May 26, 2015 | Governance, Leadership, Strategy
cartoon courtesy Hugh McLeod www.gapingvoid.com
Part of what I do day to day is made up of business reviews. Whilst every business is different, and the competitive environment is different, there are some common questions to be asked that tend to reveal the effectiveness and impact of strategic and business planning.
Strategic planning has become a cliché, often just meaning the three day off site that stuffs up your week, and takes some preparation in case you are asked some difficult questions, but following is a checklist of things I look for in a plan, which may assist your thinking.
Major trends. What are the external, big picture things that are, or will impact on your business. Trends such as technology, the regulatory environment, trade barriers, et al that have the potential to change the context in which the plan has to live. These are generally much “bigger” than a one year time frame, although the pace of technical change often gives the lie to that generality.
AAR on previous forecasts. “AAR” is an acronym, “After Action Review” which emerged from the US army after the debacle of Vietnam. They sought to quickly, and from a grass roots perspective, understand what went wrong, what worked, and how it could have been improved. In effect is it a continuous improvement cycle. Applying the same thinking to the previous years forecasts and assumptions always reveals opportunities for learning. If it is the first time, do it for the last 2 or three years, and analyse what the businesses did, or should have learnt from these experiences.
How and why the differences. Planning should be a rolling, self improving process, but so often I see planning done in isolation of the opportunities to learn from the past. Understanding the reasons why forecasts are different from one planning period to another requires an explicit understanding of the assumptions made. This step builds on the AAR above.
How would you double the business. Most business planning tends to be incremental, a 3% increase in sales, a 2% decrease in costs, it is all easy to agree to in a planning meeting, after all, who would not agree to increments of improvement? To get away from incrementalism, consider what it would take to double, or triple the business. What would you need to do differently, what new products, markets, customers would you have to acquire. I like to change the perspective to this by adopting a position 3 years down the track, imagining the business has doubled, and imagining what changes had been necessary, and how they had been implemented. With the benefit of imagined hindsight, what did we do right, what mistakes were made, what capabilities and capacities did we have to increase, how did we fund the increase, all sorts of confronting questions that in the answering offer insights to the planning process.
Where is the growth coming from. Everyone predicts growth, it is part of the commercial DNA, but articulating where it is coming from introduces some reality checks. If it is from a competitor, why will they just let the volume go? what will their reactions be, and how will you in turn react to their responses? If it is from new products, why would a customer buy yours instead of the one they had been buying, and if it is a new market you are creating, how is your value proposition sufficiently compelling to get the attention of a potential customer, and how are you going to justify the new expenditure in a market that they are unfamiliar with?
What are your distinctive strengths, and how does the plan leverage them? It is astonishing to me how often when I ask this question that the responses are reflections of the market table stakes the things you have to do well just to survive and be competitive, they are not distinctive. It is like a watchmaker proudly claiming that their watch tells exact time. So what, to be a watch, you have to be able to reliably tell the time, it is not distinctive, it is table stakes. What makes you distinctive, does something really different, passes Seth Godins “purple cow” test. It may be that your watch is waterproof to 200 meters. Not many will take advantage of this strength, but to some, the guarantee of waterproof performance will be distinctive. The problem now becomes how you reach the small number of those who care at the time the are considering a purchase.
What differentiates you from the competition, and importantly, the potential left field competition? This question is often confused with the one above, a strength is not necessarily a distinctive capability that adds value to a customer that would drive them into your arms. To continue the watch analogy, when the Japanese started delivering digital watches, the Swiss that at that time absolutely dominated the watch market failed to recognise the attraction of the differentiation that had just taken place, and were decimated.
What would a private equity owner do with this business?. This can be a confronting question, but a very useful one. If you look at the business from an entirely different perspective, one whose time frame and investment return metrics are both aggressive, and usually entirely different to the prevailing horizons, it can stimulate some thinking that is very useful, and informs the rest of the discussion.
Creating a strategy that has real “grunt” and articulating that plan to all stakeholders that are impacted, and can contribute is a huge challenge, and takes time, commitment and brain power to achieve. Unfortunately, the success rate of strategic planning is very low, testament to the difficulty, and the number of things that can go wrong.
Apr 5, 2015 | Change, Leadership
Insight from Hugh MacLeod. Thanks
Marketing is all about engaging with people, real people, one at a time, and giving them something of value.
In the process, often you have to change their minds, give them a sense of what could be, and reflect their lives back to them in ways they had not seen themselves.
As marketers, and fellow human beings, we have to do it with ideas, arguments, humanity, and ……. Cartoons??
Yes cartoons.
I have been a fan of Hugh MacLeod for a considerable time, his combination of wit, humour, sarcasm and insight, that ability to distil the hubris and bullshit we see every day, while delivering a message of great value is wonderful.
It changes peoples lives.
This collection reflects his deep understanding and connection with people and business, headlined by his collaboration with Brian Solis.
It should be required reading although you do not really read it, you either get it at a glance, or you don’t.
Happy Easter, be safe, and love someone.
Allen
Apr 1, 2015 | Communication, Governance, Innovation, Leadership
How do you know
Some pretty smart people say some pretty dumb (with hindsight) things.
“Everything that can be invented has been invented.” Charles H. Duell, Commissioner, US Patent Office has been widely credited with this quote in 1899. He may not have said it, but it was reasonable at the time given the pace of innovation that had occurred for the previous 50 years. It is no sillier than Bill gates saying in 1981 that “640k should be enough for anybody”, or “Man will not fly for fifty years,” Wilbur Wright, 1901.
It is really hard to get a handle on all the stuff you do not know, by definition, you do not know you do not know it.
However, coming to grips with the opportunities that become available when you discover something from an unknown left field is where the gold is.
So how do you begin to see things you do not know you do not know?
This question is not common, but has come up a couple of times ion the last few years when working with clients with deep technical knowledge, but perhaps a narrower than ideal breadth.
In considering the answer, there appears to be few simple strategies to put in place:
- Be constantly and remorselessly curious, and ask questions. Anyone who has had kids knows that for a few years, the most common question they have is “why”. Go Back to your childhood, and ask why all the time.
- Have a diverse group of people around you who will challenge the thinking, preconceptions assumptions and most importantly, the status quo.
- Be prepared to give and receive honest feedback. There are rarely any right answers when you go looking for the unknown, just more questions, and the often unexpected and insightful responses you get from people, use them.
- Make sure others know you do not know, and are seeking answers, not offering solutions.
- Read widely and with great variety. This is now easier than it has ever been, we are overwhelmed with information sources, and the problem is curation and absorption rather than finding stuff out.
We are undoubtedly in a knowledge economy, competitive advantage is in knowledge, so gathering, sharing and leveraging it should be high on every enterprises agenda, from multinationals to the small business around the corner.
Mar 23, 2015 | Collaboration, Innovation, Leadership, Management, Strategy
Plan backwards
All sorts of planning activity is aimed at defining the point where we want to be, then assembling the resources and capabilities to get there.
That is how planning is done, almost always, because by and large, it seems to work, and it keeps the spectator crowd happy.
Libraries have been written that describe all sorts of methods and models that can be used. They can be very useful and thought provoking, providing a framework to help articulate the factors that will impact the business, and the options you have in responding, but they rarely offer an antidote to the malaise affecting the development of really distinctive capabilities, genuinely new products, processes and business models.
The real innovations, the things that change everything seem to come from a different place, “left field” being the most common description.
Most planning ends up being just an extrapolation of the past, despite the well meaning and significant effort to make it something else.
Perhaps a better way is to put yourself in the future place, then work backwards, identifying the steps that need to have been taken to reach the point where in your mind, you are now.
Be specific about the end, articulate it clearly, and then “Plan Backwards” by considering the factors that delivered value for you. I generally call this process ‘Hindsight Planning’.
- What did you do that worked, and conversely, what might you have done that did not work?
- What capabilities did you need to develop?
- What trends drove changes to the industry you were able to leverage?
- Where did the technical innovations you leveraged come from?
- Which markets and customers were successfully addressed?
- What big customer issues were addressed?
- What did the business model(s) you used look like?
- And finally, How were you able to extract value for all these things?
This sort of analysis, if it is to lead to a positive outcome, requires that you recognise and deal with two types of barriers:
Management barriers.
People like consistency and predictability, so when the forecast future looks very like the past, just a bit blurry, they are happy with it, endorse it, and resource it. By contrast, being the harbinger of change that will affect the status quo is no way to get ahead in most organisations. However, it remains a truth that the future never looks the same as the past, no matter how much we would like it to be so.
- Idea averaging. Management absorbs and usually just “averages” or applies committee thinking to a good idea, but at worst, just rejects them for a range of reasons that sound absurd and utterly naive with the benefit of hindsight. Existing businesses are rooted in the networks and frameworks required to make them successful today, and are usually intolerant of new things that involve risk. Usually successful incumbents are well evolved, so are resistant to change, their current way has enabled the current business to be successful, why change? There are many examples of this phenomena, Kodak being a standout, Polaroid another, Cobb & Co another. The current attempts by the taxi industry to resist the encroachment of Uber in my hometown, Sydney, is an example unfolding, and the music industry prosecuting their customers for using their products is an example of one that is just about folded.
- New business models. The successful commercial execution of a real innovation generally requires some new way of delivering the value to customers and extracting value for the suppliers. In short, a new business model. Industry incumbents rarely completely disrupt themselves, by definition, they have too much to lose. Therefore, there needs to be new strategies and supporting business models developed by those outside or on the fringes in some way of an industry. Uber and Apple came from way outside the industries they disrupted, and can you imagine Hilton, or Accor funding that mad idea AirBnB that was gong to crucify their budget tourist dollars?
- The Profit paradox. Profit is counted by looking backwards rather than forward, rewards came after the fact. Forecasting profit, or “fortune telling” is inherently risky, as the only think you know for sure is that you will be wrong, the real question is by how much, but the consequences of getting this brand of fortune telling wrong are significant. However, in the long term, you are only truly profitable if your returns are greater than the cost of capital. If they are equal, you may as well put your money in the bank, because it is safe, less than that and you are long term destroying capital. This simple fact is ignored in almost every profit forecast, statement or review I have ever seen. The conundrum is that to generate a return greater than the cost of capital you must take risks and do stuff differently, some of which will not work out, or only work out in the long term, therefore risking the current profit. It is pretty easy to ramp up the profit made today at the expense of tomorrow, but in this case, tomorrow does actually come.
Creative barriers.
Creative barriers evolve around points of the assembly of ideas, where information, insight, experience, are mixed up to create the otherwise unlikely connections that are the foundation of a creative solution to a problem, situation, or challenge. These are the barriers that most businesses try and get around by the off site strategic planning sessions that rarely seem to be able to deliver the promise of the day. The energy and drive in the workshop room gets absorbed by the day to day of being back in the business. Removal of the barriers is a high priority challenge for management.
The barriers to creativity are many and varied, often overlapping in many places. Following is a ‘brain-dump’ list of the ones I consistently find.
- No commitment from the ‘top’
- It is not OK to be wrong.
- Give up too easily. Edison’s famous quote “Now I know 999 ways that do not work” whilst experimenting to develop the lightbulb resonates still.
- Creativity is hard to quantify, and is therefore often not measured. The old adage what gets measured gets done is right, so creativity is extinguished.
- Lack of resources, time, equipment, money, are all used as excuses for being too willing just to accept the status quo.
- Enterprise culture eliminates risk as far as possible, and creativity is inherently risky and “out there”.
- Rules rule. Particularly in public enterprises, and creativity is not in the rules.
- Challenging orthodoxies, assumptions and the status quo is frowned upon.
- Lack of what I call ‘environmental intelligence’ or an understanding of the macro trends and individual movements in the commercial and strategic environment in which you compete. Seeing trends that impact an enterprise, and their intersections is a rich source of creativity.
- Lack of discipline. Perhaps counter intuitively, creativity includes a range of activities that if subject to some disciplined and focused thinking can deliver great results.
- Not having the right people. Creativity is perhaps the most collaborative of human activities, well, almost. Not having the right people is a commonly owned albatross.
- Everyone can say “no”. Formal layers of approval for ideas act on creativity like a wet blanket on a campfire.
- Creativity is not a required contribution from everyone, it is assumed to be the product only of the young, or the marketing department, of the boss’s wife. Creativity should be everyone’s job!
I could go on, the list is huge, it is a wonder that creativity survives at all given the barriers.
An idea is the outcome of all that has gone before, and the triggers around at any given time, rarely is it the ‘Eureka’ moment. Ray Kurzweil who has a stellar track record in seeing the future in technology believes we need to become comfortable with what he calls “Hybrid thinking” and I can only agree but see that the ideas he articulates have a far greater range than just creativity and innovation in technology.
Feb 9, 2015 | Governance, Leadership, Management, Marketing
Gaining some sort of commitment is the first stage of any commercial process, and repeats continuously up till, and after a transaction takes place. Sufficient commitment to click an opt in button, allocate the time to a webinar, look at your product demonstration, conduct a trial, or commit to a purchase, all require that in a variety of ways, the seller has in some way engaged with you, and built your commitment to them.
It does not matter if you are BHP, a local tradesman or the suburban lawyer, addressing these four pillars will bring you business.
- Demonstrate you care. People will be attracted to those who care about what they care about, and who care about them. Showing interest by asking questions and genuinely listening to the answers and responding appropriately demonstrates you care. Next time you phone someone and you get a recorded message telling you that your call is important to them, and then wait 10 minutes to be connected to a call centre in Bangalore, you know they do not really care.
- Demonstrate you can be trusted. Nobody wants to have anything to do with those they do not trust. It follows that demonstrating you can be trusted, that you do what you say you will do becomes a fundamental foundation of a relationship, even a passing one. pretty important. Trust is the foundation of any relationship, and in a commercial one, a money back guarantee usually goes a long way.
- Demonstrate your influence. Being able to get things done, to cut through the complication and hubris that exists in most situations builds confidence in your capacity to deliver on your undertakings. This is sometimes a bit challenging, particularly in the early stages of a relationship, but there are usually ways. Some time ago, I had some work done on my house, and the architect as part of his service took on the task of dealing with the notoriously pedantic and difficult local council. No big deal, no fuss, just part of the service. Clearly he knew who to talk to get things done, and as it turned out, he did.
- Demonstrate your authority. In the past your title used to be a demonstration of authority, but no longer. Just being a lawyer of accountant, or the CEO used to be enough, but we now know that these titles just assure us that there is still a pulse. In these transparent times, authority is usually earned rather than bestowed. Finding ways to demonstrate the authority of your knowledge, leadership and position is a marker to those who may be in a position to seek out your services or products. Social proof is rapidly becoming the marker of authority, the number of comments and shares of a post, speaking at industry gatherings, published material, all point to some level of authority. Of course organisational authority is still important, but significantly less so than yesterday, and tomorrow, it will become just a label.
Your marketing challenge is tangled up in these four parameters of relationship building, and working on them all, tiny piece by tiny piece will improve your outcomes measurably in a relatively short time.
Call me when you need help, or trawl through the years of accumulated knowledge demonstrated in these 1400 odd posts.
Feb 3, 2015 | Leadership, Management, Strategy
For years I have followed Seth Godin’s musings, ideas and presentations, a remarkable collection of original thoughts, metaphors, instruction, and repackaging of the complicated into the simple, shared with enormous generosity.
This post that came out this morning, his productivity pyramid, is such a simple idea, bits of which most of us have considered in one way or another, but it takes a deeply inventive mind to articulate it in such a simple way.
I think it was Michelangelo who said something like “Simplicity is the ultimate sophistication”, may have been Mark Twain, perhaps you can correct me, but irrespective, simplicity is really hard, and this is really simple.
I just added the visual.
Thanks Seth.
