Old-school competitive advantages that depend on all-knowing leaders and better mousetraps are dead. In today’s competitive, rapidly evolving global marketplace, says Professor Edward D. Hess, the only way to develop and sustain a competitive advantage is to create a “learning organization.” Here, Hess explains what that means and shares four key points to keep in mind as your company makes the transition.
Like all business leaders, you know that your organization’s survival and success depend on maintaining a competitive advantage. So you’re constantly focused on reaching more of your target market, making your product that much better, and expanding your services.
Those are great strategies to drive your goals…if you have a time machine and are doing business in the previous century. But today? Technology has reduced the capital needed to start and build businesses, reducing an historical barrier to entering the marketplace. And new competitors can reach your customers from thousands of miles away. Technology has also given customers tremendous power in comparison shopping your product and telling the world how happy or unhappy they are with your product or service. That doesn’t bode well for the staying power of the better mousetrap you’ve just built (or for the lifespan of your company, or for your job security). Standing still is a losing strategy in many cases.
“To stay relevant, companies can no longer rely on traditional competitive advantages like location, capital, lack of choices for customers, and lack of market transparency; instead, they must transform themselves into ‘learning organizations,’” says Edward D. Hess, author of the new book Learn or Die: Using Science to Build a Leading-Edge Learning Organization. “Today’s technological and marketplace developments necessitate faster adaptation, and adaptation requires institutional learning processes such as critical and innovative thinking, critical conversations, and experimentation.”
In other words, the only way to sustain a competitive advantage is to make sure your people have the tools, motivation, and support to learn better and faster than your competitors. In his new book, which is packed with research and case studies, Hess shares his detailed formula for building what he calls a High-Performance Learning Organization (HPLO). Here, he spotlights four key points to keep in mind when building a learning culture:
Leadership must shift toward “coaching-ship.” Unless you’ve been living under a rock, you know that command-and-control structures with Theory X leaders, who think management’s job is to use rewards and punishment to direct, motivate, control, and even modify employees’ behavior in order to get organizational results, are on their way out. If we want adaptable learning organizations, we need to humanize our management models, and that requires many leaders and companies to fundamentally change their attitudes and behaviors toward employees.
Personal and intellectual humility, empathy, emotional intelligence, and self-management are required leadership capabilities within HPLOs, because these qualities nurture the very human capabilities that are at the root of adaptation and innovation: the ability to ideate, create, emotionally engage, and learn in conditions of uncertainty, ambiguity, and rapid change.
“Instead of ‘knowing and telling,’ which can cause progress-limiting dependence, leaders should work with employees as coaches, or even allow them to experiment on their own,” Hess instructs. “I recommend following Intuit’s example by consciously choosing to bury the ‘modern-day Caesar’—the kind of boss who gives thumbs up or down on all decisions. In India, this policy allowed young Intuit innovators to conduct an experiment on helping farmers get the best price for their products—even though management initially wasn’t interested in the idea. The result: 1.6 million Indian farmers now use the successful program these innovators developed.”
Your work environment must be an emotionally positive one. Positive emotional work environments are no longer negotiable. They’re a requirement. Positive emotions are associated with openness to new ideas, better problem solving, openness to disconfirming information, less rigid thinking, resilience, creativity, collaboration, better recall of neutral or positive stimuli, and mitigation of ego defenses. (Negative emotions inhibit all of these things.) So a positive emotional state is essential to developing employees who are motivated, productive learners.
“If you still feel that building a positive workplace environment is too ‘soft’ to suck up your organization’s limited time and energy, consider that none other than the U.S. Army has recently begun an initiative to promote positive psychology,” Hess says. “The training includes learning about emotions and their effects on the body and mind, learning how to manage emotions, reducing the frequency of negative emotions, and increasing the frequency of positive emotions. It’s directed toward producing soldiers and leaders who can adapt to new and challenging situations and uncertainty—that is, learn.
“Your people may not be tested on a literal battlefield, but these skills will still be crucial in helping you maintain a competitive advantage as your organization navigates the cutthroat landscape of the global marketplace,” he adds.
High employee emotional engagement is a necessity. It stands to reason that if employees don’t have an emotional investment in your company and their futures in it, they won’t be motivated to learn. But how do you transform “engagement” from a meaningless buzzword to a reality? Hess says the research of Edward L. Deci and Richard M. Ryan and their Self-Determination Theory shows us it comes down to meeting employees’ needs for autonomy, effectiveness, and relatedness. And these needs are most likely to be met when individuals feel respected, trusted, and cared for, and feel that they can trust the organization and its leaders.
“These concepts are easiest to understand when you look at them in action, and UPS is one of the best examples out there for operationalizing emotional engagement,” Hess shares. “Founder Jim Casey viewed employees as partners, and maintaining his values over the decades has led to policies that are employee-centric and hold management mutually accountable to employees: an egalitarian ‘open door’ policy for employee input, an employee ‘free agent’ program that allows any UPS employee to move anywhere in the company and advance, mentorship and training programs, and more. As a result, UPS has maintained a high retention rate and built a deep bench of long-tenured, adaptive employees.”
Employees need permission to TRY and FAIL. Abraham Maslow aptly stated that an individual would engage in learning only “to the extent he is not crippled by fear,
“Some companies are already on this journey,” comments Hess. “Bridgewater Associates, the biggest and one of the most successful hedge funds in the world, is passionate about the power of mistakes. Bridgewater actually encourages employees to get excited about their mistakes because each error that employees learn from will save them time, energy, and stress (and the company money) in the future. Employees are instructed not to feel bad about their mistakes or failed experiments, or those of others. Acknowledging mistakes, confronting weaknesses, and testing assumptions, the company believes, is a reliable strategy for long-term success.
“Another company that puts the permission-to-try-and-fail principle into action is W.L. Gore & Associates, Inc., which is known for manufacturing innovative products like GORE-TEX® fabric,” Hess adds. “All associates are encouraged to experiment using the ‘Waterline Principle.’ There’s an understanding among the associates that if they see a need, and failure isn’t going to sink the entire ship, they should just go do something about it. If it does look to be risky, however, consultation with other associates is required before taking action.”
“One final point to keep in mind: Transforming an existing organization into a learning organization requires the change to start at the top,” Hess concludes. “If you’re a leader or manager and you want to change your organization, the best advice I can give you is to change yourself first. Good intentions are not enough. Behaviors are what count.
“So role model how to think and communicate better. Admit your ignorance and your mistakes. Be authentic. Act with caring humility. Engage people so they feel like they have some control over their destinies. Be honest, have high standards, and hold everyone, including you, to those standards. Then—and only then—will you earn the enthusiastic buy-in of your learners and set the stage to build and sustain a competitive advantage.” SSA
Edward D. Hess is a professor of business administration and Batten Executive-in-Residence at the University of Virginia’s Darden School of Business and the author of 11 books, including Learn or Die: Using Science to Build a Leading-Edge Learning Organization, by Columbia University Press (September 2014).