let go to grow: linda sanford discusses ideas from her … · let go to grow: linda sanford...

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Let Go to Grow: Linda Sanford discusses ideas from her new book March 2006

Executive summary – Commoditization, the ultra-competitive marketplace and deregulation are often looked at negatively, but Linda Sanford explores ways to make these challenges the basis for success. The effective use of technology, more sophisticated business models and commitment to cultural change provide the steps to adapting to change in ways that lead to growth and prosperity. In this Executive Technology Report, Peter Andrews interviews Linda Sanford, IBM Senior Vice President, Enterprise On Demand Transformation & Information Technology. She is also the co-author of the recently published Let Go to Grow: Escaping the Commodity Trap.1

Peter Andrews What are the main messages of Let Go to Grow?

Linda Sanford I'm suggesting that we all let go of business models and management systems that are not effective in today's ultra-competitive marketplace. The Internet, globalization and deregulation have given rise to a situation in which many products and services have become commodities. To compete in this environment, businesses need to find new ways to differentiate themselves. By fostering collaboration both within their firms and with outside business partners, companies will be better equipped to drive growth through increased productivity and innovation.

The book says three things to business leaders:

1. Today, you need to start with an understanding of your business on a granular level. You can do this by breaking down your business processes using the IBM® Component Business Model™ approach.2 By doing this, you can determine what your core strengths are, as well as identifying the areas in which you need to improve, either by process improvements or outside partnerships.

2. Technology has created all kinds of possibilities for new business models. In particular, Service Oriented Architecture (SOA) and Web Services allow you to let go to grow. It is easier than ever to place components of your


business into a partner's hands without losing the ability to direct and run your business. That way, you can focus your attention on the business components you perform best.

3. Organizations are facing significant cultural change, with traditional views of how you run a business and how you succeed in a business undergoing revision. Leaders need to deal with this challenge head on. For an organization to let go to grow, there must visible and vocal support from a leader. In particular, a leader needs to incent and motivate collaboration. This is somewhat foreign to those who came up in the command and control era, when power came from what we knew. But that won’t cut it in the 21st Century. Not in the face of globalization, commoditization and constantly accelerating change.

Peter Andrews For me, one of the book’s real appeals is that it offers hope. Usually the changes are talked about in terms of things getting worse. You provide ways to make businesses healthier. Any comments?

Linda Sanford There’s more than hope; there’s an answer that can help companies survive and prosper. In Let Go to Grow, I suggest these answers and expand on them through stories of real businesses that have succeeded. In many cases, I wrote about unique, surprising successes. For instance, the textile company TAL is very non-traditional. In fact, it owns nothing. Yet, it has been prosperous. The approaches these companies come up with are not obvious, but they provide answers. There is more than hope here; there is the capability to succeed.

Peter Andrews TAL brings up a question that came up while I was reading. As you say, they own nothing and have avoided the trap of fixed costs. But everyone can’t avoid fixed costs. Ultimately, some businesses have to own factories, mines and equipment. What’s the endgame on fixed costs?

Linda Sanford Organizations need to take on capabilities where they have an advantage and provide these capabilities for many partners. They also need to create flexibility for themselves by having a portfolio of capabilities, not just a few. In this way, they are not dependent on one piece of their business or one company. When one economic sector is down, another is likely to be up. Things tend to balance out.


Peter Andrews Letting go, for many of the companies you cite, means pulling together the bits and pieces that create value from partners across the world. The successes of companies in the “value web” depend on not having any radical disruptions to communications, transportation and shipping. Doesn’t this make the model vulnerable to natural disasters, terrorism and any major changes in the availability or cost of fuel?

Linda Sanford With a value web, you have a more collaborative situation; it’s more peer to peer. Everyone is held accountable. As partners make agreements and as they work for success in the face of change, the approach is not to win at any cost. You work for the continued health of the value web as a whole.

Contrast this with a value chain. Here, you have the roles of vendor and supplier dictated. There is a definite controlling hierarchy that limits options.

This is not a perfect business model, because we live in an imperfect world. Business leaders will always have more control of some aspects than of others. That’s life, and we can expect things to get more, not less, unpredictable. But if you – and those in your value web – build in flexibility, that can work to everyone’s advantage in unpredictable times.

Peter Andrews It seems like trust is a critical success factor here.

Linda Sanford Trust is really at the center of making this work. You need genuine relationships. You need to be able to sit around a table – not across a table – and agree on common objectives. It’s not a meeting or a discussion; it’s a real collaboration, a dialogue. All parties need to be truly listening, not sitting there formulating their next points as they wait for the other person to stop speaking.

These “get-togethers” must be frequent enough to build relationships, and periodically, they really need to be face-to-face. You need to have direct, open discussions going on among people who have knowledge and expertise to share. This won’t happen if the focus is just on you and your own company. The best leaders will facilitate a fair and open dialogue.

Peter Andrews What are the characteristics of a good collaborator in this world?

Linda Sanford Let me provide you with four that I think are key:

1. You need people who are able to think horizontally. That is, they need to go beyond their silos, beyond their organizations, beyond their own experiences.


2. They also need to be able to share information and expertise in a way that fosters new ideas.

3. They need to be open to other people’s ideas.

4. They need to work to develop and respect a shared set of values with other partners.

This last is important in a fast-changing world. When the unpredictable happens, people often can’t go up the ladder before making on-the-spot decisions. The real guide to behavior needs to be through common values.

By the way, IBM thinks collaboration and horizontal thinking are so important today that we have added them to the list of essential competencies for our leaders.

Peter Andrews We talked earlier about getting a more granular view of business and bringing in partners to handle components that aren’t core. That’s facilitated by adherence to standards and by creating common accepted interfaces. In your book, you talk about how these interfaces are persistent. But doesn’t any part of the model that is long lasting limit innovation?

Linda Sanford There is a strong focus in Let Go to Grow on standards, both open and de facto. And the answer is that we need to live both in the world of standards and in the world of innovation. When change comes, you can’t just pull the plug on everything. You need to create conditions for a graceful transition. IBM has done this in the world of the mainframe by helping our clients move, bringing them along to make a successful transition.

The idea behind having open, common standards is all about innovation. Collaboration is the best way to go about solving the tough problems confronting business and society in general. And you can’t have collaboration without standards.

But let’s talk some more about innovation. And we are specifically focused on “innovation that matters.” It is one of IBM’s values – both for our own benefit and for the world. This value came from our employees in a 2003 online session we called the Values Jam.

The IBM view of innovation is broad. Many people think innovation means invention. For us, innovation is invention plus insight, and it can be for products, services, business models, business processes, culture and more. It’s really multi-dimensional. And we are very focused on helping our clients be innovative. We recognize that it is the only way to sustain progress, to achieve success. It’s the only way to deal with a world that is changing at a faster and faster pace.


Peter Andrews Which industries are leading the way in letting go to grow? Which are laggards?

Linda Sanford Most of those who lead are in industries that have hit the wall earliest. Commoditization has hit the industrial and high tech sectors hard, and businesses have had to find a better way. Because of the low margins in retail, that sector also has many examples of “let go to grow leadership.” The pharmaceutical industry has leaders for a different reason: their success is strongly driven by the time it takes to get to market. That’s why Eli Lilly, for example, has reached out beyond its research labs to find innovative technical answers. They have set up a Web-based program called InnoCentive, to build a virtual talent pool of over 50,000 scientists in 150 countries. Eli Lilly posts R&D problems any scientist can tackle, given the right expertise. The success rate has been far higher than in-house performance – at around one-sixth of the cost of doing it all in-house.

While there are examples of leaders in every sector, those in the healthcare and education sectors have generally lagged behind. This is particularly disturbing because the success of both is critical to sustaining the value webs that are being established.

Peter Andrews Another important dependency would seem to be access to talent.

Linda Sanford That’s right. And there are interesting technical advances here. We have new tools to help organizations find the people they need and also to predict the talents and skills they will need in the future. The latter represents a real breakthrough. It looks at needs across time and space, and, if companies can make a prediction informed projection and get moving quickly, it will represent a real business advantage in terms of time to market.

Social Network Analysis is one of the enabling technologies for accessing talent. It’s helpful not just with tracking down people with the required knowledge and skills, but also with identifying people who have influence and who are well networked – who can provide a quick answer or get you to the right person. And, because relationships are shown, it’s easier to qualify a candidate with regard to their real ability to provide value.

Peter Andrews In the book, you mention the growing percentage of working in the “creative class.” Does this point to substantive changes in business?


Linda Sanford People will come together around appropriate opportunities. Those with the right skills, expertise and passion for an opportunity will come together, do the work and then disband. We see this to an extent with projects in Hollywood today, for instance, but the future will bring this to a much finer level, almost down to the level of individual transactions. You’ll see this both with opportunities that emerge and with disasters, such as Hurricane Katrina in August 2005. We’ll have the tools that will be necessary to find and connect people quickly enough and effectively enough to make a difference. IBM, of course, will provide such tools. We’ll also bring along the insights and the methodologies that provide focus and help people through emerging situations and find the best ways to respond.

Peter Andrews You’ve provided our readers with a lot to think about and explore. Any final thoughts?

Linda Sanford Yes. Above all, I’d like to emphasize the cultural aspects to succeeding with a let go to grow model. In my many experiences working with other companies, this is what I’ve seen to be the “make or break” issue. You can’t let go to grow if your culture won’t let you.

So, I’d encourage all business leaders to spend time on culture. Make it important. If you can do this, you’ll be able to build an appropriate environment and common values that can make a difference. If you can get the culture right, you’ll have leaders who coach, mentor and motivate. And you’ll find you have people who are collaborating and thinking horizontally.

You’ll be on a path to making things happen, and you should get there earlier than the competition. And, if you get there first, that will likely add to your advantage and accelerate your progress.

References 1 Sanford, Linda S. and Dave Taylor. Let Go to Grow: Escaping the Commodity Trap. Prentice Hall. December 2005. http://www.phptr.com/bookstore/product.asp?isbn=0131482084&rl=1 2 Pohle, George, Peter Korsten and Shanker Ramamurthy. “Component business models: Making specialization real.” IBM Institute for Business Value. August 2005. http://www-1.ibm.com/services/us/index.wss/ibvstudy/imc/a1017908?cntxt=a1003208


Related Web sites of interest Friedman, Tom. The World Is Flat: A Brief History of the 21st Century. http://www.amazon.com/exec/obidos/tg/detail/-/0374292884/qid=1117202446/sr=8-1/ref=pd_csp_1/002-7664985-3581655?v=glance&s=books&n=507846

Murdock, Ian. “Open source and the commoditization of software.” http://ianmurdock.com/?page_id=222

Hayes, Linda. “Testing SOA: Peeling the Onion.” Computerworld. August 15, 2005. http://www.computerworld.com/developmenttopics/development/story/0,10801,103611,00.html

Andrews, Peter. “New approaches to IT management: The service-oriented model.” IBM Executive Business Institute. December 2004. http://www-1.ibm.com/services/us/index.wss/multipage/imc/executivetech/a1006925?cntxt=a1000074

“The Commoditization Of Everything.” TechTransform. Riggs Eckelberry Marketing Group, Inc. July 1, 2002. http://www.techtransform.com/id262.htm

“Commoditization And Innovation - IT Does Matter.” Tech dirt. May 6, 2004. http://www.techdirt.com/books/20040506/1217213_F.shtml

“Is innovation still America’s birthright?” On Demand Business: Speed innovation. IBM Corporation. http://www-306.ibm.com/e-business/ondemand/us/innovation/fortune/forum_b.shtml

“Component Business Model.” IBM Business Consulting Services. http://w3-03.ibm.com/services/bcs/news_pubs/features/2005/0208_cbm.html

Kapur, Vivek, Jeffere Ferris and John Juliano. “The growth triathlon: Growth via course, capability and conviction.” IBM Institute for Business Value. January 2005. http://www-1.ibm.com/services/us/index.wss/ibvstudy/imc/a1007846?cntxt=a1000449

About this publication Executive Technology Report is a monthly publication intended as a heads-up on emerging technologies and business ideas. All the technological initiatives covered in Executive Technology Report have been extensively analyzed using a proprietary IBM methodology. This involves not only rating the technologies based on their functions and maturity, but also doing quantitative analysis of the social, user and business factors that are just as important to its ultimate adoption. From these data, the timing and importance of emerging technologies are determined. Barriers to adoption and hidden value are often revealed, and what is learned is viewed within the context of five technical themes that are driving change:


Knowledge Management: Capturing a company's collective expertise wherever it resides – databases, on paper, in people's minds – and distributing it to where it can yield big payoffs

Pervasive Computing: Combining communications technologies and an array of computing devices (including PDAs, laptops, pagers and servers) to allow users continual access to the data, communications and information services

Realtime: "A sense of ultracompressed time and foreshortened horizons, [a result of technology] compressing to zero the time it takes to get and use information, to learn, to make decisions, to initiate action, to deploy resources, to innovate" (Regis McKenna, Real Time, Harvard Business School Publishing, 1997.) Ease-of-Use: Using user-centric design to make the experience with IT intuitive, less painful and possibly fun

Deep Computing: Using unprecedented processing power, advanced software and sophisticated algorithms to solve problems and derive knowledge from vast amounts of data

This analysis is used to form the explanations, projections and discussions in each Executive Technology Report issue so that you not only find out what technologies are emerging, but how and why they'll make a difference to your business. If you would like to explore how IBM can help you take advantage of these new concepts and ideas, please contact us at [email protected]. To browse through other resources for business executives, please visit

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Executive Technology Report is written by Peter Andrews, Consulting Faculty, IBM Executive Business Institute, and is published as a service of IBM Corporation. Visit

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