Ask yourself the hardest question: Today!

Ask yourself the hardest question: Today!

A question I always ask my clients at some point in an improvement initiative is: “what would a VC firm do if they took over management today?

It always leads to deep and challenging conversations, that lead to a recognition of things happening, or indeed, not happening, in a business that is delivering sub optimal outcomes.

Waste from many sources, such as rework and excess inventory, fragmented internal processes, friction for customers, sub optimal performance of machinery, functional misalignment, missed opportunities, and many others.

Approaching the identification of problem areas as a third party might, allows people to open up and be constructively critical of the status quo, and envision what changes should be made. 

 Being as we are in the middle of a crisis, you no longer need to envisage what a VC might do in the event they turned up to rape and pillage the business, it is happening around you by ‘The Bug’.

There has never been a better time, except last year, to ask yourself the question.

Second best time is right now.

When you have some of the answers, do  not waste any time implementing. The state of your cash reserves and sales pipeline will dictate the urgency of action, and some may, with the benefit of the hindsight you do not yet have, not be the absolute best option.

However, doing nothing is not an option, so get on with it and implement. 

 

How do you lead effectively in a crisis?

How do you lead effectively in a crisis?

 

By definition, a crisis is something that has to be managed weekly, if not daily. There is no time for long winded discussions about strategy, competitive reviews, investments in technology transformations, the newest shiny idea someone has. While these are profoundly important they are the framework against which to measure the daily and weekly performance to the plan that will, if implemented, deliver commercial life. If you do not have such a framework, you will be in far greater trouble than you may otherwise have been. However, ensuring that at least the day to day decisions you now make are consistent with each other, and lead to a simple, single objective will be a good start.

 

The leadership style in this case of a crisis is different from the  strategic leadership necessary to position for the long term. Churchill failed as a leader in every situation other than the crisis in which Britain found itself in 1939, in which he excelled. He communicated the objective, to beat the Nazis, nothing else mattered, and everything was measured against that single objective.

 

There are many examples from more recent times. Steve Jobs taking over Apple a few weeks from bankruptcy, and turning it around into the cash powerhouse it is today. Jeff Bezos buying the Washington Post as a personal investment (as distinct from one Amazon made) as the corpse was about to be lowered into the ground, and remaking it as a journalistic powerhouse.  Alan Mulally doing the double act, leading  Boeing  through the tragedy of 9/11, then repeating the dose by saving a dead man walking Ford, during a time further made challenging by the 2008 financial crash. You might even add Kevin Rudd to the list, ensuring Australia escaped that 2008 crash relatively unscathed.

So, how do you do it?

Simple to say, hard to do: 2 rules only:

  • Have a plan with a simple, single objective
  • Work the plan relentlessly. This means daily, weekly, monthly review and rework of the plan at every level of implementation and accountability.

 

The plan has to be articulated at the macro level, and progressively broken down into the micro, so that the role of every person, and element of the plan, plays in the achievement of the objective is transparent.

I call it a ‘nested plan,’ best visualised by the typical organisation structure diagram. It replaces the names in the pyramid with objectives, and the cascading individual plans and personnel accountabilities required to achieve the cascading objectives, culminating in the overall objective at the top.

 

Every plan review meeting, from the shop floor to the executive suite should follow a consistent format, which enables single minded focus on the single objective. That format should be something like:

  • Department plan
  • Plan status
  • Forecast
  • Opportunities and risks
  • Period over period summary, qualitative as well as quantitative
  • Status of any items requiring attention from outside the power or capability of the meeting group.

Best practice for meetings of this type is well documented, following well understood principals of psychology and accountability, but in summary:

  • The above format, or your version of it, acts as the agenda
  • The plan status is delivered by the responsible person, or multiple persons.
  • The review is not a forum for resolving problems, just articulating them. Resolution is outside the meetings, but reported back.
  • There is a consistent format to individual presentations, again following the format above.
  • Never shoot the messenger of bad news, allocate a priority to defining the problem and accountability for suggesting solutions, to be reported in the subsequent meetings.
  • Concise questions that serve to clarify and quantify are encouraged from all participants.
    Meetings are open to any from outside the specific group who may have a valuable or even different perspective to offer.
  • Meetings are absolutely transparent to all.

There will be resistance to the implementation, people are not generally used to the levels of accountability and transparency a system of this type delivers. However, once you get it rolling, it builds a momentum of its own, as people take responsibility for their part in delivering the objective.

 

The header photo is of the priorities set by Alan Mulally on taking the reins at Ford. For the whole of his tenure, the process above was relentless implemented, and Ford came though the 2008 crash not requiring any government assistance, and went on to regain its significant and profitable position in the auto industry.

Hind-sighting the Corona-demic.

Hind-sighting the Corona-demic.

 

In 6 months time, when things have sorted themselves out, and we are moving into a post corona world, what will have changed?

 

It is very hard to imagine, but discounting the potential for some sort of apocalypse, there will be a new normal at some point, but that will look very different to the ‘normal’ of just a few months ago.

 

Following are a few thoughts, what can you add?

 

Digital transformation has accelerated.

 

Necessity is the mother of invention, and a massive catalyst for change. The communication tools that were available but widely resisted have suddenly become the status quo, and we wonder why we were so reluctant.

 

Items like corporate travel, fancy offices, position in an organisation structure, will all become less important, as they will be seen as a reflection of ego rather than  necessity, an ego swept away by corona, as working from anywhere other than a central office becomes more the norm. This transformation in digital communication will act as a catalyst for other changes enabled by new technology.

 

The role of deep expertise.

 

Suddenly, the people we trust are those with deep expertise, who do not apparently have a dog in the fight. Scientists have been telling policy makers, and the public for 25 years that climate change is happening, is a huge threat to our way of life, and needs to be addressed. They have been largely ignored. No climate change scientist has been listened to outside their scientific circles sufficiently to drive significant change.

 

The ‘Bug’ has brought into stark relief the complexity of our world. Interconnected economically, socially, and by a myriad of communication channels, it is not a simple place. We humans like simplicity, and in the face of complexity, revert to existing beliefs as a substitute for consuming the cognitive energy to understand and form new ones. This human tendency has led to the increasing polarisation and emotion of positions taken on a range of public questions, the opposed sides yelling at each other.

 

Just as suddenly, we have The Chief Health Officer, Professor Brendan Murphy front and centre, providing the scientific expertise to the government to make more general decisions about how to deal with the crisis. I doubt Professor Murphy would offer too many deep economic analyses, he leaves that to others (who may or may not know what they are talking about). However, we trust Professor Murphy, measured, consistent, offering what is obviously deep expertise in a narrow field. You could make similar observations about ABC spokesperson, Dr  Norman Swann, probably better known than professor Murphy or his deputy, Professor Kelly. My pinup boy in this regard is American Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases (NIAID) with his deep expertise has been able to correct Trumpian exhortations on the spot, publicly, and keep his job. (perhaps there is hope after all)

 

Hopefully this new found respect for expertise lasts after the Corona cloud has moved on.

 

Existential crises become accepted challenges.

 

Few recognised the potential for this crisis, despite many warnings in the form of SARS, Mars, Swine flu, Ebola, just to name a few on the last decade. The obvious exception is Bill Gates, who predicted exactly what has happened in a TED talk in 2015. However, now it is clear that we have reached a stage where something must be done, the too hard basket has overflowed. Climate change, equality of opportunity, universal health, mass migrations resulting from fundamentalism, and the concentration of economic and military power, will all be back on the economic and political agenda. We will start demanding some action rather than flowery words, and kicking the can down the road for the next lot to deal with. As noted above, we need to listen to the experts.

 

Dunbar’s number

 

We will recognise that the 10,000 friends we have on Facebook are as useless as an umbrella in a cyclone, but those few close to us, with whom we have a human relationship of real depth are priceless. The theories of British anthropologist Robin Dunbar will become widely known and understood, as we revert to smaller genuine communities. Perhaps I am a silly optimist, thinking the malignant part of Facebook et al will be restrained, but you can only hope.

 

Economics and politics

 

This could be a very long list. Our economic and political systems have been changed forever, there is no going back to PCD (Pre Corona Days), I hope.

 

While the economy has tanked, and there are dire predictions about how the bill will be paid by our children, and grandchildren, we are still alive, mostly working productively, and things are getting better.

 

We might even be seeing some advantages as the politics becomes more respectful, both of people and facts, and actually indulging in some forward planning, an element absolutely missing from our body politic since, well, perhaps since the days of Keating and Hawke.

 

New jobs have been created by small pieces of manufacturing coming back to domesticity, although the unemployment rate is still a number that seemed unimaginable a year ago. We might also have a real number, instead of the nonsense of the definition of ‘Employed’ being an hour of paid work a week, the bureau of Stats taking advantage of the cover offered by the crisis to update the definition.

 

People my age will have had their superannuation reserves diminished by both the withdrawals necessary to pay the bills, and the tanking of the share market, as well as there being a whole new wave of over 50 unemployed looking for a way to pay the bills. This all means we will be working longer, and there will be a rash of over 50’s entrepreneurial activity, where those previously hide bound corporate types, now unemployed,  try  their hand at something new.

 

The government, now saddled with a range of new costs that will become part of the status quo very quickly, will be desperately looking for ways to wind them back. For example, free child care, and a ‘living wage’ will be major topics of political conversation, as they are high on the list of must haves for the political left, but are ‘socialist evil’ in the eyes of the political right. It is always easy to give stuff away, particularly in a crisis as we will have just passed, but extremely challenging to remove that stuff from voters in the lead up to an election, which will by then be on the horizon.

 

As a community we are now demanding changes to the buck passing that goes on between the states and Feds in relation to who is responsible for what. We are working under a constitution that has served us well,  but sensible change that reflects the entirely different environment we are now in, is firmly in the too hard basket. If the Christmas fires did not highlight this enough to force changes, the lunacy of the Ruby Princess, and the subsequent finger pointing should have. It was more than just the everyday political incompetence we have come to expect, it was a gross failure of  the governance processes of the nation.

 

As an additional treat, there is toilet paper and pasta back on supermarket shelves available for purchase whenever we venture out.

 

Commercial intervention by governments.

 

The political decisions taken to address the cries for assistance from many large corporate enterprises, will have significant ramifications across the economy as the smoke from the bug clears. The obvious current example is Virgin, currently holding out their hand for a public bailout. However, they will be one of many that are in trouble, and likely to bring all the pressure they can to bear on the public purse, to which many have contributed little over the years, repatriating any profits to tax havens. Beyond all considerations that relate to a particular set of circumstances surrounding an individual enterprise, I think there needs to be a consistent application of policy based on a foundation that articulates a philosophy that reflects the national will and character.

 

This philosophical foundation has been sadly absent for many years, usurped by short term political expediency, and the resulting disengagement of voters from rational public discourse.

 

Section 51 of the constitution gives the power to acquire property on just terms from any state or person, over whom the parliament has the power to make laws. Somewhere in there lies a solution, enabling the parliament to acquire the business of such enterprises, but not the company. This would prevent the obvious outcome of a corporate bailout, which in effect subsidises profits by removing part of the risk for which shareholders are paid, while socialising the risk of losses.

 

Instinctively we may not like the government owning businesses, but it seems to be a better solution than putting money in the pockets of billionaires living in the Bahamas, oil rich potentates and in some cases, dictatorial governments.

 

Healthcare.

 

Notwithstanding the comment above relating to public and private responsibilities, the health Minister popped up last Tuesday (March 31) and in effect, and temporarily, renationalised hospitals. Health and its increasing costs has been a thorn in the side and budgets of every government since Bob Hawke’s in the eighties, and getting worse. The  financially motivated parties in the health system jockey for a place at the huge and deep trough to the detriment of the community.

 

Meaningful reform and modernisation has been on the ‘way too bloody hard’ list for 20 years. Now, suddenly when we consider the welfare of sick people, before the dogfight over money, reform becomes easier. Let’s hope some of it has stuck after the smoke cleared.

 

Unions and government talking constructively.

 

Who would have seen this coming? Just over a year ago, the current Canberra incumbents won an election by warning us of a socialist apocalypse should Mr Shorten take residence in the Lodge in Canberra, and for weekends, Kirribilli House in Sydney.  I can hear Mr Shortens teeth grinding from here, but hopefully the dialogue has continued.

 

Social distancing.

 

We have become used to a larger space being ‘ours’ and others will reflexively give it to us to a greater extent than before. There may even be some level of civility re-emerge, and incidents of things like road rage will have reduced.

 

1st world indulgences

 

Many of us have what we sometimes laughingly call first world problems, such as not having a choice of three varieties of condiment at the supermarket, or the failure of the nail salon to open before 8.30 am. They have been swept away, and we will recognise them for what they are, indulgences of a privileged society, and they may become less important. In short, simple things will have become more important.

 

We will all be wiser

 

The fear and panic that gripped us for those few months of March, April and into May, will be seen as an embarrassing over reaction driven by emotions we are not used to having on general display. We will all assure ourselves that next time should there be one, and we will largely accept that there will be, we will all act more sensibly.

 

I will look back over the next Christmas break and review these observations, and give my self a mark. As an optimist, I hope a few of them are on the money.

 

 

 

 

How to get important things done: Today.

How to get important things done: Today.

 

 

No business succeeds in the absence of a concentrated application of resources to the most important problems and opportunities they face.

 

The Pareto principle, or the 80/20 rule. 80% of your profits come from 20% of your customers, so it is logical to focus on them. 

 

 The time frame differs, from the daily work, to the long term strategic thinking required for commercial sustainability, but the process does not.

 

You need to examine the questions and issues in an open ended manner, based on objectivity, creativity, and collaboration in order to have an agreed priority list. The absence of an agreed set of priorities results in less than ideal expenditure of resources. 

 

There are always facts available about what has happened.

 

There will usually be a range of short term forecasts with a high degree of probability.

 

As we go longer the probabilities of certainty diminish, and in its place comes the opportunity to anticipate the situations that may emerge, or that you can create,  to your strategic and competitive benefit.

 

The structure of the conversations, and that is what they should be, rather than being labelled ‘meetings’, which implies formality and influence based on hierarchical position, is similar.

  • What are we facing today? What needs to be done to succeed, today?
  • What do the metrics tell us? When you are looking at the few key numbers, every day, you will get to see the patterns and trends emerge, as they are doing so, which gives the time to address them.
  • What are the constraints, what are the questions and issues that are going to get in the way of performing, today?’

Such conversations have a daily, weekly, monthly cadence. The metrics and participants may alter in the differing conversations, but the agenda will not, and once embedded become a vital part of achieving results. However, they will deliver little if any benefit in the absence of specificity. Generality is the death knell, you must be specific, how much, which customer, what communication, by when, who is accountable, outcome expectations, and so on.

Need some assistance with this exercise, particularly in a time of crisis such as we are now?   Give me a call, or go to the StrategyAudit blog for many hundreds of tips, templates, and idea starters. Assistance at your fingertips.

 

 

Cartoon header courtesy GapingVoid.com 

Never have we needed to understand the OODA loop more!

Never have we needed to understand the OODA loop more!

 

Observe, Orient, Decision, Action, or ‘OODA Loop’ is a thought process articulated by John Boyd, the maverick American fighter pilot, engineer, and scientist, who revolutionised the practise of aerial warfare’. His nickname in the Airforce was ’40 second Boyd,’ reflecting his bet, that he could beat any other pilot in a dogfight in under 40 seconds. It is said, nobody ever collected from him.

Boyd’s OODA loop is a framework for creating tactical advantage. As he put it, ‘To enable you to operate inside the oppositions ability to respond’. 

The ability to respond is driven by the speed with which you are able to collect and analyse information, to come up with a tactical response given that it is almost always ambiguous and incomplete information, make the decision, and implement. This is done continuously, creating a ‘loop’ that increasingly becomes quicker than the competition can respond, leading to success.

We are in such a position now.

The ‘Bug’ has turned the way we thought things were on its head, there will be a new normal at some point. Those who survive until then, will be those who are more agile, faster to actively respond in an entirely ambiguous environment, in a manner that learns continuously.

If you apply this sort of thinking to the current situation, you might go through the following process.

Observe.

External assessment.

  • The state of the economy, recognising the rapidly deteriorating organic demand, seemingly about to receive a public jolt by way of multibillion dollar injections by governments of all three levels.
  • Corporate failures that are the inevitable outcome of the drop in demand. 
  • Explosive increases in unemployment and resulting community and individual distress
  • Crumbling of the ability of health institutions to react in sufficient time given the  resource shortages.
  • The emergence of opportunities unavailable previously, such as domestic manufacture of health related consumables and equipment, software that delivers supply chain transparency and accountability, the recognition that remote working is not only  viable, but is a cost and productivity effective  strategy.
  • Expected time when economic activity can restart and recover into some sort of ‘new normal’

Internal assessment.

  • Operating numbers: cash flow, debtors and creditors and varying payment options and cycles, sales pipeline, discretionary spending programs, fixed costs.
  • Essential people, technologies, products and customer relationships upon which rebuilding can take place.
  • Sources of cash injections that may be available, including government programs, and the timing and obligations of cash that may be available. 

Orient.

 

Having collected this information, in effect, observed the environment, it needs to be synthesised into a cohesive plan, oriented for action. You might consider factors such as your business model, pricing structures, supply chain relationships, specific market niches, staff deployment,  key strategically important customers, and internal reorganisation of individual capabilities.

Decide.

Often, taking what are really challenging decisions, made with incomplete information, that impact the lives of people and the future of the organisation, are easy to put off. There is always another piece of vital information necessary to make a better decision. Unfortunately, in a crisis, you do  not have the time to wait, you must decide, be prepared to be wrong, accept the consequences of being wrong, and learn from them, but  you must decide.

 

Act.

Having taken the decisions, take the action  necessary. A decision not acted on, is not a decision to do anything other than make yourself feel better, or avoid the pain of implementation. Understandable,  but not acceptable.

 

Wait, your work is not done.

Go back and reassess each stage, apply the OODA loop again, and again, to identify and claim that competitive advantage. In this moment, fighting the ‘Bug’, that advantage might deliver survival, and as the economy improves post bug, prosperity.

 

 

How to insulate your business from the inevitable recession

How to insulate your business from the inevitable recession

 

The inevitability of a bad deterioration in the economy is now absolute. No more fluffing around with nice, reassuring words, the  consequences of this Corona pandemic will be an economic and social clusterf**k.

So, in these circumstances, how do you insulate your business from the effect, and even make some competitive and strategic headway?

Five things I have learned over my 45 years in business, the last 25 of them helping SME’s improve, and from time to time, survive, often in adverse circumstances. Over the course of that 45 years, I have lived through a number of events that caused significant distress at the time, and resulted in massive changes to the way we live and work. However, none I suspect will be as cataclysmic as this current crisis. Nevertheless, the lessons from the past can be applied to the present, so long as we do so recognising they will not be just copies, they will have their own characteristics, and some nasty traps for the unwary. 

 

Have a strong balance sheet.

This means having cash reserves. In tough times, nothing is as valuable as cash, it delivers flexibility and options, without which you are at the mercy of others. In days of low interest rates as we have, many have been seduced by the siren song of leverage. It is the ‘ make your assets work harder‘ pitch of those in the financial leverage game. Leverage however, works both ways, and in a downturn, accelerates the rate at which you go broke.

If you are leveraged, deleverage as hard and fast as possible, and hoard your cash.

 

Have a plan

While plans are made to be broken, at least you are able to track where the divergence happens, figure out why, and how to do it better next time. Planning effectively requires that you have a common strategic objective, broken down into ‘nested’ tactical objectives. This cascading of objectives ensures that priorities are clear, that the required resources and capabilities are delivered to the points they are needed to achieve the objectives, and deliver the best return.

 

Have a spring clean

Every enterprise carries the imprint of its past, often deeply buried. Many should be jettisoned  during the bad times, when it is easier, which has the effect of delivering a leaner more responsive enterprise as things improve. Apply the Pareto principal to everything you have and do: customers, processes, product lines, employees, inventories, fixed assets,  and suppliers. Clean out the ones that do not deliver value in excess of cost, and that are inconsistent with the more focussed strategy you will have developed. Hidden deep in most businesses are transaction costs, which are almost always a source of significant cost reductions  and ‘no-cost’ capacity increases. Eliminating the friction that generates these costs, will save time and money, deliver ‘no added cost’ capacity, and make customers very happy.

A question I ask my clients at some point is: ‘What would a VC do if they bought this business? Everyone understands a VC investment is always on the basis of a fast profit. Invest, optimise, sell. The question and subsequent conversation focusses the mind on what actually generates the value customers are prepared to pay for. Sometimes there are regulatory costs, and there will be a core of necessary cost that enables operations, but the rest is on the block. 

 

Focus on getting money in, not just cutting costs

Cost cutting is the reflexive response to a cash crisis, and short term it works, but not in the longer term. To use a sporting analogy, you cannot win a game by being defensive, the very best you can do is have a draw. Having a draw in these circumstances means you go down the gurgler with all  the others. No, you have to find a way to expand, get new money in the door.

 

Let the inmates run the asylum.

Post this Corona crisis, the world will not just go back to the way it was. Many of the changes necessary to beat this thing will be baked into the way we interact with each other. Work and the expectations of our institutions will be forever altered. Setting out to manage these changed dynamics without the appropriate level of change in management processes and behaviour will lead to inevitable failure. Following are a few thoughts on the pivotal changes necessary

  • Remote work. The most obvious is that we will all be more attuned to working remotely. While it was an increasing trend prior to the bug, it has become a tsunami in the past few weeks and it will not go into reverse. Therefore, the management  task is how to harness and leverage the capabilities of a remote workforce. Most senior managers are of the vintage that did  not grow up with digital as an automatic and natural part of their lives, and for many this is a scary prospect. Most have accommodated the digital revolution in some way, but the institutional cultural barriers that remain in their hands, need to be dismembered.  
  • KPI’s need to be set on outcomes, not activity. No longer will presence at a desk, and seemingly adequate levels of activity be enough, it is the outcomes that will dominate. This change requires a whole rethink of the manner in which performance is measured in most organisations.
  • Management behaviour has to change. The best leaders and managers BB (Before Bug) spent a significant part of their time ‘walking around’, and communicating face to face. Time spent understanding the problems and opportunities for individuals, and groups of individuals at every level paid dividends. This face to face, personal interaction will no longer be practical. Leaders need to develop processes that deliver that sense of personal interaction to employees and contractors operating remotely. This means they have to have in place systems that deliver emotional security and stability while focussing individual and group effort on achieving a common goal.
  • Transparency creates accountability. Instinctively, we all know this, but for so long, information has provided power, so it has become the default to hang onto it. No longer will this be the case. Leaders will create accountability by being transparent themselves, and forcing that transparency through the organisation structures to the lowest levels. This change will be very uncomfortable for many, and will lead to a wholesale turnover in older managers who simply cannot make the changes necessary. This will lead to a social challenge for us all. However, those managers will be replaced by younger ones who are more attuned to accountability based on outcomes rather than presence. All those who have not read Ray Dalio’s book ‘Principles’, should use this downtime to do so. It lays out a comprehensive and compelling argument for what Dalio calls ‘radical transparency’. This will become, I think, the emerging  default.
  • Communicate, communicate, communicate. The options for communication have exploded, in the post bug world leaders will be using all of them, continuously. The communication is an essential ingredient in the mix of creating transparency, accountability, and focus on a common objective. It will require entirely new processes and habits to be developed, replacing old ones, and a radical reordering of the priorities of many managers.
  • Creativity will flourish, if you let it. Crises always lead to creative solutions to existing problems, and innovation to create opportunities in areas not previously recognised. The two world wars last century led to an explosion of technology, Microsoft was launched during the 1970’s oil crisis, the iPod launched in the aftermath of the dot com bust, and the 2008 meltdown led to Uber and Airbnb. All of these were spawned outside any corporate boundaries, except perhaps the iPod, but Apple was as good as broke at the time, so had little to lose. 

When you need the wisdom of having lived through it all before, and learnt from the experience, give me a call.