Transformational Leadership

In a time of crisis, leadership is needed to inspire calmness and confidence. In our current state of personal and business uncertainty, it is more important than ever to have strong leaders at the helm to guide companies, teams and families on the correct path.

Take your leadership role seriously, because those you lead are. Communicate more, listen more and provide the direction and the confidence your team needs to get through these uncertain times.

From a business standpoint, now is not the time as a company to pull back, wait and see; now is the time to invest and advance your company’s position in the market and add more value to the audiences you serve. The way you view leadership right now will have a major impact on your business’s performance tomorrow.

Defining Market Leadership

When I ask companies who the leader is in their market, the vast majority name the company with the highest market share. This myopic definition of market leadership is erroneous and can undermine the very leadership and growth you want to promote. It impairs your business decision making and handcuffs your team. Others answer that the market leader is the company that exercises the greatest influence over the market. While the ability to influence price shifts, capacity, or other areas in the marketplace are useful, it doesn’t make a company a leader. It merely indicates that the company has the wherewithal to effect functional influence at a point in time.

A true market leader is a company that transforms; one that actively advances a product category, a market and ideally, an entire industry. Market leadership is about transforming the overall market to help it grow and prosper. It is not about size, influence or control.

The word “advance” denotes a positive direction. Advancement requires vision, commitment, drive and engagement. It especially requires the courage to disrupt yourself. Companies with a dominant market share may influence a market by introducing new products or interjecting some other changes, but only companies that embed themselves in the industry's success, through good times and bad, can transform and advance the market.

Often, a smaller player or a new entrant into an industry will advance the market more than the larger, more established companies. Companies with the largest share typically focus on making products as efficiently as they can, looking around every corner for ways to cut costs and increase their market share so they can fill their production lines and spread their CAPEX investment over a larger volume. This may optimize short term results for shareholders (which is important), but it’s not necessarily industry leadership.

I have observed over and over that even a relatively small company, given sufficient time, can advance a category or even an entire industry. Some companies may rank third or fourth in market share position in their industry, and yet they play a more important role in advancing that category than the company with the most sales and the most manufacturing assets.

Hard Work and High Energy

Transforming a company and a category is hard work. If you choose to be a market leader, you must persevere at it day in and day out. You must have the vision to look forward, identifying gaps and trends to leverage. And the payoff can be huge, because this type of leadership will energize your organization, inspire your customers, and optimize your business results.

For example, which of these proclamations do you think your employees would rather hear in your next “town hall meeting”?

  • We will continue to aggressively sell the most products in our industry, making every effort to maintain our share position and taking every precaution to keep our competitors from catching us.
  • We will continue to leverage innovation and the talents and dedication of our team by thinking differently and redefining what is possible, with the goal of advancing the category and our customers’ success, so as to ultimately maximize our own success.

Both statements can be a good path for your business and a focus for your team. However, the second proclamation will be more exciting and engaging to your employees, as well as your customers. People are attracted to action-oriented organizations that are committed to innovation, leadership and advancement. That’s the type of company employees want to stay at, and ones that new recruits want to join. It’s also the type of company customers and suppliers will want to partner with (and where price becomes less important).

I always enjoy a sports analogy, so I’ll use one to further illustrate this point. Imagine you are the new highly-rated quarterback on a team, and you are just about to get your chance to shine for the season. But before the kickoff, the coach comes over to you and whispers something in your ear. Which of the following two pep talks would you rather hear?

  • I want you to just manage the game. Don't put the team in a risky situation where we might lose.
  • You have a great team around you. I know you are well prepared, and I trust that you have the vision and leadership to take advantage of the different opportunities that will come your way during the game. Be big and bold, and when you fail, learn. Now go lead this team to victory!

Unfortunately, the majority of companies with the biggest market share in their industry are like the first example above. Mistakenly, they play conservatively, and strive to maintain their leadership position. They are like a sports team that builds up a lead and then starts playing cautiously to protect it. But in business, as in sports, “playing not to lose” instead of “playing to win” can backfire. It typically results in a harvest approach (maintaining versus investing), not a growth approach, and leads to underperforming in the industry. True market leaders embrace and actually seek out change, challenges, gaps and speed bumps, and they take every opportunity to redefine the game plan to positively impact the outcome.

Transactional versus Transformational Leadership

Many companies, especially larger ones, demonstrate themselves as transactional leaders. Transactional leadership is the exact opposite of transformational leadership, relying on routine activities and motivating employees through rewards and punishments of following well-define processes. It requires heavy organizational supervision and oversight. This model doesn’t focus on continually rewarding ideation and innovation, or really any meaningful innovation beyond existing product tweaks. Instead, it is purposefully rooted in keeping things consistent, stable and predictable over time.

Transformational leadership, on the other hand, sets expectations around innovation and looks for it at every corner. It supports agile environments, and failure carries less risk and actually accounted for to help drive deeper innovation possibilities. While you want the development and maintenance of a current product offerings to remain fresh and relevant, you also do not want that focus to handcuff the advancement of new technologies and innovations. Transformational leadership leaves people free to come up with new ideas and look at “what’s possible” in a new light.

Ten Characteristics of a Transformational Leader

  1. Courageous: to make the hard, bold, uncomfortable decisions
  2. Visionary: to see beyond the needs and clutter of today
  3. Open: to truly listen and be open to others unique ideas
  4. Inspirational: to help team members see the possibilities you see
  5. Unorthodox: to try things never imagined or thought possible
  6. Ethical: to always do what’s right no matter what.
  7. Caring: to be attentive about your team and your customers
  8. Insightful: to take numerous data points and filter into key insights
  9. Mentorship: to help others think and lead like a transformational leader
  10. Drive: to continually navigate the path where the impossible can be possible

The Leader’s Trap

Why do some companies with the biggest share of a market so often fail to exercise continual transformation that drives true market leadership? At one time they must have been aggressive and growth oriented. Otherwise, they wouldn’t have become so large. So, what caused them to alter their mindset and actions? Companies with majority market share become conservative and lose their drive – they get caught in the “leader’s trap.”

Companies fall into the leader’s trap when they become so afraid of losing their dominant position within an industry that they prioritize market stability over market leadership. Out of fear of making a mistake that will cause them to lose market share or price, they become excessively cautious. This timidity ultimately can handcuff the company’s leadership team, employees, suppliers and sometimes even its customers. At a fundamental level, the cause of the leader’s trap is the fear of change. Change can sometimes result in disruption, and disruption is always inconvenient and uncomfortable. But change and disruption are prerequisites for any transformation. They are the standard currency for acquiring innovative products, services and bold new ideas. Very little meaningful innovation takes place without significant disruption within an industry, a category, or a company.

Disruption is most threatening to companies with the largest market share, because these companies have the most invested in their current products, pricing structures, technologies, plants and equipment, inventory, branding and processes. A disruptive approach can necessitate uncomfortable personnel changes, product changes, production processes and changes in business approaches across multiple regions and distribution channels.

Because companies with large market share usually have the most to lose from disruptions (at least in their minds), they are more likely to try to “play it safe.” Consciously or unconsciously, they fall into the leader’s trap by choosing to be maintainers rather than leaders. That’s why some of the strongest advancements come not from market share leaders, but from smaller companies within a category or even from companies outside a category. These smaller players are more agile and thrive off of innovation, as they believe they have less to lose and more to gain, so they take advantage of the leader’s trap syndrome of the big players. The detrimental effects of the leader’s trap can permeate the culture of an organization. When employees notice that the company is more interested in merely maintaining their position and protecting the cash cow than in pursuing new opportunities, they lose enthusiasm, commitment and edge. Excessive conservatism in problem solving breeds an environment of complacency and fearfulness.

Over the long-term, the costs of maintaining can far exceed the costs of leading. Eastman Kodak Company is a case in point. At one time, Kodak was the undisputed leader in the photographic film category. As the market leader, it also had the biggest investment in existing technologies. Although Kodak had actually invested heavily in innovation and developed the very first digital camera in 1975, they cancelled the product launch at the last minute out of fear it would lead to cannibalization of the company’s film business. Kodak fell into the leader’s trap and let other manufacturers disrupt the industry and cannibalize Kodak’s strong market share position. In January 2012, Kodak filed for Chapter 11 bankruptcy protection. The company continued in business making only niche film products, and it’s once $19 billion in film sales declined to $2 billion. However, even companies that falter can transform themselves. Kodak recently pivoted to turn itself into a materials and chemical company. The company also now manufactures key materials for some pharmaceuticals and was just awarded a government pharmaceutical contract to start replacing dependence on foreign pharma companies, causing Kodak’s stock to soar 1200% in one day after the announcement. Takeaway… never stop transforming.

I am a true believer that if you are going to be cannibalized, you should cannibalize yourself rather than let someone else take both your business and the credit for advancing the industry. Look for what’s possible and next, as someone else definitely is. So be the first one to define and execute the new possibility, even when it changes your current business model.

Unfortunately, true market leaders are somewhat rare. Most companies are content to just make modest improvements from year to year. Preferring comfort to transformation, they have little tolerance for the disruption (and the resulting discomfort) required for significant innovation. But true market leaders actively look to cannibalize their own products when necessary for advancement, instead of passively ignoring reality, until the competition does it for them.

If you want to be a market leader and transform your category and your industry, you need to embrace disruption at every turn and become comfortable with being uncomfortable. You must transform, not just with your products, but in how you approach the market. You must do more than tolerate disruption; you must deliberately seek it out and cultivate it in your organization. Encourage some of your more creative employees to be catalysts for change in meetings and consider having “disruption consultants” facilitate your strategy meetings. Make sure disruption is welcomed throughout your organization and encouraged at every opportunity. If your company doesn’t learn to harness the power of transformation, sooner or later, somebody outside of your company will.

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