Know-How

1. Know-How: The Essence of Effective Leadership

Know-how is what separates leaders who perform—who deliver results—from those who don't.

Eight critical skills. Effective leadership is built on a foundation of eight interrelated skills:

• Positioning and repositioning the business
• Detecting patterns of external change
• Managing the social system
• Judging, selecting, and developing leaders
• Molding a team of leaders
• Setting goals
• Setting priorities
• Dealing with societal forces beyond the market

These skills are not innate but can be learned and developed through practice and experience. Leaders who consistently hone these skills tend to be successful on a sustained basis.

Beyond personal traits. While personal attributes like intelligence, charisma, and vision are important, they are just one small slice of the leadership pie. The real substance of leadership lies in the ability to deliver results through these eight know-hows. Leaders must combine these skills with their personal psychology and cognitive abilities to navigate the complex and rapidly changing business environment of the 21st century.

2. Positioning and Repositioning: Adapting Your Business to Make Money

Positioning is not for eternity.

Constant adaptation. In today's fast-changing world, leaders must be prepared to reposition their businesses multiple times throughout their careers. This involves making fundamental decisions about:

• What to add to or remove from the business
• Spotting new opportunities for profitable growth
• Resegmenting markets
• Adopting new technologies

The key is to ensure that the business remains relevant and profitable in the face of evolving market conditions, customer preferences, and competitive landscapes.

Linking to moneymaking. Successful positioning and repositioning require a deep understanding of how the business makes money. Leaders must consider:

• Revenue growth
• Margins
• Cash flow
• Return on invested capital

By aligning the business model with these financial fundamentals, leaders can create sustainable value and navigate through periods of disruption and change.

3. Detecting External Change: Connecting the Dots for Future Success

You have to look at your business from the outside in.

Broad perspective. Leaders must develop the ability to detect patterns of change in the external environment. This involves:

• Looking beyond the boundaries of their industry
• Considering global economic, political, and social trends
• Anticipating how these changes might impact their business

By developing this skill, leaders can position their organizations to capitalize on emerging opportunities and mitigate potential threats.

Cognitive bandwidth. Effective leaders possess the mental capacity to:

• Process complex information from diverse sources
• Connect seemingly unrelated dots
• Form a coherent picture of the future landscape

This requires continuous learning, an insatiable curiosity, and the ability to reframe issues from multiple perspectives. Leaders like Jeff Immelt of GE demonstrate this skill through practices such as "dream sessions" with customers, where they explore long-term trends and potential scenarios.

4. Managing the Social System: Aligning People to Deliver Results

Understanding the social system of your business is the best way to get a handle on the otherwise mysterious subject of managing and changing how people work together to meet ever-changing business requirements.

Operating mechanisms. Leaders must design and manage a set of disciplined, routine meetings that bring the right people together at the right frequency with the right information to make critical decisions. These mechanisms should:

• Focus on specific business purposes
• Ensure proper information flow
• Surface and resolve conflicts
• Make necessary trade-offs

By actively shaping these interactions, leaders can align their organization to deliver results more effectively.

Shaping behaviors. In addition to designing the structure of interactions, leaders must actively shape the behaviors displayed within them. This involves:

• Encouraging open and honest communication
• Fostering collaboration across silos
• Addressing dysfunctional behaviors promptly
• Reinforcing desired behaviors through recognition and rewards

By consistently modeling and reinforcing the right behaviors, leaders can create a culture that supports the achievement of business objectives.

5. Judging and Developing Leaders: Building a Talent Pipeline

Your job as a leader is getting it done, not doing it yourself, however you decide what the "it" is.

Active talent search. Effective leaders continuously search for leadership potential throughout their organization. They:

• Look beyond formal job titles and roles
• Create opportunities to test and develop emerging leaders
• Provide challenging assignments that stretch individuals' capabilities

This proactive approach ensures a steady pipeline of talent ready to take on increasing responsibilities.

Accurate judgment. Developing the ability to judge people accurately is crucial. Leaders should:

• Focus on observable behaviors and decisions
• Gather multiple perspectives on an individual's performance
• Look for patterns over time rather than isolated incidents
• Consider both strengths and areas for development

By refining their judgment of people, leaders can make better decisions about talent placement and development, ultimately strengthening the organization's leadership capacity.

6. Molding a Team of Leaders: Creating Unity Without Uniformity

Molding a team of leaders starts when everyone is on the same page.

Common view. Leaders must help their team develop a shared understanding of:

• The business's overall strategy and positioning
• Key challenges and opportunities
• Financial realities and performance metrics

This common perspective enables more effective collaboration and decision-making across the organization.

Behavioral norms. Establishing clear expectations for team behavior is critical. Leaders should:

• Model desired behaviors consistently
• Address counterproductive behaviors promptly
• Encourage open dialogue and constructive conflict
• Reward collaboration and teamwork

By fostering the right team dynamics, leaders can harness the collective intelligence and diverse perspectives of their leadership team to drive better business outcomes.

7. Setting the Right Goals: Balancing Short-Term and Long-Term Objectives

Goals should reflect the opportunities that lie ahead and what is possible for your business as it goes forward.

Multifaceted approach. Effective goal-setting requires leaders to consider multiple factors:

• Short-term performance metrics
• Long-term strategic objectives
• External market opportunities
• Internal organizational capabilities
• Financial and non-financial measures

By balancing these various elements, leaders can create a set of goals that drive both immediate results and sustainable growth.

Realistic ambition. Goals should be:

• Challenging enough to motivate and inspire
• Achievable given the organization's resources and capabilities
• Flexible enough to adapt to changing circumstances

Leaders must have the courage to set ambitious goals while also maintaining a realistic assessment of what is possible. This requires ongoing dialogue with key stakeholders and a willingness to adjust goals as conditions change.

8. Prioritizing with Laser-Sharp Focus: Executing on What Matters Most

Priorities are the pathway for accomplishing goals.

Clear direction. Effective leaders set a small number of clear, specific priorities that:

• Align with overall goals and strategy
• Focus on the most critical issues and opportunities
• Provide clarity for resource allocation decisions

By limiting the number of priorities, leaders can ensure the organization remains focused on what truly matters.

Resource alignment. Setting priorities is meaningless without corresponding resource allocation. Leaders must:

• Shift resources (people, money, time) to support key priorities
• Be willing to make tough trade-offs between competing initiatives
• Monitor progress and adjust resource allocation as needed

This alignment between priorities and resources is essential for turning strategic intent into operational reality.

9. Navigating Societal Forces: Engaging with Stakeholders Beyond the Market

The know-how of dealing with forces outside your control is to identify new interest groups that are emerging and to discern which groups are gaining influence and have legitimate issues.

Proactive engagement. Leaders must develop the ability to:

• Identify emerging stakeholder groups and issues
• Understand the motivations and concerns of various constituencies
• Build relationships with key influencers and decision-makers
• Communicate effectively with diverse audiences

By engaging proactively with societal forces, leaders can help shape the dialogue and potentially influence outcomes in ways that benefit both their business and society at large.

Balancing act. Navigating societal forces requires leaders to:

• Consider both business and societal impacts of decisions
• Find creative solutions that address multiple stakeholder concerns
• Be willing to make short-term sacrifices for long-term sustainability
• Maintain ethical standards and transparency in all dealings

This delicate balancing act is increasingly critical as businesses face greater scrutiny and expectations from a wide range of stakeholders.

Last updated: October 19, 2024