Change happens at whiplash speed. A quick response is no longer adequate. Instead, companies must anticipate massive external disruptions and become disrupters themselves. In his new book, The Attacker’s Advantage: Turning Uncertainty Into Breakthrough Opportunities, Ram Charan–an adviser to everyone from entrepreneurs to CEOs of the world’s largest corporations–explains the new leadership imperatives: a “born-digital” understanding of technology’s power and the ability to see around corners. Charan spoke with Inc. about how to build “perceptual acuity” and the rise of the “New Age CEO.”
Why is uncertainty more of a problem than it used to be?
Of course companies have always faced uncertainty. But today, we are more than ever before dealing with structural uncertainty, which can completely destroy your market or industry and send you over the cliff. Consumer preferences can change more rapidly and broadly, and more change creators are coming out of nowhere, empowered by communication technologies. So it is no longer enough to be able to adapt to change. You must create the change yourself.
I assume startups are better at that than large companies.
Entrepreneurs have several things in their favor, notably a zero-distance connection to the customer. In large companies, the CEOs are at least several layers away. And because they don’t have resources, [startups] are on their toes looking for anything that customer could want or need. They move fast.
Perhaps the most important advantage of some younger companies is their leaders, whom I call “New Age CEOs.” These are entrepreneurs who started their businesses less than 15 years ago, and now those businesses have become large. These people really know how to use mathematics and algorithms. They understand what technology makes possible, so they dream bigger.
Look what Elon Musk has done with batteries. How long have the legacy guys been struggling with that? He succeeded because he is a born technologist with a business brain. New Age CEOs operate by figuring out the most difficult problem they can solve. Then, they have the courage to reach out to anyone in the world–no matter how famous, no matter how well-paid–to help them solve it.
Can‘t older companies develop the skills to compete with more-digital competitors?
It’s not really a question of older and younger. It’s about having that mathematical, digital mindset. General Electric has become a leader in the “industrial internet,” which combines machinery with sensors and software. But in most industries, the born-digital competitors are on the attack, and I think it will take legacy companies a long time to catch up, if they ever can.
Younger companies can also face external disruption, as Netflix and Netscape did, for example. But entrepreneurs are so busy just building their companies–how do they also keep an eye out for structural change?
Looking around corners and continuously improving your antennae to perceive change can be worth 10,000 IQ points, so building your perceptual acuity is a competitive advantage. You need to build perceptual acuity into your company, and there are a number of ways to do that. It’s a good idea, for example, to have 10-minute meetings once a week just to talk about seeds of change that may be springing up. Or you could use the first 10 minutes of staff meetings for that purpose. Has someone spotted an anomaly on the landscape? Ask staff members to present on previous or potential structural changes, so people know what to look for and become comfortable with the idea of change.
You have to make it routine. Jeff Bezos reportedly has said that every Monday morning he sits with his team, and one of the questions he dangles is, “What can we do better for the customer?” Sam Walton asked daily: “What is it the customer wants that we don’t have?”
Entrepreneurs should also be looking outside the company, globally and in different industries. Venture capitalists have incredible antennae for this kind of thing, and if they don’t know what’s happening beyond their area, they have networks around the world that you can use. Talk frequently to your customers and suppliers–the whole ecosystem. And keep your eye on the people, whoever they are, who are creating change: the catalysts.
Isn‘t trying to follow global developments a distraction for companies that haven‘t even developed domestic markets yet?
Uber became a mini-multinational corporation within two years. Airbnb and Lending Club are others that were almost born global. It used to take 50 years to do that. But digitization, mathematics, and the ability to buy software and equipment on a usage basis have allowed companies to scale up substantially in months. So no, paying attention to these things is not just a distraction. I suggest that as soon as you have done something locally, you find one or two retired global CEOs to advise you how to scale up your company rapidly.
Isn‘t it hard for startups to enlist people like that?
Not really. Because in this world, the large company guys want to interact with the New Age CEOs. They want to learn from them. This all has changed in the last five years. Hold a dinner and have leaders from different industries speak. Invite them, and they will come.
So how do entrepreneurs become New Age CEOs?
Understand the capabilities and limitations of digital technology. Create broad, informed networks inside and outside the company. And never stop asking, every day of every one, “What’s new?”