Articles
Building Self-Renewing Enterprises:
Lessons from AT&T and Enron
Dean Robb, Ph.D.
More than ever before, sustaining success in today's marketplace
demands that every company build capability for disciplined innovation
and entrepreneurship — in short, ongoing corporate self-renewal.
Yet this capability seems to be extremely elusive. Why? When studied
from the right perspective, some real lessons can be gained from
looking into the failures of AT&T and Enron. Enron saw itself
as an entrepreneurial enterprise, but it collapsed. AT&T is
a very old, bureaucratic company that has been struggling
— with little success — to become more entrepreneurial
ever since divestiture of its local operating companies in 1984.
Each company illustrates a very different kind of problem. However,
both failures can be understood using a simple 'model'
of societies and organizations developed by anthropologists and
sociologists (shown below). The model also provides some critical
insights into how to create sustainable capability for
corporate renewal.
The model is based on: 1) the degree to which members of a society
or organization have a sense of group belonging and are interconnected;
and 2) the degree of diversity, individuality and expression that's
acceptable in that society.
The upper-left zone describes societies and organizations with
a high level of group belonging, but with a low tolerance for internal
diversity, individuality or expressive freedom. Such groups always
form into hierarchies with centralized power and control, for the
purpose of perpetuating an embedded tradition and protecting the
status quo. This is the zone of the traditional corporation, as
we currently know it. In such organizations, every action and expression
must be considered carefully — they must be "in synch"
with prevailing expectations and the culture. There is little room
for independent action or spontaneous expression. This is the zone
of "keeping up appearances" and the "stiff upper
lip."
Such traditional corporations operate well in stable or slowly-changing
environments, but operate poorly in dynamically changing environments.
And, it is in their very nature to stifle the spirit of innovation
and entrepreneurship — they can't help themselves! Innovation
and entrepreneurship require freedom to explore, experiment and
openly express. They require a high level of internal diversity
as a source of learning, innovation and growth. And they require
ongoing questioning of traditions, strategies, values and everything
else. All of these go deeply against the grain of traditional
corporations!
This zone describes AT&T to a tee. When divestiture (and the
seeds of deregulation) began in 1984, AT&T had a very long history,
a deeply-embedded tradition, a steeply hierarchical, bureaucratic
organization, and a rigid mono-culture. Overcoming this legacy would
have required a revolutionary, charismatic and powerful CEO with
a genuinely new vision and the power to carry it out — someone
like Jack Welch. Instead, AT&T chose Bob Allen, a caretaker/manager
type — a true son of the tradition — who lacked real
leadership skills, a compelling vision or any sense of innovation.
Allen led AT&T down the wrong path for quite a long time, and
eventually into a real no-win situation, structurally. The once-largest
and proudest corporation on earth was purchased by its child SBC!
Enron's story is different because it fits more into the
lower-right zone — the complete opposite of AT&T. In fact,
our entire economy fits into this zone right now. In this zone,
societies and organizations are characterized by exaggerated individualism,
low social cohesion, unpredictable changes in markets, and constant
organizational restructuring, downsizing and closings. The rules
change constantly. Since there is low group belonging, people are
thrown back on their own individual wits and resources. Operating
in this environment is somewhat like living in a chaotic jungle
or swimming in a pack of sharks.
This zone breeds charismatic personalities, hucksters — and
companies — that play opportunistic, short-term business
games with the environment. These individuals and companies manipulate
and exploit emerging, short-term structural or market discontinuities
to their own advantage. The model is one of "thriving on chaos"
or "day trading" on a huge scale. Enron is a case in
point. Enron played this game, and played it well, for awhile.
But Enron collapsed. Its business practices practically guaranteed
it. Continuously finding and successfully exploiting short-term
discontinuities and opportunities is extraordinarily difficult to
sustain over any significant period of time. This "business
model" is fertile ground for the growth of unethical financial
and accounting games necessary to paper over the inevitable misreading
of constantly changing environmental "rules." If a company
manages to gain a series of big wins, hubris can easily take root
and get out of control, like a gambler who begins to think that
he or she can't lose. Inevitably they do lose, however,
and if they bet the farm, they go down the tubes. Enron is a quintessential
example of this phenomenon.
"Thriving on chaos" is a myth. Can it be done for a
short time? Yes, absolutely. Can it yield sustainable business
growth over the long-term? The odds are extremely poor.
In changing times, the most effective strategy for sustainable
profitable growth is to move into the upper-right corner of the
model by building enterprises that are highly inclusive, and embrace
high levels of diversity, individuality and expression. This zone
is "primed" for high levels of organizational experimentation,
learning, creativity, innovation, change and growth. This zone breeds
highly innovative, entrepreneurial organizations and enterprises
that can grow relatively rapidly but, because of their high degree
of internal cohesion, not chaotically. Such enterprises are capable
of creating, and recreating, internal order within a turbulent external
environment. It is a zone of rapid evolution, not revolution or
chaos.
Here are two reasons why: embracing internal diversity and individuality
overcomes the conformity and perpetuation of the status quo endemic
to traditional bureaucracies. The other reason is more subtle: one
of Enron's key problems is that its INTERNAL, social environment
mirrored the "pool of sharks" dynamic of the EXTERNAL
environment. Just like the external market, Enron's internal
world was one of individualistic opportunism and exploitation. This
is a huge mistake. When the external environment is fragmented,
the internal social world of a self-renewing enterprise should be
coordinated and act with an organic, focused unity. That requires
a high sense of internal belonging, interconnectedness and coherence.
Our ingrained belief is that it's impossible or unrealistic
to build organizations with BOTH high belonging AND high diversity.
This belief system devastates many possibilities for creating sustainable
growth in turbulent times. It's also a defense mechanism.
The truth is that it is possible to build highly inclusive/diverse
workplaces. If we are honest with ourselves, we will recognize that
the real problem is our reluctance to make the transformational
changes needed to do it. We want to hang on to our old ways, but
get new results. If we can get past our resistance, the model provides
insight into the path forward.
Enterprises in the "Renewable Zone" have low differentials
in power and status between the "top" and the "bottom"
of the organization. In other words, they are relatively flat. And,
traditional command-and-control practices are replaced by an emerging
"partnership" model based on adult-to-adult (peer) relationships.
Traditionally, organizational alignment has been gained through
subtle (or not-so-subtle), coercive cultural pressures, and through
extrinsic, social rewards like power and status. The goal is behavioral
compliance. These methods fit firmly into the "AT&T zone"
— and don't work anymore. In renewable enterprises,
alignment is gained by building individual-level, authentic commitment.
Each enterprise member is managed uniquely by tapping into
individual, intrinsic motivations and strengths, and leveraging
those for maximum enterprise advantage. As opposed to the bureaucratic
"cog in the machine" model, employees feel — and
act — like valued enterprise members.
Innovation and the entrepreneurial spirit are "activated" by constructively
harnessing internal variety and differences as the raw fuel for
continuous experimentation, innovation, learning and growth. We
instinctively resist this because allowing internal differences
to surface can initially seem like a descent into chaos. However,
while repressing differences might feel comfortable and
"safe," it is actually a dangerous strategy in a changing world.
It yields only stagnation, loss of innovation, and potential extinction.
On the other side of perceived chaos is a vibrant, dynamic and
diverse community of employees, each of whom is valued as a unique
individual and encouraged to contribute and create. To get there,
new leadership and management practices are required that foster
safety, trust, honesty, integrity, accountability, mutuality and
partnering.
This calls for a more sophisticated level of leadership and management
competency, wisdom and maturity. This might be a core reason why
creating diverse, inclusive enterprises is resisted. It's
hard work, and it falls outside of the traditional business leadership
"comfort zone." It calls upon our leaders to significantly
"ratchet up" their level of interpersonal, relational
maturity. Knowing the "business side" alone is insufficient
to build sustainable capability for corporate renewal. The key to
a future of sustainable growth lies in combining business
acumen with community-building skills.
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About Dean Robb, Ph.D.
Dr. Dean Robb is Founder and Executive Director of the Center for
Corporate Renewal (www.ctrforcorporaterenewal).
Since 1994, he has helped numerous domestic and foreign business
leaders build high-performing, innovative, entrepreneurial enterprises.
His expertise combines 26 years of practical, real-world experience
in corporate America with in-depth research in human and organizational
systems.
The Center for Corporate Renewal helps senior executives build
the capability for:
- Strategic Focus: Make sense of a changing
environment and gain focus on the next right strategic move
- Disciplined Execution: Align and mobilize
the entire organization behind this new strategic focus
- Creative Renewal: Renew the entrepreneurial
spirit by repeating these two actions over and over again.
For information on how Dr. Dean Robb can work with your organization
to instill a spirit and ethic of renewable corporate entrepreneurship,
email him at drobb@ctrforcorporaterenewal.com
or call him at 908-757-4721.
Permission to reproduce this article is hereby granted, given that
the contact information is kept intact with the article.
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