Jan 21, 2025 | Leadership, Strategy
‘Strategic thinking’ is that thing most managers claim to do. Often their effort amounts to little more than scheduling next year’s budget with a 5% increase across the board. It’s like preparing for a cross-country road trip by only checking your rearview mirror. Such a view does deliver information, which makes everyone feel better, but it is probably not what you really need to know to avoid the changes in the road.
Think of strategy like a game of stud poker. There are the cards in your hand (things you control), the cards on the table (things you can see but can’t control), and the cards yet to be dealt (the unknown unknowns that keep CEOs awake at night). Most of us spend our time obsessing over our hand while barely glancing at the table, let alone thinking about what might come next. It’s no wonder most strategic plans have the shelf life of a quarterly forecast derailed by something unexpected.
These are the three perspectives you need to integrate to build a resilient strategy that delivers superior outcomes:
- Your Hand (The Controllable): This is your comfort zone – budgets, teams, processes. Important? Sure. But if this is all you focus on, you’re playing solitaire in a poker tournament. For example, Netflix’s early strategy focused on perfecting its DVD rental logistics, then moved very early to streaming. Blockbuster completely missed the streaming wave by being wedded to what they had in their hand.
- The Table (forecastable but Uncontrollable): These are the market trends, competitor moves, and regulatory changes that everyone can see. It’s like looking out the window at the weather, you can’t control it, but you’d better pay attention, or miss out as did Blockbuster.
- The Unknown (The Wild Cards): This is where things get interesting. It’s the stuff nobody saw coming. The Covid pandemic, Homos attacking Israel, and the ferocity of Israel’s response might qualify. Similarly, a competitors factory burning down, or the sudden emergence of TikTok. Tesla’s rise wasn’t just about electric cars; it was about reimagining the automobile industry in ways others hadn’t considered, and stealing a huge lead over incumbents as a result.
Roger Martin’s Secret Sauce
Roger Martin, is the strategy guru who makes other strategy gurus feel like they need to up their game. He developed a framework that’s surprisingly simple to say, but still deeply challenging to deploy well. He calls it “Playing to Win.” I sometimes refer to it as “Five Questions that might stop you shooting yourself in the foot.”
Here’s the deal:
- What’s your winning aspiration? For Patagonia, it’s protecting the planet while making quality gear. “Being the best” doesn’t count, as it does not enable anything. My eldest sons soccer team had that goal, but lacked the basic ingredient of talent.
- Where will you play? You cannot be everything to everyone, despite what your sales team may think. Targeting eco-conscious adventurers allowed Patagonia to dominate its niche.
- How will you win? This is where you need to get specific. “Excellent customer service” is not a strategy. Amazon redefined customer service with ‘free’ 24 hour shipping and no-questions-asked returns.
- What capabilities do you need? Be honest, not optimistic. Amazon’s logistics network didn’t appear overnight; it was built with significant and deliberate investment.
- What systems must be in place? The boring but crucial bit that makes everything else possible. Walmart’s supply chain system is a textbook example of operational efficiency.
Following are some tips from experience that should make deploying Martin’s framework a bit easier.
Channel your inner five-year-old
Remember your kids kept asking “why” until you questioned your life choices? That’s first principles thinking in action. Instead of accepting “that’s how we’ve always done it” (the corporate equivalent of “because I said so”), we need to channel that annoying but brilliant five-year-old curiosity.
Tesla didn’t just make better cars. Elon Musk saw the potential of an entirely new way of engineering personal transport. Ask yourself: “What would this look like if we started from scratch today?”
Customer centricity
Being customer-centric is like being a good listener at a party. Everyone claims to do it, few actually pull it off. Real customer centricity means developing almost psychic levels of customer understanding.
Apple anticipates user needs with seamless ecosystems, while Spotify curates personalised playlists that feel almost uncanny. It’s not just about asking customers what they want, but about understanding their lives so well you can see where they’re headed before they do. Amazon keep an empty chair in every meeting as a reminder that they must never forget the customer.
Scenario planning
Think of this as your business GPS, but one that shows possible future roads, not just the ones that exist today. There are plenty of mind-mapping and task recording tools around now that assist the thinking. Update it regularly, make the updating of the map a quarterly agenda item in your management meeting. In this way, you will almost certainly be more thoughtful about emerging opportunities and threats than your current opposition.
The assumption testing framework
This is where you play “strategic Jenga” carefully pulling out each assumption to see which ones are actually holding up your business model and which ones are just taking up space. Often the challenge is to identify the core assumptions, before they become so ingrained in the fabric of the enterprise that they can almost disappear. Start by listing the core assumptions about your market, and test one at a time by having conversations in key customer segments. These conversations will also serve to alert you to the stuff happening on the fringes that may evolve to disrupt current assumptions.
Synthetic market research
AI powered market research is an emerging tool that will rapidly alter the balance of power in many markets. Suddenly, you can get very accurate insights in a very short time, for a fraction of the cost of traditional market research. For smaller marketers have been excluded from extensive market research insights by cost and time. AI powered ‘synthetic’ research is like having a time machine enabling you to look forward and make those difficult strategic choices with more certainty than just yesterday. There is no certainty about the future, but the more and better insight you have, the better choices can be made.
Have a weak signal detection system
This is your business equivalent of those people who can smell rain coming before the clouds appear. Set up your organization to notice the little changes that normally occur on the fringes of every market, that might become mainstream.
- Subscribe to trend newsletters in adjacent industries.
- Conduct regular chats with customers (the kind where you actually listen).
- Build cross-functional collaborative teams who compare notes, ideas, trends they see, and insights.
- Forge partnerships with startups to stay ahead of disruption.
- Look for the small customers that the sales people describe as demanding and difficult. Sometimes that are the ones setting out to be different. Remember that every large customer started out as a prospect, and most probably a small and difficult customer.
Continuous strategic improvement.
When playing out on the edge, mistakes will happen. When they do the best companies and people learn from them, absorb the lessons, and go again. They build resilience and deep domain expertise from everything that happens to them. Continuous improvement is a mindset as valid in strategic thinking as it is in any other operational domain. Arguably it is the driver of CI across an enterprise, as the strategy plays a key role on the generation and nurturing of culture, a necessary context for CI to thrive.
Strategic thinking isn’t about having a crystal ball, although we are getting better at articulating the challenging strategic choices that abound. It’s about building an organization that can spot changes early, adapt quickly, and occasionally make bold moves that leave competitors wondering what just happened.
The trick is finding the right balance between the cards you can see and preparing for the ones you can’t. Use first principles thinking to challenge those comfortable assumptions, stay close enough to your customers to finish their sentences, and leverage new tools like synthetic research to stay ahead of the curve.
The goal is not to predict the future perfectly, it’s to be better prepared for it than the next guy. When you can do that, you can win the competitive race, and hopefully have a little fun along the way. After all, if you’re going to spend time thinking about strategy, you might as well enjoy the process.
Jan 8, 2025 | Change, Governance, Leadership, Strategy
Around this time two years ago, I questioned the effectiveness and fairness of the initiatives bundled into the ‘National Reconstruction Fund.’
I am still questioning.
With an election looming in early 2025, I expect a predictable flurry of press releases from both sides of the political divide, each extolling their own recycled virtues. If we were able to fast forward to 2027 and look back, I have little doubt that the progress made will have been as glacial, if discernible at all, as it has been in the past decade.
Since my initial commentary, the updated Harvard Complexity Index has marked Australia’s further decline to a rank of 102, squeezed ignominiously between Senegal and Yemen. This is a stark indictment of the nation’s diminishing capacity to engage in sophisticated manufacturing and industrial activities.
There are no short-term fixes for this relentless erosion of economic potential.
The likelihood that our grandchildren will enjoy the same standard of living my generation took for granted grows slimmer with each passing year. Tragically, the long-term structural reforms needed to reverse this trend remain conspicuously absent from the agendas of those currently in power, and those seeking it. Beyond facile declarations and populist slogans there is little real substance.
The pack of political clowns in Canberra and beyond, hold the levers necessary to drive meaningful change. However, they seem paralysed: too timid to take bold action against the vested interests of a few, too ensnared by the trappings of power today, or, perhaps most damningly, too inept to grasp the urgency of the situation.
Perhaps it is all three?
Our past prosperity was built on the back of commodities.
For most of the 20th century it was those we grew, wool, beef, and grains. From the 1970’s that reliance evolved to those we dug up and exported for others to add the value. In parallel, manufacturing crashed from close to 30% of GDP in 1970 to 5.4% according to World bank figures in 2023.
Future prosperity will have an entirely different face.
It will be constructed of applied technology delivering globally competitive solutions to challenges only just emerging.
For those we require education, scientific discovery, application of those discoveries to global challenges, and a deep well of intellectual and financial capital generation to drive the development.
This is a challenging agenda, and we need to start the surgery now. The longer we leave it, the more painful it will be, and the further behind our competitors we will be starting.
Addendum January 11, 2025.
Professor Frank Bongiorno From ANU published a thought provoking piece back in 2021 reflecting on the erosion of Australia’s universities. It articulates my views on the topic way better than ever could, and deserves to be noted and spread. It was republished on ‘Inside Story’ here, and I reshared it on Linkledin.
Dec 23, 2024 | Change, Leadership
Yesterday was the summer solstice here down under. The longest day of the year. While it is a long slide into the modest chills of winter, it has begun, again.
It is also just two sleeps until my grandchildren can rip away the wrapping paper and play for a short time with their new stuff, mysteriously left by a bloke with a beard (and tatts?) before they get back to being endlessly curious about everything around them.
Wonderful thing having grandchildren. As American writer and commentator Paul Harvey said, ‘Nobody should have children, but everybody should have grandchildren”. I’m not too sure how that would work, but am fully on board.
What a year.
Our American allies voted in, again, a convicted felon as President. Nobody I know understands the dynamics of this choice, we just hope it works out better than we think it will.
World economies are struggling, and while Australia’s economy is in a per capita recession, and we have all sorts of challenges, the government seems to be delivering the promised ‘soft landing’. However, if you are renting in Sydney or Melbourne, you probably do not see anything soft about it. It also seems to me they have squibbed on several important (to some) questions. Gambling advertising will continue, we do not have any transparency on political donations, the federal ICAC has been shown to have no teeth, no regulatory progress on promised measures to mitigate carbon emissions, and housing affordability. That last one will hurt the government, as they will carry the blame for 40 years of underinvestment, and tax breaks given by both sides of politics to buy votes, which has led to the current ‘crisis’.
Investment in infrastructure generally has been lacking for years, but 2024 saw a surge in big ticket items like roads and suburban rail, showing massive cost blowouts. Snowy 2 point whatever is good in theory, and perhaps history will be kinder than me, but what a cock-up! Add AUKUS and a few others and you have the seeds to common disbelief in the ability of public bodies to get out of their own way.
Private investment in productive assets is also lacking, reflecting both a lack of long-term confidence, the incentives favouring non-productive assets, and the lack of depth in our own company’s ability to compete on the world stage. Beyond digging stuff up and shipping it off for value adding elsewhere, we are diminishing as a viable competitor in the world economy. This is a structural failure over a very long period. Donald Horne observed in 1964 that we were the ‘lucky country’. Most misunderstood the sarcasm of the statement at the time, and still do. However, we continue to sail along as if there was nothing to be fixed.
Our politics is stressed, superficial, divisive, and utterly short term, and over the first few months of 2025, will only become more so as the election approaches.
ChatGPT, launched into the wild on November 30, 2022 has led to a frenzy of innovation that will be seen by history as being as momentous as the printing press, and electricity. When I first stumbled across it in mid-December 2022, I thought it was astonishing but had little idea of the impact over the following months, and now two years. The initial thought was ‘will it take my job? I have concluded that AI will not take peoples jobs, although every job will change, and some disappear being replaced by ones we have not thought of yet. However, people who use AI will take the jobs of those who do not. No use hiding, the world has changed, again.
2024 also saw increased ferocity in the Ukraine and Gaza. Many have noted that War is the logical result of the failure of diplomacy. In both these current cases, you could add massive ego and fanaticism to the failure of diplomacy over centuries. From the comfort of a Sydney home, it seems a long way away, until a synagogue in Melbourne is torched, and there are riots in Sydney.
This is my last post for 2024.
I will sit back and wait for Santa, have a drink, see if the Boxing Day test has given us an opener who can withstand the wiles of Bumrah, and contemplate my expanding naval until early in 2025. Thanks to those few regular readers, I hope I have added to your menu of possibilities over the year.
Unlike many, every word I write is mine. Nothing artificial, inorganic or transcribed from elsewhere, although from time to time, I have asked for help in writing a headline that grabs attention. The tsunami of so called content spewing out of the AI tools makes the fight for attention more aggressive, vicious and destructive than ever.
Hug your kids, love your partner, value your friends, and stay safe and well.
Merry Christmas, and I will ‘see’ you next year.
Dec 16, 2024 | AI, Leadership
The characteristics of leadership we expect from the local nonprofit or sporting club, to the largest businesses in the country, to the Prime Minister, are pretty much the same.
Trust.
We need to trust them. Trust is earned by the behaviour we observe, never just given. It is also incremental, built over time, but is also fragile, and can be brought down in a minute by one bad example. The test, if there is such a thing is whether we believe that the private conversations the ‘leader’ is having are the same as the public ones, and would they be prepared to say those private things on the 6 O’clock news. By this test, many in prominent so called ‘leadership’ roles in this country fail. Dismally.
Dependability.
This has many forms, from delivering on the big promises made, to turning up on time for an appointment with the local hairdresser. In any leadership role, no matter the size, when a real leader finds themselves from time to time unable to deliver, they do not walk away from the fact, they acknowledge the failure, learn from it, and move on. To many, this is the essence of leadership, to me, in it’s simplest form, it is just common courtesy painted on a wider canvas.
Competence.
Someone placed in a leadership role, who is an example of the Peter principal is corrosive to the rest of the organisation. Those being led must believe that the leader is someone they can follow, and learn from. That does not mean they never make a mistake, it does not mean they are never unsure of themselves, or exhibit human frailties, it just means that we believe that they have the wisdom, skills and experience to get the job done.
Humanity.
We are herd animals, we rely on those around us for safety, and security. We have evolved and prospered as a species because we are able to collaborate and care for one another and rely on our neighbours in times of stress and crisis. In short, we care about others. Someone in a leadership position who does not care about those being led, is not a leader, at best they are a manager, dispensable and easily replaced.
When an individual displays these four characteristics, followers just seem to appear.
Header by DALL-E, who cannot be made to spell correctly no matter how hard I try to get its digital brain cells to listen!!
NOTE: Before posting this, I saw I had written an almost identical post a few years ago. While the four parameters are the same, the way I expressed them is a bit different. So, rather than scrapping it, as i have done before when realising i am repeating myself, I elected to post it anyway. Repeating a good idea is rarely a bad thing.
Nov 18, 2024 | Governance, Innovation, Leadership, Strategy
The latest economic complexity rankings put out by Harvard were recently released. Australia dropped from 93 in the world to 102. One place ahead of Yemen, one behind that manufacturing innovator, Senegal.
I had missed the report until an article in the auManufacturing LinkedIn group brought it to my attention.
The best that can be said about Australia’s drop from 93 in the previous ranking to 102 in this current ranking is that we have made possible the performance of the 101 countries that are above us.
This includes such stunners as Bangladesh at 100, Honduras at 97, Uganda at 96, and the home of Voodoo, ranking as one of the world’s poorest countries, Benin at 99.
To be fair, the ranking methodology struggles to adequately quantify the benefits accrued by services in its calculations. This compromises the ranking of Australia which has an advanced but hard to count services sector, while exporting mostly commodities, which is easy to count.
Nevertheless, while politicians are ensuring the public debate (aka playground squabbles) is around irrelevancies like the chairman’s lounge, long term challenges in education, aged care, housing, equality of opportunity, and economy wide productivity go uncontested.
Take education for instance.
This is a very substantial sector generating billions in economic activity by educating the children of our Asian neighbours. Many see it as a road to residence, which will benefit our economy doubly, as they have paid for their own education. However, many return home, enabling the ‘connections’ highlighted in the report as critical to complexity to be made. Meanwhile, for our own kids, we have continued to make getting an education more expensive to the point where it is becoming unaffordable in the absence of parental support.
In our wisdom, we are in the process of ringbarking this pathway to complexity.
How stupid can we be?
I recall in 1980 then Singapore PM Lee Kuan Yew warning that Australia was destined to become the ‘White trash of Asia’. It seems his warning is coming to pass.
PS. November 22. This ‘Visual Capitalist’ graph of the 30 largest exporters came into my feed today, adding some flesh to the bones of the index. The make-up of exports of several of them should lead to some deep thought. For example, Holland, Switzerland, Belgium, even the battered UK, where there are no hydrocarbons or minerals in the mix, outrank our commodity driven export mix. This is a solid indicator of the ‘complexity’ to which we should be building.
Nov 15, 2024 | Governance, Leadership, Management
We tend to think that the person on the top of the pyramid has the power to do whatever they wish within the boundaries of reason and the law.
To some extent this is true but there remains only five tools they can use.
Volume.
Price.
Costs.
Culture.
Strategy.
Everything in a business stems from these five fundamental tools when they are focused laser-like on customers..
A leader that has at their fingertips a few simple metrics that reflect these five tools, and focuses attention on the drivers will be successful.
The first three are quantitative. The fourth, culture, is much harder to define quantitatively. However, there are measures that will deliver insight, such as staff churn, Surveys into items such as psychological safety, diversity of training, thought, and experience, and team collaborative success.
Strategy is also qualitative, in that it cannot be measured except in hindsight, by which time, it becomes useful only as a lesson, and driver of future strategic choices.
The combination of culture and strategy, when they are mutually reinforcing, and aligned is a potent combination, that drives the quantitative allocation of resources, measured in outcome by revenue, price and costs.
Header generated by the newest shiny thing in a subsection of the toolbox: AI.
