other name. It sure is! It is about taking those risks that advance your goals, not risks that destroy your dream. It helps to develop the ability to tell the two kinds of risks apart.

I am not recommending that instead of building your product and your customer base, you spend your time writing huge formal manuals or official policies. I am, however, strongly recommending that you give some thought to the values, beliefs, knowledge, attitudes and understanding about risk shared by a group of people with a common purpose, collectively the risk culture.

How to shape your risk culture in early days? Here are some tips to clarify your thinking.

First, ask if the risk advances your objectives, your dream. At what cost?

In early days of developing a product, building user communities for early testing of features and pricing, capturing feedback and using it to improve the product, all cofounders may use their own devices to write code, collect information and user feedback, keep essential documentation. This is a good move to avoid spending a lot of cash on buying hardware that belongs to the company, if indeed the company as a legal entity exists at all in the early days. There are of course several possible existential risks at this stage. How is the repository for what the cofounders are learning being built and accessed? Where is the essential information — source code, names of suppliers, passwords for services to name a few — kept? Can all cofounders access it? Can it be lost or tampered with easily? What is the backup plan?

Second, think of mitigation plans required, should the undesirable event you anticipated comes to pass.

What if cofounders fall out, someone wants to leave, or someone dies? Can one cofounder hold the entire venture to ransom? What if your only supplier decides not to work with you, and they have copies of your sketches which they could as easily manufacture and start selling? It goes without saying that this mitigation planning needs to happen when you are making key decisions about cofounder relationships, product development, suppliers etc. One can, of course, deal with undesirables as they arise but it is likely to cost more money and time to fix than to prevent or have other recourse.

Last but not the least, by thinking through, however uncomfortable it may be, what happens if it all goes to the wall.

This is the tricky bit. Our healthcare founder was on the verge of incurring a heavy cost for not thinking through the apocalypse scenarios regarding her cofounder. His contribution was essential to her startup but his temperament and working style could not be mitigated by writing tough contractual terms. We don’t like to imagine doomsday situations, sometimes rightly so as they can be paralysing and demotivating. But it is important to know at some level what you would do to salvage your startup if the worst things you had not planned for happened.

Our risk propensity is about that we are willing to accept for just returns. A clear framework for the risk culture makes it easier to identify, preempt, accept or reject those risks. It is wise to start early.

Building your startup’s culture

This article is the ninth in the Startup Series on FirstPost’s Tech2 section and first appeared on January the 9th, 2017.

To be fair, building organisational culture is usually not on many founders’ radars in the early days, when much must be done in very little time. However as I have written in earlier columns, it is wise to consider building the scaffold of your startup for blazing success. Because while failure gives time to ponder, success rarely spares the time to do things over.

How can one go about laying the right foundations for a startup’s culture?

Culture is a catch-all term applied to business practices, processes, interactions and behaviours that make up the work environment in an organisation. Culture in a startup is how founders’ values manifest in practice. Particular business practices and behaviours may also be shaped by the founders’ personal pain points that they may be addressing with their startup.

As ever, starting with the basics is a good first step. If you are lucky, you and your cofounders are on the same page as to the values that matter to you and that set the tone — both for the organisation you wish to build with your cofounders and for your cofounder relationship.

The cofounder duo behind PostFold, whom I advise, created their fashion startup after noting that affordable fashion was often poor quality in materials and craftsmanship, or failed to understand the structure of modern life where one can seamlessly go from one’s desk at work to an evening do without an opportunity to change clothes. Their research also showed that regardless of poor quality, the markups on fashion labels were high but this did not necessarily mean that the master tailor and the machinists got paid decent wages. This, they noted, was a significant factor in poor retention of tailoring talent, which is crucial to the survival and success of a fashion business.

Their shared values were quite simple but firm. They set out to deliver a high quality of materials and craftsmanship affordably to their customers, while delivering a superior customer experience. This was the idea at the centre of their business design. They also wanted to create an atmosphere of trust and respect in the workplace, which shaped how people interact with one another in the business. This idea is in line with their belief that happy employees ensure that customers are served well. Remarkably — and this may not be feasible for all startups — the organisational values are also their core brand values.

In turn, these values shaped how they designed their business processes e.g. how customer complaints and returns are to be handled, how employees may be able to purchase the company’s products at a discount or borrow samples for occasional use, or how employees could choose work-from-home while delivering on deadlines and ensuring their collaborative projects did not get derailed.

Further, the clearly articulated brand values have shaped their brand communication strategy. If something does not increase their brand’s prominence or does not better the customer experience they aim to deliver, they choose simply not to do it. Avoiding bandwagons allows them to focus on building the excellence in serving their customers and keeping their employees motivated and engaged.

To recap, values guide our sense of what is important and what is right. Culture is how our values manifest in practice. Our daily decisions and behaviours align to our values. Processes and incentives can create reinforcement of the values on a day to day basis.

A media entrepreneur I advise has found a creative way of reinforcing the organisational values and culture within the team. He has created rituals and shared experiences to enhance the sense of belonging and the belief in their shared values. These shared rituals and experiences allow the team to speak freely, raise concerns, thrash out things and return to work with a renewed sense of commitment to their work and its purpose.

Like much else involving people and their interactions, the culture of an organisation evolves too, especially with growth and scaling. For instance, while the entire, currently small, team at the media startup I mentioned earlier can go on a shared experience, it will become harder even at twice the size.

Similarly, nearly all startups learn quickly that the formality of communications and the accessibility of the founders both change as the team size grows. This subtle change in culture can upset early employees and founders alike. At least as founders, you may find it helpful to make peace with that possibility early on.

In the next column, we shall talk about a specific aspect of building culture crucial to building a sustainable and well-run organisation.