By Steven B. McKinney. McKinney Consulting Inc. and

Rodney Johnson, Prescient Consulting Inc.

(A speech given by Mr. McKinney on November 9, 2005 to the Korean Academic Society in Business Administration (KASBA) Symposium on "The  Roles and Responsibilities of Global business Leaders in the 21st Century" in Seoul, South Korea.)

Tearing Down the Company - The CEO as Creative Destroyer or, Why I would Hire Bruce Lee to Run My Company.

"Mutation - if I may use that biological term–that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in..."   -- Joseph Schumpeter

"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity."  -- Bruce Lee

In today's world, probably a million words a year are written about CEOs and Presidents of corporations. Every manner of prescription is regularly advised for companies gone wrong. Every manner of explanation put forth for companies gone right. Consultants with so many letters behind their names that they all won't fit on their business cards earn big fees teaching CEOs how to do their jobs better and more effectively.

Today's multinational, multi-cultural, multi-language, multi-everything corporations are so large and complex it takes an army of lawyers, a database of metrics, and acres of machines to provide adequate support for CEO decision making. Books are written, speeches are made, seminars held.  With all this time spent, all this knowledge invested, and all this power given, we expect the world from our CEOs, and are often left disappointed.

Are we expecting too much? Are we expecting the right things? What are we expecting from our CEOs?  Well, we expect them to do their jobs, we say immediately. Well, what is that exactly?  After all those words written, all those things said, could we still not know what the role of a multinational CEO is? Can it be that difficult to define? 

I would argue that it is just that difficult. But I would also argue that there does indeed exist a crucial role of the CEO that we can define and it is a role that is resolved for the top person in a company only - no one else can do it. Few are willing even to comment on it, much less perform it. Indeed, it is an ugly job but someone has to do it.  It is the job of creative destruction and only the CEO has the power, the authority, and the mandate to do it. Even more than that, in a world where change is the only constant, it is his DUTY.

"When the opponent expands, I contract. When he contracts, I expand. And when there is an opportunity... I do not hit...it hits all by itself (shows his fist). Any technique, however worthy and desirable, becomes a disease when the mind is obsessed with it." -- Bruce Lee

In a world where all CEOs recognized the mandate they have to tear down the company, they'd gladly welcome alternative titles for their position like Necessary Evil, Walking Disaster, and even Weapon of Mass Destruction.  For they would realize that destruction is the ugly corridor through which every organization must pass to reach the doors of creation, rebirth, and renewal. Fear the company that walks down that corridor willingly for they will reach rebirth and ultra-competitiveness earlier than you will, and will be an awesome competitor. Fear the CEO who paces the halls of his own corporation looking for things to destroy. For he will rid his company of all things dead and dying and allow the organization to nurture the new shoots of creation. These companies aren't crazy and these CEOs aren't idiots. They know that if they don't do the dirty work of destruction themselves the competition will do it for them on the competition's own terms.

Why should we focus on creative destruction so much as to call it the main job of the future multinational CEO? Because the ability of the CEO to prune the corporation structurally and financially, the ability of the CEO to kill off those parts of the company that aren't running as well as they should be, his ability to kill bad ideas, bad movements, bad processes, bad policies, and bad product lines is crucial to the success of the future MNC. Creative destruction is not about making smaller companies; it is about getting over all that is not right today so we can get on with what will be right tomorrow. Building a company is easy. If only because people think it is a 'normal' and expected component of the CEO's job, adding products, divisions and even whole companies to the corporate portfolio are considered a regular task of a healthy company. Cutting and destroying, however is seen as something to be done only when the company is failing, only when something is seriously wrong. So Creative Destruction, therefore, is much more difficult.

Resistance to new ideas and new things is built into the genetic code of organizations. That resistance grows exponentially as we diversify the company across time, space, and culture. If the company is old, the resistance is more. If the company was very successful in the past, perhaps once a market leader, the resistance is more. If the company is very flat, and listens to people's opinions throughout the organization, the resistance is more. CEOs who can successfully prune future organizations are CEOs who have proven they can surmount the very toughest obstacles there are. It is very difficult to grow a beautiful new flower while the old weed is still firmly rooted in the prime soil.

So creatively destructive CEOs practice 'shaping' as a daily task. It cannot be something that is pushed back to the point where something is really wrong. Then there really will be a crisis. If there is a solid, undeniable, reason to push something out of the spotlight, it is already too late and competitors are already on the move.  The job of creative destruction must take place even when the company is at the heights of success.

Who can say when and where the next winning idea will come from? It most certainly will not come from the top. It can come from anywhere at anytime. The job of the CEO is to ensure that the company is ready to recognize that new winning idea - Ready to recognize it, embrace it, and run with it.

"Learn the principle, abide by the principle, and dissolve the principle. In short, enter a mold without being caged in it. Obey the principle without being bound by it. LEARN, MASTER AND ACHIEVE!!!"
                            -- Bruce Lee

The business reasons to tear down and destroy are numerous.

- New products with new technologies compete for attention and talent with the old. Quota-driven sales teams don't want to take risks with new products. They don't want to risk alienating customers who never asked for something new in the first place. They will stick with the old, throw out the new.  Tried and true, but now old, products suck the money and air out of anything new and revolutionary. Who has the courage to cut old products, which the company may rely on, which sell well, in favor of something revolutionary, untried, and yet perhaps world-changing?

- Under-performing divisions suck financing from the corporate cash cow divisions. They are a drag on the value of the company as a whole and lower shareholder return. Who will stand up and say they need to go even if overall the company's revenue may shrink dramatically?

- Corporate self-definition gone astray leads corporations away from their core missions and values and into often unknown territory.  Why?
Because companies find they aren't growing anymore with 'the same old thing, the same old products.'  But they don't want to blame themselves or the products. So they blame the market. Call it a bad market and seek greener pastures elsewhere, in other industries or other products. Brand Extension runs amok. Mission Creep creeps in. Soon the company is chasing revenue wherever they can find it.  Who has the courage to reign in the Vision Statement and say, "We aren't going to go there."  Who has the courage to bring the company back to it's fundamentals and say, "This is who we are. This is all we have. We just have to find a way to do it better. We have to find a way to be the best at it."?

- The market is always right on the large scale. That doesn't mean it will be right for you. The most important asset great companies have is great customers and, so great companies listen to their customers closely. They listen to the market closely. But the market won't bring them the next great idea. A market never asks for revolutions, they just ask for efficiency and effectiveness gains. Car buyers ask for better gas mileage. They don't ask for vertical take-off and landing. Computer buyers ask for faster speed and more stability. They don't ask for artificial intelligence.  Moviegoers ask for better special effects and better sound. They don't ask to participate in the movie. When vertical take-off and landing comes, your customers who told you that better gas mileage was 'the thing' are going to hit the road. And the market will have found its new winner. Who has the courage to ignore what their best customers are telling them is important and ensure the company is ready to welcome the next revolution?

"Before I studied the art, a punch to me was just like a punch, a kick just like a kick. After I learned the art, a punch was no longer a punch, a kick no longer a kick. Now that I've understood the art, a punch is just a punch; a kick is just a kick."
               -- Bruce Lee

In fact, creative destruction is not an esoteric exercise. It is just about getting back to where the company started. On day one, anything was possible and everything was simple. Here is a demand, let's fill that demand. Let's satisfy that market. Everyone's agenda was the same!

Now, many years and many leaders later how does the situation look? Is a punch no longer a punch and a kick no longer a kick?  How many layers of self-deception are now piled on top of each other? How many agendas? How many complications?

The basic skills needed by our hero CEO are two. Courage to seek the truth, and the ability to make others want to embrace it. Truth and simplicity lie at the heart of creative destruction. For self-deception and the complications that naturally cloak every decision the company makes lie at the heart of maintaining the status quo.

A CEO who can 'tear apart' his company is a CEO who is focused like a laser beam on the truth. The truth is the key element of creative destruction, because what is identified as true is what must be the focus of all activities. It makes no sense to deceive yourself when searching out things to creatively destroy, for they are the things that will eventually be destroyed anyway by the market mechanism - and the market is never deceived for long. Act on the truth, and CEO is beyond reproach in cutting, destroying, and shaping. His actions are right because the truth is on his side. Act on anything else and the CEO will just be causing more trouble - not to mention the huge fight he will have on his hands in getting anything done.

The goal of creative destruction is to do those things that the market would have done anyway, but to do them on your own terms, on your own time. To do those things, the CEO must first seek to dispassionately find out what the market will destroy. He cannot keep sacred cows, and must allow no one else to either, because the market keeps none.

You will notice that out of all the words I have used so far to describe our hero, the most used was courage. Courage is the one trait that a creative destroyer and our successful future leader must have. From that one wellspring comes all the other traits normally associated with leadership.

Interviewer: What goes through your mind when you face an opponent?
Bruce: There is no opponent.
Interviewer: Why is that?
Bruce: Because the word I does not exist.
                -- Bruce Lee

This final quote from Bruce Lee I think is the most appropriate. His few words very clearly outline the challenge faced by would be destroyers.  Companies of the future must forget they exist in their present form.  For their form is transitory and always changing. Their form of today will become the legacy of tomorrow.

The surest way to get hurt in a fight is to worry about getting hurt.  The surest way to lose a chess game is to waste brainpower worrying about losing. The surest way to fail as a company is to concentrate on 'maintaining current position'. However, favorable, 'what is' today must not become sacred law. Successful companies of the future must be willing to turn on a dime, pick up and shed assets in a moments notice, and cannibalize themselves in favor of their own offspring. It is when companies start taking themselves too seriously that they start to fall behind. When they seek to preserve bits and pieces of themselves as sacred cows they cease to innovate.  It is when they hold on white-knuckled to every beachhead they've ever made that they lose site of 'what could've been'. It is when they are afraid of failing, afraid of getting hurt, afraid of losing their current position, that they become their own greatest opponent.

The history of the future corporations is already being written and it is not the story of cowardly deeds. It is the story of companies who were bold enough to 'let go' and focus only on what 'can be' and not on 'what is'. This is a future of unbounded risk and unbounded reward. Wow. Who has the courage to lead?