I've just had one of those airline experiences that folk talk about at dinner parties: a story of a flight delay, a re-routed connection and some missing bags. Yesterday, I was en route from Fargo North Dakota to San Francisco via Denver, to meet an Air New Zealand flight home. However on arrival in Denver, news of a three hour delay on the DEN–SFO sector came through, meaning I would miss the SFO–AKL flight.
Not to worry (#1) though. I asked at the United Club counter for help. Even though my domestic US and international sectors were on completely different bookings, United Airlines and Air New Zealand worked together to re-route me through Los Angeles to meet an alternate flight home. The agents, Dimitros at United and Alison at Air New Zealand, were tremendous. They went above and beyond. After sorting me out, United entered instructions to divert my bags to follow me on the new route. I then discovered that my DEN–LAX ticket had been upgraded to first class as compensation. Thank you Dimitros! The flight down to Los Angeles was very pleasant, as was the overnight flight LAX–AKL. However, on arrival in Auckland I discovered my bags hadn't been diverted as hoped—they were in San Francisco per the original schedule.
Not to worry (#2) though. The baggage people in Auckland called me over and explained the situation. They told me my bags would be on the next flight and that they would be delivered by taxi to my home! The baggage problem was not of Air New Zealand's making, yet they stepped in to provide a solution, at no cost to me. Wow, that's what I call going above and beyond. Thank you Air New Zealand!
The bottom line(s)? Delays happen. Schedules get changed. Bags get lost from time to time. There is no point getting hot under the collar. Stuff happens. The response is what makes the difference. The description above is exactly the sort of experience that makes one loyal, in my case to both Air New Zealand and the Star Alliance network. Thank you to everyone concerned.
Well, ICMLG is over for another year. The ACP organisation, and hosts Babson College (Phil Dover and Sam Hariharan, in particular), organised a great conference. Delegates assembled from over 20 countries from the five major continents. The theme of entrepreneurship provided a linking thread between the keynote speakers (Isenberg and Schlesinger), the paper streams and many conversations over coffee and food.
I particularly enjoyed the provocative sessions of Isenberg and Schlesinger, and appreciated the opportunity to test some of the ideas that are emerging from my research, especially with researchers from outside the Anglosphere. That feedback will result in some adjustments to the way that my thesis is written up. To everyone who offered feedback: thank you!
I commend this conference to all management, leadership and governance researchers, and practitioners with an interest in these and related fields. Next year, the conference venue is in the southern hemisphere, in Auckland New Zealand. The co-hosts will be AUT and Massey University. Certainly, I am looking forward returning the hospitality afforded to me in the international conferences that I've been fortunate enough to attend in the last couple of years.
Peter Harrington, of Venture Simulations in the UK, presented an interesting talk on the value of simulation to enhance training and learning, particularly in entrepreneurial settings. One of the biggest challenges that managers and boards face is that they don't know what they don't know. When confronted with extreme or extremely rare situations, boards often don't know how to react or what a range of response mights might be.
Many directors and entrepreneurs don't like being talked to or talked at. They like to do and to try. Harrington asserted that experimentation is good, and that the use of simulators is very useful for discovering what we don't know. Simulations help new pilots (for example) learn to fly without the expense or danger of using a real aircraft. They also help experienced pilots test themselves in extreme situations to practice, to make mistakes and to learn how to cope. Harrington provided a graphic example. The safe landing of US Airways 1549 in the Hudson River—the so-called "miracle on the Hudson"—can be attributed to, in part at least, the many hours Capt "Sully" Sullenberger spent in the flight simulator every six months, training himself to handle himself and the aircraft in extreme situations.
Boards, entrepreneurs and managers may well be able to derive significant value from authentic simulation activities, to expose themselves and their company to extreme market forces, strategic options and other situations and, in so doing, improve their capability to respond well. Such application would require greater levels of engagement in the learning and development process however, but I suspect the time spent would deliver a payoff quite quickly. If you want to to effect an introduction to Peter Harrington (he runs a commercial business developing and selling simulation systems), I'd be happy to do so. Please note I have no commercial or other interest in this offer, it is simply an offer to refer.
The keynote speaker to kick off the second day of ICMLG'14 was Dr Leonard Schlesinger. Dr Schlesinger was recently appointed Baker Foundation Professor at Harvard University.
The talk—which built on Isenberg's entrepreneurial ecosystems talk on day 1—explored entrepreneurial thought and action, the primary point being that entrepreneurs are action-oriented rather than thinking-oriented. Whereas the normal modus operandi of established companies is built on structure and linearity, entrepreneurial activity is rather messy. Further, the future cannot readily be predicted (despite the best attempts of consulting firms and mature businesses to do through through detailed and systematic planning processes). Therefore, different approaches are required. Instead of "Where to?", the question needs to be "Where to next?" As such, a degree of predictability comes through the process of taking short steps. The goal should be to map out the next few steps, and to be agile based on known resources and known landscape at that time.
Schlesinger had much to say, more than what is reasonable to share in this post. His talk would have been quite provocative for many listeners, but I revelled in his frank commentary. They have motivated me to pause and review of some of the assumptions that underpin my doctoral research work, which is great. I'll start that process on the flight from Boston to the Midwest on Saturday morning.
The organisers of ICMLG'14 provided delegates with a treat to cap of the first day of the conference—a guided visit to the Cambridge Innovation Center (CIC). After a somewhat circuitous transfer from Babson to CIC—in a yellow grade school bus no less—we were provided with a guided tour of the facility, after which we were given the opportunity to interact with many of the people that work there. The CIC is a huge facility. It's quite unlike anything I had seen before. Some notable points about the CIC (for me at least) included:
The concept of providing a large-scale facility for startups to come together, rub shoulders with each other and with supporting enterprises (from food, gym and back-office support, to funders, lawyers and other large-scale firms) makes sense. My early view is that this type of facility runs rings around incubators and small-scale clusters that you see elsewhere. The vital difference is the support of the large firms and the resources they bring.
We spent a couple of hours on the site, including receiving a briefing on the Smart Cities concept, before moving off to dinner at the Charthouse—a relaxing cap to a busy day.
Dr James Lockhart, of Massey University, New Zealand, spoke to the highly topical issue of governance accountability in cases of corporate failure or fraud. After introducing the topic and comparing rules-based and principles-based systems of governance, Lockhart discussed several cases of corporate failure that have occurred in recent years, including:
Lockhart's conclusion was telling: if boards and managers lose large sums of money they will be held accountable. However, if lives are lost different accountability rules will apply. The evidence analysed suggests that lives lost are accorded a lower standard of accountability. That seemed odd—tragic even—to Dr Lockhart, and to many members of the audience.
The question that lingered in my mind as I left the room? How long it will be (or how many more accidents will it take) before something is done about this glaring inconsistency?
Disclosure: James Lockhart is my PhD supervisor. However, the paper he presented was entirely his work and I had no involvement in it.
Maria Aluchna, of the Warsaw School of Economics, Poland, presented an interesting paper on the effectiveness of corporate governance in founder-controlled companies, using a sample of 100 listed on the Warsaw stock exchange. Some 62% of companies listed on the Warsaw exchange are controlled by founders, which was much higher than I would have guessed.
Aluchna's analysis confirmed research that has been previously reported elsewhere: that founder-controlled companies tend to have a lower number of shareholders in total, less effective corporate governance and higher degrees of active involvement—some would say interference—in the day-to-day management and operation of the company. The "less effective" presented no real surprise, as strong-willed founders can (and often do) exert higher levels of influence (including the overriding of board decisions and CEO priorities in more extreme cases). While the research is a helpful addition to the discourse, an important question was not tackled. Are higher degrees of involvement by founders (who are not executives) good or is the bad? Aluchna's indicated that research is underway to try to answer this question. I look forward to reading the results of her work.
The opening keynote speaker at the International Conference on Management Leadership and Governance (ICMLG) was Dr Dan Isenberg. His topic was A Critical Path to Entrepreneurial Ecosystems. Isenberg described entrepreneurship, challenged a few folklore beliefs and introduced a concept he called an entrepreneurial ecosystem.
Many scholars, business leaders, community leaders—and much of the popular press—would have us believe that the Google, Facebook, LinkedIn perspective of entrepreneurship is somehow the normal model to be pursued. (This being the rapid growth from nothing towards an IPO event 6–8 years later.) Isenberg challenged this view, and did so very strongly. He cited many examples of successful entrepreneurial businesses that are not necessarily startups or innovative or youthful or owners of small businesses. The data shows that many startups simply don't grow. Further, entrepreneurial businesses are far more likely to come from ideas that are written off as dumb or worthless by 'experts'. In contrast, entrepreneurial businesses are more commonly found in older, basic industries, and that they achieve sporadic growth over time.
According to Isenberg's research (and experience from several working examples), some of the critical characteristics of successful entrepreneurial ecosystems are actually quite different from those that are commonly regarded as being crucial:
Those characteristics that are commonly regarded as being desirable, but are actually much less important in reality include:
Isenberg's comments will unsettle many folk, particularly those with an involvement or association with incubators, clusters, angel clubs or local EDAs. However, the evidence is compelling (and not dissimilar to the thoughts on innovation that Dr Bob Brown shared at ANZAM in Dec'13). Folk associated with these groups could do far worse than to take stock, because the current approaches aren't working.
Isenberg's talk set an expectant tone for the conference. It challenged much conventional wisdom, and was a breath of fresh air.
Feltex Carpets, once a great New Zealand business went public a decade ago, in May 2004. However, the business was mismanaged and it went bust within two years. The $185m case against the board, brought by a former shareholder, is now before the High Court in Wellington. The primary defendant is the board (actually, the directors). The second and third defendants are Credit Suisse Private Equity (promoter of the sale) and Credit Suite First Boston Asian Merchant Partners (CSPE parent).
During submissions yesterday it was revealed that the company was likened to a lemon from which most of the goodness had been squeezed out. Further, one director referred to "these lousy shares" in an email several months before the company's IPO. These startling revelations place the defendants is a rather awkward position. How material will these pieces of evidence be to the overall case?
The case, which is expected to last nine weeks, is being watched closely by company directors, the IoD and many others, for it will more than likely set a precedent against which future cases of mismanagement and poor governance are measured.
The final version of the ICMLG programme is now available on the conference website. This year, over 40 peer-reviewed papers will be presented on March 20–21, on the wide range of topics below. If you are interested in a particular session or paper, please let me know. I will do my best to attend that session and report back.
In addition to the paper presentations, there will be a welcome reception; two keynote speakers; PhD and Masters colloquia; a visit to the MIT Cambridge Innovation Center; and, a conference dinner (of course!). Delegates are in for a busy two days.
Thoughts on corporate governance, strategy and the craft of board work; our place in the world; and, other things that catch my attention.