Strategic planning means knowing how to deal with uncertainty

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It’s crucial to know when your need more data and when you need more action.

Geoff Wilson

When it comes to business strategy, it can be tough to know precisely where you are and where you are going, so be sure to cycle between the two constantly. Here’s another post that speaks to the value of fast cycles to your strategic plan.

Renowned physicist Werner Heisenberg’s uncertainty principle states (roughly, folks) that the more you measure one property of a particle (its velocity, for instance), the less precise you will be when it comes to measuring another property (its position, for example). Extended to the world of business strategy, this principle lends some fascinating insights.

Let me list five:

  1. The basic knowledge that there is a tradeoff to measuring multiple things at once in a complex system. You have to measure, but you also must know the limits of your ability to measure.
  2. The more you try to measure one thing, the less precise you fundamentally become on the others, all else equal. This is true of companies that spend too much time on employee engagement and drop the ball on operations. And it’s true of the operator who focuses too much on throughput and not enough on quality.
  3. The more you focus on where you are, the less you can know about how fast you’re going. Information you gather that tells you where you are is already old by the time you absorb it. Think about analysis paralysis. It’s real.
  4. The reciprocal is true as well: The more you focus on action, the less you can know about current position. The fog of war is real, too.
  5. This last one is probably the kicker for me: The better you understand your current position, the more you should know you’re probably not focused enough on momentum and action. If you’re working the financials two places to the right of the decimal point, and you aren’t a hedge fund or a bond trader, your inaction is probably showing.

And here’s a bonus insight: Your organization is not subject to the laws of quantum mechanics, so know when you need more data and when you need more action. The best answer to this tends to be finding the right “loop lengths” for different processes in your strategic management approach. And cycling through them faster than the competition.

If these things are true, then let me ask you: Why do you allow yourself to try to measure so many things so precisely?

I’m interested in your thoughts on how to trade off measurement of position with measurement of action. What do you think? 

Who’s your customer, really?

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In a “customer-centric” world, we too often lose sight of the customer.

“But I paid no attention to what mattered most”

— Ty Herndon, “What Mattered Most”

Geoff Wilson

I’ll level with you: I espouse a professional-services ethic that is decidedly “client first.” It’s frustrating to some who have worked alongside me, and perhaps edifying to others. I’ll write on where it comes from one of these days.

What “client first” means for me is this: If you’re working for or with me in serving a client on a project, the only productive discussion is one that reasonably focuses on the client mission within the defined scope.

However, I’m also experienced enough to know that not all service providers are bought into this mentality. WGP has at least once engaged specialist consultants who simply can’t step outside of their own rate structure to figure out what is best for the end client (or even WGP as their own client). The “job” is to spend time on an account and to bill fees.

What a boring mission. What a boring definition of “customer.”

In that mode of consulting, the product is hours or days of work, and the customer is actually the consultant, who seeks ways to serve herself through development of fees. The true client—the “Big C” client paying the bills—is incidental to the process.

If you employ consultants or employees who focus more on their time, their process, and their rights than on your problem to solve, you are incidental to the process. You’re like Facebook users—important to the business model because you make it go, but incidental to the business.

If you’re an executive, you have multiple customers: likely a boss, board, shareholders, and the Big C customer. And you have yourself. If you find yourself trouncing Big C in order to please your other customers or pad your income, you’re probably doing it wrong.

Some of the best consultants and executives I know make income, fees, and work nearly incidental to the client relationship. Good service is well compensated, unless you do work for bad clients (or bad bosses). But then again, why would you want to help them?

The “client first” model that we work hard to champion at WGP is simple: Listen, bring something new, do real work. Too many in professional services do too little of each of these, and then wonder why they look and act self-centered.

The key is in knowing who the customer is. Do you know yours? Is it the Big C customer, or some other customer you’re serving.

What do you think?

Trump: A demonstration of how executive mandates fail

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Your leadership mandate fails when people start to believe it has.

Geoff Wilson

“I did nothing wrong.” So many failed executives begin there to explain unsuccessful stints as leaders. But I’m here to tell you that it’s the appearance of failure that precedes executive failure, not actual failure.

President Trump’s former campaign chair Paul Manafort’s home was raided by the FBI this week in ongoing investigations of whether the Trump campaign had improper contacts with Russia. This follows months upon months of speculation about improprieties involving Russia.

The cynics and opposition already believe Trump is unethical. Trump’s defenders claim there isn’t evidence of the accused impropriety, and that extreme political attacks from the opposition are leading to mass insinuation regarding collusion with Russia.

But when the campaign chair is raided by the FBI, even the defenders have to pause and think. It looks like the apolitical investigators believe Trump’s closest advisors can’t be trusted to be forthcoming. And that is where an executive’s mandate gets crushed. Trump’s defenders will, perhaps rightly, say that no wrongdoing was done. And they miss the point. Because it’s the appearance of impropriety that destroys your mandate, eventually.

If you’re an executive, you don’t have to engage in acts of conspiracy to defraud your shareholders to be removed from office for conspiring to defraud your shareholders. And you don’t have to sleep with your subordinate to be removed for inappropriate workplace relationships. You just need enough people to believe that the accusations are possible.

If people believe an accusation is possible, you’ve already lost. And when numbers and facts start to back it up, it becomes easier to believe. How many times did you inappropriately round those numbers in that financial report? How often did you take overnight trips alone with that one subordinate? How many meetings did your organization have with Russian organizations. These elements of appearance quickly become perceived evidence of impropriety.

So what?

You want to keep your mandate? Appear and act like you should.

Here is one of the most useful aphorisms in life and work: We judge ourselves on our intentions, and we judge others on their actions. Remember that you’re being judged on your actions—even the appearance of your actions—no matter your intentions (or even the private facts).

What do you think?  

Why every company needs a code

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Successful strategy requires establishing a code—and living by it.  

“You’ve got to stand for something or you’ll fall for anything”

— Aaron Tippin

Geoff Wilson

You’re reading this because you like strategy, business, and leadership—or because somehow my not-so-vast marketing efforts fooled you into clicking something that you ultimately will or won’t like. Either way, I owe you a dose of content that is on topic. This one revolves around a simple question that very few companies think through in depth: What is our code?

By code, I mean a system of governance and a definition of what honorable behavior really is. Operating by a code cuts through the crap. It simplifies and distills to essence that which is too easy to complicate.

In building strategic plans, distilling the code is key. It generates the answers to who we are and who we hope to be. It’s necessary. “Market leadership through ethical cost leadership” is a code one can operate by. It establishes the ends, means, and methods.

Do you have a code?

For companies, codes are important for alignment and action. Companies that are unable to articulate codes, or that formulate codes that are at wild odds with personal codes, will struggle to succeed. How do I know? I’ve been in plenty of companies with codes that go something like this: “Grow revenue and grow earnings.” That’s it.

You might call this the “coin-operated code” because, just like a vending machine, you aren’t getting anything unless you put coins in. In reality, a code focused only on outcomes or money is no code at all. Executives who operate with no codes, or corrupt ones, get found out soon enough. A company that operates via a coin-operated code forgets its customers and invites attacks.

So, what’s a more holistic code? How do you know when you have one? I defined it a few paragraphs earlier: A complete code establishes the ends, means, and methods. And it does so in very simple terms.

A code I’ve worked to share in our organization, and that I believe strongly underpins the promise of WGP’s consulting practice, revolves around three things: We listen. We bring something new. We do real work. 

That’s it. That’s the “code of honor” I bandy about to our team, and one that I believe sets the stage for ultimate value.

We listen because we can’t be effective partners to our clients without understanding before being understood. We bring something new because without fresh insights, we are just a temp agency on steroids. We do real work because that’s how fact-based strategy is established (and because the world doesn’t need any more pontificating armchair consultants).

So, what’s your code?

As an aside: All of this is all secondary to and perhaps separate from personal values. Yet your corporate code has to align with personal values of the highest and best among you, or you’ll get the personal values of the lowest and least. And that’s the recipe for a code red.

I’ll just leave that for you to ponder.

What do you think? 

Don’t be friends with the monster

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Honoring functional leadership above all else creates monsters in today’s over-scienced organizations.

“I’m friends with the monster that’s under my bed”

— Rihanna on “The Monster” by Eminem

Geoff Wilson

Let’s say you’re a leader of a corporate function. Pick one, it doesn’t matter. You may lead supply chain, procurement, human resources, information technology, corporate development, strategy, finance, accounting, or any other.

If I told you, right now, to find me a treasure trove of best practices for your function, you could do so in an instant. Starting with the old standby, Harvard Business Review, you could extend and expand your Google hunt to a dizzying plethora of functional associations, business school publications, case studies, consulting publications, and puff pieces that would provide you with more best practices than you could ever digest. Ever.

And that’s the kicker. Functional leaders now have access to more best practices than ever before, and that abundance has the potential to create a monster. How? In our pursuit of functional excellence within organizations, it’s easy to lose collective sight of business excellence. That’s right. Compliance with functional mandates can have monstrous consequences for business performance and productivity.

Consider an organization with a well-meaning leadership team that empowers several functions to demand compliance from line leaders on their own functional initiatives—all at once. To functional leaders, this is nirvana. They get to install “world-class HR approaches,” or “sector-leading procurement approaches,” or “outstanding business planning,” or “structured strategic planning.” But to the line leader, such initiatives manifest themselves as barbarians at the gate. They are monstrous.

Why? Consider the line leader who suddenly has to spend hours in meetings with functional teams. For some leaders, a specific functional team will hit the spot. The meeting or new approach will be extremely valuable. For others—say, a leader without real talent gaps, who is forced to sit through days of talent reviews and plans—they’re a waste of time. But they’re mandatory. They are “the way we do things now.” And they are, quite often, entirely wrong.

They sap productive selling and organizational-development time from line leaders who usually know they are wasting time. In the worst cases (“Hey, Bob, just fill out these talent templates and we’ll see you next Tuesday.”) they simultaneously kill morale and productivity while adding no value.

How do you avoid creating a functional monster in your organization?

The answer is hard because all the management scientists and consultants peddling best practices will find holes throughout an organization that adheres to it. But it’s simple: Have the guts to empower line managers, provide them with great tools, and get out of their way.

Let there be a rational discussion and rule set for allowing business leaders to spend time with customers vs. internal functional teams. Set the menu of initiatives and manage opting out closely, but allow it. Allow the gal whose business team has no credit-and-collections issues to skip the “best-practice contracting” seminar. Allow the guy whose team has high productivity and zero turnover to avoid the talent and recruiting review.

It’s OK. Really. And I say this as someone who has perpetrated plenty of broad-based, high-value corporate initiatives. Outside of obvious risk and legal areas, “compliance” to one-size-fits-all approaches to functional “excellence” results in a distribution of gains from that excellence that very clearly hurts some players who comply.

This isn’t to say that no functional initiative is applicable to all, but rather that you should know whether or not it is.

Don’t be friends with the monster. Don’t allow honor and appreciation for good functional practices to kill productivity and morale in your line organization. Know when to let your business leaders opt out of frightful functional initiatives.

What do you think? 

Links that made me think: Bond Market Bubble, Pot Epcot, Automated Heart Diagnosis, and more

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This week’s reads and resources to provoke thoughts on strategy, leadership, life, and other things.

Geoff Wilson

Every week, I get to devour a hefty heap of digital content in service to our clients and partners. As I sift through the internet on this mission, I discover things that are relevant to business, strategy, leadership, and life in general. As I do so, I’ll share some pieces that I think are thought-provoking treasures. Here are a few articles and resources I found particularly interesting and valuable this week. Enjoy the feast—or at least whet your appetite.

  • You don’t have to like him or even believe him, but Alan Greenspan sees no stock excess, warns of bond market bubble. – Bloomberg
  • What do the smartest companies look like? Have a look at this list. – MIT Technology Review
  • Everybody is talking about the “Internet of Things,” and only a few can define it well. Some thoughts here on what it takes for an organization to go IoT. – Network World
  • It’s because we’re all jealous: The brutal truth about why everybody else resents millennials. – Inc. 
  • I’ll bet the local Frito-Lay distributor is ecstatic: Marijuana company buys a town envisioning cannabis Epcot Center. – Marijuana Business Daily
  • One more step toward a higher quality, automated medical profession: Stanford computer scientists develop an algorithm that diagnoses heart problems with cardiologist-level accuracy. – Stanford.edu

Dig in, let me know what you think, and have a great week!

GW

To succeed at strategy, you have to move fast … AND slow

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The key to strategic management lies in balancing fast decision loops with slow decision loops.

Geoff Wilson

The longer I live, the more I realize that life is all about the pace at which you make decisions. But that doesn’t always mean really fast is best.

I’ll use the concept of the “OODA loop,” made famous by Air Force Col. John Boyd. The idea is that strategic action depends on establishing and executing on decision loops that run from observation to action and back again. OODA stands for: observe, orient, decide, act. A strategic actor needs to establish and execute this loop in order to act effectively within a competitive environment. And cycling faster than the competition creates an advantage.

But (and this is important), the pace at which a manager must “loop back” to ingoing assumptions about a strategic variable changes drastically based on the factor and the business environment. You can think about this practically by envisioning the difference between the fuel gauge and the throttle position in a race car. The race car driver likely assigns the fuel gauge a decision loop that runs minutes or longer during most of the race—the driver looks at the gauge and establishes an action plan at least every few minutes. The throttle has decision loop that is drastically shorter—fractions of a second at times.

Different variables mean different loop lengths. This is a crucial concept in business management and strategy. I’ve been in the middle of discussions at technology companies that involve planning for growth in a specific, established product line that exceeds 100 percent per quarter. And I’ve spent much of my career amid product lines that do well to eek out a couple of percentage points of growth above GDP. Both circumstances had something in common: They required sets of very deliberate strategic decisions, and they required sets of very rapid ones. They had long loops and short loops.

The loops didn’t look the same in both instances, but there were fast ones and slow ones. And the same is the case with your business. You not only need to know the variables to manage, but also the loop lengths you handle them within. In strategic management, there are short loops and long loops. You have to know the difference.

Short-loop strategic variables might include:

  • Staffing
  • Marketing and sales plans
  • Account plans
  • Flexible capacities (shift structures)
  • Customer feedback cycles
  • Product enhancements

These items have loop lengths that range from days to weeks—or, in some businesses, maybe a quarter. They are highly strategic (being resource allocations and positions), but many people think they are tactics.

Long-loop strategic variables might include:

  • Workforce planning
  • Technology roadmaps
  • Asset footprints
  • Market assessments
  • Statements of strategic intent
  • Overall organization structures or operating systems

These items have loop lengths that, in most businesses, last at least a year. Management “OODAs” on them on an annual basis (in the case of strategic intent, often much longer).

They key to strategic management, then, just might be establishing the variables and loop lengths that matter for your business. A business in the semiconductor space likely can’t afford to wait for annual strategic planning if the industry moves in six-month cycles. Likewise, pushing a regulated utility to do monthly strategy updates might be a waste of time—the world just doesn’t move that fast.

Where this gets really useful is when you start to see your day-to-day activities get out of sync with your expected loop lengths. Perhaps you know it’s time to act on that staffing problem you’ve had for months now, but you just don’t have the energy to do it—you are “off loop” and likely off strategy, as it were.

One thing is for sure: You have to establish what fast and slow are, know what variables fall into the two categories for your business, and learn to lead them both.

I’ll continue to develop this further, and would love your thoughts on this one.

Welcome to the real, messy world

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Like the real world, real business isn’t as simple as you’d like it to be.

Geoff Wilson

I’ll confess, I’m a bit of a strategy junkie. You don’t have to be one to do what I do, but it helps. However, if you read my writing much, I hope you come away with a sense of the practical bent that I bring to the topic. The real world is the real world. Just as any engineer will tell you that lab scale processes rarely translate directly to production facilities, financial and strategic models rarely reflect reality—at all.

The below image was shown at a recent annual meeting of a private equity firm we have the privilege to serve. It shows indexed revenue and EBITDA performance over the life of a fund’s portfolio. Each line is a portfolio company. Lines that trend upward are green. Downward lines are red.

Keep in mind, this is a top-performing private equity fund. Returns for this portfolio were excellent. What do you see? The real world.

Each of those lines depicts the outcome of an actual business. It’s the result of some management team’s hopes and dreams. Those businesses were probably planned using relatively linear models and margins. But what you get is actual sausage making. And I’ll say it again: This is a top-performing portfolio.

The real world is sausage making. Real business comes with randomness, particularly in companies that are working to make things happen.

If you consider it failure that some parts of your portfolio might not stay in lockstep with your linear growth expectations, you probably don’t understand the nature of risk taking and enterprise building. You might be more comfortable investing in CDs.

The real world is messy. This is good to keep in mind when you’re futzing with a financial model that implies a precision that your business outcomes will never achieve.

What do you think?

“I did my job” and 9 other career-limiting mindsets

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These attitudes are great indicators of your career ceiling.

Geoff Wilson

I’ve spent much of the past 15 years navigating complex organizations and talking to people at various stages of their careers. Combine that experience with my standing as an amateur social scientist (kind of like the old adage about crazy: You don’t have to be a social scientist to be a consultant, but it helps), and you get my ability to write lists of insights about a lot of things in organizational life.

Here are 10 mindsets that are career-limiting to anyone who wants to do great things in modern business management. They’re also toxic to organizations when they become the norm around the lunch table. Try them on, and if they fit you … change.

  1. I did my job – Said by a world of downsized and rejected managers. And totally focused on the wrong thing. Doing what you’re told is only a fraction of being a successful senior manager. Your job is to find out how to do what’s necessary. “I did what you told me” is a defense mechanism, not a rationale.
  2. I don’t have the resources to be successful – OK, then why are you keeping the job? If you think your job is impossible, at least have the integrity to walk (or raise the issue). In today’s economy, resourcefulness is at a premium. How do you show it?
  3. I’m on vacation – Yes, and so are your chances for accelerated promotion. I know of very few professionals who can deploy this mindset without it having a very long half-life in their colleagues’ memories.
  4. It wasn’t my fault – Sure, you can articulate the reasons for a failure, and even your role in the chain of responsibility.  That’s fair game. Just don’t start with defense.
  5. It wasn’t my job – See points 1, 2, and 4. I’ll bet that a lack of accountability wasn’t something you highlighted on your resume.
  6. I don’t know how to do it, so I didn’t – See points 1, 2, 4, and 5. Inaction is a great way to show a glaring lack of initiative.
  7. I deserved that promotion, not him/her – We can never sweep politics aside, but in many if not most instances, a person who has this mindset hasn’t really examined the situation well. Any attitude that starts with “deserve” ought to raise big, flapping red flags.
  8. I’ve had a really tough time at home – I’ll let you in on a little secret. Individuals may care about this and say so. Your company does not. I could be even more harsh and say that, in reality, nobody cares, as Ben Horowitz said best.
  9. I took that promotion/relocation for the money – If that’s why you did it, you’ve already received the reward. Stop complaining about it being hard, unrewarding, or a career dead-end.
  10. My boss was unethical – Usually said by someone who has just been passed over or fired by that boss. Where was that sense of ethics while you were in favor? How often did you raise the issue? Most companies have plenty of ways for you to get the word out. How many did you use?

Healthy strategic management must often start with a healthy examination of a company’s dominant mindsets. If these or related mindsets rule your water cooler (or your pillow talk at home), you’ve got a problem.

What mindsets either help or hinder your own professional growth?

Everybody wants to be a rock star

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You gotta love the process to be great, in management or any field.

Geoff Wilson

You know something funny? Pretty much everybody wants to be a rock star. No, I don’t literally mean a rock-‘n’-roll celebrity with long hair, tattoos, piercings, and leather pants. I mean a figurative rock star nailing every performance at whatever they do.

But you know something else? Very few people want—no, like—to do what it takes to get there. And therein lies the rub of achieving success in just about any field. It can be boiled down to a single phrase: You have to love the process of achieving greatness to have the best chance of becoming great.

That means that no matter how much you’d love to be Eddie Van Halen on the guitar, if you don’t love or at least appreciate the pain of cracked and bleeding fingers that comes from countless hours of practicing new licks, you probably won’t get there. Ever.

Show me someone great at something, anything, and I’ll show you someone who has honed their craft through the process of becoming great. The process is typically exhausting, frustrating, painful, and tedious. If it weren’t, everyone would doggedly pursue greatness rather than passively wish for it.

Great speaker? Many hours of practice—probably in their closet or in front of the mirror, but still. Great strategist? Yep, lots of practice—possibly by observing a magnificent depth of strategic patterns and behaviors. Great mechanic? Plenty of practice, as well as burns, cuts, and sore muscles. Great typist? Lots. Of. Tedious. Typing.

Sure, the great ones are often gifted. But, most of the time, they love the process, too. They love the bloody fingers, skinned knuckles, and late nights in front of a spreadsheet. They crave the smell of engine exhaust or sweaty locker rooms.

These people relish the act of building greatness. They may love it even more than being great.

One cautionary note: I’m not talking about someone who has a great position. That’s totally different. There are people with great titles and positions, and then there are great professionals. They aren’t always the same. After enough years, you start to realize that.

So, you want to be a rock star? Find a stage where you enjoy the process of building toward greatness. If you never liked practice, you were probably in the wrong field. The great ones love the grind.

What do you think?