Tag Archive for: Strategy

Dear Strategist: Euthanize Your Gerbils

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When it comes to strategy…  The first thing we do, let’s kill all the gerbils.

On the heels of an article I wrote a couple of weeks ago titled “Being Strategic Means Naming Your Elephants,” I thought it useful to go to the other end of the spectrum…

Do you ever find yourself focused on the wrong things?

It’s ok… Admit it.

Sometimes we all get focused on things that don’t really matter to our missions.  They come in the form of shiny objects or minor brush fires that we chase to either develop or quash.

An old colleague of mine once referred to such things as “gerbils.” Gerbils are small, hairy, cute, hungry, and long-tailed. In other words, gerbils are a waste of time.

And we need to euthanize as many of them as we can.

First, a little background from my own professional life

As someone who has historically kept a very full calendar, and who continues to do so today, I have an interesting means of testing where I spend my time…  I can simply look at my calendar.

A couple of years ago, while serving as an executive in a diversified firm, I did such an analysis of my time. I was able to pull my calendared time into a spreadsheet, categorize it, and look at the results. For the record–or perhaps the hall of shame in some people’s books–the analysis covered 1,943 work hours over the course of 272 days. That’s an average of 7.14 hours a day, including weekends…about 50 hours scheduled per week.

I found that a significant minority of my time was being spent on activities for a function that was outside of my own organization’s mission.  It was remarkable to see that being “helpful” and focusing on what was at any moment labeled “important” in the micro led to what an objective observer might call a dilution of mission through allocation of time available in the macro.

To be clear, I found the split of time rewarding because I was able to get things done. I was able to help people.  I was running to fire, helping where the help was needed most.

And I was probably wrong.

I shared the analysis with other key executives and with my team and quickly explained what I saw as “wrong” with my time allocation.  I then set about to do more of the things that were important to my own mission, and to do less of (or delegate) those things that were not important.

I guess you could say I set out to euthanize the gerbils in my own agenda.

But teams and corporations have gerbils, too…and that’s where this gets juicy.

Gerbils in your company

Gerbils, like the unnamed elephants that I mentioned in my previous animal-analogy post, suck the life out of your agenda.  They tend to come in the form of executive flights of fancy or risk-averse “toe in the water” efforts.  They, by definition, are:

  • Small – They generally don’t “move the needle” for the agenda they embed within.
  • Hairy – They come with risks or needs for attention that are completely out-sized to their impact.
  • Cute – For some reason, they tend to captivate attention…examples are new products that have no market or initiatives that are vain pursuits.
  • Hungry – They eat a lot of resources to execute, and those resources have a much higher return on investment when deployed elsewhere.
  • Long-tailed – This is where the gerbil analogy really takes flight–your gerbils have long tails…they last a long time…they are persistent.

With that description, are you seeing any gerbils in your company’s corporate agenda?  Perhaps it’s a new product that’s eating up time and money that should be used to grow the company elsewhere.  Maybe it’s a cautious deployment of resources in a sub-scale manner against an opportunity that management just isn’t sure about.  Maybe it’s an initiative focused on engaging employees that the employees already view as a cynical ploy.  Maybe in your company it’s the kabuki theater of strategic planning itself that is a gerbil.

You get it?  Small, Hairy, Cute, Hungry, Long-tailed…akin to worthless.

In the midst of a strategy development discussion, a leadership team of one mid-sized company found 130 strategic initiatives to place on its agenda.

130!

It’s a rare management team that can generate much less manage 130 truly strategic initiatives.

Time to kill some gerbils.

But how?

Some of your are sitting and thinking, “Yep, I see the gerbils in my company’s agenda,” but you may be missing the point:  Gerbils exist at all levels of abstraction.  For a corporate leadership team, a gerbil could be a sub-scale acquisition millions of dollars in size but made for looks, not impact.  For a business unit leader, gerbils might be a product launch hundreds of thousands of dollars in size that is already DOA.  For an individual, it might be the waste of time on Facebook or useless blogs (not this one, others…).

Gerbils are everywhere, which is why I started with the personal anecdote.  If you can become better at finding the gerbils in your own agenda, you can get better at finding them in your company’s agenda.

All this means is that one person’s elephant is another person’s gerbil.  A circumspect leadership culture acknowledges this.  They also realize when they need help. A healthy fact base (like my calendar exercise above) can give them a start.  When it comes to corporate agendas, sometimes they simply need an outsider to help structure and organize the discussion. Sometimes they need outsiders to bring the fact base to bear.

Your mileage may vary.

In our practice at WGP, we have engaged with clients looking for structural support on their corporate and business unit agendas.  In this type of engagement, we play a challenging and facilitative role for management.  We have also engaged deeply with corporate teams and business unit teams who need a more intense and full understanding of facts and options.

In any event, a great strategist focuses on naming elephants and murdering gerbils.

May you have success in doing the same.

I would love to have your thoughts on this topic in the reply section below.

 

 

Hiring For Smarts Isn’t What You May Think It Is

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Only hire people smarter than you, but know what kinds of smarts you need…

In the modern corporate environment, far too many executives are bent on taking the notion of “hiring people smarter than they are” to the extreme.  In doing so, they create talent cultures where glib, facile intellects have an advantage over specialists of all sorts; and this is a problem for strategy creation and execution.

These cultures will take an un-apprenticed person with a generalist skillset (or, in some cases, merely a strong presence) and explain away deep functional deficiencies as “flat spots” to be rounded out.  They will concurrently ignore deep specialists without the glib (and, yes, I do mean this as a pejorative–as it very much is) facade and deem them not fit for higher office due to capability deficiencies.

They make depth and breadth equal partners in talent evaluation structures, and then overweight breadth in the actual evaluation. In doing so, they cast off expert talents in favor of generalists ones.  They get it all backwards.  In spades.

Why it happens

This problem goes back to a notion whose origin is unclear to me: “Only hire people smarter than you.”  I agree with this… No, really, only hire people smarter than you!

It’s a good policy.  Sure, on its face, it’s a ridiculous notion. It’s one whose logic leaves the smartest people in the most junior roles, and a team of ignoramuses in the C-suite.

In a seminal Harvard Business Review article called Hiring For Smarts, author Justin Menkes reinforced the notion that intelligence rules. Hire for it.

But to think that way too purely misses the point.  The people you hire need to be expected to develop more depth than you have at something. That something may be as straightforward as managing your calendar or as complex as negotiating cross-border partnerships.  People who work for you don’t have to be broader than you, but they should (eventually) be deeper than you at something. They have to be smarter than you or they won’t provide you real effectiveness.

In other words, if you only hire people who look like you but who are only slightly less capable than you at everything you do, you are either (1) running an apprenticeship shop (and that’s fine), or (2) really not a good hiring manager.  If you are hiring apprentices, that’s fine, but you need to acknowledge it.  More common is reality (2).

Some common reasons for these deficiencies 

So, then, why are so many executives, even those who are otherwise avowed technocrats, failing so miserably at this by over weighting degree, background, and a glib social presence on their way to hiring generalists that have nothing special to contribute to the team?

Here are a few reasons:

  1. They cultivate a magnificently flawed hiring processes:  Without a doubt the most common reason is that hiring processes place more focus on personality and presence than capability and competence.  To be sure, rapport is important in an interview. But, capability profiles can’t be dismissed in the interest of rapport. Some firms solve this with tests, some with good cop / bad cop interviewing approaches, and still others (the world class ones) with interview approaches that are very common and calibrated to find both rapport / fit and capability.  If your hiring processes solve for glib generalists that look like mini-senior executives, then that’s what you will get.  Unfortunately, those profiles are too often the most difficult to upskill to the needs of their next job.  Like it or not, technical competence is much harder to gain in a short time than boardroom presence, and a lot easier to justify in the after action report on a bad hire.
  2. They are scared as hiring managers: The second most common reason for the misapplication of the “hiring for smarts” notion is that hiring managers are actually afraid of hiring people with more knowledge than them. They continually hire technical lightweights because they are afraid of bringing a threat to their own well being into the organization.  So, they explicitly hire for nice looking generalists who seem very smart but who lack depth.  If your hiring managers tend to be the experts at vetoing recommendations from peers who review their candidates, you might have this in action.
  3. They propagate tyrannical management practices: The third reason I’ll give is actually the extreme other end of reason 2. This one is the hiring manager who only wants things done a certain way (whether that way is good, bad, ethical, or unethical), and will hire absolute blank slates–or, simply yes man versions of themselves–to do it. These hiring manager profiles are common, and come with significant downside.  If your hiring managers pound the table against the notion of bringing in people with strong experience from elsewhere because it “won’t fit,” you might have this dynamic in place.  You also might have someone concerned that an outside expert could find the cracks in their empire. Watch out.

So What? 

The “so what” to this post is right there at the top.  Hire people for their smarts, but know what kind of smarts you need. Try the old double blind test:  If you strip out the name, education, and company names from the resume, does it still suit your needs for a sufficient and smartly deep person?

Why am I writing on this?  It may read as very “HR-centric” and perhaps outside the scope of a practice that is focused on strategy and performance.

Simple.

Good teams build great strategies.

Good teams are built through great hiring and promotion practices.

And…Too often, today, so-called “great” hires are judged by their cover letter, brand names, and presences and not a thorough vetting of their C.V. and true special qualities.

I’ve yet to see a good team built exclusively from very smart generalists.  The best of teams have a strong vein of hard won experience and depth within them.  They also have a strong willingness to listen to that experience.

I write this for the CEOs and senior executives in my life and practice, but certainly these thoughts apply to anyone charged with building a team through hiring.

Hire people smarter than you.  Just make sure their smarts emerge from functional or technical depth, and you will be ok.

Good luck, and please share any thoughts you have!

 

The Ends of Strategy Are What Count

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A strategy is only a strategy if it survives a test of its logical ends.

As someone who meditates on strategy across sectors, I run across a lot of very natural misconceptions about the topic.

One of the most egregious, and most dangerous, is the confusion of actions with strategy.  An action–like running, standing, striking, speaking or otherwise–is not a strategy.  Most executives understand the difference; but some do not.

Some think that an action is a strategy. But, they forget a basic tenet of strategy.

Strategy is an argument.  It’s an idea. It’s a view to and end. Action forms the basis of execution–strategy’s greatest fulfillment–but is not a strategy in and of itself.

Which brings me to my point: Actions without testing of logical ends can never form the basis of an effective strategy.

For example, a strategy that is explicitly focused on achieving an end state of cost leadership is very much a viable one.  Commodity providers pursue such strategies all the time.  Such a strategy is internally consistent when logical ends testing says that being a cost leader is a sustainable position.  In markets where it applies (coal mining, not luxury goods) cost leadership, in other words, confers competitive advantage.

On the other hand, a strategy that is based only on an action (not an end state) like cost reduction is no strategy at all, unless its logical ends hold water.  A company cannot cut its way to prosperity unless the cutting confers competitive advantage.  The act of cutting costs in and of itself confers no competitive advantage at all, any more than the act of investing randomly does.  Yet, we see companies and executive teams whose “strategy” is implicitly focused on shrinking a cost base without achieving cost leadership.  Such a “strategy” fails the ends test.   It also fails the vision test.

The integrity of a strategy depends on its surviving a test of its long run sustainability.  Cost leadership, value leadership, design leadership, distinctive insights, distinctive talent, and any number of other things can confer sustainable competitive advantage when played out to their ends.  On the other hand, a “strategy” that merely harvests returns while delaying inevitable failure is only a strategy insofar as it benefits stakeholders of the soon-to-fail organization–it doesn’t benefit the organization itself.

Actions can be strategic, but they cannot be strategies. Strategies point to wins.  Actions?  Not so much.

Take a moment and play out your strategy.  Think about where it leads.

The Alchemy of Apple’s Strategy

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Apple created a culture of freedom and playfulness out of a product philosophy of absolute control. It was all about trust.

If I told you about a regime that was run by a notoriously secretive autocrat who locked out all democratic suggestions or changes and brutally suppressed the press, would you link it to the Dalai Lama?

Mohandas Gandhi?

Nelson Mandela?

Jackie Robinson?

No?

I’d have to agree. When your mind turns to suppression, control, and dictatorship, you certainly don’t think of people who represent broken barriers, peace, and freedom.

So how did Apple under Steve Jobs take an approach that was straight out of the totalitarian playbooks and turn it into the most celebrated consumer strategy of all time? How did Apple back up—earn, if you will—its association with the trailblazing freedom fighters above, writ large in its “Think Different” campaign?

Trust.

Trust is what allowed Apple to turn the grayest iron curtain of strategies into the most golden consumer product reputation possible, and trust is what enabled the alchemy of Apple’s strategy. That’s the genius of Apple over the past 20 years.

But Apple is only part of the story here.

The larger story is about why and when control can be exercised over customers (and other followers like employees, vendors, and partners). Control is an expression of power, and power, in the commercial world, is something that is derived from consent. It’s derived through trust.

Consider some of the ways Apple exercises its power:

  • Apple exercises a fanatical commitment to controlling the customer experience – a bit of corporate DNA born directly from the personality of Steve Jobs. Apple tightly controls the product, its customer interface, what peripherals work with its products, and what software runs on its products. It maintains a closed ecosystem.
  • Apple tightly controls messaging, going so far as to sue young bloggers who speculate too correctly about the next product release.
  • Apple is renowned for its aggressive supply chain management, at times driving suppliers out of business through punitive control.
  • Apple uses its massive media appeal to aggressively and maniacally extol the “next great thing” from its own pipeline and subtly denigrate the features its competitors roll out. Who (above a certain age) can forget the “been there, done that” meme from Apple acolytes when Windows 95 launched…?

But this authoritarian behavior comes with a promise: an exceptionally clean (and generally delightful) customer experience. That’s the promise—a distinctive and exceptional experience. And so far, it has been a credible one.

Consumers cede control to Apple and, in return, Apple has delivered on its promises. Like many movements that start small, Apple’s resurgence started with roughly 5% of the PC market – a core group of fanatical followers who had ceded control years ago. Today, an astounding proportion of mobile, music, and computer consumers have bought into the strategy of ceding control and relying on trust.

Apple’s strategy has been one of offering consumers overwhelming simplicity, the message being: Simplicity sets you free. But as we’ve seen, simplicity comes with a tradeoff: a loss of choice.

The Concept

The reality is that Apple has illustrated a very valuable, stable approach to customer engagement and strategy. The degree of control a company seeks to apply to its customers’ experiences successfully relates directly to how much trust the customers have in the company.

I highlight successfully because plenty of companies have tried to control all aspects of customer experience without trust and failed. You can only pursue this strategy for a short while. Companies (and as you know, I relate these concepts to leaders as well in most of my writing) that attempt a high control strategy with low trust must either build trust quickly or stop. Such a strategy is an example of an unstable equilibrium. Customers (and followers) leave you when you are in their kitchen too aggressively and without welcome.

Throwing all this into a matrix (because who doesn’t love a good matrix?) we get something like this:

apple-matrix

These lessons apply to management and leadership as well. As we gain more trust, we can take more control, but when we lose trust, we lose our ability to exert control. The uniqueness of the experience we provide is both a route to building trust with those who matter and a route to highly profitable relationships.

What’s the message for executives thinking about their business, talent, or organizational strategy? Well, it’s pretty simple:  You can be an autocrat, but you’d better have the trust of those around you that that outcome will lift all boats, or else you won’t build anything enduring.

The takeaway: Don’t forget trust.

How Improv Can Reinforce Your Strategy

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For business strategists to be flexible and responsive, they must work like the best of improv performers.

A few months ago, my wife and I had the opportunity to take our children to an improvisational comedy workshop. In the midst of getting to watch my better half pantomime milking a cow in front of 50 people, I was reminded of one of the more interesting leadership realities.

The best leaders, like the best improv performers, are constant in their ability to give and take. The best improv performers can charm the hardest of audiences, and the best leaders can lead in the most challenging of circumstances.

But. Rather than go into leadership as improv—a well-trodden trail at this  point (just Google it)—I thought it interesting to explore another very current application: business strategy as improv.

The Core of Improvisational Anything

In any sort of improvisational performance, be it music, comedy, dance, or otherwise, a core tenet is called “Yes…and.” Yes…and is the shorthand for how performers improvise together. They take something someone else has said or played, interpret it, and then take off on their own with it before teeing it up for the next performer.

It goes something like this:

Performer 1:  “Today, I tried to walk the cat.”

Performer 2:  “Yes…and you probably found that the cat walked you…”

Except with a wittier writer, you might have laughed out loud.  It’s important to note that Yes…and is an idea in practice, so you don’t hear performers actually saying “yes…and” out loud during an improv performance (well, not often).

At its core, improv requires a few things.

It requires perception; the performer must be constantly focused on what others are doing, not on what they will do. Being self-focused is a surefire way to failure as an improv performer. So, you listen, and watch, and look for insights.

It requires agreement and acceptance. Improv starts with “yes” no matter what is said. Your counterpart flubs it, and you say yes; you start with yes and shape the conversation from there. Sure, you interpret action and revise approach, but you do it while moving forward.

It requires interpretation. The joy of improvisational comedy is that it often results in comedic insights through unique interpretations of a stated fact.

It requires action. The wheels of an improv performance don’t—can’t—stop. You never see an effective improv act that taps the brakes in the middle to “get things right” or “study further.”  Improvisers take the “and” part of “Yes…and” seriously. It’s where they deliver.

Applying Improv to Strategy

There is a great, growing insight in the world of management strategy that strategic planning approaches are mistimed to the real world. Some companies do 3- or 5-year strategic plans as deep studies and then go to “execute,” when meanwhile, the world is working at a much faster pace. The strategy that’s written today is out of date in a month if not a week; it’s a script in a world that requires improv.

Strategy is becoming constant motion and revision. It’s becoming improvisation within a framework vs. scripting and perfecting all actions and plans. So, we seek agility. We seek to plan and execute as a perpetual thought process versus a periodic one.

Yes…and that is where improv comes in.

As strategic leaders, we must establish the framework of our strategy. Study hard, know what you know (and don’t), and ensure alignment on core values and mission areas for the organization. And then, encourage and lead your organization through constant (or at least much more frequently periodic) perception, acceptance, interpretation, and action.

Effective strategists perceive by listening to their people, customers, markets, and macro trends and seeking insights.

They accept by ensuring that the facts they perceive, whatever they might be, are the facts. They avoid spin, confront reality, and say “YES!”

They interpret what they have perceived and accepted by formulating and reformulating their strategies in microcycles and being explicit about the microcycles.

And they act by ensuring that their initiatives, messages, and personal actions have integrity.

The strategist as improvisational artist is a new animal. For too long, we have thought of strategists as long-range thinkers devoid of any action orientation. But now, it’s time to embrace “Yes…and” in our strategies.

I welcome your comments.

6 Challenges Today’s Executives Face

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Periodically, I’ll post on some of the implicit but common executive challenges I observe while carrying out my practice.  This is one of those posts…

The context of this post is simple:  I have the opportunity to work across numerous executive teams and within institutions of various sizes.  In nearly every case, individual leaders consume themselves with how different their organizations or their problems are.  I figured I’d take a moment to reflect on some of the common themes that I see leaders dealing with.  Perhaps it will strike you in a way that’s helpful.

So, here are six challenges that executives I’ve worked with face–whether they know it or not–and an accompanying quick note on ideas to overcome each of them.

The Six Challenges

1. Ego Depletion

The Challenge: We have only a limited capacity to make considered, controlled decisions.  But, many of us (you and me) have an unlimited number of decisions we could make in a given day.  Executives have a relentless access to decisions. The pace of information flow these days enables it.  If you are like me, you probably get up and check email sometime in the morning, starting the flow of decisions you must make.  You also (possibly) check email at the end of the day, and fire off a few more decisions or opinions.  In between, you’ve probably had to make decisions all day.  Such is life, but if you think about your ability to make decisions in a given day as finite, you’ll understand the concept of Ego Depletion.  You may laugh and say you know people whose egos never deplete, but still.

Ways to Overcome it:  This one is easy and hard at the same time.  Delegate choices.  Be deliberate about the scope of decisions you’ll take.  Keep your focus on the major things in your professional (and personal) life.  Know what matters to you (and, hopefully, it’s not everything).  Also, and most critically, realize that your capacity to ponder and decide on minutiae may be exceptional, but that you–as executive–can deplete the capacities of the people around you.  Yes, you can exhaust your subordinate’s ability to make good decisions simply by placing too much focus on things that may not matter much.

2. Separating Signal and Noise 

The Challenge: We face a tremendous amount of information flow that amounts to noise in our daily professional lives. By noise I mean, literally, junk that has no meaning or implication for work or play.  Examples that executives face include internal rumors, short term changes in customer behavior, and macro-level news that people will view as significant, but whose impact is negligible on daily business.  The challenge arises when executives feel the need to justify a response or reaction to the noise.  One of my favorite momentary pastimes is to flick the “Stocks” app on my iPhone a few times a day and get a look at the headlines for the S&P 500.  Without fail, the headlines attempt to explain a 0.50% change in the market index.  It’s linked to jobs, or Greece, or some other secular trend.  It would be amusing if you didn’t actually think about the people spending their lives conjuring such headlines.  Folks, sometimes it’s just noise.  Know the difference.

Ways to Overcome it:  I’m a fan of the old Army saying “Once is happenstance, twice is coincidence, and three times is enemy action.”  It’s okay to level yourself out and wait out the first bit of information as potential noise.  Practically speaking, when presented with challenging but not-yet-significant information, be willing to ask “what would make this information more than just noise?”  Know when enough is enough.

3. Making Talent Mobility an Advantage

The Challenge: In the immortal words of Billy Joel:  We Didn’t Start the Fire.  Talent mobility is not really new anymore; but the amount of information that talented people have at their fingertips has changed drastically.  What this means is that the most driven, talented individuals–usually the ones who actually know their value in the marketplace–are much more likely to vote with their feet.  This challenge is common, but it’s increasing as talented people have more and more access to inside information on both their own company and companies they might consider joining.  The implication of this challenge is that some employers will suffer mightily from adverse selection as their best employees decide to ply their trades elsewhere.  The current generation of 50 something’s may cling to the notion of loyalty as something an employer gets value from, but younger workers are starting to know better. Your cost of talent is high if you can’t engage people and propagate vision. It is infinite if you are dishonest and people catch on.

Ways to Overcome it:  In reality, talent mobility is only a challenge to companies and leaders who place limited focus on engaging and exciting people.  Companies who have great places to work will get richer because they will have a lower cost of talent.  Companies who can no longer hide their really bad workplaces will get poorer and engage in more mercenary practices to attract talented people.  Propagate a vision, engage people, know what they think.  Most of all, seek understanding. Listen.

4. Avoiding A False Sense of Disruption

The Challenge: Make no mistake some sectors are being disrupted mightily, and the challenge for executives is how to move faster.  Still, there is an unhealthy proportion of executives out there who, like Don Quixote, are out tilting at windmills when it comes to disruption.  They are looking for a disruptive fight at the expense of handling daily business.  So much ink is drained on the topic of disruption, innovation, and creativity that the average executive sees it as a panacea; when in reality–and in the average business–there is far more value in having a healthy business with solid people, processes, performance, and prospects.  True disruptive innovation takes a long time in MOST sectors.

Ways to Overcome it:  First of all, you need to know what disruption really is.  Are you truly changing the basis of competition, or are you simply selling that notion.  When it comes to disruption, be careful not to assume your sector is different in terms of the pace of change without testing the notion.  Know that investments in disruptive business models and technologies are important, and needed; but be sure to pursue them as a piece (often a small but focused piece) of a healthy business portfolio.  Saying that you are going to make a business healthy by creating the next better mousetrap ignores the history of disruption.  Avoid the false security it provides.

5. Avoiding Tyrannical Short-Termism

The Challenge: Short-termism is the opposite challenge from the “False Sense of Disruption” outlined above.  Because I see many different companies in operation, I see both of these faces show themselves. Sometimes they show themselves within the same company.  The challenge here is that executives, faced with near term earnings targets and expectations; actually underinvest in capital assets and innovative improvements to process, product, or people engagement.  They lack an emphasis on longer term, disruptive, or even incremental business model or product improvements because they can’t afford them. In reality, they can’t afford not to have them in the portfolio.

Ways to Overcome it:  A balanced portfolio is the key here.  The average executive gets this notion; but the average executive also needs someone to keep him or her honest when it comes to rationalization of investment levels in new or interesting businesses.  Typically, this challenge rears its head at the margin.  It’s in questions like “Do we really need to have that many sales people pushing our new product?” or “Does that expensive training program really need to be held this year?” Keep people close who can argue for the balanced portfolio.  Oh, and listen to them.

6. Making Strategy Flexible

The Challenge: I am approached monthly by companies that desire a way to think about strategy differently.  They want a strategy.  The biggest challenge of strategy formulation, however, is breaking through the mindset that a “strategy” is a set thing.  Set piece battles are getting increasingly rare in business (they will exist as long as privileged assets exist, but that’s a different post).  The proverbial strategy in a booklet gathering dust on the shelf is proverbial because it has happened far too often. Usually, this occurs when a strategy is built to placate senior management or a board vs. to truly inform the approach to business.  This is a continuing challenge for executives.  Strategy is not deterministic.  It is subject to random changes. It is subject to competitive moves.  It has to be adaptive.  Executives face the challenge of making it so.

Ways to Overcome it:  Strategy is a living thing.  The first way to overcome this challenge is to embrace the adage that “no plan survives contact with the enemy.”  In business it’s perhaps more polite to say “no plan survives implementation intact.”  Strategic plans are no different, so start with that in mind. Understand the boundaries within which a given strategy remains intact, and the triggers that would make a refreshed or different approach appropriate.  This is a big challenge, and one I have spent a lot of time on in the past several years.

There you have it.  Six challenges that I see as pivotal for current executives.  If I’d had more time and a better text editor, I might have made this shorter, but I hope you get the gist.

I’d love to have your thoughts.

When “Strategic” Cost Reduction is Really Just Whacking…

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Cost reduction is easy…Doing it right is hard.  

Any strong, financially based view of productivity must address the cost side of the equation.  So, we are faced with the need to assess, restructure, and consequently reduce costs.

Cost reduction and restructuring exercises are underway at companies around the world at any given point in time.  Just ask the likes of IBM, which recently found itself mired in a bit of bad PR around the scope and magnitude of cost cuts coming in 2015.

Any leader who has been through one of these exercises can tell you how harrowing it can be.

It’s not harrowing because of the topic itself…After all, any Neanderthal can lop costs. Just tell him how much to go get, and he will get it.

It’s harrowing because cost reduction exercises are tough to get right.

Cost reduction exercises start with either a burning desire to improve a strong company, or a burning platform under a struggling one.  But, what separates a true “strategic cost reduction” mindset from our friendly Neanderthal whacking away is a considered approach to performance and risk (notice I didn’t say cost) that centers on effective allocation of burden and costs.

Unfortunately, whacking can become the norm.

Let me tell you why.

The corruption of strategic cost reduction

Usually, a strategic cost reduction exercise begins with a provocative question.  It’s the sort of question that gets any organizational or budget leader into a sincere case of the willies quickly.

“How would you do what you need to do with 40% fewer resources?”

It’s a scary question, but one that is a great stretch exercise for any organization at any time.

Applying a strategic cost mindset, such a question is intended to invoke the necessity of invention that more incremental approaches can never get to.

Just look at the structure of the question:

“How would you do what you need to do…” – This piece of the question implies creativity on the output side.  Are you doing too much?  Are there things better left to others?  Could you justify the first and last outputs that you and your organization are creating? Are you covering your key risks?

“…with 40% fewer resources?” – This piece of the question gets at the input side…In this case, justify the resources in light of the outputs.

Done well, strategic cost exercises that root themselves in the question above result in leaner, more effective organizations with better clarity and stronger culture.

However…

…Executives who use this sort of thought process to reduce costs have a pernicious tendency to fall out of a strategic cost mindset and into a whacking mindset.

They ask their people “How can you reduce costs by 40%?”

What’s the nuance?  It’s in the implied calculus around inputs, outputs, risks, and justification.  In the first (and best) case, the question posed is a creativity inducer.  In the second case, it’s simply an order couched as a question.

That is the realm of legendary whackers like “Chainsaw” Al Dunlap.

Many, many executives and consultants have taken this sort of 40% question–intended as a thought starter and creativity driver–and turned it into a fait accompli.  

So, what’s the right thing to do?

All situations are different. But, the right thing to do is ensure a structured approach to evaluation, action, and strategic alignment.

In one client I served, a transportation provider facing significant financial stresses following 9/11, the strategic cost exercise was about the solvency of the company. Its leadership team faced an existential threat and had to act fast.  But, rather than just issuing an order to “cut costs” by a given percentage (the whacker’s favorite approach), the company’s leadership took a highly structured, thoughtful, but blisteringly fast-paced approach.

In another client situation, this time in packaging, longer term structural changes in the industry led to a need for rethinking the company’s organizational and operating footprint.  The two things went together.  With a measured approach, the company found more than 20% improvement in cost structure through organization and footprint alone.

And, get this, neither of these companies killed morale.

Wait! What?  Neither, you say?  Come on! These exercises are murderous to morale…Right? 

Not really.

And I’ll tell you why:  The ones who get this sort of exercise right start with strategy and mission, and end with a better organization at a lower cost aligned with the strategy and mission.

The ones who get it wrong start with a number, usually a percent or hard dollar number, and end with a number.

The right thing to do is to measure, then cut.  It sounds simple; but it isn’t.  Any time a significant cost reduction effort is undertaken, it is about redesigning the operating model of the company.

Whacking isn’t the way to do such a thing.

One warning:  Depending on point of view, it can be both…

One thing to be very careful about:  Some of these exercises can be strategic and driven very carefully from the top; but because of breaks in communication or agency problems they can at the same time be viewed by the organization as arbitrary whacking.

Senior leadership sees itself as implementing a strategic cost framework.

Senior leadership’s agents–perhaps aggressive middle managers or consultants under pressure to deliver budgetary numbers–resort to the whacking model.

People on the ground see job cuts coming like artillery barrages.  Sure, there’s some rhyme to it (perhaps the stanza repeats every budget cycle), but the reason isn’t there.

All action obtains meaning, regardless of whether meaning is communicated.

A structured, thoughtful, strategically aligned, and well-communicated approach to productivity improvement is the foundation of a modern performance ethic.

I’d be interested in your thoughts and experiences in this area.

There Are No Executive Training Wheels

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Once you are an executive, the future is now…

Ben Horowitz of Loudcloud and Andreeson-Horowitz fame posted a while back on “The Sad Truth About Developing Executives.”

Here’s a LINK.

I encourage you to read it; and if not, at least give it a click.

The Insight:

Horowitz lays out the essential reasons that a CEO can’t afford to hire executives that must be developed.

He opens the article with a heartfelt and somewhat (for me) convicting notion…  Namely:

My greatest disappointment as CEO was the day I realized that helping my executives develop their skill sets was a bad idea. Up to that point in my career, I prided myself on my ability to develop people and get the most out of them.

 

Ouch.  Right?

He then goes on to explain why.  And, it’s compelling.

He gives 6 reasons.  First he outlines how time spent developing under-performing executives is a misappropriation of the CEO’s valuable time and skills.

Then he outlines the consequences ranging from bad results, poor cultural impact, and, in the end, a clear undermining of the person being “developed.”

The Application:

I like stretch roles.

But, assigning a person to a stretch role (that is, one they are not currently fully practiced to take) requires that they have the credibility within the organization to fill it and you have the confidence to let them fill it without undermining them.

Because of these two factors–credibility and confidence–at some level in an organization, the notion of “stretch” as “potential” has to be shelved.

The stakes get too high.

You and I wouldn’t want our neurosurgeon to walk into the operating room, pat us on the shoulder, and say “I’ve never done this before, but I’m really smart and savvy and my medical director thinks I’m going to be great…Let’s see how it goes.”

The horror.

He has no credibility, and neither you nor I have confidence in him…regardless of what his medical director thinks.

The executive level of most organizations comes with the same horror when incompetent or under-apprenticed executives are placed and then expected to “develop.”

The difference is that an incompetent neurosurgeon affects a single life; and an incompetent executive can affect thousands.

There are no executive training wheels.

As Horowitz explains quite nicely:  Once you are an executive, you are compensated based on your existing ability, not based on your potential.

Executives either gain or lose the confidence of those around them… There is no “wait and see.”

The organization, customers, and board members are watching.

They see when a CEO steps in to answer for an incompetent or under-apprenticed exec.  They see when a given executive is the project of a CEO.  They also feel the pain of incompetence when an executive leader just doesn’t have “it” when it comes to the business.  “It” might be the ability to work with customers or it might be the ability and knowledge of how not to significantly mar sensitive personnel issues.

So What? 

When you boil it down, allocation of talent is perhaps the most important activity in an organization.  It is strategy just as allocation of capital is strategy.  That is, unless the executive team allows it to become a hobby (or worse, a clubby exercise).

In thinking through executive roles, CEOs have to look toward demonstrated competence as the top criterion for a position.  Everything else pales, and I do mean pales, in comparison.  Executive presence, savvy, speaking ability, golf handicap, sense of style, etc. all need to be relegated (or, for most of these, disregarded).

The time for development was last year.   Humane talent management, just like capital investment, requires vision.  If you are staffing an apprentice into a master’s role, you probably lack vision.

One Disclaimer and One Beef:

I’ll offer one slight disclaimer here:  Some of you will read this and think I’m writing that everybody has to have been there in order to get there, and thus the talent for executive or “high stakes” jobs in an organization must be sourced from outside the company.  Nothing can be further from the truth.  Smart executive teams create apprenticeship roles with definite time periods and demonstrable tasking to build the credibility and confidence required of an individual who will take on an executive role.

And, then, the beef:  I agree with Horowitz that CEOs shouldn’t expect to coach their own people; but I believe in a strong focus on continuous improvement. Every executive has areas of emphasis that can be shored up with some coaching or counseling; and a good CEO enables that kind of coaching.  I doubt Horowitz meant that a CEO shouldn’t coach occasionally or enable continuous improvement; but I’d want to be sure.

Look for credibility in your executives, and lose the training wheels.

Yahoo and The Danger of Irrelevant Benchmarks

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Morgan Stanley says that relative to Facebook, Yahoo is fat. Well…Relative to Usain Bolt, we are all slow.

Morgan Stanley has posted a report on Yahoo that urges Yahoo’s CEO to cut 1,400 jobs to keep earnings flat.

The driver?

Yahoo’s revenue per employee is sub-par relative to a list of other seemingly similar “names.”

Here’s a link from Business Insider that outlines the situation.

The insight

This is not a post about Yahoo, even though the pursuit of cost cutting there seems to be required, and the process seems to be misguided, I’ll leave that to another post.

This is a post about knowing your benchmarks.

Morgan Stanley produced this exhibit to show that Yahoo’s revenue per employee is out of whack.

 

What I see is a list of “tech” names.  That’s easy enough.

What I also see is a list of companies with vastly different business models.  Amazon is a conglomeration of retail, digital, and media.  Priceline sells travel.  PayPal is a financial services company.  I actually have no idea what AOL does these days (okay, that’s a bit tongue in cheek, but still.).

The implication…

The point is this:  If you are a shotputter, it’s irrelevant how fast you run compared to Usain Bolt.

We are all slow compared to Usain Bolt.

Morgan Stanley is committing an analytical sin here, and it’s an easy one to commit:  That of the inappropriate first order comparison.

Inappropriate first order comparisons tend to come up with executives and analysts when they are either ill-informed (actually less common) or just looking for simple (or lazy) comparisons (actually more common).

If I have a company in the tech sector, it seems simple to compare myself to another company in the tech sector; but the reality is much more complex.  Business models are highly divergent, even within the same “sector” like tech.

That’s not to say that a company shouldn’t look to others to compare its business model and think strategically about change; it is to say that simply doing mathematical benchmarks without considering business model differences is a loser’s game.  

So What? 

Morgan Stanley looks at revenue per employee and says “cut employees.” We could just write that off to the naivete of a Morgan Stanley analyst who has never run a business.

But…

…A lot of executives manage by spreadsheet in this manner.

A better way is to do a second order scrub for business models, scrutinize the business model, then execute.

The reason is this:  Trying to take a “square peg” business and benchmark it against a bunch of “round peg” businesses can lead to demoralizing results.  The demoralizing results usually hit the organization in the near term–and those can be papered over by savvy executives.  The demoralizing results hit the shareholders at a later date.  The crackpipe of layoffs-as-an-accounting-measure, once given to the market, investors, or–and I hope this isn’t your company–executives, is hard to get away from; and done (as Yahoo seems to be doing) without rhyme or reason, it can kill companies.

Ask Al Dunlap.  Well, no, don’t ask him.  Ask people who worked at Al Dunlap’s companies.

Never let a false comparison drive you to manage by math.  Never let an “easy” index comparison let you get away from the fundamentals of whether that index actually fits your business.

Beware false benchmarks. They can destroy you.

A Strategist’s Secret: Find Beauty Every Day

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A habit of seeking out strength and beauty every day can make you a better strategic leader.

This is going to appear to be a soft article…after all, I’m writing on finding beauty.

But, I can assure you that the concept here applies to the hardest core, barest knuckled aspects of business as much as it applies to stopping and smelling the figurative roses.

The gist is this:  Through a combination of hurry and training, we get locked into the “things we do” every day.  We become so focused (or, I might say, unfocused) on problems–the ugliness and weakness–that we forget to appreciate the things of beauty and strength right in our midst.

You and I can be better leaders if we stop and acknowledge the strengths and beauty around us.

What a thing of beauty really is…

What I’m writing on today is a positive appreciation for winning practices and attitudes that are right under our noses. We actually don’t often have the discipline to look for the things of beauty that are right in front of us; and all too often that’s because we’ve been rewarded by others for finding ugly.

Finding ugly.

You know, like finding what other people are doing wrong…Finding out what’s broken…Searching out weaknesses and soft spots–All those things that good problem solvers finders do.

Oops.  You saw that correctly.

Problem finders often focus on the ugly.

Problem solvers tend to look for the sublime.

You know why?  Because our strengths tend to be what we use to overcome our weaknesses.

Strengths are possibilities.  Weaknesses are limitations.

Building a winning strategy in business and life by focusing only on what is broken or weak is, near as I can tell, impossible. Sure, strategic plans can start with break fixes, but if they end there, they will miss the upside.

Trust me.

Beauty is in your strengths.

But, what does it mean to find beauty?

Finding beauty means having a willingness to step back and appreciate the real capabilities that you, the people around you, and your organization actually have right now.

It might be the way that your organization processes material…

or serves customers…

or designs product…

or, and this is a good one, respects one another.

Evaluating capabilities–strengths and not merely weaknesses–is a critical step for any strategist.

Add to that the fact that positive framing of capabilities and situations is likewise a real strategic leadership strength; and you will find that a focus on beautiful strengths is a healthy thing for your relationships as a leader, family member, and friend.

Why this is hard

Too often, and for too many good reasons, we get distracted from finding the beauty of strong capabilities around us.

The good reasons?  Well, more often than not, we have a problem to solve.

While you are focused on achieving that bonus or making it to the next stopping point in your career, or–maddeningly–just following orders, you might be missing the beautiful things around you.

The talent you have.

The talent people around you have vs. what is available in the market.

The glory of a job you did well today.

You know… the little things.

I’ll give a great example of how distraction can rule our lives and remove us from recognizing beauty around us.  Some of you may have seen this before; but if not, I encourage you to watch it.

In this video, famed virtuoso violinist Joshua Bell decides to play in a D.C. subway station, just to see if anyone notices… Have a look. It’s well worth a couple minutes of your time.

I’m betting that more than a handful of the people who walked through that subway station were not only aficionados of classical violin, but were probably so much so that they could tell you how excited they would be to go to the symphony hall to see such a performer as Joshua Bell.

And, they each had the opportunity not only to see Bell, but to have an almost personal performance by him.  That’s something that many people would pay a lot of money for.

But they aren’t looking for the thing of beauty that is right in front of them.

It’s a remarkable and somewhat sad commentary on the pace of our lives that a virtuoso gets nearly zero reactions from everyone powering their way through the train station toward their next goal.

The same distractions apply to you while you lead your life…

Chances are you have strengths right in front of you that aren’t being used.

Chances are you’ve let “popular” notions of what talent or capability looks like (in the worst case–prejudiced or preconceived notions) cloud your vision of what strong capabilities are right in front of you.

Chances are, you’ve gotten yourself into a hurry.

A parting shot

I’ll leave you with a little bit of humor.

If you have never seen it, I encourage you to watch the “Double Rainbow” video here.

Now, There’s a guy who found a thing of beauty in his life.

Okay, so maybe you don’t have to get that excited.  Still…

…Go find your double rainbow today.

Find a thing of beauty today.  Find a strength to build on.  It might get you somewhere that a focus on ugly won’t.

That’s a core secret of an effective strategist.

I’d love to have you share your reactions and comments…