A decade ago, while studying high-tech companies that thrived during the internet boom, Don Sull discovered something surprising: big, complex powerhouses like Intel and Cisco relied not on complicated frameworks to shape their high-level strategies, but on simple, specific rules of thumb.
Fast forward to today, and complexity seems to be the norm – in all organizations, regardless of size. There has been a positive shift from command-and-control bureaucracies to “distributed leadership” models that spread leadership functions across multiple levels and teams. But as enterprises seek more constant and collaborative innovation from increasingly autonomous employees, leaders must figure out how to engage teams without creating chaos. Sull, a global expert on strategy and implementation in turbulent environments, contends that simple rules will get the job done. Well.
“At one extreme, you can have long lists of rules and regulations, standard operating procedures, detailed checklists and so forth. You have a high level of control, but a very low level of autonomy. And when people lack autonomy, it stifles creativity. People tend to disengage. They tune out and don’t apply their judgments so well. Then you can go to the other extreme and say, ‘Anything goes. No rules.’ It is hard then to keep people all moving in the same direction; hard to keep activities aligned with strategy. Simple rules occupy a privileged position on the spectrum because they impose a threshold level of structure. So it’s not anything goes, but there’s still ample scope for judgment, creativity and initiative.”
As he shared with me in a recent interview for the MIT Thought Leader Series, simple rules replace bureaucratic stagnation. They enable firms to provide more freedom, but maintain control. They allow leaders to execute on strategy – and succeed. And they encourage the input and action of many rather than the few as we’ve seen in many enterprises where distributed or “shared” leadership is hard at work. In large, complex organizations, execution lives and dies with “distributed leaders,” Sull explains; it doesn’t come from the top, it’s driven by the middle. Same goes for the simple rules.
“When everyone in your organization is following the same rule at the micro-level, there are macro-effects,” he says. Simple rules:
- Help to avoid the paralysis that often strikes when people confront too many alternatives.
- Not only trigger people to act, but keep them from abandoning a decision once they have made it. Their simplicity increases the odds that people will remember them, act on them, and stick with them over time.
- Promote collective behavior by imposing a minimal level of coordination and leaving ample room for choice and individual interest.
Simple Rules in Action
Sull’s work with four cohorts of young president’s organizations is a terrific example of simple rules in action. Here’s the story in brief.
Each cohort clarified their strategy and identified a critical activity – capital budgeting, choice of customers, new product development. One of the companies, a dental implant company, was challenged with the issue of customer prioritization. There are literally hundreds of thousands of potential customers: dentists who could buy their products. Yet, they had a salesforce of only 12. The basic question – the bottleneck, the critical activity or decision keeping the companies from executing its strategy – was this: how should the sale force prioritize customers?
The cohort analyzed historical data and came up with a set of rules to help identify those customers worth approaching. “Did the dentist have a website?” Those with websites are typically more commercially oriented, more ambitious. “Were they of a certain age?” Dentists just starting their practice don’t have a lot of patients; those a little later in their career or nearing retirement, typically scale back their work. The analysis determined there was a sweet spot in terms of age where dentists were most likely to buy their products. Armed with these rules, the salesforce could much more quickly screen which customers were most aligned with Frontier Dental’s strategy. The results were quick and significant: in one year, the company’s revenues increased by 50 percent in a market that was decreasing by about 7 percent.
“By providing some guidance and structure, and focusing the behavior of the people who matter most for making decisions, but leaving flexibility to exercise judgment and creativity, the results can be dramatic,” Sull said.
Rules for Creating Simple Rules
Sull has four rules for creating simple rules.
- Define your strategy. Before you can figure out how to do something, you must first define what you want to do. Be precise.
- Identify the bottleneck. Resource allocation? Capital budgeting? Choice of strategic partners? What is really getting in the way of what you’re trying to achieve?
- Develop the rules. These aren’t one-size-fits-all; they’re guidelines intended to offer limited guidance to help you focus on what matters most. Keep them simple. Data drives decisions.
- Measure the results. Being able to say, “Look, here are the results we’re getting,” makes it much easier to get others on board, but also helps you make mid-course corrections if things aren’t working.
We live in a world of mounting uncertainty where people at every level of the organization must be prepared to make swift, difficult decisions, acting with clarity in chaos. As Sull explained to me, if leaders can do these four things and link back to their strategy, they can truly thrive in this new reality. He’s proven it time and time again. Can you do the same?