By some estimates, 70% of strategic transformations do not achieve their objectives as rapidly as required or fail to achieve them at all. They fail for many reasons, but a lack of honest conversations is the common thread in most of them. Honest conversations are collective (involving key people across the company) and internally public—everyone in the company knows the conversations are taking place. They’re informative—employees can learn management new strategic direction. They’re open—people at lower levels of the hierarchy can speak truth to power about what is working and what isn’t. Having honest conversation requires leaders who have the courage to advocate a new direction and at the same time make themselves vulnerable by inquiring into barriers to effective execution of the strategy that might include their own leadership.
Launching a transformation with conversations, instead of with confident certainty, may seem counterintuitive and unconventional. But that’s what Vince Forlenza did when he took charge as CEO of Becton Dickinson in 2010. Having an honest conversation with just one other person is difficult enough, but imagine involving more than 150 others—employees as well as external stakeholders. Nevertheless, that’s what he did.
It started with a structured leadership platform developed at BD called the Strategic Fitness Process. It had been employed by three of his predecessors and dozens of key business, regional and functional leaders at the company (and beyond by hundreds of senior executives around the globe in many different industries).
BD was already an excellent company. Under the leadership of Ed Ludwig, Vince’s predecessor, it had performed in the top quartile of the industry for a decade. So Vince wisely collaborated with Ed in leading the honest conversation. Ed had successfully employed it when he took charge of BD in 2000 to turn around BD when its stock price had plummeted. As a member of Ed’s senior team, Vince had seen what honest conversations could do.
After many conversations with the senior team, Ed and Vince concluded that, given changes they were seeing in the competitive landscape—movement from products to solutions—BD had to become more innovative. As a member of the senior team put it, BD was already a very good athlete, but it had to become an Olympian.
Put another way, the company had to become fit to compete—its system of organizing, managing and leading had to be realigned to fit BD’s new innovation strategy. To get there, Vince needed the increased trust, commitment and energy that honest, collective and public conversation can unleash.
For starters, the company’s key employees, in all units and functions, were given a chance to safely say what they thought was right and wrong with BD and its leadership. They expressed these opinions to a task force of 12 managers commissioned by the senior team based on their trust of the 12 and that of people at lower levels of the organization. The task force interviewed key people across BD about strengths and barriers to executing the new direction. The other participants were external stakeholders—investors, customers, thought leaders and a few CEOs of industry and partners—who offered their views of the company’s strengths and barriers to executing the new strategy.
The task force of 12 managers then presented what they had heard to the senior team—in person. The senior team, in turn, acknowledged to the company exactly what they had heard from the lower levels—however uncomplimentary some of it might have been. And they said what they planned to do about it. Nothing was hidden in a consultant’s report or the minutes of a board meeting.
That sounds unremarkable, but a moment’s reflection reveals what an unusual step it was. Vince and Ed already knew what strategy they wanted to pursue, and they knew some of the changes that BD had to make. Why, then, would they commit themselves to listen to and act on unvarnished feedback about barriers to the transformation from people over whom they had authority? Why not just tell people what was expected of them? Why would they commit themselves to communicate honestly to hundreds of people around the world the uncensored truths they had heard about those barriers to innovation and their plans for change? Wouldn’t this signal to everyone that they were weak and indecisive? Wouldn’t it slow down the transformation they so urgently wanted to make? Wouldn’t it lead to a culture of complaints, endless debate and inaction? And in any case, would people below the top have much to contribute to high-level strategy? Why go asking for trouble? Why not just lead?
As Vince understood, successful transformation required more than his many good ideas. He knew they could be improved upon by people who lived BD’s strengths every day and ran into its barriers to innovation and faster growth. He was right. In approximately eight weeks, the picture became clear, allowing Vince and his senior team to develop an agenda for change that would be enacted and modified over the next several years. And Vince and his team followed up with smaller and more focused honest conversation around specific issues.
The honest conversation identified ten barriers to executing the innovation strategy. The task force of 12 were understandably nervous about delivering their difficult message, but the Strategic Fitness Process empowered them to put the truth on the table. None of it came as a total surprise to Vince. Nevertheless, hearing in detail how lower levels experienced the barriers to innovation was powerful and valuable.
As demanded by the process, the feedback began with many positives: top management’s effort to make BD a high performing company, the company’s ethical purpose and behavior, its excellent high-quality products, and the honest conversation itself. But if BD was to become more innovative and grow faster, the power and influence of marketing, sales, R&D and regions outside the U.S region had to be increased.
“Our strategic marketing is weak,” the task force said. This was not new news to Vince, but the details provided by the feedback helped clarify the dimensions of the problem. Most important, it mobilized commitment to hiring a chief marketing officer. The company had never had a CMO because, according to Ed Ludwig, one or more senior executives saw themselves in that role and global business leaders would feel their autonomy threatened. That proved prophetic when the CMO who was subsequently hired launched a revealing global marketing study.
BD was also seen as too U.S centric. Global business leaders responsible for US sales and marketing gave priority to sales and product development in the U.S. at the expense of opportunities to grow overseas. That was particularly true in Asia. In response, a separate U.S sales and marking regional organization was created to level the playing field between regions with regard to prioritizing opportunities for profitable growth around the globe. This was a difficult change that took sole decision rights away from global business leaders. The honest conversation and the systemic change agenda that emerged from it enabled global business leaders to accept the loss of decision rights and commit to the changes.
BD’s matrix organization was also identified as a problem. Some of Vince’s early ideas about how BD should be organized were modified by the feedback. The result was equal direct authority for all three dimensions of the global matrix (businesses, functions and regions), a dramatic departure not immediately welcomed by global business leaders.
The innovation system itself, said the task force, needed major reformulation. This led to multiple changes, including a new innovation group that later evolved into innovation councils charged with developing priorities for investments. And a pool of capital was set aside for major innovations managed by BD’s senior team.
As a result of these conversations, Vince and his team were able to see the whole system, and the interrelationship between the various barriers. Reporting those barriers and the full agenda for change to the larger organization helped everyone see the transformation as fundamental, not just as a single change initiative. Vince also asked his business, regional and functional leaders to lead an honest conversation in their organizations. And he introduced other forms of honest conversations.
The results? Between 2010 and 2016, BD made fundamental changes in how the company was organized, managed and led; and it also acquired a company half its size. In most companies, changes of that magnitude occur only in the face of a near-death experience. During this period, the company’s new product development improved from 8% to 16% as a percentage of revenue. Revenue grew 24% and the stock price rose 39%, well above the growth rate for the S&P 500. Moreover, the culture changed: trust and commitment increased and courage to hear the truth became a new leadership standard.
“These results occurred, in part,” Vince says, “because the honest conversation enabled by the Strategic Fitness Process enabled me to refine my thinking, really energized our people and led to the kind of comprehensive implementation on which ultimate success depends.”