In his new co-authored book, Connect, Tommy Stadlen speaks to the likes of Sheryl Sandberg, Tony Blair and Tim Berners-Lee as he explores the idea of our connection with society, its competitive advantages and its impact on leaders of the future. Here we quiz him on his findings…
Tommy Stadlen is an entrepreneur and former McKinsey consultant who worked for Barack Obama’s first presidential campaign. He has written Connect alongside John Browne, former CEO of BP, and current McKinsey consultant Robin Nuttall.
Virgin: Connect highlights the necessity for large companies to play an active role in society. How important is it for entrepreneurs, small businesses, as well as large corporations, to engage with society?
Tommy Stadlen: Fewer than 20 per cent of people trust business leaders to tell the truth. For me that was a shocking discovery. Business is the engine of human progress but it’s almost as if we’re uncomfortable in our own skin. In Connect we explore the recurring rift between business and society, and offer a practical plan for companies to prosper by connecting with the world.
All companies, large and small, interact with society at large – whether it’s the environment, human health or cultural issues. In a connected world, transgressions are instantly broadcast and the privilege of being in business can be withdrawn very quickly. But this is not just about downside protection – there is a huge prize for entrepreneurs who are willing to meet society’s needs with respect and authenticity.
What is the main premise behind connected leadership and why is it important?
Connected leadership is about integrating societal and environmental issues deeply into your core business model.
For many years Corporate Social Responsibility has been the accepted way for companies to ‘deal’ with society. The problem with CSR is that it’s fundamentally disconnected from a company’s real commercial activities.
People in business dismiss it as a fluffy cost centre and outsiders often see it as propaganda. In Connect we tell the story of Enron, who won every CSR award going in the same year they committed one of the worst corporate scandals of all time. It’s time to declare CSR dead.
We’ve seen a handful of companies like Tesla and Unilever break the cycle of anti-business sentiment. It requires CEOs and founders to give enough time to this activity and recognise it as a commercial imperative.
Those who understand this will become tomorrow’s leaders. In the book we identify four tenets of connected leadership which can revolutionise a company’s standing in society and significantly improve profitability.
1. Map your world
2. Define your contribution
3. Apply world-class management
4. Engage radically
You describe connected leadership as "the new frontier of competitive advantage". How can business and entrepreneurs expect to benefit?
One of the major findings in the book was that 30 per cent of private sector profits are at stake from interactions with stakeholders like regulators, NGOs and employees. But research by McKinsey & Company undertaken for the book also found that just a fifth of CEOs felt they were successful in their external engagement.
So there is this big pot of money at stake and most of your competitors don’t know how to access it. Given how hard companies have to fight for any small advantage in operations or marketing, Connected Leadership should be a priority for everyone in business. For a startup it can set you far apart from the crowd.
We think of external engagement as the last remaining unprofessionalized business function. If you apply commercial rigour to it, you will unlock major advantage.
As a founder yourself, are you implementing some of the insights in Connect?
It’s exciting to have the opportunity to put all the ideas into practice. An example is the second tenet of Connected Leadership, ‘define your contribution’. It is such a brilliant discipline for a startup to question every day what it is you are offering the world. Obviously that’s crucial when it comes to consumers, but it goes deeper. If you’re genuinely making the world a better place your business will go far.
We’re also mindful of pioneers like Milton Hershey who not only took advantage of the industrial revolution but also strived to solve its dark underbelly, labour relations. Companies that embrace today’s challenges, from privacy to the so-called death of quality journalism, will make a big mark.
Connect contains interviews with business leaders like Sheryl Sandberg. Did any of your interviewees surprise you with their insights?
The three authors – former BP CEO Lord Browne, McKinsey partner Robin Nuttall, and I – interviewed people all over the world for two years. We spoke to over 70 business and political leaders, from the CEO of Goldman Sachs to General Petraeus and Tony Blair.
Some of the most memorable conversations I had were with Google’s director of research and with the man who invented their driverless car. It was striking how open they were about the risks of artificial intelligence. They obviously think AI can achieve great things for humanity. But they also told us that the risks are essentially limitless because machines act in ways we don’t understand.
Tim Berners-Lee, the inventor of the World Wide Web, went a step further. He painted a picture of the automated corporation, a paper robot with all the rights of a human being and much greater capabilities. He thinks we’re already there.
AI has the potential to improve the world in so many ways, but business leaders need to tread incredibly carefully. They have to address society’s fears – real or perceived.
Another person who surprised me with his openness was Paul Polman, Unilever’s CEO and former trainee priest. He said very bluntly that he gets up in the morning to better the world through Unilever’s influence. The ephemerality of market share and stock prices don’t interest him. He invited short-term hedge-funds to give up their Unilever holdings as soon as he became CEO because "they couldn’t fire me on my first day."
The book also explores the idea of companies having a 'reputation', do you think that the reputation a company has impacts its business in a big way? What are the top three things a new company can do in order to build a good reputation?
Reputation is vital. It has the power to make or break a company. But reputation management has been co-opted in recent years by PR operatives and spin doctors.
The first thing to acknowledge is that reputation is an outcome of who you really are, not a construct to be managed. It is the result of your products, activities and how well you connect with society.
Secondly, reputation is a reservoir of goodwill that must be filled up over a long period of time, not artificially engineered for last-minute use. In times of crisis, a well-stocked reservoir of goodwill can be drawn down to give you the chance to put things right. When the reservoir is dry, an accident or scandal can destroy the company.
Finally, business people need to learn how to speak human again. Whenever you see a CEO on television using management-speak, you sense immediately that you are receiving a version of the truth rather than the actual truth.
What calamities are likely to occur if a company ignores its responsibility to society?
History tells us that long-term success is only possible when companies connect effectively with society. The past is littered with the carcasses of firms that broke these rules.
The life expectancy of a leading US company has plummeted in the last century, from 67 years in the 1920s to 15 years today. Richard Foster, a former McKinsey director, estimates that by 2020 more than three quarters of the S&P 500 will be currently unknown firms.
Start-ups that engage with society will break through and those that do not will fall by the wayside.
What advice would you give to those embarking on their first business venture?
Make sure you define your contribution and your purpose from the very beginning. Start-ups are fueled by purpose, more so than money or a good idea. The culture you establish in the first few weeks will determine your culture for years to come.
Connect: How Companies Succeed by Engaging Radically with Society, by John Browne with Robin Nuttall and Tommy Stadlen, was published by WH Allen on September 10th. Available on Amazon.