Apr 13, 2021 | Change, Governance, Strategy
When should you let go of the sunk cost that is not performing?
How do you decide when to quit, walk away from an investment? It is as important a decision as the one you made when planning where to allocate your resources in the first place.
Strategic quitting is the flip side of strategic planning.
Realistically, you have only a limited amount of resource to be allocated. Determining the priority for those allocations includes being able to stop proceeding with some, and redirect. This acknowledges the opportunity costs often swept under the corporate carpet.
It is not being a quitter, it is sensible strategic leadership
The good thing about being at the point of strategic quitting is that you have actually done things, and hopefully learned from them. Therefore the next action you take should be better informed.
I am sick and tired of the fluff around strategic planning, what we need is less of it, and more strategic doing!!
Strategic quitting is a fundamental part of strategic success, embrace it.
Apr 6, 2021 | Change, Strategy
If a problem can be solved with money, then arguably, it is not really a problem!!
Most companies, especially big ones try money before they try creativity and thinking from first principals.
To my mind, this is one of the reasons that smaller companies are inherently more creative, they must be. They simply do not have the money to throw at a problem. They have to be scrappy, to hustle, experiment, and invent a way to address the problem without a pile of money.
One of the several strategies big companies deploy to manage their Innovation programs, is to be very sensitive to the activities of start-ups, even invest in a few. When one of the small bets looks like a winner, buy them out.
Solves the innovation problem for them, short term. It offers a big payday for founders, so may be good for them as well. Problem is that many such innovative start-ups that have been purchased are suffocated by the culture that prevented the big acquiring company innovate out of its own optimised way of thinking.
Being innovative requires being sub optimal, scrappy, unsure, and often wrong. Which executive in a big company is going to go to their boss and ask to be put in charge of something that might not work, will disrupt the existing status quo, require investment and time, and probably fail? On top of that, these volunteer intrapreneurs in large companies want to be paid as they would be on the optimised and secure world of the corporate behemoth.
Counter intuitively, it turns out that the lack of money can be a competitive advantage small companies have over big ones. The challenge is to keep the effort going in the face of the never-ending bills that arrive to be paid immediately.
Header cartoon credit: Scott Adams and Dilbert on Innovation. Right again!
Mar 30, 2021 | Change
March 30, 2009 was the date of the first post on the StrategyAudit site.
I did not know where the second was coming from, but they seemed to emerge from the conversations I have, problems clients and others face, and the observation of what is going on around me.
March 2009 seems a lifetime ago.
Digital had yet to get a stranglehold on our lives, Facebook was still a benign force delivering connectivity we had not previously dreamed about. Its pernicious impact was still well in the future. Barack Obama had just been inaugurated as the 44th, and first black president of the US, and Kevin Rudd the 26th prime Minister had just passed the halfway mark to being deposed by Julia Gillard, before being very briefly resurrected in 2013.
Statistically, half of the almost 2000 posts on this site are below average, on any metric you choose to use. Readership, impact, shared numbers, interest, longevity, all fit somewhere on the normal curve.
That is just the maths of it.
It does not mean there is no value in the below average ones, just that they have failed to generate sufficient traction to move up the ladder. In some cases, that is just the result of a poor headline, which often directs a post I thought was of value to the trash heap. Sometimes the topic is of little interest to others despite tickling my interest, and occasionally, the post truly deserves to be at the bottom of the class.
The very first post was titled ‘Cash is the KPI‘. Not a thrilling headline, but it remains a theme through the following 1,966 posts. Small businesses, the ones I talk to, and from time to time, work with, often forget that cash is the lifeblood of their business. You can go broke with a great looking P&L when you run out of cash.
Unfortunately, I have seen it too often. The accounting profession, focussed as they are on compliance often fail to do the simple analysis of the management accounts their clients need, along with a clear explanation and a plan. Small business owners often do not understand accounting jargon, and remain in the dark too long, and sometimes until too late.
There are a number of other posts that day in and day out generate page views, shares, and occasionally, a phone call or email that leads to a mutually beneficial commercial relationship. I observe that many of those in that last category started slowly, but built over time, and keep building.
12 years seems a long time, but gone in a flash.
Mar 29, 2021 | Change, Leadership
We seem to accept that the world is getting faster.
The tempo of activity is picking up in just about everything in our lives, and the 2020 pandemic did nothing to slow anything down. Instead, it operated as a catalyst to an increase in tempo across the board.
Trends that were evident, emerging slowly, suddenly took on a huge leap in tempo. The pace of government decisions, the evolution from supply chains and business models, remote work, and others, all accelerated. Perhaps the most astonishing is the speed at which a vaccine for Corona has been developed, tested, and is into the early stages of distribution. A process that would normally take years, condensed down into 10 months.
John Boyd spoke about Tempo as being the determining factor in the OODA loop. The combatant that could realign their tempo quicker than their opposition won the fight.
Several Cafes in my local area of which there seemed to have been a pre-Covid oversupply, have not reopened. A characteristic of those that have reopened is that during and since the height of the closedown, they were able to evolve their business model. They introduced new products and services quickly, way more quickly than would have been the case in the absence of the virus.
In the natural world, the tempo of climate change appears to be quickening. The melting of the polar ice is now happening at a rate higher than the worst-case scenarios predicted just a decade ago. Compounding that is that the tempo of the melting is increasing as the seas warm, as a result of the reflective ice being gone.
All around us, the tempo of life is speeding up, and the speed is reflected in the speed at which changes in direction occur. As a result, it is becoming increasingly easy to be left behind, even when you are diligent about continuous improvement of your own operations, and in scanning the environment in which you compete for signs of ‘movement’.
It seems to me that long term survival will require significantly more attention to be focussed on the wider context of your competitive environment than has been the case in the past.
Finding the right means to deliver that wider and deeper understanding of the competitive pressures will evolve into a determining factor in commercial survival.
Tempo.
Tempo of activity, of decision making, of change, and of competitive action.
Do not be left behind, you will be shot down.
Header photo: John Bonham, legendary Led Zeppelin Tempo man.
Mar 24, 2021 | Change, Leadership
There has been a lot of commentary on what we as a manufacturing cohort, and the government should do to haul Australia out of the steady decline of manufacturing.
Most of it is good, thoughtful commentary, but we seem unable to move forward meaningfully on many fronts.
Question is, how will we know what works and what does not in the absence of specific and apolitical (in the widest sense of the word) measures?
Following are some thoughts distilled from the commentary, and relying heavily on the 2016 paper by the Australia Institute. On re-reading this paper, it seems obvious from my interactions that the numbers may have changed somewhat, but the trends are still in place, and probably more advanced. An update would be immensely valuable.
It seems sensible to me to articulate a few boundary items that need to be addressed before any detail can be reasonably considered.
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- If we are to effectively manage investment and activity across the economy, we need a common base and clear definitions of what is included under ‘manufacturing’. In short, a common nomenclature.
- Following nomenclature clarity, we then need what is in effect a national manufacturing P&L, undiluted by fuzzy numbers from other sectors, free from confirmation bias, and understood by all. While we do have a range of measures currently via industry bodies, the ABS, and various government departments, there is no common base for measurement. This lack of commonality just serves to obscure the numbers, and more importantly, the trends.
- Having such an explicit set of manufacturing numbers would enable valid comparisons against which to measure progress. Comparisons to other parts of the economy, similar economies around the world, the components of the total numbers, items like employment, sources of inputs, impacts of investments, supply chain agility, all the things we do routinely for our own businesses. This would not be an easy task, but to my mind, it is a vital one.
- Having solid articulation of the current situation is the core of any sensible strategic planning. While we all know the plans will be flawed, and need to evolve with circumstances as implementation progresses, the process of strategic planning is essential.
- Eliminate the prospect of ideological change as governments change by deepening the recognition that for the economy to be sustainably prosperous, manufacturing is a foundation stone. Businesses will be more likely to invest when their time frame of policy certainty is longer than a few short years and managed by a bunch who spend their time watching what the loonies on Twitter think is a policy input. The debacle with energy policy, and lack of it, over the last decade should be a salient lesson for the future.
- Invest in education and research, the underpinning that businesses need to harness to deliver innovations products. We have a fine record of research on limited budgets, but a lousy record in the commercialisation, although there are individual examples that run against this observation. The intellectual infrastructure that delivered this fine record has been rotting for 35 years or more, and we are seeing the impact now. The cycle time of science to marketable product is more like 30 years than 3, and that time frame requires public investment. Sadly, we seem unable to grasp this simple notion. As a result, we have bureaucrats trying to pick winners in a 3-5 year timeframe, and the continuing erosion of investment in education.
We should take advice from some of the real geniuses that have passed through.
‘You cannot manage what you cannot measure’ is Peter Drucker’s often used quote with which I agree, partly. Einstein, speaking on the same topic also said, ‘Not everything that counts can be counted, and not everything that can be counted, counts’.
Two geniuses having different views on the same topic. How confusing is that?
No wonder the Canberra clown factory and its state based training camps cannot get its head around the challenges.
Header cartoon courtesy Tom Gauld at www.tomgauld.com
Mar 11, 2021 | Change, Leadership, Marketing
Every successful strategy I have seen, heard of, read about, or imagined, has three common factors. The first is obvious, the second and third less so.
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- The strategy is implemented.
- The strategy is communicated widely as a story, that draws stakeholders in, giving them an emotional stake in the outcome. It is backed by research facts and figures, speculation, and opinion, but at its core, it tells a story.
- The strategy is modular, evolved from the bottom up, not delivered intact in final form by the hand of some commercial demi-god. One section builds on, and in turn relies on other parts of the strategy, for the wider impact. Each part is interdependent of all other parts, to some extent.
This organic structure enables strategic evolution in response to the changing external environment and internal learning as the strategy implementation evolves, without losing sight of the objective. The path to the end has many possible sub paths, but the end is clear.
A successful story has a beat, a rhythm to it that responds to some sort of incident, observation, or crisis, and a resolution, all built up in a series of ‘beats’ each of which has each of these elements escalating into sequences and a climax of some sort.
The emergent strategy, like an organic structure, has a range of base materials organised as self-contained units that combine to form an ever increasingly complex and interdependent system.
Developing a strategic model that has the potential and opportunity to evolve is not something that comes easily from a template, or ‘packaged’ advice. It is extremely context sensitive, fragile in early stages, requiring constant expert attention and nurturing.
Call me when you need some of this ‘strategic gardening’ to enhance your performance.
Header cartoon is once again courtesy of Scott Adams and Dilbert
