The first book to explore the use of Thought Leadership as a powerful business tool using unique case studies from internationally renowned organisations such as Philips, Mckinsey, IBM, Deloitte, Fairtrade and Unilever.

Before diving into the pros and cons, the elements of success and failure, it’s sensible to first explore how it is that Thought Leadership actually works. There seem to be several components:

1 Business people read, explore ideas and listen to trends

Perhaps this should say ‘some business people read’. The most senior leaders of many large organizations are open-minded, curious and explorative. They see part of their role as introducing concepts and change in an appropriate and structured way to their organization. In fact, many see this as an important aspect of leadership. As a result, executives at all levels will read and attend conferences. If a top-flight executive attends the Davos conference or a private seminar hosted by a firm like McKinsey or Deloitte, and hears of a new idea, they are likely to be intrigued. They might pick up a popular book about it at an airport or get someone to research the subject in detail. If they hear that peers at the top of other companies are having success with it, then they are likely to ask their own people to dig into it, in order to see if it’s for them and their organization. That’s the rational side of this dynamic.

There is an important emotional side too. It is unusual to talk about emotion in business but it plays a role in the consumption of Thought Leadership. People do not switch off their emotions when they come to work and emotions guide the hunger for external ideas. For instance, when an idea is gathering pace, a number simply like to be part of the herd. They gain reassurance from feeling that they are involved in an emerging trend. They join in with the momentum of the idea, revelling in the sense that they are part of something that is explorative and escalating in pace. Others want to be up-to-date with the latest ideas and simply to be modern or current. Some business leaders seem to be scared of missing something. They may be pressured by analysts and shareholders; driven by fear of failure. Each of these emotions varies in intensity between people and between situations but they are, nonetheless, real and influence the demand for Thought Leadership.

A few executives spend much of their time trying to bring external voices into their organization in order to influence its direction. Often individualistic and ill-fitting with their organization, they like to draw in expertise from outside in order to initiate change and quench their own dissatisfaction. They often seek out Thought Leadership and socialize it in their business, even if they are not necessarily in a senior role.

As a result of this swirling mix of rational and emotional drivers there are extremes in business circles when it comes to the exploration of ideas. One Business Week article, for example, quoted the then CEO of Motorola as saying ‘Ideas are key. We listen. We read. Management thinkers are very influential. They are developers and promulgators of key ideas.’ Yet the same article has the Chairman of Xerox saying that most management literature was ‘pure rubbish’ (see Byrne, 1992).

2 Thought Leadership is linked to corporate reputation

Reputation appears to be a crucial element in the success of Thought Leadership. A report by a leading advisory firm carries weight because it has such a powerful corporate reputation behind it. Studies put out by Deloitte, IBM or McKinsey are quoted by journalists, academics and thousands of others trying to convince colleagues or customers of an idea. Opinion pieces or researched articles by leading journals also carry weight. A report by the Economist Intelligence Unit or Fortune will be quoted to support developing policies. They are, of course, more convincing if aligned to the area of expertise in which the firm or publication has its roots. A report by Fujitsu on a technology trend or the FT on financial issues, is likely to be taken very seriously. Similarly, commentary by individuals who have earned a reputation gain traction with large audiences. Opinion pieces by Michael Porter on competition or Fredrick Reichheld on loyalty are likely to carry a lot of weight. So, reputation is an important mechanism behind the impact of Thought Leadership.

Thought Leadership also contributes to reputation. In recent years, corporate reputation has come under closer scrutiny. There has been increasing pressure for businesses to align their operations with modern values (like attitudes to sub-contracted foreign labour or the environment) and their reputation has suffered if they have not responded. Technology (eg social media) and campaigning groups (eg Greenpeace) have made it impossible for businesses to ignore the potential impact of negative behaviour on their reputation and, eventually, on their sales. So, a wide range of modern business has to take pains to demonstrate that it is changing to be in tune with modern values. A variety of tools are used to do this (from PR and advertising to pro bono work and community engagement) and Thought Leadership plays a powerful part.

3 It ‘show-cases’ expertise and intellectual capital

Intellectual capital is the knowledge, experience and expertise of a person or organization and it is all that a pure advisory firm has to offer. In order to attract clients these practices must therefore find ways to demonstrate their expertise, and Thought Leadership is one important mechanism. As McKinsey report in their case study on page 34, they share their concept development freely because it demonstrates their capability to clients and the world in general.

Yet, Thought Leadership, in this context, must be more than just the communication of a technical development or a new capability. A practice might need mechanisms to demonstrate that it has capability in different aspects of law, accountancy or consulting. That, though, is standard, generic marketing. They are simply setting out their stall. Demonstrating intellectual capital through Thought Leadership goes beyond this. It shows the ability of the people involved to apply, develop or innovate around concepts. To quote Susan Brelus, of the law firm Squire Sanders & Dempsey LLP. (in Bloom Group, 2008): ‘Intellectual capital is what we provide to clients. Thought Leadership goes beyond regurgitation of a new law or ruling. It begins with analysis and thorough understanding, and then takes a step further to identify issues and opportunities in order to provide unique insights toward solutions.’

4 It fits with industry belief systems

It will seem strange to some that belief plays a part in business life. Surely, business people, especially those smart MBAs buzzing around the world in large organizations, are hard-headed, analytical and ‘bottom-line orientated’? Surely belief is reserved for religion or ‘new agers’ fascinated by crystals or astrology? Or isn’t belief the reserve of idiotic conspiracy theorists who have never seen the inside of a large organization and don’t understand how difficult it is for massive secrets to remain hidden in ham-fisted, clumsy, politics-ridden bureaucracies? Not a bit of it. Belief systems affect business life to a shocking degree.

One of the neglected business thinkers of the 20th century is the late Wroe Alderson, a professor at Wharton Business School. He wrote a book in which he pointed out that markets adopt herd behaviour (Alderson, 1957). They evolve their own language, history, icons, beliefs and behaviours, which all who participate in the market adopt. Business leaders and other executives evolve a framework of ideas in which their products and services are developed, launched and communicated. As a result, conventional wisdom grows up within an industrial sector that becomes the basis of business policy. Suppliers and competitors conform to it and, interestingly, customers collude with it while they engage in that market.

Suppose, for example, that someone went shopping for a luxury product, perhaps as an important gift. In that market, long-established brand names such as Gucci, Rolex or Chanel will be sought out. The shopper will expect their purchase to look and feel expensive; reflecting its durability and heritage. Some will even spend large sums on second-hand branded pens or watches that are decades old. Yet in the same shopping trip they might also buy an over-the-counter drug (where markets are slow to change and investment is on at least a seven-year life cycle) and a personal computer (where technologists believe the customers are fast-changing and only want cheapness). The precepts of each of these markets contradict, but are genuinely believed by the suppliers and, as a result, accepted by shoppers while they engage in that market.

Alderson showed that business executives, competitors and suppliers to them develop a closed world view, a belief system through which they judge the viability of policies and investments. Together they define their market through these shared beliefs and operate within these constraints. Yet some of those beliefs can be profoundly idiotic and out of touch with the realities of the world, causing real problems. Or they simply get out of date so that the belief system of an industry becomes increasingly restrictive. Another professor, Theodore Levitt, published a famous article in the Harvard Business Review on the damage caused by this blinkered attitude called ‘Market myopia’ (Levitt, 1960). He said that, although the great 19th-century rail companies made fabulous wealth by transforming US transport, they eventually went bust because they defined their businesses as ‘trains’ rather than ‘transportation’.

More recently, professors Michael Shermer (founder of The Skeptic magazine) and Gerald Zaltman have examined this further. Both call it: ‘the mind of the market’ (Shermer, 2008; Zaltman, 2003). Business strategists, on the other hand, call it a ‘closed mental model’ because it can inhibit performance. The danger of this blinkered stupidity is often shown up, too late, in a simple, dramatic and very practical way: a new entrant comes into a market from anther industry and takes share because it does not have the ingrained, limiting beliefs.

Ideas that resonate with these established beliefs have a powerful influence, building respect and opening access to the heights of the business elite. The approach works because, in a busy and demanding job, executives do not have time to examine every aspect of every issue that confronts them. Instead they resort to instinct (emotion, experience and belief) to make decisions. Thought Leadership inculcates this belief system, transforming into de facto strategies and, as a result, has wide impact. It creates interest and demand in the organizations and individual people that promulgate it. Michael Hammer, for example, is quoted as saying that management ideas, Thought Leadership by another name, are ‘a theology because it requires a belief that there is a different way to do things’ (Byrne, 1992).

Bias and ridiculous beliefs linger among both the suppliers and consumers of management ideas. As Peters and Waterman point out, a researcher called Andrew Pettigrew attributed strategic inertia to outmoded beliefs as long ago as 1973. He demonstrated that companies often hold onto obviously outdated assumptions despite overwhelming evidence that their environment has changed (see Pettigrew, 1973). Yet they do, eventually, move on. So suppliers who simply reinforce the restrictive mental models of any market will eventually be found out and their reputation damaged.

5 It can generate demand

There is no doubt that the publication of Thought Leadership through respected communications media attracts buyers. If an expert writes a credible article that is published in the Harvard Business Review, or has an idea reported in a leading newspaper such as The Wall Street Journal or the Financial Times or presents convincingly at a leading conference such as Davos, then work will follow. People will see these communications and, if it resonates with their situation, will be drawn to discuss the application of the concept to their organization. This invariably leads to work and even product sales.
ITSMA research showed that 30 per cent of US business buyers are likely to use suppliers whose Thought Leadership helped them to clarify the issues they were trying to address; and 54 per cent of that group would ‘single-source that supplier’ (see ITSMA, 2012). In other words, Thought Leadership is a means of getting around harsh, competitive tendering processes.

The wealth created in this way can be astounding. If, for instance, a business or an individual owns the rights to a book that sells several million copies, they will receive around 15 per cent of the gross revenues for several years. Based on their book, authors are often asked to give paid presentations and the truly elite can command fees of US $100,000 per session. These famous pundits often undertake paid consultancy, which can, at the time of writing, earn in excess of US $20,000 per day.
Yet the value created by Thought Leadership ideas spreads far beyond these famous specialists. In the past few decades, several leading advisory firms dedicated practices to their own versions of breakthrough ideas such as CRM, shareholder value, outsourcing and BPR. The best firms made many millions from them. There is no available estimate of the wealth generated through Thought Leadership but the combined revenues generated by the leading advisory firms from these famous concepts alone must amount to many millions of dollars or euros.

However, a piece of Thought Leadership will not always generate demand for advice or assistance. The best producers of Thought Leadership are generous with their ideas and, like young adults leaving the family home, let their ideas go out into the world. In many cases they are known as the true ‘parent’ of the idea and will be asked to advise on its application. In other cases they will not. In fact, as a concept takes hold and builds momentum, it may be that the person or organization that started it will not want the work it generates. A high-margin professional service firm such as McKinsey, PricewaterhouseCoopers or Allen & Overy, may not want to advise on concepts they created in the past because they no longer have the ability to earn the profits they need from them. They may not want to help with work on 7-S strategy, balance sheet structures or IP registration if the majority of current clients, a ‘late majority’ perhaps, cannot afford their fee structures. The potential client might find a cheaper specialist to help or apply it themselves. Nevertheless the concept’s credibility is assured by its origination from these high-end international entities.

6 It can educate a public, creating a framework in which products or services will be bought

This is one of the most interesting and powerful aspects of Thought Leadership. It has been used to help create latent demand for products or services that people did not know they wanted. The PR and viral messages about a new idea act as a bow-wave, interesting people in a new technology or improvement to life. Once they are intrigued by its potential, they then think seriously about individual products associated with it. The Lunar Men did this with the idea of the steam engine before the detail of Watt’s particularly adaptation was known. Lever did it with the use of soap to create interest for his Sunlight product and successive generations of Silicon Valley engineers have done it with IT and communication technology.

7 It connects with modern buyer behaviour and values

Creators of consumer-orientated Thought Leadership define it as insight that connects with societal values. They set out to understand evolving beliefs and to produce programmes that resonate with modern consumer values. As their ‘Anatomy of an idea’ on page 235 shows, the remarkable success of the Fairtrade movement demonstrates the enormous economic power which rests in the hands of organizations that develop an authentic connection with modern audiences in this way.

The growing importance of Thought Leadership in business markets results from a similar resonance, but with business buyers. It has been known for a long time that good Thought Leadership connects with very senior executives for instance. It often relates to strategic issues that they are trying to resolve. They contact suppliers who produce relevant content because they feel they have an understanding of their situation and issues they are facing. As a result, it has been used by organizations trying to go ‘up the value chain’ and side-step harsh buying processes by having more consultative engagement with their customers. A wide range of companies has used it to help develop advisory businesses in this way. One author says: ‘It cuts through to elusive senior executives in particular, because it helps them set strategy and make decisions, tasks that rely on making educated guesses about the future’ (see Butler, 2012).

At the time of writing, though, it is also having a more generic impact on business buying processes. Businesses across the Western world are undergoing a generational shift in professional behaviour. To those born in the past few decades, web-based tools such as social media are not new technology. They are simply a way of life. This new generation integrates mobile and internet-based technology into their lives in just the same way that their parents did television and telephony. One researcher (see Tapscott, 2009) has called this generation the ‘netgen’ (as opposed to ‘Generation X’ or ‘baby boomers’) because the internet is redefining how they live, work and socialize (others call them ‘digital natives’). As his work is based on interviews with 10,000 people and over 40 reports, it has credibility. He suggests that this generation has eight new ‘norms’. (They want: freedom, to customize, to scrutinize, insist on corporate integrity, want to play, collaborate, want speed and to innovate.) In their annual survey the McKinsey Quarterly found that 50 per cent of these people were advanced users of smartphones, social networking tools and internet videos. They also demonstrated that people were abandoning e-mail, texts and phone calls for these new tools. So, as they progress in their careers, new behaviours are coming into business life.

It is second nature to these people to consume information on the web. Some spend as much as an hour of their working day on the web reading issues relevant to their work. The evidence suggests that, in the West, this is changing the nature of supplier selection. An increasing body of research shows that this new generation is drawn to suppliers that produce Thought Leadership which they admire and which matches their values.

For instance, the ITSMA said: "It used to be that the buying process began when salespeople called on the buyer, but no more. Today, the buying process begins with on-line search... What buyers seek first and foremost are ideas, ideas that speak to their particular circumstances and spark epiphanies. The power of search (and, increasingly, social media) is redefining the buying process. As buyers begin seeking ideas and answers long before they are ready to buy, the buying process is starting earlier and earlier... Trust must be built early on, at arm’s length, through great ideas... To be found, providers must churn out a steady stream of high-quality original thinking that is based on hard data rather than opinion and is leavened with proof points from real-world experience with customers – what’s commonly known as thought leadership." (ITSMA, 2012)

Their research showed that a staggering 88 per cent of US business buyers said that Thought Leadership was important for suppliers to get onto their shortlist for sales.

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