Otis White

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Cities and Disruptive Change

September 23, 2010 By Otis White

In 1997, a book was published that made sense of the business world—and terrified corporate executives. It was “The Innovator’s Dilemma” by Clayton M. Christensen, a professor at Harvard Business School, and it answered two questions that CEOs in the 1990s were asking frantically: Why were so many highly regarded corporations losing ground to startup companies? And how could they stop it from happening to their companies?

In his book, Christensen focused on technological change—change so great that it altered the business models in an industry. Sometimes, he wrote, this disruptive change came fast, as when the internet undermined the music industry in a few years’ time. Sometimes it came more slowly, like the decades-long decline of Sears and rise of discount retailers like Target and Wal-Mart.

One thing about disruptive change was clear, Christensen wrote. Big, established companies didn’t handle it well, and the companies that did were mostly smaller and newer.

In this posting, I want to talk about how disruptive change comes to cities—change that alters a city’s growth model. Unlike corporations in the 1990s, the key to how a place manages disruptive change isn’t size—some big cities handle big changes well and many small towns handle them poorly—but rather leadership. And that’s because in communities as in corporations, the way to manage major change is to do things that, to many people’s way of thinking, don’t make sense. For citizens to go along with these things, there must be a high level of trust in city leaders.

But before we talk about cities, let’s go back to “The Innovator’s Dilemma.” The part of the book that terrified executives was Christensen’s discovery that the victims of change were often among the best managed companies—“the kinds that many managers have admired and tried to emulate,” he wrote, “the companies known for their abilities to innovate and execute.” Even more frightening, he added, many of these companies had seen the disruptive changes coming, tried their best to accommodate them—and failed.

So what went wrong? In times of disruptive change, Christensen said, executives depended on practices that had served them well in normal times—things like listening attentively to their customers, offering customers a steady stream of new products, and investing in products with the greatest potential returns. In other words, the things they had learned at Harvard Business School.

Problem was, disruptive change wasn’t normal. It didn’t come from a company’s best customers, who were usually happy with the way things were. It began with marginal customers, people who wanted products that were simpler, smaller, cheaper—and far less profitable for manufacturers. These were the people who wanted desktop computers in the early 1980s: hobbyists, early adopters and small companies willing to learn DOS and be their own IT departments. These weren’t the corporate customers that IBM and Digital Equipment Corp. were used to dealing with. IBM tried serving these marginal customers but gave up; DEC never really tried. So the marginal customers (who, of course, became the vast majority of computer buyers in years to come) were handed over to startups like Microsoft, Apple and Dell.

For large corporations, Christensen wrote, the way to manage disruptive change was to do things that almost defied reason. First, they had to devote themselves to identifying and understanding fringe market segments that had the potential of growing fast. Second, they had to supply these marginal customers with cheaper, simpler products, tailored to their needs—even if the profit margins were slim or non-existent and threatened to undercut existing products. Third, they had to create special units to serve these marginal customers. Finally, they had to protect these units from being judged by corporate standards or run according to company rules.

In other words, they had to turn practically every corporate instinct and well-established practice on its head. No wonder so few companies made the transition.

So what does this mean for cities? Well, to begin, there are changes that are every bit as disruptive to cities’ growth models as the technological changes that have swept through business. Here are five:

Natural or man-made calamity: This is easily grasped. New Orleans will never be the city it was before Aug. 29, 2005 when Hurricane Katrina struck, and most citizens accept that.

Economic change: This is much harder to see than a natural calamity—and some will deny it’s taking place. Michigan cities, for example, have known for 30 years that the state’s auto industry was in decline, but many have been unsuccessful at developing alternative economic bases.

Demographic change: Same difficulties as economic change: Demographic change is hard to see because it tends to take place slowly, and denial is a common reaction. There’s an additional problem, and that’s bias. Old-timers often don’t like the newcomers and some will oppose any efforts to help them.

Major political change: Cities are particularly vulnerable to political changes at other levels of government. For example, you can date the long decline of California’s local governments (and, for that matter, state government) to the passage in 1978 of Proposition 13, the tax-limitation law that changed the way government services were paid for.

Changes of taste, values or world view: This may be the single hardest disruptive change to recognize and manage because, unlike economic and demographic change, there are no reliable numbers to point to, and unlike calamities or political change there’s no event (tornado, hurricane, new laws, etc.) to mark its beginning. There’s simply a group of people who begin to think about things differently. Example: The Jane Jacobs-inspired movement toward mixed-use neighborhoods.

Surely, these are big changes. But what makes them disruptive? Because they have the potential of changing a city’s growth model—the elements that make a place grow and prosper and support the services that citizens want. The disruptions can be good ones—as in the turnaround that many big cities saw in the late 1990s when young people and empty-nesters returned to urban centers—or bad (see Proposition 13, above). Either way, the change has to be so great that the city grows or pays for public services in a fundamentally different way afterward.

How do places adapt to disruptive change? Christensen offers a good model:

  1. Begin by recognizing changes before they become obvious. Again, this is easy to do in a natural disaster, much harder to do with changes of taste or world view. But I would add that, except for calamities, disruptive change rarely comes suddenly to cities. If a city wanted to adapt to changes of attitude about transit and mixed-use development, for instance, it had a long, long lead time. Jane Jacob’s seminal book, “The Death and Life of Great American Cities”—the one that inspired New Urbanism in the 1980s—was written in1961.
  2. Don’t try to address disruptive changes using the same processes—or people—your city uses for other types of change. For instance, don’t ask the city’s department of transportation to make the city more walkable if its mission has long been devoted to making it more drivable. Create a new agency or organization to handle walkability issues. Much later, if the DOT has accepted walkability as central to its mission, you might bring it into the department—but be careful.
  3. Don’t measure progress using familiar yardsticks. That’s because you’re investing in the future, not the present. And the future, well, hasn’t happened yet. Transit critics, for example, often point to the millions being poured into light-rail projects and the relatively small numbers riding these new systems. Using that logic, which infrastructure would you have invested in 100 years ago, expensive paved roads used by a few automobiles or cheap dirt roads for the many horses? Again, the question isn’t which is the most efficient investment by today’s standards but which is the wisest investment for the future.
  4. The key terms, in talking to the citizens, are “future” and “investment.”  Citizens like leaders who are hard-nosed visionaries—people who can sketch an appealing future, point out the ways of getting there and deliver results. By and large, citizens aren’t blind; they will accept some sacrifice, as long as it leads to a place they want to go. They’ll even put aside some of their prejudices, if they see how it can benefit them in the long run.

But it starts by seeing the changes that are coming and knowing the right responses. And what if you’re not a particularly visionary person? Don’t worry, there are plenty of people in your city who think about the future. Just ask around. Take a few of them to lunch. Look at the city’s demographic and economic indicators. Ask legislators about major changes in politics and law. Read up on how cities elsewhere are changing.

Oh, and it wouldn’t hurt to read a book about managing disruptive change. Here’s a good one to start with: “The Innovator’s Dilemma.”

Photo by Tom Blackwell licensed under Creative Commons.

Seven Ways Community Decisions Are Different

September 1, 2010 By Otis White

I am sometimes asked if community decision making is different from other forms of decision making—say, the kinds used in companies or nonprofits. And my short answer is yes.

But I’d like to offer a longer answer, which is that community decision making is different not in one or two ways, but in a number. And because it’s different, it means we need different kinds of leadership in communities, leadership that is far more patient, collaborative and comfortable with ambiguity than we expect in CEOs or executive directors. I think you’ll see why as we move down the list of differences.

One: In most communities, legitimacy for big decisions comes from the bottom up (citizens), not the top down (CEO or board of directors). As a result, everyone expects a voice in community decisions.

In most ways, this is the sign of a healthy community, but it can lead to problems if citizens are asked to make decisions they’re not in a good position to judge. Take, for example, a proposal to start a streetcar system. To know if this is a good idea, you might want to visit Portland, Oregon or other places that have streetcars and see their impact, but not many citizens can do this. They depend, then, on others to visit, ask questions and report back to them—people like newspaper reporters and community leaders. And that would be fine, except for the next way community decision-making is different . . .

Two: There is little deference or ceding of expertise in communities. Many business employees and nonprofit workers are discouraged and cynical. But even corporate cynics will concede that, in some instances, top executives know more than they do and perhaps have good reasons for trying something new. But that’s not the case in many communities, where citizens do not presume that community leaders know better than they do —or even more than they do.

Three: It is much easier to slow or stop things in communities and much harder to get them started. That’s by design. In America, responsibility and power is dispersed among levels of government (local, state, federal) and types of governments (cities, counties, government authorities) and then fought over by independently elected officials (mayor, city council, and maybe a half-dozen others). And all of these parties are governed by legal requirements that serve to make the time line of decision making much longer in communities than in organizations. The result is that even the best decisions move slowly—and sometimes get stopped cold.

Four: It isn’t just the legal responsibility that’s dispersed. Resources are as well. Take almost any big community problem —from improving public safety and maintaining neighborhood parks to creating a more walkable downtown—and you quickly realize that these aren’t government problems alone; they involve multiple interests, from neighborhood associations and youth athletic associations to private property owners, businesses and special interests. All of these interests have resources they could contribute to the solution—if, that is, they agreed with it. As a result, the community decisions must be made collaboratively if they’re going to be effective.

Five: News media coverage of communities is far more extensive than of organizations. Again, this is a healthy thing—except that it exposes the “sloppiness” of decision making far more than in corporations and nonprofits. Don’t get me wrong: Decision making in big companies is sloppy too, with loud debates, false steps and corporate intrigue. But with few exceptions (think about BP’s repeated failed attempts to plug the 2010 Gulf oil spill and its clumsy public relations efforts), the sloppiness isn’t apparent to outsiders. Not so in communities. Fumble a big community decision—by going down one decision-making path and then abruptly changing course—and you’ll read about it in the newspaper and probably lose public support.

Six: Leadership is not as easily defined in communities as in organizations. That’s because community initiatives can come from many places—local governments, business organizations, neighborhood associations, nonprofits or individuals. (As an example, Kansas City is building a light-rail system because a single person got enough signatures on petitions to place the idea on the ballot and the voters passed it—over loud warnings by government and business leaders that light rail wasn’t feasible.) Companies may make poor decisions, but we know who makes them. That’s not always the case in communities.

Seven: In organizations, the measurements of success are clear: profits for corporations and results for nonprofits (the hungry are fed, trees are planted, museum attendance is up, etc.). There are no easy measurements of success in communities. This makes it harder to know whether past decisions succeeded and opens every new decision to long debates about outcomes and benefits.

I don’t mean to suggest that decision making is easy in corporations. I’ve spent enough time around large companies to know how gut-wrenching it is to deal with markets that suddenly collapse, competitors that emerge overnight or technologies that turn your industry upside down. Decision making in companies is fast because it has to be. CEOs would love to have the long time horizons of mayors and county commissions. But they would hate the ambiguity and loath the painstaking process of consensus building.

So when you hear someone say that your city should be run like a business, just say two words: Not possible.

The Purpose of a City

August 20, 2010 By Otis White

For 30 years, I’ve read and reread Peter Drucker’s books. Drucker was a professor, writer and consultant who may have singlehandedly created the study of business management in 1945 with his magisterial book about General Motors, “Concept of the Corporation.” Drucker taught many things about how large organizations work, but his greatest skill was an ability to focus managers’ thinking without simplifying their tasks. And here’s an example: In 1954, Drucker defined, in 13 simple words, why companies exist. He wrote, “There is only one valid definition of business purpose: to create a customer.”

Savor that for a moment: Companies don’t exist to make profits (profits are a means to an end, Drucker would say), or provide jobs for employees (again, means to an end), or benefit society (wonderful if it happens, but it’s a byproduct, not a purpose). No, the purpose of a business is to create customers because, without them, there would be no profits, jobs or social benefit. So every company’s focus must be, first and foremost, on creating customers.

I’m no Peter Drucker, but I’d like to try my hand at defining a purpose for cities: Cities exist to create citizens. Not to generate economic gains (they do, but as a byproduct), or provide a home to the arts, entertainment or learning (again, byproducts), and certainly not to support a government (it’s a means to an end). I would argue that the real purpose of cities is to create a group of people who will take responsibility for their community. And it’s this willingness to accept responsibility that is the difference between a resident and a citizen.

The good news is that cities are almost uniquely positioned to do this. States don’t easily create citizens, nor do nations; rural areas do it only with the greatest of difficulties. But cities have three unique assets for building responsibility-seeking citizens:

  • The people are already there. Cities are natural gathering places, so you don’t have to have a special meeting at the state capital or in Washington, D.C. to get the interested parties together. They’re around, seven days a week. And proximity is critical to building responsibility. If a person is concerned about an issue, there’s no need to read about it in the newspaper or watch it on CNN; she can go down to city hall, raise her hand and participate.
  • Cities are not abstractions like states or countries; they’re tangible places that you can see, touch, hear, smell and walk around in. As a result, the issues that concern cities—economic development, housing, public safety, downtown development, water and sewers, roads and schools—are far closer to the everyday concerns of people than those that preoccupy Congress and state capitals.
  • Maybe most important, cities can be molded by their citizens. They can determine the city’s physical form, the streets, buildings, sidewalks and connections. And that form, over time, will mold them. In that sense, it’s a feedback loop: the more you consciously shape the urban form, the more the form changes you and others around you.

When you put these things together—the accessibility of cities, their concreteness, and the opportunities for physical and social change—you can see why citizenship is much easier to create in cities than anywhere else.

And here’s maybe the best thing: Cities get much better as they create more citizens. Just about every problem in a city is easier to manage if citizens will step forward to help, from social ills and unresponsive government to a struggling local economy. So, just as businesses must focus first on creating customers in order to achieve their other goals, cities should focus first on creating citizens if they want to make progress in any other area.

I’m not the only one who thinks this. Daniel Kemmis, the former mayor of Missoula, Montana, wrote a wonderful book in 1995 called, “The Good City and the Good Life” in which he described how important it was for cities to create responsibility-seeking citizens, even if just a few at a time. Kemmis wrote:

If every meeting that dealt with a difficult public issue could, by its own dynamic, produce a half-dozen people who took upon themselves some measure of responsibility for the way people treated each other, we would solve problems at a much higher rate than most of us in most of our cities have ever experienced.

I’ll talk in the future about how cities can create more citizens and point to one city that’s actually doing it, but let me close with an important caveat: Citizen creation is not the work solely of city governments. Governments can do a lot to encourage and facilitate citizen involvement, but we need many community institutions to be involved, from schools and neighborhood associations to youth groups and foundations.

It’s only when people are surrounded by opportunities to get involved in their communities, opportunities that come at them from many directions, that we can move large numbers from being passive residents to active citizens.

Photo by Matt Malone licensed under Creative Commons.

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About Otis White

Otis White is president of Civic Strategies, Inc., a collaborative and strategic planning firm for local governments and civic organizations. He has written about cities and their leaders for more than 30 years. For more information about Otis and his work, please visit www.civic-strategies.com.

The Great Project

Otis White's multimedia book, "The Great Project," is available on Apple iTunes for reading on an iPad. The book is about how a single civic project changed a city and offers important lessons for civic leaders considering their own "great projects" . . . and for students in college planning and political science programs.

For more information about the book, please visit the iTunes Great Project page.

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