Oct 8, 2024 | Analytics, Innovation, Strategy
Have you ever been in a situation where you just ‘know’ a course of action is right?
No data, no detailed scenario planning, you just know.
I have.
Where does that confidence come from, and is it justified?
Have you distinguished between genuine intuition, based on experience and knowledge, and the overconfidence that can arise from a lack of awareness of one’s limitations?”
In my experience which includes choices that have been both very good, and very poor, there are two qualitative drivers of those good choices.
Significant domain experience.
This experience does not come from being around for a while, it comes from taking action many times, and learning from the outcomes, resetting, and trying again.
For example: a seasoned chess grandmaster can often intuitively anticipate the best move without consciously calculating every possible outcome, drawing on years of experience and pattern recognition.”
Learning from analogy.
When you see a course of action succeed in other domains that have some similarity to your own, you can infer that the success may be repeatable in yours.
For example: The introduction of disc brakes in cars came from their development for use in stopping aeroplanes when landing.
In a world increasingly dominated by data, it’s crucial to remember that while numbers provide valuable insights, they should not be blindly trusted. True wisdom often lies in the delicate balance between data-driven analysis and the intuition honed through experience and learning from mistakes.
Chess is a game where a grand master has a store of intuition gathered and sorted by years of practice that is leveraged instinctively when playing.
Sep 9, 2024 | Governance, Leadership, Strategy
Amongst the tsunami of gratuitous advice on the web about how to manage remotely, whether you be the team leader, or a team member, there is a critical piece missing.
Depth of strategic thinking.
Regular and managed team video gatherings, as well as a range of individual catch ups for assistance, follow up, mentoring, and all the other things that go on, are tactical.
Particularly in times of crisis and high stress, it is sensible and natural to focus on tactical execution. However, tactical can only take you so far, and in the absence of a strategic framework, can lead you astray quickly.
Consider breaking out specific sessions for the discussion of the strategic issues and questions that emerge. They remain in place irrespective of the current crisis, whatever that may be.
Strategic depth is not something generated in a series of quick meetings. It requires data, forecasts, scenarios and deep discussion and contemplation by people who know the box from the outside, as well as from the inside.
These deeper questions of strategy usually reside in the ‘very important but not urgent‘ basket. In the absence of being addressed, they will be forgotten. Worse still, they will be over-ridden by short term tactical outcomes that would not have been allowed to evolve with sensible strategic oversight in place.
We are social animals, our best work is done when people get together, and together look to solve problems and pressure test assumptions. This takes time and human engagement. Verbalisation of ideas, questions, and explanations is only a small part of ‘Communication’. Face to face, there are a myriad of non-verbal nuances and contextual contributors to ‘communication’ that are lost over Zoom or Teams.
Failing to accommodate these human interactions will destroy your capacity to generate the insight necessary for deep and productive strategic thinking.
Header credit: Tom Fishburne at Marketoonist. Thanks again for encapsulating a difficult idea in a cartoon.
Sep 6, 2024 | Governance, Leadership, Strategy
Opportunity cost.
The mistakes you make of Commission are the ones by which performance is judged. They show up in a profit and loss and balance sheets of businesses. However, when you pass up a golden opportunity that turns out to be a winner, that ‘cost of potential profit’ does not show up anywhere.
It is a mistake of omission, not commission.
Those of us who failed to buy Apple shares when they were less than a dollar in 2003, and similarly, NVIDIA shares when they were $1.30, might see a missed opportunity. Both now trade at well over 100 times those prices.
However, such mistakes are acceptable when the opportunity is outside what Warren Buffett calls a ‘Circle of competence’. This is the area where you have the expertise to understand the opportunity being offered, but fail to accept it.
In the case of Apple and Nvidia, they are both outside my circle of competence. Therefore, I did not know enough to recognise the opportunity. Had I been immersed in the IT industry it might have been clearer.
Buffett’s seven rules for successful investing, summarised, are:
- Hire only intelligent people with integrity.
- Pay attention to facts, not emotions.
- Buy wonderful businesses, but not ‘cigar butts’
- Buy only stocks you understand.
- Seize the opportunity.
- Don’t sell because of price fluctuations.
- Buy stocks below what they are worth.
Passing up an opportunity that turns out to be something you should have grabbed, with the benefit of hindsight, means you have failed to give yourself an adequate answer to one, or more, of three simple questions.
- How much cash would the opportunity deliver to you?
- When are you going to get it?
- How sure are you?
Buffett and his late side-kick Charlie Munger are widely seen as geniuses. I suspect Mr Buffett would be embarrassed by that label. He might respond that all he did was follow the simple 7 rules, something most cannot do.
Sep 1, 2024 | Leadership, Strategy
Today, September 1, 2024, is the 85th anniversary of the German invasion of Poland in 1939.
There are very few people left alive who were old enough at the time to remember that critical date that drove the world into an orgy of destruction, death, and depravity.
Over time we tend to lose the instinctive understanding of the context, circumstances, and drivers of events. This increases the risk that we fail to learn, so we repeat our mistakes. In short, our institutional memory fades, becomes distorted, and is often rewritten.
There is evidence of this all around us.
- After the French conceded defeat and left Vietnam, the US went in, believing they could win.
- The US again, (who deliver us numerous examples), thought their invasion of Afghanistan would work better than the Russian one. Like the Russians and British before them, they failed to have any understanding of the tribal, ethnic and historical context of Afghanistan, so were destined to repeat their mistakes.
- Few saw the 2008 financial crisis coming, despite the intensively researched similarities to the lead-up to the 1929 crash.
- The litany of failure of appeasement as a strategy to harness the aggression of regimes in Europe going back to the Romans. ‘Peace in our time’ sounded good on Chamberlin’s return from Berlin, but was empty hope.
We see it in our personal lives every day.
That bully in the schoolyard is not going to stop being a bully by having the tactic proving to be continually successful.
30 years ago, I left corporate employment, suddenly, after 10 years of accumulating market knowledge, experience, and ‘gut-feel’ insight. I was replaced by a group that had no such knowledge and insight, and who for the next few years made utterly predictable mistakes. This is despite the records left in a great big storage box filled as my former office was cleaned out, and in the heads of my former colleagues, but disregarded.
When we lose institutional memory, we are almost destined to repeat the mistakes of the past. This applies equally to individuals as it does to businesses, families, institutions, and countries.
So, how do we best avoid repeating the mistakes of the past?
Rely on data. This requires intentional and effective documentation and archiving of material. It must articulate the varying views and perspectives and their logical base, the hypotheses generated, tested, reviewed, implemented, and the outcomes of implementation tied back to cause-and-effect chains. In effect deliver yourself a searchable OODA loop for reference.
Leverage technology. The above step used to be a monumental undertaking, but current and emerging technology makes it not just easily doable, but a competitive and strategic necessity.
Knowledge transfer and mentorship. Culturally, there must be a recognition of the value not just of having the information but building on it and sharing widely. This takes a particular skill in leadership that builds a culture of learning and trust.
The successful corporations of the future will avoid repeating the mistakes of the past, which leads to erosion of their values and culture. They will see individual and group productivity and innovation as the two necessary sides of the same coin. They will navigate the tensions created by the order and repeatability of optimisation, with the messy and uncertain terrain of innovation.
They will not be able to succeed in the absence of that critical component, institutional memory.
Today is also Fathers day, a triumph of marketing by the Hallmark card company.
Lest we forget.
Aug 30, 2024 | Collaboration, Marketing, Small business, Strategy
Identifying, building, defending and leveraging competitive advantage has been, and will remain, the foundation of successful marketing.
It is also the essence of strategy: making choices with incomplete information that serve to shape the future to your benefit as it arrives.
The challenge is, the location of competitive advantage has moved, and many, if not most, have failed to pick the move.
Think about it.
Until the early 2020’s, competitive advantage was still all about brand, scale, control of supply chains, access to capital, and the ‘old boys network’. To use Charlie Mungers description, they constituted the ‘Moats’ around successful businesses. Kodak, Xerox, GE, GM, Exxon, IBM, Wal-Mart, P&G, and the banks and insurance companies ran the world on the basis of wide and deep moats built on these 5 factors.
Suddenly, the world moved on.
We watched as a raft of new businesses leveraging the capabilities of the internet took over. Along with the obvious Amazon, Facebook, Alibaba, Google, Uber, Air BnB, eBay, Netflix, Salesforce, and others that are pure internet plays, you had Apple, Microsoft, and more recently Tesla, combining the connectivity of the net with the ‘old school marketing moats’ in whole new ways.
What made the difference?
Each of the newbies benefitted from network effects.
Those that dropped out of sight did not.
Even some of the tech giants of the very early 2000’s, such as Yahoo and Alta Vista have dropped out of sight because they failed to recognise the potential value they had in their hands. They did not leverage the potential network effects.
Those network effects have two differing core types:
- An ecosystem of complementary, and often partially competitive enterprises that support each other’s efforts. This occurs particularly often in R&D, early-stage commercial development and in logistics and supply chain management.
- Double sided markets, such as eBay, Facebook, and Air BnB, where the value of the offering increases with the number of people connected to it.
The answer to the question posed in the header: in your networks!
On a simple scale you see it all the time in retail. The specialist shoe shop in the mall collaborating and cross promoting with the fashion dress shop.
Your networks will build as you create value for others greater than the cost of being a part of the network.
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.
