Lead Right for Your Company’s Type

How to Connect Your Culture with Your Customer Promise

William E. Schneider
Copyright © 2017 AMACOM, a division of American Management Association
224 pages
[@]

Rating Take-Aways

8
8 Applicability • Enterprises fall into four different types: “customized, best-in-class, enrichment,” and
“predictable and dependable.”
7 Innovation
8 Style • Customized organizations design and deliver a product or service that meets a
customer’s singular requirements.

• Best-in-class firms create and sell a top-quality product or service.

 
Focus • Enrichment enterprises improve the lives of their customers.

• Predictable and dependable firms deliver a basic, reliable product or service.

Leadership & Management
Strategy • Each firm is a “living people system” made up of leaders, employees and customers.
Sales & Marketing
• Leaders must adapt their leadership style to the type of enterprise they lead.
Finance
Human Resources • Most business experts incorrectly believe that a great management idea will work well
IT, Production & Logistics for all firms.
Career & Self-Development
• Companies make “core promises” to their customers and should give their employees
Small Business the conditions they need to deliver on those promises.
Economics & Politics
Industries
• Leaders should have a “system-centric” mind-set, not an “individual-centric” one.
Global Business • This means focusing on the type of enterprise you really lead, not on the type you think
Concepts & Trends you lead and not on the individuals you lead.

To purchase personal subscriptions or corporate solutions, visit our website at www.getAbstract.com, send an email to info@getabstract.com, or call us at our US office (1-305-936-2626) or at our Swiss office
(+41-41-367-5151). getAbstract is an Internet-based knowledge rating service and publisher of book abstracts. getAbstract maintains complete editorial responsibility for all parts of this abstract. getAbstract
acknowledges the copyrights of authors and publishers. All rights reserved. No part of this abstract may be reproduced or transmitted in any form or by any means – electronic, photocopying or otherwise –
without prior written permission of getAbstract AG (Switzerland).

This document is restricted to the personal use of Miguel Felix (felix.ma.1@pg.com) 1 of 5

BatchLoginContext[cu=4399869,asp=1052,subs=0,free=0,lo=en,co=US] 2018-10-13 03:37:44 CEST

getabstract

getabstract
Relevance
getabstract
What You Will Learn
In this summary, you will learn:r1) How to define the four types of enterprises and the management system they
need, 2) How to avoid “system disconnections” and 3) Why most mergers fail.
getabstract
Recommendation
An oil-drilling field boss hired a sensitivity consultant to work with his crew. The consultant asked the crew members
to describe their feelings for each other. They were uncomfortable and silent. This was a misapplication of sensitivity
training. How oil rig workers feel about each other isn’t as relevant as how they handle the drill. Many leaders
mistakenly assume that the management techniques that are good for one business are beneficial to all businesses.
Implementing the wrong approaches and policies can damage your firm. Consulting psychologist and scholar William
E. Schneider provides valuable information on tailoring your policy and management approach to four different types
of enterprises – “customized, best-in-class, enrichment,” and “predictable and dependable.” Knowing what will work
requires an astute understanding of your business. Organizational leaders can make good use of Schneider’s insights,
charts, diagrams and assessment resources.
getabstract
getabstract

getabstract
Summary
getabstract
Four Types of Enterprises
Organizations can take four general forms, but each company has its own distinctive culture,
leadership style and promise to customers. Of these interdependent components, customer
promise matters most. A firm’s culture and leadership depend on it. The four types of
getabstract
“Leadership is about companies are:
empowerment –
creating the conditions
for employees,
1. “Predictable and dependable” – These companies provide reliable products or
managers and fellow services that fulfill basic needs. They need well-defined policies, practices and
leaders to deliver on the operational systems. They are capital-intensive and operate with slim margins based
enterprise’s customer
promise.” on economies of scale. About 60% of the 100 largest American companies fit this
getabstract category. Among other features, their management approach generally includes “vertical
de-integration, activity-based costing, zero-based budgeting, lean manufacturing” and
“statistical process control.” These companies often have a robust leadership pipeline.
Examples include Federal Express and Walmart.
2. “Enrichment” – These organizations are values-based. They operate with honorable
goals and deeply held beliefs and principles. They seek to improve customers’ lives
and help people reach their full potential and purpose. Most enrichment organizations
focus on mission, not profit, and don’t scale well. Sales and marketing takes the form
getabstract
“Enterprises are of fundraising. Their traits often include “principle-centered leadership, humanistic
started by people, led management, quality of work life, synchronicity,” and similar strategies. Examples
by people, operated by
people, improved by include Habitat for Humanity, the TOMS shoe company and Patagonia.
people, perpetuated by 3. “Best-in-Class” – These firms deliver distinctive products or services and charge
people, dissolved by
people. premium prices. Apple exemplifies best-in-class; the iPhone is a best-in-class
getabstract product. Among other techniques, these organizations rely on “benchmarking, matrix
management, core competencies, meritocracy leadership” and “constant innovation.”
Examples include Tiffany & Company, Intel and the RAND Corporation.
4. “Customized” – These companies have a single focus on discovering and serving their
clients’ specialized needs. They learn everything they can about their customers. Most

Lead Right for Your Company’s Type                                                                                                                                                   getAbstract © 2018 2 of 5

This document is restricted to the personal use of Miguel Felix (felix.ma.1@pg.com)

BatchLoginContext[cu=4399869,asp=1052,subs=0,free=0,lo=en,co=US] 2018-10-13 03:37:44 CEST

 customized firms establish long-term customer relationships. Among other attributes,
these companies feature “self-directed teams, quality circles, a collaborative workplace,
group-oriented leadership, sensitivity training” and “high-performance work teams.”
getabstract They emphasize customer loyalty. Examples include BBDO, IDEO and Edelman.
“People are inherently
motivated to prosper, to
contribute, to succeed Avoiding “System Disconnections”
and to win. If you as
a leader create the Every enterprise is a “living people system” made up of employees, customers and leaders.
conditions for that to These groups are interdependent. Senior executives who understand this interdependence
happen, you don’t need
to force anything.” make the most effective leaders. They realize that many of the challenges they face are
getabstract “people problems,” such as “internal conflicts, distrust, employee disengagement, low
morale, high…turnover, turf battles, too much politicking, leaders hoarding power, low
level of accountability, communication breakdowns, workflow bottlenecks” and “power
battles.”

People problems are symptoms of system disconnections. They occur when executives
impose leadership approaches that aren’t suitable for the specific type of firm they
getabstract
“If a leader brings lead. Inappropriate leadership policies undermine the interdependencies among leaders,
his or her leadership employees and consumers.
approach into an
enterprise that requires
a different approach, it AOL and Time Warner
disrupts that system and
creates crosscurrents To illustrate what can go wrong when leaders prove insensitive to – or inadvertently operate
and contradictions.” against – their enterprises’ characteristics, consider the disastrous merger between America
getabstract
Online (AOL) and Time Warner, which are now, once again, independent companies.

In 2000, Time Warner joined AOL in a $165 billion merger, the second-biggest financial
deal of its type in the United States. At the time, many believed this enormous merger
represented a watershed moment when traditional media would partner with the Internet to
herald an exciting “new economy.” But the merger became a disaster.
getabstract
“If you make money the The two companies interacted like “oil and water.” They didn’t sell to the same people. Their
focus, your enterprise customer promises were at odds. Their employees and leaders had nothing in common.
loses money. Money is
the result of fully and
Attempting to meld these groups under a combined AOL–Time Warner could never have
consistently delivering worked out – and it didn’t because “their living systems (networks) were completely
on your customer different.” At the time, AOL was a best-in-class enterprise. Time Warner was a predictable
promise.”
getabstract and dependable enterprise. Within less than 12 months, they suffered crippling problems
trying to work together.

Then years later, the two companies were once again independent entities. Their combined
value in 2010 was less than one-seventh of what it was on the day they merged. Now
business schools teach that the AOL–Time Warner merger was one of the worst business
deals in US history.
getabstract
“A balanced enterprise
is functioning in a
The strategic flaw that condemned the deal was the leaders’ view of their companies as cash
state of equilibrium. cows: strictly financial entities from which they could squeeze the maximum in “revenues,
Integrated culture and cost-cutting and layoffs, and more profits.” They should have seen the two firms as carefully
leadership drivers
are being practiced structured, minutely organized living systems.
appropriately and not
taken to extremes.”
getabstract Best-selling management guru Peter Drucker explained why the right systems matter so
much to companies. Citing a “fundamental insight underlying all management science,”
he said, “the business enterprise is a system of the highest order: a system whose parts
are human beings contributing voluntarily…to a joint venture” According to Drucker,

Lead Right for Your Company’s Type                                                                                                                                                   getAbstract © 2018 3 of 5

This document is restricted to the personal use of Miguel Felix (felix.ma.1@pg.com)

BatchLoginContext[cu=4399869,asp=1052,subs=0,free=0,lo=en,co=US] 2018-10-13 03:37:44 CEST

 “interdependence” is the linchpin of well-functioning systems. AOL co-founder Steven
Case and Time Warner CEO Gerald Levin didn’t lead their companies or set their goals
based on a “system-centric” point of view. They failed to understand their separate
getabstract
“Unless and until businesses as living people systems of linked consumers, workers and executives.
any management or
leadership idea to
improve your enterprise Ron Johnson and Carly Fiorina
can be clearly linked to Instead of a “system-centric mind-set,” many such leaders adopt a dysfunctional
your customer promise,
it needs to be viewed “individual-centric mind-set.” To illustrate, Ron Johnson, a successful Apple executive,
with skepticism at the failed miserably when he took over as CEO at JCPenney department stores in 2011. Johnson
very least.”
getabstract couldn’t reorient his mind-set from the workings of Apple, a best-in-class enterprise, to
the wildly different operations and environment – and system – at JCPenney, a predictable
and dependable enterprise. During Johnson’s two-year tenure at the retail chain, sales
plummeted 25%.

Carly Fiorina ran into similar issues when she took over as CEO of Hewlett-Packard. Like
Johnson, Fiorina operated with a best-in-class mind-set. This didn’t work well for Hewlett-
getabstract
“New products and Packard, a customized enterprise. Fiorina’s time at Hewlett-Packard was no more successful
technologies appear, than Johnson’s tenure at JCPenney.
new competitors
come on the scene,
new regulations are The board members who chose Johnson to run JCPenney and Fiorina to run Hewlett-
developed, markets
shrink and markets get Packard operated with individual-centric mind-sets. They assumed that because Johnson
saturated.” and Fiorina had impressive records as successful executives, they would automatically
getabstract
succeed in their new CEO roles. However, a high-quality executive who does well in one
business environment won’t necessarily do as well in a different environment. “One size
does not fit all.” If the members of both boards had chosen their new CEOs based on
recognizing each company as its own kind of interdependent system, they probably would
have selected more appropriate executives.

getabstract Why Most Mergers Fail

“Customer promise A glaring lack of system-centric mind-sets at the highest levels accounts for many business
is the decider. It
establishes your mind- failures, including the surprisingly large percentage of mergers and acquisitions (M&A) –
set. It centers your estimated between 50% and 83% – that don’t work. Often the leaders who plan and organize
thinking, energy,
attention and behavior
M&A deals fail to appreciate that each organization develops a distinctive and different
and establishes your living people system.
core.”
getabstract
For an M&A to work, the companies’ living people systems must find ways to blend.
This cultural combination can be difficult to achieve under the best of circumstances.
Unfortunately, the impetus for many M&A deals often comes from the worst reasoning,
with an undue emphasis on “financial engineering, cost accounting and revenue estimating”
– to the short-sighted exclusion of other considerations.

“Connect Your Customer Promise, Culture and Leadership”

getabstract
To deliver on its customer promise, your enterprise must understand itself. You can fulfill
Customer promise your customer promise only by being true to your organization’s nature, so you must
“sets your priorities, establish the conditions which make that fidelity possible.
parameters, boundaries
and ground rules.”
getabstract Carefully consider your customer promise: It’s what your customers expect. It represents
your enterprise’s honorable pledge to them. It is the value proposition that unifies your
enterprise and connects your culture, workforce and leadership. Create an “enterprise-wide
customer goal attainment system” to manage the fulfillment of your customer promise.

Lead Right for Your Company’s Type                                                                                                                                                   getAbstract © 2018 4 of 5

This document is restricted to the personal use of Miguel Felix (felix.ma.1@pg.com)

BatchLoginContext[cu=4399869,asp=1052,subs=0,free=0,lo=en,co=US] 2018-10-13 03:37:44 CEST

 Leaders should focus on fulfilling their customer promise, instead of dwelling only
on finances. Microsoft offers a telling example. By 1997, Microsoft operating systems
powered 86.3% of all American personal computers.

Then everything changed. Microsoft’s technology group stopped reporting to chairman Bill
Gates and began reporting to CEO Steve Ballmer. Unlike Gates, who emphasized new ideas,
Ballmer focused on profits and losses. At the time, a technology group leader recalls, “We
getabstract couldn’t be focused any more on developing technology that was effective for consumers.
“Your enterprise is a
living people system.” Instead, all of a sudden, we had to look at this and say ‘How are we going to use this to
getabstract make money.’ And it was impossible.”

As a leading best-in-class enterprise, Microsoft must constantly deliver high-quality,

innovative technology. An atmosphere where “quick profits” matter more than
technological advances won’t ever prioritize developing surprising technology. Ballmer’s
insistence that the company’s engineers focus primarily on revenues over innovation
seriously undermined Microsoft’s revenues. In just a few years, the firm lost more than
50% of its value.
getabstract
“The three living
elements of your Such a loss inevitably happens when leaders fail to understand or appreciate precisely what
enterprise are your
customers, employees,
type of enterprise they are leading. Such a lack of awareness – and the inappropriate policies
and you and your this kind of blindness can generate – are at the root of many management mistakes.
fellow leaders. Your
job as a leader is to set
direction, unify these Take time to research and understand what type of business you run and how you can lead it
three and create the most effectively. To fulfill your customer promise, apply a system-centric leadership mind-
systemic conditions
for delivering on set that sees your firm as a people-based system.
your promise to your
customers.”
getabstract Configuring Your Organization
A properly configured company operates like an efficient electricity grid, and each of
the four types of enterprise has a different optimal “configuration.” The most effective
configuration gives primary power and authority to the core of the enterprise. Spreading
power among processes that aren’t relevant diffuses the strength of the configuration and
the organization’s potential success.

Deciding to give executives nontraditional titles is often a revealing symptom of

getabstract
“People create and organizational “misconfiguration.” Such titles include chief customer officer, director of
provide value for creativity, head of diversity and chief happiness officer. These pseudo-titles describe
people. People are the
life of your enterprise.” functions that should be integral to everyone’s work. Every company automatically strives
getabstract to innovate and create, to achieve a diverse workforce, and to develop the conditions that
make employees happier. Organizations shouldn’t assign executives to target these areas.

A company that bases its existence on selling to customers doesn’t need an executive who
focuses on customers. That would be like having a chief customer officer at Disney World,
where delighting customers is ingrained in the culture.

getabstract
getabstract

getabstract
About the Author
getabstract
Consulting psychologist William E. Schneider, PhD, co-owns Corporate Development Group, a Colorado
leadership and organizational development firm.

Lead Right for Your Company’s Type                                                                                                                                                   getAbstract © 2018 5 of 5

This document is restricted to the personal use of Miguel Felix (felix.ma.1@pg.com)

BatchLoginContext[cu=4399869,asp=1052,subs=0,free=0,lo=en,co=US] 2018-10-13 03:37:44 CEST