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Issue 30, Autumn 2007 EBF

Indepth

Leading Paradoxically

By Nick Shreiber and Bala Chakravarthy

Modern
leadership
requires the
ability to
manage
things that
appear at
odds, but in
fact are not.
Illustrations:
Robert Hunter

Corporate leaders face a more

contradictory at all. In the business

that high-performing organisations

complex world and must satisfy

environment, three aspects of

can successfully pursue several

more competing objectives than

paradox are worth emphasising:

seemingly contradictory goals at

they did even a decade ago. In

(1) Leaders are faced with

the same time.

order to maintain competitive

contradictory demands. For

advantage, the firms product

example, there may be the need

streams of research. The first

and services must be differentiated,

to pursue global growth

originates in practice, and comes

and yet cost competitiveness is

aggressively and at the same time

from Nick Shreibers career first as

also paramount. Corporations are

contain or reduce business risks.

a strategy consultant with McKinsey

expected to play responsible roles

Or there might be a need to

& Company and then as CEO of

in society, yet demands for the

differentiate a firms products and

Tetra Pak, one of the worlds leading

protection and enhancement of

services while at the same time

packaging companies for liquid

returns to shareholders are stronger

improving operational efficiency.

foods. He went on to test his

than ever. Top management must

(2) Common sense rebels against

insights through contacts with

personally vouch for the numbers

pursuing these contradictory

academic institutions including

that their firms put out, yet

demands simultaneously. For

Emory University, IMD and IESE.

it is also increasingly necessary

example, if top management

The second stream comes from

to delegate responsibility.

tightens corporate controls and

Bala Chakravarthys research on

also announces its intention to

leadership dilemmas, which has

modern world requires the ability

increase employee empowerment,

been conducted over the course

to deal with multiple paradoxes.

it will have to sell its ideas very

of ten years, first in the information-

Paradox is a noun of Greek origin

convincingly to avoid scepticism

communication industry and

that describes seemingly

on the part of employees.

through field research in the

contradictory statements which,

(3) Many of these paradoxes can

chemical, energy, pharma-

when explained, are not

be resolved. Our experience tells us

ceutical, food and retail

Leading a business in the

EBF Issue 30, Autumn 2007

This article is based on two

29

Indepth

In Brief

industries (see Chakravarthy 1997,

vision for the company a couple

measured the return on capital

Chakravarthy and Lorange 2007,

of years ago, seeking to make

invested in each of its customer-

for more details of this research).

Best Buy one of the first companies

centric stores on a daily basis.

> Modern business

Resolving paradoxes requires

in retailing to be truly customer-

Employees were trained on the

leadership requires

not so much common sense as

centric. The underlying idea was

basics of how shareholder wealth

the ability to deal with

uncommon sense the knowledge

to target the most profitable

was created.

paradoxes that is,

that apparently contradictory

customers for the company and

things which appear

demands can still be met. This

increase the companys share of

that helped improve return on

to be contradictory

certainty has to originate from

their spending. The other goal of

capital employed were thus readily

but in fact are not.

the top. As some experts put it:

customer-centricity was to enhance

identified. While employees were

> Creative thinking can help

Followers want comfort, stability

value for the firms shareholders.

urged to delight customers, top

overcome the problem

and solutions from their leaders.

of paradox and resolve

But that is baby sitting. Real

centricity does not necessarily

targeted customers would also be

apparent contradictions.

leaders ask hard questions and

translate to better returns for the

profitable customers. This helped

knock people out of their comfort

shareholder in the short term. For

employees recognise that

requires both innovation

zones. Then they manage the

a discount retailer like Best Buy,

shareholder value can be enhanced

and discipline it is not

resulting distress (Heifetz and

managing inventory turns is very

while delighting customers at the

a question of either/or.

Laurie, 2001). The resulting tension

important. Customer-centricity, on

same time. Asking employees at

often provides the spark that leads

the other hand, could lead to the

Best Buy to be creative in serving

to a creative solution.

holding of more stock-keeping units

the needs of their customers was

and slower inventory turns. Besides,

very energising and inspiring.

> For example, creativity

> Balancing competing

demands is a key aspect
of modern leadership, and

However, creating stress is

management had ensured the

all aspiring leaders must

not enough. Corporate leaders

both the cost of store fixtures

Simply asking them to add value

develop the skills to do so.

must do four key things in order

and added employee training that

for the companys shareholders

to resolve organisational paradoxes:

were needed to support customer-

would have been far less appealing.

(1) frame the challenge creatively,

centricity could hurt store profitability

(2) balance the organisational

in the short run.

context, (3) offer thought

While employees in the

Thus the two goals, delighting

customers and adding shareholder
value, may appear contradictory,

leadership to produce solutions,

customer-centric stores were given

but in reality they are not. By

and (4) provide moral guidance

a simple goal delight customers

creatively framing this paradox,

to the organisation.

the organisational context that

Best Buy has been able to improve

they were placed in helped focus

employee empowerment, customer

Creative framing

attention on the other goal, creating

loyalty and return to its

A useful way of managing

value for shareholders. Through

shareholders all at the same time.

paradoxes is to find a creative way

careful analysis, the company had

to frame the challenge. Paradoxes

identified seven profitable customer

can be daunting. The trick is to

segments. Each store was

Balancing the
organisational context

embed one of the competing

assigned one or two of these

The tension between functions and

goals as part of the context, and

customer segments to focus upon,

processes within an organisation

offer the other as the primary goal

as appropriate to the demographics

provides another source of

to be served.

of the markets that they served.

paradoxical discomfort that can

Consider the example of Best

30

On the face of it, customer-

Customer-centricity initiatives

Serving these customer segments

be addressed through good

Buy, the North American consumer

would enhance store revenues

leadership. It is often debated

electronics retailer. Its current CEO,

and profitability. Best Buy also put

whether a company organised

Brad Anderson, introduced a new

in place a control system that

along functional lines can embrace

Issue 30, Autumn 2007 EBF

cross-functional business

will improve process design

processes. The way to frame

as well as execution.

this paradox is to understand that

(5) Ensure functional excellence

well-run functions are absolutely

throughout the organisation. This

essential to a business; they are

will remind the organisation that

the sine qua non that provide the

it is not about process alone, but

capabilities for the smooth

about function as well.

operations and intra-functional

Another myth that pervades

learning without which a company

many organisations is that

cannot operate. Functional

discipline and structure are

excellence is part of the operational

incompatible with creativity and

context of a company, and senior

innovation. Discipline, it is argued,

executives should focus their

is useful to promote productivity,

energy on cross-functional

but it smothers creative work.

business processes that will enable

Skunk works, the garbage-can

functions to work in an integrated

model of organising, and similar

and efficient fashion across the

popular vehicles are offered as

company in a way that functions

moving towards a process

than on hierarchical seniority.

on their own could never achieve.

orientation are not just introducing

(2) Give the process leader

new ways of working and modified

responsibility over the most

process will improve the chances

and service quality by documenting

organisational charts. Often, they

critical function within the

of success for new products by

and spreading best practices

are fundamentally altering their

process. For example, the leader

weeding out poor ideas early on

around a company. Thus they

companies corporate culture, and

of an equipment supply chain

and concentrating a companys

avoid the infamous re-inventing

they must act accordingly.

process might also be the

scarce resources on those

Processes improve efficiency

of the wheel. And process

In fact, a disciplined innovation

functional head of the equipment

innovations with highest potential.

improvement can reach into every

process can be resolved with five

assembly plants.

It will also focus creativity where it

corner of a company, from

key actions that ensure alignment

(3) Choose appropriate metrics

is most needed: for example, on

improved factory floor operations

between functions and processes:

with which to measure process

product design.

to better corporate governance.

(1) Appoint process leaders who

performance. These must be

are recognised as high-level,

visible to and understood by all

also reduce misspent energy by

to bring process-thinking into their

respected individuals. Because

parties involved in the process,

bringing objectivity to decision-

organisations can be traced to the

they exercise authority over

in order to create true shared

making through the establishment

lack of visible commitment by the

people not under their direct

responsibilities.

of specific milestones, where each

CEO and senior leaders, or to their

responsibility, process leaders

(4) Conduct process audits.

project is evaluated against an

own confusion regarding whether

should be vested with informal

These assessments will ensure

objective set of criteria rather than

priority is placed on functions or

authority authority based on

compliance, but they will also

seat-of-the pants feelings.

on processes.

their knowledge and ideas rather

provide a forum for dialogue that

Many companies initial failures

The paradox of function versus

necessary to support creativity.

Process leaders must

be enthusiastically supported
throughout the change
programme, and visibly rewarded
when successful. The CEO and
senior leaders in a traditionally
functional organisation that is

EBF Issue 30, Autumn 2007

An innovation process will

While top management should

encourage the generation of new

A myth that pervades many

organisations is that discipline
and structure are incompatible
with creativity and innovation

ideas, it should also curb escalating

commitments to failed ideas.
A carefully designed innovation
process can resolve this paradox
by bringing together elements of
creativity and discipline.

31

Indepth

and achieved simultaneously.

Figure 1: The paradox of creativity versus discipline

(3) Time bomb

(1) Ensuring
the future

Creativity

(5) No mans land

(4) Mine field

(2) Boomerang

Discipline

A second area where perceptive

(1) Ensuring the future

> Continuous flow of new ideas
> Losers weeded out early
> Many high-impact winners
(2) Boomerang
> Over-structured process stifles creativity
> Tight cost control, but few real innovations

senior executives will exercise

thought leadership is on the rare
occasions when they must resolve
the paradox of how and when to
allow for exceptions to an rigorously
established core business process

(3) Time bomb

> Plentiful new ideas, but resources
spread too thin
> Missed opportunities due to lack of focus

such as the innovation process

(4) Minefield
> Wheel reinvented every time resources
spent on administration
> Priority-setting defaulted to most vocal managers

projects have the potential to be

(5) No mans land

> Paradox recognised but not resolved
> Can drift into boxes 2, 3 and 4

or unsupportive market research.

described earlier: how to decide

whether certain development
ground-breaking ideas, even if
opposed by internal scepticism
Ideas such as Sonys Walkman
or Tetra Paks Tetra Recart package
a carton-based package that
competes head-on with the metal
can for solid foods are examples

The leaders
of great
firms must
embrace the
genius of
the and
rather than
rely on
the tyranny
of the or
32

Thought leadership

higher inventory levels to allow

of products that required

Resolving paradoxes usually

greater manufacturing flexibility on

championing by top management.

begins with the state of mind of

the plant floor. Reducing lead times

These situations call for executives

an organisations leaders. They

while at the same time reducing

to rely on their judgement shaped

must reject the common sense

working capital appears to them

by prior experience, technical

rebellion mentioned in our

an unsolvable paradox. The fact

knowledge, the company culture,

introduction. To paraphrase from

is, however, that appropriate tools,

availability of financial resources,

Built to Last (Collins and Porras,

such as World Class Manufacturing

and other factors. Exercising this

1994), leaders of great companies

(WCM), can result in both goals

judgement is more art than

must embrace the genius of the

being achieved simultaneously.

science. The trick is to support

and rather than rely on the

WCM resolves the paradox

experimentation, while putting a

tyranny of the or. However, a

of pursuing conflicting production

stop to experiments that are not

state of mind will not on its own

goals by mobilising employees

yielding desired results.

resolve conflicts. Leaders must

and executives at all levels of the

be willing to benchmark their

company. It gathers individual and

type of thought leadership have

organisations against the best

group ideas, solves problems by

been seen over the years. The

in class and bring proven tools

attacking root causes, shares best

Nespresso system would not

and approaches to bear, while

practices across language barriers

have become a reality had the

empowering the rest of the

by using graphic tools,

CEO of Nestl, Dr Helmut Maucher,

organisation to do likewise.

systematises work flows and

listened to the pessimistic

For example, many traditional

Outstanding examples of this

brings order to the plant floor.

consumer surveys for the proposed

manufacturing managers will tell

WCM gives machine operators the

innovation. Similarly, Dan Vasella,

you that, in order to reduce delivery

opportunity to demonstrate that

CEO of Novartis, pushed for the

lead times, they must maintain

conflicting goals can be pursued

development of Gleevec, a cure for

Issue 30, Autumn 2007 EBF

an extremely rare form of leukaemia,

and received positive public

positive power of solving a sensitive

tries to respect the core values of

despite commercial concerns over

relations benefits in the process.

paradox. Corporate philanthropy

the firm in a manner that also

and shareholder value can be

enhances shareholder interests.

the small number of patients that

Following the tsunami, too,

would need this drug. Gleevec had

Abbot Laboratories Fund pledged

reconciled if a corporation carries

a projected market of only 6,000

$4m in healthcare products and

out philanthropic activities that

paradoxes requires a leadership

Recognising and resolving

patients per year, but it has

cash; Procter & Gamble provided

support the long-term strategy and

style that may itself be a

reinforced Novartis reputation as a

$1m worth of its PUR water

reputation of the company. This is

paradoxical blend of directing and

true innovator in the drugs industry.

purification sachets plus cash

enlightened self-interest.

listening. Senior executives have

Long ago, Henry Ford remarked

to partner organisations to deliver

that If I had asked people what

more than 150 million litres

they wanted, they would have said

of purified water;

faster horses. The successes

Johnson & Johnson

we have highlighted

of Nespresso, Gleevec and Fords

distributed medical

four approaches

through the use of informal

Model T are a matter of record.

supplies throughout

to dealing with

authority: listening to the

the region; UPS, an

paradoxes. The first

organisation; clarifying the leaders

Providing moral guidance

Atlanta-based

views the leader as

views; mounting a convincing

Another classic paradox is how a

package delivery

firm can enhance shareholder value

company, shipped up

while championing its core values.

to one million pounds of

Are these contradictory goals?

emergency relief supplies free of

did so successfully at Best Buy

the consequences to the company

They do not have to be. According

charge; FedEx shipped medical

when introducing customer-

of not pursuing them. When the

to the New York Times (September

supplies to the region on behalf of

centricity. The second views the

need for change is fully accepted

14, 2005) companies are becoming

several aid groups; and Northwest

leader as a balancer in the

by the members of an organisation,

more strategic in their approach to

Airlines teamed up with AmeriCares

organisation, blending function and

resistance to the pain of change will

philanthropy, tapping their particular

to transport relief supplies. Similar

process, creativity and discipline.

be much more easily overcome.

realms of expertise to make a

in-kind efforts were reported in the

The third calls on CEOs and senior

difference. When a tsunami

wake of the terrorist attacks of

executives to act as knowledge

Bala Chakravarthy is professor of

devastated parts of south-east

September 11, 2001, and the

brokers, bringing in expertise and

strategy and international management

Asia in December 2004, Tetra Pak

Hurricane Katrina disaster of 2005.

tools to help resolve difficult

at IMD, and also holds the the Shell chair

and some of its customers provided

In another case, Home Depot

paradoxes and to use judgement on

in sustainable business growth. Nick

the power to force their decisions

Conclusion
In this brief article,

on an organisation. Paradoxically,
they should rarely use that power.
The most lasting changes will come

a strategist, helping to

argument for the need for change;

frame the new challenge

and explaining clearly the benefits

creatively, as Brad Anderson

of change programmes as well as

free water and liquid foods

and Bell South teamed up with

when to have flexibility in systematic

Shreiber is executive in residence at IMD,

to victims, using the companys

Habitat for Humanity to help

approaches. Finally, there is the

and was formerly CEO of Tetra Pak

capabilities in supplying safe

revitalise neighbourhoods in South

moral side to a leader, as he/she

and a partner with McKinsey & Company.

and easily transported beverage

Atlanta. Both companies were

packages. Tetra Pak spent several

helping communities while at the

million dollars to support relief

same time promoting programmes

efforts in affected countries, notably

directly related to their core

Indonesia, Thailand and India. This

businesses: do-it-yourself activities

was a philanthropic act that helped

and in-home telecoms, respectively.

save scores of lives. But at the

It would be cynical to suggest

References
Chakravarthy, B (1997) A New Strategy Framework for Coping with Turbulence,
Sloan Management Review 38 (2).

same time, it also demonstrated

that these well-meaning acts of

Chakravarthy, B and Lorange, P (2007) Profit or Growth? Why You Dont

Have to Choose, Englewood Cliffs: Wharton School Publishing.

the use of its packages to a

philanthropy had the devious

Collins, JC and Porras, JI (1994) Built to Last, New York: HarperBusiness.

segment of consumers who may

purpose of boosting product sales.

not have experienced them before

Rather, they simply illustrate the

EBF Issue 30, Autumn 2007

Heifetz, R and Laurie, D (2001) The Work of Leadership, Harvard Business

Review, December: 131-140.

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