Tag Archive for: Strategy

Tversky, Trump, and Unintended Consequences

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Bad things can happen when people see no upside.

The 2016 election has produced a president-elect who is…unorthodox.

Donald Trump’s election, however, is quite possibly the result of one of the most important quirks to human decision making ever discovered.  Namely, that people are risk seeking when faced with certain losses.

That’s right–when our back is to the wall, we tend to roll the dice.

In a series of experiments years ago, the late, famous psychologist Amos Tversky and his collaborator Danny Kahneman delineated Prospect Theory.  Among the key outputs of Prospect Theory was the notion that people are protective of gains…we like sure gains over gambles even if the gambles are expected to pay off more than the sure thing.

But, we are very willing to speculate when it comes to sure losses.  We will take the prospect of a gamble that results in a big loss or no loss at all over a certain smaller loss. Back us to the wall, and we roll the dice.

It’s arguable that such a psychological phenomenon drove the election of Donald Trump, who represents tremendous uncertainty when it comes to things that matter (like policy…I’m not talking about his tendency to Tweet). Things may just work out great, but we don’t know yet.

A large enough proportion of the electorate was backed into a position where voting for Trump’s opponent was a sure loss–a vote for a status quo that wasn’t really working for them.  Instead, they had the option to roll the dice on an option that might just break even.  So, they did…in droves.

You could argue–and Monday morning quarterbacks of the election have done so–that by disregarding wide swaths of the electorate who saw only continued decline coming with a vote for Hillary Clinton, the Democrat party backed those people against the wall.

Kahneman and Tversky showed us that if we put people in a lose or gamble situation, they will gamble. They will gamble even if the loss is only modest (in this case, simply the status quo of steady opportunity erosion).

So, what’s the insight for you as a leader?

From an organizational perspective, let’s say you are an executive or a board member who wants to “send a message” to an organization.  Maybe that message looks like a substantially more challenging compensation structure–you raise target performance by 50 percent, cutting likely compensation for executives by 25% in the process.

What you’ve done is sent a message to them that says “you are going to lose compensation this year.”  Remember that when faced with a sure loss, people are much more likely to roll the dice and move on. Expect lots of people, especially good ones with other prospects, to check out.

From a strategic business perspective, the same can happen.  If your strategy is to drive your competition to the brink, then you must know that competitors will roll the dice when at the brink.  Good conduct consists of avoiding backing the competition into the wall unless you know the endgame.

It might feel good to back them to the wall; but be ready for their gamble if you do.

What do you think? 

Why You Need A Little Intransigence

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An effective organization has a little intransigence.

 

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.

 – George Bernard Shaw

Meditate on that quotation for a minute.

Now, think about whether you have ever encountered the marginalization of an “unreasonable” person.  Once you’ve been in leadership positions long enough, you come to accept that it happens.  The brilliant researcher whose ideas are just too outlandish gets ignored by the cool-kid MBAs because he’s too likely to call their spin what it is.

The exceptional sales person whose ideas would revolutionize the way the company sells is just too aggressive with senior management to “get things done” the political way.

It happens all the time.

Now, think about someone you know who has actually built or turned around a company.  Think about how much of their style depended on being accommodating and flexible vs. directive and uncompromising. You will find a lot more of the uncompromising style in a real builder.  The easiest ones to name are nearly caricatures of doing things their own way–think Jobs, Rockefeller, Ford.

Somebody, somewhere, thought each of them were “unreasonable.”

And, there’s a lesson in these two thoughts.  You, as a leader, might buy into the notion that you have to go along to get along.  That’s fine, but you have to realize that real progress–real growth–requires people who are willing to challenge the status quo.

If you find yourself marginalizing people with new ideas because they don’t “get” your earnings target, you are part of the problem.  If you find yourself being bothered by someone whose entrepreneurial push to get you to try new things threatens your own well ordered sense of the world, you are limiting progress in your organization.

In short, if you aren’t the unreasonable one, then you need to find a few of them on your team.

There’s probably a critical mass of “stubborn” on a given management team.  I would guess it’s somewhere more than 20% of the team and somewhere less than 50% of the team; but I believe that proportion depends highly on the leader of the team.

A leadership team composed of a group of acolytes who only seek to enshrine themselves alongside the leader can be successful in the short term (if you read this blog you know that I believe that anyone can be successful in the short term).  But, it will lack the capacity to challenge the status quo.

Don’t murder or marginalize your unreasonable ones. Find a way to “dose” and channel the stubbornness into new things.  Create forums for intransigence and revolution.

You just might build something.

Finding Value in Your Vision

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Your vision for your career and your company should start with an articulation of the value you provide.

 

Does your vision articulate value?  It ought to.

Often, in the middle of coaching discussion with young professionals, I asked a basic question:

“What do you want to accomplish?”

The responses I receive to that question are often telling.  In some cases, I get interesting, highly functional visions of the next step in a career:

“I want to become a trusted finance leader.”

“I want to become the best project leader in the company.”

“I want to be an expert on M&A processes.”

These are visions that imply a strong value orientation.  They imply delivery of value on the way to accomplishing the vision. One cannot become a trusted finance leader without developing the skills necessary to, in fact, be a trusted finance leader.

Sometimes, though, the answer is more problematic:

“I want to get promoted.”

“I want to run a business.”

“I want to be a senior executive.”

These are visions that imply a strong status orientation.  They create ends that are status driven. One can “get promoted” under the wrong circumstances.  One can “be a senior executive” without developing the skills and capabilities necessary for the task.

Having witnessed multiple highly corrosive senior executives who were placed via the machinations of their own ambitions rather than the value they provide, I can tell you that fulfilling someone’s vision of position and status is exceptionally dangerous if that vision is not accompanied by a vision for value.

And that’s the point of this post:  Vision devoid of value is rubbish.

But, though I’ve articulated the examples above in terms of individuals’ visions for their careers, individuals aren’t even the worst offenders.  I know plenty of individuals who are great professionals but who can only articulate vision for their career as “promotion” or “a raise.”

They will be okay (if a little shortsighted).

Where the vision-devoid-of-value issue often comes up–and causes the most damage–is actually in business strategy.  We see status goals articulated as vision all the time.

“We will double the size of our company.”

“We will be number one in our market.”

“We will be a great place to work.”

These are all corporate level equivalents of “I want to be a senior executive.” They are status oriented visions.  They pass for leadership art in companies the world over.

And, they are entirely insufficient.

Shoot for specificity in the value you will provide.  Articulate a vision for that value…and then, go!

Can you articulate a value oriented vision for your career?  What about for your organization?

At WGP, our own vision statement could use some of the scrutiny I’ve suggested here.  We say our vision is to be the premier strategic advisory firm in the region.  What we really mean is to be the premier strategic advisory firm in the region because of the quality of our insights, advice, and people.  

There’s a difference.

What do you think?  How do you articulate a value-driven vision?

 

The Asymmetry of Action

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Seeking massive upside can lead you to inaction.  Watch out for “asymmetry driven inaction” in your strategic plans.

 

Sometimes you have to kiss a few frogs to find a prince.

 

In the lexicon of strategy and strategic plans, the word asymmetry is a useful one. But, it’s a dangerous one.

There is information asymmetry in negotiations.

There is asymmetry of outcomes for a strategic decision.

There is asymmetry of allocations: talent, resources, mindsets, and any other “resource” that can be allocated.

Asymmetry is everywhere. It’s the real world. We can engineer symmetry through repetition and reduction of variability, but reality is filled with imbalance, particularly in the land of business strategy.

Business strategists rarely have the luxury of making the same decision over, and over, and over, and over again. They usually have a few big decisions to make, and they have to guard them very closely.  Why?  Because the world is finite.  There are only so many customers you can piss off when trying to get your sales approach right.  There are only so many acquisitions targets you can approach with the wrong pitch before you run out of them.

True strategists face a series of one-shot games. They can learn from their shots, but each game is different. Each deal has a different flavor. In fact, if you sit in a position where you face only a continuous series of outcomes vs. a discontinuous one, you are probably not a strategist. You are a portfolio or risk manager. Those are not the same thing.  A true strategist has to account for everything before taking one shot.

And, this accounting is where the real danger of taking popular and business press too literally comes into play.

The popular press likes anecdotes, and can lead you to try to mimic anecdotes that simply don’t fit your model. And, in search of an easy “positive asymmetry,” you read an anecdote about how company X has created massive value via acquisitions.  You then go to mimic the actions of company X without understanding the strategic context or capability sets company X had to its advantage.

The academic press isn’t much better.  You read an academic study about how, on average, business transformation efforts fail.  This leads you to pooh-pooh the notion of driving big change in your organization.  “There’s too much downside.”  And, yet, the academics have only generalized from a broad set of companies without outlining the real strategic and organizational contexts at play.

So, the popular press can lead you to seek only those moments that “look” like the founding of Facebook; and the academic press can convince you that management initiative has too much downside.  You bog yourself down in “inaction” by taking both anecdotes and statistics too literally.

So what?

We all want more upside than downside. We all want massive “positive asymmetry.” It’s a natural desire. It’s analytically comfortable.  We all want certainty.  But what happens when our search for massive upside leads us to sit out the game? What happens when we choose to do nothing as a rule vs. as a strategy?

We waste time and resources. That’s what.

I once knew a senior business leader who was given a beautiful portfolio of opportunities and the sponsorship to do whatever he wanted. The problem? The guy couldn’t get out of the spreadsheet.  He couldn’t place moderate size bets that might pay off because he kept looking for bets that would only pay off.

He, therefore, did nothing. He destroyed value by stripping away valuable assets and capabilities to meet earnings targets, but never really got off the dime when it came to making possible bets.

He squandered a beautiful opportunity to grow and inspire.

Doing nothing–whether it be with your career, your business unit, or your corporation’s resources–has a cost. It has downside.

And, an easy way to do nothing is to only look for sure things–massive “positive asymmetry” in the bets you place.  In my experience, massive positive asymmetry only exists ex post.  It exists before hand only in some popular press anecdote.  The strategist who achieved it usually knows there was a struggle to get there.

They know what frog lips taste like. Go, kiss a few frogs.

What do you think? 

Got Talent? Prove it.

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Talent can only look good on paper for so long.

I happen to follow a certain college football team that has been in the process of breaking in a new quarterback while having–at the same time–one of the most exciting backs in the game. The new quarterback looks good on paper: Big guy, good athlete, strong arm.

Half a season ago, the new quarterback (and, no, there’s no reason to get into names because that would be personal and there’s too much press on these guys as it is) was coming along very slowly.  He wasn’t showing much, but made a few plays.  The coaches would say he was “doing what was needed” while the superstar back did his job and basically carried the team.

Only, the back couldn’t do it all.

And, the quarterback–when asked to do more–hasn’t been able to deliver.  The so-called smart money is starting to move from the incumbent new guy to “player to be named later.”

The quarterback, able to ride along with great talent, didn’t have to make many plays.  But, when it came time for him to actually carry the team, he hasn’t been able to do so.  It’s a truism in sports just as much as it is in business:  When bringing new players online, it’s good to develop them slowly. This is especially true if you can surround your new players with great talent.

But, eventually, the new players have to answer the bell…on their own.

This post is about answering the bell.

The “point” of this post for management and boards

Developing players is a critical part of any manager’s role in an organization. And, knowing whether you’ve chosen the right players is a substantial part of any executive’s or board member’s role.

So, what does my little football vignette tell you?

1. Developing players slowly is fine, but you have to have a glimpse.

Just like the quarterback in my story above, it’s fine to place a new executive in a role and let them get used to the organization and culture before making decisions. It’s fine to move people into roles slowly.  But you have to see something of substance during the transition.

You have to see them want to make a decision or two.

Ask yourself:  Have I seen a glimpse of the production I need from this new player?

2. Surrounding new players with supportive talent is great, but the new player has to bring something to the table.

I’m a big fan of “scaffolding” new hires and new executive teams with supportive structures that get them up to speed. In the story above, our new quarterback has an all-America back in the backfield with him.  That makes things easier.  Surrounding new executives with talented people who provide data, insight, direction, and suggestions goes a long way toward “apprenticing” great new talent.  But, how the new player responds to the scaffolding can be instructive.  You’ve placed a new executive at the head of a team of high talent sales people. Do they start to bring anything to the table, or do they just “hold office?”

If they just hide (or just warm their seat), especially behind other talent, then you need to know that.

Ask yourself: Does the new player produce without leaning inordinately on the talent around them?

3. Eventually, everybody is exposed.

This may be the most important point. In fact, it’s the point that prompted the post.  Eventually, your player’s talent will be tested.  You will have to have your player stand up in front of your board or a key customer and perform.  They will eventually have to answer the call.  Their scaffolding will be stripped away, they will have had enough time to absorb and reflect. They will be laid bare.  What happens then? If you are counting on an incompetent hire–whether it’s your account manager in sales, your VP of HR, or your CEO–to hide forever (or even just until you retire), then you are playing with fire.

Eventually, everybody is exposed. Some are exposed faster than others.

Ask yourself: Will my new player survive exposure as the individual talent they are supposed to be?

4. Other people are watching.

Your new player may take longer than you planned to develop. That can be ok. Unless they are exposed early, timing can be flexible. You hire a new guy to do a bunch of M&A work, and it takes years to get off the ground. That can be fine.  But…and it’s a big but…you have to watch out for collateral damage.  A CEO who comes into a new company with board mandate but without much vision or knowledge can only survive for so long before the executive team and the organization realize the new emperor has no clothes. Same can be said of any new hire or new player.  I’ve witnessed senior leaders who make no decisions of any substance due to their own lack of conviction and knowledge.  They wander hither and yon without any real point of view–letting the rest of the team do the real work.

One senior executive I spent some time around spent more time contemplating the design and furnishing of facility renovations and figuring out ways to manage around board meetings than he ever spent on business strategy, customer value propositions, financial plans, or anything else that might have been “strategic” to an executive of his standing.  Whether through lack of insight, energy, or ability, his “happy place” just wasn’t in actually doing the job of a a senior executive. His people knew it, and it hurt.

If you are the person who hire the “hither and yon” executive, you have to know that such hires reflect on your own competence.

Ask yourself: Is my new hire hurting my organization and my own reputations via his own incompetence?

So what?

All of this is to say one thing:  In the world of strategic management, player selections can only look good on paper for so long.

The players eventually have to show glimpses.

They eventually have to carry the load on their own.

They have to survive exposure.

Your performance depends on it, not to mention your reputation.

What do you think?

It’s Your Value Proposition, Stupid!

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The missing link in too many strategies is the master link.

 

Have you ever walked into a store and said “I’m buying brand X because they have the best scientists?”

How about “I’m going to buy this car because the maker has an outstanding leadership development program?”

What about “I’m buying from them because they are going to double the size of the company in 5 years?”

Probably not.

When we are customers, we buy based on a really strange thing called a value proposition. That is to say that we buy something because it is worth more to us than the time and money it takes to (a) buy it in particular and (b) buy it or anything else from someone else in general.  That’s it.  That’s how you win.

The crazy thing, however, is that I see corporate and business strategies spending less than an iota of time defining a true value proposition. They instead tend to focus on internal capabilities or realities and pose them as value propositions.

Have you ever seen this?

“Our strategy is to be great at business to business sales.”

Okay, fine, but does the customer who actually buys from you really care?

“Our strategy is to use our impeccable R&D capabilities to drive innovation.”

Um, maybe, but unless you sell R&D services, the customer doesn’t buy R&D from you, they buy a different product or service.

I’ll leave this one shorter than it needs to be: Your value proposition is what wins you business. Your strategy has to encompass your value proposition. Sure, it can also encompass other competitive advantages like operations, unique skills, or low-cost assets; but if you cannot articulate your value proposition (which may very well be delivered via your competitive advantages) to the customer, then your strategy is probably a waste of space.

Are you wondering why your growth strategy isn’t resulting in growth? Are you struggling to figure out why your customer acquisition strategy isn’t acquiring customers? Are you clueless about why your operations strategy hasn’t given you the boost you expected?

Then, check their links to the value proposition you are delivering to the market.

It’s your value propositions to the customers you hope to serve that determine your success…and too often the customer value proposition is disregarded in favor of some internal, known, but altogether insufficient drivers of success.

Your value proposition is far too often both the master link of your strategy, and the missing link.

Mind your value proposition, stupid.

What do you think? 

Your Platitudes Are Showing

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Strategic platitudes can ruin your day.

 

Have a look at these:

“We’re going to be number 1 or number 2 in our markets.”

“We’re going to double the size of the company!”

“We’re going to focus on M&A as our growth driver.”

“We’re going to build a growth engine in our product development department.”

“We’re going to out-compete our competitors.”

Ever hear any of these articulated as “our strategy?”  Probably.  Maybe in your own company, today.

They are the chunks in the chunky soup of management platitudes.  You hear them and their derivatives at all times.

Let’s take them apart…

“We’re going to be number 1 or number 2 in our markets.”

This is a bastardization of an old portfolio management philosophy most famously articulated in the U.S. by General Electric.  It was and is a good one, in my opinion.  But, one cannot confuse a portfolio management philosophy (which is strategy at one level) with a strategic plan for a business.  Yet you hear people ripping off Jack Welch, even today, and claiming it as a strategy for a business.

You want to be number 1 or number 2?  Okay, fine.  How?  That’s where strategy comes in.

“We’re going to double the size of the company!”

This one has been strewn across management thinking in the worst of ways. Put simply, “growth” is not a strategy.  It’s not a strategy for a portfolio and certainly not for a given business.  In fact, anyone who articulates strategy as “we’re going to grow” is only slightly removed from the guy who says his strategy for winning the football game is to “score more points than the opponent.”  It’s a nice notion and definitely a metric, but it isn’t going to determine the concept of your passing or ground game.

 “We’re going to focus on M&A as our growth driver.”

This one is especially dangerous because of the implications it brings with it.  Focusing on M&A as a tool for growth is ok.  It really is.  Plenty of companies allocate capital to acquisitions all day long and book the growth.  But, let’s be clear, acquired growth without a coherent strategic philosophy is a loser’s proposition.  In the 1970’s, AMF Corporation made motorcycles and bowling pins. Its management team walked itself into a non-performing corner by acquiring indiscriminately.  It died a slow death as all of its pieces were sold off in the ’80s and beyond.

M&A as a “strategy” implies that the current business is played out.  It lets management give itself a free pass on growing the existing business. Why would any board allow that?  M&A is not a strategy any more than “sales” is a strategy.  M&A is a tool in the toolkit of an effective management strategist.

“We’re going to build a growth engine in our product development department.”

This one is interesting because it presents a competitive advantage as a strategy.  Competitive advantages are great.  But, they aren’t strategy.  Strategy is direction, focus, resourcing, and value delivery.  Anybody who tells you their strategy is to invest in a competence needs to be asked whether the competence links to actual value delivery.  Building an asset is nice, but remember, an asset delivers cash.

“We’re going to out-compete our competitors.”

I threw this one in there for good measure.  Strategies that assume harder work than the competition are legion.  I mean that.  “Hard work” is not a strategy.  Neither is “focus.”  Yet we see these sorts of platitudes trotted out as components of a strategy.  We are going to work harder than the competition!  Sure, whatever. The competitor is a competitor because they are already in your market. What makes you think it’s a good idea to imply to yourself or your organization that the competition doesn’t work as hard as you?

Strategic management is hard.  To muck it up with low worth slogans and platitudes is to distract from the mission.

What do you do when your platitudes are showing?

 

Don’t Forget Your Change

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The focus of strategy should be on what needs to change, but too often, we leave the change behind. 

 

For those of us who still pay in cash, there is the experience of going through a modern checkout line, paying with paper money, and receiving paper money in return from the clerk, while coin-based change is chunked out by an automated machine.

Invariably, this setup requires the clerk to say “Don’t forget your change!”

Why?

Because what used to be a one-part activity (receiving change from a clerk) has now been split into two parts. This post is about not forgetting your change.

…

Allow me to outline two modes of strategic planning.

First is the mode that business owners tend to engage in–let’s just call it owner mode.  Working with owners on strategic planning tends to be very interesting and engaging for someone like me because you can dispense with the pleasantries of multi-constituency narratives and logrolling and just go straight to the spreadsheet.  Private equity firms are my favorites at this. My best private equity clients don’t want the PowerPoint; they want a well-structured and justified to-do list and a spreadsheet that outlines the costs and benefits of the action we came up with.

The same can be said for owner/operators.  A CEO client of mine who happens also to be an owner, when asked by one of his team members, “What do we need to do to start implementing the plan?,” simply said, “Why aren’t you implementing it already?”

While owners want to see justification for change, they only want so much before they put it in place: they want their change, as it were.  Private equity firms and owner/operators derive benefits from and demand near- and long-term changes in performance.

The second mode of strategic planning is manager mode; manager mode is extremely common in companies that are populated by managers who are not…you guessed it…owners.  The manager mode of strategic planning tends to be more status quo oriented, and there’s a reason for that:  current management doesn’t necessarily derive great benefit from explaining to its owners how wrong they have been over the past few years.

Face it, nobody walks into the office every day saying “Today, I’m going to do a bad job.  I’m going to misallocate resources and tamp down our sales culture with massive bureaucracy.  In fact,  I think I’ll demotivate a few people today.”

Nobody says that, not even the worst managers.  Everything happens for a reason (or at least has a story for why it happened), even current structures and processes that really make no sense. So managers tend to focus more of their time on strategic planning and justifying why they are where they are vs. why that should be blown up and rebuilt.  They entertain their boards with creative narratives. They “kill the clock” with their owners and boards so as not to confront hard things. And they build plans that are heavy on narrative but light on change, and this is especially true when it comes to the specificity of change implied in manager-driven plans.

So with those two modes of planning outlined, the enlightened strategist has to understand that effective strategic planning, especially with manager-driven strategic plans, is a two-step process: There is the step of creating the paper plan, and then there’s the step of producing the hard change that will ensure competitive endurance.

So I’ll just leave this with you:

Strategic planning from a manager’s point of view can devolve into an argument for the status quo and why change is hard, while an owner’s point of view tends to ensure a focus on change sooner, faster, and deeper. In every strategic planning exercise, there must be a moment where the planners–whether or not they are owners–put on the owner hat and test for whether recommended changes are sufficient. 

A strategic plan should envision changes to meet challenges.

Don’t forget your change.

 

Strategy That’s Liquid At Room Temperature

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Formulating and deploying effective strategy during good times is hard…A few basic practices can help you along.  

 

One of the fascinating things about most people is their ability to rise to the occasion during times of stress.  For many of us, stressful times create focus.  They foster creativity. They engender a competitive edge.

Apply heat to most of us, and we respond well. Crisis cuts through the crap. It liquefies culture and allows it to flow.

Nobody questioned the need to change when responding to the global financial crisis.  Nobody questioned the need to drastically re-think homeland defense following the 9/11 attacks.  Those things, by themselves, liquefied old thinking.

But a crisis shouldn’t–can’t–be the only way to create strong and responsive strategic discipline.  How do you get all of these really good things–focus, creativity, edge, and responsiveness–during times of plenty?

How do you, in short, create a strategy that is liquid at room temperature?

I’ll describe one way that might work for you and that I’ve seen work well in many circumstances. And, I’ll give you one that probably will work but that is the wrong way.

Strategic Search As A Liquefying Agent

The fundamental mindset underlying strategic discipline is search.  A spirit of inquisitiveness–about one’s flaws, one’s strengths, one’s competition, one’s product, and one’s customer–is the spirit of fluidity that strategic discipline requires.

In your organization, you probably need to build periodic search time into the calendar on each of these aspects.  Sure, you can complete a yearly SWOT analysis and get there to some degree (to be clear, a surprising proportion of business leaders don’t even apply that level of periodic discipline). But, a relentless search for the facts in good and bad times is the catalyst of fluid strategy. Why? because without facts and data, you can’t test hypotheses.

So, how do you get there?

One means of getting there is building a strong and ongoing intelligence gathering apparatus. A fatal flaw of too many strategic plans is that they are built upon fact bases that were crammed for the test.  A far, far better approach is to constantly scan and gather competitive and customer data as a matter of course, and to use periodic strategic planning sessions to draw implications from the data, rather than to try to gin up data and implications at the same time. Investing in just a bit of excess capacity to gather and disseminate good business intelligence can be a godsend.

Another means of getting there is to enlist a broader set of people in the search for insight. A typical corporate approach to strategic planning during good times is to gather a few experts and draw on their expertise on the way to an incremental adjustment to the plan.  Let everyone else keep executing because, well, they are busy with good stuff…

The problem with this approach is it tends to confirm the good times and avoids looking for any canaries in the coal mine.  An approach to creating employee, supplier, customer, and other focus groups as critical inputs to strategy on a periodic basis can keep your strategic plan liquid at room temperature.

Finally, the notion of “liquid at room temperature” has to permeate your leadership culture. If your leaders believe that the good times are permanent, they are much more likely to shut down their search for strategic insights before the work is done.  Your leaders have to install search as a fundamental part of their job, vs. a reaction to poor business conditions.

A method to avoid…

That last leadership point brings me to an approach that may work for you, but that is best to avoid.  I’ve been near leadership cultures who use secrecy as a means of manufacturing a crisis mindset.  Leaders were good at masking how good things really were and creating a tense sense of unease among their subordinates…even going so far as to set vastly different performance expectations for subordinates than they set for themselves.  This absolutely created liquidity and creativity when it came to strategic search…

…but it’s an approach that, put simply, lacks integrity.  Now, if you are the shareholder of your business, you may do as you like. However, if you rely on fooling people into a false sense of insecurity, it will eventually come around to bite you.

To wit: the best example of this is when subordinates, spun up into a sense of crisis by goals that they have to attain in order to meet highly inflated “false crisis” metrics, create and recommend options that senior management never seems to act on (because senior management doesn’t have the same compensation metrics and knows that their own life is good).  They conduct a frantic search for options, senior management cherry picks a few and disregards the rest, and subordinates are left to wonder why their superiors don’t share their own sense of urgency–given to them by their superiors.

Do that for a few cycles and people will catch on.

Creating strategy that is liquid at room temperature requires a leadership culture that engenders search, and that builds search into the very fabric of strategic management processes.

Feel free to comment on this below…

 

What are you good at?

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Just another post on playing to your strengths…

 

I am 6 foot 7 inches tall and a smidgen under 300 pounds; you might not know it to look at me, but I’m not going to be a gymnast anytime soon. While I may dream of being a dancer or a distance runner, it’s just not going to happen.

And, while businesses can certainly make pivots almost as drastic as those I outline above, far too many executives talk about them as though they are simple moves.

In our work on business strategy, I often get asked the question “How do we take our company in an entirely new direction?”

It’s a good question, and one that disciplined managers should always explore, at least periodically. But it’s also one that is fraught with blind alleys and red herrings.

Why?

Well, for one, when people ask about what they can do that’s new and different, they’re often in the throes of being seduced by merely what is popular, whether it’s what’s popular in the press or among the management team itself.

The issue is that what’s popular may never fit your strengths—if you’re a 300-pound offensive lineman, you have to ignore the wide receiver who’s getting all the accolades, or at least appreciate both him and yourself for what you both are.

So when companies need to make a significant strategic pivot, the most important thing to do is inventory company strengths, including specific value propositions, talents, expertise, or operational capabilities.

We do this aggressively in our client strategy work. Why?

Because organizations exist for a reason: They exist to deliver on a mission or set of missions that were devised sometime in the past. The organization itself has grown up around those missions, and expecting an organization that has grown up around a specific set of missions to drastically pivot away from many of those missions at once is foolish.  Well, if it’s not foolish, it’s at least naive.

I tend to simplify strategic pivots into three categories:

– Category one is a strategic pivot to a new customer base. This type of pivot requires understanding a new set of customer needs, gathering a new set of insights, and typically adjusting products to meet those needs.

– Category two involves pivoting into new technological fields. This type of pivot typically requires research, product development, and specific new skills in order to deliver on new technologies.

– Category three involves pivots to new delivery models. I typically phrase this as “new routes to market.” This type of pivot may seem easy until you’ve been in a company that has attempted to pivot from a direct sales model to a distributor sales model or vice versa.

Where the trouble starts is when management desires a pivot on multiple categories at once. Pick one category and you have your hands full; pick two and you have the recipe for being overwhelmed; pick three, and unless you’re forming a new company, you’re likely to fail. Why?

Because you have to overcome the inertia of an existing organization.

The innovation literature is rife with potential “solutions” to this multi-category pivot problem, ranging from isolated teams to internal start-ups. I won’t go there with this post, but what I will say is that you must understand whether you’re making a multi-category risk in order to know the risk you’re likely to take in the real world.

Sure, plenty of existing companies have entered new markets with new customers, new technologies, and new distribution models.  But in making that observation, we have to be careful not to ignore a significant survivorship bias–far more companies, I would argue, have failed at multi-category pivots like those described.  So, you’d better watch out!

The good news is, in the business world, a lineman can sometimes become a ballerina–it’s just important for leadership to know what it takes to be successful before starting.

I would love your thoughts on this topic. Please engage below.