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| Best Practices: Climbing the Pyramid |
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| Written by Brad Dawson |
| Saturday, 31 January 2009 23:00 |
 {mosimage} We are all familiar with the concept of self-actualization. A term coined by Abraham Maslow in 1943 as the ultimate level of human achievement, self-actualization is a state in which an individual fully utilizes his/her talents and creativity. Is it possible for a corporation to realize a similar level of unsurpassed achievement? Can there be such a thing as corporate actualization? The premise for the argument is grounded in the Hierarchy of Corporate Needs, which mirrors, in a sense, the definitions proffered for individuals by Maslow more than 60 years ago. Under Maslow’s theory, it is necessary for an individual to satisfy each level in the hierarchical pyramid, ultimately rising to a state of actualization. Likewise, corporate actualization follows a path where various levels of the hierarchical pyramid must be satisfied, with the ultimate experience being the achievement of corporate actualization. Level 1: Financial self sufficiency At the bottom of Maslow’s hierarchical pyramid are basic physiological needs (food, water, air). For corporations, these basic needs take the form of paying customers, relevant products and services, effective employees, and positive cash flow, all aspects that define financial self-sufficiency. There is no innovation. There is no creativity. There is merely existence. Let’s face it: many corporations are stuck at this level. Given the current levels of shareholder scrutiny, corporations are evaluated on short-term results and penalized for making longer-term investments. CEOs act like CFOs as their corporate focus moves from exploiting market opportunities to analyzing and resolving financial results. Level 2: Innovation Maslow’s second level, safety needs, provides for an individual’s daily security, protection, and stability, regardless of his or her actions. This freedom-from-failure mentality is the basis for the second level of corporate actualization: innovation. Innovation is the state in which organizations can try out new ideas, expand traditional corporate operating venues, and develop art-of-the-possible solutions. As with Maslow’s theory, innovation can only be achieved when financial self-sufficiency is assured. Surprisingly, innovation is the most difficult step to achieve because it requires an outwardly focused, somewhat fearless, CEO—an individual willing to challenge short-term shareholder demands. Ray Kroc, the former president of McDonald’s, infused innovation into the fast food restaurant industry by offering such items as the Egg McMuffin, a breakout approach that immediately increased restaurant revenue potential by more than 30%. Conversely, the airline industry, plagued by financial short-falls and ongoing performance issues, has not introduced a new jet engine design in more than 30 years—an innovation failing. Does your corporation foster innovation through aggressive research and development activities, or does it feel fortunate to trip into your “five minutes of fame”? Level 3: Globalization Maslow’s third level, socialization, is defined as the need for love, affection, and a sense of belonging in a relationship. For corporations, globalization is the attainment of universal acceptance. Competition may still be apparent, but it’s not hidden as it would be if the corporation chose to wait on its domestic soil for a competitor’s conquest. The good news is that corporate innovation success lends itself to globalization. Innovation, in its purest form, has a ready cadre of interested consumers. Globalization just provides a larger shopping environment. DHL and Lenovo are both examples of corporations that have achieved globalization, a tribute to their sales and marketing prowess. When the Soviet Union broke up, DHL was the only international shipping service inside the newly formed Russian Federation (albeit an expensive one). Lenovo, through its acquisition of IBM’s personal computer division, landed in a coveted spot where market distribution channels could quickly capitalize on competitive price advantages. Today, both DHL and Lenovo are facing even greater levels of competition as a by-product of successful globalization. Level 4: Unique mastery Maslow’s fourth level, self-esteem, is defined as the need for respect, prestige, recognition, competency, and mastery. For corporations, this translates to unique mastery: a position in which your name is synonymous with quality, innovation, and marketshare. Built on the preceding pyramid rungs, this level is often the responsibility of a strong operational individual, typically the COO. This level of corporate actualization is focused almost exclusively on product-based companies. BMW has for the last generation constantly been ranked near the top of automotive industry. Microsoft and Starbucks share similar traits that put them at the top of their respective industries. And, arguably, Berkshire Hathaway (Warren Buffet’s firm) could be considered having achieved this level, even though, by definition, it is a services firm. Level 5: Corporate actualization At the top of Maslow’s hierarchy of needs is self-actualization, the ability to use one’s individual talents to their fullest and most creative extent. Corporate actualization is the point at which the entire corporation (not the CEO) is recognized as achieving a sustainable, highly effective organization, one that continues to satisfy each level of the Hierarchy of Corporate Needs without regard for the person sitting in the CEO’s chair. No single corporation has been able to achieve a sustained level of corporate superiority beyond a single management generation. Ford Motor Company, an icon of the automotive industry early in the 20th century, fell down with the retirement of Henry Ford. Likewise, Starbucks faltered when Howard Schultz left the management suite. Even Apple Computer stumbled when Steve Jobs left the helm. On paper, this status should not be so difficult to attain. Any competent CEO can ensure that all the components of the business are operating effectively, the basis for achieving the lower levels in the hierarchical pyramid. The real issue appears to revolve around the CEO’s ability to innovate within the corporation. Microsoft is a great example. Steve Ballmer is an effective CEO, but he lacks the level of innovation that Bill Gates brought to the corporation. Logically, under the corporate actualization theory, Microsoft, with the loss of Bill Gates, will become an also-ran and remain at Level 4. Corporate actualization is a unique way to judge the effectiveness of any corporation. By comparing organizations against the Hierarchy of Corporate Needs, CEOs can determine where their businesses rank and, more importantly, develop strategies to enhance overall corporate stature. Brad Dawson is the managing director of LTV Dynamics and has more than 27 years of management consulting experience. Known for his innovative strategic planning style, he consults with entrepreneurial business owners throughout the US, Russia, China, Latvia, and Mongolia on ways to immediately increase their revenues and profits. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . |