There’s a belief in business that one way to gain competitive advantage is by obstructing competition — locking up suppliers and customers and building barriers to entry or exit.
But for most organizations, there really isn’t a “unicornlike position” where suppliers and customers are locked up and no one else can enter or exit a market, according to MIT Sloan senior lecturer The companies that stand out for generating and delivering value better than competitors in their market generally have access to the same resources as their peers.
So the question becomes, how can an organization gain advantage over its competition?
“If everything else is equal, the only difference is your management system,” Spear said in a recent MIT Sloan Executive Education webinar — specifically, a management system that creates ways for people to individually solve problems for a collective purpose.
Drawing from the upcoming book “Wiring the Winning Organization,” which he co-authored with Gene Kim, Spear shared three traits of a winning management system and what leaders can do to develop them.
1. Social circuitry
Whether it’s energy, electrons, fluids, or knowledge, wiring is the way something available in one location is moved to another spot in need of supply, Spear explained. And just as an electrician doesn’t design a complicated piece of electrical equipment with wires going every which way, the same goes for an organization’s social wiring.
“Social circuitry is not arbitrary or metaphorical,” Spear said. “It’s the processes, it’s the routines, it’s the procedures by which the work of individuals is harnessed together through collective action toward common purpose.”
Wire the circuitry correctly, and people are more easily able to collaboratively solve problems. But if that social circuitry is incorrectly wired, Spear said, people end up spending their time and creative resources trying to figure out their roles within those processes and routines, “and hardly any [resources are] left for the real problems that we’re asked to solve.”
A correctly wired system could include partitioning larger problems into smaller ones so more problem-solving can occur in parallel, according to Spear.
2. A developmental mindset
Employees might be ready to solve problems, but without the right organizational mindset, they won’t have opportunities to do so.
Under a transactional mindset, organizations account for available resources and treat them as a scarcity. “This transactional mindset is an incredibly pessimistic one because it assumes that the things we have, that’s all we’re going to get,” Spear said.
In contrast, a developmental mindset accounts for available resources, but rather than worrying about scarcity, the priority is understanding what to do with those resources and promoting distributed problem-solving.
A developmental mindset “takes you in the direction of experimentation; it takes you in the direction of accumulating experience,” Spear said. “It takes you in the direction of generating new data and improving upon your mindsets as you go along.”
Spear said this mindset also translates to how leaders treat their employees. For example, under former CEO Paul O’Neill, aluminum producer Alcoa increased its income by engaging and empowering its employees.
In other companies’ production factories, employees were told to check their brains at the door because they were only hired for their brawn. “And Paul O’Neill said, ‘All I had to do was switch the conversation, [such] that when that person came in the door, I said … “Thank you for bringing this brain on the job, because now there’s more intellect to solve the problems we have,”’” Spear said.
3. Leadership through engagement, not enforcement
Under a transactional mindset, a leader at the top decides where to send resources under the framework of command, control, and compliance.
Under a developmental mindset, leaders are present and engaged at every stage of problem-solving.
Spear shared his experience at an automobile plant where he observed “a ballet of people executing their work putting on trim, fastening this, putting seats in, electronics; it’s hypnotic watching this beautiful flow of people and product and process.”
He saw that for every three or four associates, there was a team leader stepping in to assist when there was a question to be answered or a problem to be solved, or when an extra hand was needed. Those team leaders in turn had group leaders who supported two or three of them and offered similar help at that level of supervision.
“It really changes the notion of what the leader is there to do,” Spear said. “Are they there to issue instructions and enforce compliance? Or are they there to create conditions, monitor conditions, and improve conditions by which the minds and hands of everybody else are well engaged?”