By Pratap Nambiar for The Sunday Times

Today’s leaders require greater complexity of thought to adapt to change

The heritage UK travel company Thomas Cook, a master of package tours with a history of almost 200 years, has collapsed. The Internet took its toll. Offering travelers the classic range of services – arranging holiday tours, hotels, airlines, insurance and other travel-related services -came with a high cost structure, and eventually led to its downfall.

The old business model, based on a static value proposition led by a reactive set of leaders who were late in recognising the changes in customer needs and behaviours, finally crumbled in the face of mounting debts and lack of cash flow.

Thomas Cook is a classic case of how leaders fail to overcome adaptive challenges. They keep throwing technical solutions that provide only short-term fixes, without making significant changes in the way they think about their business.

As business complexity increases, the leadership mind needs to evolve and grow its own complexity of thought, to keep pace with the changes that require a fundamental shift of perspective.

It is the structure of mind that drives performance. An organisation’s leadership imperative is to continuously evolve beyond the pace of change and escalating business complexity. It requires creative thinking, a coping strategy that does not involve reactive self-limiting behaviours that derail competencies.

As Albert Einstein once observed, we cannot solve our problems with the same thinking we used when we created them. Put it another way, the measure of intelligence of a leader is the ability to change. If you are not changing, you are not growing.

If chief executive officer Peter Fankhauser, a Swiss businessman who ran the company for the last five years, wanted to change the destiny of Thomas Cook, he should have changed the conversations he was having with his team. In fact, change the very language of the organisation to drive the changes needed to realign its business model to survive in the complex environment in which it had got trapped.

But for that, Mr Fankhauser would have to change himself first. Leaders need to recognise that for things to change, first they need to change.

When a service or product has for many years been delivering profits, it becomes an emotional decision to kill it and reinvent the offerings that are more relevant in the changing times.

Incremental thinking without adequate focus on real transformation leads to short-term results that keep providing the illusion of a turnaround before the same old issues surface again.

The challenge is to change the vision and realign the team to a new way of thinking about the business, which will allow for a sustainable growth without the yo-yo effect that happens when there is no fundamental transformation.

 

LEADERSHIP EFFECTIVENESS

Effective leadership requires an understanding that there is an inner game and an outer game. The outer game is significantly influenced by the inner game.

By inner game I mean the operating beliefs and assumptions which contribute to the consciousness of the leader. It is this inner game that defines the quality of leaders’ decisions, their interactions with people and the way they manage their time.

The leaders’ way of being, their sense of meaning-making, their way of seeing the world, their perspectives, their risk appetite, the way they show up, define the outcomes they get.

Thomas Cook had managed to pile up debt of US$2.1 billion (S$2.85 billion) built up over time on the back of questionable deals that made it impossible to respond to the changed Internet-driven market behaviours.

Individual customers had changed their buying habits and, with easy access to all the relevant information, they found no further value in what the company was providing. Possibly exiting the commodity offerings and becoming a provider of niche services was the way to go.

The board of Thomas Cook is also responsible for not recognising that they were presiding over a CEO overwhelmed by the changing market conditions.

On the other side of the Atlantic, one can see a different response of a board to a CEO – Mr Adam Neumann of office rental company WeWork. The board convinced him to step down as CEO in order to salvage a potential initial public offering (IPO) which had been in the works.

The CEO came under a lot of scrutiny in terms of his behaviour and quality of interaction with major investors, which became a significant distraction and risk to the IPO process. Mr Neumann had led WeWork since its founding in 2010. However, his free-wheeling ways and party-heavy lifestyle came into focus once he failed to get the IPO under way. Investors convinced the board to get him to step down.

Yet another dramatic collapse early this year in Britain was Carillion, which employed 43,000 people to provide services in defence, education, health and transport, becoming the largest construction bankruptcy in British history.

Incremental thinking without adequate focus on real transformation leads to short-term results that keep providing the illusion of a turnaround before the same old issues surface again.

On the other hand, Mr Leo Quinn, CEO of infrastructure group Balfour Beatty, after suffering a £304 million (S$529 million) pre-tax loss in 2014, turned it around by overhauling the firm’s leadership – which was crucial to its recovery.

On rival Carillion’s collapse, Mr Quinn is clear that poor leadership was a major factor in the firm’s downfall. “When a company of that size, or any company, fails, it’s ultimately a failure of leadership,” he said.

“You can’t blame the employees. It comes down to the CEO: You have a board, you have a senior executive team and, ultimately, whether you like it or not, the responsibility sits with them.”

As a leadership transformation coach to CEOs around the world, what I have observed is that successful leaders are able to recognise that it is their inner state of being, their consciousness, that helps them pay attention to paying attention, with a subtlety and clarity of thought that shapes appropriate behaviours and enables high-quality decision-making.

The development journey of the leader is not a short one. It requires deliberate effort, including the intervention of a coach, to continuously evolve to develop the complexity of thinking, the ability to resolve dilemmas, and the willingness to adapt to changing business conditions to stay relevant and ahead of the challenges of change.

Pratap Nambiar is the founder and chairman of Thought Perfect, a Singapore-based organisation engaged in delivering leadership transformation services to CEOs.  

This article was originally published in The Sunday Times on November 10, 2019.

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See Pratap Nambiar discuss the leadership transformation journey in this series of 6 videos.

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