Let Go to Grow: Linda Sanford discusses ideas from her new book
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Let Go to Grow: Linda Sanford discusses ideas from her
new book
March 2006
Executive summary – Commoditization, the ultra-competitive marketplace and
deregulation are often looked at negatively, but Linda Sanford explores ways
to make these challenges the basis for success. The effective use of
technology, more sophisticated business models and commitment to cultural
change provide the steps to adapting to change in ways that lead to growth
and prosperity.
In this Executive Technology Report, Peter Andrews interviews Linda Sanford, IBM
Senior Vice President, Enterprise On Demand Transformation & Information
Technology. She is also the co-author of the recently published Let Go to Grow:
Escaping the Commodity Trap.1
Peter Andrews What are the main messages of Let Go to Grow?
Linda Sanford I'm suggesting that we all let go of business models and
management systems that are not effective in today's ultra-competitive marketplace.
The Internet, globalization and deregulation have given rise to a situation in which
many products and services have become commodities. To compete in this
environment, businesses need to find new ways to differentiate themselves. By
fostering collaboration both within their firms and with outside business partners,
companies will be better equipped to drive growth through increased productivity
and innovation.
The book says three things to business leaders:
1. Today, you need to start with an understanding of your business on a
granular level. You can do this by breaking down your business processes
using the IBM® Component Business Model™ approach.2 By doing this,
you can determine what your core strengths are, as well as identifying the
areas in which you need to improve, either by process improvements or
outside partnerships.
2. Technology has created all kinds of possibilities for new business models.
In particular, Service Oriented Architecture (SOA) and Web Services allow
you to let go to grow. It is easier than ever to place components of your
ibm.com/bcs Executive technology report 1business into a partner's hands without losing the ability to direct and run
your business. That way, you can focus your attention on the business
components you perform best.
3. Organizations are facing significant cultural change, with traditional views
of how you run a business and how you succeed in a business undergoing
revision. Leaders need to deal with this challenge head on. For an
organization to let go to grow, there must visible and vocal support from a
leader. In particular, a leader needs to incent and motivate collaboration.
This is somewhat foreign to those who came up in the command and
control era, when power came from what we knew. But that won’t cut it in
the 21st Century. Not in the face of globalization, commoditization and
constantly accelerating change.
Peter Andrews For me, one of the book’s real appeals is that it offers hope.
Usually the changes are talked about in terms of things getting worse. You provide
ways to make businesses healthier. Any comments?
Linda Sanford There’s more than hope; there’s an answer that can help
companies survive and prosper. In Let Go to Grow, I suggest these answers and
expand on them through stories of real businesses that have succeeded. In many
cases, I wrote about unique, surprising successes. For instance, the textile
company TAL is very non-traditional. In fact, it owns nothing. Yet, it has been
prosperous. The approaches these companies come up with are not obvious, but
they provide answers. There is more than hope here; there is the capability to
succeed.
Peter Andrews TAL brings up a question that came up while I was reading. As you
say, they own nothing and have avoided the trap of fixed costs. But everyone can’t
avoid fixed costs. Ultimately, some businesses have to own factories, mines and
equipment. What’s the endgame on fixed costs?
Linda Sanford Organizations need to take on capabilities where they have an
advantage and provide these capabilities for many partners. They also need to
create flexibility for themselves by having a portfolio of capabilities, not just a few. In
this way, they are not dependent on one piece of their business or one company.
When one economic sector is down, another is likely to be up. Things tend to
balance out.
ibm.com/bcs Executive technology report 2Peter Andrews Letting go, for many of the companies you cite, means pulling
together the bits and pieces that create value from partners across the world. The
successes of companies in the “value web” depend on not having any radical
disruptions to communications, transportation and shipping. Doesn’t this make the
model vulnerable to natural disasters, terrorism and any major changes in the
availability or cost of fuel?
Linda Sanford With a value web, you have a more collaborative situation; it’s more
peer to peer. Everyone is held accountable. As partners make agreements and as
they work for success in the face of change, the approach is not to win at any cost.
You work for the continued health of the value web as a whole.
Contrast this with a value chain. Here, you have the roles of vendor and supplier
dictated. There is a definite controlling hierarchy that limits options.
This is not a perfect business model, because we live in an imperfect world.
Business leaders will always have more control of some aspects than of others.
That’s life, and we can expect things to get more, not less, unpredictable. But if you
– and those in your value web – build in flexibility, that can work to everyone’s
advantage in unpredictable times.
Peter Andrews It seems like trust is a critical success factor here.
Linda Sanford Trust is really at the center of making this work. You need genuine
relationships. You need to be able to sit around a table – not across a table – and
agree on common objectives. It’s not a meeting or a discussion; it’s a real
collaboration, a dialogue. All parties need to be truly listening, not sitting there
formulating their next points as they wait for the other person to stop speaking.
These “get-togethers” must be frequent enough to build relationships, and
periodically, they really need to be face-to-face. You need to have direct, open
discussions going on among people who have knowledge and expertise to share.
This won’t happen if the focus is just on you and your own company. The best
leaders will facilitate a fair and open dialogue.
Peter Andrews What are the characteristics of a good collaborator in this world?
Linda Sanford Let me provide you with four that I think are key:
1. You need people who are able to think horizontally. That is, they need to
go beyond their silos, beyond their organizations, beyond their own
experiences.
ibm.com/bcs Executive technology report 32. They also need to be able to share information and expertise in a way that
fosters new ideas.
3. They need to be open to other people’s ideas.
4. They need to work to develop and respect a shared set of values with other
partners.
This last is important in a fast-changing world. When the unpredictable happens,
people often can’t go up the ladder before making on-the-spot decisions. The real
guide to behavior needs to be through common values.
By the way, IBM thinks collaboration and horizontal thinking are so important today
that we have added them to the list of essential competencies for our leaders.
Peter Andrews We talked earlier about getting a more granular view of business
and bringing in partners to handle components that aren’t core. That’s facilitated by
adherence to standards and by creating common accepted interfaces. In your book,
you talk about how these interfaces are persistent. But doesn’t any part of the
model that is long lasting limit innovation?
Linda Sanford There is a strong focus in Let Go to Grow on standards, both open
and de facto. And the answer is that we need to live both in the world of standards
and in the world of innovation. When change comes, you can’t just pull the plug on
everything. You need to create conditions for a graceful transition. IBM has done
this in the world of the mainframe by helping our clients move, bringing them along
to make a successful transition.
The idea behind having open, common standards is all about innovation.
Collaboration is the best way to go about solving the tough problems confronting
business and society in general. And you can’t have collaboration without
standards.
But let’s talk some more about innovation. And we are specifically focused on
“innovation that matters.” It is one of IBM’s values – both for our own benefit and for
the world. This value came from our employees in a 2003 online session we called
the Values Jam.
The IBM view of innovation is broad. Many people think innovation means
invention. For us, innovation is invention plus insight, and it can be for products,
services, business models, business processes, culture and more. It’s really multi-
dimensional. And we are very focused on helping our clients be innovative. We
recognize that it is the only way to sustain progress, to achieve success. It’s the
only way to deal with a world that is changing at a faster and faster pace.
ibm.com/bcs Executive technology report 4Peter Andrews Which industries are leading the way in letting go to grow? Which
are laggards?
Linda Sanford Most of those who lead are in industries that have hit the wall
earliest. Commoditization has hit the industrial and high tech sectors hard, and
businesses have had to find a better way. Because of the low margins in retail, that
sector also has many examples of “let go to grow leadership.” The pharmaceutical
industry has leaders for a different reason: their success is strongly driven by the
time it takes to get to market. That’s why Eli Lilly, for example, has reached out
beyond its research labs to find innovative technical answers. They have set up a
Web-based program called InnoCentive, to build a virtual talent pool of over 50,000
scientists in 150 countries. Eli Lilly posts R&D problems any scientist can tackle,
given the right expertise. The success rate has been far higher than in-house
performance – at around one-sixth of the cost of doing it all in-house.
While there are examples of leaders in every sector, those in the healthcare and
education sectors have generally lagged behind. This is particularly disturbing
because the success of both is critical to sustaining the value webs that are being
established.
Peter Andrews Another important dependency would seem to be access to talent.
Linda Sanford That’s right. And there are interesting technical advances here. We
have new tools to help organizations find the people they need and also to predict
the talents and skills they will need in the future. The latter represents a real
breakthrough. It looks at needs across time and space, and, if companies can make
a prediction informed projection and get moving quickly, it will represent a real
business advantage in terms of time to market.
Social Network Analysis is one of the enabling technologies for accessing talent. It’s
helpful not just with tracking down people with the required knowledge and skills, but
also with identifying people who have influence and who are well networked – who
can provide a quick answer or get you to the right person. And, because
relationships are shown, it’s easier to qualify a candidate with regard to their real
ability to provide value.
Peter Andrews In the book, you mention the growing percentage of working in the
“creative class.” Does this point to substantive changes in business?
ibm.com/bcs Executive technology report 5Linda Sanford People will come together around appropriate opportunities. Those
with the right skills, expertise and passion for an opportunity will come together, do
the work and then disband. We see this to an extent with projects in Hollywood
today, for instance, but the future will bring this to a much finer level, almost down to
the level of individual transactions. You’ll see this both with opportunities that
emerge and with disasters, such as Hurricane Katrina in August 2005. We’ll have
the tools that will be necessary to find and connect people quickly enough and
effectively enough to make a difference. IBM, of course, will provide such tools.
We’ll also bring along the insights and the methodologies that provide focus and
help people through emerging situations and find the best ways to respond.
Peter Andrews You’ve provided our readers with a lot to think about and explore.
Any final thoughts?
Linda Sanford Yes. Above all, I’d like to emphasize the cultural aspects to
succeeding with a let go to grow model. In my many experiences working with other
companies, this is what I’ve seen to be the “make or break” issue. You can’t let go
to grow if your culture won’t let you.
So, I’d encourage all business leaders to spend time on culture. Make it important.
If you can do this, you’ll be able to build an appropriate environment and common
values that can make a difference. If you can get the culture right, you’ll have
leaders who coach, mentor and motivate. And you’ll find you have people who are
collaborating and thinking horizontally.
You’ll be on a path to making things happen, and you should get there earlier than
the competition. And, if you get there first, that will likely add to your advantage and
accelerate your progress.
References
1
Sanford, Linda S. and Dave Taylor. Let Go to Grow: Escaping the Commodity Trap.
Prentice Hall. December 2005.
http://www.phptr.com/bookstore/product.asp?isbn=0131482084&rl=1
2
Pohle, George, Peter Korsten and Shanker Ramamurthy. “Component business models:
Making specialization real.” IBM Institute for Business Value. August 2005. http://www-
1.ibm.com/services/us/index.wss/ibvstudy/imc/a1017908?cntxt=a1003208
ibm.com/bcs Executive technology report 6Related Web sites of interest
Friedman, Tom. The World Is Flat: A Brief History of the 21st Century.
http://www.amazon.com/exec/obidos/tg/detail/-/0374292884/qid=1117202446/sr=8-
1/ref=pd_csp_1/002-7664985-3581655?v=glance&s=books&n=507846
Murdock, Ian. “Open source and the commoditization of software.”
http://ianmurdock.com/?page_id=222
Hayes, Linda. “Testing SOA: Peeling the Onion.” Computerworld. August 15, 2005.
http://www.computerworld.com/developmenttopics/development/story/0,10801,103611,00.ht
ml
Andrews, Peter. “New approaches to IT management: The service-oriented model.” IBM
Executive Business Institute. December 2004. http://www-
1.ibm.com/services/us/index.wss/multipage/imc/executivetech/a1006925?cntxt=a1000074
“The Commoditization Of Everything.” TechTransform. Riggs Eckelberry Marketing Group,
Inc. July 1, 2002. http://www.techtransform.com/id262.htm
“Commoditization And Innovation - IT Does Matter.” Tech dirt. May 6, 2004.
http://www.techdirt.com/books/20040506/1217213_F.shtml
“Is innovation still America’s birthright?” On Demand Business: Speed innovation. IBM
Corporation. http://www-306.ibm.com/e-
business/ondemand/us/innovation/fortune/forum_b.shtml
“Component Business Model.” IBM Business Consulting Services. http://w3-
03.ibm.com/services/bcs/news_pubs/features/2005/0208_cbm.html
Kapur, Vivek, Jeffere Ferris and John Juliano. “The growth triathlon: Growth via course,
capability and conviction.” IBM Institute for Business Value. January 2005. http://www-
1.ibm.com/services/us/index.wss/ibvstudy/imc/a1007846?cntxt=a1000449
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