The Cascade Effect
Famed naturalist E.O. Wilson wrote in his book The Origins of Creativity that "98 percent of the species that have ever lived have vanished." He adds that "…one wrong turn, one misstep of evolution, even a single unfortunate delay in an evolutionary adaptation, could have been fatal [for a species]."
We humans are the lucky 2%, but if most species can vanish, then most companies can too. When faced with "evolutionary adaptation," failure to act can be fatal. Companies may delay product innovation, or competition blindsides them, or the internet takes them down by surprise.
A case in point: Back in the 90s, I was in advertising and led the Waterhouse Discount Brokerage account. Broker-assisted companies were on the decline. Waterhouse sold to Toronto Dominion of Canada, ensuring a future. Then along came the internet and E-Trade — another threat. With assistance from my team, TD Waterhouse (now TD Ameritrade) transformed its business model, becoming one of the top three companies in online trading. Meanwhile, other discount brokerages failed to recognize what was going on and quickly disappeared.
How do some companies engage in "adaptive evolution" at exactly the right time? One nonscientific possibility is a term I call "cascading," an idea that I first came across in a book by Robert Anderson and Bill Adams called Scaling Leadership. They argue that a leader needs to develop leaders, who in turn will develop other leaders, thereby creating a cascading effect throughout the organization.
Cascading takes hold when the CEO establishes the differentiating behaviors that create the conditions for scaling leadership. In my experience, if the CEO creates the right environment for their executive team, then the executive team can perform better together, and other teams will follow suit as these actions cascade through the organization. They will be more candid and will have courageous conversations that lead to better answers. Ideas will multiply. Authenticity will carry the day. Actions between departments will be in sync. The company will seem as if it is acting as a single organism.
TD Waterhouse cascaded action and thought:
• Speed was a competitive advantage. The company was smart, fast, nimble and committed. It aligned almost instantly in evolutionary terms to marketplace changes with a new vision and business model.
• The company invested heavily in systems and marketing, capturing significant share in online trading. It took risks and played to win.
• It had equity with customers, because of high service levels and value, so it was able to withstand big evolutionary adaption without losing them.
• TD Waterhouse knew that the customer focus must not change as it was transitioning to a DIY model.
Here are some suggestions for your consideration, regardless of organization size:
1. In business, 'adaptive evolution' is a real-time revolution.
Scientifically, adaptive evolution takes thousands of years. For companies, it has to happen in a flash. Companies need to focus on tomorrow's business model today. Create scenarios. Imagine what or who will put you out of business. Be prepared to pivot quickly.
2. The CEO should be the chief risk-taker.
The CEO must take responsibility for cascading action. TD Waterhouse's CEO moved quickly and smartly. He modeled calculated risk. This had a major impact on the culture of his executive team, and they all took chances to achieve a common objective.
3. Scaling leadership is imperative.
Cascading successfully will only take hold if the CEO and other leaders are focusing on developing their leaders.
4. Many companies can be challenged by their own values.
There are three ways values and behaviors can fall short:
• Values can be hollow. Take "integrity" or "trust" — most people will say they can be trusted and truthful even if they are not company values. Create values with teeth. With one of my clients, we created the value of "creative drive." What does that mean? We further clarified the behavior as having the "creative leadership that effects change in the organization."
• Behaviors are ill-defined. Cascade expected behaviors with purpose. For values to meaningfully cascade, they need to be differentiated. The CEO should model behaviors they expect: e.g., composed, authentic, even vulnerable at times. That's differentiated integrity and trust. Employees will see it. It gives others permission to be this way with impunity.
• There's a lack of consistency. It is vital for leadership to make cascading a conscious effort every day. The first level of leadership is powerful but often fails to recognize its collective power and consistently use it.
5. The customer is inextricably linked to the cascading effect.
TD Waterhouse knew its customer. Loyal customers create leverage against technology advances, and new competition. They become the company's great cheerleaders and defenders.
6. Cascading affects every department.
A marketing department will align to the values and behaviors of the company with appropriate strategies and tactics. Financial management, sales approaches and important areas such as safety and human resource policies will all look to the cascading examples set at the top.
It doesn't need to be complicated. A client of mine connected every meeting's purpose with one of the values of the company. He had eight direct reports who did the same with the next 50 leaders. One can imagine how that simple technique cascaded through the organization.
We humans have been lucky when it comes to warding off extinction, but companies do not have the luxury of luck. It's rough out there. Cascading is a key to thriving in today's environment. It may be worth a conversation among the executive team. Ask yourselves, "Is the (entire) company equipped to withstand sudden change?"