Jan 11, 2021 | Governance, Management, Strategy
It is January, and looming in many organisations is the annual, calendar driven budgeting exercise.
In more normal times, the strategic planning update would have been done in September or October last year, but that went out the window, along with the comparisons of performance to budget that are usually the basis for an extrapolative budgeting process.
Never has there been a better time to revisit the whole process, as it is clearly no longer fit for purpose.
There are better ways.
Top-down mandated budgets designed to give senior management the appearance of control and foresight have been on the slippery slide for some time. The ‘Bug’ should have been the terminal injection of reality.
Constant and unforecastable crisis does not lend itself to a process that purports to predict the future 18 months to 5 years out.
Given that background, how should management be thinking about the planning process?
My advice is that the process should be one of rolling planning, that accommodates information as it emerges, and rolls it into the action programs, while retaining the necessary strategic consistency and functional alignment.
What constitutes strategic success?
Strategic success is not about the money, profits, or shareholder dividends, although sometimes you might wonder. Strategic success is a function of the choices made, the distribution channels opened, customer lifetime value and share of wallet, the innovation pipeline, and capability development that will enable commercial sustainability. These are all things, amongst many others, that are enabled by the tactical choices being made. While the costs and returns are important considerations in these choices, they are just the simplest but often misleadingly one-dimensional means by which they are measured.
How does this impact the planning process?
Planning is vital, as the absence of a clear destination means any road can be taken. However, the process must be way more agile than has been the norm, while not losing sight of the objective. This requires a clearly articulated and understood strategic framework within which the ongoing tactical decisions can be made. At every point of choice, the question should be asked:
‘Does this choice add to the achievement of the strategy?
Strategic priorities can be broken down into operational and tactical choices across and within functional responsibilities. These choices can then be reviewed and updated regularly as information is received and absorbed.
The ideal outcome is that there is regular communication, and by regular, I mean daily, weekly, monthly, and so on, where information is absorbed into the decision processes and used to adjust on the run. Rolling planning at every level can be ‘rolled up’ (pardon the pun) into the longer-term processes ensuring strategic consistency and alignment.
In effect you are matching the tempo and type of decision making to the level most appropriate for that decision to be taken, with those in whatever ‘front line’ is engaged, taking the responsibility and accountability for the decision.
I refer to it as ‘Nested Planning’.
Each stage builds on the former, becoming increasingly less tactical but more strategic in its nature. The most visible metaphor is the Russian wooden dolls that progressively fit inside each other.
Abandon the immoveable budget that becomes set in stone, and replace it with rolling forecasts that track the progress of the resource allocation choices at every level, towards the strategic outcome agreed.
Header credit: ‘mountaineer’ via Flikr.
Jan 4, 2021 | Analytics, Social Media, Strategy
Which StrategyAudit posts gathered attention during 2020?
The StrategyAudit blog, and supporting research is both a personal archive of ideas, that vary from complete to really half-baked, a recitation of the things I see and learn from those I work and interact with, and the lessons that come from those interactions.
Over the course of the year, there were 120 posts published on the StrategyAudit site. It seems like a small return for the effort. Luckily, I did not keep a count of the hours spent thinking, researching, writing, and editing these 120, or I would probably have to counsel myself to do something more useful to my retirement fund with the time.
The 3 most popular posts published this year.
A bit of an unfair advantage accrues to those published earlier in the year. However, the pattern across the decade of this blog has consistently demonstrated that most views of most posts happen over the week or so after publishing. It is the minority that then pick up later and continue to deliver multiple views weekly over a long period.
Reflecting on the new management challenges created by Covid, the April attempt at predicting the impact of Covid came in first. Perhaps understandable, and with the benefit of now 8 months hindsight, I am very pleased with the accuracy of the predictions. That will be the subject, as promised at the time, of a separate post. Second place goes to a June post that looked at what I saw as the 6 critical challenges of remote work, a topic we were all thinking about, and at that time just coming to grips with. Third was a bit of a personal rant, which obviously struck a chord at the time, after that idiot MP Craig Kelly jumped on British morning television in January, telling all and sundry that the fires, then ravaging the east coast of NSW, bore no relationship to the hoax that is climate change.
I am going to stretch the friendship a bit and give a dead cat bounce award to a post that I think had some considerable value as I review it, but that got no traction at all. I set out to describe the benefits that may flow from the Covid crisis, reflecting on the adage that there is a silver lining in every cloud. As with the winner in the category, I feel vindicated that the predictions made have been pretty accurate. Perhaps it was just a lousy headline?
The 3 most popular posts of the year.
This is a hands down to a post published over 6 years ago that describes the business model of supermarkets. It has continued to be the most viewed post every year since it was first published. Coming in second is the perennial runner up published in 2016, describing the 4 dimensions of project planning. Third was a welcome surprise, from early 2018, a marketers explanation of the accounting term Net Present Value. Many of those who run small businesses have a disturbing lack of understanding of even the most basic financial management tools, of which NPV is a common and very useful one. There are several other similar posts on accounting related ‘accounting type’ topics that also contributed significantly to the numbers.
Ideas that got no traction, but that seem valuable.
Some of the ideas I post may be a bit whacky, at least to some. However, it is not my job to reflect the consensus, it is my job to stimulate thought, and create some disturbance to the status quo by throwing in stuff from left field.
This one from 2019 combines two ideas. The first that the demarcation between marketing and sales is artificial nonsense created for the convenience of corporate management, and the second, that the accepted sales funnel is as redundant as a knife in a gunfight. Checklists on just about everything abound on the net. This post from late 2017 summarises a checklist I use when assessing the health of a business, was prompted by a similar idea published in the AICD magazine written by Phil Ruthven, for whom I have a very high regard. In 2013 I stumbled across an article in Fast Company magazine that started to explain the OODA loop, an idea that evolved from the fertile and obsessive mind of US air Force colonel John Boyd. I have since read a biography of Boyd, and spent considerable time reflecting on the competitive implications of the OODA loop, which I think is a seminal idea, highlighted this year by the speed and destructive spread of the Corona virus. Those who have successfully re-oriented themselves to get inside the ‘turning circle’ of their competitors, and the spread of the ‘Bug’, and been able to pivot their businesses in the face of the unexpected, have followed, mostly without knowing, the wisdom of the loop to their collective benefit. This follow up published in October 2020 was, sadly, a very strong contender for the dead cat award for 2020.
Finally, one of my personal favourite posts, viewed only once this year, published in 2016 after the death of Leonard Cohen. It has nothing to do with running a business, but is a deeply personal post, reflecting on a couple of the pivotal events in my life.
I look forward to interacting with you throughout 2021, which is getting harder, and harder. The combined impact of the continuing increasingly intense battle for your attention, and the squeezing of organic access to those who may be interested by the ‘social’ platforms makes life a challenge. (with the number of links in this post, LinkedIn is likely to stick me in solitary and throw away the key) If you find value in my thoughts, subscribe to them directly from the website, and spread the word amongst your networks. I promise not to follow you around when you do.
Have a better 2021 than 2020, perhaps an easy goal for most, and the basis of continuous improvement, finding a way to do a better job every day.
Header cartoon: once again, my thanks to Hugh McLeod at gapingvoid.com for the header
Jan 1, 2021 | Governance, rant, Strategy
Well, we made it through the most disruptive year in the last 50. As I reflect, it was the last gasps of the war in Vietnam and Australia’s involvement that even comes close to the disruption of 2020.
However, sitting in the epicentre of the Corona ‘Croydon Cluster’, 2021 looks pretty sad. Unlike a year ago looking forward to 2020 with optimism, despite the fires that had been lingering around, about to break out into the inferno that started 2020 on such a bad footing.
As the year progressed, downwards, we had now forgotten floods right after the fires that destroyed communities and took lives, then the Corona bug caused an economic and social lockdown which continues.
Our PM started the year very badly, hiding in Hawaii, then trying to find a hand to shake in the ashes of Cobargo, but learnt his lesson and did a surprisingly good job of leading into the corona crisis, bringing the state Premiers and unions into a collaborative forum which for a few months looked like having a lasting benefit. Then the urge for political and partisan chicanery took hold across federal and state jurisdictions, and the year ended in a dogfight over proposed IR changes that will be central to the 2021 destruction of any remaining urge to collaborate across party and philosophical lines.
On top of the chicanery, we had the NSW premier, perhaps the (formerly) most respected political leader in the country, first fess up to a relationship with a disgraced former parliamentarian who had clearly used the premier in more ways than one for personal gain at the expense of the taxpayers. Then followed her admission that pork barrelling was a normal part of the political process. While we all knew that is the case, the evidence over a long period is unequivocal, it is just that hearing it said, so explicitly, was shocking.
Then China decided Australia needed a kick up the backside, and progressively closed off their economy to Australian exports, a process still evolving, although apart from iron ore, there seems little left to ban. We represent only a tiny fraction of China’s imports, but they represent almost 40% of our exports, and 27% of our imports. This is a dislocation of our economy that will have severe long-term consequences, and the best we can do is have a new minister with no diplomatic chops at all, blathering about a pivot to India. To be fair, it is not an easy problem to solve, but politicians grandstanding and publicly shooting their mouths off are unlikely to help much.
We have become hooked on Government stimulus spending, what happens when it is turned off? This is uncharted territory as private investment has been booted in the belly, despite the lowest interest rates in my lifetime, and households are deleveraging as fast as possible given the uncertainty.
Stimulus investment has been more about mitigating the negative impact of Corona, than it has been about putting in place the drivers of future growth. This is understandable, and has been commendable, but we must recognise that it is a tactical response to the crisis, not a strategic one with long term outcomes of growth as the objective.
Politically, we have no confidence in the collective leadership to address the problems in creative and constructive ways, but we assume the pollies will make sure they are OK. We simply do not trust them any more, the old adage that if a pollies mouth is open, they must be lying, is sadly more current than ever.
Underlaying all this we had the spectacle of many politicians who for unfathomable reasons continue to have power, resolutely refusing to accept the overwhelming science surrounding climate change for the last 30 years, jump in the ‘believe the science’ bandwagon in relation to the virus. This level of obstinate hypocrisy is dazzling in its depth.
We might hope that the collective ‘We’ have learnt a lot from this year but suspect that we have not. With a federal election coming any time from August this year, strap in for more piles of rhetoric, lies and pork barrelling, laced with sweet smelling perfume trying to hide the stench of the bullshit. That will be piled on top of a now highly partisan media that has replaced fact with opinion and populism, largely controlled by a former Australian octogenarian billionaire living in New York. No independent thinking and reporting there, so we will have to dig harder than ever to see the truth in whatever ‘mainstream’ media feeds us.
As a final note, most people are thinking about how to make 2021 better, they are making resolutions, usually big things, outcomes. Something like ‘I will lose 20kg‘. 99.9% of these resolutions made in the depths of new year celebrations, go out the window by the second or third week of January. Instead, decide to make some small changes that will lead to the outcome. We all know that small changes in behaviour both compound and lead to the opportunity to make bigger changes later, so resolve to make a couple of small, easy to maintain changes to your behaviour that will contribute to achieving the objective. This is basic management, do not focus on the objective without recognising that changes must happen if you are to get a different outcome from that which you are trying to move away from.
Look out and stay safe.
Dec 19, 2020 | Leadership, Strategy
Rugby league is a ferocious sport, now gone well beyond a sport to be a profession, at least at the top levels. You can still play in the park, and enjoy the competition and physicality of it, but that is not what the top level is about.
It is a business, and the CEO’s are not those with the title of CEO of the clubs concerned, while they might have the power of financial veto, the real CEO’s are the coaches. They are the ones that shape the way the teams play on the day and are ultimately responsible for putting in the processes that can generate the results on the field over the weekend.
As such, what can businesses learn from the two most successful coaches of the last 20 years, and perhaps the two best coaches of all time.
They are playing in the big league, while most businesses are still playing the commercial equivalent of park footy.
Talent development & leverage
Both coaches seem to have the ability to see latent talent in young players and develop them into top level players over time. It is the ability to see the future in a youngster and apply the right mix of game skills and personal development, which leads to the individual being a part of a team, contributing to the whole in a truly meaningful way, delivering ‘leverage’ to the team that sets them apart.
However, it is also the ability to see the latent talent in a journeyman player and turn them into an ‘A’ player by bringing out the latent talent that is amazing in both these cases. Few businesses I have seen do much of a job at talent development and are poor at leveraging existing talent. More often the round peg that failed to fit into the square hole is dispensed with irrespective of the latent talent, rather than being helped to find that round hole. Talent wastage is rife in most businesses.
The talent development pipeline created at the Storm is awesome. Billy Slater was one of the genuinely great fullbacks, recruited as a youngster from country Queensland. When retirement was coming, there were moans about the hole his absence would create, and lo and behold, the hole never eventuated, simply because there was a replacement ready to step up, and has done so in a dazzling manner. Similarly, when Cooper Cronk left, and went to another club. How would the ‘spine’ of Melbourne work without not just Slater, but now also Cronk? No problem, the replacement is a wonderful player, fully capable of filling giant shoes, while Cronk brought a competitive edge to the new club that contributed enormously to them winning the premiership. Now Cameron Smith is on the verge of retiring, and the same moans are being heard. I am sure his replacement will be a wonderful player, blooded and coached into the winning systems of the club.
Coaching
Coaching is what coaches do, the headline task. Turning those talented youngsters into super athletes, but as importantly, turning the B players into A players.
Bellamy and Bennett both seem to be loved and respected by their charges, even when they have moved on to another club. There are numerous examples of talented players moving onto other clubs from under the wings of the two B’s, and shining because the habits and motivation instilled by the B’s. The development and honing of their talent is forever, not just in the context of the two teams directly coached by the B’s.
Most businesses spend way too little time, money and energy coaching their employees. They are treated as numbers, dispensable units of production, rather than people who generally want to, and are willing to be contributors when allowed and enabled to be.
Perhaps coaching is the highest form of leadership?
Recruiting
I have seen it written many times that the primary responsibility of a manager is to replace themselves with someone who will do the job better than them. The great leaders always have a full bench of talented individuals being readied to move up the ladder, while at the same time, looking outside to find the talented individuals to add to the bench. The ‘B’s’ spend a lot of time watching for the talent out there on the fringes, and when they see it, they find a way to move them into the system. This goes with the time and energy spend in talent development and coaching, it provides the raw material that over time will develop.
Almost all the recruiting I have seen in 45 years of commercial life is around filling a seat when it suddenly becomes vacant for any number of reasons, and then it is usually the best that turns up on the day that gets the seat. The “B’s’ would never recruit this way. They will each have a list of those that they think might, one day, fit into their system, and they put in the effort to get to know and understand the talent well before there is any hint of recruiting.
Processes
Every team has processes on the field, the plays they run against the opposition. Sometimes they work, often they do not, but what is obvious every time you see a play being run, is that it has been planned and practised until it is second nature. The ‘B’s’ must have a book of plays from which they pick and choose depending on the strengths and weaknesses of the opposition they will be facing. There will be some standard plays, a set of processes that they use all the time, as well as the specialised couple that they see as being particularly competitive against their current opposition.
These processes are written down, refined, and used as the basis of continuous improvement. They are not computer programs that tell you what to do, they are processes in which the players are engaged in the development, and ultimately responsible for the implementation.
Few businesses have their equivalent. As a consultant the easiest way to make an early impact is often to create and implement a few basic processes that rectify what are usually basic flaws in operating procedures. Documenting operating procedures is the first step in standardising, and then improving the drivers of success.
Practice
Practise makes perfect is a cliché taken seriously by all sporting teams, I suspect it is a religion for the ‘B’s’. Spartan mythology gave us the cliché: ‘Sweat more in training, Bleed less in war’. Make no mistake, a rugby league (and union) field is war, so the more sweat in training the less blood on game day.
Businesses do not practise enough. Sales is the prime example. Salespeople are often subjected to the most training in a business yet getting them to role play and ‘practise’ their sales pitches and processes has proved to be hard. They might do it once or twice in a 2-day training session with the other salespeople, but it does not ever in my experience become a routine, a way of getting ready and continually improving their performance.
Contextualised creativity
The best players are always creative, they seem to be able to see more than anyone else, they see the gaps opening before they open, and they always seem to have time others do not. To quote ice hockey great Wayne Gretsky ‘I skate to where the puck will be, not where it is now’.
In a game dominated by process and physical power on the back of great athletic skills, the teams that have in them the ability to see and exploit an opening before it opens, requires not only a creative individual, but a team that operates in such a manner that they can adjust on the fly, almost without speaking. It is the sporting equivalent of improv jazz, where each player is a master of their own instrument, while being able to improvise within the context of the piece that is being played by the group.
Team Execution & individual Accountability
The foundation of execution is the ability of the players to execute the plays they have practised and practised under the added pressure of game day. At the same time, they must be able to anticipate and smother the offensive plays being run at them by the opposition.
Core to excellence in execution is the accountability of individuals to play their part in the execution of the plays.
On one hand, the team wins or loses, on the other, individuals in successful teams are held accountable for their part of the execution, and the parts and performance of each individual player is transparent to the whole team.
In the great commercial teams, I have seen that this circular motion of team performance and individual accountability is the glue that holds together the ability to perform under pressure and deliver superior results.
Resilience
No success comes without its fair share of knocks along the way. It is the way the teams and individuals pick themselves up from the knocks that show the true nature of the competitive spirit.
When Melbourne was well beaten by lowly rated St George in the last round of the premiership, the pundits wrote them off as able to be the winner of the 2020 premiership. Favouritism went to Penrith, who had played an unbeaten run of 16 straight games in the lead up to the grand final. Melbourne came back to win the final handsomely. Resilience plus!
Rarely do I see resilience built into the operating processes of businesses. Almost always they hide after a setback, failing to learn from the problem, and then able to adjust their approach and go again.
Discipline
Discipline comes from focus of the individual and the team, mutual accountability, and the determination to finish. Whether this be one play in a range of plays, or a whole season of games, the discipline holds. Everyone knows their individual role, and the contribution it makes to the whole team, so it is the combination of both that delivers the outcome.
The level of discipline shown by the teams under the coaching of the ‘B’s’ is greater than that of their opposition, both on and off the field, in every aspect of their performance.
Scorekeeping
In the absence of a score, how do you know who won? Every competition relies on keeping score, not just as a means of assisting team and individual accountability, but to also deliver a sense of shared purpose.
While it is true that not everything that matters can be easily measured, it is also true that over time, the drivers of superior performance become obvious, and it is possible to generate measures of these leading indicators of performance, and tracking trends over time is enlightening.
Again, I am sure the ‘B’s’ track game scores (indeed, when Melbourne loses, the frustration and passion of Bellamy is often on show) as well as a range of leading indicators of future performance. Why else would the players be wearing distance trackers during practice. And practises be videoed and played and replayed?
Commercial scorekeeping is generally piss-poor. The score that generally counts most is the bottom right corner of the P&L. Unfortunately for many, this number is only an outcome of a whole range of factors, that if left unscored, will not deliver the profit numbers.
This has been the last post of a year best forgotten. Having said that, the lessons from the year, if heeded will lead to a better future than would otherwise have been the case. We Aussies have demonstrated a depth of resilience that might surprise some. Long may it continue.
Have a safe and merry Christmas, thanks to those who have read, shared, and commented on my rantings over the year, and I will ‘see’ you in 2021.
Dec 2, 2020 | Change, Strategy
When do you quit, let go of the sunk cost?
How do you decide when to quit? It is a hugely important component of deciding how and where to allocate your scarce resources.
Quitting, and taking the ‘hit’ is also much harder than just planning. There are always sunk costs involved, and every psychologist will tell you that the pain of a loss is far greater than the prospect of a gain. Then there is ego, credibility and self respect at stake. In a corporate environment, many avoid mistakes, or at least conceding a mistake has been made, as that can have a detrimental impact on career prospects, bonuses attached to KPI’s, and the perception of those around. you.
No matter the size of the enterprise, from the corporate monoliths to the garage operator, there is a reluctance to admit mistakes and move on.
You cannot change the past, but you can learn from it, and move on, if you choose to do so..
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 taken action, done things, and hopefully learned from them, so that the next action you take will be better informed.
What we need is less strategic planning, and more strategic doing, and part of that is being prepared to quit, learn, and move on.
Strategic quitting is a fundamental part of strategic success, embrace it.
Again, Dilbert has the last word, thanks to Scott Adams.
Nov 27, 2020 | Change, Strategy
‘Snowmobiling’ is a term created by Col. John Boyd, USAF to describe the process of pulling down a set of existing items, drivers, or perceptions, and putting them back together in an entirely different way, simply not seen by anyone else, just because it is different, and outside the expectations.
Existing views generate a confirmation bias that ensures that information that confirms those existing beliefs is used as confirmation that the current situation is all there is. Contrary information is either not seen, or dismissed as irrelevant, unreliable, or ‘fake’
The Snowmobile is the result of such a process of disrupting existing perceptions and barriers that made quick, convenient low-cost movement around snowfields a tough problem.
It is the result of breaking down the mechanics of a motor bike, a sled, a jet ski, and a tracked vehicle for rough terrain, and putting them back together in a different form that gives you mobility on the snow.
One of the great outcomes of Covid, which will change forever many of the pre-existing business models, is that is has become the catalyst for widespread Snowmobiling.
I live in Sydney’s inner west. There is Snowmobiling everywhere I look.
For example, the closure of restaurants and cafes was terminal for many, but increasingly, they started delivery via a number of means. Then, a few went a few steps further, breaking down the restaurant experience into its component parts, and putting them back together in a variety of ways.
You can now have your favourite restaurants deliver a pack with all the ingredients for a menu pre-cut, and ready for the pot, along with a USB stick with the specific cooking instructions for that recipe. You want some matched wine, easy. Others have one of the apprentices come to your home, and do all the cooking and service for you, providing everything bar the atmosphere of the restaurant. Then they clean up and take it all away.
Snowmobiling.
Are you doing it, or are you allowing the confirmation bias of the way it was dictate the manner in which you conduct your business?
One of the classic strategy questions is: “What business am I in?”
At a time like this as business models of all types are being not just disrupted, but thrown against the wall, and reassembled in entirely different ways, it is time to ask yourself the question again.
“What business am I in?”
Header photo courtesy DevilDucMike via Flikr
