Wayne Wilson on Companies in Transition

Planning pitfalls for the unwary

Developing effective and executable strategic plans is hard, especially if one of the goals is to bring about significant organizational change.

In a recent article, Why Strategic Plans Fail, Shamis and Nisberg list some of the factors which can cause your great sounding plan to slide off the road into the ditch. They include:

• Change is always hard
• Change threatens those invested in the status quo
• Insufficient buy-in during plan development
• Organizational "short term-ism"
• Founder resistance to change
• Lack of concrete goals and accountability

Truly effective strategic planning requires:

• Clear executive sponsorship
• Evidence-based analyses
• Broad organizational participation and buy in
• Executable strategies with clear implementation plans and accountability
• Extensive alternative scenario planning to prepare for changing circumstances

And remember the old saying often attributed to Dwight Eisenhower: "Plans are worthless, but planning is everything."

 

Brexit: a "test case for deglobalization"?

"...Britain outside the European Union will be less competitive. It will henceforth have to consume less and export more of what it makes. A lower currency and higher interest rates will bring that about....Brexit is thus turning out to be a useful test case for deglobalization."

-Greg Ip, in the WSJ

As the news media has recently reported, the case for Britain heading for a "hard" Brexit is growing. Whether the outcome of such a path will be good or bad for Britain in the long-run does not eliminate the need for companies doing business overseas to continually evaluate the political and economic risks emanating from each of the countries in which they do business.

The rules for business success are changing. Best to get prepared by:

• remaining vigilant for the trail signs of impending change
• improving operational and financial flexibility
• preparing to seize the new opportunities which volatility inevitably brings

The "network effect" Is a key driver of prosperity

Technology companies have for years demonstrated the economic multiplier effect of increasing numbers of users in a given network: the larger the number of users, the greater the benefit to individual users. Facebook and other social networks are prime examples.

Cities have similarly been the centers of economic and intellectual development throughout history because they bring together people, resources, and ideas which leverage each other to create more economic value than is possible in smaller, more isolated areas. Young people leave the farm and go  to the city for a reason: better jobs and greater opportunity. 

Thomas Sowell's Wealth, Poverty and Politics builds on extensive international empirical research to demonstrate his thesis that it is the confluence of many factors including geography, demography, and knowledge (their network effect) which drives increasing prosperity while isolation and other forms of separation frequently result in lower prosperity or poverty. 

Sowell's work does not bode well for the economic  futures of Brexiteers and other nationalist political movements.

The End Is Always Coming

There is a natural human tendency to assume that the way things are is the way they will always be, and by corollary, that they must have always been that way. One might say that our perspective is a bit narrow, even akin cosmically to the life span of the fruit fly (which is about 30 days).

"Disruption is inevitable."

Having only recently become facile with the current generation of smartphones, I was startled today by an article on Business Insider about the coming obsolescence of smartphones - The End Of The Smartphone Era Is Coming. The author's (Nicholas Carlson) conclusion was partly premised on previews of coming technology attractions from Google and Microsoft but more so on the fundamental premise that "disruption is inevitable."

While I agree with the premise, the difficulty is that all disruptions do not occur on the same timescale. Smartphones may well be obsolete in a few years time, but the fundamental achitecture of the nation's telephone system has been in place for many decades. And the alternating current system of electricity generation and distribution has been with us for over a century.

The trick then is being sensitive to the likely timescale of change in your particular industry, technology or business. Unfortunately, the longer an incumbent technology has been in place (think publishing and recorded music), the more difficult will be the adaptation to disruptive change for its practitioners.

The end is always coming - it's just a matter of time. Or as John Maynard Keynes once said, "In the long run, we are all dead."[1]

_______________

[1] en.wikiquote.org/wiki/John_Maynard_Keynes

Are you creating value or destroying it?

Business owner/CEOs intent on creating value for their shareholders often engage in a variety of “value-enhancing” strategies. Some of those strategies involve being in the right place at the right time; some of them work; some of them don’t; and some of them are just plain death defying for their businesses.

In a recent article, Marty Wolf, president of Martin Wolf Securities, pointed out several of these value destroying techniques, which are unfortunately all too common:

1. Opportunistic acquisitions

2. Growth for the sake of growth

3. Weak balance sheets

4. Convoluted ownership structures

5. Missing the window for a liquidity event

Is your business at risk because of one of these?

Read Marty’s article.

Leadership for the “new normal”

In his new book, Great by Choice, Jim Collins describes some of the leadership characteristics necessary for companies to survive and thrive in the extreme environments of the “new normal.”

Collins believes that the “unbroken rising prosperity” of the last 50 years was probably an aberration, and that we are now returning to a period of turbulence, uncertainty, and chaos which have characterized most of history.

Collins’ leadership qualities include:

• the “20-Mile March approach” - this is about establishing and maintaining a daily/weekly/monthly/annual performance standard which the organization commits to achieving continuously. Be it “zero manufacturing defects” or generating 20% return on equity every year, the goal is to establish a performance discipline which paces the organization for continuous success while also avoiding risky over extensions. Stretch in tough times while holding back in good times - steady wins the race.

• productive paranoia - this is about channeling the fear which arises in a scary world. One way to do this is to maintain a “conservative financial position” - clean balance sheets with very little debt while holding lots of cash for emergencies and opportunities. Many companies have recently been accused of hoarding cash. More likely, they are adapting to the higher levels of uncertainty of the “new normal.”

• empirical creativity - Direct marketers spend a lot of time testing mailing pieces before committing large sums of money to a campaign. The same principle should apply to all large initiatives and expenditures. Make sure the evidence is on your side before placing those big bets. Big gains require big bets, but all big bets do not result in big gains. Do the math and homework first.

Getting a return on “luck”

We all hope to “get lucky.” Right? But what do we mean by “get lucky” and how does one benefit from “being lucky”?

Jim Collins, author of Good to Great and Great by Choice, says that the causes of luck could be “randomness or complexity or anything in between.” He defines a “luck event” as any event that meets three tests ¹:

• it happens outside of your doing
• it has a potentially significant consequence - maybe good, maybe bad
• it is unpredictable

But the real key to getting a “return on luck” is what you do when a lucky event occurs:

• Does it cause you to change your plans?
• Do you grab it? or
• Do you run away from it?

According to Collins, great companies are not any luckier than other companies; the great companies just do a better job of capitalizing on the luck that comes their way.

_________

¹ FinancialExecutive, January/February 2012, p. 31

David Petraeus on strategic leadership

A new book about General David Petraeus’ year as commander of NATO forces in Afghanistan [1] describes at one point four tasks which all strategic leaders - be they military, political, or business - must undertake if they are to be successful.

• First, “get the big ideas right”
• Second, communicate “those big ideas”
• Third, oversee “the implementation of those big ideas”, and
• Fourth, capture the “best practices and lessons” and use them to refine the ideas and process.

There is no magic here, but rather a virtuous circle of continuous improvement if the process is implemented correctly.

“Big ideas” are really about key themes - vision, mission, goals - and the strategies that the leader must develop and employ to move his/her thematic agenda forward. In business turnaround situations, these ideas usually involve an assessment of an organization’s capabilities and the market opportunities available to it coupled with a short list of carefully thought out strategies for actually making something out of the combination.

“Communicating the big ideas” often must begin even before the strategies have been formulated because the leader needs the insights, skills, and efforts of others in the organization to ensure that the hoped-for “big ideas” will actually work (a virtuous circle within a virtuous circle if you will).

None of this matters if the "big ideas" are not implemented. Choosing the right lieutenants, communicating with and through them constantly, setting a proper example, demonstrating your commitment to the “big ideas” through  the decisions you make - all of these are important to laying the groundwork for other associates down the line to actually carry out the work of transformation which they will only undertake once they are convinced that the leader is serious about his/her agenda.

And finally, capturing, distilling, communicating and re-enforcing “lessons learned” enables this process to repeat itself with increasing levels of productivity and effectiveness because successful turnarounds invariably require multiple cycles through this process to generate truly successful performance improvement.

If it were easy, organizations wouldn't need strategic leaders.

____________

[1] Paula Broadwell and Vernon Loeb. All In: The Education of General David Petraeus at amazon.com.

What world are we living in?

Thomas Friedman's column in Sunday's New York Times (Serious in Singapore) describes the nimbleness of Singapore's people in responding to a changing world. Their mantra: What world are we living in and what do we have to do to thrive?

As a tiny city-state, lacking natural resources, in a volatile part of the world, Singapore has developed a culture and economy based on rapid adaptation.

What are some of the lessons here for owner/CEOs?

1. Focus on the world as it is, not as we would like it to be.

2. The world is large and we are small; learn to move quickly.

3. Success comes from being nimble and hustling.

4. Training and education are the foundation.

5. No amount of wishing is going to make reality different from what it is.

Singapore's success is a great example of figuring out what you have and making the most of it.

Are you afraid of innovation?

Economic growth is often fueled by innovation. And innovation can be tricky to cultivate and manage. Most owner/CEOs have seen examples or heard stories about workers who resist innovation because they are afraid of change, afraid that they won't be able to keep up, or afraid that they just might lose their jobs.

Are CEOs immune to this fear?

Apparently not according to innovation consultant Jeffrey Phillips. Phillips says too many executives are uneasy with the notion of unpredictable routines and uncertain outcomes. The trouble results because of the differing skill sets required to foster innovation versus manage routine operations:

"Innovation requires ART not SCIENCE
Innovation requires QUALITATIVE insights not QUANTITATIVE statistics
Innovation requires HUNCHES not FACTS
Innovation requires RISKS not CERTAINTIES"

Learn about some of the techniques great companies such as Apple use to minimize innovation fear in Phillips' Why innovation makes executives uncomfortable.