Category Archives: Plan Execution

Strategy and Culture

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Setting a strategy in motion is not easy.  Often, managers bemoan the company culture as the cause of their failure.  A recent article in HBR discusses the impact of ignoring culture when implementing a new strategy.  Clearly, to accomplish big things you need a good strategy.  But how you communicate it to your team and how you sell it to them is critical.  Yes, you do need to sell it.  Every person has to recognize why the new strategy is good for them and the company.  And every employee must choose to implement the company strategy.

Your best bet at a change in your employees is to help them uncover for themselves why the change is important to them.  Not tell and sell, but rather get people to ask themselves why the change is good for themselves and their company.  One way to help this process is to involve employees in discussions that feed into the strategy creation process.  When people are treated like stakeholders, they begin thinking more like stakeholders.  They’ll be more likely to consider the importance of the strategy and what their role will be in making it successful.

 

Buck the Status Quo

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What’s keeping you from taking action?  Maybe things in your business aren’t great, but they might not be too bad either.  Perhaps sales are flat or growth has just leveled off.  You’d like things to be better, but for some reason you haven’t done anything substantial about it.  Welcome to the status quo, a land where mediocrity rules and where once great businesses go to die.  Okay, maybe I’m being a bit dramatic, but the status quo is a powerful anchor in the human mind.  It keeps us from making decisions when we perceive risks in taking action.  The problem is, inaction has risks too.

An article in McKinsey Quarterly entitled: Hidden Flaws in Strategy1, by Charles Roxburgh discusses 8 common flaws managers make with respect to strategy.  In the article, Roxburgh discusses how the status quo affects decision-making, and the resulting impact on strategy.  I’ve found that one of the most insidious affects of this bias, is that it keeps organizations (and communities) from adapting to a changing world.  When your environment changes you must adapt to compete and thrive.  So how do we break ourselves out of the status quo?

Tim Riesterer wrote a blog post on HBR.org called Stimulate Your Customer’s Lizard Brain to Make a Sale2, that may offer some insight.  Maybe we need to stimulate our own lizard brain, the part of our brain that senses danger.  There is certainly danger in doing nothing to adapt to competition.  The problem is, that danger may not feel real yet.  How do we tap into this instinct to drive action within ourselves?   Humans respond to urgency, its our nature.  To take advantage of this fact, we need to increase the urgency of the needed change to enhance our ability to take action now.

Here’s the trick, once we’ve created urgency for seeking a change we must build our motivation by asking what positive outcomes will come from taking action and why those outcomes are important to us.3  Only by building the whys can we convince ourselves of the positive reasons for change.  The contrast of this positive future versus the urgency and danger of the status quo is what can produce the activation energy needed to break our inertia.

References:

1. Charles Roxburgh, “Hidden Flaws in Strategy: Can insights from behavioral economics explain why good executives back bad strategies?” McKinsey Quarterly, (May 2003), https://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Hidden_flaws_in_strategy_1288, accessed August 2012.

2. Tim Riesterer, “Stimulate Your Customer’s Lizard Brain to Make a Sale,” HBR Blog Network (blog),July 31, 2012,  http://blogs.hbr.org/cs/2012/07/stimulate_your_customers_lizar.html, accessed August 2012.

3. Michael V. Pantalon, Instant Influence: How to Get Anyone to Do Anything – FAST (New York, NY: Little, Brown and Company, 2011).

Leverage Analytics in the Frederick News Post

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Last week I gave a talk at the Frederick Innovative Technology Center on the importance of having a good strategy and why strategy is important to business leaders and stakeholders.  The Frederick News Post did piece on the talk: Speaker’s message: Strategy key to success in business.  The turnout was great and the audience was engaged in the topic.  I’ve posted the prezi below and on the strategy page of this website.

Starting and running a small business can be overwhelming, but it is important to be able engage in strategic thinking regularly.  I hope the talk gave attendees an opportunity to think about their business outside of the hustle and bustle of daily activities.  The objective of these talks is to give business leaders a chance to assess why and how they do what they do and create breakthroughs in their thinking.

Great Businesses Master Operational Effectiveness

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In business, as in life, there are truly great performers and there are mediocre and bad performers.  Great businesses manage to get a lot right.  Operational effectiveness is a foundational trait that every great business must have.  Without effective business operations, even a great strategy will be stunted.   How you operate your business also directly impacts your ability to see and take advantage of growth potential.  Often, the process of trying to scale up to meet a large customer’s order uncovers the weaknesses in your operations.

Be proactive.  Develop a game plan to identify and tackle your weak links.  While they don’t need to become your strongest assets, weak links should be improved so as to not limit the potential of your business.  Create more value by improving how you do things, instead of trying to take on more different things.  Question everything in an effort to clarify if processes are working or if they need to be updated.  You may uncover all kinds of waste and costs that you didn’t know existed.  In the end, you’ll often see returns to your bottom line just by going through this process.

Designing Your Business, Why Simplicity Matters

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Last week I wrote about why it’s important to design your business before you build it.  A fundamental concept in design is simplicity.  Never make things more complex then they need to be.  This applies to businesses as well.  Businesses tend to make things more complex then needed, especially as they grow and become more bureaucratic.  This goes for everything from the way mission statements are written to undisciplined attention to divergent business opportunities.  Here are three reasons why simplicity trumps unnecessary complexity.

1. Fewer Objectives – More Achievement: Focus on the primary objectives required to succeed.  Use the power of focus.

2. Clear Objectives – Less Confusion: Simplicity gets to the root of intended results and why those results are important to the overarching business strategy.

3. Clear Path – Better Execution:  Simple plans strip away unnecessary elements, providing essential actions required to achieve objectives.

Your whole team should understand your business model so they can execute their part.  Overly complex business models lead to disjointedness and poor performance, the result of poor coordination of actions.  Consider simple, concrete objectives and plans when you design your business.  Communicate these objectives to your team with the same clarity to ensure sound execution.

 

Designing Your Business For Success

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Why do we say we’re building businesses, but never designing businesses?  Your business needs design.  Engineers design new products before they build them (imagine what you’d get if they didn’t!)  Your business is a system that exists to produce a result, like a product.   Like any good product engineer, you should be the master of your business’s design.

A key component in designing your business is to understand that the parts of the business must work together to achieve the objective.  The elements of a good system work coherently to build advantages.  Likewise, your business’s action plans and policies should work together to create advantages that help it achieve objectives.

An example will help to serve my point.  If your business is competing on a strong customer service model, your HR and general management policies had better foster a very strong inner work life for your employees.  Why?  You don’t just want content employees, you want team members that enthusiastically champion your cause by providing the best service in the industry.  If stellar customer service is your competitive advantage your organization needs to go beyond the obvious training and create an environment that is designed to support the positive *inner work lives of its team.  That requires training managers in the skills required to positively affect their teams’ inner work lives.  Zappos is a prime example of a company that has designed itself through coherent policies to attract, retain, and promote team members and attitudes that solidify its core competitive advantage in customer service.

Design is coordinating policies and actions across the entire enterprise to create highly effective systems.  Is your company designed for success?

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*An excellent book that describes the influences on employee inner work life is The Progress Principle: Using Small Wins to Ignite Joy, Engagement, and Creativity at Work by Dr. Teresa Amabile and Dr. Steven Kramer.  I highly recommend this book for any manager trying to motivate their team.

 

Building Business Momentum

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Creating momentum for your business is all about building a series of wins.  Patience and consistent diligence at doing the right things will lead to a steadily increasing list of successes that the company can build upon.   This requires discipline from management.

First, discipline to stick to a plan that is working, and not go off chasing “windfall opportunities” in the hopes of creating booms in performance.  In the book Great by Choice, Jim Collins and Morten Hansen describe how the 10x companies they studied were fanatical about achieving consistent growth, while at the same time restraining growth.  This might seem counter intuitive, but these companies actually tried to limit “booms” in profits.  This resulted in a more stable growth rate and positioned the companies to continue to perform in poor economic times.  The authors named this approach the “20 mile march”.  In their study, the 10x companies outperformed their comparison companies and the general stock market by at least ten times.

Second, firms must be disciplined to foster new opportunities where they can continue to grow when their markets become saturated.  Studies show that firms that find ways to leverage their current market position to open up new growth opportunities in related areas tend to be more profitable than those that diversify into unrelated markets.  Collins and Hansen call this “firing bullets”.  These are small low risk experiments into new opportunities.  Examples include product innovations, changing the way the market consumes their products, etc.  The idea here is to build empirical evidence for a larger investment into the opportunity.  A classic example of this approach is Apple.  Apple has steadily created a position for itself that leverages its brand and products across a number of interfaces creating a “digital hub” for its customers.  This has created tremendous market value and made Apple one of the most valuable technology firms in the world.

 

Stay on Target: Opportunities Abound

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There is a common problem in many entrepreneurial business ventures- too many opportunities.  Entrepreneurs have a knack for identifying compelling business opportunities.  Moreover, they are adept at creating opportunities, a very important skill.  However, context is everything.   Obviously this can be a very good thing.  But in a new venture that’s trying to achieve a specific goal, chasing an ever increasing list of new opportunities with little or no discipline can be a serious roadblock to success.

For firms that have not yet fully exploited their a market opportunity, every distinct opportunity chased divides the effectiveness of the current business operations.  A focused set of business objectives, by contrast, allows the business to coordinate actions and functional units to achieve specific goals.  The solution then is to be disciplined in assessing opportunities.  Keep your focus on the things that drive your business performance, but adopt a culture of experimentation to build empirical evidence for new opportunities.  This requires small investments to test out the opportunity before making big bets and diverting critical resources. Also, be disciplined about how many of these “opportunity experiments” you perform at once.  Having too many of even these small experiments running will make it hard to apply the necessary attention to assess their potential.

Managers almost always underestimate the negative effects (i.e. unintended consequences) of opportunity chasing on their business’s performance.  By taking a disciplined approach to vetting opportunities you can effectively keep performance high while limiting organizational distraction.

Business Strategy Requires Choice

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A big question for any entrepreneur is what opportunities to move on and what opportunities constitute a distraction from you primary business. One of the key character traits of an entrepreneur is the ability to see opportunities that other don’t recognize. Once the entrepreneur begins the business, and starts to interact with other businesses, it may seem as though there are so many opportunities that it becomes difficult to filter the good from the bad. Most startups are undercapitalized to start with, so staying focused is important. That said there are countless instances where the ultimate business does not resemble the original business idea.

Take Paypal for instance. I’ve read that the founders originally were developing a technology to perform wireless secure financial transfers. The Paypal system as we know it was an offshoot of the main software project that was loaded on the company’s website as a demo. When it turned out that more people were using the website version they eventually turned their focus to that and created the application in its current form. So, sometimes it is worth the change in focus if the opportunity has a more solid business model. In this case, the company had new customers from ebay coming to use their product demo. When the numbers were too significant to ignore they changed focus.

Here is the rub, there may always seem like another better business opportunity but unless you stick with one thing long enough you will never actually be able to take full advantage of it. Here are some simple things to keep in mind when deciding whether to pursue a new opportunity.
1. Does the new business venture add value to your current business line or would it be better as a stand alone venture?
2. Can you easily monetize the idea to generate cash flow?
3. How capital intensive is the new business focus relative to your current core business? Will it require additional capital beyond what you have access to now?
4. Do you have private investors? If so consider how this change will be perceived by them.
5. Does the new focus offer a greater ROI, faster return, a larger or more robust market?
6. Does the new focus fit within your core competencies?

Taken together the answers to these questions will help you decide whether it makes sense to change focus and if so how to do it. Remember that if you’ve already taken investment capital then you have an obligation to your investors to use that money accordingly.