The Responsible Business: Reimagining Sustainability and Success
Read an excerpt from the book.
The Responsible Business: Reimagining Sustainability and Success
285 pages, Jossey Bass, 2011
The following is an excerpt from the book.
Chapter 12—Assessing Responsibility
Like many people, I often wish I knew the degree of responsibility practiced by the companies I do business with. I particularly wish I had this kind of understanding when I make investment decisions. Though some companies are very transparent about this kind of information, current rules and executive mindsets make it difficult for most people to really know the companies they buy from.
But it is possible to make evaluations with publicly available knowledge that provides pretty good indicators of intention and direction. For example Google, WR Gore, and Apple are three companies about which so much has been written, that it is possible to look beyond corporate rhetoric to get a glimpse of their intentions with regard to responsibility. All three of these companies are very successful. But to what degree can they be described as Responsible Corporations? And where are the arenas for improvement?
I interviewed two-dozen executives from companies who have done business with these three corporations, or have studied them carefully as competitors. Many have also been my clients and all are familiar with the ideas offered in this book. I engaged them in small group dialogues, the same method I recommend for companies that wish to do their own assessments. All the executives who participated in these dialogues wondered aloud how these three companies would assess themselves. In what follows I have summarized their thinking and agreed to keep them anonymous.
For the executives I engaged, user experience was seen as driving everything that Apple and Google do. Google explicitly states that if a customer has difficulty using its offerings, then it is Google’s problem. Google commits to reading the minds of its users by tracking patterns in their entries, much as a spouse learns to finish a partner’s sentences. It interprets spelling, so that users don’t necessarily have to figure out how to spell an inquiry before they can be helped. Google doesn’t ask its users to change, it continually changes itself to anticipate what’s needed and give better service. “I want a husband like that,” one of my executives said.
How was this possible? Although everyone agreed that Google competed vigorously to hire brilliant minds, there were clearly other factors that enabled it to “adopt a customer’s problem” as its own. Unlike Microsoft, Google manages the software for its users. Microsoft addresses problems every two to three years when it releases new versions of its products. Or it provides downloadable on-line upgrades that customers must be reminded of and agree to accept. By contrast, Google can correct a problem within weeks or days, because management of the software remains entirely in its hands. There is no reason for the user to modify, or to upgrade to a new version. The on-going service to the customer remains uniquely seamless, even invisible. Amazon and Salesforce.com have also developed strength in this arena, but the executives I spoke with saw Google as the master.
Google has also mastered the ability to manage multiple levels of offerings. A user can enter an amazing variety of options into a Google search box (including math questions) or go to Wonder Wheel and find a new organization of information. With such complex software, it would take many disks to load a program and many manuals to understand it. But Google makes a sophisticated search immediately available in many forms. . A single portal makes layers of questions with levels of background possible.
Google definitely offers a better life when a searcher can make mistakes and know someone has your back. A user does not want to be educated or sold on how great something would be if you could only learn to use it. Google or Apple offerings do not require a user’s manual. If it is not intuitive and even filled with surprises in how well it serves you, it is not adding to or giving the customer a better life. All the executives felt that both companies excelled here. And both have been focused on getting better over the last five years at creating a better life for customers.
For all three companies, a rare distributed understanding of customers was seen as a fundamental difference that gave them a competitive edge with customers in all markets. Each keep design and creative persons connected to the experience of the customer and user. The marketing department is not seen as a place to aggregate, hold and direct knowledge of the customer experience, much less be the interpreter for product design. In each organization, design and production members work from a real experience of customers, not an aggregated survey or functional filtered experience. In Google, product engineers are product managers.
Google tests and tracks continuously to interpret for people what they want and how they can work. This direct access to customer experience not only fosters creativity but instills in co-creators more passion for their role in the business. The contribution to the lives of others, literally in the case of Gore’s medical offerings, is compelling and fulfilling.
Google has famously provided its engineers an allotment of time with which they can do anything they want. A couple of the members of the dialogue group who work closely with Google revealed that this time is still available, but is being more focused in the direction it might take rather than leaving it wide open. There was also a criticism among the dialogue executives that this creative time is separated out from ‘real’ work rather than imbedded into all work. The executives drew on their own experience with Promises Beyond Ableness, which made ideation more wide spread with a higher return on the invested time. They had found that, using this process, the rate of implementation of new ideas, almost 100% after their refinement in the alignment process, gave everyone a sense of contribution. It is not just the freedom and autonomy that counts, but the contribution that matters for how that time and creativity is used. They also noted that having all members of organizations involved and not just the engineers as in Google’s case, also amplifies the sense of honoring the worthiness and the unique ability to contribute of all employees.
For Google, a couple of engineers known to our executives had mixed feelings when hired—not about working there but about being brought on with no defined role and being asked to find where they fit. They didn’t want to be fit into a round hole when they might be a square peg, but the sense of contribution and fulfillment that comes from teaming seemed delayed. In each case it took about nine months to find a home in which they knew they would belong. Each suggested they wanted to design a process that could support the discovery and creative nature of the unique opportunity they had identified, and they did find mentors who helped. In fact, one is using the 20% allotted open time to work on evolving the entry process without losing the character and motivation building it offers.
Google is not a heavily managed company, making expression of uniqueness more available for engineers at least. Microsoft is heavily hierarchical; 4 to 6 direct reports for each manager. This makes for many levels to manage a large team—5 managers for every 25 people on average. In Google, there are 40-50 people per manager. Google counts on a bottom up approach for innovation. The culture supports people feeling important without the number of direct reports indicating status. They empower people at the bottom with their 20% open time, freeing them from the management chain, and encouraging new directions for innovation. Without this there would be no amazing search engine, clever marketing and YouTube. Even the Android operating system stands out as a result of this open time.
But Google has started to modify and shape this time. While it promotes entrepreneurship, enables responsibility to the customer stakeholder, and provides the co-creator’s an opportunity to contribute, it seemed too much was being launched too fast. The large number of engineers, combined with incentives to launch new ideas and get awards was expanding both the number and frequency of new ideas. There were so many launches that it confused customers. So Google, a couple of years back, revamped the 20% time to focus on key strengths of the businesses.
One story of Google was especially enlightening on the subject of community. And it made the group understand how they might have thought of it. In 2009, FCC auctioned off the frequencies that has previously been analog as they converted to digital. This was expected to bring $10 million into the US Treasury. The government’s job was to get the highest price for taxpayers. In theory it was an open auction for the bandwidth, but it was likely that it would be bought-up by existing carriers in cable and wireless services in order to shut out competition. The bandwidth was auctioned in packages. Established carriers have a big lock on the whole thing and were expected to control it all. It was not an auction where anyone would have expected Google to be one the parties. But is was an issue that would affect their customers and they decided to act in a way to benefit them.
As it is now, a wireless customer cannot participate directly in the use of bandwidth but can only access it though someone who licenses and controls use. You have to contract with a carrier to play, and use their wireless or cable frequencies. But customers want to buy phones and go where they want without restrictions. Google could see this. So they announced to the FCC that they were willing to bid at a higher rate to set a higher minimum, which could greatly accelerate the bidding, thus serving the FCC’s mandate to return value to taxpayers. To do this they required that the FCC change the rules for how bandwidth can be used, and to ask for legislation to that effect. This new rule would offer a spectrum of bandwidth within which wireless service customers could go anywhere. Google succeeded in getting the FCC to change the rule for part of the bandwidth, even though they did not win the auction. They are credited with single-handedly setting FCC regulations in a new direction, knowing there would be no innovation without it. The taxpayer as an investor won, the consumer won. You still have to go to go to a carrier for cable, which holds back innovation in the field of recording and broadcasting. But maybe Google will find a way to tackle that next.
This was an act of community service. Why and how could Google do this? They hire people in all fields who are likely to think of such possibilities. And the entire culture is focused on pushing the limits. This is imbedding responsibility into HOW one does business, not carrying it out as a separate Corporate Responsibility program.
Google was also seen as using the Ten Things, a statement of Google’s values, as principles that affect communities of all kinds who have an investment in its success. The “do no harm” idea of the medical establishment has found a place in Google’s list. In their frame, it means it is quick to fix something if its communities see negative exposure or impact on them as users of Google offerings. The dialogue group did not see Facebook with the same overarching principles and ethic.
Google explicit states this as “you can make money without doing evil”. The executives found this exemplified in Google’s explicit disallowance of ads that are not directly related to the search terms. They want to have everything on the page be relevant to what the search was about. The advertiser must be able to provide useful information that the search party is searching for or the ad and money are refused. Google further adds transparency as to advertising vs search results, with the overt specification of advertised info as a “sponsor link” just below its ad. Also, no can buy a better page ranking than you earn by the algorithms search results.
Every executive involved felt that the Google’s IPO (Initial Public Offering) was an innovation of the same nature as their intervention with the FCC. And that it represented understanding regulatory dynamics and leveraging them for the good of all stakeholders. It is typical for investment banks to underwrite such ventures and set a floor or initial price. In exchange, they get a percentage of the stock. Of course, they set the floor price as low as possible so as to participate in the up side. Goldman Sachs is the biggest player in such IPOs. They promise that all the stock will be sold and to buy any remaining if that is not the case. They also get a fee for their effort. Prior to the IPO. Goldman Sachs takes a share and proceeds to sell more in a second round of offerings to other investment banks. They also get a percentage for this sale. They do this to ensure the IPO gets reasonable reception because the price is stabilized. However it is an artificial structure not reflecting any market value. It is not a free market model.
Google decided instead to create a Dutch auction. There was no setting of an artificial price. All bidding was initially opened to the public. Anyone could, and many did bid for a share. The investor set the price. Once all bids are in, the sales start from first bid and are sold at the rate bid until all shares are sold. Their own lowest price is what every one gets. The shareholder, not the investment bank, decides pricing of the stock. This approach brought authenticity into the IPO, making it operate in an open market. There were no middlemen to get a fee. The ultimate shareholder therefore, did not have to pay that fee. It was a form of unadulterated capitalism that benefitted investors directly and created a responsible market model for investing.
Read a blog related to this excerpt, "The Responsible Entrepreneur."
Reprinted by permission from the publisher Jossey-Bass, an imprint of Wiley, from The Responsible Business, by Carol Sanford. Copyright (c) 2011 by Carol Sanford.