Part 2: CEO’s: Are you getting the most out of your time?
This is the second part of my two-part post on how to make the most of your time as a leader. If you haven’t read the first part, check it out here.
This section discusses the activities that CEOs should and should not prioritize in their companies. The advice is directed to the very top of the organization but the principles hold for leaders at all levels.
Activities that CEOs should delegate but don’t
Sustaining Innovations: Sustaining innovations improve your products. They can be incremental or radical improvements but all maintain the existing trajectory of performance improvement. CEOs spend a lot of time worrying about their sustaining innovations because they are critical to remaining relevant in core markets. However, because they improve margins and build on existing products and platforms, the organization is very motivated to pursue them and has developed significant experience executing them.
These projects require limited CEO attention. CEOs should make sure that the projects are realistic and improve on attributes that customers demand more performance from. But they don’t require the significant amount of attention that most leaders dedicate.
Capital Budgeting: Most organizations have robust capital budgeting processes that deploy standard, rules-based approaches, like Net Present Value, to determine which projects to invest in. Anything that has been codified into rules is part of a process and the CEO can delegate the task. CEOs should ensure that the capital budgeting process is tightly linked with the strategy and innovation processes, but beyond that, avoid investing additional time.
Activities that CEOs should manage personally
In their earnest attempts to manage activities that don’t require their day-to-day involvement, CEOs crowd-out activities that do require their involvement in order to succeed. This is one of the major reasons why incumbent companies fail to innovate and do new things; the organization doesn’t have processes that will prioritize and execute them and the CEO doesn’t personally take responsibility for them. What kinds of activities do these entail?
There are two general categories where the organization will fail to execute without the CEO:
1) Activities that don’t align with the existing Resource Allocation Process (RAP).
2) Activities for which the organization has no process.
The Resource Allocation Process (RAP) is one of the most powerful forces inside an organization and is important for every leader to understand. If you’re unfamiliar with it, I urge you to read my previous writing about it here. In short, the RAP determines where your employees will dedicate their scarce time and energy and where your organization will deploy its scarce capital. If an activity won’t gain impetus in the RAP, the CEO must lead it.
Disruptive Innovations are the most important activities that require the CEO to allocate resources. Because disruptive innovations typically deliver less margin and target smaller markets at the outset, the organization will not naturally prioritize them. To receive funding and attention, the CEO must personally allocate resources and take an active role in executing them. Even with active involvement, the CEO must fight the organization’s inertia to pursue other activities; therefore, the CEO must maintain her involvement until the innovation can stand on its own and receive investment through the RAP. Launching disruptive innovations is not a one-time event that requires the CEO but rather a process for which they must maintain their involvement throughout.
The second group that requires CEO attention contains activities for which the organization has no established processes. The CEO must be involved in directing the organization in these circumstances to create new processes that align with the organization’s strategy.
Business Model Innovations are a critical activity that fall into this category. Organizations attempt to innovate their business models infrequently, treating them as events rather than processes. Therefore, the CEO must take an active role in leading the innovation. Most CEOs don’t do this because new businesses start small and target emerging markets that don’t merit their attention based on the traditional prioritization approach. However, without dedicated CEO attention, the new business will be unable to pursue the new objectives. Forced to operate within the existing processes, it will conform to the organization’s current RAP and evolve into a sustaining innovation project for the core business.
Like disruptive innovations, business model innovations require ongoing attention from CEOs. The CEO must lead the new business unit until it is large and established enough to fund itself without competing with the core business for resources. In order to delegate the creation of new, innovative business models, the CEO must create a process for business model innovation. This means pursuing business model innovation frequently enough (with success) that the organization is able to standardize its approach.
Adopting the capability-based approach to leadership activity will feel uncomfortable at first but CEOs who take this approach will find that they have significantly more time to pursue activities that are vital to the organization’s long term health but don’t conform to its existing processes.