Aug 20, 2024 | Leadership, Strategy
George Patton is reputed to have said ‘A good strategy today is far better than a perfect one tomorrow.’
This is absolutely correct. However, any strategy is only as good as its deployment. This is always best when it is clearly understood, consistently communication, and completely aligned towards the objective.
Business is all about making choices, from the c-suite to the factory floor, everyone is faced with choices. Those in the c-suite may be different to those on the floor, but they are nevertheless choices that together impact on the performance of the business.
‘I will do this, I will not do that’
While seeking rhythm and flow in a business, I also look for ‘strategic nesting’
How will the choices made at one level be understood and acted on at different levels in the business in a consistent manner, such that the outcomes do not create turbulence in the flow of activities that occurs.
The challenge of integrating ‘Flow’ into a smooth set of processes that merge at the points where they intersect is substantial. This is where the notion of ‘nesting’ comes into play.
Processes are ‘nested’ in sets of sub processes that are all ‘in synch’ and contribute to the end outcome.
Often this is called alignment, but just using the term without the further idea of ‘nesting’ misses the point. Alignment is one dimensional, nesting is multidimensional.
Effective processes contain sub processes that act in partnership creating synergy, and when done really well, compounding outcomes. Each part of the ‘nest’ is optimized, internally, and in relation to those external parts on which it depends. This enables the optimization of the whole to be compounded.
Effective processes, from the strategic development and implementation to the cleaning of the coffee machine, rely on the effective nesting of sub processes.
The implementation of strategy is always challenging. You are translating high level choices into sets of cascading targets in functional action plans with appropriate KPI’s and feedback loops for optimisation. There are multiple levels from a strategic plan to the execution of daily activities in the workplace for things to fall out of the nest.
The evolution of a ‘happy nest’ is an iterative process. It requires the input of those involved at all levels, and a leadership capable and prepared to adjust choices under new circumstances.
All the parts are moving at the same time, and they all influence each other. Iteration must be a multi-dimensional challenge, you can iterate up, down, and across functions, on the basis of feedback. The challenge is to get it all done without disturbing the flow of the processes.
Jul 30, 2024 | AI, Leadership
Increasingly, we must distinguish between ‘content’ created by some AI tool, masquerading as thought leadership and advice, and the genuine output of experts seeking to inform, encourage debate and deepen the pool of knowledge.
I’m constantly reminded as I read and hear the superficial nonsense spread around as serious advice, of the story Charlie Munger often told of Max Planck and his chauffeur.
Doctor Planck had been touring Europe giving the same lecture on quantum mechanics to scientific audiences. His constant chauffeur had heard the presentation many times, and had learnt it by heart. One night in Munich, he suggested that he give the lecture while Doctor Planck acting as the chauffeur sat in the audience, resting.
After a well received presentation a question from a professor was asked to which the chauffeur responded, ‘I am surprised that in an advanced city like Munich, I get such an elementary question. I am going to ask my chauffeur to respond’.
It is hard at a superficial level to tell the difference between a genuine expert, and someone who has just learned the lines.
To tell the difference between those two you must
- Dig deeper to determine the depth of knowledge, where it came from. Personal stories and anecdotes are always a good market of originality.
- Understand how the information adjusts to different circumstances, and contexts. An inability to articulate the ‘edge’ situations offers insight to the depth of thinking that has occurred.
- Look for the sources of the information being delivered. Peer reviewed papers and research is always better than some random Youtube channel curated for numbers to generate ad revenue.
- Consider the ‘tone of voice’ in which the commentary is delivered. AI generated material will be generic, bland, average. By contrast, genuine originality will always display the verbal, written and presentation characteristics of the originator.
- Challenge the ‘expert’ to break down the complexity of the idea into simple terms that a 10 year old would understand.
These will indicate to you the degree of understanding from first principles, the building blocks of knowledge, that the ‘Guru’ has.
The header is a photo of Max Planck in his study, without his chauffeur.
Jul 15, 2024 | AI, Governance, Leadership
In a world dominated by discussions around AI, electrification to ‘save the planet’ and its impact on white collar and service jobs, the public seems to miss something fundamental.
All this scaling of electrification to replace fossil fuel, power the new world of AI, and maintain our standard of living, requires massive infrastructure renewal.
Construction of that essential electricity infrastructure requires many skilled people in many functions. From design through fabrication to installation, to operational management and maintenance, people are required. It also requires ‘satellite infrastructure’, the roads, bridges, drivers, trucks, and so on.
None of the benefits of economy wide electrification and AI can be delivered in the absence of investment in the hard assets.
Luckily, investment in infrastructure, hard as it may be to fund in the face of competing and increasing demands on public funds, is a gift we give to our descendants.
I have been highly critical of choices made over the last 35 years which have gutted our investment in infrastructure, science, education, and practical training. Much of what is left has been outsourced to profit making enterprises which ultimately charge more for less.
That is the way monopoly pricing works.
When governments outsource natural monopolies, fat profits to a few emerge very quickly at the long-term expense of the community.
Our investment in the technology to mitigate the impact of climate change is inherently in the interests of our descendants. Not just because we leave them a planet in better shape than it is heading currently, but because we leave them with the infrastructure that has enabled that climate technology to be deployed.
Why are we dancing around short-term partisan fairy tales, procrastinating, and ultimately, delivering sub-standard outcomes to our grandchildren?
Header illustration via Gemini.ai
Jul 10, 2024 | Innovation, Leadership
Roger Federer is the greatest tennis player I have seen in a long life of watching and playing the game. He may have been overtaken by Djokovic as the winner of the most grand slams, which seems to be the public benchmark of the GOAT, but he will remain the greatest to me.
His greatness is not just on the court, where everything seemed effortless. It extends to his demeanour and humility off the court.
In a recent commencement speech at Dartmouth College, he gave the graduates a critical piece of wisdom that applies widely to life:
“Perfection is impossible. In the 1526 singles matches I played in my career, I won almost 80% of those matches.
Now, I have a question for you.
What percentage of points do you think I won in those matches?
Only 54%.
In other words, even top-ranked tennis players win barely more than half of the points they play. When you lose every second point on average, you learn not to dwell on every shot.
You teach yourself to think, okay, I double-faulted … it’s only a point. Okay, I came to the net, then I got passed again; it’s only a point. Even a great shot, an overhead backhand smash that ends up on ESPN’s top 10 playlist. That, too, is just a point.
And here’s why I’m telling you this. When you’re playing a point, it has to be the most important thing in the world, and it is. But when it’s behind you, It’s behind you. This mindset is really crucial because it frees you to fully commit to the next point and the next point after that, with intensity, clarity, and focus’.
Those words resonated with me.
They resonated, not just because I lose way more than 50% of the points I play these days, and must accommodate that in my competitive brain, but because it applies to the way we all should live our lives.
It certainly applies to those I work with, where an obsession with the past often clouds the next move, and the one after that.
We need to understand why what we did worked out differently to the plan, and learn to adjust both on the run, and over time as we alter the mechanics and drivers of activity. Beyond that, the past is irrelevant. It is the past, unchangeable, immutable.
By contrast, what we do with the lessons of the past is crucial.
Jun 28, 2024 | Leadership
Performance is always enhanced when there is skin in the game.
I only work with SME’s, for the very simple reason that those in charge have skin in the game. The process of creating the environment where significant improvement to financial operational and strategic performance can be achieved requires change, and change is hard. When you own the business, and you decide that change is necessary to achieve the goals, you can drive those changes, and most people will follow. In a large business, most of the senior management still get paid, even when the train goes off the rails. They may lose a bonus here and there, but usually not, as they set the rules themselves.
It is a situation I dislike.
In the case of marketing, the lack of accountability for outcomes is more pronounced than in other functions. There is a mystique, a black box, and marketers have convinced themselves, and others that success is about long-term brand building, therefore they cannot be held accountable for results today.
Nonsense.
Marketing should be accountable for margins, absolute and percentages, today and tomorrow. Then they have some skin in the game and will act accordingly.
The upside of the greater accountability is that those in the corner office will take them more seriously than they have in the past.
The turnover of senior marketing personnel is faster than any other function. CEO’s are usually accountants, lawyers or engineers, and they quickly get sick of marketers talking in cliches, making vague promises, then delivering creative excuses when the outcomes fail to materialise.
Accept accountably for revenue and margins, and that uncertainty goes away.
As Steve Jobs put it, you need to ‘own the results‘.
Header credit: NZ Herald State of origin 2,.2024
Jun 19, 2024 | Change, Governance, Leadership
Many years ago, I worked for Dairy Farmers Ltd. It was a large dairy co-operative operating in the dying days of milk regulation in NSW. The business had two divisions, reporting at EBIT. The first and biggest by a very large margin was the regulated milk business.
All milk produced in NSW at that time was by regulation vested in a statutory authority, which then ‘sold’ the milk to processors to be processed and distributed as fresh milk. It was a highly regulated and price-controlled industry from the cow to the consumers fridge.
Milk in excess of the requirements for fresh milk was termed ‘manufacturing’ milk. The farmers were paid directly by processors at a market rate.
At the time, the price paid by the diary corporation for fresh milk was roughly 2.2 times the price the co-operative paid for manufacturing milk by the second division, the Dairy Foods division that produced all dairy products beyond fresh milk.
Manufacturing milk was unregulated in any way beyond food safety.
The commercial imperative for the dairy farmers was clear, albeit not viable long term.
After 8 years of struggle, the Dairy Foods division had recovered from being a commercial basket case, one step from the corporate mortician to a significant and profitable player in the national market. The culture that supported that huge improvement was highly competitive, productivity focused, and financially disciplined. By contrast the milk division was a cost-plus business operating as a regulated monopoly, and so had become fat and lazy.
A newly arrived Managing Director decided to merge the two divisions. His reason, supported by a report by a highly paid consultant, was that the commercial culture of the dairy foods division was needed to be patched onto the milk division, facing the reality of deregulation at some point.
As a newly appointed GM of the dairy foods division after those 8 long years of struggle, I resisted this change as strongly as I knew how. I argued that culture could not be ‘copied and pasted’ from one organisation to another, even those working under a common ownership and centralised head office structure that allocated capital. It seemed to me that the much larger still regulated business would reject the completely different culture of the smaller unit, which would in turn erode the competitive culture of the dairy foods division they were trying to spread.
That is what happened, resulting in Dairy farmers becoming another sovereign corporate casualty.
- Processes that ordered, allocated and paid for milk for the regulated fresh market dominated the cash flow of the merged divisions. The Dairy Foods division cash flow processes and management became lost in the quagmire of the regulated cash flow of the much larger former milk division. Focus and discipline went out the window.
- The board of the business, was made up of farmers with 2 exceptions, the chairman and MD. The rest of the board were dairy farmers who unanimously rejected the notion of deregulation. It was clearly in their short-term financial interests to retain the existing regulated system. There was simply no formal recognition that the regulated system was an economic basket case. Privately, several of the board members did recognise that fact, but the power of the status quo prevailed formally.
- Major customers, the supermarket retailers were able to bring significant pressure onto trading terms given the previously completely separated divisions were now one. This pressure seemed to me to be a catalyst that brought forward the date of deregulation. The retailers started to bring fresh milk across the border from deregulated Victoria, and discounting in NSW in defiance of the state regulations, citing Section 92 of the Australian constitution, which bans constraints on interstate trade.
- The financial discipline beyond managing cash flow exercised by the former Dairy Foods division was lost as the reporting was merged. It was further complicated as Dairy Farmers set about ‘merging’ (Co-Operative speak for taking over) other Co-ops in NSW, QLD and SA. These co-ops were all different, but all were afflicted by lack of commercial and competitive focus on customers and consumers.
All of these point to the fact that culture is organic, and like all organic systems requires time, investment, alignment across the broad stakeholder population, and nurturing.
What should have happened but did not.
- There was no attention paid to the differing cultures that existed. Little useful thought was given to the practical challenges of merging them. The merger came via announcement, and a revision of the organisation chart. The two were simply incompatible. While a sensible review would have highlighted that fact, it was ignored.
- There was no integration plan that ranged from the strategic to the tactical and operational. Again, it was driven by the revised organisation chart, with little effort made to successfully articulate the reasons for the merger to anyone, including senior management.
- Any attempt to articulate a ‘vision’ for the merged entity was missing in action. The justification was all about the imagined financial benefits that would flow, and the risk mitigation coming from the probable deregulation of the fresh milk business at some future point. Both were reasonable expectations, but there was no thought about how to turn reasonable expectations into cash. Somehow, by some unknown osmotic process, it was supposed to just happen.
- There were no objectives for the integration that reflected the strengths of both, the holes that needed filling, and the resources necessary to achieve the restructured strategic objectives.
- There were no financial or operational objectives beyond budgets generated by spreadsheet aiming at an EBIT that was by decree, rather than by any disciplined process. The budgets of the two separate divisions were just merged, with the mythical improvement index applied.
- There was always going to be considerable resistance from both sides of the merger. Almost universally, (most certainly by me) the merger was seen as a retrograde step, ignoring the very different challenges faced by the two entities.
The great irony I see from the perspective of 30 years, is that Bega Co-operative virtually broke on the back of cheese factory expansion that had run significantly over budget, was saved by a cash injection by Dairy Farmers. Bega has since evolved into a major producer of branded packaged goods to supermarkets. Dairy Farmers has disappeared as a commercial entity.
The lesson: Cultural change is complex, messy, and potentially terminal in the absence of skilled leadership, complete transparency, and what at the time would seem to be significant over-communication.
Header cartoon credit: www.Gapingvoid.com
