LLC: A Case Study of Organizational Learning at EDS

Chapter Six, Organizational Strategy

"The Need to Transform the Eagle"

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Activities occurring within the EDS corporate strategy group were also instrumental in creating an environment conducive to the concepts and methodologies of organizational learning, thereby, facilitating the creation and the acceptance of the LLC project. Drislane described EDS as "an information technology company whose currency was in organizational thoughts." This chapter will explore, from a strategic perspective, the conditions within EDS at a time just prior to and during the initiation of the LLC program.

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Corporate Initiatives

The EDS strategic process resulted in several corporate initiatives in 1992. Some of these initiatives were intended to "reinvent" the corporation to ensure its success in the rapidly changing global marketplace. EDS management identified leadership as a critical success factor for EDS and called it a "differentiating behavior". Two of the corporate initiatives pertain to the LLC program, Corporate Initiative Three (CI3) and Corporate Initiative Five (CI5). CI5 was a corporate strategic thinking and planning activity. CI3 was a parallel initiative to CI5 and was created to develop the required leadership of the future. CI3 addressed the current leadership team and called for the selection and preparation of the next generation of leaders.

The corporate strategy planning initiative, CI5, was completed differently than EDS' traditional planning process. Rather than only have the top leaders get together and decide where EDS needed to go, people were included from all across the company. Getting people together and talking about business issues led EDS management to believe that existing business practices would not allow EDS to be successful in the future. There was a great demand for something different.

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Why Transform?

EDS viewed "transformation" as absolutely critical to their corporate survival. EDS looked at the life-span of large and successful corporations and was amazed by how short they actually were. They believed that most of the top companies from eighty years ago were not in existence today. A quote from a Senge article describes the situation this way: "Over the long run, superior performance depends on superior learning. A Shell study showed that, according to former planning director Arie de Geus, a full one-third of the Fortune '500' industrials listed in 1970 had vanished by 1983. Today, the average lifetime of the largest industrial enterprises is probably less than half the average lifetime of a person in an industrial society. On the other hand, de Geus and his colleagues at Shell also found a small number of companies that survived for seventy-five years or longer. Interestingly, the key to their survival was the ability to run "experiments in the margin," to continually explore new business and organizational opportunities that create potential new sources of growth." 35

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Alternatives

EDS management began thinking about this after they met with Gary Hamel, of the London Business School, at a seminar. Gary used a slide that listed the most successful companies of twenty years ago and contrasted that with a similar list generated in the early 1990's. The company names on the two lists were strikingly dissimilar. Today's most successful companies were not on the list of twenty years ago. Many of the top companies from twenty years ago do not exist in the same form today. EDS considers itself, and is considered by others, to be a successful company. They have been consistently profitable and have experienced tremendous growth. They believe themselves to be the premier provider of information services. EDS was concerned by the history of previously successful companies. Might their current success foreshadow their eventual decline? EDS asked, "Why do great companies fail?" "Is it inherent?" "Are corporate life spans limited?" The answer to the last question was obviously no, in that some companies have been around for a long time. EDS management believed EDS was currently a top company and intended to remain so for the next twenty years. By asking why do great companies surrender their leadership position the EDS Strategy group found the following conditions: 1) this occurred in industries that were in a competitive transition period, 2) had unrivaled track records of success, 3) had abundant resources, 4) had embedded business methods that had contributed to prior success, and 5) the original visionaries that formed the company had left its employment. EDS management recognized that these conditions were similar to their own current state of affairs. One of the potential errors was mistaking market momentum for leadership.

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The Concern

Since EDS was flush with financial resources the attitude that they could out spend the competition might develop. Past successful business practices had become ingrained in the corporate culture and could potentially be impossible to change. If you have more builders than architects, the organization begins to lack vision. 36 The sense of urgency to change was not evident. Failure drives change. The more difficult challenge is to change while a company is very successful. EDS management considered their two options; maintain the status quo and change when failure knocked on their door, or attempt to change while they were still successful, trying to avoid failure altogether. Since their past business practices have assisted in their success, there will be a natural resistance to change. The risk exists that the industry might change faster than the firm. The lack of urgency and the inability to change, or escape their past, had more to do with the mental models of the management team than the evolution of technology, the competition, or the market place. EDS management further concluded that the ability to adapt, grow, innovate and learn were sustainable capabilities and that perhaps, these competencies may be the most important sustainable competitive advantages of the company.

There are several factors or pressures requiring EDS to look at things differently; the geographic market for EDS is expanding, technology continues to change and evolve, the competition is multiplying not only in foreign markets, but from consulting firms competing in information technology. Former suppliers such as IBM are now competitors. The stability of EDS' work force is changing. Per Clark, "For the first twenty-five years of EDS history the average age of employees was thirty-one years old with two years of service. Now the average age is thirty-six years old with six years of service." 37 EDS management wanted to have their vision, strategy, culture and practices aligned. They knew they would have to change their practices in numerous situations. On the people side, for example, they knew they would have to change how they select, orient, develop, reward and measure employees. They needed to address leadership development as the means to address the culture of the company. Many companies re-engineer processes, but without modifying the culture, maximum benefits are not achieved. EDS developed the plan to do both pieces.

EDS is a service company. Their only product is the service they provide to the customer. Clark commented, "Once you look at the company in this way, it is obvious that people truly are the only sustainable competitive advantage for EDS."

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LLC Is Proposed

During its development, CI5 focused on changing the mental models of EDS management by not creating strategic plans. Some of the EDS leadership members had attended one of Kofman's three day sessions on organizational learning. These managers liked Kofman's approach and invited him to address the CI5 group and conduct the same three day organizational learning session for the CI5 group. The leadership concluded that it is impossible to get permanent, long lasting transformation in three days. This concern created an appetite and a willingness to explore a more intense effort at cultural transformation. When LLC was proposed, EDS management recognized it as a potential avenue to achieve their goals and they were eager to try the program. One of the objectives of LLC was to achieve long lasting personal change.

EDS corporate strategy evaluated the following model, introduced by Kofman: Traditional strategies are developed and executed with the best information available. If the world becomes the world envisioned when developing the strategy, then success follows. If there is a mismatch, there is less success than expected and then a new strategy is developed and implemented. 38 EDS management believed that not only does the strategy require revision, but so do the mental models that developed the unsuccessful strategy. The EDS strategy group's charter is to change the mental models of the EDS management team and the rest of the people in the organization. EDS management believes this is critical to their survival as a company. They also want to have the foresight to see failure on the horizon and the mental agility and human competencies to change direction to not only avoid disaster but to capitalize on the changing environment. Again, LLC was a direct link to these objectives in that the LLC program was intended to provide learning skills to improve the ability of EDS leadership to change directions.

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Leadership Model

The Leadership Model of EDS has three basic components; Leadership Attributes, Fundamental Traits and Knowledge and Skills. CI3 defined and framed EDS' leadership values, focusing on leadership rather than management; on attitude rather than the task. The following Seven Leadership attributes were the result of CI3: 39

Strong Personal Convictions

Leaders demonstrate strong personal convictions to a core set of beliefs and values that they live their life by, and to a select set of key issues and actions that they believe are vital to the success of the unit.

Visionary

Leaders have a well-developed sense of what the future will bring and seek the responsibility for the creation of and the commitment to a vision for the future.

Emotional Bonds

Successful leadership requires establishing emotional bonds of trust with individuals and the team.

Inspirational

Inspirational leaders stretch the team to a higher level of excellence and achievement, while expanding each individual's comfort zone.

Team oriented

Leaders recognize and demonstrate that a team can achieve more than a collection of individuals can.

Risk Takers

Leaders understand that gain can only be achieved with a commensurate level of necessary risk.

Drive to Excel

Leaders constantly seek to improve themselves, their team and EDS.

EDS intended that these attributes be used to select, coach, develop, assess, recognize and reward the leadership of EDS.

EDS management next identified 1) the fundamental traits and 2) the knowledge and skills they felt were necessary prerequisites for the leadership attributes. Per Clark, "... we believe the fundamental traits are well established by early childhood and will only change based on a significant emotional event or in small increments over a long period of time. These traits are very important as EDS views people for leadership positions as well as being selected to be brought into the company." The fundamental traits include: personal character, willingness to learn, self-esteem, desire and courage to lead, transformational, positive attitude and energy. 40 Knowledge and skills are those components that have an unlimited capacity for growth and development and include building trust, team building, change management and empowerment as well as many others. 41

Per Clark, EDS developed the "Five Learning Values" as the basis for global diversity and organizational learning. The values coupled with appropriate training are intended to move people from awareness to action. These values, that are core to LLC, are: 42

• Humility is about understanding that every person has mental models. These models are all unique and are all incomplete. Therefore, there is always the opportunity to learn something from everyone.

• Curiosity says a person can not learn about the mental model unless they ask questions. People need to balance advocacy and inquiry in order to learn and experience learning edges.

• Empathy is the fact that while all people have many differences they all have the common basis that they are human beings. As a result of this common basis we can empathize with each other.

• Trust is simply the attitude or belief that all folks do their best based on their mental models. Everybody starts with the benefit of the doubt vs. the prove it to me attitude.

• Self-esteem means "I may not have all the answers, and it's "OK" to say "I don't know", "I'm sorry" or "I need help".

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LLC Comes Together

The activities and the resulting output from CI3 and CI5 helped create an environment within EDS that fostered the initiation and the nurturing of LLC. All of this came together internal to EDS and provided the support structure to facilitate the execution of the LLC program. CI3 was directed at creating a new breed of leadership and the development of the intrinsic skills and abilities in the EDS leaders of the future. CI5 provided a strategic vision of what type of company EDS wanted to be in the future. LLC was intended to provide the methodology to achieve the visions established by these initiatives. Drislane commented: "It would have been tough to do LLC without the vision established by CI5."

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