CROSS-ENTERPRISE LEADERSHIP: A NEW APPROACH TO MANAGING IN THE 21st CENTURY

While the environment of business has become global and more complex, the organization as we know it has remained static and hierarchical. What’s needed  is a dynamic “enterprise”, one that bases leadership and managing on a broad, issues-based platform, not the narrow, turf-protecting expertise of a single department. Enter Cross-Enterprise Leadership.

Cross-Enterprise Leadership is a holistic approach to value creation in the enterprise. It recognizes four emergent realities that redefine general management for the   challenges of the 21st-Century manager. First, whereas general management focused on integrating the various functions within an organization, the business  imperative today requires an approach — Cross-Enterprise Leadership — that can create, capture and distribute value across a network of companies, not just within a  company. Second, these networks, which we call enterprises, are complex and dynamic, and must be able to respond as a whole to the emergent challenges that are  continually presented. Third, no one leader can “manage” the enterprise, and therefore leadership needs to be distributed. Finally, these changes require an approach  to leadership over-and-above that possessed by traditional business leaders.

At its core, Cross-Enterprise Leadership recognizes that managers operate in a complex world in which the boundaries of organizations are fluid and dynamic,  cutting across functional designations, departments, business units, companies, geography and cultures. Cross-Enterprise Leadership represents the next  generation of general management. This evolution of management education, practice and research requires augmenting the traditional functional focus beyond an integrative emphasis, to build an approach that transcends the functions and the organization. The thrust of this article is to describe Cross- Enterprise Leadership. A series of follow-up articles in Ivey Business Journal will tackle the implications for management education, research and practice.

Cross-Enterprise Leadership Elements

The words “Cross-Enterprise Leadership” pack a lot of meaning. As Table 1 on the next page summarizes, and as the sections that follow detail, there are critical  differences between General Management and Cross-Enterprise Leadership. The word “Enterprise” shifts the emphasis from organization, which has a more static orientation and where boundaries are more clearly defined, to enterprise as an action-oriented value creating community, where the boundaries of the organization are not clear and are often in flux. The concept of “Cross” emphasizes that there are necessary links across these boundaries and that value creation is not achieved by the components themselves, but in the enterprise’s ability to connect the components, thereby informing a dynamic and much more comprehensive approach to leadership than the static, singleperspective approach of traditional leadership. “Leadership” in this context shifts from a hierarchical command-and-control approach to a distributed leadership model. The move from general “management” to cross-enterprise “leadership” emphasizes that leadership is the aim. In in addition, leaders today need to manage in a context that is far more complex and uncertain, and where time-based competition has become a fact of life. All of these elements have implications for management education in terms of moving beyond functions to issues, and moving beyond imparting knowledge to a more action-oriented approach, which we refer to as “Think-Act-Lead.”

From Organization to Enterprise

A central element that distinguishes Cross-Enterprise Leadership from General Management is the entity itself. Management education and practice have focused on the organization, where the boundaries of the firm are well defined. Leadership in that context is different from leadership of an enterprise. In an enterprise, there is a network of value-adding entities and the boundaries can be very fuzzy. Alliances, joint ventures, and strategic partnerships have enabled the traditional organization  to adapt to an increasingly complex world. However, we need to shift our emphasis from the organization to the enterprise to understand what it takes to create and capture value, and lead in this new context.

A striking example of the fuzziness of organizational boundaries is the fact that firms compete in some areas, yet cooperate in others. For example, Coca Cola and  Nestle are competitors in bottled water and several beverage categories around the world. But in North America, Coca Cola is the primary distributor for Nestle’s  Nestea product. In fact, consumers may not even know which organization is actually serving them. For example, UPS undertakes the repairs of Toshiba products — no need to incur the cost or delay in shipping all the way back to Toshiba. Singaporebased Flextronics undertakes design and manufacturing services for a range  of companies in the automotive, industrial, medical and technology sectors. They help customers design, build, ship and service electronic products through their global network spanning 30 countries. As well, there are many logistics providers whose trucks can be customized to represent a particular client where the  employees will even wear the uniform of that client. In the end, the customer is not aware of which organization is serving them.

“Enterprise” emphasizes the multiple and complex interdependencies that exist in a network of value-creating activities. From pharmaceuticals to music, the interdependencies and network of value-creating activities are paramount. While some pharmaceutical companies have emphasized developing networks of  relationships with other research organizations, others, such as GlaxoSmithKline, have broken up their organization into smaller biotech-style organizations in the  hope of creating a more entrepreneurial environment. As Andrew Jack of the Financial Times suggests, it “presents challenges to ensure that all the information  generated on different sites in selfcontained units around the world can be effectively coordinated and shared across a multinational network.”i This is the essence  of Cross-Enterprise Leadership.

Consider the success of the Apple iPod and iTunes. To focus simply on Apple would miss the mark. One needs to look at the broader context, namely the  entertainment industry and beyond to understand Apple’s success. First, where others failed to gain buy-in from the recording companies, Steve Jobs was able to  craft a solution that bought their support and thereby allowed Apple to escape the vicious assault the recording industry association’s RIAA had been waging on  internet music providers. In contrast, though Sony possessed the technology and the music, internal battles prevented the company from pulling these two key pieces together. Where Sony failed, Apple succeeded by partnering with a variety of stakeholders. Like Nestle, Apple needed to figure out how far to push the boundaries of the enterprise to encompass its own competitors, by making iTunes compatible with Microsoft Windows. Apple’s challenges have been predominantly to work with this wide collection of stakeholders, rather than within their own organization. Yet, Cross-Enterprise Leadership is not simply about the enterprise itself, but more broadly about the environment in which it operates.

Stability to Dynamic Complexity

Markets are global, and industry and organizational boundaries are often difficult to define. The pace of change is dramatic in many quarters. As a result, the luxury of long planning horizons has diminished as real-time competition becomes a reality. There is more information than we can fathom, yet identifying and managing knowledge is a challenge, placing a huge premium on judgement and responsiveness. Many of our management practices and approaches to leadership were  developed for more stable and predictable contexts than exist today. Unfortunately, leaning heavily on old management techniques does not hold up under  pressure. Just like musicians who must change their technique to play at a higher tempo, we need to augment our approaches to management to deal with the pace of change. Yet, it is not just the pace of change, but also the uncertainty and associated implications for planning (or lack thereof) that must be addressed. In the case of music, the jazz musician needs to have more capabilities than the orchestral musician in order to improvise. Unfortunately, most managers operate like the traditional orchestra – waiting to do their written part. However, the business environment does not offer the same level of certainty that orchestral music provides. Rather, business is more like jazz; created in real time.

Our research on improvisation suggests that management approaches for dealing with complexity, uncertainty and real-time creation do exist. However, they are, for the most part, not used. One of the first problems is that many managers simply can’t “see” it. As the esteemed management guru Karl Weick suggests, people operate as if they will “believe it when they see it”; but actually, we tend to “see what we believe.” So, we need to start with what we believe in order to see our environment in its full richness and complexity. Removing organization blinders is a first step. Understanding that an enterprise is more than the traditional organization begins to reveal both problems and opportunities that span boundaries. The Apple iPod initiative certainly demonstrates this. Where Apple was able to look beyond its organization and industry to consider the possibilities inherent in music, Sony Corporation, with platforms in both technology and music, was unsuccessful in pulling them together. Apple is now leveraging its expertise in the music industry to develop a range of on-demand communication and  entertainment initiatives.

When there is no plan, or music score in the case of jazz, the team is creating in real time. Teams need to learn to deal with complexity and ambiguity. Our research reveals a variety of techniques for doing this. For example, improvisation training helps managers to “see” differently, but it goes further. Nevertheless,  improvisation is just one example of how management education and practice needs to consider new approaches to deal with the contexts that have changed.

Leadership for a New Context

Although many would argue that general management incorporated leadership, the emphasis was largely on “management.” Of course there have been many debates about the differences, if any, between management and leadership. Whatever the theoretical debating points are, there is a tangible difference in practice. Who cannot describe someone who they think can manage but not lead, and also someone they think can lead but not manage? There is no doubt we need both, but we can’t assume that good managers will automatically become good leaders.

Leadership in a context where organizational boundaries are blurry and time-based competition dictates rapid change means that the old hierarchical approach is not sufficient. Distributed leadership approaches are necessary as no one individual can manage it all. Similarly, the “power” of a position becomes less relevant in an enterprise, where different stakeholders come together to “influence” outcomes. Many would suggest that it was Steve Jobs’ ability to influence the record companies that enabled Apple to successfully secure the inventory of music for iTunes.

Shifting the focus from power to influence emphasizes a range of issues, from understanding the various stakeholder positions to being able to work collaboratively within the network. Leaders must be capable of identifying potential partners, initiating and maintaining relationships, resolve conflicts, and reconfigure their relationships. Furthermore, Cross-Enterprise Leadership means that leaders will be comfortable dealing with ambiguity, uncertainty, complexity and time pressures, while leveraging these relationships.

Distributed-leadership means that leading crossenterprise is not only necessary for those at the top of the organization, but that it is even more essential at lower levels of the organization, where there isn’t a natural crossenterprise vantage point. Those at the top tend to see more of the organization and the industry landscape – they see the forest rather than the trees. Those at lower levels see the trees and are more challenged to see the forest. However, it is this very capability that is essential for distributed leadership, as these individuals are likely to be the nexus within the network and the point of contact with external stakeholders.

Cross-Enterprise Leadership is relevant for every business, whether it be large or small, domestic or multinational. Consider the extremes. Small, domestic entrepreneurial companies are, by their very nature, crossenterprise since the founders rarely have a full set of resources to implement the plan. Much of the context they face is uncertain and ambiguous, and entrepreneurs will tell you that they need to adjust on the fly. Equally, the large multi-national company is inherently complex and cross-enterprise means crossing functions, levels, business lines, geographies and companies.

From Functions to Issues

Management education and management practice have been anchored in functions, or what academics refer to as disciplines. The last two decades have seen phenomenal growth in the body of knowledge and associated expertise in the field of management. Drawing on disciplines such as economics, psychology and sociology, business schools developed their own acumen in areas such as finance and marketing. Faculty became experts in these areas and spawned many generations of business graduates with strong functional expertise. A general management orientation was traditionally achieved by integrative courses that drew on all functional areas. The “chinks in the armour” of this approach have been apparent for some time. The “silo mentality” of business is a direct result of this functional focus. In business schools, the proliferation of new courses in areas such as entrepreneurship, international management and information management suggests that the traditional functional orientation does not cover the territory. And clearly, the changing environment of business exposes the vulnerability of current business models.

Consider an issue on the minds of most business leaders — innovation. Growth through innovation is one of the primary means to drive shareholder value. However, innovation has not been dealt with very well by the functional disciplines in business schools. Even when the topic is covered, it is done so in piece-meal fashion, with little or no integration across the disciplines. Although lack of integration is a problem, the bigger problem is that innovation is not inherently a functional type of issue! Understanding innovation requires us to draw on an incredibly diverse knowledge base. Aspects of that knowledge base are strewn throughout academic research and management practice, and rarely drawn together in a holistic sense in the classroom, or beyond. Consider where the mandate for innovation lies within a business. At first blush, it is difficult to pin down, and a quick second glance suggests that it is everywhere. Yet, few business leaders know how to tackle it. Innovation is indeed complex. It not only requires working with the resources of the business, but also collaborating cross-enterprise with many other organizations, often in a global context. In his bestselling book, The World is Flat, Thomas Friedman describes how business innovation spans organizations and the globe. A California accounting firm outsources tax returns to a company in India that completes them at lower cost, faster turnaround (given the time difference), and with similar, if not better quality.

When we begin to examine business issues from a crossenterprise fashion we are in a better position to understand the problems and opportunities. Narrow functional or cross-functional perspectives drastically limit the possibilities. From a management education standpoint this is somewhat of a “back to the future” orientation. Before the tremendous bodies of functional knowledge emerged, the focus was on issues. The challenge today is to build on the functional knowledge without being a prisoner of it. As the foregoing suggests, there is much more to Cross-Enterprise Leadership than integrating functional competencies.

From Knowledge to Think-Act-Lead

Walk into an MBA class in many business schools and you would likely sit through a lecture in Finance, Marketing, or Accounting. Thinking cross-enterprise goes beyond understanding theories and how they can be integrated. It requires understanding the complexity of business issues from all angles, not just from a functional perspective. That understanding spans functions, levels of the organization, business units, companies, geographies and cultures.

Acting in a cross-enterprise fashion extends understanding of complex issues to develop the capacity to make decisions and implement them in an environment filled with uncertainty and complexity. Textbook learning of theories does little to develop an action orientation. Being actionoriented when faced with uncertainty, complexity and time pressure “ups the ante.” Borrowing from the experiences of hospital emergency rooms, firefighting and crisis management, where time is a scare resource, we know that making decisions and taking actions in these contexts is different than when we have plenty of time to think and act, and when options are clearly defined. How quickly can the credit card companies respond to the threat by the Japanese mobile phone operator NTT who is launching a credit card service over its mobile phones? Some may end up partnering while others may end up competing. Whatever the course of action, time is at a premium in being able to respond. Management education needs to build in processes to develop the capacity to act in contexts that are much more dynamic than they once were.

Finally, leading cross-enterprise is not for the faint of heart. It means that individuals have the capacity to deal with ambiguity and complexity, and more importantly, rally others to do so as well. Cross-enterprise means that these “others” may reside in other parts of the organization, other organizations, other geographies and cultures, and in most cases the leader may be operating without power and authority and must rely almost entirely on influence. It would be a mistake to characterize these leaders in a heroic fashion, as is the case in so many business schools and businesses. On the contrary, operating with influence, under ambiguous and complex circumstances and across the many divides, requires the development of leadership characteristics that have often been at odds with traditional business education and management practice. Cross-Enterprise leaders are confident about what they do, but they also have a healthy dose of humility since they are always in a learning mode. They are aggressive about achieving results but also smart enough to recognize that patience is important. They are analytical but also rely on intuition. We can select for these kinds of characteristics, but it is also our responsibility to develop and promote what it takes to lead cross-enterprise.

Although Cross-Enterprise Leadership is a new term, it essentially redefines general management for the challenges of the 21st-Century manager. The redefinition is, however, not trivial. How we choose to define ourselves drives our priorities in both management education and practice. Cross-Enterprise Leadership demands a shift from focusing on the organization to the enterprise, and a shift from being anchored in functions to being anchored in business issues, which by their nature, are crossenterprise. Just as we need to build on the strengths of the functions, and of general management, we need to radically rethink how we will employ those strengths in the service of Cross-Enterprise Leadership.

i “Collaboration is the route to better returns Pharmaceutical companies are looking to the biotech for new ideas and innovative partnerships; Financial Times (London, England); November 25, 2005.