“Leadership is the capacity of a human community to shape its future.” — Peter Senge 1
When Satya Nadella took over from Steve Ballmer as CEO in February 2014, Microsoft had been “universally viewed as spiralling toward obsolescence, having missed almost every significant computing trend of the 2000s—mobile phones, search engines, social networking—while letting its main source of revenue, Windows, stagnate.” 2
This sentiment was reflected in its market capitalisation — just $318 billion in February 2014, down from $392 billion thirteen years earlier in June 2001.
By April 2019, five years into Nadella’s tenure, Microsoft’s market cap hit $1 trillion. Today, a further three years on, it stands at $2.25 trillion. 3
How did Microsoft achieve such a spectacular turnaround from a declining dinosaur slowly sliding towards oblivion into an innovative, agile, adaptive organisation worth seven times as much in just eight short years?
Here’s what Nadella told Business Insider in 2017: 4
“One of the things I’ve come to realize, and I think all of us at Microsoft have come to realize, is that there are two important things determining long-term success.
The first is the sense of purpose and mission that is enduring.
The other one is culture. These are the two bookends to me.”
He says his inspiration for transforming Microsoft’s culture came from a book he read a couple of years before becoming CEO — “Mindset” by Carol Dweck:
“I was reading it not in the context of business or work culture, but in the context of my children’s education. The author describes the simple metaphor of kids at school. One of them is a "know-it-all" and other is a "learn-it-all", and the "learn-it-all" always will do better than the other one even if the "know-it-all" kid starts with much more innate capability.
“Going back to business: If that applies to boys and girls at school, I think it also applies to CEOs, like me, and entire organizations, like Microsoft. We want to be not a “know-it-all” but “learn-it-all” organization.”
Nadella is one of very few CEO’s to have taken organisational learning seriously enough to have turned it from rhetoric into reality.
He’s certainly achieved highly visible results from embracing learning at the organisational level — results that even the most diehard of business traditionalists can’t ignore.
But if you’d have told those of us at the forefront of the organisational learning practitioner community 30 years ago that it would take until the third decade of the 21st century to see such incontrovertible evidence of the power of creating a learning organisation, we’d have been amazed and depressed in equal measure.
I’d become hooked on organisational learning in 1992 when I read Peter Senge’s The Fifth Discipline, the book that launched the organisational learning movement and was described by Harvard Business Review as “one of the seminal management books of the previous 75 years”. 5
My involvement in the organisational learning community stepped up a gear in 1995, when Arthur D. Little (ADL) acquired Innovation Associates (IA), the consulting firm established by Charles Kiefer, Peter Senge, and Joel Yanowitz.
At the time, I worked for the open innovation services laboratory Cambridge Consultants, then an ADL subsidiary. 6
The head of ADL’s Technology and Innovation Management practice, Jean-Philippe Deschamps, often brought me in to help ADL clients create cultures of innovation.
With the IA acquisition, my work was suddenly much more mainstream in ADL, so I joined the combined ADL + IA OL team full-time.
Then followed five fabulous years working closely with many of the world’s leading OL practitioners. 7
Until disaster struck.
ADL had over-exposed itself to the tech stock bubble, and when this burst in 2001, ended up filing for Chapter 11 bankruptcy protection. 8
As ADL retrenched, our happy band of leadership and learning warriors dispersed in various directions.
I’ve remained close to many of my colleagues from those early days, including working together since with various clients.
Then in 2009 I was elected a Director of the Society for Organisational Learning (SoL) UK, and served as UK representative on the Global SoL Leadership Team.
This brought with it the great fortune of eight years working closely with SoL UK Chair Arie de Geus, the former Head of Group Planning at Shell who Peter Senge says introduced him to organisational learning. 9
Arie’s 1997 book The Living Company built on the learning theme, asking: “what if we saw an organisation as a living system?” — a perspective that’s returned to prominence recently under the rubric of organisational ecosystems. 10
A central theme in my professional work has been Peter’s deeply insightful definition of “leadership” as “the capacity of a human community to shape its future”. 11
What’s so immensely powerful about this definition is that it inclusively frames the traditional view of ‘leading’ as the exclusive preserve of a few folks in big hats — a view still deeply embedded in many organisations, as indeed it was at Microsoft before Satya Nadella became CEO.
The problem with this legacy view of leadership is that when only a few high-ups get to seriously participate in decision making, the capacity of the whole organisational community to shape its future gets massively curtailed. 12
In my work with clients throughout Europe, Asia and the US over the past 35 years I’ve learned that the capacity to shape the future of an organisation ultimately depends on how - and how well - it does three vital things:
How and where these three activities happen, and how well they interrelate, interconnect, and interact defines each organisation’s unique culture — “the way we do things round here” — which people know not through mission, vision, values, or purpose statements but through their own lived embodied experience. 13
As with pre-Nadella Microsoft, when decision making gets dominated by senior people with ‘know it all’ attitudes, many of the decisions that get made don’t make sense to people in the body of the organisation tasked with putting them into action.
This deeply debilitating dysfunction can only be overcome by realising that the richest sense making almost never happens at the top, but in the body of an organisation.
High quality sense making occurs in the body of an organisation because that’s where the real action taking occurs, where people encounter customers and their evolving wants and needs, with colleagues who bring diverse perspectives, and with ways of working that either create, or frequently, destroy value. 14
When senior executives wilfully or unwittingly perpetuate a ‘know it all’ culture through traditional legacy approaches to sense making, decision making & action taking, a future-fit ‘learn it all’ culture of innovation, agility, and adaptiveness will forever prove elusive.
And if Microsoft’s spectacular example isn’t convincing enough as evidence of the upside, just reflect on how the last couple of years has clearly demonstrated how increasingly uncertain and unpredictable our world is becoming.
Tempting as it may be, no organisation can realistically return to the pre-pandemic charade of cooking up a cunning strategy and expecting to simply roll it out through a cascade of operating plans. 15
If Covid-19 taught us anything, it’s that any strategic plan an organisation had in January 2020 wasn’t worth the paper it was written on three months later.
Organisations stuck with sclerotic strategies, structures and systems that constrain decision making by involving only a few overloaded high-ups will find themselves unfit for a future that in many cases has already arrived.
To thrive in uncertain and unpredictable times requires a culture of innovation, agility, and adaptiveness where sense making, decision making & action taking are ever more tightly coupled, rapidly and repeatedly iterated, deeply embedded and widely distributed throughout the organisation.
In other words, three decades after it first rose to prominence, organisational learning is needed now more than ever.
Peter Senge will be in the UK to deliver the annual Mike Jackson Lecture at the Hull University Centre for Systems Studies on Tuesday 5th April 2022.
It’s a hybrid online and in-person event, with tickets available here.
I’ll be there in person. If you will too, I look forward to seeing you.
Peter Senge remained at MIT, but I had the great fortune to work with Charlie Kiefer, Joel Yanowitz, Bryan Smith, Jenny Kemeny, Chuck Conn, Mike Goodman, and others.
Ibid - Dance of Change
For more on this theme see this earlier post on Decisions that don’t make sense.