Underdog Leadership: Finding Opportunities in Chaos

Today’s business climate is stormy with even rougher weather ahead.

Following the Great Recession and the financial crisis, many business leaders took the safest paths, avoiding as many risks as they could find. Today, the opposite tack,
embracing chaos and surfing the waves of change, offers these same business leaders new opportunities for profit, growth and transformation of their businesses into 21st Century organizations.

Is there a price for pursuing these opportunities? Simple answer: yes. Business leaders must adapt and change. Today, it is not possible to control every aspect of a leader’s operations as completely as they did in the days before Facebook, Twitter and web-based marketing. The New Media Revolution has given birth to an interactive world in which customers and employees have more access to information and more options than ever before. Gone are the days when CEOs could exercise iron control over every aspect of their companies and their brands. The old methods of leadership are as obsolete as manual typewriters and green eyeshades.

“Executives used to be in control,” says consultant Ross Dawson, “to know what was happening, and to direct the company’s activities in detail to achieve success. That doesn’t work any more.” Instead, Dawson asserts, CEOs should become increasingly comfortable with uncertainty, create a corporate structure that is much less top-heavy and hierarchical, and adopt innovative practices and methods. CEOs should not run for cover when economic hurricanes threaten; instead, they should surf the waves of change…and reap the rewards.

For example, the rise of social media, competition from emerging economies and a slow and unpredictable recovery from the Great Recession put today’s molecules in motion. In particular, social media and net-based communications offer unprecedented opportunities in marketing for business leaders who are willing to learn the new methods and to accept the radical, decentralized nature of a new web-based world. The companies that choose to ignore social and electronic media are in danger of being out- competed by firms that understand and exploit these new tools.

In the twenty-first century, there are many companies using Dawson’s innovative leadership strategy. You haven’t heard of most of them—yet. For example, defense contractor Rite-Solutions invites employees to propose new ventures of all kinds: New technological fields to enter, new lines of business to try and new efficiency improvements. Furthermore, in the company intranet, employees discuss the new ideas, develop them and vote on them. If a new idea makes money for the company the employees get a share of the profits.

Some of the new experiments in commerce and social media are colorful, to say the least. For example, at Threadless.com, Jake Nickell and Thomas Ryan preside over a
corporation that operates on a crowd-sourced model: Customers upload their own t-shirt designs to the company’s website and then vote online for their favorites. The winning designers get cash prizes, and the t-shirts with their designs are sold on the Threadless online store. If you want to check out their operation, you can stop by the Chicago office and hang out for awhile; the bean-bag chairs are comfortable, the giant TV and the video game consoles are available, and you can pick up a few T-shirts. Only don’t confuse the operation with a frat house or a hippie commune; the company has 1.5 million twitter followers and sells more than a million shirts a year.

One of the less obvious waves of change is demographic: The emergence of a hip, young, well-educated and underemployed generation for which the American dream is in some ways a vanishing mirage. After working hard in college and paying a small fortune for their education, this generation is finding that middle-class jobs are scarce or nonexistent. Out of college, they’ll be paying off student loans and trying to survive—not buying houses or picking out new furniture—and generally behaving like the middle-class consumers who supported the American economy in the twentieth century.

But still, soon, they will be buying something; in fact, they’ll be buying quite a lot.

So your job/opportunity is to figure out what they want and sell it to them. Russel Wright did that for an earlier generation; he designed and mass-produced inexpensive dinnerware and home furnishings for middle-class customers whose purchasing power had been reduced by the Great Depression. In the process, Wright’s company made millions and revolutionized the look of American homes. Wright is credited with inventing lifestyle marketing half a century before Martha Stewart. His best-selling and modestly-priced products were revolutionary in their day and are still popular; they recently appeared in exhibitions in the Smithsonian and other museums. And, by the way, Russel Wright Studios is still in business today; the company even has a Facebook page.

Wright wasn’t the only one to find opportunity in the chaos of the Great Depression. IBM, for example, came very close to bankruptcy—but was saved by the creative action of its CEO, Thomas Watson. After the stock-market crash of 1929, Watson called the company’s managers together and persuaded them that a revolutionary and contrarian strategy could save the company. While other companies reduced output, laid-off employees and shut-down factories, Watson kept his factories operating, increased production and warehoused the surplus he could not sell. He invested in research and built a large-scale corporate research lab.

By 1934, IBM’s stock had fallen dramatically, and it looked as though Watson’s brave gamble would bankrupt the company. But in 1935, the Social Security Act passed and the U.S. government suddenly needed large numbers of business machines. IBM was ready to supply them, in vast quantities and in the latest models. By contrast, IBM’s competitors, having drastically cut production and development, had very little to sell. Watson’s decision to throw away the conventional playbook in favor of actions that, at the time, seemed revolutionary or even insane saved the company.
Since the 1930s, IBM has incurred criticism, some of it justified, for being too conventional and stodgy; but without Watson’s unconventional thinking during a crisis, IBM would not have survived at all.

Emerging from the Great Recession, we face today a number of ongoing structural problems—many with no obvious solutions. Yet our current situation is nowhere near as uncontrollable and catastrophic as the chaos that followed the stock market crash of 1929. The entrepreneurs of the Great Depression were able to adapt to new conditions and exploit the chaos in which they found themselves; and the CEOs of the present can do the same. As Ross Dawson observes, “The first step on the path is the recognition that change is required.” Afterwards, he asserts, the process of new thinking, new attitudes, and new behaviors can take a company into a profitable future in which change, uncertainty, and lack of central control are not problems, but rather assets that ensure the company’s survival and growth.

Here is the rule today: Change rules. To survive, companies must expose individuals to new ways of thinking. Companies must create a spirit of innovation that leads not only to new product development, but also to new and different approaches to every aspect of your operation. The CEO whose company can adapt to these new and decentralized ways of thinking and operating will be the market leaders of tomorrow.