Transformational change in an era of uncertainty

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Speaker 2: (singing)

Nathan Anibaba:
Jamie Cleghorn is a partner at Bain & Company. He is a member of Bain technology and customer practices. Jamie leads Bain’s B2B commercial excellence practice in the Americas, leads Bain’s go to market transformation and sales place system solutions globally, and is one of the developers of the Elements of Value. He works with CEOs and executives teams during periods of transformational change, with a focus on strategy, growth, and organizational effectiveness. He has worked across technology, telecoms, industrials, healthcare, and business services to name a few. Jamie Cleghorn, welcome to ClientSide.

Jamie Cleghorn:
Thanks for having me, Nathan, very happy to be here.

Nathan Anibaba:
So your background and experience is super fascinating. You’re working with CEOs of some of the biggest companies around the world today to improve organizational effectiveness, help them grow. Tell us a little bit more about what the common challenges have been of the leaders that you are speaking to and how have they changed over the last 18 months or so?

Jamie Cleghorn:
Great question. In some ways they haven’t changed at all. The challenge statement remains almost precisely the same, which is how do I get great product market fit, how do I hit that raw customer need, and how do I get out there in a way that customers can get in front of my product and experience it. However, as we all know, with COVID and with so many other things that have challenged our world in the last couple of years, there are a lot of new dynamics. And as we think about that, what we see is that the traditional scales have really fundamentally shifted. So the things that used to constrain our business’ time, distance, capital, really a lot of those have completely changed.

So what we’ve seen in COVID is that we had five years of cloud acceleration and technology acceleration in a year, so that has… For anyone that lives in those worlds, or who sells into those worlds, their five year plans became one year plans all of a sudden. So they had to reinvent those plans on the fly. We see massive capital deployment. And if you look at some of the funds out there, like Tiger or the vision fund at SoftBank, or just the unfettered pace and rate of capital deployment, there’s so much money being spent right now. And that’s going both into new innovation as well as digitization of old businesses, so there’s just a lot of degrees of freedom to play with things and the rules change and the competitive set changes quickly. Distance stopped being meaningful in many ways. We’ve really seen that in our business and all of our clients have seen that. And you and I are on the phone right now, we’re staring at each other across an ocean, but on a video screen, and I’m sitting here in Chicago this morning. So physical distance is almost gone.

And then really the scorecards are changing quite rapidly. So profits still matter, let’s not make no mistake about that, but I think the human capital base is really screaming for purpose, and we’re seeing purpose in sustainability, we’re seeing it in D&I, we’re seeing people evaluating their lives and saying, “Is this the job I want? Is this the life I want?” So it’s just a very dynamic world we’re living in right now, and the rules of the game are changing. So that’s exciting. The scorecards are different, though. I don’t think anyone knows what good looks like in that world. I was talking to some of my colleagues at Salesforce, and actually, maybe I picked this up for an article, but when COVID happened, they set a goal of, “Let’s do a million minutes of Zoom calls.’ They had no idea if the right measure or not. And it turns out that it was the wrong measure. They hit 5 million. So I just think our ability to know what good looks like on these new measures isn’t calibrated yet. So there’s just so much dislocation.

And then in my world, which is really about growth and go to market and how do you get that right innovation and how do you get it to market quickly, everyone became an inside seller. All sales became virtual. We just don’t know, we just know how to do it yet. And we’re learning quickly. We’re becoming experts on that. So that’s some of the… Some of those have been hard. I think one of the things that’s been super exciting, though, is that people’s ability to change has gotten better. And not that they’re necessarily more skilled at it, but they’ve just had to. And we’ll probably talk about this more today, because we do so much work around organizational alignment and getting organizations to change, but there was no choice but to change. So it’s kind of like that first time you go to physical therapy after you broke a bone and get out of the cast. That first time you move those muscles again, it’s like, “Oh, that hurts.” But you did it.

So I think there’s been that great first PT experience that everyone in every job everywhere has had, which is, “Boy, we did change. We’ve proven to ourselves we can change. So how do we do it again?” So the question shifts from, “Can we change? Well, we know that. The answer is, do we want to?” And that’s the challenge for leaders, is to cast a vision in this more purposeful world, where you can get a vision that employees wake up every day and say, “I want to do that. I’m excited about doing that. That’s how I want to spend my energy. That’s how I want to spend my days.” So that’s really, I think, the crux now is how do you create that compelling vision for people to rally around and get excited about and show up to work every day and show up in their lives every day and be excited about?

Nathan Anibaba:
And as you say, part of your role is really helping CEOs define what their go to market strategy should look like, what their growth strategies should look like. A big challenge for that, as you’ve just articulated, is that no one really knows what best or good looks like at the moment in this new world. And also a hard part of that is defining how the rest of the organization should align around this new vision or this new growth strategy. In your mind, from the leaders that you speak to, how do the best organizations in the world do that? How do they catalyze an organization to align around a common vision and a common growth strategy?

Jamie Cleghorn:
Yeah, and boy, these aren’t new things. These are old skills, but they’re perennially relevant. So I’m sitting in Chicago. I said that there was a great architect here named Daniel Burnham, and he said, “Make no small plans, for they have no ability to stir the blood of men.” And you would probably say men and women in this current age. But I still think that’s it. You need to give people a sense of purpose where we’re going, and a better vision of tomorrow, and I think the best leaders do that and they do it in a way that’s compelling, and they do it in a way that’s accessible. When I say accessible, it’s accessible for all types of learning and for all types of people and for how they envision themselves. So you need to tell that story in lots of different ways and bring it to life through lots of different mediums.

At the same time, when you introduce that new change, and I was sitting with a CEO and an executive team yesterday, with the strategy to reshape a global business that’s been around for a hundred years, that change is going to cause disruption, and people experience change as disruption, whether it’s good change or bad change. You’re moving their cheese and people don’t like their cheese moved. So we approach change at Bain through the lens of that disruption itself and the psychology behind that. And the psychology would say that in a period of disruption, people’s ability to process information goes down by about 80%. Their attention spans drop to maybe 10 to 12 minutes at best. And their ability to retain information drops to maybe three pieces of information. So really getting crisp on that message and getting repetitive on that message and letting people anchor on a clear, simple message, I think that’s important.

The other piece that we’re really seeing is authenticity. So I had a great example of a leader a couple weeks ago. She was introducing some change to her organization, I think it was a couple hundred people, and got through the presentation and someone raised their hand and said, “But how are we going to do this piece, X?” And she looked at her and said, “I don’t know the answer, but we’re going to figure it out together, and we’re going to keep talking about it until we solve it. How does that sound?” And that sounded great to the employee, and there was a lot of head nodding in the room. And I think the more authentic leaders can be around some of that vulnerability and reality of change and not being the person that has all the answers, but being the person that can provide confidence that the team will get it to the answers and that they’ll work together on it, that authenticity is really, really important in leading change. So that’s part of it.

I guess the last piece maybe is we think of resistance as being bad, and resistance just means that people are engaging. So that would be a challenge to leaders to view resistance as good, and to view resistance as people wrestling with the ideas and wrestling with the change, I had a client, they had become cynical, they’d become cynical of changes and they’d had a strategy every three years, every five years there was a new strategy and a new bold vision. Someone on the team had coined this phrase called the inverse productivity principle, which basically stated that the best thing you could do was to ignore the strategy because it was going to fail and you would waste all your energy spending time on it. So boy, when that level of jadedness and cynicism has dropped in… So no one resisted it. They’re like, “Okay, this too will go away.” And that’s a bad sign. That means you’ve lost the patient at the beginning. So how do you get that resistance? The resistance is good.

Nathan Anibaba:
Really interesting. Let’s talk about the Elements of Value. You co-authored the B2B Elements of Value in 2018, which factored in the personal considerations of business customers. There were 40 of them in total. You separated them into five different categories. Some of them were rational things, some of them were emotional or more subjective. Tell us for the listener that isn’t aware, what the most surprising revelations were from your research and define, if you could, what the Elements of Value seek to achieve?

Jamie Cleghorn:
Thanks for bringing that up. This is a fun piece of work we did. And I, first of all, would be remiss if I didn’t acknowledge Eric Almquist who’s a colleague of mine in Boston recently retired, and he really is the one who originated the Elements of Value. And I helped him adapt it for the B2B environment. It starts with this premise that a value prop is not this amorphous, intangible thing that’s not measurable. It starts with the premise that says a value proposition and value is actually discrete, it’s measurable, it has components, those components are consistent over time. And what great brands do, what great value propositions do is they assemble those elements in different ways and key on different pieces of that.

So that’s what the framework does. We developed it using lots and lots and lots of primary research, hundreds of thousands of sample survey size, and also using meta studies of past work we’d done on value proposition design and market research to say what were the elements that showed up over and over and over, as people were saying, “Boy, this is why I buy this product. This is why I buy from this company.” So those are the Elements of Value. They’re typed along a hierarchy of needs very much inspired by Maslow and his hierarchy of needs. They’re the Legos. They’re the Legos of which you can build a value prop. So we’ve got red Legos and yellow Legos and green Legos and little Legos and big Legos. And then together you can make them.

I think the surprising thing, particularly in the B2B side, was how clearly they showed that decisions are not as rational as we think they are. Or maybe better said, they’re rational in a different way. There’s this school of economic thought that says humans are perfect economic trade off machines, and a lot of the work we’ve seen in behavioral economics has disproven that.

Nathan Anibaba:
Thaler, Tversky, Kahneman – go down the list.

Jamie Cleghorn:
Yeah, exactly. And what we see there is that people make really good trade off decisions, they just make them on criteria that might not appear rational on the outside, or might not appear rational if you don’t understand the criteria they’re using.

Nathan Anibaba:
Give us an example.

Jamie Cleghorn:
So in the Elements of Value, what we see is… Or in B2B forever technology was sold on feeds and speeds. And that’s a very rational argument. That’s an engineer to engineer argument saying, “This is my spec sheet. This is the competitor’s spec sheet.” And then it all came down to price. And what we saw is there’s this whole… That’s just the very bottom of the pyramid. That’s the 101 part of the value prop. But as you move up on that pyramid, there’s all these things around being easy to do business with as a company, company to company, and expertise and responsiveness, and how will you integrate together and how stable you are as a vendor and how much quality you bring and how will you simplify the world. And then there’s this whole of layer beyond that, which is… You think about the buyer, the individual. How are they factoring in? And how does doing business with you, help them on their development, help them with their career, or even help their personal tastes?

And then there’s this whole other thing about inspirational value and moving beyond self and into social responsibility. So we’re seeing that certainly the inspirational value and that transcendent value is everywhere these days. And we’re actually pushing it to the forefront. I’m working right now with my colleagues on how do we bring sustainability to the forefront of these offerings, because industrial companies can’t show up at their customers anymore and not have a really authentic, compelling sustainability story as part of their value proposition. And I think it’s just a matter of months, if not a handful of years before that’s transferred into all business places, technology, healthcare, things like that. It’s certainly starting in industrials because the carbonization is most pronounced there.

Nathan Anibaba:
And it’s super fascinating. As you say, there are so many factors that go into value for the customer, right? It’s not only products and benefits and their solution, because their competitor can probably offer very similar products and services. But it’s also, as you said, other intangible things like ease of doing business. Also the market context, who else are they thinking about in their competitive set when they think about their products or service offering? It may be another direct competitor. It may be just doing nothing at all. So thinking about how that product feeds into their… All the areas of value that the customer is taking into consideration when making a buying decision, which there are a number of. You identified 40 of them. But it’s super fascinating to understand that actually there are all of these other intangible sources of value that also are equally very valuable and play a huge role when it comes to making a final decision.

Jamie Cleghorn:
Exactly. And you said equally, and what our research shows is actually those harder to measure ones, those more “irrational” ones, those actually are weighted higher in the consideration set. So not only are they important, they’re actually more important. Companies just aren’t geared to think about it this way. They’re not geared to… I think you would be shocked. I continue to be just surprised every day at the amount of innovation that’s done just inside out, and people sitting at a whiteboard or in a lab and coming up with an idea and throwing it over the wall to the market and seeing if it works.

Nathan Anibaba:
Seeing what happens. Well that leads me to my next question, really, which you’ve partly answered, but which elements of value matter most? Are there some that are just higher priority?

Jamie Cleghorn:
Yeah. I mean, certainly the individual elements, the ones higher up around that second agenda that people have as individual buyers. That ease of doing business layer is… If you don’t have the framework in front of you, it’s a little hard to see, but all those things about productivity and relationship and operations, that is where we’re seeing a lot of innovation happening right now, particularly as companies think about how do they digitize more and more parts of their business processes, and in the offers themselves. I think those are the value elements that are really getting unlocked. So we see this as being a great framework for innovation. The traditional model of innovation was come up with ideas and see what sticks. This says, “Well, there’s only 40 things that matter,” and play with the Legos that matter at the beginning. And we’re seeing more of those higher level things really baking into the most compelling value props.

Nathan Anibaba:
Really interesting. Last question on this before we move on. You published the study in 2018. In the intervening four years, what’s changed in the elements of value, what developments or insights would you have preferred to add in with the knowledge of hindsight?

Jamie Cleghorn:
Yeah, great question. So we’ve actually done some testing on that and we’ve tested some other elements to see if they rise to the level statistically. And in fact they don’t. What we do see is that the relative importance changes, and at peak COVID, boy, we saw a flight to relationship, we saw a flight to quality, we saw a flight to risk reduction. So I think that’s what we see, is that the relative weighting of these things, it shifts and has shifted. And then I think the… That’s cyclical. COVID will go. The structural one I think is more to that top and more of that purpose driven economy. And again, sustainability and human equity issues are at the fore of that, and I think we’ll see other issues rise up to that level and continue to be at the top of agendas of customers. That’s why it should matter to companies, because it matters to customers.

Nathan Anibaba:
Makes complete sense. Let’s talk a little bit about Bain and actually what we can learn from the big management consultancies. What can enterprise B2B businesses such as the ones that we deal with on a regular basis, and agencies actually, what can we all learn from the way that management consultancies such as Bain operate?

Jamie Cleghorn:
Interesting question. Well, there’s actually a lot of things you wouldn’t want to take, from how we manage our business. It’s kind of a peculiar business and it has its own idiosyncrasies. One of the things that I do think we get right is human capital. We’ve always been in the business of finding talent, recruiting talent, developing talent, nurturing talent, and keeping talent engaged, energized, excited. That’s always been our business. I think that’s becoming everyone’s business now. And I do think we’re pretty good at that. I saw this great study the other day, which was talking about technology pricing models and they were talking about subscription versus consumption. And the thesis was, and it was borne out in the data, that consumption based pricing models actually have better enterprise value.

And that was because when you’re buying something based on a daily consumption decision, the product better be pretty good. And that kind of is the way we’ve run our business forever, which is we have a value proposition for our employee base and they’re picking, maybe not every day, but boy, they’re picking every quarter or every year, do they want to keep working here or do they want to go somewhere else? So the bar’s high and we have to deliver on that. I think the easy solves are things you can throw money at. Better food in the kitchen and massages and all the-

Nathan Anibaba:
Table tennis.

Jamie Cleghorn:
Exactly. And look, who doesn’t love table tennis? We’ll take it.

Nathan Anibaba:
Nice coffee machine.

Jamie Cleghorn:
Exactly. But that’s not what gets people to stick around. And what gets people to stick around, the reason I’ve stuck around Bain for 17 years is I can point to 10 people between 2 and 10 years my senior, who have taken a real vested interest in me and have helped train me and develop me and been with me in the hard times and been with me in the good times. And I can point to 10 people or more that I’ve done that for. And I think that’s the power of the model is this… Mentorship at scale is built into our whole business model, and I think that level of human connection and personal sponsorship and personal development’s just incredibly powerful.

Nathan Anibaba:
So a real focus on human capital. Absolutely fascinating. Let’s talk about digital transformation. You’ve seen a ton of clients go through a lot of digital transformation, especially in the last 18 months, as you’ve just said, 10 years of digital transformation in like a year. What’s your biggest tip for digital transformation and what things do you spend your time advising your clients about?

Jamie Cleghorn:
Yeah, it’s a great question. I’m going to show my age a little bit here. I remember being in a corporate office in 1990… Probably 8, 99, somewhere in that period. And I was an intern, so I’m not that old. But I remember an executive leader saying we got to get some of this internet stuff, it’s going to be big. She of course was right, but there was no grid. There was no sense of what it was, how it worked, and how to apply it. And I think that’s a little bit the analog of where we are with digital. And honestly, the world has evolved a lot on this front in the last, probably two or three years, I think. But boy there were a lot of companies two years ago saying, “We need digital,” like it was pixie dust that you could sprinkle on a business and it would magically be better.

So let’s extrapolate that. I think transformations that are framed as digital transformations are probably destined to fail. Business transformations that have a strong component of digital inside them can be very powerful. So there have been quite a few pretty high profile failure stories of enterprises that spent a ton of money on digital offices and digital officers, and it was something that was done to the business. And it just missed, because it wasn’t critical path with the business, it wasn’t zeroed in on what customers cared about. And the ones that have succeeded are natively digital, are business leaders that are doing it by the business, within the business, and getting it… To maybe mix metaphors, doing it to the source code of their own business and getting that digital in there. So that that’s where we’ve seen it. Julie Sweet, the CEO of Accenture, said something pretty provocative, which was, “If you have a digital practice, it means you don’t know what digital is, because digital just should be inside all of your practices at this point.”

Nathan Anibaba:
It should just be all of your practices. Fascinating.

Jamie Cleghorn:
Exactly. So I think the other thing in that is it gets back to that first point on the time scale and the pace of business. I came to Bain to do strategy, and when I came to Bain to do strategy, it was… We always talked about where to play and how to win. And we spent a lot of time on where to play. We spent a lot of time doing market research studies and figuring out growth rates and CAGRs and total addressable market size. And it was probably 80:20 where to play, how to win. And I think what I’ve seen in my time at Bain pushing up on the better part of two decades now is that it’s shifted, and the where to play is a lot easier. A lot of that information that I worked hard as an analyst to create out of whole cloth is now just available cheaply or freely on the internet. But boy, the how to win is hard.

Nathan Anibaba:
So what goes into how to win? Is that the go to market strategy? Is that all the nuts and bolts of implementation.

Jamie Cleghorn:
Yeah. It’s, it’s all of that. It’s the whole go to market value chain, from what’s strategy, what’s our product offering, how are we going to win the market, what are we going to build, how do we tell that story, how do we get out there and bring that story to market, how do we sell it in a way that it can be product led discovered, or seller assisted or seller led? How do I put customer success on the back end of that and drive adoption and consumption, and how does that create a platform that drives expansion? And seeing how to make that whole model work is really hard. I spent a lot of time with my clients on… I call it value that gets trapped in the seams, or maybe a better way to put it is that the corporate game of telephone where the game of telephone, you whisper in the ear around a circle and you get a totally different message.

Well, I think most corporations work that way. The strategy team comes up with something and they tell you the product team, who then tells it to product marketing, who then tells it to content, who then tells it to the marketing launch team, field marketing, that then gets it to sellers. And boy, a lot gets lost in that. A lot gets lost in that. So figuring out how to do that at speed and scale. I cannot tell you how many clients I’ve talked to in the last year who’ve said we have a product marketing problem. And the reason they say that is because product marketing is what sits between product and sales. And I said, “Well, you might have a product marketing problem. You might have a product and sales alignment problem. You might have a strategy problem.”

So the easy solution is to just throw another specialized function at something. Let’s throw five product marketers at this and see if it works. But they’re just going to be another note of complexity if you don’t actually have a good, simple story that can flow through your whole go to market value chain. So to me, that’s a lot of what we talk about in how to win is how do you get all those functions lined up? And I think about it sometimes, and the metaphor I use is a pipe, and you want that pipe… You want those six lengths of the pipe to be straight and fast and water to flow through them. And oftentimes the pipe is straight and then bent and then missing and then bent the other direction, and you just get a trickle out the other side.

Nathan Anibaba:
That’s my garden.

Jamie Cleghorn:
Yeah, exactly.

Nathan Anibaba:
But I love the metaphor. I think it’s definitely apt and it definitely works, especially with the amount of complexity that you’re dealing with, with some of the largest companies in the world. I think it’s absolutely fascinating. Just bringing the interview towards a close now, what would you say, or what advice would you give to aspiring brand technology leaders on how best to navigate their careers, especially within a large consultancy or technology business, which is generally the sort of clients that we work with. What advice would you give them on how best to navigate their careers if they want a similar trajectory to yourself?

Jamie Cleghorn:
Yeah, great question. I mean, the first one is do the job you have today, and know the second and third order issues. There’s that great Toyota exercise of the five why’s, and if you ask the question, why five times you’ll get to the right answer and you’ll probably get it in the second or third one. There’s too many people that don’t know the second or third why of their own job. So knowing why this, why now, why me, why not them? All of those are so important. So just immerse yourself in what you’re doing. And when you do that, you buy options. So what I’ve seen is that successful business leaders were successful individual contributors who someone took notice of and said, “Boy, if I gave that person more resources, they would do better.”

So by doing your job well, you’re buying options every day. And then I think the last one is… When you buy those options, the doors will swing open, but sometimes they won’t swing open. Sometimes you have to push them open a little bit. So when you have conviction about that door you want to walk through, just find a way to do it. There was a great… That show Comedians in Cars with Jerry Seinfeld, there’s one with Alec Baldwin. Did you see the one with Alec Baldwin?

Nathan Anibaba:
I didn’t see that one, no. It’s on my list.

Jamie Cleghorn:
Well, they’re joking, and these are two guys in their 60s looking back at their life and talking about when they’re young and they said, “Yeah, when I was in my 20s I just sat there waiting for the Bureau of Undiscovered Talent to call me, like, ‘Oh, is this Jerry Seinfeld? We’re from the Bureau of Undiscovered talent. We want to make you a star.'” And obviously the joke is there is no Bureau of Undiscovered Talent. Yeah, there’s points in your career where you have to say that this is the door I want to swing open, this is the door I want to kick open.

Nathan Anibaba:
And you have to push it yourself and go through it yourself. Fascinating. I love that. Buy options. Absolutely love that. I’m going to steal that one if you don’t mind.

Jamie Cleghorn:
It’s all yours.

Nathan Anibaba:
Jamie, thank you so much for being a guest on the show.

Jamie Cleghorn:
My pleasure. Thanks for inviting me, and it’s been fun.

Nathan Anibaba:
If you’d like to share any comments on this episode or any episode of ClientSide, find us online at fox.agency. If you’d like to appear as a guest on the show, please email zoey@fox.agency. The people that make the show possible are Jennifer Brennan, our booker/researcher. David Claire is our head of content. Ben Fox is our executive producer. I’m Nathan Anibaba. You’ve been listening to ClientSide from Fox Agency.

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