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6 New Rules for the Digital Age

6 New Rules for the Digital Age

EVERY NOW AND THEN, a book comes along to give you the insights you need to see and understand the world you live in and how to thrive in it. Rethinking Competitive Advantage: New Rules for the Digital Age by Ram Charan is one of those books. The ideas and terminology you’ve heard and read about come together here to give you a holistic view of where you need to go next.

Charan has taken years of observation and distilled it into six practical rules to guide you into this digital age.

To begin:

In the digital age, competitive advantage is the ability to win the ultimate prize—the consumer’s preference—repeatedly, through continuous innovation on behalf of the consumer, and to create immense value for the shareholders at the same time.

As opposed to:

Until recently, the greatest competitive advantage went to companies that controlled distribution channels, had hard assets on the largest scale, or had established brands or patents.

In other words, it’s more about what a company does than what it has.

Digitization defines the playing field. “The old adage ‘stick to your knitting,’ for example, a colloquial version of ‘build on your core competence,’ tends to narrow a company’s imagination. Yet a bold imagination is a requirement for leaders today.”

Digital companies like Netflix, Amazon, Google, and Alibaba, have certain elements—or approaches—in common:

• They imagine a 100x market space that doesn’t yet exist.
• They have a digital platform at their core.
• They have an ecosystem that acerates their growth.
• Their moneymaking is tied to cash and exponential growth.
• Their decision-making is designed for innovation and speed.
• Their leaders drive learning, reinvention, and execution.

These elements lead to six rules that a leader must work with if they are going to thrive in the digital age. The way forward is understanding the new rules of competition and playing a different game. Charan explains several roadblocks like—an overreliance on outdated theories—to moving forward in the digital age that insightful. The first four rules represent building blocks for building a competitive advantage. The last two relate to the human side of bringing this all together.

Rule #1. A personalized consumer experience is key to exponential growth.

The digital companies connect with the end-user and creating a customized experience. They work from the end-user backward. The customer is not the retailer but the end-user. “The key is to identify an experience that can both be personalized and appeal to a very large number of people, regardless of national or cultural boundaries.” Most traditional companies don’t think big enough.

Rule #2. Algorithms and data are essential weapons.

Algorithms and data must become central to your business. Charan distinguishes digital capability and digital platform. Digital capability usually means that the company has utilized algorithms to improve internal processes. In contrast, a digital platform is “a set of algorithms that collect and analyze data. Combining and refining algorithms over time helps a company build a competitive advantage.”

Converting to a digital platform should be done incrementally. Leaders must understand what technology can do for them and have good judgment about how to use it. A digital platform can personalize the consumer experience, create market spaces of 100x, eliminate intermediaries, utilize dynamic pricing, and use data to uncover opportunities for exponential growth.

Rule #3. A company does not compete. Its ecosystem does.

The ecosystem is the arrangement between partners that can be created. “Moving forward requires seamless systems and technology platforms, taking advantage of the latest technical developments, meeting a range of consumer preferences, and processing massive amounts of data to improve the outcome of things.”

Conceiving these ecosystems takes imagination and a specific set of leadership skills. Fundamentally, “it’s about building relationships with people from other cultures and with different incentives.”

The predominant challenge is to conceive of the ecosystem in its entirety, how it will deliver a great experience for the consumer, how the partners will enhance each other capabilities, and how success will be measured and shared.

Rule #4. Moneymaking is geared for huge cash generation, not earnings per share, and the new law of increasing returns. Funders understand the difference.

When it comes to digital companies, earnings per share is not the focus. Revenue growth and cash gross margin is.

Moneymaking is different in the digital age. Of course the components of moneymaking—things like revenues, cash, gross margin, cost structure, and funding—are the same as ever. But the emphasis, the patterns, the timing, and the relationships among them are different.

In digital companies, as revenues grow, so does gross margin because of the law of increasing returns.

As digital companies grow revenues and improve percentage gross margin, they exponentially increase their gross margin in cash. In essence, they become a cash-generation machine.

The gross margins of born-digital companies are generally higher than those of their conventional counterparts.

The digital connection that digital companies have with their customer base makes it easier for them to keep them engaged and gather more data. “Algorithms can then help detect the causes of certain behaviors, including customer defections, and test ways to improve the customer experience.”

Rule #5. People, culture, and work design form a “social engine” that drives innovation and execution personalized for each customer.

The social engine, a company’s culture and way of organizing work, helps drive the growth of the big digital companies.

Most of these digital giants operate with only three or four layers below the CEO. Organizing into functionally focused teams makes for better and faster decisions and implementation. Important too is who is on those teams. Who you choose to lead those teams speaks volumes about the values of the company. Beyond just plain competency, you need people who want to learn, grow, and get things done. Laslo Bock said that at Google, they “disqualified anyone who gave even a small signal that they might not be collaborative or intellectually humble.”

Once established, the culture becomes a magnet for others who share those values and behave that way.

Rule #6. Leaders continuously learn, imagine, and break through obstacles to create the change that other companies must contend with.

Speaking of intellectual humbleness, leaders must be at the forefront of curiosity and learning—continuously growing. “Any company that is or wants to be digital must have leaders who match up against the criteria a digital company requires.” The main difference Charan sees between traditional leaders of legacy companies versus leaders of digital companies has to do with their “cognition, skills, and psychological orientation.” Among these traits are:

They have the mental capacity to think in terms of 10x or 100x, to imagine a future space that doesn’t exist, and the confidence that they will overcome whatever obstacles they might encounter.

They have a facility for and are comfortable with data-based analysis. Facts and knowledge—not predictable outcomes—give them the courage to act.

There is fluidity to their thinking. They welcome change and even seek it.

They are hungry for what’s next and are willing to create and destroy. Their psychology is geared toward high speed, urgency, and continuous experimentation.

They are literate in the application of algorithmic science and value fact-based reasoning.

They are willing to reconceptualize the organizational structure so that decision-making takes place closer to the customer to improve the speed and quality of decisions.

This insightful and very accessible book is one of Charan’s best. It should be widely read. Even if you do not want to join the current reality and perhaps go down with the ship, at least you’ll know why.

Here are a few more thoughts from the book:

Dissatisfaction with the status quo and a search for what’s next is a universal human endeavor. It does not reside in one person, department, or organizational layer. The flow of ideas cannot be blocked by bureaucratic layers. Do the people at traditional companies welcome change? What happens to the good ideas that emerge? How quickly do they get converted into action?

Today transformational change is the norm. Every company has to be able to perceive what will make their best-laid plans obsolete tomorrow and change direction quickly.

Trying to build on your core competence can be a liability in the digital age. Why? Because it tends to promote an inside-out perspective and narrow a leader’s peripheral vision and constrain imagination.

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Attackers Advantage Is Your Organization Digitally Mature

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Mayday! Mayday! How to Build Trust in a Crisis

Trust Horsager

NOTHING reveals an organization’s limits more than a sudden crisis. And after 2020, we’ve all become more familiar with what that looks like. Crisis situations test what you have built — your culture, your relationships, your resilience. But at the root of all of these challenges is one capacity that means the difference between success and failure: trust.

Trust is your most important asset amidst crisis and change. A team with high levels of trust will have the agility necessary to make decisions and react quickly to fluctuating situations.

Building Trust Instantly

The beautiful thing about trust is that it will help you through a crisis even if you start to build it the day things go off the rails. In fact, your quickest opportunity to build trust is in a crisis. On 9-11, complete strangers trusted each other in an instant if they were running in the same direction.

To some degree, trust is built up over time, but your ability to build trust multiplies in a crisis. Building trust consists of strengthening eight traits (also called pillars) that came out of research on what makes the most effective leaders and organizations.

Take a look at the pillar of clarity for example. Clarity increases trust instantly. It’s almost impossible to trust a leader who is vague or who gives insufficient information. But be crystal clear in your words and your actions, and trust will immediately increase — especially in the middle of a crisis.

This three-point strategy prioritizes clarity and provides a roadmap that you can use over and over in any crisis.

1. Narrow your focus to a single priority. When the unexpected hits, everything feels like a priority. But it’s actually the opposite; in a crisis, it’s essential to address only one priority at a time. Ask yourself these two questions to help guide your actions: first, ask “What can I control?” It’s tempting to focus on barriers, but the only thing that matters in a crisis is what you can control, not what you can’t.

The second question to ask yourself is “What is the one, most important thing that I can do, right now?” That’s your priority. Designating only one priority means your team will be able to follow through. There’s nothing that builds clarity more effectively than aligning a team around a single, achievable priority. When your team knows exactly where to focus its efforts, trust in your leadership will grow.

2. Compress your plan into short blocks. In a conversation with Gen. McChrystal (best known for his leadership of the US Army Joint Special Operations Command), he shared that when the war in Afghanistan took a turn for the worse, they weren’t able to quickly get the intel they needed. So instead of planning weeks ahead, they set 30-minute daily meetings to define a daily priority. What could this look like in business? Often leaders set a one-year priority, but in a crisis the pace of change means you may need to set a one-month, one-week, or even a one-day priority for your people to follow.

In any crisis, task completion is a crucial benchmark because momentum builds momentum. Narrow your priority to something that can be completed in this short timeframe, or shorter! After a week, the situation may have completely transformed. A doable goal also facilitates engagement and optimism. When people know absolutely that their efforts are aligned with a larger plan, they won’t have to waste precious time second guessing or asking for approval. Nothing solidifies trust like a reliable pattern of completion. And the more trust increases, the more smoothly and quickly your operation can run.

3. Maintain agility. Responding to a crisis requires speed, but it also requires flexibility and agility. The situation will change constantly and on a massively accelerated timeframe. The ability to take in information, adjust, and pivot to a new direction is crucial. Once you’ve completed one priority, you need to be able to identify and shift to the next one. The ability to reassess a situation and pivot quickly is just as important as narrowing to a single focus. Leaders must be actively engaged in this process, taking their teams from start to finish, then circling back around to repeat the process.

Making it through a crisis unscathed requires organizations to be able to identify, complete, and move on from tasks at a rapid clip. A high trust organization will always be able to move more quickly and maintain solid footing. And nothing facilitates trust better than crystal clear communication.

Once you start, clarity builds on itself, and as clarity increases, trust grows exponentially in your leadership and in your business.

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Leading Forum
David Horsager, MA, CSP, CPAE, is the CEO of Trust Edge Leadership Institute, Trust Expert in Residence at High Point University, and Wall Street Journal bestselling author of The Trust Edge. David has advised leaders and delivered life-changing presentations on six continents, with audiences ranging from FedEx, Toyota, MIT and global governments to the New York Yankees and the Department of Homeland Security. His new book, Trusted Leader: 8 Pillars that Drive Results describes how to create a companywide foundation of trust. Learn more at TrustEdge.com or davidhorsager.com.

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The Trust Edge Decision to Trust

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Leading Thoughts for April 8, 2021

Leading Thoughts

IDEAS shared have the power to expand perspectives, change thinking, and move lives. Here are two ideas for the curious mind to engage with:


The late economic historian professor at the University of California, Berkeley, Carlo M. Cipolla on the five laws of human stupidity:

1. Everyone underestimates the number of stupid individuals among us.
2. The probability that a certain person is stupid is independent of any other characteristic of that person.
3. A stupid person is a person who causes losses to another person while deriving no gain and even possibly incurring losses themselves.
4. Non-stupid people always underestimate the damaging power of stupid individuals.
5. A stupid person is the most dangerous type of person.

Source: The Basic Laws of Human Stupidity


Watts Wacker and Jim Taylor on vision:

“The only way to succeed in the marketplace today—the marketplace of individuals or products or services or ideas—is to know your own story and to follow it into the future. Define yourself by someone else’s benchmarks, immerse yourself in someone else’s possibilities, and you become the thing you define yourself by and immerse yourself in. Measure yourself against your own rate of change and you stay inside your own story. That way, when the other side ceases to exist, you still have a reason to go on. External and lateral competition is the distraction. Internal and vertical competition is the game. The real battle is against yourself.”

Source: The Visionary's Handbook: Ten Paradoxes That Will Shape the Future of Your Business

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Leading Thoughts Whats New in Leadership Books

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What Leaders Need to Know About Data

Data Ruben Ugarte

SOMETIME between the 1st and 4th century, something incredible happened. Indian mathematicians invented a system for measuring objects. Arabic mathematicians eventually adopted the system, and it was through them that Europe would eventually learn about the numerical system we still use today.

Ever since then, numbers have played an important role in our lives. Statistics surround us, and leaders need to have a good grasp of numbers’ roles within their companies. Here are the key things leaders should know about data — and what things they can safely ignore.

Data Can Speed Up Decisions

The decisions that you make as a leader can have an outsized impact on your company. Data can help you speed up these decisions and ensure that you’re making the correct choices. If you’re exploring a new market to enter, data can provide you with potential projections about sales and give you an idea of the type of customers within this market.

The quality of your decisions and the speed at which you make them matter. Look back at the last year, and you’ll realize that it wasn’t just about making the right decision, but doing it rapidly. The entire world went into lockdown within weeks, and leaders had to determine how to shift entire companies into remote work, change how they serve customers and try to figure out how to survive.

You can also use data to help your team make better decisions. Leaders know that they need to delegate, but the actual process isn’t always clear. The people under you may not have the same confidence or intuition, but they could be accessing the same information. They could use data to guide them to the right decision without your involvement. Better yet, they can measure the success of their decisions.

Data Is Your Flashlight and Map

Think about a cave. It’s dark, humid and you can’t see more than a few feet ahead of you. You know there’s an exit somewhere, but you’re not sure how far it is or what path to follow.

It would be nice to know the exit direction, but instead, you have a map and a flashlight. And that’s all you actually need! As you lead through uncertainty, think about how your team adjusts to last-minute changes and what kind of map you’re using. The best leaders can quickly create maps for new situations — and better yet, they know when to abandon the map and when to follow it.

The new CEO of UPS, Carol Tome, came in with a simple idea: saying “no.” UPS should say no to the wrong customers, wrong product lines and wrong ideas. UPS stock has risen over the last year, and it’s well-positioned to grow beyond the pandemic.

I don’t think Ms. Tome knew exactly what might happen under this strategy, but she gave her team a map and flashlight. She trusted that her team could adjust midway through and continue moving towards the exit.

Data Can Help You Measure Success

Measurement is important in providing options for determining opportunities and new ideas — and determining whether the direction you take is successful.

Think about what data you’ll be using to measure progress on your goals. You can explore reports, dashboards and working with specific people to generate the relevant data.

Consider also scheduling regular touchpoints to talk about the data and discuss opportunities. What new customer segments are appearing? What products or services should you abandon?

Innovation needs to be consciously thought through and carried out. Look at Great Britain’s efforts for funding innovation. It has plans to create its own Defense Advanced Research Projects Agency (DARPA) and give money to innovative ideas. The results are yet to be seen, but it’s moving in the right direction. Leaders are ahead of the pack, trying to scout these innovation opportunities.

Numbers have been a blessing and a curse. They’ve given us the ability to understand our world, but they aren't always intuitive. Use data to speed up your decisions, guide you in the dark and measure success. Better yet, use data to become a better leader for your team.

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Leading Forum
Ruben Ugarte is founder of Practico Analytics, providing expertise in data analytics. He has worked with companies on five continents and in all company stages, helping them to use data to make higher quality decisions, boost performance, increase profitability, and make their teams world-class. He also maintains a popular blog with more than 100,000 readers. His new book is The Data Mirage: Why Companies Fail to Actually Use Their Data (Business Expert Press, January 22, 2021). Learn more at rubenugarte.com.

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Predictive Analytics Competing in the Age of AI

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Lead from the Future

Lead from the Future

THERE is present-forward vision, and there is future-back vision. There is a difference. Present-forward thinking will get you incremental change and often leaves you stuck in the present. Future-back thinking expands your horizon to see opportunities that are beyond your core business. Future-back helps you quiet the noise today to see the faint signals that could disrupt your business or activities tomorrow.

In Lead from the Future, Mark Johnson and Josh Suskewicz describe future-back thinking as “a way of seeing and being in the world.”

Jules Verne Rocket
The authors point out that present-forward thinking innovation at most organizations is mostly incremental improvements to what they are already doing. “Sometimes they do invent something that has the potential to be transformative, but they develop it within a system that is defined and constrained by the facts of the present—like a spaceship in a Jules Verne story with lace curtains hanging over its portholes, and a cockpit fitted out with gas lamps, Persian rugs, and overstuffed armchairs.”

While we need to master the present, we can be lulled into thinking that the future will take care of itself because we are making our quarterly numbers. Most founders are future-back thinkers, but “most incumbent organizations are led by people who are much less future-thinking than their founders.” And understandably so, we must succeed in the present. But if we are to survive into the future, we need to be capable of mastering the future too and turn that vision into action today.

Present-forward thinking is high in knowledge and driven by known rules, facts, and data; future-back thinking is low in initial knowledge and high in assumptions—its aim is to discover what could be true.

The authors offer a three-step process to help leaders develop visionary strategies and bring them to life.

1. Develop Your Vision

Identify the potential inflection points in your industry and focus on the timeframe when they are likely to occur.

The key is to focus on a date that is distant enough to stretch your thinking, but not so far-off that it is utterly unrelatable.

Remember, the goal is not to predict the future with certainty (nobody can) but to paint an impressionistic painting of it detailed enough to build clarity and alignment on what will have to be done to meet its challenges and opportunities.

Focus on what you will offer as part of your envisioned future state, how you will create value, and how you’ll address your looming growth, positioning, and capability gaps in doing so.

2. Convert Vision to Strategy

To connect your vision of the future to a concrete plan for what you must do today to bring it to life, you need to develop three portfolios: future state portfolio, innovation portfolio, and an investment portfolio. These are “continually updated and tracked as you reshape your vision based on the new learning that comes over time.”

The future state portfolio helps you identify your growth gap – what you will need to provide beyond what you are capable of delivering presently to reach your vision. These needed capabilities become your innovation portfolio.

Develop an investment portfolio in which you formalize your decisions about where to invest and where your resources will come from. In building it, you should measure dollars but also people and leadership mindshare, as talent and leadership energy are often more scarce in big companies than seed funding.

3. Program & Implement the Strategy

Just as a vision needs to be translated into a strategy, a strategy must be carefully programmed into an organization before it can be effectively implemented.

Formalize the roles and responsibilities of the senior leadership team as champions of both the strategy and the breakthrough innovation teams set up to carry it out. Set up an organizational model that protects breakthrough innovation teams from the countervailing influences of the core. Manage initiatives with an explore, envision, and discover process so senior teams and innovation teams can learn their way to success together.

The leadership framework shown below highlights the mindsets for both present-forward and future-back leadership. It is not an either/or proposition. The most successful leaders will be those who can do both as needed. A leader described the left side as “serious, disciplined, and self-critical” and the right side as “aspiration, optimism, and risk orientation.”

Future Back Leadership

In The Innovator’s DNA, Clay Christensen identified five attributes that correlate closely with Future-Back Leadership: associating, questioning, observing, experimenting, and networking.

Business innovators are sponges for unfamiliar ideas; as such they seek out conferences and other venues to exchange and combine their ideas.

Once you understand the principles presented here, you can begin to look at everything with a future-back mindset—including your own life. We need as leaders to have and immerse our teams and organizations with a learning mindset. The tyranny of the present quickly pulls us back into a short-term present-focused mindset. We need to look for the balance and link the present with the future.

Future-back needs to become an organizational capability, led at the top, and permanently embedded in leadership mindsets, strategic planning processes, and organizational culture.

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Winning the Long Game How Did They Get Ten Steps Ahead

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First Look: Leadership Books for April 2021

Here's a look at some of the best leadership books to be released in April 2021. Don't miss out on other great new and future releases not listed here.

9780525575603Rethinking Competitive Advantage: New Rules for the Digital Age by Ram Charan

The old ways of creating competitive advantage for your business—such as building moats to ward off competitors—have become dangerous. Giants like Amazon and Alibaba are creating vast new market spaces through a deft combination of tools like machine learning and business savvy that reimagines customer experiences while generating immense shareholder value. A handful of traditional companies, including Fidelity Investments, Walmart, and B2W, have adopted these new approaches to reinvigorate their businesses. Most, however, are stalled—and the clock is running out. In this lively, accessible guide, Ram Charan, bestselling author and adviser to some of the world’s top CEOs and boards, redefines competitive advantage for the digital-first era, offering a set of new rules to get ahead.

9781540900807Soundtracks: The Surprising Solution to Overthinking by Jon Acuff

Overthinking isn't a personality trait. It's the sneakiest form of fear. It steals time, creativity, and goals. It's the most expensive, least productive thing companies invest in without even knowing it. And it's an epidemic. When New York Times bestselling author Jon Acuff changed his life by transforming his overthinking, he wondered if other people might benefit from what he discovered. He commissioned a research study to ask 10,000 people if they struggle with overthinking too, and 99.5 percent said, "Yes!" The good news is that in Soundtracks, Acuff offers a proven plan to change overthinking from a super problem into a superpower.

9780735217553The Scout Mindset: Why Some People See Things Clearly and Others Don't by Julia Galef

When it comes to what we believe, humans see what they want to see. In other words, we have what Julia Galef calls a "soldier" mindset. From tribalism and wishful thinking, to rationalizing in our personal lives and everything in between, we are driven to defend the ideas we most want to believe--and shoot down those we don't. But if we want to get things right more often, argues Galef, we should train ourselves to have a "scout" mindset. Unlike the soldier, a scout's goal isn't to defend one side over the other. It's to go out, survey the territory, and come back with as accurate a map as possible. Regardless of what they hope to be the case, above all, the scout wants to know what's actually true.

9780593135648Effortless: Make It Easier to Do What Matters Most by Greg McKeown

As high achievers, we’ve been conditioned to believe that the path to success is paved with relentless work. That if we want to overachieve, we have to overexert, overthink, and overdo. That if we aren’t perpetually exhausted, we’re not doing enough. But lately, working hard is more exhausting than ever. And the more depleted we get, the more effort it takes to make progress. Stuck in an endless loop of “Zoom, eat, sleep, repeat,” we’re often working twice as hard to achieve half as much. Getting ahead doesn’t have to be as hard as we make it. No matter what challenges or obstacles we face, there is a better way: instead of pushing ourselves harder, we can find an easier path. Effortless offers actionable advice for making the most essential activities the easiest ones, so you can achieve the results you want, without burning out.

9781982128562High Conflict: Why We Get Trapped and How We Get Out by Amanda Ripley

When we are baffled by the insanity of the “other side”—in our politics, at work, or at home—it’s because we aren’t seeing how the conflict itself has taken over. That’s what “high conflict” does. It’s the invisible hand of our time. And it’s different from the useful friction of healthy conflict. That’s good conflict, and it’s a necessary force that pushes us to be better people. High conflict, by contrast, is what happens when discord distills into a good-versus-evil kind of feud, the kind with an us and a them. In this state, the normal rules of engagement no longer apply. The brain behaves differently. We feel increasingly certain of our own superiority and, at the same time, more and more mystified by the other side. Ripley investigates how good people get captured by high conflict—and how they break free.

9781641120241 9781633695931 9780806541037

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“The great thing is to be always reading but never get bored—treat it not like work, more as a vice.”
— C. S. Lewis

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Whats New in Leadership Books Best Books of 2020

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Leading Thoughts for April 1, 2021

Leading Thoughts

IDEAS shared have the power to expand perspectives, change thinking, and move lives. Here are two ideas for the curious mind to engage with:


Joseph T. Hallinan on how the tail begins to wag the dog when it comes to our perceptions of reality:

“Once we have an opinion about how something should be, that expectation often colors our perception of how that thing actually is. When we look, we look with a purpose—we don’t look at something; we look for something. We tend to see what we expect to see and to experience what we expect to experience.”

Source: Kidding Ourselves: The Hidden Power of Self-Deception


Paul Zak on how fear-based leadership undermines our goals and dumbs us down:

“The science shows that fear-based management is a losing proposition because people acclimate to fear quickly. Fear-inducing leaders must ramp up threats to increase productivity, but there are only so may threats one can make.

“Fear is a fine short-term motivator but a poor long-term one. Worse than having no effect, when leaders spew out threats at work, it engenders learned helplessness in which people just give up trying to do anything.”

Source: Trust Factor: The Science of Creating High-Performance Companies

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Leading Thoughts Trust Factor

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LeadershipNow 140: March 2021 Compilation


twitter Here are a selection of tweets from March 2021 that you don't want to miss:

See more on twitter Twitter.

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Art of Being Indispensable At Work Everyday People

Posted by Michael McKinney at 08:41 AM
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