Dr. Jim Underwood asks us this question in his book, What’s Your Corporate IQ?  The author contends that Corporate IQ provides a “concrete, quantifiable method to rank companies within industries.”  Corporate IQ “measures the degree to which a firm is prepared to operate within and meet the challenges of its external environment.” 

Dr. Underwood measures 17 areas within an organization (encompassing strategy, organization, and character) and has found a strong statistical correlation between a firm’s Corporate IQ and its industry ranking.   

So many “sacred cows” of strategic planning are slaughtered in this book—theories that focus on such things as core competencies or sustainable competitive advantage.  The author makes an argument that these concepts no longer apply since business is now so complex and change is increasing at a faster and faster rate.   

Your organization and mine must know of and respond to (and sometimes shape) our global environment and the creative competitive actions of our opponents.  If our Corporate IQ does not match the Competitive Index of our industry—we will not produce above average financial results. 

Yes, we need to continue to improve our existing competencies.  But being the most efficient and effective buggy whip maker in 1910 did not keep the automobile industry from making the buggy whip irrelevant.   

The author claims that in middle-of-the-road organizations, executives spend over 90% of their time on operational issues.  Whereas in well-run companies, executives spend their time across three areas: 

·         Maximizing what’s in the box (our present mission)

·         Thinking and acting out of the box (present and future focus)

·         Staying ahead of the curve (knowing what’s coming and preparing for it) 

This certainly resonates with my experience as I see the top leaders of one company after another spending almost all of their time working “IN” the business rather working “ON” the business.  The best leaders are the best thinkers—and thinking is a lot of work! 

To maximize what’s in the box requires a commitment to excellence and managers who lead in organizational learning, transformation and performance.  Organizations with high Corporate IQ maximize what’s in the box by truly valuing, respecting and recognizing their people.  As one manager stated, “It’s the people that create the profit.” 

A company that “thinks and acts out of the box” is never static; it’s ever changing based on what’s going on in its external environment and what the competition is doing.  This company is constantly gathering external information and then thinking about what strategic changes need to take place to prepare the organization to continue to compete at a high level in the future.   

To “stay ahead of the curve” requires an organization where people are permitted to dream and fail without negative repercussions.  Great leaders rarely discover the future.  Their people do.  The challenge is sustainability.  Companies that fail to anticipate environmental shifts and adapt to them are not sustainable. 

Turbulence

The author makes a case for why most management theories eventually fail—because they are based on an assumption of “simple stability.”  This assumption states that the world is simple and somewhat constant.  When in fact, the world is complex (and becoming more so) and the world is changing (and the speed of change is quickening). 

Competitive Index

I really enjoyed reading this book because the author’s research is so “quantifiable.”  It’s probably the engineer within me, but I like to see numbers, not just a qualitative view of things.  The author calculates a Competitive Index based on the average of two measures:

·         Marketing Turbulence

·         Innovation Turbulence

Marketing turbulence is made of sales aggressiveness, marketing aggressiveness, marketing strategy and industry capacity versus demand.  Innovation turbulence consists of innovation aggressiveness, innovation strategy, customer strategy, and product life cycles.  It all boils down to one number—the Competitive Index.  The claim made by the author is that those organizations who measure out (remember the 17 measures of the Corporate IQ?) within +/- 0.5 of their industry’s Competitive Index will be industry leaders. 

For competitive success, your strategies must match the aggressiveness factors in your industry:

·         Marketing aggressiveness

·         Innovation aggressiveness

·         Product portfolio balance

·         Product technology applications

For competitive success, your organization must match the adaptive factors in your industry:

·         CEO attributes

·         Managers

·         Culture

·         Formal structure

·         Quality and process

·         Decision systems

·         Corporate strategy

·         Attitude toward change

·         Internal technology applications

For competitive success, your organization must be maximized in these areas:  

·         Values

·         Ethics

·         Value of people

·         Excellence rating

We’ll begin to explore these 17 areas that make up your Corporate IQ in next week’s Insight.