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SEASON 1 | EPISODE 2 | SEPTEMBER 2019
Episode 2: Stasis vs. Growth Mindset

For some companies, success can be dangerous: a “stasis mindset” can take root, with a complacent “we know best” attitude capable of bringing down even the highest-performing companies. Stephen Miles explains that the best leaders actively fight off this mentality by embracing a “growth mindset” – they seek out new challenges and learn new ways of thinking by looking beyond what they already know. He discusses how both individuals and organizations cultivate this critical leadership mindset.

In this episode
Stephen Miles
Founder and Chief Executive Officer

Coach to top CEOs, boards, and C-suite executives around the world, Stephen Miles is the founder and CEO of The Miles Group (TMG). His 20+ years of working closely with some of the highest performing executives, leadership teams, and boards of directors in the global Fortune 500 has put him at the center of some of the most critical leadership challenges and decisions companies are facing today.

Speaking frequently to organizations on strategies for coaching C-level executives and developing high-potential talent, Stephen has been featured in the Harvard Business Review, The Wall Street Journal, Forbes, Fortune, Entrepreneur, and Chief Executive. He is co-author of Your Career Game: How Game Theory Can Help You Achieve Your Professional Goals; he collaborates frequently with the Stanford Graduate School of Business on research around CEOs and boards, including a recent exploration of the costs and benefits of CEO activism. Stephen and his CEO advisory services were profiled in the Bloomberg Businessweek article “The Rising Star of CEO Consulting.”

Full transcript
RICHARD

For some companies, success can be dangerous because it can lead to complacency, and complacency leads to a fixed mindset. What’s the difference between getting stuck in stasis and going for growth?

C-Suite Intelligence: exclusive leadership lessons from coaches to the world's top-performing executives. I'm Richard Davies.

Every company says they're about growth, yet many are stuck in stasis

STEPHEN

I think what happens when you become fixed is that you discount things that are happening in the external world. You just don't take them as seriously as you would normally.

R

Stephen Miles, Founder and CEO of The Miles Group, says the best leaders fight off this mentality by staying curious and embracing a growth mindset. They seek out new challenges and ideas, and learn new ways of thinking by looking outside what they already know.

S

As the old analogy goes, "Culture eats strategy for breakfast." We're talking about culture here, and we're talking about deeply-entrenched culture.

R

He'll give a checklist of solutions.

S

And really, this is about being healthy and fit as an organization or having cancer as an organization, and the cancer can kill you.

R

I asked Stephen first: How does an organization get caught in a fixed mindset?

S

This comes out of good intent, and this comes out of success. This isn't some malicious manifestation inside a company. It comes in slowly. It creeps in, and, like a cancer, it takes you over, and eventually kills you. And if you're a company, the way it kills you is, you know, you don't have success anymore, and that success leads to an activist and you get sold, you become part of a larger organization, or you simply just go out of business. And so, the costs associated with stasis are extremely high.

R

What are some of the signs of stasis [00:02:00] or a fixed mindset?

S

The simple way to think about this is that number one is the organization takes an inside-out view of the world versus an outside-in view. And it seems really simple, but the manifestation of that in terms of culture and mindset is that, "We don't actually have a lot to learn on the outside. We actually have our way of doing business. It's better than everybody else's way of doing business, and therefore we don't need to study everybody else in the detail that we would've had earlier in our tenure as a company." And basically that isolates you. It creates silos. It creates this non-permeable membrane between the organization and the outside world, and, as we all know, the outside world is more unpredictable than it's ever been. It's more uncertain than it's ever been, and the velocity of information that's flowing in every direction is higher. So, basically, a competitive advantage now for an organization is to really have a true outside-in mindset, and when the inside-out seeps in, it causes a calcification and a lack of agility and adaptability to the world.

R

You've mentioned these two terms: "inside-out" and "outside-in." Could you explain the fundamental difference between the two?

S

Yeah. Inside-out is simple, which is you basically work from the company out to the rest of the world, which means that, "Our processes are better. Our content is better. Our way of doing business or approaching a problem is better, and therefore we're always working from our position, our company towards the outside.” Versus outside-in is your simple operating hypothesis is that, "Look, we don't know it all in any way, shape, or form, and we're in a learn-it-all mode, and we're going to take in every piece of information and change in the outside world, address it, and then put that into our own operating model to see if anything needs to change in a dynamic way."

R

So, give me an example of [00:04:00] the outside-in model really working, flexibility towards the marketplace and your likely competition.

S

Well, I think what happens when you become fixed is that you discount things that are happening in the external world. You just don't take them as seriously as you would normally. And so, therefore, when something germinates somewhere—like Amazon is a good example, right? It germinated in 1994. Amazon didn't creep up on anybody, and suddenly, in the era that we live in today, they're a trillion-dollar company—or approaching that—and they're the 900-pound gorilla in a lot of things, mostly not books. But that didn't creep up on anybody. They've been around, and people have been talking about Amazon, and suddenly Amazon is now the threat, right? But there are a lot of companies that sort of sat back and said, "Our business model is robust. They're a bookseller. There's not really much happening over there. We'll just keep doing what we do." Right? This real fixed version of the world—and that version has changed now that Amazon is the 900-pound gorilla in many different dimensions, but it didn't creep up. And so, what's important if you are in a company that is successful is that you're taking these petri dishes that are outside of you seriously. There might be some green shoots there or some green shoots over there, but you need to take them seriously because before they become a vine strangling you, you need to really understand what the threat is. And can you adapt to that threat or work with that threat in order to be successful? As opposed to the fixed view, which is the inside-out version of the world, which is, "Look, our business model's bulletproof. They're just this little green shoot over there. We're a redwood, and we have nothing to worry about.” And eventually, you do. You have a lot to worry about.

R

Another example is Dollar Shave Club and how that changed the men's shaving market

S

Well, it's a great example because I think if you look at the incumbents in the shaving world, [00:06:00] they had this amazing business model where they give you away the handle—they've written Harvard Business Review cases on it—and you pay for the razors. And if you're a shaver out there, you cringe when you have to buy those razors. It is a lot of money for a razor.

R

Absolutely.

S

And what came along was a couple of kids that decided that you're spending too much money on your razor blades, and they developed a new business model, which was a subscription model for the razors. And a lot of the incumbents didn't take it seriously and allowed this to germinate, and eventually it became a multibillion-dollar business. It's just these ecosystems are changing. Business models are changing and are dynamic, and as a leader, you have to have this outside-in mindset, so you can say, "Okay, the subscription model is coming along, and how do we step into that early and understand it?" as opposed to saying, "Look, we're the 900-pound gorilla. We've got this thing figured out. They're just a scratch on our back. We won't worry about them."

R

When a CEO decides that it’s important to switch culture and to be more flexible and to get out of stasis, can there be a lot of resistance?

S

Well, I think that there's huge resistance because, as the old analogy goes, "Culture eats strategy for breakfast." We're talking about culture here, and we're talking about deeply-entrenched culture. And culture is really the output of a set of behaviors and actions, and there's a set of behaviors and actions that reinforce this fixed mindset that can really get in the way of success of the company.

R

In what sort of ways?

S

So, a few things to talk about—so, if you're in a company now, you can just sort of close your eyes and start to think about, "Is this us or not?" So, number one is a lot of people get really good at explaining how something didn't happen as opposed to coming with solutions, right? So, you get the explanation culture [00:08:00] infused inside the organization, and then you train people to get really good at explaining how they didn't get stuff done. There are overarching and stifling processes inside the organization, layer after layer after layer of it, which gets in the way of actually getting stuff done. It reinforces meetings, and, look, if you're a senior executive inside a company, you're going to spend most of your time in meetings. That's just a fact of life, but those meetings are really unfulfilling for everybody, right? The wrong person's in the room. Somebody hijacks the meeting. We basically end the meeting and just go to the next one without concluding the meeting. There's this notion of just reinforcing meetings, but you don't actually advance the topic in any way, shape, or form. So, it's meetings for meetings' sake as opposed to meetings for delivering a great outcome.

R

We have another podcast episode in this series about meetings, how to have better meetings and how to avoid just having useless, boring, intractable meetings.

S

Yeah, which is a great topic for all of our listeners because meetings are one of the places where you can move the needle very quickly in terms of performance.

R

Other things around process?

S

Things that are too hard—so, people will avoid the really hard things. So, they'll come in through the door, something doesn't seem right over in that far corner, and will just go out through the other door and not tend to it. And that happens a lot. One of the hallmarks of a fixed mindset is you'll be in a meeting, and you'll be somebody who is a growth-oriented person, and you'll make suggestions around doing something a specific way, and somebody—or usually more than one person—will say, "We tried that before. Let's just move on." Right? It's the classic way to capture the fixed mindset, which is they really aren't open to new ideas because, "We've tried that before."

R

It's part of the explanation culture you talked about.

S

Exactly, yeah. It sort of reinforces that, and people are really good at that. Other ways that it manifests is, because you're an inside-out model, you typically are really focused on just having people enter through the front door when [00:10:00] you're 20 years old, and then you get promoted from within through your entire life, which is great thing in principle. The challenge is that you create a culture that’s inbred, and you create a culture that doesn't allow for new DNA to fuse itself into the organization. You really sort of wall yourself off from the outside world, and one of the inside-out versus outside-in versions of the world is around talent. So, what happens is, if you're somebody from the outside who tries to join one of these companies, what happens is you're rejected because you don't fit the culture. You can kill anybody with, "They're not a cultural fit."

R

Another example of inside-out thinking is that people tend to be defensive and personalize things.

S

So, when you challenge with new ideas, if you are a growth-oriented person, and you're a driver, and you have good ideas, and you want to challenge the status quo, and you want to break through, there are a whole bunch of people that get defensive and push back on you and really make this about conflict as opposed to the idea and sort of put you back in the box, and there are a lot of those types of people roaming around.

R

We've been talking about the negatives of staying within a fixed mindset. Let's move to some successful ways to drive a growth mindset, and if you're a CEO or a leader that needs to change the mindset of your organization from fixed to growth, what are some steps you need to take?

S

Look, I think a lot of people aspire to be growth-oriented, and I think elements of this should resonate with many of our listeners. So, number one, you have an outside-in view, which is really you care deeply about what's going on around you. What's the competitive landscape? What are some of those ecosystems that are working? What's the evolution of business models? What are people doing outside the company that's relevant to us, and how do we think about that and absorb that every single day? Because our world's uncertain and dynamic, and you need to be a voracious consumer of that outside-in. And you're always translating that into your business model, your function, your business area. What are we doing? How can we do it better? [00:12:00] Who's doing it better? And what's the manifestation for us in that context?

R

And that doesn't just apply to a CEO. That applies to executives further down the chain.

S

Oh, no, this is for everybody. Number two: what's really nice to have as a direct report is somebody who's solutions-oriented. "Look, we've got this wicked hard problem over there, and here...you know, I've really thought about that. Here are the facts and data and three options. And I'm giving you Option B, and here's the rationale for Option B." If I'm that leader, and you're my direct report, I love you every single day because you're coming to me with solutions. You're a thinker, and you're fact-based and data-driven, and there's options related to your thinking, which makes you dynamic in the way that you're thinking about the world and makes you a great direct report.

R

So, you give a series of choices.

S

Yeah, you're always focused on solutions as opposed to explaining what didn't go wrong.

R

Is it important to think about the future in terms of fixed periods of time like three years or the next five years?

S

Well, I think it's always important to win in the business of today and build the business of tomorrow. And I put it more in business of today is in that sort of three-year window, and business of tomorrow is five to ten. And it's important to have the balance and have people inside the organization that are in that mindset, and they're kind of different people, right? The people who are really good at the business of today are really about extracting value from your business model today. And then you have future-oriented people that are really thinking about business models and ecosystems of tomorrow, and how do we build that?

R

Some other ways for you to be in that growth mindset: involve your capacity for work and taking on new projects.

S

“We'll figure it out. It's going to take some work, but here's how we're going to go get that done,” as opposed to, "You know what, if you want that done, it's going to cost you another million bucks, and we need six other people. Otherwise, that's not happening." Other things that I think are really important to take into consideration in your personal checklist is: really, nothing is too hard. We talked about, in the fixed mindset, [00:14:00] there are a lot of things that are too hard, and people sort of walk through doors and look over in the corner and go, "Oh, my goodness. I'm going to go out through the other door," versus in the growth mindset, people tackle the "nothing is too hard" problems, and they get involved in that, and they break through. And, look, when you're dealing with a "nothing is too hard" problem, you may open a door and get a crack of light, and you may not see your destination, but you figure out that crack of light's going to give you these answers, and then you open another door and get another crack of light, and you're going to get some more answers. And they deal with the ambiguity associated with that and the difficulty associated with that to deliver an outcome as opposed to saying, "Wow, this is too hard. I'm looking in at that crack of light, and forget about it."

R

Another way of resisting a fixed mindset, says Stephen, is your view of idea conflict and how you raise or deal with challenging ideas.

S

I think people who aspire and are growth-oriented really embrace the notion of going hard on the idea. They have the skillset, and they have worked on themselves in order to work hard on going hard on the idea, so debating and trying to develop a better solution as opposed to personalizing and getting defensive and fighting against people who challenge them. They're actually open to challenge, and they actually want the idea to be better through that discourse. Positive attitude—the way it manifests is just "can do."

R

Can you give me an example of can-do attitude, of the way that works?

S

Well, a lot of times—look, we live in a world now where a lot of companies have been leaned out, and leaned out usually translates into, "I do more and make less money," right? We can have all sorts of great management terms for it, but if you're actually doing the work, usually there's fewer people around you, and you're doing those jobs. And so, in the context of that, when something new is added to your portfolio, oftentimes you'll have the conversations which, "X left," or, "We need you to do Y," and really, the can-do person turns around and says, "Yeah, that's great. Let me understand the problem. Set some context for me. We'll figure it out. [00:16:00] We'll get it done." Versus the, "Oh, my god, the sky is falling. I need another million dollars, and I need five extra people. Otherwise, we can’t tackle that problem." Right? That's a really different kind of mindset.

R

It sounds like that's also something you need to tell yourself as well as others.

S

I think for sure. I think when you prepare to go outside of the company—you're going to a special meeting, you're going to a customer, you're going to a supplier, you're going to an outside conference—you bring the best version of yourself. You are on. You've done your homework. You're ready to go. And then, when you come back to the company, for whatever reason, we get the lesser version of people. It's a little bit lazier, a little bit less prepped, little bit less of everything. So, we get the five, six, or seven out of ten version of you, and that's just not okay. So, really, one of the tools in your toolkit as an executive is to bring great energy to the situation and bring the ten out of ten version to yourself in everything you do.

R

Is part of that ten out of ten version of yourself being focused on relationships that involve empathy as opposed to just merely transactional relationships with your colleagues, with people you work with?

S

A hundred percent. What we try to do is really think about your relationship network and ecosystem, but a lot of people overestimate the quality of their relationships. They think if they've gone and had a coffee with somebody, somehow that relationship is in a good place. And, really, relationships are broken down into two categories: transactional and what we would define as empathy-based relationships. And the test of your relationship is when something goes wrong, does your counterparty point the finger and assign blame, or do they give you a heads-up proactively and try to work the problem and solve the problem with you? And you have to work to build empathy-based relationships. These just don't happen having coffee with somebody. Basically, what you need to do is help somebody when you don't want something in return. And we kind of live in a world today where everything is quid pro quo, [00:18:00] but there are some special people inside organizations that look to coauthor things or to allow the other person to be the sole author, and they are the person behind the curtain supporting, removing obstacles, problem solving, and helping them be successful. And, look, not everybody's going to give you empathy, but generally, 9.5 out of 10 people, you'll get some empathy built in the relationship if you're willing to help somebody and you don't need something in return. And when you do need something in return, oftentimes they're there for you, and they'll help you, give you a heads-up, "This is coming over the hill. I heard this," and help you be in a place where you can be successful.

R

That's a vital piece of advice for an executive at any level or an employee at any level.

S

Yeah, look, it's the CEO all the way down to whoever inside the organization. This is super important. You should look at your relationship ecosystem, and in order for you to get stuff done and be successful in the year, there's a number of critical relationships for you, and you should have empathy in those relationships, and a lot of people don't look at it this way.

R

One more important area on achieving a growth mindset involves talent?

S

Yeah, I think when we look at growth-oriented executives, and you look at their leadership teams, it's usually a nice mix of inside and outside people. Look, we still want to reinforce the company culture. We still want to create high performance, and we want to give people who've committed to the organization a real chance to grow and develop inside the company. But, at the same time, we want to continue to graft in and infuse DNA from the outside so we continue to get better every day.

R

So, there's a mix between people who've come up inside the organization and people who've spent a significant amount of their career outside the organization.

S

A hundred percent. There's this nice mix of inside talent development and external talent recruitment, and they're really good at onboarding people from the outside and grafting them into the organization so they can be successful and bring what they've learned from outside the organization [00:20:00] to make the team, business unit, or function better.

R

We've been talking about ways of achieving a growth mindset. How important is this to organizations?

S

If you look at sustainable competitive advantage, and basically I think any expert would tell you that culture eats everything, and this really is the manifestation of culture, and really this is about being healthy and fit as an organization or having cancer as an organization, and the cancer can kill you. So, what we want to do is create an organization where people, A., are aware: What is stasis or fixed versus a growth orientation? And then, how do we select people, nurture people, and create an organization that's moving towards growth and that we reinforce that growth mindset in everything we do from a leadership perspective?

R

If you're a CEO and you need to shake up your organization and change it having a fixed mindset to a growth mindset, what do you do?

S

Yeah. So, I think step one is you need to create awareness. So, you actually need to know what we're talking about in terms of stasis or fixed versus growth. So, awareness is super important. If you're the CEO, a few things—I think, A., you need to give members of your team the ability to demonstrate to you that they are growth-oriented because, look, we're very adaptable as people, and if the overarching culture is actually fixed, I'm going to adapt to that fixed model pretty quickly and be pretty damn good at it. So, let's not just assume that somebody is broken and unfixable as our starting hypothesis. So, what we want to do is create awareness on the leadership team, awareness with you as the CEO, and then have expectations for people to assess themselves in terms of stasis versus fixed versus growth, and we want to see the evolution of the manifestation of the growth behaviors in everything they do, in every interaction every day. And we can observe that. We can do a 360. We can do a bunch of stuff to collect that data, but we want to give people the chance to be successful through awareness because if this has sort of taken over your company, there's often people who [00:22:00] have a growth orientation but are successful in the prevailing culture. Number two is the greatest leverage you have as a CEO is what I would define as the second circle. So, first circle is yourself and your direct reports. Second circle is the next—depends on the size of the company—25 to 50 people, right? And they are the people who do the work. Let's not kid ourselves here. If you are a CEO and/or a direct report, you don't actually do any work. You step in and out of the streams of other people's work, and the other people that you step in and out of is the second circle, the next 25 to 50 people. And where the greatest leverage happens here is that this second circle is usually not as curated as the first circle. So, there's usually a bigger mixture, a broader range of capability and talent in that second circle, and it usually hasn't been attended to the same way that the first circle has just in terms of assessing this notion of stasis or fixed versus a growth mindset. And I think step two in the journey or step two that's concurrent in the journey is that you take a look at the second circle. You create awareness for that second circle. You do your rough assessment of: What's the percentage of stasis versus growth? And then over the course of a number of quarters, can we move that? And, look, I don't want to be ruthless here, but there are some people who just like a stasis world, a fixed world, and that's who they are, and that's how they've been successful, and they're never going to be on your growth journey. And you just need to identify who those people are, and they probably need to go at some period of time. However, there's a huge cohort of people that are on the fence that have been successful adapting to your fixed culture and can be equally successful adapting to your growth-oriented culture, and they will come off the fence, or they will come off the other yard and jump the fence into your yard if you give them the opportunity to do that.

R

So, Stephen, let's do a checklist, which is a summary, really, of what we've been talking about—first, the aspects of a [00:24:00] fixed mindset in a company.

S

So, number one is you have an inside-out view of the world if you're fixed, right? You're always coming from the company out to the rest of the world. You typically explain things. So, you're good at explanations. You're less good at solutions. You typically reinforce process. You reinforce meetings, and they're not high-quality meetings. This is meeting for meeting's sake as opposed to meeting to get an outcome. Things generally are too hard. So, we talked about sort of coming through the door and seeing something over in the corner, and you just go out through the other door, right? You do this often, that things are actually too hard. You usually start off a conversation when somebody has a growth mindset and has a good idea or an idea with, "We've tried that before." You typically reject external talent, and you usually use, "They're not a cultural fit," to get rid of them, and you do that over and over and over again. So, you don't have a brand for bringing people in from the outside. You typically reinforce this inside-out view. You typically are defensive and personalize things. So, you can't actually break yourself from the idea, and you thrive on conflict, and you thrive on going hard on the person. And if somebody goes hard on you, you get extremely defensive extremely quickly, and you push them away hard as opposed to trying to advance the topic. You often have a glass-half-empty, negative attitude as it relates to the world. Your relationships—when we talked about transactional versus empathy-based—are highly transactional. They're just...you need people to get stuff done, or you just have your peeps inside the organization, and that's what you reinforce. And you typically have a finite capacity for work, and you're not able to move that capacity. It's basically, "If you need more, you need to give me more." There's no ability to bootstrap related to a situation.

R

So, that's the checklist on the fixed mindset. Now let's go to growth mindset.

S

So, if you're on the growth side, or you aspire to be on the growth side, a couple things. You want to have the outside-in view. So, you're a voracious consumer [00:26:00] of the external environment. You're always translating that into your current state and seeing how that affects things. You are solutions-oriented, right? So, whoever you’re a direct report for, you're figuring out hard problems. You're trying to be proactive. So, not everything is reactive, and you're not being told to do stuff, but you're coming to them proactively with option A, B, and C. "I'm choosing B because..." right? Everybody wants that person to be their direct report. You have a huge capacity for work, and so you figure out how to get more stuff done with less. You're a "nothing is too hard" person. So, basically, those doors that you go through where there's something in the corner, you are attracted to that corner, and you go over there and try and figure out what it is and: What do we need to do in order to mobilize to solve that problem? You usually thrive on idea conflict. So, you're willing to go hard on the idea. You want the idea to be developed, and you want it to be developed effectively with your colleagues. And so, you aren't defensive when somebody challenges you. You actually take that on as something in order to develop your point of view or advance the topic that you're working on. You typically have a very positive attitude. So, it's "can do" even in the deepest doldrums of something—and, look, every week isn't going to be a shiny, bright, sunny week—you're still able to bring good energy, and you manage your energy in a way that even on the downside of things, you bring good energy to the situation and lift the whole room or lift the topic based on how you manage your own energy. Not everybody's relationship network can all be all be empathy-based, but you really think about empathy-based relationships, and you do things for them in order to build capital up, so you can draw on that when you need to get stuff done. And, finally, you really have a brand around developing talent, and the development of talent is really around inside talent development as well as selective external recruiting. So, your teams are always a mixture of inside and outside people, and your brand is really around talent and talent development and getting the best team around you. [00:28:00]

R

Stephen Miles, thanks very much. Stephen Miles of The Miles Group. C-Suite Intelligence is a series of podcasts with insights from coaches to some of the world's top-performing executives. They share ideas and insights based on years of knowledge. Find our episodes on Apple podcasts, Spotify, Google, Stitcher, and other podcast platforms. I'm Richard Davies. Thanks for listening. [00:28:26]

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